As Filed With the Securities and Exchange Commission on March 31, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDEXONLY TECHNOLOGIES, INC.
(Name of Small Business Issuer in its Charter)
NEVADA 7370 88-0301365
(State or Other Jurisdiction (Primary Standard (IRS Employer
of Incorporation or Industrial Classification Identification
Organization) Code Number) Number)
3823 HENNING DRIVE, SUITE 217
BURNABY, BRITISH COLUMBIA V5C 6P3 CANADA
(604) 419-4401
(Address and Telephone Number of Principal Executive Offices and Principal Place
of Business)
(Name, address and telephone number for service) With Copies to:
Cliff Sweeney Edward L. Mayerhofer
Chief Executive Officer Morton & Company
Indexonly Technologies, Inc. Barristers & Solicitors
3823 Henning Drive, Suite 217 1750 - 750 West Pender Street
Burnaby, British Columbia V5C 6P3 CANADA Vancouver, British Columbia
(604) 419-4401 V6C 2T8 CANADA
(604) 681-1194
Approximate Date of Proposed Sale to the Public: As soon as practicable and
from time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
[ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Each Proposed Maximum
Class of Amount Maximum Aggregate Amount of
Securities to Be to Be Offering Price Offering Registration
Registered Registered per Share (1) Price(1) Fee
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Common Stock,
.001 par value 5,282,000 $2.00 $10,564,000 $2,789
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act of
1933.
<PAGE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933, or until the registration statement shall become
effective on such date as the Commission, acting pursuant to section 8(a), may
determine.
[OUTSIDE FRONT COVER PAGE]
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND WILL BE AMENDED AND
COMPLETED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD,
NOR MAY OFFERS TO BUY BE ACCEPTED, UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL SECURITIES, NOR IS IT A SOLICITATION OF AN OFFER TO BUY
SECURITIES, IN ANY STATE, PROVINCE OR OTHER JURISDICTION WHERE THE OFFER OR SALE
WOULD BE UNLAWFUL.
SUBJECT TO COMPLETION - MARCH 27, 2000
PROSPECTUS
[graphic of company logo: the letter i encircled with a red diagonal mark]
INDEXONLY TECHNOLOGIES, INC.
5,282,000 SHARES
COMMON STOCK
The selling shareholders of Indexonly Technologies, Inc. listed on page 5 under
the caption "Selling Shareholders" may offer and sell up to an aggregate of
5,282,000 shares of our common stock under this prospectus. The selling
shareholders may offer and sell the shares at any price. We will not receive
any of the proceeds of this offering.
Our common stock is not listed on a national securities market or the Nasdaq
Stock Market. Our common stock is quoted on the National Quotation Bureau Pink
Sheets under the trading symbol "IOTI". Our common stock is thinly traded, and
price quotations for our common stock reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions. There can be no assurance that an active trading market will
develop. We anticipate filing an application for quotation on the OTC Bulletin
Board prior to the commencement of this offering, however there can be no
guarantee that our application will be successful.
No underwriters are involved or are expected to be involved in the offer or sale
of the common stock. The offering will begin on the date that the registration
statement that includes this prospectus becomes effective and will continue
until all shares are sold or until we terminate the offering.
Concurrently with the offering under this prospectus, we expect to directly
offer 5,000,000 shares of our common stock from our treasury. On March 13, 2000
we filed a registration statement with the Securities and Exchange Commission
respecting our concurrent treasury offering of 5,000,000 shares.
AN INVESTMENT IN THE COMMON STOCK OFFERED UNDER THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK AND WE URGE YOU TO CAREFULLY REVIEW THIS PROSPECTUS WITH
PARTICULAR ATTENTION TO THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 2000
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<PAGE>
Page 2
[INSIDE FRONT COVER PAGE]
You should rely only on the information contained in this document. We have not
authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities.
Indexonly Technologies Inc. and Indexonly.com are trademarks or service marks of
Indexonly Technologies, Inc. Other trademarks and tradenames in this prospectus
are the property of their respective owners.
TABLE OF CONTENTS
Page No.
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Prospectus Summary 3
Risk Factors 5
Use of Proceeds 16
Market for Common Stock and Other Shareholder Matters 18
Management's Discussion and Analysis 18
Business 20
Management 30
Executive Compensation 32
Security Ownership of Certain Beneficial Owners and Management 34
Certain Relationships and Related Transactions 34
Selling Shareholders 35
Description of Securities 35
Plan of Distribution 36
Shares Eligible for Future Sale 37
Experts 37
Changes in Certifying Accountants 38
Financial Statements Index 39
<PAGE>
Page 3
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before buying shares in the offering. You should read the entire
prospectus carefully.
INVESTMENT RISKS
An investment in this offering involves risk. The market for Internet products,
services and advertising is new, rapidly evolving and intensely competitive.
Our service has not achieved market acceptance to date. Our business plan was
conceived in April 1999. We have a limited operating history and a history of
operating losses. Our loss for the period ended December 31, 1999 was $486,859,
which is also our accumulated deficit. We may incur net losses in the future.
INDEXONLY TECHNOLOGIES, INC.
We are developing an Internet business directory intended to allow Internet
users who are looking for goods or services quick access to the businesses that
provide those goods or services in their area. Our directory is based on
subject guides, which will constantly be updated with information from Internet
websites as well as data from other sources, such as the network of regional and
district agents we are developing. We believe that our directory of
community-based information, combined with our proprietary computerized
filtering and sorting method, will provide fast and relevant search results. We
believe that Internet users will find the focused search results they obtain
from our directory to be superior to the expansive and frequently irrelevant
search results that existing "search engine" websites provide.
We are designing our directory to match consumers with businesses even if the
business does not have a presence on the Internet. Our directory is currently
operational however we are in the process of adding or updating business entries
into our database and accordingly consider our business to be in the development
stage. In order to complete our database of business listings we must first
expand our network of regional and district agents, who will provide information
on many of the businesses that are currently included or that will be included
in our database. Our directory is on our website, located at www.indexonly.com,
-----------------
and we have filed an application to register the trade name "Indexonly.com" in
the United States and Canada.
We expect that our main revenue sources will ultimately be advertising revenues
and e-commerce commissions. In the coming year, we expect to develop a network
of regional and district agents that will provide us with revenues in the form
of license fees. All regional agents are required to purchase a regional
license to operate within a designated geographic region, and all district
agents are required to purchase a district license to operate in a designated
district within a region. Under the terms of the regional license, our regional
agents are responsible for recruiting and managing district agents and receive a
portion of the licensing fee paid by the district agent. District agents in
turn are expected to generate revenues through sales of various of our Internet
advertising options to businesses situated in their district. District agents
are also expected to add, verify and update information concerning local
businesses contained in our database. District agents receive commissions based
on a percentage of revenues from sales of advertising, but do not receive any
direct compensation for verifying and updating business listings in our
database. Regional agents also receive commissions based on a lesser percentage
of revenues from sales of advertising by district agents operating within their
region. Our compensation structure has been formulated to provide a level of
compensation as necessary to attract regional and district agents that meet our
qualification requirements and to permit the rapid expansion of our network.
As at February 25, 2000, we have received license fees from 5 regional agents
and 10 district agents for geographic regions and districts in Canada. In the
United States we have received offers and deposits for two regions.
We plan to rapidly expand our network of regional and district agents throughout
North America. We believe that the use of district sales agents provides us with
a means to generate advertising revenues from businesses that may not otherwise
advertise on the Internet. We expect to support the sales efforts of our
district sales agents by aggressively marketing our website in the regions where
sales agents operate.
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Page 4
Our principal executive offices are located at 3823 Henning Drive, Suite 217,
Burnaby, British Columbia, V5C 6P3, Canada, and our phone number is (604)
419-4401.
THE OFFERING
Common stock offered
by selling shareholders.: 5,282,000 shares
----------------
Common stock to be
outstanding after this offering: 27,226,733 shares (assuming the
sale of all 5,000,000 shares in our
concurrent treasury offering)
Proposed OTC Bulletin Board symbol: IOTI
This summary of our offering is based on shares outstanding as at February 25,
2000. In addition, as at February 25, 2000 we had reserved 1,248,000 common
shares issuable upon exercise of warrants and 10,164,000 common shares issuable
upon exercise of stock options granted to management, consultants and employees.
On March 13, 2000, we filed a registration statement with the Securities and
Exchange Commission respecting our concurrent offer for sale of 5,000,000 shares
of common stock to be issued from our treasury, at a price of $2.00 per share
for gross proceeds of $10,000,000. The offering by the selling shareholders
under this prospectus and the concurrent offering by us of 5,000,000 shares will
be on a delayed or continuous basis. We will not receive any of the proceeds
from the sale of shares by our selling shareholders.
SUMMARY FINANCIAL DATA
The following table summarizes the statement of loss and deficit and balance
sheet data for our business. For a more detailed explanation of these financial
data, see "Selected Financial Data," "Management's Financial Discussion and
Analysis" and our financial statements located elsewhere in this prospectus. On
August 30, 1999, we effected a stock split of 25 new shares for each previous
share of our common stock. All references in this prospectus take this stock
split into effect when referring to the number of shares of common stock, or the
per share data.
PERIOD JUNE 28, 1999 (INCEPTION) TO
-----------------------------------
DECEMBER 31, 1999
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STATEMENT OF OPERATIONS DATA:
- ----------------------------
Revenues $100,351
Operating Expenses $571,317
Loss from Operations $(486,859)
Net Loss $(486,859)
Basic Loss per share $(0.03)
Weighted average common shares outstanding 16,035,618
AS AT DECEMBER 31, 1999
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BALANCE SHEET DATA:
- ------------------
Cash and cash equivalents $ 95,175
Total Assets $605,904
Total Liabilities $316,632
Shareholders' Equity $289,272
<PAGE>
Page 5
RISK FACTORS
There are significant risks associated with an investment in our common stock.
Before making a decision concerning the purchase of our securities, you should
carefully consider the following factors, among others, as you evaluate our
business and the forward-looking statements we make in this prospectus. Any of
these risk factors could materially and adversely affect our business, financial
condition or operating results, in which case a market for our stock might not
develop, the trading price of our common stock could decline, and you could lose
all or part of your investment.
YOU SHOULD NOT PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS BECAUSE THEY
ARE INHERENTLY UNCERTAIN.
You should not place undue reliance on forward-looking statements in this
prospectus. This prospectus contains forward-looking statements that involve
risks and uncertainties. In this prospectus words such as "anticipates",
"believes", "plans", "expects", "future", "intends" and similar expressions are
used to identify these forward-looking statements. This prospectus also
contains forward-looking statements regarding the growth in the use of the
Internet and commerce over the Internet, the demand for Internet advertising,
and other similar forward-looking statements. Our actual results could differ
materially from those anticipated in these forward-looking statements for many
reasons, including the risks we face as described in "Risk Factors" and
elsewhere in this prospectus.
WE ARE A START-UP COMPANY WITH LIMITED OPERATING HISTORY
Development of our Internet business directory began in April of 1999 and its
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies with extremely limited operating histories,
particularly companies in the new and rapidly evolving markets for the Internet
and Internet services, including the Internet advertising market. These risks
include uncertainty of revenues, markets and profitability, and the need to
raise capital to fund our ongoing operations. Our ability to address these risks
and carry out our business plan is unproven. As a new enterprise, we could also
be subject to risks we have not anticipated.
WE MAY EXPERIENCE CONTINUED LOSSES
We have incurred net losses of $486,859 for the financial period ended December
31, 1999. There is no certainty that we will become profitable or generate
positive cash flow from operations in the future. A failure to achieve
profitability could deplete our current capital resources and we may not be
successful at raising additional capital. We expect to increase our operating
expenses significantly to expand our operations including our sales and
marketing efforts, our directory databases and our website. If these expenses
are not accompanied by increased revenues, our business and stock price (if a
liquid market develops) would suffer.
WE WILL NEED ADDITIONAL FINANCING
Our existing working capital is not sufficient to allow us to execute our
business plan, including the further development of our commercial directory and
website, or to fund our expansion and marketing plans for the year 2000. If we
are unable to obtain adequate capital financing through equity or other
financings, we may have to revise, delay or abandon our short-term or long-term
plans for expansion and we may not meet our working capital requirements.
The full development and implementation of our database will require additional
resources. We may not be able to obtain the working capital necessary to
develop our database fully. Furthermore, our commercial directory and website
may not produce material revenue even if successfully developed.
Even if we succeed in our business plans, we may experience rapid growth
requiring additional funds to expand our operations and organization. Our
working capital requirements in the foreseeable future will depend on a variety
of factors, including capital requirements to implement and adjust our business
plan.
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Page 6
We do not have current commitments for financing. If our concurrent offering of
5,000,000 shares of our common stock does not provide adequate working capital,
we might not succeed in raising additional equity capital or in negotiating and
obtaining additional and acceptable financing when we need it. Our ability to
obtain additional capital may depend on market conditions (including the market
for Internet stocks), national and global economies and other factors beyond our
control. If adequate capital were not available or were not available on
acceptable terms at a time when we needed it, our ability to execute our
business plan, develop or enhance our services or respond to competitive
pressures would be significantly impaired.
THE SUCCESS OF OUR BUSINESS MODEL REQUIRES THE DEVELOPMENT AND IMPLEMENTATION OF
AN EFFECTIVE INTERNET BUSINESS DIRECTORY AND AN EFFECTIVE WEBSITE
For our website to be perceived as a viable advertising marketplace the website
must provide accurate and timely information on a consistent, easy-to-use and
reliable basis. We may not be successful in our plans to implement, maintain and
develop our database and usage of our website.
Our success will also depend on our ability to design, develop, test and support
new services and enhancements on a timely basis that meet changing customer
needs and our ability to respond to technological developments and emerging
industry standards. We may be unable to maintain adequate quality control
procedures, develop and market new services and enhancements that meet changing
customer needs, or respond to technological developments and emerging industry
standards. In our effort to develop new and enhanced services and features for
our website, we may alienate current users or experience technical difficulties.
If we introduce services or features that do not function properly or that our
current clients do not perceive favorably, they may not continue to visit our
website. Clients may also choose a competitor's site over ours. We may also
experience difficulties that could delay or prevent us from introducing new
services or features. Furthermore, these services or features may contain
errors or problems that we discover after we have already introduced them. We
may need to modify significantly the design of these services or features on our
website to correct these errors. Errors could lead to the loss of some users of
our Internet directory and advertisers on our website.
WE MAY NOT BE ABLE TO ATTRACT AND RETAIN THE DIRECT SALES FORCE THAT THE SUCCESS
OF OUR BUSINESS MODEL REQUIRES
Our business model requires that we establish a community-based direct sales
network licensed to sell advertising on our Web site and to update our database.
This dependence involves a number of risks, including the need to increase the
size of our direct sales force throughout North America, and the need to
attract, hire, retain, integrate and motivate additional sales and sales support
personnel through our regional license holders. Particularly in light of the
strong economy and tight labor market, we may not be able to attract and retain
the qualified sales and sales support personnel needed to implement our business
plan.
WE ARE REQUIRED TO COMPLY WITH STATE FRANCHISE LAWS
Some States in which we will sell regional and district licenses to sales agents
consider such sales to constitute the sale of franchises, requiring compliance
with State franchise laws. Compliance may require the preparation and filing of
a Uniform Franchise Offering Circular, and delivery of this document to
potential license holders. Our failure to comply with these laws in any State
may result in rights of rescission being available to our license holders in
that State which may be reflected by an in our financial statements by an
increase liabilities and a decrease in shareholders equity and revenues. If
rights of rescission are available to a significant number of license holders,
this would have a direct effect on operating results for a particular quarter
and these fluctuations could cause our stock price (if a liquid market develops)
to decline.
WE MAY NOT BE ABLE TO ESTABLISH THE INDEXONLY BRAND
We are unknown in the Internet sector. In order to generate traffic to our
website and to support the efforts of our sales network in creating a demand for
advertising on our website we will need to spend significant resources on
marketing and promoting our Internet directory. If we are unable to establish
brand recognition in the areas where we operate, our business may be negatively
affected.
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THERE ARE RISKS ASSOCIATED WITH INTERNET ADVERTISING
We expect most of our revenue over time to come from selling advertising on our
website. No standards have been widely accepted to measure the effectiveness of
Internet advertising. If such standards do not develop, existing advertisers
might not continue their current levels of Internet advertising. Advertisers
that have traditionally relied upon other advertising media may be reluctant to
advertise on the Internet. Our business would suffer if the market for Internet
advertising fails to continue to develop or develops more slowly than expected.
There is currently no standard model for fixing the price of advertising on the
Internet and the adoption of such standards could adversely affect our revenue
expectations from sales of advertising.
Advertisers may require information on the size and demographics of our user
base or other information prior to purchasing advertising. We may not be able
to provide them with this information, or may have to incur additional expense
to obtain this information, both of which may have an adverse effect on our
results of operations. Even if obtained, our user base may not be sufficient to
generate interest from advertisers.
WE FACE COMPETITION FROM NUMEROUS E-COMMERCE BUSINESSES AND OTHER COMPANIES
We expect to face competition in our efforts to develop Indexonly.com into a
leading community-based business search directory website. The market for
Internet-based services and products is relatively new, intensely competitive,
rapidly evolving and subject to rapid technological change. We expect
competition to intensify and increase in the future. Barriers to entry are
relatively low, and current and new competitors can launch new sites at a
relatively low cost using commercially available software. A number of
companies that have expertise in developing online commerce and in facilitating
Internet advertising for small business could be potential competitors if they
elected to enter or focus on the business search directory business. Companies
offering various business Internet search engine or directory services include
Alta Vista, Yahoo!, eXcite, Webcrawler, LookSmart, YellowPages.com and Dow
Jones.com. There are also a large number of other small directory services,
including those that serve specialty or regional markets such as
NorthernLight.com and CityXpress. We potentially face competition from a number
of companies and large online communities and services that have expertise in
developing online commerce and in facilitating online person-to-person
interaction.
An important part of our strategy is to develop and increase awareness and
recognition of our website. If we are unable to do so, or if our competitors
develop their brand names more successfully than we do, our future growth and
our business would suffer. Many of the Internet-based companies with commercial
search directory models have longer operating histories, larger customer bases,
greater brand recognition and significantly greater technical, financial and
marketing resources then we do. These competitors may be able to respond more
quickly to new or emerging technologies and changes in Internet user demands and
to devote greater resources to the development promotion and sale of their
website and services than we can. We might not be able to compete successfully
against our current or future competitors.
OUR QUARTERLY RESULTS OF OPERATION MAY BE SUBJECT TO SIGNIFICANT FLUCTUATION
Our quarterly results of operations may fluctuate significantly in the future as
a result of a variety of factors, many of which are beyond our control. These
factors include:
- - the level of Internet usage for commercial purposes;
- - the demand for and market acceptance of our directory;
- - our ability to develop our database and implement our sales network;
- - our ability to attract and retain advertisers to our website;
- - the introduction of similar directory services by our competitors and the
change in rates for Internet advertising as a result of competition;
- - the amount and timing of costs related to marketing efforts and promotion;
- - the amount and timing of capital expenditures and other costs relating to
the expansion of our operations;
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- - the occurrence of technical difficulties and system downtime;
- - our ability to keep pace with technological advancements and changes in
user demands; and
- - general economic and market conditions.
Operating results for any particular quarter might not be indicative of future
operating results. We expect to depend primarily on sales of licenses and
advertising revenues for the foreseeable future. We plan to significantly
increase our operating expenses in order to increase sales and marketing
operations, however we may not be able to adjust spending in a timely manner in
order to compensate for any revenue shortfall. Any shortfall in revenues would
have a direct effect on operating results for a particular quarter and these
fluctuations could cause our stock price (if a liquid market develops) to
decline.
WE MAY INCUR ADDITIONAL RISK FROM DEFECTS OR ERRORS IN OUR DIRECTORY
The success of our commercial search directory is dependent upon the quantity
and quality of its data. We rely upon our internal personnel as well as our
sales agent network to gather data, to upgrade the data and to verify the data.
All data gathered by us and our sales agents is indexed using our proprietary
software. The data gathered will require continuous updating and is subject to
short-term obsolescence. Our internal personnel and the licensed agent network
may not gather, upgrade and verify data at the level expected. The data used by
us may contain undetected errors or defects, and there can be no assurances that
errors will not be found in our business search directory. The occurrence of
such errors, defects or failures could result in the loss of users of our
directory and advertisers on our website which could have a material adverse
effect on our business and cause our stock price (if a liquid market develops)
to decline.
WE ARE DEPENDENT ON THE CONTINUED GROWTH OF THE MARKET FOR INTERNET SERVICES
The market for the sale of advertising on the Internet and commerce over the
Internet is a new and emerging market. Our ability to earn revenues in the
future will be substantially dependent upon the widespread acceptance of the
Internet and online services as a medium for commerce by consumers. Rapid
growth in the use of and interest in the Web, the Internet and online services
is a recent phenomenon. This acceptance and use may not continue. Even if the
Internet is accepted, concerns about fraud, privacy and other problems may mean
that a sufficiently broad base of consumers will not adopt the Internet as a
medium of commerce. The adoption of the Internet for information retrieval and
exchange, commerce and communications, particularly by those enterprises that
have historically relied upon alternative means of information gathering,
commerce and communications, generally will require the acceptance of a new
medium of conducting business and exchanging information. These concerns may
increase as additional publicity over privacy issues over the Internet increase.
Market acceptance for recently introduced services and products over the
Internet is highly uncertain, and there are few proven services and products.
In order to develop and expand our user base, we must appeal to and acquire
consumers who historically have used traditional means of commerce to access
business directory information, and to place industry specific advertising. If
the Internet as a source of information and business medium fails to develop
further or develops more slowly than expected, our business could suffer and our
stock price (if a liquid market develops) could decline.
WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH
We intend to expand our level of operations, and we will need an effective
planning and management process to implement our business plan successfully.
With the introduction of our website, we may experience a period of significant
expansion of our business. Depending on the amount and timing of any increase
in business, this expansion could place a strain on our management, operational
and financial resources. Some areas that could be put under strain by growth
include customer support, customer billing and website support and maintenance.
To accommodate growth, if any, we may be required to implement and improve our
management, operating and financial systems, procedures and controls on a timely
basis and to expand, train, motivate and manage our employees. There is a risk,
however, that our systems may be inadequate to support our existing and future
operations or that hiring, training and managing new employees will be more
difficult then we anticipate.
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WE ARE DEPENDENT ON KEY PERSONNEL
We are engaged in a start-up business with a core management and development
team. The successful implementation of our business plan and the overall
success of our business will depend on the skills and efforts of our management
personnel and, to a large extent, the active participation of Cliff Sweeney, our
Chief Executive Officer and President. We have an employment agreement in place
with Mr. Sweeney. We do not have key man life insurance on our executives. The
loss or unavailability of Mr. Sweeney to us for an extended period of time could
seriously damage our business operations and prospects. To the extent that Mr.
Sweeney's services would be unavailable to us for any reason, we would be
required to procure other personnel to manage and operate our business. There
can be no assurance that we would be able to locate or employ a suitably
qualified person on acceptable terms, or at all.
WE FACE COMPETITION FOR QUALIFIED PERSONNEL
We will need to hire additional personnel in connection with the expansion of
our business. Our future success will depend on our ability to attract, train,
retain and motivate technical, managerial, marketing and customer support
personnel. Competition for these personnel is intense, particularly for
individuals with e-commerce experience and we face the risk that we will be
unable to attract, integrate, retain and motivate qualified employees.
WE MAY NOT BE ABLE TO OBTAIN CLEAR RIGHTS TO ALL THE INTELLECTUAL PROPERTY WE
NEED TO RUN OUR BUSINESS
To the extent that consultants, vendors or other third parties apply
technological information independently developed by them or by others to our
proposed products and services, disputes may arise as to the proprietary rights
to such information, which may not be resolved in our favor. If we cannot use
technological information necessary to the competitive operation of our
business, our business will suffer and our stock price (if a liquid market
develops) could decline.
WE NEED TO SUBCONTRACT FOR DATA MAINTENANCE AND ADVERTISING SALES
Our future success depends, in significant part, on our ability to license
others throughout the United States and Canada to maintain our data and attract
advertisers successfully, cost-effectively and in sufficient volume. We intend
to enter into licensing agreements with third party sales agents who will verify
and upgrade data, and sell our advertising products. There can be no assurance
that we will succeed in entering into the quantity of license agreements
necessary to complete our business plan. Should we succeed in entering into
such license agreements, there can be no assurance that the agents will be able
to verify and upgrade data or market our advertising products satisfactorily.
If we cannot establish a broad and competent licensed agent network, our
business will suffer and our stock price (if a liquid market develops) could
decline.
In addition, we are reliant upon our licensing agreements to achieve our
national market objective. These contracts may require us to litigate in order
to enforce the covenants and conditions of these agreements, and such litigation
could take place in any one of the 50 U.S. States, or any one of the Provinces
of Canada. There can be no assurances that we will be successful in any such
litigation, or that any successfully obtained judgment could be enforced.
WE MAY BE UNABLE TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS
We rely on a combination of patent, trade secret, copyright and trademark laws
and contractual restrictions to establish and protect our intellectual property
rights. We have entered into and will continue to enter into when necessary
confidentiality and work-for-hire agreements with our employees, and
non-disclosure agreements with our suppliers, subcontractors, agents and
customers in order to limit access to and disclosure of proprietary information.
There can be no assurance that these contractual arrangements or the other steps
taken by us to protect our intellectual property will be sufficient to prevent
misappropriation of our intellectual property or to deter independent
third-party development of similar property. The laws of certain foreign
countries may not protect our products or intellectual property rights to the
same extent as the laws of the United States and Canada.
In the future we may receive notices from third parties claiming that our
intellectual property, if any, or our proprietary rights infringe the
proprietary rights of third parties. As the number of products and competitors
in the market grow, we expect to be increasingly subject to such infringement
claims. Any such claim, whether meritorious or not, could be time consuming,
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result in costly litigation, cause or require us to enter into royalty or
additional licensing agreements. Such royalty or licensing agreements might not
be available on terms acceptable to us or at all, which could damage our
business and cause our stock price (if a liquid market develops) to decline.
WE MAY EXPERIENCE DIFFICULTIES IN INTEGRATING BUSINESSES, PRODUCTS AND
TECHNOLOGIES WE MAY ACQUIRE INTO OUR BUSINESS
As part of our development and growth strategy, we may acquire businesses,
products and technologies and enter into joint ventures and strategic
relationships with other companies that may expand or complement our business.
Any of these transactions would expose us to additional risks, including:
- - the difficulty of assessing the values, strengths, weaknesses and
profitability of acquisition candidates;
- - the difficulty of assimilating and integrating the operations of the
combined companies and retaining key personnel;
- - the potential disruption of our ongoing business;
- - the additional expenses associated with the amortization of acquired
intangible assets, integration costs and unanticipated liabilities or
contingencies; and
- - diversion of management's attention.
We do not have significant experience in the identification and management of
acquisitions. If we are unable to successfully address these risks, it could
materially harm our business and financial condition.
THERE ARE MANY RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
While we are currently focusing on expansion within North America, we may in the
future expand operations internationally. Expansion into international markets
will require management attention and resources. We may not be successful in
expanding into international markets or in generating revenues from foreign
operations. Even if we were successful, the costs of operating internationally
may exceed our international revenues. If we expand internationally, we are
subject to risks of doing business internationally, including the following:
- - local regulatory requirements may limit or prevent the offering of our
services in local jurisdictions;
- - legal uncertainty regarding liability for the listings of our users,
including less Internet-friendly and unique local laws;
- - regulatory limitations on the public's access to the Internet;
- - difficulties in staffing and managing foreign operations;
- - different accounting practices;
- - political instability;
- - potentially adverse tax consequences; and
- - administrative burdens in collecting local taxes, including value-added
taxes.
Some of these risks may cause our international costs to exceed our domestic
costs of doing business. If we expand our international operations and have
additional portions of our international revenues denominated in foreign
currencies, we also could become subject to increased risks relating to foreign
currency exchange rate fluctuations.
ONGOING YEAR 2000 PROBLEMS COULD DISRUPT OUR BUSINESS
Prior to January 1, 2000, many computer systems and software products were coded
to accept or recognize only two digit entries for the date. Those systems were
subject to the risk that they would recognize a date using "00" as the year 1900
rather than the year 2000. While we did not experience any known effects as a
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result of the year 2000 change-over, there may software or hardware that we rely
on or that our third party service providers rely on that may have undetected
errors or potential errors resulting from the inability to recognize the year
2000. To the extent that any such errors or potential errors may appear, our
business and results of operations could be negatively affected.
WE WILL DEPEND ON THE CONTINUED UTILITY OF THE INTERNET AND THE WEB
INFRASTRUCTURE FOR OUR COMMERCIAL SEARCH DIRECTORY WEBSITE.
The performance of the Indexonly.com website will be dependent on the successful
operation of the Internet and on certain third parties and services, such as
Internet service providers, Internet backbone providers and Web browsers. Users
may experience difficulties resulting from system failures unrelated to our
internal systems and services. If the Internet were to become regularly
unavailable for many hours at a time, or if its ability to handle traffic loads
were to deteriorate enough to cause frequent unavailability or slow response
times, there would be less traffic to our website. Furthermore, the perception
of the quality of our services could suffer.
Our Internet services are designed around certain standards, including, for
example, Internet security standards. The future success of our services may
become subject to additional industry standards as Internet commerce rapidly
evolves. As a result our business may incur additional costs of unknown
proportions as we are confronted with new technology standards. In addition, we
may not be successful in our efforts to enhance existing services and to
develop, introduce and market new services. Furthermore, our enhancements and
new services may not adequately meet the requirements of the marketplace and
achieve market acceptance. As the Internet develops, it is possible that
incompatibility or lack of appropriate features could impact our business.
We expect sales of our services will depend in large part on a robust industry
and infrastructure for providing Internet access and carrying the rapidly
increasing Internet traffic. Because global e-commerce and on-line exchange of
information on the Internet and other similar wide open area networks are new
and evolving, we cannot predict with any assurance whether the infrastructure or
complementary products necessary to make the Internet a viable commercial
marketplace will continue to be developed. Even if the necessary infrastructure
and complementary products are developed, we cannot predict whether the Internet
will remain a viable commercial marketplace. In addition, the widespread
adoption of new Internet or telecommunications technologies or standards could
require us to make substantial expenditures to modify or adapt our services. In
this case, the new Internet or telecommunications services or enhancements that
we offer could contain design flaws or other defects. Although we expect to be
responsive to changes in the Internet and technology, we may not be successful
in achieving widespread acceptance of our services before competitors offer
services with speed and performance equal to or greater than ours.
SECURITY AND PRIVACY CONCERNS COULD SUBJECT US TO LIABILITY OR OTHERWISE DETER
CONSUMERS FROM USING OUR WEBSITE.
We could be subject to litigation and liability if third parties were able to
penetrate our network security or otherwise misappropriate our databases. This
liability could include claims for unauthorized transactions, impersonation or
other similar fraud claims. We could also be subject to claims for misuse of
personal information, such as for unauthorized marketing purposes, whether by us
or a third party. In addition, the Federal Trade Commission and certain states
have been investigating certain Internet companies regarding their use of
personal information. We could incur additional expenses if new regulations
regarding the use of personal information are adopted.
The need to securely transmit confidential information over the Internet has
been a significant barrier to electronic commerce and communications over the
Internet. Any well-publicized compromise of security could deter more people
from using the Internet or from using it to conduct transactions that involve
transmitting confidential information. Internet security concerns could
frustrate our efforts to grow our advertiser base. We may also incur
significant costs to protect against the threat of security breaches or to
alleviate problems caused by such breaches. Our security measures may not
prevent security breaches, and failure to prevent security breaches could harm
our business.
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OUR BUSINESS MAY BE HARMED BY THE LISTING OR ADVERTISING BY US OR OUR CLIENTS OF
PIRATED OR INFRINGING ITEMS, OR BY FRAUDULENT ACTIVITIES ON OUR WEBSITE
We may in the future receive communications alleging that certain items listed
or advertised on our directory infringe third-party copyrights, trademarks and
tradenames or other intellectual property rights. An allegation of the
unauthorized sale or infringement of third-party intellectual property rights
may result in litigation against us. Any such litigation could be costly for
us, could result in increased costs of doing business through adverse judgment
or settlement, could require us to change our business practices in expensive
ways, or could otherwise harm our business and cause our stock price (if a
liquid market develops) to decline.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH INFORMATION DISSEMINATED THROUGH OUR
SERVICE
The law relating to the liability of online services companies for information
carried on or disseminated through their services is currently unsettled.
Claims could be made against online services companies under both United States
and foreign law for defamation, libel, invasion of privacy, negligence,
copyright or trademark infringement, or other theories based on the nature and
content of the materials disseminated through their services. Federal, state and
foreign legislation has been proposed that imposes liability for or prohibits
the transmission over the Internet of certain types of information. If we become
liable for information provided by our users and carried on our service, we
could be directly harmed and we may be forced to implement new measures to
reduce our exposure to this liability. This may require us to expend
substantial resources and/or to discontinue certain service offerings. In
addition, the increased attention focused upon liability issues as a result of
these lawsuits and legislative proposals could harm our reputation or otherwise
affect the growth of our business. We do not currently carry liability
insurance for this risk. Even if we become insured, the insurance may not be
adequate to fully compensate us if we become liable for information carried on
or through our service. Any costs incurred as a result of this liability or
asserted liability could harm our business and cause our stock price (if a
liquid market develops) to decline.
OUR BUSINESS MAY BE SUBJECT TO SALES AND OTHER TAXES
We collect Canadian Goods and Services taxes from our Canadian users; however we
do not collect sales or other similar taxes from our users in the United States.
One or more states may seek to impose sales tax collection obligations on
companies such as ours that engage in or facilitate online commerce. Several
proposals have been made at the state and local level that would impose
additional taxes on the sale of goods and services through the Internet. These
proposals, if adopted, could substantially impair the growth of electronic
commerce, and could diminish our opportunity to derive financial benefit from
our activities. The U.S. federal government recently enacted legislation
prohibiting states or other local authorities from imposing new taxes on
Internet commerce until October 21, 2001. This tax moratorium will last only
for a limited period and does not prohibit states or the Internal Revenue
Service from collecting taxes on our income, if any, or from collecting taxes
that are due under existing tax rules. A successful assertion by one or more
states or any foreign country that we should collect sales or other taxes on the
exchange of merchandise on our system would harm our business.
WE FACE RISKS FROM POTENTIAL GOVERNMENT REGULATION OF ONLINE SERVICES AND OF THE
INTERNET.
We are subject to the same federal, provincial, state and local laws as other
companies conducting business on the Internet. Currently there are relatively
few laws governing usage of the Internet or specifically directed towards online
services. However, due to the increasing popularity and use of the Internet and
online services, it is possible that a number of laws and regulations will be
adopted with respect to the Internet or online services. These laws and
regulations could cover issues such as online contracts, user privacy, pricing,
fraud, content and quality of products and services, taxation, advertising,
intellectual property rights and information security. The applicability to the
Internet of existing laws in various jurisdictions governing issues such as
property ownership, copyrights and other intellectual property issues, taxation,
and personal privacy is uncertain and may take years to resolve. The vast
majority of these laws were adopted prior to the advent of the Internet and
related technologies and, as a result, do not contemplate or address the unique
issues of the Internet and related technologies. Those laws that do reference
the Internet, such as the recently passed Digital Millennium Copyright Act, have
not yet been interpreted by the courts and their applicability and reach are
therefore uncertain. We are not aware of any legal determination to date that
has been made with respect to the applicability of state regulations to our
online business and little precedent exists in this area. One or more states
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may attempt to impose these regulations upon us in the future, which could harm
our business. In addition, as the nature of the directory information requested
by our users changes, we may become subject to new regulatory restrictions.
Several states have proposed legislation that would limit the uses of personal
user information gathered online or require online services to establish privacy
policies. The Federal Trade Commission also has recently settled a proceeding
with one online service regarding the manner in which personal information is
collected from users and provided to third parties. Changes to existing laws or
the passage of new laws intended to address these issues could directly affect
the way we intend to do business or could create uncertainty in the marketplace.
This could reduce demand for our services, increase the cost of doing business
as a result of litigation costs or increased service delivery costs, or
otherwise harm our business. In addition, because our services are accessible
worldwide foreign jurisdictions may claim that we are required to comply with
their laws. If we develop international activities, we may become obligated to
comply with these laws. Compliance may be more costly or may require us to
change our business practices or restrict our service offerings relative to
those in the United States. Our failure to comply with foreign laws could
subject us to penalties ranging from fines to bans on our ability to offer our
services.
In the United States, companies are required to qualify as foreign corporations
in states where they are conducting business. As an Internet company, it is
unclear in which states we are actually conducting business. Our failure to
qualify as a foreign corporation in a jurisdiction where we are required to do
so could subject us to taxes and penalties for the failure to qualify and could
result in our inability to enforce contracts in those jurisdictions. Any new
legislation or regulation, or the application of laws or regulations from
jurisdictions whose laws do not currently apply to our business, could harm our
business.
AN ESTABLISHED PUBLIC TRADING MARKET FOR OUR SECURITIES DOES NOT EXIST; ANY
MARKET FOR THE SECURITIES WHICH DOES DEVELOP MAY BE ILLIQUID.
We do not currently meet the requirements such as income, stockholders' equity
and number of public shares outstanding, to have our shares listed on a U.S.
stock exchange or the Nasdaq Stock Market. We will not meet these requirements
immediately after the offering, and we may never meet them. We cannot give any
assurance that we will achieve sufficient distribution or that we will be able
to obtain the number of market-makers necessary to obtain a listing on the
Nasdaq Stock Market.
We intend to apply to have our stock quoted on the OTC Bulletin Board however we
cannot guarantee that we will meet the eligibility criteria for quotation
thereon. The OTC Bulletin Board is an electronic quotation medium used by
subscribing broker dealers to reflect dealer quotations on a real-time basis.
The over-the-counter market provides significantly less liquidity than the
Nasdaq Stock Market. Quotes for stocks included on the OTC Bulletin Board are
not listed in the financial sections of newspapers, unlike those for the Nasdaq
Stock Market. Further, quotation entries on the OTC Bulletin Board may reflect
an unpriced indicator of interest (such as "bid wanted" or "offer wanted"
indicators) or unsolicited non-dealer interest. Therefore, prices for
securities traded solely on the OTC Bulletin Board may be difficult to obtain,
and holders of common stock may be unable to resell their securities at or near
their original offering price or at any price. In addition, price quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions. As a result, an investment in our shares
may be illiquid even if there is a market.
"PENNY STOCK" REGULATIONS IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF
SECURITIES
The SEC has adopted regulations which generally define "penny stock" to be any
equity security that is not traded on a national securities exchange or Nasdaq
and that has a market price of less than $5.00 per share or an exercise price of
less than $5.00 per share, subject to certain exceptions. The definition
excludes the securities of an issuer meeting certain minimum financial
requirements. Generally, these minimum thresholds would be met by an issuer
with net tangible assets in excess of $2 million or $5 million, respectively,
depending upon whether the issuer has been continuously operating for less or
more than three years, or by an issuer with "average revenue" of at least $6
million for the last three years.
As long as we do not meet the relevant financial requirements and our common
stock is trading at less than $5.00 per share on the OTC Bulletin Board, our
securities are subject to the penny stock rules. These rules impose additional
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sales practice requirements on broker-dealers who sell our securities to persons
other than established customers and accredited investors (generally, investors
with a net worth in excess of $1,000,000 or an individual annual income
exceeding $200,000, or, together with the investor's spouse, a joint income of
$300,000). For transactions covered by the penny stock rules, the broker-dealer
must make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the transaction
prior to the purchase. Additionally, for any non-exempt transaction involving a
penny stock, the rules require, among other things, that the broker-dealer
deliver an SEC mandated risk disclosure document relating to the penny stock
market and the risks associated therewith prior to the transaction. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative as well as current quotations
for the securities. If the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, the broker-dealer must send monthly statements
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the penny
stock rules may restrict the ability of broker-dealers to sell our securities
and may affect the ability of our shareholders to sell their securities in the
secondary market.
VOLUME OF SHARES ELIGIBLE FOR SALE COULD IMPAIR OUR STOCK PRICE
Of the 22,226,733 shares of common stock outstanding as of the date of this
prospectus, 21,628,000 were issued and sold by us in private transactions and
are restricted securities within the meaning of Rule 144 under the Securities
Act, and 598,733 shares are currently free trading. All of the shares sold
through this registration statement will be eligible for resale in the open
market. Even without an effective registration statement, all of the restricted
shares, including shares held by affiliates, will be eligible for resale under
U.S. federal securities laws commencing in November, 2000, in the open market,
if any, subject to the volume restrictions and other conditions of Rule 144. In
general, under Rule 144, every three months a person may sell up to one percent
of our outstanding shares. Concurrently with the offering under this
registration statement, we will be filing a registration statement respecting
the offer for sale by by us of up to 5,000,000 shares of common stock from our
treasury. All shares sold through the concurrent offering of our treasury
shares will be eligible for resale in the open market. There are no contractual
restrictions on the resale of the outstanding common stock. The sale in the
public market of the shares being registered for resale in the registration
statement to which this prospectus relates as well as the restricted shares, or
the perception that these sales may occur, may depress prevailing market prices
of the common stock. These factors may also make it more difficult for us to
raise funds through future offerings of common stock.
OUR MANAGEMENT WILL HAVE SUBSTANTIAL DISCRETION OVER THE USE OF PROCEEDS OF THE
CONCURRENT TREASURY OFFERING AND MAY NOT APPLY THEM EFFECTIVELY
We have not designated any specific use for the net proceeds to us from the sale
of our common stock in our concurrent offering of 5,000,000 shares and
accordingly, our management will have significant discretion in applying these
proceeds. We expect to use the net proceeds of the concurrent offering for
developing our network of regional and district sales agents, capital
acquisitions of computer equipment, costs required to support expansion,
implementing our marketing strategy and other general corporate purposes. We
may, when the opportunity arises, use a portion, or all, of the net proceeds to
acquire or invest in complementary businesses, products or technologies. We may
enter into joint ventures and strategic relationships with other companies that
may expand or complement our business. Although we anticipate that we will
evaluate possible acquisition candidates, we are not currently engaged in any
discussions for any material acquisitions. We cannot assure you that we will
identify suitable acquisition candidates or that we will, in fact, complete any
acquisition. Our management's failure to apply the net proceeds of our
concurrent offering effectively could cause our business to suffer and cause our
stock price (if a liquid market develops) to decline.
WE HAVE ARBITRARILY DETERMINED THE OFFERING PRICE OF SHARES OFFERED IN OUR
CONCURRENT TREASURY OFFERING.
We have arbitrarily determined the price for the common stock offered in our
concurrent treasury offering. Since a principal underwriter has not been
engaged to offer the securities, our establishment of the offering price of the
shares has not been determined by negotiation with an underwriter as is
customary in underwritten public offerings. The offering price does not bear
any relationship whatsoever to our assets, earnings, book value or any other
objective standard of value.
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OUR STOCK OWNERSHIP IS CONCENTRATED IN A SMALL NUMBER OF CURRENT STOCKHOLDERS
Cliff Sweeney, Norman Friend, Freddy Fuller, Dion Cillars, Alistair Donaldson,
Em-Power Industries, Hermes Trading and Eros Trading Ltd., in the aggregate
beneficially own approximately 70% of our outstanding common stock before the
offering and approximately 57% of our outstanding common stock after the
offering, subject to any sales by these individuals in the concurrent
shareholder offering. The stockholders listed above if acting together, would
be able to significantly influence all matters requiring approval by our
stockholders, including the election of directors and the approval of mergers or
other business combination transactions. There are currently no agreements in
place between these shareholders as to the voting of shares beneficially held by
them.
OUR CHARTER DOCUMENTS MAY MAKE IT MORE DIFFICULT TO ACQUIRE US
Provisions of our Bylaws and Restated Articles of Incorporation could make it
more difficult for a third party to acquire us, even if doing so would be
beneficial to our stockholders. For example, if the number of directors on our
board of directors is greater than two, our board of directors will be divided
into three classes, with one class being elected each year by our stockholders.
This generally makes it more difficult for stockholders to replace a majority of
directors and obtain control of our board. In addition, our charter documents
allow our board of directors to issue preferred stock which may have rights and
preferences that are superior to those of our common stock, thereby deterring a
potential acquiror. Our bylaws provide that a special meeting of stockholders
may only be called by a majority of our board of directors.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common stock by the
selling shareholders. However, the net proceeds of our concurrent treasury
offering of up to 5,000,000 shares of our common stock, after deducting
estimated offering expenses, are approximately $9,910,000 if the offering is
completely sold. We may use registered broker-dealers to act as selling agents
and in connection with such sales will pay fees or commissions not in excess of
the usual and customary fees and commission. If we use selling agents the net
proceeds of the concurrent treasury offering after deduction of commissions to
selling agents will be $9,210,000 assuming the full offering is sold through the
selling agent. We presently intend to use the net proceeds of our concurrent
treasury offering as follows:
Approximate
Approximate Percentage of
Amount Net Proceeds
----------- -------------
APPLICATION OF NET PROCEEDS
- ---------------------------
Development of website and business plan $2,317,000 23.38%
Marketing $2,940,000 29.67%
Acquisition of capital equipment $1,069,000 10.79%
General corporate and working
capital purposes, including
possible acquisitions of, and
investments in, complementary
businesses and technologies(1) $3,584,000 36.16%
Total Net Proceeds $9,910,000 100.00%
=========== =======
(1) This amount may be reduced by approximately $700,000 if commissions are
paid to selling agents.
The following is a description of each of the items in the table above.
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NET PROCEEDS AVAILABLE. The net proceeds of the concurrent treasury offering as
described in the table above assume the payment of commissions to brokers or
dealers on 100% of the securities sold in the offering. We are conducting the
concurrent treasury offering on a best efforts basis through our officers,
directors and employees. No commissions or other compensation will be paid to
our officers, directors and employees in connection with the concurrent
offering. No broker or dealer has been retained or is under any obligation to
purchase any of the securities, although we may use brokers or dealers and pay a
commission of up to 7% on such sales. In addition, we may pay a broker or
dealer additional compensation in the form of a non-accountable expense
allowance equal to up to three percent (3%) of the gross proceeds of the
concurrent offering. Any differential in net proceeds raised will be used for
general corporate and working capital purposes.
Our calculation of net proceeds includes a deduction for estimated offering
expenses of $90,000, consisting of estimated legal, accounting and other
professional fees, printing and postage costs, transfer agent fees and other
related offering expenses.
DEVELOPMENT OF WEBSITE AND BUSINESS PLAN. We will use the estimated net proceeds
of the concurrent treasury offering allocated to development for proprietary
software development and continue enhancement of our business search directory
website.
MARKETING. We will use the estimated net proceeds of the concurrent treasury
offering allocated to marketing for advertising on the Internet, trade
publications, direct mail programs, vendor exhibits, salaries for personnel,
brochures and public relations.
ACQUISITION OF CAPITAL EQUIPMENT. We will use the estimated net proceeds of the
concurrent treasury offering allocated to the acquisition of capital equipment
to purchase or otherwise acquire computers, servers, communication hardware and
software, and networking equipment.
GENERAL CORPORATE AND WORKING CAPITAL PURPOSES. We will use the estimated net
proceeds of the concurrent treasury offering allocated to general corporate and
working capital purposes to fund the capital requirements associated with our
growth, including, without limitation, the retention and training of personnel.
We may, when the opportunity arises, use a portion, or all, of the net proceeds
to acquire or invest in complementary businesses, products or technologies. We
may use the net proceeds to obtain the right or license to use complementary
technologies, and may enter into joint ventures and strategic relationships with
other companies that may expand or complement our business. Although we
anticipate that we will evaluate possible acquisition candidates, we are not
currently engaged in any discussions for any material acquisitions, and have no
agreements, plans or arrangements with respect to any acquisition or investment.
The foregoing represents our best estimate of the allocation of the net proceeds
of the sale of the securities offered in our concurrent treasury offering based
on our contemplated operations, our business plan, and current industry
conditions and is subject to reapportionment of proceeds among the categories
listed above or to new categories in response to changes in our plans,
regulations, industry conditions, and future revenues and expenditures. The
amount and timing of our expenditures will vary depending on a number of
factors, including the timing of offering receipts, changes in our contemplated
operations or business plan, and changes in economic and industry conditions.
Until we use the net proceeds for a particular purpose, we may invest them in
short-term interest bearing securities, which may be investment grade
securities, certificates of deposit, or direct or guaranteed obligations of the
United States or Canadian government.
MARKET FOR COMMON STOCK
Prior to our listing being deleted on October 21, 1999, our common stock was
quoted on the OTC Bulletin Board under the symbol "IOTI." The OTC Bulletin
Board has a limited and sporadic trading market and does not constitute an
"established trading market." See "Risk Factors AN ESTABLISHED PUBLIC TRADING
MARKET FOR OUR SECURITIES DOES NOT EXIST; ANY MARKET FOR THE SECURITIES WHICH
DOES DEVELOP MAY BE ILLIQUID." The range of high and low bid prices for our
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common stock for each quarter during the period from October 20, 1998 through
October 20, 1999, is set forth below. The trading prices have been adjusted to
give effect to the 25:1 stock split effective August 30, 1999.
QUARTERLY COMMON STOCK PRICE RANGES(1)
- -----------------------------------
QUARTER 1999
----
HIGH LOW
---- ---
1ST 0.875 0.688
2ND 1.00 0.688
3RD 1.75 0.875
4TH 1.56 0.875
(1) This table reflects the range of high and low bid prices for our common
stock during the indicated periods, as published by the OTC Bulletin Board prior
to October 21, 1999, and on the National Quotation Bureau's "pink sheets"
thereafter. The quotations merely reflect the prices at which transactions were
proposed, and do not necessarily represent actual transactions. Prices do not
include retail markup, markdown or commissions.
The National Association of Securities Dealers has recently enacted Rules that
limit quotations on the OTC Bulletin Board to securities of those issuers that
are required to report to the Securities and Exchange Commission and are current
in their reports filed with the Securities and Exchange Commission. The intent
of this rule is to make reliable and current financial and other information
about issuers quoted on the OTC Bulletin Board available to the investing
public. As a result of this rule, our securities are not eligible for quotation
on the OTC Bulletin Board until such time as we have cleared an effective
registration statement with the Securities and Exchange Commission. Our stock
is currently quoted on the National Quotation Bureau's "pink sheets" and will
continue to be quoted on this service until we meet the requirements for
quotation on the OTC Bulletin Board. Our trading market while quoted on the
"pink sheets" is generally illiquid and holders of common stock may be unable to
obtain quotations for our securities.
There were 871 record holders of our common stock as of August 30, 1999. We
estimate there are currently approximately 909 beneficial owners of our common
stock.
DIVIDENDS POLICY
We have not paid dividends on our common stock since our inception. Dividends
on common stock are within the discretion of the Board of Directors and are
payable from profits or capital legally available for that purpose. It is our
current policy to retain any future earnings to finance the operations and
growth of our business. Accordingly, we do not anticipate paying any dividends
on common stock in the foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with our
audited Financial Statements and Notes thereto and other financial information
appearing elsewhere in this prospectus.
OVERVIEW
We were organized under the laws of the State of Nevada in July, 1993. Our name
was Women in Motion, Inc., but we conducted no business until acquiring Global
Accsys Information Systems, Inc., a British Columbia corporation ("Global
Accsys") in November 1996. In connection with the acquisition of Global Accsys
we obtained a license to a proprietary loyalty card program. In September,
1997, we reversed the transaction and acquired Creative Sports Marketing. We
acquired Creative Sports Marketing, and changed our name to Classic Golf
Corporation. In April of 1999, we reversed the acquisition of Creative Sports
Marketing.
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On August 31, 1999, as Classic Golf Corporation, we entered into a stock
acquisition agreement to purchase our current business by way of share exchange
with Indexonly Technologies, IncAs Indexonly's shareholders received the largest
number of shares and Classic Golf Corporation had no substantive operations,
this transaction was accounted for as a recapitalization transaction,
effectively as if Indexonly had issued shares in consideration for the net
assets of Classic Golf Corporation.
We have two subsidiaries: Indexonly Technologies USA Inc., a Nevada company
("Indexonly USA"), which we wholly own, which in turn wholly owns Indexonly
Canada Inc. ("Indexonly Canada") a Canadian federally incorporated corporation.
Our principal executive offices are located at 3823 Henning Drive, Suite 217,
Burnaby, British Columbia, V5C 6P3, Canada, and our phone number is (604)
419-4401.
We effected a 25 for 1 stock split on August 30, 1999. All references in this
prospectus take this stock split into effect when referring to the number of
shares of common stock, or to the per share data.
PLAN OF OPERATIONS
We are developing Indexonly.com into an online business search directory where
businesses and individuals can access timely, accurate, geographically specific
information. Commencing October 1999, the company began to derive revenues.
Sources of revenue include revenues from the sale of regional and district
licenses and revenues from advertising placed on our website. Revenue from the
sale of regional and district licenses is expected to generate approximately 30%
of our total revenue over the next 3 years. Advertising revenue is a recurring
source of revenue and is expected to account for approximately 70% of our
revenue over the next 3 years.
We have not yet started to market or generate significant revenues from our
business and we cannot assure you that we will be successful in completing the
development of our business search directory or marketing our licenses and
advertising products. Our operations to date have consisted principally of
research and business plan development, undertaking the initial design,
development, and testing and launching of our commercial search directory
website, business and facilities planning and evaluation, raising sufficient
working capital and recruiting and organizing personnel, and the selling of
regional and district licenses.
Whether we can continue to generate revenues or be able to operate profitably
will depend, among other things, on our ability to achieve the following
objectives: (1) attract a large number of clients to our website; (2) increase
awareness of the specific search services we can provide; (3) develop our
regional and state-wide/province-wide distributor network; (4) respond
effectively to competitive pressures; (5) continue to develop and upgrade our
technology; (6) attract, integrate, retain and motivate qualified personnel; (7)
effectively execute our plan to develop additional online content, applications
and products; and (8) respond effectively to increased business operation
demands. We may be unable to accomplish one or more of the above, which could
cause our business to not succeed. In addition, accomplishing one or more of
the above could be very costly, which could harm our financial results.
RESULTS OF OPERATIONS
PERIOD FROM JUNE 28, 1999 (INCEPTION) TO DECEMBER 31, 1999
The period June 28, 1999 to December 31, 1999 was the first period of Indexonly
and operating under our current business plan.
Revenue
Revenues totaling $100,351 during the period June 28, 1999 (inception) to
December 31, 1999 relate to sales of regional and district licenses. These are
fees charged for exclusive rights to a region or district. The district fees are
apportioned between Indexonly.com and the related regional agent. Fee revenue is
recognized when all material services or conditions relating to the sale have
been substantially performed or satisfied. The rights or license agreements
provide for additional fees payable to Indexonly based on future operating or
license sales performance.
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Operating expenses
For the period June 28, 1999 to December 31, 1999 operating expenses totaled
$571,317. Marketing and promotion expense was $130,034 with our marketing focus
on advertising and promotion to attract regional agents. Technical and
development expense totaled $68,851 for the period June 28, 1999 to December 31,
1999. These expenses were for the development of the Indexonly.com web site and
included programming and data base costs. General and administration costs
totaled $329,752 for the period June 28, 1999 to December 31, 1999 and included
costs such as professional fees for assistance with strategic development and
regulatory filings. Interest expense totaled $6,218 during the period.
Throughout the period staff were hired as the need arose in each department.
LIQUIDITY AND CAPITAL RESOURCES
Since June 28, 1999 ( the inception date of our current business), we have
funded our activities primarily through our equity financing activities. At
December 31, 1999, we had cash and cash equivalents of $95,175. The cash
supplied by financing activities during the period ended December 31, 1999
totaled $774,583 which included $527,524 from the sale of 1,455,550 shares of
common stock and the balance of $247,059 from issuance of shareholder loans. At
December 31, 1999, we had sold a further 398,000 shares for subscriptions
receivable of $189,000 all of which was received subsequent to period end.
The net cash used for operating activities during the period ended December 31,
1999 was $343,495. Investing activities during this period used $335,913 for
the purchase of property, equipment, intangible assets and short term
investments. Stockholders' equity totaled $289,272 at December 31, 1999.
We maintain our cash balances at one major financial institution located in
Vancouver, British Columbia. Funds not required for the immediate needs may be
invested in certificates of deposit, short-term government obligations, or money
market funds.
We lease our office facility in Burnaby, British Columbia under an operating
lease agreement that expires August 31, 2004. Future minimum rental commitments
pursuant to this lease are $41,100 for fiscal years 2000 through 2003, and
$27,400 for fiscal year 2004. As at February 25, 2000, we have no material
commitments for capital expenditures.
We do not have sufficient working capital to allow us to achieve our expected
expansion goals and demands for our services through the end of the 2000
calendar year. We will therefore need to obtain additional working capital
through the sale of our capital stock, the issuance of debt or other financing
methods. We believe our existing working capital and anticipated cash from
financing activities will be sufficient to allow us to execute our business
plan, including the further development of our business directory and website
and to fund our expansion and marketing plans for the year 2000. Despite this
belief, there is no assurance that our resources will be sufficient. (See "Risk
Factors We will need additional financing")
BUSINESS
Form and year of organization
Our corporate structure is based on the outcome of a reverse takeover
transaction completed in the summer of 1999. In a reverse takeover transaction,
the shareholders of an acquired company end up owning all or almost all of the
outstanding shares of the acquiring company. In our reverse takeover
transaction, the acquired company was Indexonly Technologies USA Inc., a Nevada
corporation formed on June 28, 1999. The acquiring company, which the
shareholders of Indexonly USA came to own, was Classic Golf Corporation, a
Nevada corporation formed on July 9, 1993 under the original name Women in
Motion, Inc. In connection with the reverse takeover, Classic Golf changed its
name to Indexonly Technologies, Inc. As a result of the reverse takeover,
Indexonly Technologies, Inc. owns 100% of Indexonly USA, which in turn owns 100%
of Indexonly Canada Inc., a Canadian federal corporation incorporated on August
11, 1999.
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Under our previous name, Classic Golf Corporation, we had conducted some
business involving marketing of professional golf tournaments in 1998, but
ceased operations and abandoned the business plan by January of 1999, prior to
the reverse takeover. In 1998 the primary activity of Classic Golf was to
create, manage and sell sponsorship to The Classic at Superstition Mountain, a
professional golf tournament held in Phoenix, Arizona in March 1998. Classic
Golf created and wholly managed the event. It was responsible for contracting
the professional golfers, administering the tournament on the golf course,
producing the television coverage and negotiating corporate sponsorship of the
event. The event was planned to be the first in a series of events held across
the United Sates at various golf resort communities. The Classic Golf business
plan was dependent upon the participation of selected professional gofers and
tournament sponsors. In May of 1999, we determined that we could not secure our
sponsors for a second season and abandoned the business plan. We subsequently
acquired our current business by purchasing all of the issued shares of
Indexonly USA.
Overview
Indexonly has created and operates an online business directory that assists
Internet users searching for goods and services in locating an appropriate
business in their geographic area. The directory can be searched by keyword and
by geographic location to locate a business anywhere in North America. Our
directory is intended to reduce the time involved for Internet users seeking to
obtain information on a business in their community. We are developing a
network of licensed sales agents to sell advertising on our website and to
continuously update and verify information contained on our directory. While
our directory is operational, we currently consider our business to be in the
development stage and we anticipate that our business will remain in the
development stage until we have substantially developed our network of licensed
sales agents. We currently have over 17,000,000 businesses recorded in our
directory database. Our database will require review and updating by the
licensed sales agents in order to provide our users with a comprehensive and
current directory of businesses.
Industry Overview
The Internet has emerged as a source of information on almost any subject,
including news, commerce, information on businesses and people worldwide. Over
the past decade the Internet has achieved widespread recognition by both the
business community and the general public. This has resulted in rapid growth in
the use of the Internet as more businesses and individuals use the Internet as
both an informational and commercial tool. International Data Corporation (IDC)
estimates that the number of users of the Internet worldwide will increase from
over 100 million in 1998 to over 300 million by 2002. IDC estimates that the
number of website Uniform Resource Locators (URL), often synonymous with a
webpage or file within a webpage, is expected to grow from 925 million in 1998
to 13.1 billion in 2003. The number of consumers purchasing goods and services
over the Internet is also expected to increase from 28% at the end of 1998 to
approximately 40% in 2002, based on IDC estimates. The increasing number of
commercial transactions conducted over the Internet suggests that there is an
increasing level of acceptance by both consumers and businesses of the Internet
as a tool to conduct commercial transactions and as a medium for advertising.
The increasing number of websites and users of the Internet also means a glut of
information is available over the Internet that can be time consuming to search
through using a traditional search engine. In particular, the matching of
businesses to consumers can be difficult as consumers sort through large amounts
of often irrelevant information available on the Internet in order to locate a
business providing a good or service in the consumers community. A related
issue is the ability of businesses advertising on the Internet to reach their
consumers in their geographic region.
The most common method of obtaining information using the Internet is through
the use of search engines. Traditional Internet search engines, such as those
provided by Yahoo, Excite, Infoseek, Lycos and others, use dedicated computer
hardware and software to collect data (also called "content") using automated
programs called "spiders," "robots," or "crawlers" that go from website to
website recording and following all the links they find along the way. The
automated process for data collection typically used by these traditional search
engines looks for "key words" on Internet websites. When "matches" for the key
words are located the result is added to the search engine's database and
indexed.
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Searches done using traditional search engines may result in a large number of
irrelevant hits requiring the user to spend additional time to sort through the
information provided and refine the search process. Users of these search
engines type into an on-screen box, selected search criteria such as a desired
name or subject that they wish to view information on. The search engine
compares the search criteria to information contained in its database and
provides a list of all matches (also referred to as "hits" or "search results")
to the user. This process is unrefined as a search engine does not look at the
context of key word matches to eliminate search results that have little or no
relevancy to the Internet user. Due to the large number of websites currently
connected to the Internet search engines may only index a representative portion
of the websites connected to the Internet, or information on a website may not
be current. Search engines typically rank search results using a number of
ranking methods, including the accuracy of the match. Search engines may also
give preferential ranking to certain websites based on submissions from that
website or monetary and non-monetary consideration. The result to the end user
of the search engine is that a search will typically result in a very large
number of matches of which few or none may be relevant. The end user will
review the search results, possibly follow up on some of the results to
determine their relevancy, and may also spend additional time trying to refine
the search by modifying the search criteria.
The search results generated by search engines are usually in the form of an
Internet link to a website along with some informational extracts from the
website. An Internet user wishing to visit a website listed in the search
results can link directly to the website by selecting the desired search result.
Occasionally, a link may still be indexed in the search engine's database, but
the website address has changed or is otherwise outdated and accordingly the
connection cannot complete. This is referred to as a "dead link".
Where an Internet user wishes to locate a business in their community, search
engines often result in wasted time as the user sorts through a large number of
search results and tries to refine the search in order to limit the search
results to a specific geographic region. Search engines typically do not have
the ability to restrict search results to a geographic region such as a state or
town, and accordingly it is up to the Internet user to spend the time to locate
geographically relevant information using a search engine. Some search engines
can restrict search results based on large geographic regions such as a country.
There are an estimated 370 search engines available to Internet users of which
about ten are most commonly used. There are also a large number of local and
national Internet directories with search capabilities. These include "yellow
page" or "white page" directories, offering names, addresses and/or phone
numbers and/or e-mail addresses. These directories' services can be searched by
location and name to locate an individual or business. There are also a large
number of local Internet directories that provide information, for example, on
activities or restaurants within a city. Other national directories exist that
provide information on businesses within a desired geographical area, however
the listings are restricted to businesses that pay a fee for the listing
service.
The traditional search engines also provide advertising space to businesses.
However these advertisements posted on a search engine's website often are
targeted to a national or international market. Advertisers, such as a local
mechanic or car dealership, wishing to target consumers in their city or town, ,
typically only require that their advertising only reach consumers in their
geographic area.
The Indexonly Solution
By comparison to a search engine, our business is that of an Internet directory.
A "directory" is an approach to organizing information, the most familiar
example being a telephone directory. Internet directories are subject guides,
often organized by major topics and subtopics. The content of directories is
typically more focussed than that of search engines. Directories can be global,
such as the directory at Yahoo, or local, such as city directories. Some
companies that provide search engines, also provide directories, such as the
directory at Yahoo.
We believe that the services of most larger search engines are not suited to
locating specific businesses in a region due to the low relevance and
overwhelming volume of search results, and the time required to refine a search
Our Internet business directory is being developed to address these weaknesses
in search engines by using a searchable database that includes only businesses
indexed by geographic location. Our directory can be searched by geographic
region such as a state, province, city or town. The search results are
restricted to the geographic region requested. Our directory also provides
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services such as allowing a user to view the location of a selected business on
an on-screen local map, and allowing a user to link to the businesses website
when available.
We are positioning our website and Internet directory to benefit from the
increasing use of the Internet as a commercial tool. Our directory is primarily
designed to bring businesses and consumers together. We believe the
effectiveness of our business directory is associated with the speed in which
consumers using the Internet can locate a business in their geographical area,
and the currency and accuracy of the search results. We are not aware of any
other search directory similar to ours that offers a comprehensive database of
businesses indexed by geographical location.
We are also engaged in Internet-based advertising, where we obtain revenues from
selling advertising space on our website to businesses. Businesses that choose
to advertise on our website will be those that wish to target consumers in their
geographic area. Advertisers on our website can select the geographic areas in
which Internet users can view their advertisements. For example, a local car
dealership would typically require advertising of its services and products to
consumers located in the same community or region. An advertisement on our
website by the car dealership would only be presented on screen to a consumer
using our directory to locate a related business in the same community or
region.
Our target market for advertisers on our website is all businesses in North
America. We expect that our district sales agents will target mostly community
based businesses such as local retailers, for sales of advertising on our
website. National retailers and businesses will also be targeted through
strategic alliances and directly by our sales network. We may in the future
target businesses in overseas markets such as Europe and Asia. We have not yet
generated revenues from sales of advertising due to our stage of development.
The Indexonly Strategy - Our Internet Directory
Our Internet business directory is designed to enable Internet users to search
for a business by subject or name, and obtain search results that are
geographically relevant. The data contained on our directory is the result of
our system of screening, sorting by geographic location and updating information
on businesses. This system is designed to speed up the Internet search process
by eliminating information that is not current or not geographically relevant to
the user.
Users of the Internet can access our business directory through our Internet
website. The website has been in operation since January 1, 2000 and is
undergoing continuous development as we revise and update our database of
business listings and our services to users of the website. Currently we are
developing our database to include businesses by province, state, city and town
throughout North America. Accordingly our database is in the development stage
and will remain in the development stage until we have substantially developed
our network of community-based licensed sales agents. These sales agents will
add, verify and update information contained in our database.
The process for performing a search on our Internet business directory is as
follows: A user of our business directory will enter search criteria on our web
page, consisting of the subject or name of business along with the desired
geographical location of the business. Our search program then looks through
our database for matches in the geographical location requested. The search
results in a list of businesses matching the subject or name requested in the
state, province, city or town requested. The list of businesses also provides
information on the business such as the business name, address, phone/fax
numbers, website, email address and contact person. In some cases the user
could also view a map with the location of the business, or link directly to a
businesses' website. The time to complete the search is reduced as the number of
matching operations is much smaller than would be required by a typical large
search engine.
Our database is designed to include a comprehensive listing of all businesses in
each geographic area without the requirement that businesses pay a fee for a
listing. This feature is intended to enhance functionality of the website to
consumers when compared to other directories and search engines that only list
businesses that pay a fee for listing. Increased functionality is intended to
increase traffic flow to our website and is part of our strategic plan to
increase our ability to market our website to potential advertisers on our site.
Currently our database consists of over 17 million listings of businesses
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located throughout North America. These listings will be reviewed and updated
by our community-based sales agents on a continuous basis.
Unlike a search engine the process of maintaining and updating our database is
not fully automated. We use a combination of automated and non-automated
processes for data collection, filtering and sorting. The automated process
consists of purchasing databases of business listings from third parties as well
as filtering information available through the Internet. The non-automated
process involves developing and using a network of community based district
agents that will initially be required to physically collect information on
businesses in their community for inclusion on our database. The district
agents will also conduct an ongoing review and update of existing information as
necessary to ensure that our directory content is current and accurate. This
two step process allows us to continuously update information contained on our
directory at the community level, and reduces the number of dead links.
Our directory is operated out of an executive office in Burnaby, British
Columbia, and we will develop our commercial search directory business by means
of regional, state and local agents, each providing regional information by
means of integrating local data with our proprietary software.
Our website is hosted on multiple servers operated in-house. We plan on moving
these servers offsite to a securely protected data center within a few months.
Currently, all access to the web servers is through multiple T1 lines provided
by two separate internet service providers (ISPs). Access through these lines is
secured through a firewall and additionally, some load balancing software. We
presently host the web site on four servers. For redundancy and scalability,
both the web site and the database reside on one or more of these servers and
each server contains a disk array in case of hard drive failure. In this way, we
can provide the maximum protection from hardware, software or network failure.
Network monitoring is also provided to automatically page technical personnel in
the event that our internal or external monitoring service detects a warning of
possible problems in either hardware, software or the actual network itself. We
may in the future outsource these services and operations.
The Indexonly Strategy - Our Sales Network
We use regional and district agents to maintain our business database and to
generate revenues from sales of advertising and sales of licenses.
We are developing a network of regional agents throughout North America.
Regional agents are qualified entrepreneurs who will be responsible for
recruiting, training and managing a network of community based "district agents"
within their designated region. Regional agents will purchase from us a license
to use our brand name, software and system of operations within a defined
territory, usually consisting of an entire state or province. Larger states and
provinces may be subdivided into two or more regions for the purpose of granting
licenses. License fees for regional agents range from $12,000 to $60,000
depending on the size of the region and the stage of development of our
directory. We have identified approximately 100 regions within the United
States and Canada. Currently we have sold 5 of the 7 Canadian regional
licenses. These regions are: British Columbia, Alberta, Manitoba/Saskatchewan,
Western Ontario and Eastern Ontario. In the United States we have received
executed Offer to Purchase Agreements and deposits for 2 regions.
All regional agents must meet certain eligibility criteria and are required to
enter into a formal license agreement. The license agreement provides for the
grant of the license for a 5 year renewable term, unless terminated or revoked
by us. Regional agents are compensated by commissions on sales of licenses to
district agents and sales of advertising by district agents. Regional agents
are subject to performance standards including their ability to recruit
qualified district agents and to generate revenues from sales of district
licenses and advertising. Regional agents are required to re-invest 5% of their
commissions on regional advertising and promotion. The license agreement also
contains non-competition and non-disclosure provisions. Regional agents are also
required to obtain independent legal advice prior to signing our license
agreement. The license may be assigned with our consent. Regional agents attend
a two day training program at our head office and are provided with computer
hardware and software necessary to commence operations.
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Regional agents will in turn identify and recruit "district agents". District
agents are individuals or businesses who will operate as sales agents in a
geographically defined area roughly the size of a town or small city, comprised
of approximately 4,000 businesses. Larger cities and towns may be subdivided
into three or four districts, while smaller towns may be grouped together to
form one district. The North American regions identified by us can be
subdivided into a total of approximately 3,000 districts. Regions and districts
are identified by Zip or Postal Codes.
District agents serve two purposes. First, the district agents will be
responsible for gathering, verifying and updating information on our database as
it applies to businesses in their community (such as hotels, car rental
companies, florists, accountants, etc). Second, they are our front-line
Internet advertising sales force and will work within their district to approach
local businesses for the purposes of selling various options for advertising on
our website.
District agents are required to purchase from us a district license to use our
services and brand name. The license agreement sets out terms under which we can
revoke their right to represent our services, including failing to meet sales
targets. All district agents must be pre-approved by us and are required to
attend a two day seminar with their regional agent. The district license
agreement includes non-competition and non-disclosure terms. District agents
are compensated through commissions on the sale of advertising. The one time
fee to purchase a license and computer hardware and software necessary to
commence operations is $8,000. The license is granted for a 3 year renewable
term, unless revoked by us or otherwise terminated. The license may be assigned
with our consent. We have sold 5 district licenses in British Columbia, 3
district licenses in Alberta and 2 district licenses in Western Ontario.
For the balance of the fiscal year ending December 31, 2000, our objective is to
recruit 31 regional agents who will in turn recruit up to 344 district agents.
We are conducting a recruitment program that includes public relations activity,
advertising on business opportunity websites, regional and local advertisements
in newspapers and industry magazines, and networking within the industry. For
the balance of the current fiscal year we expect that our public relations and
marketing budget for developing our regional and district agent network will be
approximately $120,000 per month on average. This amount may be adjusted to
reflect available funds (see "Risk Factors" herein"). Our public relations and
marketing program in this regard is designed to generate leads to qualified
regional agents, and to assist regional agents in generating leads to recruit
district agents.
The efforts of regional and district agents in marketing our website to
potential advertisers will be supported by an aggressive marketing program
designed to increase brand name recognition and traffic to our website in the
areas where district agents operate. The sales network itself is expected to
increase brand name recognition and traffic to our website through sales
activities.
We will also support the community based sales efforts of our district agents
through strategic partnerships with other online service providers for the
purpose of increasing brand recognition and traffic to our website. We are
seeking strategic alliances with other Internet companies that through synergies
in services have the ability to drive traffic to our website or otherwise
increase awareness of our website to potential advertisers, sales agents and
directory users. Indexonly has entered into strategic affiliate agreements with
the following companies: CBS Sportsline; Barnes & Noble; Disney; ClickPay,
e-stamp; Magazines.com; Omaha Steaks; Petstore.com; 1-800-flowrers; Cooking.com;
800.com; Lands' End; Great Catalogs; e-Bags; e-Toys; more.com; liquor.com;
babyfurniture.com; OfficeMax.com; and Verio Web Hosting. As an example of a
typical strategic affiliate agreement, we have an affiliate agreement with a
national book seller. Every time a user does a search for books, a banner ad
for that book seller appears on the same page as the search results. If the
user clicks on the banner ad they will be connected to the book seller's
website. If they purchase books at the book seller's website, we receive a 5%
commission. We use technology and service of a third party to track the results
of these strategic affiliations.
Some States in which we propose to sell regional and district licenses consider
the sale of our licenses to be the sale of franchises, requiring compliance with
State franchise laws. We are preparing a Uniform Franchise Offering Circular
which will be delivered to potential regional and district agents within these
States and filed with the appropriate State authority. To the extent that any
State franchise requirements are not complied with the license holder may be
entitled to rights of rescission. See "RISK FACTORS - WE ARE REQUIRED TO COMPLY
WITH STATE FRANCHISE LAWS".
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Our Sources of Revenues
There are several different sources of revenue from our business operations, as
follows:
We will charge a one-time regional and district license fee to our regional and
district agents. The fee for regional agents ranges from $12,000 to $60,000
depending on the size of the region. The fee for district agents is $8,000. In
both cases the fee includes the cost of computer hardware and software required
to commence operations. For the balance of the fiscal year ending December 31,
2000 our objective is to sell a total of 31 regional licenses and 344 district
licenses. From the commencement of operations of our current business through
December 31, 1999 we earned approximately $100,000 from the sale of regional and
district licenses.
We will charge fees for advertising on our website. District sales agents will
be primarily responsible for selling advertising on our website. The pricing
guidelines used by district sales agents for sales of advertising are determined
by us and governed by the terms of the license agreement. There are several
options for advertising on our website which are as follows:
- - Banner Advertising: The most visible of advertisements on our website are
"banner" ads that often run along the top or bottom of a webpage. The banner
ad may have the advertiser's name, slogan, or message displayed, and may be
clicked on to access an advertisers website. Advertisers without a website
can also use banner advertising. As a result of our directory being based on
geographic location, we will also be able to offer local businesses the
option of having their banner advertisement appear only in connection with a
search for a similar business in their geographic area. Businesses can
select any number of geographic areas in which their advertisements are to
be targeted to. Advertisers using banner ads are charged a yearly fee
ranging from $360 to $540 per year depending on the location of the ad on
our website. Our website allows advertisers to create their own banner ad
using our software, or we can assist them in preparing the ad. National
advertisers wishing to use this option are eligible for preferential pricing
on a case by case basis.
- - Display Advertising: A display ad utilizes the visual effects of
different fonts, type style, size and colour in order to draw attention to
an advertisers listing among other businesses listed in the search results.
Advertisers are charged a yearly fee of $180 for this service. Advertisers
can create their own display ad through our website using our software.
- - Quick Search Advertising: This form of advertising provides a searcher
using the quick search feature of our website with access to just one
business in each district under the search criteria used. The fee for this
service is $720 per year.
- - Priority Listing Placement: Priority placement places a company's listing
above other non-priority listings in the search results. Only three
businesses can request a priority listing. The fee for a priority listing
is $240 per year.
- - Web Link: Business with their own website can place a "Go To Web" link
next to their listing which allows a user to click on the link to
immediately access the businesses website. The fee for this service is $60
per year.
Our advertising options have a one year term and all fees for advertising
services are payable in advance. Total fees are subject to revenue sharing
deductions to regional and district agents and accordingly do not represent the
net fee to us. We have not yet generated significant revenues from sales of
advertising as we are in the process of implementing our network of regional and
district agents. Sales of advertising will initially be a second priority for
our district agents pending the development of the content of our website. Due
to the relatively small amount of fees received from any single advertiser, we
do not expect that the loss of any one advertiser will have an adverse material
effect on our business. In order to be successful in generating revenues from
advertisements we must generate awareness of our website and attract users of
the Internet to our website. Revenues are typically derived from the sale of
advertising, the value of which is typically predicated on the number of "hits"
to the website.
We may also sell the content of our database. The content consists of
information that we have compiled, using our network and other sources, on
businesses in various geographical regions, including name, address, telephone
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and fax numbers, contact persons, email addresses and web pages. As content in
our directory is gathered and/or verified by a physical team of district agents,
we believe the information that can be offered for sale by us will be more
accurate and relevant than other search engines and directories. We have not
yet determined the pricing for this potential source of revenue.
Profitability for us is associated with our ability to sell licenses to
continuously expand our network of regional and district agents, and to
generate advertising revenues based on the efforts of our licensed agents. We
are currently operating at a loss and expect to continue operating at a loss
through our development stage as we will incur large expenses associated with
rapidly increasing our agent network and develop brand recognition. For the
balance of the fiscal year ended December 31, 2000, we intend to reinvest our
revenues towards the cost of expanding operations and marketing. We will
require additional capital from external sources until we achieve profitability.
