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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/12g/A
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
e-Auction Global Trading Inc.
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(Name of Small Business Issuer in its Charter)
Nevada Pending
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
161 Bay Street, BCE Place, Suite 4700
Toronto, Ontario, Canada M5J 2S1
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(Address of principal executive offices) Postal Code
(416) 214-1587
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(Issuer's telephone number)
Securities to be registered pursuant to Section 12(b) of the Act:
None.
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001.
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TABLE OF CONTENTS
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PART I
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Item 1 - Description of Business
Item 2 - Plan of Operation
Item 3 - Description of Property
Item 4 - Security Ownership of Certain Beneficial Owners and Management
Item 5 - Directors, Executive Officers, Promoters and Control Persons
Item 6 - Executive Compensation
Item 7 - Certain Relationships and Related Transactions
Item 8 - Description of Securities
PART II
Item 1 - Market Price of and Dividends on the Registrant's Common
Equity and Other Stockholder Matters
Item 2 - Legal Proceedings
Item 3 - Changes in and Disagreements with Accountants
Item 4 - Recent Sales of Unregistered Securities
Item 5 - Indemnification of Directors and Officers
PART F/S
Financial Information
PART III
Item 1 - Index to Exhibits
Item 2 - Description of Exhibits
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PART I
ITEM 1 - DESCRIPTION OF BUSINESS
INTRODUCTORY STATEMENT
e-Auction Global Trading Inc. ("e-Auction") has elected to file this Form 10-SB
General Form for Registration of Securities of Small Business Issuers
("Registration Statement") on a voluntary basis in order to become a reporting
issuer under the SECURITIES EXCHANGE ACT OF 1934 (the "Act"). Pursuant to the
National Association of Securities Dealers, Inc.'s rules, in order for e-Auction
to continue its listing on the OTC Bulletin Board ("OTCBB"), e-Auction must
become a reporting issuer under the Act. On January 19, 2000, e-Auction's common
shares were delisted from quotation on the OTCBB due to the Company's inability
to become a reporting issuer prior to the deadline imposed by the National
Association of Securities Dealers, Inc. Prior to January 19, 2000, e-Auction's
common stock was quoted on the OTCBB under the symbol "EAUC". The Company's
common shares are currently quoted on the quotation system operated by the
National Quotation Bureau, LLC, known as the Pink Sheets, under the trading
symbol "EAUC".
This Registration Statement, including the information incorporated herein by
reference, contains forward-looking statements including statements regarding
e-Auction's business, growth strategies and anticipated trends in e-Auction's
business and demographics. These forward-looking statements are subject to a
number of risks and uncertainties, certain of which are beyond e-Auction's
control. Actual results could differ materially from the forward-looking
statements included herein as a result of factors described in this section
under the heading "Risk Factors".
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e-Auction was originally organized by the filing of articles of incorporation
(the "Articles of Incorporation") with the Secretary of State of the State of
Nevada on January 8, 1998 under the name "Kazari International, Inc."
("Kazari"). The Articles of Incorporation of Kazari authorized the issuance of
forty million (40,000,000) shares of common stock at a par value of $0.001 per
share.
On February 26, 1999, Kazari, e-Auction Global Trading Inc. (Barbados)
("e-Auction (Barbados)") and QFG Holdings Limited ("QFG") entered into a share
exchange agreement (the "Share Exchange Agreement"). At the time of the Share
Exchange Agreement, QFG was the owner of thirty four million five hundred
thousand (34,500,000) common shares in the capital of e-Auction (Barbados) (the
"e-Auction (Barbados) Shares"), which e-Auction (Barbados) Shares represented
all of the issued and outstanding common shares in the capital of e-Auction
(Barbados). Pursuant to the terms of the Share Exchange Agreement, Kazari
purchased the e-Auction (Barbados) Shares in exchange for thirty four million
five hundred thousand (34,500,000) common shares in the capital of Kazari being
issued from treasury to the shareholders of e-Auction (Barbados) on a one for
one basis. Kazari had no viable business activities at the time of the Share
Exchange Agreement.
On June 10, 1999, Kazari amended its articles of incorporation by filing a
Certificate of Amendment of Articles of Incorporation (the "Certificate") with
the Secretary of the State of Nevada, which Certificate amended Kazari's name to
"e-Auction Global Trading Inc." and increased the number of authorized shares of
common stock from forty million (40,000,000) shares of common stock, par value
$0.001 to two hundred and fifty million (250,000,000) shares of common stock,
par value $0.001.
e-Auction currently has a wholly owned subsidiary, e-Auction (Barbados), which
in turn has one wholly owned subsidiary, e-Auction Global Trading Inc. (Canada).
The Company has a 50.01% ownership interest in e-Auction Austrailasia Pay
Limited, an Australian Company. The Company also owns e-Auction Belgium N.V.,
directly, which in has one wholly owned subsidiary, Schelfhout Computer Systemen
N.V. ("Schelfhout"), a Belgium company. See "Business - Acquisition of
Schelfhout".
BUSINESS ACTIVITIES OF E-AUCTION
e-Auction is a development stage company with the principal objective to be a
provider of real time, electronic auction and related financial services to
auctioneers selling commodities. e-Auction's market strategy is to become a
world leader in the electronic perishable commodity auctions in the short term,
and expand its world leadership into the electronic commodity auctions in the
longer term. In order to better service its customers for electronic auction
services, the Company has identified that it requires business relationships
with a company (or companies) which have the capability to provide foreign
exchange and settlement services to its customers. While no definitive company
has been selected, the Company is confident that such a relationship will be
established.
According to Forrester Research Inc.(1) ("Forrester"), the on-line auction
market is divided into the following four categories; (i) commodity auctions;
(ii) business consignment auctions; (iii) consumer auctions; and (iv) private
auctions. e-Auction will specialize in commodity auctions, which Forrester
estimates to account more than 50% of the total value of business auction
transactions.
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(1) Forrester Research Inc., Business Trade & Technology Strategies,
March 1998.
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[GRAPH]
THE EMERGING ELECTRONIC AUCTION MARKET
The on-line auction model has emerged as a significant channel and electronic
commerce methodology in the business to consumer market ("B2C"), also referred
to as "Independent Auctions", with such companies as eBay, Onsale, uBid and
Bid.com currently providing such services.
However, according to Forrester, the real potential for electronic auctions lies
in the business to business market ("B2B") also referred to as "Commodity
Auctions". Forrester predicts the trade in Commodity Auctions will reach US$32.2
billion by the year 2002 versus only US$5.5 billion dollars for Independent)
Auctions.
e-Auction was founded to capitalize on the market opportunity to provide B2B
electronic auction services. On February 1, 1999, e-Auction (Barbados) acquired
the internet auctioning software, technology and other intellectual property
assets of Generated Solutions Ltd. ("GSL"). GSL's technology provides the
technology platform to allow electronic auctioning to occur effectively.
Previously, GSL had been providing its propriety internet auctioning technology
to a number of auction houses conducting electronic auctions. On February 1,
1999, e-Auction (Barbados) acquired the licence rights previously granted by GSL
to National Electronic Marketing Inc. ("NEMI"). E-Auction acquired the exclusive
rights of NEMI to market GSL's internet auctioning software outside of North
America and NEMI's non-exclusive North American rights. Upon the completion of
the Share Exchange Agreement, e-Auction acquired the rights to market and
exploit the GSL and NEMI technologies from e-Auction (Barbados).
There are a number of components to the e-Auction/GSL trading platform, as
discussed below:
DYNAMIC TRADE SERVER(S)
These server applications are written in Java (and/or C++). They are the
multi-threaded engines that manage all dynamic trading (auctioning). They
support English and Dutch style auctioning as well as bid/offer and bid/ask
trading. They also support reverse or procurement auctions.
The servers communicate to the client through sockets, RMI (Remote Method
Invocation) and/or HTML pages (Java Server Pages). The C++ implementation of the
trade server must be hosted on a Windows NT platform. The Java implementations
of the trade servers are platform independent and may be hosted on any computer
platform that provides a Java Virtual Machine version 1.1.7 or above.
DYNAMIC TRADE CLIENT(S)
There are different trade clients depending on the style of dynamic trade server
used. For Dutch, English and Procurement auctions, the client is either a Java
applet or application. For bid/offer auctions, the client
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is provided as HTML pages hosted on a web site. The bid/ask trading server will
support both a Java client and HTML page interface.
TRADE INFO CATALOGUE
The trade info catalogue is the repository that contains all lot listings for
the sales that are scheduled on the platform. This data is managed by a SQL
database and can be accessed through the trade info manager. The information is
also accessed by the trade servers when the auctions are running.
TRADE INFO MANAGER
The trade info manager is available as a Java application or as a set of HTML
pages (JSP/Servlet based). It is used to maintain the information contained in
the trade info catalogue. The info manager provides a generic interface through
which an auction house may enter the lot information for their sales and
configure their sale parameters.
TRADE ACCOUNTING SERVER
As auction sales are completed, the data from those sales is summarized and
copied to the trade accounting server. This repository and interface is used to
provide billing information for customer settlement with e-Auction. This is not
the settlement of the auction sale itself, but rather the transactional fees due
to e-Auction for the use of the platform.
TRADE HISTORY SERVER
As auction sales are completed, the data from those sales is moved to the trade
history server. This repository and interface is used to provide historical
analysis of the auction results. It provides a JSP/Servlet interface to produce
historical reports.
TRADE SETTLEMENT SYSTEM
The trade settlement system for any particular dynamic trader (auction house)
typically includes invoice printing for buyers, cheque printing for sellers,
collection or deduction of commissions, insurance fees, taxes, etc. It may also
include lot delivery scheduling and lot grading or inspection processes. There
is no generic system for trade settlement, but rather there is a framework that
is tailored to each dynamic trader (auction house). The system can be web-based
(HTML, Java Applet) or client-based (Java or other application).
FINANCIAL SERVICES INTERFACE
Integration to e-Auction's financial services back-end will be offered through
an integration interface. This interface will allow a dynamic trader to host the
financial services on a web-site or access them through e-Auction's web site(s).
e-Auction believes that an enormous opportunity awaits the company which can
successfully integrate and efficiently deliver the various components and
services of a dynamic global trading solution. e-Auction intends to deliver such
a global trading system in the form of an entirely new distribution channel
which will:
(i) improve economic efficiency in the management of sales and
distribution;
(ii) improve information flow and product availability to potential
purchasers; and
(iii) lower the cost of sales by exploiting internet technologies and
sharing a technology platform.
e-Auction has the potential to be successful and profitable because it is
targeting low risk established high volume B2B auction and commodity exchange
markets. e-Auction's high value and high margin transactional revenue model will
help ensure sustainable growth for the long term.
GOVERNMENTAL APPROVAL, REGULATION AND ENVIRONMENTAL COMPLIANCE
Other than general business licensing requirements, e-Auction is unaware of any
governmental approval which is necessary for e-Auction's operations in the
perishable commodity trading sector. In addition, e-
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Auction is unaware of any existing or probable governmental regulations on the
perishable commodity trading sector.
Given the nature of e-Auction's business, e-Auction does not anticipate any
material costs associated with compliance with federal, state and local
environmental laws and regulations.
e-Auction is not aware of any federal, state or local laws and regulations
regulating the Internet at this time which would materially affect e-Auction's
business activities.
REVENUE FROM FINANCIAL SERVICE
e-Auction's intention is not to remove the traditional auction house from the
electronic auction process, but rather e-Auction intends to make the process
more transparent to those involved in the auction process. Currently, there are
multiple steps in the auction process (from the actual auction to providing
foreign exchange services, settlement services, the insurance of goods in
transit and the delivery of the goods). Therefore, individual buyers and sellers
have to arrange the ancillary services around the auction themselves. e-Auction
proposes to provide a cradle to grave solution for the buyers and sellers.
Initially, e-Auction will focus on the financial services component which
includes foreign exchange services and settlement services.
With the acquisition of Schelfhout, the Schelfhout computer system will continue
to provide software solutions to an existing customer base with international
trade. The "new" Schelfhout system will allow individual buyers to conduct their
auction purchases on the Internet in their own domestic currency. e-Auction will
generate revenue from both the foreign exchange and the settlement services.
SCHELFHOUT COMPUTER SYSTEMEN N.V.
Schelfhout was acquired by the Company on January 10, 2000. See "Business -
Acquisition of Schelfhout".
When it was established in 1983, Schelfhout focused on two market sectors: (i)
the computerization of auctions; and (ii) automation for the preservation of
perishable products. As an ancillary to the auction system, a modular graphic
display panel was developed by Schelfhout in 1992 and added to the product
range.
