<PAGE>
FORM 10-SB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
HEALTHNET INTERNATIONAL INC.
----------------------------
(Name of Small Business Issuer in its charter)
COLORADO
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(state or other jurisdiction of
incorporation or organization)
98-0206627
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(I.R.S. Employer I.D. No.)
#301 - 1201 WEST PENDER STREET
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VANCOUVER, BRITISH COLUMBIA
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V6E 2V2
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(Address of principal executive offices and zip code)
(604) 669-3573
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(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
NONE
----
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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Title of each class to be so registered
FORWARD LOOKING STATEMENTS
Healthnet International Inc. (the "Company" or "Healthnet") cautions readers
that certain important factors (including without limitation those set forth in
this Form 10-SB) may affect the Company's actual results and could cause such
results to differ materially from any forward-looking statements that may be
deemed to have been made in this Form 10-SB registration statement, or that are
otherwise made by or on behalf of the Company. For this purpose, any statements
contained in the registration statement that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may", "expect", believe",
"anticipate", "intend", "could", "estimate" or "continue" or the negative or
other variations of comparable terminology, are intended to identify
forward-looking statements.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
I. BUSINESS DEVELOPMENT
--------------------
A. HEALTHNET INTERNATIONAL INC.
----------------------------
Healthnet International Inc. (the "Company") was incorporated in January 1999 in
the state of Colorado. In March 1999, the Company incorporated a wholly owned
subsidiary in the state of Nevada called Healthnet (USA) Inc. which is intended
to act as the operating company for all USA based business activities of the
Company. The Company intends to incorporate a wholly owned subsidiary in the
province of British Columbia, Canada called HNI Healthnet (Canada) Inc. which is
intended to act as the operating company for all Canada based business
activities of the Company. The intent of the Company is to develop an electronic
website or websites for the purpose of providing health-related information to
the public and retailing health-related products to the public in established
markets. The Company, including its subsidiaries, employs 8 persons, of whom
seven are employed on a full-time basis and one is employed on a part time
basis. The majority of these individuals either develop and produce the content
for the website for display on the computer accessible medium known commonly as
the Internet, pursue alliances with manufacturers of health related products for
sale on the website, or develop alliances with other health related websites
which are intended to allow the Company's website to be linked to such websites
for the purpose of driving Internet traffic to the website.
B. HEALTHNET INTERNATIONAL INC. CORPORATE HISTORY
----------------------------------------------
In January 1999, the Company filed its Articles of Incorporation with the
Secretary of State of Colorado in which, among other things, the Board of
Directors was elected as follows: Mark N. Dohlen, Douglas N. Bolen, Grant
Johnson and S. Ross Johnson. The authorized capital of the Company consists of
100,000,000 Common Shares and 50,000,000 Preferred Shares. On January 22, 1999,
the Directors, by way of Organizational Consent of the Directors of the Company,
accepted the stock subscriptions of the above named entities and payment for the
number of shares issued to each at a price of $0.001 per share. In addition, the
Directors appointed Douglas N. Bolen to the office of Secretary, Grant Johnson
to the office of Chief Executive Officer/President and S. Ross Johnson to the
office of Chairman of the Board of Directors.
On February 25, 1999, the Company accepted subscription agreements from nine
entities to acquire securities of the Company pursuant to a Rule 504 offering
under Regulation D. The Board authorized the Company to proceed with the sale of
its shares pursuant to the subscriptions received for the sale of 4,500,000
Common Shares at a price of $0.001 per Common Share. Pacific Stock Transfer
Company was appointed as the Transfer Agent of the Common Shares of the Company.
On April 9, 1999, a Board of Directors Meeting was held at which the number of
the Board members was increased to seven and the following additional members
were elected to the Board: Hartland M. MacDougall, Raymond G. Harris and Dr. R.
Dean Linden.
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II. BUSINESS OF THE ISSUER
----------------------
Healthnet (USA) Inc. ("Healthnet USA") was incorporated in March 1999 and is
based in Las Vegas, Nevada, USA. Healthnet USA is a wholly owned subsidiary of
the Company and intends to act as the operating entity for the Company's
business in the USA. The Company intends to incorporate HNI Healthnet (Canada)
Inc. ("Healthnet Canada") in Vancouver, British Columbia, Canada. This soon to
be incorporated wholly owned subsidiary of the Company is intended to act as the
operating entity for the Company's business in Canada. The Company, through its
wholly owned subsidiaries, intends to establish itself as an on-line retailer of
health and health related products as well as providing an online source of
health and health related information to the general public. Its early entry
into the on-line health products retailing industry is expected to help the
Company gain a well-recognized brand and a large customer base. The Company
intends to strive to combine the advantages of online commerce with a superior
customer focus in order to be the authoritative source for health and health
related products. The Company's online store is expected to offer broad
selection, informative content, easy to use navigation and search capabilities,
a high level of customer service, competitive pricing and personalized
merchandising and recommendations. With the intention to make available up to
100,000 items, the Company will provide a selection of readily available
products that is five to ten times that of a typical, store-based, health
products retailer. The Company's store will be open 24 hours a day, seven days a
week and will offer its customers convenient and timely product fulfillment,
including an overnight delivery option.
The Company has entered into an agreement with Webcast Systems Inc., a Vancouver
based software provider, whereby the Company obtained a license to use such
software as the platform upon which the Company's Internet based stores will be
built, run and hosted. The Company believes that the software has the capacity
to facilitate every aspect of the Company's plans in respect of the stores,
including, order taking, credit card processing, order fulfillment,
distribution, data collection, accounting and the provision of information of
users.
III. INDUSTRY OVERVIEW, COMPETITION AND RISKS
----------------------------------------
The Internet is the largest and most widely used computer network in the world
and provides access to an incredible volume of information and data. Management
of the Company believes that hundreds of billions of private and public dollars
will be invested over the next decade to weave together the global information
systems, including the hardware and software necessary to navigate the Internet.
There are several other retailers of health and health related products
currently accessible through computer networks all competing for the public's
monthly health related dollars. The Company also competes with many other
traditional, store based retailers of health and health related products. The
Company cannot estimate how these competing industries may grow nor to what
extent such growth may decrease the Company's revenues. The Company believes
that the principal competitive factors in its online market are brand
recognition, selection, variety of value-added services, ease of use, site
content, quality of service, technical expertise, product exclusives and price.
Many of the Company's potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than the Company. The Company is aware
that certain of its competitors have and may continue to adopt aggressive
pricing or inventory availability policies and devote substantially more
resources to website and systems development than the Company. Increased
competition may result in reduced operating margins, loss of market share and a
diminished brand franchise.
The Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets such as
online commerce. Such risks include, but are not limited to, possible inability
to respond promptly to changes in a rapidly evolving, unpredictable business
environment, the risk of inability to manage growth, the inability to attract
and retain qualified personnel, the risk that the Internet may not become a
viable commercial market place and the risks associated with government
regulation of the Internet. To address these risks, the Company must, among
other things, develop and expand its customer base, successfully implement its
business and marketing strategies, continue to develop and upgrade its website
and transaction processing systems, provide superior customer service, respond
to competitive developments, attract and retain qualified personnel and monitor
government regulation of the Internet. If the Company is not successful in
addressing such risks, it will be materially and adversely affected.
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IV. REGULATORY BACKGROUND
---------------------
The Company may be subject, both directly and indirectly, to various laws and
regulations relating to its business, although there are few laws or regulations
directly applicable to access the Internet. However, due to the increasing
popularity and use of the Internet, it is possible that a number of laws and
regulations may be adopted with respect to the Internet and the use thereof.
Such laws and regulations may cover issues such as user privacy, pricing,
copyrights, distribution and characteristics and quality of products and
services. Furthermore, the growth and development of the market for online
commerce may prompt calls for more stringent consumer protection laws that may
impose additional burdens on those companies conducting business online.
V. DISCLOSURE
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The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and/or
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the Company intends to be an electronic
filer and as such, all items filed by the Company are available through an
Internet site maintained by the SEC which contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC, which site is available at http://www.sec.gov. The
Company also maintains an Internet site which contains information about the
Company. This site is available at http://www.healthnetinternational.com.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
I. PLAN OF OPERATIONS
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A. Revenues and Financing
----------------------
The Company currently has no revenues. It intends to derive its revenues
principally from the sale of health related products via the Internet. Secondary
revenues are expected to be generated through major sponsorships on the
Company's website, sales of demographic data obtained through the Company's
websites and through the sale of memberships on the website to the general
public. It is anticipated that the Internet will continue to become more
accessible and that the market opportunities for the Company will continue to
expand. This tremendous growth will also attract many potential new competitors.
In order to maintain sales growth, the Company intends to expand the content and
to improve the services on its Internet web sites, as well as researching and
developing other projects that will utilize its existing facilities and
expertise.
The Company has been funded to date through debt financing from private arm's
length lenders and shareholders' loans. The Company has secured approximately
$500,000 US through debt financing, which should enable the Company to meet its
financial obligations for the next five to eight months. Thereafter, the
Management of the Company believes that revenues from sales will enable the
Company to meet its financial obligations.
B. Operations for the Next Twelve Months
-------------------------------------
It is the intention of the Company to have its suppliers and distribution
channels in place by August 1999 and to make available to the public, its first
web site in August 1999. As such, revenues are expected to commence in September
1999. The Company intends to establish a new web site in October 1999 and each
month thereafter for the following twelve months.
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The Company intends to hire additional research, marketing, computer programming
and graphic design personnel over the next twelve months as is deemed necessary
by the Management. From customer and purchasing data obtained from the web sites
during the first ten to twelve months of operations, the Company plans to make
adjustments to the operations as is deemed necessary by the Management.
Operations to date have been limited to establishing the infrastructure and
other general and administrative expenditures. Losses for the first quarter
ended May 31, 1999 amounted to $53,065.
C. Balance Sheet Data
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At May 31, 1999 At February 28, 1999
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Working Capital (deficiency) (298,979) (217)
Total Assets 452,120 9,157
Shareholders' Equity (deficit) (52,777) 217
D. Liquidity and Capital Resources
-------------------------------
The Company has leased approximately 2,195 square feet of office space at 1201
West Pender Street, Vancouver, British Columbia, Canada. The lease is for a
1-year term with one 6-month renewal option. The term commenced on May 1, 1999
but Healthnet Canada took possession of the leased space on April 15, 1999. The
Company was also granted first right of refusal in respect of the balance of the
floor on which the offices are currently situated and the Management expects
that it will occupy such additional space within its first year of operations.
Total monthly rent in respect of the current leased space is approximately
$1,250.12 USD per month.
Cash flow used in operations for the three months ended May 31, 1999 was
$46,537. The $259,467 used in investing activities consisted primarily of
$46,187 worth of office and computer equipment, and $203,358 of website
development costs.
E. Impact of Inflation
-------------------
The Company believes that inflation will not materially effect its business.
ITEM 3. DESCRIPTION OF PROPERTY
The Company occupies 2,195 square feet of commercial office space at 1201 West
Pender Street, Vancouver, British Columbia, Canada. This facility houses the
majority of the Company's operations including production, marketing and
administration. The only operation not housed at this location is the computer
server on which the Company's online store is located. The building in which the
Company has leased space is in the heart of downtown Vancouver and is home to
several other Technology and Internet based companies. This arrangement and
proximity to other similar companies is expected to lend itself well to
promoting the Company as being in the right area and on the leading edge of
technology.
The terms of the Pender Street commercial lease are as follows: The Company
leases 2,195 square feet through to April 30, 2000 (12 months) at an annual rent
of $ 15,001.44 USD. The Company has an option to renew this lease for an
additional six-month term. An additional provision in the lease provides
Healthnet Canada with first right of refusal in respect of the balance of the
third floor, on which it is located, so that it can expand its operations as the
need arises. The Company has obtained an insurance policy as is required by the
terms of the lease.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 7, 1999 by (i) each person
who is known to the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) each of the Company's directors, (iii) executive
officers and (iv) all current directors and executive officers as a group.
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Owner (1) of Class
- --------------------------------------------------------------------------------
Grant Johnson 2,750,000 26.2%
1521 Chartwell Drive beneficial owner (2)
Vancouver, British Columbia
Canada, V7S 2R9
CEO/President/Director
Mark N. Dohlen 2,000,000 19.0%
Suite 509-1188 Quebec St. beneficial owner (3)
Vancouver, British Columbia
Canada, V6A 4B3
Director
Douglas N. Bolen 750,000 7.2%
Suite 509-1188 Quebec St. beneficial owner (4)
Vancouver, British Columbia
Canada, V6A 4B3
Secretary/Director
S. Ross Johnson 500,000 4.8%
1312 Cleaver Drive beneficial owner (5)
Oakville, Ontario
Canada L6J 1W4
Director/Chair of Board
Ray G. Harris 100,000 .95%
116 Bartlett Blvd.
Princeton Shores
P.O. Box 3331, RR #3
Collingwood, Ontario
Canada, L9Y 3Z2
Director
Hartland M. MacDougall 100,000 .95%
C/o Suite 2360, 100 King St. W. beneficial owner (6)
Toronto, Ontario
Canada, M5X 1C7
Director
Dr. R. Dean Linden 100,000 .95%
5413 Pueblo Road
Louisville, Kentucky
U.S.A. 40207
Director
All Directors & Executive 6,300,000 60.05%
Officers as a Group (7 persons)
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(1) No member of Management has the right to acquire within sixty days
through options, warrants, rights, conversion, privilege or similar
obligations any security of the Company.
(2) The Grant Johnson Family Trust, of which Grant Johnson is a
beneficiary enjoys legal ownership of said securities.