Competition
We believe our primary competition will be from the following services:
- - Traditional telephone directory books such as the Yellow PagesTM;
- - National internet directories such as YellowPages.com;
- - Internet search engines such as Yahoo, Excite, WebCrawler, Infoseek and
others; and
- - Local business directories.
Many of our competitors have established reputations and better financial
resources. Our ability to compete over time will depend on our ability to
attract Internet users to our website and to deliver a superior search result to
those who use our directory service so that they will return to our website. We
believe that a focused business directory indexed by geographic location in
combination with our community-based direct sales network will provide us with a
competitive advantage. Our competition for Internet users will not depend
directly on price, because our service, like our competitors', will be free to
Internet users. Price will matter, however, if Internet users do not believe
that our search results direct them to businesses that provide a quality product
at a competitive price.
Our competition for Internet users will to a large extent determine our success
in competing for advertising revenues. We will be able to demand higher
advertising rates if we can demonstrate that large numbers of Internet users
make purchases based on our search results. We believe our main competition for
advertising dollars from community-based businesses will come from niche
websites and existing forms of advertising, such as the local Yellow Pages and
business directories. We believe that the larger search engines generally will
not compete for the same advertising dollars as us, because our target market is
mostly community-based businesses that will be targeted by our community-based
sales force. Larger search engines have minimal or no community-based presence
or sales network, and are more likely to seek national advertisers.
Intellectual Property
We rely on a combination of copyright and trademark laws, trade secrets,
software security measures, license agreements and nondisclosure agreements to
protect our proprietary rights and software products. Much of our proprietary
information may not be secured by means of patent, copyright, domain
registration, or trade or service mark, and we are not the owner or assignee of
any domestic or foreign patents. We have a U.S. federal and international
trademark registered for Indexonly Technologies, Inc.
We have federal service mark applications pending for "Indexonly.com." We have
registered Internet domain names for indexonly.com, indexonly.ca,
Indexonly.co.uk, indexonly.net and indexonly.org as well as 22 other relevant
domain names.
We filed an application for the Canadian trade mark "INDEXONLY.COM" (with a
disclaimer for the word ".COM"). The application was filed on May 31, 1999 and
the application was formalized on July 5, 1999.
We filed an application in the U.S. Patent and Trademark Office on the Principal
Register on November 30, 1999, for the trademark "INDEXONLY.COM" based on our
earlier Canadian application. That trademark registration is currently pending.
<PAGE>
Page 27
We have received no opposition to our trademark registration and we are unaware
of any reasons why the registration will not be approved.
Our ability to enforce our rights to the name "INDEXONLY.COM" will be critical
to our success once we have established an identity and reputation with
advertisers and Internet users.
We require all our employees, regional and district agents to enter into
confidentiality agreements.
To date we have not received notification that our services or products infringe
the proprietary rights of third parties. Third parties could however make such
claims of infringement in the future. We cannot be certain that others will not
develop substantially equivalent or superseding proprietary technology, or that
equivalent services will not be marketed in competition with our services,
thereby substantially reducing the value of our proprietary rights.
Furthermore, there can be no assurance that any confidentiality agreements
between us and our employees or any license agreements with our customers will
provide meaningful protection for our proprietary information in the event of
any unauthorized use or disclosure of such proprietary information. See "Risk
Factors - WE MAY NOT BE ABLE TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS."
We also rely on software that we license from third parties, which is used in
our website to perform key functions. There can be no assurance that these
third party technology licenses will continue to be available to us on
commercially reasonable terms. The loss of or inability to maintain any of
these technology licenses could result in delays or reductions in service
development or delivery until equivalent technology could be identified,
licensed and integrated. Any such delays or reduction in service development or
delivery would adversely affect our business. See "Risk Factors - WE MAY
EXPERIENCE DIFFICULTIES IN INTEGRATING BUSINESSES, PRODUCTS AND TECHNOLOGIES WE
MAY ACQUIRE INTO OUR BUSINESS."
Government Regulation
We are subject to the same federal, state and local laws as other companies
conducting business on the Internet. Internet commerce is subject to direct
regulation by the Telecommunications Act of 1996, as administered primarily by
the Federal Communications Commission. Additionally, consumer protection laws
such as the Telephone Consumer Protection Act and the Telemarketing and Consumer
Fraud and Abuse Prevention Act, as well as applicable state and provincial law
may regulate or restrict Internet commerce. While much of Internet content is
constitutionally protected in the United States, obscene content violating the
provisions of Miller v. California is prohibited. Additional regulation is
possible and likely concerning Internet transactions that are international in
origin or termination. In 1996 the United States Congress passed the
Communications Decency Act (CDA). The CDA has created a defense for online
service providers from civil liability for content they did not create.
Due to the increasing popularity and use of the Internet and online services, it
is possible that a number of laws and regulations governing domestic Internet
transactions will be adopted with respect to the Internet or online services.
These laws and regulations could cover issues such as online contracts, user
privacy, pricing, fraud, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. The
applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, copyrights and other intellectual
property issues, taxation, and personal privacy is uncertain and may take years
to resolve. The vast majority of these laws were adopted prior to the advent of
the Internet and related technologies and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. Those laws
that do reference the Internet, such as the recently passed Digital Millennium
Copyright Act, have not yet been interpreted by the courts and their
applicability and reach are therefore uncertain. We are not aware of any legal
determination to date that has been made with respect to the applicability of
state regulations to our online business and little precedent exists in this
area. One or more states may attempt to impose these regulations upon us in the
future, which could harm our business. In addition, as the nature of the
products listed by our users changes, we may become subject to new regulatory
restrictions.
Several states have proposed legislation that would limit the uses of personal
user information gathered online or require online services to establish privacy
policies. The Federal Trade Commission also has recently settled a proceeding
with one online service regarding the manner in which personal information is
<PAGE>
Page 28
collected from users and provided to third parties. Changes to existing laws or
the passage of new laws intended to address these issues could directly affect
the way we intend to do business or could create uncertainty in the marketplace.
This could reduce demand for our services, increase the cost of doing business
as a result of litigation costs or increased service delivery costs, or
otherwise harm our business. In addition, because our services are accessible
worldwide, if we facilitate sales of intellectual property to users worldwide,
foreign jurisdictions may claim that we are required to comply with their laws.
If we develop international activities, we may become obligated to comply with
these laws. Compliance may be more costly or may require us to change our
business practices or restrict our service offerings relative to those in the
United States. Our failure to comply with foreign laws could subject us to
penalties ranging from fines to bans on our ability to offer our services.
In the United States, companies are required to qualify as foreign corporations
in states where they are conducting business. As an Internet company, it is
unclear in which states we are actually conducting business. Our failure to
qualify as a foreign corporation in a jurisdiction where we are required to do
so could subject us to taxes and penalties for the failure to qualify and could
result in our inability to enforce contracts in those jurisdictions. Any new
legislation or regulation, or the application of laws or regulations from
jurisdictions whose laws do not currently apply to our business, could harm our
business. See "Risk Factors - WE FACE RISKS FROM POTENTIAL GOVERNMENT
REGULATION OF ONLINE SERVICES AND OF THE INTERNET."
Employees
At January 31, 2000, we operated with the services of our directors, executive
officers, independent contractors, and twenty full-time employees and
consultants. Our future success will depend, in part, on our ability to
attract, retain and motivate highly qualified technical and management
personnel. From time to time, we may employ additional independent consultants
or contractors to support our research and development, marketing, sales and
support and administrative organizations. Our employees are not represented by
any collective bargaining unit, and we have not experienced a work stoppage. We
estimate that successful implementation of our growth plan would result in
approximately 10 additional employees and 375 licensed regional and district
agents by the end of fiscal 2000.
Property
Our executive offices are located in Burnaby, British Columbia, where we
currently lease approximately 4,028 square feet. We lease this space under an
operating lease that expires August 31, 2004. We believe that our current
facilities are adequate and are suitable for our current use, and that suitable
additional facilities will be available, when needed, upon commercially
reasonable terms. Our facilities are adequately insured against perils in a
manner consistent with industry practice.
Legal Proceedings
To the best of our knowledge, there are no legal actions pending, threatened or
contemplated against us.
Additional information
We will file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). You may read
and copy any reports, statements or other information on file at the SEC's
Public Reference Room at 450 5th Street, N.W., Judiciary Plaza, Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site
that contains the reports, proxy statements and other information on which we
file electronically with the SEC. The SEC's website is located at
http://www.sec.gov.
-----------
We have filed with the SEC a registration statement under the Securities Act
with respect to the securities offered by this prospectus. This prospectus,
which constitutes a part of the registration statement, omits certain of the
information set forth in the registration statement in accordance with the rules
and regulations of the SEC. For further information with respect to us and the
securities offered by this prospectus, reference is made to the registration
statement and the exhibits filed as a part thereof. Statements contained in
<PAGE>
Page 29
this prospectus as to the content of any contract or other document referred to
are not necessarily complete, and in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by this
reference. The registration statement and exhibits can be inspected and copied
at the public reference section at the SEC's Public Reference Room in Washington
D.C. noted above, and at the SEC's regional offices in Chicago, Illinois and New
York, New York. The registration statement and exhibits can also be reviewed on
the SEC's Internet site at http://www.sec.gov.
------------
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our management is vested in our Board of Directors and officers. There currently
are two directors. The directors are elected by the shareholders. Our Board of
Directors is currently comprised of only one class of directors. All of the
directors serve until the next annual meeting of shareholders and until their
successors are elected and qualified, or until their earlier death, retirement,
resignation or removal. Our officers hold office at the discretion of the Board
of Directors. In the event that there are three or more directors, the directors
will be divided into three different classes, Class I, Class II and Class III.
Each director will serve for a term ending on the date of the third annual
general meeting following the annual general meeting at which the director was
elected, provided that each initial director in Class I holds office until the
first annual meeting of the shareholders; each initial director in Class II
holds office until the second annual meeting of the shareholders; and each
initial director in Class III holds office until the third annual meeting of the
shareholders. At least one-fourth of the directors must be elected annually.
Our Board of Directors and executive officers and their respective ages as of
December 31, 1999 are set forth in the table below. Also provided is a brief
description of the business experience of each director and executive officer
and the key personnel during the past five years and an indication of
directorships (if any) held by each director in other companies subject to the
reporting requirements under the Federal securities laws.
Name Age Position
---- --- --------
Cliff Sweeney 46 Chief Executive Officer, President,
Director, Chairman of the Board
Norman Friend 53 Vice President, Director
David Manning 45 Chief Financial Officer
Michael Lightheart 37 Chief Technical Officer
Following is a discussion of the business background of each director and
executive officer. Cliff Sweeney, Norman Friend, David Manning and Michael
Lightheart are full-time employees.
BUSINESS EXPERIENCE
Cliff Sweeney was appointed as director, President and Chief Executive Officer
of Indexonly in June of 1999. Mr. Sweeney was also appointed a director of
Indexonly USA and Indexonly Canada in August of 1999. From 1998 to 1999 Mr.
Sweeney was Chief Operating Officer of Welcome To Search (now CityXpress) which
is quoted on the OTC Bulletin Board. Prior from 1994 to 1998 he acted as
President of C.F.S. Trading Co. Ltd., a barter franchise. Mr. Sweeney has a
Bachelor of Commerce Degree in Business Administration from Concordia
University, Montreal, Quebec. He is also the Chairman of the Dollarton
Foreshore Association, a community-based association that works to restore
salmon stock and repair shoreline erosion, and a Director of the Greenway &
Blueway Foundation, a foundation that promotes greenway and blueway projects.
Norman Friend was appointed as director of Indexonly since August 30 1999, and
Vice-President, International Expansion & Marketing since July 1999. Mr. Friend
was also appointed a director of Indexonly USA and Indexonly Canada in August of
1999. From 1988 to 1999 Mr. Friend was the President and Owner of The Franchise
Group, a company that provides consulting services to businesses concerning
marketing and expansion strategies such as franchising, licensing, distribution
and dealerships since 1988. Mr. Friend is the co-author of The Complete Canadian
<PAGE>
Page 30
Franchise Guide (hard cover) and So You Want To Buy A Franchise. Mr. Friend also
wrote the text for the Canadian Franchise Association's publication Investigate
before you Invest. He is founding director of the Pacific Franchise Association
and past president of the Canadian Home Builders Association for British
Columbia, receiving the national award for "Outstanding Contribution to the
Residential Construction Industry."
David Manning was appointed Chief Financial Officer of Indexonly in October
1999. From 1994 to 1999 Mr. Manning was an independent consultant providing
CFO and accounting services to high tech, natural resource and biotech
companies. From 1997 to 1999 he acted as Vice President Finance of Central
Minera Corp. From 1987 to 1994 he was Vice President, Finance for the Walker
Group, a private, international multi-industry group of companies. Mr. Manning
has a B.Comm. from the University of B.C. and is a Chartered Accountant.
Michael Lightheart was appointed Chief Technical Officer of Indexonly in January
2000. Previously Mr. Lightheart was the Chief Technical Officer of CityXPress
from 1998 to 1999. From 1993 to 1998 he acted as Vice President of Research and
Development with Vicom Multimedia Inc. where he was responsible for strategic
technology planning, product management and software development. He attended
British Columbia Institute of Technology (B.C.I.T.) for a diploma in Computer
Science and Technology.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
Cliff Sweeney. Pursuant to an Employment Agreement effective as of July 1,
1999, we employed Cliff Sweeney as our President and Chief Executive Officer.
Mr. Sweeney is also a director. The term of employment commenced on July 1,
1999, and continues month to month. Mr. Sweeney's initial salary is $40,000 per
annum, plus cell phone cost reimbursement, plus up to $6,000 per year for an
automobile lease, which may be increased annually at the discretion of the Board
of Directors of Indexonly. In the event of change of control, and for a minimum
period of three years thereafter, all existing unvested options awarded or
granted are to automatically vest, and one year's salary is then due and
payable.
Norman Friend. Pursuant to a Consultant Agreement effective as of July 1, 1999,
we contracted Norman Friend as our Vice President of International Expansion and
Marketing. He is also a director. The term of employment commenced on July 1,
1999, and continues for one year. Mr. Friend's initial salary is $40,000 per
annum, which may be increased annually at the discretion of the Board of
Directors. In the event of change of control, and for a minimum period of three
years thereafter, all existing unvested options awarded or granted are to
automatically vest, and one year's salary is then due and payable.
David Manning. Pursuant to a Consultant Agreement effective as of October 1,
1999, we contracted with David Manning to provide services to Indexonly as our
Chief Financial Officer. The term of the agreement commenced on October 1, 1999,
and continues month to month. Mr. Manning's initial salary is $40,000 per
annum, which may be increased annually at the discretion of the Board of
Directors. In the event of change of control, and for a minimum period of three
years thereafter, all existing unvested options awarded or granted are to
automatically vest, and one year's salary is then due and payable.
Michael Lightheart. Pursuant to an Employee Agreement effective as of January
2000, we employed Michael Lightheart as our Chief Technical Officer. The term
of employment commenced in January 2000, and continues month to month. Mr.
Lightheart's salary is $40,000 per annum, which may be increased annually at the
discretion of the Board of Directors of Indexonly.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or earned for services
rendered to us in all capacities during the years ended December 31, 1999 and
December 31, 1998 by our President and Chief Executive Officer (the "Named
Officer"). No executive officer received total annual salary, bonus and other
compensation in excess of $100,000 in those periods. No executive officer that
would have otherwise been included in this table on the basis of salary and
bonus earned for the 1999 and 1998 fiscal year has been excluded by reason of
his or her termination of employment or change in executive status during the
fiscal year.
<PAGE>
Page 31
SUMMARY COMPENSATION TABLE
--------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
SECURITIES
STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY OTHER AWARDS OPTIONS/SAR's
- --------------------------- ---- ------ ----- ------ -------------
Cliff Sweeney 1999 $20,000 -(1) 1,750,000
President and CEO
David Marr II 1998 $15,000 -(1) - -
President and CEO
(1) Perquisites and other personal benefits, securities and property in the
aggregate do not exceed the threshold reporting level of the lesser of $50,000
or 10% of total salary and bonus reported for the Named Officer.
OPTION GRANTS IN LAST FISCAL YEAR
The following options were granted to the Named Officer during the fiscal year
ended December 31, 1999.
- --------------------------------------------------------------------------------
NAME NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/
UNDERLYING SARs GRANTED EXERCISE
OPTIONS/SARs TO EMPLOYEES IN OR BASE EXPIRATION
GRANTED (#) FISCAL YEAR PRICE ($/Sh) DATE
(a) (b) (c) (d) (e)
- --------------------------------------------------------------------------------
Cliff Sweeney,
Chief
Executive
Officer 1,750,000 17.2% $1.00 October 1, 2002
- --------------------------------------------------------------------------------
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
None of the Named Officers exercised options during the last fiscal year. There
was no in-the-money realizable value to the unexercised options granted to the
Named Officer as at the end of the last fiscal year.
DESCRIPTION OF 1999 STOCK OPTION PLAN
The 1999 Stock Option Plan ("1999 Plan") is intended to serve as an equity
incentive program for management, qualified employees, non-employee members of
the Board of Directors, and independent advisors or consultants. The 1999 Plan
became effective on July 30, 1999 upon adoption by the Board of Directors, and
was ratified by shareholders at the annual meeting in August 30, 1999. As of
February 25, 2000, we had granted options to purchase an aggregate of 10,164,000
shares of common stock under the 1999 Plan. The following is a summary of the
principal features of the 1999 Plan.
Under the 1999 Plan, the total number of shares of common stock reserved for
issuance at any time is fifteen million shares of Company common stock, which
may be Incentive Stock Options ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or nonqualified stock options. If
any outstanding option expires or is terminated for any reason, the shares of
common stock allocable to the unexercised portion of that option may again be
subject to an option to the same optionee or to a different person eligible
under this Plan.
<PAGE>
Page 32
The 1999 Plan contains two separate components: (i) a discretionary option grant
program under which eligible individuals in our employ or service (including
officers and other employees, non-employee Board members and independent
advisors or consultants) may, at the discretion of the plan administrators, be
granted options to purchase shares of common stock; and (ii) an automatic option
grant program under which option grants will automatically be made at periodic
intervals to eligible non-employee Board members to purchase shares of common
stock at an exercise price equal to their fair market value on the grant date.
The discretionary option grant program is administered by the Board of Directors
or a committee of two or more members of the Board. Plan administrators have
sole authority to prescribe the form, content and status of options to be
granted, select the eligible recipients, determine the timing of option grants,
determine the number of shares subject to each grant, the exercise price,
vesting schedule, and term for which any option will remain outstanding,
provided, however, that the exercise price for any option granted may not be
less than the fair market value per share of the common stock at the date of
grant. The Board of Directors has the authority to determine the terms and
restrictions on all restricted option awards granted under the 1999 Plan, and in
general, to construe and interpret any provision of the 1999 Plan.
The exercise price for outstanding option grants under the 1999 Plan may be paid
in cash or, upon approval of the plan administrators, in shares of common stock
valued at fair market value on the exercise date, having shares withheld from
the amount of shares of common stock to be received by the optionee, by delivery
of an irrevocable subscription agreement obligating the optionee to take and pay
for the shares of common stock to be purchased within one year of the date of
such exercise, through a same-day cashless exercise program or a reduction in
the amount of any Company liability to the optionee, or by such other
consideration and method of payment for the issuance of shares to the extent
permitted by applicable laws.
Under the 1999 Plan, no stock option can be granted for a period longer than
three years or for a period longer than three years for ISOs granted to
optionees possessing more than 10% of the total combined voting power of all
classes of stock of Indexonly. Unless extended by the Plan administrators until
a date not later than the expiration date of the option, the right to exercise
an option terminates ninety days after the termination of an optionee's
employment, contractual or director relationship with us. If the optionee dies
or is disabled, the option will remain exercisable for a period of one year
after the termination of employment or relationship with us.
DIRECTOR COMPENSATION
Except for grants of stock options and reimbursement of expenses, directors of
Indexonly generally do not receive compensation for services rendered as a
director. We do not compensate our directors for committee participation or for
performing special assignments for the Board of Directors.
LIMITATION OF LIABILITY
Our bylaws provide for the indemnification of officers and directors to the
fullest extent possible under Nevada Law, against expenses (including attorney's
fees), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding, arising by reason of the fact that
such person is or was an agent of us. We are also granted the power, to the
maximum extent and in the manner permitted by the Nevada Revised Statutes, to
indemnify each of our employees and agents (other than directors and officers)
against expenses (including attorneys' fees), judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
us.
Our Articles of Incorporation limit or eliminate the personal liability of
officers directors for damages resulting from breaches of their fiduciary duty
for acts or omissions, except for damages resulting from acts or omissions which
involve intentional misconduct, fraud, knowing violation of the law, or the
payment of dividends in violation of the Nevada Revised Statutes.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of Indexonly
pursuant to the foregoing provisions, or otherwise, Indexonly has been advised
<PAGE>
Page 33
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of February 25, 2000(2,3) by (a) each person
known by us to be a beneficial owner of more than five percent (5%) of our
outstanding common stock; (b) each of our Directors; and (c) all our directors
and officers as a group.
Name and Address of Shares Percentage of Shares
Beneficial Owner(1) Beneficially Owned(2,3) Beneficially Owned
------------------- ---------------------- --------------------
Dion Cillars 3,000,000 13.49%
302-1371 Harwood St.,
Vancouver
Em-Power Industries 3,000,000 13.49%
(Maureen Berard)
706-518 Moberly Rd,
Vancouver
Alistair Donaldson 2,500,000 11.25%
304-2182 W 2nd Ave,
Vancouver
Cliff Sweeney (1,4) 2,350,000 10.57%
2915 Dollarton Hwy,
North Vancouver
Freddy Fuller (6,7) 1,575,000 7.09%
2538 Ross Road,
Abbotsford
Hermes Trading 1,250,000 5.62%
(Ann Williams)
Arawak Inn & Beach Club,
Grand Turk, Turks & Caicos
Eros Trading Ltd. 1,250,000 5.62%
(Gail Johnston)
Palm Grove Villas,
Grand Turk,
Turks & Caicos
Norman Friend (1,5) 700,000 3.15%
425 Southborough Dr,
West Vancouver
All directors and officers 3,050,000 13.72%
as a group ( 2 persons)
(1) Except as noted below, the business address of Mr. Sweeney and all other
directors and executive officers is #217 - 3823 Henning Drive, Burnaby, BC V5C
6P3.
(2) There were a total of 22,226,733 shares outstanding as of February 15, 2000
pursuant to the transfer agent's record. Includes 20,150,000 shares of Common
Stock issued pursuant to agreements dated August 30, 1999 to acquire
approximately 100% of the common stock of Indexonly USA.
<PAGE>
Page 34
(3) Pursuant to applicable rules of the Securities and Exchange Commission,
"beneficial ownership" as used in this table means the sole or shared power to
vote shares (voting power) or the sole or shared power to dispose of shares
(investment power). Unless otherwise indicated, the named individual has sole
voting and investment power with respect to the shares shown as beneficially
owned. In addition, a person is deemed the beneficial owner of those securities
not outstanding which are subject to options, warrants, rights or conversion
privileges if that person has the right to acquire beneficial ownership within
sixty (60) days.
(4) Excludes 1,750,000 shares underlying stock options granted but not yet
vested.
(5) Excludes 2,500,000 shares underlying stock options granted but not yet
vested.
(6) Excludes 1,000,000 shares underlying stock options granted but not yet
vested
(7) Freddy Fuller, as sole shareholder, director and officer of Zen Management,
Inc., is also deemed the beneficial owner of the shares of the common stock
owned Zen Management, Inc., because of his power to vote and dispose of those
shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
None of our current directors, executive officers or nominees for election as a
director of Indexonly, and no owner of five percent or more of our outstanding
shares or any member of their immediate family has entered into or proposed any
transaction in which the amount involved exceeds $60,000.
In August of 1999 our subsidiary Indexonly USA issued 250,000 shares in our
common stock for a deemed price of $2,500 to acquire certain domain names from
Freddy Fuller. Mr. Fuller is a consultant to Indexonly and assisted us in
connection with the development of our business plan.
CONFLICTS OF INTEREST
Chairman of the Board, CEO and President of Indexonly, Mr. Cliff Sweeney is also
a shareholder in CityXpress, a competitor. Although Mr. Sweeney has secured an
unlimited waiver of a non-compete agreement that would have prevented him from
holding his current offices with Indexonly, there can be no assurances that a
claim of conflict will not be made, or that such a claim will not be successful.
In the event such a claim was brought, and was proved, our subsequent action
made necessary by any such finding of conflict may have a materially adverse
effect on us.
SELLING SHAREHOLDERS
The following table sets forth the names of the selling stock holders, the
number of shares of common stock beneficially owned by the selling stockholders,
the number of shares of common stock which may be offered for sale pursuant to
this prospectus by such selling shareholders, the number of shares beneficially
owned by such selling shareholders after the offering, and the percentage
ownership after the offering. The offered shares of common stock may be offered
from time to time by each of the selling shareholders named below. See "Plan of
Distribution". However the selling shareholders are under no obligation to sell
all or any portion of the shares of common stock offered, neither are the
selling shareholders obligated to sell such shares of common stock immediately
under this prospectus. Particular selling shareholders may not have a preset
intention of selling their shares and may offer less than the number of shares
indicated. Because the selling shareholders may sell all or part of the share
of common stock offered hereby, the following table assumes that all shares
offered under this prospectus have been sold by the selling shareholders.
<PAGE>
Page 35
Number of Percentage of
Shares Number of Shares the Class
Beneficially Beneficially Beneficially
Name of Owned Prior to Number of Owned After Owned After
Selling the Offering Shares the Offering the Offering
Shareholder (1) Offered (1) (1)
- ------------------------------------------------------------------------------
Cliff Sweeney (3) 2,350,000 587,500 1,762,500 7.93%
Norm Friend(4) 700,000 175,000 525,000 2.36%
Micheal Lightheart(5) 120,000 30,000 90,000 0.40%
Freddy Fuller(6) 1,575,000 393,750 1,181,250 5.31%
(Zen Management,
Inc.)
Damian Loth(7) 150,000 37,500 112,500 0.51%
(Ocean Cafe
International)
Hermes Trading 1,250,000 312,500 937,500 4.22%
Weymss Ltd 1,000,000 250,000 750,000 3.37%
Alistair Donaldson 2,500,000 625,000 1,875,000 8.43%
Dion Cillars 3,000,000 750,000 2,250,000 10.12%
Em-Power Industries 3,000,000 750,000 2,250,000 10.12%
Michael Connel 800,000 200,000 600,000 2.70%
Eros Trading Ltd 1,250,000 312,500 937,500 4.22%
Sandford Capital
Limited 1,327,450 329,500 997,950 4.49%
Neville Abreo 340,000 85,000 255,000 1.15%
(Corporate Finance
Group)
Andrew Hammond 40,000 10,000 30,000 0.13%
Wayne Hammond 40,000 10,000 30,000 0.13%
Cindy McWilliams 40,000 10,000 30,000 0.13%
Sharon Muche 40,000 10,000 30,000 0.13%
James Hume 40,000 10,000 30,000 0.13%
Cynthia Goranson 40,000 10,000 30,000 0.13%
Capital Square
Holdings 40,000 10,000 30,000 0.13%
Garth Olson 40,000 10,000 30,000 0.13%
Ken Parlee 40,000 10,000 30,000 0.13%
Tom Tanton 40,000 10,000 30,000 0.13%
Rene Pfander 68,000 17,000 51,000 0.23%
Bonnie Hume 40,000 10,000 30,000 0.13%
B.W. Van Lieshout 16,000 4,000 12,000 0.05%
Peter Gill 50,000 12,500 37,500 0.17%
Ron Sutch 59,310 14,828 44,482 0.20%
Todd Hiebert 13,080 3,270 9,810 0.04%
Murray Werner 13,080 3,270 9,810 0.04%
Mike Makara 40,000 10,000 30,000 0.13%
Gerald Hiebert 13,080 3,270 9,810 0.04%
GKS Corp 200,000 50,000 150,000 0.67%
Peter Ribeiro 20,000 5,000 15,000 0.07%
Ian Patton 6,000 1,500 4,500 0.02%
Songbai Li 22,000 5,500 16,500 0.07%
Hume Diving 20,000 5,000 15,000 0.07%
Ernie Minard 20,000 5,000 15,000 0.07%
Paul Landry 15,000 3,750 11,250 0.05%
Lodge Enterprises 100,000 25,000 75,000 0.34%
Lodge Contracting 100,000 25,000 75,000 0.34%
Stones Bay Holdings 100,000 25,000 75,000 0.34%
Paul Stent 10,000 2,500 7,500 0.03%
Peter Robin 10,000 2,500 7,500 0.03%
<PAGE>
Page 36
Larry Wiebe 40,000 10,000 30,000 0.13%
Success West 20,000 5,000 15,000 0.07%
Murray Reid 240,000 60,000 180,000 0.81%
Michael Kopp 20,000 5,000 15,000 0.07%
Robert Turnball 10,000 2,500 7,500 0.03%
Doug Rollheiser 20,000 5,000 15,000 0.07%
Brian Lee 20,000 5,000 15,000 0.07%
Julie Cockling 20,000 5,000 15,000 0.07%
Al Steel 20,000 5,000 15,000 0.07%
Rob Lancit 20,000 5,000 15,000 0.07%
- -------------- -------------- ------- ------- -----
TOTAL 21,128,000 5,279,638 16,241,000 73.06%
(1) Prior to the exercise of up to 1,248,000 share purchase warrants and
10,164,000 stock options outstanding as at February 25, 2000, some of
which are held by the above shareholders.
(2) Assumes the sale of all offered shares of common stock under this
offering and prior to the exercise of up to 1,248,000 share purchase
warrants and 10,164,000 stock options outstanding as at February 25,
2000, and prior to the issuance of common stock under our concurrent
treasury offering.
(3) Cliff Sweeney is a current director, Chief Executive Officer and
President of Indexonly.
(4) Norman Friend is a current director and Vice President of Indexonly.
(5) Michael Lightheart is Chief Technical Officer of Indexonly.
(6) Freddy Fuller is a former promoter of Indexonly.
(7) Damian Loth is a former director and President of Indexonly, under its
prior name Classic Golf Corp.
DESCRIPTION OF SECURITIES
Our articles of incorporation, as amended, authorize the issuance of up to
50,000,000 shares of common stock, $.001 par value per share. The articles also
authorize up to 10,000,000 shares of preferred stock, $0.001 par value per
share.
COMMON STOCK
Each share of common stock has the same rights, privileges and preferences.
Holders of the shares of common stock have no preemptive rights to acquire
additional shares or other subscription rights. They have no conversion rights
and are not subject to redemption provisions or future calls by us. As at
February 25, 2000, there were 22,226,733 shares of common stock issued and
outstanding, 1,248,000 warrants outstanding to purchase the same number of
shares of common stock, and stock options outstanding exercisable to acquire
10,164,000 shares of our common stock.
The holders of shares of common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. The holders
of common stock are not entitled to cumulate their votes.
In the event of our liquidation, dissolution, or winding-up, either voluntarily
or involuntarily, the holders of the outstanding shares of our common stock are
entitled to receive a pro rata share of our net assets as are distributable
after payment of all liabilities which may then be outstanding, subject to the
preferences that may be applicable on any outstanding preferred stock if any.
PREFERRED STOCK
The board of directors has the authority, without action by the stockholders, to
designate and issue preferred stock in one or more series and to designate the
rights, preferences and privileges of each series, which may be greater than the
rights of the common stock. The preferred stock could include rights that have
the effect of restricting dividends of the common stock, diluting the voting
power of the common stock, impairing the liquidation rights of the common stock
or delaying or preventing a change in control without further action by the
stockholders.
<PAGE>
Page 37
DIVIDENDS POLICY
Dividends on common stock are payable from our profits or capital legally
available for that purpose. Common stock will participate equally in dividends
if declared by the Board of Directors, subject to the preferences that may be
applicable on any outstanding preferred stock if any. We have not paid
dividends on our common stock since our inception. It is the current policy of
the Board of Directors to retain any future earnings to finance operations and
growth. Accordingly, we do not anticipate paying any cash dividends in the
foreseeable future.
PROVISIONS RELATED TO A CHANGE IN CONTROL
In the event that there are three or more directors, the directors will be
divided into three different classes, Class I, Class II and Class III. Each
director will serve for a term ending on the date of the third annual general
meeting following the annual general meeting at which the director was elected,
provided that each initial director in Class I holds office until the first
annual meeting of the shareholders; each initial director in Class II holds
office until the second annual meeting of the shareholders; and each initial
director in Class III holds office until the third annual meeting of the
shareholders. At least one-fourth of the directors must be elected annually.
TRANSFER AGENT
Our transfer agent is Holladay Stock Transfer, Inc., 2939 N. 67th Place, #C,
Scottsdale, AZ 85251, Telephone: (480) 481-3940.
PLAN OF DISTRIBUTION
The sale or distribution of the common stock covered by this prospectus may be
effected directly to purchasers by the selling shareholders from time to time in
the over the counter market on the OTC Bulletin Board at prices and at terms
prevailing at the time of sale. The shares may be sold by one or more of the
following methods: (a) a block trade in which the broker or dealer so engaged
will attempt to sell the shares of common stock as an agent, but may position
and resell a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resales by that broker or
dealer for its own account pursuant to this prospectus; (c) an over-the-counter
distribution in accordance with the rules of the OTC Bulletin Board; (d) in
ordinary brokerage transactions or transactions in which the broker solicits
purchasers; (e) in transactions otherwise than on any stock exchange or in the
over-the-counter market; and (f) pursuant to Rule 144. Any of these
transactions may be effected at market prices prevailing at the time of sale, at
prices related to the prevailing market prices, at varying prices determined at
the time of sale or at negotiated or fixed prices, in each case as determined by
the selling shareholder, or by agreement between the selling shareholder and
underwriters, brokers, dealers or agents, or purchasers. There is no assurance
that any of the selling shareholders will sell any or all of the shares offered
by them.
In effecting sales, brokers or dealers engaged by the selling shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the selling shareholders in amounts to be
negotiated prior to the sale. The selling shareholders, and any brokers, dealers
or agents that participate in the distribution of the shares may be deemed to be
underwriters, and any profit on the sale of the common stock by them and any
discounts, concessions or commissions received by any underwriters, brokers,
dealers or agents may be deemed to be underwriting discounts and commissions
under the Securities Act.
Under the securities laws of certain states, the shares may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in that state or an exemption from registration or
qualification is available and is met.
The offer and sale of the common stock offered under this prospectus will
commence promptly upon the date of this prospectus and will continue until all
of the shares are sold or until we terminate the offering. There are no
pre-existing contractual agreements for any person to purchase the shares.
<PAGE>
Page 38
SHARES ELIGIBLE FOR FUTURE SALE
Of the 22,226,733 shares of common stock outstanding as of February 25, 2000, a
total of 20,150,000 were issued to the former shareholders of Indexonly USA
under an exemption from the registration provisions of the Securities Act under
Rule 504 of Regulation D and are restricted as to resale under Rule 144. Of
these shares, a total of up to 5,282,000 are being offered under this prospectus
and may be sold without restriction thereafter. The balance of these shares and
any shares not sold under this prospectus will be eligible for resale in the
open market, if any, in compliance with Rule 144 commencing in November of 2000.
Thereafter Rule 144 imposes volume restrictions on resale which apply for one
year on stock held by non-affiliates, and continuously for stock held by
affiliates. The volume restriction is typically 1% of the issued and
outstanding shares at the time of sale. A total of 1,478,000 shares were
subsequently issued in private placement under Regulation S, which are also
restricted under Rule 144, and will be eligible for resale commencing November
2000 through February 2001. There are no contractual restrictions on the resale
of the outstanding common stock.
In general, Rule 144 under the Securities Act provides that securities may be
sold if there is current public information available regarding Indexonly and
the securities have been held at least one year. Rule 144 also includes
restrictions on the amount of securities sold, the manner of sale and requires
notice to be filed with the SEC. Under Rule 144 a minimum of one year must
elapse between the later of the date of the acquisition of the securities from
the issuer or from an affiliate of the issuer, and any resale under the Rule.
If a one-year period has elapsed since the date the securities were acquired,
the amount of restricted securities that may be sold for the account of any
person within any three-month period, including a person who is an affiliate of
Indexonly, may not exceed the greater of 1% of the then outstanding shares of
our common stock or the average weekly trading volume in the over-the-counter
market during the four calendar weeks preceding the date on which notice of sale
is filed with the SEC. If a two-year period has elapsed since the date the
securities were acquired from the issuer or from an affiliate of the issuer, a
seller who is not an affiliate of Indexonly at any time during the three months
preceding a sale is entitled to sell the shares without regard to volume
limitations, manner of sale provisions or notice requirements. Affiliates of
the issuer are subject to an ongoing volume restriction pursuant to Rule 144. on
resales of shares held by them.
EXPERTS
The financial statements of Indexonly Technologies, Inc. as at December 31,
1999 and for the period from June 28, 1999 (inception) to December 31, 1999,
have been included herein and in the registration statement, in reliance upon
the report of KPMG LLP, independent auditors, appearing elsewhere herein, and
upon their authority as experts in accounting and auditing.
CHANGES IN CERTIFYING ACCOUNTANTS
Williams & Webster, P.S., has audited the financial statements of Classic Golf
Corporation for fiscal years 1997 and 1998. Since the acquisition of Indexonly
USA and the change of the Board of Directors, we have engaged the firm of KPMG
LLP as our independent accountants for the period ended December 31, 1999.
The reports of Williams & Webster, P.S. for prior fiscal years did not contain
an adverse opinion or disclaimer of opinion, audit scope or accounting
principles. There were no disagreements with the former accountant on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
The audit reports for the fiscal years ending December 31, 1998 and 1999 were
prepared on the basis that the company will continue as a going concern.
<PAGE>
Page 39
FINANCIAL STATEMENTS INDEX
Page No.
-------
Period Ended December 31, 1999, Indexonly
Technologies, Inc.
Independent Auditor's Report F-2
Consolidated Balance Sheet F-3
Consolidated Statement of Operations F-4
Statement of Stockholders' Equity (Deficit) F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
<PAGE>
Consolidated Financial Statements of
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Indexonly Technologies, Inc.
We have audited the consolidated balance sheet of Indexonly Technologies, Inc.
(a Development Stage Enterprise) as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the period from June 28, 1999 (inception) to December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Indexonly Technologies, Inc. (a
Development Stage Enterprise) as of December 31, 1999 and the results of their
operations and their cash flows for the period from June 28, 1999 (inception) to
December 31, 1999, in conformity with United States generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 1 to
the consolidated financial statements, the Company has suffered recurring losses
from operations and negative cash flows from operations that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Chartered Accountants
Richmond, Canada
January 25, 2000
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheet
(Expressed in U.S. Dollars)
December 31, 1999
1999
----
Assets
Current assets:
Cash and cash equivalents $ 95,175
Short-term investment 7,600
Accounts receivable 9,237
Subscriptions receivable 189,000
Prepaid expenses 13,041
-------
Total current assets 314,053
Property and equipment (note 4) 184,542
Intangible assets (note 5) 107,309
-------
$ 605,904
=======
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 69,573
Shareholder loans (note 6) 247,059
-------
Total current liabilities 316,632
Stockholders' equity (deficit) (note 7):
Common stock, $0.001 par value, authorized 50,000,000 shares;
issued 20,748,733 shares in 1999 20,749
Preferred stock, $0.0001 par value, authorized 10,000,000 shares;
no shares issued in 1999
Additional paid-in capital 372,014
Share subscriptions 386,500
Deficit accumulated during the development stage (486,859)
Accumulated other comprehensive income:
Cumulative translation adjustment (3,132)
-------
Total stockholders' equity (deficit) 289,272
------
Commitments and contingencies (note 8)
Subsequent events (note 12)
$ 605,904
=======
See accompanying notes to consolidated financial statements.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Statement of Operations
(Expressed in U.S. Dollars)
Period from
June 28,
1999 (inception)
to December,
31, 1999
---------
Revenue $ 100,351
Cost of services 15,893
------
Gross profit 84,458
-------
Operating expenses:
Marketing and promotion 130,034
Technical and development 68,851
General and administration 329,752
Depreciation and amortization 36,462
-------
Total operating expenses 565,099
Interest expense, net 6,218
-------
Loss for the period, being deficit accumulated during the
development stage (486,859)
Net loss per common share, basic and diluted $ (0.03)
=======
Weighted average common shares outstanding,
basic and diluted 16,035,618
==========
See accompanying notes to consolidated financial statements.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (Deficit)
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Other
Deficit Comprehensive
Accumulated Income:
Share and Other During Cumulative Total
Common Stock Subscriptions Paid-In Development Translation Stockholders'
-----------------
Shares Amount Unit Amount Capital Stage Adjustment Equity (Deficit)
------ ------ ----------- ------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 28, 1999 (Classic
Golf Corporation common stock) 14,968,187 $ 14,968 $ - $ 225,432 $ - $ - $ 240,400
25 for 1 share consolidation
in August 30, 1999 (14,369,454) - - - - - -
Adjustment to comply with
recapitalization accounting:
Elimination of Classic Golf
common stock (14,968) - (225,432) - - (240,400)
Indexonly common stock 599 - - - - 599
Common stock issued August 10,
1999 for services 18,819,450 18,819 - - - - 18,819
Common stock issued for purchase
of intangible assets 250,000 250 - 2,250 - - 2,500
Common stock issued for cash,
August 16, 1999 at approximately
$0.17 per share 648,000 648 - 108,744 - - 109,392
Common stock issued for cash,
August 24, 1999 at $0.50 per
share, net of costs of $23,142 432,550 433 - 217,100 - - 217,533
Fully paid common stock sub-
scriptions, October 1, 1999 to
December 31, 1999, at $0.50 per
share (note 7(c)) - - 20,000 - - - 20,000
Issuance of units, October 1,
1999 to December 31, 1999 at
$0.50 per unit, where each
unit includes a common share
and a share purchase warrant - - 366,500 - - - 366,500
Amortization of option compen-
sation cost - - - 43,920 - - 43,920
Net loss - - - - (486,859) - (486,859)
Cumulative translation adjustment - - - - - (3,132) (3,132)
----------- ------- ------- ---------- ------- ------ -------
20,748,733 $ 20,749 $ 386,500 $ 372,014 $ (486,859) $ (3,132) $ 289,272
========== ======= =========== ========= ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
(Expressed in U.S. Dollars)
Period from
June 28,
1999 (inception)
to December
31, 1999
----------------
Cash flows from operating activities:
Loss for the period $ (486,859)
Items not affecting cash:
Depreciation and amortization 36,462
Common stock issued in exchange for services 18,819
Amortization of option compensation cost 43,920
Cumulative translation adjustment (3,132)
Changes in operating assets and liabilities:
Accounts receivable (9,237)
Prepaid expenses (13,041)
Accounts payable and accrued liabilities 69,573
-------
Net cash used in operating activities (343,495)
--------
Cash flows from investing activities:
Purchase of short-term investment (7,600)
Purchase of property and equipment (205,674)
Purchase of intangible assets (122,639)
---------
Net cash used in investing activities (335,913)
---------
Cash flows from financing activities:
Proceeds from issuance of shareholder loans 247,059
Net proceeds from issuance of common stock 330,024
Net proceeds from common stock subscriptions 20,000
Net proceeds from issuance of units 177,500
-------
Net cash provided by financing activities 774,583
-------
Net increase in cash and cash equivalents 95,175
Cash and cash equivalents at beginning of period -
=======
Cash and cash equivalents at end of period $ 95,175
======
Supplemental disclosure of non-cash financing and
investing activities:
Debt issued to acquire net assets on acquisition $ -
Income taxes paid -
Interest paid 4,202
Share subscriptions receivable 189,000
See accompanying notes to consolidated financial statements.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
1. Nature of development stage activities:
Classic Golf Corporation was incorporated in Nevada on July 9, 1993 and
was a holding company prior to its acquisition of Indexonly Technologies
USA Inc. (note 2(a)). At the time of the acquisition, Classic Golf
Corporation had no substantive operations and changed its name to Indexonly
Technologies, Inc. (the "Company").
The Company is currently in the business of developing internet commercial
search directory, which allows users to locate specific information
relevant to geographical areas. The Company's primary sources of revenue
result from the sale of regional franchise rights to authorized agents and
through advertising sold to businesses on its directory.
These consolidated financial statements have been prepared on a going
concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes the
Company will continue in operation for the foreseeable future and will be
able to realize its assets and discharge its liabilities and commitments in
the normal course of business. Certain conditions, discussed below,
currently exist which raise substantial doubt about the validity of this
assumption. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company's future operations are dependent upon the market's acceptance
of its franchise and advertising products and services. There can be no
assurance that the Company's products and services will be able to secure
market acceptance. As of December 31, 1999, the Company is considered to
be in the development stage as the Company has not generated significant
revenues, is continuing to develop its business, and has experienced
negative cash flow from operations. Operations have primarily been
financed through the issuance of common stock and other equity instruments.
The Company does not have sufficient working capital to sustain operations
until the end of the year ended December 31, 2000. Additional debt or
equity financing will be required and may not be available or may not be
available on reasonable terms. Management plans to raise funds within the
next 12 months through a public sale of its common stock.
2. Significant accounting policies:
(a) Basis of presentation:
On August 31, 1999, Classic Golf Corporation issued 20,150,000 common
shares in exchange for 100% of the issued and outstanding shares of
Indexonly Technologies USA Inc., a company incorporated in the State
of Nevada on June 28, 1999. The acquisition was accounted for as a
recapitalization of Indexonly Technologies USA Inc. and an issuance of
shares by Indexonly Technologies USA Inc. for the net assets of the
Company.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(a) Basis of presentation (continued):
The Company's historical financial statements reflect the financial
position, results of operations and cash flows of Indexonly
Technologies USA Inc. from the date of its incorporation on June 28,
1999 under the laws of the State of Nevada. The historical
stockholders' equity gives effect to the shares issued to the
stockholders of Indexonly Technologies USA Inc. The results of
operations of Classic Golf Corporation are included from the date of
acquisition, August 31, 1999.
Costs of the transaction, in excess of cash held by Classic Golf
Corporation have been expensed in the accounts.
(b) Basis of consolidation:
These consolidated financial statements have been prepared using
generally accepted accounting principles in the United States. The
financial statements include the accounts of the Company's wholly
owned subsidiaries, Indexonly Technologies USA Inc. and Indexonly
Canada Inc. All significant intercompany balances and transactions
have been eliminated in the consolidated financial statements.
(c) Use of estimates:
The preparation of consolidated financial statements in accordance
with United States generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
reported revenues and expenses for the reporting periods. Significant
areas requiring the use of estimates include the valuation of long-
lived assets, estimating the fair market value of equity instruments
and the valuation of deferred tax assets. Actual results may
significantly differ from these estimates.
(d) Revenue recognition:
Revenue consists of franchise fee revenue from the sale of area
franchises; revenue from the sale, by franchisees, of individual
franchises and revenue from advertising sales. Revenue is recognized
when all material services and conditions relating to the sale have
been substantially performed or satisfied by the Company. Franchise
fee revenue is recognized before the sale of individual franchises.
Revenue from the sale of individual franchises is recognized before
revenue from advertising sales which are made by the individual
franchises.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(e) Foreign currency:
The functional currency of the Company and its U.S. subsidiary is the
United States dollar. The functional currency of its Canadian
subsidiary is the Canadian dollar, the applicable local currency. The
translation of the applicable foreign currency into the parent
company's functional currency is performed for assets and liabilities
using exchange rates in effect at the balance sheet date. Revenue and
expense transactions are translated using average exchange rates
prevailing during the period. Exchange gains and losses arising on the
translation of the applicable foreign operations into the Company's
functional currency are excluded from the determination of income and
reported as the cumulative translation adjustment in stockholders'
equity. Foreign exchange gains of the parent or U.S. subsidiary
relating to the transactions denominated in foreign currency are
included in the determination of net income.
(f) Cash and cash equivalents:
The Company considers all short-term investments with a maturity date
at purchase of three months or less to be cash equivalents.
(g) Property and equipment:
Property and equipment are stated at cost and are depreciated using the
straight-line method over their estimated useful lives as follows:
Computer equipment and software 3 years
Furniture and office equipment 5 years
Leasehold improvements Over lease term
(h) Intangible assets:
Intangible assets, including Goodwill, Trademarks and World Wide Web
domain names are amortized on a straight-line basis over three years.
The Company periodically evaluates the recoverability of intangible
assets and recognizes an impairment loss if the projected undiscounted
future cash flows are less than the carrying amount. The assessment of
the recoverability of intangible assets will be impacted if estimated
future operations cash flows differ from those activities.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(i) Impairment of long-lived assets and long-lived assets to be disposed
of:
The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of. The Company
reviews property and equipment for impairment whenever events or
changes in circumstances indicate the carrying value may not be
recoverable. If the sum of future cash flows expected to result from
the use of the asset and its eventual disposition is less than the
carrying amount, an impairment loss is recognized for the excess of the
carrying amount of the asset over the fair value of the asset.
(j) Income taxes:
The Company follows the asset and liability method of accounting for
income taxes. Under this method, current taxes are recognized for the
estimated income taxes payable for the current period.
Deferred income taxes are provided based on the estimated future tax
effects of temporary differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases as
well as the benefit of losses available to be carried forward to
future years for tax purposes.
Deferred tax assets and liabilities are measured using enacted tax
rates that are expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in operations in the period that includes
the substantive enactment date. A valuation allowance is recorded for
deferred tax assets when it is more likely than not that such deferred
tax assets will not be realized.
(k) Research and development:
Research and development costs are expensed when incurred. Equipment
used in research and development is capitalized only if it has an
alternative future use.
(l) Net loss per share:
A basic earnings per share is computed using the weighted average
number of common shares outstanding during the periods. Diluted loss
per share is computed using the weighted average number of common and
potentially dilutive common shares outstanding during the period. As
the Company has a net loss in each of the periods presented, basic and
diluted net loss per share is the same.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(l) Net loss per share (continued):
Excluded from the computation of diluted loss per share for the period
ended December 31, 1999 are the share subscriptions and unit
subscriptions because their effects would be anti-dilutive. Also
excluded from the computation of diluted loss per share are 494,118
shares of common stock on the assumed conversion of shareholder loans
and outstanding at December 31, 1999.
(m) Stock-based compensation:
The Company accounts for its stock-based compensation arrangements in
accordance with provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense under fixed plans would
be recorded on the date of grant only if the fair value of the
underlying stock at the date of grant exceeded the exercise price. The
Company recognizes compensation expense for stock options, common
shares and other equity instruments issued to non-employees for
services received based upon the fair value of the services or equity
instruments issued, whichever is more reliably determined. This
information is presented in note 7(a).
3. Acquisitions:
On August 13, 1999, Indexonly Technologies USA Inc. and Indexonly Canada
Inc., subsidiaries of the Company, acquired all of the assets of Indexonly
Technologies Inc., an unrelated company, through the issuance of two
promissory notes, in the amount of $191,079. The net assets acquired were
as follows:
Current assets $ 48,804
Property and equipment 20,470
Intangible assets 121,805
-------
$ 191,079
=======
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
4. Property and equipment:
Property and equipment consists of the following:
Computer equipment $ 133,862
Computer software 33,086
Furniture and office equipment 34,112
Leasehold improvements 4,614
-----
205,674
Less accumulated depreciation (21,132)
-------
$ 184,542
=======
5. Intangible assets:
Intangible assets are recorded net of accumulated amortization of $15,330.
6. Shareholder loans:
Loans from shareholders are denominated in Canadian dollars, bear interest
at 10% per annum, are unsecured and repayable on May 1, 2000. The loans are
convertible, at the option of the holder, into common shares, at $0.50 U.S.
per share.
7. Stockholders' equity:
(a) Stock option plan:
The Company has reserved 15,000,000 common shares for issuance under
its stock option plan. The plan provides for the granting of stock
options to directors, officers, eligible employees and contractors at
the fair market value of the Company's stock at the grant date.
The options granted in the period ended December 31, 1999 vest as
follows:
- 50.0% - March 1, 2001
- 50.0% - March 1, 2002
The Board of Directors determines the terms of the options granted
including the number of options granted the exercise price and the
vesting schedule.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
7. Stockholders' equity (continued):
(a) Stock option plan (continued):
Period from inception
(June 28, 1999)
to December 31, 1999
-----------------------
Weighted
Average
Number of Exercise
Shares Price
------ -----
Outstanding, June 28, 1999 - $ -
Granted 5,943,000 1.00
Exercised - -
Cancelled - -
--------- --------
Outstanding, December 31, 1999 5,943,000 1.00
========= ====
Exercisable, December 31, 1999 Nil Nil
=== ===
Weighted-average fair value of options granted
during the periods 0.00
====
Information regarding the stock options outstanding at December 31, 1999 is
summarized below:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Shares Remaining Exercise Shares Exercise
Prices Outstanding Contractual Life Price Exercisable Price
- ------ ----------- ---------------- ----- ----------- -----
USD Cdn USD
$ $ $
$1.00 5,943,000 1.1 years $1.00 $0.00 $0.00 $0.00
========= ========== ===== ===== ===== =====
The options outstanding at December 31, 1999 expire on March 31, 2001 and 2002.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
7. Stockholders' equity (continued):
(a) Stock option plan (continued):
The Company adopted only the disclosure provisions of Statement of
Financial Accounting Standards No. 123 ("FAS 123"), Accounting for
Stock Based Compensation, to account for grants to employees under the
Company's existing stock based compensation plan. All options are
issued with an exercise price equal to or greater than the market value
of the stock on the date of grant. Accordingly, no compensation cost
has been recognized for the stock option plan. Had compensation cost
for the Company's stock option plan been determined based on the fair
value at the grant date for awards under those plans consistent with
the measurement provisions of FAS 123, the Company's net loss and basic
loss per share would have been adjusted as follows:
Period from
June 28, 1999
(inception to
December 31,)
1999
----
Loss for the period - as reported $ (486,859)
Loss for the period - proforma (506,810)
Basic loss per share - as reported (0.03)
Basic loss per share - proforma (0.03)
Proforma amounts reflect options granted in the period and may not be
representative of amounts in future years.
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following assumptions:
December 31,
1999
----
Expected dividend yield 0.0%
Expected stock price volatility 60.0%
Risk-free interest rate 6.0%
Expected life of options 1.8 years
The Black-Scholes option valuation model was developed for use in estimating the
fair value of options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
7. Stockholders' equity (continued):
(b) Stock-based compensation:
In 1999, the Company recorded non-cash compensation expense of $18,819
related to the issuance of 18,819,450 common shares to certain
stockholders and officers of the Company. The fair value of the common
shares was estimated at $0.001 per share at the time of the
transaction.
In 1999, the Company issued 250,000 shares of common stock for the
acquisition of domain names. The fair value of these shares was
estimated based upon the estimated fair value of the goods received or
$2,500.
In 1999, the Company recorded non-cash compensation expense of $43,920
related to the issuance of 4,110,000 stock options to purchase common
shares to certain contractors and stockholders of the Company. The
fair value of the stock options was estimated at $0.10 at the time of
the transaction.
(c) Share subscriptions:
(i) In 1999, the Company signed share subscription agreements,
committing to the issuance of 40,000 common shares at $0.50 per
share, for total proceeds of $20,000. All proceeds have been
collected at December 31, 1999.
(ii) In 1999, the Company issued 733,000 units for $366,500. Each
unit, upon exercise, entitles the holder share to committing to
the issuance of 733,000 common shares and 733,000 common share
purchase warrants. Each share purchase warrant entitles the
holder to purchase one common share at $0.50 per share, any time
after March 31, 2000, until March 31, 2001. At December 31, 1999,
$177,500 of the proceeds had been collected. The remaining balance
was collected prior to January 25, 2000.
8. Operating leases:
The Company leases office facilities in British Columbia under an operating
lease agreement that expires August 31, 2004. Minimum lease payments under
this operating lease are as follows:
2000 $ 41,100
2001 41,100
2002 41,100
2003 41,100
2004 27,400
Rent expense totalled $13,700 for the period ended December 31, 1999.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
9. Deferred tax assets and liabilities:
December 31,
1999
----
Deferred tax assets:
Operating loss carry forward $ 199,600
Share issue costs and other 9,400
-----
Total deferred tax assets before valuation allowance 209,000
Valuation allowance (209,000)
---------
Net deferred tax assets $ -
===========
Management believes that it is not more likely than not that it will create
sufficient taxable income sufficient to realize its deferred tax assets. It is
reasonably possible these estimates could change due to future income and the
timing and manner of the reversal of deferred tax liabilities. Due to its
losses, the Company has no income tax expense.
The Company has operating loss carryforwards for income tax purposes at December
31, 1999 of approximately $437,700. Operating losses begin to expire in fiscal
year 2006.
10. Financial instruments:
(a) Fair values:
The Company regularly invests funds in excess of its immediate needs in
guaranteed investment certificates. The fair value of cash and cash
equivalents, accounts receivable, accounts payable and accrued
liabilities approximates their financial statement carrying amounts due
to the short-term maturities of these instruments. The carrying amount
of shareholder loans approximates fair value since they have a short-
term to maturity.
(b) Foreign currency risk:
The Company operates internationally which gives rise to the risk that
cash flows may be adversely impacted by exchange rate fluctuations.
<PAGE>
INDEXONLY TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Period from June 28, 1999 (inception) to December 31, 1999
- --------------------------------------------------------------------------------
11. Uncertainty due to the Year 2000 Issue:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information-using year 2000 dates is processed. In addition, similar
problems may arise in some systems, which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure, which could affect an entity's
ability to conduct normal business operations. Although the Company is not
aware of any Year 2000 issues, it is not possible to be certain that all
aspects of the Year 2000 Issue affecting the entity, including those related
to the efforts of customers, suppliers, or other third parties, will be
fully resolved.
12. Subsequent events:
Subsequent to year-end, the Company granted 550,000 stock options to
officers, directors and employees with an exercise price of $1.00 per share;
and collected the $189,000 of subscriptions receivable.
<PAGE>
[OUTSIDE BACK COVER PAGE]
SUBJECT TO COMPLETION - MARCH 27, 2000
PROSPECTUS
[graphic of company logo: the letter i encircled with a red diagonal mark]
INDEXONLY TECHNOLOGIES, INC.
5, 282,000 SHARES
COMMON STOCK
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or a
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Indexonly
have not changed since the date hereof.
Until , 2000 (90 days after the date of this prospectus), all
------------ ------
dealers that effect transactions in these shares of common stock may be required
to deliver a prospectus. This is in addition to the dealer's obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.
THE DATE OF THIS PROSPECTUS IS , 2000
------------------ -------
<PAGE>
Page F-1
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 78.751 of the Nevada General Corporation Law, we may
indemnify our officers and directors against expenses incurred by such persons
in connection with any threatened, pending or completed action, suit or
proceedings, whether civil, criminal, administrative or investigative, involving
such persons in their capacities as officers and directors, so long as such
persons acted in good faith and in a manner which they reasonably believed to be
in our best interests. If the legal proceeding, however, is by or in our right,
the director or officer may not be indemnified in respect of any claim, issue or
matter as to which he is adjudged to be liable for negligence or misconduct in
the performance of his duty to us unless a court determines otherwise.
Under Nevada law, corporations may also purchase and maintain insurance or make
other financial arrangements on behalf of any person who is or was a director or
officer (or is serving at the request of the corporation as a director or
officer of another corporation) for any liability asserted against such person
and any expenses incurred by him in his capacity as a director or officer. These
financial arrangements may include trust funds, self-insurance programs,
guarantees and insurance policies.
Our articles of incorporation, as amended, provide that our directors or
officers shall not be personally liable to us or any of our stockholders for
damages resulting from breaches of fiduciary duty as a director or officer for
acts or omissions, except for damages resulting from acts or omissions which
involve intentional misconduct, fraud, knowing violation of law, or the payment
of dividends in violation of the Nevada Revised Statutes.
Our bylaws provide for the indemnification of officers and directors to the
fullest extent possible under Nevada Law, against expenses (including attorney's
fees), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding, arising by reason of the fact that
such person is or was our agent. We are also granted the power, to the maximum
extent and in the manner permitted by the Nevada Revised Statutes, to indemnify
each of our employees and agents (other than directors and officers) against
expenses (including attorneys' fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding,
arising by reason of the fact that such person is or was our agent.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses for the issuance and distribution of the shares
registered by this prospectus are set forth in the following table, exclusive of
selling agent commissions and expenses:
ITEM AMOUNT ($)
---- ----------
SEC Registration Fee 2,789
EDGAR Filing Expenses 1,500
Transfer Agent Fees 1,500
Legal Fees 10,000
Accounting Fees 5,000
Printing Costs 2,000
Miscellaneous 3,000
------
Total $25,789
ITEM 26. RECENT SALE OF UNREGISTERED SECURITIES
Within the past three years we have issued and sold the following securities
without registration. The information has been adjusted to give effect to the 25
for 1 stock split on August 30, 1999.
<PAGE>
Page F-2
In July of 1997, we issued 10,000,000 shares of our common stock at a deemed
price per share of $0.28 to six individual vendors in exchange for the assets of
Creative Sports Marketing Ltd. This sale was made without registration under
the Securities Act of 1933 as amended (the "Act"), in reliance upon the
exemption from registration afforded by sections 3(b) and 4(2) of the Act. The
issuance of the shares may also be exempt from the registration requirements of
the Act pursuant to Rule 504 of Regulation D. The 10,000,000 shares were
subsequently surrendered to us and cancelled on March 19, 1999, in connection
with our termination of the former Classic Golf business.
On September 15, 1997, we sold and issued 12,035,487 shares of our common stock
at a purchase price ranging from $0.01 to $0.05 per share to eleven individual
purchasers, including two of our former officers and directors. The issuance was
made without registration under the Act in reliance upon the exemption from
registration afforded by Rule 504 and sections 3(b) and 4(2) of the Act. On
June 23, 1998 a total of 4,992,300 of these shares were surrendered to the
company and cancelled in connection with the cancellation of subscriptions
receivable.
On March 27, 1998, we issued 600,000 shares of common stock at a deemed price of
$0.001 per share, to six professional golfers for their services in connection
with the marketing of a golf tournament. This sale was made without registration
under the Securities Act of 1933 as amended (the "Act"), in reliance upon the
exemption from registration afforded by sections 3(b) and 4(2) of the Act. The
issuance of the shares may also be exempt from the registration requirements of
the Act pursuant to Rule 504 of Regulation D.
On August 11, 1998, we completed the sale of 625,000 shares of common stock,
225,000 at a purchase price of $0.05 per share and 400,000 at a deemed price of
$0.001 per share, to one entity in exchange for consulting services in
connection with our former Classic Golf business. The aggregate purchase price
of the units was $11,650. This sale was made without registration under the
Securities Act of 1933 as amended (the "Act"), in reliance upon the exemption
from registration afforded by section 3(b) of the Securities Act and on Rule
504 promulgated thereunder.
In November of 1999, we issued 20,150,000 shares of common stock at a deemed
price of $0.001 per share to 38 shareholders of Indexonly USA in connection with
the acquisition of 100% of the common stock of Indexonly USA. The aggregate
deemed purchase price of the shares was $20,150. The shares were issued pursuant
to a share purchase agreement between the Company, Indexonly USA and the
shareholders of Indexonly USA. This share exchange created the
parent/subsidiary relationship between us and Indexonly USA. The issuance was
made without registration under the Act in reliance upon the exemption from
registration afforded by Rule 504 and sections 3(b) and 4(2). As such the
shares are restricted in accordance with Rule 144 under the Act. The following
table lists the names of the purchasers and their respective shares:
Cliff Sweeney 2,300,000
Alistair Donaldson 2,500,000
Weymss Ltd 1,000,000
Clarence Joy 500,000
Hermes Trading 1,250,000
Zen Management 1,250,000
Ocean Caf International 150,000
Norm Friend 700,000
Dion Cillars 3,000,000
Em-Power Industries 3,000,000
Michael Connel 800,000
Eros Trading Ltd 1,250,000
Sandford Capital Limited 969,450
Neville Abreo 150,000
Freddy Fuller 250,000
Andrew Hammond 40,000
Wayne Hammond 40,000
Cindy McWilliams 40,000
Sharon Muche 40,000
James Hume 40,000
Cynthia Goranson 40,000
Capital Square Holdings 40,000
<PAGE>
Page F-3
Garth Olson 40,000
Ken Parlee 40,000
Tom Tanton 40,000
Rene Pfander 68,000
Corporate Finance Group 140,000
Bonnie Hume 40,000
B.W. Van Lieshout 16,000
Peter Gill 30,000
Ron Sutch 59,310
Todd Hiebert 13,080
Murray Werner 13,080
Mike Makara 40,000
Gerald Hiebert 13,080
GKS Corp 200,000
Peter Ribeiro 20,000
Ian Patton 6,000
Songbai Li 22,000
----------- --------------
TOTAL 20,150,000
In February of 1999, we issued units consisting of 1,248,000 shares of our
common stock and 1,248,000 warrants, at a price of $0.50 per unit for total
proceeds of 624,000. Each warrant entitles the holder to acquire an additional
common share at a price of to acquire an additional share, for a price of $0.50
until March 31, 2001. We also concurrently issued 230,000 shares of common
stock at $0.50 per share to two individual purchasers for proceeds of $115,000.
The issuance was made without registration under the Act in reliance upon the
exemption from registration afforded by Regulation S and sections 3(b) and 4(2)
under the Act, due to the foreign nationality of the purchasers. As such the
shares are restricted in accordance with Rule 144 under the Act. The following
table lists the names of the purchasers and their respective purchase of shares:
Shareholder Shares Warrants
----------- ------ --------
Hume Diving 20,000
Ernie Minard 20,000
Paul Landry 15,000 15,000
Lodge Enterprises 100,000 100,000
Lodge Contracting 100,000 100,000
Stones Bay Holdings 100,000 100,000
Paul Stent 10,000 10,000
Peter Robin 10,000 10,000
Sandford Capital Limited 358,000 358,000
Micheal Lightheart 40,000 40,000
Peter Gill 20,000
Larry Wiebe 40,000
Success West 20,000
Murray Reid 240,000 240,000
Michael Kopp 20,000
Robert Turnball 10,000
Doug Rollheiser 20,000
Brian Lee 20,000
Julie Cockling 20,000
Al Steel 20,000
Rob Lancit 20,000 20,000
Freddy Fuller 40,000 40,000
Micheal Lightheart 80,000 80,000
Cliff Sweeney 50,000 50,000
Corporate Finance 50,000 50,000
Freddy Fuller 35,000 35,000
<PAGE>
Page F-4
In February of 1999, we granted stock options to our directors, officers,
employees and consultants to acquire 10,164,000 shares of our common stock,
pursuant to our 1999 Stock Option Plan. The options are exercisable at the
price of $1.00 per share until March 1, 2002, and are subject to a vesting
schedule. The options were granted pursuant to exemption from registration
under Rule 701 promulgated under the Act and accordingly shares issued upon
exercise of the an option may be resold by the option holder ninety following
the effective date of this registration statement.
ITEM 27. EXHIBITS
The following Exhibits are attached to this registration statement.
3.1 Restated Articles of Incorporation
3.2 Bylaws
5.1 Opinion of Ogden Murphy Wallace P.L.L.C.
10.1 Stock Acquisition Agreement with Indexonly Technologies, dated
August 31, 1999
10.2 1999 Stock Option Plan with Form of Option Agreement
10.3 Employment Agreement with Cliff Sweeney
10.4 Consulting Agreement with Creekside Consultants Inc. (Norm Friend)
21.1 Subsidiaries of the registrant
23.2 Consent of KMPG LLP
23.3 Consent of Counsel (see Exhibit 4.1)
24.1 Power of Attorney (included on signature page)
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in
the registration statement; and
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement.
(2) For the purpose of determining any liability under the Securities Act,
to treat each post-effective amendment that contains a prospectus as a new
registration statement of the securities offered, and the offering of the
securities at that time as the initial bona fide offering of those
securities.
(3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described above in Item 24, or
otherwise, the registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction of the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(4) For purposes of determining any liability under the Securities Act, to
treat the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1), or
(4), or 497(h) under the Securities Act as part of this registration
statement as of the time the SEC declared it effective.
<PAGE>
Page F-5
SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that we have reasonable grounds to believe that we meet all
of the requirements for filing on Form SB-2 and have authorized this
registration statement to be signed on our behalf by the undersigned, in the
city of Vancouver, Province of British Columbia, on the 27th day of March, 2000.
INDEXONLY TECHNOLOGIES, INC.
----------------------------
(Registrant)
By: /s/ Cliff Sweeney
------------------------
Cliff Sweeney
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Cliff Sweeney, as his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration
Statement on Form SB-2 of Indexonly Technologies, Inc., and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, grant unto said attorney-in-fact and agent,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitutes, may
lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Cliff Sweeney Chairman and Chief March 27, 2000
- -----------------
Executive Officer
/s/ David Manning Chief Financial Officer March 27, 2000
- -----------------
/s/ Norm Friend Director March 27, 2000
- ---------------
<PAGE>
Page F-6
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Restated Articles of Incorporation, as filed with the Nevada
3.2 Bylaws
5.1 Opinion of Ogden Murphy Wallace P.L.L.C.
10.1 Stock Acquisition Agreement with Indexonly Technologies, Inc.
dated as of August 31, 1999
10.2 1999 Stock Option Plan with Form of Option Agreement
10.3 Employment Agreement with Cliff Sweeney
10.4 Consulting Agreement with Creekside Consultants Inc. (Norm Friend)
21.1 Subsidiaries of the registrant
23.2 Consent of KPMG, LPP
23.3 Consent of Counsel (see Exhibit 4.1)
24.1 Power of Attorney (included on signature page)
<PAGE>
Page F-7
Exhibit 3.1
Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF
INDEXONLY TECHNOLOGIES, INC.
On the 30th day of August, 1999, pursuant to the Nevada Revised Statutes 78.320
and other applicable Nevada Revised Statutes, the annual meeting of shareholders
representing a majority of the holders was held. Whereas, there being shares
validly issued and outstanding and entitled to vote, with a total voting power
of 14,968,187 shares, shareholders voted either by proxy or in person 57 % being
a majority and 8,567,286 shares FOR, representing 197,800 shares against, to
reinstate the articles of incorporation of Indexonly Technologies, Inc.
Therefore, the corporation does by these presents restate its articles of
incorporation as follows:
FIRST: Name
The name of the corporation is Indexonly Technologies, Inc., (The
"Corporation").
SECOND: Registered Office and Agent
The address of the registered office of the corporation in the State of
Nevada is 1700 East Desert Inn Road, Las Vegas, NV 89109, in the city of Las
Vegas, County of Clark. The name and address of the corporation's registered
agent is Doug Ansell, at said address, until such time as another agent is duly
authorized and appointed by the corporation.
THIRD: Purpose and Business
The purpose of the corporation is to engage in any lawful act or activity
for which corporations many now or hereafter be organized under the Nevada
Revised Statutes of the State of Nevada, including, but not limited to the
following:
(a) The Corporation may at any time exercise such rights, privileges, and
powers when not inconsistent with the purposes and object for which this
corporation is organized;
(b) The Corporation shall have power to have succession by it's corporate
name in perpetuity, or until dissolved and it's affairs would up according to
law;
(c) The Corporation shall have power to sue and be sued in any court of law
or equity;
(d) The Corporation shall have power to make contracts;
(e) The Corporation shall have power to hold, purchase and convey real and
personal estate and to mortgage or lease any such real and personal estate with
its franchises. The power to hold real and personal estate shall include the
power to take the same by devise or bequest in the State of Nevada, or in any
other state, territory or country;
(f) The corporation shall have power to appoint such officers and agents as
the affairs of the Corporation shall requite and allow them suitable
compensation;
<PAGE>
Page F-8
(g) The Corporation shall have power to make bylaws not inconsistent with
the constitution or laws of the United States, or of the State of Nevada, for
the management, regulation and government of it's affairs and property, the
transfer of it's stock, the transaction of it's business and the calling and
holding of meetings of stockholders;
(h) The Corporation shall have the power to wind up and dissolve itself, or
be wound up or dissolved;
(i) The Corporation shall have the power to adopt and use a common seal or
stamp, or to not use such seal or stamp and if one is used, to alter the same.
The use of a seal or stamp by the corporation on any corporate documents is not
necessary. The Corporation may use a seal or stamp, if it desires, but such use
or non-use shall not in any way affect the legality of the document;
(j) The Corporation shall have the power to borrow money and contract debts
when necessary for the transaction of it's business, or for the exercise of it's
corporate rights, privileges or franchises, or for any other lawful purpose of
it's incorporation; to issue bonds, promissory notes, bills of exchange,
debentures and other obligations and evidence of indebtedness, payable at a
specified time or times, or payable upon the happening of a specified event or
events, whether secured by mortgage, pledge or otherwise, or unsecured, for
money borrowed, or in payment for property purchased, or acquired, or for
another lawful object;
(k) The Corporation shall have the power to guarantee, purchase, hold, sell,
assign, transfer, mortgage, pledge, or otherwise dispose of the shares of the
capital stock of, or any other bonds, securities or evidence in indebtedness
created by any other corporation or corporations in the State of Nevada, or any
other state or government and, while the owner of such stock, bonds, securities
or evidence of indebtedness, to exercise all the rights, powers and privileges
of ownership, including the right to vote, in any;
(l) The Corporation shall have the power to purchase, hold, sell and
transfer shares of it's own capital stock and use therefore it's capital,
capital surplus, surplus or other property or fund;
(m) The Corporation shall have to conduct business, have one or more
offices and hold, purchase, mortgage and convey real and personal property in
the State of Nevada and in any of the several states, territories, possessions
and dependencies of the United States, the District of Columbia and in any
foreign country;
(n) The Corporation shall have the power to do all and everything necessary
and proper for the accomplishment of the objects enumerated in it's articles of
incorporation, or any amendments thereof or necessary or incidental to the
protection and benefit of the Corporation and, in general, to carry on any
lawful business necessary or incidental to the attainment of the purposes of the
Corporation, whether or not such business is similar in nature to the purposes
set forth in the articles of incorporation of the Corporation, or any amendment
thereof;
(o) The Corporation shall have the power to make donations for the public
welfare or for charitable, scientific or educational purposes;
(p) The Corporation shall have the power to enter partnerships, general or
limited, or joint ventures, in connection with any lawful activities.
<PAGE>
Page F-9
FOURTH: Capital Stock
1. Classes and Number of Shares The total number of shares of all classes
----------------------------
of stock, which the corporation shall have authority to issue is Sixty Million
(60,000,000), consisting of Fifty Million (50,000,000) shares of Common Stock,
par value of $0.001 per share (The "Common Stock") and Ten Million (10,000,000)
shares of Preferred Stock, which have a par value of $0.001 per share (the
"Preferred Stock").
2. Powers and Rights of Common Stock
---------------------------------
(a) Preemptive Right. No shareholders of the Corporation holding common
----------------
stock shall any preemptive or other right to subscribe for any additional
un-issued or treasury shares of stock or for other securities of any class, or
for rights, warrants or options to purchase stock, or for scrip, or for
securities of any kind convertible into stock or carrying stock purchase
warrants or privileges unless so authorized by the Corporation;
(b) Voting Rights and Powers. With respect to all matters upon which
------------------------
stockholders are entitled to vote or to which stockholders are entitled to give
consent, the holders of the outstanding shares of the Common Stock shall be
entitled to cast thereon one (1) vote in person or by proxy for each share of
the Common Stock standing in his/her name;
(c) Dividends and Distributors.
---------------------------
i. Cash Dividends. Subject to the rights of holders of Preferred Stock,
---------------
holders of Common Stock shall be entitled to receive such cash
dividends as may be declared thereon by the Board of Directors from
time to time out of assets of funds of the Corporation legally
available thereof;
ii. Other Dividends and Distributions. The Board of Directors may issue
----------------------------------
shares of the Common Stock in the form of a distribution or
distributions pursuant to a stock dividend or split-up of the shares
of the Common Stock;
iii. Other Rights. Except as otherwise required by the Nevada Revised
------------
Statutes and as now otherwise be provided in the Restated Articles of
Incorporation, each share of the Common Stock shall have identical
powers, preferences and rights, including rights and liquidation;
3. Preferred Stock. The powers, preferences, rights, qualifications, limitations
---------------
and restrictions pertaining to the Preferred Stock, or any series thereof, shall
be such as may be fixed, from time to time, by the Board of Directors in it's
sole discretion, authority to do so being hereby expressly vested in such board.
4. Issuance of the Common Stock and the Preferred Stock. The Board of Directors
----------------------------------------------------
of the Corporation may from time to time authorize by resolution the issuance of
any or all shares of the Common Stock and the Preferred Stock herein authorized
in accordance with the terms and conditions set forth in these Restated Articles
of Incorporation for such purposes, in such amounts, to such persons,
corporations, or entities, for such consideration and in the case of Preferred
Stock, in one or more series, all as the Board of Directors in it's discretion
may determine and without any vote or other action by stockholders, except as
otherwise required by law. The Board of Directors, from time to time, also may
authorize, by resolution, options, warrants and other rights convertible in
Common or Preferred stock (collectively "securities"). The securities must be
<PAGE>
Page F-10
issued for such consideration, including cash, property, or services, as the
Board of Directors may deem appropriate, subject to the requirement that the
value of such consideration being less than the par value if the shares issued.
Any shares issued for which the consideration so fixed has been paid or
delivered shall be fully paid stock and the holder of such shares shall not be
liable for any further call or assessment or any other payment thereon, provided
that the actual value of such consideration is not less than the par value of
the shares so issued. The Board of Directors may issue shares of Common Stock
in the form of a distribution or distributions pursuant to a stock divided or
split-up of the shares of the Common Stock only to the then holders of the
outstanding shares of the Common Stock.
5. Cumulative Voting. Except as otherwise required by applicable law, there
------------------
shall be no cumulative voting on any matter brought to a vote of stockholders of
the Corporation.
FIFTH: Adoption of Bylaws
In the Furtherance and not in limitation of the powers conferred by statute
and subject to Article Sixth hereof, the Board of Directors is expressly
authorized to adopt, repeal, rescind, alter or amend in any respect the Bylaws
of the Corporation (the bylaws)
SIXTH: Shareholder Amendment of Bylaws.
Notwithstanding Article Fifth hereof, the bylaws may also be adopted,
repealed, rescinded, altered or amended in any respect by the stockholders of
the Corporation, but only by affirmative vote of the holders of not less than
seventy-five percent (75%) of the voting power of all outstanding shares of
voting stock, regardless of class and voting together as a single voting class.
SEVENTH: Board of Directors
The business and affairs of the Corporation shall be managed by and under
the direction of the Board of Directors. Except as may otherwise be provided
pursuant to Section 4 or Article Forth hereof in connection with rights to elect
additional directors under specified circumstances, which may be granted to the
holder of any class or series of Preferred Stock, the exact number of directors
of the Corporation shall be determined from time to time by a by-law or
amendment thereto, providing that the number of directors shall not be reduced
to less than two (2). The directors holding office at the time of the filing of
these Restated Articles of Incorporation shall continue as directors until the
next annual meeting and/or until their successors are duly chosen.
EIGHT: Term of Board of Directors
Except as otherwise required by applicable law, each director shall serve
for a term ending on the date of the third Annual Meeting of Stockholders of the
Corporation (the "Annual Meeting") following the Annual Meeting at which such
director was elected. All directors, shall have equal standing.
Not withstanding the foregoing provisions of this Article Eighth each
director shall serve until his successor is elected and qualified or until his
death, resignation or removal; no decrease in the authorized number of directors
shall shorten the term of any incumbent director; and additional directors,
elected pursuant to Section 4 or Article forth hereof in connection with rights
to elect such additional directors under specified circumstances, which may be
granted to the holders of any class or series of Preferred Stock, shall not be
included in any class, but shall serve for such term or terms and pursuant to
such other provisions as are specified in the resolution of the Board of
Directors establishing such class or series.
<PAGE>
Page F-11
NINTH: Vacancies on Board of Directors
Except as may otherwise be provided pursuant to Section 4 of Article Forth
hereof in connection with rights to elect additional directors under specified
circumstances, which may be granted to the holders of any class or series of
Preferred Stock, newly created directorships resulting from any increase in the
number of directors, or any vacancies on the Board of Directors resulting from
death, resignation, removal, or other causes, shall be filled solely by the
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified or until
such director's death, resignation or removal, whichever first occurs.
TENTH: Removal of Directors
Except as may otherwise be provided pursuant to Section 4 or Article Fourth
hereof in connection with rights to elect additional directors under specified
circumstances, which may be granted to the holders of any class or series of
Preferred Stock, any director may be removed from office only for cause and only
by the affirmative vote of the holders of note less than seventy-five percent
(75%) of the voting director, provided, however, that where such removal is
approved by a majority of the Directors, the affirmative vote of a majority of
the voting power of all outstanding shares of voting stock entitled to vote in
connection with the election of such director shall be required for approval of
such removal. Failure of an incumbent director to be nominated to serve an
additional term of office shall not be deemed a removal from office requiring
any stockholder vote.
ELEVENTH: Stockholder Action
Any action required or permitted to be taken by the stockholder of the
Corporation must be effective at a duly called Annual Meeting or at a special
meeting of stockholders of the Corporation, unless such action requiring or
permitting stockholder approval is approved by a majority of the Directors, in
which case such action may be authorized or taken by the written consent of the
holders of outstanding shares of Voting Stock having not less than the minimum
voting power that would be necessary to authorize or take such action at a
meeting of stockholders at which shares entitled to vote thereon were present
and voted, provided all other requirements of applicable law these Articles have
been satisfied.
TWELFTH: Special Stockholder Meeting
Special meetings of the stockholder of the Corporation for any purpose or
purposes may be called at any time by a majority of the Board of Directors or by
the Chairman of the Board or the President. Special meeting may not be called
by any other person or persons. Each special meeting shall be held at such date
and time as is requested by the person or persons calling the meeting, within
the limits fixed by law.
THIRTEENTH: Location of Stockholder Meetings.
Meetings of stockholders of the Corporation may be held within the State of
Nevada, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision of the Nevada Revised Statutes) outside the State of
Nevada at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws.
<PAGE>
Page F-12
FOURTEENTH: Private Property of Stockholders
The private property of the stockholder shall not be subject to the payment
of corporate debts to any extent whatever and the stockholder shall not be
personally liable for the payment of the corporation's debts.
FIFTEENTH: Stockholder Appraisal Rights in Business Combinations.
To maximum extent permissible under the Nevada Revised Statutes of the
State of Nevada, the stockholders of the Corporation shall be entitled to the
statutory appraisal rights provided therein, with respect to any business
Combination involving the Corporation and any stockholder (or any affiliate or
associate of any stockholder), which required the affirmative vote of the
Corporation's stockholders.
SIXTEENTH: Other Amendments
The Corporation reserves the right to adopt, repeal, rescind, alter or
amend in any respect any provision contained in these Restated Articles of
Incorporation in the manner now or hereafter prescribed by applicable law and
all rights conferred on stockholders herein granted subject to this reservation.
SEVENTEENTH: Term of Existence.
The Corporation is to have perpetual existence.
EIGHTEENTH: Liability of Directors
No director of this Corporation shall have personal liability to the
Corporation or any of it's stockholders for monetary damages for breach of
fiduciary duty as a director or officers involving any act or omission of any
such director of officer. The foregoing provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of loyalty
to the Corporation or it's stockholders, (ii) for acts or omissions not in good
faith or, which involve intentional misconduct or a knowing violation of law,
(iii) under application Sections of the Nevada Revised Statutes, (iv) the
payment of dividends in violation of Section 78.300 of the Nevada Revised
Statutes or, (v) for any transaction from which the director derived an improper
personal benefit. Any repeal or modification of this Article by the
stockholders of the Corporation shall be prospective only and shall not
adversely affect any limitation on the personal liability of a director or
officer of the Corporation for acts or omissions prior to such repeal or
modification.
NINETEENTH: Name and Address of Incorporator
The name and physical address of the Incorporator of the Corporation is:
Doug Ansell
1700 East Desert Inn Road
Las Vegas, NV 89109
The name and mailing address of the incorporator of the Corporation is:
Doug Ansell
1700 East Desert Inn Road
Las Vegas, NV 89109
<PAGE>
Page F-13
I Norm Friend, Secretary of Indexonly Technologies, Inc., do hereby certify
that the Restated Articles of Incorporation as contained herein are true and
correct as adopted by a majority of shareholders on August 30th, 1999.
The undersigned Notary Public certified, deposes and states that Cliff
Sweeney, personally appeared before me and executed the foregoing on behalf of
the Corporation as it's President, this 30th day of November, 1999.
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
INDEXONLY TECHNOLOGIES, INC.
(THE CORPORATION)
We the undersigned, Cliff Sweeney (President) and Norm Friend (Treasurer)
of the Corporation do hereby certify:
That the board of Directors of the Corporation at a meeting duly convened and
held on the 10th day of November, 1999, adopted a resolution to amend the
original articles as follows:
Article I is hereby amended to read as follows:
"The name of the Corporation is (hereinafter know as the
corporation) Indexonly Technologies, Inc."
The number of shares of the Corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation are 14,968,187, that the said
change(s) and amendment has been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
/s/ Cliff Sweeney /s/ Norm Friend
- ----------------- ---------------
Cliff Sweeney, President Norm Friend, Secretary
The undersigned Notary Public certified, deposes and states that Cliff
Sweeney and Norm Friend, personally appeared before me and executed the
foregoing on behalf of the Corporation as it's President and Secretary
respectively, this 30th day of November, 1999.
By: /s/ Larry Ference
-------------------
Notary Public
<PAGE>
Page F-14
Exhibit 3.2
Exhibit 3.2
BYLAWS
OF
INDEXONLY TECHNOLOGIES, INC.
A NEVADA CORPORATION
ADOPTED: DECEMBER 1, 1999
1.0 OFFICES
-------
1.1 The principal office of the Company shall be 3823 Henning Drive,
Suite 217, Burnaby, British Columbia V5C 6P3. The Board of Directors shall have
the power and authority to establish and maintain branch or subordinate offices
at any other locations within or without the State of Nevada.
2.0 BOARD OF DIRECTORS
------------------
2.1 General Powers and Duties. The business and affairs of the Company
-------------------------
shall be managed by its Board of Directors. The Board of Directors may elect
any member of the Board as Chairman. The Chairman may be an officer. He shall,
if present, preside at all meetings of the Board of Directors. He shall have
other powers and duties as the Board prescribes. All the powers of the Company
are vested in the Board of Directors unless specifically expressed to be vested
in the shareholders by statute or by the Articles or by these Bylaws.
2.2 Number, Tenure and Qualifications. The number of directors of the
---------------------------------
Company shall be no fewer than one nor more than nine. The number of directors
may at any time be increased or decreased by the directors or by the
shareholders at any regular or special meeting of directors or shareholders
provided that no decrease shall have the effect of shortening the term of any
incumbent director except as otherwise provided in these Bylaws. Directors
shall be elected at the annual meeting of shareholders, and the term of office
of each director shall be until the next annual meeting of shareholders or until
the election and qualification of his or her successor. Any directorship to be
filled by reason of an increase in the number of directors may be filled by the
Board of Directors for a term of office continuing only until the next election
of directors, or by shareholders for the term of office associated with the
class to which directors are elected. Directors need not be residents of the
State of Nevada and need not be shareholders of the Company.
If there are three or more directors, the Board of Directors shall be
divided into three classes, Class I, Class II, and Class III, which shall be as
nearly equal in number as possible. Each director shall serve for a term ending
on the date of the third annual meeting following the annual meeting at which
the director was elected; provided that each initial director in Class I shall
hold office until the first annual meeting of shareholders; each initial
director in Class II shall hold office until the second annual meeting of
shareholders, and each initial director in Class III shall hold office until the
third annual meeting of shareholders. At least one-fourth in number of the
directors must be elected annually.
2.3 Regular Meetings. A regular meeting of the Board of Directors
----------------
shall be held without notice other than these Bylaws immediately after and at
the same place as the annual meeting of shareholders. The Board of Directors
may provide by resolution, the time and place for holding additional regular
meetings without notice other than the resolution. Additional regular meetings
shall be held at the principal office of the Company in the absence of any
designation in the resolution.
2.4 Special Meetings. Special meetings of the Board of Directors may
----------------
be called by or at the request of the President or any two directors, and shall
be held at the principal place of business of the Company or at any other place
as the directors may determine.
<PAGE>
Page F-15
2.5 Action of Directors by Communications Equipment. Any regular or
-----------------------------------------------
special meeting of the directors may be called and held over telephone or other
electronic means, and communication from a contacted director constitutes
attendance at the meeting so held.
2.6 Notice. Notice of any special meeting shall be given at least
------
twenty-four (24) hours before the time fixed for the meeting, by written notice
delivered personally or mailed to each director at his business address, by
facsimile or by telegram. If mailed, the notice shall be deemed to be delivered
when deposited in the United States mail with postage prepaid, not less than
five (5) days prior to the commencement of the above stated notice period. If
notice is given by telegram, the notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any director may waive notice
of any meeting. The attendance of a director at a meeting shall constitute a
waiver of notice of the meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of the meeting.
2.7 Quorum. A majority of the number of directors fixed by these
------
Bylaws shall constitute a quorum for the transaction of business at any meeting
of the Board of Directors, but if less than a majority is present at a meeting,
a majority of the directors present may adjourn the meeting from time to time
without further notice. At an adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally notified. The directors present at the duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum.
2.8 Board Decisions. 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. However, an actual majority shall be required for:
(a) Recommending to the shareholders the Amendment of the Articles
of Incorporation;
(b) Adopting a plan of merger or consolidation;
(c) Recommending to the shareholders the sale, lease, exchange,
mortgage, pledge, or other disposition of all or substantially all
the property and assets of the Company otherwise than in the usual
and regular course of its business;
(d) Recommending to the shareholders a voluntary dissolution of
the Company or a revocation of the Company;
(e) Amending the Bylaws of the Company;
(f) Filling vacancies on the Board of Directors;
(g) Authorizing or approving reacquisition of shares, except according
to a formula or method prescribed by the Board of Directors;
(h) Authorizing or approving the issuance or sale or contract for
sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except
that the Board of Directors may authorize a committee to do so within
the limits specifically prescribed by the Board of Directors.
2.9 Vacancies. Any vacancy occurring in the Board of Directors,
---------
including one created by an increase in the number of directors, shall be filled
by the affirmative vote of a majority of the remaining directors though less
than a quorum of the Board of Directors. A director elected to fill a vacancy
not created by an increase in the number of directors shall be elected for the
unexpired term of his predecessor in office. A director elected to fill a
vacancy created by an increase in the number of directors shall be elected for a
term of office continuing until the next election of directors.
<PAGE>
Page F-16
2.10 Compensation. By resolution of the Board of Directors, the
------------
directors may be paid for their expenses, if any, of attendance at each meeting
of the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Company in any other
capacity and receiving compensation therefor.
2.11 Presumption of Assent. A director 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 taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment of the meeting or shall forward his dissent by registered
mail to the secretary of the Company immediately after the adjournment of the
meeting. The right to dissent shall not apply to a director who voted in favor
of the action.
2.12 Executive Committee. By resolution, the Board of Directors may
-------------------
designate two or more directors to constitute an executive committee to the
extent provided in the resolution and shall have and may exercise all the
authority of the Board of Directors in the management of the Company, not
including:
(a) Recommending to the shareholders the Amendment of the Articles
of Incorporation;
(b) Adopting a plan of merger or consolidation;
(c) Recommending to the shareholders the sale, lease, exchange,
mortgage, pledge, or other disposition of all or substantially all
the property and assets of the Company otherwise than in the usual
and regular course of its business;
(d) Recommending to the shareholders a voluntary dissolution of the
the Company or a revocation of the Company;
(e) Amending the Bylaws of the Company.
(f) Filling vacancies on the Board of Directors;
(g) Authorizing or approving reacquisition of shares, except according
to a formula or method prescribed by the Board of Directors;
(h) Authorizing or approving the issuance or sale or contract for
sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except
that the Board of Directors may authorize a committee to do so within
the limits specifically prescribed by the Board of Directors.
2.13 Standards of Conduct for Directors. A director shall discharge
----------------------------------
the duties of a director, including the duties as a member of a committee, in
good faith, with the care an ordinarily prudent person in a like position would
exercise under similar circumstances and in a manner the director reasonably
believes to be in the best interests of the Company.
In discharging the duties of a director, a director is entitled to rely on
information, opinions, reports or statements including financial statements and
other financial data, if prepared or presented by an officer or employee of the
Company whom the director reasonably believes to be reliable and competent in
the matters presented; legal counsel, public accountants or other persons as to
matters the director reasonably believes are within the person; professional or
expert competence; or a committee of the Board of Directors of which the
director is not a member if the director reasonably believes the committee
merits confidence.
A director is not liable for any action taken as a director, or any failure
to take any action, if the director performed the duties of the director's
office in compliance with these Bylaws.
<PAGE>
Page F-17
3.0 SHAREHOLDERS
------------
3.1 Annual Meeting. The annual meeting of the shareholders of the
--------------
Company shall be fixed by the Board of Directors within 150 days of the end of
the fiscal year, beginning with the year 1996, for the purpose of electing
directors and for the transaction of other business as may properly come before
the meeting. If the day fixed for the annual meeting shall be a legal holiday in
the State of Nevada or on Sunday, the meeting shall be held on the next
succeeding business day. If the election of directors is not held on the day
fixed by the Board of Directors for any annual meeting of the shareholders, or
at any adjournment of an annual meeting, the Board of Directors shall cause the
election to be held at a special meeting of the shareholders as soon afterward
as is convenient.
3.2 Special Meetings. Special meetings of the shareholders, for any
----------------
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or by the Board of Directors, and shall be called by the President
at the request of the holders of not less than of all the outstanding shares of
the Company entitled to vote at the meeting.
3.3 Place of Meeting. The Board of Directors may designate any place
----------------
within or outside of the State of Nevada as the place of meeting for any annual
meeting or for any special meeting called by the Board of Directors. A waiver
of notice signed by all shareholders entitled to vote at a meeting may designate
any place, either within or without the State of Nevada, as the place for the
holding of the meeting.
3.4 Notice of Meeting. Written or printed notice stating the place,
-----------------
day, and hour of the meeting and, in 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, unless a different time frame is specified
by statute for a particular purpose, before the date of the meeting, either
personally or by mail, by or at the direction of the President, Secretary, or
the officer or persons calling the meeting, to each shareholder of record
entitled to vote at the meeting. If mailed, the notice shall be deemed to be
delivered when deposited in the United States mail with postage prepaid,
addressed to the shareholder at his address as it appears on the stock transfer
books of the Company. Any stockholder may waive notice of any meeting by
written notice signed by him or his duly authorized attorney, either before or
after the meeting.
3.5 Closing Transfer Books or Fixing Record Date. For the purpose of
--------------------------------------------
determining shareholders entitled to notice of, or to vote at, any meeting of
shareholders or any adjournment of a meeting, or shareholders entitled to
receive payment of any dividend, or to make a determination of shareholders for
any other proper purpose, including for solicitation of proxies, the Board of
Directors of the Company may provide that the stock transfer books shall be
closed for a stated period, but not to exceed sixty (60) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of, or to vote at, a meeting of shareholders, the books shall
be closed for at least ten (10) days immediately preceding the meeting. In lieu
of closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any determination of shareholders, the date in any
event to be not more than sixty (60) days, and in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action requiring the determination of shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for
the determination of shareholders entitled to notice of, or to vote at, meeting
of shareholders, or of shareholders entitled to receive payment of a dividend,
the date that the notice of meeting is mailed or the date on which the
resolution of the Board of Directors declaring the dividend is adopted, as the
case may be, shall be the record date for the determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, the determination shall
apply to any adjournment of a meeting except where the determination has been
made through the closing of the stock transfer books and the stated period of
closing has expired.
<PAGE>
Page F-18
3.6 Quorum. Forty percent (40%) of the outstanding shares of the
------
Company entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of shareholders. If less than Forty percent (40%) of the
outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At the adjourned meeting at which a quorum is present or represented, any
business may be transacted that might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders.
3.7 Proxies. At all meetings of shareholders, a shareholder may vote
-------
by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. The proxy shall be filed with the Secretary of the Company
before or at the time of the meeting. Any solicitation of proxies by the
directors or management of the Company shall be made by mailing the proxies by
certified mail or providing them to the shareholder in an alternative acceptable
manner at least not less than ten days nor more than sixty days before the date
of the meeting for which the proxies are solicited. Each shareholder as of the
record date shall receive a proxy. Proxies shall describe the location and
purpose of the meeting and the matter or business for which the proxy is
solicited. No proxy shall be valid after six (6) months from the date of its
execution unless otherwise provided in the proxy.
3.8 Voting of Shares. Every stockholder of record shall be entitled to
----------------
one vote for each share of stock standing in his name on the books of the
Company on each matter submitted to a vote at a meeting of the shareholders. No
shareholder shall be entitled to cumulate his votes for election of directors.
3.9 Consent to Action. Any action which may be taken at a meeting of
-----------------
the shareholders may be taken without a meeting if a consent in writing setting
forth the action so taken is signed in original, facsimile or counterpart by
shareholders holding at least a majority of the voting power. The written
consent shall have the same force and effect as a unanimous vote of the
shareholders. Shareholders signing the written consent are not subject to the
notice provisions of these Bylaws.
3.10 Action of Shareholders by Communications Equipment. Shareholders
--------------------------------------------------
may participate in a meeting of shareholders by means of a conference telephone
call or similar communication equipment by means of which all persons
participating in the meeting can hear each other at the same time, and
participation by these means shall constitute presence in person at a meeting.
3.11 Shareholder's Right to Examine Stock Ledger. Any person who has
-------------------------------------------
been a stockholder of record of the Company for at least six months immediately
preceding his demand, or any person holding, or authorized in writing by the
holders of, at least five percent of all its outstanding shares, upon at least
five days' written demand, shall have the right if it is in the interest of the
business of the Company to inspect in person or by agent or attorney, during
usual business hours, the stock ledger or duplicate stock ledger, whether kept
in the principal office of the Company in the state of Nevada or elsewhere and
to make copies. If the Company neglects or refuses to keep the stock ledger or
duplicate copy open for inspection, it shall forfeit to the State the sum
specified in the applicable statute for every day of any neglect or refusal.
3.12 Shareholder's Right to Examine Books and Records. Any person who
------------------------------------------------
has been a stockholder of record of the Company and owns not less than fifteen
percent (15%) of all of the issued and outstanding shares of the stock of the
Company or has been authorized in writing by the holders of at least fifteen
percent of all its issued and outstanding shares, upon at least five days'
written demand, is entitled to inspect in person or by agent or attorney, during
normal business hours, the books of account and all financial records of the
Company, to make extracts therefrom, and to conduct an audit of the records.
Holders of voting trust certificates, if any, representing fifteen percent of
the issued and outstanding shares of the Company shall be regarded as
shareholders for the purpose of this subsection. The right of shareholders to
inspect the corporate records shall not be limited in the articles or bylaws of
the Company.
<PAGE>
Page F-19
All costs for making extracts of records or conducting an audit shall be
borne by the person exercising his rights under this Section.
The rights authorized by this Section may be denied to any stockholder upon
his refusal to furnish the Company an affidavit that the inspection, extracts or
audit is not desired for any purpose not related to his interest in the Company
as a stockholder. Any stockholder or other person, exercising rights under this
Section, who uses or attempts to use information, documents, records or other
data obtained from the Company, for any purpose not related to the stockholder's
interest in the Company as a stockholder, is guilty of a gross misdemeanor.
If any officer or agent of the Company keeping records in Nevada willfully
neglects or refuses to permit an inspection of the books of account and
financial records upon demand by a person entitled to inspect them, or refuses
to permit an audit to be conducted, as provided in this Section, the Company
shall forfeit to the State the sum specified in the applicable statute for every
day of such neglect or refusal, and the Company, officer or agent is jointly and
severally liable to the person injured for all damages resulting to him.
A stockholder who brings an action or proceeding to enforce any right under
this Section or to recover damages resulting from its denial:
(a) Is entitled to costs and reasonable attorneys fees, if he
prevails; or
(b) Is liable for such costs and fees if he does not prevail in
the action or proceeding.
The provisions of this Section do not apply to any corporation listed and
traded on any recognized stock exchange nor do they apply to any corporation
that furnishes to its shareholders a detailed annual financial statement.
4.0 OFFICERS
--------
4.1 Number. The officers of the Company shall be those officers
------
appointed from time to time by the Board or by any other officer empowered to do
so. The officers of the Company shall, at the minimum, include a President,
Secretary and Treasurer, and also may include a Chief Executive Officer, none,
one or more Vice Presidents (the number of Vice Presidents to be determined by
the Board of Directors), a Chief Financial Officer and a Controller, each of
whom shall be appointed by the Board of Directors. The Board shall have the
sole power and authority to appoint executive officers. As used herein, the
term "executive officer" shall mean the President, any Vice President in charge
of a principal business unit, division or function or any other officer who
performs a policy-making function. The Board or the President may appoint such
other officers and assistant officers to hold office for such period, have such
authority and perform such duties as may be prescribed. The Board may delegate
to any other officer the power to appoint any subordinate officers and to
prescribe their respective terms of office, authority and duties. Any two or
more offices may be held by the same person. Unless an officer dies, resigns or
is removed from office, he or she shall hold office until his or her successor
is appointed.
Each officer has the authority and shall perform the duties set forth in
the Bylaws or, to the extent consistent with the Bylaws, the duties prescribed
by the Board of Directors or by direction of an officer authorized by the Board
of Directors to prescribe the duties of other officers.
4.2 Election and Term of Office. The officers of the Company to be
---------------------------
elected by the Board of Directors shall be elected annually at the first meeting
of the Board of Directors held after each annual meeting of the shareholders.
If the election of officers is not held at the meeting, the election shall be
held as soon thereafter as is convenient. Each officer shall hold office until
his or her successor has been duly elected and qualifies or until the officer's
death or until he or she resigns or is removed in the manner provided by these
Bylaws.
4.3 Removal. Any officer or agent elected or appointed by the Board of
-------
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Company would be served by that removal, but the removal
<PAGE>
Page F-20
shall be without prejudice to the contract rights, if any, of the person so
removed.
4.4 Vacancies. A vacancy in any office because of death, resignation,
---------
removal, disqualification or otherwise, may be filled by the Board of Directors
for the unexpired portion of the term.
4.5 Standards of Conduct for Officers. An officer with discretionary
---------------------------------
authority shall discharge the duties of an officer under that authority in good
faith; with the care an ordinarily prudent person in a like position would
exercise under similar circumstances; and in a manner the officer reasonably
believes to be in the best interests of the Company.
In discharging the duties of an officer, the officer is entitled to rely on
information, opinions, reports or statements including financial statements and
other financial data, if prepared or presented by an officer or employee of the
Company whom the officer reasonably believes to be reliable and competent in the
matters presented; legal counsel, public accountants or other persons as to
matters the officer reasonably believes are within the person's professional or
expert competence.
An officer is not acting in good faith if the officer has knowledge
concerning the matter in question that makes reliance otherwise permitted by
these Bylaws unwarranted.
An officer is not liable for any action taken as an officer, or any failure
to take any action, if the officer performed the duties of the office in
compliance with these Bylaws.
If any certificate or report made or public notice given by a officer(s) of
the Company shall be false or fraudulent in any material representation, the
officer(s) knowingly and intentionally signing the same jointly and severally be
personally liable to any person who has become a creditor or stockholder of the
Company upon the faith of any such material representation therein to the amount
of the debt contracted upon the faith thereof if not paid when due, or the
damage sustained by any purchaser of or subscriber to its stock upon the faith
thereof.
The liability imposed by this section shall exist in all cases where the
contents of any such certificate, report or notice of any material
representation therein shall have been communicated either directly or
indirectly to the person so becoming a creditor or stockholder and he or she
became such creditor or stockholder upon the faith thereof.
No action can be maintained for a cause of action created by this section
unless brought within two (2) years from the time the certificate, report or
public notice shall have been made or given by the officers of the Company.
4.6 Powers and Duties of the Chairman of the Board. If appointed, the
----------------------------------------------
Chairman of the Board shall perform such duties as shall be assigned to him or
her by the Board from time to time and shall preside over meetings of the Board
and Shareholders unless another officer is appointed or designated by the Board
as Chairman of such meetings.
4.7 Powers and Duties of the Chief Executive Officer. If appointed,
-------------------------------------------------
the Chief Executive Officer shall preside at all meetings of the shareholders
and, in the absence of the Chairman of the Board, at all meetings of the Board
of Directors. He or she shall have ultimate responsibility and authority for
management including, but not limited to, the power to appoint committees,
officers, agents or employees from time to time as he or she may, in his or her
discretion, decide is appropriate to assist in the conduct of the affairs of the
Company. The Chief Executive Officer shall enforce these Bylaws and generally
shall supervise and control the business, affairs and property of the Company.
He or she shall have general and active supervision over the company's officers
and may sign, execute and deliver in the name of the Company corporate
documents, instruments, powers of attorney, contracts, bonds and other
obligations.
<PAGE>
Page F-21
4.8 Powers and Duties of the President. The President shall have the
----------------------------------
authority and perform such duties as the Board of Directors authorizes or
directs. If no Chief Executive Officer has been appointed, or in the event of
the death of the Chief Executive Officer or his or her inability to act, the
President shall perform the duties of the Chief Executive Officer, except as may
be limited by resolution of the Board, with all the powers of, and subject to
all of the restrictions upon, the Chief Executive Officer.
4.9 Duties of the Vice President(s). If appointed, the Vice
-------------------------------
President(s) shall have the authority and perform duties as the Board of
Directors or Chief Executive Officer may authorize or direct.
4.10 Duties of the Secretary. The Secretary shall record the minutes
-----------------------
of all meetings of the shareholders and the Board of Directors. The Secretary
shall mail to both the shareholders and the directors notices of the holding of
any meeting as prescribed by these Bylaws. If the Company has a seal, the
Secretary shall be the custodian of the seal and shall affix it to minutes,
notices or other instruments executed by the Company as required. The Secretary
shall have the authority and perform other duties as the Board of Directors or
Chief Executive Officer may authorize or direct.
4.11 Duties of the Assistant Secretary. If appointed, the Assistant
---------------------------------
Secretary shall perform the duties of the Secretary as may be necessary in the
Secretary's absence, in the case of the Secretary's inability to act or when it
shall be inconvenient for the Secretary to so act. The Assistant Secretary
shall have the authority and perform other duties as the Board of Directors or
Chief Executive Officer may authorize or direct.
4.12 Duties of the Chief Financial Officer. If appointed, the Chief
-------------------------------------
Financial Officer for the Company shall have charge of and be responsible for
all funds and securities belonging to the Company and shall keep and deposit the
funds for and on behalf of the Company in a bank or banks to be designated by
the Board of Directors. In the absence of a designation, the Chief Financial
Officer may select the bank or banks in which to deposit the funds. He or she
shall have the authority and perform other duties as the Board of Directors or
Chief Executive Officer may authorize or direct.
4.13 Duties of the Controller. If appointed, the Controller for the
------------------------
Company shall be charged with certain duties in relation to the fiscal affairs
of the Company, principally to examine and audit the accounts, to keep records,
and to report the financial situation from time to time. The Controller shall
have the authority and perform other duties as the Board of Directors or Chief
Executive Officer may authorize or direct.
4.14 Duties of the Treasurer. The Treasurer shall have the authority
-----------------------
and perform such duties as the Board of Directors or Chief Executive Officer
authorize or direct.
4.15 Powers of the Board of Directors. The Board of Directors may
--------------------------------
create subordinate offices and employ subordinate officers or agents as it from
time to time deems expedient and may fix the compensation of the officers or
agents and define their powers and duties, provided the powers and duties do not
constitute a delegation of the authority as is reposed in the directors by law,
which shall be exercised and performed exclusively by them. The Board of
Directors shall also have the power to appoint a General Manager, who shall hold
office at the pleasure of the Board. The Board of Directors shall have the
power to delegate to the General Manager the executive power and authority as it
may deem necessary to facilitate the handling and management of the Company's
property and interests.
4.16 Salaries. The salaries of the officers shall be fixed from time
--------
to time by the Board of Directors, and no officer shall be prevented from
receiving a salary by reason of the fact that he or she is also a director of
the Company.
<PAGE>
Page F-22
5.0 CONTRACTS, CORPORATE FUNDS, LOANS, CHECKS AND DEPOSITS
------------------------------------------------------
5.1 Contracts. Without limiting any powers elsewhere granted by these
---------
Bylaws to the President or other officer of the Company, the Board of Directors
may authorize any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and on behalf of
the Company, and the authority may be general or confined to specific instances.
5.2 Corporate Funds. All funds of the Company shall be under the
---------------
supervision of the Board of Directors and shall be handled and disposed of in
the manner and by the officers or agents of the Company as provided in these
Bylaws or as the Board of Directors may authorize by proper resolutions from
time to time.
5.3 Loans. No loans shall be contracted on behalf of the Company and
-----
no evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. The authority may be general or confined
to specific instances.
5.4 Checks, Drafts, or Orders. All checks, drafts, or other orders for
-------------------------
the payment of money, notes, or other evidence of indebtedness issued in the
name of the Company shall be signed by an officer or officers, agent or agents
of the Company and in a manner as shall from time to time be determined by
resolution of the Board of Directors.
5.5 Deposits. All funds of the Company not otherwise employed shall be
--------
deposited from time to time to the credit of the Company in banks, trust
companies, or other depositories as the Board of Directors may select.
6.0 CERTIFICATES FOR SHARES; TRANSFERS
----------------------------------
6.1 Certificates for Shares. Certificates representing shares of the
-----------------------
Company shall be in a form as shall be determined by the Board of Directors.
The certificates shall be signed by the President or a Vice President, if any.
If the Company has more than one shareholder, the certificate shall also be
signed by the Secretary or an Assistant Secretary. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address
of the person to whom the shares represented by the certificates are issued,
with the number of shares and date of issue, shall be entered on the stock
transfer books to the Company. All certificates surrendered to the Company for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed, or mutilated certificate a
new one may be issued on the terms and indemnity to the Company as the Board of
Directors may prescribe.
6.2 Registrar. The registrar is the person designated by the Company
---------
to keep official shareholder records, including names and addresses of
shareholders and number of shares owned. The registrar may hold one or more
offices or no offices of the Company.
6.3 Transfer of Shares. Transfer of shares of the Company shall be
------------------
made in the manner specified in the Uniform Commercial Code. The Company shall
maintain stock transfer books, and any transfer shall be registered only on
request and surrender of the stock certificate representing the transferred
shares, duly endorsed. The Company shall have the absolute right to recognize
as the owner of any shares of stock issued by it, the person or persons in whose
name the certificate representing the shares stands according to the books of
the Company for all proper Company purposes, including the voting of the shares
represented by the certificate at a regular or special meeting of shareholders,
and the issuance and payment of dividends on the shares.
6.4 Shares of Another Corporation. Shares owned by the Company in
-----------------------------
another corporation, domestic or foreign, may be voted by an officer, agent or
proxy as the Board of Directors may determine or, in the absence of a
determination, by the President of the Company.
<PAGE>
Page F-23
6.5 Subscriptions. Subscriptions to the shares shall be paid at times
-------------
and in installments as the Board of Directors may determine. The Board of
Directors may adopt resolutions prescribing penalties for default on
subscription agreements.
7.0 FISCAL YEAR
-----------
7.1 The fiscal year is the calendar year.
8.0 DIVIDENDS
---------
8.1 The Board of Directors may from time to time declare, and the
Company may pay, dividends on its outstanding shares in the manner and on the
terms and conditions provided by law and its Articles of Incorporation.
9.0 SEAL
----
9.1 The Board of Directors may adopt a corporate seal, which shall be
circular in form and shall have inscribed on it the name of the Company, the
year incorporated, the state of incorporation and the words "corporate seal".
The seal shall be stamped or affixed to documents as may be prescribed by law or
by the Board of Directors.
10.0 CONFLICT OF INTEREST
--------------------
10.1 No contract or other transaction between the Company and one or
more of its directors or officers, or between the Company and any other
corporation, firm, association or entity in which one or more of its directors
or officers are directors or officers or are financially interested, shall be
either void or voidable because of the relationship or interest or because the
director or directors are present at the meeting of the Board of Directors or a
committee of directors which authorizes, approves or ratifies a contract or
transaction or because the votes of common or interest directors are counted for
that purpose, if:
(a) The fact of the relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient
for the purpose without counting the votes or consents of the
interested directors or officers and is so noted in the minutes; or
(b) The fact of the relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve or
ratify a contract or transaction by vote or written consent; or
(c) The fact of the relationship or interest is not disclosed or known
to the director or officer at the time the transaction is brought
before the Board of Directors of the corporation for action; or
(d) The contract or transaction is fair and reasonable to the Company.
11.0 NOTICE AND CONSENT
------------------
11.1 Waiver of Notice. Whenever any notice is required to be given to
----------------
any shareholder or director of the Company under the provisions of these Bylaws,
the Articles of Incorporation, or by law, a waiver in writing, signed in
original, facsimile or counterpart by the person or persons entitled to notice,
whether before or after the time stated in the notice, shall be deemed
equivalent to the giving of a notice. Any shareholder or director may waive
notice of any meeting by a notice signed by him or his duly authorized attorney,
either before or after the meeting. Attendance of a shareholder or director of
the Company at a meeting shall constitute waiver of notice of a meeting except
where a shareholder or director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or adjourned.
11.2 Consent to Action. Any action which may be taken at a meeting of
-----------------
the shareholders, may be taken without a meeting if a consent in writing setting
forth the action so taken is signed in original, facsimile or counterpart by
<PAGE>
Page F-24
shareholders holding at least a majority of the voting power. Any action which
may be taken at a meeting of the Board of Directors may be taken without a
meeting if written consent is signed by all members of the Board of Directors
entitled to vote on the action. The consent shall have the same force and
effect as a unanimous vote of the shareholders or directors. Notice
requirements of these Bylaws which apply to meetings of shareholders and
directors are deemed waived by all directors and shareholders if a Consent to
Action is signed in lieu of holding an actual meeting.
12.0 RESTRICTIONS ON TRANSFER
------------------------
12.1 Transfer of Shares. No securities of this Company or certificates
------------------
representing the securities shall be transferred in violation of any law or of
any restriction on transfer set forth in the Articles of Incorporation or
amendments to the Articles, or the Bylaws; or contained in any buy/sell
agreements, right of first refusal, or other agreement restricting a transfer
which has been executed by the Company, or filed with the Secretary of the
Company and signed by the parties to the agreement. The Company shall not be
bound by any restrictions not so filed and noted.
12.2 Restrictive Legend. The Company and any party to any agreement
------------------
shall have the right to have a restrictive legend imprinted upon any of the
certificates and any certificates issued in replacement or exchange or with
respect to them.
13.0 AMENDMENTS
----------
13.1 The power to alter, amend or repeal the Articles of Incorporation
is vested exclusively in the shareholders and must be approved by a majority
vote of all classes of shareholders having the right to vote.
13.2 The power to alter, amend or repeal the Bylaws of the Company is vested
in the directors or shareholders and must be approved by a majority vote of the
Board of Directors or shareholders at any regular or special meeting of the
Board of Directors or shareholders.
14.0 INDEMNIFICATION AND LIABILITY
-----------------------------
14.1 The Company shall indemnify officers and directors to the fullest
extent possible under the Nevada law.
14.2 Neither the Company, its directors nor its officers will be in any
way liable to the shareholders where legal counsel has been relied on in a
matter.
14.3 A director or officer of the Corporation shall have no
personal liability to the Corporation or its shareholders for damages or breach
of fiduciary duty as a director or officer, except for damages resulting from:
(a) Acts or omissions which involve intentional misconduct, fraud,
or a knowing violation of law; or
(b) The payment of dividends in violation of the provision of
section 78.300 of the Nevada Revised Statutes, as it may be amended
from time to time, or any successor statute.
<PAGE>
Page F-25
CERTIFICATION AS TO THE BYLAWS
BY THE SECRETARY OF THE COMPANY
I, the undersigned, being the Secretary of the Company do hereby certify
the foregoing to be the Bylaws of the Company.
/s/ Norm Friend , Secretary
- ----------------
<PAGE>
Page F-26
Exhibit 5.1
[OGDEN MURPHY WALLACE LETTERHEAD]
,2000
- --------- ---------------------
Indexonly Technologies Inc.
3823 Henning Drive, Suite 217
Burnaby, British Columbia, V5C 6P3, Canada
RE: REGISTRATION STATEMENT ON FORM SB-2
Gentlemen:
We have examined the Registration Statement on Form SB-2 filed by you with
the Securities and Exchange Commission on , 2000 (the
----------- ---------
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of shares of your Common Stock, $0.001 par
value (the "Shares"). As your special US counsel in connection with this
transaction, we have examined the proceedings taken and are familiar with the
proceedings proposed to be taken by you in connection with the issuance and sale
of the Shares pursuant to the plan of distribution set forth in the Registration
Statement.
It is our opinion that, when issued and sold in the manner described in the
Registration Statement, the Shares will be legally and validly issued,
fully-paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement and any amendments thereto.
Very truly yours,
OGDEN MURPHY WALLACE, P.L.L.C.
/s/ Ogden Murphy Wallace, P.L.L.C.
--------------------------------
<PAGE>
Page F-27
Exhibit 10.1
Exhibit 10.1
STOCK ACQUISITION AGREEMENT
DATED: August 31, 1999
AMONG: CLASSIC GOLF CORPORATION ("CSGC")
a Nevada corporation
AND: INDEXONLY TECHNOLOGIES, INC. ("IOTI")
a Nevada corporation
AND: Dion Cillars Em-Power Industries
Allstair Donaldson Cliff Sweeney
Hermes Trading Zen Management
Eros Trading Ltd Weymss Ltd
Sandford Capital Limited Michael Connel
Norm Friend Clarence Joy
Freddy Fuller GKS Corp
Ocean Caf International Neville Abreo
Corporate Finance Group Rene Plander
Ron Sutch Andrew Hammond
Wayne Hammond Cindy McWilliams
Sharon Muche James Hume
Cynthia Goranson Capital Square Holdings
Garth Olson Ken Parlee
Tom Tanton Bonnie Hume
Mike Makara Peter Gil
Songbail Li Peter Ribeiro
B.W. Van Lieshout Todd Hiebert
Murray Warner Gerald Hiebert
Ian Patton ("IOTI Shareholders")
(all collectively referred to as "the Parties")
1.0 RECITALS
--------
1.1 IOTI is engaged in the business of developing a smart search engine
for Internet application. The business operations of IOTI have been carried on
as distinct businesses under the name of IndexOnly.Com and/or Indexonly
Technologies, Inc. IOTI Shareholders are the owners, of record and beneficially,
of all the issued and outstanding capital stock and ownership interests of IOTI.
<PAGE>
Page F-28
1.2 Subject only to the limitations and exclusions contained in this
Stock Acquisition Agreement ("Agreement") and on the terms and conditions set
forth below, IOTI and the IOTI Shareholders desires to sell and CSGC desires to
purchase substantially all of the Shares of IOTI (the "IOTI Shares") for the
Purchase Price.
1.3 This Agreement contemplates a transaction in which on the Closing
Date the IOTI Shares shall be sold, assigned, transferred, and conveyed to CSGC,
and become the Shares of CSGC.
NOW THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements contained in this
Agreement, and intending to be legally bound, the Parties agree as follows:
2.0 DEFINITIONS
-----------
2.1 "AGREEMENT" means this Stock Acquisition Agreement and all of its
attached exhibits and schedules; "hereof," "hereto," and "hereunder" and similar
expressions mean and refer to this Agreement and not to any particular Section
or paragraph; "Section," "paragraph" or "clause" means and refers to the
specified article, section, paragraph or clause of this Agreement.
2.2 "ACQUIRED ASSETS" means all right title and interest of IOTI in and to
(i) the Specified Assets, consisting of the Intellectual Property and other
assets specified in SCHEDULE 2.2.1, and (ii) the properties, assets and rights
of every nature, kind and description, tangible and intangible (including
goodwill), whether real, personal or mixed, whether accrued, contingent or
otherwise and whether now existing or hereinafter acquired primarily relating to
or used or held for use in connection with the Business of IOTI as may exist on
the Closing Date, including without limitation all those items in the following
categories:
(a) all machinery, equipment, furniture, furnishings, automobiles, trucks,
vehicles, tools, dies, molds, parts and similar property;
(b) all inventories of raw materials, work in progress, finished products,
goods, spare parts, replacement and component parts, and office and other
supplies (collectively, the "Inventories"), including Inventories held at
any location controlled by IOTI and Inventories previously purchased and
in transit to any Seller at IOTI's location;
(c) all rights in and to products sold or leased (including, but not limited
to, products hereafter returned or repossessed and unpaid IOTI rights of
rescission, replevin, reclamation and rights to stoppage in transit);
(d) all rights (including but not limited to any and all Intellectual
Property rights) in and to the products sold or leased and in and to any
products or other Intellectual Property rights under research or
development prior to or on the Closing Date;
(e) all of the rights of IOTI under all contracts, arrangements, licenses,
leases and other agreements, including, without limitation, any right to
receive payment for products sold or services rendered, and to receive
goods and services, pursuant to these agreements and to assert claims and
take other rightful actions in respect of breaches, defaults and other
violations of these contracts, arrangements, licenses, leases and other
arrangements;
<PAGE>
Page F-29
(f) all credits, prepaid expenses, deferred charges, advance payments,
security deposits and prepaid items;
(g) all notes and accounts receivable held by IOTI and all notes, bonds and
other evidences of indebtedness of and rights to receive payments from any
Person held by IOTI;
(h) all Intellectual Property and all rights thereunder or in respect
thereof primarily relating to or used or held for use in connection with
the Business, including but not limited to, rights to sue for and remedies
against past, present and future infringements, and rights of priority and
protection of interests therein under the laws of any jurisdiction
worldwide and all tangible embodiments (together with all Intellectual
Property rights included in the Specified Assets);
(i) all books, records, manuals and other materials (in any form or medium),
including, without limitation, all records and materials maintained at the
offices of IOTI, advertising matter, catalogues, price lists,
correspondence, mailing lists, lists of customers, distribution lists,
photographs, production data, sales and promotional materials and records,
purchasing materials and records, personnel records, quality control
records and procedures, blueprints, research and development files,
records, data books, Intellectual Property disclosures, media materials
and plates, accounting records, sales order files and litigation files;
(j) to the extent their transfer is permitted by law, all Governmental
Approvals, including all applications therefor;
(k) all rights to causes of action, lawsuits, judgments, claims and demands
of any nature available to or being pursued by IOTI with respect to the
Business or the ownership, use, function or value of any Acquired Asset,
whether arising by way of counterclaim or otherwise; and
(l) all guarantees, warranties, indemnities and similar rights in favor of
IOTI with respect to any Acquired Asset;
(m) the corporate charter, qualifications to conduct business as a corporation
or business entity, arrangements with registered agents relating to these
qualifications, taxpayer and other identification numbers, seals, minute
books, stock transfer books, blank stock certificates, and other documents
relating to the organization, maintenance and existence of IOTI as a
business entity.
2.3 "ASSUMED LIABILITIES" means any and all liabilities, obligations and
commitments relating exclusively to the Business or the Acquired Assets:
(a) specified in SCHEDULE 2.3 ("Assumed Liability Schedule")
(b) that are incurred after the date of the Assumed Liability Schedule in
the ordinary course of business consistent with prior practice and in
accordance with the terms of this Agreement, and that are not,
individually or in the aggregate, material to the Business
<PAGE>
Page F-30
(c) arising out of the agreements, contracts and commitments set forth on
the SCHEDULE 5.7, but not including any obligation or liability for any
breach thereof occurring prior to the Closing Date
(d) liabilities in respect of Transferred Employees to the extent
specifically assumed by CSGC pursuant to Section 8.2(e)
2.4 "BEST OF IOTI'S KNOWLEDGE" shall mean the knowledge of the Shareholders
and/or members and officers of IOTI, after reasonable inquiry;
2.5 "BUSINESS" means the business presently and heretofore carried on by
IOTI at any location, worldwide, whether duly acquired by IOTI or intended to be
acquired, relating generally to IOTI's business plan, to be acquired by CSGC
pursuant to this Agreement, consisting of the Shares, the Assets, and the
Assumed Liabilities.
2.6 "CSGC" has the meaning set forth in the preface above.
2.7 "CLOSING" means the completion of the sale and purchase of the IOTI
Shares by the transfer and delivery of documents of title and the payment of the
purchase price as contemplated in this Agreement;
2.8 "CLOSING DATE" means the 31st of August, 1999, or such other date as the
Parties may agree as to the date upon which the Closing shall take place;
2.9 "CLOSING TIME" means 1:00 o'clock Pacific Daylight Time in the afternoon
on the Closing Date or such other time on the Closing Date as the Parties may
agree as to the time on the Closing Date upon which the Closing shall take
place;
2.10 "CONFIDENTIAL INFORMATION" means any information exchanged by the
parties, including but not limited to trade secrets, know-how, formulas,
processes, data, network configuration and rights-of-way, drawings, proprietary
information, customer lists, prices, and any non-public information which
concerns the business and operations of a party to this Agreement, and shall
also include any information exchanged pursuant to this Agreement. Confidential
Information, when disclosed in written, machine-readable, or other tangible form
by one party to the other party, may be clearly marked as "Confidential" or as
otherwise specified as confidential by the policies of the Parties. Information
which is of an apparent confidential nature, either in writing or orally, shall
be treated as Confidential Information.
2.11 "GAAP" means United States generally accepted accounting principles,
consistently applied as in effect from time to time.
2.12 "INTELLECTUAL PROPERTY" means any and all United States and foreign:
(a) patents (including design, utility and software patents) and patent
applications (including patent disclosures awaiting filing, reissues, divisions,
continuations and extensions), patent disclosures awaiting filing determination,
inventions and improvements thereto; (b) trademarks, service marks, trade names,
trade dress, logos, Internet domain names, business and product names (but
excluding the name PQR), slogans, registrations and applications for
registration; (c) copyrights (including software) and registrations thereof; (d)
inventions, processes, designs, formulae, trade secrets, know-how, confidential
and technical information, manufacturing, engineering and technical drawings,
<PAGE>
Page F-31
product specifications and confidential business information; (e) intellectual
property rights similar to any of the foregoing; (f) copies and tangible
embodiments thereof (in whatever form or medium, including electronic media) and
(g) all computer software (including data and related documentation).
2.13 "IOTI" has the meaning set forth in the preface above.
2.14 "IOTI ENTITY" refers to Indexonly Technologies, Inc., a Nevada
corporation and its wholly owned subsidiary Indexonly Canada Inc.
2.15 "IOTI SHARES" refers to all of the shares of IOTI, in all classes,
outstanding at the Closing Date.
2.16 "LIENS" means any mortgage, pledge, hypothecation, right of others,
claim, security interest, encumbrance, lease, sublease, license, occupancy
agreement, adverse claim or interest, easement, covenant, encroachment, burden,
title defect, title retention agreement, voting trust agreement, interest,
equity, option, lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever, including but not limited to those which
may arise under any contracts.
2.17 "ORGANIZATIONAL DOCUMENTS" refers to the (a) articles of incorporation
and bylaws of a corporation; (b) the certificate of formation or articles of
organization and the operating agreement of a limited liability company; (c) any
charter or similar document adopted or filed by the corporation or limited
liability company prepared in connection with the creation, formation or
organization of a corporation entity.
2.18 "PERSON" means any natural person, corporation, firm, partnership,
association, company, trust, business trust, government, governmental agency or
any other entity.
2.19 "CSGC SHARES" means nineteen million (20,150,000) common shares in the
capital stock of CSGC to be issued to the IOTI Shareholders in full payment and
satisfaction of the Purchase Price. The distribution of the CSGC Shares shall
be pursuant to the distribution set forth on Schedule 2.19.1.
2.20 "PURCHASE PRICE" shall have the meaning set forth in Section 4.4 below.
2.21 "SEC" means the United States Securities and Exchange Commission.
2.22 "SECURITIES ACT" means collectively the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
2.23 "SHAREHOLDERS" has the meaning set forth in the preface above.
2.24 "SPECIFIED ASSETS" is defined in Section 2.2 above.
2.25 "TAX" means any tax levied by federal, state, local or foreign
governments on income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, sales, use,
<PAGE>
Page F-32
transfer, registration, value added, alternative or add-on minimum, estimated or
other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not.
2.26 "TRANSFERRED EMPLOYEES" has the meaning set forth in Section 8.2(e)
below.
3.0 SCHEDULES AND EXHIBITS
----------------------
3.1 The following are the Schedules and Exhibits annexed hereto and
incorporated by reference and deemed to be part of this Agreement:
Schedule 2.2.1 - Intellectual Property and other Specified Assets
Schedule 2.3 - Assumed Liabilities
Schedule 2.19.1 - CSGC Share Distribution
Schedule 4.1 - Liens on Acquired Assets; Conflicts and
Consents
Schedule 6.7 - Contracts, Leases, Rental Agreements
Schedule 6.8 - Undisclosed Liabilities
Schedule 6.12 - Receivables
Schedule 6.17 - Employees
Schedule 6.20 - Bank Accounts
Schedule 6.21 - Insurance
Schedule 7.7 - Contracts, Leases, Rental Agreements
Schedule 7.8 - Undisclosed Liabilities
Schedule 7.12 - Receivables
Schedule 7.17 - Employees
Schedule 7.20 - Bank Accounts
Schedule 7.21 - Insurance
Exhibit A - Forms of Shareholder Assignment
4.0 BASIC TRANSACTION
-----------------
4.1 Share Acquisition. Subject to and upon the terms and conditions
-----------------
set forth in this Agreement, on the Closing Date, the IOTI Shareholders will
sell, transfer, convey, assign and deliver to CSGC, and CSGC will purchase or
acquire from the same, all right, title and interest of all classes of shares of
IOTI (the "IOTI Shares") then outstanding. At that time, IOTI shall have full
right and title to the Acquired Assets as defined herein, which shall include,
but not be limited to, the Specified Assets consisting of the Intellectual
Property, all of the shares of Indexonly Canada Inc. and the other assets listed
on SCHEDULE 2.2.1.
4.2 Closing. The Closing shall take place at on or before the close of
-------
business ("Closing Time") on the 31st of August, 1999 ("Closing Date"), at such
time and place as the Parties may agree.
4.3 Purchase Price. On the terms and subject to the conditions set
--------------
forth in this Agreement, CSGC agrees to purchase from the IOTI Shareholders the
IOTI Shares for an aggregate Purchase Price of twenty million one hundred fifty
thousand shares (20,150,000) of CSGC common voting stock. On Closing, the IOTI
Shares shall be sold, assigned, transferred and conveyed to CSGC.
4.3.1 IOTI and Shareholders acknowledge and agree that, except for
those shares duly registered with the Securities Exchange
<PAGE>
Page F-33
Commission and applicable state authorities, none of the CSGC
Shares, nor any portion thereof, may be sold, conveyed,
transferred, traded or disposed of on or before twelve (12)
months after Closing.
4.4 Further Assurances. Each of the Parties will cooperate with the
------------------
other and execute and deliver to the other parties such other instruments and
documents and take such other actions as may be reasonably requested from time
to time by any other party to this Agreement as necessary to carry out, evidence
and confirm the intended purposes of this Agreement.
5.0 REPRESENTATIONS OF EACH SHAREHOLDER
----------------------------------
5.1 Right to Sell. The IOTI Shares constitute in the aggregate all of
-------------
the issued and outstanding shares in the capital stock of IOTI, and the IOTI
Shareholders are the sole registered and beneficial owners of the IOTI Shares,
free and clear of all liens, charges, pledges, security interests, demands,
adverse claims, rights, or other encumbrances whatsoever, and no person, firm or
corporation other than CSGC now or at Closing will have any right, option,
agreement or arrangement capable of becoming an agreement for the acquisition of
any of the IOTI Shares or any interest therein from the IOTI Shareholders.
5.2 Due Authorization. Each IOTI Shareholder represents and states
-----------------
that such Shareholder is legally competent to enter into this agreement, that
each such Shareholder has all necessary power, authority and capacity to enter
into this Agreement and to perform the obligations hereunder, that each such
Shareholder is entering into this Agreement free of duress or other
non-disclosed inducement. Each IOTI Shareholder represents that they have
either sought legal counsel for purposes of review and advice concerning this
Agreement or have intentionally waived such legal counsel.
5.3 Valid and Binding Obligation. This Agreement when executed will
----------------------------
constitute the legal, valid, and binding obligation of each Shareholder
hereunder, enforceable against each Shareholder in accordance with its terms,
and therefore subject to limitation with respect to enforcement imposed in
connection with laws affecting the rights of creditors generally including,
without limitation, applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws and to the extent that equitable remedies such as
specific performance and injunction are in the discretion of the court from
which they are sought.
5.4 No Violation. Each IOTI Shareholder is not a party to, bound by or
------------
subject to any indenture, mortgage, lease, agreement, instrument, charter or
by-law provision, statute, regulation, order, judgment, decree or law which
would be violated, contravened or breached by, or under which any default would
occur as a result of the execution and delivery by each such Shareholder of this
Agreement or the performance by each such Shareholder of any of the terms
hereof.
5.5 Reliance. Each Shareholder hereby expressly acknowledges that CSGC
--------
is relying upon the covenants, representations and warranties of each
Shareholder contained in this Agreement or in any agreement, certificate or
other document delivered pursuant to this Agreement in connection with the sale
of the Shares.
5.6 Brokers or Finders. Each Shareholder has incurred no contingent
------------------
obligation or liability, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold CSGC harmless from any such payment alleged to be due by or through
each such Shareholder as a result of the action of the Shareholder.
<PAGE>
Page F-34
5.7 Litigation and Claims. There is no suit, action, litigation,
---------------------
investigation, or administrative, governmental, arbitration or other proceeding,
including without limitation appeals and applications for review, in progress,
or to the best knowledge and belief of each Shareholder, pending or threatened
against or relating to Shareholder, or affecting its respective properties or
business, or affecting the right of Shareholder to enter into this Agreement or
perform Shareholder's obligations hereunder.
6.0 REPRESENTATIONS AND WARRANTIES OF IOTI
-------------------------------------
6.1 Due Authorization. IOTI has all necessary corporate power,
-----------------
authority and capacity to enter into this Agreement and the agreements and other
instruments contemplated herein and to perform its respective obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereunder have been, and on the Closing Date will
have been, duly authorized by all necessary company action on the part of IOTI.
IOTI has all necessary power, authority and capacity to enter into this
Agreement and the agreements and other instruments contemplated herein and the
consummation of the transactions contemplated hereunder. This Agreement when
executed constitutes, and on the Closing Date will constitute legal, valid and
binding obligations of IOTI, enforceable against IOTI in accordance with its
terms.
6.2 Organization and Good Standing. IOTI is a corporation, duly
------------------------------
incorporated, duly organized, validly existing, and in good standing under the
laws of Nevada, and has all necessary power, authority and capacity to own or
lease its property and assets (including, without limitation, the Specified
Assets) and to carry on the Business as presently conducted by it. Neither the
nature of the Business nor the location or character of the property owned or
leased by IOTI requires IOTI to be registered, recorded, licensed or otherwise
qualified as a foreign corporation or to be in good standing in any jurisdiction
other than in Nevada. IOTI will deliver to CSGC, prior to Closing, copies of its
Organizational Documents including a Certificate of Good Standing, as currently
in effect.
6.3 Conflicts. Except as set forth in SCHEDULE 4.1, the disposition of
---------
the Acquired Assets and the entering into and performance of this Agreement and
the agreements and other instruments contemplated herein will not (with or
without the giving of notice or the lapse of time or both):
(a) contravene, conflict with, or result in a violation of (i) any provision
of the Organizational Documents of IOTI, or (ii) any resolution adopted by
the directors, manager(s) or the Shareholders of IOTI;
(b) contravene, conflict with, or result in a violation of any legal
requirement, applicable law or any order to which IOTI, or any of the
Acquired Assets owned or used by IOTI, may be subject;
(c) contravene, conflict with, or result in a violation of any of the terms
or requirements of any governmental authorization that is held by IOTI or
that otherwise relates to the business of, or any of the assets owned or
used by IOTI;
(d) contravene, conflict with, or result in a violation or breach of any
provision of any contract, instrument or third party agreement to which
IOTI or its Shareholders may be a party, or by which any of their assets
may be subject, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any applicable contract; or result
<PAGE>
Page F-35
in the imposition or creation of any encumbrance upon or with respect to
any of the assets owned or used by IOTI.
6.4 Financial Statements. IOTI represents and warrants to CSGC that
--------------------
the following financial statements have been or will be delivered to CSGC prior
to Closing, and that each document is or will be, to the Best of IOTI's
Knowledge, true, correct, and complete:
6.4.1 Unaudited balance sheets of IOTI as of June 30, 1999 ("Balance
Sheets"), and the related unaudited consolidated statements of
income, changes in equity, and cash flow for the fiscal year or
interim period then ended. The financial statements referred to
in this Section have been prepared in accordance with IOTI's
internal accounting practices and have not been prepared
in accordance with GAAP, but present fairly the financial
condition and the results of opera-tions, changes in equity, and
cash flow of IOTI as at the respective dates of and for the
periods referred to in such financial statements, subject to
adjustments that to the Best of IOTI's Knowledge are not
material.
6.5 Books and Records. The books of account, minute books,
-----------------
capitalization record books, and other records of IOTI, all of which will be
made available to CSGC prior to Closing, are, to the Best of IOTI's Knowledge,
complete and correct and have been main-tained in accordance with sound business
practices, are not false, misleading, or fail to state a material facts nor are
they based on any misrepresentations of any officers or directors of IOTI. The
minute books of IOTI contain accurate and complete records of all meetings held
of, and corporate action taken by, the members, the manager(s), and committees
of IOTI, and no meeting of any such members, manager(s), or committees has been
held for which minutes have not been prepared and are not contained in such
minute books.
6.6 Assets. Except as set forth in SCHEDULE 4.1, IOTI has good title
------
to all Acquired Assets free and clear of all Liens, except liens for current
taxes not yet due. Prior to Closing, IOTI will provide any and all true and
correct copies of instruments by which IOTI holds property and inter-ests, all
contracts, all insurance policies, opinions, abstracts, and surveys in the
possession of IOTI and relating to such the ownership or contractual rights to
the Acquired Assets. The Acquired Assets, together with the services of the
Transferred Employees, comprise all assets and services required for the
continued conduct of the Business by CSGC as now being conducted. Except for
Excluded Assets, there are no assets or properties used in the operation of the
Business and owned by any Person other than IOTI that will not be leased or
licensed to CSGC under valid, current leases or license arrangements. The
Acquired Assets are structurally sound, are in good operating condition and
repair, and are adequate for the uses to which they are currently used or are
held for use, and none of the Acquired Assets or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost.
6.7 Contracts. SCHEDULE 6.7 contains a complete and correct list of
---------
all agreements, contracts, commitments, leases, instruments, arrangements and
other documents which have been made available for review by IOTI, together with
all amendments thereto, and accurate descriptions of all oral contracts. There
are no other agreements, contracts, commitments, leases, arrangements and other
documents by which any of the Acquired Assets are bound or affected or to which
IOTI or Shareholders are a party or bound in connection with the Business or its
Assets. Except as set forth in SCHEDULE 4.1, to the Best of IOTI's Knowledge
there does not exist under any contract any event of default or event or
condition that, after notice or lapse of time or both, would constitute a
violation, breach or default on the part of IOTI. Neither IOTI nor any
Shareholder has outstanding any power of attorney relating to the Business.
<PAGE>
Page F-36
6.8 No Undisclosed Liabilities. Except to the extent reflected or
--------------------------
reserved against in the Balance Sheets (including the notes thereto), or
incurred subsequent to the date thereof and disclosed in SCHEDULE 6.8 or
elsewhere in this Agreement (including the Schedules hereto) and except for
unsecured current obligations and liabilities incurred in the ordinary and usual
course of the Business and which are not materially adverse to the nature and
manner of conducting the Business, or the operations, assets, properties, future
prospects or financial condition of IOTI, IOTI does not have any material
outstanding indebtedness or any material liabilities or obligations (whether
accrued, determinable, absolute, contingent or otherwise) in respect of which
IOTI or CSGC may be liable on or after the completion of the transactions
contemplated by this Agreement. None of the IOTI employees are now or will by
the passage of time become entitled to receive any vacation time, vacation pay
or severance pay attributable to services rendered prior to the Closing Date
except as disclosed on the Balance Sheets or in SCHEDULE 6.8.
6.9 Taxes.
-----
6.9.1 IOTI has filed or caused to be filed, on a timely basis since
inception, all federal, state, municipal or local tax returns
that are or were required to be filed by or with respect to any
of them, either separately or as a member of a group, pursuant to
applicable legal requirements. IOTI has delivered or made
available to CSGC copies of, and SCHEDULE 6.9 contains a complete
and accurate list of, all such tax returns relating to income or
franchise taxes filed from the date of formation through March
31, 1999 and a complete list of audits of all tax returns. Except
as set forth in SCHEDULE 2.3, IOTI has paid, or made provision
for the payment of, all taxes that have or may have become due
pursuant to those tax returns or otherwise, or pursuant to any
assessment received by IOTI, except such taxes, if any, as are
listed in SCHEDULE 6.9 and are being contested in good faith and
as to which adequate reserves have been provided in the Balance
Sheets.
6.9.2 Except as described in SCHEDULE 6.9, IOTI has not been given nor
has IOTI requested waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of
any statute of limitations relating to the payment of taxes for
which IOTI may be liable.
6.9.3 All tax returns filed by (including any on a consolidated basis)
IOTI are true, correct, and complete.
6.10 Business Carried On in Ordinary Course. The Business has been
--------------------------------------
carried on in the ordinary and usual course since the date of the Balance Sheet
and to the Best of IOTI's Knowledge there has been no change in the affairs,
business, prospects, operations or condition of the Business, financial or
otherwise, or arising as a result of any legislative or regulatory change,
revocation of any license or right to do business, fire, explosion, accident,
casualty, labor problem, flood, drought, riot, storm, act of God or otherwise,
except changes occurring in the ordinary and usual course of the Business and
which, in the aggregate, have not materially adversely affected and will not
materially adversely affect the nature and manner of conducting the Business, or
the operations, assets, properties, future prospects or financial condition of
the Corporation.
6.11 Litigation and Claims. There is no suit, action, litigation,
---------------------
labor grievance or complaint, investigation, (including, without limitation,
investigations under human rights or health and safety legislation) or
administrative, governmental, arbitration or other proceeding (whether or not
purportedly on behalf of IOTI), including without limitation appeals and
applications for review, in progress, or to the best knowledge and belief of
IOTI (after due inquiry from the Shareholders), pending or threatened against or
<PAGE>
Page F-37
relating to IOTI, or affecting its respective properties or the Business, or
affecting the Acquired Assets, or affecting the right of CSGC to enter into this
Agreement or perform CSGC's obligations hereunder.
6.12 Accounts Receivable. All accounts receivable of IOTI that are
-------------------
reflected on SCHEDULE 6.12 or on the Balance Sheets or account-ing records of
IOTI, (collec-tively, the "Accounts Receivable") represent valid obligations
arising from sales actually made or services actually per-formed in the ordinary
course of business, as of the date of execution of this Agreement. Except as
reflected on SCHEDULE 6.12, to the Best of IOTI's Knowledge, each of the
Accounts Receivable either has been or should be collected in full, within
ninety days after the day on which it first becomes due and payable. There is
no contest, claim, or right of set-off, other than arising in the ordinary
course of business, under any contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
6.13 Compliance with Law. To the Best of IOTI's Knowledge, except as
-------------------
otherwise set forth in SCHEDULE 4.1, IOTI is, as of the date of execution of
this Agreement, and will be as of the Closing Date, in full compliance with any
applicable law, ordinance, or regulation that is or was applicable to IOTI or to
the conduct or operation of their business or the ownership or use of any of
their assets. IOTI have not received any notice or other communications whether
oral or written from any governmental body or any other person regarding (a) any
actual, alleged, possible, or potential violation of, or failure to comply with,
any applicable law, or (b) any actual, alleged, possible, or potential
obligation on the part of any IOTI Entity to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
6.14 Intellectual Property.
----------------------
6.14.1 SCHEDULE 2.2.1 contains a complete and accurate list and summary
description (including, where applicable, applications for
registration and registration particulars), of all Intellectual
Property and documents and agreements relating to the
Intellectual Property (as defined in Section 2.13 above) which
is owned or used by IOTI and IOTI has the sole and exclusive
right to use the same. Except as listed in SCHEDULE 2.2.1, there
are neither any royalty payments or license fees payable to IOTI
or by IOTI, or other agreements to which IOTI is a party or by
which IOTI is bound, except for any license implied by the sale
of a product and perpetual, paid-up licenses for commonly
available software programs with a value of less than $1,000
under which IOTI is the licensee. There are no outstanding and,
to the Best of IOTI's Knowledge, no threatened disputes or
disagreements with respect to any such agreement. IOTI has not
received notice that, and to the Best of IOTI's Knowledge, the
conduct of the Business is not infringing any patent, trade
mark, trade name, copyright, proprietary or similar right,
domestic or foreign, of any other person, firm or corporation.
6.14.2 To the Best of IOTI's Knowledge, the intellectual property
assets are all those necessary for the operation of IOTI's
businesses as they are currently conducted in the business plan
disclosed to CSGC. IOTI is the owners of all right, title, and
interest in and to each of the intellectual property assets,
free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims, and has the
right to use without payment to a third party of the
intellectual property assets.
6.15 Leases. IOTI is not a party to or bound by any leases or licenses
------
of real property or agreements in the nature of leases or licenses of real
property, either as lessor or lessee, or agreements to enter into such leases or
licenses, other than those referred to in SCHEDULE 6.7 (in which is specified
the parties, their dates of execution and expiry dates, any options to renew,
the location of any leased or licensed lands or premises and the rental payments
<PAGE>
Page F-38
thereunder) and except as set forth in the agreements or under Nevada law all
interests held by IOTI as lessor, lessee, licensor or licensee under such
leases, licenses or agreements and to the knowledge and belief of IOTI, are free
and clear of any and all mortgages, security interest, charges, adverse claims,
rights, pledges, demands, liens, title retention agreements and other
encumbrances of any nature or kind whatsoever. All rental and other payments
required to be paid by IOTI pursuant to such leases, licenses or agreements have
been duly paid and IOTI is not otherwise in default in meeting their obligations
under any such leases, licenses or agreements. To the Best of IOTI's Knowledge,
there are no events or circumstances which could give rise to such parties
claiming default by IOTI under such leases, licenses or agreements. No consent
of any parties to such leases, licenses or agreements (other than IOTI) is
required by reason of the transactions contemplated hereby except as specified
in SCHEDULE 4.1 nor will such transactions impose any more onerous obligations
on IOTI under such leases, licenses or agreements.
6.16 Full Disclosure. To the Best of IOTI's Knowledge, no
--------------
representation or warranty of IOTI in this Agreement contains any untrue
statement or omits to state a material fact. To the Best of IOTI's Knowledge,
IOTI has disclosed and made available to CSGC all information relating to or
otherwise in connection with the use and operation of the properties or assets
used in or held for use in connection with the Business.
6.17 Employees and Employment Contracts. There are set forth in
----------------------------------
SCHEDULE 6.17 the names and titles of all the directors and officers of IOTI,
and of all personnel employed or engaged in the Business, together with
particulars of the material terms and conditions of employment or engagement of
such persons, including rates of remuneration, benefits and positions held.
Except as disclosed on SCHEDULE 6.17, IOTI does not have any written contracts
of employment entered into with any employees employed by IOTI, any oral
contracts of employment which are not terminable on the giving of reasonable
notice in accordance with applicable law, any management, any employee benefit,
bonus, deferred compensation, profit sharing, severance, termination, change of
control, stock option, stock appreciation, stock purchase or other similar
agreement, plan or arrangement, whether written or unwritten that provides or
may provide benefits or compensation in respect of any employee or former
employee employed or formerly employed in the Business. All vacation pay,
bonuses, commissions and other forms of compensation for employees of IOTI have
been disclosed on SCHEDULE 6.17.
6.18 No Guarantees. IOTI has not given or agreed to give, or are a
-------------
party or bound by, any indemnity, or any guarantee of indebtedness or other
obligations of third parties or any other commitment by which IOTI or the
Business is or is contingently responsible for such indebtedness or other
obligations.
6.19 Brokers or Finders. IOTI have incurred no obligation or liability
------------------
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and the transactions
contemplated thereby.
6.20 Bank Accounts. There is set forth in SCHEDULE 6.20 the name of
-------------
each bank or other depository in which IOTI maintains any bank account, trust
account or safety deposit box and the names of all persons authorized to draw
thereon or who have access thereto.
6.21 Insurance. IOTI maintains such policies of insurance, issued by
---------
responsible insurers, as are appropriate to its Business, property and assets,
in such amounts and against such risks as are customarily carried and insured
against by owners of comparable businesses, properties and assets. SCHEDULE 6.21
lists all such policies together with worker's compensation coverages presently
maintained by IOTI together with a brief description of each such policy
including the types of policy, name of insurer, coverage limits, expiration
dates and annual premiums. All such policies of insurance are in full force and
effect and IOTI is not in default, whether as to the payment of premium or
otherwise, under the terms of any such policy and have not failed to give any
<PAGE>
Page F-39
notice or present any claim under any such insurance policy in due and timely
fashion. No notice of cancellation or non-renewal with respect to, nor
disallowance of any claim under or with respect to any such policy has been
received by IOTI. IOTI has no knowledge (after due enquiry from the
Shareholders) of any circumstances or occurrences which might form the basis of
a material increase in premiums.
6.22 Changes to Technology. As of the Closing Date, there are no new
---------------------
technological developments of which IOTI has any knowledge which might have an
adverse effect on the Business or its operations or which might require
substantial new capital investment by CSGC in the Business, provided that IOTI
make no representation or warranty with respect to disruptions to the Business
caused by what is commonly referred to as the "Y2K Problem."
7.0 REPRESENTATIONS OFCSGC
----------------------
7.1 Due Authorization. CSGC has all necessary corporate power,
-----------------
authority and capacity to enter into this Agreement and the agreements and other
instruments contemplated herein and to perform its respective obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereunder have been, and on the Closing Date will
have been, duly authorized by all necessary company action on the part of CSGC.
CSGC has all necessary power, authority and capacity to enter into this
Agreement and the agreements and other instruments contemplated herein and the
consummation of the transactions contemplated hereunder. This Agreement when
executed constitutes, and on the Closing Date will constitute legal, valid and
binding obligations of CSGC, enforceable against CSGC in accordance with its
terms.
7.2 Organization and Good Standing. CSGC is a corporation, duly
------------------------------
incorporated, duly organized, validly existing, and in good standing under the
laws of Nevada, and has all necessary power, authority and capacity to own or
lease its property and assets (including, without limitation, the Specified
Assets) and to carry on the Business as presently conducted by it. Neither the
nature of the Business nor the location or character of the property owned or
leased by CSGC requires CSGC to be registered, recorded, licensed or otherwise
qualified as a foreign corporation or to be in good standing in any jurisdiction
other than in Nevada. CSGC will deliver to IOTI, prior to Closing, copies of its
Organizational Documents including a Certificate of Good Standing, as currently
in effect.
7.3 Conflicts. The disposition of the Acquired Assets and the entering
---------
into and performance of this Agreement and the agreements and other instruments
contemplated herein will not (with or without the giving of notice or the lapse
of time or both):
(a) contravene, conflict with, or result in a violation of (i) any provision
of the Organizational Documents of CSGC, or (ii) any resolution adopted
by the directors, manager(s) or the Shareholders of IOTI;
(b) contravene, conflict with, or result in a violation of any legal
requirement, applicable law or any order to which CSGC, or any of the
Acquired Assets owned or used by CSGC, may be subject;
(c) contravene, conflict with, or result in a violation of any of the terms
or requirements of any governmental authorization that is held by CSGC
or that otherwise relates to the business of, or any of the assets owned
or used by CSGC;
(d) contravene, conflict with, or result in a violation or breach of any
provision of any contract, instrument or third party agreement to which
CSGC or its Shareholders may be a party, or by which any of their assets
<PAGE>
Page F-40
may be subject, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any applicable contract; or
result in the imposition or creation of any encumbrance upon or with
respect to any of the assets owned or used by CSGC.
7.4 Financial Statements. CSGC represents and warrants to IOTI that the
--------------------
following financial statements have been or will be delivered to IOTI prior to
Closing, and that each document is or will be, to the Best of CSGC's Knowledge,
true, correct, and complete:
7.4.1 Unaudited balance sheets of CSGC as of June 30, 1999 ("Balance
Sheets"), and the related unaudited consolidated statements of
income, changes in equity, and cash flow for the fiscal year or
interim period then ended. The financial statements referred to
in this Section have been prepared in accordance with CSGC's
internal accounting practices and have not been prepared in
accordance with GAAP, but present fairly the financial condition
and the results of operations, changes in equity, and cash flow
of CSGC as at the respective dates of and for the periods
referred to in such financial statements, subject to adjustments
that to the Best of CSGC's Knowledge are not material.
7.5 Books and Records. The books of account, minute books,
-----------------
capitalization record books, and other records of CSGC, all of which will be
made available to IOTI prior to Closing, are, to the Best of CSGC's Knowledge,
complete and correct and have been main-tained in accordance with sound business
practices, are not false, misleading, or fail to state a material facts nor are
they based on any misrepresentations of any officers or directors of CSGC. The
minute books of CSGC contain accurate and complete records of all meetings held
of, and corporate action taken by, the members, the manager(s), and committees
of CSGC, and no meeting of any such members, manager(s), or committees has been
held for which minutes have not been prepared and are not contained in such
minute books.
7.6 Assets. CSGC has good title to all Acquired Assets free and clear
------
of all Liens, except liens for current taxes not yet due. Prior to Closing,
CSGC will provide any and all true and correct copies of instruments by which
CSGC holds property and inter-ests, all contracts, all insurance policies,
opinions, abstracts, and surveys in the possession of CSGC and relating to such
the ownership or contractual rights to the Acquired Assets. The Acquired
Assets, together with the services of the Transferred Employees, comprise all
assets and services required for the continued conduct of the Business as now
being conducted. Except for Excluded Assets, there are no assets or properties
used in the operation of the Business and owned by any Person other than CSGC
that will not be leased or licensed to CSGC under valid, current leases or
license arrangements. The Acquired Assets are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
currently used or are held for use, and none of the Acquired Assets or equipment
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost.
7.7 Contracts. SCHEDULE 7.7 contains a complete and correct list of
---------
all agreements, contracts, commitments, leases, instruments, arrangements and
other documents which have been made available for review by IOTI, together with
all amendments thereto, and accurate descriptions of all oral contracts. There
are no other agreements, contracts, commitments, leases, arrangements and other
documents by which any of the Acquired Assets are bound or affected or to which
IOTI or Shareholders are a party or bound in connection with the Business or its
Assets. To the Best of CSGC's Knowledge there does not exist under any contract
any event of default or event or condition that, after notice or lapse of time
or both, would constitute a violation, breach or default on the part of CSGC.
Neither CSGC nor any Shareholder has outstanding any power of attorney relating
to the Business.
<PAGE>
Page F-41
7.8 No Undisclosed Liabilities. Except to the extent reflected or
--------------------------
reserved against in the Balance Sheets (including the notes thereto), or
incurred subsequent to the date thereof and disclosed in SCHEDULE 7.8 or
elsewhere in this Agreement (including the Schedules hereto) and except for
unsecured current obligations and liabilities incurred in the ordinary and usual
course of the Business and which are not materially adverse to the nature and
manner of conducting the Business, or the operations, assets, properties, future
prospects or financial condition of CSGC, CSGC does not have any material
outstanding indebtedness or any material liabilities or obligations (whether
accrued, determinable, absolute, contingent or otherwise) in respect of which
IOTI or CSGC may be liable on or after the completion of the transactions
contemplated by this Agreement. None of the CSGC employees are now or will by
the passage of time become entitled to receive any vacation time, vacation pay
or severance pay attributable to services rendered prior to the Closing Date
except as disclosed on the Balance Sheets or in SCHEDULE 7.8.
7.9 Taxes.
-----
7.9.1 CSGC has filed or caused to be filed, on a timely basis since
inception, all federal, state, municipal or local tax returns
that are or were required to be filed by or with respect to any
of them, either separately or as a member of a group, pursuant
to applicable legal requirements. CSGC has delivered or made
available to IOTI copies of, and SCHEDULE 7.9 contains a complete
and accurate list of, all such tax returns relating to income or
franchise taxes filed from the date of formation through March
31, 1999 and a complete list of audits of all tax returns. CSGC
has paid, or made provision for the payment of, all taxes that
have or may have become due pursuant to those tax returns or
otherwise, or pursuant to any assessment received by CSGC, except
such taxes, if any, as are listed in SCHEDULE 7.9 and are being
contested in good faith and as to which adequate reserves have
been provided in the Balance Sheets.
7.9.2 Except as described in SCHEDULE 7.9, CSGC has not been given nor
has CSGC requested waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of
any statute of limitations relating to the payment of taxes for
which CSGC may be liable.
7.9.3 All tax returns filed by (including any on a consolidated basis)
CSGC are true, correct, and complete.
7.10 Business Carried On in Ordinary Course. The Business has been
--------------------------------------
carried on in the ordinary and usual course since the date of the Balance Sheet
and to the Best of CSGC's Knowledge there has been no change in the affairs,
business, prospects, operations or condition of the Business, financial or
otherwise, or arising as a result of any legislative or regulatory change,
revocation of any license or right to do business, fire, explosion, accident,
casualty, labor problem, flood, drought, riot, storm, act of God or otherwise,
except changes occurring in the ordinary and usual course of the Business and
which, in the aggregate, have not materially adversely affected and will not
materially adversely affect the nature and manner of conducting the Business, or
the operations, assets, properties, future prospects or financial condition of
the Corporation.
7.11 Litigation and Claims. There is no suit, action, litigation,
---------------------
labor grievance or complaint, investigation, (including, without limitation,
investigations under human rights or health and safety legislation) or
administrative, governmental, arbitration or other proceeding (whether or not
purportedly on behalf of CSGC), including without limitation appeals and
applications for review, in progress, or to the best knowledge and belief of
CSGC (after due inquiry from the Shareholders), pending or threatened against or
<PAGE>
Page F-42
relating to CSGC, or affecting its respective properties or the Business, or
affecting the Acquired Assets, or affecting the right of CSGC to enter into this
Agreement or perform CSGC's obligations hereunder.
7.12 Accounts Receivable. All accounts receivable of CSGC that are
-------------------
reflected on SCHEDULE 7.12 or on the Balance Sheets or accounting records of
CSGC, (collectively, the "Accounts Receivable") represent valid obligations
arising from sales actually made or services actually per-formed in the ordinary
course of business, as of the date of execution of this Agreement. Except as
reflected on SCHEDULE 7.12, to the Best of CSGC's Knowledge, each of the
Accounts Receivable either has been or should be collected in full, within
ninety days after the day on which it first becomes due and payable. There is
no contest, claim, or right of set-off, other than arising in the ordinary
course of business, under any contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
7.13 Compliance with Law. To the Best of CSGC's Knowledge, CSGC is, as
-------------------
of the date of execution of this Agreement, and will be as of the Closing Date,
in full compliance with any applicable law, ordinance, or regulation that is or
was applicable to CSGC or to the conduct or operation of their business or the
ownership or use of any of their assets. CSGC has not received any notice or
other communications whether oral or written from any governmental body or any
other person regarding (a) any actual, alleged, possible, or potential violation
of, or failure to comply with, any applicable law, or (b) any actual, alleged,
possible, or potential obligation on the part of any CSGC Entity to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature.
7.14 Intellectual Property.
----------------------
7.14.1 There are neither any royalty payments or license fees payable
to CSGC or by CSGC, or other agreements to which CSGC is a party
or by which CSGC is bound, except for any license implied by the
sale of a product and perpetual, paid-up licenses for commonly
available software programs with a value of less than $1,000
under which CSGC is the licensee. There are no outstanding and,
to the Best of CSGC's Knowledge, no threatened disputes or
disagreements with respect to any such agreement. CSGC has not
received notice that, and to the Best of CSGC's Knowledge, the
conduct of the Business is not infringing any patent, trade mark,
trade name, copyright, proprietary or similar right, domestic or
foreign, of any other person, firm or corporation.
7.14.2 To the Best of CSGC's Knowledge, the intellectual property
assets are all those necessary for the operation of CSGC's
businesses as they are currently conducted in the business plan
disclosed to IOTI. CSGC is the owners of all right, title, and
interest in and to each of the intellectual property assets, free
and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims, and has the
right to use without payment to a third party of the intellectual
property assets.
7.15 Leases. CSGC is not a party to or bound by any leases or licenses
------
of real property or agreements in the nature of leases or licenses of real
property, either as lessor or lessee, or agreements to enter into such leases or
licenses, other than those referred to in SCHEDULE 7.7 (in which is specified
the parties, their dates of execution and expiry dates, any options to renew,
the location of any leased or licensed lands or premises and the rental payments
thereunder) and except as set forth in the agreements or under Nevada law all
interests held by CSGC as lessor, lessee, licensor or licensee under such
leases, licenses or agreements and to the knowledge and belief of CSGC, are free
and clear of any and all mortgages, security interest, charges, adverse claims,
rights, pledges, demands, liens, title retention agreements and other
encumbrances of any nature or kind whatsoever. All rental and other payments
required to be paid by CSGC pursuant to such leases, licenses or agreements have
<PAGE>
Page F-43
been duly paid and CSGC is not otherwise in default in meeting its obligations
under any such leases, licenses or agreements. To the Best of CSGC's Knowledge,
there are no events or circumstances which could give rise to such parties
claiming default by CSGC under such leases, licenses or agreements. No consent
of any parties to such leases, licenses or agreements (other than CSGC) is
required by reason of the transactions contemplated hereby nor will such
transactions impose any more onerous obligations on CSGC under such leases,
licenses or agreements.
7.16 Full Disclosure. To the Best of CSGC's Knowledge, no
---------------
representation or warranty of CSGC in this Agreement contains any untrue
statement or omits to state a material fact. To the Best of CSGC's Knowledge,
CSGC has disclosed and made available to IOTI all information relating to or
otherwise in connection with the use and operation of the properties or assets
used in or held for use in connection with the Business.
7.17 Employees and Employment Contracts. There are set forth in
----------------------------------
SCHEDULE 7.17 the names and titles of all the directors and officers of CSGC,
and of all personnel employed or engaged in the Business, together with
particulars of the material terms and conditions of employment or engagement of
such persons, including rates of remuneration, benefits and positions held.
Except as disclosed on SCHEDULE 7.17, CSGC does not have any written contracts
of employment entered into with any employees employed by CSGC, any oral
contracts of employment which are not terminable on the giving of reasonable
notice in accordance with applicable law, any management, any employee benefit,
bonus, deferred compensation, profit sharing, severance, termination, change of
control, stock option, stock appreciation, stock purchase or other similar
agreement, plan or arrangement, whether written or unwritten that provides or
may provide benefits or compensation in respect of any employee or former
employee employed or formerly employed in the Business. All vacation pay,
bonuses, commissions and other forms of compensation for employees of CSGC have
been disclosed on SCHEDULE 7.17.
7.18 No Guarantees. CSGC has not given or agreed to give, or are a
-------------
party or bound by, any indemnity, or any guarantee of indebtedness or other
obligations of third parties or any other commitment by which CSGC or the
Business is or is contingently responsible for such indebtedness or other
obligations.
7.19 Brokers or Finders. CSGC has incurred no obligation or liability
-------------------
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and the transactions
contemplated thereby.
7.20 Bank Accounts. There is set forth in SCHEDULE 7.20 the name of
-------------
each bank or other depository in which CSGC maintains any bank account, trust
account or safety deposit box and the names of all persons authorized to draw
thereon or who have access thereto.
7.21 Insurance. CSGC maintains such policies of insurance, issued by
---------
responsible insurers, as are appropriate to its Business, property and assets,
in such amounts and against such risks as are customarily carried and insured
against by owners of comparable businesses, properties and assets. SCHEDULE 7.21
lists all such policies together with worker's compensation coverages presently
maintained by CSGC together with a brief description of each such policy
including the types of policy, name of insurer, coverage limits, expiration
dates and annual premiums. All such policies of insurance are in full force and
effect and CSGC is not in default, whether as to the payment of premium or
otherwise, under the terms of any such policy and have not failed to give any
notice or present any claim under any such insurance policy in due and timely
fashion. No notice of cancellation or non-renewal with respect to, nor
disallowance of any claim under or with respect to any such policy has been
received by CSGC. CSGC has no knowledge (after due enquiry from the
Shareholders) of any circumstances or occurrences which might form the basis of
a material increase in premiums.
<PAGE>
Page F-44
7.22 Changes to Technology. As of the Closing Date, there are no new
---------------------
technological developments of which CSGC has any knowledge which might have an
adverse effect on the Business or its operations or which might require
substantial new capital investment by CSGC in the Business, provided that CSGC
make no representation or warranty with respect to disruptions to the Business
caused by what is commonly referred to as the "Y2K Problem."
8.0 CONDITIONS PRECEDENT TO THE PERFORMANCE BY CSGC AND IOTI OF THEIR
-----------------------------------------------------------------
OBLIGATIONS UNDER THIS AGREEMENT
--------------------------------
8.1 CSGC's Conditions. The obligation of CSGC to complete the purchase
-----------------
of the Shares hereunder shall be subject to the satisfaction of, or compliance
with, at or before the Closing Time, each of the following conditions precedent
(each of which is hereby acknowledged to be inserted for the exclusive benefit
of CSGC and may be waived by CSGC in whole or in part):
(a) Truth and Accuracy of Representations of IOTI at Closing Time. All
-------------------------------------------------------------
of the representations and warranties made in or pursuant to this Agreement
(including the Schedules hereto) or in agreement, certificate or other document
delivered or given pursuant to this Agreement, including, without limitation,
the representations and warranties set forth in Section 6.0, shall be true and
correct in all material respects as at the Closing Time and with the same effect
as if made at and as of the Closing Time (except as such representations and
warranties may be affected by the occurrence of events or transactions expressly
contemplated and permitted hereby).
(b) Performance of Obligations. IOTI shall have complied with and
--------------------------
performed in all respects its obligations, covenants and agreements herein.
(c) No Material Adverse Effect. No event, occurrence, fact, condition,
--------------------------
change, development or effect shall have occurred, exist or come to exist since
the date of this Agreement that, individually or in the aggregate, has
constituted or resulted in, or could reasonably be expected to constitute or
result in a material adverse effect to the Business, operations, prospects,
results of operations, condition (financial or otherwise), properties (including
intangible properties), assets (including intangible assets) or liabilities of
the Business.
8.2 Non-Performance of Conditions for the Benefit of CSGC. In the event
-----------------------------------------------------
that any of the conditions set forth in Section 8.1 shall not be fulfilled and/
or performed at or before the Closing Time, CSGC may terminate this Agreement
by notice in writing to IOTI, and CSGC shall thereupon be released from all
obligations under this Agreement and IOTI shall also be released from all
obligations under this Agreement, provided any of the conditions may be waived
in whole or in part by CSGC at any time without prejudice to its right of
termination in the event of a non-fulfillment and/or non-performance of any
other condition or conditions, any such waiver to be binding upon CSGC only if
the same is in writing.
8.3 Acceptance of Notice of Non-Fulfillment. CSGC covenants and agrees
---------------------------------------
that in the event that at the Closing Time, any condition or conditions for the
benefit of CSGC set out in this Section 8.0 have not been fulfilled and/or
performed to the reasonable satisfaction of CSGC and such condition or
conditions is or are not reasonably capable of being fulfilled and/or performed
or caused to be fulfilled and/or performed by IOTI, and IOTI has, at or prior to
the Closing Time, made complete and accurate disclosure in writing, referring
specifically to the provisions of this Section 7.3 to CSGC of the facts relating
to its failure to fulfill and/or perform such condition or conditions, and CSGC
elects to complete the purchase and sale of the Acquired Assets, except as
otherwise agreed by CSGC and IOTI, IOTI shall not be liable to CSGC hereunder
<PAGE>
Page F-45
for breach of any covenant, representation or warranty in respect of the matter
so disclosed.
8.4 IOTI's Conditions. The obligation of IOTI to complete the sale of
-----------------
the Acquired Assets hereunder shall be subject to the satisfaction of, or
compliance with, at or before the Closing Time, each of the following conditions
precedent (each of which is hereby acknowledged to be inserted for the exclusive
benefit of IOTI and may be waived by IOTI in whole or in part):
(a) Truth and Accuracy of Representations of CSGC at Closing Time. All
-------------------------------------------------------------
of the representations and warranties of CSGC made in or pursuant to this
Agreement (including the Schedules hereto) or in agreement, certificate or other
document delivered or given pursuant to this Agreement, including, without
limitation, the representations and warranties set forth in Section 7.0, shall
be true and correct in all material respects as at the Closing Time and with the
same effect as if made at and as of the Closing Time (except as such
representations and warranties may be affected by the occurrence of events or
transactions expressly contemplated and permitted hereby).
9.0 COVENANTS OF CSGC AND IOTI
--------------------------
9.1 Covenants of IOTI. IOTI covenants and agrees that IOTI shall do
-----------------
the following:
(a) Conduct Business in Ordinary Course. Except as otherwise contemplated
-----------------------------------
or permitted by this Agreement, the Shareholders shall cause IOTI during the
period from the date of this Agreement to the Closing Time, to conduct the
Business in the ordinary and usual course thereto and not, without the prior
written consent of CSGC, to enter into any transaction or do any thing which, if
effected before the date of this Agreement, would constitute or would cause a
material breach of the covenants, representations and warranties contained
herein. On Closing, IOTI shall provide CSGC with updated management prepared
financial statements as of August 25, 1999, which shall comprehensively reflect
all material changes and the financial position of IOTI from the date of the
Balance Sheets up to the date of this Agreement. IOTI acknowledges its
obligation to provide CSGC with financial statements to the Closing Date, to be
provided as soon as possible but in no event later than 30 days thereafter.
(b) Investigations. The Shareholders shall cause IOTI to permit CSGC and
--------------
its employees, agents, counsel and accountants or other representatives, between
the date hereof and the Closing Time, without interference to the ordinary
conduct of the Business, to have free and unrestricted access during normal
business hours to the premises and personnel of IOTI, to all the books,
accounts, records and other data of IOTI (including, without limitation, all
Organizational Documents, Intellectual Property, corporate, accounting and tax
records, guarantees, agreements, title documentation, surveys, minute books,
share certificate books, tax returns and related correspondence, and financial
statements of IOTI) and to the properties and assets of IOTI, and to furnish to
CSGC such financial and operating data and other information with respect to the
Business, legal condition, properties and assets of IOTI as CSGC shall from time
to time consider necessary or desirable to enable confirmation of the matters
represented, warranted and covenanted herein. Without limiting the generality of
the foregoing, it is agreed that the accounting representatives of CSGC shall be
afforded ample opportunity to make a full investigation of all aspects of the
financial affairs of IOTI.
No investigations made by or on behalf of CSGC at any time shall have the effect
of waiving, diminishing the scope of or otherwise affecting any representation,
warranty or covenant made by IOTI herein or in any agreement, certificate or any
other document delivered or given pursuant to this Agreement.
<PAGE>
Page F-46
(c) Correctness of Representations and Warranties. The Shareholders and
---------------------------------------------
IOTI shall cause each of the covenants, representations and warranties of IOTI
contained herein, including, without limitation, Section 6.0, to remain true and
correct until and at each of the Closing Date and the Closing Time.
(d) Continue Insurance. The Shareholders and IOTI shall cause IOTI during
------------------
the period from the date of this Agreement to the Closing Time, to continue in
force and effect, and to renew, when necessary, all existing policies of
insurance presently maintained by IOTI and to give all notices and present all
claims under all such policies of insurance in due and timely fashion and to
promptly advise CSGC of any such claims.
(e) Perform Obligations. The Shareholders and IOTI shall cause IOTI during
-------------------
the period from the date of this Agreement to the Closing Time, to comply with
all laws and other obligations affecting the operation of the Business and to
pay all required taxes and tax installments, including without limitation,
income, corporate, retail, excise and realty taxes.
(f) Further Assurances. Each of IOTI and the Shareholders from time to time
------------------
after the Closing, at CSGC's request, will execute, acknowledge and deliver to
CSGC such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other documents, certifications and further
assurances as CSGC may reasonably require in order to better enable CSGC or CSGC
to complete, perform or discharge any it duties hereunder.
(g) No Encumbrances. Each Shareholder shall deliver to CSGC all right,
---------------
title and interest in IOTI Shares, free and clear of all mortgages, liens,
charges, security interests, adverse claims, pledges, demands, rights and other
encumbrances of any nature or kind.
(h) No Solicitation. Until the Closing Date, none of the Shareholders or
---------------
IOTI, any of their affiliates or any person acting on their behalf shall solicit
or encourage any inquiries or proposals for, or enter into any discussions with
respect to, the acquisition of the IOTI Shares or of any properties or assets
held for use in connection with the conduct of the Business.
(i) Non-Public Information; Public Announcements. Until the Closing Date,
--------------------------------------------
none of the Shareholders or IOTI, any of their affiliates or any person acting
on their behalf shall furnish or cause to be furnished any non-public
information concerning the Business or this Agreement to any Person (other than
CSGC and its agents and representatives), other than in the ordinary course of
business or pursuant to applicable law and after prior written notice to CSGC.
Except as required by applicable law, IOTI shall not, and they shall not permit
any of their affiliates or any person acting on their behalf to, make any public
announcement in respect of this Agreement or the transactions contemplated
hereby without the prior written consent of CSGC.
(j) Shareholder Employment Agreements. The Shareholders and IOTI shall
---------------------------------
deliver and cause to be delivered to CSGC at the Closing Time executed
Employment Agreements with Creekside Consultants, Inc., Laura Rachiele d.b.a.
Lasting Results, Greg Patton, Clarence Joy, Clifford Sweeney, Robert Baziuk, and
Kelly O'Shea ("IOTI Employees"). As consideration for these Employment
Agreements, IOTI Employees and IOTI agree that each party will not compete or
participate, whether as an owner, shareholder, partner, consultant,
entrepreneur, employee, or otherwise, or knowingly cause or enable any other
person or entity to compete, in any business related to the Business currently
operated by IOTI or the post-acquisition business of CSGC within any area where
CSGC is operating its business or plan to operate, for a period of two (2) years
from the last date of employment.
<PAGE>
Page F-47
(k) Board and Shareholder Approval. IOTI shall obtain the adoption and
------------------------------
approval of this Agreement and the transactions contemplated thereby from its
Board of Directors at a meeting duly called, noticed and held for such purpose
or as otherwise required by Nevada Law.
9.2 Covenants of CSGC. CSGC covenants and agrees that CSGC shall do
-----------------
the following:
(a) Confidentiality. In the event of the termination of this Agreement
---------------
without consummation of the transactions contemplated hereby, CSGC will use its
best efforts to keep confidential any Confidential Information (unless in the
public domain) obtained from IOTI. If this Agreement is so terminated, promptly
after such termination, all documents, working papers and other written material
obtained from one party in connection with this Agreement and not theretofore
made public (including all copies thereof), shall be returned to the party which
provided such material or, in lieu thereof, a certificate in writing confirming
that the Confidential Information in question has been destroyed.
(b) Correctness of Representations and Warranties. CSGC shall cause each of
---------------------------------------------
the covenants, representations and warranties of CSGC contained herein,
including, without limitation, Section 7.0, to remain true and correct until and
at each of the Closing Date and the Closing Time.
(c) Board Approval. CSGC shall obtain the ratification, adoption and
---------------
approval of this Agreement and the stock issuances and transactions contemplated
thereby from its board of directors, at a meeting duly called, noticed and held
for such purpose or as otherwise required by Nevada Law.
(d) Shareholder Employment Agreements. CSGC shall assume the employment
---------------------------------
agreements between IOTI and Creekside Consultants Inc., Laura Rachiele d.b.a.
Lasting Results, Greg Patton, Clarence Joy, Clifford Sweeney, Robert Baziuk and
Kelly O'Shea (the "IOTI" Employees") in their current forms and IOTI shall take
such steps as necessary to assign such agreements to CSGC as may be required to
effect a complete assumption. Under the terms of the Employment Agreements, the
IOTI Employees are to receive an indeterminate number of shares of common stock.
Upon the Closing Date and within ninety (90) days thereafter, CSGC will take
such steps as necessary to award options pursuant to the terms of the 1999 Stock
Option Plan of CSGC to each of these IOTI Employees, on terms consistent with
their respective employment agreements.
In consideration for these Employment Agreements, IOTI Employees agree that each
party will not compete or participate, whether as an owner, shareholder,
partner, consultant, entrepreneur, employee, or otherwise, or knowingly cause or
enable any other person or entity to compete, in any business related to the
Business currently operated by IOTI or the post-acquisition business of CSGC
within any area in the United States where CSGC is operating its business or
plans to operate, for a period of two (2) years from the last date of
employment.
(e) Transferred Employees Employment Agreements. Effective as of the Closing
-------------------------------------------
Date, CSGC shall offer employment to those employees set forth on SHEDULE 6.18,
who are employed by IOTI principally in the operation of the Business at wage or
salary levels. CSGC shall honor all salaries and incentive plans of current
IOTI employees as set forth on SCHEDULE 6.18. Those employees who accept such
offers of employment effective as of the Closing Date shall be referred to in
this Agreement as the "TRANSFERRED EMPLOYEES." Effective as of the Closing
<PAGE>
Page F-48
Date, CSGC shall assume the liability of IOTI in respect of the Transferred
Employees for accrued but unpaid salaries, wages, vacation and sick pay, but
only to the extent the liability is reflected on SCHEDULE 6.18. CSGC agrees to
hear any argument to increase the compensation of the Transferred Employees
based on market value following the date of this agreement. All Transferred
Employees' salaries will be reviewed within 90 days of the date of this
agreement. Annual employee compensation reviews must at minimum reflect an
adjustment for cost of living increases. If a change of venue from Nevada is
required, employee compensation must be increased in relation to the cost of
living increase with the change of venue. Employee options, if granted, will
vest at an equal calendar quarterly rates over a four-year period beginning one
year and ending five years from the date of this Agreement, and will expire five
years and thirty days after the date of grant.
10.0 ADDITIONAL COVENANTS
---------------------
10.1 Each of the Parties will cooperate with the other and execute and
deliver to the other parties such other instruments and documents and take such
other actions as may be reasonably requested from time to time by any other
party to this Agreement as necessary to carry out, evidence and confirm the
intended purposes of this Agreement.
10.2 Each party will conduct its own due diligence review after the
execution of this Agreement, and shall pay its own expenses, fees, and costs
incurred in the preparation and performance of this Agreement.
10.3 Any term of this Agreement may be waived in writing at any time by
the party which is entitled to the benefit thereof, upon the authority of the
board of directors or manager(s) of such party, but no such waiver shall affect
or impair the right of the waiving party to require observance, performance or
satisfaction of any other term or condition hereof. Any of the terms or
provisions of this Agreement may be amended or modified at anytime by mutual
agreement in writing executed upon the sole authority of the board of directors
or manager(s) of each party.
10.4 Survival of Representations, Warranties and Covenants of IOTI. The
-------------------------------------------------------------
representations, warranties and covenants of IOTI contained in this Agreement or
in any agreement, certificate or any other document delivered or given pursuant
to this Agreement shall survive the completion of the transactions contemplated
by this Agreement and, notwithstanding such completion or any investigation made
by or on behalf of CSGC, shall continue in full force and effect for the benefit
of CSGC for a period of 1 year from the Closing Date, subject to Section 10.0.
Notwithstanding the provisions of this Section or other provision of this
Agreement or any of its schedules or exhibits, and regardless of any disclosure
to CSGC, any liability of IOTI under this Agreement shall be limited to and
shall not exceed the Purchase Price.
10.5 Survival of Representations, Warranties and Covenants of CSGC.
--------------------------------------------------------------
The covenants, representations, and warranties of CSGC contained in this
Agreement or in any agreement, certificate or any other document delivered or
given pursuant to this Agreement shall survive the completion of the
transactions contemplated by this Agreement and, notwithstanding such completion
or any investigation made by or on behalf of IOTI, shall continue in full force
and effect for the benefit of IOTI for a period of 1 year from the Closing Date,
subject to Section 10.0.
10.6 This Agreement shall be binding upon and inure to the benefit of
the Parties named herein and their respective successors and permitted assigns.
No Party may assign either this Agreement or any of its rights, interests, or
<PAGE>
Page F-49
obligations contained in this Agreement without the prior approval of the other
Parties.
10.7 IOTI, IOTI Shareholders and CSGC expressly agree and acknowledge
that each Party has sought the advice of its own counsel at its own expense for
the legality and tax effects of this transaction and is not relying on any
representations or of the other party or their agents. Each Party agrees to
hold the other harmless for any representations or comments with regards to the
legality and tax effects of this transaction.
10.8 This Agreement constitutes and contains the entire agreement of
the Parties, and supersedes any and all prior negotiations, correspondence,
understandings, letters of intent and agreements between the Parties.
10.9 Any notice, request, demand, claim, instruction, or other document
to be given to any party pursuant to this Agreement shall be in writing
delivered personally or sent by mail, registered or certified, postage fully
prepaid, as follows:
If to IOTI, to the following address:
Indexonly Technologies, Inc.
3410 Bryan Street
Reno, Nevada 89503-1909
Attn: Cliff Sweeney, President
If to CSGC, to the following address, with a copy to:
Classic Golf Corporation Stephen Pidgeon, Attorney at Law
789 Drake Street, Suite 1805 1411 Fourth Avenue, Suite 1022
Vancouver, BC V6Z 2N7 Seattle, Washington 98101
Attn: Damian Loth
If to Shareholders
Indexonly Technologies, Inc.
2538 Henning Drive, Suite 217
Burnaby, British Columbia V6Z 1N7
Any party may give any notice, request, demand, claim, instruction, or
other document under this section using any other means (including expedited
courier, messenger service, telecopy, facsimile, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, instruction, or
other document shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change its address for purposes of this section by giving notice of the change
of address to the other party in the manner provided in this section.
10.10 Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
<PAGE>
Page F-50
10.11 With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
10.12 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument, and in making proof hereof it shall not be necessary to
produce or account for more than one such counterpart.
10.13 This Agreement shall be construed in accordance with its terms and the
laws of the State of Nevada.
10.14 In the event an arbitration, suit or action is brought by any party
under this Agreement to enforce any of its terms, or in any appeal therefrom, it
is agreed that the prevailing party shall be awarded and receive from the
non-prevailing party all costs and expenses, including all reasonable attorneys
fees to be fixed by the arbitrator, trial court, and/or appellate court, in the
action and on appeal.
10.15 In the event of breach or anticipatory breach of any provision of this
Agreement, the Parties shall have only the right to damages, specific
performance, and injunctive relief. Any Party shall be entitled to obtain
injunctive relief against a threatened breach of this Agreement or the
continuation of any breach, or both, without the necessity of proving actual
damages.
10.16 The exhibits and schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
11.0 INDEMNIFICATION
---------------
11.1 IOTI to Indemnify. Subject to the limitations set forth in
-----------------
Section 11.3 below, IOTI covenants and agrees to indemnify and save harmless
CSGC, its respective officers, directors, shareholders, lenders and affiliates,
of and from:
(a) all debts, liabilities, contracts or engagements whatsoever, including
any liabilities for federal, provincial, sales, excise, income, corporate or any
other taxes of IOTI, existing at the Closing Time and not disclosed on or
included in the Balance Sheets save and except those liabilities disclosed in
this Agreement (including the Schedules hereto) or accruing or incurred
subsequent to the date of the Balance Sheet in the ordinary course of the
Business and none of which is materially adverse to the Business, or the
operations, assets, properties or financial condition of IOTI;
(b) all contingent liabilities which IOTI become obligated to pay, existing
at the Closing Time, not disclosed or reflected in the Balance Sheets or notes
forming part of the Financial Statements or elsewhere in this Agreement
(including the Schedules hereto);
(c) any assessment or reassessment for income, franchise or corporate tax,
interest and/or penalties for any period up to and including the Closing Date
for which no adequate reserve has been provided and disclosed or reflected in
the Balance Sheets or notes forming part of the Financial Statements or
elsewhere in this Agreement (including the Schedules hereto);
(d) any loss suffered by CSGC or the Business as a result of any breach of
any representation, warranty or covenant of IOTI contained in this Agreement or
in any agreement, certificate or other document delivered or given pursuant to
this Agreement;
(e) any claims by or liabilities to any Person with whom IOTI or its agents
and affiliates have had discussions regarding the disposition of the Acquired
Assets made or incurred in relation to or as a result of or in connection with
the consummation of the transactions contemplated by this Agreement; and
<PAGE>
Page F-51
(f) all claims, actions, causes of action, damages, losses, liabilities,
demands, costs and expenses (including legal fees and costs) in respect of the
foregoing.
11.2 The liability of IOTI under this Section shall cease upon the
expiration of the respective limitation periods set out in Section 10.4 unless
IOTI shall have been given notice by CSGC of any claim hereunder pursuant to
this Section prior to such date, in which event the limitation period shall not
apply with respect to such claim.
11.3 Limitations. IOTI shall not be obligated to make any payment to CSGC in
respect of any amount payable by IOTI to either or both of them under this
Section 11.0 unless, and then only to the extent that, in the case of one
payment, the amount exceeds $1,000, or in the event that the aggregate of such
amounts exceeds $1,000. Notwithstanding the provisions of this Section or other
provision of this Agreement or any of its schedules or exhibits, and regardless
of any disclosure to CSGC, any liability of IOTI's under this Agreement shall be
limited to and shall not exceed the Purchase Price.
11.4 Nothing contained in this Agreement, including without limitation,
Section 10.4, shall limit the liability of IOTI to CSGC by reason of any
fraudulent breach of representation or warranty contained in this Agreement or
in any agreement, certificate or other document delivered or given pursuant to
this Agreement, or limit the time within which a claim hereunder on account of
such fraudulent breach may be made.
11.5 Nothing contained in this Agreement, including without limitation,
Section 10.5, shall limit the liability of CSGC to IOTI by reason of any
fraudulent breach of representation or warranty contained in this Agreement or
in any agreement, certificate or other document delivered or given pursuant to
this Agreement, or limit the time within which a claim hereunder on account of
such fraudulent breach may be made.
11.6 IOTI Shareholders to Indemnify. IOTI Shareholders covenant and
------------------------------
agree to indemnify and save harmless CSGC, its respective officers, directors,
shareholders, members, of and from any loss suffered by CSGC or the Business as
a result of any breach of any representation, warranty or covenant of IOTI
Shareholders contained in this Agreement.
11.7 Notwithstanding the provisions of this Section or other provision
of this Agreement or any of its schedules or exhibits, and regardless of any
disclosure to IOTI or the IOTI Shareholders, any liability of CSGC under this
Agreement shall be limited to and shall not exceed the Purchase Price.
12.0 SIGNATURES
----------
IN WITNESS WHEREOF, this Agreement has been signed by each of the Parties.
("CSGC") ("IOTI")
Classic Golf Corporation Indexonly Technologies, Inc.
a Nevada corporation a Nevada corporation
/s/ Damian Loth /s/ Cliff Sweeney
- --------------- -----------------
By: Damian Loth, President By: Cliff Sweeney, President
/s/ Dion Cillars /s/ Maureen Berard
---------------- ------------------
Dion Cillars Em-Power Industries
<PAGE>
Page F-52
/s/ Allstair Donaldson /s/ Cliff Sweeney
---------------------- -----------------
Allstair Donaldson Cliff Sweeney
/s/ Ann Williams /s/ Freddy Fuller
---------------- -----------------
Hermes Trading Zen Management
/s/ Gail Johnston /s/ Patricia Cassidy
----------------- --------------------
Eros Trading Ltd Weymss Ltd
/s/ Jenny Tong /s/ Michael Connel
-------------- ------------------
Sandford Capital Limited Michael Connel
/s/ Norm Friend /s/ Clarence Joy
--------------- ----------------
Norm Friend Clarence Joy
/s/ Freddy Fuller /s/ Gerry Ghini
----------------- ---------------
Freddy Fuller GKS Corp
/s/ Damion Loth /s/ Neville Abreo
--------------- -----------------
Ocean Caf International Neville Abreo
/s/ Neville Abreo /s/ Rene Pfander
----------------- ----------------
Corporate Finance Group Rene Pfander
/s/ Ron Sutch /s/ Andrew Hammond
------------- ------------------
Ron Sutch Andrew Hammond
/s/ Wayne Hammond /s/ Cindy McWilliams
----------------- --------------------
Wayne Hammond Cindy McWilliams
/s/ Sharon Muche /s/ James Hume
---------------- --------------
Sharon Muche James Hume
/s/ Cynthia Goranson /s/ Larry Nierau
- -------------------- ----------------
Cynthia Goranson Capital Square Holdings
/s/ Garth Olson /s/ Ken Parlee
--------------- --------------
Garth Olson Ken Parlee
<PAGE>
Page F-53
/s/ Tom Tanton /s/ Bonnie Hume
-------------- ---------------
Tom Tanton Bonnie Hume
/s/ Mike Makara /s/ Peter Gil
--------------- -------------
Mike Makara Peter Gil
/s/ Songbai Li /s/ Peter Ribeiro
-------------- -----------------
Songbai Li Peter Ribeiro
/s/ B.W. Van Lieshout /s/ Todd Hiebert
--------------------- ----------------
B. W. Van Lieshout Todd Hiebert
/s/ Murray Warner /s/ Gerald Hiebert
----------------- ------------------
Murray Warner Gerald Hiebert
/s/ Ian Patton
--------------
Ian Patton
<PAGE>
Page F-54
Exhibit 10.2
Exhibit 10.2
INDEXONLY TECHNOLOGIES, INC.
1999 STOCK OPTION PLAN
I. ESTABLISHMENT OF THE 1999 PLAN
Indexonly Technologies, Inc. (hereinafter called the "Company") hereby
establishes the 1999 Stock Option Plan (hereinafter called "1999 Plan") upon the
terms and conditions hereinafter stated.
II. PURPOSES OF THE 1999 PLAN
The purposes of the 1999 Plan are: (1) to encourage stock ownership by selected
key employees and directors of the Company; (2) to provide an incentive for such
employees to expand and improve the growth and prosperity of the Company and its
Subsidiary Companies; (3) to assist the Company and its Subsidiary Companies in
obtaining and retaining such employees and directors; and (4) to build a
proprietary interest among the Company's Non-Employee Directors and thereby
secure for the Company's shareholders the benefits associated with common stock
ownership by those who will oversee the Company's future growth and success.
III. DEFINITIONS
A. "Board" means the Board of Directors of the Company and includes the
Executive Committee of the Board as to any matter in regard to which the
Executive Committee may lawfully exercise the powers of the full Board.
B. "Capital Stock" means shares of the common stock of the Company.
C. "Code" means the Internal Revenue Code of 1986 (or any successor federal tax
law) as from time to time amended.
D. "Committee" means with respect to all Options, the Compensation Committee or
any successor committee or other committee established by the Board pursuant to
Article V(A) hereof, or the Board acting in lieu of the Compensation Committee
or such other committee.
E. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
F. "Fair Market Value" means the fair market value of the shares of Capital
Stock as determined by the Committee in its sole discretion, provided, however,
that if the shares of Capital Stock are admitted to trading on national
securities exchanges, the Fair Market Value on any date shall be the average of
the high and low sale prices as reported in THE WALL STREET JOURNAL for the
shares of Capital Stock on such date or on the last day preceding such date on
which a sale was reported.
G. "Grantee" means an individual to whom an Option is granted under the 1999
Plan.
H. "Non-Employee Director" means a director of the Company who is not an
employee of the Company or any Subsidiary Company.
I. "Option" means a right granted to purchase Capital Stock under the 1999
Plan. An Option may be either an Incentive Option or a Non-Qualifying Option (as
both terms are defined in Article IV hereof).
<PAGE>
Page F-55
J. "Retirement" means the voluntary termination of employment, of an employee
of the Company or one of its subsidiary companies, who has accrued at least five
(5) years of credited service as defined in the Company's pension and health
plans and who will be eligible for the payment of retirement benefits upon
obtaining a certain age as defined by the pension plans of the Company. In the
case of a Non-Employee Director, retirement means the termination of active
participation as a member of the Board of Directors due to attainment of the
mandatory retirement age as reflected in the AFLAC Incorporated Retirement Plan
for Non- Employee Directors.
K. "Subsidiary Company" means a subsidiary of the Company that, at the time of
granting the Option in question, meets the definition of a "subsidiary
corporation" in Section 424(f) of the Code.
IV. TYPES OF OPTION
The 1999 Plan provides for both:
A. "Incentive Options;" that is, options intended to qualify as "incentive
stock options" under the provisions of Section 422 of the Code, and
B. "Non-Qualifying Options;" that is, non-qualified stock options that do not
qualify as incentive stock options under the provisions of Section 422 of the
Code.
V. ADMINISTRATION OF THE 1999 PLAN
A. The 1999 Plan shall be administered by the Board of Directors of the Company
("the Board") and/or by a duly appointed committee or committees of the Board
having such powers as shall be specified by the Board. The Committee shall be
made up of not fewer than two directors of the Company who shall be appointed by
and shall serve at the pleasure of the Board, each of whom shall meet all
requirements for qualification as a "non-employee director" within the meaning
of Rule 16b-3, promulgated under the Exchange Act ("Rule 16b-3") and shall meet
the requirements for qualification as "outside directors" within the meaning of
section 162(m) of the Code, in each case except as otherwise determined by the
Board. All questions of interpretation of the 1999 Plan or of any Options
granted under the 1999 Plan shall be determined by the Board, and such
determinations shall be final and binding upon all persons having an interest in
the 1999 Plan, and/or any Option. Any subsequent references herein to the Board
shall also mean the committee(s) if such committee(s) has been appointed.
B. The Board may grant Options under the 1999 Plan and shall have the
authority, within the limitations of the 1999 Plan, to determine:
1. which of the eligible individuals will be granted Options under the 1999
Plan,
2. whether Incentive Options or Non-Qualifying Options are to be granted in a
particular case,
3. the number of shares that may be purchased under each Option,
4. the Fair Market Value at the time of grant of the shares subject to each
Option,
5. the exercise price to be paid for shares subject to Options, such exercise
price to be determined in accordance with Article IX, and
6. the terms and provisions of individual option agreements (which need not be
identical).
<PAGE>
Page F-56
C. The Board shall also have the power to make all other determinations, and to
establish any rules, regulations or policies consistent with the terms of the
1999 Plan, necessary or advisable for administering the 1999 Plan, including
policies concerning whether interruption of service for military or public
service, leaves of absence, temporary assignment to other employment, or similar
reasons shall constitute a termination or interruption of employment for
purposes of the 1999 Plan.
D. The decisions of the Board shall be final and binding. The date of Board
action approving a grant of an Option shall be deemed the date of grant. No
member of the Board shall be liable for any action taken, or determination made
in good faith related to the 1999 Plan, and the Company shall indemnify, to the
fullest extent permitted by law, any Board member for any expenses borne by him
or her (including costs of any proceeding or threatened proceeding), or claim
made against him or her, arising out of actions related to the 1999 Plan.
VI. ELIGIBILITY
The individuals to whom Options may be granted shall be full-time employees
(including Directors who are employees) of the Company or of a Subsidiary
Company. Pursuant to Article XIII hereof, awards shall be granted to
Non-Employee Directors. The Board may grant other Options to additional
individuals, independent advisors, consultants, and companies.
VII. CAPITAL STOCK SUBJECT TO OPTION
The aggregate number of shares of Capital Stock that may be issued pursuant to
Options granted under the 1999 Plan shall not exceed 15,000,000 shares, subject
to adjustments as hereinafter provided in Article XIX. If an Option as to any
shares is surrendered before exercise, or expires, or is canceled, surrendered,
or otherwise terminates for any reason without having been exercised in full, or
for any reason ceases to be exercisable, the number of unpurchased shares
covered thereby shall, unless the 1999 Plan shall have been terminated, again
become available for the granting of Options under the 1999 Plan within the
aggregate maximum stated above, without regard to whether the expired or
terminated option was an Incentive Option or a Non-Qualifying Option.
VIII. DURATION AND TERM OF PLAN
Subject to the other provisions of the 1999 Plan, all Options shall be granted,
if at all, within three (3) years from the date the 1999 Plan is adopted by the
Board. Termination of the 1999 Plan either by reason of this Article or Board
resolution under Article XX shall not affect any Options previously granted and
such Options shall remain in effect until they have been fully exercised, are
surrendered or expire by their terms.
IX. EXERCISE PRICE
The price to be paid on exercise for each share of Capital Stock purchasable
under any Option granted under the 1999 Plan shall not be less than the Fair
Market Value, thereof at the time the Option is granted. In determining such
Fair Market Value the Board shall comply with such rules and regulations as may
be promulgated by the Internal Revenue Service for such determinations
concerning "incentive stock options" as defined in Section 422 of the Code.
<PAGE>
Page F-57
X. TERMS AND CONDITIONS OF THE OPTIONS
Subject to the provisions of the 1999 Plan, the Board shall determine for each
Option (which need not be identical) the number of shares of Capital Stock that
may be purchased under the Option, which number shall also be subject to
adjustment as hereinafter provided in Article XIX, the option exercise price of
the Option, the timing and terms of exercisability and vesting of the Option,
whether the Option is to be treated as an Incentive Option or as a
Non-Qualifying Option, and all other terms and conditions of the Option not
inconsistent with the 1999 Plan. Subject to the limitations of the 1999 Plan, as
amended or modified from time to time, all Options granted under the 1999 Plan
shall be evidenced by written stock option agreements specifying the number of
shares of Capital Stock covered thereby, in such a form as the Board shall from
time to time establish. The Board may condition the grant of any Option on
execution by the Grantee of such written documents as it judges appropriate to
evidence the Grantee's acceptance of such written stock option agreements,
limits and conditions.
XI. SPECIAL RULES FOR INCENTIVE OPTIONS
Notwithstanding any other provision of the 1999 Plan, in the case of any
Incentive Option granted under the 1999 Plan:
A. The aggregate Fair Market Value (determined as of the time the Option is
granted) of the shares of Capital Stock with respect to which Incentive Options
(or other options qualifying as "incentive stock options" under Section 422 of
the Code) are exercisable for the first time by the Grantee during each calendar
year (under all option plans of the Company and its Subsidiary Companies) shall
not exceed $100,000 as computed in accordance with Section 422 of the Code and
the regulations thereunder.
B. If any Grantee disposes of shares of Capital Stock acquired on the exercise
of an Incentive Option by sale or exchange either: 1. within two years after the
date of the grant of the Option under which such shares were acquired, or 2.
within one year after the transfer of the shares so acquired, such Option will
no longer qualify for the favorable tax treatment provided to an "incentive
stock option" (within the meaning of Section 422 of the Code). In such event,
the Grantee shall promptly notify the Company of such disposition and of the
amount realized and of the adjusted basis in such shares.
XII. EXERCISABILITY AND DURATION OF OPTIONS
A. Exercisability. Each Option shall be exercisable as to 33 1/3% of the shares
of Capital Stock covered by the Option as of March 1, 2000, and an additional 33
1/3% of the shares of Capital Stock covered by the Option on each of March 1,
2001 and on March 1, 2002.
B. Duration of Exercisability. Unless an Option provides otherwise, the
unexercised portion of any Option granted under the 1999 Plan shall
automatically and without notice terminate and become null and void on the
earliest to occur of the following:
1. Three years from the date of grant or the expiration of such shorter period
of time as the Option may provide;
2.a. In the case of an Incentive Option, three months following the date of
termination of the Grantee's employment with the Company, or 12 months in the
case of:
(i) an employee who is disabled (within the meaning of Section 422(c)(6) of the
Code) on the date of termination, or
<PAGE>
Page F-58
(ii) an employee whose death occurs during his or her employment with the
Company.
b. Unless an Option provides otherwise, Incentive Options not exercised prior to
the dates specified in Article XII(B)(2)(a) remain exercisable until the date
determined in accordance with Article XII(B)(1), but will not qualify for the
favorable tax treatment provided for incentive stock options within the meaning
of Section 422 of the Code.
XIII. NON-EMPLOYEE DIRECTOR OPTIONS
Notwithstanding any of the other provisions of the 1999 Plan to the contrary,
the provisions of this Article XIII shall apply only to grants of Options to
Non-Employee Directors. Except as set forth in this Article XIII, the other
provisions of the 1999 Plan shall apply to grants of Options to Non-Employee
Directors to the extent not inconsistent with this Article. For purposes of
interpreting the applicable provisions of the 1999 Plan, a Non-Employee
Director's service as a member of the Board shall be deemed to be employment
with the Company or its Subsidiary Companies.
A. General. Non-Employee Directors shall receive Non-Qualifying Options in
accordance with this Article and may not be granted Incentive Options under the
1999 Plan. The purchase price per share of Capital Stock purchasable under
Options granted to Non-Employee Directors shall be the Fair Market Value of a
share of Capital Stock on the date of grant. No Option agreement with any
Non-Employee Director may alter the provisions of this Article, and no Option
granted to a Non-Employee Director may be subject to a discretionary
acceleration of exercisability.
B. Initial Grants. As of October 1, 1999, and October 1, 2001, each
Non-Employee Director as of such dates shall be granted automatically, without
action by the Board, an Option to purchase 15,000 shares of Capital Stock. This
clause is valid only if such Non-Employee Director has no other Company Options.
C. Grants to New Non-Employee Directors. Each Non-Employee Director who, after
August 30, 1999, is elected to the Board for the first time by the stockholders
of the Company at any special or annual meeting of stockholders or, if earlier,
is appointed to the Board, will, at the time such Non-Employee Director is
elected or appointed (as the case may be) and duly qualified, be granted as of
said date automatically, without action by the Committee, an Option to purchase
15,000 shares of Capital Stock.
D. Vesting. Each Option shall be exercisable as to 33 1/3% of the shares of
Capital Stock covered by the Option as of March 1, 2000, and an additional 33
1/3% of the shares of Capital Stock covered by the Option on March 1, 2001 and
on March 1, 2002; provided, however, that upon a Non-Employee Director's
cessation of service by reason of retirement, such Non-Employee Director's
Option shall be 100% vested and immediately exercisable. To the extent not
exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date the
Option expires.
E. Duration. Subject to the immediately following sentence, each Option granted
to a Non-Employee Director shall be for a term of 3 years. Upon the cessation of
a Non-Employee Director's membership on the Board for any reason other than
retirement, Options granted to such Non-Employee Director not then exercisable
shall expire, and Options to the extent then exercisable may be exercised until
the expiration of the respective terms of such Options. The Board may not
provide for an extended exercise period beyond the periods set forth in this
Article XIII(E).
<PAGE>
Page F-59
XIV. NON-ASSIGNABILITY
Options shall not be transferable by a Grantee except by transfers pursuant to
domestic relations orders, by will or by the laws of descent and distribution,
and during a Grantee's lifetime shall be exercisable only by such Grantee. In
the case of transfers pursuant to domestic relations orders, due to the
non-employment by the Company of such spouse, both ISO and NQ Options covered by
such orders will not be surrendered to the Company, but will be amended by such
orders and that the spouse's portion of such Options, which are covered by such
Orders, will be treated as NQ Options, but will not be available for the
withholding of shares for the payment of federal and state taxes as pursuant to
Article XV. Options that are transferred by will or by the laws of descent and
distribution may be exercised after the Grantee's death only by his or her
executors or administrators, or by the person who acquired the right to exercise
such Options by bequest or inheritance or by reason of the death of the Grantee.
XV. PAYMENT FOR SHARES
A. Payment in full of the purchase price for the shares purchased pursuant to
the exercise of any Option shall be made, in accordance with Article XVI, upon
exercise of the Option. All shares sold under the 1999 Plan shall be fully paid
and non-assessable.
B. The terms of any Option granted under the 1999 Plan (other than Options
granted to Non-Employee Directors pursuant to Article XIII hereof), may, but
need not, include an arrangement whereby the Grantee may, upon exercise of an
Option, borrow all or an established part of the purchase price from the Company
on such terms described in the Option agreement, consistent with applicable law
or regulations, as the Board shall from time to time determine. The principal
amount of any such loan shall bear interest at a rate such that there is neither
a necessity to avoid "imputed interest" under Section 483 of the Code nor
"foregone interest" under Section 7872 of the Code.
C. The terms of the Options granted to Non-Employee Directors pursuant to
Article XIII hereof shall permit Non-Employee Directors, upon exercise of their
Options, to pay the purchase price by tender of shares of Capital Stock of the
Company owned by such Non-Employee Directors. The terms of any Option granted
under the 1999 Plan to any other Grantee, may, but need not, permit the Grantee,
under procedures established by the Committee, upon exercise of an Option, to
pay the purchase price by tender of shares of Capital Stock of the Company owned
by the Grantee. In either case, the current Fair Market Value of the shares
tendered as of the date of the Company's receipt of notice of exercise, given
pursuant to Article XVI(A), shall be treated as payment of the corresponding
amount of the purchase price of the shares being acquired under the Option.
D. Subject to such rules as may be adopted by the Committee, a Grantee
(other than a Non-Employee Director) who will incur federal, state or local
income tax liability as a result of the exercise of a Non-Qualifying Option may,
at his or her option, elect to have the Company withhold, or to transfer to the
Company, on the date that the amount of such tax liability is determined, shares
of Capital Stock of the Company equal in market value to an amount not exceeding
the maximum amount payable under federal, state and local marginal tax rates
applicable to the Grantee and the particular Option exercise transaction. The
election must be made on or before the date that the amount of tax to be
withheld is determined. The value of the shares of Capital Stock to be withheld
by, or transferred to, the Company shall be valued at Fair Market Value as of
the date that the amount of the tax is determined.
<PAGE>
Page F-60
XVI. MANNER OF EXERCISE
A. To exercise an Option granted under the 1999 Plan as to all or part of the
shares covered thereby, a Grantee (or after his or her death, the person
authorized to exercise the Option, as provided in Article XII) if unable to do
so in person, shall deliver written notice of such exercise to the Company
official designated by the Board (or, in the absence of such designation, to the
Secretary of the Company). The notice shall identify the Option being exercised
and specify the number of shares then being purchased. The date of receipt of
such notice shall be deemed the date of exercise.
B. The notice of exercise shall be accompanied by payment of the amount of the
aggregate purchase price of the shares being purchased under the Option being
exercised in one of the following forms:
1. A check, wire transfer or money order payable to the order of the Company
for such amount;
2. If the terms of the Option being exercised expressly permit borrowing from
the Company for exercise of the Option, the Grantee's note for such amount, such
note to include such terms, including terms related to time of payment and
interest, and to be in such form, as is prescribed by the Board, consistent with
the terms of the Option; or
3. If the terms of the Option being exercised expressly permit payment with
shares of Capital Stock for exercise of the Option, tender of shares of Capital
Stock of the Company with Fair Market Value on the date of exercise equal to or
exceeding such amount, such tender to be made in conformity with the applicable
terms of the Option and with such requirements as the Board may prescribe. In
the case of an exercise of a Non-Qualifying Option, the tender of such shares
may be performed by:
(a) The actual delivery of Capital Stock in certificate form, or in the case of
the grantee being a registered shareholder of record holding, his or her shares
in certificate form or deposited in the Dividend Reinvestment or Stock Purchase
Plans of the Company, or
(b) the execution of a written and acknowledged statement of such ownership of
said shares, whereby the exercise of the Option may be performed by a net issue
transaction of the net new shares from the Option into the Capital Stock
Transfer System of the Company.
C. The Board shall have full authority to direct the proper officers of the
Company to issue or transfer shares of Capital Stock pursuant to the exercise of
an Option granted under the 1999 Plan. As soon as practicable after its receipt
of such notice and payment, the Company shall cause the shares so purchased to
be issued to the Grantee or to the person authorized to exercise the Option
after his or her death, as the case may be, and shall promptly thereafter cause
one or more certificates for such shares to be delivered to such Grantee or
other person. The holding periods referred to in Article XI(B)(1) and (2) shall
be measured from the date of issuance.
XVII. VOTING AND DIVIDEND RIGHTS
No Grantee of any Option shall have any voting or dividend rights or any other
rights of a stockholder in respect of any shares of Capital Stock covered by an
Option prior to the time that his or her name is recorded on the Company's
stockholder ledger as the holder of record of such shares acquired pursuant to
an exercise of an Option.
<PAGE>
Page F-61
XVIII. CONDITIONS ON GRANTEE'S SALE OF SHARES
A. Unless the Company has filed an effective Registration Statement pursuant to
the Securities Act of 1933 covering the shares offered under the 1999 Plan, each
Grantee purchasing shares shall be required to represent to the Company at that
time that he or she is acquiring such shares for investment purposes and not
with a view to their sale or distribution, and each certificate for such shares
shall have printed or stamped thereon appropriate language, as determined by the
Board, stating such restriction.
B. The Board may in its discretion require the Grantee, on any exercise of an
Option granted hereunder or any portion thereof and as a condition to the
Company's obligation to accept the notice of exercise and to deliver
certificates representing the shares subject to exercise, to take such action as
is, in its sole judgment, necessary or prudent to ensure that issuance of the
shares of Capital Stock pursuant to exercise of the Option will be in compliance
with applicable law.
XIX. EFFECT OF CHANGE IN CAPITAL STOCK
The aggregate number of shares of Capital Stock available for Option under the
1999 Plan, the shares subject to any Option, the maximum number of shares
subject to Options granted to any individual during any three consecutive year
period pursuant to Article VII, and the price per share, shall all be
proportionately adjusted for any increase or decrease in the number of shares of
Capital Stock issued subsequent to the effective date of the 1999 Plan or the
effective date of any shareholder-approved increase in the number of shares
available for issuance under Options granted under the 1999 Plan, in either
case, resulting from a subdivision or consolidation of shares or any other
capital adjustment, the payment of a stock dividend or other increases or
decreases in such shares effected without receipt of consideration by the
Company. A change in the number of shares, and/or a change in the price per
share, subject to an Option shall also be made in order to reflect any reduction
in the Fair Market Value of shares subject to an Option in any case in which
(a) such reduction arises on account of a "corporate transaction" as defined in
Treasury Regulations Section 1.425-1(a)(1)(ii),
(b) the excess of the aggregate Fair Market Value (determined immediately after
such corporate transaction) of the shares subject to the Option immediately
after such change over the aggregate new Option exercise price of such shares is
not more than the excess of the aggregate Fair Market Value of the shares
subject to the Option immediately before the transaction over the aggregate
former Option price of such shares,
(c) the ratio of the Option exercise price to the Fair Market Value of the stock
subject to the Option immediately after the corporate transaction is not more
favorable to the Grantee on a share-by-share comparison than the ratio of the
old Option exercise price to the Fair Market Value of the stock subject to the
Option immediately before such transaction,
(d) the Option after such change does not give the Grantee additional benefits
that he or she did not have before such change, and
(e) in the case of an Incentive Option, such change does not constitute a
modification of the Option within the meaning of Section 424 of the Code. If the
Company or a Subsidiary Company issues or assumes a stock option in a
transaction to which Section 424(a) of the Code applies, the per share Option
price, the date or dates of exercise and the other provisions of such Option
shall be fixed by the Board so as to meet the requirements of that section.
<PAGE>
Page F-62
XX. AMENDMENT AND DISCONTINUANCE
The Board or the Compensation Committee established by the Board or any
subsequent Committee appointed pursuant to Article V(A) hereof, by resolution,
may terminate, suspend, amend or revise the 1999 Plan with respect to any shares
of Capital Stock, as to which Options have not been granted, provided, however,
that no amendment shall be effective unless approved by the stockholders of the
Company where stockholder approval of such amendment is required to comply with
any law, regulation or stock exchange rule. The Board or Committee may not,
without the consent of the Grantee of an Option, alter or impair rights under
any Option previously granted under the 1999 Plan except as expressly authorized
herein.
XXI. EMPLOYMENT RIGHTS
Neither the 1999 Plan, nor the grant of any Options hereunder, nor any action
taken by the Board or any Committee in connection with the 1999 Plan, shall
create any right on the part of any person to continue in the employ of (or as a
director of) the Company or a Subsidiary Company, or affect the right of the
Company to terminate a Grantee's employment (or directorship) at any time,
subject to the provisions of law or any contract of employment between the
Company and the Grantee.
XXII. GOVERNING LAW
A. All references to a provision of a statute or regulation incorporate
subsequent amendments and apply also to corresponding successor provisions,
however denominated.
B. The 1999 Plan and all Options granted under the 1999 Plan shall be governed
by, and construed in accordance with, the laws of the State of Nevada, except to
the extent that federal law is controlling, and provided that the terms of the
1999 Plan and all Options granted under it shall be construed so as to qualify
for exemption under Rule 16b-3 and, in the case of any Incentive Options, for
treatment as an incentive stock option under Section 422 of the Code.
XXIII. CORPORATE REORGANIZATION
In the event of (a) a liquidation of the Company, (b) a reorganization, merger,
or consolidation of the Company as a result of which the outstanding Capital
Stock of the Company is changed into or exchanged for cash or property or
securities not of the Company's issue, (c) a sale, exchange, or transfer of all
or substantially all of the property of the Company, or one of its business
units, to another person or corporation, or (d) the direct or indirect
acquisition of all or substantially all of the outstanding voting shares of the
Company by another person or corporation, the Board may, in its sole discretion,
arrange with the surviving, continuing successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "Acquiring Corporation"),
for the Acquiring Corporation to assume the Company's rights and obligations
under outstanding Options or substitute options for the Acquiring Corporation's
stock for such outstanding Options. In the event the Acquiring Corporation
elects not to assume the Company's rights and obligations under or substitute
for such outstanding Options, the Board may, in its sole discretion, provide
that any unexercised portion of the outstanding Options shall be fully
exercisable as of a date prior to such corporate transaction, as the Board so
determines. Any Options that are neither assumed or substituted for by the
Acquiring Corporation in connection with the corporate transaction nor exercised
as of the date of the corporate transaction shall terminate and cease to be
outstanding effective as of the date of the consummation of the corporate
transaction.
<PAGE>
Page F-63
XXIV. EFFECTIVE DATE OF THE PLAN
The 1999 Plan will become effective on August 30, 1999, the date of adoption by
the Board of Directors, subject, however, to the approval by the Company's
shareholders within twelve (12) months thereafter, such approval to be
manifested by a vote sufficient to satisfy the federal tax requirements then in
effect related to shareholder approval of stock option plans under the rules for
incentive stock options and any stock exchange requirements, respectively.
<PAGE>
Page F-64
Exhibit 10.3
Exhibit 10.3
EMPLOYEE AGREEMENT
(TICK ONLY ONE BOX BELOW)
FULL TIME EMPLOYEE AGREEMENT
PART TIME EMPLOYEE AGREEMENT
BETWEEN:
- --------
MR. CLIFFORD SWEENEY
(THE "EMPLOYEE")
OF THE FIRST PART;
AND:
- ---
LNDEXONLY TECHNOLOGIES INC.
("INDEXONLY.COM")
OF THE SECOND PART;
(The Employee and indexonly.com will hereinafter be collectively referred to as
the "Parties")
A. indexonly.com hereby offers to employ the Employee as PRESIDENT. Upon
acceptance of this offer, and in consideration of the Employee being employed by
indexonly.com, the Employee hereby agrees to comply with all terms and
conditions contained in this agreement and amendments thereto during the term of
employment.
B. TERMS OF EMPLOYMENT
-------------------
1 . The term of employment shall be on a month to month week basis unless
otherwise agreed in writing and may be terminated by either the Employee or
indexonly.com upon giving a minimum of one (1) months notice or such time or pay
in lieu thereof as required by indexonly.com pursuant to the provisions of the
Employment Standards Act (British Columbia) or equivalent legislation in the
Province in which the Employee is employed.
2. During the term of employment and subject to the terms of this agreement,
the Employee shall faithfully and diligently serve indexonly.com and use the
Employee's best efforts to further the interests of indexonly.com and its
customers, and to comply with all lawful instructions and directions of
indexonly.com as may be in effect from time to time.
3. During the term of employment and subject to the terms of this agreement,
the Employee shall devote the Employee's entire working time and attention to
the Employee's responsibilities, to indexonly.com and its customers.
4. As indexonly.com only authorizes employees to purchase and use legal
computer software, the Employee hereby undertakes that it will never load
unauthorized (illegal) computer software on any computer operated by
indexonly.com.
5. The terms of this agreement may only be altered in writing, signed by the
Parties, and no omissions by either the Employee or indexonly.com to strictly
enforce the terms of this agreement shall relieve the Parties from the
obligations set forth in this agreement.
<PAGE>
Page F-65
6. Nothing contained in this agreement shall be taken in any way to affect
or impact the right of indexonly.com to, in its sole discretion, terminate this
agreement for just cause without previous notice and without payment in lieu of
notice. Without restricting the generality of the foregoing, just cause will
include any breach by the Employee of the Employee's obligations pursuant to the
terms of this agreement.
C. CONFIDENTIALITY
---------------
The Employee hereby agrees to the following:
1. The Employee will be in a position to have access to and be entrusted
with confidential information and trade secrets relating to the activities of
indexonly.com and its customers as a result of the Employee's employment.
2. The improper use or disclosure of any such confidential information and
trade secrets of indexonly.com would be detrimental to indexonly.com and its
customers, and the right to maintain such confidential information and trade
secrets constitutes a proprietary right, which indexonly.com is entitled to
protect.
3. The Employee acknowledges and agrees that indexonly.com's
methodology, operations and the manner in which such operations are conducted is
unique and of extraordinary value, and as such it is necessary for indexonly.com
to protect same, and a breach by the Employee of the confidentiality provisions
of this agreement will cause indexonly.com irreparable damage.
4. To keep confidential all matters relating to the business or affairs
of indexonly.com and its customers, which shall either directly or indirectly
come to the Employee's knowledge.
5. To keep confidential and not to disclose any confidential
information, trade secret, etc. acquired or developed by the Employee or any
other employee or indexonly.com, including all information, methodology,
systems, formats, etc. presently utilized by indexonly.com. The Employee shall
disclose promptly to indexonly.com, in writing, all ideas, inventions and
discoveries related to indexonly.com's business whether or not conceived or
developed during working hours or on the business premises of indexonly.com. All
ideas, inventions and discoveries relating to such business shall be the sole
property of indexonly.com and indexonly.com shall have the exclusive right to
any patents, copyrights, trademarks, licenses and other proprietary rights and
protection which may be issued thereon or which may arise with respect thereto.
The Employee shall, and does hereby assign to indexonly.com all the Employee's
right, title and interest in and to patent, copyright, trademark, license or
other proprietary right or protection which may be issued or which may arise
based thereon.
6. Not to use, manufacture or sell any product or service which
incorporates any information or trade secret, etc. of indexonly.com as a basis
for the design or creation of any similar product or service, or for any other
purpose, without indexonly.com's prior written consent.
7. Not to make copies of any specifications, plans, drawings,
prototypes, models, documents, materials or other information appertaining or
relating to the equipment or services manufactured or provided by indexonly.com
or its customers, other than in the normal course of the execution of the
Employee's obligations as an employee of indexonly.com. The Employee shall
forthwith, upon demand by indexonly.com, return to indexonly.com all
specifications, plans, drawings, prototypes, models, documents, materials or
<PAGE>
Page F-66
other information together with any copies thereof and any materials arising out
of the foregoing, and shall not retain any copies thereof for any purpose.
8. The Employee agrees that indexonly.com would suffer irreparable
damages as a result of the Employee breaching the terms of this agreement and
that indexonly.com could not adequately be compensated for such damages by
monetary award. Accordingly, in addition to any other rights or remedies it may
have as a result of any such breach, indexonly.com shall be entitled, as a
matter of right, to any injunction or other equitable relief to prevent the
violation by the Employee of any of the provisions of this agreement.
9. All documents, records, note books, working papers, notes, memoranda
and similar repositories, records or containers of the confidential information
and trade secrets of indexonly.com made or compiled by the Employee at any time,
or made available to the Employee during his or her employment by indexonly.com
is the property of and belongs to indexonly.com and is held by the Employee in
trust and solely for the benefit of indexonly.com to be delivered to
indexonly.com upon the termination of Employee's employment or immediately at
any time upon request by indexonly.com.
D. NON-COMPETITION PROVISION
1. During this agreement, and for six (6) months after the termination of
this agreement, the Employee shall not, directly or indirectly, by means of any
interest in or connection with any corporate or other entity, engage in business
with or on behalf of or be connected in any manner with any other competing
Internet search engine company. UNLESS such Internet search engine company is
affiliated with Mr. Freddy Fuller.
E. REMUNERATION
Please refer to Schedule "A" attached for remuneration details.
F. VACATION
The Employee is entitled to a maximum of three (3) weeks paid vacation each
year.
NOTE:
FOR BOTH "FULL TIME" AND "PART TIME" EMPLOYEES
During the Probationary Period, as described under (Section D - "Terms of
Employment") of this agreement, the Employee is entitled to accumulate vacation
days but is not entitled to take (or exercise) any vacation days.
The Parties hereto are in agreement with all terms and conditions as contained
herein.
July 26/99 /s/Cliff Sweeney Cliff Sweeney
- ---------- ----------------- -------------
Date Signature of Employee Printed Name
July 26/99 /s/ Freddy Fuller Freddy Fuller
- ---------- ----------------- -------------
Date Signature of Authorized Printed Name
Signatory of indexonly.com
<PAGE>
Page F-67
Exhibit 10.4
Exhibit 10.4
CONSULTING AGREEMENT
THIS AGREEMENT made as of the lst day of July, 1999.
---
BETWEEN:
INDEX ONLY TECHNOLOGIES INC,, doing business as "INDEXONLY.com" and having its
head office at 2821 McBride Street, Abbotsford, B.C. V3G IH2.
(hereinafter referred to as the "Company")
OF THE FIRST PART,
and
CREEKSIDE CONSULTANTS INC., dba "The Franchise Group", a corporation
incorporated under the laws of the Province of British Columbia and having its
head office at 1678 Plateau Crescent, Coquitlam, B.C. V3E 3B3
(hereinafter referred to as the "Consultant")
OF THE SECOND PART.
WHEREAS the Company is in the business of providing an Internet search
engine and related services (the "Business");
AND WHEREAS the Company is desirous of retaining the Consultant to provide
consulting services in connection with the Business of the Company;
AND WHEREAS the Consultant is desirous of providing such services to the
Company, on the terms and subject to the conditions herein set out;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
respective covenants and agreements of the parties contained herein, the sum of
one dollar paid by each party hereto to each of the other parties hereto and
other good and valuable consideration (the receipt and sufficiency of which is
hereby acknowledged by each of the parties hereto) it is agreed as follows:
ARTICLE ONE - CONSULTING SERVICES
1.1 Retainer. The Company hereby agrees to retain the Consultant to provide
the Company with consulting services including:
(a) managerial services;
(b) advising on sales, marketing and growth strategies;
(c) research comparable business opportunities;
(d) develop marketing material to attract agents, and develop marketing
material in general.
(e) development and delivery of training programs for licensed agents of the
Company;
(f) train the Company's employees in the sale of regional and district
licenses;
(g) develop documentation for the licensing of regional and district agents
in conjunction with a lawyer retained by the Company and mutually agreed
upon between the parties hereto, and
<PAGE>
Page F-68
such other consulting services as the Company and the Consultant may from time
to time agree upon, (the "Services") and the Consultant hereby agrees to provide
such Services to the Company.
1.2 Term of Agreement. This Agreement shall remain in full force and effect
from July 1, 1999, to June 30, 2000, subject to earlier termination as
hereinafter provided. This Agreement is capable of extension by mutual written
agreement of the parties hereto.
1.3 Provision of services. The Services to be provided hereunder to the
Company by the Consultant shall be provided by the Consultant. It is agreed and
acknowledged that the Consultant may from time to time provide services to other
persons, firms and Companies, provided that the Consultant shall at no time
while this agreement remains in force provide ongoing consulting services to any
competitor of the Company that is not an affiliate of the Company. It is
acknowledged by the parties hereto that Jurock International Net shall not be
considered a competitor of the Company and shall be specifically excluded from
the provisions of this section 1.3.
1.4 Compensation. In consideration for the services rendered by the
Consultant hereunder, the Company shall pay to the Consultant consulting fees
(the "Consulting Fees") as set out below:
(a) the sum of four thousand ($4,000.00)dollars per month, including GST,
for the term of the Agreement. The Consulting Fees shall be paid
bimonthly, in arrears on the 15th day of each month and last business day
of each month, and
(b) in the event that the Company shares are listed on a stock exchange
either as an initial public offering, or the Company becomes a subsidiary
of a company which is listed on a stock exchange, a minimum of 530,000 of
the Company's common shares shall be issued directly from the Company's
treasury, at no cost to the Consultant. Such common shares shall be
transferred by the Company to the Consultant as soon as they become
available. The Company covenants and agrees that any trading restrictions
on such shares shall be no less favourable than shares issued or
available to any principal of the Company and are subject to any pooling
agreement which may be made between the founders and principals.
1.5 Amendments. It as acknowledged and agreed between the parties this
Agreement may be amended prior to its expiration or termination to reflect any
additional time commitment the Company. may require of the Consultant and/or to
reflect the Company's increased ability to compensate the Consultant
accordingly.
1.6 Invoicing. The Consultant shall provide the Company with invoices on a
timely basis for the compensation referred to in 1.5 above, in accordance with
the Company's standard compensation procedures.
1.7 Expenses. The Consultant shall be reimbursed from time to time for all
reasonable out of pocket expenses, including travel costs, actually and properly
incurred by the Consultant in connection with providing the Services hereunder.
The Consultant shall furnish statements and vouchers to the Company for all such
expenses.
1.8 Copyright. The Consultant by execution of this Agreement, assigns any
copyright in materials prepared for the Company which may subsist in the
Consultant to the Company absolutely and irrevocably. The Consultant waives any
moral rights he may have in material provided to the Company. The Consultant
covenants that any written material delivered to the Company will in no way
violate any copyright of any third party.
<PAGE>
Page F-69
1.9 Responsibility for Payments. During the term of this Agreement, the
Consultant shall be responsible and will pay all applicable taxes, Canada
Pension Plan and other withholding deductions and payments. The Consultant will
also pay worker's compensation insurance coverage if applicable, and will make
all applicable unemployment tax payments.
ARTICLE TWO -- COVENANTS
2.1 No Delegation of Services. The Consultant covenants and agrees with the
Company that it shall not delegate performance of the Services to anyone without
the prior written consent of the Company.
ARTICLE THREE -- CONFIDENTIALITY AND NON-COMPETITION
3.1 Confidential Information. The Consultant covenants and agrees that he
shall not disclose to anyone any confidential information with respect to the
business or affairs of the Company except as may be necessary or desirable to
further the business interests of the Company. This obligation shall survive
the expiry or termination of this Agreement.
3.2 Return of Property. Upon expiry or termination of this Agreement the
Consultant shall return to the Company any property, documentation, or
confidential information which is the property of the Company.
3.3 Promotion of Company's Interests. The Consultant shall and will
faithfully serve and use his best efforts to promote the interests of the
Company, shall not use any information he may acquire with respect to the
business and affairs of the Company or its affiliates for his own purposes or
for any purposes other than those of the Company or its affiliates.
3.4 Non-Competition During this Agreement. During this Agreement and for
one (1) year following the date of termination of this Agreement, the Contractor
shall not,, directly or indirectly, by means of any interest in or connection
with any corporate or other entity, engage in business with or on behalf of or
be connected in any manner with any other competing Internet search engine
company without the prior written approval of the Company which approval shall
not be unreasonably withheld,
ARTICLE FOUR - TERMINATION
4.1 Termination of Agreement with Notice The Company may terminate this
Agreement by giving the Consultant thirty (30) days' written notice or in lieu
of such written notice by paying the Consultant a consulting fee equivalent to
thirty (30) days of consulting, and any unpaid balance of common shares, as
determined pursuant to Section 1.4 hereof. The Consultant may terminate this
Agreement at any time by giving the Company thirty (30) days written notice.
The obligations of the Consultant under this Agreement shall terminate upon the
earlier of the Consultant ceasing to be retained by the Company or the
termination of this Agreement by the Company or the Consultant.
4.2 The Company may, in its sole discretion, terminate this Agreement with
cause, effective immediately, upon the Contractor breaching any of the material
terms and conditions of this Agreement.
ARTICLE FIVE - CAPACITY
5.1 Capacity of Consultant. It is acknowledged by the parties hereto that
the Consultant is being retained by the Company in the capacity of independent
contractor and not as an employee of the Company. The Consultant and the
Company acknowledge and agree that this Agreement does not create a partnership
or joint venture between them.
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Page F-70
ARTICLE SIX -- GENERAL CONTRACT PROVISIONS
6.1 Notices All notices, requests, demands or other communications
(collectively, "Notices") by the terms hereof required or permitted to be given
by one party to any other party, or to any other person shall be given in
writing by personal delivery or by registered mail, postage prepaid, or by
facsimile transmission to such other party as follows:
(a) To the Company at: 2821 McBride Street, Abbotsford,
B.C. V3G IH2
(b) To the Consultant at: 1678 Plateau Crescent, Coquitlam, B.C.
V3E 3B3
or at such other address as may be given by such person to the other parties
hereto in writing from time to time.
All such Notices shall be deemed to have been received when delivered or
transmitted, or, if mailed, 48 hours -after 12:01 a.m. on the day following the
day of the mailing thereof. If any Notice shall have been mailed and if regular
mail service shall be interrupted by strikes or other irregularities, such
Notice shall be deemed to have been received 48 hours after 12:01 a.m. on the
day following the resumption of normal mail service, provided that during the
period that regular mail service shall be interrupted all Notices shall be given
by personal delivery or by facsimile transmission.
6.2 Additional Conditions The parties shall sign such further and other
documents, cause such meetings to be held, resolutions passed and by-laws
enacted, exercise their vote and influence, do and perform and cause to be done
and performed such further and other acts and things as may be necessary or
desirable in order to give full effect to this Agreement and every part thereof.
6.3 Counterparts. Agreement may be executed in several counterparts, each
of which so executed shall be deemed to be an original and such counterparts
together shall be but one and the same instrument.
6.4 Time of the Essence. Time shall be of the essence of this Agreement and
of every part hereof and no extension or variation of this Agreement shall
operate as a waiver of this provision.
6.5 Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to all of the matters herein and its execution
has not been induced by, nor do any of the parties rely upon or regard as
material, any representations or writings whatever not incorporated herein and
made a part hereof and may not be amended or modified in any respect except by
written instrument signed by the parties hereto. Any schedules referred to
herein are incorporated herein by reference and form part of the Agreement.
This Agreement supersedes all previous communications, agreements and contracts
between the parties.
6.6 Enurement. This Agreement shall enure to the benefit of and be binding
upon- the parties and their respective legal personal representatives, heirs,
executors, administrators or successors.
6.7 Assignment by the Consultant. This Agreement is personal to the
Consultant and may not be assigned by the Consultant.
6.8 Assignment by Company. The Company shall have the right to assign its
rights under the terms and conditions of this Agreement, provided that any such
assignee is an affiliate of the Company.
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Page F-71
6.9 Currency. Unless otherwise provided for herein, all monetary amounts
referred to herein shall refer to the lawful money of Canada.
6.10 Headings for Convenience Only. The division of this Agreement into
articles and sections is for convenience of reference only and shall not affect
the interpretation or construction of this Agreement.
6.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia and the federal
laws of Canada applicable therein and each of the parties hereto agrees
irrevocably to conform to the non-exclusive jurisdiction of the Courts of such
Province.
6.12 Gender. In this Agreement, words importing the singular number shall
include the plural and vice versa, and words importing the use of any gender
shall include the masculine, feminine and neuter genders and the word "person"
shall include an individual', a trust, a partnership, a body corporate, an
association or other incorporated or unincorporated organization or entity.
6.13 Prompt Review. The Company will be available and will perform a prompt
review of any information that is pertinent to the timely completion of this
Agreement.
6.14 Legislation Reference. Any reference in this Agreement to any law,
bylaw, rule, legislation, order or act of any government, governmental body or
other regulatory body shall be numbered as to reference thereto as amended or
re-enacted from time to time or as a reference to any successor thereto.
6.15 Severability. If any Article, Section or any portion of any Section of
this Agreement is determined to be unenforceable or invalid for any reason
whatsoever that unenforceability or invalidity shall not affect the
enforceability or validity of the remaining portions of this Agreement and such
unenforceable or invalid Article, Section or portion thereof shall be severed
from the remainder of this Agreement.
6.16 Indemnity. The Consultant acknowledges and agrees that Company shall
not be responsible or liable for any negligence, act or omission of the
Consultant and the Consultant agrees to defend, indemnify and save the Company
harmless from and against any and all claims, demands, losses, damages, costs,
liabilities and expenses of whatever kind or character, on account of any actual
or alleged loss, injury or damage to any person, firm or corporation or to any
property, arising out of or in connection with the services rendered by the
Consultant pursuant hereto.
IN WITNESS WHEREOF the parties have duly executed this Consulting Agreement this
26 day of June, 1999.
- --
INDEX ONLY TECHNOLOGIES INC.
/s/ Cliff Sweeney
- -----------------
Authorized Signing Officer
Cliff Sweeney
Print Name
CREEKSIDE CONSULTANTS INC.
/s/ Norman P. Friend
- --------------------
Authorized Signing Officer
Print Name
<PAGE>
Page F-72
Exhibit 21.1
Exhibit 21.1 - Subsidiaries of the Registrant
Indexonly Technologies, Inc. has the following wholly owned subsidiaries:
Indexonly Technologies USA Inc., a company incorporated pursuant to the laws of
the State of Nevada.
Indexonly Technologies Canada Inc., a company incorporated under the federal
laws of Canada.
<PAGE>
Page F-73
Exhibit 23.2
Exhibit 23.2 - Accountants' Consent
The Board of Directors
Indexonly Technologies, Inc.
We consent to the use of our auditors' report dated January 25, 2000, on the
consolidated balance sheet of Indexonly Technologies, Inc. as at December 31,
1999 and the related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for the period from June 28, 1999 (inception) to
December 31, 1999, included in the registration statement on Form SB-2 and to
the reference to our firm under the heading "Experts" in the prospectus.
Our report dated January 25, 2000, contains an explanatory paragraph that states
that the Company has suffered recurring losses from operations and negative cash
flows, which raise substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of that uncertainty.
/s/KPMG LLP
Chartered Accountants
Richmond, Canada
March 28, 2000
<PAGE>