As one of the world's leading solutions provider for perishable commodity (fish,
flower, fruits and vegetables) auction houses, Schelfhout has developed over 150
electronic trading systems for numerous selling organizations all over the
world. Schelfhout delivers the tools to bring together supply and demand under
optimum conditions and thus create a better market situation. Because of its
experience in the marketing of perishable goods and the development of
customized hardware and software solutions in this niche market, Schelfhout
takes pride in its unsurpassed knowledge of the sector of which it has now
become Europe's leading manufacturer.
Schelfhout has developed a range of controllers with microprocessors, customized
for the following market segments :
- - ULO (ultra low oxygen) preservation of hard fruit,
- - Short-term preservation of soft fruit, exotic fruit, vegetables, plants
and flowers, and
- - General temperature control for preservation of deep-frozen and cooled
products.
Schelfhout's controllers are also used to control condensers, gas analysis,
energy management, etc.
Schelfhout has developed a graphic modular display panel on which text, logos
and drawings can be displayed. This innovative concept offers numerous
advantages over standard systems:
- - unlimited dimensions,
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- - storage capacity of more than 100 graphic images, and
- - various special effects are included as standard: scrolling, blinking and
animation via fast displays of successive images
[GRAPH]
EURONET PORTALS
Upon completion of the acquisition of Schelfhout, e-Auction and Schelfhout will
jointly launch EuroNet Trading Portals which can be described as pan-European
networks targeted to link Schelfhout's existing standalone European systems,
which currently trade approximately US$7 billion dollars in perishable
commodities per year.
The networks will be launched into the following three vertical markets:
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- - 38 Fish Auctions Approximately US $2.0 billion in
trade volume annually
- - 29 Fruits and Vegetables Auctions Approximately US $2.4 billion in
trade volume annually
- - 11 Flower Auctions Approximately US $2.4 billion in
trade volume annually
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The EuroNet Trading Portals will link existing Schelfhout clients using the
Internet, extranet and X.25 networks, as well as clients interested in migrating
to Internet Protocol ("IP") based networks.
The EuroNet Trading Portals for fish, fruit, vegetables and flower will consist
of the development of European auction networks which will offer financial
settlement services and foreign exchange services as their main services. The
Internet will enable individual buyers to participate in the auction process
remotely.
The current European landscape of auctions is highly fragmented. This
fragmentation has not allowed for economies of scale to occur as each auction
house has been saddled with expenses. These expenses will be reduced
significantly with the implementation of e-Auction's business proposition.
e-Auction will link existing stand-alone auction houses in each perishable
commodity vertical, which in turn will benefit from the centralization of
ancillary services around the auction process, such as foreign exchange services
and financial settlement services. Stand-alone auction houses currently do
credit checks and receive letters of credit for each buyer. The buyers, in turn,
must repeat the process with each auction house they deal with. e-Auction will
eliminate these redundancies by implementing a centralized financial settlement
solution which will benefit all the parties involved.
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[GRAPH]
The solution will make it possible for a remote buyers to participate in
auctions using their own currency while the auction houses and producers will
also be paid in their own local currencies. Hence, a foreign currency service is
an integral part of the bundled financial services offered by e-Auction.
The whole financial settlement for both buyer and seller (auction house and
producer) should be as understandable and as customer-friendly as possible. All
of these services will be offered on the basis of a transaction fee. The
advantage with this cost structure is that auctions will not need to make
substantial investments in Information Technology ("IT") and infrastructure.
The use of these services is therefore a variable cost.
When a network has been established with the Schelfhout customers, it is the
objective of e-Auction to extend that network to include the remaining European
auctions which are not currently Schelfhout's clients, as well as adding
additional international demand.
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BENEFITS OF EURONET TRADING PORTALS
[GRAPH]
BENEFITS OF EURONET TRADING PORTALS:
BENEFITS TO AUCTION HOUSES ON NETWORK
- - Increased numbers of buyers and sellers;
- - Focuses on core competency rather than issues such as credit checks and
limits;
- - Offers value added service;
- - Offers competitive advantage over other European auction houses; and,
- - Serves as a deterrent for non-payment, since only buyers with credit
approval may participate in the auctions.
BENEFITS TO BUYERS ON NETWORK
- - Need only one letter of credit or a single escrow account;
- - Can purchase from all the auction houses on the network;
- - Receive better quality product; and,
- - Better selection available.
BENEFITS TO SELLER ON NETWORK
(i) Better prices through transparency;
(ii) Increased number of purchasers; and
(iii) Guaranteed payment.
ACQUISITION OF SCHELFHOUT COMPUTER SYSTEMEN N.V.
By a share purchase agreement dated as of January 10, 2000 between the Company,
Luc Schelfhout, Hilde De Laet ("SCS Agreement"), the Company, through its
subsidiary, e-Auction Belgium N.V., acquired all of the shares of Schelfhout, a
Belgium company, from Luc Schelfhout and Hilde De Laet. The purchase price for
the shares of Schelfhout was $10 million, paid by the Company by $4 million cash
and by the issuance
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of 3,636,364 common shares to Luc Schelfhout and Hilde De Laet. The Company
in the SCS Agreement agreed to not sell or otherwise transfer the shares of
Schelfhout during the 12 month period ending on January 10, 2001. As security
for the covenant not to sell the shares and for other matters, the Company
has pledged the shares of Schelfhout in favour of Luc Schelfhout and Hilde De
Laet.
RISK FACTORS
e-Auction should be considered speculative due to the nature of the business in
which e-Auction will be engaged, its early state of development and the degree
of reliance e-Auction places on the expertise of management. Specifically,
assuming completion of the Schelfhout acquisition, e-Auction's business is
subject to numerous risk factors, including but not limited to the following:
E-AUCTION'S LIMITED OPERATING HISTORY AND EVOLVING BUSINESS MODEL - Although the
acquisition of Schelfhout will provide extensive operating knowledge, e-Auction
has a limited operating history under its current business model upon which it
can be evaluated.
SYSTEM DEVELOPMENT AND OPERATION RISKS - USE OF INTERNET - e-Auction's software
products are based on programming languages, which to date have been used
primarily for specialized applications on the desktop. The future success of
e-Auction will depend, in large part, on the development of specialized
programming languages geared to facilitate Internet based applications with a
particular emphasis on wide spread commercial use in a server based environment.
The Company will be required to add additional software and hardware and further
develop and upgrade its existing technology, transaction-processing capability
and network infrastructure to accommodate increased traffic over its supported
networks due to increased auction volumes as its business expands. Any inability
to do so may cause system disruptions, slower response times and degradation in
auction service levels. There can be no assurance that the Company will be able
to upgrade its systems as necessary in a timely manner or to integrate smoothly
any newly developed or purchased upgrades or enhancements to its current
systems. Any inability to do so could have a material adverse effect on the
Company's business, prospects, financial condition, and results of operation.
DEPENDENCE ON MARKET ACCEPTANCE OF E-AUCTION PACKAGED APPLICATIONS - The vast
majority of e-Auction's revenues will be derived from the implementation of
packaged applications around the perishable commodity auction process.
e-Auction's success will depend on the acceptance of financial services and
settlement services application software by the market, as well as e-Auction's
ability to enhance its products to meet the evolving needs of customers on a
timely basis. There can be no assurance of the market's acceptance of
e-Auction's solutions or e-Auction's ability to meet customers' needs.
INTENSE COMPETITION - The e-commerce business to business market is highly
competitive, is rapidly changing, and is significantly affected by new product
introductions and geographical regional market growth. Barriers to entry into
this market are relatively low and e-Auction expects that competition will
intensify in the future. Specific factors upon which e-Auction competes include,
but are not limited to, functionality of its applications, technological
sophistication, ease of use, timing for implementation, quality of support and
services, price and breadth of experience. e-Auction believes that it will
compete favorably on all of these competitive factors. However, there remains
significant risk that competitive forces may effect e-Auction's ability to
compete and generate revenue. Some of the potential competitors to e-Auction in
the fish commodity space are: Fishmonger, Gofish, French Fish, Nieaff-Smidt and
OES. In the flower commodities space: WCOL, American Clock, Nieaff-Smidt and
OES. In the fruits and vegetables commodities space: WCOL, Nieaff-Smidt and OES.
RISKS ASSOCIATED WITH PAST AND FUTURE ACQUISITIONS - e-Auction intends to engage
in selective acquisitions of perishable commodity businesses in the future,
which may include software vendors, auction houses and information technology
service companies. There are no assurances that e-Auction will be able to
identify suitable acquisition candidates available for sale at reasonable
prices, complete any acquisitions or successfully integrate any acquired
business, including Schelfhout when completed, into e-Auction's operations.
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RISKS ASSOCIATED WITH ADDITIONAL FINANCING - e-Auction intends to raise
additional financing, which financing is critical in furthering its business
plan. There are no assurances that e-Auction will be successful in capitalizing
the company and therefore the business plan may not be able to be executed as
stated herein.
THE PROPOSED OPERATIONS OF E-AUCTION ARE SPECULATIVE - The success of
e-Auction's proposed plan of operation depends to a great extent on the
operations, financial condition and management of Schelfhout and other target
companies. While business combinations with entities having established
operation histories are preferred, there are no assurances that e-Auction will
be successful in locating candidates meeting such criteria. In the event that
e-Auction completes business combinations, the success of the e-Auction's
operations will depend on the management of the target companies and numerous
other factors.
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
The Company's success depends, in part, upon the protection of its proprietary
rights in its products, technology and trade secrets. The Company relies on a
combination of patent, copyright, and trademark laws, confidentiality procedures
and licensing arrangements to protect its proprietary rights. There can be no
assurance, however, that the confidentiality and license agreements on which the
Company relies to protect its trade secrets and proprietary technology will be
adequate. Further, the laws of certain countries in which the Company does
business, do not protect the Company's proprietary rights to the same extent as
the laws of the United States. Legal protections of the Company's proprietary
rights may be ineffective in such countries. Policing unauthorized use of the
Company's products is difficult, and litigation to defend and enforce the
Company's intellectual property rights could result in substantial costs and
diversion of resources. Despite the Company's efforts to safeguard and maintain
its proprietary rights both in the United States and abroad, there can be no
assurance that the Company will be successful in doing so, or that the steps
taken by the Company in this regard will be adequate to deter misappropriation
or independent third party development of the Company's technology or to prevent
an unauthorized third party from copying or otherwise obtaining and using the
Company's products or technology. Any failure in the protection of the Company's
proprietary rights could have a material adverse effect on the Company's
business, financial condition and results of operations.
As the number of industry-specific packaged application and service vendors in
the industry increases and the functionality of these products further overlaps,
software development and services companies like the Company may increasingly
become subject to claims of infringement or misappropriation of the intellectual
property rights of others. There can be no assurance that third parties will not
assert infringement or misappropriation claims against the Company in the future
with respect to current or future products. Any claims or litigation, with or
without merit, could be time-consuming, result in costly litigation, diversion
of management's attention and cause product shipment delays or require the
Company to enter into royalty or licensing arrangements. Such royalty or
licensing arrangements, if required, may not be available on terms acceptable to
the Company, if at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations. Adverse
determinations in such claims or litigation could also have a material adverse
effect on the Company's business, financial condition and results of operations.
RAPID TECHNOLOGICAL CHANGE; RISKS OF DEVELOPMENT; DEPENDENCE ON NEW PRODUCTS AND
SERVICES
The Company currently has a substantial number of products and services under
development. There can be no assurance that the Company will not experience
difficulties that delay or prevent the successful development of these new
services. In most cases, substantial expenses will be incurred prior to any
payment by customers.
Rapid technological change, dynamic demands and frequent introductions of new
products and product enhancements characterize the market for the Company's
services. Customer requirements for services can change rapidly as a result of
innovations and changes within the computer hardware and software industries and
the customers' vertical markets, the introductions of new products and
technologies and the emergence, evolution or widespread adoption of industry
standards. The actual or anticipated introduction of new
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services can render existing services obsolete or unmarketable or result in
delays in the purchase of such services.
The Company's future success will depend in large part on its ability to improve
its current services and to develop and market new services that address these
changing markets and market requirements on a timely basis. There can be no
assurance that the Company will be successful in developing and marketing any
new services, that the Company will not experience difficulties that delay or
prevent the successful development, introduction or marketing of such services
or that any new services will adequately address market requirements and achieve
market acceptance. If the Company is unable, for technological or other reasons,
to develop new services in a timely manner in response to, among other things,
changing market conditions or customer requirements, the Company's business,
operation results and financial condition will be materially adversely affected.
