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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported): March 15, 2000
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Anyox Resources Inc.
(Exact name of registrant as specified in its charter)
Nevada 0-25389 98-01912
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
540 N. Tamiami Trail
Sarasota, Florida 34236
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 954-1144
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Item 1. Changes in Control of Registrant
Name of Persons Who Acquired Control
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On March 5, 2000, Anyox Resources Inc. (the "Company") entered into a Share
Exchange Agreement (the "Agreement") with Web Partners, Inc. ("WPI") and two of
its primary shareholders, Wyly Wade ("Wade"), President of WPI, and Mark Gray
("Gray"), CEO of WPI, as well as several other interested shareholders (the
"Proxy Grantors"). The Agreement, concluded on March 15, 2000 (the "Closing
Date"), allows the Company to acquire WPI. The initial stage of the acquisition
was a share exchange between the Company, on one hand, and Wade and Gray, on the
other. The second stage will be conducted pursuant to a voluntary share
exchange offering to WPI's remaining shareholders, discussed under Item 5 of
this Form 8-K. A copy of the Agreement, along with the accompanying exhibits to
the Agreement, are attached as Exhibit 2.
As a result of the share exchange, concluded on the Closing Date, the
management of WPI will effectively take control of the Company, and the two WPI
principals, Wade and Gray, will become major shareholders of the Company and
control the appointment of directors to the Board of the Company. The Company
will change its name and trading symbol to reflect the decision to focus its
business activities solely on the web-based technologies developed by WPI.
Amount and Source of Consideration
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As part of the Agreement, Wade and Gray each exchanged 1,000,000
shares of WPI common and/or preferred shares for 4,000,000 restricted common
shares of the Company's common stock, apportioned 2,000,000 to Wade and
2,000,000 to Gray. The Company effectively acquired 57% of the issued and
outstanding shares of WPI and Wade and Gray became major shareholders of the
Company.
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Basis of Control
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The Agreement provides for Wade and Gray to control the Company on both an
interim basis and a long-term basis. On an interim basis, out of 20,028,500
shares outstanding on March 30, 2000, Wade and Gray own or control the following
shares:
Directly owned 4,000,000
Controlled pursuant to irrevocable proxy (1) 6,500,000
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10,500,000
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(1) These proxies were granted pursuant to contract by fewer than ten
persons.
Upon the pending closing of a private placement of the Company's common
stock at $0.85 per share, as discussed in the Company's Form 8-K filed with the
Commission on March 21, 2000, Wade and Gray will control the voting power of no
less than 52.4% of the Company. In addition, the Agreement permitted Wade and
Gray to designate the members of the Board of Directors. As indicated in the
Company's Form 8-K filed with the Commission on March 21, 2000, Carsten Mide and
Philip Yee resigned as directors, and successors designated by Wade and Gray
were appointed.
On a long-term basis, the Agreement requires the Company to call a special
meeting of its shareholders for the purpose of amending and restating its
Articles of Incorporation, in part to authorize the Board of Directors to
designate classes of preferred stock without the need for shareholder approval.
The Company intends to file a proxy statement with the Commission in connection
with this special meeting. Wade and Gray control votes sufficient to approve
the amendment and restatement of the Company's Articles of Incorporation. The
Agreement further provides that, upon approval of the amendment and restatement
of the Company's Articles of Incorporation, the Company shall create a special
class of preferred stock consisting of 200,000 shares that shall have the power,
among other things, to control the election of directors and any amendment of
the Company's Articles of Incorporation or Bylaws. Wade and Gray will each have
the right to exchange 100,000 shares of their common stock for 100,000 shares of
the preferred stock.
The Company is not aware of any arrangement that would upset the control
mechanisms currently in place. Although it is conceivable that a third party
could attempt a hostile takeover of the Company, the Company has not received
notice of any such effort.
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Item 2. Acquisition or Disposition of Assets
On March 15, 2000, the Company acquired 57% of the issued and outstanding
shares of WPI. Wade and Gray each exchanged 1,000,000 shares of WPI common
and/or preferred shares for 4,000,000 restricted common shares of the Company's
common stock, apportioned 2,000,000 to Wade and 2,000,000 to Gray. The Agreement
provides for a subsequent voluntary stock exchange offering in which the Company
will offer to acquire the remaining 43% of WPI's shares. The remaining
shareholders of WPI may exchange their WPI shares for shares of the Company's
common stock on the same one for two basis as Wade and Gray. In connection with
the amendment and restatement of its Articles of Incorporation as discussed in
Item 1, the Company intends to change its name to reflect its abandonment of its
prior business in favor of that of WPI.
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DESCRIPTION OF THE COMPANY
The Company, a Nevada corporation that was incorporated on July 13, 1998,
was a development-stage company engaged in the exploration of minerals. The
Company's executive offices are located at 540 North Tamiami Trail, Sarasota,
Florida, 34236 and its telephone number is 941-954-1144. As part of the
acquisition of WPI, the Company will change its name and trading symbol to
reflect the decision to focus its business activities solely on the web-based
technologies developed by WPI.
DESCRIPTION OF BUSINESS OF WPI
Overview
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WPI, a Florida corporation formed in September 1998, is a development-stage
company with its core business focused on the research and development of new
web-based technologies. WPI also provides creative production services in
connection with developing online 30-second commercial spot advertisements.
WPI's executive offices are the same as the Company's and are located at 540
North Tamiami Trail, Sarasota, Florida, 34236 and its telephone number is 941-
954-1144. Management plans to relocate its corporate headquarters to Atlanta,
Georgia during the first quarter of 2000.
Industry Overview
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Over the last several years, the marketplace has had high expectations for
business opportunities on the Internet. These expectations have been reflected
in the investments into the Internet made by traditional companies, and the
market capitalization of many new Web-based companies. The popularity of the
Internet has been well documented in recent years. The International Data
Corporation ("IDC") has estimated that there were over 51 million Web users in
the United States and over 97 million worldwide at the end of 1998. Since that
time the number has continued to grow. As a media, it is the fastest growing
new media in history reaching 50 million users in only five years. This is
compared to 10 years for cable TV, 13 years for broadcast TV and 38 years for
radio.
With an increasing number of users, the Internet is also gaining in
importance as a media for advertising. Computer time is the leading activity
that takes people away from watching television, the currently preferred means
used by advertisers to reach an audience. Yet despite the rapidly growing
Internet audience, there are still barriers that have kept Internet advertising
from reaching its full potential. Marketers are still trying to gauge Internet
advertising's overall effectiveness, and to identify which techniques are most
effective.
According to Internet Advertising Bureau ("IAB"), in 1998, $201 billion was
spent on advertising in the United States on all types of media. Of that, only
$1.9 billion was spent on Internet advertising. While this number is currently
small in comparison to broadcast television ($39.5 billion), Internet
advertising has grown quickly from about $266 million in 1996 to its current
level. According to the IAB, for the second quarter of 1999, Internet
advertising revenues reached $934 million, marking the fourteenth consecutive
quarter of growth. These
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figures mark a 35% increase over the first quarter of 1999. The second quarter
1999 figures are a 97% increase from the second quarter of 1998. At this level
of growth, the Internet advertising industry is on pace to reach $4 billion in
annual spending for 1999. (Source: IAB Internet Advertising Revenue Report, 1999
First-Quarter Results.) Still, this places the Internet far behind the majority
of sectors in the $200 billion advertising industry, including magazines, cable
TV and broadcast television. This raises the possibility of tremendous remaining
potential for Internet advertising.
The Internet is the first medium to promise an increased accountability as
to the effectiveness of an ad campaign. While tools for tracking such
information have improved, there is still no universal standard for measuring an
audience. Advertisers currently rely on a combination of three types of
standardized measurement tools to measure their return on investments and plan
future campaigns:
Site-centric - Site-based. Tracks site visitor activity when user
clicks on an ad.
Ad-centric - Ad server-based. Allows advertisers to track
effectiveness across multiple sites.
User-centric - Sample-based. Relies on panel-based sampling
techniques.
Site-centric and Ad-centric reporting are both maintained by the publishers
and ad networks, which can be a conflict of interest. Thus, measurement
auditing by an independent third party becomes essential for verification. For
reliable auditing, it is essential to have established standards. To accomplish
this, a number of organizations have been formed to address this problem. One
such organization is FAST Forward (a committee born out of Future of Advertising
Stakeholders) which released the FAST Principles of Online Audience Measurement
in early 1999. In September 1997, the IAB Media Measurement Task Force produced
a document titled "Metric and Methodology". Both propose guidelines for the
measurement of online advertising data.
Further reflecting the demand by advertisers for lessening the up-front
risk of Internet advertising is the popularity of hybrid pricing. Hybrid
pricing combines impression click-based pricing and performance-based
compensation. This provides online publishers with the up-front valuation of
its audience and with back-end revenue sharing. Advertisers also benefit by
receiving discounted up-front costs. This pricing structure may help bring new
advertisers to the Internet, who recognize the potential of Internet
advertising, but who are not yet comfortable with current methods of reaching
Web users.
Companies with a presence on the Internet, but not engaged in e-commerce,
rely on advertising as their primary, if not only, source of Internet-generated
revenue. E-commerce companies also rely on advertising to supplement their e-
commerce sales. While on-line advertising has experienced tremendous growth
during the past several years, that growth has not translated into profits for
these companies. Many advertisers and agencies are not comfortable with current
methods for advertising via the Internet, nor available audience measurement
tools. Furthermore, results of the currently preferred method of advertising,
banner ads, have been
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inconclusive at best, and show major ineffectiveness at worst. Advertisers are
generally more comfortable with traditional means of reaching their audience,
especially through print, television and radio. Still, Internet advertising is
in its infancy, and is only beginning to find its true potential.
Internet Advertising Technologies / Techniques
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Currently there are a number of Internet advertising technologies /
techniques in use. The most prominent techniques are banner ads, sponsorship,
interstitials and emails. Banner ads are most prevalent. Emails to customers,
while the least employed technique, have been measured to be the most effective
in eliciting a response from the customers.
Banner Ads. Banner ads are typically inch-high "banners" that are found on
the top or bottom of a Web page. They can contain a company name, logos,
pictures and slogans. They can be static or animated with moving characters or
pictures. When a user clicks on the banner it takes the user to another Web
site. Although they are the most commonly employed form of Internet
advertising, they are the least likely to elicit a response.
Sponsorships. An advertiser may choose to "sponsor" a Web site, helping
the online publisher by funding the site in exchange for advertising. This
typically requires an up-front payment by the advertiser, whether or not there
is a sale generated by the advertising. Sponsorships provide a valuable
association between brand and content.
Interstitials. Interstitials are advertisements that appear as Web users
switch between Web pages. Interstitials are the industries first answer to the
lack of audio and video in Internet advertising. However, interstitials have
grown out of favor with consumers as they may take as long as two minutes to
download. Current interstitials require substantial download time and therefore
may degrade a user's speed of receiving other web content. Therefore, many
portals require such interstitial ads to be "click-based" where a user must
request the ad.
Email. Email is one of the cheapest and most effective methods of Internet
advertising. Emails offer advertising directly to select customers. Yet,
emails only comprise a very small percentage of Internet advertising. This is
due to the intrusiveness of the email to consumers, and the resistance by
consumers to "spam" and clutter.
Others. Other forms of Internet advertising include superstitials, rich
media expanding banners and affiliations. Superstitials are interstitials that
reduce download time by downloading to a Web user's browser's short-term memory.
Rich media banners include video and audio to bring information to the consumer
without leaving the current Web site. Affiliate deals split an advertiser's
revenues with a Web site operator in exchange for free advertising. Still,
these forms of advertising are restricted by there own disadvantages. For
instance, superstitials still require download time and move the Web user from
their original Web site. Rich media banners require download time, cover Web
site content, and have been reported to cause Web sites to crash. (Source:
"Advertising that clicks", The Economist, October 9, 1999, pp. 71-73.)
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The WPI Solution
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WPI's technology toolkit fills the needs of both Internet companies and
advertisers. WPI's array of technologies was designed to deliver a complete
online advertising platform. The system is comprised of a 30-second commercial
for major brand advertisers, and a system of audience measurement and commercial
delivery verification. This platform provides familiar media advertising tools
for major brand managers, coupled with the interactivity of the Internet.
CyberSpots are 30-second online, interactive-multimedia commercial spots, which
reach the audience quickly and with minimal interruptions using WPI's Instant On
User Interface technology. Delivery Verification Technology allows for the most
advanced feedback to measure the delivery of each advertisement. By offering
CyberSpots, Internet companies can provide effective and measurable advertising
to advertisers previously reluctant to participate in Internet advertising. WPI
helps Internet companies realize greater revenues. WPI products and services
also help advertisers reach Web users via a method more similar to traditional
means of reaching the audience, while being able to measure the results of the
advertisement to a degree not available by any other method.
WPI's Products
Instant On User Interface ("IOUi"). IOUi is a Web-based software
technology developed by WPI. Version 1.1 of the technology has been developed
to support popular browsers without the use of media players, plug-ins or
software attachments of any type including the following platforms: HTML 3, HTML
4, Perl, JAVA and JAVAScript. Management plans to develop Version 1.2 to
support popular browsers in concert with media players including the following
platforms: Flash and SMIL. Version 1.3 is also in development and plans to
support XML among other media enhancements.
The operating methodology allows a Web user to access specialized content
in a number of formats from a Web server with little or no delay across multiple
networks at most modem speeds (28.8 and above). One of the proprietary
applications of the IOUi technology is the CyberSpot.
IOUi technology is a unique combination of existing Web technologies
requiring no specialized hardware, browser or player software. Deployment of
content utilizing IOUi requires no modification of standard PC, Macintosh or
WebTV platforms in order to receive "instant on" content delivery. The
technology lives solely on a proprietary CyberSpot server.
CyberSpots. CyberSpots are Web-based commercial spots, typically 30
seconds in duration, although shorter or longer formats may be supported. The
commercials may be automatically launched in a number of applications, including
when a user clicks on a banner ad, or when a user enters a Web URL containing a
link to a CyberSpot server. Additionally, CyberSpot may be launched at any
point when a user must wait online, such as during an E-Commerce credit card
authorization or while down loading a file.
Commercials in beta testing loaded and commenced autoplay in less than two
seconds, with all modem speeds tested (28.8 or better), using popular browsers.
The CyberSpot technology empowers the advertiser (at the advertiser's option) to
take control of the user's
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browser for the duration of the commercial, making play of the CyberSpot
"uninterruptable". Should advertisers wish to allow users to exit their
CyberSpot commercial prior to completed play, the advertiser may elect to enable
a user exit button. Utilizing the IOUi technology, the Web site is downloaded in
the background during the playback of a CyberSpot. This has the net effect of
allowing full use of the commercial playtime for site content download and / or
site navigation. The end result is the virtual elimination of "world wide wait"
delays online.
CyberSpot creative treatments for advertisers and / or site operators are
produced in a proprietary methodology. The commercials may be displayed in an
array of sizes and resolutions ranging up to full screen. Additionally,
CyberSpots have the ability to playback many sub-components, which may include
certain types of audio tracks including music.
Delivery Verification Technology ("DVT"). DVT is separate from the IOUi
technology and the CyberSpot copyrighted commercial methodology. Developed by
WPI, DVT provides the first online advertising measurement system that verifies
audience reach and spot delivery. Television advertisers rely on Nielsen /
Arbitron audience measurement systems that are estimated from electronically
gathered survey samples. Print advertisers rely on audited circulation
distribution of periodicals without confirmation of specific ad viewership. The
CyberSpot DVT rises to the level of certified mail return receipt confirmation.
The technology operates via a return verification message that is triggered from
the online users PC, Mac or WebTV once the CyberSpot has been received and fully
played.
DVT provides advertisers with reliable, real-time confirmation of audience
reach and spot delivery. The CyberSpot DVT allows multiple measurement points
at the commencement, completion and key measurement points throughout the
CyberSpot commercial. In essence, the CyberSpot DVT allows audience monitoring
of spot commercials on a scaleable level of detail.
The CyberSpot DVT relies on completed spot playback, not simply file
receipt, to trigger its proprietary return message system, giving advertisers
complete audience measurement and spot delivery verification.
Target Market and Distribution
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Specific markets and client groups identified by WPI include advertising
agencies, advertising measurement companies, Internet portals, e-commerce
companies and consumer product companies with a desire to optimize their
Internet presence. WPI plans to market its technologies through licensing
agreements with companies that have existing sales and service infrastructure.
WPI does not plan to sell online advertising directly to end-users or compete
directly with its distribution channels.
Internet Advertising
WPI has developed unique CyberSpot sponsorship formats, which provide the
least intrusive user experience. Market research studies have demonstrated
increased ad retention from program sponsorship spots to be greater than other
Internet adverting medium. Furthermore, online sponsorship, as a promotional
tool, has increasingly grown in recent years.
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Advantages to online sponsorship include the following: (1) a lower cost
alternative for companies primarily seeking branding / awareness; (2) they are
fixed, which results in a higher possibility of ad exposure for the advertiser;
and (3) they offer the advertiser exclusivity and the right of first refusal for
future opportunities.
Traditional advertising agencies are currently in a rapid expansion of
their Internet advertising services. In her introductory address as the
American Association of Advertising Agencies' (AAAA), incoming Chairman, Shelly
Lazarus, called the Internet "the greatest new medium since television." Ms.
Lazarus' agency, Ogilvy & Mather Worldwide, spawned its own interactive media
arm, Ogilvy Interactive, which, according to Ms. Lazarus in the agencies' Annual
Report, grew 600% in 1998. Due to the integration of advertising mediums,
Ogilvy Interactive is Ogilvy's single fastest growing division. Other
traditional advertising agencies, including Young & Rubicam Inc., Cordiant
Communications Group plc, and Grey Advertising, Inc., have reported significant
acquisitions or growth in their Internet advertising divisions. These companies
are actively pursuing opportunities to establish and grow their Internet
advertising services in order to provide their clients with an "integrated"
advertising solution. Internet advertising allows the agency to reach a mass-
market while at the same time providing a customizable pitch.
Web Boutique Firms
The traditional advertising agencies are not the only potential customers
in this field. Web boutique firms, such as DoubleClick, 24/7 Media and Flycast
Communications, have established themselves as leading providers of Internet
advertising technology, and planning and tracking online media campaigns. While
these companies currently offer products that might compete with WPI,
deficiencies in current online advertising delivery and measurement may render
them potential customers of WPI's improved technology.
Advertising Measurement Companies
DVT attempts to track for advertisers the number of times their
advertisement is viewed. One of the main reasons advertisers are not spending
more money on online advertising is that they have not been able to get an
accurate accounting of ads delivered.
Some of the technological challenges facing the market result from the
reliance on server-based tracking. When Web users call up a page, they may not
wait for all ads and content to load. The user might never have seen an ad
fully displayed. A server tracking system would count the above example as a
"hit" or "page viewed". In other instances, content never arrives and appears
as a "server busy" on-screen message or simply locks up. Online advertisers
have constantly been dealing with the issue of ad delivery confirmation. Drop-
off rates are as high as 42% between ads that were served but never arrived at
the browser, according to a study by OgilvyOne and Thinking Media published in
the August-September 1999 issue of The Advertiser, the magazine of the
Association of National Advertisers. In addition, the confirmation of display
duration is another potentially important measure for online ads just as it is
for broadcast.
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Another server-based tracking shortcoming is related to caching. Caching
is the local storage of recently viewed Web pages for faster access. When the
user wants to revisit a Web page, the browser doesn't need to retrieve the full
page from the Internet. Internet Service Provider's ("ISP's"), such as AOL,
regularly "cache" Web content and later serve the site to multiple users. This
process causes the underreporting of the number of times a viewer actually views
a Web page or an ad. The server-based technical approach to accurately
retrieving such data is not fully developed, leaving opportunities for existing
or new companies to introduce improved products.
WPI's DVT is a client-based tracking system. It provides advertising
measurement companies with a more reliable standard for audience measurement
than the current server-based systems. WPI's DVT licensees can offer their
clients confirmation that Web pages, banner ads and CyberSpots have been fully
downloaded and displayed on each unique user's terminal. Furthermore, the DVT
measures pages that did not load on the user's desktop, measures those pages
that are cached, and tracks user interactivity with loaded Web pages using an
active message back technology. These real-time verifications can be
incorporated into the company's billing and accounting system, saving the
company the costs and time needed to bill its clients.
Other DVT Uses
DVT also has potential commercial applications outside measuring the
delivery of advertisements to consumers. For example, DVT can be used to notify
email senders that an email has been delivered to the recipient's email address.
This is particularly applicable to email delivery outside an organization or
email provider. Another potential application for DVT involves fraud detection
and prevention. DVT can be used to monitor the loading of software and report
back to the developer that the software has been loaded on a particular
computer. The developer can then determine whether the software was reloaded on
other computers. DVT can also be used to determine if multiple copies of the
same licensed software are running at the same time. Finally, DVT may also be
used to verify copyright and content usage. For example, DVT can measure how
many times a licensed article has been loaded on a licensed site.
E-Commerce Companies
According to Forrester Research, Inc., Internet commerce in the trade of
hard goods will grow from $43 million in 1998 to $1.3 trillion by 2003, or an
annual growth rate of 99%. Currently, computing and electronics companies lead
the trade. However, these increases should be realized in all industries from
cars to utilities to food and agriculture.
Companies entering Internet commerce face two challenges: (1) the cost of
setting up and maintaining the site and (2) building the brand recognition to
draw customers to the site. The WPI technology toolkit can aid these companies
with their Internet commerce challenges.
Building the brand name must extend beyond the boundaries of the company's
Web site. WPI's products can help the company to offer a complete, cross-
medium, marketing strategy that encompasses the customer response and
advertising efficiency measurements detailed in the above agency and measurement
company descriptions. Furthermore, online companies have
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unique advantages over other retailers. First, Web users accessing an e-commerce
site are typically looking for information or making a purchase. For those
looking for information, the CyberSpots offer the best way to inform the
consumer about the products using an audio and visual message. These are
particularly helpful in customer retention of information, further enhanced by
the fact that the customer sought out the information, and is therefore more
attentive to the message than the average television viewer would be to a
traditional commercial. Another advantage of the online retailer is provided by
the download times available while the company performs such tasks as credit
card verification. A company can further develop its brand by providing to the
customer information about new or related products, or customer service
information. WPI's measurement tools help the company to monitor which products
or services elicit the most responses. These CyberSpots help the company to
target and broaden its product offerings, increase sales, and promote repeat
business through better service.
Part of the expense of setting up and maintaining an Internet commerce site
is tied to marketing costs. Aside from WPI's pricing structure that helps the
company to limit its up-front risk and expense, there are unique revenue
opportunities offered by the CyberSpots. One way to recoup the costs of
Internet commerce would be to cross-market targeted products. For instance, an
airline makes a sale to a customer for two tickets to Aspen, Colorado. While
the airline is confirming the customer's credit card and frequent flier program
information, a cross-marketed CyberSpot plays to the customer promoting area
hotels or ski packages. This offers an e-commerce company the opportunity for
increased revenues to offset the cost of initiating Internet commerce.
Furthermore, WPI's advertising measurement tool enables the company to monitor
that the promotions were fully received, viewed and interacted with by a
consumer.
Market Risks
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The market risks facing the Internet industry as a whole, and WPI in
particular, can be segregated into industry risks and technology risks.
Industry Risks
Unrealized Growth. Use of the Internet and Internet advertising is
projected to grow rapidly. However, there is no guarantee that these
projections will come to fruition, or that WPI will realize similar growth
rates.
Privacy Concerns. Privacy concerns raised by some Internet commentators,
advocates and government bodies could place restrictions on the use of Internet
tracking and may limit industry targeting capabilities.
Internet May Not Be Effective Advertising Medium. Internet advertising
companies compete with traditional advertising mediums (e.g. television, radio)
for shares of advertisers' spending. As Internet advertising measurement
technologies increase, advertisers may find that the Internet is a limited or
ineffective medium. Reluctance by advertisers to expend significant portions of
their advertising budgets on the Internet may limit industry growth.
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Costs of E-Commerce. In addition, the costs of establishing Internet
commerce sites and brand recognition may cause potential retailers and
advertisers to decide not to pursue an Internet commerce strategy. Reductions
in Internet commerce might also adversely affect Internet advertising.
Other Risks. There are other industry risks to consider as well. It is a
possibility that users will find that CyberSpots are more intrusive than current
Internet advertising formats. If this is the case, advertisers may choose not
to accept CyberSpots as a viable format. Also, there is the constant risk that
new competitors will enter the industry with lower cost, more advanced
technology. Finally, WPI will need to add human resources in order to keep up
with advancements in its technology and increased demand. In the current
employment market, there is the possibility that it will be difficult to find
enough technically qualified individuals to meet its needs.
Technology Risks
The Internet promotes and is a product of rapidly changing technology. New
technologies, standards and customer demands may make the technology currently
relied on for Internet advertising obsolete. Changes in technology and
protocols may require additional expenditures to adapt products to the new
marketplace. Software that filters the information and graphics presented to
Web users may be further developed, requiring additional product updates and
advancements. Furthermore, Internet companies depend on the reliability of the
Internet infrastructure. Significant breakdowns in the Internet infrastructure
might lower confidence in the medium and adversely affect the industry.
There are other technological risks to consider as well. Concerns over the
fallibility of information technology resources are an ever-present reality. As
CyberSpots and DVT become more widely used, there is always the issue of
maintaining the servers to handle projected advertising volume. Finally, as
Internet user tracking becomes more developed, concerns over security may cause
regulators to place certain restrictions on this technology. Until, and if, WPI
is granted patent protection for its technology there will continue to be the
risk that a competitor could reverse engineer its technology.
Government Regulation
WPI is subject to the same federal, state and local laws as other companies
conducting business on the Internet. Internet commerce is subject to direct
regulation by the Telecommunications Act of 1996, as administered primarily by
the Federal Communications Commission. Additionally, consumer protection laws
such as the Telephone Consumer Protection Act and the Telemarketing and Consumer
Fraud and Abuse Prevention Act, as well as applicable state and provincial law
may regulate or restrict Internet commerce. While much of Internet content is
constitutionally protected in the United States, obscene content violating the
provisions of Miller v. California is prohibited. Additional regulation is
possible and likely concerning Internet transactions that are international in
origin or termination. In 1996 the United States Congress passed the
Communications Decency Act (CDA). The CDA has created a defense for online
service providers from civil liability for content they did not create.
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Due to the increasing popularity and use of the Internet and online
services, it is possible that a number of laws and regulations governing
domestic Internet transactions will be adopted with respect to the Internet or
online services. These laws and regulations could cover issues such as online
contracts, user privacy, pricing, fraud, content and quality of products and
services, taxation, advertising, intellectual property rights and information
security. The applicability to the Internet of existing laws in various
jurisdictions governing issues such as property ownership, copyrights and other
intellectual property issues, taxation, and personal privacy is uncertain and
may take years to resolve. The vast majority of these laws were adopted prior
to the advent of the Internet and related technologies and, as a result, do not
contemplate or address the unique issues of the Internet and related
technologies. Those laws that do reference the Internet, such as the recently
passed Digital Millennium Copyright Act, have not yet been interpreted by the
courts and their applicability and reach are therefore uncertain. WPI is not
aware of any legal determination to date that has been made with respect to the
applicability of state regulations to its online business and little precedent
exists in this area. One or more states may attempt to impose these regulations
upon WPI in the future, which could harm its business. In addition, as the
nature of the products listed by WPI's users changes, it may become subject to
new regulatory restrictions.
Because WPI's services are accessible worldwide, if WPI facilitates sales
of intellectual property to users worldwide, foreign jurisdictions may claim
that it is required to comply with their laws. If WPI develops international
activities, it may become obligated to comply with these laws. Compliance may
be more costly or may require WPI to change its business practices or restrict
its offerings relative to those in the United States. WPI's failure to comply
with foreign laws could subject it to penalties ranging from fines to bans on
its ability to offer its products.
Sources of Revenue
------------------
WPI intends to generate revenue from licensing fees, creative / production
fees and a technology license-based on a cost-per-play model. WPI plans to
produce and distribute CyberSpot production software that will enable global
production of CyberSpots by advertisers, agencies and web development firms.
WPI plans to license its family of technologies within the U.S., Asia and
Europe.
WPI's revenue model currently focuses on four distinct revenue drivers: (1)
the development of CyberSpot ads, (2) the delivery of CyberSpot ads, (3)
CyberSpot enterprise licensing and (4) DVT licensing. The following sections
provide more specific information on each driver.
Ad Development Fees / Creative Services. Clients are charged an hourly
rate plus materials to build CyberSpot ads. This is standard practice in the
advertising industry. The estimated cost to an advertiser for the development
of a CyberSpot ad ranges from $10,000 to $30,000. With the development of WPI's
proprietary CyberSpot production software, advertising agencies and development
firms may bring production in-house.
14
<PAGE>
CyberSpot Delivery. In addition to the development fee, advertisers are
responsible for a per-play license fee. The per-play fee is volume sensitive.
DVT Industry Licensing. DVT has begun to develop into a stand-alone
product. WPI has received requests for information from several audience
measurement companies, including Nielsen Media Research, Arbitron and Media
Metrix. However, it is too early in the process to ascertain the eventual
outcome of these discussions. In order to provide the complete solution that
the advertisers need, WPI intends to license the DVT technology to one or two
major measurement companies such as Nielsen Media Research, Arbitron or Media
Metrix. Combining DVT with these type organizations and their extensive
measurement backgrounds and infrastructure could position DVT as the standard
for online advertising measurement.
WPI anticipates that the DVT license agreements will include a technology
transfer fee plus an ongoing royalty. The royalty will be based on either a per
measurement occurrence or a percentage of applicable revenues. WPI's
projections currently do not include any revenue from potential DVT Licensing.
However, the projections do incorporate a full-time DVT Team whose
responsibilities will include identifying and developing new markets.
CyberSpot Licensing. One of WPI's strategies involves licensing its
technology toolkit to e-commerce groups, ad agencies, web developers, portals,
etc. These groups can use the technology to develop customized CyberSpots
regarding their sites, products and organizations. For example, an automobile
manufacturer can create a CyberSpot that allows a web surfer to instantly (two
seconds) download and start playing video-like images, audio and text
information on a particular car. The CyberSpot can also be made interactive,
thus allowing the surfer to change colors, interiors and other options. WPI
intends to distribute this product for free primarily through the Internet and
to license each user. WPI also intends to charge the licensee on a per play
model. CyberSpots produced by licensees will be hosted by WPI or its strategic
ad delivery partner. WPI also intends to provide product training and technical
support to licensees. WPI does not currently plan to sell the toolkit through
retail channels.
Primary Expenses
----------------
Each revenue driver, ad production and CyberSpot per play, has an
associated variable cost. Ad production variable costs are comprised entirely
of human resources. A certain number of personnel are needed to produce and
test each ad. Ad production / CyberSpot Account Executives, Project Managers
and Creative Directors can manage the development of eight ads per month. Ad
production Senior Developers, Code Writers and Graphic Artists can produce four
ads per month. One Audio Engineer can produce ten ads per month. Once per-
month ad production levels exceed each group's capacity, additional personnel
will need to be hired. The remaining ad production team is comprised of a
Quality Assurance Manager, a Senior IT Engineer and a Senior IT Manager. The
number of personnel in this group is not as directly influenced by the number of
ads produced.
DVT variable costs are also comprised entirely of human resources. The DVT
team will be responsible for marketing the DVT technology and identifying
additional applications for the technology. The DVT team is not anticipated to
include more than seven people. Finally, the
15
<PAGE>
CyberSpot per play variable cost is comprised of the fee charged by the ad
delivery strategic partner. This fee is currently estimated at $0.005 per play.
The development of the toolkit is the largest expense item included in the
operating expenses. Executive and Operational team salaries and benefits,
CyberSpot licensee technical support, legal fees and advertising also account
for a significant portion of the operating expenses. Travel is dependent on the
number of employees, while legal fees and advertising are a percentage of total
revenue.
Competition
-----------
WPI's competition in the online advertising industry comes from three
primary groups: (1) rich media companies, (2) advertisement delivery / sales
companies and (3) advertisement measurement companies. This is a young industry
with a majority of its players being formed within the last two to three years.
The growth of this industry has created opportunities for media and technology
companies. Some of these companies are developing and testing a number of new
banner advertising technologies, which are designed to make the traditional
banner ad more flexible, advanced and effective. Generally referred to as "rich
media," these ads incorporate an expanding array of animations, audio, pull down
menus, pop-up boxes and interactivity. While some companies are developing this
new banner technology, other companies are focusing on ad outsourcing and
placement services and still others are creating new technologies to better
track Internet advertisements.
Rich Media
The advertisement industry defines rich media as messages that contain more
sophisticated programming than the "plain-vanilla" banner ads. The most popular
form of rich media is Java applets, which can be read by browsers that are used
by more than 90% of the Web users. Less than 0.5% of Web users surveyed said
that they clicked on banner ads, while rich media banners with sound, 3-D
graphics and interactive capabilities have experienced up to 15% click-through
rates, according to a recent IAB survey.
The greatest problems experienced with rich media advertisements are that
they are slow and unreliable, which keeps many Web sites from running rich media
advertisements. Some top sites still will not accept rich media, and at least
half of the top sites still refuse to accept rich media ads from third-party ad
servers such as DoubleClick, 24/7 Media and CMGI's AdSmart. ZDNet and
EarthWeb's Developer sites insist on serving their own rich media ads, and CNet
refuses to take any Java ads at all, according to Valandra.
Yahoo! is another site that has been reluctant in accepting rich media ads,
including those with Shockwave technology. The portal does accept ads with
HTML, JAVAScript and JPEG images, and puts Flash, Enliven and Intervu ads on
selected areas of its site.
According to Anil Singh, Yahoo!'s chief sales and marketing officer, Yahoo!
selectively places rich media ads in the portal's news section. This is based
on audience research that has found that most of the area's visitors have the
capabilities to experience the ads. However, rich
16
<PAGE>
media technologies offer more capability than what the existing networks can
handle, says Jim Nail, an analyst at Forrester Research. Rich media companies
will have to find solutions to deal with the limitations of existing networks
for the next several years. In fact, the new broadband technology will only
reach about a quarter of the Internet population by 2004.
Meanwhile, many advertising companies are working to improve rich media
solutions so that even Web surfers with a 28.8-Kbps modem connection can
download the ads fast and reliably. Below are some of WPI's competitors who are
making efforts to do just that:
Unicast's Superstitial(TM) - is an advertisement that downloads the rich
media content onto a viewer's hard-drive cache while a Web page is being viewed.
When the viewer clicks on one of the internal links on the site, a rich media ad
(e.g., a movie preview) will pop up and read its content from the cache. Once
the ad has finished playing, the content is flushed out of the cache. This
player-based technology requires substantial download time and is in its second
year of beta testing. Superstitial(TM) has been tested by a number of portals
and, due to the lengthy download time, is not automatically playable, but is
available only when a user "requests" a commercial. (www.unicast.com)
iWeb's iNotes(TM) - has patent-pending technology enabling ISP's to deliver
rich media advertisements, e-commerce announcements and customer service
messages directly to subscribers' screens whenever and wherever they are online,
irrespective of the Web site they are visiting. The technology does not require
the download or installation of application software. Since iNotes(TM) messages
do not depend on the Web page being viewed, ISP's and advertisers can directly
target their audiences based on demographics and geography. (www.iweb.com)
Enliven(R) - is a rich media advertisement that utilizes Macromedia(R)
Director(R) to provide multimedia and interactivity capabilities including
animation, sound and video, all within the host site. Enliven(R) uses streaming
media, which downloads the beginning of the file, starts playback and then
streams the remainder of the file in the background while the file continues to
play. (www.enliven.com)
Advertisement Delivery / Sales
Advertisement delivery / sales companies manage their customer's online
advertising and marketing efforts from start to finish. These companies
maintain a sales force, deliver targeted advertising to their client's site,
control an advertiser's reach and frequency, deliver reports of advertiser
performance, and manage invoicing and payment. By alleviating these efforts,
companies can focus on developing and maintaining their sites and other aspects
of their business. A majority of smaller companies do not have the resources
available to perform an effective sales operation, therefore advertisement
delivery / sales companies have the ability to increase their customer's site
revenues and profits through broadening the ability to reach potential
advertisers. Below are brief descriptions of some of the companies who perform
these services:
DoubleClick, Inc. - provides comprehensive Internet advertising for
marketers and Web publishers by selling advertising space on approximately 1,300
Web sites and delivers those ads
17
<PAGE>
using its Dynamic Advertising Reporting and Targeting ("DART") patented
technology. DoubleClick's DART tracks and reports audience behavior to predict
which ads will get the most response and makes sure potential buyers see ads
they're likely to find appealing. The technology also provides detailed reports
of Web traffic and ad effectiveness for both advertisers and Web publishers.
Thereby combining technology and media expertise, DoubleClick centralizes
planning, execution, control, tracking and reporting for online media campaigns.
(www.doubleclick.com)
24/7 Media, Inc. - is an Internet advertiser and marketer who provides
online ad outsourcing services to Web site operators and online ad placement
services to advertisers. More than 300 Web sites, which form the 24/7 Network,
contract exclusively with 24/7 Media to outsource their online advertising
functions. The company also provides online ad outsourcing to ContentZone, a
group of more than 2,500 small to medium-sized Web sites. Furthermore,
advertisers and ad agencies contract 24/7 Media to create online ad programs,
which are carried by members of its 24/7 Network and ContentZone. The company
offers banner ads, direct email, sponsorships, promotions and e-commerce
services. (www.247media.com)
Advertising Measurement Companies
The majority of the companies currently offering Internet advertising
verification use server-based tracking systems. However, new technologies are
being developed which now allow advertisers to better track the results of
Internet advertising. Specifically, Thinking Media now offers a client-based
system that could directly compete with WPI's DVT. Below are brief descriptions
of some of the companies who have developed tracking technology:
Thinking Media's ActiveTrack(SM) - uses a patented technique called
"Client-Side Tracking." This real-time tracking and reporting system confirms
the delivery of the ad to the browser (not the server), the duration of the ad's
display, and other key measurements. ActiveTrack(SM) uses an executable file, or
program, which loads into the browser along with the ad and vanishes when the
viewer leaves the page on which the ad appears. ABC Interactive confirmed that
the ActiveTrack(SM) technology works and that the data delivered and measured by
Thinking Media is auditable. (www.thethinkingmedia.com)
Nielsen // NetRatings - audience measurement and analysis service is
jointly offered by Nielsen Media Research and NetRatings, Inc. Nielsen //
NetRatings' audience tracking technology provides the ability to automatically
measure ad banner viewing and clicking (BannerTrack), e-commerce activity
(CommerceTrack), cached page views (CacheTrack), page loading times, and user
demographics. (www.nielsen-netratings.com)
WPI's Competitive Advantage
The most frequently used form of online advertising is the inch high banner
ad. Banner ads can be either static or animated and, when clicked, take the user
to another Web site. While banner ads are the most ubiquitous form of
advertising, they are also the least likely to elicit a response with "click-
through" rates averaging less than 0.5%. Banner content is limited to its
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<PAGE>
inch high container, while CyberSpots are full screen dynamic, multimedia Web
commercials that load and play in less than two seconds.
Other forms of online advertising currently used include rich media
superstitials, interstitials and expanding banners and sponsorship. Rich media
ads account for less than 5% of all online advertisements and are generally
considered slow to download and unreliable. Furthermore, certain top sites will
not accept rich media ads or will place them on a special page. CyberSpot
incorporates all of the advantages of the rich media form including video-like
images, audio and interactivity and none of the disadvantages. Since CyberSpots
load and commence play in less than two seconds, there is no "world wide wait"
for the ad to be played. Furthermore, the small "foot print" of CyberSpot, in
terms of file size, allows for greater speed and reliability without degrading
the content provider's Web page load time. WPI has also developed unique
CyberSpot sponsorship formats which will provide the least intrusive user
experience.
Intellectual Property
---------------------
WPI has filed for U.S. patent protection for a family of technologies that
include its IOUi, CyberSpots, and DVT technologies. WPI relies on a combination
of copyright and trademark laws, trade secrets, software security measures,
license agreements and nondisclosure agreements to protect its proprietary
rights. Much of WPI's proprietary information may not be secured by means of
patent, copyright, domain registration, or trade or service mark.
WPI's ability to enforce its rights will be critical to its success once it
has established an identity and reputation with advertisers and Internet users.
To date, WPI has not received notification that its services or products
infringe the proprietary rights of third parties. Third parties, however, could
make such claims of infringement in the future. WPI cannot be certain that
others will not develop substantially equivalent or superseding proprietary
technology, or that equivalent services will not be marketed in competition with
its services, thereby substantially reducing the value of its proprietary
rights. Furthermore, there can be no assurance that any confidentiality
agreements between WPI and its employees or any license agreements with its
customers will provide meaningful protection for its proprietary information in
the event of any unauthorized use or disclosure of such proprietary information.
19
<PAGE>
Employees
---------
Growth in human resource needs is driven almost entirely by ad production.
WPI also wants to finish putting in place a comprehensive and experienced
executive team. The total number of personnel is expected to grow to 111 by
year three. The following table summarizes the number of personnel by year:
<TABLE>
<CAPTION>
Division Year 1 Year 2 Year 3
- -------- -------------- -------------- --------------
<S> <C> <C> <C>
CyberSpot Team 29 59 68
DVT Team 7 7 7
Executive Team 8 8 8
Operational Team 28 28 28
TOTAL EMPLOYEES 72 102 111
</TABLE>
The operational infrastructure needed to support the revenue drivers is
heavily dependent on human resources. WPI intends to outsource key functional
areas to strategic partners. Its current business model also does not include
the development of an ad sales force. Its plan is to rely on strategic partners
to provide this function. The following sections discuss some of the key
operational areas in more detail.
Ad Delivery
Reliable ad delivery services to web sites is critical to the success of
WPI. Ad delivery is a complex and labor and capital intensive process. The
typical ad delivery infrastructure includes both ad servers and software, a
media buy / sell team and a traffic management team. WPI has concluded that the
time and resource commitments needed to build the ad delivery infrastructure
would distract it from its core business strengths. Therefore, WPI intends to
outsource this function to a strategic partner such as DoubleClick or 24/7
Media. These groups already have the technology and human resource components
in place to manage the ad delivery infrastructure.
CyberSpot Ad Development Team
The success of WPI's business model and the financial projections are
heavily dependent on its ability to produce CyberSpot ads. The production of
ads is a labor-intensive process that requires a team of individuals working
together. In order to meet its ad production goals, WPI will need to hire and
train approximately 70 new people. WPI has already established a relationship
with a college in Sarasota that has developed a curriculum around its
technology. The curriculum provides graduates with the basic technology tools
needed to develop CyberSpots.
20
<PAGE>
Software Development Team
WPI's business model also involves the development of a software toolkit
that will allow ad agencies, web developers, etc. to build their own CyberSpots.
WPI anticipates providing the toolkit at no cost to licensees, but requiring the
user to enter into a per play license agreement. The toolkit will be developed
either internally or in partnership with a major software developer such as
Adobe.
Item 5. Other Events
DISCLOSURE OF VOLUNTARY SHARE EXCHANGE
During the month of April, 2000, the Company intends to commence a
voluntary share exchange offering whereby the remaining shareholders of
1,700,000 shares of WPI common stock may exchange their shares on a one-for-two
basis for shares of the Company's common stock. The Company intends to leave
the voluntary share exchange offering open for approximately one month.
The common stock to be offered in the voluntary share exchange offering
will not be registered under the Securities Act of 1933 and may not be offered
or sold in the United States absent registration or an applicable exemption from
registration requirements. The Company will offer to each remaining shareholder
of WPI two shares of its common stock in exchange for each share of common stock
of WPI. No shareholder of WPI can be compelled to exchange their shares in the
voluntary share exchange offering. The common stock of the Company will be
exchanged solely for the common stock of WPI held by existing shareholders of
WPI. No money or other consideration will be offered or accepted. The common
stock of the Company to be offered will not be registered with or approved by
any state securities agency or the Commission and will be offered and sold
pursuant to an exemption from registration.
The Company issued a press release with respect to the voluntary share
exchange on March 6, 2000, a copy of which is attached as Exhibit 99.1 to this
Form 8-K.
APPOINTMENT OF NEW DIRECTOR
Effective March 22, 2000, the number of directors comprising the Board of
Directors of the Company was increased from four to five. Mark Burchill was
appointed to the Board of Directors.
Mr. Burchill was a founding partner of 24/7 Media, one of the largest
global Internet marketing companies and the largest Internet advertising
network. Upon his departure in January, 2000, 24/7 Media had 42 offices in over
20 countries and a market cap of over $1.4 billion. Mr. Burchill is credited
with growing the network into one of the largest-reach vehicles on the Internet
as well as expanding 24/7 Media's presence around the world to Europe, Asia and
Latin America.
In 1995, he co-founded Petry Interactive, an Internet marketing company,
which was one of the three companies that merged to become 24/7 Media. As the
Director of Strategic Development for Petry Media in 1994, Burchill lived and
worked in Hong Kong, laying
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<PAGE>
the groundwork for a joint venture Asian ad sales company with Pearson PLC. Mr.
Burchill began his career in the media department of Young & Rubicam in New York
where he worked on top national and local accounts such as Colgate-Palmolive,
American Home Products and NYNEX. Mr. Burchill holds a Masters of Business
Administration from UCLA.
The Company issued a press release with respect to the addition of Mr.
Burchill as a director on March 22, 2000, a copy of which is attached as Exhibit
99.2 to this Form 8-K.
Item 7. Financial Statements, Pro Forma Information and Exhibits
Financial Statements
--------------------
Accompanying this Form 8-K are the financial statements of WPI required by
Regulation S-B, Item 310(c).
Index to Financial Statements of WPI
<TABLE>
<S> <C>
Report of Independent Auditors, dated October 29, 1999.................................................................. F-1
Balance Sheets as of January 31, 2000 (unaudited) and October 25, 1999.................................................. F-2
Income Statements for the three months ended January 31, 2000 (unaudited) and the period ended October 25, 1999......... F-4
Statements of Cash Flows for the three months ended January 31, 2000 (unaudited) and the period ended October 25, 1999.. F-6
Statement of Stockholders Equity for the three months ended January 31, 2000 (unaudited) and the period
ended October 25, 1999.................................................................................................. F-8
Notes to Financial Statements for the three months ended January 31, 2000 (unaudited) and the period ended
October 25, 1999........................................................................................................ F-10
</TABLE>
Pro Forma Financial Information
-------------------------------
The pro forma information required by Regulation S-B, Item 310(d), will be
filed by amendment shortly.
22
<PAGE>
Exhibits
--------
2 Share Exchange Agreement, dated as of March 5, 2000, by and
between Wyly Wade and Mark E. Gray, Carsten Mide, Web Partners,
Inc., and Anyox Resources Inc.
3.1 Articles of Incorporation, dated July 10, 1998*
3.2 Bylaws, dated July 18, 1998*
99.1 Press release on Anyox Resources Inc.'s acquisition of Web
Partners, Inc., dated March 6, 2000
99.2 Press release on naming Mark Burchill a member of the Board of
Directors of Anyox Resources Inc., dated March 22, 2000.
* Incorporated here by reference from the Company's Form 10-SB filed
with the Commission on June 24, 1999 as Exhibit No. 2 (A) and Exhibit No. 2 (B),
respectively.
Item 8. Change in Fiscal Year
Effective March 15, 2000, WPI has changed, by resolution of the Board of
Directors, its fiscal year end from the last Monday in October to June 30th in
order to correspond with the fiscal year end of the Company.
23
<PAGE>
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.
ANYOX RESOURCES INC.
Dated: March 30, 2000
By: /s/ Santu Rohatgi
------------------------------
Name: Santu Rohatgi
Title: President
24
<PAGE>
[LETTERHEAD OF CHRISTOPHER, SMITH, LEONARD, BRISTOW, STANELL & WELLS, P.A.]
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Web Partners, Inc.
We have audited the accompanying balance sheet of Web Partners, Inc. (a
development stage enterprise) at October 25, 1999 and the related statements of
operations, stockholders' equity, and cash flows for the year ended October 25,
1999 and for the period from September 11, 1998 (inception) to October 25, 1999.
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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Web Partners, Inc. (a
development stage enterprise) as of October 25, 1999, and the results of its
operations and its cash flows for the year ended October 25, 1999 and for the
period from September 11, 1998 (inception) to October 25, 1999, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered losses from operations and has a
net capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 9. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Christopher, Smith, Leonard,
Bristow, Stanell & Wells, P.A.
CHRISTOPHER, SMITH, LEONARD,
BRISTOW, STANELL & WELLS, P.A.
October 29, 1999
F-1
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JANUARY 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
Assets
Current Assets
Cash $ 18,985
Prepaid expenses 12,891
Employee advances 50
Shareholder receivable 24,267
Other receivable 127
--------------------
Total current assets 56,319
Property and Equipment
Furniture and fixtures 20,013
Office equipment 12,424
Computer equipment 116,182
Software 13,599
Leasehold improvements 26,539
Accumulated depreciation and amortization (14,760)
--------------------
Total property and equipment 173,998
Other Assets
Deposits 5,667
Capitalized software cost less accumulated amortization of $18,591 255,750
Patent rights less accumulated amortization of $11,940 44,121
--------------------
Total other assets 305,538
Total Assets $ 535,854
====================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 516,306
Accrued liabilities 111,938
Notes payable 205,000
--------------------
Total liabilities 833,244
Stockholders' Equity
Preferred stock, $.005 par value, 3,000,000 shares authorized; 66,665
issued and outstanding 333
Class A - Common stock, $.005 par value, 2,000,000 shares authorized;
1,000,000 issued and outstanding 5,000
Class B - Common stock, $.005 par value, 5,000,000 shares authorized;
1,917,487 issued and outstanding 9,587
Additional paid in capital 953,144
Deficit accumulated during the development stage (1,265,454)
--------------------
Total stockholders' equity (297,390)
Total liabilities and stockholders' equity $ 535,854
====================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these
internally prepared financial statements.
F-2
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
OCTOBER 25, 1999
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash $ 166,055
Prepaid expenses - CyberQuest - Note 6 54,000
Employee advances 22,500
Shareholder receivable - Note 6 3,143
Accrued interest receivable 20,000
---------
Total current assets $ 266,043
Property and Equipment - Note 1
Office equipment 924
Computer equipment 69,113
Software 13,265
Accumulated depreciation (2,926)
---------
Total property and equipment 80,376
Other Assets - Note 1
Deposits 1,000
Capitalized software costs less accumulated amortization of $2,772 34,016
Patent rights, less accumulated amortization of $3,957 13,937
Loan costs, less accumulated amortization of $767 7,937
---------
Total other assets 56,186
---------
TOTAL ASSETS $ 402,605
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 155,282
Accrued liabilities 1,685
Stock subscription liability - Note 3 165,000
Notes payable - Note 3 175,000
---------
Total current liabilities 496,967
Long-term debt - Note 3 100,000
Commitments and contingencies - Note 2
Stockholders' equity - Note 3
Preferred stock, $.005 par value, 3,000,000 shares authorized;
-0- issued and outstanding -0-
Class A - Common stock, $.005 par value, 2,000,000 shares
authorized; issued and outstanding 1,000,000 5,000
Class B - Common stock, $.005 par value, 5,000,000 shares
authorized; 1,000,000 issued and outstanding 5,000
Additional paid-in capital 446,850
Deficit accumulated during the development stage (651,212)
---------
Total stockholders' equity (deficit) (194,362)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 402,605
=========
</TABLE>
The accompanying notes are in integral part of these financial statements.
F-3
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
Costs and Expenses
Amortization $ 23,922
Accounting and auditing expense 307
Advertising and promotion 115,198
Auto expenses 408
Bank charges 244
Charitable contributions 145
Computer support 2,000
Conferences and seminars 1,600
Depreciation 10,948
Dues and subscriptions 640
Employee benefit programs 6,359
Gifts expense 1,411
Interest 5,445
Internet service provider expense 6,774
Leased employees 101,939
Legal and professional 8,697
Licenses 25
Maintenance expense 993
Management information systems expense 7,344
Merit bonus 74,114
Moving expense 8,731
Office expense 3,026
Postage expense 5,846
Recruiting expense 26,731
Rent or lease expense 39,228
Research and development 117,794
SBO bonus 12,822
Security expense 97
Signing bonus 12,500
Telephone 5,267
Temporary wages 10,532
Travel and meals 20,701
Utilities expense 2,210
Overhead allocation (18,914)
-------------------
Total costs and expenses 615,087
-------------------
Operating loss (615,087)
Interest income 845
-------------------
Net Loss $ (614,242)
===================
Basic loss per share $0.18
Shares used in basic per share computation 3,452,961
Diluted loss per share $0.15
Shares used in diluted per share computation 3,991,782
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these
internally prepared financial statements.
F-4
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
COSTS AND EXPENSES
Amortization $ 7,496
Advertising and promotion 154,801
Auto expenses 167
Bank charges 540
Computer support 750
Depreciation 2,926
Interest 1,685
Legal and professional 35,085
Licenses 907
Office expense 7,219
Research and development 419,542
Telephone 1,302
Travel and meals 19,252
------------
Total costs and expenses 651,672
------------
Operating (loss) (651,672)
Interest income 460
------------
NET LOSS $ (651,212)
============
Basic loss per share $ (1.31)
============
Shares used in basic per share
computation 489,630
============
Diluted loss per share $ (1.25)
============
Shares used in diluted per share
computation 519,831
============
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FROM OCTOBER 26, 1999 to JANUARY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Cash Flows From Operating Activities
Net loss $ (914,242)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 34,870
Changes in operating assets and liabilities:
Decrease in prepaid expenses 63,609
Decrease in employee receivable 3,093
Increase in shareholder receivable (4,267)
Decrease in other receivable 218
Increase in deposits (4,667)
Increase in accounts payable 361,024
Increase in accrued liabilities 110,253
----------
Net cash used in operating activities (350,109)
Cash Flows from Investing Activities
Capital expenditures (105,456)
Intangible asset expenditures (267,721)
----------
Net cash used in investing activities (373,177)
Cash Flows from Financing Activities
Proceeds from notes payable 105,000
Proceeds from equity investors net of issue costs 652,216
Accounts payable converted to capital (6,000)
Debt converted to capital (175,000)
----------
Net cash provided by financing activities 576,216
Net Decrease in cash (147,070)
Cash - beginning of period 166,055
----------
Cash - end of period $ 18,985
==========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these
internally prepared financial statements.
F-6
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (651,212)
Adjustment to reconcile net loss to
net cash used in operating activities 10,422
Depreciation and amortization
Changes in operating assets and
liabilities
Increase in prepaid expenses (76,500)
Increase in employee receivable (3,143)
Increase in shareholder receivable (20,000)
Increase in interest receivable (345)
Increase in deposits (1,000)
Increase in accounts payable 155,282
Increase in accrued liabilities 1,685
-------------
Net cash (used) in operating activities (584,811)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (83,302)
Intangible asset expenditures (62,682)
-------------
Net cash used in investing activities (145,984)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 175,000
Proceeds from long-term debt 100,000
Proceeds from equity investors net of issue costs 446,850
Proceeds from stock subscription 165,000
Issuance of common stock 10,000
-------------
Net cash provided by financing activities 896,850
-------------
NET INCREASE IN CASH 166,055
Cash - beginning of period -0-
-------------
CASH - END OF PERIOD $ 166,055
=============
SUPPLEMENTAL INFORMATION
- ------------------------
Cash paid for interest $ -0-
=============
Cash period for income taxes $ -0-
=============
The accompanying notes are in integral part of these financial statements.
F-7
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Capital Stock Additional During the
----------------------------- Paid In Development
Shares Amount Capital Phase
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance - October 25, 1999 2,000,000 10,000 446,850 (651,212)
Preferred Stock
issued in connection with bridge loan conversion 66,665 333 - -
Class A - Common Stock - - - -
Class B - Common Stock
issued in private placement 640,826 3,203 - -
issued in payment of fees 4,000 20
issued in conversion of debt 213,333 1,067
issued per escrow agreement 8,000 40
issued per stock option agreements 51,328 257
Additional paid-in-capital, net of offering cost - - 506,294 -
Net loss -
Three months ended January 31, 2000 - - - (614,242)
--------------------------------------------------------------
Balance - January 31, 2000 2,984,152 14,920 953,144 (1,265,454)
==============================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these
internally prepared financial statements.
F-8
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
DEFICIT
ACCUMULATED
CAPITAL STOCK ADDITIONAL DURING THE
------------------- PAID IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE
--------- --------- ----------- -----------
Balance - September 11, 1998 -0- -0- -0- -0-
Class A - Common Stock
issued in connection
with technology rights 1,000,000 5,000 -0- -0-
Class B - Common Stock
issued in connection
with technology rights 1,000,000 5,000 -0- -0-
Additional paid-in-capital,
net of offering costs -0- -0- 466,850 -0-
Net loss -
Year ended
October 25, 1999 -0- -0- -0- (651,212)
--------- --------- ----------- -----------
BALANCE - October 25, 1999 2,000,000 $ 10,000 $ 446,850 $ (651,212)
========= ========= =========== ===========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------
The Company
-----------
Web Partners, Inc. (the "Company") is a development stage company formed
in the State of Florida on September 11, 1998. This entity remained
dormant until August, 1999. The Company is engaged in research and
development of new web based technologies. The Company is in the
process of filing for United States patent protection for a family of
technologies which allow the rapid development of online, thirty second
commercial spot advertisements, providing online advertisers with the
first reliable audience delivery verification system. The Company's
business is predominately based in the United States.
The Company is in the development stage and its efforts through January
31, 2000 have been principally devoted to organizational activities,
research and development of its technologies and raising capital.
Management anticipates incurring substantial additional losses as it
pursues its research and development efforts.
The Company shares facilities and certain other resources with
CyberQuest Group, Inc. Certain of CyberQuest Group, Inc.'s officers
serve as officers of the Company and the Company obtains management and
administrative support from CyberQuest Group, Inc.'s staff.
The Company has raised capital through the form of a subscription
agreement. The Company expects that the proceeds from this and any
additional capital campaigns will enable it to fund its operations at
least through the year 2000.
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
revenue and expenses during the period. Despite management's best
effort to establish good faith estimates, actual results may differ from
these estimates.
Advertising Costs
-----------------
The Company charges advertising costs to expense when the advertising
takes place. Advertising expenses approximated $115,000 for the period
ended January 31, 2000.
F-10
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
-----------------------------------------------------------
Depreciation and Amortization
-----------------------------
Depreciation is computed using the straight-line method over an
estimated useful life of three years for computer equipment and computer
software, and five years for office equipment.
Amortization is computed using the straight-line method over the
estimated useful lives of the assets, not to exceed 5 years.
Capitalized Software
--------------------
The Company capitalized costs of materials and consultants, incurred in
developing internal-use computer software once technological feasibility
is attained. Technological feasibility is attained when software
products reach Beta release. Costs incurred prior to the establishment
of technological feasibility are charged to product development expense.
The establishment of technological feasibility and the ongoing
assessment of recoverability of capitalized software development costs
require considerable judgment by management with respect to certain
external factors, including, but not limited to, anticipated future
revenues, estimated economic life and changes in software and hardware
technologies.
Upon the general release of the software product to customers,
capitalization ceases and such costs are amortized (using the straight-
line method) on a product by product basis over the estimated life which
is generally three years.
All research and development expenditures are charged to research and
development expense in the period incurred.
Capitalized software costs and accumulated amortization as of January
31, 2000 and related software amortization expense for the period then
ended was as follows:
Capitalized software $274,342
Accumulated amortization (18,591)
--------
$255,751
========
Amortization expense $ 15,819
========
F-11
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
-----------------------------------------------------------
Intangible Assets
-----------------
The Company, in an agreement dated July 27, 1999, received the right to
use certain proprietary technology(s) systems methodologies and/or
combination of elements which may be deemed patentable ("Patent Rights")
for a period of one year. These patent rights were exchanged for common
stock totaling $10,000 (see Note 3). The capitalized patent rights and
accumulated amortization at January 31, 2000 and related amortization
expense for the period then ended was as follows:
<TABLE>
<S> <C>
Patent Rights:
From exchange agreement $10,000
Patent expenses 46,061
-------
56,061
Accumulated amortization 11,940
-------
44,121
Amortization expense $ 7,983
=======
</TABLE>
Revenue Recognition
-------------------
The Company will contract with customers for providing online, thirty
second commercial spot advertisements. Revenues are generally
recognized when a fixed period license agreement has been signed, the
software product has been developed, there are no uncertainties
surrounding product acceptance, the fees are fixed and determinable, and
collection is considered probable. For customer license agreements,
which meet these recognition criteria, the portion of the fees related
to software licenses will generally be recognized in the current period,
while the portion of the fees related to services is recognized as the
services are performed. However, for the period ending January 31,
2000, the Company had not entered into any contracts for the sale or use
of its products.
F-12
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
-----------------------------------------------------------
Per Share Data
--------------
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share ("SFAS 128"), requiring public
companies to exclude the dilutive effect of stock options in calculating
basic earnings per share. Basic income per share as required under SFAS
128 is computed using the weighted average number of common shares
outstanding during the period. Diluted income per share is computed
using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Common equivalent
shares consist of the shares issuable upon the exercise of stock options
(using the treasury stock method). The following table sets forth the
computation of basic and diluted income per share for the period ended
January 31, 2000:
<TABLE>
<S> <C>
Numerator:
Net Loss $ (614,242)
Denominator:
Denominator for basic income per share -
weighted average shares 2,592,848
Stock options 366,370
Convertible debt 94,696
----------
Denominator for diluted income per share -
adjusted weighted average shares and
assumed exercises 3,422,511
Basic loss per share $ (0.20)
==========
Diluted loss per share $ (0.18)
==========
</TABLE>
Newly Effective Accounting Standards
------------------------------------
Statement of Position ("SOP") 97-2, "Software Revenue Recognition", SOP
98-4, "Deferral of the Effective Date of a Provision of SOP 97-2,
Software Revenue Recognition" and SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions",
were issued in October 1997, March 1998, and December 1998, respectively
and address software revenue recognition matters primarily from a
conceptual level and do not include specific implementation guidance.
These standards supersede SOP 91-1 and, in part, are effective for
transactions entered into for fiscal years beginning after December 15,
1997. Based on it's reading and interpretation of SOPs 97-2 and 98-4,
the Company believes it is currently in compliance with the standards.
Complying with SOP 98-9 or additional detailed implementation guidance,
once issued, could lead to unanticipated changes in the Company's
current revenue accounting practices, and such changes could adversely
impact the Company's ability to recognize revenue consistent with its
current practice.
F-13
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 25, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
-----------------------------------------------------------
Newly Effective Accounting Standards - Continued
------------------------------------------------
This new standard is not effective until the year 2000. Web Partners,
Inc. has not fully assessed its ability to comply with SOP 98-9 using
current contracting and business practices. However, Web Partners, Inc.
believes that SOP 98-9 will not significantly effect its reporting of
revenues.
Risks and Concentrations
------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk are cash and cash equivalents. As of the
balance sheet date of January 31, 2000, the cash balances were not in
excess of insured amounts. The financial institution has a strong credit
rating and management believes that credit risk related to these
deposits is minimal. During the year, the Company has monies held in
various bank accounts. Funds in these accounts could exceed insurable
limits during the course of the year.
Until December 12, 1999, the Company had incurred the majority of its
research and development, marketing and promotional activities from
CyberQuest Group, Inc., a related party (NOTE 6). Until that date, the
Company's concentration for such services had been critical to the
operations of Web Partners, Inc. From December 13, 1999 to January 31,
2000 Web Partners, Inc. has not used the services of CyberQuest Group,
Inc.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is not aware of any legal disputes and proceedings arising
from the ordinary course of general business activities. However,
depending on the amount and the timing, an unfavorable resolution of
some unreported matters could materially affect the Company's future
results of operations or cash flows in a particular period.
Acquisitions
------------
In an agreement dated August 9, 1999, the Company has entered into an
acquisition agreement with 547341 BC Ltd. (Newco.). Newco will acquire
30% of the issued and outstanding Class B common stock of the Company in
exchange for $3,000,000 or a pro-rata amount not to exceed 30%. In
circumstances where Newco acquires less than all of the issued and
outstanding shares of the Company, the number of
F-14
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 2 - COMMITMENTS AND CONTINGENCIES - CONTINUED
-----------------------------------------
Acquisitions - Continued
------------------------
acquisition shares shall be adjusted accordingly, provided that in any
event Newco will not complete the acquisition of the Company unless
persons holding at least 90% of the shares of the Company shall have
entered into the Share Exchange Agreement or otherwise consented to the
proposed reorganization of the Company.
Pursuant to the August 9, 1999 agreement, and management
representations, it is acknowledged and agreed that it is a condition
precedent to the completion of the Share Exchange Agreement that Newco
shall have forwarded as either a loan or in the form of securing equity
investors, or both, to the Company certain monies. Such monies, if
advanced as a loan are to be considered an interest free loan secured by
a first charge over the assets of the Company. Should the Share
Exchange Agreement terminate, these monies are due within two years of
termination. Newco retains the right to convert any outstanding loans
for the pro-rata earned equity of the Company. As of January 31, 2000,
Newco converted a $100,000 loan to equity at $0.75 per share. Newco has
also secured and advanced equity investors funds of $650,000 in
compliance with this agreement.
This Agreement shall terminate and be of no further force and effect in
circumstances where the Closing has not taken place as of February 15,
2000 or if Newco has failed to meet the funding obligations as outlined
above. Said Closing deadline may be extended by mutual agreement for
additional periods. The exception that the obligation of the Company to
repay any monies advanced to it will remain in effect.
NOTE 3 - CAPITALIZATION
--------------
The Company has been initially capitalized from the exchange of certain
proprietary technology(s), systems, methodologies and/or combination of
elements which may be deemed patentable (Patent Rights) from Mark Gray
and Wyle Wade in an agreement dated July 27, 1999. Mark Gray was issued
1,000,000 shares Class A common stock with a par value of $5,000 and
Wyle Wade was issued 1,000,000 shares Class B common stock, par value
$5,000. The purchase price was determined without independent
appraisal.
The Company has also been capitalized from funding raised through the
subscription of the Company's Class B Common Stock totaling $956,000.
Costs of the subscription approximated $70,636 and are treated as a
reduction of additional paid-in capital.
F-15
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 3 - CAPITALIZATION - CONTINUED
--------------------------
Notes Payable - Continued
-------------------------
Preferred Stock
---------------
The Company has authorized the issuance of 3,000,000 shares of Preferred
Stock, par value $0.005 per share. The Board of Directors of the
Company has broad discretion to create one or more series of preferred
stock and to determine the rights, preferences and privileges of any
such series. This stock has a preference in involuntary liquidation
compared to all other classes of common stock. At January 31, 2000,
66,665 shares of preferred stock have been issued in connection with a
debt conversion.
Notes Payable
-------------
Notes payable at January 31, 2000 consisted of the following:
The Company has issued $100,000 of notes payable dated October 21, 1999
which carry no interest, payable 180 days after receipt of funds. These
notes are convertible by the holder to the following:
1. At any time prior to maturity, the holder can convert to shares
of preferred stock at $1.50 per share and common stock warrants
exercisable twelve months after maturity of the debt at a price
of $1.50 per warrant; or
2. At maturity, the holder can convert to principal in cash plus
common stock warrants, exercisable twelve months after the debt
matures, at a price of $1.50 per warrant.
In addition, the Company issued notes as follows to a major shareholder
at 10% interest payable in 30 days:
<TABLE>
<S> <C>
January 7, 2000 $ 30,000
January 14, 2000 20,000
January 21, 2000 30,000
January 27, 2000 25,000
--------
$105,000
--------
</TABLE>
F-16
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 3 - CAPITALIZATION - CONTINUED
--------------------------
Notes Payable - Continued
-------------------------
The table below summarizes the Company's outstanding preferred stock
options and common stock warrants, and the options and warrants
currently exercisable at January 31, 2000. This presentation represents
the more dilutive of the two options available to the holders.
<TABLE>
<CAPTION>
TOTAL OPTIONS
OUTSTANDING CURRENTLY
PREFERRED STOCK OPTIONS OPTIONS EXERCISABLE
----------------------- ----------- -----------
<S> <C> <C>
Balance October 25, 1999 66,665 66,665
Options exercised by debt
conversion (66,665) (66,665)
------- -------
Balance January 31, 2000 -0- -0-
</TABLE>
The option price for preferred stock is $1.50 per share. No market
value has been established and there are no assurances that a market
will be established.
<TABLE>
<CAPTION>
TOTAL OPTIONS
OUTSTANDING CURRENTLY
COMMON STOCK WARRANTS OPTIONS EXERCISABLE
--------------------- ----------- -----------
<S> <C> <C>
Balance October 25, 1999 66,665 -0-
Grants - Common Stock -0- -0-
------ ---
Balance January 31, 2000 66,665 -0-
</TABLE>
These warrants are exercisable twelve months after maturity of the debt
at a price of $1.50 per warrant. At January 31, 2000, no options were
forfeited or exercised.
NOTE 5 - RESEARCH AND DEVELOPMENT ACTIVITIES
-----------------------------------
The Company has incurred research and development costs through January
31, 2000 totaling $117,794. These charges represent costs associated
with the ongoing development of its E-Commerce applications.
F-17
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 5 - RELATED PARTY TRANSACTIONS
--------------------------
The Company has loaned two shareholders two note agreements for $5,000
each, for a total of $10,000 per shareholder. The first set of notes
are dated August 5,1999 and the second set are dated August 27, 1999.
All four notes bear annual interest at 9% per year and each note is due
12 months from the note agreement dates. At January 31, 2000, interest
income was $630 and interest receivable was $975. The notes carry a
provision that upon the performance of certain agreed upon
accomplishments, the notes become earned income to the individual. As
of the date of this report, the specific accomplishments have not been
identified for purpose of the agreements.
The Company has entered into an agreement with CyberQuest Group, Inc., a
related party, for certain professional services related to the
development of the Company's technologies. The companies are related
through common ownership and control. Costs incurred under this
agreement at January 31, 2000 approximated $142,861, and at the balance
sheet date, the Company has outstanding accounts payable to CyberQuest
Group, Inc. of $202,865. The agreement was terminated effective December
12, 1999. Further, pursuant to the agreement, CyberQuest Group, Inc.
vested, on a monthly pro-rated basis, the option to purchase up to an
aggregate of 400,000 shares of Class B common stock, fully paid for and
nonassessable with voting rights as outlined under the Articles of
Incorporation. At January 31, 2000, 166,667 options are currently
exercisable. If the Company undertakes the filing of a registration
statement with the Securities and Exchange Commission, pursuant to
either the Securities Act of 1933 or the Exchange Act of 1934, or both,
any shares then owned by CyberQuest Group, Inc. shall be granted "piggy
back" registration rights which will provide that said shares may be
registered with all other shares of the Company. Any expenses incurred
in connection with the registration of the Company's shares shall be the
obligation of the Company.
The Company has also incurred expenses for promotional and marketing
services from CyberQuest, Inc. At January 31, 2000, these costs
approximated $54,000.
The company issued promissory notes to a major shareholder totaling
$105,000. These are at 10% annual interest payable in 30 days from the
date of issue.
The Company has become party to a stock repurchase and exchange
agreement between CyberQuest Group, Inc. (a related party) and
CyberQuest Group, Inc. shareholders. The details of this transaction
are as follows:
CyberQuest Group, Inc. will offer its shareholders the option to
exchange three shares of either Class A preferred, Class A common or
Class B common stock of CyberQuest, Inc. owned by a shareholder for one
share of Class B common stock of Web Partners, Inc. As of January 31,
2000, CyberQuest Group, Inc. has options totaling 166,667 shares in Web
Partners, Inc. stock. To accomplish the transaction, CyberQuest Group,
Inc. will exercise these options. The options currently available will
be sufficient to conclude the share portion of the transaction.
F-18
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 1999 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 6 - INCOME TAXES
------------
At January 31, 2000, the Company has an operating loss carry forward for
tax purposes of approximately $1,265,454. While the Company has not
filed a tax return, these losses will be available to offset income in
future years. In addition, the Company has elected to defer and
amortize in future periods certain computer software development, patent
and loan costs amounting to approximately $299,871 at January 31, 2000.
The Company has fully reserved the tax benefit of the operating loss
carry forward because the likelihood of realization of the benefit
cannot be established.
The Internal Revenue Code contains provisions which may limit the loss
carry forwards available if significant changes in stockholder ownership
of the Company occur.
NOTE 7 - STOCK PLANS
-----------
The Company has entered into stock option agreements with its Chief
Financial Officer, certain key professionals, and employees. The
following table summarizes the Company's outstanding stock options and
the options currently exercisable at January 31, 2000:
<TABLE>
<CAPTION>
TOTAL OPTIONS
OUTSTANDING CURRENTLY
OPTIONS EXERCISABLE
------------ ------------
<S> <C> <C>
Balance October 25, 1999 847,200 205,235
Grants - Class B Common Stock 93,765 314,902
Options exercised (51,328) (51,328)
------- -------
Balance January 31, 2000 889,637 468,809
======= =======
</TABLE>
The option price for Class B common stock is $.01 per share. No market
value has been established and there are no assurances that a market
will be established.
NOTE 8 - GOING CONCERN
-------------
The Company's continued existence is dependent upon its ability to
resolve its liquidity problems, principally by obtaining additional debt
financing and equity capital. While pursuing additional debt and equity
funding, the Company must continue to operate on limited cash flows
generated internally. The Company has experienced a net loss from
continuing operations for the period ended January 31, 2000 of $614,242.
The Company will have to minimize its requirements for working capital
by continuing its cost reduction efforts. Working capital limitations
continue to effect day-to-day operations, thus contributing to continued
operating losses. The continued support and forbearance of its lenders
will be required.
F-19
<PAGE>
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM OCTOBER 26, 2000 TO JANUARY 31, 2000
(UNAUDITED)
NOTE 8 - GOING CONCERN - CONTINUED
-------------------------
Management believes operations will improve significantly in mid 2000 as
revenues from services rendered will be applicable upon completion of
its primary research and development of its existing service.
NOTE 10 - SUBSEQUENT EVENTS
-----------------
The Company has entered into negotiations with a non-operational,
publicly trading entity for the purpose of a reverse merger that will
allow the Web Partners, Inc. stock to sell shares in the public market.
F-20
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------
The Company
-----------
Web Partners, Inc. (the "Company") is a development stage company formed in
the State of Florida on September 11, 1998. This entity remained dormant
until August, 1999. Consequently, reported amounts also represent
cumulative reporting since inception. The Company is engaged in research
and development of new web based technologies. The Company is in the
process of filing for United States patent protection for a family of
technologies which allow the rapid development of online, thirty second
commercial spot advertisements, providing online advertisers with the first
reliable audience delivery verification system. The Company's business is
predominately based in the United States.
The Company is in the development stage and its efforts through October 25,
1999 have been principally devoted to organizational activities, research
and development of its technologies and raising capital. Management
anticipates incurring substantial additional losses as it pursues its
research and development efforts.
The Company shares facilities and certain other resources with Cyberquest
Group, Inc. Certain of CyberQuest Group, Inc.'s officers serve as officers
of the Company and the Company obtains management and administrative
support from CyberQuest Group, Inc.'s staff.
The Company has raised capital through the form of a subscription
agreement. However, as of the balance sheet date, the stock associated with
the signed subscription agreements has yet to be issued. The Company
expects that the proceeds from this and any additional capital campaigns
will enable it to fund its operations at least through the year 2000.
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 revenue
and expenses during the period. Despite management's best effort to
establish good faith estimates, actual results may differ from these
estimates.
Advertising Costs
-----------------
The Company charges advertising costs to expense when the advertising takes
place. Advertising expenses approximated $155,000 for the period ended
October 25, 1999.
F-21
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
- --------------------------------------------------------------------
Depreciation and Amortization
-----------------------------
Depreciation is computed using the straight-line method over an estimated
useful life of three years for computer equipment and computer software,
and five years for office equipment.
Amortization is computed using the straight-line method over the estimated
useful lives of the assets, not to exceed 5 years.
Capitalized Software
--------------------
The Company capitalized costs of materials and consultants, incurred in
developing internal-use computer software once technological feasibility
is attained. Technological feasibility is attained when software products
reach Beta release. Costs incurred prior to the establishment of
technological feasibility are charged to product development expense.
The establishment of technological feasibility and the ongoing assessment
of recoverability of capitalized software development costs require
considerable judgment by management with respect to certain external
factors, including, but not limited to, anticipated future revenues,
estimated economic life and changes in software and hardware technologies.
Upon the general release of the software product to customers,
capitalization ceases and such costs are amortized (using the straight-line
method) on a product by product basis over the estimated life which is
generally three years.
All research and development expenditures are charged to research and
development expense in the period incurred.
Capitalized software costs and accumulated amortization as of October 25,
1999 and related software amortization expense (included in cost of license
fees) for the period then ended was as follows:
1999
-------
Capitalized software:
Purchased from third parties $36,788
Accumulated amortization (2,772)
-------
$34,016
=======
Amortization expense $ 2,772
=======
F-22
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Intangible Assets
The Company, in an agreement dated July 27, 1999, received the right to use
certain proprietary technology(s) systems methodologies and/or combination
of elements which may be deemed patentable ("Patent Rights") for a period
of one year. These patent rights were exchanged for common stock totaling
$10,000 (see Note 3). The capitalized patent rights and accumulated
amortization at October 25, 1999 and related amortization expense for the
period then ended was as follows:
1999
-------
Patent Rights:
From exchange agreement $10,000
Patent expenses 7,894
-------
17,894
Accumulated amortization 3,957
-------
13,937
Amortization expense $ 3,957
=======
Revenue Recognition
-------------------
The Company will contract with customers for providing online, thirty
second commercial spot advertisements. Revenues are generally recognized
when a fixed period license agreement has been signed, the software product
has been developed, there are no uncertainties surrounding product
acceptance, the fees are fixed and determinable, and collection is
considered probable. For customer license agreements, which meet these
recognition criteria, the portion of the fees related to software licenses
will generally be recognized in the current period, while the portion of
the fees related to services is recognized as the services are performed.
However, for the period ending October 25, 1999, the Company had not
entered into any contracts for the sale or use of its products.
F-23
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTANT POLICIES - CONTINUED
Per Share Data
--------------
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share ("SFAS 128"), requiring public companies to
exclude the dilutive effect of stock options in calculating basic earnings
per share. Basic income per share as required under SFAS 128 is computed
using the weighted average number of common shares outstanding during the
period. Diluted income per share is computed using the weighted average
number of common and dilutive common equivalent shares outstanding during
the period. Common equivalent shares consist of the shares issuable upon
the exercise of stock options (using the treasury stock method). The
following table sets forth the computation of basic and dilutive income per
share for the period ended October 25:
1999
---------
Numerator:
Net Loss $(651,212)
Denominator:
Denominator for basic income per share -
weighted average shares 498,630
Stock options 21,630
Convertible debt -0-
---------
Denominator for diluted income per share -
adjusted weighted average shares and assumed
exercises 519,831
Basic loss per share $ (1.31)
=========
Diluted loss per share $ (1.25)
=========
Newly Effective Accounting Standards
------------------------------------
Statement of Positions ("SOP") 97-2, "Software Revenue Recognition", SOP
98-4. "Deferral of the Effective Date of a Provision of SOP 97-2, Software
Revenue Recognition" and SOP 98-9, "Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions", were issued in
October 1997, March 1998, and December 1998, respectively and address
software revenue recognition matters primarily from a conceptual level and
do not include specific implementation guidance.
These standards supersede SOP 91-1 and, in part, are effective for
transactions entered into for fiscal years beginning after December 15,
1997. Based on its reading and interpretation of SOPs 97-2 and 98-4, the
Company believes it is currently in compliance with the standards.
Complying with SOP 98-9 or additional detailed implementation guidance,
once issued, could lead to unanticipated changes in the Company's current
revenue accounting practices, and such changes could adversely impact the
Company's ability to recognize revenue consistent with its current
practice.
F-24
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
-----------------------------------------------------------
Newly Effective Accounting Standards - Continued
------------------------------------------------
Although this new standard is not effective until the year 2000, the
Company, in accordance with its practice of complying with new revenue
recognition standards as soon as issued, may choose to adopt the standard
in 1999, requiring either changes in revenue recognition practices or
changes in the Company's sales and contracting practices in order to
comply. Web Partners, Inc. has not fully assessed its ability to comply
with SOP 98-9 using current contracting and business practices. However,
Web Partners, Inc. believes that SOP 98-9 will not significantly effect its
reporting of revenues.
Risks and Concentrations
------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk are cash and cash equivalents. As of the
balance sheet date of October 25, 1999, the cash balances were in excess of
insured amounts by $76,645. These financial institutions have a strong
credit rating and management believes that credit risk related to these
deposits is minimal. During the year, the Company has monies held in
various bank accounts at two institutions. Funds in these accounts could
further exceed insurable limits during the course of the year.
On October 25, 1999, the Company has incurred the majority of its research
and development, marketing and promotional activities from CyberQuest
Group, Inc., a related party (NOTE 6). The Company's concentration for such
services have been critical to the operations of Web Partners, Inc. to
date.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is not aware of any legal disputes and proceedings arising from
the ordinary course of general business activities. However, depending on
the amount and the timing, an unfavorable resolution of some unreported
matters could materially affect the Company's future results of operations
or cash flows in a particular period.
Acquisitions
------------
In an agreement dated August 9, 1999, the Company has entered into an
acquisition agreement with 547341 BC Ltd. (Newco.). Newco will acquire 30%
of the issued and outstanding Class B common stock of the Company in
exchange for $3,000,000 or a pro-rata amount not to exceed 30%. In
circumstances where Newco acquires less than all of the issued and
outstanding shares of the Company, the number of
F-25
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 2 - COMMITMENTS AND CONTINGENCIES - CONTINUED
-----------------------------------------
Acquisitions - Continued
------------------------
acquisition shares shall be adjusted accordingly, provided that in any
event Newco will not complete the acquisition of the Company unless persons
holding at least 90% of the shares of the Company shall have entered into
the Share Exchange Agreement or otherwise consented to the proposed
reorganization of the Company.
Pursuant to the August 9, 1999 agreement, and management representations,
it is acknowledge and agreed that it is a condition precedent to the
completion of the Share Exchange Agreement that Newco shall have forwarded
as either a loan or in the form of securing equity investors, or both, to
the Company certain monies. Such monies, if advanced as a loan are to be
considered an interest free loan secured by a first charge over the assets
of the Company. Should the Share Exchange Agreement terminate, these monies
are due within two years of termination. Newco retains the right to convert
any outstanding loans for the pro-rata earned equity of the Company. At
October 25, 1999, Newco has advanced as a loan $100,000 to the Company.
Newco has also secured and advanced equity investors funds of $643,750 in
compliance with this agreement.
This Agreement shall terminate and be of no further force and effect in
circumstances where the Closing has not taken place as of February 15, 2000
or if Newco has failed to meet the funding obligations as outlined above.
Said Closing deadline may be extended by mutual agreement for additional
periods. The exception that the obligation of the Company to repay any
monies advanced to it will remain in effect.
NOTE 3 - CAPITALIZATION
--------------
The Company has been initially capitalized from the exchange of certain
proprietary technology(s), systems, methodologies and/or combination of
elements which may be deemed patentable (Patent Rights) from Mark Gray and
Wyle Wade in an agreement dated July 27, 1999. Mark Gray was issued
1,000,000 shares Class A common stock with a par value of $5,000 and Wyle
Wade was issued 1,000, shares Class B common stock, par value $5,000. The
purchase price was determined without independent appraisal.
The Company has also been capitalized from funding raised through the
subscription of the Company's Class B Common Stock totaling $643,750. Costs
of the subscription approximated $31,900 and are treated as a reduction of
additional paid-in capital. As of October 25, 1999, the Company has not
formally issued any Class B Stock certificates. Further, of the $643,750
raised, $478,750 was received from investors who have signed stock
subscription agreements and is recorded in additional paid in capital. The
remaining $165,000 was received from investors who have not signed stock
subscription agreements and is therefore reported in current liabilities.
F-26
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 3 - CAPITALIZATION - CONTINUED
--------------------------
Notes Payable - Continued
-------------------------
Preferred Stock
---------------
The Company has authorized the issuance of 3,000,000 shares of Preferred
Stock, par value $0.005 per share. The Board of Directors of the Company
has broad discretion to create one or more series of preferred stock and to
determine the rights, preferences and privileges of any such series. This
stock has a preference in involuntary liquidation compared to all other
classes of common stock. At October 25, 1999, no preferred stock had been
issued.
Note Payable
------------
Notes payable at October 25, 1999 consisted of the following:
The Company issued three notes payable of $25,000 each dated August 4, 1999
with an annual interest rate of 10% payable 120 days after receipt of
funds. In addition, at maturity the holder shall receive one third of one
percent (.033%) of Preferred Stock issued and outstanding at that time as a
loan origination fee. These notes, at any time prior to maturity, are
convertible by the holder to one percent (1%) of the issued and outstanding
shares of Preferred Stock. An additional option exists for the Company to
convert the principle sum to one and two thirds percent (1.66%) of the
issued and outstanding shares of Preferred Stock. At October 25, 1999, no
Preferred stock has been issued.
The Company has issued $100,000 of notes payable dated October 21, 1999
which carry no interest, payable 180 days after receipt of funds. These
notes are convertible by the holder to the following:
1. At any time prior to maturity, the holder can convert to shares of
preferred stock at $1.50 per share and common stock warrants
exercisable twelve months after maturity of the debt at a price of
$1.50 per warrant; or
2. At maturity, the holder can convert to principal in cash plus common
stock warrants, exercisable twelve months after the debt matures, at a
price of $1.50 per warrant.
F-27
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 3 - CAPITALIZATION - CONTINUED
Notes Payable - Continued
The table below summarizes the Company's outstanding preferred stock
options and common stock warrants, and the options and warrants currently
exercisable at October 25, 1999. This presentation represents the more
dilutive of the two options available to the holders.
TOTAL OPTIONS
OUTSTANDING CURRENTLY
PREFERRED STOCK OPTIONS OPTIONS EXERCISABLE
----------------------- ----------- -----------
Balance September 11, 1998 -0- -0-
1999 Grants - Preferred Stock 66,665 66,665
------ ------
Balance October 25, 1999 66,665 66,665
The option price for preferred stock is $1.50 per share. No market value
has been established and there are no assurances that a market will be
established. At October 25, 1999, no options were forfeited or exercised.
TOTAL WARRANTS
OUTSTANDING CURRENTLY
COMMON STOCK OPTIONS OPTIONS EXERCISABLE
-------------------- ----------- -----------
Balance September 11, 1998 -0- -0-
1999 Grants - Common Stock 66,665 -0-
------ ------
Balance October 25, 1999 66,665 -0-
These warrants are exercisable twelve months after maturity of the debt at
a price of $1.50 per warrant. At october 25, 1999, no options were
forfeited or exercised.
NOTE 4 - LONG-TERM DEBT
--------------
Long-term debt at October 25, 1999 consisted of the following:
Note payable to 547341 BC Ltd. (Newco)
due October 25, 2001. This note bears no
interest and is not collateralized. $100,000
========
NOTE 5 - RESEARCH AND DEVELOPMENT ACTIVITIES
-----------------------------------
The Company has incurred research and development costs through October 25,
1999 totaling $419,542. These charges represent costs associated with the
ongoing development of its E-Commerce applications
F-28
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 6 - RELATED PARTY TRANSACTIONS
--------------------------
The Company has loaned two shareholders two note agreements for $5,000
each, for a total of $10,000 per shareholder. The first set of notes are
dated August 5, 1999 and the second set are dated August 27, 1999. All four
notes bear annual interest at 9% per year and each note is due 12 months
from the note agreement dates. At October 25, 1999, interest income and
interest receivable was $345. The notes carry a provision that upon the
performance of certain agreed upon accomplishments, the notes become earned
income to the individual. As of the date of this audit report, the
specific accomplishments have not been identified for purpose of the
agreements.
The Company has entered into an agreement with CyberQuest Group, Inc., a
related party, for certain professional services related to the development
of the Company's technologies. The companies are related through common
ownership and control. Costs incurred under this agreement at October 25,
1999 approximated $404,829, and at the balance sheet date, the Company has
outstanding accounts payable to CyberQuest Group, Inc. of $115,319. In
addition to development costs, the Company has paid $54,000 in prepaid
services to CyberQuest Group, Inc. which represents a prepayment for future
services to be rendered by CyberQuest Group, Inc. Further, pursuant to the
agreement, CyberQuest Group, Inc. shall vest, on a monthly pro-rated basis,
the option to purchase up to an aggregate of 400,000 shares of Class B
common stock, fully paid for and nonassessable with voting rights as
outlined under the Articles of Incorporation. At October 25, 1999, 94,444
options are currently exercisable. If the Company undertakes the filing of
a registration statement with the Securities and Exchange Commission,
pursuant to either the Securities Act of 1993 or the Exchange Act of 1934,
or both, any expenses incurred in connection with the registration of the
Company's shares shall be the obligation of the Company.
The Company has also incurred expenses for promotional and marketing
services from CyberQuest, Inc. At October 25, 1999, these costs
approximated $56,000.
F-29
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES
------------
At October 25, 1999, the Company has an operating loss carry forward for
tax purposes of approximately $655,583. While the Company has not filed a
tax return, these losses will be available to offset income in future
years. In addition, the Company has elected to defer and amortize in future
periods certain computer software development, patent and loan costs
amounting to approximately $55,186 at October 25, 1999. The Company has
fully reserved the tax benefit of the operating loss carry forward because
the likelihood of realization of the benefit cannot be established.
The Internal Revenue Code contains provisions which may limit the loss
carry forwards available if significant changes in stockholders ownership
of the Company occur.
NOTE 8 - STOCK PLANS
-----------
The Company has entered into stock option agreements with its Chief
financial Officer and certain key professionals. The following table
summarizes the Company's outstanding stock options and the options
currently exercisable at October 25, 1999:
TOTAL OPTIONS
OUTSTANDING CURRENTLY
OPTIONS EXERCISABLE
----------- -----------
Balance September 11, 1998 -0- -0-
1999 Grants - Class B Common Stock 847,200 205,235
------- -------
Balance October 25, 1999 847,200 205,235
======= =======
The option price for Class B common stock is $.01 per share. No market
value has been established and there are no assurances that a market will
be established. At October 25, 1999, no options were forfeited or
exercised.
NOTE 9 - GOING CONCERN
-------------
The Company's continued existence is dependent upon its ability to resolve
its liquidity problems, principally by obtaining additional debt financing
and equity capital. While pursuing additional debt and equity funding, the
Company must continue to operate on limited cash flows generated
internally. The Company has experienced a net loss from continuing
operations for the year ended October 25, 1999 of $651,212.
The Company will have to minimize its requirements for working capital by
continuing its cost reduction efforts. Working capital limitations continue
to effect day-to-day operations, thus contributing to continued operating
losses. The continued support and forbearance of its lenders will be
required.
F-30
<PAGE>
- --------------------------------------------------------------------------------
WEB PARTNERS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FROM SEPTEMBER 11, 1998 (INCEPTION) TO OCTOBER 25, 1999
(AUDITED)
- --------------------------------------------------------------------------------
NOTE 9 - GOING CONCERN - CONTINUED
-------------------------
Management believes operations will improve significantly in mid 2000 as
revenues from services rendered will be applicable upon completion of its
primary research and development of its existing service.
NOTE 10 - SUBSEQUENT EVENTS
-----------------
Subsequent to the financial statement date, the Company has become party to
a stock repurchase and exchange agreement between CyberQuest Group, Inc. (a
related party) and CyberQuest Group, Inc. shareholders. The details of this
transaction are as follows:
CyberQuest Group, Inc. will offer its shareholders the option to exchange
three shares of either Class A preferred, Class A common or Class B common
stock of CyberQuest, Inc. owned by a shareholder for one share of Class B
common stock of Web Partners, Inc.
As of October 25, 1999, CyberQuest Group, Inc. has options totaling 94,444
shares in Web Partners, Inc. stock. To accomplish the transaction,
CyberQuest Group, Inc. will exercise these options and purchase the
remaining necessary shares from Web Partners, Inc. Management of CyberQuest
Group, Inc. has represented that a straw poll of the CyberQuest Group, Inc.
shareholders taken in October 1999 indicates that the options currently
available of 94,444 shares will be sufficient to conclude the share portion
of the transaction.
F-31
<PAGE>
EXHIBIT 2
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement") is entered into and
effective as of March 5, 2000, by and between Wyly Wade ("Wade") and Mark E.
Gray ("Gray") (Wade and Gray known collectively as the "SHAREHOLDERS"); Carsten
Mide ("Mide"); WEB PARTNERS, INC., a Florida corporation ("WPI") and ANYOX
RESOURCES INC., a Nevada corporation ("ANYX" or the "COMPANY"); and those
parties that join this Agreement after the date hereof but prior to Closing
(such parties and Mide known collectively as the "PROXY GRANTORS").
1. RECITALS
This Agreement is entered into with reference to and in contemplation of
the following facts, circumstances and representations:
1. The SHAREHOLDERS are the owners of 2,000,000 shares (the "WPI Shares")
of the common stock and/or preferred shares of WPI which represents 57%
of the issued and outstanding shares of the common stock and/or
preferred shares of WPI.
2. ANYX desires to issue a total of 4,000,000 shares of its common stock
(the "ANYX Shares") to the SHAREHOLDERS in exchange for the WPI Shares
on a two (2) shares of ANYX for one (1) share of WPI basis.
3. The SHAREHOLDERS desire to exchange the WPI Shares for the ANYX Shares
in accordance with the terms and conditions of this Agreement.
4. The parties hereto desire that, consistent with all applicable law,
additional steps be taken following the issuance of the ANYX Shares to
permit WPI to become a wholly-owned subsidiary of ANYX.
SHARE EXCHANGE AGREEMENT
Page 1
<PAGE>
5. WPI and the PROXY GRANTORS desire that this transaction be
consummated.
2. EXCHANGE AND ISSUANCE OF SHARES
2.1 Exchange of ANYX Shares: Subject to the terms and conditions of this
Agreement, ANYX shall exchange and deliver to the SHAREHOLDERS, a total of
4,000,000 restricted shares of ANYX common stock, apportioned 2,000,000 shares
to Wade and 2,000,000 shares to Gray.
2.2 Exchange of WPI Shares: Subject to the terms and conditions of this
Agreement, the SHAREHOLDERS shall exchange and deliver to ANYX, through ANYX's
transfer agent, a total of 2,000,000 shares of WPI common stock and/or preferred
shares, apportioned 1,000,000 shares to Wade and 1,000,000 shares to Gray, which
represents 57% of the issued and outstanding shares of WPI.
2.3 Nature of ANYX Shares: The SHAREHOLDERS shall be issued the ANYX
Shares which, unless otherwise contractually restricted, shall be subject to the
resale provisions of SEC Rule 144.
2.4 Restricted Nature of ANYX Shares: Wade and Gray hereby acknowledge
that, upon issuance of the ANYX Shares, each will become an "affiliate" or
"control person" of ANYX subject to certain limitations with respect to the sale
of its ANYX Shares. Accordingly, as a result of such a designation, the sale of
the ANYX Shares will be limited by SEC Rule 144.
2.5 Private Sale Acknowledgment: The parties acknowledge and agree that
the exchange and issuance of the ANYX Shares is being undertaken as a private
sale pursuant to Section 4(2) of the Securities Act of 1933, as amended and
Nevada Revised Statutes Chapters 78 and 90 and is not being transacted via a
broker-dealer and/or in the public market place.
SHARE EXCHANGE AGREEMENT
Page 2
<PAGE>
2.6 Status of Present Share Ownership and Contemplated Share Issuance by
ANYX: Upon the Closing of the share exchange contemplated by this Agreement,
the following will be the resulting share ownership of ANYX:
Name No. Shares % Ownership
------ ---------- -----------
1. Present ANYX Rule
504 Shareholders 6,024,800 30.08%
2. Restricted Shares 4,003,700 19.99%
3. WPI Shareholders 4,000,000 19.97%
4. New Investor Shares 6,000,000 29.96%
---------- -------
TOTALS 20,028,500 100.00%
========== =======
3. GRANT OF IRREVOCABLE PROXIES COUPLED WITH AN INTEREST
3.1 Grant of Irrevocable Proxies: The PROXY GRANTORS hereby
irrevocably grant to the SHAREHOLDERS proxies to vote their shares, which
proxies are coupled with an interest as set forth in Section 3.2. Such proxies
shall be evidenced by proxy cards in the form of Exhibit A hereto, which shall
be delivered to the SHAREHOLDERS at Closing.
3.2 Inducement to Enter Into and Perform Agreement: The PROXY GRANTORS
hereby acknowledge that they have examined the transactions contemplated by this
Agreement, had the opportunity to ask questions and receive answers concerning
the terms and conditions of the transactions contemplated by this Agreement, and
obtained any additional information that they considered necessary to their
examination and evaluation of the transactions contemplated by this Agreement.
After such assessment, the PROXY GRANTORS have concluded that it is in their
interest that the transactions contemplated by this Agreement be consummated and
that they therefore are willing to grant irrevocable proxies to the SHAREHOLDERS
to induce them to
SHARE EXCHANGE AGREEMENT
Page 3
<PAGE>
enter into this Agreement. The parties to this Agreement other than the
SHAREHOLDERS acknowledge that the SHAREHOLDERS have demanded as a material
requirement of their willingness to enter into this Agreement, that the
SHAREHOLDERS have irrevocable proxies to vote the shares of the PROXY GRANTORS
in order to accomplish the purposes of this Agreement, and that, absent such
grants of irrevocable proxies, the SHAREHOLDERS would not enter into this
Agreement because they would not have the certainty that they require that the
transactions contemplated by this Agreement will be consummated. The PROXY
GRANTORS expressly agree and understand that the irrevocable grant of their
proxies is coupled with an interest, and as a result may not be withdrawn or
otherwise retrieved from or denied to the SHAREHOLDERS, except by its terms as
set forth in Exhibit A hereto.
3.3 No General Solicitation: The SHAREHOLDERS hereby confirm that they
have not contacted, directly or indirectly, any shareholders of ANYX other than
the PROXY GRANTORS with respect to their request that they obtain irrevocable
proxies to vote shares of ANYX.
3.4 Agreement to Cancel Shares: In further consideration of the
SHAREHOLDERS agreeing to enter into this Agreement and to consummate the
transactions contemplated by this Agreement, Mide agrees, upon demand of the
SHAREHOLDERS, to cancel his shares of ANYX stock, and upon cancellation ANYX
shall reconvey to Mide the "Fame" properties. In furtherance of this covenant,
Mide agrees to execute an Irrevocable Order to Cancel Shares, in the form of
Exhibit B hereto, which shall be delivered to the SHAREHOLDERS at Closing.
4. DIRECTORS AND OFFICERS
On Closing, the existing officers of ANYX shall resign, and the existing
directors of ANYX shall resign in a sequential manner so that Santu Rohatgi and
Edward Bertha shall be appointed as directors of ANYX immediately following the
Closing.
SHARE EXCHANGE AGREEMENT
Page 4
<PAGE>
5. AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION
Each of the parties hereto agrees to use its best efforts to cause the
Articles of Incorporation of ANYX to be amended and restated as set forth in
Exhibit C hereto and the Bylaws of ANYX to be amended and restated substantially
as set forth in Exhibit D hereto. As soon as practicable following the Closing,
ANYX agrees to hold a meeting of its board of directors for the purpose of
calling a special meeting of shareholders to amend and restate the Articles of
Incorporation of ANYX as set forth in Exhibit C hereto. In connection with such
meeting, ANYX shall establish a record date, provide notices, information
statements and such other materials as may be required by applicable law.
6. INTERCOMPANY LOANS: On Closing of the issuance of the shares of Common
Stock to Wade and Gray, upon delivery by WPI to ANYX of a demand promissory note
in the form of Exhibit E hereto, ANYX shall make intercompany advances to WPI
according to the terms of the note.
7. CREATION OF CLASS A PREFERRED STOCK
AND OTHER TERMS AND CONDITIONS
As further consideration for the acquisition of the WPI Shares, ANYX hereby
agrees as follows:
7.1 Creation and Approval of Class A Preferred Stock: Upon shareholder
approval and effectiveness of the amendment and restatement of ANYX's Articles
of Incorporation, ANYX shall create a new class of preferred stock, consisting
of 200,000 shares, to be designated as "Class A Preferred Stock", which shall,
in addition to customary protections against dilution by virtue of stock
dividends, stock splits or similar transactions, have the rights as set forth in
Paragraph 7.2 below. The initial conversion ratio of the Class A Preferred
Stock shall be on a one-for-one basis.
SHARE EXCHANGE AGREEMENT
Page 5
<PAGE>
7.2 Statement of Certain Rights For Class A Preferred Shares: The Class A
Preferred Shares shall have the preferences, limitations and relative rights set
forth in Exhibit F hereto.
7.3 Right to Exchange Shares: Wade and Gray shall each have the right,
upon creation of the Class A Preferred Stock, for a period of ten days, to
exchange 100,000 shares of their ANYX Shares on a one-for-one basis for shares
of Class A Preferred Stock.
8. VOLUNTARY EXCHANGE OFFERING
ANYX shall prepare an Offering Memorandum pursuant to which it shall offer
each shareholder of WPI other than the SHAREHOLDERS the opportunity to exchange
each share of WPI stock that they hold for two shares of ANYX common stock. No
later than 10 days after the establishment of ANYX's Class A Preferred Stock and
the issuance thereof to Wade and Gray, ANYX shall promptly commence a private
offering of its common stock pursuant to the Offering Memorandum in which it
shall offer each shareholder of WPI other than the SHAREHOLDERS the opportunity
to exchange each share of their WPI common stock for two shares of ANYX common
stock.
9. EMPLOYEE STOCK OPTION PLAN
9.1 Authorization and Approval of Employee Stock Option Plan: The parties
hereto still further agree to use their best efforts to cause the authorization
of an Employee Stock Option Plan (the "Plan") for the attraction and retention
of ANYX and its subsidiary WPI. The administration of the Plan shall be
undertaken by a compensation committee of not less than three (3) outside
directors of ANYX. Said Plan shall provide for those matters as set forth
below. Following the offering contemplated by Section 8 of this Agreement, ANYX
shall file a Form S-8 registration statement to register all shares potentially
subject to issuance under the Plan.
SHARE EXCHANGE AGREEMENT
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<PAGE>
9.2 Reservation of Shares: ANYX shall reserve and may issue under the
Plan, One Million Five Hundred Thousand (1,500,000) shares of employee stock
options in year one and/or two. Said options shall be exercisable within five
(5) years at exercise prices which shall average not less than One Cent ($0.01).
The allocation and distribution of said stock options shall be made available on
the closing of the annual or quarterly statements of ANYX (10Q or 10K) for the
periods included during year one from the date of the execution of this
Agreement and allowing for the audited confirmation of revenue generated by
ANYX.
9.3 Initial Reservation Milestone: Subject to ANYX achieving Two Million
Dollars ($2,000,000) of revenue during the one year period immediately following
the execution of this Agreement, Five Million Five Hundred Thousand (5,500,000)
shares of stock shall be reserved and may be issued by the board of directors
subject to the Plan. Said options shall be exercisable within five (5) years at
exercise prices which average not less than Six Dollars ($6.00). The allocation
and distribution of said stock options shall be made available on the closing of
the annual or quarterly statement of the ANYX (10K or 10Q) for the periods
included during year one from the date of the execution of this Agreement and
allowing for the audited confirmation of revenue generated by ANYX.
9.4 Second Share Reservation Milestone: Subject to ANYX achieving Five
Million Dollars ($5,000,000) of revenue during the second, one-year period
immediately following the execution of this Agreement, Seven Million
(7,000,000) shares of stock shall be reserved and may be issued by the board of
directors subject to the Plan. Said shares shall be exercisable within five (5)
years at exercise prices which shall average not less than Six Dollars ($6.00).
The allocation and distribution of said stock options shall be made available on
the closing of the annual and quarterly statement of ANYX (10K or 10Q) for the
periods included during year one from the date of the execution of this
Agreement and allowing for the audited confirmation of revenue generated by
ANYX.
9.5 Maximum Share Reservation Milestone: The maximum shares available
for issuance under the Plan shall be Fourteen Million (14,000,000) in year one
and year two combined. Said shares shall be subject to whatever reasonable lock-
up agreement that may be required of other shareholders by any underwriter
engaged by ANYX in future stock offerings or underwritings of future stock
offerings of ANYX. To effect said lock-up requirements, shares reserved for
SHARE EXCHANGE AGREEMENT
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<PAGE>
and delivered to employees in the exercise of their stock options may be
imprinted with an appropriate legend outlining the terms of said lock-up period.
Said lock-up period shall not to exceed 180 days.
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The COMPANY represents and warrants to the SHAREHOLDERS and WPI as follows:
10.1 Organization: ANYX is a corporation duly incorporated and validly
existing under the laws of the State of Nevada and is in good standing with
respect to all of its regulatory filings.
10.2 Capitalization: The authorized capital of ANYX consists of
200,000,000 common shares with a par value $.001 and with the exception of the
common shares described in Paragraph 2.6, no common shares will have been
validly authorized and issued by the COMPANY prior to the Closing of the
contemplated share exchange. Each PROXY GRANTOR holds of record 500,000 shares
of common stock of the COMPANY.
10.3 Financial Statements: ANYX has furnished to the SHAREHOLDERS and WPI
audited financial statements for the period ending June 30, 1999. That at the
Closing the financial affairs of ANYX will be materially the same as represented
in the financial statements for the period ending June 30, 1999, except that
ANYX has received proceeds of $5,100,000 in connection with a private placement
of 6,000,000 shares, as indicated in the table in Section 2.6.
10.4 Books and Records: All material transactions of ANYX have been
promptly and properly recorded or filed in or with its books and records and the
Minute Book of ANYX contains records of all meetings and proceedings of the
shareholders and directors thereof.
SHARE EXCHANGE AGREEMENT
Page 8
<PAGE>
10.5 Legal Compliance: To the best of its knowledge, ANYX is not in
breach of any laws, ordinances, statutes, regulations, by-laws, orders or
decrees to which ANYX is subject or which apply to it or any of its assets.
10.6 Tax Returns: All tax returns and reports of ANYX required by law to
be filed prior to the date hereof have been filed and are substantially true,
complete and correct and all taxes and governmental charges have been paid.
10.7 Adverse Financial Events: ANYX has not experienced nor is it aware of
any occurrence or event which has had or might reasonably be expected to have a
material adverse effect on its financial condition.
10.8 Disputes, Claims and Investigations: There are no disputes, claims,
actions, suits, judgments, investigations or proceedings outstanding or pending
or to the knowledge of ANYX threatened against or affecting ANYX at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau or agency.
10.9 Employee Liabilities: ANYX has no known liability to former employees
or any liability to any governmental authorities with respect to current or
former employees.
10.10 No Conflicts or Agreement Violations: The execution, delivery and
performance of this Agreement will not conflict with or be in violation of the
articles or by-laws of ANYX or of any agreement to which ANYX is a party and
will not give any person or company a right to terminate or cancel any agreement
or right enjoyed by ANYX and will not result in the creation or imposition of
any lien, encumbrance or restriction of any nature whatsoever in favor of a
third party upon or against the assets of ANYX.
10.11 Validly Issued and Authorized Shares: That the ANYX Shares will be
validly authorized and issued by the COMPANY, they will be fully paid and non-
assessable and they will be issued in full compliance with all federal and state
securities laws.
10.12 Restrictive Legend: That the ANYX Shares will have a restrictive
legend imposed thereon identifying them as "Restricted Shares" which are
SHARE EXCHANGE AGREEMENT
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<PAGE>
subject to the conditions and limitations of SEC Rule 144 with respect to their
sale in the U.S. public market place.
10.13 Corporate Authority: The officers or representatives of the COMPANY
executing this Agreement represent that they have been authorized to execute
this Agreement pursuant to a resolution of the Board of Directors of the
COMPANY.
11. REPRESENTATIONS OF SHAREHOLDERS AND WPI
The SHAREHOLDERS and WPI collectively and individually hereby represent and
warrant to ANYX as follows:
11.1 Share Ownership: That the SHAREHOLDERS are the owners, beneficially
and of record, of the WPI Shares and said shares are free and clear of all
liens, encumbrances, claims, charges and restrictions.
11.2 Transferability of WPI Shares: That the SHAREHOLDERS have full power
to transfer the WPI Shares to ANYX without obtaining the consent or approval of
any other person or governmental authority.
11.3 Validly Issued and Authorized Shares: That the WPI Shares are
validly authorized and issued, fully paid, and nonassessable, and the WPI Shares
have been so issued in full compliance with all securities laws of the State of
Florida.
11.4 Organization: WPI is a corporation duly incorporated and validly
existing under the laws of the State of Florida and is in good standing with
respect to all of its regulatory filings.
11.5 Capitalization: The authorized capital of WPI consists of 10,000,000
common shares with $0.005 par value and of which 3,452,432 common shares are
issued and outstanding as fully paid and non-assessable shares.
SHARE EXCHANGE AGREEMENT
Page 10
<PAGE>
11.6 Financial Statements: WPI has furnished to ANYX financial statements
for the period ending October 25, 1999. That at the Closing the financial
affairs of WPI will be materially the same as represented in these same
financial statements. Schedule 11.6 contains a listing of WPI's obligations as
of the Closing.
11.7 Books and Records: All material transactions of WPI have been
promptly and properly recorded or filed in or with its books and records and the
Minute Book of WPI contains records of all meetings and proceedings of the
shareholders and directors thereof.
11.8 Legal Compliance: WPI is not in breach of any laws, ordinances,
statutes, regulations, by-laws, orders or decrees to which WPI is subject or
which apply to it or any of its assets.
11.9 Tax Returns: All tax returns and reports of WPI required by law to
be filed prior to the date hereof have been filed and are true, complete and
correct and all taxes and governmental charges have been paid.
11.10 Adverse Financial Events: WPI has not experienced nor is it aware
of any occurrence or event which has had or might reasonably be expected to have
a material adverse effect on its financial condition.
11.11 Disputes, Claims and Investigations: There are no disputes, claims,
actions, suits, judgments, investigations or proceedings outstanding or pending
or to the knowledge of WPI threatened against or affecting WPI at law or in
equity or before or by any federal, municipal or other governmental department,
commission, board, bureau or agency.
11.12 Employee Liabilities: WPI has no liability to former employees or
any liability to any government authorities with respect to current or former
employees.
11.13 No Conflicts or Agreement Violations: The execution, delivery and
performance of this Agreement will not conflict with or be in violation of the
Articles of Incorporation of WPI or of any agreement to which WPI is a party and
will not give any person or company a right to terminate or cancel any agreement
SHARE EXCHANGE AGREEMENT
Page 11
<PAGE>
or right enjoyed by WPI and will not result in the creation or imposition of any
lien, encumbrance or restriction of any nature whatsoever in favor of a third
party upon or against the assets of WPI.
11.14 No Liens: That WPI has not received a notice of any assignment,
lien, encumbrance, claim or charge against the WPI Shares.
11.15 Ownership of Proprietary Technology: That WPI is the owner of all
right, title and interest in that certain proprietary technology free and clear
of any lien, encumbrance, claim or charge which is described below and which is
collectively referred to herein as the "Technology":
1. "CyberSpots": Online, interactive-multimedia, rich-media
commercial spots which are capable of quickly reaching the
audience with minimal interruptions.
2. Deliver Verification Technology ("DVT"): DVT provides an online
advertising measurement system that verifies audience reach and
spot delivery.
WPI has made application for a patent in connection with the Technology, but no
patent has been issued. To WPI's knowledge, there is no reason why it should
not ultimately obtain a patent in connection with the Technology. WPI cannot
guarantee, however, that it will obtain a patent in connection with the
Technology.
11.16 Corporate Authority: The officers or representatives of WPI
executing this Agreement represent that they have been authorized to execute
this Agreement pursuant to a resolution of the Boards of Directors of WPI.
12. REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDERS ALONE
The SHAREHOLDERS alone further represent and warrant to ANYX as follows
with respect to the ANYX Shares that:
SHARE EXCHANGE AGREEMENT
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<PAGE>
12.1 Financially Responsible: They are financially responsible, able to
meet their obligations and acknowledge that this investment will be speculative.
They understand that the ANYX Shares is a "restricted security" within the
meaning of the Act, and certificates representing the ANYX Shares are legended
with certain restrictions on the resale of the ANYX Shares and the ANYX Shares
may not be resold without a valid exemption from registration under the Act, or
until a registration statement is filed with respect thereto under the Act.
There can be no assurance that upon registration of the ANYX Shares pursuant to
the Act, that a market for the ANYX Shares will exist on an exchange or market
or quotation system. Accordingly, the SHAREHOLDERS are aware that there are
legal and practical limits on their ability to sell or dispose of the ANYX
Shares, and, therefore that they must bear the economic risk of the investment
for an indefinite period of time. The SHAREHOLDERS have adequate means of
providing for their current needs and possible personal contingencies and
haveneed for only limited liquidity of this investment. The SHAREHOLDERS'
commitment to illiquid investments is reasonable in relation to their net worth.
They are capable of bearing the high degree of economic risks and burdens of
this investment, including but not limited to the possibility of complete loss
of all their investment capital and the lack of a liquid market, such that they
may not be able to liquidate readily the investment whenever desired or at the
then current asking price.
12.2 Investment Experience: They have had experience in the business of
investments in one or more of the following: (i) investment experience with
securities such as stocks and bonds; (ii) ownership of interests in
partnerships, new ventures and start-up companies; (iii) experience in business
and financial dealings; and that they can protect their own interests in an
investment of this nature. They have such knowledge and experience in financial
and business matters that they are capable of evaluating the merits and risks of
the prospective investment in the ANYX Shares, which are substantial and have in
fact evaluated such merits and risks in making investment decision to purchase
the ANYX Shares. The SHAREHOLDERS, by virtue of their business and financial
expertise, have the capacity to protect their own interest in connection with
this transaction, or have consulted with tax, financial, legal or business
advisors as to the appropriateness of an investment in the ANYX Shares. The
SHAREHOLDERS have relied completely on the advice of, or have consulted with,
their own personal tax, investment, legal or other advisors and have not
SHARE EXCHANGE AGREEMENT
Page 13
<PAGE>
relied on ANYX or any of its affiliates, officers, directors, attorneys,
accountants or any affiliates of any thereof and each other person, if any, who
controls any thereof, within the meaning of Section 15 of the Act.
12.3 Exempt Transaction: The SHAREHOLDERS understand that the ANYX Shares
is being offered and sold in reliance on specific exemptions from the
registration requirements of U.S. federal and state law and that the
representations, warranties, agreements, acknowledgments and understandings set
forth herein are being relied upon by ANYX in determining the applicability of
such exemptions and the suitability of the SHAREHOLDERS to acquire such ANYX
Shares.
12.4 Access to Information: They have had access to the information
regarding the financial condition of the COMPANY and they were able to request
copies of such information, ask questions of and receive answers from the
COMPANY regarding such information and any other information their desires
concerning the ANYX Shares, and all such questions have been answered to their
full satisfaction. They expressly acknowledge that they have reviewed the
public filings of ANYX with the SEC. In addition, they acknowledge their
understanding that the consummation of this transaction will make ANYX the
majority owner of WPI. In connection with this result, they acknowledge their
status as executive officers of WPI and their detailed understanding of WPI's
assets, business, financial condition and prospects.
12.5 Private Transaction: At no time were they presented with or
solicited by any leaflet, public promotional meeting, circular, newspaper or
magazine article, radio or television advertisement or any other form of general
advertising.
12.6 Investment Intent: The ANYX Shares are not being purchased with a
view to or for the resale or distribution thereof and they have no present plans
to enter into any contract, undertaking, agreement or arrangement for such
resale or distribution.
12.7 Due Diligence: That the SHAREHOLDERS shall have completed a due
diligence review of the affairs of ANYX and are satisfied with the results of
that review.
SHARE EXCHANGE AGREEMENT
Page 14
<PAGE>
12.8 Restrictive Legend: The certificates representing the ANYX Shares
shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
OTHER SECURITIES AUTHORITIES. THEY HAVE BEEN ISSUED PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE ACT. THESE SECURITIES
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF THOSE SECURITIES LAWS. IN CONNECTION WITH ANY
SUCH SALE OR TRANSFER THE ISSUER MAY REQUIRE AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL
THAT SUCH SALE OR TRANSFER MAY BE MADE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS.
ANYX may in its sole discretion place a "Blue Sky" legend on the certificates in
accordance with U.S. State securities laws or as required by applicable
securities laws.
13. CLOSING, ESCROW HOLDER AND
CONDITIONS TO CLOSING
13.1 Exchange Closing: The closing of the share exchange as contemplated
by this Agreement (the "Closing") shall occur at such time and place as may be
agreed among the parties, but in no event later than March 10, 2000, unless
otherwise extended in writing by the parties.
SHARE EXCHANGE AGREEMENT
Page 15
<PAGE>
13.2 Escrow Conditions and Closing: At Closing the following will be
required:
1. Delivery of WPI Shares: The SHAREHOLDERS shall deliver the
certificate or certificates representing the 2,000,000 WPI
Shares duly endorsed for transfer accompanied by a duly
executed assignment of the WPI Shares to ANYX.
2. Delivery of ANYX Shares: ANYX shall deliver a total of
4,000,000 ANYX Shares apportioned 2,000,000 shares to Wade
and 2,000,000 shares to Gray.
3. Delivery of Certificates of Good Standing: Each corporate
party shall deliver a current Certificate of Good Standing
issued by the Nevada and Florida Secretary of State.
4. Requisite Corporate Resolutions: Each corporate party shall
deliver certified copies of resolutions from their respective
Boards of Directors authorizing the subject transaction.
5. Delivery of Proxies: Each PROXY GRANTOR set forth on the
final signature page hereto shall have joined this Agreement
and shall deliver duly executed irrevocable proxies as set
forth in Section 3.1, accompanied by their respective stock
certificates.
6. Delivery of Order to Cancel: Mide shall deliver his duly
executed irrevocable order to cancel shares as set forth in
Section 3.4, accompanied by his stock certificate.
SHARE EXCHANGE AGREEMENT
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<PAGE>
13.3 Close of Transaction: The subject transaction shall "close" upon the
satisfaction of the above conditions.
13.4 Notices: All notices given pursuant to this Agreement must be in
writing and may be given by (1) personal delivery, or (2) registered or
certified mail, return receipt requested, or (3) via facsimile transmission to
the parties as set forth below. Any party hereto may by notice so given change
its address for any future notices:
TRANSFER AGENT: Nevada Agency and Trust Company
50 West Liberty Street, Suite 880
Reno, Nevada 89501
SHAREHOLDERS WYLY WADE
AND WPI: MARK GRAY
540 North Tamiami Trail
Sarasota, Florida
Phone: (941) 954-1144
Fax: (941) 953-3777
ANYX: 540 North Tamiami Trail
Sarasota, Florida
Attn: President
Phone: (941) 954-1144
Fax: (941) 953-3777
with a copy to: Ogden Murphy Wallace P.L.L.C.
(which shall not 1601 Fifth Avenue, Suite 2100
constitute notice) Seattle, WA 98101
Attn: Shea Wilson
Phone: (206) 447-7000
Fax: (206) 447-0125
Notice may be given to Mide and to the PROXY GRANTORS at the address and
facsimile numbers set forth below their names on the signature page.
14. COOPERATION, ARBITRATION, INTERPRETATION,
SHARE EXCHANGE AGREEMENT
Page 17
<PAGE>
MODIFICATION AND ATTORNEY FEES
14.1 Cooperation of Parties: The parties further agree that they will do
all things necessary to accomplish and facilitate the purpose of this Agreement
and that they will sign and execute any and all documents necessary to bring
about and perfect the purposes of this Agreement.
14.2 Arbitration: The parties hereby submit all controversies, claims and
matters of difference arising out of this Agreement to arbitration in
Sarasota, Florida according to the rules and practices of the American
Arbitration Association from time to time in force. This submission and
agreement to arbitrate shall be specifically enforceable. The Agreement shall
further be governed by the laws of the State of Nevada.
14.3 Interpretation of Agreement: The parties agree that should any
provision of this Agreement be found to be ambiguous in any way, such ambiguity
shall not be resolved by construing such provisions or any part of or the entire
Agreement in favor of or against any party herein, but rather by construing the
terms of this Agreement fairly and reasonably in accordance with their generally
accepted meaning.
14.4 Modification of Agreement: This Agreement may be amended or modified
in any way at any time by an instrument in writing stating the manner in which
it is amended or modified and signed by each of the parties hereto. Any such
writing amending or modifying this Agreement shall be attached to and kept with
this Agreement.
14.5 Attorney Fees: If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of the Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it may be entitled.
14.6 Entire Agreement: This Agreement constitutes the entire Agreement
and understanding of the parties hereto with respect to the matters herein set
SHARE EXCHANGE AGREEMENT
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<PAGE>
forth, and all prior negotiations, writings and understandings relating to the
subject matter of this Agreement are merged herein and are superseded and
canceled by this Agreement.
14.7 Counterparts: This Agreement may be signed in one or more
counterparts.
14.8 Facsimile Transmission Signatures: A signature received pursuant to
a facsimile transmission shall be sufficient to bind a party to this Agreement.
SHARE EXCHANGE AGREEMENT
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above.
SHAREHOLDERS: ANYOX RESOURCES INC.
/s/ Wyly Wade /s/ Carsten Mide
- ------------------------------ ------------------------------
WYLY WADE By Carsten Mide
Its President
/s/ Mark Gray
- ------------------------------
MARK GRAY
MIDE WEB PARTNERS, INC.
/s/ Carsten Mide /s/ Wyly Wade
- ------------------------------ ------------------------------
CARSTEN MIDE By Wyly Wade
Its President
Notice Address:
- ------------------------------
- ------------------------------
- ------------------------------
- ------------------------------
Fax:
--------------------------
[signatures continued on next page]
SHARE EXCHANGE AGREEMENT
Page 20
<PAGE>
Each undersigned hereby joins in that certain Share Exchange Agreement (the
"Agreement") entered into on March 5, 2000 by and between Wyly Wade, Mark E.
Gray, Carsten Mide, WEB PARTNERS, INC., a Florida corporation and ANYOX
RESOURCES INC., a Nevada corporation, and agrees to be bound by the Agreement's
terms and conditions as a full party thereto and to perform all of its
obligations set forth in the Agreement.
<TABLE>
<CAPTION>
PROXY GRANTORS:
MONTIER FINANCE S.A. ISLAY GROUP SERVICES INC. SUNART OVERSEAS LIMITED
<S> <C> <C>
/s/ Christine Malic /s/ Amir Sosa /s/ Marie Gabb
- ------------------------------------ --------------------------------------- ---------------------------------------
By St. Luke Management Co. LTD. By St. Luke Management Co. LTD. By St. Luke Management Co. LTD.
-------------------------------- ----------------------------------- ---------------------------------------
Its Secretary Its Secretary Its Secretary
--------------------------- ------------------------------ -------------------------------
7 March 2000 7 March 2000 7 March 2000
- ------------------------------------ --------------------------------------- ---------------------------------------
(Date) (Date) (Date)
Notice Address: Notice Address: Notice Address:
35 Barrack Road 35 Barrack Road 35 Barrack Road
- ------------------------------------ --------------------------------------- ---------------------------------------
Third Floor Third Floor Third Floor
- ------------------------------------ --------------------------------------- ---------------------------------------
Belize City Belize City Belize City
- ------------------------------------ --------------------------------------- ---------------------------------------
Belize Belize Belize
- ------------------------------------ --------------------------------------- ---------------------------------------
Fax: 501-233-501 Fax: 501-233-501 Fax: 501-233-501
------------------------------- --------------------------------- ----------------------------------
CARDONA ENTERPRISES S.A. MANRESA EQUITIES CORPORATION
/s/ Tracey Williams /s/ Keith King
--------------------------------------- ---------------------------------------
By First Nevisian Services LTD. By First Nevisian Services LTD.
----------------------------------- -----------------------------------
Its Secretary Its Secretary
------------------------------ ------------------------------
7 March 2000 7 March 2000
--------------------------------------- ---------------------------------------
(Date) (Date)
Notice Address: Notice Address:
Henville Building Henville Building
--------------------------------------- ---------------------------------------
Charletown Charletown
--------------------------------------- ---------------------------------------
Nevis Nevis
--------------------------------------- ---------------------------------------
--------------------------------------- ---------------------------------------
Fax: 869-469-1204 Fax: 869-469-1204
--------------------------------- ---------------------------------
</TABLE>
SHARE EXCHANGE AGREEMENT
Page 20
<PAGE>
SCHEDULE 11.6
- -------------
OBLIGATIONS OF WPI
- ------------------
SHARE EXCHANGE AGREEMENT
SCHEDULE 11.6
<PAGE>
Exhibit A to
Share Exchange Agreement
IRREVOCABLE PROXY
THIS PROXY IS GRANTED PURSUANT TO A PRIVATE AGREEMENT AND HAS NOT BEEN SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS OR ANY OTHER PARTY
The undersigned hereby appoints Wyly Wade and Mark Gray, or either of them, as
proxy for the undersigned, each with full power of substitution, to vote all
shares of the Common Stock of Anyox Resources Inc. which the undersigned would
be entitled to vote if personally present at any annual or special meeting of
shareholders of Anyox Resources Inc., and at any adjournments thereof, on any
proposal and any other matters properly brought before the meeting.
The undersigned specifically directs that this Proxy be voted in favor of the
Amendment and Restatement of the Articles of Incorporation of Anyox Resources
Inc. as contemplated by section 5 of that certain Share Exchange Agreement dated
March ___, 2000. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before any meeting and at any
adjournment or postponement thereof. This Proxy, when properly executed, will
be voted in the manner directed herein by the undersigned.
This Proxy shall continue in force until the date 10 days after Anyox Resources
Inc. establishes a Class A Preferred Stock and offers it to Wyly Wade and Mark
Gray as contemplated by section 7 of that certain Share Exchange Agreement dated
March ___, 2000. The Undersigned hereby agrees and understands that this proxy
is coupled with an interest as provided by section 3 of that certain Share
Exchange Agreement dated March ___, 2000, and therefore irrevocable, and as a
result may not be withdrawn or otherwise retrieved from or denied to Wyly Wade
and Mark Gray, or either of them; provided, however, that the Undersigned may
revoke this proxy if, and only if, Wyly Wade or Mark Gray shall remain in
material breach of that certain Share Exchange Agreement dated March ___, 2000,
after 5 days' notice of such material breach. For purposes of the preceding
sentence, Wyly Wade or Mark Gray shall not be considered to be in material
breach of that certain Share Exchange Agreement dated March ___, 2000, if,
despite technically remaining in breach, he has taken all reasonable steps to
effect a cure and thereafter diligently prosecutes such cure to completion.
The Undersigned hereby expressly confirms that it intends that this proxy be
irrevocable.
- ----------------------------------------
(print name of record stockholder)
- ---------------------------------------- ------------------------------------
By (Date)
-------------------------------------
Its
---------------------------------
<PAGE>
Exhibit B to
Share Exchange Agreement
ORDER TO CANCEL SHARES
----------------------
(Date)
Anyox Resources Inc.
540 North Tamiami Trail
Sarasota, Florida
Attn: President
Sir:
On the books and records of Anyox Resources Inc. (the "Company") I am the
holder of 4,000,000 shares of restricted common stock. Except as provided in the
next sentence, I hereby order you to cancel my 4,000,000 shares of restricted
common stock without further consideration. If not delivered to the Company by
the date 10 days after the Company establishes a Class A Preferred Stock and
offers it to Wyly Wade and Mark Gray as contemplated by section 7 of that
certain Share Exchange Agreement dated March ___, 2000, this order shall be
null, void ab initio and of no force or effect.
-----------------------------------------
Carsten Mide
<PAGE>
Exhibit C to
Share Exchange Agreement
------------------------
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
[NEW CORPORATE NAME]
The undersigned hereby adopts as its chartering document these Amended and
Restated Articles of Incorporation.
ARTICLE I
The name of the corporation is "[New Corporate Name]".
ARTICLE II
2.1. Authorized Capital
The total number of shares that this corporation is authorized to issue is
200,000,000, consisting of 160,000,000 shares of Common Stock having a par value
of $0.001 per share and 40,000,000 shares of Preferred Stock having a par value
of $0.001 per share. The Common Stock is subject to the rights and preferences
of the Preferred Stock as set forth below.
2.2. Issuance of Preferred Stock by Class and in Series
The Preferred Stock may be issued from time to time in one or more classes
and one or more series within such classes in any manner permitted by law and
the provisions of these Articles of Incorporation, as determined from time to
time by the Board of Directors and stated in the resolution or resolutions
providing for its issuance, prior to the issuance of any shares. The Board of
Directors shall have the authority to fix and determine and to amend the voting
powers, designations, preferences, limitations, restrictions and relative rights
of the shares (including, without limitation, such matters as dividends,
redemption, liquidation, conversion and voting) of any class or series that is
<PAGE>
wholly unissued or to be established. Unless otherwise specifically provided in
the resolution establishing any class or series, the Board of Directors shall
further have the authority, after the issuance of shares of a class or series
whose number it has designated, to amend the resolution establishing such class
or series to decrease the number of shares of that class or series, but not
below the number of shares of such class or series then outstanding.
ARTICLE III
The purpose of this corporation is to engage in any business, trade or
activity that may lawfully be conducted by a corporation organized under the law
of the state of Nevada (hereinafter, "applicable corporate law") and to engage
in any and all such activities as are incidental or conducive to the attainment
of the foregoing purpose or purposes.
ARTICLE IV
Except as may be authorized pursuant to Section 2.2 of Article II, no
preemptive rights shall exist with respect to shares of stock or securities
convertible into shares of stock of this corporation.
ARTICLE V
The right to cumulate votes in the election of Directors shall not exist
with respect to shares of stock of this corporation.
SHARE EXCHANGE AGREEMENT
EXHIBIT C
Page 2
<PAGE>
ARTICLE VI
6.1. Number of Directors
The Board of Directors shall be composed of not less than one nor more than
nine Directors. The specific number of Directors shall be set by resolution of
the Board of Directors or, if the Directors in office constitute fewer than a
quorum of the Board of Directors, by the affirmative vote of a majority of all
the Directors in office. The number of Directors of this corporation may be
increased or decreased from time to time in the manner provided herein, but no
decrease in the number of Directors shall have the effect of shortening the term
of any incumbent Director.
6.2. Classification of Directors
The Directors shall be divided into three classes, with each class to be as
nearly equal in number as possible, as specified by resolution of the Board of
Directors or, if the Directors in office constitute fewer than a quorum of the
Board of Directors, by the affirmative vote of a majority of all the Directors
in office. The term of office of Directors of the first class shall expire at
the first annual meeting of shareholders after their election. The term of
office of Directors of the second class shall expire at the second annual
meeting after their election. The term of office of Directors of the third class
shall expire at the third annual meeting after their election. At each annual
meeting after such classification, a number of Directors equal to the number of
the class whose term expires at the time of such meeting shall be elected to
hold office until the third succeeding annual meeting. Absent his or her death,
resignation or removal, a Director shall continue to
SHARE EXCHANGE AGREEMENT
EXHIBIT C
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<PAGE>
serve despite the expiration of the Director's term until his or her successor
shall have been elected and qualified or until there is a decrease in the number
of Directors.
6.3. Removal of Directors
The shareholders may remove one or more Directors with or without cause,
but only at a special meeting called for the purpose of removing the Director or
Directors, and the meeting notice must state that the purpose, or one of the
purposes, of the meeting is removal of the Director or Directors.
6.4. Vacancies on Board of Directors
If a vacancy occurs on the Board of Directors, including a vacancy
resulting from an increase in the number of Directors, the Board of Directors
may fill the vacancy, or, if the Directors in office constitute fewer than a
quorum of the Board of Directors, they may fill the vacancy by the affirmative
vote of a majority of all the Directors in office. The shareholders may fill a
vacancy only if there are no Directors in office.
ARTICLE VII
This corporation reserves the right to amend or repeal any of the
provisions contained in these Articles of Incorporation in any manner now or
hereafter permitted by the applicable corporate law, and the rights of the
shareholders of this corporation are granted subject to this reservation.
SHARE EXCHANGE AGREEMENT
EXHIBIT C
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<PAGE>
ARTICLE VIII
The Board of Directors shall have the power to adopt, amend or repeal the
Bylaws of this corporation, subject to the power of the shareholders to amend or
repeal such Bylaws. The shareholders shall also have the power to amend or
repeal the Bylaws of this corporation and to adopt new Bylaws.
ARTICLE IX
9.1. Shareholder Actions
Subject to any limitations imposed by applicable securities laws, any
action required or permitted to be taken at a shareholders meeting may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
9.2. Number of Votes Necessary to Approve Actions
Whenever applicable corporate law permits a corporation's articles of
incorporation to specify that a lesser number of shares than would otherwise be
required shall suffice to approve an action by shareholders, these Articles of
Incorporation hereby specify that the number of shares required to approve such
an action shall be such lesser number.
SHARE EXCHANGE AGREEMENT
EXHIBIT C
Page 5
<PAGE>
9.3. Special Meetings of Shareholders
So long as this corporation is a public company, except as may be
authorized pursuant to Section 2.2 of Article II, special meetings of the
shareholders of the corporation for any purpose may be called at any time by the
Board of Directors or, if the Directors in office constitute fewer than a quorum
of the Board of Directors, by the affirmative vote of a majority of all the
Directors in office, but such special meetings may not be called by any other
person or persons.
9.4. Quorum for Meetings of Shareholders.
Except with respect to any greater requirement contained in these Articles
of Incorporation or the applicable corporate law, one-third of the votes
entitled to be cast on a matter by the holders of shares that, pursuant to the
Articles of Incorporation or the applicable corporate law, are entitled to vote
and be counted collectively upon such matter, represented in person or by proxy,
shall constitute a quorum of such shares at a meeting of shareholders.
ARTICLE X
To the full extent that applicable corporate law, as it exists on the date
hereof or may hereafter be amended, permits the limitation or elimination of the
personal liability of Directors, a Director of this corporation shall not be
liable to this corporation or its shareholders for monetary damages for conduct
as a Director. Any amendments to or repeal of this Article X shall not adversely
affect any right or protection of a Director of this corporation for or with
respect to any acts or omissions of such Director occurring prior to such
amendment or repeal.
SHARE EXCHANGE AGREEMENT
EXHIBIT C
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<PAGE>
ARTICLE XI
11.1. Indemnification.
The corporation shall indemnify its directors to the full extent permitted
by applicable corporate law now or hereafter in force. However, such indemnity
shall not apply if the director did not (a) act in good faith and in a manner
the director reasonably believed to be in or not opposed to the best interests
of the corporation, and (b) with respect to any criminal action or proceeding,
have reasonable cause to believe the director's conduct was unlawful. The
corporation shall advance expenses for such persons pursuant to the terms set
forth in the Bylaws, or in a separate Board resolution or contract.
11.2. Authorization.
The Board of Directors may take such action as is necessary to carry out
these indemnification and expense advancement provisions. It is expressly
empowered to adopt, approve, and amend from time to time such Bylaws,
resolutions, contracts, or further indemnification and expense advancement
arrangements as may be permitted by law, implementing these provisions. Such
Bylaws, resolutions, contracts or further arrangements shall include but not be
limited to implementing the manner in which determinations as to any indemnity
or advancement of expenses shall be made. The Board of Directors shall have
further power to authorize the corporation to indemnify its officers, employees
or agents (whether
SHARE EXCHANGE AGREEMENT
EXHIBIT C
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<PAGE>
serving the corporation directly or serving at its request) to the full extent
permitted by applicable corporate law now or hereafter in force.
11.3. Insurance.
The corporation shall have the power, exercised by authority of the Board
of Directors, to purchase and maintain insurance on behalf of any person to whom
indemnity is provided under or through this Article XI to the full extent
permitted by applicable corporate law now or hereafter in force.
11.4. Effect of Amendment.
No amendment or repeal of this Article shall apply to or have any effect on
any right to indemnification provided hereunder with respect to acts or
omissions occurring prior to such amendment or repeal.
SHARE EXCHANGE AGREEMENT
EXHIBIT C
Page 8
<PAGE>
Exhibit D to
Share Exchange Agreement
BYLAWS
of
__________________________
SECTION 1. OFFICES
The principal office of the corporation shall be located at the principal
place of business or such other place as the Board of Directors ("Board") may
designate. The corporation may have such other offices as the Board may
designate or as the business of the corporation may require.
SECTION 2. SHAREHOLDERS
2.1 Annual Meeting
The annual meeting of the shareholders to elect Directors and transact such
other business as may properly come before the meeting shall be held on a date
not more than 180 days after the end of the corporation's fiscal year, such date
and time to be determined by the Board.
2.2 Special Meetings
(a) Subject to paragraph 2.2(b), the Chairman of the Board, the President
or the Board may call special meetings of the shareholders for any
purpose. Further, a special meeting of the shareholders shall be held
if the holders of not less than 25% of all the votes entitled to be
cast on any issue proposed to be considered at such special meeting
have dated, signed and delivered to the Secretary one or more written
demands for such meeting, describing the purpose or purposes for which
it is to be held.
(b) So long as the Company is a public company, special meetings of the
shareholders of the Company for any purpose may be called at any time
by the Board or, if the Directors in office constitute fewer than a
quorum of the Board, by the affirmative vote of a majority of all the
Directors in office, but such special meetings may not be called by
any other person or persons.
2.3 Meetings by Communications Equipment
Shareholders may participate in any meeting of the shareholders by any
means of communication by which all persons participating in the meeting can
hear each other during the meeting. Participation by such means shall
constitute presence in person at a meeting.
<PAGE>
2.4 Date, Time and Place of Meeting
Except as otherwise provide in these Bylaws, all meetings of shareholders,
including those held pursuant to demand by shareholders, shall be held on such
date and at such time and place designated by or at the direction of the Board.
2.5 Notice of Meeting
Written notice stating the place, day and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called shall be given by or at the direction of the Board, the Chairman of the
Board, the President or the Secretary to each shareholder entitled to notice of
or to vote at the meeting not less than 10 nor more than 60 days before the
meeting, except that notice of a meeting to act on an amendment to the Articles
of Incorporation, a plan of merger or share exchange, the sale, lease, exchange
or other disposition of all or substantially all of the corporation's assets
other than in the regular course of business or the dissolution of the
corporation shall be given not less than 20 or more than 60 days before such
meeting. If an annual or special shareholders' meeting is adjourned to a
different date, time or place, no notice of the new date, time or place is
required if they are announced at the meeting before adjournment. If a new
record date for the adjourned meeting is or must be fixed, notice of the
adjourned meeting must be given to shareholders entitled to notice of or to vote
as of the new record date.
Such notice may be transmitted by mail, private carrier, personal delivery,
telegraph, teletype or communications equipment that transmits a facsimile of
the notice. If those forms of written notice are impractical in the view of the
Board, the Chairman of the Board, the President or the Secretary, written notice
may be transmitted by an advertisement in a newspaper of general circulation in
the area of the corporation's principal office. If such notice is mailed, it
shall be deemed effective when deposited in the official government mail, first-
class postage prepaid, properly addressed to the shareholder at such
shareholder's address as it appears in the corporation's current record of
shareholders. Notice given in any other manner shall be deemed effective when
dispatched to the shareholder's address, telephone number or other number
appearing on the records of the corporation. Any notice given by publication as
herein provided shall be deemed effective five days after first publication.
2.6 Waiver of Notice
Whenever any notice is required to be given by an shareholder under the
provisions of these Bylaws, the Articles of Incorporation or the Washington
Business Corporation Act, a waiver of notice in writing, signed by the person or
persons entitled to such notice and delivered
SHARE EXCHANGE AGREEMENT
EXHIBIT D
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<PAGE>
to the corporation, whether before or after the date and time of the meeting or
before or after the action to be taken by consent is effective, shall be deemed
equivalent to the giving of such notice. Further, notice of the time, place and
purpose of any meeting will be deemed to be waived by any shareholder by
attendance in person or by proxy, unless such shareholder at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting.
2.7 Fixing of Record Date for Determining Shareholders
For the purpose of determining shareholders entitled (a) to notice of or to
vote at any meeting of shareholders or any adjournment thereof, (b) to demand a
special meeting, or (c) to receive payment of any dividend, or in order to make
a determination of shareholders for any other purpose, the Board may fix a
future date as the record date for any such determination. Such record date
shall be not more than 70 days, and, in case of a meeting of shareholders, not
less than 10 days, prior to the date on which the particular action requiring
such determination is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote a meeting, the
record date shall be the day immediately preceding the date on which notice of
the meeting is first given to shareholders. Such a determination shall apply to
any adjournment of the meeting unless the Board fixes a new record date, which
it shall do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting. If no record date is set for the
determination of shareholders entitled to receive payment of any stock, dividend
or distribution (other than one involving a purchase, redemption or other
acquisition of the corporation's shares), the record date shall be the date the
Board authorizes the stock dividend or distribution.
2.8 Voting Record
At least 10 days before each meeting of shareholders, an alphabetical list
of the shareholders entitled to notice of such meeting shall be made, arranged
by voting group and by each class or series of shares, with the address of and
number of shares held by each shareholder. This record shall be kept at the
principal office of the corporation for 10 days prior to such meeting, and shall
be kept open at such meeting, for the inspection of any shareholder or any
shareholder's agent or attorney.
2.9 Quorum
Except with respect to any greater requirement contained in the Articles of
Incorporation or the Washington Business Corporation Act, one-third of the votes
entitled to be cast on a matter by the holders of shares that, pursuant to the
Articles of Incorporation or the Washington Business Corporation Act, are
entitled to vote and be counted collectively upon such matter, represented in
person or by proxy, shall constitute a quorum of such shares at a meeting of
SHARE EXCHANGE AGREEMENT
EXHIBIT D
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<PAGE>
shareholders. If less than the required number of such votes are represented at
a meeting, a majority of the votes so represented may adjourn the meeting from
time to time. Any business may be transacted at a reconvened meeting that might
have been transacted at the meeting as originally called, provided a quorum is
present or represented at such meeting. Once a share is represented for any
purpose at a meeting other than solely to object to holding the meeting or
transacting business, it is deemed present for quorum purposes for the remainder
of the meeting and any adjournment (unless a new record date is or must be set
for the adjourned meeting), notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2.10 Manner of Acting
If a quorum is present, action on a matter other than the election of
Directors shall be approved if the votes cast in favor of the action by the
shares entitled to vote and be counted collectively upon such matter exceed the
votes cast against such action by the shares entitled to vote and be counted
collectively thereon, unless the Articles of Incorporation or the Washington
Business Corporation Act requires a greater number of affirmative votes.
Whenever the Washington Business Corporation Act permits a corporation's bylaws
to specify that a lesser number of shares than would otherwise be required shall
suffice to approve an action by shareholders, these Bylaws hereby specify that
the number of shares required to approve such an action shall be such lesser
number.
2.11 Proxies
As shareholder may vote by proxy executed in writing by the shareholder or
by his or her attorney-in-fact or agent. Such proxy shall be effective when
received by the Secretary or other officer or agent authorized to tabulate
votes. A proxy shall become invalid 11 months after the date of its execution,
unless otherwise provided in the proxy. A proxy with respect to a specified
meeting shall entitle its holder to vote at any reconvened meeting following
adjournment of such meeting but shall not be valid after the final adjournment.
2.12 Voting Shares
Except as provided in the Articles of Incorporation, each outstanding share
entitled to vote with respect to a matter submitted to a meeting of shareholders
shall be entitled to one vote upon such matter.
2.13 Voting for Directors
Each shareholder entitled to vote to an election of Directors may vote, in
person or by proxy, the number of shares owned by such shareholder for as many
persons as there are
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EXHIBIT D
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<PAGE>
Directors to be elected and for whose election such shareholder has a right to
vote. Shareholders shall not have the right to cumulate their votes. Unless
otherwise provided in the Articles of Incorporation, the candidates elected
shall be those receiving the largest number of votes cast, up to the number of
Directors to be elected.
2.14 Action by Shareholders Without a Meeting
Any action that may be or is required to be taken at a meeting of the
shareholders may be taken without a meeting by unanimous consent if one or more
written consents setting forth the action so taken shall be signed by all the
shareholders entitled to vote with respect to the matter. Action may also be
taken by less than unanimous consent. Action by less than unanimous consent may
be taken if one or more written consents describing the action taken shall be
signed by shareholders holding the record or otherwise entitled to vote in the
aggregate not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
on the action were present and voted. If not otherwise fixed by the Board, the
record date for determining shareholders entitled to take action without a
meeting is the date the first shareholder consent is signed. A shareholder may
withdraw a consent only by delivering a written notice of withdrawal to the
corporation prior to the time that consents sufficient to authorize taking the
action have been delivered to the corporation. Every written consent shall bear
the date of signature of each shareholder who signs the consent. A written
consent is not effective to take the action referred to in the consent unless,
within 60 days of the earliest dated consent delivered to the corporation,
written consents signed by a sufficient number of shareholders to take action
are delivered to the corporation. Unless the consent specifies a later effective
date, actions taken by written consent of the shareholders are effective when
(a) consents sufficient to authorize taking the action are in possession of the
corporation and (b) the period of advance notice required by the Articles of
Incorporation to be given to any nonconsenting or nonvoting shareholders has
been satisfied. Any such consent shall be inserted in the minute book as if it
were the minutes of a meeting of the shareholders.
SECTION 3. BOARD OF DIRECTORS
3.1 General Powers
All corporate powers shall be exercised by or under the authority of, and
the business and affairs of the corporation shall be managed under the direction
of, the Board, except as may be otherwise provided in these Bylaws, the Articles
of Incorporation or the Washington Business Corporation Act.
3.2 Number, Classification and Tenure
SHARE EXCHANGE AGREEMENT
EXHIBIT D
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<PAGE>
The Board shall be composed of not less than one nor more than six
Directors, the specific number to be set by resolution of the Board or, if the
Directors in office constitute fewer than a quorum of the Board, by the
affirmative vote of a majority of all the Directors in office. The number of
Directors may be changed from time to time as provided by the Articles of
Incorporation, but no decrease in the number of Directors shall have the effect
of shortening the term of any incumbent Director. The Directors shall be divided
into three classes, with each class to be as nearly equal in number as possible,
as specified by resolution of the Board or, if the Directors in office
constitute fewer than a quorum of the Board, by the affirmative vote of a
majority of all the Directors in office. The term of office of Directors of the
first class shall expire at the first annual meeting of shareholders after their
election. The term of office of Directors of the second class shall expire at
the second annual meeting after their election. The term of office of Directors
of the third class shall expire at the third annual meeting after their
election. At each annual meeting after such classification, a number of
Directors equal to the number of the class whose term expires at the time of
such meeting shall be elected to hold office until the third succeeding annual
meeting. Absent his or her death, resignation or removal, a Director shall
continue to serve despite the expiration of the Director's term until his or her
successor shall have been elected and qualified or until there is a decrease in
the number of Directors. Directors need not be shareholders of the corporation
or residents of the state of Washington, and need not meet any other
qualifications.
3.3 Annual and Regular Meetings
An annual Board meeting shall be held without notice immediately after and
at the same place as the annual meeting of shareholders. By resolution the
Board, or any committee designated by the Board, may specify the time and place
for holding regular meetings without notice other than such resolution.
3.4 Special Meetings
Special meetings of the Board or any committee designated by the Board may
be called by or at the request of the Chairman of the Board, the President, the
Secretary or, in the case of special Board meetings, any one-third or more of
the Directors in office and, in the case of any special meeting of any committee
designated by the Board, by its Chairman. The person or persons authorized to
call special meetings may fix any place for holding any special Board or
committee meeting called by them.
3.5 Meetings by Communications Equipment
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by, or conduct the meeting
through the use of, any means of
SHARE EXCHANGE AGREEMENT
EXHIBIT D
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<PAGE>
communication by which all Directors participating in the meeting can hear each
other during the meeting. Participation by such means shall constitute presence
in person at a meeting.
3.6 Notice of Special Meetings
Notice of a special Board or committee meeting stating the place, day and
hour of the meeting shall be given to a Director in writing or orally. Neither
the business to be transacted at nor the purpose of any special meeting need be
specified in the notice of such meeting.
3.6.1 Personal Delivery
If notice is given by personal delivery, the notice shall be delivered to a
Director at least two days before the meeting.
3.6.2 Delivery by Mail
If notice is delivered by mail, the notice shall be deposited in the
official government mail at least five days before the meeting, properly
addressed to a Director at his or her address shown on the records of the
corporation, with postage thereon prepaid.
3.6.3 Delivery by Private Carrier
If notice is given by private carrier, the notice shall be dispatched to a
Director at his or her address shown on the records of the corporation at least
three days before the meeting.
3.6.4 Facsimile Notice
If a notice is delivered by wire or wireless equipment that transmits a
facsimile of the notice, the notice shall be dispatched at least two days before
the meeting to a Director at his or her telephone number or other number
appearing on the records of the corporation.
3.6.5 Delivery by Telegraph
If notice is delivered by telegraph, the notice shall be delivered to the
telegraph company for delivery to a Director at his or her address shown on the
records of the corporation at least three days before the meeting.
3.6.6 Oral Notice
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<PAGE>
If notice is delivered by orally, by telephone or in person, the notice
shall be personally given to the Director at least two days before the meeting.
3.7 Waiver of Notice
3.7.1 In Writing
Whenever any notice is required to be given to any Director under the
provisions of these Bylaws, the Articles of Incorporation or the Washington
Business Corporation Act, a waiver thereof in writing, signed by the person or
persons entitled to such notice and delivered to the corporation, whether before
or after the date and time of the meeting, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any regular or special meeting of the Board or any committee designated by
the Board need be specified in the waiver of notice of such meeting.
3.7.2 By Attendance
A Director's attendance at or participation in a Board or committee meeting
shall constitute a waiver of notice of such meeting, unless the Director at the
beginning of the meeting, or promptly upon his or her arrival, objects to
holding the meeting or transacting business at such meeting and does not
thereafter vote for or assent to action taken at the meeting.
3.8 Quorum
A majority of the number of Directors fixed by or in the manner provided in
these Bylaws shall constitute a quorum for the transaction of business at any
Board meeting but, if less than a majority are present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice. A majority of the number of Directors composing any committee of
the Board, as established and fixed by resolution of the Board, shall constitute
a quorum for the transaction of business at any meeting of such committee but,
if less than a majority are present at a meeting, a majority of such Directors
present may adjourn the committee meeting from time to time without further
notice.
3.9 Manner of Acting
If a quorum is present when the vote is taken, the act of the majority of
the Directors present at a Board or committee meeting shall be the act of the
Board or such committee, unless the vote of a greater number is required by
these Bylaws, the Articles of Incorporation or the Washington Business
Corporation Act.
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<PAGE>
3.10 Presumption of Assent
A Director of the corporation who is present at a Board or committee
meeting at which any action is taken shall be deemed to have assented to the
action taken unless (a) the Director objects at the beginning of the meeting, or
promptly upon the Director's arrival, to holding the meeting or transacting any
business at such meeting, (b) the Director's dissent or abstention from the
action taken is entered in the minutes of the meeting, or (c) the Director
delivers written notice of the Director's dissent or abstention to the presiding
officer of the meeting before its adjournment or to the corporation within a
reasonable time after adjournment of the meeting. The right of dissent or
abstention is not available to a Director who votes in favor of the action
taken.
3.11 Action by Board or Committees Without a Meeting
Any action that could be taken at a meeting of the Board or of any
committee created by the Board may be taken without a meeting if one or more
written consents setting forth the action so taken are signed by each of the
Directors or by each committee member either before or after the action is taken
and delivered to the corporation. Action taken by written consent of Directors
without a meeting is effective when the last Director signs the consent, unless
the consent specifies a later effective date. Any such written consent shall be
inserted in the minute book as if it were the minutes of a Board or a committee
meeting.
3.12 Resignation
Any Director may resign from the Board or any committee of the Board at any
time by delivering either oral tender of resignation at any meeting of the Board
or any committee, or written notice to the Chairman of the Board, the President,
the Secretary or the Board. Any such resignation is effective upon delivery
thereof unless the notice of resignation specifies a later effective date and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
3.13 Removal
At a meeting of shareholders called expressly for that purpose, one or more
members of the Board, including the entire Board, may be removed with or without
cause (unless the Articles of Incorporation permit removal for cause only) by
the holders of the shares entitled to elect the Director or Directors whose
removal is sought if the number of votes cast to remove the Director exceeds the
number of votes cast not to remove the Director.
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3.14 Vacancies
If a vacancy occurs on the Board, including a vacancy resulting from an
increase in the number of Directors, the Board may fill the vacancy, or, if the
Directors in office constitute fewer than a quorum of the Board, they may fill
the vacancy by the affirmative vote of a majority of all the Directors in
office. The shareholders may fill a vacancy only if there are no Directors in
office. A Director elected to fill a vacancy shall serve only until the next
election of Directors by the shareholders.
3.15 Executive and Other Committees
3.15.1 Creation of Committees
The Board, by resolution adopted by the greater of a majority of the
Directors then in office and the number of Directors required to take action in
accordance with these Bylaws, may create standing or temporary committees,
including an Executive Committee, and appoint members from its own number and
invest such committees with such powers as it may see fit, subject to such
conditions as may be prescribed by the Board, the Articles of Incorporation,
these Bylaws and applicable law. Each committee must have two or more members,
who shall serve at the pleasure of the Board.
3.15.2 Authority of Committees
Each Committee shall have and may exercise all the authority of the Board
to the extent provided in the resolution of the Board creating the committee and
any subsequent resolutions adopted in like manner, except that no such committee
shall have the authority to: (1) authorize or approve a distribution except
according to a general formula or method prescribed by the Board, (2) approve or
propose to shareholders actions or proposals required by the Washington Business
Corporation Act to be approved by shareholders, (3) fill vacancies on the Board
or any committee thereof, (4) amend the Articles of Incorporation pursuant to
RCW 23B.10.020, (5) adopt, amend or repeal Bylaws, (6) approve a plan of merger
not requiring shareholder approval, or (7) authorize or approve the issuance or
sale of contract for sale of shares, or determine the designation and relative
rights, preferences and limitations of a class or series of shares except that
the Board may authorize a committee or a senior executive officer of the
corporation to do so within limits specifically prescribed by the Board.
3.15.3 Minutes of Meetings
All committees shall keep regular minutes of their meetings and shall cause
them to be recorded in books kept for that purpose.
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3.15.4 Removal
The Board may remove any member of any committee elected or appointed by it
but only by the affirmative vote of the greater of a majority of Directors then
in office and the number of Directors required to take action in accordance with
these Bylaws.
3.16 Compensation
By Board resolution, Directors and committee members may be paid either
expenses, if any, of attendance at each Board or committee meeting, or a fixed
sum for attendance at each Board or committee meeting, or a stated salary as
Director or a committee member, or a combination of the foregoing. No such
payment shall preclude any Director or committee member from serving the
corporation in any other capacity and receiving compensation therefore.
SECTION 4. OFFICERS
4.1 Appointment and Term
The officers of the corporation shall be those officers appointed from time
to time by the Board or by any other officer empowered to do so. The Board shall
have sole power and authority to appoint executive officers. As used herein, the
term "executive officer" shall mean the President, the chief financial officer
and any other officer designated by the Board as an executive officer. The Board
or the President may appoint such other officers to hold office for such period,
have such authority and perform such duties as may be prescribed. The Board may
delegate to any other officer the power to appoint any subordinate officers and
to prescribe their respective terms of office, authority and duties. Any two or
more offices may be held by the same person. Unless an officer dies, resigns or
is removed from office, he or she shall hold office until his or her successor
is appointed.
4.2 Resignation
Any officer may resign at any time by delivering written notice to the
corporation. Any such resignation is effective upon delivery, unless the notice
of resignation specifies a later effective date, and, unless otherwise
specified, the acceptance of such resignation shall not be necessary to make it
effective.
4.3 Removal
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Any officer may be removed by the Board at any time, with or without cause.
An officer or assistant officer, if appointed by another officer, may be removed
at any time, with or without cause, by any officer authorized to appoint such
officer or assistant officer.
4.4 Contract Rights of Officers
The appointment of an officer does not itself create contract rights.
4.5 Chairman of the Board
If appointed, the Chairman of the Board shall perform such duties as shall
be assigned to him or her by the Board from time to time, and shall preside over
meetings of the Board and shareholders unless another officer is appointed or
designated by the Board of Chairman of such meetings.
4.6 President
If appointed, the President shall be the chief executive officer of the
corporation unless some other offices is to designated by the Board, shall
preside over meetings of the Board and shareholders in the absence of a Chairman
of the Board, and, subject to the Board's control, shall supervise and control
all the assets, business and affairs of the corporation. In general, the
President shall perform all duties incident to the office of President and such
other duties as are prescribed by the Board from time to time. If no Secretary
has been appointed, the President shall have responsibility for the preparation
of minutes of meetings of the Board and shareholders and for authentication of
the records of the corporation.
4.7 Vice President
In the event of the death of the President or his or her inability to act,
the Vice President (or if there is more than one Vice President, the Vice
President who was designated by the Board as the successor to the President, or
if no Vice President is so designated, the Vice President first elected to such
office) shall perform the duties of the President, except as may be limited by
resolution of the Board, with all the powers of and subject to all the
restrictions upon the President. Vice Presidents shall perform such other duties
as from time to time may be assigned to them by the President or by or at the
direction of the Board.
4.8 Secretary
If appointed, the Secretary shall be responsible for preparation of minutes
of the meetings of the Board and shareholders, maintenance of the corporation
records and stock registers, and
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authentication of the corporation's records, and shall in general perform all
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him or her by the President or by or at the direction of
the Board. In the absence of the Secretary, an Assistant Secretary may perform
the duties of the Secretary.
4.9 Treasurer
If appointed, the Treasurer shall have charge and custody of and be
responsible for all funds and securities of the corporation, receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in banks,
trust companies or other depositories selected in accordance with the provisions
of these Bylaws, and in general perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him or
her by the President or by or at the direction of the Board. In the absence of
the Treasurer, an Assistant Treasurer may perform the duties of the Treasurer.
4.10 Salaries
The salaries of the officers shall be fixed from time to time by the Board
or by any person or persons to whom the Board has delegated such authority. No
officer shall be prevented from receiving such salary by reason of the fact that
he or she is also a Director of the corporation.
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 Contracts
The Board may authorize any officer or officers, or agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation. Such authority may be general or confined to
specific instances.
5.2 Loans to the Corporation
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the Board. Such authority may be general or confined to specific instances.
5.3 Checks, Drafts, Etc.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, or
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agent or agents, of the corporation and in such manner as is from time to time
determined by resolution of the Board.
5.4 Deposits
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the Board may authorize.
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Issuance of Shares
No shares of the corporation shall be issued unless authorized by the
Board, or by a committee designated by the Board to the extent such committee is
empowered to do so.
6.2 Certificates for Shares
Certificates representing shares of the corporation shall be signed, either
manually or in facsimile, by the President or any Vice President and by the
Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary
and shall include on their face written notice of any restrictions that may be
imposed on the transferability of such shares. All certificates shall be
consecutively numbered or otherwise identified.
6.3 Stock Records
The stock transfer books shall be kept at the principal office at the
corporation or at the office of the corporation's transfer agent or registrar.
The name and address of each person to whom certificates for shares are issued,
together with the class and number of shares represented by each such
certificate and the date of issue thereof, shall be entered on the stock
transfer books of the corporation. The person in whose name shares stand on the
books of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes.
6.4 Restriction on Transfer
Except to the extent that the corporation has obtained an opinion of
counsel acceptable to the corporation that transfer restrictions are not
required under applicable securities laws, or has otherwise satisfied itself
that such transfer restrictions are not required, all certificates representing
shares of the corporation shall bear a legend on the face of the certificate, or
on the
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reverse of the certificate if a reference to the legend is contained on the
face, which reads substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE
STATE SECURITIES LAWS, AND NO INTEREST MAY BE SOLD, DISTRIBUTED, ASSIGNED,
OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, (B) THIS
CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE
SECURITIES SATISFACTORY TO THIS CORPORATION STATING THAT SUCH TRANSACTION
IS EXEMPT FROM REGISTRATION, OR (C) THIS CORPORATION OTHERWISE SATISFIES
ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.
6.5 Transfer of Shares
The transfer of shares of the corporation shall be made only on the stock
transfer books of the corporation pursuant to authorization or document of
transfer made by the holder of record thereof or by his or her legal
representative, who shall furnish proper evidence of authority to transfer, or
by his or her attorney-in-fact authorized by power of attorney duly executed and
filed with the Secretary of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificates for a like number of shares shall have been
surrendered and canceled.
6.6 Lost or Destroyed Certificates
In the case of a lost, destroyed or damaged certificate, a new certificate
may be issued in its place upon such terms and indemnity to the corporation as
the Board may prescribe.
SECTION 7. BOOKS AND RECORDS
The corporation shall:
(a) Keep as permanent records minutes of all meetings of its shareholders
and the Board, a record of all actions taken by the shareholders or the Board
without a meeting, and a record of all
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actions taken by a committee of the Board exercising the authority of the Board
on behalf of the corporation.
(b) Maintain appropriate accounting records.
(c) Maintain a record of its shareholders, in a form that permits
preparation of a list of the names and addresses of all shareholders, in
alphabetical order by class of shares showing the number and class of
shares held by each; provided, however, such record may be maintained by an
agent of the corporation.
(d) Maintain its records in written form or in another form capable of
conversion into written form within a reasonable time.
(e) Keep a copy of the following records at its principal office:
1. the Articles of Incorporation and all amendments thereto as
currently in effect;
2. these Bylaws and all amendments thereto as currently in effect;
3. the minutes of all meetings of shareholders and records of all
action taken by shareholders without a meeting, for the past three
years;
4. the financial statements described in Section 23B.16.200(1) of
the Washington Business Corporation Act, for the past three years;
5. all written communications to shareholders generally within the
past three years;
6. a list of the names and business addresses of the current
Directors and officers; and
7. the most recent annual report delivered to the Washington
Secretary of State.
SECTION 8. ACCOUNTING YEAR
The accounting year of the corporation shall be the calendar year, provided
that if a different accounting year is at any time selected by the Board for
purposes of federal income taxes, or any other purpose, the accounting year
shall be the year so selected.
SECTION 9. SEAL
The Board may provide for a corporate seal that shall consist of the name
of the corporation, the state of its incorporation, and the year of its
incorporation.
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SECTION 10. INDEMNIFICATION
10.1 Right to Indemnification
Each person who was, is or is threatened to be made a party to or is
otherwise involved (including, without limitation, as a witness) in any
threatened, pending or completed action, suit, claim or proceeding, whether
civil, criminal, administrative or investigative and whether formal or informal
(hereinafter a "proceedings"), by reason of the fact that he or she is or was a
Director or officer of the corporation or, that being or having been such a
Director or officer of the corporation, he or she is or was serving at the
request of the corporation as a Director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise (hereafter an "indemnitee"), whether the basis
of a proceeding is alleged action in an official capacity or in any other
capacity while serving as such a Director, officer, partner, trustee, employee
or agent, shall be indemnified and held harmless by the corporation against all
losses, claims, damages (compensatory, exemplary, punitive or otherwise),
liabilities and expenses (including attorneys' fees, costs, judgments, fines,
ERISA excise taxes or penalties, amounts to be paid in settlement and any other
expenses) actually and reasonably incurred or suffered by such indemnitee in
connection therewith and such indemnification shall continue as to an indemnitee
who has ceased to be a Director or officer of the Company or a Director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and
shall insure to the benefit of the indemnitee's heirs, executors and
administrators. Except as provided in subsection 10.4 of this Section with
respect to proceedings seeking to enforce rights to indemnification, the
corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if a proceeding (or part
thereof) was authorized or ratified by the Board. The right to indemnification
conferred in this Section shall be a contract right.
10.2 Restrictions on Indemnification
No indemnification shall be provided to any such indemnitee for acts or
omissions of the indemnitee finally adjudged to be intentional misconduct or a
knowing violation of law, for conduct of the indemnitee finally adjudged to be
in violation of Section 23B.08.310 of the Washington Business Corporation Act,
for any transaction with respect to which it was finally adjudged that such
indemnitee personally received a benefit in money, property or services to which
the indemnitee was not legally entitled or if the corporation is otherwise
prohibited by applicable law from paying such indemnification. Notwithstanding
the foregoing, if Section 23B.08.560 or any successor provision of the
Washington Business Corporation Act is hereafter amended, the restrictions on
indemnification set forth in this subsection 10.2 shall be as set forth in such
amended statutory provision.
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10.3 Advancement of Expenses
The right to indemnification conferred in this Section shall include the
right to be paid by the corporation the expenses reasonably incurred in
defending any proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"). As advancement of expenses shall be made upon
delivery to the corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified.
10.4 Right of Indemnitee to Bring Suit
If a claim under subsection 10.1 or 10.3 of this Section is not paid in
full by the corporation within 60 days after a written claim has been received
by the corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be 20 days, the indemnitee
may at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim. If successful in whole or in part, in any such suit
or in a suit brought by the corporation to recover an advancement of expenses
pursuant to the terms of the undertaking, the indemnitee shall be entitled to be
paid also the expense of litigating such suit. The indemnitee shall be presumed
to be entitled to indemnification under this Section upon submission of a
written claim (and, in an action brought to enforce a claim for an advancement
of expenses, when the required undertaking has been tendered to the corporation)
and thereafter the corporation shall have the burden of proof to overcome the
presumption that the indemnitee is so entitled.
10.5 Procedures Exclusive
Pursuant to Section 23B.08.560(2) or any successor provision of the
Washington Business Corporation Act, the procedures for indemnification and the
advancement of expenses set forth in this Section are in lieu of the procedures
required by Section 23B.08.550 or any successor provision of the Washington
Business Corporation Act.
10.6 Nonexclusivity of Rights
Except as set forth in subsection 10.5, the right to indemnification and
the advancement of expenses conferred in this Section shall not be exclusive of
any other right that any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation or Bylaws of the corporation, general
or specific action of the Board or shareholders, contract or otherwise.
10.7 Insurance, Contracts and Funding
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The corporation may maintain insurance, at its expense, to protect itself
and any Director, officer, partner, trustee, employee or agent of the
corporation or another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any expense, liability or loss, whether
or not the corporation would have the authority or right to indemnify such
person against such expense, liability or loss under the Washington Business
Corporation Act or other law. The corporation may enter into contracts with any
Director, officer, partner, trustee, employee or agent of the corporation in
furtherance of the provisions of this section and may create a trust fund, grant
a security interest, or use other means (including, without limitation, a letter
of credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Section.
10.8 Identification of Employees and Agents of the Corporation
In addition to the rights of indemnification set forth in subsection 10.1,
the corporation may, by action of the Board, grant rights to indemnification and
advancement of expenses to employees and agents or any class or group of
employees and agents of the corporation (a) with the same scope and effect as
the provisions of this Section with respect to indemnification and the
advancement of expenses of Directors and officers of the corporation; (b)
pursuant to rights granted or provided by the Washington Business Corporation
Act; or (c) as are otherwise consistent with law.
10.9 Persons Serving Other Entities
Any person who, while a Director or officer of the corporation, is or was
serving (a) as a Director, officer, employee or agent of another corporation of
which a majority of the shares entitled to vote in the election of its directors
is held by the corporation or (b) as a partner, trustee or otherwise in an
executive or management capacity in a partnership, joint venture, trust,
employee benefit plan or other enterprise of which the corporation or a majority
owned subsidiary of the corporation is a general partner or has a majority
ownership shall conclusively be deemed to be so serving at the request of the
corporation and entitled to indemnification and the advancement of expenses
under subsections 10.1 and 10.3 of this Section.
SECTION 11. LIMITATION OF LIABILITY
To the full extent that the Washington Business Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of any person who would be considered an indemnitee
under subsection 10.1 of Section 10, an indemnitee of the Company shall not be
liable to the Company or its shareholders for monetary damages for conduct in
the capacity based upon which such person is considered an indemnitee.
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Any amendments to or repeal of this Section 11 shall not adversely affect any
right or protection of any indemnitee of the Company for or with respect to any
acts or omissions of such indemnitee occurring prior to such amendment or
repeal.
SECTION 12. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board, except that the Board may not repeal or amend any Bylaw
that the shareholders have expressly provided, in amending or repealing such
Bylaw, may not be amended or repealed by the Board. The shareholders may also
alter, amend and repeal these Bylaws or adopt new Bylaws. All Bylaws made by the
Board may be amended, repealed, altered or modified by the shareholders.
The foregoing Bylaws were adopted by the Board on
-----------------------.
____________________________________
Secretary
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EXHIBIT E TO
SHARE EXCHANGE AGREEMENT
MULTIPLE ADVANCE NOTE
TO BE USED FOR BUSINESS TRANSACTIONS ONLY
FIXED INTEREST
Sarasota, Florida
March __, 2000 $___________
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
Anyox Resources Inc., on [date], the sum of the aggregate principal balance of
all advances made by Anyox Resources Inc. to the undersigned hereunder, in legal
tender of the United States with interest thereon at the rate specified below,
from the date of the respective advances hereunder until fully paid.
1. Interest Rate. The rate of interest shall be ________ percent (___%)
per annum.
2. Authorization of Advances. Advances under this Note may be made at the
oral or written request of the President or Chief Operating Officer of Web
Partners, Inc. Any such advance shall be made to or for the benefit of the
undersigned when made in accordance with requests for directions from authorized
personnel.
3. Effect of Principal Payments. This is a revolving line of credit.
Except as provided below, until maturity, the undersigned may request further
advances at any time the principal balance outstanding is less than the maximum
principal amount stated herein, up to such maximum amount.
4. Cessation of Advances. The holder will have no obligation to make
advances under this note, regardless of the principal balance outstanding, if
(a) there occurs a material adverse change in the undersigned's financial
condition, or in the value of any collateral securing this note; (b) the
undersigned is in default in any payments on this note or under the terms of any
other agreement between the undersigned and holder; or (c) holder reasonably
deems itself to be insecure, even if there has been no default.
5. Application of Payments. All payments made shall be applied first to
late payment charges outstanding (if any), then to accrued interest, and then to
principal.
6. Prepayment of Principal. So long as there is no default under the
terms of this note, the undersigned shall have the right to make a prepayment of
the principal balance or any portion thereof without charge or premium.
7. Default. If any payment is not paid when due, or if the undersigned
breach any other agreement with the holder of this note, the undersigned will be
in default. Upon default, the holder may declare the unpaid principal balance
and all accrued interest and unpaid late charges, if any, immediately due and
payable, without notice, and Obligors will then pay that amount.
1
<PAGE>
Upon default, the holder may also increase the interest rate to a rate
equal to four (4) percentage points greater than the rate otherwise provided in
this note, and such interest rate shall apply until the note is fully paid. In
addition, the holder may include any unpaid interest and late charges at the
time of acceleration as part of the amount due under this note and subject to
interest at the higher rate determined according to this paragraph.
The holder may employ attorneys or other agents to collect amounts due
under this note if the undersigned is in default or to otherwise enforce the
terms of this note and any agreement securing this note, and the undersigned
agrees to pay all fees, costs and expenses incurred by the holder as a
consequence of its default. Such fees, costs and expenses include attorneys'
fees whether or not litigation is commenced and including any appeal, fees or
expenses incurred in any bankruptcy, receivership, or other insolvency
proceedings, any anticipated post-judgment collection charges, and all other
costs of collection, including court costs.
The holder may delay enforcing any of its rights under this note without
forfeiting such rights. In the event litigation is commenced, the undersigned
agrees to submit to the jurisdiction of the court in the county in which Anyox
Resources Inc. is located.
8. Waiver. The undersigned hereby waives presentment, demand for payment,
protest, notice of nonpayment or dishonor, and any relief, waiver or discharge
arising from any extension of time for payment granted before, at or after
maturity, or for any other causes.
ORAL PROMISES TO FORGIVE PAYMENT OR TO FOREBEAR ENFORCEMENT OF PAYMENT ARE NOT
ENFORCEABLE.
WEB PARTNERS, INC.
-----------------------------------
By Wyly Wade
Its President
2
<PAGE>
EXHIBIT F TO
SHARE EXCHANGE AGREEMENT
DESIGNATIONS
OF CLASS A PREFERRED STOCK
OF
[CORPNAME]
2.2.1. Class A Convertible Preferred Stock. The rights, preferences,
privileges and limitations granted to and imposed on the Class A Preferred Stock
of this corporation (the "Class A Stock"), are as set forth below in this
Section 2.2.1.
2.2.1.1. Dividends. Dividends shall be declared and set aside, out of
funds or assets of this corporation legally available therefor, for any shares
of Class A Stock only upon resolution of the Board of Directors; provided,
however:
(a) no dividend may be declared or paid on shares of Common Stock
if the net assets of this corporation after such event would be insufficient to
make the liquidation payment described in paragraph 2.2.1.2(a) on shares of
Class A Stock;
(b) if the Board of Directors declares a dividend payable upon
shares of Common Stock, the holders of shares of Class A Stock shall be entitled
to dividends per share of Class A Stock as would be declared payable on the
largest number of whole shares of Common Stock into which each share of Class A
Stock held by each holder thereof could be converted, based upon the total
number of shares that could be converted at any one time by such holder thereof,
not upon each share of Class A Stock that could be converted (as of the record
date for the determination of holders of shares of Common Stock entitled to
receive such dividend) pursuant to the provisions of subsection 2.2.1.4 hereof;
(c) if the Board of Directors declares a dividend payable upon
securities of this corporation, other than Common Stock, payable in Common Stock
or securities of this corporation convertible into or otherwise exchangeable for
Common Stock, the holders of shares of Class A Stock shall be entitled to
receive, upon conversion of the Class A Stock, in addition to the number of
shares of Common Stock receivable thereon, the number of shares of such
securities distributed in as nearly an equivalent manner to protect the rights
of the holders of Class A Stock against dilution or impairment; and
<PAGE>
Stormix Technologies Inc.
Designations of Preferred Stock
First Class, Class A
(d) if the Board of Directors declares a dividend payable in
shares of this corporation's capital stock or assets, then those shares of
capital stock or the assets calculated to be payable on shares of Class A Stock
shall not be distributed, but shall instead be reserved for issuance and/or
distribution upon conversion of Class A Stock. In the case of a dividend payable
in shares of Common Stock, the dividend shall be considered the subject of an
Extraordinary Common Stock Event (as defined in paragraph 2.2.1.4(d)), thus
affecting the number of shares of Common Stock to be received upon the
conversion of the Class A Stock.
2.2.1.2. Liquidation, Dissolution or Winding Up.
(a) Treatment at Liquidation, Dissolution or Winding Up.
(i) In the event of any liquidation, dissolution or winding
up of this corporation, whether voluntary or involuntary, holders of each share
of Class A Stock shall be entitled to be paid before any sums shall be paid or
any assets distributed among the holders of shares of: (A) Preferred Stock
subordinate to (1) the Class A Stock and (2) all other shares of Preferred Stock
that shall participate pari passu with the Class A Stock upon liquidation, or
(B) Common Stock; out of the assets of this corporation available for
distribution to holders of this corporation's stock of all classes, whether such
assets are capital, surplus or earnings, the sum of $0.85 per share of Class A
Stock (which amount shall be subject to equitable adjustment whenever there
shall occur after the final closing of the offering of Class A Stock a stock
split, combination, reclassification or other similar event involving the Class
A Stock).
(ii) If the assets of this corporation are insufficient to
permit payment in full to the holders of shares of Class A Stock as provided in
this subsection 2.2.1.2 and payment in full to the holders of all other shares
of Preferred Stock that shall participate pari passu with the Class A Stock upon
liquidation, then the entire assets of this corporation available for such
distribution shall be distributed ratably among the holders of shares of Class A
Stock and all other shares of Preferred Stock that shall participate pari passu
with the Class A Stock upon liquidation according to the respective amounts
which would be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to said shares were paid
in full.
SHARE EXCHANGE AGREEMENT
EXHIBIT F
Page 2
<PAGE>
Stormix Technologies Inc.
Designations of Preferred Stock
First Class, Class A
(iii) After payment shall have been made in full to: (A) the
holders of shares of Class A Stock and all other shares of Preferred Stock that
shall participate pari passu with the Class A Stock upon liquidation, and (B)
the holders of all other shares of Preferred Stock (1) subordinate to the Class
A Stock and all other shares of Preferred Stock that shall participate pari
passu with the Class A Stock upon liquidation (2) but prior to the Common Stock
upon liquidation; or funds necessary for such payments shall have been set aside
by this corporation in trust for the account of the holders of shares of all
such Preferred Stock, so as to be available for such payments, all remaining
assets available for distribution to stockholders shall be distributed ratably
solely among the holders of shares of Common Stock to the exclusion of the
holders of shares of such Preferred Stock.
(b) Treatment of Consolidations, Mergers and Sales of Assets.
(i) A consolidation or merger of this corporation into or
with another corporation (as a result of which the holders of more than 50% of
the shares of Common Stock receive cash, stock or other property in exchange for
their shares of such stock) or a sale of all or substantially all of the assets
of this corporation shall not be regarded as a liquidation, dissolution or
winding up of the affairs of this corporation.
(ii) As part of any consolidation, merger or sale of assets
referred to in subparagraph 2.2.1.2(b)(i), provision shall be made so that the
holders of shares of Class A Stock shall thereafter be entitled to receive upon
conversion of the Class A Stock, the number of shares of stock or other
securities or property to which such holder would have been entitled if such
holder had converted its shares of Class A Stock immediately prior to such
consolidation, merger or sale of assets.
(c) Distributions Other Than Cash. Whenever the distribution
provided for in this subsection 2.2.1.2 shall be payable in property other than
cash, the value of such distribution shall be the fair market value of such
property as determined in good faith by the Board of Directors.
2.2.1.3. Voting Power.
(a) General Rule. Except as required by law and as provided by
paragraphs 2.2.1.3(b and c), (i) each holder of shares of Class A Stock shall be
entitled to vote on
SHARE EXCHANGE AGREEMENT
EXHIBIT F
Page 3
<PAGE>
Stormix Technologies Inc.
Designations of Preferred Stock
First Class, Class A
all matters and shall be entitled to that number of votes equal to the largest
number of whole shares of Common Stock into which such holder's shares of Class
A Stock could be converted under subsection 2.2.1.4 hereof, based upon the total
number of shares that could be converted at any one time by such holder thereof,
not upon each share of Class A Stock that could be converted, at the record date
for the determination of stockholders entitled to vote on such matter or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is solicited, and (ii) the holders of all shares,
Preferred and Common, shall vote together as one class on all matter requiring a
vote of stockholders according to the number of votes assigned to them by the
Certificate of Incorporation and the DGCL.
(b) Special Voting Powers. With regard to any vote in respect of
the following matters, the authorized Class A Stock shall be entitled, in the
aggregate, with relative voting powers among the holders of Class A Stock
apportioned according to their respective holdings, to cast votes equal to 51%
of the votes necessary to authorize or take action in respect of such matter at
a meeting at which all shares entitled to vote thereon were present and voted,
with the voting rights of all other classes of stock (whether preferred or
common and whether currently existing or to be created) being entitled, in the
aggregate, to cast votes equal to 49% of the votes necessary to authorize or
take action in respect of such matter at a meeting at which all shares entitled
to vote thereon were present and voted:
(i) Directors. Any election of directors or proposal to
remove a director; or
(ii) Amendment of Articles of Incorporation or Bylaws. Any
amendment or repeal of the Articles of Incorporation or Bylaws, including any
such action which prohibits the Board of Directors from reconsidering any
amendment or repeal of the Bylaws.
2.2.1.4. Conversion Rights. The holders of shares of Class A Stock
shall have the following rights with respect to the conversion of shares of
Class A Stock into shares of Common Stock:
(a) General.
(i) Voluntary Conversion. Any share of Class A Stock may, at
the option of the holder, be converted at any time into such number of fully
paid and
SHARE EXCHANGE AGREEMENT
EXHIBIT F
Page 4
<PAGE>
Stormix Technologies Inc.
Designations of Preferred Stock
First Class, Class A
nonassessable shares of Common Stock as are equal to the product
obtained by multiplying the Applicable Class A Conversion Rate (determined under
paragraph 2.2.1.4(b)) by the number of shares of Class A Stock being converted.
(ii) Mandatory Conversion. (A) Upon the closing of a Public
Distribution (as defined below), all outstanding shares of Class A Stock shall
be converted automatically into the number of shares of Common Stock into which
such shares of Class A Stock are convertible pursuant to subparagraph
2.2.1.4(a)(i) hereof, without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
this corporation or its transfer agent for Common Stock. For these purposes, a
"Public Distribution" means a firmly underwritten public offering by this
corporation of shares of Common Stock, registered under the Securities Act of
1933, in which the aggregate offering proceeds paid for such shares by the
public is at least $10 million (before payment of underwriters' discounts and
commissions). (B) All outstanding shares of Class A Stock shall also be
converted automatically into the number of shares of Common Stock into which
such shares of Class A Stock are convertible pursuant to subparagraph
2.2.1.4(a)(i) hereof, without any further action of the holders of such shares
and whether or not the certificates representing such shares are surrendered to
this corporation or its transfer agent for Common Stock, on the date that
holders of a majority of the shares of Class A Stock then outstanding deliver to
this corporation their written consent to have their Class A Stock converted
into shares of Common Stock.
(b) Applicable Class A Conversion Rate. The conversion rate in
effect at any time (the "Applicable Class A Conversion Rate") shall be the
quotient obtained by dividing $0.85 by the Applicable Class A Conversion Value,
calculated as provided in paragraph 2.2.1.4(c) and subsection 2.2.1.6.
(c) Applicable Class A Conversion Value. The "Applicable Class A
Conversion Value" in effect from time to time, except as adjusted in accordance
with paragraph 2.2.1.4(d) or subsection 2.2.1.6 hereof, shall be $0.85.
(d) Adjustments to Applicable Class A Conversion Value Upon
Extraordinary Common Stock Event. Upon the happening of an Extraordinary Common
Stock Event (as defined below) after the final closing of the offering of Class
A Stock, the Applicable Class A Conversion Value shall, simultaneously with the
happening of such Extraordinary Common Stock Event, be adjusted by multiplying
the then effective Applicable Class A
SHARE EXCHANGE AGREEMENT
EXHIBIT F
Page 5
<PAGE>
Stormix Technologies Inc.
Designations of Preferred Stock
First Class, Class A
Conversion Value by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such Extraordinary Common Stock
Event, and the product so obtained shall thereafter be the Applicable Class A
Conversion Value. The Applicable Class A Conversion Value, as so adjusted, shall
be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (i) the issue of
additional shares of Common Stock as a dividend or other distribution on
outstanding stock of this corporation, (ii) a subdivision of outstanding shares
of Common Stock into a greater number of shares of Common Stock, or (iii) a
combination of outstanding shares of Common Stock into a smaller number of
shares of Common Stock.
(e) Capital Reorganization or Reclassification. If the shares of
Common Stock issuable upon the conversion of shares of Class A Stock shall be
changed into the same or a different number of shares of any class or classes of
stock whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
elsewhere in this subsection 2.2.1.4), then and in each such event the holder of
each share of Class A Stock shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change
by holders of the number of shares of Common Stock into which such share of
Class A Stock might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.
(f) Certificate as to Adjustments; Notice by Corporation. In each
case of an adjustment or readjustment of the Applicable Class A Conversion Rate
after the final closing of the offering of Class A Stock, this corporation, at
its expense, will furnish each holder of shares of Class A Stock with a
certificate, prepared by its President or Chief Financial Officer, showing such
adjustment or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.
(g) Exercise of Conversion Privilege. To exercise its conversion
privilege, a holder of shares of Class A Stock shall surrender the certificate
or certificates
SHARE EXCHANGE AGREEMENT
EXHIBIT F
Page 6
<PAGE>
Stormix Technologies Inc.
Designations of Preferred Stock
First Class, Class A
representing the shares being converted to this corporation at its principal
office, and shall give written notice to this corporation at that office that
such holder elects to convert such shares. Such notice shall also state the name
or names (with address or addresses) in which the certificate or certificates
for shares of Common Stock issuable upon such conversion shall be issued. The
certificate or certificates for shares of Class A Stock surrendered for
conversion shall be accompanied by proper assignment thereof to this corporation
or in blank. The date when such written notice is received by this corporation,
together with the certificate or certificates representing the shares of Class A
Stock being converted, shall be the "Class A Conversion Date". As promptly as
practicable after the Class A Conversion Date, this corporation shall issue and
shall deliver to the holder of shares of Class A Stock being converted, or to
such other person as such holder may request in writing, such certificate or
certificates as it may request for the number of whole shares of Common Stock
issuable upon the conversion of such shares of Class A Stock in accordance with
the provisions of this subsection 2.2.1.4, such number of whole shares shall be
based upon the total number of shares being converted by such holder, not upon
each share of Class A Stock being converted, cash in the amount of all accrued
and unpaid dividends on such shares of Class A Stock, whether or not earned or
declared, up to and including the Class A Conversion Date, and cash, as provided
in paragraph 2.2.1.4(h), in respect of any fraction of a share of Common Stock
issuable upon such conversion. Such conversion shall be deemed to have been
effected immediately prior to the close of business on the Class A Conversion
Date, and at such time the rights of the holder as holder of the converted
shares of Class A Stock shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(h) Cash in Lieu of Fractional Shares. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Class A Stock. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of shares of
Class A Stock, this corporation shall pay to the holder of shares of Class A
Stock which were converted a cash adjustment in respect of such fractional
shares in an amount equal to the same fraction of the market price per share of
Common Stock (as determined in a reasonable manner prescribed by the Board of
Directors) at the close of business on the Class A Conversion Date. The
determination as to whether or not any fractional shares are issuable shall be
based upon the total number of shares of Class A Stock being converted at any
one time by any holder thereof, not upon each share of Class A Stock being
converted.
SHARE EXCHANGE AGREEMENT
EXHIBIT F
Page 7
<PAGE>
Stormix Technologies Inc.
Designations of Preferred Stock
First Class, Class A
(i) Partial Conversion. In the event some but not all of the
shares of Class A Stock represented by a certificate or certificates surrendered
by a holder are converted, this corporation shall execute and deliver to the
holder or to such other person as the holder may request in writing, at the
expense of this corporation, a new certificate representing the number of shares
of Class A Stock which were not converted.
(j) Reservation of Common Stock. This corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of Class A Stock, such number of its shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all outstanding shares of
Class A Stock, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Class A Stock, this corporation shall take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
2.2.1.5. Redemption. The Class A Stock shall not be redeemable by
this corporation.
2.2.1.6. Notice. The holders of Class A Stock will be entitled to
receive a notice at least twenty days prior to the date specified therein
indicating (a) the record date for the purpose of determining the holders of any
class of securities entitled to receive any dividends or other distribution or
(b) the date on which any reorganization of this corporation or reclassification
of its capital stock is expected to become effective.
2.2.1.7. Protective Provision. No class of stock, whether common or
preferred, shall be created, and no amendment to or repeal of the Articles of
Incorporation or Bylaws shall be passed, which dilutes or undermines the voting
powers, designations, preferences, limitations, restrictions and relative rights
of the Class A Stock, without, in any such case, the consent of the holders of a
majority of the outstanding shares of Class A Stock.
2.2.1.8. Integration with Articles of Incorporation. This
Designation of Class A Preferred Stock has been adopted pursuant to and is an
integral part of this corporation's
SHARE EXCHANGE AGREEMENT
EXHIBIT F
Page 8
<PAGE>
Stormix Technologies Inc.
Designations of Preferred Stock
First Class, Class A
Articles of Incorporation. Capitalized terms not defined herein shall have the
meaning given them elsewhere in the Articles of Incorporation of this
corporation.
SHARE EXCHANGE AGREEMENT
EXHIBIT F
Page 9
<PAGE>
EXHIBIT 99.1
Monday March 6, 2000 at 11:50 am Eastern Time
SARASOTA, FL
Anyox Announces Acquisition of Stock of Web Partners, Inc. to Focus Its Business
on Web-Based Advertising Technologies.- PR Newswire
RENO, Nev., March 6 /PRNewswire/ -- Anyox Resources Inc. (OTC Bulletin Board:
ANYX - news) announces that it has concluded a definitive agreement to enter
into a business combination with Web Partners, Inc. and two of its primary
shareholders, Wyly Wade and Mark Gray.
About Web Partners, Inc.
WebPartners is a developer and provider of web-based technologies for the
advertising industry. The company, with its proprietary set of patent-pending
web products is setting the standard in online advertising. Leading internet
portals stand to benefit from the potentially huge advertising revenues streams
made possible by these technologies.
WebPartners has a family of technologies that allow the rapid deployment of
online 30-second commercial spot advertisements - CyberSpot(TM). This new
technology allows Instant On User interface(TM), which completely loads dynamic
web content, full screen in under 2 seconds, using any popular web browser and
requiring no media players or plug-ins.
A third Web Partners product, Delivery Verification Technology (DVT), gives
advertising and media managers the first reliable standard for online audience
measurement. DVT measures whether Web pages, banner ads and the newest platform,
CyberSpot(TM) commercials, have been fully downloaded and displayed on the
user's terminal.
Acquisition
Anyox, its President Carsten Mide, Web Partners, its President Wyly Wade and its
CEO Mark Gray entered into a Share Exchange Agreement on March 5, 2000 that will
allow Anyox to acquire Web Partners. The initial stage of the acquisition is
subject to satisfaction of certain conditions, and the second stage will be
conducted pursuant to a voluntary share exchange.
As a result of the deal the management of Web Partners will effectively take
control of Anyox, and the two Web Partners principals, Wade and Gray, will
become major shareholders of Anyox and control the appointment of directors to
the Board of Anyox.
<PAGE>
Giving full effect to the deal, Anyox will change its name and trading symbol to
reflect the decision to focus its business activities solely on the web-based
technologies developed by Web Partners.
The common stock to be offered in the voluntary share exchange will not be
registered under the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration requirements. Anyox will offer to each remaining shareholder of Web
Partners two shares of its common stock in exchange for each share of common
stock of Web Partners. No shareholder of Web Partners can be compelled to
exchange their shares in a voluntary share exchange offering. This announcement
is not an offer to sell securities or a solicitation of an offer to buy
securities. The common stock of Anyox will be exchanged solely for the common
stock of Web Partners held by existing shareholders of Web Partners. No money or
other consideration is being solicited or will be accepted by way of this
announcement. The common stock of Anyox to be offered will not be registered
with or approved by any state securities agency or the U.S. Securities and
Exchange Commission and will be offered and sold pursuant to an exemption from
registration.
About Anyox Resources Inc.
Anyox is a Nevada corporation that was incorporated on July 13, 1998. The
Company is engaged in the exploration stage, without assurance that reserves
exist, in its mineral exploration project until further exploration work has
been done and economic evaluation based on such work concludes economic
feasibility. Mr. Carsten Mide is Anyox's President. The Company has no
subsidiaries and no affiliated companies. The Company's executive offices are
located at 2453 Philips Place, Burnaby, British Columbia, Canada, V5A 2W1, and
its telephone number is 604-420-7474.
Cautionary Warning
You should not place undue reliance on forward-looking statements in this press
release. This press release contains forward-looking statements that involve
risks and uncertainties. Words such as "will", "anticipates", "believes,"
"plans," "expects," "future," "intends" and similar expressions are used to
identify these forward-looking statements. Actual results could differ
materially from those anticipated in these forward-looking statements for many
reasons, including the risks we face as described in this press release and in
our filings with the SEC, which may be accessed at its website,
http://www.sec.gov, in the EDGAR database.
<PAGE>
EXHIBIT 99.2
Wednesday March 22, 2000 at 8:29 am Eastern Time
SARASOTA, FL
Web Partners Names Mark Burchill, Founding Partner of 24/7 Media, To Board of
Directors- PR Newswire
Mr. Burchill was a founding partner of 24/7 Media, one of the largest global
Internet marketing companies and the largest Internet advertising network. Upon
his departure in January, 2000, the company had 42 offices in over 20 countries
and a market cap of over $1.4 billion. Mr. Burchill is credited with growing the
network into one of the largest-reach vehicles on the Internet as well as
expanding 24/7's presence around the world to Europe, Asia and Latin America.
In 1995, he co-founded Petry Interactive, an Internet marketing company, which
was one of the three companies that merged to become 24/7 Media. As the Director
of Strategic Development for Petry Media in 1994, Burchill lived and worked in
Hong Kong, laying the groundwork for a joint venture Asian ad sales company with
Pearson PLC. Mr. Burchill began his career in the media department of Young &
Rubicam in New York where he worked o top national and local accounts such as
Colgate-Palmolive, American Home Products and NYNEX. Mr. Burchill holds a
Masters of Business Administration from UCLA.
"Mark brings a wealth of knowledge to our team," said Santu Rohatgi, President
of Web Partners. "His industry reputation and extensive, relevant experience
will be a tremendous boon to us as we vigorously continue to grow our business."