(3) The Wentworth Bancor Trust, of which Mark Dohlen is a beneficiary,
enjoys legal ownership of said securities.
(4) The BRF Family Trust, of which Douglas Bolen is a beneficiary, enjoys
legal ownership of said securities.
(5) The S. Ross Johnson Family Trust, of which Ross Johnson is a
beneficiary enjoys legal ownership of said securities.
(6) Goodwood International Holdings Inc., of which Hartland MacDougall is
an owner, enjoys legal ownership of said securities.
CHANGES IN CONTROL
- ------------------
Management is not aware of any arrangements which may result in a change of
control of the issuer.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
I. DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
S. ROSS JOHNSON, DIRECTOR AND CHAIR OF THE BOARD
1312 Cleaver Drive
Oakville, Ontario, Canada
L6J 1W4
(905) 845-6896
DOB: April 18, 1929 (Age 70) Calgary, Alberta, Canada
S. Ross Johnson, B. Comm., C.L.U.- Director & Chair of the Board
Mr. Johnson brings over 45 years of senior management experience. Mr. Johnson
has considerable experience in both large corporations and entrepreneurial
enterprises. Mr. Johnson began his career with New York Life in 1952, and was
Resident Vice President of New York Life's Canadian operations from 1969 to
1979. Mr. Johnson joined National Life of Canada as Executive Vice President in
1979 and was appointed President and Chief Executive Officer in 1984. He held
that position until 1989. He was appointed President of Canadian Operations of
Prudential Insurance Company of America in 1991 and held that position until his
retirement in 1994. Mr. Johnson was awarded the Canada Award of Business
Excellence in 1987. He is currently part of several charitable organizations
including being a Board member on both the City of Toronto's Santa Clause Parade
and the City's Earth Day. He sits on the Board of Advisors for the School of
Business at the University of Toronto, Scarborough Campus. Since 1995, Mr.
Johnson has been Chief Executive Officer of People Count Inc., a private
consulting company specializing in psychological testing.
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Mr. Johnson holds a Bachelor of Commerce from the University of British Columbia
in Canada. Mr. Johnson is a Chartered Life Underwriter (C.L.U.).
Mr. Johnson was appointed to the position of Director in January 1999 to serve
until his successor has been elected and qualifies.
GRANT JOHNSON, CHIEF EXECUTIVE OFFICER/PRESIDENT AND DIRECTOR
3924 Capilano Road
North Vancouver, British Columbia, Canada
V6B 4J2
(604) 986-0754
DOB: January 23, 1960 (Age 39) Edmonton, Alberta, Canada
Grant Johnson, B.A. - Chief Executive Officer/President & Director
Mr. Johnson brings over fifteen years of experience in business management. Mr.
Johnson has considerable experience in both large corporations and
entrepreneurial enterprises and is qualified in the areas of business
development, finance, information systems, marketing, and sales. Mr. Johnson was
Vice President of Corporate Development for Starnet Communications International
Inc., a Delaware corporation, which is a fully reporting issuer on the NASD
OTC:BB from 1997 to 1999. From 1996 to 1997, Mr. Johnson was President of G & J
Sales Ltd., an independent sales consulting company based in Toronto, Canada.
>From 1995 to 1996, Mr. Johnson owned and operated Cable Direct Inc., an
electronics company with five offices in Ontario and Eastern Canada. >From 1993
to 1995, Mr. Johnson was the Regional Manager for Ontario for Tee-Com
Electronics Inc., an Ontario based Satellite television manufacturer and
distributor. Mr. Johnson holds Bachelor of Arts degrees in Economics and History
from the University of Western Ontario in Canada.
Mr. Johnson was appointed to the position of Director in January 1999 to serve
until his successor has been elected and qualifies.
DOUGLAS N. BOLEN, CORPORATE COUNSEL, SECRETARY AND DIRECTOR
3035 Westgate Ave.
Regina, Saskatchewan, Canada
Canada, S4S 1B4
(306) 585-2501
DOB: August 25, 1965 (Age 34) Regina, Saskatchewan, Canada
Douglas N. Bolen, B.A., L.L.B. - Corporate Counsel & Secretary & Director.
Mr. Bolen brings over ten years experience in entrepreneurial enterprise. Mr.
Bolen received a Bachelor of Arts from the University of Regina, Saskatchewan
and his Bachelor of Laws from the University of Saskatchewan. Mr. Bolen is a
member in good standing of the Law Society of Saskatchewan, the Regina Bar
Association and the Canadian Bar Association. From 1995 to 1999, Mr. Bolen
articled and practiced law at Balfour Moss, Barristers and Solicitors, a large
Regina, Canada based law firm with a practice concentration in the area of
Corporate Commercial law. Mr. Bolen's public company experience stems from his
firm's involvement in several public equity and debt offerings which involved
raising in excess of $250,000,000. From 1992 to 1995, Mr. Bolen was attending
the College of Law at the University of Saskatchewan. Mr. Bolen currently is a
Director and officer of IDS Internet Distribution Systems Inc., a Colorado based
company which intends to provide jewelry retail services via the Internet.
Mr. Bolen was appointed to the position of Director in January 1999 to serve
until his successor has been elected and qualifies.
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MARK N. DOHLEN, DIRECTOR
Suite 509 - 1188 Quebec Street
Vancouver, British Columbia, Canada
Canada, V6A 4B3
(604) 806-0106
DOB: May 25, 1960 (Age 39) Yorkton, Saskatchewan, Canada
Mark N. Dohlen, B.Admin., M.B.A., L.L.B., F.C.I.S., P.Admin. - Director.
Mr. Dohlen brings over fifteen years of experience in senior management
positions. Mr. Dohlen has considerable experience in both large corporations and
entrepreneurial enterprises, and has operated as a management consultant to
small development stage firms. Mr. Dohlen was President and Director of ISG
Consulting Inc., a private consulting firm based in Vancouver, Canada from
October 1994 to May 1996. Since May 1996, Mr. Dohlen has been Director and Chief
Executive Officer of Starnet Communications International Inc., a Delaware
corporation, which is a fully reporting issuer on the NASD OTC:BB. Mr. Dohlen
currently is a Director of IDS Internet Distribution Systems Inc., a Colorado
based company which intends to provide jewelry retail services via the Internet.
Mr. Dohlen holds a Bachelor of Administration in Finance from the University of
Regina, Saskatchewan, a Master of Business Administration in Management
Information Systems from Simon Fraser University British Columbia, and a
Bachelor of Laws from the University of British Columbia, Canada. Mr. Dohlen is
a Fellow of the Chartered Institute of Secretaries (F.C.I.S.) and is a
Professional Administrator (P. Admin.). Mr. Dohlen is completing the Certified
Management Consultant (C.M.C.) program.
Mr. Dohlen was appointed to the position of Director in January 1999 to serve
until his successor has been elected and qualifies.
HARTLAND M. MACDOUGALL, DIRECTOR
Suite 2630, 100 King St. W
PO Box 143
One First Canadian Place
Toronto, Ontario, Canada
M5X 1C7
(416) 369-2303
D.O.B.: January 28, 1931 (Age 68)
Hartland M. MacDougall, CVO, OC - Director
Until his retirement in 1993, Mr. MacDougall held the office of Chair of Royal
Trust Company and was previously Vice Chair and Director of the Bank of
Montreal, with which he was associated for more than 30 years. He was also
Director and deputy chair for the London Insurance Group from 1985 to 1997. He
is a graduate of McGill University and of Harvard University and is a Commander
of the Royal Victorian Order ("CVO"); an Officer of the Order of Canada ("OC");
Order of the Rising Sun (Gold and Silver Star); Knight Commander of the Order of
St. Lazarus of Jerusalem ("KCLJ"); and in 1993 was awarded the Officer of Merit
("OMLJ"). He was the first recipient of the Gabrielle Leger Metal (in 1978), is
President of the Westminster Abbey Fund in Canada, Founding Chair of the Japan
Society & Heritage Canada, honorary president of the Royal Agricultural Winter
Fair, Founding Chair of St. Michael's Hospital Foundation, Bermudiana Foundation
of Canada, and has held numerous philanthropic and honorary positions on various
corporate boards. Mr. MacDougall is currently a professional investment advisor.
Mr. MacDougall was elected to the position of Director in April 1999 to serve
until his successor has been elected and qualifies.
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RAYMOND GEORGE HARRIS, DIRECTOR
116 Bartlett Blvd.
Princeton Shores
Box 3331
RR #3
Collingwood, Ontario, Canada
L9Y 3Z2
(705) 445-0521
D.O.B.: June 24, 1929 (Age 70)
Raymond George Harris, Director
Mr. Harris was a partner with Deloitte & Touche and its predecessor firms from
1955 until his retirement in 1992. He served as a lead client service partner in
the firm's Edmonton, Calgary and Toronto offices providing audit, accounting,
taxation and business advisory services to clients in a wide variety of
businesses including forestry, oil & gas, mining, manufacturing, retail and real
estate. In the latter years in the firm, he advanced through the positions of
Edmonton Office Managing Partner, National Administrative Partner, Executive
Director and finally, Chair of the Firm.
During the period since mid-1996, his consulting activities have included
advising on World Bank and other lending agency-financed projects in Indonesia,
China, Kazakstan and Kyrgystan. From 1993 to 1996 he was resident in Beijing
managing a team of consultants providing advice to the Ministry of Finance of
the People's Republic of China on a World Bank-financed project dealing with the
establishment of a program of continuing professional education for Chinese
Certified Public Accountants and the setting of accounting standards that meet
the needs of China's socialist market. He is currently a Member of Board of
Trustees and Chairman of the Finance Committee of the Collingwood General and
Marine Hospital. Mr. Harris is currently a financial consultant and a corporate
director.
Mr. Harris was elected to the position of Director in April 1999 to serve until
his successor has been elected and qualifies.
DR. R. DEAN LINDEN, CHAIR OF THE MEDICAL ADVISORY BOARD, DIRECTOR
5413 Pueblo Road
Louisville, Kentucky USA
40207
(502) 897-9404
D.O.B.: April 13, 1956 (Age 43) Ottawa, Ontario, Canada
Dr. R. Dean Linden, Ph.D., Chair of the Medical Advisory Board, Director
Dr. Linden is a graduate of Ontario's Queen's University and of the University
of Ottawa. His first academic position was at the University of Toronto, from
1985 to 1989, as an Assistant Professor of Neurosurgery. In 1989, he joined the
University of Louisville, Division of Neurosurgery, as an Assistant Professor
and was promoted to Associate Professor and received his tenure in 1992. He
currently holds that position. His expertise is in the development of industrial
and university research ideas. He has won several academic awards and honors,
has published extensively, and has given more than 100 academic and business
presentations.
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Dr. Linden has extensive experience as an entrepreneur: in 1992, he founded
Neurosafe Inc.; in 1995, he founded the Durable Medical Equipment Company; and,
Meridian Home Medical, LLC. In 1998, Dr. Linden collaborated with several
colleagues in creating three ventures including a series of Pain and
Rehabilitation Centers, an Internet credit reporting company, Healthcheck.net,
LLC, and a radiological interpretation company, Premier Medical, LLC.
Dr. Linden was elected to the position of Director in April 1999 to serve until
his successor has been elected and qualifies.
II. FAMILY RELATIONSHIPS
--------------------
There are no family relationships among directors, executive officers or persons
nominated or chosen by the Company to become officers or executive officers
other than Grant Johnson and S. Ross Johnson. S. Ross Johnson is the father of
Grant Johnson.
III. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
----------------------------------------
The Company is not aware of any material legal proceedings involving any
director, director nominee, promoter or control person including criminal
convictions, pending criminal matters, pending or concluded administrative or
civil proceedings limiting one's participation in the securities or banking
industries, or findings of securities or commodities law violations. However, a
personal bankruptcy proceeding under Canadian law involving Mark Dohlen
concluded in September 1994, with Mr. Dohlen receiving a judicial discharge.
ITEM 6. EXECUTIVE COMPENSATION
The Company did not pay any compensation to its chief executive officer, any
other executive officer nor to any senior employees during its first fiscal year
ending February 28, 1999. Currently, the only executive officer receiving salary
from the Company is Grant Johnson, Chief Executive Officer, who is receiving a
salary of $ 47,520.00 USD per year. Senior employees currently receiving
salaries include: Adrian Wesley, Vice President of Operations, $34,320 USD;
Wayne Clark, Manager of Marketing, $27,720 USD; and Jomo Green, Manager of
Investor Relations, $27,720 USD.
The members of the Company's Board are reimbursed for actual expenses incurred
in attending Board meetings. There are no other arrangements for compensation to
the Board of Directors' members.
There are no written employment contracts or agreements with any executive
officers. Employee salaries are set by the Members of the Board of Directors.
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ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is not aware of any transactions or proposed transactions in respect
of which the Company was or is to be a party, in which any director, executive
officer, nominee for election as a director, 5% security holder, member of the
immediate family of any of the previously named persons had a direct or indirect
interest in the transaction.
ITEM 8. DESCRIPTION OF SECURITIES
The securities to be registered pursuant to this Form 10-SB are all of the
authorized Common Stock of Healthnet International Inc. Holders of the Common
Stock are entitled to cast one vote for each share held at all shareholder
meetings for all purposes, except that in the election of Directors, each
shareholder of Common Stock shall have as many votes for each share held by him
as there are directors to be elected and for whose election the shareholder has
a right to vote. There are no preemptive rights associated with the securities
and no cumulative voting is authorized by the Articles of Incorporation or the
By-Laws. The total amount of shares authorized by the Company's Articles of
Incorporation is 150,000,000. Of these, 100,000,000 are Common Stock and
50,000,000 are Preferred Stock. There has been no issuance of any Preferred
stock. Dividend, voting, conversion rights, liquidation rights and other rights
of the Preferred Stock, if any, will be established by the Board of Directors
upon issuance.
PART 2
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
There is no public trading market for the common equity shares of the
registrant. If the registrant successfully obtains a listing, as is presently
intended by management, the common equity shares will be listed upon the OTC
Bulletin Board Service. As of June 15, 1999, there are approximately 19 equity
holders of record of the Company's Common Stock. As of June 15, 1999, there are
no shares of the Company's Common Stock subject to outstanding options or
warrants to purchase or securities convertible into Common Stock of the Company.
The number of shares eligible for trading will be all of the Common Stock except
that which is owned by management of the Company. The Management of the Company
currently owns an aggregate of 6,300,000 shares which can be sold only in
compliance with Rule 144. There have been no cash dividends declared since the
inception of the Company nor its subsidiaries. There are no restrictions that
would limit the ability to pay dividends on common equity or that are likely to
do so in the future.
ITEM 2. LEGAL PROCEEDINGS
The issuer is not a party to any pending legal proceeding nor is its property
the subject of any pending legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no disagreements on accounting and financial disclosures from
the inception of the Company through to the date of this Registration Statement.
12
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In January 1999, the Company issued an aggregate of 6,000,000 shares of Common
Stock to the initial four Directors of the Company. The certificates
representing these shares bear a restrictive legend. These shares were issued
under the exemption from registration provided by Section 4(2) of The Securities
Act 1933. On February 25, 1999, the Company executed a Form D disclosing that it
relied upon Rule 504 in selling 4,500,000 shares of the Common Stock in exchange
for an aggregate of $4,500.00 US to nine entities. This offering was done by
means of a private placement.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles 7(b) and (c) of the Company's Articles of Incorporation read as
follows:
(b) INDEMNIFICATION. The corporation shall indemnify, to the
maximum extent permitted by Colorado law, any person who is or was a director,
officer, agent, fiduciary or employee of the corporation against any claim,
liability or expense arising against or incurred by such person made party to a
proceeding because he is or was a director, officer, agent, fiduciary or
employee of the corporation or because he is or was serving another entity or
employee benefit plan as a director, officer, partner, trustee, employee,
fiduciary or agent at the corporation's request. The corporation shall further
have the authority to the maximum extent permitted by Colorado law to purchase
and maintain insurance providing such indemnification.
(c) LIMITATION ON DIRECTOR'S LIABILITY. No director of this
corporation shall have any personal liability for monetary damages to the
corporation or its shareholders for breach of his fiduciary duty as a director,
except that this provision shall not eliminate or limit the personal liability
of a director to the corporation or its shareholders for monetary damages for
any breach, act, omission or transaction as to which the Colorado Business
Corporation Act (as in effect from time to time) prohibits expressly the
elimination or limitation of liability. Nothing contained herein will be
construed to deprive any director of his right to all defenses ordinarily
available to a director nor will anything herein be construed to deprive any
director of any right he may have for contribution from any other director or
other person.
In addition, s.7-108-402 of The Colorado Business Corporation Act indicates that
the foregoing provisions shall not eliminate or limit the liability of a
director to the corporation or to its shareholders for monetary damages for any
breach of the director's duty of loyalty to the corporation or to its
shareholders, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, improper corporate distributions, or
any transaction from which the director directly or indirectly derived an
improper personal benefit.
PART F/S. FINANCIAL STATEMENTS
I. HEALTHNET INTERNATIONAL INC. AUDITED FINANCIAL STATEMENTS,
FEBRUARY 28, 1999.
13
<PAGE>
FINANCIAL STATEMENTS
HEALTHNET INTERNATIONAL INC.
(A DEVELOPMENT-STAGE COMPANY)
FEBRUARY 28, 1999
14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
HEALTHNET INTERNATIONAL INC.
(A DEVELOPMENT-STAGE COMPANY)
We have audited the accompanying balance sheet of HEALTHNET INTERNATIONAL INC.
as of February 28, 1999 and the related statements of loss, comprehensive loss,
and deficit and cash flows for the period from incorporation on January 21, 1999
to February 28, 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 Healthnet International Inc. at
February 28, 1999, and the results of its operations and its cash flows for the
period from incorporation on January 21, 1999 to February 28, 1999 in conformity
with accounting principles generally accepted in the United States.
Vancouver, Canada,
April 7, 1999. Chartered Accountants
15
<PAGE>
HEALTHNET INTERNATIONAL INC.
(A DEVELOPMENT-STAGE COMPANY)
BALANCE SHEET
(IN UNITED STATES DOLLARS)
As at February 28
1999
$
- --------------------------------------------------------------------------------
ASSETS
CURRENT
Cash 9,157
- --------------------------------------------------------------------------------
9,157
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities [NOTE 4] 8,940
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital [NOTE 3] 10,500
Deficit (10,283)
- --------------------------------------------------------------------------------
217
- --------------------------------------------------------------------------------
9,157
================================================================================
SEE ACCOMPANYING NOTES
16
<PAGE>
HEALTHNET INTERNATIONAL INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF LOSS, COMPREHENSIVE LOSS,
AND DEFICIT
(IN UNITED STATES DOLLARS)
FOR THE PERIOD FROM
INCORPORATION ON
JANUARY 21, 1999
TO FEBRUARY 28,
1999
$
- --------------------------------------------------------------------------------
EXPENSES
Accounting 6,146
Incorporation costs 2,441
Other fees 672
Wages 1,024
- --------------------------------------------------------------------------------
LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD
AND DEFICIT, END OF PERIOD 10,283
================================================================================
LOSS PER COMMON SHARE 0.00
================================================================================
SEE ACCOMPANYING NOTES
17
<PAGE>
HEALTHNET INTERNATIONAL INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF CASH FLOWS
(IN UNITED STATES DOLLARS)
FOR THE PERIOD FROM
INCORPORATION ON
JANUARY 21, 1999
TO FEBRUARY 28,
1999
$
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss for the period (10,283)
Increase in accounts payable and accrued liabilities 8,940
- --------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (1,343)
- --------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of share capital 10,500
- --------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 10,500
- --------------------------------------------------------------------------------
INCREASE IN CASH DURING THE PERIOD 9,157
Cash, beginning of period --
- --------------------------------------------------------------------------------
CASH, END OF PERIOD 9,157
================================================================================
SEE ACCOMPANYING NOTES
18
<PAGE>
1. NATURE OF BUSINESS
Healthnet International Inc. (the "Company") was incorporated on January 21,
1999 in the State of Colorado and is currently in the development stage.
The Company intends to establish itself as an online retailer of health products
and other health-related products. The Company's proposed online store intends
to offer broad selection, informative content, easy-to-use navigation and search
capabilities, a high level of customer service, competitive pricing and
personalized merchandising and recommendations.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles in the United States. The following is a summary of the
significant accounting policies used in the preparation of these financial
statements.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Management believes that the estimates utilized in preparing its financial
statements are reasonable and prudent; however, actual results could differ from
these estimates.
FINANCIAL INSTRUMENTS
The carrying values of the Company's financial instruments approximate fair
values, except as otherwise disclosed in the financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS133 `Accounting for
derivative instruments and hedging activities'. SFAS133 is effective for
financial statements for fiscal years beginning after June 15, 1999.
SFAS133 currently has no impact on the Company.
19
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
TRANSLATION OF FOREIGN CURRENCIES
Monetary assets and liabilities denominated in foreign currencies are translated
into United States dollars at the year end rates of exchange. Foreign currency
revenue and expense items are translated at average monthly rates of exchange.
Exchange gains or losses are included in the statements of loss, comprehensive
loss, and deficit.
INCORPORATION COSTS
Incorporation costs are expensed as incurred as required in SOP 98-5, "Reporting
on the Costs of Start-Up Activities".
3. SHARE CAPITAL
1999
$
- --------------------------------------------------------------------------------
AUTHORIZED
100,000,000 common shares, par value $0.001
50,000,000 preferred shares, par value $0.001
ISSUED
10,500,000 common shares 10,500
================================================================================
At February 28, 1999, 1,000,000 common shares were reserved for issuance
pursuant to exercise of stock options to be granted to the directors and
officers of the Company.
4. RELATED PARTY TRANSACTIONS
Accounts payable and accrued liabilities at February 28 include $250 due to Mark
Dohlen, a director and shareholder. The balance payable to the related party is
non-interest bearing and is repayable on demand.
20
<PAGE>
5. SUBSEQUENT EVENTS
On March 8, 1999, the Company incorporated a 100% owned subsidiary company,
Healthnet U.S.A. Inc., incorporated in the State of Nevada. This subsidiary is
intended to function as the operating company for the United States market.
6. YEAR 2000 ISSUE (UNAUDITED)
Like other companies, financial and business organizations and individuals
around the world, the Company could be adversely affected if the computer
systems it uses and those used by the Company's suppliers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 issue".
Management will monitor the status of and its exposure to this issue. For the
period ended February 28, 1999, the Company incurred no Year 2000 related costs
and does not expect to incur significant Year 2000 costs.
II. HEALTHNET INTERNATIONAL INC. CONSOLIDATED FINANCIAL STATEMENTS,
MAY 31, 1999;
21
<PAGE>
FINANCIAL STATEMENTS
HEALTHNET INTERNATIONAL INC.
MAY 31, 1999
22
<PAGE>
HEALTHNET INTERNATIONAL INC.
BALANCE SHEET
(IN UNITED STATES DOLLARS)
UNAUDITED
As at May 31
1999
$
- --------------------------------------------------------------------------------
ASSETS
CURRENT
Cash 201,092
Prepaid Expenses 4,826
205,918
- --------------------------------------------------------------------------------
CAPITAL ASSETS 246,202
- --------------------------------------------------------------------------------
452,120
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 4,897
Note Payable 500,000
- --------------------------------------------------------------------------------
504,897
SHAREHOLDERS' EQUITY
Share capital 10,500
Deficit (63,277)
- --------------------------------------------------------------------------------
(52,777)
- --------------------------------------------------------------------------------
452,120
================================================================================
23
<PAGE>
HEALTHNET INTERNATIONAL INC.
STATEMENT OF LOSS, COMPREHENSIVE LOSS,
AND DEFICIT
(IN UNITED STATES DOLLARS)
UNAUDITED
FOR THE QUARTER
ENDED MAY 31,
1999
$
- --------------------------------------------------------------------------------
EXPENSES
Accounting and legal 240
Amortization 13,855
Advertising 64
Incorporation costs 573
Foreign exchange loss 1,402
General and administrative 17,966
Salaries 17,493
Telecommunications 1,401
- --------------------------------------------------------------------------------
Loss for the period 52,994
ACCUMULATED DEFICIT, BEGINNING OF PERIOD 10,283
================================================================================
ACCUMULATED DEFICIT, END OF PERIOD 63,277
================================================================================
LOSS PER COMMON SHARE 0.01
================================================================================
24
<PAGE>
HEALTHNET INTERNATIONAL INC.
STATEMENT OF CASH FLOWS
(IN UNITED STATES DOLLARS)
UNAUDITED
FOR THE QUARTER
ENDED MAY 31,
1999
$
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss for the period (52,994)
Amortization 13,855
Increase in prepaid expenses (4,826)
Decrease in accounts payable and accrued liabilities (4,043)
- --------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (48,008)
- --------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to capital assets (260,057)
- --------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (260,057)
- --------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in promissory notes 500,000
- --------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 500,000
- --------------------------------------------------------------------------------
INCREASE IN CASH DURING THE PERIOD 191,935
Cash, beginning of period 9,157
- --------------------------------------------------------------------------------
Cash, end of period 201,092
================================================================================
25
<PAGE>
PART III. INDEX TO EXHIBITS
Page No.
2. (i) Articles of Incorporation 27
(ii) Bylaws 31
6. Material Contracts
(i) Webcast Systems Inc. 55
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Healthnet International Inc.
(Registrant)
Date: June 27, 1999
/s/ "Grant R. Johnson"
-----------------------------------------------------
Grant R. Johnson, Chief Executive Officer and Director
Date: June 27, 1999
/s/ "Douglas N. Bolen"
-----------------------------------------------------------
Douglas N. Bolen, Corporate Counsel, Secretary and Director
26
<PAGE>
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
HEALTHNET INTERNATIONAL INC.
The undersigned, who, if a natural person, is eighteen years of age or
older, hereby establishes a corporation pursuant to the Colorado Business
Corporation Act as amended and adopts the following Articles of Incorporation:
FIRST: The name of the corporation is Healthnet International Inc.
SECOND: The corporation shall have and may exercise all of the rights,
powers and privileges now or hereafter conferred upon corporations organized
under the laws of Colorado. In addition, the corporation may do everything
necessary, suitable or proper for the accomplishment of any of its corporate
purposes. The corporation may conduct part or all of its business in any part of
Colorado, the United States or the world and may hold, purchase, mortgage, lease
and convey real and personal property in any of such places.
THIRD: (a) The aggregate number of shares which the corporation shall
have authority to issue is 150,000,000, consisting of 100,000,000 shares of
common stock and 50,000,000 shares of preferred stock. The shares of common
stock shall have unlimited voting power, subject to the voting rights of the
shares of preferred stock as established by the Board of Directors of the
corporation in accordance with these Articles of Incorporation and the Colorado
Business Corporation Act. The shares of common stock shall have the right to
receive the net assets of the corporation upon dissolution, subject to the
rights of the shares of preferred stock as established by the Board of Directors
of the corporation in accordance with these Articles of Incorporation and the
Colorado Business Corporation Act. The Board of Directors of the corporation
shall have the authority to divide the class of preferred shares into series and
to fix and determine the relative rights, preferences and limitations of the
preferred shares of any such series to the full extent permitted by the Colorado
Business Corporation Act.
(b) Each shareholder of common stock of record shall have one
vote for each share of common stock standing in his name on the books of the
corporation and entitled to vote, except that in the election of directors each
shareholder of common stock shall have as many votes for each share held by him
as there are directors to be elected and for whose election the shareholder has
a right to vote. Cumulative voting shall not be permitted in the election of
directors or otherwise.
(c) Unless otherwise ordered by a court of competent
jurisdiction, at all meetings of shareholders a majority of the shares of a
voting group entitled to vote at such meeting, represented in person or by
proxy, shall constitute a quorum of that voting group.
27
<PAGE>
FOURTH: The number of directors of the corporation shall be fixed by
the bylaws, or if the bylaws fail to fix such a number, then by resolution
adopted from time to time by the board of directors. Four directors shall
constitute the initial board of directors. The following persons are elected to
serve as the corporation's initial directors until the first annual meeting of
shareholders or until their successors are duly elected and qualified:
NAME ADDRESS
---- -------
Mark Dohlen Suite 509, 1188 Quebec Street
Vancouver, British Columbia
Canada V6A 4B3
Douglas Bolen 3035 Westgate Ave.
Regina, Saskatchewan
Canada S4S 1B4
Grant Johnson 3924 Capilano Road
North Vancouver, British Columbia
Canada V6B 4J2
S. Ross Johnson 1312 Cleaver Drive
Oakville, Ontario
Canada L6J 1W4
FIFTH: The street address of the initial registered office of the
corporation is 1560 Broadway, Denver, Colorado. The name of the initial
registered agent of the corporation at such address is Corporation Service
Company.
SIXTH: The address of the initial principal office of the corporation
is Suite 509, 1188 Quebec Street, Vancouver, British Columbia, Canada V6A 4C3.
SEVENTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the corporation, and the same
are in furtherance of and not in limitation or exclusion of the powers conferred
by laws.
(a) CONFLICTING INTEREST TRANSACTIONS. As used in this
paragraph, "conflicting interest transaction" means any of the following: (i) a
loan or other assistance by the corporation to a director of the corporation or
to an entity in which a director of the corporation is a director or officer or
has a financial interest; (ii) a guaranty by the corporation of an obligation of
a director of the corporation or of an obligation of an entity in which a
director of the corporation is a director or officer or has a financial
interest; or (iii) a contract or transaction between the corporation and a
director of the corporation or between the corporation and an entity in which a
director of the corporation is a director or officer or has a financial
interest. To the full extent permitted by Colorado law, no conflicting interest
transaction shall be void or voidable, be enjoined, be set aside, or give rise
to an award of damages or other sanctions in a proceeding by a shareholder or by
or in the right of the corporation, solely because the conflicting interest
28
<PAGE>
transaction involves a director of the corporation or an entity in which a
director of the corporation is a director or officer or has a financial
interest, or solely because the director is present at or participates in the
meeting of the corporation's board of directors or of the committee of the board
of directors which authorizes, approves or ratifies a conflicting interest
transaction, or solely because the director's vote is counted for such purpose
if: (A) the material facts as to the director's relationship or interest and as
to the conflicting interest transaction are disclosed or are known to the board
of directors or the committee, and the board of directors or committee in good
faith authorizes, approves or ratifies the conflicting interest transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors are less than a quorum; or (B) the material facts as
to the director's relationship or interest and as to the conflicting interest
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the conflicting interest transaction is specifically authorized,
approved or ratified in good faith by a vote of the shareholders; or (C) a
conflicting interest transaction is fair as to the corporation as of the time it
is authorized, approved or ratified in good faith by a vote of the shareholders;
or (D) a conflicting interest transaction is fair as to the corporation as of
the time it is authorized, approved or ratified by the board of directors, a
committee thereof, or the shareholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes, approves or ratifies the
conflicting interest transaction.
(b) INDEMNIFICATION. The corporation shall indemnify, to the
maximum extent permitted by Colorado law, any person who is or was a director,
officer, agent, fiduciary or employee of the corporation against any claim,
liability or expense arising against or incurred by such person made party to a
proceeding because he is or was a director, officer, agent, fiduciary or
employee of the corporation or because he is or was serving another entity or
employee benefit plan as a director, officer, partner, trustee, employee,
fiduciary or agent at the corporation's request. The corporation shall further
have the authority to the maximum extent permitted by Colorado law to purchase
and maintain insurance providing such indemnification.
(c) LIMITATION ON DIRECTOR'S LIABILITY. No director of this
corporation shall have any personal liability for monetary damages to the
corporation or its shareholders for breach of his fiduciary duty as a director,
except that this provision shall not eliminate or limit the personal liability
of a director to the corporation or its shareholders for monetary damages for
any breach, act, omission or transaction as to which the Colorado Business
Corporation Act (as in effect from time to time) prohibits expressly the
elimination or limitation of liability. Nothing contained herein will be
construed to deprive any director of his right to all defenses ordinarily
available to a director nor will anything herein be construed to deprive any
director of any right he may have for contribution from any other director or
other person.
29
<PAGE>
EIGHTH: The name and address of the incorporator is:
Scott M. Reed
1919 14th Street, Suite 330
Boulder, Colorado 80302
DATED the "21st" day of January, 1999.
/s/ "Scott M. Reed"
---------------------------
Incorporator
Corporation Service Company hereby consents to the appointment as the
initial registered agent for Healthnet International Inc.
---------------------------
Initial Registered Agent
30
<PAGE>
EXHIBIT 2.2
<TABLE>
BYLAWS
OF
HEALTHNET INTERNATIONAL INC.
TABLE OF CONTENTS
PAGE
----
<CAPTION>
<S> <C> <C>
ARTICLE I.............................................................................................OFFICES 1
ARTICLE II. SHAREHOLDERS.................................................................................. 1
SECTION 1...................................................................................ANNUAL MEETING 1
SECTION 2.................................................................................SPECIAL MEETINGS 2
SECTION 3.................................................................................PLACE OF MEETING 2
SECTION 4................................................................................NOTICE OF MEETING 2
SECTION 5............................................................................FIXING OF RECORD DATE 3
SECTION 6.....................................................................................VOTING LISTS 4
SECTION 7......................................................RECOGNITION PROCEDURE FOR BENEFICIAL OWNERS 4
SECTION 8......................................................................QUORUM AND MANNER OF ACTING 5
SECTION 9..........................................................................................PROXIES 5
SECTION 10................................................................................VOTING OF SHARES 6
SECTION 11...............................................................CORPORATION'S ACCEPTANCE OF VOTES 7
SECTION 12.................................................................INFORMAL ACTION BY SHAREHOLDERS 8
SECTION 13...................................................................MEETINGS BY TELECOMMUNICATION 8
ARTICLE III. BOARD OF DIRECTORS............................................................................ 8
SECTION 1...................................................................................GENERAL POWERS 8
SECTION 2................................................................NUMBER, QUALIFICATIONS AND TENURE 8
SECTION 3........................................................................................VACANCIES 9
SECTION 4.................................................................................REGULAR MEETINGS 9
SECTION 5.................................................................................SPECIAL MEETINGS 9
SECTION 6...........................................................................................NOTICE 9
SECTION 7...........................................................................................QUORUM 10
SECTION 8.................................................................................MANNER OF ACTING 10
SECTION 9.....................................................................................COMPENSATION 10
SECTION 10...........................................................................PRESUMPTION OF ASSENT 10
SECTION 11......................................................................................COMMITTEES 11
SECTION 12....................................................................INFORMAL ACTION BY DIRECTORS 11
SECTION 13.............................................................................TELEPHONIC MEETINGS 11
SECTION 14................................................................................STANDARD OF CARE 12
31
<PAGE>
ARTICLE IV. OFFICERS AND AGENTS.......................................................................... 12
SECTION 1..........................................................................................GENERAL 12
SECTION 2...................................................................APPOINTMENT AND TERM OF OFFICE 12
SECTION 3..........................................................................RESIGNATION AND REMOVAL 13
SECTION 4........................................................................................VACANCIES 13
SECTION 5........................................................................................PRESIDENT 13
SECTION 6..................................................................................VICE PRESIDENTS 14
SECTION 7........................................................................................SECRETARY 14
SECTION 8........................................................................................TREASURER 14
ARTICLE V. STOCK........................................................................................ 15
SECTION 1.....................................................................................CERTIFICATES 15
SECTION 2.........................................................................CONSIDERATION FOR SHARES 16
SECTION 3................................................................................LOST CERTIFICATES 16
SECTION 4...............................................................................TRANSFER OF SHARES 16
SECTION 5.....................................................TRANSFER AGENT, REGISTRARS AND PAYING AGENTS 17
ARTICLE VI. INDEMNIFICATION OF CERTAIN PERSONS........................................................... 17
SECTION 1..................................................................................INDEMNIFICATION 17
SECTION 2.........................................................................RIGHT TO INDEMNIFICATION 18
SECTION 3..................................................................EFFECT OF TERMINATION OF ACTION 18
SECTION 4..........................................GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION 18
SECTION 5....................................................................COURT-ORDERED INDEMNIFICATION 19
SECTION 6..............................................................................ADVANCE OF EXPENSES 19
SECTION 7..............................................ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER
.................................................................................. THAN DIRECTORS 20
SECTION 8.................................................................................WITNESS EXPENSES 20
SECTION 9...........................................................................REPORT TO SHAREHOLDERS 20
ARTICLE VII. PROVISION OF INSURANCE....................................................................... 20
SECTION 1...........................................................................PROVISION OF INSURANCE 20
ARTICLE VIII. MISCELLANEOUS................................................................................ 21
SECTION 1.............................................................................................SEAL 21
SECTION 2......................................................................................FISCAL YEAR 21
SECTION 3.......................................................................................AMENDMENTS 21
SECTION 4............................................................RECEIPT OF NOTICES BY THE CORPORATION 21
SECTION 5...........................................................................................GENDER 21
SECTION 6........................................................................................CONFLICTS 21
SECTION 7......................................................................................DEFINITIONS 21
</TABLE>
32
<PAGE>
BYLAWS
OF
HEALTHNET INTERNATIONAL INC.
ARTICLE I.
OFFICES
The principal office of the corporation shall be designated from time
to time by the corporation and may be within or outside the State of Colorado.
The corporation may have such other offices, either within or outside
the State of Colorado, as the board of directors may designate or as the
business of the corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not be,
identical with the principal office, and the address of the registered office
may be changed from time to time by the board of directors.
ARTICLE II.
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders shall
be held each year on a date and at a time fixed by the board of directors of the
corporation (or by the president in the absence of action by the board of
directors), for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the election of directors
is not held on the day fixed as provided herein for any annual meeting of the
shareholders, or any adjournment thereof, the board of directors shall cause the
election to be held at a special meeting of the shareholders as soon thereafter
as it may conveniently be held.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call of or proper demand for a special
meeting and notice of the special meeting was not given within thirty days after
the date of the call or the date the last of the demands necessary to require
calling of the meeting was received by the corporation pursuant to C.R.S. ss.
7-107-102(1)(b), or the special meeting was not held in accordance with the
notice.
33
<PAGE>
SECTION 2. SPECIAL MEETINGS. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors. The president shall call a special
meeting of the shareholders if the corporation receives one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by holders of shares representing at least ten percent of
all the votes entitled to be cast on any issue proposed to be considered at the
meeting.
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, either within or outside Colorado, as the place for any annual meeting or
any special meeting called by the board of directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or outside Colorado, as the place for such meeting. If no
designation is made, or if a special meeting is called other than by the board,
the place of meeting shall be the principal office of the corporation.
SECTION 4. NOTICE OF MEETING. Written notice stating the place, date,
and hour of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, except that (i) if the number of authorized
shares is to be increased, at least thirty days' notice shall be given, or (ii)
if any other longer notice period is required by the Colorado Business
Corporation Act, such longer period of notice shall be applicable. The secretary
shall be required to give such notice only to shareholders entitled to vote at
the meeting except as otherwise required by the Colorado Business Corporation
Act.
Notice of a special meeting shall include a description of the purpose
or purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity which
this corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the corporation, or (v) any other purpose for which a statement
of purpose is required by the Colorado Business Corporation Act. Notice shall be
given personally or by mail, private carrier, telegraph, teletype,
electronically transmitted facsimile or other form of wire or wireless
communication by or at the direction of the president, the secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed and if in a comprehensible form, such notice
shall be deemed to be given and effective when deposited in the United States
mail, addressed to the shareholder at his address as it appears in the
corporation's current record of shareholders, with postage prepaid. If notice is
given other than by mail, and provided that such notice is in a comprehensible
form, the notice is given and effective on the date actually received by the
shareholder.
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If requested by the person or persons lawfully calling such meeting,
the secretary shall give notice thereof at corporate expense. No notice need be
sent to any shareholder if three successive notices mailed to the last known
address of such shareholder have been returned as undeliverable until such time
as another address for such shareholder is made known to the corporation by such
shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise the corporation in writing of any change in such
shareholder's mailing address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for the
adjourned meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such shareholder. Such waiver
shall be delivered to the corporation for filing with the corporate records, but
this delivery and filing shall not be conditions to the effectiveness of the
waiver. Further, by attending a meeting either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meeting unless the shareholder objects at the beginning of the meeting to the
holding of the meeting or the transaction of business at the meeting because of
lack of notice or defective notice. By attending the meeting, the shareholder
also waives any objection to consideration at the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, or (iii)
demand a special meeting, or to make a determination of shareholders for any
other proper purpose, the board of directors may fix a future date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the day before the notice of the meeting is
given to shareholders, or the date on which the resolution of the board of
directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting. Unless otherwise specified when the record
date is fixed, the time of day for such determination shall be as of the
corporation's close of business on the record date.
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Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
SECTION 6. VOTING LISTS. After a record date is fixed for a
shareholders' meeting, the secretary shall make, at the earlier of ten days
before such meeting or two business days after notice of the meeting has been
given, a complete list of the shareholders entitled to be given notice of such
meeting or any adjournment thereof. The list shall be arranged by voting groups
and within each voting group by class or series of shares, shall be in
alphabetical order within each class or series, and shall show the address of
and the number of shares of each class or series held by each shareholder. For
the period beginning the earlier of ten days prior to the meeting or two
business days after notice of the meeting is given and continuing through the
meeting and any adjournment thereof, this list shall be kept on file at the
principal office of the corporation, or at a place (which shall be identified in
the notice) in the city where the meeting will be held. Such list shall be
available for inspection on written demand by any shareholder (including for the
purpose of this Section 6 any holder of voting trust certificates) or his agent
or attorney during regular business hours and during the period available for
inspection. The original stock transfer books shall be prima facie evidence as
to who are shareholders entitled to examine such list or to vote at any meeting
of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
SECTION 7. RECOGNITION PROCEDURE FOR BENEFICIAL OWNERS. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
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SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the votes
entitled to be cast on a matter by a voting group represented in person or by
proxy, shall constitute a quorum of that voting group for action on the matter.
If less than a majority of such votes are represented at a meeting, a majority
of the votes so represented may adjourn the meeting from time to time without
further notice, for a period not to exceed 120 days for any one adjournment. If
a quorum is present at such adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, unless the meeting is adjourned and a
new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action, unless the vote of a greater number or voting by classes is required
by law or the articles of incorporation.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a telegram,
teletype, or other electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service organization,
or other person duly authorized by the proxy to receive appointments as agent
for the proxy, or to the corporation. The transmitted appointment shall set
forth or be transmitted with written evidence from which it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be filed with
the secretary of the corporation before or at the time of the meeting. The
appointment of a proxy is effective when received by the corporation and is
valid for eleven months unless a different period is expressly provided in the
appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile,
of an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could be
used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
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The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
SECTION 10. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors, and
each fractional share shall be entitled to a corresponding fractional vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the articles of incorporation as permitted by the Colorado Business
Corporation Act. Cumulative voting shall not be permitted in the election of
directors or for any other purpose.
In the election of directors each record holder of stock shall be
entitled to vote all of his votes for as many persons as there are directors to
be elected. At each election of directors, that number of candidates equaling
the number of directors to be elected, having the highest number of votes cast
in favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
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SECTION 11. CORPORATION'S ACCEPTANCE OF VOTES. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the corporation
has been presented with respect to the vote, consent, waiver, proxy appointment
or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee
in bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect to the
vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign for
the shareholder has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-tenants or fiduciaries, and the person signing appears to be acting on behalf
of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
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Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section is
liable in damages for the consequences of the acceptance or rejection.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for determining
shareholders entitled to take action without a meeting is the date the
corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
SECTION 13. MEETINGS BY TELECOMMUNICATION. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 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 its board of directors, except as otherwise
provided in the Colorado Business Corporation Act or the articles of
incorporation.
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SECTION 2. NUMBER, QUALIFICATIONS AND TENURE. The number of directors
of the corporation shall be fixed from time to time by the board of directors,
within a range of no less than one or more than seven, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. A director shall be a natural person who is eighteen years
of age or older. A director need not be a resident of Colorado or a shareholder
of the corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Colorado Business Corporation Act. Any director may be removed by the
shareholders of the voting group that elected the director, with or without
cause, at a meeting called for that purpose. The notice of the meeting shall
state that the purpose or one of the purposes of the meeting is removal of the
director. A director may be removed only if the number of votes cast in favor of
removal exceeds the number of votes cast against removal.
SECTION 3. VACANCIES. Any director may resign at any time by giving
written notice to the secretary. Such resignation shall take effect at the time
the notice is received by the secretary unless the notice specifies a later
effective date. Unless otherwise specified in the notice of resignation, the
corporation's acceptance of such resignation shall not be necessary to make it
effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders at a special meeting called
for that purpose or by the board of directors. If the directors remaining in
office constitute fewer than a quorum of the board, the directors may fill the
vacancy by the affirmative vote of a majority of all the directors remaining in
office. If elected by the directors, the director shall hold office until the
next annual shareholders' meeting at which directors are elected. If elected by
the shareholders, the director shall hold office for the unexpired term of his
predecessor in office; except that, if the director's predecessor was elected by
the directors to fill a vacancy, the director elected by the shareholders shall
hold office for the unexpired term of the last predecessor elected by the
shareholders.
SECTION 4. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without notice immediately after and at the same place
as the annual meeting of shareholders. The board of directors may provide by
resolution the time and place, either within or outside Colorado, for the
holding of additional regular meetings without other notice.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any one director. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or outside Colorado, as the place for holding
any special meeting of the board of directors called by them, provided that no
meeting shall be called outside the State of Colorado unless a majority of the
board of directors has so authorized.
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SECTION 6. NOTICE. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the meeting
by written notice either personally delivered or mailed to each director at his
residence or business address, or by notice transmitted by private courier,
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be given and
to be effective on the earlier of (i) five days after such notice is deposited
in the United States mail, properly addressed, with first class postage prepaid,
or (ii) the date shown on the return receipt, if mailed by registered or
certified mail return receipt requested, provided that the return receipt is
signed by the director to whom the notice is addressed. If notice is given by
telex, electronically transmitted facsimile or other similar form of wire or
wireless communication, such notice shall be deemed to be given and to be
effective when sent, and with respect to a telegram, such notice shall be deemed
to be given and to be effective when the telegram is delivered to the telegraph
company. If a director has designated in writing one or more reasonable
addresses or facsimile numbers for delivery of notice to him, notice sent by
mail, telegraph, telex, electronically transmitted facsimile or other form of
wire or wireless communication shall not be deemed to have been given or to be
effective unless sent to such addresses or facsimile numbers, as the case may
be.
A director may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records, but such
delivery and filing shall not be conditions to the effectiveness of the waiver.
Further, a director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless at the beginning of the meeting, or
promptly upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by the
board of directors pursuant to Article III, Section 2 or, if no number is fixed,
a majority of the number in office immediately before the meeting begins, shall
constitute a quorum for the transaction of business at any meeting of the board
of directors. If less than such majority is present at a meeting, a majority of
the directors present may adjourn the meeting from time to time without further
notice, for a period not to exceed sixty days at any one adjournment.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
SECTION 9. COMPENSATION. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
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SECTION 10. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless (i) the director objects at the beginning of the
meeting, or promptly upon his arrival, to the holding of the meeting or the
transaction of business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting, (ii) the director contemporaneously
requests that his dissent or abstention as to any specific action taken be
entered in the minutes of the meeting, or (iii) the director causes written
notice of his dissent or abstention as to any specific action to be received by
the presiding officer of the meeting before its adjournment or by the secretary
promptly after the adjournment of the meeting. A director may dissent to a
specific action at a meeting, while assenting to others. The right to dissent to
a specific action taken at a meeting of the board of directors or a committee of
the board shall not be available to a director who voted in favor of such
action.
SECTION 11. COMMITTEES. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have all
the authority of the board of directors, except that no such committee shall
have the authority to (i) authorize distributions, (ii) approve or propose to
shareholders actions or proposals required by the Colorado Business Corporation
Act to be approved by shareholders, (iii) fill vacancies on the board of
directors or any committee thereof, (iv) amend the articles of incorporation,
(v) adopt, amend or repeal the bylaws, (vi) approve a plan of merger not
requiring shareholder approval, (vii) authorize or approve the reacquisition of
shares unless pursuant to a formula or method prescribed by the board of
directors, or (viii) authorize or approve the issuance or sale of shares, or
contract for the sale of shares or determine the designations and relative
rights, preferences and limitations of a class or series of shares, except that
the board of directors may authorize a committee or officer to do so within
limits specifically prescribed by the board of directors. The committee shall
then have full power within the limits set by the board of directors to adopt
any final resolution setting forth all preferences, limitations and relative
rights of such class or series and to authorize an amendment of the articles of
incorporation stating the preferences, limitations and relative rights of a
class or series for filing with the Secretary of State under the Colorado
Business Corporation Act.
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the board of
directors or a member of the committee in question with his responsibility to
conform to the standard of care set forth in Article III, Section 14 of these
bylaws.
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SECTION 12. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board of directors may be taken without a meeting if a written consent
(or counterparts thereof) that sets forth the action so taken is signed by all
of the directors entitled to vote with respect to the action taken. Such consent
shall have the same force and effect as a unanimous vote of the directors or
committee members and may be stated as such in any document. Unless the consent
specifies a different effective time or date, action taken under this Section 12
is effective at the time or date the last director signs a writing describing
the action taken, unless, before such time, any director has revoked his consent
by a writing signed by the director and received by the president or the
secretary of the corporation.
SECTION 13. TELEPHONIC MEETINGS. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
SECTION 14. STANDARD OF CARE. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the corporation or its
shareholders for any action he takes or omits to take as a director if, in
connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom a director is entitled to rely are (i)
one or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters presented, (ii)
legal counsel, public accountant, or other person as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the board of directors on which the director
does not serve if the director reasonably believes the committee merits
confidence.
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ARTICLE IV.
OFFICERS AND AGENTS
SECTION 1. GENERAL. The officers of the corporation shall be a
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be appointed by the board of directors and shall be a natural person
eighteen years of age or older. One person may hold more than one office. The
board of directors or an officer or officers so authorized by the board may
appoint such other officers, assistant officers, committees and agents,
including a chairman of the board, assistant secretaries and assistant
treasurers, as they may consider necessary. Except as expressly prescribed by
these bylaws, the board of directors or the officer or officers authorized by
the board shall from time to time determine the procedure for the appointment of
officers, their authority and duties and their compensation, provided that the
board of directors may change the authority, duties and compensation of any
officer who is not appointed by the board.
SECTION 2. APPOINTMENT AND TERM OF OFFICE. The officers of the
corporation to be appointed by the board of directors shall be appointed at each
annual meeting of the board held after each annual meeting of the shareholders.
If the appointment of officers is not made at such meeting or if an officer or
officers are to be appointed by another officer or officers of the corporation,
such appointments shall be made as determined by the board of directors or the
appointing person or persons. Each officer shall hold office until the first of
the following occurs: his successor shall have been duly appointed and
qualified, his death, his resignation, or his removal in the manner provided in
Section 3.
SECTION 3. RESIGNATION AND REMOVAL. An officer may resign at any time
by giving written notice of resignation to the president, secretary or other
person who appoints such officer. The resignation is effective when the notice
is received by the corporation unless the notice specifies a later effective
date.
Any officer or agent may be removed at any time with or without cause
by the board of directors or an officer or officers authorized by the board.
Such removal does not affect the contract rights, if any, of the corporation or
of the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office, however occurring, may
be filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors, or
officer or officers authorized by the board of directors, may remove the officer
at any time before the effective date and may fill the resulting vacancy.
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SECTION 5. PRESIDENT. The president shall preside at all meetings of
shareholders and all meetings of the board of directors unless the board of
directors has appointed a chairman, vice chairman, or other officer of the board
and has authorized such person to preside at meetings of the board of directors.
Subject to the direction and supervision of the board of directors, the
president shall be the chief executive officer of the corporation, and shall
have general and active control of its affairs and business and general
supervision of its officers, agents and employees. Unless otherwise directed by
the board of directors, the president shall attend in person or by substitute
appointed by him, or shall execute on behalf of the corporation written
instruments appointing a proxy or proxies to represent the corporation, at all
meetings of the stockholders of any other corporation in which the corporation
holds any stock. On behalf of the corporation, the president may in person or by
substitute or by proxy execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the president,
in person or by substitute or proxy, may vote the stock held by the corporation,
execute written consents and other instruments with respect to such stock, and
exercise any and all rights and powers incident to the ownership of said stock,
subject to the instructions, if any, of the board of directors. The president
shall have custody of the treasurer's bond, if any. The president shall have
such additional authority and duties as are appropriate and customary for the
office of president and chief executive officer, except as the same may be
expanded or limited by the board of directors from time to time.
SECTION 6. VICE PRESIDENTS. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, of if the board makes no such designation,
then the vice president designated by the president, or if neither the board nor
the president makes any such designation, the senior vice president as
determined by first election to that office), shall have the powers and perform
the duties of the president.
SECTION 7. SECRETARY. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors without a meeting, a record of all actions taken by a
committee of the board of directors in place of the board of directors on behalf
of the corporation, and a record of all waivers of notice of meetings of
shareholders and of the board of directors or any committee thereof, (ii) see
that all notices are duly given in accordance with the provisions of these
bylaws and as required by law, (iii) serve as custodian of the corporate records
and of the seal of the corporation and affix the seal to all documents when
authorized by the board of directors, (iv) keep at the corporation's registered
office or principal place of business a record containing the names and
addresses of all shareholders in a form that permits preparation of a list of
shareholders arranged by voting group and by class or series of shares within
each voting group, that is alphabetical within each class or series and that
shows the address of, and the number of shares of each class or series held by,
each shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past three years to shareholders as a group or
to the holders of any class or series of shares as a group, a list of the names
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and business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (viii) 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 by the
president or by the board of directors. Assistant secretaries, if any, shall
have the same duties and powers, subject to supervision by the secretary. The
directors and/or shareholders may however respectively designate a person other
than the secretary or assistant secretary to keep the minutes of their
respective meetings.
Any books, records, or minutes of the corporation may be in written
form or in any form capable of being converted into written form within a
reasonable time.
SECTION 8. TREASURER. The treasurer shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. Subject to the limits imposed by the board of directors,
he shall receive and give receipts and acquittances for money paid in on account
of the corporation, and shall pay out of the corporation's funds on hand all
bills, payrolls and other just debts of the corporation of whatever nature upon
maturity. He shall perform all other duties incident to the office of the
treasurer and, upon request of the board, shall make such reports to it as may
be required at any time. He shall, if required by the board, give the
corporation a bond in such sums and with such sureties as shall be satisfactory
to the board, conditioned upon the faithful performance of his duties and for
the restoration to the corporation of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation. He shall have such other powers and perform such other
duties as may from time to time be prescribed by the board of directors or the
president. The assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
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ARTICLE V.
STOCK
SECTION 1. CERTIFICATES. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by the president, a vice president, the secretary or an assistant
secretary. In case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, such certificate may nonetheless be issued by the
corporation with the same effect as if he were such officer at the date of its
issue. The names of the owners of the certificates, the number of shares, and
the date of issue shall be entered on the books of the corporation. Each
certificate representing shares shall state upon its face:
(i) That the corporation is organized under the laws of Colorado;
(ii) The name of the person to whom issued;
(iii) The number and class of the shares and the designation of the
series, if any, that the certificate represents;
(iv) The par value, if any, of each share represented by the
certificate;
(v) If the corporation is authorized to issue different classes of
shares or different series within a class, the certificate shall contain a
conspicuous statement, on the front or the back, that the corporation will
furnish to the shareholder, on request in writing and without charge,
information concerning the designations, preferences, limitations, and relative
rights applicable to each class, the variations in preferences, limitations, and
rights determined for each series, and the authority of the board of directors
to determine variations for future classes or series; and
(vi) Any restrictions imposed by the corporation upon the transfer of
the shares represented by the certificate.
If shares are not represented by certificates, within a reasonable time
following the issue or transfer of such shares, the corporation shall send the
shareholder a complete written statement of all of the information required to
be provided to holders of uncertificated shares by the Colorado Business
Corporation Act.
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SECTION 2. CONSIDERATION FOR SHARES. Certificates or uncertificated
shares shall not be issued until the shares represented thereby are fully paid.
The board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment for
shares of the corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
SECTION 3. LOST CERTIFICATES. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
SECTION 4. TRANSFER OF SHARES. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be entered on
the stock books of the corporation which shall be kept at its principal office
or by the person and the place designated by the board of directors.
Except as otherwise expressly provided in Article II, Sections 7 and
11, and except for the assertion of dissenters' rights to the extent provided in
Article 113 of the Colorado Business Corporation Act, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as the
owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or rights
deriving from such shares on the part of any person other than the registered
holder, including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares on the part of any person other
than the registered holder, including without limitation any purchaser, assignee
or transferee of such shares or rights deriving from such shares, unless and
until such other person becomes the registered holder of such shares, whether or
not the corporation shall have either actual or constructive notice of the
claimed interest of such other person.
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SECTION 5. TRANSFER AGENT, REGISTRARS AND PAYING AGENTS. The board may
at its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Colorado. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI.
INDEMNIFICATION OF CERTAIN PERSONS
SECTION 1. INDEMNIFICATION. For purposes of Article VI, a "Proper
Person" means any person (including the estate or personal representative of a
director) who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that he is or was a director, officer, employee, fiduciary or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary or agent of any
foreign or domestic profit or nonprofit corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company, or other enterprise or employee benefit plan. The corporation
shall indemnify any Proper Person against reasonably incurred expenses
(including attorneys' fees), judgments, penalties, fines (including any excise
tax assessed with respect to an employee benefit plan) and amounts paid in
settlement reasonably incurred by him connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article that he conducted himself in good faith and that he reasonably believed
(i) in the case of conduct in his official capacity with the corporation, that
his conduct was in the corporation's best interests, or (ii) in all other cases
(except criminal cases), that his conduct was at least not opposed to the
corporation's best interests, or (iii) in the case of any criminal proceeding,
that he had no reasonable cause to believe his conduct was unlawful. Official
capacity means, when used with respect to a director, the office of director
and, when used with respect to any other Proper Person, the office in a
corporation held by the officer or the employment, fiduciary or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. Official capacity does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.
A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirements in (ii) of this Section 1. A director's conduct with respect to an
employee benefit plan for a purpose that the director did not reasonably believe
to be in the interests of the participants in or beneficiaries of the plan shall
be deemed not to satisfy the requirement of this section that he conduct himself
in good faith.
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No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper Person was
adjudged liable to the corporation or in connection with any proceeding charging
that the Proper Person derived an improper personal benefit, whether or not
involving action in an official capacity, in which he was adjudged liable on the
basis that he derived an improper personal benefit. Further, indemnification
under this Section in connection with a proceeding brought by or in the right of
the corporation shall be limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding.
SECTION 2. RIGHT TO INDEMNIFICATION. The corporation shall indemnify
any Proper Person who was wholly successful, on the merits or otherwise, in
defense of any action, suit, or proceeding as to which he was entitled to
indemnification under Section 1 of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the corporation other than the
determination in good faith that the defense has been wholly successful.
SECTION 3. EFFECT OF TERMINATION OF ACTION. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person seeking indemnification did not meet the standards
of conduct described in Section 1 of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
SECTION 4. GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION.
Except where there is a right to indemnification as set forth in Sections 1 or 2
of this Article or where indemnification is ordered by a court in Section 5, any
indemnification shall be made by the corporation only as determined in the
specific case by a proper group that indemnification of the Proper Person is
permissible under the circumstances because he has met the applicable standards
of conduct set forth in Section 1 of this Article. This determination shall be
made by the board of directors by a majority vote of those present at a meeting
at which a quorum is present, which quorum shall consist of directors not
parties to the proceeding ("Quorum"). If a Quorum cannot be obtained, the
determination shall be made by a majority vote of a committee of the board of
directors designated by the board, which committee shall consist of two or more
directors not parties to the proceeding, except that directors who are parties
to the proceeding may participate in the designation of directors for the
committee. If a Quorum of the board of directors cannot be obtained and the
committee cannot be established, or even if a Quorum is obtained or the
committee is designated and a majority of the directors constituting such Quorum
or committee so directs, the determination shall be made by (i) independent
legal counsel selected by a vote of the board of directors or the committee in
the manner specified in this Section 4 or, if a Quorum of the full board of
directors cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board
(including directors who are parties to the action) or (ii) a vote of the
shareholders.
Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible except that, if the determination that indemnification
or advance of expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses shall be made by the
body that selected such counsel.
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SECTION 5. COURT-ORDERED INDEMNIFICATION. Any Proper Person may apply
for indemnification to the court conducting the proceeding or to another court
of competent jurisdiction for mandatory indemnification under Section 2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If a court determines that the Proper Person is
entitled to indemnification under Section 2 of this Article, the court shall
order indemnification, including the Proper Person's reasonable expenses
incurred to obtain court-ordered indemnification. If the court determines that
such Proper Person is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not he met the standards of
conduct set forth in Section 1 of this Article or was adjudged liable in the
proceeding, the court may order such indemnification as the court deems proper
except that if the Proper Person has been adjudged liable, indemnification shall
be limited to reasonable expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered indemnification.
SECTION 6. ADVANCE OF EXPENSES. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 may be paid by the corporation to any Proper Person in
advance of the final disposition of such action, suit or proceeding upon receipt
of (i) a written affirmation of such Proper Person's good faith belief that he
has met the standards of conduct prescribed by Section 1 of this Article VI,
(ii) a written undertaking, executed personally or on the Proper Person's
behalf, to repay such advances if it is ultimately determined that he did not
meet the prescribed standards of conduct (the undertaking shall be an unlimited
general obligation of the Proper Person but need not be secured and may be
accepted without reference to financial ability to make repayment), and (iii) a
determination is made by the proper group (as described in Section 4 of this
Article VI) that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be made in
the same manner specified in Section 4 of this Article VI.
SECTION 7. ADDITIONAL INDEMNIFICATION TO CERTAIN PERSONS OTHER THAN
DIRECTORS. In addition to the indemnification provided to officers, employees,
fiduciaries or agents because of their status as Proper Persons under this
Article, the corporation may also indemnify and advance expenses to them if they
are not directors of the corporation to a greater extent than is provided in
these bylaws, if not inconsistent with public policy, and if provided for by
general or specific action of its board of directors or shareholders or by
contract.
SECTION 8. WITNESS EXPENSES. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a time
when he has not been made a named defendant or respondent in the proceeding.
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SECTION 9. REPORT TO SHAREHOLDERS. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
ARTICLE VII.
PROVISION OF INSURANCE
SECTION 1. PROVISION OF INSURANCE. By action of the board of directors,
notwithstanding any interest of the directors in the action, the corporation may
purchase and maintain insurance, in such scope and amounts as the board of
directors deems appropriate, on behalf of any person who is or was a director,
officer, employee, fiduciary or agent of the corporation, or who, while a
director, officer, employee, fiduciary or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee fiduciary or agent of any other foreign or domestic
corporation or of any partnership, joint venture, trust, profit or nonprofit
unincorporated association, limited liability company, other enterprise or
employee benefit plan, against any liability asserted against, or incurred by,
him in that capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of Article VI or applicable law. Any such insurance may be
procured from any insurance company designated by the board of directors of the
corporation, whether such insurance company is formed under the laws of Colorado
or any other jurisdiction of the United States or elsewhere, including any
insurance company in which the corporation has an equity interest or any other
interest, through stock ownership or otherwise.
ARTICLE VIII.
MISCELLANEOUS
SECTION 1. SEAL. The board of directors may adopt a corporate seal,
which shall be circular in form and shall contain the name of the corporation
and the words, "Seal, Colorado."
SECTION 2. FISCAL YEAR. The fiscal year of the corporation shall be as
established by the board of directors.
SECTION 3. AMENDMENTS. The board of directors shall have power, to the
maximum extent permitted by the Colorado Business Corporation Act, to make,
amend and repeal the bylaws of the corporation at any regular or special meeting
of the board unless the shareholders, in making, amending or repealing a
particular bylaw, expressly provide that the directors may not amend or repeal
such bylaw. The shareholders also shall have the power to make, amend or repeal
the bylaws of the corporation at any annual meeting or at any special meeting
called for that purpose.
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SECTION 4. RECEIPT OF NOTICES BY THE CORPORATION. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (1) at
the registered office of the corporation in Colorado; (2) at the principal
office of the corporation (as that office is designated in the most recent
document filed by the corporation with the secretary of state for Colorado
designating a principal office) addressed to the attention of the secretary of
the corporation; (3) by the secretary of the corporation wherever the secretary
may be found; or (4) by any other person authorized from time to time by the
board of directors or the president to receive such writings, wherever such
person is found.
SECTION 5. GENDER. The masculine gender is used in these bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
SECTION 6. CONFLICTS. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
SECTION 7. DEFINITIONS. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same definition as
in the Colorado Business Corporation Act.
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EXHIBIT 6
SOFTWARE LICENSE AGREEMENT
--------------------------
THIS AGREEMENT is entered into this May 31st, 1999.
BETWEEN: Healthnet USA Inc. with offices at Suite 301, 1201 West Pender Ave.,
Vancouver, British Columbia, Canada.
(the "Licensee")
AND
Webcast Systems Inc. with offices at Suite 503, 555 West Hastings
Street, Vancouver, British Columbia, Canada.
("Webcast")
WHEREAS,
A. Webcast owns rights to Internet E-Community software (the
"Software");
B. Webcast wishes to license the Software to other companies;
C. Webcast wishes to provide a complete computer hardware and
software package that the Licensee may use to operate a vertical
Internet portal community;
D. The Licensee wishes to license the Software and make use of
Webcast's computer hardware in order to operate a vertical
Internet portal community;
NOW THEREFORE, in consideration of the premises and mutual covenants herein set
forth, the parties agree as follows:
1. GENERAL PROVISIONS
------------------
1.1. DEFINITIONS
1.1.1. "Licensed Software" shall mean a licensed data processing
program or micro program consisting of a series or sequence
of signals, or instructions, statements, or fonts stored on
any media in machine readable form, and any related
license.
1.1.2. "Customer Information" shall mean all data collected and
stored in respect of customers including, without limiting
the generality of the foregoing, name, address, phone and
fax number, e-mail address, credit card numbers and
expiration dates or information on other types of payments.
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1.1.3. "Confidential Information" shall mean material in the
possession of Webcast which is not generally available to
or used by others or the utility or value of which is not
generally known or recognized as standard practice,
including, without limitation, all financial business and
personal data relating to Webcast's clients any non-public
information about affiliates, subsidiaries, consultants and
employees of Webcast or it's affiliates, business and
marketing plans, strategies and methods, studies, charts,
plans, tables and compilations of business industrial
information, computer software and computer technology
whether patentable, copyrightable or not, which is acquired
or developed by or on behalf of Webcast or its affiliates
from time to time.
1.2. RIGHT TO AUDIT
1.2.1. The Licensee shall, within reason, have the right, without
prior notice to Webcast to inspect and audit all Webcast's
business, accounting and supporting records which are
necessary for purposes of determining Webcast's compliance
with the terms of this Agreement. Webcast shall fully
co-operate with any independent chartered accountants or
certified public accountants hired by the Licensee to
conduct any such inspection or audit. If any such
inspection or audit discloses an under statement of less
than 3% for any period, Webcast shall pay, within ten days
after receipt of the inspection or audit report, the sums
due on account of such understatement with interest
calculated at U.S. prime plus one percent. Further, if such
inspection or audit is made necessary by failure of Webcast
to furnish invoice reports or any other documentation as
herein required, or if an understatement for any period is
determined by such inspection or audit to be 3% or greater,
Webcast shall, on demand and in any event within the said
ten days, in addition to paying the sums due on account of
such understatement, also reimburse for the cost of such
inspection or audit, including without limitation, the
charges of any independent chartered accountants or
certified public accountants retained by the Licensee in
connection with such audit or inspection and the reasonable
travel expenses, room, board and compensation of employees
of the Licensee.
1.2.2. The Licensee's right to audit records shall only extend to
records that date back no more than two of Webcast's fiscal
years prior to the date Webcast receives notice of an
impending audit.
1.3. INDEMNIFICATION
1.3.1. The Licensee acknowledges and agrees that neither Webcast
nor any of its members, shareholders, directors, officers,
employees or representatives (the "Indemnified Parties")
will be liable to the Licensee or any of the Licensee's
customers for any special, indirect, consequential,
punitive or exemplary damages, or damages for loss of
profits or savings, in connection with this Agreement, the
services or the Hardware or any other information, material
or services provided by Webcast to the Licensee under this
Agreement.
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1.4. DISRUPTIONS
1.4.1. The Licensee acknowledges that from time to time, as a
result of Hardware failure, supplier failures, or acts of
god, the services provided under this Agreement by Webcast
can be temporarily disrupted. The Licensee acknowledges and
agrees that neither Webcast nor any of its members,
shareholders, directors, officers, employees or
representatives will be liable to the Licensee or any of
the Licensees customers for any specific, indirect,
consequential, punitive or exemplary damages, or damages
for loss of profits or savings, in connection with these
temporary disruptions. For the purpose of this section, if
the services provided under this Agreement by Webcast are
temporarily disrupted for a period of seven days or more,
the minimum monthly fees as calculated in section l.7.2
shall be reduced on a pro rata basis.
1.5. CONDITIONS OF LICENSE
This license is granted under the following conditions:
1.5.1. The Licensee acknowledges that its rights in and to the
Licensed Software may not be assigned, licensed or
otherwise transferred by operation of law without the prior
written consent of Webcast, unless such transfer is to any
corporation which controls, is controlled by or is under
common control with the Licensee. Violation of this section
is grounds for immediate termination of this Agreement.
1.5.2. Copyright and other proprietary rights of Webcast protect
the Licensed Software. The Licensee may be held directly
responsible for acts relating to the Licensed Software
which are not authorized by this Agreement.
1.5.3. All right, title and interest in and to the Licensed
Software, and any copies thereof, and all documentation,
code and logic, which describes and/or comprises the
Licensed Software remains the sole property of Webcast.
1.5.4. Webcast shall not be responsible for failure of performance
of this Agreement due to causes beyond its control,
including, but not limited to, work stoppages, fires, civil
disobedience, riots, rebellions, acts of God, and similar
occurrences.
1.5.5. The Licensee acknowledges that this is an exclusive
Agreement in the consumer health vertical market, and that
Webcast will license the Licensed Software to as many other
parties in other vertical markets, as are willing to enter
into a licensing agreement with Webcast.
57
<PAGE>
1.5.6. The Licensee shall be responsible for ensuring that it is
operating the Licensed Software in compliance with any and
all applicable state, provincial, national, and
international laws.
1.5.7. The Licensee has the right to host the Licensed Software
with an alternative hosting service. The Licensee must give
Webcast 60 days notice of its intent to use alternative
hosting services.
1.6. TERM AND TERMINATION
1.6.1. This Agreement shall commence and be deemed effective on
the date when fully executed (the "Date"). This Agreement
is in effect for a period of one year (the "Term") and
shall be automatically renewed indefinitely with additional
one year terms unless the Licensee gives written notice of
termination of this Agreement at least 45 days prior to the
end of any one year period.
1.6.2. Webcast may terminate this Agreement at any time upon 30
days notice if the Licensee is more than 30 days in arrears
in paying any material monthly fees due and owing to
Webcast. The Licensee shall be allowed to cure the breach
during the notice period, thus pre-empting Webcast's
ability to terminate this Agreement in accordance with this
section. The arrears contemplated in this section must be
of a material amount for the rights conferred in this
section to be used by Webcast. For the purposes of this
section, material shall mean anything greater than 5% of
the previous month's fees.
1.6.3. Webcast may terminate this Agreement at any time upon 5
days notice if the Licensee becomes bankrupt or insolvent
or ceases carrying on business for any reason.
1.6.4. Webcast may terminate this Agreement at any time upon 30
days notice if Webcast, or any of its principals, officers
or directors becomes the subject of third party civil or
criminal litigation as a result of the Licensee's
operations under this Agreement. The litigation
contemplated herein must be material and found to be of a
serious nature by independent legal counsel.
1.6.5. The Licensee may terminate this Agreement at any time upon
five days notice if Webcast becomes bankrupt or insolvent
or ceases carrying on business for any reason.
1.6.6. The Licensee may, inter alia, terminate this Agreement at
any time upon five days notice if Webcast is materially in
breach of this Agreement for more than 30 days. Webcast
shall be allowed to cure the breach during the notice
period, thus pre-empting the Licensee's ability to
terminate this Agreement in accordance with this section.
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<PAGE>
1.6.7. Upon termination of this Agreement, the Licensee shall
immediately return to Webcast any and all of Webcast's
materials in which Webcast has a proprietary right in that
are in the Licensee's possession and/or in the possession
of the Licensee's agents, servants and employees.
1.6.8. Upon termination of this Agreement, all Customer
Information shall be given to the Licensee and Webcast
shall not make use of or disclose any Customer Information
to any third party.
1.7. REMUNERATION
1.7.1. The Licensee shall pay to Webcast a onetime license fee of
$100,000 U.S. for the License to use the Software and setup
of the E-Community architecture and site. This payment
shall be paid in accordance with Schedule A.
1.7.2. Notwithstanding any amount due and owing in accordance with
Schedule A of this Agreement, the Licensee shall pay to
Webcast a minimum of $5,000 per month for server hosting of
the Licensee's E-Community website. This payment shall be
paid in accordance with Schedule B.
1.8. CONFIDENTIALITY
1.8.1. The Licensee shall not disclose, publish, or disseminate
Confidential Information to anyone other than those of its
employees or others with a need to know, and the Licensee
agrees to take reasonable precautions to prevent any
unauthorized use, disclosure, publication, or dissemination
of Confidential Information. The Licensee agrees not to use
Confidential Information otherwise for its own or any third
party's benefit without the prior written approval of an
authorized representative of Webcast in each instance.
1.8.2. Webcast shall not disclose, publish, or disseminate
Customer Information to anyone other than those of its
employees with a need to know, and Webcast agrees to take
reasonable precautions to prevent any unauthorized use,
disclosure, publication, or dissemination of Customer
Information. Webcast agrees not to use Customer Information
otherwise for its own or any third party's benefit without
the prior written approval of an authorized representative
of the Licensee in each instance.
59
<PAGE>
1.8.3. All Confidential Information and any derivatives thereof
whether created by Webcast remains the property of Webcast
and no license or other rights to Confidential Information
is granted or implied hereby. For purposes of this
Agreement, "derivatives" shall mean: (a) for copyrightable
or copyrighted material, any translation, abridgement,
revision or other form in which an existing work may be
recast, transformed or adapted; (b) for patentable or
patented material, any improvement thereon; and (c) for
material which is protected by trade secret, any new
material derived from such existing trade secret material,
including new material which may be protected by copyright,
patent and/or trade secret.
1.8.4. Notwithstanding anything in this Section 1.8, Webcast shall
be allowed to use Customer information for the purpose of
fulfilling its reporting obligations as a public company.
Webcast shall also be allowed to use Customer Information
in a statistical form so long as it does not identify
individuals or specific companies.
1.8.5. The Licensee shall not disclose the contents of this
Agreement to any third party who is not bound to maintain
confidentiality between the parties. The Licensee
acknowledges that disclosure of the terms of this Agreement
to third parties would cause considerable damage to
Webcast.
2. OBLIGATIONS OF WEBCAST
----------------------
2.1. HARDWARE (If Licensed Software is hosted by Webcast)
2.1.1. Webcast shall supply the Hardware as defined in Schedule B.
2.1.2. Webcast shall maintain the Hardware and pay all costs for
maintaining and/or upgrading the Hardware
2.1.3. Webcast shall supply the office space required to house the
Hardware at no cost to the Licensee.
2.1.4. The Hardware shall, at all times, remain the property of
Webcast.
2.1.5. Webcast shall supply an appropriate connection to the
Internet with sufficient bandwidth to properly operate the
Licensed Software. The Licensee shall pay for all bandwidth
associated with customers of the Licensee's E-Community
Internet site. Bandwidth shall be charged to the Licensee
at market rates.
2.1.6. Webcast shall maintain a redundant server hardware
configuration.
60
<PAGE>
2.1.7. Webcast shall make all reasonable efforts to repair and
correct any problems arising under Webcast's areas of
responsibility that may arise from time to time which would
cause it to be unable to perform its' obligations under
this Agreement (see section 1.5.4).
2.1.8. Webcast shall notify the Licensee of any problems that may
arise from time to time and shall keep the Licensee
apprised of any efforts undertaken to rectify the problem.
2.2. THE LICENSED SOFTWARE
2.2.1. Webcast shall install the Licensed Software on the
Hardware.
2.2.2. Webcast shall allow all of the Licensee's customers and all
persons who seek to be Licensee's customers Internet access
to the Licensed Software.
2.2.3. Webcast may from time to time, at its discretion, create
additional E-Community Utilities which can be added to the
Licensed Software. If additional E-Community Utilities
become available the Licensee may request to have the
additional Utilities added to the Licensed Software at an
additional license and setup cost.
2.2.4. Notwithstanding anything stated in this section 2.2, any
changes requested by the Licensee to be made to the
graphics portion of the Licensed Software shall be charged
to the Licensee at market rates or supplied by the
Licensee, whichever the Licensee prefers.
2.2.5. Webcast shall only be required to provide the Licensed
Software in the English language only.
2.2.6. Webcast will provide all upgrades of the Licensed Software
that do not require changes to the graphical interface, at
no charge to the Licensee.
2.2.7. All upgrades are to be made available to the Licensee
within 30 days of the completion of testing.
2.3. TECHNICAL SUPPORT
2.3.1. Webcast shall supply 24 hour technical support to the
Licensee only.
2.3.2. Webcast shall make the technical support available via the
Internet and via telephone lines.
61
<PAGE>
2.4. ACCOUNTING (TRANSACTION AND HOSTING COSTS)
2.4.1. The Licensee shall pay a flat fee of $100.00 US plus all
reasonable hourly administration fees and disbursements,
including printing, photocopy and shipping costs, each time
accounting information is requested. Administration fees
shall be paid out at market prices. No fees are payable for
regular accounting information provided to the Licensee for
the purpose of calculating Net Revenue.
2.4.2. Webcast shall supply a complete accounting record, as
defined by Webcast and the Licensee from time to time, of
the previous month's activity relating to the Licensed
Software within ten working days of the end of each month.
The accounting records shall be delivered either by
facsimile or by e-mail.
2.4.3. Webcast shall have the right to utilize the accounting
information for statistical and reporting purposes provided
specific information about the Licensee is not disclosed
2.4.4. Webcast shall archive and maintain the accounting
information for a period of 2 fiscal years.
2.5. CUSTOMER DATA
2.5.1. Webcast shall maintain a database containing the Customer
Information.
2.5.2. The Customer Information shall remain the property of the
Licensee.
2.5.3. Webcast shall provide daily interim Customer Information
reports, as defined by jointly by Webcast and the Licensee
from time to time.
2.5.4. The Licensee shall pay a flat fee of $100.00 US plus
reasonable hourly administration fees and disbursements
including printing, photocopy and shipping costs, each time
additional Customer Information is requested.
Administration fees shall be paid out at market prices.
2.5.5. Webcast shall archive and maintain the Customer Information
for a period of two years.
2.5.6. Webcast, in its discretion, may destroy any portion of the
Customer Information that Webcast deems to be no longer
relevant.
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<PAGE>
2.5.7. The Licensee shall be given thirty days written notice prior to
the destruction of any Customer Information. The Licensee may
choose to archive information about to be destroyed, at its own
facility's.
3. OBLIGATIONS OF THE LICENSEE
---------------------------
3.1. MERCHANT NUMBERS
3.1.1. The Licensee shall be responsible for obtaining and
maintaining appropriate merchant numbers for the processing
of Visa, Master Card, American Express Card and any other
credit card or payment mechanism the Licensee may wish to
use in connection with the Licensed Software.
3.2. MARKETING
3.2.1. The Licensee shall be responsible for all marketing of the
services offered through the Licensed Software.
3.2.2. The Licensee shall be responsible for all aspects of
customer service, including but not limited to dealing with
customer complaints.
3.3. THE WEB SITE
3.3.1. The Licensee shall pay for any and all Uniform Resource
Locators ("URLs") that the Licensee deems necessary to
properly market the Licensed Software.
3.3.2. The Licensee shall have the right to add as many URL's that
are dedicated solely to the promotion of the Licensee's
site as the Licensee deems necessary.
3.3.3. The Licensee shall have the right to make any changes to
the websites the Licensee feels appropriate. All changes
that are effected by Webcast will be charged to the
Licensee at market rates.
3.3.4. If requested, Webcast shall construct and maintain any and
all additional websites the Licensee deems necessary for
the marketing of the Licensed Software. All work done to
build additional websites shall be charged to the Licensee
at market rates.
3.3.5. Webcast shall not in any way be responsible for the design
of the websites utilized by the Licensee, unless the
Licensee contracts Webcast to do so.
3.3.6. The Licensee shall include in their Terms and Conditions
for the Licensed Software the Terms and Conditions as
attached as Schedule C that are recommended by Webcast. The
Licensee may embellish or add to these Terms and
Conditions. If the Licensee does not implement the minimum
required Terms and Conditions, in so far as the Terms and
Conditions would have protected the Licensee, Webcast shall
not be responsible to the Licensee, notwithstanding
anything in this Agreement.
63
<PAGE>
4. STANDARD CLAUSES
----------------
4.1. NOTICES
Unless otherwise provided in this Agreement, any notice provided
for under this Agreement shall be in writing and shall be
sufficiently given if delivered personally, or if transmitted by
facsimile with an original signed copy delivered personally within
twenty-four hours thereafter, or mailed by prepaid registered post
addressed to Webcast at its respective addresses set forth below
or at such other than current address as is specified by notice.
To Webcast: PO Box 12114
555 West Hastings Street
Suite 503, Spencer Wing
Vancouver, British Columbia V6B 4N6
Attention: Paul Harris
Fax: (604) 943-6680
To the Licensee: Suite 301, 1201 West Pender
Vancouver, British Columbia
Attention: Grant Johnson
Fax: (604) 669-1359
4.2. ENTIRE AGREEMENT AND SCHEDULES
The parties agree that this Agreement and its Schedules constitute the
complete and exclusive statement of the terms and conditions between
the Licensee and Webcast covering the performance hereof and cannot be
altered, amended or modified except in writing and executed by an
authorized representative of each party. The Licensee further agrees
that any terms and conditions of any purchaser order or other
instrument issued by the Licensee in connection with this Agreement
which are in addition to or inconsistent with the terms and conditions
of this Agreement shall not be binding on Webcast and shall not apply
to this Agreement.
4.3. GOVERNING LAW AND ARBITRATION
This Agreement and all Schedules shall be governed by and construed in
accordance with the laws of the Country of Canada and the Licensee
hereby attorns to the jurisdiction of the courts of British Columbia
notwithstanding any other provision expressed or implied in either the
Agreement or the Schedules.
Any dispute in connection with this Agreement shall be settled by
arbitration in accordance with the Arbitration Act of British Columbia,
however, should any dispute arise under this Agreement, the parties
shall endeavor to settle such dispute amicably between themselves. In
the event that the parties fail to agree upon an amicable solution,
such dispute shall be finally determined by arbitration as aforesaid.
64
<PAGE>
4.4. GOOD FAITH
The parties acknowledge to one another that each respectively intends
to perform its obligations as specified in this Agreement in good
faith.
4.5. PARTIES TO ACT REASONABLY
The parties agree to act reasonably in exercising any discretion,
judgment, approval or extension of time that may be required to effect
the purpose and intent of this Agreement. Whenever the approval or
consent of a party is required under this Agreement such consent shall
not be unreasonably withheld or delayed.
4.6. TIME TO BE OF THE ESSENCE
Time is of the essence.
4.7. NUMBER AND GENDER
In this Agreement the use of the singular number includes the plural
and vice versa the use of any gender includes all genders, and the word
"person" includes an individual, a trust, a partnership, a body
corporate and politic, an association and any other incorporated or
unincorporated organization or entity.
4.8. CAPTIONS
Captions or descriptive words at the commencement of the various
sections are inserted only for convenience and are in no way to be
construed as a part of this Agreement or as a limitation upon the scope
of the particular section to which they refer.
4.9. NON-ASSIGNABILITY
This Agreement is personal to the Licensee, except as provided in 4.11
and the Licensee may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent from
Webcast.
4.10. BENEFIT
This Agreement shall ensure to the benefit of and be binding upon the
Licensee, its successors and assigns. The Licensee may delegate the
performance of any of its obligations hereunder to any corporation
which controls, is controlled by or is under common control with the
Licensee.
65
<PAGE>
4.11. WAIVER
No condoning, excusing or waiver by any party hereto of any default,
breach of non-observance by any other party hereto, at any time or
times with respect to any covenants or conditions herein contained
shall operate as a waiver of that party's rights hereunder with respect
to any continuing or subsequent default, breach or nonobservance, and
no waiver shall be inferred from or implied by any failure to exercise
any rights by the party having those rights.
4.12. FURTHER ASSURANCE
Each of the parties hereto hereby covenants and agrees to execute such
further and other documents and instruments and to do such further and
other things as may be necessary to implement and carry out the intent
of this Agreement.
4.13. CUMULATIVE RIGHTS
All rights and remedies of Webcast are cumulative and are in addition
to and shall not be deemed to exclude any other rights or remedies
allowed by law except as specifically limited hereby. All rights and
remedies may be exercised concurrently.
4.14. PRIOR AGREEMENTS
Except as specifically provided for herein this Agreement, including
its schedules, contains all of the terms agreed upon by the parties
with respect to the subject matter herein and supersedes all prior
agreements arrangements and understandings with respect thereto,
whether oral or written.
4.15. SEVERABILITY
If any part of this Agreement is unenforceable because of any rule of
law or public policy, such unenforceable provision shall be severed
from this Agreement, and this severance shall not affect the remainder
of this Agreement.
4.16. NO PARTNERSHIP
Notwithstanding anything in this Agreement, no part of this Agreement,
nor the Agreement as a whole shall be construed as creating a
partnership or agency relationship between the parties. If any part of
this Agreement should be construed as forming a partnership or agency
relationship, that part shall be amended such that no partnership or
agency relationship is created but that part achieves what it was
originally intended to achieve.
4.17. DOLLAR AMOUNTS
All references to money or specific dollar amounts in this Agreement
are in United States Dollars.
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<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement on the date first
written above.
WEBCAST SYSTEMS INC.
/s/ "Jeffrey Conatser Per: /s/ "Paul Harris"
----------------------------------- --------------------------------
Witness
/s/ "Jeffrey Conatser Per: /s/ "Phil Cox"
----------------------------------- --------------------------------
Witness
The Licensee: HEALTHNET USA INC.
/s/ "C. J. Lanfranco" Per: /s/ "Grant Johnson"
----------------------------------- --------------------------------
Witness
/s/ "C. J. Lanfranco" Per: /s/ "Douglas Bolen"
----------------------------------- --------------------------------
Witness
67
<PAGE>
SCHEDULE A
----------
Consulting $100,000
Webcast will assist the Licensee in defining the functional
specification of their vertical Internet community portal, revenue
model opportunities, management of website design and interface, and
project management. Webcast will also assist in the development of
strategic partnership opportunities.
The Licensee agrees to pay Webcast fees according to the following:
Software License Fee (one time payable)
Setup Fee (up front) $25,000
4 monthly payments $18,750
Total Software License Fee $100,000
Customization
All customization to the software that is requested by the Licensee
will be charged out at current market rates.
SCHEDULE OF MARKET RATES
------------------------
The Market rates as set out in this schedule and referred to in this Agreement
are subject to change without notice to the Licensee.
3D graphics and animation: $125.00 per hour
Graphic design: $75.00 per hour
Programming: $125.00 per hour
Quality Assurance and testing: $40.00 per hour
68
<PAGE>
SCHEDULE B
----------
SERVER HOSTING CONFIGURATION AND COSTS
The cost for hosting the Licensed Software is determined by the following
formula with a minimum cost of $5,000 per month.
A. PER MEMBER PER YEAR HOSTING COST - of $3.60 per member per year
($0.30 per member per month) for the first 50,000 members, $3.00 per
member per year ($0.25 per month) up to 100,000 members, and $2.40 per
member per year ($0.20 per member per month) over 100,000 members. This
base costing includes 5MB of storage and 5MB of bandwidth usage per
member per month, plus their usage of all the member account utilities.
ADDITIONAL MEMBER STORAGE - Additional member storage and bandwidth are
available and can be offered to members separately or in conjunction with
membership packages.
UPGRADE PACKAGE 1: 20MB of storage and 20MB of upload/download bandwidth per
month will be offered to members at a minimum cost of $12.00 per year.
UPGRADE PACKAGE 2: 40MB of storage and 40MB of upload/download bandwidth per
month will be offered to members at a minimum cost of $20.00 per year.
Healthnet would receive 20% of all upgrade fees and there would be not be a per
member fee for all members who purchase upgrade storage packages.
OVERALL SITE USAGE ( independent of members ) - 50 GB of bandwidth per month, 20
GB of storage and hosting in our 7 X 24 webcasting facility are included in the
above hosting fee. Additional bandwidth would be charged at $250 per 20 GB per
month.
69
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HARDWARE CONFIGURATION
The Webcast Systems e-Community Management and Development Platform (CMDP)
provides a fully scalable system architecture. It is efficient enough to be run
from a single server handling 100s of members a day or it can be scaled to a
multiple server configuration meeting the needs of millions of visitors.
e-Communities and their members require AVAILABILITY, PERFORMANCE and
SCALABILITY, throughout the life cycle of the e-community. This is no simple
matter since today's e-communities and their members require powerful utilities
and services including dynamic content and e-commerce, not just the static web
pages of the past.
The CMDP architecture uses accepted industry standards and is
not dependant upon any certain manufacture's hardware or software technology to
accomplish this goal. Instead it combines the best design principles and
technologies available to meet the growing demands and needs for the content and
activities of each e-community. Making sure the community is always available to
the members, with a level of performance that exceeds their expectations.
INCLUDES:
LOAD BALANCED WEB APPLICATION SERVERS:
Windows NT Server Enterprise Edition
running Microsoft Internet Information
[Hardware Server
Configuration
Graphic CLUSTERED SQL SERVERS: Windows NT
Here) Server Enterprise Edition running
Microsoft SQL database and attached
via SCSI to RAID.
CLUSTERED RAID FILE SERVER (storage
array will be converted to a fiber
channel storage solution in 1999)
70
<PAGE>
SCHEDULE C
----------
TERMS AND CONDITIONS
DISCLAIMER
Medicinecabinet.com maintains this website to enhance access to information
about health issues, products and services. This service is continually under
development. While we try to keep the information as current and accurate as
possible, we make no warranty of any kind, implied or express, as to its
accuracy, completeness or appropriateness for any purpose. We will make an
effort to correct errors brought to our attention. Some of the documents on this
server contain hypertext pointers to information created and maintained by other
organizations. Please be aware that we do not control or make any warranty that
this outside information will be accurate, relevant, current or complete.
Neither the inclusion of pointers nor the mention of particular
Medicincecabinet.com products, services or items is intended to reflect their
importance. Such inclusion or mention does not constitute or imply a
recommendation or endorsement by Medicinecabinet.com, unless it is explicitly
stated.
RESTRICTIONS ON USE OF MATERIALS
This site is owned and operated by Healthnet International, Inc. Each visitor to
this site may download one copy (on a single computer only) of
Medicinecabinet.com material posted on this site for personal, non-commercial
home use only. All copyright, service mark and other proprietary notices must be
kept intact.
No material (other than as specifically stated above) from this, or any other
website owned or operated by Healthnet International, Inc., or any affiliated
company may be copied, reproduced, republished, uploaded, posted, transmitted,
or distributed in any way, without the prior written consent of Healthnet
International, Inc. or affiliated company. Modification of the
Medicinecabinet.com material or use of Medicinecabinet.com material for any
other purpose is a violation of Healthnet International, Inc.'s copyright,
service mark, and other proprietary rights.
PRIVACY POLICY: INFORMATION COLLECTION AND USE
Medicincecabinet.com routinely gathers quantitative and anonymous information on
web site activity, including the number of visitors to the site, and the pages
visited. No personal information is collected in our efforts to compile this
data.
Any information which is voluntarily provided to Medicinecabinet.com through
this web site by e-mail is treated with the same consideration and
confidentiality as any information sent to us by the US mail or communicated to
us by telephone.
YOUR PERSONAL INFORMATION
We at Medicinecabinet.com recognize your right to confidentiality and are
committed to protecting your privacy. We use the information that we collect on
our site to provide you with a superior personalized experience. When you join,
we will ask you to set up "your membership account," which includes your name,
e-mail address, and elements of your address. In addition, we ask that you
indicate whether you would like to receive e-mail from Medincinecabinet.com
keeping you informed of new products or features. If you would like to review or
revise the information we have in your account, you may access such information
by clicking on the "member account" button on the Home screen. We protect your
account information against unauthorized access or release. We will not sell,
rent, or loan any identifiable personal information to any third party. We may
share non-personal, summary, or aggregate customer data with partners and other
third parties.
71
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<FISCAL-YEAR-END> FEB-28-1999 FEB-28-1999
<PERIOD-START> MAR-31-1999 JAN-01-1999
<PERIOD-END> MAY-31-1999 FEB-28-1999
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0 0
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