Although the Company has no current plans to the contrary, there can be no
assurance that the Company's future services will be similar to, or bear any
resemblance to, its current services.
COMPETITION
The electronic auction market is highly competitive, is changing rapidly, and is
significantly affected by new product and service introductions. Companies are
increasing the demand for industry-specific solutions to meet their needs in
providing products and services to customers and trading partners. Barriers to
entry into this market are relatively low, and the Company expects that
competition will intensify in the future. The market environment in which the
Company operates is extremely dynamic and is characterized by constantly
evolving standards and new market entrants.
The Company's primary competition currently comes from traditional auction
suppliers of hardware and software services such as OES and Palm-Nieaf. OES is
North Americas Largest traditional auction builder specialising on flowers and
tobacco. Palm-Nieaf is Europe oldest auction builder. The company once dominated
the space, now it has 30 installations left predominantly in flowers and fish.
The Company's secondary competition comes from new internet companies such as
World Commerce On-line (WCOL), Decofrut, Farms.com, Pan European Fish Auction
(PEFA), Vertical Net, Moai, OpenSite Technologies, FairMarketSM, Inc, Ariba and
Trade'ex, Gofish, Fishmonger, FreeMarkets and many other. A brief description is
included below:
WCOL delivers Internet-based, global e-commerce solutions to large international
organisations and worldwide vertical industries. Decofrut: provides the
verification of the quality of fruits shipped into the world's largest port,
Rotterdam, and Philadelphia. Farms.com will shortly be offering a Bid-Ask
marketplace. Commodity traders will be able to participate in Real Time Bid-Ask
trading with bids exchanged instantaneously. Pan European Fish Auction (PEFA):
operates a network of electronic Fish Auctions spread over Europe. These
auctions are linked together and accessible to the buyers via the internet, thus
creating a virtual marketplace on a " business-to-business" level. VerticalNet,
Inc. is a creator and operator of vertical trade communities. VerticalNet
leverages the interactive features and global reach of the Internet to create
multi-national, targeted business-to-business communities. Moai provides
commerce solutions for the Internet. Moai provides companies with the technology
and services for customized online auctions and trading exchanges. OpenSite
Technologies: provides online auction solutions. Since 1996, OpenSite has
offered online auction software with quick implementation and ease of
management.
FairMarketSM, Inc. is a provider of networked, online dynamic pricing solutions
that are designed to allow customers to expand their distribution channels and
create new online revenue opportunities. Their primary service offering is an
outsourced, private-label auction solution that is used by some of merchants and
portals on the Web. Ariba and Trade'ex: the evolution of the Internet economy
and the creation of new Digital Marketplaces will streamline the commerce
process and totally transform the way businesses exchange goods, services, and
information. Sorcity is an Internet hosted, business-to-business reverse-auction
service for buyers and sellers of both direct and indirect items. Respond.co is
a online shopping service, a way of matching buyers and sellers of a wide range
of products and services. Gofish: creates a
<PAGE>
-13-
single resource for everyone connected with the seafood industry. Where buyers
and sellers can do business faster and easier than ever before--with features
like real-time pricing and up-to-date credit reporting.
FishMonger is based adjacent to the bustling seafood industry of Seattle, the
Puget Sound, and the North Pacific. It has been developed by combining the
talent from the seafood industry with exceptional expertise from the world of
e-commerce. FreeMarkets creates business-to-business online auctions for buyers
of industrial parts, raw materials, commodities and services. Since 1995, it has
created auctions for goods and services in more than 50 product categories,
including injection molded plastic parts, commercial machining, metal
fabrications, chemicals, printed circuit boards, corrugated packaging and coal.
Many of the Company's competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources than the Company,
greater name recognition, more strategic relationships and a larger installed
base of customers. In addition, certain competitors have well-established
relationships with current or potential customers of the Company. As a result,
the Company's competitors may be able to devote greater resources to the
development, promotion and sale of their services, may have more direct access
to corporate decision-makers based on previous relationships and may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements. There can be no assurance that the Company will be able to compete
successfully against current or future competitors or that competitive pressure
will not have a material adverse effect on its business, operating results and
financial condition.
EMPLOYEES
The Company considers its labour relations to be good and, none of its employees
is covered by a collective bargaining agreement. As of February 1, 2000
e-Auction has thirty five full time employees and five part time employees and
independent contractors. e-Auction is currently dependent upon Daniel McKenzie,
President, C.E.O. and Chairman of e-Auction, Luc Schelfhout, President of
Schelfhout Computer System N.V. and David Hackett, the Chief Financial Officer
of e-Auction and Shane Maine for its success. Mr. Maine has agreed to allocate a
portion of his time to the activities of e-Auction without cash compensation but
has agreed to accept stock options granted as discussed below. None of the
Company's employees is represented by a labor union, and the Company considers
its employee relations to be good. Competition for qualified personnel in the
Company's industry is intense, particularly among software development and other
technical staff. The Company believes that its future success will depend in
part on its continued ability to attract, hire and retain qualified personnel.
MISCELLANEOUS
Currently, e-Auction does not have any registered patents, trademarks, licenses,
franchises, concessions or royalty agreements. There has been small amounts
(approximately Cdn$185,000) spent since inception on research and development.
From February 1999 to present, the Company has had a development team working on
the auction platform.
There are currently no publicly announced new product or services. Currently,
the Company is not dependent on one or a few major customers as the Company is
in development mode. Upon the completion of the acquisition of Schelfhout, the
combined company will have a more diverse customer base, which will not be
dependent on one or a few major customers.
ITEM 2 - PLAN OF OPERATION
The following description of e-Auction's plan of operation should be read in
conjunction with, and qualified in its entirety by, the financial statements and
the notes to the financial statements contained in the Exhibits to this
Registration Statement.
<PAGE>
-14-
CASH REQUIREMENTS
Over the next twelve months, the Company intends to grow rapidly. With this
expansion will come the need for additional cash requirements to fund operating
capital needs. As its business grows, the Company fully intends to significantly
employ its personnel. The acquisition of Schelfhout, has added approximately 30
employees (of which approximately 26 are full time). Such additional personnel
will be required to expand the Company's service offering to its customer base
and to develop additional services for the EuroNet portal strategy.
e-Auction intends to raise additional financing, which financing is critical in
furthering its business plan. The Company just recently completed a private
offering of its common shares raising approximately $8.2 million of new capital.
The Company used a portion of these funds to close the Schelfhout acquisition.
As of the date of this registration statement the Company has $2.8 million in
cash. The Company believes that it has sufficient cash to meet its expected
needs until the end of its current fiscal year (December 31, 2000). The
Company's Schelfhout operation is generating a modest amount of positive cash
flow and any deficiency experienced will be satisfied by a further private
offering of its shares if necessary.
The Company does not foresee any major capital expenditures in its current
fiscal year. The Company intends to grow its staff, both in research and
development personnel as well as increase its sales and marketing staff. The
Company anticipates spending approximately $500,000 out of current working
capital to purchase new computer equipment for the increased staff.
ITEM 3 - DESCRIPTION OF PROPERTY
e-Auction currently has no properties and has not entered into any agreements to
acquire any properties. e-Auction has offices located at 161 Bay Street, Suite
47000, BCE Place, Toronto, Ontario, Canada, M5J 2S1 and at Bormte 204/A,
Stekene, Belgium 9190. The offices at 161 Bay Street are leased by Venture North
Investment Partners Inc. ("Ventures North") from which e-Auction sublets office
space. e-Auction has not entered into a lease agreement and pays all rental
charges on a month to month basis. As part of the Schelfhout acquisition, the
land and building were removed from the company prior to the acquisition. As
part of the acquisition, Schelfhout shall be entitled to remain on the premises
where Schelfhout currently operates and carries on business for a period of
twelve (12) months from January 7, 2000 on a rent free basis and that following
such twelve (12) month period, Schelfhout shall lease the building at a rate of
2,400 BEF per square metre for office space, 1,800 BEF per square meter for the
work room and 1,200 per square metre for the warehouse, for a term of 10 years,
which terms of the lease can be considered as normal at January 7, 2000.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of filing this Registration
Statement, each person known to e-Auction to be the beneficial owner of five
percent or more of e-Auction's common stock:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------ ------------------ ----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE OF CLASS
- ------------------------------------------------------------------------ ------------------ ----------------------
<S> <C> <C>
J. Andrews in Trust for the Shareholders of Sanga International Inc.(A) 16,500,000 27.2%
C/O Blake, Cassels & Graydon
45 O'Connor Street, Ottawa, Ontario K1P 1A4
- ------------------------------------------------------------------------ ------------------ ----------------------
Luc Schelfhout(B) 3,636,364 6.0%
Bornte 204/A, Stekene, Belgium 9190
- ------------------------------------------------------------------------ ------------------ ----------------------
QFG Holding Limited (C) 8,474,193 14%
P.O. Box 659, Roadtown, Tortola, BVI
- ------------------------------------------------------------------------ ------------------ ----------------------
</TABLE>
<PAGE>
-15-
Notes:
(A) The shares are beneficially owned by Sanga International Inc. which is
currently undergoing a restructuring pursuant to Chapter 11 of United
States Bankruptcy laws. Sanga does not have any controlling
shareholder.
(B) Includes 1,818,182 common shares held by Mr. Schelfhout's spouse, Hilde
de Laet. Mr. Schelfhout is an officer and director of the Company.
(C) QFG is controlled by the Ballantine Family Trust, and David Ballantine
is the sole director of QFG.
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, positions and ages of the executive
officers and directors of e-Auction as at March 1, 2000. Directors are elected
at e-Auction's annual meeting of shareholders and serve for one year or until
their successors are elected. Officers are elected by the board of directors and
their terms of office are, except to the extent governed by employment
contracts, at the discretion of the board of directors.
<TABLE>
<CAPTION>
- ------------------------------------- ----------------------------------- -----------------------------------
NAME AGE TITLE
- ------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
Daniel McKenzie 45 President, C.E.O. and Chairman
- ------------------------------------- ----------------------------------- -----------------------------------
Luc Schelfhout 38 President, Schelfhout Computer
System N.V.
- ------------------------------------- ----------------------------------- -----------------------------------
David Hackett 34 Chief Financial Officer
- ------------------------------------- ----------------------------------- -----------------------------------
Philip Lapp 71 Director
- ------------------------------------- ----------------------------------- -----------------------------------
Phillip MacDonnell 58 Director
- ------------------------------------- ----------------------------------- -----------------------------------
Eric White 46 Director
- ------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
BIOGRAPHIES
Dan A. McKenzie, President, C.E.O. and Chairman.
Mr. McKenzie brings a strong and diversified background in corporate management
and technology development. Mr. McKenzie has 19 years of high tech management
experience, with 15 as an owner/manager. He is the principal founder of two
successful businesses, McKenzie Brown Canada and EveryWare Development Inc. His
experience in mapping out strategic directions, operational skills, and
turnaround techniques have, in each case, maximized shareholder returns.
McKenzie Brown, a national computer peripheral distribution company, was founded
in 1983 and reached sales in excessive of $30 million per year. Mr. McKenzie was
the initial investor and founding partner of EveryWare Development Inc. in 1990
and built the business through sales and software development with a record of
profit for 5 consecutive years as President and CEO. EveryWare is a market
leader in providing innovative cross-platform development tools for creating
dynamic Web-based applications. Dan took the company public in 1995 as CEO and
Chairman of the Board. Dan led the company through numerous financings and
acquisitions, including InContext Systems Inc. (TSE:INI) and in November 1998
EveryWare was purchased by Pervasive Software Inc. Mr. McKenzie's experience in
growing and merging early stage technology companies enables him to identify the
needs of the marketplace to bring new products and services quickly and
profitably to market. Mr. McKenzie's entrepreneurial spirit developed after
working his way up through management at Corvus Computer Corporation and Maclean
Hunter Limited. Mr. McKenzie was National Sales Manager for Corvus, responsible
for developing revenues and reseller relationships across Canada, and at Maclean
Hunter he served in their Business Press Division.
<PAGE>
-16-
Luc Schelfhout, President, Schelfhout Computer Systemen N.V.
Mr. Schelfhout created the company in 1983 which has grown under his management
into the market leader in the development and implementation of electronic
trading systems. Prior to starting Schelfhout, Mr. Schelfhout worked for Stafa
Control Systems, a company specialising in control and measurement systems. Mr.
Schelfhout also has a degree in Electronics (A1-B1) and is a licensed pilot.
Through Mr. Schelfhout's leadership, Schelfhout has lead in the development of
more than 100 electronic trading systems world-wide. In addition, numerous
feasibility studies have been prepared the highlights are as follows:
- - Apeda, New Delhi, India: establishment of 4 flower markets in Pune,
Bombay, Bangalore & Madras.
- - European Commission: Information and trading network for the marketing of
fresh fish in Europe (INFOMAR).
- - Irish Fish Producers' Organisation Dublin, Ireland : fish auction network.
- - Meat & Livestock Commission, Milton Keynes : Improvement of IT in UK
cattle markets.
- - F.A.O. of the UNITED NATIONS : establishment of fish markets in Morocco.
David Hackett, Chief Financial Officer
David Hackett attained his Chartered Accountant designation in 1989 while at
Ernst & Young. Mr. Hackett also holds a Master of Business Administration from
the University of Western in Ontario, Canada. In 1992, Mr. Hackett co-founded
323-2323- The Infotainment Line, a movie, restaurant, kids and special events
information telephone service. From 1994 to 1996, Mr. Hackett was a consultant
for the television production industry with Alliance Atlantis Communications
Inc. (formerly "Atlantis Communications Inc.") and CanWest Global Communications
Corp. In 1996, Mr. Hackett joined EveryWare Development Inc. ("EveryWare"), a
provider of middleware database conductivity tools. As Chief Financial Officer
of EveryWare, Mr. Hackett was responsible for the finance and administration
department as well as the day to day operations of EveryWare and its
subsidiaries. While at EveryWare, Mr. Hackett completed numerous financings,
acquisitions and divestitures including the sale of EveryWare to Pervasive
Software Inc. in November 1998. Mr. Hackett is not a director of any other
reporting company.
Philip A. Lapp, Director
Dr. Lapp has been Senior Vice President and Director of SPAR Aerospace Limited,
responsible for all engineering and technical programs. While there, Mr. Lapp
established and developed entry into the medical and technological markets. Dr.
Lapp served as both Director of Technical Operations and Chief Engineer at de
Havilland Aircraft of Canada. At the Massachusetts Institute of Technology Dr.
Lapp was a research Associate and Instructor in Aeronautical Engineering. Dr.
Lapp has received a Centennial Medal 1967, Honorary Member, Engineering
Institute of Canada 1973, Fellow of Ryerson Polytechnical Institute 1987, Gold
Medal from the Association of Professional Engineers of Ontario in1992, Officer
of the Order of Canada in 1995. Dr. Lapp still holds many present Directorships
including CDM Information Inc., InfoWest Services Inc., Kenneth Molson
Foundation (Chairman), EMR Microwave Technology Corporation, PCI Enterprises
Inc. Mind The Store Inc. (Chairman), VisuaLabs Inc., and Honorary Governor, York
University. Dr. Lapp also holds professional affiliations with; Canadian Council
of Professional Engineers, (President 1987-1988), Fellow of the Royal Society of
Canada, Fellow of the Canadian Academy of Engineering, (President 1988), Member
of the Association of Professional Engineers of Ontario (President 1982-1983),
Senior Member of the Institute of Electrical and Electronics Engineers, Fellow
of Canadian Aeronautics and Space Institute (President 1967-1968), Member of
Canadian Remote Sensing Society and Senior Member of American Aeronautics and
Astronautics.
Phil MacDonnell, Director
Mr. MacDonnell is presently Vice President and a Director of Hawk Capital
Corporation and Hawk Partners Ltd., which provides financial services to
Canadian companies, he has held these positions since 1998 and 1997
respectively. Mr. MacDonnell is also currently President and Director of P.G.
MacDonnell Services Ltd., a Director of Constitution Insurance Company since
1987, Director of Syntex Systems Ltd.
<PAGE>
-17-
(a publicly traded company on the ASE, since 1997), Director of World Wide
Warranty (CDNX) and a Director of Palco Communications, apriate Alabama
company since 1999. Mr. MacDonnell obtained an Honors Business Administration
Degree at the University of Western Ontario in 1960, later in 1964 he
obtained a Chartered Accountants Degree from the Institute of Chartered
Accountants. Mr. MacDonnell became a founding partner in Loewen Ondaattje
McCutheon & Co. Ltd. (an international institutional stock Brokerage Company
and publicly traded on the TSE). From 1989-1991 Mr. MacDonnell was the
President of Family Trust Corporation before it was sold to Manulife
Insurance. Mr. MacDonnell has sat on the Board of the Vancouver Stock
Exchange and was a Director of Grand Field Pacific Ltd., (a publicly traded
hotel company on the TSE 1996-1998) and EveryWare Development Inc., (a
publicly traded software company on the ASE 1997-1998)
Eric White, Director
Mr. White is currently a Partner with The Chancellor Partners, a executive
recruiting firm, and has held that position since 1993. From 1989-1993 Mr. White
was a Partner with Chowne Beaston White & Hoogstra. In 1986-1989 Mr. White was a
Partner with Corporate Recruiters Ltd. Mr. White served as Director, Personnel
for Expo 86 with the Expo 86 Corporation from 1983-1986. Mr. White was a
management consultant with Touche Ross & Partners from 1981-1983. In 1980-1981
Mr. White was a self-employed search consultant. Mr. White was also the
Principal for Real Estate Development and Retail Building Supplies for two
locations with the Scotia Development Corporation from 1975-1980. Mr. White
graduated from the St. Thomas University in New Brunswick with a B.A. (Honors).
The experience that Mr. White brings is in, assisting management in solving
organizational challenges, managing organizational change, merging/rationalizing
staffing & designing/implementation of strategic plans. His experience also
includes large national consulting firms and local consulting firms.
ITEM 6 - EXECUTIVE COMPENSATION
The following table sets forth certain information for the years ended December
31, 1999 and 1998 regarding the compensation of the Company's Chief Executive
Officer and each of the other most highly compensated executive officers whose
compensation on an annualized basis (salary and bonus) for services rendered in
all capacities to the Company during the year ended December 31, 1999 or 1998
exceeded $100,000 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------ -------------------------------------- ---------------
Long-term compensation
- --------------------------- -------------------------------------- --------------------------- ---------- ---------------
Annual compensation Awards Payouts
- ------------------- ------- ------------ --------- --------------- ------------ -------------- ---------- ---------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------- ------- ------------ --------- --------------- ------------ -------------- ---------- ---------------
Restricted Securities
Other annual stock underlying LTIP All other
Name and Salary Bonus compensation awards options/ SARs payouts compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------- ------- ------------ --------- --------------- ------------ -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fred Tham, 1999 - - - - - - -
CEO & President(1) 1998 $39,500
- ------------------- ------- ------------ --------- --------------- ------------ -------------- ---------- ---------------
Shane Maine, CEO 1999 - - - - 1,000,000 - -
& President (2) 1998
- ------------------- ------- ------------ --------- --------------- ------------ -------------- ---------- ---------------
David Hackett, 1999 C$58,333 1,000,000
Chief Financial 1998
Officer
- ------------------- ------- ------------ --------- --------------- ------------ -------------- ---------- ---------------
</TABLE>
(1) Mr. Tam resigned as CEO and President on February 26, 1999.
<PAGE>
-18-
(2) Mr. Maine resigned as acting CEO and director of the Company on January
17, 2000 and was replaced as CEO by Dan McKenzie on January 17, 2000.
Shane Maine, a former director and acting CEO of e-Auction, does not receive any
compensation, other than options as indicated below, for his services rendered
to e-Auction, has not received such compensation in the past, and is not
accruing any compensation pursuant to any agreement with e-Auction. However, Mr.
Maine anticipates receiving benefits as a beneficial shareholder of e-Auction.
Should e-Auction become profitable and produce commensurate cash flows from
operations and/or through the sale of strategic investments, there may be some
level of compensation paid to Mr. Maine in the future. However, such
compensation will be subject to approval by e-Auction's board of directors.
Dan McKenzie, e-Auction's President, Chief Executive Officer, and Chairman has
an employment contract with the Company whereby he receives a base salary of
Cdn$150,000 per annum. If the Company terminates Mr. McKenzie without just cause
before December 31, 2000 Mr. McKenzie will receive a total amount equal to the 6
months compensation; without just cause after December 31, 2000 Mr. McKenzie
will receive a total amount equal to the 12 months compensation. Mr. McKenzie
was granted 1,000,000 options in e-Auction. The options vest over 3 years and
are exercisable at $0.85 per common share. Furthermore, during the month of
April 2000, the Board will review Mr. McKenzie's option amount with the ability
to grant an additional 500,000 options which will be vesting based on specific
performance goals of e-Auction. Option pricing will be determined based on the
share price at the time of grant in April 2000. Should there be a change in
control of the Company, all of Mr. McKenzie's unvested options will vest.
David Hackett, e-Auction's Chief Financial Officer, has an employment contract
with the Company whereby he receives a base salary of Cdn$100,000 per annum and
is entitled to bonuses of up to Cdn$100,000 per annum. If the Company terminates
Mr. Hackett without just cause Mr. Hackett will receive a total amount equal to
the greater of (i) 12 months compensation; and (ii) $150,000.00 plus bonuses.
Mr. Hackett was granted 1,000,000 options in e-Auction. The options vest over 3
years and are exercisable at $0.85 per common share. Should there be a change in
control of the Company, all of Mr. Hackett's unvested options will vest.
No retirement, pension, annuity benefits have been adopted by e-Auction for the
benefit of its employees.
INCENTIVE STOCK OPTIONS GRANTED TO NAMED EXECUTIVE OFFICERS DURING THE FINANCIAL
YEAR ENDED DECEMBER 31, 1999
The following table sets forth the particulars of individual grants of options
to purchase Common Shares made to each of the Named Executive Officers who were
granted options during the financial year ended December 31, 1999:
<TABLE>
<CAPTION>
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------------
MARKET VALUE OF
% OF TOTAL SECURITIES
OPTIONS GRANTED UNDERLYING
SECURITIES UNDER TO EMPLOYEES IN OPTIONS ON THE
NAME OPTION GRANTED FISCAL YEAR EXERCISE PRICE DATE OF THE GRANT EXPIRATION DATE
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Dan McKenzie 1,000,000 23% $0.85 $0.84375 November 30, 2009
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------------
David Hackett 1,000,000 23% $0.85 $0.84375 November 30, 2009
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------------
Shane Maine 1,000,000 23% $0.85 $0.84375 November 30, 2009
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------------
</TABLE>
COMPENSATION OF DIRECTORS
The Company has not yet instituted any standard arrangement for the compensation
of its directors. On August 29, 1999 Michael Gilley received stock options to
purchase up to 250,000 shares of common stock in e-Auction. The options vest
over 3 years and are exercisable at $5.00 per common share. Under an agreement
dated March 1, 1999 with Millennium Advisors Inc., of which Mr. Gilley is
President, e-Auction agreed to pay to Millennium Advisors a management fee of
$20,000 per month for advice and services with respect to mergers and
acquisitions, corporate structuring, corporate administration, and
<PAGE>
-19-
financing. As of the date of filing this Registration Statement, the total
amount of management fees due payable to Millennium Advisors Inc. as fees has
accrued to approximately $200,000 and as of the date of this Registration
Statement has not been yet paid.
On December 1, 1999, Mr. McKenzie, Mr. Hackett and Mr. Maine, a former director
and acting Chief Executive Officer, each received stock options to purchase up
to 1,000,000 shares of common stock in e-Auction. The options vest over 3 years
and are exercisable at $0.85 per common share.
STOCK OPTION PLAN
e-Auction established a stock option plan on March 1, 1999 (the "Stock Option
Plan") to provide incentives to attract, retain and motivate eligible persons
whose presence and potential contributions are important to the success of
e-Auction. The purpose of the Stock Option Plan is to further the interest of
e-Auction and its stockholders by providing incentives in the form of stock or
stock options to key employees and directors who contribute materially to the
success of e-Auction. The grant of options will recognize and reward outstanding
individual performances and contributions and will give such persons a
proprietary interest in e-Auction, thus enhancing their personal interest in
e-Auction's continued success and progress. This program will also assist
e-Auction in attracting and retaining key employees and directors. To date
4,300,000 options have been granted with exercise prices ranging from $0.01 to
$5.00 per common share. Options to purchase 3,250,000 common shares of e-Auction
have been issued to the officers and directors as a group.
<TABLE>
<S> <C> <C>
DATE NUMBER PRICE
- ---- ------ -----
December 1, 1998 1,000,000 $0.01
August 29, 1999 250,000 $5.00
December 1, 1999 3,050,000 $0.85
January 20, 2000 300,000 $2.00
March 1, 2000 1,300,000 $4.38
----------------
Total 5,900,000
----------------
</TABLE>
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
e-Auction believes that the terms and conditions of the following transaction
was no less favorable to e-Auction than terms attainable from unaffiliated third
parties.
As previously described in Item 1, on February 26, 1999, e-Auction entered into
a stock exchange agreement with the stockholders of e-Auction (Barbados) (the
"Stock Exchange Agreement"). This transaction was made at a time when
e-Auction's common stock was infrequently traded with virtually no trading
volume. e-Auction issued a total of 34,500,000 of its common stock to the
stockholders of e-Auction (Barbados) in exchange for all of the issued and
outstanding shares in the capital of e-Auction (Barbados). The terms and
conditions of the Stock Exchange Agreement were determined by the parties
through arms length negotiations. However, no appraisal was performed. As a
result of the Share Exchange Agreement, the e-Auction (Barbados) shareholders
received 86.6% of the outstanding shares of common stock of e-Auction.
e-Auction treated the Share Exchange Agreement as an acquisition of e-Auction
(Barbados) and a recapitalization whereby e-Auction (Barbados) was the
accounting acquirer. At the time of the acquisition, there were only an
infrequent number of trades and virtually no trading volume of the common stock
of e-Auction and e-Auction was unable to estimate the market value of its common
stock to determine resulting valuation of this acquisition.
On January 10, 2000, e-Auction, through its subsidiary e-Auction Belgium N.V.,
purchased all of the shares of Schelfhout in exchange for consideration of US$10
million, of which 1,818,182 common shares of e-Auction were issued to Luc
Schelfhout, a current officer of the Company, and 1,818,182 common shares of
e-Auction were issued to Mr. Schelfhout's spouse, Hilde de Laet.
<PAGE>
-20-
ITEM 8 - DESCRIPTION OF SECURITIES
As previously described in Item 1 under the heading "Description of Business",
e-Auction is authorized to issue two hundred and fifty million (250,000,000)
shares of common stock, of which 60,539,030 common shares are currently issued
and outstanding. The holders of common stock are entitled to one vote per share
on each matter submitted to a vote of shareholders, including the election of
directors. No stockholder is entitled to cumulative votes, preemptive,
subscription or conversion rights. The election of directors and other general
stockholder action requires the affirmative vote of a majority of shares
represented at a duly held meeting at which a quorum is represented, except that
pursuant to the by-laws, a written consent to corporate action by a majority of
stockholders entitled to vote on a matter is permitted. The outstanding shares
of common stock are validly issued, fully paid and non-assessable.
The holders of common stock are entitled to receive dividends when and if
declared by the board of directors. In the event of liquidation, dissolution or
winding up of the affairs of e-Auction, the holders of common stock are entitled
to share ratably in all assets remaining for distribution to them subject to the
rights of holders of senior securities, if any.
There are no provisions in the charter or by-laws of e-Auction that would delay,
defer or prevent a change in control.
At the present time, no preferred stock is authorized in the Articles of
Incorporation, and there are no warrants outstanding. e-Auction approved the
issuance of up to 6,000,000 options to acquire common stock in the company on
March 1, 1999 pursuant to the Company's Stock Option Plan. At the time of filing
the Registration Statement, there were 5,900,000 options outstanding.
The Company's common stock may be deemed to be "penny stock" as that term is
defined in Rule 3a51-1 of the Securities and Exchange Commission. Penny stocks
are stocks (i) with a price of less than $5.00 per share; (ii) that are not
traded on a "recognized" national exchange; (iii) whose prices are not quoted on
the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet
requirement (i) above); or (iv) in issuers with net tangible assets less than
$2,000,000 (if the issuer has been in continuous operation for at least three
years) or $5,000,000 (if in continuous operation for less than three years), or
with average revenues of less than $6,000,000 for the last three years. Section
15(g) of the Securities Exchange Act of 1934, as amended, and Rule15g-2 of the
Securities and Exchange Commission require broker/dealers dealing in penny
stocks to provide potential investors with a document disclosing the risks of
penny stocks and to obtain a manually signed and dated written receipt of the
document before effecting any transaction in a penny stock for the investor's
account. Potential investors in our common stock are urged to obtain and read
such disclosure carefully before purchasing any shares that are deemed to be a
"penny stock." Moreover, Rule 15g-9 of the Securities and Exchange Commission
requires broker/dealers in penny stocks to approve the account of any investor
for transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker/dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker/dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
the Company's common stock to resell their shares to third parties or to
otherwise dispose of them.
SHARES ELIGIBLE FOR FUTURE SALES
Of the 60,539,030 outstanding shares of common stock of e-Auction, 4,820,000 are
free trading shares as of the date of filing this Registration Statement and
55,719,030 shares of common stock are restricted
<PAGE>
-21-
securities as that term is defined in Rule 144 promulgated under the
SECURITIES ACT OF 1933 ("Restricted Securities").
Rule 144 governs resale of Restricted Securities for the account of any
person, other than the issuer, and restricted and unrestricted securities for
the account of an "affiliate" of the issuer. Restricted securities generally
include any securities acquired directly or indirectly from an issuer or its
affiliates, which were not issued or sold in connection with a public
offering registered under the SECURITIES ACT of 1933. An affiliate of the
issuer is any person who directly or in directly controls, is controlled by,
or is under common control with the issuer. Affiliates of e-Auction may
include its directors, executive officers and persons directly or indirectly
owning 10% or more of the outstanding common stock. Under Rule 144,
unregistered resale of restricted common stock cannot be made until it has
been held for a minimum of one year from the later of its acquisition from
e-Auction or an affiliate of e-Auction. Thereafter, shares of common stock
may be resold without registration subject to Rule 144's volume limitation
aggregation, broker transaction, notice filing requirements, and requirements
concerning publicly available information about e-Auction ("Applicable
Requirements"). Resale by e-Auction's affiliates of restricted and
unrestricted common stock is subject to the Applicable Requirements. The
volume limitations provide that a person, or persons who must aggregate their
sale cannot, within any three-month period, sell more than the greater of (i)
one percent of the then outstanding shares, or (ii) the average weekly
reported trading volume during the four calendar weeks preceding each such
sale. A person who is not deemed an "affiliate" of e-Auction and who has
beneficially owned shares for at least two years would be entitled to sell
such shares under Rule 144 without regard to the Applicable Requirements.
At the time of filing this Registration Statement, the Restricted Securities
have not been held for more than two years. However, between now and the year
2001, approximately 35,020,000 of the Restricted Securities will have been held
for more than two years and therefore could be sold without limitation. No
prediction can be made as to the effect, if any, that sales of shares of common
stock or the availability of such shares for sale will have on the market prices
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of common stock may be sold in the public market would likely have a
material adverse effect on prevailing market prices for the common stock and
could impair e-Auction's ability to raise capital through the sale of its equity
securities.
TRANSFER AGENT, REGISTRAR AND DIVIDEND DISBURSING AGENT
Interwest Transfer Co., Inc., located at 100-1981 East Murray Holiday Road, Salt
Lake City, Utah, 84117 was appointed transfer agent, registrar and dividend
disbursing agent for all of the shares of common stock of e-Auction on April 15,
1999 and continues to act in those capacities as of the date of filing this
Registration Statement.
<PAGE>
-22-
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
e-Auction's common stock is currently traded on the OTCBB under the symbol
"EAUC". The following table sets forth, for the periods indicated, the high and
low bid quotations for the common stock of e-Auction as reported on the OTCBB
until January 19, 2000 and on the Pink Sheets thereafter. The bid prices reflect
inter-dealer quotations, do not include retail mark-ups, markdowns, or
commissions and do not necessarily reflect actual transactions.
<TABLE>
<CAPTION>
----------------------------- ----------------- ----------------
MONTH ENDED PRICE HIGH PRICE LOW
----------------------------- ----------------- ----------------
<S> <C> <C>
January, 1999 2.70 2.30
----------------------------- ----------------- ----------------
February, 1999 n/a n/a
----------------------------- ----------------- ----------------
March, 1999 9.05 4.70
----------------------------- ----------------- ----------------
April, 1999 11.00 6.60
----------------------------- ----------------- ----------------
May, 1999 11.375 9.500
----------------------------- ----------------- ----------------
June, 1999 9.9375 7.000
----------------------------- ----------------- ----------------
July, 1999 9.250 5.750
----------------------------- ----------------- ----------------
August, 1999 5.875 1.750
----------------------------- ----------------- ----------------
September, 1999 2.375 1.1875
----------------------------- ----------------- ----------------
October, 1999 1.78125 1.09375
----------------------------- ----------------- ----------------
November, 1999 1.46875 1.26
----------------------------- ----------------- ----------------
December, 1999 2.719 0.906
----------------------------- ----------------- ----------------
January, 2000 3.50 1.688
----------------------------- ----------------- ----------------
February, 2000 4.38 2.375
----------------------------- ----------------- ----------------
Up to March 3, 2000 6.00 5.00
----------------------------- ----------------- ----------------
</TABLE>
To the best of e-Auction's knowledge, prior to February 26, 1999 (the date of
the Share Exchange Agreement between Kazari and e-Auction (Barbados)), no
broker-dealer made an active market or regularly submitted quotations for
e-Auction's common stock. During this period, there were only an infrequent
number of trades and virtually no trading volume.
As of January 18, 2000, there were 113 holders of record of e-Auction's common
stock.
DIVIDENDS
e-Auction has not paid any dividends to date and has no plans to do so in the
immediate future. The current policy of e-Auction's board of directors is for
e-Auction to retain all earnings, if any, to provide funds for operations and
expansion of e-Auction's business. The declaration of dividends, if any, will be
subject to the discretion of the board of directors, which may consider such
factors as e-Auction's results of operations, financial condition, capital needs
and acquisition strategy, amongst others.
ITEM 2 - LEGAL PROCEEDINGS
Except as described below, e-Auction is not presently a party to any litigation,
nor to the knowledge of the board of directors is there any litigation
threatened against e-Auction.
(1) An action (the "Action") was commenced by Icon Capital Corporation (the
"Plaintiff") in the United States District Court - Central District of
California on November 17, 1999 against John Andrews, e-Auction Global
Trading Inc. (a Nevada Corporation), e-Auction Global Trading Inc. (a
Barbados Corporation), e-Medsoft.com, e-Net Global Financial Services,
Inc., Kazari International, Inc., Shane Maine, Shaun Maine, John
McLennan, QFG Holdings Limited,
<PAGE>
-23-
Ventures North International Inc, Jeff Wheeler, 582976 BC Ltd. and
Sanga International, Inc. ("Sanga") as a nominal defendant.
The Action is a shareholder derivative action brought on behalf of the
nominal defendant Sanga. The Plaintiff, on behalf of Sanga, alleges
that the defendants damaged Sanga by: (i) engaging in conversion; (ii)
engaging in fraud; (iii) interfering with Sanga's prospective business
advantage; (iv) breach of contract; (v) violating California usury
laws; and (vi) breach of fiduciary duty. As such, the Plaintiff claims
that the defendants' actions have not only damaged Sanga, but also the
Plaintiff and the remaining shareholders of Sanga totaling as much as
$100 million dollars.
The Plaintiff also seeks a preliminary and permanent injunction
restraining and enjoining all defendants from: (i) using the
proprietary internet auction software of Sanga; (ii) using the
proprietary financial services technology of Sanga; (iii) representing
that the defendants own or have the right to utilize the internet
auction software, the financial services technology or other assets
from Sanga; (iv) continuing to conceal any true and material facts
regarding e-Auction; (v) transferring Sanga's financial services
technology;(vi) transferring any assets of Sanga; and (vii) enforcing
any loans.
The Action was stayed on November 29, 1999 as a result of Sanga filing
for protection pursuant to Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court - Central District of California.
(2) A second action (the "ICON Action") was commenced by Icon Capital
Corporation (the "Plaintiff") in the United States District Court -
Central District of California on February 7, 2000 against John
Andrews, e-Auction Global Trading Inc. (a Nevada Corporation),
e-Auction Global Trading Inc. (a Barbados Corporation), e-Medsoft.com,
e-Net Global Financial Services, Inc., Kazari International, Inc.,
Shane Maine, Shaun Maine, John McLennan, QFG Holdings Limited, Ventures
North International Inc, Jeff Wheeler, 582976 BC Ltd. and DOES 1-50.
The Plaintiff, a shareholder of Sanga International Inc., alleges that
the defendants breached their fiduciary duties to the Plaintiff. As
such, the Plaintiff claims that the defendants' actions have damaged
the Plaintiff totaling several millions of dollars.
The Company does not believe that either of the two above described actions will
have any material adverse effect on the Company or its assets or business.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
In a report dated June 8, 1998, David A. Cox, a Chartered Accountant engaged by
e-Auction, reported on e-Auction's interim financial operations from the date of
incorporation on January 8, 1998 to June 1, 1998. Such report did not contain an
adverse opinion or disclaimer of opinion, nor was such report qualified or
modified as to uncertainty, audit scope or accounting principles, except that
the statements were prepared in accordance with Canadian generally accepted
accounting principals. There were no disagreements with David A. Cox on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure. It was decided between Mr. Cox and the Company that
due to Mr. Cox wishing to pursue other areas of accounting practice, Mr. Cox
decided to forego the account. The departure of Mr. Cox as auditor of the
Company was not due to any disagreement or dissatisfaction on the part of either
Mr. Cox or the Company. While there is no record that the board of directors
approved of the departure of Mr. Cox, the board has approved of the hiring of
Dale Matheson Carr-Hilton to become the auditors of the Company.
On December 1, 1999, Dale Matheson Carr-Hilton was hired as the auditors of
e-Auction.
<PAGE>
-24-
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
Since the date of its incorporation, the following transactions were effected by
e-Auction in reliance upon exemptions from registration under the SECURITIES ACT
OF 1933, as amended, (the "1933 Act") as provided in Section 4(6) thereof.
Each certificate issued for unregistered securities contained a legend stating
that the securities have not been registered under the Act and setting forth the
restrictions on the transferability and the sale of the securities.
On January 8, 1998, e-Auction issued 1,250,000 shares of common stock equally
to Fred Tham, Kam Chun Hui, Noni Wee, Kar Chun Chow and AiNgoh Chiam for an
aggregate purchase price of $1,250.00 pursuant to Section 4(6) of Regulation
D of the 1933 Act. E-Auction believes that the investors had knowledge and
experience in financial and business matters which allowed them to evaluate
the merits and risks of the receipt of these securities and that they were
knowledgeable about e-Auction's operations and financial condition.
On January 30, 1998, e-Auction issued 4,000,000 shares of common stock at a
purchase price of one cent ($0.01) per share for an aggregate purchase price of
$40,000.00 through an offering circular under Rule 504 of Regulation D
promulgated under the 1933 Act. e-Auction believes that the investors had
knowledge and experience in financial and business matters which allowed them to
evaluate the merits and risks of the receipt of these securities and that they
were knowledgeable about e-Auction's operations and financial condition.
On April 26, 1998, e-Auction issued 70,000 shares of common stock at a purchase
price of three dollars ($3.00) per share for an aggregate purchase price of
$210,000.00 pursuant to an offering under Rule 504 of Regulation D promulgated
under the 1933 Act. e-Auction believes that the investors had knowledge and
experience in financial and business matters which allowed them to evaluate the
merits and risks of the receipt of these securities and that they were
knowledgeable about e-Auction's operations and financial condition.
On February 26, 1999, e-Auction entered into a Stock Exchange Agreement with the
stockholders of e-Auction (Barbados). e-Auction issued a total of 34,500,000
shares of common stock of e-Auction pursuant to Regulation S promulgated under
the 1933 Act to the e-Auction (Barbados) stockholders in exchange for all of the
outstanding shares of e-Auction (Barbados). e-Auction believes that the
stockholders of e-Auction (Barbados) had knowledge and experience in financial
and business matters which allowed them to evaluate the merits and risks of the
receipt of these securities and that they were knowledgeable about e-Auction's
operations and financial condition.
On August 13, 1999, e-Auction issued 197,219 shares of common stock to the
Millennium Advisors Inc. as payment for the fee and interest on a $1 million
loan made to the Company in August 1999. The common shares were issued to
Millennium Advisors Inc., as a non-US person, pursuant to Regulation S
promulgated under the 1933 Act. e-Auction believes that Millennium Advisors
Inc. had knowledge and experience in financial and business matters which
allowed them to evaluate the merits and risks of the receipt of these
securities and that they were knowledgeable about e-Auction's operations and
financial condition.
On January 7, 2000, the Company issued 16,885,447 shares of common stock to
various non-United States purchasers pursuant to Regulation S promulgated
under the 1933 Act upon the exercise of special warrants previously issued by
the Company. e-Auction believes that the purchasers of the special warrants
had knowledge and experience in financial and business matters which allowed
them to evaluate the merits and risks of the receipt of these securities and
that they were knowledgeable about e-Auction's operations and financial
condition.
On January 10, 2000, the Company issued 3,636,364 shares of common stock to
the former shareholders of Schelfhout pursuant to Regulation S promulgated
under the 1933 Act as partial consideration for the purchase by the
<PAGE>
-25-
Belgium subsidiary of the Company of all of the shares of Schelfhout.
e-Auction believes that the stockholders of Schelfhout had knowledge and
experience in financial and business matters which allowed them to evaluate
the merits and risks of the receipt of these securities and that they were
knowledgeable about e-Auction's operations and financial condition.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of e-Auction contain the following provisions
which limit the liability of directors:
ARTICLE V
The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permissible under the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented.
ARTICLE VI
The corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented (the "Law") indemnify and any all persons whom it shall
have power to indemnify under the Law from and against any and all of
the expenses, liabilities, or other matters referred to in or covered
by the Law. The indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of
the heirs, executors and administrators.
Section 9 of e-Auction's By-laws, which reads as follows, provides for the
indemnification of agents of and the purchase of liability insurance:
For purposes of this Section 9, "agent" means any person who is or was
a director, officer, employee or other agent of the Corporation, or is
or was serving at the request of the Corporation as a director,
officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a
director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor corporation of the Corporation or
of another enterprise at the request of such predecessor corporation of
the Corporation or of another enterprise at the request of such
predecessor corporation; "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative
or investigative; and "expenses" included without limitation,
attorneys' fees and any expenses of establishing a right to
indemnification under this Section 9.
The Corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any proceeding) other
than an action by or in the right of the Corporation to procure a
judgement in its favor) by reason of the fact that such person is or
was an agent of the Corporation, against expenses, judgements, fines,
settlements and other amounts actually and reasonably incurred in
connection with such proceedings to the fullest extent permitted under
the General Corporation Law of the State of Nevada, as amended from
time to time.
<PAGE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
INCOME STATEMENT 1999 1998
- ---------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDING MARCH 31 January 1 to January 8 to
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS) March 31 March 31
<S> <C> <C>
REVENUE - -
EXPENSES
Salaries and benefits 64,909 -
Legal 5,716 -
Sales, general and administrative 61,852 -
--------------------------------------
TOTAL EXPENSES 132,477 -
--------------------------------------
--------------------------------------
Net Loss (132,477) -
--------------------------------------
Opening retained earnings (deficit) - -
Closing retained earnings (deficit) (132,477) -
Weighted average shares 17,970,000
Loss per share (0.007)
</TABLE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
BALANCE SHEET AS AT MARCH 31 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS)
ASSETS
CURRENT ASSETS
Cash 1 -
--------------------------------------
- -
Deposit in Schelfhout - -
Software Assets 34,247 -
--------------------------------------
34,247 -
--------------------------------------
34,248 -
--------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable & Accruals 84,247 -
Due to Ventures North Investment Partners 82,477 -
Loan Payable - -
--------------------------------------
166,724 -
EQUITY
Share Capital 1 -
Retained Earnings (Deficit) (132,477) -
--------------------------------------
(132,476) -
--------------------------------------
34,248 -
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
STATEMENT OF CASH FLOWS 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
FOR THE THREE MONTHS ENDING MARCH 31 January 1 to January 8 to
<PAGE>
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS) March 31 March 31
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (132,477) -
Add items not affecting cash
Allowance for loan receivable - -
Net changes in non-cash operating accounts
Accounts payable 84,247 -
--------------------------------------
(48,231) -
--------------------------------------
FINANCING ACTIVITIES
Due to related parties 82,477 -
Issuance of share capital - -
--------------------------------------
82,478 -
--------------------------------------
INVESTING ACTIVITIES
Software assets (34,247) -
Deposit in Schelfhout - -
--------------------------------------
(34,247) -
--------------------------------------
INCREASE (DECREASE) IN CASH - -
CASH, beginning of period 1 -
--------------------------------------
CASH, end of period 1 -
--------------------------------------
</TABLE>
e-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
1. INCORPORATION AND NATURE OF BUSINESS
- --------------------------------------------------------------------------------
The Company was incorporated on January 8, 1998 in Nevada, U.S.A.
The Company is a development stage entity and was organized with the
intent to be a holding company, which will acquire and/or form joint
ventures with corporate entities conducting various types of businesses
throughout the world.
- --------------------------------------------------------------------------------
2. ORGANIZATION AND BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
a) Reverse takeover
Pursuant to a Share Exchange Agreement dated February 26, 1999,
e-Auction Global Trading Inc. (formerly Kazari International Inc.)
("Nevada"), a Nevada company, acquired 100% of the issued and
outstanding shares of e-Auction
<PAGE>
Global Trading Inc., ("Barbados"), a Barbados company, for the
issuance of 34,500,000 common shares. As a result of the
transaction, control of the Company passed to Barbados.
Accordingly, the share exchange has been accounted for as a
reverse takeover of Nevada by Barbados.
Application of reverse takeover accounting results in the
following:
i) The consolidated financial statements of the combined entity
are issued under the name of the legal parent, e-Auction Global
Trading Inc. (formerly Kazari International Inc.), but are
considered a continuation of the financial statements of the
legal subsidiary (Barbados).
ii) As Barbados is deemed to be the acquirer for accounting
purposes, its assets and liabilities are included in the
consolidated financial statements of the continuing entity at
their carrying value.
b) Principles of consolidation
The accompanying financial statements consolidate the accounts of
the Company and its wholly owned subsidiaries, e-Auction Belgium
N.V., e-Auction Global Trading Inc. (Barbados) and their wholly
owned subsidiary e-Auction Global Trading Inc. (Canada).
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
a) Foreign currency translation
The Company's functional currency and reporting currency are U.S.
dollars. The Company follows SFAS 52 where all foreign currency
transactions are translated using the exchange rate in effect at
the date of the transaction. At each balance sheet date, recorded
balances denominated in a currency other than U.S.
b) Loss per common share
The weighted average number of shares used for calculating loss
per share is 17,970,000. Loss per share for the period from
January 1, 1999 to March 31, 1999 is $0.007.
c) Measurement uncertainty
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant areas requiring the use of management
estimates relate to the determination of impairment of assets and
useful lives for depreciation and amortization. Financial results
as determined by actual events could differ from those estimates.
d) Financial instruments
The Company's financial instruments consist of cash, accounts
payable due to related parties, loans payable and a convertible
loan, the fair market value of which approximates their carrying
value.
e) Amortization
Amortization of capital assets. Amortization is provided at the
following annual rates:
Software Straight-line over 5 years
f) Related party transactions
Related party transactions are recorded at their exchange amounts,
which approximate fair market value.
g) Uncertainty due to the Year 2000 Issue
<PAGE>
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. 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.
h) Income taxes
The Company would record a deferred tax asset subject to an
evaluation allowance where that asset is impaired or not expected
to be realized. The Company's valuation allowance would be equal
to the amount of the deferred tax assets.
Therefore, there have been no amounts booked in the accounts of
the Company.
- --------------------------------------------------------------------------------
4. CAPITAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
$ $
------ ------
Software 34,247 -
====== ======
</TABLE>
No amortization has been taken for the year as the software was put into
use until after year end.
- --------------------------------------------------------------------------------
5. DUE TO RELATED PARTIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
$ $
------ ------
Ventures North Investment Partners Inc. ("Ventures") 82,477 -
====== =======
</TABLE>
The majority of the Company's operations during the year were funded by
Ventures. Ventures is related through significant common shareholdings.
The amounts advanced are non-interest bearing with no fixed terms of
repayment.
- --------------------------------------------------------------------------------
6. SHARE CAPITAL AND CONTRIBUTED SURPLUS
- --------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
NUMBER OF 1999 CONTRIBUTED TOTAL
SHARES $ SURPLUS $
------------ ------ ------------- ------
<S> <C> <C> <C> <C>
b) Issued -
Balance, beginning of year 5,320,000 5,320 (5,319) 1
Share exchange agreement 34,500,000 34,500 (34,500) -
---------- ------ ------- ------
Balance, end of year 39,820,000 39,820 (39,819) 1
========== ====== ======= ======
</TABLE>
<PAGE>
The number of shares outstanding at the beginning of the year are the
shares of the legal parent, e-Auction Global Trading Inc. (Nevada)
while the dollar amount is the share capital of e-Auction Global
Trading Inc. (Barbados).
c) Share capital and contributed surplus since inception
<TABLE>
<CAPTION>
CONTRIBUTED
NUMBER SURPLUS
DATE ISSUED OF SHARES $ $
----------- --------- ---- ------------
<S> <C> <C>
January 8, 1998 1,250,000 1,250 -
April 12, 1998 4,000,000 4,000 36,000
June 1, 1998 70,000 70 209,930
Share issue costs - - (10,000)
----------- ------- --------
5,320,000 5,320 235,930
Adjustment to reflect reverse takeover - - (241,249)
----------- ------- -------
5,320,000 5,320 (5,319)
February 26, 1999 34,500,000 34,500 (34,500)
---------- ------ --------
39,820,000 39,820 ( 39,819)
========== ====== =========
</TABLE>
d) Stock options
On March 1, 1999 the Company adopted a stock option plan which
reserved 6,000,000 shares. Vesting requirements are determined by a
Committee when the options are granted. No option may be exercisable
after 10 years. The exercise price of an option may not be less than
the fair market value on the date of grant.
<TABLE>
<CAPTION>
DATE OF EXERCISE EXPIRY
GRANT NUMBER PRICE DATE RESTRICTIONS
------- ------ ----- ---- ------------
<S> <C> <C> <C> <C>
March 1, 1999 1,000,000 $0.01 December 1, 2003 None
</TABLE>
- --------------------------------------------------------------------------------
7. ACQUISITION
- --------------------------------------------------------------------------------
On February 26, 1999 the Company entered into a Share Exchange Agreement
between itself, e-Auction Global Trading Inc. ("Barbados") and QFG
Holdings Limited ("QFG"), a significant shareholder of Barbados.
The Agreement required the Company to purchase 100% of the issued and
outstanding shares of Barbados for 34,500,000 shares of the Company. Also
contemplated in the agreement was the adoption of 1,000,000 options at
$0.01/share outstanding in Barbados.
At the time Barbados' only assets were two purchases of intellectual
property negotiated by QFG and assigned to Barbados. The first purchase
was for the exclusive rights to market the operation and management of an
on-line auction system for $300 Cdn. paid in the form of 30,000 options
at a price of $0.01 in the share capital of Barbados. In connection with
this acquisition a consulting agreement was entered into where a company
associated with the vendor would be paid $5,000 Cdn. per month to be
expensed as consulting fees when paid. Additionally on December 1, 1998,
the vendor received options to acquire 65,000 common shares at
$0.01/share in Barbados.
The second purchase was for intellectual property rights relating to the
operation and management of on-line auction for $50,000 Cdn. in cash. In
connection with this acquisition a management services agreement was
entered into where $1,000 Cdn. per month would be paid to the vendor.
These fees will be expensed as consulting fees when paid. Additionally on
December 1, 1998 the vendor received options to acquire 80,000 common
shares at $0.01/share in Barbados.
Subsequent to the acquisitions, Barbados transferred the intellectual
property to its Canadian subsidiary e-Global Auction Trading Inc. The
$50,000 cash purchase price was not paid prior to the share exchange
agreement and is now being paid by the Canadian subsidiary.
<PAGE>
At the time of the Agreement, Barbados through QFG had entered into a
three way letter agreement with Jameson Investment Corporation
("Jameson") to acquire 100% of the outstanding shares of Jameson
International Foreign Corporation for a purchase price of $7,500,000.
During the ongoing negotiations QFG agreed to pay Jameson a $2,000,000
Canadian deposit to extend the closing date to October 15,1999. Funds
totaling $1,400,000 were borrowed by QFG from Millennium Advisors Inc.
("Millennium"), a company related through common directors. These funds
were deposited into the Company's trust account and paid to Jameson.
During the fall of 1999 the deal failed to close and the deposit provided
by QFG was forfeited. QFG has accepted responsibility for repaying the
funds they borrowed from Millennium. The Company paid $88,785 in
professional fees in connection with this proposed acquisition.
The options issued in connection with the two purchases of intellectual
property are included in the 1,000,000 options adopted from Barbados.
Since both companies had no net tangible assets, the value assigned to
the 34,500,000 shares issued is nil.
- --------------------------------------------------------------------------------
8. COMPARATIVE FIGURES
- --------------------------------------------------------------------------------
Comparative figures are for the period from April 30, 1998 (date of
incorporation) of e-Auction Global Trading Inc. ("Barbados") to December
31,1998. Certain of the comparative figures have been reclassified to
conform to the current presentation.
- --------------------------------------------------------------------------------
9. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
a) On January 7, 2000 the Company completed its acquisition of
Schelfhout Computer Systemen N.V. Proforma financial statements are
provided under Note 16.
b) On January 7, 2000 the Company completed a private placement of
16,885,447 shares at $0.50/share. 10,000,000 of the shares were
issued to Ventures North Investment Partners Inc., a company related
through significant common shareholdings and four companies related
to them in exchange for their settling the Company's debts to
Millennium Advisors Inc. of $1,000,000, Halium Hongorzul of 2,200,000
and Ventures North Investment Partners Inc. of $777,126.
c) On January 7, 2000 the Company issued 197,219 shares to Millennium
Advisors Inc. as a financing fee.
d) On February 17, 2000 the Company repaid its convertible loan in the
amount of $2,200,000 with interest of $21,698 and a finders fee of
$200,000 to a shareholder of a company.
e) On January 20, 2000 the Company granted 300,000 options with an
exercise price of $2/share and on March 1, 2000 the Company granted
1,300,000 options with an exercise price of $4.38/share.
- --------------------------------------------------------------------------------
10. CONTINGENCIES
- --------------------------------------------------------------------------------
a) A shareholder derivative action was brought against the Company on
November 17, 1999 in the United States District Court against the
Company, its subsidiaries, two of its directors and several other
companies and individuals.
The action alleges Sanga International, Inc.'s ("Sanga") reputation
was damaged by the Defendants (i) engaging in conversion (ii)
engaging in fraud (iii) interfering with Sanga's prospective business
advantage (iv) breach of contract (v) violating California usury laws
and (vi) breach of fiduciary duty.
The plaintiff claims the defendants' actions have not only damaged
Sanga but also the plaintiff and the remaining shareholders of Sanga
by as much as $100 million dollars.
<PAGE>
The Action was stayed on November 29, 1999 as a result of Sanga
filing for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court.
Exposure to the Company is not determinable at this time.
b) On February 7, 2000 a second action was brought against the Company,
its subsidiaries, two of its former directors. QFG Holdings Limited,
Ventures North International Inc. and several other individuals and
companies in the United States District Court.
The action alleges they breached their fiduciary duty to the
plaintiff, a shareholder of Sanga International Inc. The plaintiff
claims that the defendants' actions have damaged the plaintiff
totaling several millions of dollars.
<PAGE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
INCOME STATEMENT 1999 1999 1998 1998
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDING JUNE 30 January 1 to April 1 to January 8 to April 1 to
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS) June 30 June 30 June 30 June 30
<S> <C> <C> <C> <C>
REVENUE - - - -
EXPENSES
Salaries and benefits 272,966 208,057 - -
Legal 33,254 27,538 - -
Sales, general and administrative 332,031 270,179 - -
--------------------------------------------------------------
TOTAL EXPENSES 638,251 505,774 - -
--------------------------------------------------------------
--------------------------------------------------------------
Net Loss (638,251) (505,774) - -
--------------------------------------------------------------
Opening retained earnings (deficit) - (132,477) - -
Closing retained earnings (deficit) (638,251) (638,251) - -
Weighted average shares 28,955,359 39,820,000
Loss per share (0.022) (0.013)
</TABLE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
BALANCE SHEET AS AT JUNE 30 1999 1998
- ----------------------------------------------------------------------------------------------------
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 1,024 1
----------------------------------
1,024 1
Deposit in Schelfhout - -
Software Assets 34,247 -
----------------------------------
34,247 -
----------------------------------
35,271 1
----------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable & Accruals 307,697 -
Due to Ventures North Investment Partners 365,824 -
Loan Payable - -
----------------------------------
673,521 -
EQUITY
Share Capital 1 1
Retained Earnings (Deficit) (638,251) -
----------------------------------
(638,250) 1
----------------------------------
35,271 1
----------------------------------
</TABLE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
<PAGE>
STATEMENT OF CASH FLOWS 1999 1999 1998 1998
- --------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDING JUNE 30 January 1 to April 1 to January 8 to April 1 to
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS) June 30 June 30 June 30 June 30
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (638,251) (505,774) - -
Add items not affecting cash - -
Allowance for loan receivable - - - -
Net changes in non-cash operating accounts -
Accounts payable 307,697 223,450 - -
--------------------------------------------------------------
(330,554) (282,324) - -
--------------------------------------------------------------
FINANCING ACTIVITIES
Due to related parties 365,824 283,347 - -
Issuance of share capital - - 1 1
Share issue costs - - - -
--------------------------------------------------------------
365,824 283,347 1 1
--------------------------------------------------------------
INVESTING ACTIVITIES
Software assets (34,247) - - -
Deposit in Schelfhout - - - -
--------------------------------------------------------------
(34,247) - - -
--------------------------------------------------------------
INCREASE (DECREASE) IN CASH 1,023 1,023 1 1
CASH, beginning of period 1 1 - -
--------------------------------------------------------------
CASH, end of period 1,024 1,024 1 1
--------------------------------------------------------------
</TABLE>
e-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
1. INCORPORATION AND NATURE OF BUSINESS
- --------------------------------------------------------------------------------
The Company was incorporated on January 8, 1998 in Nevada, U.S.A.
The Company is a development stage entity and was organized with the
intent to be a holding company, which will acquire and/or form joint
ventures with corporate entities conducting various types of businesses
throughout the world.
- --------------------------------------------------------------------------------
2. ORGANIZATION AND BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
<PAGE>
a) Reverse takeover
Pursuant to a Share Exchange Agreement dated February 26, 1999,
e-Auction Global Trading Inc. (formerly Kazari International Inc.)
("Nevada"), a Nevada company, acquired 100% of the issued and
outstanding shares of e-Auction Global Trading Inc., ("Barbados"),
a Barbados company, for the issuance of 34,500,000 common shares.
As a result of the transaction, control of the Company passed to
Barbados. Accordingly, the share exchange has been accounted for as
a reverse takeover of Nevada by Barbados.
Application of reverse takeover accounting results in the
following:
i) The consolidated financial statements of the combined entity
are issued under the name of the legal parent, e-Auction Global
Trading Inc. (formerly Kazari International Inc.), but are
considered a continuation of the financial statements of the
legal subsidiary (Barbados).
ii) As Barbados is deemed to be the acquirer for accounting
purposes, its assets and liabilities are included in the
consolidated financial statements of the continuing entity at
their carrying value.
b) Principles of consolidation
The accompanying financial statements consolidate the accounts of
the Company and its wholly owned subsidiaries, e-Auction Belgium
N.V., e-Auction Global Trading Inc. (Barbados) and their wholly
owned subsidiary e-Auction Global Trading Inc. (Canada).
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
a) Foreign currency translation
The Company's functional currency and reporting currency are U.S.
dollars. The Company follows SFAS 52 where all foreign currency
transactions are translated using the exchange rate in effect at
the date of the transaction. At each balance sheet date, recorded
balances denominated in a currency other than U.S.
b) Loss per common share
The weighted average number of shares used for calculating loss
per share is 28,955,359. Loss per share for the period from
January 1, 1999 to June 30, 1999 is $0.022.
c) Measurement uncertainty
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant areas requiring the use of management
estimates relate to the determination of impairment of assets and
useful lives for depreciation and amortization. Financial results
as determined by actual events could differ from those estimates.
d) Financial instruments
The Company's financial instruments consist of cash, accounts
payable due to related parties, loans payable and a convertible
loan, the fair market value of which approximates their carrying
value.
e) Amortization
Amortization of capital assets. Amortization is provided at the
following annual rates:
Software Straight-line over 5 years
<PAGE>
f) Related party transactions
Related party transactions are recorded at their exchange amounts,
which approximate fair market value.
g) 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. 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.
h) Income taxes
The Company would record a deferred tax asset subject to an
evaluation allowance where that asset is impaired or not expected
to be realized. The Company's valuation allowance would be equal
to the amount of the deferred tax assets. Therefore, there have
been no amounts booked in the accounts of the Company.
- --------------------------------------------------------------------------------
4. CAPITAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
------ ------
<S> <C> <C>
Software 34,247 -
====== ======
</TABLE>
No amortization has been taken for the year as the software was put into
use until after year end.
- --------------------------------------------------------------------------------
5. DUE TO RELATED PARTIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
$ $
------- -------
Ventures North Investment Partners Inc. ("Ventures") 365,824 -
======= =======
</TABLE>
The majority of the Company's operations during the year were funded by
Ventures. Ventures is related through significant common shareholdings.
The amounts advanced are non-interest bearing with no fixed terms of
repayment.
- --------------------------------------------------------------------------------
6. SHARE CAPITAL AND CONTRIBUTED SURPLUS
- --------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
NUMBER OF 1999 CONTRIBUTED TOTAL
SHARES $ SURPLUS $
------------ ------ ------------- ------
<S> <C> <C> <C> <C>
b) Issued -
Balance, beginning of year 5,320,000 5,320 (5,319) 1
<PAGE>
Share exchange agreement 34,500,000 34,500 (34,500) -
---------- ------ ------- -----------
Balance, end of year 39,820,000 39,820 (39,819) 1
========== ====== ======= ================
</TABLE>
The number of shares outstanding at the beginning of the year are the
shares of the legal parent, e-Auction Global Trading Inc. (Nevada)
while the dollar amount is the share capital of e-Auction Global
Trading Inc. (Barbados).
c) Share capital and contributed surplus since inception
<TABLE>
<CAPTION>
CONTRIBUTED
NUMBER SURPLUS
DATE ISSUED OF SHARES $ $
----------- --------- ---- ------------
<S> <C> <C> <C>
January 8, 1998 1,250,000 1,250 -
April 12, 1998 4,000,000 4,000 36,000
June 1, 1998 70,000 70 209,930
Share issue costs - - (10,000)
----------- ------- --------
5,320,000 5,320 235,930
Adjustment to reflect reverse takeover - - (241,249)
----------- ------- -------
5,320,000 5,320 (5,319)
February 26, 1999 34,500,000 34,500 (34,500)
---------- ------ --------
39,820,000 39,820 (39,819)
========== ====== =========
</TABLE>
d) Stock options
On March 1, 1999 the Company adopted a stock option plan which
reserved 6,000,000 shares. Vesting requirements are determined by a
Committee when the options are granted. No option may be exercisable
after 10 years. The exercise price of an option may not be less than
the fair market value on the date of grant.
<TABLE>
<CAPTION>
DATE OF EXERCISE EXPIRY
GRANT NUMBER PRICE DATE RESTRICTIONS
----- ------ ----- ---- ------------
<S> <C> <C> <C> <C>
March 1, 1999 1,000,000 $0.01 December 1, 2003 None
</TABLE>
- --------------------------------------------------------------------------------
7. ACQUISITION
- --------------------------------------------------------------------------------
On February 26, 1999 the Company entered into a Share Exchange Agreement
between itself, e-Auction Global Trading Inc. ("Barbados") and QFG
Holdings Limited ("QFG"), a significant shareholder of Barbados.
The Agreement required the Company to purchase 100% of the issued and
outstanding shares of Barbados for 34,500,000 shares of the Company. Also
contemplated in the agreement was the adoption of 1,000,000 options at
$0.01/share outstanding in Barbados.
At the time Barbados' only assets were two purchases of intellectual
property negotiated by QFG and assigned to Barbados. The first purchase
was for the exclusive rights to market the operation and management of an
on-line auction system for $300 Cdn. paid in the form of 30,000 options
at a price of $0.01 in the share capital of Barbados. In connection with
this acquisition a consulting agreement was entered into where a company
associated with the vendor would be paid $5,000 Cdn. per month to be
expensed as consulting fees when paid. Additionally on December 1, 1998,
the vendor received options to acquire 65,000 common shares at
$0.01/share in Barbados.
The second purchase was for intellectual property rights relating to the
operation and management of on-line auction for $50,000 Cdn. in cash. In
connection with this acquisition a management services agreement was
entered into where $1,000
<PAGE>
Cdn. per month would be paid to the vendor. These fees will be expensed
as consulting fees when paid. Additionally on December 1, 1998 the
vendor received options to acquire 80,000 common shares at $0.01/share in
Barbados.
Subsequent to the acquisitions, Barbados transferred the intellectual
property to its Canadian subsidiary e-Global Auction Trading Inc. The
$50,000 cash purchase price was not paid prior to the share exchange
agreement and is now being paid by the Canadian subsidiary.
At the time of the Agreement, Barbados through QFG had entered into a
three way letter agreement with Jameson Investment Corporation
("Jameson") to acquire 100% of the outstanding shares of Jameson
International Foreign Corporation for a purchase price of $7,500,000.
During the ongoing negotiations QFG agreed to pay Jameson a $2,000,000
Canadian deposit to extend the closing date to October 15,1999. Funds
totaling $1,400,000 were borrowed by QFG from Millennium Advisors Inc.
("Millennium"), a company related through common directors. These funds
were deposited into the Company's trust account and paid to Jameson.
During the fall of 1999 the deal failed to close and the deposit provided
by QFG was forfeited. QFG has accepted responsibility for repaying the
funds they borrowed from Millennium. The Company paid $88,785 in
professional fees in connection with this proposed acquisition.
The options issued in connection with the two purchases of intellectual
property are included in the 1,000,000 options adopted from Barbados.
Since both companies had no net tangible assets, the value assigned to
the 34,500,000 shares issued is nil.
- --------------------------------------------------------------------------------
8. COMPARATIVE FIGURES
- --------------------------------------------------------------------------------
Comparative figures are for the period from April 30, 1998 (date of
incorporation) of e-Auction Global Trading Inc. ("Barbados") to December
31,1998. Certain of the comparative figures have been reclassified to
conform to the current presentation.
- --------------------------------------------------------------------------------
9. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
a) On January 7, 2000 the Company completed its acquisition of
Schelfhout Computer Systemen N.V. Proforma financial statements are
provided under Note 16.
b) On January 7, 2000 the Company completed a private placement of
16,885,447 shares at $0.50/share. 10,000,000 of the shares were
issued to Ventures North Investment Partners Inc., a company related
through significant common shareholdings and four companies related
to them in exchange for their settling the Company's debts to
Millennium Advisors Inc. of $1,000,000, Halium Hongorzul of 2,200,000
and Ventures North Investment Partners Inc. of $777,126.
c) On January 7, 2000 the Company issued 197,219 shares to Millennium
Advisors Inc. as a financing fee.
d) On February 17, 2000 the Company repaid its convertible loan in the
amount of $2,200,000 with interest of $21,698 and a finders fee of
$200,000 to a shareholder of a company.
e) On January 20, 2000 the Company granted 300,000 options with an
exercise price of $2/share and on March 1, 2000 the Company granted
1,300,000 options with an exercise price of $4.38/share.
- --------------------------------------------------------------------------------
10. CONTINGENCIES
- --------------------------------------------------------------------------------
a) A shareholder derivative action was brought against the Company on
November 17, 1999 in the United States District Court against the
Company, its subsidiaries, two of its directors and several other
companies and individuals.
<PAGE>
The action alleges Sanga International, Inc.'s ("Sanga") reputation
was damaged by the Defendants (i) engaging in conversion (ii)
engaging in fraud (iii) interfering with Sanga's prospective business
advantage (iv) breach of contract (v) violating California usury laws
and (vi) breach of fiduciary duty.
The plaintiff claims the defendants' actions have not only damaged
Sanga but also the plaintiff and the remaining shareholders of Sanga
by as much as $100 million dollars.
The Action was stayed on November 29, 1999 as a result of Sanga
filing for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court.
Exposure to the Company is not determinable at this time.
b) On February 7, 2000 a second action was brought against the Company,
its subsidiaries, two of its former directors. QFG Holdings Limited,
Ventures North International Inc. and several other individuals and
companies in the United States District Court.
The action alleges they breached their fiduciary duty to the
plaintiff, a shareholder of Sanga International Inc. The plaintiff
claims that the defendants' actions have damaged the plaintiff
totaling several millions of dollars.
<PAGE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
INCOME STATEMENT 1999 1999 1998 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDING SEPTEMBER 30 January 1 to July 1 to January 8 to July 1 to
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS) September 30 September 30 September 30 September 30
REVENUE - - - -
EXPENSES
Salaries and benefits 517,546 244,580 - -
Legal 86,697 53,443 - -
Sales, general and administrative 1,592,343 1,260,312 - -
------------------------------------------------------------------
TOTAL EXPENSES 2,196,586 1,558,335 - -
------------------------------------------------------------------
------------------------------------------------------------------
Net Loss (2,196,586) (1,558,335) - -
------------------------------------------------------------------
Opening retained earnings (deficit) - (638,251) - -
Closing retained earnings (deficit) (2,196,586) (2,196,586) - -
Weighted average shares 32,616,703 39,820,000
Loss per share (0.067) (0.055)
</TABLE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
BALANCE SHEET AS AT SEPTEMBER 30 1999 1998
- ------------------------------------------------------------
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 63 1
----------------------------------
63 1
Deposit in Schelfhout 1,000,000 -
Software Assets 34,247 -
----------------------------------
1,034,247 -
----------------------------------
1,034,247 1
----------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable & Accruals 1,503,994 -
Due to Ventures North Investment Partners 726,901 -
Loan Payable 1,000,000 -
----------------------------------
3,230,895 -
EQUITY
Share Capital 1 1
Contributed Surplus - -
Retained Earnings (Deficit) (2,196,586) -
----------------------------------
(2,196,585) 1
----------------------------------
1,034,310 1
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
STATEMENT OF CASH FLOWS 1999 1999 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDING SEPTEMBER 30 January 1 to July 1 to January 8 to July 1 to
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS) September 30 September 30 September 30 September 30
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (2,196,586) (1,558,335) - -
Add items not affecting cash
Allowance for loan receivable - - - -
Net changes in non-cash operating accounts
Accounts payable 1,503,994 1,196,297 - -
------------------------------------------------------------------
(692,592) (362,038) - -
------------------------------------------------------------------
FINANCING ACTIVITIES
Due to related parties 726,901 361,077 - -
Loan payable 1,000,000 1,000,000 - -
Issuance of share capital - - 1 -
Share issue costs - - - -
------------------------------------------------------------------
1,726,901 1,361,077 1 -
------------------------------------------------------------------
INVESTING ACTIVITIES
Software assets (34,247) - - -
Deposit in Schelfhout (1,000,000) (1,000,000) - -
------------------------------------------------------------------
(1,034,247) (1,000,000) - -
------------------------------------------------------------------
INCREASE (DECREASE) IN CASH 62 (961) 1 -
CASH, beginning of period 1 1,024 - 1
------------------------------------------------------------------
CASH, end of period 63 63 1 1
------------------------------------------------------------------
</TABLE>
e-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
1. INCORPORATION AND NATURE OF BUSINESS
- --------------------------------------------------------------------------------
The Company was incorporated on January 8, 1998 in Nevada, U.S.A.
The Company is a development stage entity and was organized with the
intent to be a holding company, which will acquire and/or form joint
ventures with corporate entities conducting various types of businesses
throughout the world.
<PAGE>
- --------------------------------------------------------------------------------
2. ORGANIZATION AND BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
a) Reverse takeover
Pursuant to a Share Exchange Agreement dated February 26, 1999,
e-Auction Global Trading Inc. (formerly Kazari International Inc.)
("Nevada"), a Nevada company, acquired 100% of the issued and
outstanding shares of e-Auction Global Trading Inc., ("Barbados"),
a Barbados company, for the issuance of 34,500,000 common shares.
As a result of the transaction, control of the Company passed to
Barbados. Accordingly, the share exchange has been accounted for as
a reverse takeover of Nevada by Barbados.
Application of reverse takeover accounting results in the
following:
i) The consolidated financial statements of the combined entity
are issued under the name of the legal parent, e-Auction Global
Trading Inc. (formerly Kazari International Inc.), but are
considered a continuation of the financial statements of the
legal subsidiary (Barbados).
ii) As Barbados is deemed to be the acquirer for accounting
purposes, its assets and liabilities are included in the
consolidated financial statements of the continuing entity at
their carrying value.
(SEE NOTE 11)
b) