UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
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
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
CybeRecord, Inc.
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(Name of Small Business Issuer in its charter)
Florida 91-1985843
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(State or other jurisdiction of (I. R. S. Employer Identification No.)
incorporation or organization)
800 Bellevue Way NE, 4th Floor, Bellevue, WA 98004
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (425) 990-5593
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Securities to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
None None
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Securities to be registered pursuant to Section 12(g)
of the Act.
Common Stock $.01 par value
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(Title of Class)
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CybeRecord, Inc.
Form 10-SB
TABLE OF CONTENTS
PART I........................................................................1
Item 1. Description of Business..............................................1
Item 2. Plan of Operation....................................................9
Item 3. Description of Property.............................................11
Item 4. Security Ownership of Certain Beneficial Owners and Management......11
Item 5. Directors and Executive Officers, Promoters and Control Persons.....12
Item 6. Executive Compensation..............................................14
Item 7. Certain Relationships and Related Transactions......................15
Item 8. Description of Securities...........................................17
PART II......................................................................18
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters.............................18
Item 2. Legal Proceedings...................................................19
Item 3. Changes in and Disagreements with Accountants.......................19
Item 4. Recent Sales of Unregistered Securities.............................19
Item 5. Indemnification of Directors and Officers...........................20
PART F/S
Financial Statements........................................................F-1
PART III
Items 1 and 2. Index to Exhibits and Description of Exhibits................21
SIGNATURES...................................................................21
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PART I
CybeRecord, Inc. (which we refer to in this registration statement as "we" or
the "Company" or "CybeRecord") submitted two previous filings to the Securities
and Exchange Commission (the "SEC") on Form 10-SB. The first filing, our
original Form 10-SB, was filed electronically on EDGAR on October 26, 1999. The
second filing, an amended Form 10-SB, was filed on EDGAR on February 11, 2000.
Due to our inexperience with SEC disclosure requirements, our previous filings
on Form 10-SB contained information under Part I, Items 1 and 2, that was
unclear and beyond the scope of what was required for a Form 10-SB filing.
THE INFORMATION SET FORTH UNDER ITEMS 1 AND 2 BELOW REPLACES, IN ITS ENTIRETY,
THE INFORMATION CONTAINED IN OUR OCTOBER 26, 1999 AND FEBRUARY 11, 2000 FORM
10-SB FILINGS. THE PUBLIC SHOULD RELY ON THE INFORMATION CONTAINED IN THIS
REGISTRATION STATEMENT AND NOT ON THE INFORMATION CONTAINED IN PART I, ITEMS 1
AND 2 IN OUR OCTOBER 26, 1999 AND FEBRUARY 11, 2000 FORM 10-SB FILINGS.
Item 1. Description of Business.
Form and Year of Organization
CybeRecord is the continuation of a corporation that was first formed on
February 17, 1969 under Florida law. Our Company was first named Flexi-Built
Modular Housing Corporation. In March 1984, we changed our name to Flexicare,
Inc., and then in September 1996 we changed it again to Pillar Entertainment
Group Inc. In November 1997 we acquired all of the outstanding stock of
Chrysalis Hotels and Resorts Corp. and changed our name to Chrysalis Hotels and
Resorts Corp. None of our predecessor corporations engaged in any significant
business activities.
In April 1999 we acquired a group assets from people who were working
independently to develop technology relating to microfilm scanning device
design. The people from whom we acquired the assets were James J. Lucas, Glenn
and Paulette Kimball, Marek Niczyporuk, James L. and Barbara Baker Quinn,
Herbert and Patricia Walker, and Alva D. and Kirsten Cravens. These people were
not part of a company, but they were coordinating their work and for convenience
we will refer to them as the "Kristal Group."
The assets we acquired from the Kristal Group in April 1999 all related to the
development, production, and marketing of our key product: a low-cost,
high-speed automated microfilm scanning device, which we have named
"ScanServer." The assets we acquired included: (a) owned and licensed
intellectual property rights for the device's overall design, and all hardware
design; (b) computer programming code and all software developed including (but
not limited to) all software needed to allow ScanServer to operate reliably and
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with commercial quality and efficiency; (c) programs software, including all
related trademarks and intellectual property, in machine readable or human
readable form (or both); (d) rights to, and any rights to apply for and
register, patents and patent applications, copyrights, trademarks, trade secrets
and all other proprietary rights relating the intellectual property we acquired;
(e) records and files relating to manufacturing, quality control, sales,
marketing, customer support, and designs for the intellectual property we
acquired; (f) derivative works of intellectual property; and (g) all related
documentation. We also acquired hardware patents, rights to hardware patents,
customer lists, contracts, agreements, licenses or license agreements,
commitments, warranties, claims, and other existing and inchoate rights. We
treated the costs of these asset as research and development expenses because we
determined that the assets had not, at the time we acquired them, reached
technological feasibility.
We issued Company common stock to pay for the assets we acquired from the
Kristal Group in April 1999. In May 1999 we changed our name to CybeRecord, Inc.
Since April 1999 we have continued to conduct our research and development and
marketing activities under the name CybeRecord, Inc. As of the filing date of
this registration statement, we are in the early stages of starting to
manufacture ScanServers for commercial distribution.
Forward-Looking Statements
In explaining our business in this registration statement, some of what we say
will be "forward- looking statements." Words such as "expect," "anticipate,"
"intend," "believe," "plan," "objective," "target," "goal," and similar
expressions indicate that a statement is forward- looking. Our forward-looking
statements reflect our management's beliefs and assumptions based on the
information we currently have available. Because our forward-looking statements
are based on what we know and expect at the time we are preparing this
registration statement, we cannot be sure that the actual course of our business
activities will correspond to what we say in our forward-looking statements.
There are many risks and uncertainties that could cause the assumptions we have
used to formulate our business plans to turn out to be wrong. If our assumptions
turn out to be wrong, our business's actual performance could be much worse than
we anticipate based on our current assumptions. If our business does not perform
as well as investors expect, or analysts or investors develop concerns about how
well our business will perform, the trading prices for our stock are likely to
decline, perhaps substantially.
As explained in more detail below, our business is to develop, manufacture, and
market a low- cost, high-speed automated microfilm scanner. The following are
some of the key risks and uncertainties that could have a serious negative
effect on our business, or at least delay our progress. While we are not
currently aware of circumstances that would produce the potential problems and
delays we describe below, we recognize that we cannot foresee what adverse
events our business might encounter. If our business does encounter unexpected
problems because of risks and uncertainties, investors could lose some or all of
their investments in our business.
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Potential Risks Relating to Production
As reflected in our financial statements, we are currently a development stage
company. As of the filing date of this registration statement, we are in the
early stages of moving to limited production of ScanServers for commercial
distribution. We have never generated any revenues from sales. If, as we begin
our transition to the initial stages of commercial production, we encounter
problems, we will not progress from development to revenue-generation in the
time frame we have planned on as set forth in Part I, Item 2 below. Problems
could come from being unable to identify reliable and affordable sources of
quality parts necessary to build our scanners, being unable to assemble scanners
on schedule even if parts arrive on time and in sufficient quantities, or
producing scanners that do not meet necessary quality-control standards.
Potential Risks Relating to Cash-Flow
We need cash to continue funding our operations. If we have problems moving to
commercial production, it will delay our ability to generate revenue from
operations. If during a delay, we cannot obtain sufficient funding to keep
operating our business, our business will most likely fail or have to be sold.
Furthermore, even if the beginning of our commercial production phase goes
smoothly, there will be a delay before we can generate sufficient cash from
operations to meet our on-going expenses. If we cannot obtain adequate credit or
sufficient cash from selling additional stock while we are trying to build up
our production and revenue stream, it will delay or limit our activities and
hurt our business. Also, if the securities markets in the United States
experience a downturn, it will most likely be harder for us to raise cash by
selling stock than it would be if securities markets were strong and rising.
Potential Risks Relating to Key Technology
We have developed our key technology with the goal of creating a microfilm
scanner that can automatically recognize individual images, locate the
boundaries between images, and accurately convert images into digital form. We
have been testing and refining our technology, but we cannot be certain that we
have identified and corrected all the potential problems that could prevent
ScanServer's hardware or software from functioning properly. If we do encounter
serious problems with our critical technology, it will hurt our ability to
market the ScanServer to new customers and our existing customer relationships
are likely to suffer also.
Potential Risks Relating to Key Personnel
Our current engineering and technical employees, as well as our President and
Chief Executive Officer, have specialized knowledge and experience relating to
the ScanServer and to the microfilm scanner industry generally. Our future
success depends heavily on our ability to retain our key management and
technical personnel. Competition for skilled technical and management employees
is intense within and among high-technology industries. We therefore may not be
able to retain our existing key management and technical personnel. We also may
not be able to attract additional qualified employees in the future. If we lose
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key management or technical employees or cannot attract qualified new employees,
it could have a serious negative effect on our business's future growth and
operating results.
Potential Risks Relating to Patent Protection
We have applied for patents to protect technology relating to the ScanServer. If
the United States Patent and Trademark Office does not grant the patents for
which we have applied, that will expose us to competition from other businesses
that try to take advantage of our technology. Even if we receive all the patents
for which we have applied, if are not able to protect our rights under those
patents, we could be seriously hurt by competitors taking advantage of our
patented technology.
Need for Governmental Approvals and Agency Listings
Our ScanServers include electronic components for which we must obtain evidence
of compliance with Federal Communications Commission ("FCC") standards
concerning radio frequency emissions (under Part 15 of the FCC's rules). Our
electrical components should also receive safety listings from Underwriters'
Laboratories ("UL"). To the extent we seek to place our ScanServers into service
in Canada, the United Kingdom, and other parts of Europe and the rest of the
world, there are similar requirements for testing and approval. We have not yet
applied for FCC approval or a UL listing in the United States or for similar
approvals in any other country.
If we are delayed in obtaining necessary approvals or clearances, it will delay
our ability to distribute ScanServers in the affected locations. If we are
unable to obtain a required approval or clearance, we will either have to forego
marketing our ScanServer in the affected locations or expend the time and money
to change our ScanServer until it meets the applicable requirements. Delay or
failures in obtaining governmental or agency approvals or listings could have a
significant negative impact on the development of our business.
Potential Risks Relating to General Economic Conditions
Like many other businesses, our business will be sensitive to general economic
conditions that affect us or our potential customers or both. For example, if
interest rates rise and our expenses in running our business increase because of
that, it will be harder for us to price our scanner competitively and still
generate a profit. If the businesses, agencies, and organizations that we plan
to target as our customers experience financial constraints for any reason, they
may decide that using our scanner to convert their microfilm records to digital
form is an expense they prefer to forego or delay. If we are not able to place
as many scanners with customers as we expect, our revenues will be lower than we
anticipate and this will impede the continuing development of our business.
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Principal Product
Our business is to develop, manufacture, and market a low-cost high-speed
automated microfilm scanner. We believe the key drivers for microfilm conversion
are the desire to have speedier and more convenient access to records, and the
desire to share and transmit images electronically. Our ScanServer technology
create images that can be transmitted across the Internet or placed on a server
and made accessible by intra-net. Users can select the standard image format
they wish to use for their converted microfilm images, which are stored on a
computer hard-drive. Among the standard image formats available are "tif,"
"jpg," and bit map files. The stored images can be cataloged, viewed, and
transmitted electronically using standard "off-the-shelf" software.
Our ScanServer does not produce a computer file that can be edited as text or
other types of data. The digital record is essentially an electronic picture of
the original microfilm image. A converted image, if it consists of text, could,
if a customer chose, be loaded into an optical character recognition (OCR)
device or program. This step is not part of what ScanServer provides to its
users, however. It would require customers to use separate applications with the
necessary capabilities. We envision that in the future we may find opportunities
to develop alliances with other types of information management businesses, such
as in the areas of conversion to word-processible documents or databases that
could be edited, sorted, or searched. We do not presently have any alliances of
this type in place or under development. We have incorporated nothing into
ScanSaver's current design to mesh with or enable other conversion processes,
except the ability of ScanServer software to improve the clarity and contrast of
imperfect or deteriorated microfilm images.
We plan to rent our microfilm scanners to customers who can use them to convert
their microfilm records to digital form. We currently do not intend to encourage
customers to purchase ScanServers. We plan to base the fees we charge our
customers on the number of images they convert from microfilm to digital format.
We call this per-image fee a "click- charge."
Competitive Business Conditions, Position in Industry,
and Methods of Competition
Offering customers the ability to rent rather than buy or lease our ScanServer,
and to pay based on the number of images converted, are two of the key factors
we believe will allow us to offer an attractive alternative to other options
customers may consider. We believe our target customers have essentially two
alternatives to renting our ScanServer: outsourcing their records to a third
party (such as a service bureau) for conversion or purchasing or leasing other
producers' microfilm scanners.
In our view, outsourcing has the drawback of taking critical, potentially
irreplaceable records away from the customer's premises and out of the
customer's control. This means that while the records are being converted, the
customer does not have access to them. In addition, the charges for conversion
through outsourcing can be significant for customers that have millions of
records to convert. The information we have from potential customers on their
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expected costs for service bureau conversion range from 5(cent) to 15(cent) per
image converted or more. We plan to offer a "click charge" pricing structure
with a sliding scale based on the number of images converted. We expect that the
high end of our pricing scale will meet the lowest prices service bureaus can
offer. We expect that for customers whose volume places them in the middle or
lower end of our sliding scale, the per-image charge will be lower than the
least expensive service bureau charges. At the same time, our customers will not
need to surrender control of and access to their records during the conversion
process. Our customers will be able to use the ScanServer at their places of
business.
A chief drawback we perceive with respect to purchase or leasing our
competitors' scanners is the need for businesses to include purchase or leasing
costs in their capital planning cycles. Another drawback is the potentially
limited usefulness of any purchased or leased scanners after the initial
conversion process is completed. A business may be required to purchase or lease
a large number of scanners to complete initial conversion in a timely manner,
but need fewer machines to keep up with on-going microfilm conversion. With our
proposed rental arrangement based on click-charges, there is no need for capital
budget treatment and no need to procure more scanners than are required to meet
a business's current needs. We envision that many potential customers may prefer
to rent several ScanServers for a limited period to facilitate conversion of
microfilm images over a shorter time period. In this way, a customer does not
have to endure an extended disruption to records access and does not have to
devote as much personnel attention to the conversion process. Our click-charge
approach facilitates use of multiple scanners in a way we believe purchase or
lease arrangements do not.
Our currently available information on prices for other companies' microfilm
scanners indicates that they range from $50,000 to $160,000 for a single
scanner. We believe that SunRise Imaging, Inc. and Mekel are presently the
leaders in the microfilm scanner market. Fuji also offers a proprietary scanner
limited to its own 16mm blipped roll film.
Both SunRise Imaging and Mekel have recently been acquired by other companies.
We believe that the effect of these acquisitions is likely to make them less
competitive than they were before. So far as we know, none of the existing
microfilm scanner companies place their products without a sales contract or
third party lease, both of which require capital purchase approval and capital.
The exception is a Fuji film scanner that sells for around $16,000, but the
scanner is limited to16mm Fuji blipped roll-film and is therefore in our view
not a competitor for the general microfilm scanning market.
The other important distinctions between our ScanServer and the other microfilm
scanners with which we are familiar are the degree of automation, simplicity of
use, multiple film format capability, and quality of converted images. Our
ScanServer incorporates two key software components that we believe will give
our product a significant competitive advantage. We call them "ImageFinder" and
"ImageRestore."
ImageFinder is designed to automatically detect and distinguish between images
on microfilm. As explained in a November 30, 1999 press release available
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through our Website (www.cyberecord.com), we tested ImageFinder in November 1999
using microfilm samples we selected specifically to challenge ImageFinder's
capabilities. The sample included overlapping images and films that had
different size images intermixed with each other. We were very pleased with the
results of our test. Our ImageFinder software partitioned the images on the test
samples with 100% accuracy, without the need for operator intervention.
ScanServer's ability to accurately locate and distinguish among microfilm images
is central to our marketing strategy. Our goal is to offer a scanner that
requires minimal human supervision, so that our customers will incur lower
personnel costs and less work disruption than will other scanners. To accomplish
this goal, our scanner has to provide reliable, automatic image recognition. Our
ImageFinder software is designed to meet this need. Furthermore, the ScanServer
works with a range of microfilm formats, including fiche, jacketed and cut film,
reel and cartridge formats, and aperture cards.
The ScanServer's second key software component is ImageRestore. ImageRestore is
designed to automatically restore contrast, clarity, and content to digital
images produced from microfilm records. As described in an August 3, 1999 press
release available through our Website, when we tested ImageRestore on a variety
of microfilm samples, we obtained very good results. The images we tested not
only had improved clarity, but extraneous marks such as scratches and specks had
been removed.
Another advantage we believe we can offer customers with ScanSaver is simplicity
of use. We have designed ScanServer to be easy enough to operate to allow an
unskilled clerk to use it correctly with minimal training. Our ScanServer is no
more difficult to operate than a simple photocopier. A set of microfilm records
is placed into the ScanServer, the operator chooses the copying options, presses
the start button, and the ScanServer carries out the conversion process
automatically. We consider this is a significant improvement over other
currently available scanners, which we believe are complicated and cumbersome to
operate and require substantial training. Our competitors' scanners require an
operator to manually process each image in microfilm format, particularly
difficult images. By "difficult," we mean images that are overlapping, have
unclear borders, are non-standard shapes or sizes or are skewed within their
frames. Our ScanServer is designed to automatically detect even difficult
images. If other scanners are less reliable in accurately and consistently
recognizing individual microfilm images, they have to be much more closely
attended because an operator has to manually check and compensate for any image
recognition errors.
Even though we believe that our click-charge approach will enable customers to
more quickly and efficiently convert existing microfilm records to digital form,
we anticipate that many businesses and agencies will continue to generate
records on microfilm in the future. This is because microfilm is considered one
of the most durable and economical methods of storing large quantities of
information. Microfilm has been in successful use for more than one-hundred
years, and does not depend on computer programming to make it accessible.
Microfilm therefore does not carry the risk that it could become unretrievable
because of outmoded software the way computer-generated data can. Therefore, we
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believe businesses will most likely continue to keep critical records on
microfilm because of its durability. At the same time, we expect that for ease
of access, management, and distribution, they will also want to create duplicate
records in digital form.
Potential Customers and Markets
In identifying the scope of our target market and potential customers, we have
relied on widely- recognized sources in the information-management field (such
as the Association for Information and Image Management or "AIIM"), as well
direct contacts with customers and the substantial experience of our management,
research and development, and sales personnel. According to information posted
on AIIM's public Website (www.aiim.org), AIIM is the successor to the National
Microfilm Association, which was founded in 1945. AIIM claims membership of more
that 650 corporations and 9,000 individuals. Based on our management's long
experience in the information and imaging industries and the information we have
about AIIM, we believe AIIM to be a respected and reliable source of
information. AIIM has commissioned and published substantial studies of the
magnitude, make-up, and growth rate of the market for document imaging and
information management, which are available through AIIM's Website.
The information published by AIIM and other industry sources provides
independent confirmation of what our own experience and marketing efforts have
indicated: that a vast array of businesses, organizations, and agencies
worldwide have stored and continue to generate enormous quantities of critical
information in various microfilm formats. These include banks and financial
services institutions, insurance companies, libraries, government and law
enforcement agencies (federal, state, and local), educational and research
institutions, and private businesses. The types of information these potential
customers have in their microfilm records include such documents as mortgage
records, customer service and loan records, insurance policies, personnel and
human resources records, claims files, intelligence data, IRS records, birth,
death, and marriage certificates, arrest and fingerprint records, medical
records of all kinds, and so forth. Initially, we expect to focus our marketing
efforts most heavily on government agencies (including law enforcement),
banking, insurance, and title companies. To help us establish ourselves in these
areas, we have focused on recruiting and hiring sales and marketing personnel
with experience and contacts in each of these sectors.
Methods of Distribution and Marketing
We currently expect to distribute our ScanSaver through direct sales channels.
We also plan to work to develop relationships with resellers, value-added
resellers, and system integrators as viable opportunities emerge. Our marketing
strategy is to use in-person and telephone sales calls, advertising, direct
mail, and trade show appearances. We plan to target our advertising in trade
magazines aimed at the types of businesses and agencies we have identified for
our initial marketing focus, such as government, banking, insurance, and title
companies.
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Sources and Availability of Raw Materials
Manufacturing the ScanServer requires three types of basic materials: metal
parts for the structural and exterior components, optical elements, and computer
parts. We expect to purchase optical components for our ScanServers from
commercially available sources. The computer parts are available from
over-the-counter computer stores. Most of the metal components require custom
manufacturing, for which we have arranged with a third-party contractor. We do
not expect to be dependent on any single or few sources for raw materials.
Dependence on One or a Few Major Customers
We do not anticipate that we will be dependent on a single or very small number
of customers.
Patent, Trademark, and Service Mark Applications and Research and Development
Activities
We currently have a number of United States and foreign patent applications
pending with respect to our ScanServer's technology. We have also applied for
trademark and service mark protection for the words "cyberecord" and "4eyes."
Since acquiring the assets of the Kristal Group in April 1999, essentially all
of our activities have been focused on research and development, but none of the
associated costs have been or will be borne directly by our customers.
Governmental Regulation and Environmental Compliance
We are not aware of any current or pending federal, state, or local
environmental laws or regulations that are likely to have a significant impact
on our business operations. We do not anticipate any significant governmental
regulation unique to our business, other than the matters described above under
the subheadings "Need for Governmental Approvals and Agency Listings" and
"Patent, Trademark, and Service Mark Applications and Research and Development
Activities."
Employees
We currently have 18 employees, all of whom work full time for CybeRecord or one
of its wholly owned subsidiaries.
Item 2. Plan of Operation.
In February 2000 we produced two prototype ScanServers that will be used for
testing and evaluation. Over the next 12 months, our goal is to move from a
development stage company to commercial production of the ScanServer. As of the
beginning of April 2000, we have ordered sufficient hardware components to
assemble 30 ScanServers and sufficient computer and electronic components for 10
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ScanServers. (We ordered hardware for a larger number of ScanServers because
these components require custom manufacturing.) We have arranged for a
subcontractor in southern California to build ScanServer units for commercial
shipping with an initial target of 10 units to be completed by the end of May
2000. After May, our goal is to achieve a continuing production rate of
approximately 20 units per month. If the parts arrive as expected, the assembly
process proceeds without significant delays, and we obtain necessary FCC
approval and UL listings, we expect to begin shipping commercial production
units by the end of May 2000. Our initial target geographical market is the
United States, to be followed by Canada, the United Kingdom, Columbia, Brazil,
and Mexico. Based on cash raised from stock sales between February 11 and March
3, 2000 (as described in Part II, Item 4 below), we believe we have sufficient
cash available to meet our current manufacturing and marketing schedule.
If we are able to implement our production plans as we intend, we believe that
we will be able to generate adequate revenues from placing ScanServer units into
service to maintain operations at the modest level described in the preceding
paragraph. Without raising additional funds through stock sales, we do not
expect to be able to expand the scale of our production and marketing efforts
quickly, but we believe we could sustain our business and grow slowly.
Additional capital investment in our business during the next 12 months would
influence our activities in three key respects: how much advertising we are able
to do, how quickly we can expand the scale of our production operations, and how
quickly we can enter additional geographical markets. If we are able to secure
additional funding through stock sales, we would expect to pursue these areas to
the extent we considered it feasible. We cannot, however, be certain of placing
enough ScanServers into service over the next 12 months to meet our operating
requirements. If we do not place enough units, then we will need to either
obtain adequate commercial credit arrangements or sell additional stock to fund
our continuing operations. We do not currently have commitments in place for
obtaining credit or selling additional stock.
As of April 2000, we do not intend to conduct significant new research and
development efforts over the next 12 months. We plan to focus our efforts on
manufacturing ScanServers and placing them into commercial service. As an
integral part of moving from product development to production, we expect to
conduct on-going evaluation of possible ways to improve production and lower
costs. We will also be watching for opportunities to further develop or build on
our core technology in ways that complement our microfilm scanning business. We
do not currently have any concrete plans in this regard, however.
We do not anticipate acquiring significant new plant or equipment during the
next 12 months. We plan to contract with third parties to assemble our
ScanServers, rather than acquiring infrastructure to build them ourselves.
We do not currently expect to hire a significant number of additional employees
during the next 12 months. We believe that overall, the complement of
management, technical, and sales and marketing personnel we currently employ
should enable us to proceed with production and marketing at our initial target
levels over the next 12 months.
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Item 3. Description of Property.
The Company leases offices at 800 Bellevue Way, N.E., Suite 400, Bellevue,
Washington under a written lease, which runs through December 31, 2000. The
Company has the right to terminate the lease early (on June 30, 2000) by
providing 30 days' prior written notice. Unless terminated, after December 31,
2000 our lease will automatically renew for successive one-year terms, with
annual seven-percent increases in the monthly rental. The terms of our lease
provide for office space, communication services, and office furniture. Our
lease is with Vantas Bellevue, 800 Bellevue Way, NE, 4th Floor, Bellevue,
Washington 98004, telephone number (425) 462-4059.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of March 31, 2000, the stock ownership of
each executive officer and director of CybeRecord, of all executive officers and
directors of CybeRecord as a group, and of each person known by CybeRecord to be
a beneficial owner of five percent or more of its common stock. Except as
otherwise noted, each person listed below is the sole beneficial owner of the
shares listed opposite his or her name and has sole investment and voting power
for those shares. No person listed below has any options, warrants, or other
rights to acquire additional securities of the Company except as otherwise
indicated.
Name and Address Number of Shares
of Beneficial Owner (1) Beneficially Owned Percentage of Class
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James J. Lucas
401 -- 100th NE, #316 1,500,000 8.96
Bellevue, WA 98004-5456
Glenn Kimball*
2850 College Avenue 1,500,000 8.96
Modesto, CA 95350
Marek A. Niczyporuk
962 Elsinore Drive 1,300,000 7.77
Palo Alto, CA 94303
Brent Nelson
5395 176th Place 1,225,000** 6.90
Bellevue, WA 98004
Thomas Morikawa
1737 14th Avenue 1,115,000 6.66
Seattle, WA 98122
James L. Quinn***
3419 Evergreen Point Road 1,100,000 6.57
Medina, WA 98039
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Name and Address Number of Shares
of Beneficial Owner (1) Beneficially Owned Percentage of Class
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Alva D. Cravens
17235 Deerpark Road 100,000 0.60
Los Gatos, CA 95032
William S. Altieri
675 Sharon Park Drive none n/a
Menlo Park, CA 94025
All directors and executive
officers as a group (7 persons) 6,725,000 37.89
- --------------------------------------------------------------------------------
* Shares held jointly with Mr. Kimball's wife, Paulette Kimball
** Includes 1,000,000 shares that may be acquired by Northwest Capital
Partners, L.L.C. for $.01 per share under a consulting agreement with
CybeRecord if conditions specified in the consulting agreement are
satisfied. Mr. Nelson is the president and sole owner of Northwest
Capital Partners, L.L.C.
*** Shares held jointly with Mr. Quinn's wife, Barbara Quinn
(1) For purposes of this table, a person is considered to "beneficially
own" any shares with respect to which he or she directly or indirectly
has or shares voting or investment power or of which he or she has the
right to acquire the beneficial ownership within 60 days. Unless
otherwise indicated above and subject to applicable community property
law, voting and investment power are exercised solely by the person
named above or shared with members of his or her household.
Item 5. Directors and Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company and their ages as of the
filing date of this registration statement are as follows:
Name Age Position
- ---- --- --------
William S. Altieri 71 Director
Alva D. Cravens 59 Director
James J. Lucas 58 Director, Chief Executive Officer,
and President
Brent Nelson 38 Director and Secretary
James L. Quinn 63 Vice President of Sales
Glenn S. Kimball 67 Vice President of Engineering
Marek Niczyporuk 34 Vice President of Software Development
12
<PAGE>
William S. Altieri, Director -- Mr. Altieri was appointed a Director on November
15, 1999. Since 1975, he has been a self-employed marketing and sales consultant
for clients in a variety of business areas, including franchising, computer
services, soft drinks, automobile products, and food products. Mr. Altieri's
experience encompasses domestic and international product branding, corporate
and product positioning, and advertising and general marketing for consumer,
industrial, and high-technology products. He has been employed as a Brand
Manager for Procter and Gamble's Joy detergent. He later joined Norman, Craig
and Kummel Advertising in New York City as a Vice President and was promoted to
Senior Vice President of European Operations directing marketing programs for
Colgate Palmolive, Chesebrough-Ponds, and American-Cyanamid. Subsequently, he
became a senior partner and Managing Director of London's Jack Tinker
Advertising, where he was responsible for adapting U.S. marketing efforts into
European marketing programs for Coca-Cola, Exxon, Miles Laboratories, and
Nabisco. Mr. Altieri holds an MBA from Stanford University. As a Lieutenant in
the United States Navy, he served on an UDT (Underwater Demolition Team), now
called a SEAL (Sea Air Land) team. Mr. Altieri's term as Director runs through
the next annual shareholders' meeting. As of the filing date of this
registration statement, the Company's Board of Directors has not yet set a date
for the next annual shareholders' meeting.
Alva D. Cravens, Director -- Mr. Cravens was appointed a Director of the Company
on November 15, 1999. Since January 1999 he has been Vice President of Worldwide
Marketing for AdForce, an Internet ad-serving firm recently ranked ninth in
Inter@ctive Week magazine's top ten advertising and marketing companies. From
March 1998 to January 1999, Mr. Cravens was President of OpenGrid (formerly
Ensemble Solutions, Inc.), an electronic distribution company. From April 1996
to January 1998, he served as Vice President of Marketing at Adaptec, Inc., a
manufacturer of SCSI, fiber channel, and RAID products. Between August 1992 and
March 1996, Mr. Cravens was Vice President of Marketing for Radius, Inc. (now
Digital Origin, Inc.), a developer and manufacturer of computer displays and
graphic and video technologies. Mr. Cravens has more than 20 years of executive
experience in strategic marketing, communications, positioning, branding, and
advertising for technology companies. Mr. Cravens holds both a B.A. and an M.A.
in communications from San Jose State University. Mr. Cravens' term as Director
runs through the next annual shareholders' meeting.
James J. Lucas, Director, Chief Executive Officer, and President -- Mr. Lucas
has more than 20 years of senior management experience in digital imaging
markets. He joined CybeRecord as President and CEO May 1999, and was appointed a
Director on November 15, 1999. From June 1998 to May 1999, Mr. Lucas was
Director of National Sales, Seybold Seminars, for ZD Events. From May 1996 to
October 1998, Mr. Lucas served as Vice President of Sales and Marketing for
SunRise Imaging, Inc. in Foster City, California, and from May 1994 to May 1996
he was Vice President of Sales and Marketing for ScanView, Inc. in Foster City,
California. Mr. Lucas' career highlights also include positions as vice
president of product marketing and vice president of advertising and public
relations for General Electric Company, Calma Division, and vice president of
special markets for Eastman Kodak Company, Atex Division. In 1981, he developed
the original business and product concepts for Qubix Graphic Systems, a
venture-funded company that went public and was subsequently acquired. Mr.
Lucas' term as Director runs through the next annual shareholders' meeting.
13
<PAGE>
Brent Nelson, Director and Secretary -- Mr. Nelson has served as a Director and
as Secretary of the Company since October 1997. For more than the past five
years, Mr. Nelson has been president of Northwest Capital Partners, L.L.C., a
venture capital firm located in Bellevue, Washington. Within the past five years
Mr. Nelson has also been Chief Executive Officer of PanPacific Containers L.L.C.
and Director of Business Development for Waterwood Mountain Hotel Resort & Spa
Ltd. and Waterwood International Spa Resorts, Inc. (both Canadian companies). In
addition to CybeRecord, Mr. Nelson presently serves on the boards of directors
of the following reporting companies: Interactive Objects, Inc., a software
development firm, Eclipse Entertainment Group, Inc., a film development,
production, and distribution company, and Mobile PET Systems, Inc., a medical
company. He earned a diploma in marketing from Douglas College, Vancouver, B.C.,
Canada in 1983. Mr. Nelson has over 15 years of experience in corporate project
financing. Mr. Nelson's term as Director runs through the next annual
shareholders' meeting.
James Quinn, Vice President of Sales -- From December 1994 until he joined
CybeRecord in August 1999, Mr. Quinn was Director of International Sales for
Tally Printer Corporation, Kent, Washington. Mr. Quinn graduated from Franklin
Marshall University in 1958.
Glenn Kimball, Vice President of Engineering -- For more than five years before
joining CybeRecord in May 1999, Mr. Kimball operated an independent consultant
business, Kimball Engineering. Mr. Kimball has more than 20 years of experience
in imaging product development, primarily for large government organizations. He
developed image-processing techniques to separate and enhance poor quality,
overlapping bank endorsements and a series of test documents, enabling
performance of high-speed check reader- sorters for the Federal Reserve. He
managed development and production of seven multimillion-dollar topographic map
compilation systems that performed at micron accuracy for the United States
Defense Mapping Agency.
Marek Niczyporuk, Vice President of Software Development -- Mr. Niczyporuk was
appointed Vice President of Software Development on April 7, 2000. From May 1,
1999 until April 7, 2000, he served as CybeRecord's Director of Imaging Systems.
For more than five years before joining CybeRecord, Mr. Niczyporuk conducted a
private software consulting business. He is a leading machine vision and
computer image processing scientist with expertise in incorporating advanced
image processing methods into successful medical, commercial, and industrial
applications. His cardiovascular imaging systems to detect and reconstruct
real-time, three-dimensional shapes of the heart surface have been in daily
operation since 1989. Mr. Niczyporuk has also developed a system to analyze
Doppler ultrasound images, software to interpret retinal topography, machine
vision systems for inspection and quality control in the printing industry, and
color image analysis programs for a variety of manufacturing environments.
14
<PAGE>
Item 6. Executive Compensation.
The table below sets forth all compensation paid to the Company's executive
officers during 1999 (the Company's most recently completed fiscal year). Other
than as indicated in the table below, none of the Company's executive officers
received any benefits or compensation in any form (including stock, stock
options, stock appreciation rights, long-term incentive plan payouts, etc.) for
service as executive officers of the Company during 1999.
Compensation Paid During 1999
Other
Position Salary Bonus Compensation
- -------- ------ ----- --------------
James Lucas, Pres. & CEO* $ 105,000 $12,500
Glenn Kimball, VP Engineering* $ 72,000 $12,500
James Quinn, VP Sales* $ 55,000
Tom Morikawa, Exec. VP of Operations** $ 71,875 $25,000
and Chief Financial Officer
Brent Nelson, Secretary*** $ 5,000
* Salary payments to Mr. Lucas began on May 16, 1999. Salary payments to Mr.
Kimball began on May 1, 1999. Salary payments to Mr. Quinn began on August 1,
1999. The amounts stated in the table above reflect actual payments made to
these officers from the beginning of their salary payments through December 31,
1999. Had the Company's executive officers been on the Company's payroll for the
entire 1999 fiscal year at the same salary rate they received from the beginning
of their salary payments through December 1999, their annual base compensation
would have been as follows: $168,000 for Mr. Lucas; $108,000 for Mr. Kimball,
and $132,000 for Mr. Quinn.
** Mr. Morikawa was a Director and the Chief Executive Officer of Chrysalis
Hotels and Resorts Corp. (which was the name under which the Company operated
until April 1999) through April 1999, and then Director, Executive Vice
President of Operations, and Chief Financial Officer for CybeRecord until
November 15, 1999. Since November 15, 1999, Mr. Morikawa has been a consultant
to the Company and during 1999 received retainer payments under his consulting
agreement of $25,000. These consulting payments are included under "Other
Compensation" in the table above.
*** Mr. Nelson was a Director and Secretary of Chrysalis Hotels and Resorts
Corp. (the last name under which the Company operated before changing its name
to CybeRecord, Inc. in April 1999). He is one of the Company's current Directors
and shareholders, as well as its Secretary. Mr. Nelson received compensation
through payments the Company made to Northwest Capital Partners, L.L.C. under
the Consulting Agreement described below under Item 7. These consulting payments
are included under "Other Compensation" in the table above.
15
<PAGE>
Item 7. Certain Relationships and Related Transactions.
1. As described above under Part I, Item 1, in April 1999 the Company issued
stock to acquire a group assets from the Kristal Group. Several members of
the Kristal Group are now officers or directors, as well as shareholders,
of the Company. These include James J. Lucas, who is President and CEO of
CybeRecord as well as a director; James L. Quinn, who is Vice President of
Sales for CybeRecord; Glenn S. Kimball, our Vice President of Engineering;
Marek Niczyporuk, our Vice President of Software Development; and Alva D.
Cravens, who is one of the Company's current directors.
The Company issued 6,000,000 shares of common stock to acquire assets from
the Kristal Group. The common stock was valued at $.50 per share, based on
stock sales in the same time period. The number of shares issued was based
on negotiations between the Company and the individuals who made up the
Kristal Group. As part of these negotiations, certain shareholders
contributed 5,000,000 shares of common stock back to the Company so that,
when the transaction was completed, the parties' ownership percentages in
CybeRecord would be as agreed upon within the Kristal Group.
2. In March 1999, the President of CybeRecord, Inc., a Nevada corporation
("CybeRecord Nevada") executed a Consulting Agreement (the "Agreement")
with Brent Nelson on behalf of Northwest Capital Partners, L.L.C.
("Northwest"). Brent Nelson is the sole member of Northwest. Brent Nelson
is also a director and officer of CybeRecord Nevada. The Board of Directors
of CybeRecord Nevada has not yet approved the Agreement.
The Agreement, which runs through February 2002, provides for Northwest to
assist in obtaining financing for CybeRecord Nevada. In return for
consulting services under the Agreement, CybeRecord Nevada agreed to pay
the consultant $500 per month. Provision is made for this payment to
increase to $1,000 per month. The Agreement also provides that the
consultant is to be issued 500,000 shares of common stock for $0.01 per
share when the market capitalization of CybeRecord Nevada reaches
$100,000,000 and is to be issued an additional 500,000 shares of common
stock at $0.01 per share when the market capitalization of CybeRecord
Nevada reaches $200,000,000. Any shares issued under the Agreement will be
restricted shares, and will have "piggy-back" rights, so that the shares
will be registered upon CybeRecord Nevada's first registration after the
shares are issued.
Two CybeRecord, Inc. exist in the United States: CybeRecord, Inc., a
Florida corporation ("CybeRecord Florida") and CybeRecord Nevada. We are
CybeRecord Florida. Brent Nelson is a director and officer of both
corporations. Brent Nelson is also a shareholder of CybeRecord Florida.
Both companies share the same President. Neither company owns the stock of
the other. However, both companies have taken steps to merge CybeRecord
Florida into CybeRecord Nevada, but the merger has not been completed.
16
<PAGE>
While Northwest's contract is with CybeRecord Nevada, Northwest has
performed services for CybeRecord Florida. CybeRecord Florida has paid
Northwest $500 per month ($5,000 in 1999). CybeRecord Florida's Board of
Directors has not approved a contract with Northwest. CybeRecord Florida
and Northwest are working to identify the terms upon Northwest will provide
services to CybeRecord Florida.
Since December 31, 1999, CybeRecord Florida has reached a market
capitalization that exceeds $200,000,000. If CybeRecord Florida and
Northwest enter into a consulting agreement with stock provisions similar
to the provisions contained in CybeRecord Nevada's Agreement, or CybeRecord
Florida assumes CybeRecord Nevada's obligations under the Agreement, then
Northwest will have the right to purchase the stock from CybeRecord
Florida.
3. Tom Morikawa, one of the shareholders named in the table of beneficial
security owners under Item 4 above and also a former director and chief
executive officer of the Company, is currently a consultant to the Company.
Under our consulting agreement with Mr. Morikawa, we pay Mr. Morikawa a
monthly retainer of $12,500. The consulting agreement with Mr. Morikawa
remains in effect through May 15, 2000.
4. After January 1, 2000, the Company borrowed $100,000 from Brent Nelson, who
is one of the Company's directors and shareholders, as well as its
secretary. The Company has repaid this loan, which was due on demand,
unsecured, and bore no interest.
Item 8. Description of Securities.
Common Stock
The Company has authorized 20,000,000 shares of Common Stock, par value $.01.
Under its Articles of Incorporation, the Company is also authorized to issue
1,500,000 shares of Class B Common Stock, par value $.10 per share. The Company
has not, however, issued any Class B Common Stock and has not registered any
Class B Common Stock under Section 12 of the Securities Exchange Act of 1934.
Each outstanding share of Common Stock, par value $.01 is entitled to one vote,
either in person or by proxy, on all matters that may be voted upon by holders
of the Company's Common Stock at meetings of the Company's shareholders.
The holders of Common Stock (i) have equal ratable rights to dividends from
funds legally available for payment of dividends, when and if declared by the
Company's Board of Directors; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution, or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription, or conversion rights, or redemption or
sinking fund provisions applicable thereto; and (iv) are entitled to one
non-cumulative vote per share on all matters on which shareholders may vote at
all meetings of shareholders.
All of the issued and outstanding shares of Common Stock are, and all unissued
shares when sold will be, duly authorized, validly issued, fully paid, and
non-assessable. To the extent that additional shares of the Company's Common
Stock are issued, the relative interests of the then-existing shareholders may
be diluted.
17
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
Market Information
The Company's Common Stock ($.01 par value) is publicly traded on the
over-the-counter market. It is presently traded in the OTC "Pink
Sheets." Although the Company's Common Stock is not currently listed on a
national exchange, we are voluntarily registering our Common Stock under Section
12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") at the request
of the SEC. It is our understanding that during 1999, the SEC contacted numerous
companies with securities trading on electronic bulletin boards. The SEC
requested that these companies register as reporting companies under Section
12(g) of the Exchange Act to facilitate more thorough and timely disclosure of
business and financial information to investors. At the time we received the
SEC's request, our Common Stock was trading on an electronic bulletin board,
although as of the filing date of this registration statement, it is currently
traded only in the OTC "Pink Sheets." It is in response to the SEC's request
that we are filing this registration statement.
The Company's principal market makers are Olsen Payne & Company, Paragon Capital
Corporation, Sharpe Capital Corp., and Hill, Thomson Magid and Company. The
high-low bid information for the Company's stock for the period January 1998 to
December 1999 as reported by the "Wall Street City" website
(www.wallstreetcity.com) of Telescan, Inc. follows:
Monthly prices (January 1998 to December 1999)
Date High Low Close
- ---- ---- --- -----
Dec-99 2.125 0.812 2.125
Nov-99 1.375 0.625 1.250
Oct-99 1.750 0.625 1.062
Sep-99 1.000 0.500 0.875
Aug-99 1.250 0.937 1.000
Jul-99 1.562 1.125 1.187
Jun-99 1.875 0.937 1.625
May-99 1.437 0.500 1.093
Apr-99 1.000 0.406 0.875
Mar-99 0.812 0.125 0.562
Feb-99 0.375 0.187 0.375
Jan-99 0.250 0.125 0.250
Dec-98 0.375 0.125 0.218
Nov-98 0.593 0.250 0.312
Oct-98 0.531 0.218 0.218
Sep-98 0.750 0.250 0.500
Aug-98 0.937 0.500 0.625
Jul-98 1.125 0.750 0.937
Jun-98 1.250 0.687 0.900
May-98 1.187 0.437 1.000
Apr-98 0.687 0.500 0.500
Mar-98 0.750 0.375 0.593
Feb-98 0.750 0.500 0.687
Jan-98 0.750 0.375 0.640
18
<PAGE>
Holders
The approximate number of record holders of the Company's Common Stock as of
December 31, 1999 was 330, inclusive of those brokerage firms and/or
clearinghouses holding the Company's common shares for their clientele (with
each such brokerage house and/or clearinghouse being considered as one holder).
The aggregate number of shares of Common Stock outstanding as of December 31,
1999 was 15,471,864 shares.
Dividends
The Company has not paid or declared any cash dividends on its Common Stock
since its inception and does not anticipate paying cash any dividends on its
Common Stock in the foreseeable future.
Item 2. Legal Proceedings.
The Company is not presently a party to any material litigation, and, to the
Company's knowledge, there is no material litigation currently threatened
against the Company.
Item 3. Changes in and Disagreements with Accountants.
The Company has had no changes in or disagreements with accountants on
accounting or financial disclosure.
Item 4. Recent Sales of Unregistered Securities.
The Company has issued the following shares of its Common Stock during past
three years without registration under the Securities Act of 1933, as amended
(the "Act"):
1. On October 1, 1997, the Company issued 4,000,000 shares to fifty-one
non-affiliates at a price of $.06 per share for aggregate consideration of
$240,000 pursuant to an exemption from registration under Regulation D,
Rule 504 of the Act. In connection with this October 1, 1997 transaction,
the Company redeemed and canceled (without compensation) 700,000 of the
4,000,000 shares that were issued.
2. On October 11, 1997, the Company issued 8,000,000 shares to seventeen
affiliates. These shares were issued by one of the Company's predecessor
corporations, Pillar Entertainment Group Inc., in exchange for all of the
outstanding shares of Chrysalis Hotels and Resorts Corp. Following the
exchange Pillar Entertainment Group Inc. changed its name to Chrysalis
Hotels and Resorts Corp. The shares issued in this exchange transaction
were exempt from registration pursuant to Section 4(2) of the Act.
19
<PAGE>
3. On March 24, 1999, the Company issued 1,970,000 shares to ten
non-affiliates pursuant to an exemption from registration under Regulation
D, Rule 504 of the Act, at a price of $.50 per share for total
consideration of $985,000. In consideration for legal services rendered,
46,000 shares were issued to two non-affiliates pursuant to an exemption
from registration under Regulation D, Rule 504 of the Act.
4. On April 20, 1999, the Company issued 6,000,000 shares to seven affiliates.
These shares were issued by one of the Company's predecessor corporations,
Chrysalis Hotels and Resorts Corp., in exchange for assets acquired from
the Kristal Group. An additional 50,000 shares were issued as a finder's
fee in the transaction. Following the asset acquisition, Chrysalis Hotels
and Resorts Corp. changed its name to CybeRecord, Inc. The shares issued in
this transaction were exempt from registration pursuant to Section 4(2) of
the Act.
5. In November 1999, the Company issued 70,000 shares to two non-affiliates in
exchange for legal services. The shares were exempt from registration
pursuant to Section 4(2) of the Act.
6. Between February 11 and March 3, 2000, the Company issued 1,275,000 shares
to 17 non-affiliates pursuant to an exemption from registration under
Regulation D, Rule 506 of the Act, at a price of $1.75 per share for
aggregate consideration of $2,231,250.
Item 5. Indemnification of Directors and Officers.
The Certificate of Incorporation and Bylaws of the Company contain provisions
limiting or eliminating the liability of directors of the Company to the Company
or its stockholders to the fullest extent permitted by the General Corporation
Law of Florida and indemnifying officers and directors of the Company to the
fullest extent permitted by the General Corporation Law of Florida. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act") may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer, or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the purchase or sale of the Company's
Common Stock, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act, and will be governed by the final
adjudication of such issue.
20
<PAGE>
PART F/S
The Company's financial statements required by Regulation S-B begin on page F-1
and are incorporated into this part of this Amendment No. 2 to Form 10-SB by
this reference.
PART III
Items 1 and 2. Index to Exhibits and Description of Exhibits.
3.1 Articles of Incorporation with Amendments
3.2 By-Laws
10.2 Consulting Agreement with Northwest Capital Partners, L.L.C.
10.3 Asset Purchase Agreement Relating to Purchase of Kristal Group Assets
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
CybeRecord, Inc.
-------------------
(Registrant)
Date: April 20, 2000 By: /s/ JAMES J. LUCAS
----------------- -------------------------------
James J. Lucas, President & CEO
21
<PAGE>
CYBERECORD, INC.
FINANCIAL REPORT
DECEMBER 31, 1999
<PAGE>
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
Balance sheets F-2
Statements of operations F-3
Statements of stockholders' equity F-4
Statements of cash flows F-5
Notes to financial statements F-6 - F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
CybeRecord, Inc.
Bellevue, Washington
We have audited the accompanying balance sheets of CybeRecord, Inc. (a
development stage company) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 1999 and 1998, and for the period from September 27, 1996 to
December 31, 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 audits.
We conducted our audits 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 audits provide 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 CybeRecord, Inc. (a development
stage company) as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998,
and for the period from September 27, 1996 to December 31, 1999, in conformity
with generally accepted accounting principles.
March 15, 2000
F-1
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------------- -----------------
<S> <C> <C>
Current Assets
Cash $ 111,154 $ 1,307
Prepaid expenses and deposits 15,194
----------------- -----------------
Total current assets 126,348 1,307
Furniture and Equipment, at cost,
less accumulated depreciation of $3,940 25,328
----------------- -----------------
$ 151,676 $ 1,307
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 21,436 $ -
Stockholders' Equity
Common stock, par value $.01 154,719 123,359
Additional paid-in capital 4,342,269 309,079
Deficit accumulated during the
development stage (4,366,748) (431,131)
----------------- -----------------
130,240 1,307
----------------- -----------------
$ 151,676 $ 1,307
================= =================
</TABLE>
See Notes to Financial Statements
F-2
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999 and 1998, and the Period
From September 27, 1996 to December 31, 1999
<TABLE>
<CAPTION>
Total
Accumulated
During
Development
Stage
(September 27,
1996 to
December 31,
1999 1998 1999)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
Expenses
Write-off of acquired research
and development 3,000,000 3,000,000
Research and development 175,425 175,425
General and administrative 760,192 82,251 1,191,323
----------------- ----------------- -----------------
3,935,617 82,251 4,366,748
----------------- ----------------- -----------------
Net loss $ (3,935,617) $ (82,251) $ (4,366,748)
================= ================= =================
Basic loss per share of common stock $ (0.27) $ (0.01) $ (0.36)
================= ================= =================
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1999 and 1998, and the Period
From September 27, 1996 to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Common Paid-in Development
Shares Stock Capital Stage Total
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances, September 27, 1996 335,864 $ 3,359 $ 769 $ - $ 4,128
Issuance of common stock (October and November 1996) 8,700,000 8,700 49,410 58,110
Net loss (3,192) (3,192)
------------ ---------- ---------- ----------- ------------
Balances, December 31, 1996 9,035,864 12,059 50,179 (3,192) 59,046
Issuance of common stock, net of effects of exchange
of Chrysalis shares for Pillar shares (October 1997) 3,300,000 111,300 128,700 240,000
Additional capital contributed by shareholders 46,700 46,700
Net loss (345,688) (345,688)
------------ ---------- ---------- ----------- ------------
Balances, December 31, 1997 12,335,864 123,359 225,579 (348,880) 58
Additional capital contributed by shareholders 83,500 83,500
Net loss (82,251) (82,251)
------------ ---------- ---------- ----------- ------------
Balances, December 31, 1998 12,335,864 123,359 309,079 (431,131) 1,307
Issuance of common stock in exchange for cash (March 1999) 1,970,000 19,700 965,300 985,000
Issuance of common stock in exchange for services
(March and April 1999) 96,000 960 39,040 40,000
Contribution of shares back to the corporation
by shareholders (April 1999) (5,000,000) (50,000) 50,000
Issuance of common stock in exchange for
Kristal Group assets (April 1999) 6,000,000 60,000 2,940,000 3,000,000
Issuance of common stock in exchange for services
(November 1999) 70,000 700 30,800 31,500
Additional capital contributed by shareholders 8,050 8,050
Net loss (3,935,617) (3,935,617)
------------ ---------- ---------- ----------- ------------
Balances, December 31, 1999 15,471,864 $ 154,719 $4,342,269 $(4,366,748) $ 130,240
============ ========== ========== =========== ============
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
CYBERECORD, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998, and the Period
From September 27, 1996 to December 31, 1999
<TABLE>
<CAPTION>
Total
Accumulated
During
Development
Stage
(September 27,
1996 to
December 31,
1999 1998 1999)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (3,935,617) $ (82,251) $ (4,366,748)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation 3,940 3,940
Write-off of purchased in-process
research and development that had
not reached technological feasibility 3,000,000 3,000,000
Professional fees exchanged for
common stock 71,500 71,500
Changes in operating assets and liabilities
Prepaid expenses and deposits (15,194) (15,194)
Accounts payable 21,436 21,436
----------------- ----------------- -----------------
Cash used in operating activities (853,935) (82,251) (1,285,066)
Cash Flows From Investing Activity
Purchase of equipment (29,268) (29,268)
Cash Flows From Financing Activities
Issuance of common stock 985,000 1,283,110
Capital contribution 8,050 83,500 138,250
----------------- ----------------- -----------------
Cash provided by financing activities 993,050 83,500 1,421,360
----------------- ----------------- -----------------
Net increase in cash 109,847 1,249 107,026
Cash, beginning of period 1,307 58 4,128
----------------- ----------------- -----------------
Cash, end of period $ 111,154 $ 1,307 $ 111,154
================= ================= =================
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Significant Accounting Policies
Organization/Development Stage Company
CybeRecord, Inc. ("CybeRecord") was previously known as Chrysalis Hotels and
Resorts, Corp. ("Chrysalis"). Chrysalis was previously known as Pillar
Entertainment, Inc. ("Pillar").
Pillar was a corporation with very little financial activity for many years. In
October 1997, Pillar exchanged its common stock for all the outstanding stock of
Chrysalis. As Pillar and Chrysalis were related corporations (Pillar's president
was a major stockholder in Chrysalis), the transaction was accounted for at a
historical cost basis. Pillar then changed its name to Chrysalis. These
financial statements are prepared as if the companies were combined as of
September 27, 1996 (the date Chrysalis was incorporated).
In April 1999, Chrysalis issued common stock to acquire in-process research and
development from ten individuals: Glenn Kimball, Paulette Kimball, Marek
Niczyporuk, James J. Lucas, James L. Quinn, Barbara Baker Quinn, Herbert J.
Walker, Patricia A. Walker, Alva D. Cravens, and Kristin Cravens (hereinafter
referred to as the "Kristal Group" for the sake of convenience). Chrysalis then
changed its name to CybeRecord.
In conjunction with the acquisition of the Kristal Group's assets, CybeRecord is
working toward the development of product that will enhance paper and microfilm
records when converted to digital documents. This will allow these records to be
shared electronically over the Internet and within company Intranet systems. As
of December 31, 1999, products developed by CybeRecord have not reached the
stage of technological feasibility as defined by Statements of Financial
Accounting Standards ("SFAS") 86. Accordingly, the cost of the assets acquired
from the Kristal Group and all costs associated with product development have
been charged to expense as research and development.
CybeRecord intends to market the product it is developing. Revenue recognition
policies for product sales will be established when products are ready for
distribution.
These financial statements have been prepared treating CybeRecord as a
development stage company. CybeRecord has not generated any revenues through
December 31, 1999. For the purpose of these financial statements, it is assumed
the development stage started September 27, 1996, which is the date of inception
for Chrysalis.
F-6
<PAGE>
Note 1. (Continued)
Cash
Cash includes cash balances held at a bank and all highly liquid debt
instruments with original maturities of three months or less. Cash balances are
in excess of amounts insured by the Federal Deposit Insurance Corporation.
No cash payments for interest or income taxes were made during the years ended
December 31, 1999 and 1998.
Furniture and Equipment
Furniture and equipment are depreciated using the straight-line method over the
estimated useful lives of the related assets.
Research and Development
Research and development costs are expensed as incurred. When products being
developed reach technological feasibility, costs associated with these products
will be capitalized and amortized over their estimated useful lives.
Taxes on Income
CybeRecord accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for expected
future tax consequences of events that have been recognized in CybeRecord's
financial statements or tax returns. In estimating future tax consequences,
CybeRecord generally considers all expected future events other than enactments
of changes in the tax laws or rates.
Earnings Per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares. There are no potentially dilutive common shares at December 31,
1999 and 1998. The weighted average number of shares was 14,559,531 and
12,335,864 for the years ended December 31, 1999 and 1998. The weighted average
number of shares was 12,004,685 for the period from September 27, 1996 to
December 31, 1999.
F-7
<PAGE>
Note 1. (Continued)
Stock-Based Compensation
Although there has been no stock-based compensation, CybeRecord accounts for
stock-based compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly, compensation cost for
stock options granted to employees is measured as the excess, if any, of the
quoted market price of CybeRecord's stock at the date of the grant over the
amount an employee is required to pay for the stock.
Comprehensive Income
There are no reconciling items between the net loss presented in the Statements
of Operations and comprehensive loss as defined by SFAS No. 130, "Reporting
Comprehensive Income."
Segment Reporting
Management considers CybeRecord to operate on only one business segment.
Accordingly, any disclosures required by SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," are already incorporated in
other financial statement disclosures.
New Accounting Standards
New accounting standards issued through the date of the independent auditors'
report do not have an effect on these financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Accordingly, actual results could differ from the estimates that were used.
F-8
<PAGE>
Note 2. Capital Stock
December 31, 1999 December 31, 1998
----------------- -----------------
Shares authorized 20,000,000 20,000,000
================= =================
Shares issued and outstanding 15,471,864 12,335,864
================= =================
Note 3. Non-Cash Transactions
In 1999, CybeRecord issued 6,000,000 shares of common stock in conjunction with
the acquisition of the Kristal Group's assets (See Note 1). The common stock was
valued at $.50 per share. This value was based on stock sales in the same time
period. The number of shares issued was based on negotiations between CybeRecord
and the various owners of the Kristal Group's assets. As part of these
negotiations, certain shareholders contributed 5,000,000 shares of common stock
back to CybeRecord. These shareholders contributed the stock back to CybeRecord
so that ownership percentages in CybeRecord subsequent to this transaction were
in accordance with percentages that were agreed upon with the Kristal Group.
In 1999, CybeRecord issued 46,000 shares in exchange for legal services. These
shares were valued at $.50 per share, as they were issued at approximately the
same time that shares were issued for the Kristal Group's assets. In 1999,
CybeRecord issued 50,000 shares in exchange for consulting services. These
shares were valued at $12,000, as they were issued to settle a $12,000 invoice.
In November 1999, CybeRecord issued 70,000 shares in exchange for legal
services. These shares were valued at the closing market price on November 2,
1999, as discounted because the shares were restricted.
Note 4. Income Taxes
The reconciliation of income tax on income computed at the federal statutory
rates to income tax expense is as follows:
December 31, 1999 December 31, 1998
----------------- ------------------
Tax at statutory rate $ (1,338,109) $ (27,966)
Change in valuation allowance
for deferred tax asset 1,338,109 27,966
----------------- ----------------
Income tax expense $ - $ -
================= ================
F-9
<PAGE>
Note 4. (Continued)
CybeRecord's deferred tax asset is as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
---------------- -------------------
<S> <C> <C>
Net operating loss carryforwards
(before valuation allowance) $ 425,626 $ 144,713
Acquired research and development
costs expensed for financial
statement purposes, but capitalized
for income tax purposes 1,200,000
Other 39,068 1,872
Less valuation allowance for deferred tax asset (1,484,694) (146,585)
-------------- ---------------
Net deferred tax asset $ - $ -
============== ===============
</TABLE>
CybeRecord has net operating loss carryforwards of $1,206,000 at December 31,
1999. Most of these losses expire in 2019.
Note 5. Consulting Contracts
In March 1999, the President of CybeRecord, Inc., a Nevada corporation
("CybeRecord Nevada") executed a Consulting Agreement (the "Agreement") with
Brent Nelson on behalf of Northwest Capital Partners, LLC ("Northwest"). Brent
Nelson is the sole member of Northwest. Brent Nelson is also a director and
officer of CybeRecord Nevada. The Board of Directors of CybeRecord Nevada has
not yet approved the Agreement.
The Agreement, which runs through February 2002, provides for Northwest to
assist in obtaining financing for CybeRecord Nevada. In return for consulting
services under the Agreement, CybeRecord Nevada agreed to pay the consultant
$500 per month. Provision is made for this payment to increase to $1,000 per
month. The Agreement also provides that the consultant is to be issued 500,000
shares of common stock for $0.01 per share when the market capitalization of
CybeRecord Nevada reaches $100,000,000 and is to be issued an additional 500,000
shares of common stock at $0.01 per share when the market capitalization of
CybeRecord Nevada reaches $200,000,000. Any shares issued under the Agreement
will be restricted shares, and will have "piggy-back" rights, so that the shares
will be registered upon CybeRecord Nevada's first registration after the shares
are issued.
F-10
<PAGE>
Note 5. (Continued)
Two CybeRecord, Inc. exist in the United States: CybeRecord, Inc., a Florida
corporation ("CybeRecord Florida") and CybeRecord Nevada. We are CybeRecord
Florida. Brent Nelson is a director and officer of both corporations. Brent
Nelson is also a shareholder of CybeRecord Florida. Both companies share the
same President. Neither company owns the stock of the other. However, both
companies have taken steps to merge CybeRecord Florida into CybeRecord Nevada,
but the merger has not been completed.
While Northwest's contract is with CybeRecord Nevada, Northwest has performed
services for CybeRecord Florida. CybeRecord Florida has paid Northwest $500 per
month ($5,000 in 1999 and none in 1998). CybeRecord Florida's Board of Directors
has not approved a contract with Northwest. CybeRecord Florida and Northwest are
working to identify the terms upon Northwest will provide services to CybeRecord
Florida.
Since December 31, 1999, CybeRecord Florida has reached a market capitalization
that exceeds $200,000,000. If CybeRecord Florida and Northwest enter into a
consulting agreement with stock provisions similar to the provisions contained
in CybeRecord Nevada's Agreement, or CybeRecord Florida assumes CybeRecord
Nevada's obligations under the Agreement, then Northwest will have the right to
purchase the stock from CybeRecord Florida. Emerging Issue Task Force ("EITF")
No. 96-18 states that CybeRecord Florida would account for this stock
arrangement by estimating the fair value of the arrangement as of the
"measurement date" and recognizing the consulting expense over the term of the
consulting agreement. Based on guidance contained in EITF No. 96-18, management
has determined that the appropriate date to measure the fair value of this stock
arrangement is March 1999 (If CybeRecord Florida assumes CybeRecord Nevada's
agreement), or the date that CybeRecord Florida enters into a consulting
agreement with Northwest.
CybeRecord also has a consulting agreement for services with a shareholder and
former chief executive officer. The consultant received $25,000 in 1999 and will
receive an additional $62,500 through May 2000.
F-11
<PAGE>
Note 6. Subsequent Events
Subsequent to December 31, 1999, CybeRecord issued 1,275,000 shares of common
stock to unrelated parties at a price of $1.75 per share resulting in total
proceeds of $2,231,250.
In addition, CybeRecord borrowed $100,000 from a company owned by a member of
the board of directors. The loan is due on demand, unsecured and bears no
interest.
F-12
ARTICLES OF INCORPORATION
OF
FLEXI-BUILT MODULAR HOUSING CORPORATION
We, the undersigned, hereby associate ourselves for the purpose of
becoming and forming a body corporate under the laws of the State of Florida,
under and by virtue of the following articles of incorporation.
ARTICLE I
The name of the corporation shall be:
FLEXI-BUILT MODULAR HOUSING CORPORATION.
ARTICLE II
The general nature and the objects of the business and the purposes
proposed to be transacted and varried on are to do any and all things mentioned
herein as fully and to the same extent as natural persons might or could do,
viz:
1) To manufacture, buy, sell, transport, erect, or construct
prefabricated homes and buildings, mobile or permanent, of every kind, nature
and description.
2) To exercise any power and authority which may be done by a private
corporation organized and existing under and by virtue of Chapter 608, Florida
Statutes, it being the intention that this corporation may conduct and transact
any business lawfully authorized and not prohibited by Chapter 608, Florida
Statutes.
ARTICLE III
The maximum number of shares of the capital stock which this
corporation shall be authorized to have outstanding at any time is fifty (50)
shares of common with a par value of Ten Dollars ($10.00) per share.
<PAGE>
ARTICLE IV
The amount of capital with which this corporation shall begin business
is not less than Five Hundred ($500.00) Dollars.
ARTICLE V
The existence of this Corporation shall be perpetual.
ARTICLE VI
The business of this corporation shall be conducted by a board of
directors which shall consist of not less than three (3) nor more than seven (7)
members, the exact number to be fixed from time to time by the By-Laws of this
Corporation.
ARTICLE VII
The initial post office address of the corporation shall be 550 Seybold
Building, Miami, Florida, 33132.
ARTICLE VIII
The names and addresses of the first Board of Directors who shall hold
office for the first year of the corporation's existence, or until their
successors are elected and have qualified, are as follows:
Martin Fried 550 Seybold Building
Miami, Florida 33132
Joel Rubin 550 Seybold Building
Miami, Florida 33132
Albert D. Greenfield 550 Seybold Building
Miami, Florida 33132
ARTICLE IX
The names and post office address of each subscriber to these
Articles of Incorporation and a statement of the number of shares of stock which
each agrees to take, are as follows:
Name Post Office Address No. of Shares
- ---- ------------------- ---------------
Martin Fried 550 Seybold Building 20 $200.00
Miami, Florida 33132
Joel Rubin 550 Seybold Building 20 $200.00
Miami, Florida 33132
Albert D. Greenfield 550 Seybold Building 10 $100.00
Miami, Florida 33132
<PAGE>
ARTICLE X
A director of this corporation shall not be disqualified by dealing
with or contracting with this corporation.
ARTICLE XI
The By-Laws of this corporation may provide that less than a majority
of the Board of Directors shall constitute a quorum for the transaction of
business.
IN WITNESS WHEREOF, we the undersigned, herein have made, subscribed
and acknowledged these Articles of Incorporation this 11th day of February,
1969.
/s/ Martin Fried
------------------------- (SEAL)
Martin Fried
/s/ Joel Rubin
------------------------- (SEAL)
Joel Rubin
/s/ Albert D. Greenfield
------------------------- (SEAL)
Albert D. Greenfield
STATE OF FLORIDA }
: SS.:
COUNTY OF DADE }
Before me, the undersigned authority, personally appeared MARTIN FRIED,
JOEL RUBIN and ALBERT D. GREENFIELD, to me known to be the persons described in
and who executed the foregoing Articles of Incorporation, and each of them
acknowledged before me, according to law, that he executed the same for the
purposes therein mentioned and set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 11th day
of February, 1969.
/s/ Robert H. Carthill
----------------------
Robert H. Carthill
Notary Public, State of Florida at Large
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
FLEXI-BUILT MODULAR HOUSING CORPORATION, a corporation organized and
existing under and by virtue of the provisions of Chapter 608 of the Florida
Statutes, the Certificate of Incorporation of which was filed in the office of
the Secretary of State on February 17, 1969; the principal office of which
corporation is at 1451 North Bayshore Drive, Miami, Florida 33132; pursuant to
the provisions of Chapter 608.18 of the Florida Statutes, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation unanimously
approved and proposed to the stockholders, and the persons holding all of the
issued and outstanding shares of stock of the said corporation did consent in
writing to the following resolution:
RESOLVED, that the Article III of the Articles of
Incorporation of this corporation is hereby stricken in its
entirety and the following is substituted in lieu thereof as
said Article III.
"ARTICLE III.
The total number of shares which this Corporation is
authorized to issue is 3,000,000 shares, all of the par
value of one cent ($.01) each, all of one class."
SECOND: That the said amendment was duly adopted in accordance with the
provisions of Chapter 608.18 of the Florida Statutus.
THIRD: That the capital of said corporation will not be reduced under
or by reason of said proposed amendment.
<PAGE>
IN WITNESS WHEREOF, the said FLEXI-BUILT MODULAR HOUSING CORPORATION
has caused its corporate seal to be hereunto affixed and this Certificate signed
by HAROLD GOLDBURG, its President and ALBERT D. GREENFIELD, its Secretary this
day of May, 1969.
FLEXI-BUILT MODULAR HOUSING CORPORATION
By: /s/ Harold Goldberg
--------------------
Harold Goldberg
Attest: /s/ Albert D. Greenfield
-------------------------
Albert D. Greenfield
I, ALBERT D. GREENFIELD, Secretary of FLEXI-BUILT MODULAR HOUSING CORPORATION, a
corporation organized and existing under the laws of the State of Florida, do
hereby certify, as the Secretary of the meeting of all the shareholders of the
said corporation on May 8, 1969 called and held for the purpose of considering
the above Amendment to the Articles of Incorporation of the said corporation,
that all of the shareholders of the said corporation approved, by affirmative
vote, the said Amendment.
By: /s/ Albert D. Greenfield
------------------------
Albert D. Greenfield, Secretary
STATE OF FLORIDA }
: SS.:
COUNTY OF DADE }
Before me personally appeared HAROLD GOLDBERG and ALBERT D. GREENFIELD,
to me well-known and known to me to be the individuals described in and who
executed the foregoing instrument as President and Secretary of FLEXI-BUILT
MODULAR HOUSING CORPORATION, and severally acknowledged such instrument as
President and Secretary, respectively of said corporation, and the seal affixed
to the foregoing instrument is the corporate seal of said corporation, and that
it was affixed to said instrument by due and regular corporate authority, and
the said instrument is the free act, deed and agreement of said corporation.
WITNESS my hand and official seal this day of May, 1969.
/s/ Dean Ramey
---------------
Dean Ramey
Notary Public, State of Florida at Large
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
FLEXI-BUILT MODULAR HOUSING CORPORATION, a corporation organized and
existing under and by virtue of the provisions of Chapter 607 of the Florida
Statutes, the Certificate of Incorporation of which was filed in the office of
the Secretary of State on February 17, 1969; the principal office of which
corporation is at Suite 801 Brickell Centre, 799 Brickell Plaza, Miami, Florida
33131; pursuant to the provisions of Chapter 607.181 of the Florida Statutes,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation unanimously
approved and proposed to the stockholders, and the persons holding the majority
of the issued and outstanding shares of stock of the said corporation did
consent at a Special Meeting to the following resolution:
RESOLVED that the name of this corporation shall be changed
to FLEXICARE, INC.
SECOND: That the said amendment was duly adopted in accordance with the
provisions of Chapter 607.181 of the Florida
Statutes.
THIRD: That the capital of said corporation will not be reduced under
or by reason of said proposed amendment.
<PAGE>
IN WITNESS WHEREOF, the said FLEXI-BUILT MODULAR HOUSING CORPORATION
has caused its corporate seal to be hereunto affixed and this certificate signed
by MARCIA LYNN HUNTER, its Vice President and ALBERT D. GREENFIELD, its
Secretary this 12th day of March 1984.
FLEXI-BUILT MODULAR HOUSING CORPORATION
By: /s/ Marcia Lynn Hunter
------------------------
Marcia Lynn Hunter
Attest: /s/ Albert D. Greenfield
---------------------------
Albert D. Greenfield
I, ALBERT D. GREENFIELD, Secretary of FLEXI-BUILT MODULAR HOUSING
CORPORATION, a corporation organized and existing under the laws of the State of
Florida, do hereby certify, as the Secretary of the meeting of all the
shareholders of the said corporation on March 12, 1984 called and held for the
purpose of considering the above Amendment to the Articles of Incorporation of
the said corporation, that in excess of a majority of the Shareholders of the
said corporation approved, by affirmative vote, the said Amendment.
By: /s/ Albert D. Greenfield
--------------------------
Albert D. Greenfield
Secretary
<PAGE>
STATE OF FLORIDA }
COUNTY OF DADE }
Before me personally appeared MARCIA LYNN HUNTER and ALBERT D.
GREENFIELD, to me well known and known to me to be the individuals described in
and who executed the foregoing instrument as Vice President and Secretary of
FLEXI-BUILT MODULAR HOUSING CORPORATION and severally acknowledged such
instrument as Vice President and Secretary, respectively, of said corporation,
and that the seal affixed to the foregoing instrument is the corporate seal of
said corporation, and that it was affixed to said instrument by due and regular
corporate authority, and that said instrument is the free act, deed and
agreement of said corporation.
WITNESS my hand and official seal this 13th day of March 1984.
/s/ Kathlene M. Brandon
--------------------------
Kathlene M. Brandon
Notary Public
State of Florida at Large
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
FLEXI-BUILT MODULAR HOUSING CORPORATION, a corporation organized and
existing under and by virtue of the provisions of Chapter 607 of the Florida
Statutes, the Certificate of Incorporation of which was filed in the office of
the Secretary of State on February 17, 1969 and whose name was changed to
FLEXICARE, INC. by a Name-Change Amendment which was filed on March 14, 1984:
the principal office of which corporation is at Suite 801 Brickell Centre, 799
Brickell Plaza, Miami, Florida 33131; pursuant to the provisions of Chapter
607.181 of the Florida Statutes, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation unanimously
approved and proposed to the stockholders, and the persons holding the majority
of the issued and outstanding shares of stock of the said corporation did
consent at a Special Meeting to the following resolution:
RESOLVED, that the Article III of the Articles of
Incorporation of this corporation is hereby stricken in its
entirety and the following is substituted in lieu thereof as said
Article III.
"ARTICLE III.
The total number of shares which this Corporation is
authorized to issue is 10,000,000 shares, all the par value of
one cent ($.01) each, all of one class."
<PAGE>
SECOND: That the said amendment was duly adopted in accordance with the
provisions of Chapter 607.181 of the Florida Statutes.
THIRD: That the capital of said corporation will not be reduced under
or by reason of said proposed amendment.
IN WITNESS WHEREOF, the said FLEXICARE, INC. has caused its corporate
seal to be hereunto affixed and this certificate signed by MARCIA LYNN HUNTER,
its Vice President and ALBERT D. GREENFIELD, its Secretary this 30th day of
March, 1984.
FLEXICARE, INC.
By: /s/ Marcia Lynn Hunter
------------------------
Marcia Lynn Hunter
Attest: /s/ Albert D. Greenfield
---------------------------
Albert D. Greenfield
I, ALBERT D. GREENFIELD, Secretary of FLEXICARE, INC., a corporation
organized and existing under the laws of the State of Florida, do hereby
certify, as the Secretary of the meeting of all the shareholders of the said
corporation on March 12, 1984 called and held for the purpose of considering the
above Amendment to the Articles of Incorporation of the said corporation, that
in excess of a majority of the Shareholders of the said corporation approved, by
affirmative vote, the said Amendment.
By: /s/ Albert D. Greenfield
--------------------------
Albert D. Greenfield
Secretary
<PAGE>
STATE OF FLORIDA }
COUNTY OF DATE }
Before me personally appeared MARCIA LYNN HUNTER and ALBERT D.
GREENFIELD, to me well known and known to me to be the individuals described in
and who executed the foregoing instrument as Vice President and Secretary of
FLEXI-BUILT MODULAR HOUSING CORPORATION and severally acknowledged such
instrument as Vice President and Secretary, respectively, of said corporation,
and that the seal affixed to the foregoing instrument is the corporate seal of
said corporation, and that it was affixed to said instrument by due and regular
corporate authority, and that said instrument is the free act, deed and
agreement of said corporation.
WITNESS my hand and official seal this 30th day of March 1984.
/s/ Kathlene M. Brandon
--------------------------
Kathlene M. Brandon
Notary Public
State of Florida at Large
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
FLEXICARE, INC.
Pursuant to the provisions of the Florida Business Corporation Act, the
undersigned corporation adopts the following amendment to the Corporation's
Articles of Incorporation, which amendment was adopted by the shareholders of
the Corporation on June 13, 1994 by the holders of the outstanding common stock,
the only voting group entitled to vote thereon, by written consent pursuant to
Section 607.0704 of the Florida Business Corporation Act. The number of shares
adopting the amendment was sufficient for approval by that group.
1. The name of the Corporation is FLEXICARE, INC.
2. Article III of the Articles of Incorporation of the Corporation is
hereby amended to read as follows:
ARTICLE III
Capital Stock
The total amount of capital stock which this Corporation has the
authority to issue is as follows:
20,000,000 shares of Common Stock, $.01 par value per share; and
1,500,000 shares of Class B Common Stock, $.10 par value per share.
<PAGE>
The Class B Common Stock shall have the powers, rights, qualifications,
limitations and restrictions as follows:
(i) Dividends and Other Distributions. The Class B Common Stock shall
be entitled to receive a dividend pari passu to any dividends and other
distributions to the Common Stock of the Corporation.
(ii) Liquidation. Upon dissolution, liquidation or winding up of the
Corporation, the holders of the Class B Common Stock shall be entitled to
receive distributions pari passu to any distributions made to the holders of
shares of Common Stock of the Corporation, share for share.
(iii) Voting. Shares of Class B Common Stock shall be entitled to vote
as a class with the Common Stock.
(iv) Conversion.
(a) Subject to the provisions for adjustment hereinafter set forth,
shares of Class B Common Stock shall be convertible at any time at the option of
the holder thereof, upon surrender of certificate or certificates evidencing the
shares so to be converted, into fully paid and nonassessable shares of Common
Stock of the Corporation at the rate of ten (10) shares of Common Stock for each
shares of Class B Common Stock so surrendered for conversion provided, however,
that any such shares issued in connection with any corporation acquisition may
not be converted until such shares have been released from any escrow agreement
in connection with such acquisition.
(b) The number of shares of Common Stock into which a share of Class B
Common Stock is convertible shall be subject to adjustment from time to time
only as follows:
<PAGE>
(i) If after the date on which shares of Class B Common Stock are first
issued the number of outstanding shares of Common Stock is increased by a
dividend declared payable in shares of Common Stock to all holders of its Common
Stock or by a subdivision of shares of Common Stock, the number of shares of
Common Stock into which a share of Class B Common Stock is convertible shall be
increased in proportion to such increase in the outstanding shares of Common
Stock. Such adjustment shall become effective immediately after the opening to
business on the day following the date on which the Corporation takes a record
of the holders of Common Stock for the purpose of entitling them to receive such
dividend or the day upon which such subdivision becomes effective.
(ii) If after the date on which shares of Class B Common Stock are
first issued the number of outstanding shares of Common Stock is decreased by a
combination of shares of Common Stock, the number of shares of Common Stock into
which a share of Class B Common Stock is convertible shall be decreased in
proportion to such decrease in the outstanding shares of Common Stock. Such
adjustment shall become effective immediately after the opening of business on
the day upon which such combination becomes effective.
(iii) For the purposes of making the adjustments referred to in
subparagraphs (i) and (ii) above, the books of the Corporation shall control
absolutely in determining the number of outstanding shares of Common Stock and
the number of additional shares issued or decrease in shares as a result of any
stock dividend, subdivision or combination.
<PAGE>
(iv) In case of any consolidation or merger of the Corporation with or
into another corporation or in case of any sale or conveyance to another
corporation of all or substantially all the assets of the Corporation or in case
the Corporation issues by reclassification or recapitalization of its Common
Stock any shares of the Corporation, the holder of each share of Class B Common
Stock then outstanding shall have the right thereafter, so long as his
conversion right hereunder shall exist, to convert such share into the kind and
amount of shares of stock and other securities and property receivable upon such
consolidation, merger, sale, conveyance, reclassification or recapitalization by
a holder of the number of shares of Common Stock into which such share might
have been converted immediately prior to such consolidation, merger, sale,
conveyance, reclassification or recapitalization and shall have no other
conversion rights under these provisions; provided, that effective provision
shall be made, in the Articles or Certificate of Incorporation of the resulting
or surviving corporation or otherwise, so that the provisions set forth herein
for the protection of the conversions rights of the shares of Class B Common
Stock shall thereafter be applicable, as nearly as reasonably may be, to any
such other shares of stock and other securities and property deliverable upon
conversion of the shares of Class B Common Stock remaining outstanding or other
convertible securities received by the holders in place thereof; and provided
further that any such resulting or surviving corporation shall expressly assume
the obligation to deliver, upon the exercise of the conversion privilege, such
shares, other securities or property as the holders of the shares of Class B
Common Stock remaining outstanding, or other convertible securities received by
the holders in place thereof, shall be entitled to receive pursuant to these
provisions, and to make provisions for the protection of the conversion right as
above provided. In case securities or property other than Common Stock shall be
issuable or deliverable upon conversion, then all references in this Section (v)
shall be deemed to apply, so far as appropriate and as nearly as may be, to such
other securities or property.
<PAGE>
(v) No fractional share of Common Stock shall be issued upon any
conversion but, in lieu thereof, there shall be paid to the holder of the shares
of Class B Common Stock surrendered for conversion as soon as practicable after
the date such shares are surrendered for conversion, an amount in cash equal to
the same fraction of the current market price per share of Common Stock, unless
the Board of Directors shall determine to adjust fractional shares in some other
manner.
(vi) No adjustment in the number of shares of Common Stock into which
each share of Class B Common Stock is convertible shall be required unless such
adjustment would require an increase or decrease of at least 1/25th of a share
in the number of shares of Common Stock into which such share is then
convertible; provided, however, that any adjustments which by reason of this sub
paragraph are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(vii) Whenever an adjustment is required in the shares into which each
share of Class B Common Stock is convertible, the Corporation shall forthwith
(i) file with the transfer agent, if any, for the Class B Common Stock a
statement describing in reasonable detail the adjustment and the method of
calculation used and (ii) cause a copy of such notice to be mailed to the
holders of record of the shares of Class B Common Stock.
<PAGE>
(c) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares the full number of shares of Common Stock
into which all shares of Class B Common Stock from time to time outstanding are
convertible.
(d) The Corporation will pay any and all issue and other taxes that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Class B Common Stock. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of Common Stock in a name other than
that in which the shares of Class B Common Stock is converted were registered,
and no such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Corporation the amount of any such tax, or
has established, to the satisfaction of the Corporation, that such tax has been
paid.
FLEXICARE, INC.
By: /s/ Dominick Inodara
---------------------
Dominick Inodara
President
June 15, 1994
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
FLEXICARE, INC.
Pursuant to the provision of section 607.1005, Florida Statutes, the undersigned
corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: Amendment(s) adopted: Name Change to Pillar Entertainment group, Inc.
SECOND: If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing the amendment if not
contained in the amendment itself, are as follows:
THIRD: The date of each amendment's adoption: 3-15-96.
FOURTH: Adoption of Amendment(s) (check one)
____ The amendment(s) was/were adopted by the incorporators or board of
directors without shareholder action and shareholder action was not
required.
___X___ The amendment(s) was/were approved by the shareholders. The number of
votes cast for the amendment(s) was/were sufficient for approval.
______ The amendment(s) was/were approved by the shareholders through voting
groups.
(The following statement must be separately provided for each voting
group entitled to vote separately on the amendment(s).)
The number of votes cast for the amendment(s) was/were sufficient for
approval by _________. (voting group)
(continued)
<PAGE>
Signed this 18 day of March 1996.
FLEXICARE, INC.
-------------------------
Corporation Name
By: /s/ G.F. Labrozzi
----------------------
G.F. Labrozzi
Secretary/Director
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
Pilar Entertainment Group, Inc.
Pursuant to the provisions of section 607.1006, Florida Statutes, This Florida
profit corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: Amendment(s) adopted: (indicate article number(s) being amended, added
or deleted)
Name change to: FLEXICARE, INC.
SECOND: If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing the amendment if not
contained in the amendment itself, are as follows:
<PAGE>
THIRD: The date of each amendment's adoption : 7/10/96.
FOURTH: Adoption of Amendment(s) (CHECK ONE)
_X_ The amendment(s) was/were approved by the shareholders. The number of
votes cast for the amendment(s) was/were sufficient for approval.
___ The amendment(s) was/were approved by the shareholders through voting
groups. The following statement must be separately provided for each voting
group entitled to vote separately on the amendment(s):
" The number of votes cast the amendment(s) was/were sufficient
for approval by _________________________________________."
voting group
___ The amendment(s) was/were adopted by the board of directors without
shareholder action and shareholder action was not required.
___ The amendment(s) was/were adopted by the incorporators without shareholder
action and shareholder action was not required.
Signed this 31 day of July, 1996
By: /s/ M. Fried
--------------------
M. Fried
Secretary/Director
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FLEXICARE, INC.
Pursuant to the provisions of Section 607.1006, Florida Statutes, the
undersigned corporation adopts the following articles of amendment to its
articles of incorporation:
FIRST: Amendments adopted:
Name change to: Pillar Entertainment Group, Inc.
Officers and Directors
G.F. Labrozzi - Chief Executive Officer, Chairman of the Board
Gregory L. Paige - President, Director
Address for each is 801 Brickell Avenue, Suite 932, Miami FL 33131
SECOND: If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing the amendment if not
contained in the amendment itself, are as follows:
THIRD: The date of each amendment's adoption: September 9, 1996.
FOURTH: Adoption of Amendment(s) (CHECK ONE)
___ The amendment(s) was/were adopted by the incorporators or board of directors
without shareholder action and shareholder action was not required.
_X_ The amendment(s) was/were approved by the shareholders. The number of
votes cast for the amendment(s) was/were sufficient for approval.
___ The amendment(s) was/were approved by the shareholders through voting
groups.
(The following statement must be separately provided for each voting
group entitled to vote separately on the amendment(s)).
The number of votes case the amendment(s) was/were sufficient
for approval by _________________________________________.
voting group
(Continued)
<PAGE>
Signed this 9 day of Sept., 1996.
FLEXICARE, INC.
By: /s/ G.F. Labrozzi
-----------------------
G.F. Labrozzi
Chairman
-----------------------
(Title)
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PILLAR ENTERTAINMENT GROUP, INC.
THE UNDERSIGNED, the President of PILLAR ENTERTAINMENT GROUP, INC. a Florida
Corporation, does hereby certify that:
FIRST: "That the Board of Directors of said Corporation, by written consent
filed with the minutes of the Board, adopted the following resolution proposing
and declaring advisible the following amendment to the Certificate of
Incorporation of said Corporation:
"That Article FIRST of the Certificate of Incorporation be amended and, as
amended, read a follows:
'FIRST: The name of the Corporation is "CHRYSALIS HOTELS AND RESORTS
CORP.";
SECOND: That the aforesaid amendment was duly adopted by consent of the
requisite majority of the shareholders of this Corporation in accordance with
the applicable provisions of Section 607 of the Business Corporation Act of the
State of Florida. The number of votes cast by the shareholders was sufficient
for approval.
THIRD: Prompt notice of the taking of this corporate action is being given
to all stockholders who did not consent in writing, in accordance with Section
607 of the Business Corporation Act of the State of Florida.
The date adoption was October 31, 1997.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by
Brent Nelson, its President and Secretary this 3rd day of November 1997.
PILLAR ENTERTAINMENT GROUP, INC.
By: /s/ Brent Nelson
------------------------
Brent Nelson, President
ATTEST:
By: /s/ Brent Nelson
-------------------------
Brent Nelson, Secretary
<PAGE>
STATE OF WASHINGTON
COUNTY OF KING
On this 3rd day of November, 1997 before me the undersigned officer,
personally appeared BRENT NELSON who, being first duly sworn by me, declared
that he is the President of the PILLAR ENTERTAINMENT GROUP, INC., and that he
being authorized to do so, executed the foregoing instrument for the purposes
therein contained, by signing the name of the corporation by himself as such
officer; and that the statements therein contained are true.
IN WITNESS WHEREOF I have hereunto set me hand and official seal.
By: /s/ Carol A. Barden
------------------------------
Carol A. Barden, Notary Public
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CHRYSALIS HOTELS & RESORTS CORP.
THE UNDERSIGNED, the President of CHRYSALIS HOTELS & RESORTS, CORP. a
Florida corporation, does hereby certify that:
FIRST: That the Board of Directors of said Corporation, by written
consent filed with the minutes of the Board, adopted the following resolution
proposing and declaring advisable the following amendment to the Certificate of
Incorporation of said Corporation:
"That Article I of the Articles of Incorporation be amended and, as
amended, read as follows:
'I - NAME: The name of the Corporation is "CYBERECORD, INC.";
SECOND: That the aforesaid amendment was duly adopted by consent of the
requisite majority of the shareholders of this Corporation in accordance with
the applicable provisions of Section 607 of the Business Corporation Act of the
State of Florida, on May 6, 1999.
FORTH: Prompt notice of the taking of this corporate action is being
given to all stockholders who did not consent in writing, in accordance with
Section 607 of the Business Corporation Act of the State of Florida.
IN WITNESS WHEREOF, the Corporation has caused this Articles of
Amendment to be signed by Thomas Morikawa, its President, this 6th day of May
1999.
CHRYSALIS HOTELS & RESORTS, CORP.
By: /s/ Thomas Morikawa
--------------------
Thomas Morikawa, President
BYLAWS OF
FLEXI-BUILT MODULAR HOUSING CORPORATION
ARTICLE A.
OFFICES
The Corporation may have offices at such places within or without the
State of Florida as the board may, from time to time, establish.
ARTICLE B.
SHAREHOLDERS
1. Annual Meeting. The annual meeting of the Shareholders of this
Corporation shall be held annually on a date and a time and place designated
from time to time by the Board of Directors of the Corporation. Business
transacted at the annual meeting shall include the election of Directors of the
Corporation and the transaction of any other proper business. If the designated
day shall fall on a Sunday or legal holiday, then the meeting shall be held on
the first business day thereafter.
2. Special Meetings. Special Meetings of the Shareholders shall be held
when directed by the President or the Board of Directors, or when requested in
writing by the holders of not less than ten percent (10%) of all the shares
entitled to vote at the meeting. Such written request must be signed, dated and
delivered to the Secretary of the Corporation. A meeting requested by
Shareholders shall be called for a date not less than ten (10) nor more than
sixty (60) days after the request is made unless the Shareholders requesting the
meeting designate a later date. The call for the Special Meeting shall be issued
by the Secretary, unless the President, Board of Directors, or Shareholders
requesting the Special Meeting shall designate another person to do so. Such a
request for a Special Meeting shall state the purpose of the proposed Special
Meeting. Business transacted at any Special Meeting shall be limited to the
purpose stated in the notice thereof.
3. Place of Meeting. Meetings of Shareholders shall be held at the
principal place of business of the Corporation or at such other place as may be
designated by the Board of Directors.
4. Notice of Meeting. Written notice to each Shareholder of record
entitled to vote stating the place, day and hour of the meeting and, in the case
of a Special Meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than ten (10) nor more than sixty (60) days before
the meeting either personally, by mail, telegram or overnight carrier. if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the Shareholder at the Shareholder's address as it
appears on the stock transfer books of the Corporation, with postage prepaid. If
notice is given by telegram or overnight courier, such notice shall be deemed to
be delivered when the telegram or overnight carrier is delivered to the
telegraph company or overnight carrier. If any Shareholder shall transfer such
Shareholder's stock after notice, it shall not be necessary to notify the
transferee. Any Shareholder may waive notice of any meeting either before,
during or after the meeting. The attendance of a Shareholder at a meeting shall
constitute a waiver of notice of such meeting, except where a Shareholder
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
5. Notice of Adjourned Meeting. When a meeting is adjourned to another
time or place, it shall not be necessary to give any notice of the adjourned
meeting if the time and place to which the meeting is adjourned are announced at
the meeting at which the adjournment is taken; and any business may be
transacted at.the adjourned meeting that might have been transacted on the
original date of the meeting. If, however, after adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in paragraph 4 of this Article to
each Shareholder of record on the new record date entitled to vote at such
meeting.
1
<PAGE>
6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten (10) days
before each meeting of Shareholders, a complete list of Shareholders entitled to
vote at such meeting, or any adjournment thereof, arranged in alphabetical
order, with the address and number of shares held by each, which list, for a
period of ten (10) days prior to such meeting, shall be kept on file at the
principal office of the Corporation and shall be subject to inspection by any
Shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any Shareholder during the whole time of the meeting. The
original stock transfer book shall be prima facie evidence as to who are the
Shareholders entitled to examine such list or to vote at any meeting of the
Shareholders.
7. Transfer Books and Record Date. For the purposes of determining
Shareholders entitled to notice of, or 'to vote at any meeting, or entitled to
receive payment of any dividend, or in order to make a determination of
Shareholders for any other purpose, the Board of Directors may close the stock
transfer books of the Corporation as provided by law.
8. Quorum. Except as otherwise provided in these Bylaws, or as required
by the Articles of Incorporation, the majority of the shares entitled to vote
(50% + 1), represented in person or by Proxy, shall constitute a Quorum at a
meeting of Shareholders, but in no event shall a Quorum consist of less than one
third (1/3) of the shares entitled to vote at the meeting.
After a Quorum has been established at a Shareholders, meeting, the
subsequent withdrawal of Shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a Quorum, shall
not effect the validity of any action taken at the meeting or any adjournment
thereof.
9. Voting of Shares. Each Shareholder entitled to vote shall at every
meeting of Shareholders be entitled to one (1) vote for each share of voting
stock held by them.
10. Proxy. Every Shareholder entitled to vote at a meeting of
Shareholders, or to express consent or dissent without a meeting, or the
Shareholder's duly authorized attorney-in-fact, may authorize another person or
persons to act for the Shareholder by Proxy. The Proxy must be signed by the
Shareholders or their attorney-in-fact. No Proxy shall be valid after the
expiration of eleven (11) months from the date thereof, unless otherwise
provided in the Proxy or by Florida law.
ii. Informal Action by Shareholders. Unless otherwise provided by law or
by the Articles of Incorporation, any action required to be taken at a regular
meeting of the Shareholders, or any other action which may be taken at a Special
Meeting of the Shareholders may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed by holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize such action at a meeting at which all shares entitled to
vote thereon were present and voted. Within ten (10) days after obtaining such
authorization by written consent, notice must be given to those Shareholders who
have not consented in writing. The notice shall fairly summarize the material
features of the authorized action and, if the action shall have been such that
dissenters, rights are provided under Florida law, the notice shall contain a
clear statement of the right of Shareholders dissenting therefrom to be paid the
fair value of their shares upon compliance with certain further provisions of
such Florida law regarding the rights of dissenting Shareholders.
2
<PAGE>
ARTICLE C.
BOARD OF DIRECTORS
1. General Powers. The business of the Corporation shall be managed and
its corporate powers exercised by its Board of Directors.
2. Number, Tenure and Qualifications. The Board of Directors shall
consist of at least one (1) director. The number may be altered from time to
time by the Shareholders. Directors shall be elected at the annual meeting of
Shareholders and each Director elected shall hold office until such Director's
successor has been elected and qualified, or until their prior resignation or
removal. It shall not be necessary for Directors to be Shareholders.
3. Vacancies. If the office of any Director, member of a committee or
other officer becomes vacant, the remaining Directors in office, by a majority
(50% + 1) vote, though this may constitute less than a quorum of the Board of
Directors, may appoint any qualified person to fill such vacancy, who shall hold
office for the unexpired term and until their successor shall be duly elected
and has qualified.
4. Removal of Directors. Any or all of the Directors may be removed
with or without cause by vote of a majority (50% + 1) of all of the shares
outstanding and entitled to vote at a Special Meeting of Shareholders called for
that purpose.
5. Resignation. A Director may resign at any time by giving written
notice to the Board, the President or the Secretary of the Corporation. Unless
otherwise specified in the notice, the resignation shall take effect upon
receipt thereof by the Board of Directors or of such officer, and the acceptance
of the resignation shall not be necessary to make it effective.
6. Quorum of Directors. A majority of the Directors (50% + 1) shall
constitute a quorum for the transaction of business. If at any meeting of the
Board there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no further
notice thereof need be given other than by announcement at the meeting which
shall be so adjourned. 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.
7. Place and Time of Board Meetings. The Board may hold its meetings at
the office of the Corporation or at such other place, either within or without
the State of Florida as it may, from time to time, determine.
8. Notice of Meetings of The Board. A regular annual meeting of the
Board may be held without notice at such time and place as it shall, from time
to time, determine. Special Meetings of the Board shall be held upon notice to
the Directors and may be called by the President upon two (2) days, notice to
each Director, either personally or by mail or by wire. Special Meetings shall
be called by the President or by the Secretary in a like manner on written
request of a Director. Any Special Meeting may be held by telephone conference
as set forth in Section 11 hereof. Notice of a meeting need not be given to any
Director who submits a waiver of notice whether before or after the meeting, or
who attends the meeting without protesting prior thereto, or at its
commencement, the lack of notice to him.
9. Annual Meeting. An annual meeting of the Board shall be held
immediately following, and at the same place as, the annual meeting of
Shareholders.
10. Compensation. No compensation shall be paid to Directors, as such,
for their services, but by resolution of the Board, a fixed sum and expenses for
actual attendance, at each regular or Special Meeting of the Board may be
authorized. Nothing herein contained shall be construed to preclude any Director
from serving the Corporation in any other capacity and receiving compensation
therefor.
3
<PAGE>
11. Action by Telephonic Conference. The Directors may act at a meeting
by means of a conference by telephone or similar communications equipment by
means of which all persons participating in the meeting can communicate with
each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
12. Presumption of Assent. A Director of the Corporation who is present
at a meeting of the Board of Directors at which action on any corporate matter
is taken shall be presumed to have assented to the action unless he voted
against such action or abstains from voting in respect thereto because of an
asserted conflict of interest.
13. Informal Action by Board. Any action required or permitted to be
taken by any provision of law, of the Articles of Incorporation or of these
Bylaws at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if a written consent thereto is signed by all
members of the Board or of such committee, as the case may be.
ARTICLE D.
OFFICERS
1. Officers, Election and Term. The Board may elect or appoint a
President, one or more Vice Presidents, a Secretary, a Treasurer, and such other
officers as it may determine, who shall have such duties and powers as
hereinafter provided.
All officers shall be elected or appointed to hold office until the
meeting of the Board following the next annual meeting of Shareholders and until
their successors have been elected or appointed and qualified.
Any two (2) or more offices may be held by the same person.
2. Removal, Resignation. Salary. Etc. Any officer elected or appointed
by the Board may be removed by the Board with or without cause.
In the event of the death, resignation or removal of an officer, the
Board, in its discretion, may elect or appoint a successor to fill the unexpired
term.
Any officer elected by the Shareholders may be removed only by vote of
the Shareholders unless otherwise provided by the Shareholders.
The salaries of all officers shall be fixed by the Board.
The Directors may require any Officer to give security for the faithful
performance of his duties.
3. Duties. The officers of this Corporation shall have the following
duties:
The President shall be the chief executive officer of the Corporation
and shall have general and active management of the business and affairs of the
Corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the Shareholders and Board of Directors.
The Vice-President shall possess and may exercise, such power and
authority, and shall perform such duties as may from time to time be assigned to
him or her by the Board of Directors or the President.
The Secretary shall have custody of and maintain all of the corporate
records except the financial records; shall record the minutes of all meetings
of the Shareholders and Board of Directors, and send all notices of all meetings
4
<PAGE>
and perform such other duties as may be prescribed by the Board of Directors or
the President and shall perform such duties as may from time to time be assigned
to him or her by the Board of Directors or the President.
The Treasurer shall have custody of all corporate funds and maintain all
of the financial records and shall keep accurate financial records and shall
render reports thereof of the annual meetings of Shareholders and at other times
when requested to do so by the Board of Directors and shall perform such duties
as may from time to time be assigned to him or her by the Board of Directors or
the President.
4. Removal of officers. An officer or agent elected or appointed by the
Board of Directors may be removed with or without cause by the Board whenever in
the Board's judgment, the best interests of the Corporation will be served
thereby.
Any vacancy in any office may be filled by the Board of Directors for
the unexpired term.
ARTICLE E.
EXECUTIVE AND OTHER COMMITTEES
1. Creation of Committees. The Board of Directors may, by resolution,
passed by a majority of the Board, designate an executive committee and one or
more other committees, each to consist of two (2) or more of the Directors of
the Corporation.
2. Executive Committee. The executive committee, if there shall be one,
shall consult with and advise the officers of the Corporation in the management
of its business and shall have and may exercise, to the extent provided in the
resolution of the Board of Directors creating such executive committee, such
powers of the Board of Directors as can be lawfully delegated by the Board.
3. Other Committees. Such other committees shall have such functions
and may exercise the powers of the Board of Directors as can be lawfully
delegated and to the extent provided in the resolution or resolutions creating
such"committee or committees.
4. Meetings of Committees. Regular meetings of the executive committee
and other committees may be held without notice at such time and at such place
as shall from time to time be determined by the executive committee or such
other committees, and Special Meetings of the executive committee or such other
committees may be called by any member thereof upon two (2) days' notice to each
of the other members of such committee, or on such shorter notice as may be
agreed to in writing by each of the members of such committee, given either
personally or in the manner provided in Section 8 of Article III of these Bylaws
(pertaining to notice for Directors, meetings).
5. Vacancies on Committees. Vacancies on the executive committee or on
such other committees shall be filled by the Board of Directors then in office
at any regular or Special Meeting.
6. Quorum on Committees. At all meetings of the executive committee or
such other committees, a majority (50% + 1) of the committee's members then in
office shall constitute a quorum for the transaction of business.
7. Manner of Action of Committees. The acts of a majority (50% + 1) of
the members of the executive committee or such other committees, present at any
meeting at which there is a quorum, shall be the act of such committee.
8. Minutes of Committees. The executive committee, if there shall be
one, and such other committees shall keep regular minutes of their proceedings
and report the same to the Board of Directors when requested.
5
<PAGE>
9 Compensation. Members of the executive committee and such other
committees may be paid compensation in accordance with the provisions of
Articles III, Section 10 of these bylaws (pertaining to compensation of
Directors).
ARTICLE F.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall indemnify any person made or threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by, or in the right of, the Corporation) , brought to impose a liability or
penalty on such person in his capacity of Director, officer, employee or agent
of this Corporation, or of any other corporation which such person serves as
such at the request of this Corporation, against judgments, fines, amounts paid
in settlement and expenses, including attorney's fees, actually and reasonably
incurred as a result of such action, suit or proceeding, or any appeal thereof,
if they acted in good faith in the reasonable belief that such action was in the
best interest of this Corporation, and in criminal actions or proceedings
without reasonable ground for belief that such action was unlawful. The
termination of any such civil or criminal action, suit or proceedings by
judgment, settlement, conviction or upon a plea of nolo contenders shall not in
itself create a presumption that any Director or officer did not act in good
faith in the reasonable belief that such action was in the best interests of
this Corporation or that they had reasonable ground for belief that such action
was unlawful. The foregoing rights of indemnification shall apply to the heirs
and personal representatives of any such Director, officer, employee or agent
and shall not be exclusive of other rights to which they may be entitled.
ARTICLE G.
CERTIFICATE OF STOCK
1. Issuance. Unless otherwise determined by the Board of Directors,
every holder of shares in this Corporation shall be entitled to have a
certificate representing all shares of which they are entitled. No certificate
shall be issued for any share until such share is fully paid.
2. Form. Certificates representing shares in this Corporation shall be
signed by the President or Vice President and the Secretary or an Assistant
Secretary and may be sealed with the seal of this Corporation or a facsimile
thereof.
3. Transfer of Shares. Transfers of shares of the Corporation shall be
made upon the Corporation's books by the holder of the shares in person or by
the holder's lawfully constituted representative, upon surrender of the
certificate of stock for cancellation. The person in whose name shares stand on
the books of the Corporation shall be deemed by the Corporation to be the owner
thereof for all purposes and the Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person whether or not the Corporation shall have express or other notice
thereof, unless otherwise provided by the laws of the State of Florida. Every
certificate representing shares which are restricted as to sale, disposition or
other transfer shall state that such shares are restricted as to such transfer
or disposition and shall set forth or fairly summarize upon the certificate, or
state that the Corporation will furnish to any holder thereof, upon request and
without charge, a full statement of such restrictions.
4. Facsimile Signature. Where a certificate is signed (1) by a transfer
agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf
of the Corporation and a registrar, the signature of any such Chairman of the
Board, President, Vice President, Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary may be facsimile. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates and have ceased to be such officer or officers then
such certificate or certificates may nevertheless be adopted by the Corporation
6
<PAGE>
and be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have been
used thereon had not ceased to be such officer or officers of the Corporation.
5. Lost, Stolen or Destroyed Certificates. If a Shareholder shall claim
to have lost or destroyed a certificate of shares issued by the Corporation, a
new certificate shall be issued upon the making of an affidavit of that fact by
the person claiming the certificate of stock to be lost, stolen or destroyed,
and, at the discretion of the Board of Directors, upon the deposit of a bond or
other indemnity in such amount and with such sureties, if any, as the Board may
reasonable require.
ARTICLE H.
BOOKS AND RECORDS
1. General. This Corporation shall keep correct and complete books and
records of account and shall keep minutes of the proceedings of its
Shareholders, Board of Directors and committees of Directors.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
2. Inspection. All Shareholders who are entitled to inspect the
Corporation's books and records pursuant to Florida law shall have such
inspection rights as prescribed by the most recent Florida law available when
the request is made.
ARTICLE I.
DISTRIBUTIONS
The Board of Directors of the Corporation may, from time to time,
declare, and the Corporation may make, distributions to the Shareholders,
subject to the restrictions of applicable law.
ARTICLE J.
CORPORATE SEAL
The seal of the Corporation shall be circular in form and bear the name
of the Corporation, the year of its organization and the words "CORPORATE SEAL,
FLORIDA." The seal may be used by causing it to be impressed directly on the
instrument or writing to be sealed, or upon adhesive substance affixed thereto.
The seal on the certificates for shares or on any corporate obligation for the
payment of money may be facsimile, engraved or printed.
ARTICLE K.
EXECUTION
All corporate instruments and documents shall be signed or
countersigned, executed, verified or acknowledged by such officer or officers or
other person or persons as the Board may, from time to time, designate.
7
<PAGE>
ARTICLE L.
FISCAL YEAR
The fiscal year of the Corporation shall be the 12-month period selected
by the Board of Directors as the taxable year of the Corporation for federal
income tax purposes.
ARTICLE M.
NOTICE AND WAIVER OF NOTICE
Whenever any notice is required by these Bylaws to be given, personal
notice is not meant unless expressly so stated, and any notice so required shall
be deemed to be sufficient if given by depositing the same in the post office
box in a sealed post-paid wrapper, addressed to the person entitled thereto at
his last known post office address, and such notice shall be deemed to have been
given on the day of such mailing. Shareholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
Florida Law.
Whenever any notice is required to be given under the provisions of any
law or under the provisions of the Articles of incorporation of the Corporation,
or these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE N.
CONSTRUCTION
Whenever a conflict arises between the language of these Bylaws and the
Articles of Incorporation, the Articles of Incorporation shall govern.
ARTICLE 0.
BUSINESS
1. Conduct of Business Without Meetings. Any action of the
Shareholders, Directors and any committee may be taken without a meeting if
consent in writing setting forth the action so taken shall be signed by all
persons who would be entitled to vote on such action at a meeting and filed with
the Secretary of the Corporation as part of the proceedings of the Shareholders,
Directors or committees, as the case may be.
2. Management by Shareholder. In the event the Shareholders are named
in the Articles of Incorporation and are empowered therein to manage the affairs
of the Corporation in lieu of Directors, the Shareholders of the Corporation
shall be deemed Directors for the purposes of these Bylaws, and wherever the
words "directors, 11 "Board of Directors" or "Board" appear in these Bylaws,
those words shall be taken to mean Shareholders.
The Shareholders may, by majority vote (50!k + 1) , create a Board of
Directors to manage the business of the Corporation and exercise its corporate
powers.
ARTICLE P.
AMENDMENTS
1. By Shareholders. The Bylaws shall be subject to alteration or
repeal, and new Bylaws may be made, by the affirmative vote of Shareholders
holding of record in the aggregate at least a majority of the outstanding shares
entitled to vote,in the election of Directors at any annual or Special Meeting
of Shareholders, provided that the notice or waiver of notice of such meeting
shall have summarized or set forth in full therein the proposed amendment.
8
<PAGE>
2. By Directors. The Board of Directors shall have power to make,
adopt, alter, amend and repeal, from time to time, the Bylaws of the
Corporation; provided, however, that the Shareholders entitled to vote with
respect thereto as in this Article XVI above provided, may alter, amend or
repeal Bylaws made by the Board of Directors, except that the Board of Directors
shall have no power to change the quorum for meetings of Shareholders or of the
Board of Directors, or the change any provisions of the Bylaws with respect to
the removal of Directors or the filling of vacancies in the Board resulting from
the removal by the Shareholders. If any Bylaw regulating an impending election
of Directors is adopted, amended or repealed by the Board of Directors, there
shall be set forth in the notice of the next meeting of shareholders for the
election of Directors, the bylaw so adopted, amended or repealed together with a
concise statement of the changes made.
9
CONSULTING AGREEMENT
This Agreement is made and entered into this _____ day of March, 1999, between
CybeRecord, Inc. (Nevada) (the "Company") and Northwest Capital Partners, L.L.C.
(the "Consultant"), and sets forth the terms and conditions upon which the
Consultant will act as financial advisor to the Company in connection with the
completion of the financing described in Exhibit "A" attached hereto (the
"Financing").
In consideration for the mutual promises and covenants contained herein, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. PURPOSE. The Company hereby engages the Consultant during the term hereof to
arrange financing, as a finder, for the Company upon terms and conditions as set
forth herein and in accordance with the requirements set forth in Exhibit "A"
(the "Financing"). Consultant shall also have a right of first refusal to
consult with the Company regarding appropriate financings subsequent to the
Financings set forth in Exhibit "A" for a period of three years following the
term of this Agreement.
2. TERM. The term of this Agreement shall be for a period of 36 months, provided
that the first Interim Financing shall be completed within 30 days of the
Company's approval and, following the quotation of the Company's common stock on
the NASD OTC Bulletin Board. The second Interim Financing shall be completed
within 180 days of the Company's approval, following the quotation of the
Company's common stock on the NASD OTC Bulletin Board. This offering will be
pursuant to Rule 504 or other applicable Rule adopted pursuant to the Securities
Act of 1933, as amended (the "Act"). A third round of financing, if required,
shall be negotiated and completed after the 180 day period following the date
the Company's common stock is quoted on the NASD OTC Bull tin Board.
3. DUTIES OF THE CONSULTANT. During the term hereof, Consultant shall provide
the Company with the benefit of its best judgment and efforts to complete the
Financing on a reasonable business basis in accordance with the requirements set
forth in Exhibit "A." It shall be Consultant's duty to suggest and evaluate from
the standpoint of financial soundness, the Company's business plans and
programs, corporate financial structures, and corporate organization, and any
other financial matters involving the Company. In connection with the financing
contemplated by this Agreement, Consultant agrees that it will advise and work
with the Company to complete the Financing successfully in accordance with Rule
504 or other applicable Rule under the Act and the related and applicable Blue
Sky laws of the states in which the financing is completed. Consultant shall
advise the Company of each proposed broker or other financing or referral source
identified by Consultant prior to authorizing any participation in the
Financing. Consultant shall use its best efforts, after receiving information
from Company sufficient to comply with the informational requirements of Rule 1
<PAGE>
5c2-l 1 under the Securities Exchange Act of 1934 (the "1934 Act"), to arrange
for the shares of common stock of the Company to be quoted on the NASD OTC
Bulletin Board either by direct application and approval through the NASD or by
reverse merger. The Company and the Consultant shall review the potential filing
of a Form 10 (1934 Act form) with the U.S. Securities and Exchange Commission
following the Second Stage Financing. Company agrees that it will accept
Financing amounts at each closing contemplated by Exhibit "A" which are in
excess of the amounts in Exhibit "A" if Consultant is able to raise such
additional amounts in accordance with the appropriate disclosure and the
securities registration exemption provisions of the Act and the relevant Blue
Sky laws. Consultant's duties shall also include, but not be limited to:
3.1 Assist the Company's management in the development and execution of a
strategic short-term, intermediate term and long-term financial plan;
3.2 Assist the Company in the negotiation of the terms of the Financings;
3.3 Assist the management of the Company in connection with inquiries made by
or on behalf 0 any proposed brokers and investors;
3.4 Assist the management of the Company in the preparation of presentation
materials for the purpose of pursuing the Financing;
3.5 Using its best efforts, on terms acceptable to the Company, to arrange
the Financings as described in Exhibit "A" attached hereto.
3.6 If the Company and the Consultant determine that a direct application to
the NASD is not n the best interest of the Company and determine that the
Company go public by way of a reverse merger with an existing publicly traded
company the Consultant will be responsible for the location and acquisition of
such public company including all costs associated with its acquisition.
4. CONSULTANT'S COMPENSATION.
4.1 The Company shall pay Consultant a fee of $500.00 for each month or
partial month this Agreement has been in effect, providing that such payment
shall be paid, as accrued, at the closing of the Interim Financing and then
continuing through the closing of the Second and Third Stage Financings, as
described in Exhibit "A," by the Consultant. Upon the closing of any Third Round
of Financing, the fee of $500.00 will be increased to $1,000.00 per month will
be extended for an additional 36 months, for duties to be mutually agreed upon
by the parties.
4.2 The Company agrees to issue the Consultant 500,000 shares at a value of
$0.01 per share if the Company's market capitalization achieves the value of
$100,000,000.00 or more. The Company agrees to issue the Consultant an
additional 500,000 shares a' a value of $0.01 per share if the Company's market
capitalization achieves the value of $200,000,000.00 or more. These shares will
be issued by the company as restricted shares at a value of $0.01 per share and
will be granted "piggy- back" rights so that the shares will be registered upon
the Company's first registration after the share's issuance.
<PAGE>
4.3 The Company agrees that it shall reimburse Consultant for reasonable,
out-of-pocket expenses incurred by Consultant in performing the services
provided pursuant to this Agreement, provided that such out-of-pocket expense
reimbursement shall not exceed $3,000 in any calendar month or partial month,
and provided that any expenses in excess of $500 ill any calendar month shall
require advance approval by the Company. Such reimbursement shall be paid upon
the within 15 days of the Company's receipt of the Consultant's invoice. Such
reimbursement may be claimed for any month commencing with the signing of this
Agreement and monthly thereafter to the date of each closing, payable within 15
days of receipt.
4.4 If he Consultant is unsuccessful in introducing investors to the Company
(either directly or through a broker) who would be willing to fund the
Financings contemplated in Exhibit "A" within the time periods set forth, this
Agreement may be terminated at the Company's discretion, unless otherwise
extended by mutual consent. Such consent will be implied should the Company be
in or continue negotiation with investors which should reasonably result in
successful Financing or should the Company accept funds from one of the sources
introduced to the Company by the Consultant during this period. Following
termination, however, Consultant will be entitled to the consideration above as
to those stages of the Financing completed and in the event that after
termination a financing of any kind or amount is consummated with any party
introduced to the Company by the Consultant during a period of twelve months
after termination of this Agreement.
5. INDEMNIFICATION.
5.1 The Company agrees to indemnify the Consultant, its agents and employees
against any and all claims, lawsuits, and litigation arising from
representations of the Company made t Consultant or prospective investors
concerning its business plan and financial condition. Such indemnification shall
include reasonable attorney's fees to defend any such actions or claims.
5.2 The Consultant agrees to indemnify the Company, its agents and employees
against any and all claims, lawsuits, and litigation arising from
representations of the Consultant made to prospective investors concerning the
Company except for those representations constituting information provided by
the Company. Such indemnification shall include reasonable attorney's fees to
defend any such actions or claims.
Promptly after receipt by an indemnified party of notice of any claim or
commencement of any action in respect of which indemnity may be sought, the
indemnified party will notify the indemnifying party in writing of the receipt
or commencement thereof and the indemnifying party shall have the right to
assume the defense of any such claim or action (including the employment of
counsel reasonably satisfactory to the indemnified party and the payment of fees
and expenses of such counsel), after which the indemnifying party shall not be
<PAGE>
liable to the indemnified party for any legal fees incurred by the indemnified
party in connection with the defense of such claim or action. Notwithstanding
the prior sentence, the indemnified party shall have the right to control its
defense if in the opinion of it counsel, the indemnified party's defense is
unique or separate to it, as the case may be, as opposed to a defense pertaining
to the indemnifying party. In such event, the indemnified party shall have the
right to retain counsel reasonably satisfactory to the indemnifying party at the
indemnifying party's expense, to represent it in any claim or action in respect
of which indemnity may be sought and agrees to cooperate with the indemnifying
party and the indemnifying party's counsel on the defense of any such claim of
action, it being understood, however, that the indemnifying party shall not, in
connection with any such claim or action or separate but substantially similar
or related claim or action in the same jurisdiction arising out of the same
general circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys, unless the defense of one indemnified party
is unique or separate from that of another indemnified party subject to the same
claim or action. No party shall be liable for any settlement of any claim or
action effected without its written consent.
6. REPRESENTATION AND WARRANTIES. Company represents and warrants as follows:
6.1 The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Nevada and is
qualified as a foreign corporation where required.
6.2 The shares of common stock of the Company which will be delivered to the
investors and Consultant will be duly authorized and validly issued and fully
paid and nonassessable.
7. CONDITIONS PRECEDENT. Consultant's duties to use its best efforts to complete
the Financings contemplated herein shall be subject to:
7.1 The Company will not change or modify the Company's capital structure
without the prior written consent of Consultant, which consent shall not be
unreasonably withheld.
7.2 The Company will submit quarterly budgets to Consultant during the period
of the Financing and for one year after successful completion of the Financing.
7.3 The Company will provide all pertinent information in connection with the
Company's assets, including, but not limited to, all tangible and intangible
assets, and all copyright and trademark information.
7.4 The Company shall have received executed employment agreements from each
of its officers and directors and other key individuals in a form reasonably
appropriate in accordance with industry standards.
<PAGE>
7.5 The Company will provide Consultant with all information and
verifications thereof which Consultant or its legal counsel may reasonably
request from the Company in a manner and form satisfactory to Consultant and its
legal counsel.
7.6 Receipt by Consultant of suitable financial statements of the Company
that are in form and substance satisfactory to Consultant, in its sole
discretion. The Company shall provide financia1 statements consisting of a
balance sheet and a related statement of income for the period then ended, which
fairly present the financial condition of each as of their respective dates and
for the periods involved, and such statements shall be prepared in accordance
with generally accepted accounting principles consistently applied or upon such
other basis as the parties shall mutually agree and for the periods mutually
agreed upon among the parties.
7.7 All existing shares of the Company have or will be issued in accordance
to Rule 4(2) of the 1933 Act and consequently, such securities will be
"Restricted Securities" as such term is defined in Rule 144 as promulgated under
the 1933 Act and thus will be subject to certain resale limitations as contained
in Rule 144 and the certificates shall bear the following restrictive legend
limiting their resale under Rule 144 of the Act.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED PURSUANT
TO A TRANSACTION EFFECTED IN RELIANCE UPON SECTION 4(2) OF THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND HAVE NOT BEEN THE SUBJECT OF A REGISTRATIQN
STATEMENT UNDER THE ACT OR ANY STATE SECURITIES ACT. THESE SECURITIES MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR APPIACABLE
EXEMPTION THEREFROM UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES ACT."
8. CONDITIONS SUBSEQUENT.
8.1 For a period of three years from the date of closing of a Financing
arranged by Consultant pursuant to this Agreement, the Company will provide
Consultant, at its expense, following a reasonable request by Consultant for the
purpose of reviewing and/or protecting the Company's shareholder's interests,
with copies of stock transfer sheets from the Company's Transfer Agent, as well
as weekly DTC Reports from the Depository Trust Company to the extent such
reports can be made available to a party that is not an affiliate of the
Company, and will provide Consultant with all publicly available financial
reports and publicly available reports of material developments regarding the
Company and its compliance with laws and regulations applicable thereto.
8.2 For a period of three years after the date that the Company's shares of
common stock commence trading on the NASD OTC Bulletin Board, the Company's
executive officers and directors who own at least five percent (5%) of the
<PAGE>
Company's common stock ("Principal Stockholders") and the Company shall provide
the Company with the right of first refusal with respect to any offering (public
or private) of the Company's securities by either the Company or the Principal
Stockholders involving more than 1000 shares of stock.
For a period of three years after the date that the Company's shares of common
stock commence trading on the NASD OTC Bulletin Board, the Company's executive
officers and directors who own at least five percent (5%) of the Company's
common stock ("Principal Stockholders") and the Company shall provide the
Consultant with the second right of first refusal with respect to any offering
(public or private) of the Company's securities by either the Company or the
Principal Stockholders involving more than 1000 shares of stock.
For a period of three years after the date that the Company's shares of common
stock commence trading on the NASD OTC Bulletin Board, the Company's executive
officers and directors who own at least five percent (5%) of the Company's
common stock ("Principal Stockholders") and the Company shall provide the other
Principal Stockholders of the Company with the third right of first refusal with
respect to any offering (public or private) of the Company's securities by
either the Company or the Principal Stockholders involving more than 1000 shares
of stock.
8.3 The Company's officers and directors will use their best efforts to cause
each Principal Shareholder and each other holder of 5% or more of the Company's
common stock to enter into an agreement with Consultant pursuant to the terms of
which each such person shall agree not to sell any shares owned by such person
on the NASD OTC Bulletin Board, for a period of twelve months after the date
that the Company's shares of common stock commence trading on the NASD OTC
Bulletin Board, without Consultant's prior written consent, which consent will
not be unreasonably withheld. Provided that each such person may sell up to
1,000 shares every three months after the first 180 days has passed after the
date that the Company's shares of common stock commence trading on the NASD OTC
Bulletin Board.
8.4 Consultant shall be entitled for a period of five years to nominate a
director for the Company's board of directors which the Company's existing
directors will support. Such director shall be paid the same salary as other
directors (for director's duties performed) and shall participate in all bonus
programs granted to the Company's board of directors.
9. TERMINATION OF RELATIONSHIP. This Agreement shall terminate upon the
happening of any one of the following events:
9.1 Either party may terminate this Agreement upon ten days written notice to
the other that a material breach by the other of the terms or covenants of this
Agreement shall have occurred and such breach shall not have been cured within
ten days after such notice. 9.2 Either party shall have the right (but not the
obligation) to terminate this Agreement upon written notice to the other party
if such terminating party reasonably determines that the other party or any of
its directors, officers or controlling shareholders has engaged in any unlawful,
wrongful, or fraudulent act against the Company or its shareholders.
<PAGE>
9.3 Either party shall have the right (but not the obligation) to terminate
this Agreement upon written notice to the other party if such terminating party
shall determine that any material fact concerning the other party represented to
them during the course of performing their undertakings under this Agreement are
misstated or untrue or that the other party has intentionally failed to provide
the terminating party with material facts concerning the other party.
9.4 Either party may terminate this Agreement at any time: (i) in the event
of war; (ii) in the event of any material adverse change in the business,
property or financial condition of the Company (of which terminating party shall
be the sole judge); (iii) in the event of any action, suit or proceeding at law
or at equity against the Company or Consultant, or by any Federal, State or
other commission or agency where any unfavorable decision would materially
adversely affect the business, property, financial condition or income of a
party; (iv) in the event of adverse market conditions of which event the
terminating party is to be the sole judge. Further, Consultant's commitment will
be subject to receipt by Consultant of all information and verifications thereof
which Consultant or their counsel may reasonably request from the Company in a
manner and form satisfactory to Consultant.
In the event of Termination by Consultant, upon grounds stated herein above,
Consultant shall be entitled to accrued fees and expense reimbursements and
shares otherwise payable shall be paid as though this Agreement was not
terminated.
10. MISCELLANEOUS.
10.1 Authorization. This Agreement has been duly authorized, executed and
delivered by and on behalf of the Company and the Consultant.
10.2. Notices. Any notice or other communication required or permitted by any
provision of this Agreement shall be in writing and shall be deemed to have been
given or served for all purposes if delivered personally or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed to the
parties as follows:
To Consultant: Northwest Capital Partners, L.L.C.
Mr. Brent Nelson
10900 NE 8th Street, Suite 900
Bellevue, Washington 98004
Tel : 425-455-1969
Fax : 425-990-5979
<PAGE>
To the Shareholders
and to the Company: CybeRecord, Inc. Nevada)
Mr. James Lucas
21 El Cerrito Ave.
San Mateo, California 94402
Tel : 650-343 4771
Fax: 650-343-4779
10.3 Validity; Complete Agreement. The validity and enforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof. This Agreement sets forth the entire understanding and
embodies the entire agreement of the parties with respect to the subject matter
covered hereby and supersedes all prior or contemporaneous oral or written
agreements, understandings, arrangements, negotiations or commumcations among
the parties hereto.
10.4 Amendment. This Agreement shall not be modified or amended except by
written agreement of the parties hereto.
10.5 Governing Law. This Agreement shall be governed by the laws of the state
of Washington giving effect to that state's conflict of laws principle.
In witness whereof, the parties hereto have executed this Agreement as of the
date first above written.
NORTHWEST CAPITAL PARTNERS, L.L.C.
By:
-----------------------
Brent Nelson, President
CYBERECORD INC. (NEVADA)
By:
---------------------------
James Lucas, Chairman & CEO
EXHIBIT "A"
CybeRecord, Inc. (Nevada) Financing Requirements
Attached hereto and made a part hereof the Agreement between CybeRecord, Inc.
(Nevada) and Northwest Capital Partners, L.L.C.
Dated March ___ 1999
MINIMUM AMOUNT APPROXIMATE DATE
$500,000 Interim Financing June 30, 1999
$500,000 Interim Financing (1) October31, 1999
Third Stage financings as required (2)
(1) The price per share of common stock shall be determined by the Company
following consultation with Consultant.
(1) The term "Interim Financing" as used in the Agreement shall include
segment 1 above.
(2) Within 6 months after the date the Company's common stock is quoted on the
NASD OTC Bulletin Board, provided that the Company has subsequently filed with
the U.S. Securities and Exchange Commission a Form 10 pursuant to Section 12(g)
of the 1934 Act.
CYBERECORD. INC. (NEVADA)
APPROVAL OF CAPITAL RESTRUCTURE
The undersigned hereby agree to revise the Capital Structure of CybeRecord, Inc.
(Nevada) as indicated below. Furthermore, the undersigned agree to allow the
CybeRecord, Inc. (Nevada) Compensation Committee to grant stock options from
those shares of stock reserved in the Employee Pool to new or existing hires, in
accordance. with the option package structure guidelines to be determined by the
CybeRecord, Inc. (Nevada) Compensation Committee, and at the Committee's
discretion.
Shareholder Shares
- ----------- ------
James Lucas 1,500,000
Glenn & Paulette Kimball 1,500,000
Marek Niczyporuk 1,300,000
James L. & Barbara Quinn 1,100,000
Herbert L. & Patricia A. Walker 500,000
Alva D. & Kirstin Cravens 100,000
Total Shares to be issued to CybeRecord, Inc. 6,000,000
Signed this ____ day of March, 1999 by:
Brent Nelson
President, Northwest Capital Partners, L.L.C.
James Lucas
Chairman & CEO CybeRecord, Inc. (Nevada)
ASSET PURCHASE AGREEMENT Conformed Copy
ASSET PURCHASE AGREEMENT dated as of April 13, 1999 (the "Agreement"),
by and between CHRYSALIS HOTELS & RESORTS, CORP., a Florida corporation
("CHRYSALIS"), and James Lucas, a single person, Glenn Kimball and Paulette
Kimball, husband and wife, Marek Niczyporuk, a single person, James L. Quinn and
Barbara Baker Quinn, husband and wife, Herbert J. Walker and Patricia A. Walker,
husband and wife, Alva D. Cravens and Kirstin Cravens, husband and wife
(collectively, the "KRISTAL GROUP").
RECITALS
A. CHRYSALIS desires to acquire certain assets of KRISTAL GROUP (the
"Acquired Assets" as defined in Section 1.1), all on the terms and subject to
the conditions hereinafter set forth.
B. KRISTAL GROUP desires to sell such assets to CHRYSALIS, on the terms
and subject to the conditions hereinafter set forth.
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and
the mutual representations, warranties, covenants and agreements contained
herein, CHRYSALIS and KRISTAL GROUP hereby agree as follows:
ARTICLE I
ACQUISITION AND DISPOSITION OF ACQUIRED ASSETS
1.1 Acquired Assets. Subject to the terms and conditions of this
Agreement, at the Closing (as defined below), KRISTAL GROUP shall sell, convey,
transfer, assign and deliver to CHRYSALIS, and CHRYSALIS shall purchase, acquire
and accept from KRISTAL GROUP, certain assets owned by KRISTAL GROUP as follows:
1.1.1 KRISTAL GROUP Intellectual Property. "KRISTAL GROUP"
Intellectual Property" which shall mean all the intellectual property (except as
expressly stated below) of KRISTAL GROUP owned, licensed or otherwise used in
the business conducted by KRISTAL GROUP for the microfilm, et al, scanning
device design, all hardware design, and computer programming code and software
owned by KRISTAL GROUP including but not limited to any and all Software needed
to allow the scanning/digitizing/reading device to operate in a reliable and
commercial manner, programs software (as more fully described in Schedule
1.1.1(A), including the trademarks and (and any other trademarks), and including
without limitation the intellectual property listed on or related to the
intellectual property listed on Schedule 1.1.1(A), in both machine readable
and/or human readable form, and including: (i) rights to, and any rights to
apply for and/or register, patents and patent applications, copyrights,
trademarks, trade secrets and all other proprietary rights relating to such
intellectual property, (ii) records and files relating to manufacturing, quality
control, sales, marketing and customer support and designs for such intellectual
property, (iii) Derivative Works of such KRISTAL GROUP Intellectual Property,
1
<PAGE>
and (iv) all related Documentation. "Derivative Work" means any translation
(including any translation into other computer languages), portation,
modification, correction, addition, extension, upgrade, improvement,
compilation, abridgment or other form prepared by or for KRISTAL GROUP and
presently in the possesssion of or under the control of KRISTAL GROUP in which
the KRISTAL GROUP Intellectual Property has been recast, transformed, or
adopted. "Documentation" means any and all software, hardware and firmware
listings, fully commented and updated source code, complete system built
software and instructions related to the KRISTAL GROUP Intellectual Property in
the posssession or under the control of KRISTAL GROUP, and any and all user,
technical and business documentation related to the KRISTAL GROUP Intellectual
Property in the possession or under the control of KRISTAL GROUP in both machine
readable and/or human readable form.
1.1.2 Other Assets. "Other Assets" shall mean all of KRISTAL
GROUP's hardware patents, rights to hardware patents, customer lists, contracts,
agreements, licenses or license agreements, commitments, warranties, claims and
other existing and inchoate rights, but excluding without limitation, cash,
marketable securities, receivables and rights relating to contractual
obligations.
All of the above shall be referred to as the "Acquired Assets."
1.2 Liabilities. CHRYSALIS shall not assume or be deemed to have
assumed, or to have any obligations with respect to, any liabilities or
obligations of KRISTAL GROUP of any nature whatsoever, whether such other
liabilities and obligations arose or arise before or after, or mature before or
after, the Closing (the "Retained Liabilities").
1.3 Purchase Price and Payment. The purchase price (the "Purchase
Price") for the Acquired Assets shall consist of the following:
1.3.1 Stock Issuance. At Closing, CHRYSALIS shall deliver to
the KRISTAL GROUP 6,000,000 shares of common stock of CHRYSALIS ("CHRYSALIS"
Common Shares") as follows:
NUMBER OF
KRISTAL GROUP CHRYSALIS SHARES
------------- ----------------
James Lucas 1,500,000
Glenn & Paulette Kimball 1,500,000
Marek Niczyporuk 1,300,000
James L. and Barbara Baker Quinn 1,100,000
Herbert L. and Patricia A. Walker 500,000
Alva D. and Kirstin Cravens 100,000
TOTAL 6,000,000
2
<PAGE>
Immediately after the Closing, CHRYSALIS will place the Acquired Assets into a
newly-formed, wholly-owned subsidiary known as CybeRecord Inc. (the
"Subsidiary"), and shall cause the Subsidiary to commence operations
immediately. Also, immediately after closing, CHRYSALIS Board of Directors shall
cause a special shareholders meeting to be convened for the purposes of amending
the corporation's articles and bylaws, as necessary, to establish a board of
directors of five individuals, and to elect directors to a term of office that
shall commence immediately upon election. These obligations shall survive
closing.
1.4 Closing and Delivery of Acquired Assets. The closing of the
transaction (the "Closing") and delivery of the Acquired Assets will take place
upon execution of this Agreement (the "Closing Date"), at such date or place as
agreed to by the parties hereto.
1.5 Conveyance of Acquired Assets. The sale, conveyance, transfer,
assignment and delivery to CHRYSALIS of the Acquired Assets, as herein provided,
shall be effected by such bills of sale, endorsements, assignments and other
instruments of transfer and conveyance as may be necessary to vest in CHRYSALIS
the right, title and interest of KRISTAL GROUP in and to the Acquired Assets,
free and clear of all liens, claims, charges and encumbrances, except as
otherwise provided in this Agreement. Such documents shall include, without
limitation, a Bill of Sale and an Assignment of Rights in the forms attached
hereto as Schedules 1.5(A) and (B), respectively. KRISTAL GROUP shall, at the
Closing or at any time or from time to time after the Closing, upon request,
perform or cause to be performed such acts, and execute, acknowledge and deliver
or cause to be executed, acknowledged and delivered such documents, as may be
reasonably required or requested to effectuate the sale, conveyance, transfer,
assignment and delivery to CHRYSALIS of any of the Acquired Assets or for the
performance by KRISTAL GROUP of any of its obligations hereunder.
ARTICLE II
REPRESENTATION AND WARRANTIES
2.1 Representations and Warranties of KRISTAL GROUP. KRISTAL GROUP
represents and warrants to CHRYSALIS on execution of this Agreement and on the
Closing Date as follows:
2.1.1 KRISTAL GROUP Intellectual Property. KRISTAL GROUP owns
all the KRISTAL GROUP Intellectual Property used or under development in KRISTAL
GROUP's business as currently conducted. Schedule 1.1.1(A) lists: (i) all
patents, copyrights, trademarks, trade names, service marks, and any
applications therefor included in the KRISTAL GROUP Intellectual Property,
3
<PAGE>
together with a list of all of KRISTAL GROUP's hardware and software products;
and (ii) all licenses, sublicenses and other agreements to which KRISTAL GROUP
is a party and pursuant to which KRISTAL GROUP or any other person is authorized
to use any of the KRISTAL GROUP Intellectual Property or other trade secrets of
KRISTAL GROUP, and includes the identities of the parties thereto, a description
of the nature and subject matter thereof, and certain terms thereof. KRISTAL
GROUP is not, nor as a result of the execution, delivery or performance of
KRISTAL GROUP's obligations hereunder will be, in violation of any license,
sublicense or agreement described in Schedule 1.1.1(A). KRISTAL GROUP: (i) is
the sole and exclusive owner or licensee of, with all right, title and interest
in and to (free and clear of any liens and encumbrances), the KRISTAL GROUP
Intellectual Property; and (ii) has sole and exclusive rights to use of the
KRISTAL GROUP Intellectual Property. KRISTAL GROUP is not contractually
obligated to pay any compensation to any third party, nor is any third party
otherwise entitled to any compensation, with respect to KRISTAL GROUP's use of
the KRISTAL GROUP Intellectual Property. The manufacture, sale or use of any
product or process as now used or offered by KRISTAL GROUP does not infringe any
copyright, trade secret, trademark, service mark, trade names, firm names, logo,
trade dress or any patent of any person. No adverse claims with respect to the
KRISTAL GROUP's Intellectual Property have been asserted or, to the knowledge of
KRISTAL GROUP, threatened by any person, nor are there any valid grounds for any
bona fide claims (i) to the effect that the manufacture, sale or issue of any
product or process as now used or offered for sale by KRISTAL GROUP infringes or
will infringe on any copyright, trade secret, trademark, service mark, logo,
trade dress or patent of any person, (ii) against the use by KRISTAL GROUP of
any trade secrets, copyrights, trademarks, trade names, firm names, logos, trade
dress patents, technology, know-how, processes or computer software programs and
applications used in the business of KRISTAL GROUP relating to the Properties as
currently conducted, or (iii) challenging the ownership, validity or
effectiveness of any of the KRISTAL GROUP Intellectual Property. All granted and
issued patents and all registered trademarks listed on Schedule 1.1.1(A) and all
copyrights held by KRISTAL GROUP are valid, enforceable and subsisting. To
KRISTAL GROUP's knowledge, there is and has been no material unauthorized use,
infringement or misappropriation of any of the KRISTAL GROUP Intellectual
Property by any third party, employee or former employee.
2.1.2 Disclosure. No representation or warranty made by
KRISTAL GROUP in this Agreement, nor any document, written information,
statement, financial statement, certificate or exhibit prepared and furnished by
KRISTAL GROUP or its representatives pursuant hereto or in connection with the
transactions contemplated hereby, when taken together, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in light
of the circumstances under which they were furnished.
2.1.3 Reliance. The foregoing representations and warranties
are made by KRISTAL GROUP with the knowledge and expectation that CHRYSALIS is
placing reliance thereon.
4
<PAGE>
2.2 Representations and Warranties of CHRYSALIS. CHRYSALIS represents
and warrants to KRISTAL GROUP as follows:
2.2.1 Organization, Standing and Power. CHRYSALIS is a
corporation duly organized, validly existing and in good standing under the laws
of Florida, has all requisite power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which a
failure to so qualify would have a material adverse effect on the Business
Condition of CHRYSALIS.
2.2.2 Authority. The execution, delivery, and performance of
this Agreement by CHRYSALIS has been duly authorized by all necessary action of
the Board of Directors of CHRYSALIS. CHRYSALIS has duly and validly executed and
delivered this Agreement, and this Agreement constitutes a valid, binding and
enforceable obligation of CHRYSALIS in accordance with its terms.
2.2.3 Disclosure. No representation or warranty made by
CHRYSALIS in this Agreement, nor any document, written information, statement,
financial statement, certificate or exhibit prepared and furnished or to be
prepared and furnished by CHRYSALIS or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were furnished.
2.2.4 Control. Upon Closing, the KRISTAL GROUP shall own a
controlling interest of CHRYSALIS stock. KRISTAL GROUP will own 6,000,000 shares
and 1,500,000 options. The KRISTAL GROUP will own no less than fifty-three
percent (53%) of the outstanding stock of CHRYSALIS.
2.2.5 Reliance. The foregoing representations and warranties
are made by CHRYSALIS with the knowledge and expectation that KRISTAL GROUP is
placing reliance thereon.
ARTICLE III
CONDITIONS PRECEDENT
3.1 Conditions of Obligation of CHRYSALIS. The obligation of CHRYSALIS
to effect the purchase is subject to the satisfaction of the following
condition:
3.1.1 Transfer Agreement. KRISTAL GROUP shall have executed,
and delivered to CHRYSALIS, a Transfer Agreement by which KRISTAL GROUP shall
have irrevocably assigned and transferred to CHRYSALIS any and all right, title
5
<PAGE>
and interest they may hold or may have held in the CHRYSALIS Intellectual
Property and shall have released CHRYSALIS from any and all claims relating
thereto.
3.1.2 Employment Agreements. As a condition precedent to the
obligation of CHRYSALIS to perform hereunder, each of the executive officers of
KRISTAL GROUP shall sign at the Closing employment agreements with KRISTAL GROUP
which shall contain terms and conditions acceptable to CHRYSALIS, including,
without limitation, acceptable non-competition agreements.
ARTICLE IV
ADDITIONAL AGREEMENTS
In addition to the foregoing, CHRYSALIS and KRISTAL GROUP each agree to
take the following actions after the execution of this Agreement.
4.1 Expenses. Whether or not this Agreement is closed, except as
specifically provided in this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense.
4.2 Additional Agreements. In case at any time after the Closing Date,
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement, the proper representatives of each party to this
Agreement shall take all such necessary action, e.g., in the case of any
documents required to effectuate the transfer of the Acquired Assets, or to make
any governmental filings.
4.3 Taxes. Any sales or use or similar tax or levy arising from the
transactions contemplated by this Agreement shall be the sole responsibility of
CHRYSALIS and CHRYSALIS shall indemnify KRISTAL GROUP from and against any
liability arising in connection therewith; provided, however, that KRISTAL GROUP
shall pay any and all state, local, provincial, United States or Canadian income
tax or excise taxes imposed on or assessed against KRISTAL GROUP as a result of
this transaction, and KRISTAL GROUP shall indemnify CHRYSALIS from and against
any and all liability arising in connection therewith.
4.4 Brokers and Finders. KRISTAL GROUP will be responsible for and pay
any fees that may be owed to any broker previously retained (or who claims to
have been retained) by KRISTAL GROUP, and shall hold CHRYSALIS harmless from any
liability arising from such claim(s) with the exception of Marvin Belcher who
will receive 50,000 shares of Chrysalis from Chrysalis immediately following the
closing of this transaction.
6
<PAGE>
4.5 Documentation. KRISTAL GROUP shall provide to CHRYSALIS
documentation containing all specifications and design of any and all hardware
and the source code and the object code of the KRISTAL GROUP Intellectual
Property, where appropriate.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification Relating to Agreement.
5.1.1. KRISTAL GROUP hereby agrees to defend, indemnify, and
hold CHRYSALIS harmless from and against, and to reimburse CHRYSALIS with
respect to, any and all losses, damages, liabilities, claims, judgments,
settlements, fines, costs, and expenses (including attorneys' fees)
("Indemnifiable Amounts") of every nature whatsoever incurred by CHRYSALIS by
reason of or arising out of or in connection with (i) any breach, or any claim
(including claims by parties other than CHRYSALIS) that would, if true,
constitute a breach by KRISTAL GROUP of any representation, warranty, or
covenant of KRISTAL GROUP contained in this Agreement or in any agreement,
certificate or other document delivered to CHRYSALIS pursuant to the provisions
of this Agreement, and (ii) the failure, partial or total, of KRISTAL GROUP to
perform any agreement or covenant required by this Agreement.
5.1.2. CHRYSALIS agrees to defend, indemnify, and hold KRISTAL
GROUP harmless from and against, and to reimburse KRISTAL GROUP with respect to,
any and all Indemnifiable Amounts of every nature whatsoever incurred by KRISTAL
GROUP by reason of or arising out of or in connection with (i) any breach, or
any claim (including claims by parties other than KRISTAL GROUP) that would, if
true, constitute a breach by CHRYSALIS of any representation, warranty, or
covenant of CHRYSALIS contained in this Agreement (including, but not limited
to, CHRYSALIS's obligations with respect to the Assumed Contracts) or in any
agreement, certificate or other document delivered to KRISTAL GROUP pursuant to
the provisions of this Agreement, and (ii) the failure, partial or total, of
CHRYSALIS to perform any agreement or covenant required by this Agreement.
5.2 Third Party Claims. For the purposes of this Section 5.2, a party
seeking indemnification pursuant to Section 5.1 shall be referred to as the
"Indemnified Party" and a party to whom such notice is addressed shall be
referred to as the "Indemnitor." With respect to any claims or demands by third
parties, whenever an Indemnified Party shall have received a written notice that
such a claim or demand has been asserted or threatened, the Indemnified Party
shall notify the Indemnitor of such claim or demand and of the facts within the
Indemnified Party's knowledge that relate thereto within a reasonable time after
receiving such written notice. The Indemnitor shall then have the right to
contest, negotiate or settle any such claim or demand through counsel of their
own selection, satisfactory to the Indemnified Party and solely at their own
cost, risk, and expense. Notwithstanding the preceding sentence, the Indemnitor
shall not settle, compromise, or offer to settle or compromise any such claim or
7
<PAGE>
demand without the prior written consent of an Indemnified Party, which consent
shall not be unreasonably withheld. By way of illustration and not limitation,
it is understood that an Indemnified Party may object to a settlement or
compromise which includes any provision which in its reasonable judgment may
have an adverse impact on or establish an adverse precedent for the Business
Condition of an Indemnified Party or any of its Subsidiaries. An Indemnified
Party shall not have the right to object to a settlement which consists solely
of the payment of a monetary damage amount and which is fully indemnified by
KRISTAL GROUP. If the Indemnitor fails to given written notice to an Indemnified
Party of its intention to contest or settle any such claim or demand within
twenty (20) calendar days after the Indemnified Party has notified the
Indemnitor that any such claim or demand has been made in writing and received
by the Indemnified Party, or if any such notice is given but any such claim or
demand is not promptly contested by the Indemnitor, the Indemnified Party shall
have the right to satisfy and discharge the same by payment, compromise, or
otherwise, and the Indemnitor shall be entirely liable therefor to the
Indemnified Party under this indemnity. The Indemnified Party may also, if it so
elects and entirely within its own discretion, defend any such claim or demand
if the Indemnitor fails to give notice of their intention to contest or settle
and such claim or demand, in which event the Indemnitor shall be required to
indemnify the Indemnified Party and its affiliates for any and all costs,
losses, liabilities, and expenses whatsoever, including without limitation
attorneys' and other professional fees, that the Indemnified party may sustain,
suffer, incur, or become subject to as a result of the Indemnified Party's
decision to defend any such claim or demand.
ARTICLE VI
MISCELLANEOUS
6.1 Entire Agreement. Notwithstanding anything to the contrary, this
Agreement, including the agreements, exhibits and schedules delivered pursuant
to this Agreement, contain all of the terms and conditions agreed upon by the
parties relating to the subject matter of this Agreement and supersedes all
prior agreements, negotiations, correspondence, undertakings, and communications
of the parties, whether oral or written, respecting that subject matter.
6.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York as applied to agreements
entered into and entirely to be performed within that state.
6.3 Notices. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given (i) on the date of
delivery if personally delivered by hand, (ii) upon the third business day after
such notice is (a) deposited in the United States mail, if mailed by registered
or certified mail, postage prepaid, return required, or (b) sent by a nationally
recognized overnight express courier, or (iii) by facsimile upon written
confirmation (other than the automatic confirmation that is received from the
recipient's facsimile machine) of receipt by the recipient of such notice:
8
<PAGE>
If to CHRYSALIS: Chrysalis Hotels & Resorts, Inc.
- --------------- 10900 NE 8th Street
Bellevue, Washington 98004
Telephone No. (425) 688-3031
Fax No. (425) 990-5979
With a copy to: John B. Lowy, P.C.
- -------------- John B. Lowy, President
645 Fifth Avenue, 4th FL
New York, NY 10022
Telephone No. (212) 371-7799
Fax No. (212) 371-8527
If to KRISTAL GROUP: KRISTAL GROUP
- ------------------- James Lucas
21 El Cerrito Ave
San Mateo, CA 94402
Telephone No. (650) 343-4771
Fax No. (650) 343-4779
With a copy to: Malcolm C. McLellan
- -------------- Davis Arneil Law Firm
617 Washington Street
Wenatchee, WA 98801
Telephone No. 509.662.9074
Fax No. 509.662.9074
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 6.3.
6.4 Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be modified rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
extent possible. In any event, all other provisions of this Agreement shall be
deemed valid and enforceable to the full extent.
6.5 Survival of Representations and Warranties. All representations and
warranties contained in this Agreement, including the exhibits and schedules
delivered pursuant to this Agreement, shall survive the Closing Date.
6.6 Assignment. No party to this Agreement may assign, by operation of
law or otherwise, all or any portions of its rights, obligations, or liabilities
under this Agreement without the prior written consent of the other party to
this Agreement, which consent may be withheld in the absolute discretion of the
9
<PAGE>
party asked to grant such consent. Any attempted assignment in violation of this
Section 6.6 shall be voidable and shall entitle the other party to this
Agreement to terminate this Agreement at its option.
6.7 Counterparts. This Agreement may be executed in any number of
counterparts. All such counterparts shall constitute a single document with the
same force and effect as if all Parties signing a counterpart had signed all the
other counterparts.
6.8 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
6.9 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section, Exhibit
or Schedule to this Agreement unless otherwise indicated. The words "include,"
"includes," and "including," when used therein shall be deemed in each case to
be followed by the words "without limitation." The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
6.10 No Third Party Beneficiaries. Nothing in this Agreement shall be
deemed to create in any person not a signatory to this Agreement any rights
(including rights as a third party beneficiary) under this Agreement.
IN WITNESS WHEREOF, CHRYSALIS and KRISTAL GROUP have executed this
Agreement as of the date first written above.
CHRYSALIS HOTELS & RESORTS CORP.
By: /s/ THOMAS MORIKAWA
----------------------
Thomas Morikawa, Chairman
KRISTAL GROUP:
/s/ JAMES LUCAS /s/ JAMES L. QUINN
- ---------------------------------- -------------------
James Lucas James L. Quinn
/s/ BARBARA BAKER QUINN /s/ HERBERT J. WALKER
- ---------------------------------- ----------------------
Barbara Baker Quinn Herbert J. Walker
/s/ PATRICIA A. WALKER /s/ GLENN KIMBALL
- ---------------------------------- ------------------
Patricia A. Walker Glenn Kimball
10
<PAGE>
/s/ PAULETTE KIMBALL /s/ MAREK NICZYPOURK
- ----------------------------------- ---------------------
Paulette Kimball Marek Niczypourk
/S/ ALVA D. CRAVENS /s/ KIRSTIN CRAVENS
- ----------------------------------- --------------------
Alva D. Cravens Kirstin Cravens
11
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<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1.000
<CASH> 111,154
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 126,358
<PP&E> 29,268
<DEPRECIATION> 3,940
<TOTAL-ASSETS> 151,676
<CURRENT-LIABILITIES> 21,436
<BONDS> 0
0
0
<COMMON> 154,719
<OTHER-SE> (24,479)
<TOTAL-LIABILITY-AND-EQUITY> 151,676
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,935,617
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,935,617)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,935,617)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,935,617)
<EPS-BASIC> (0.27)
<EPS-DILUTED> (0.27)
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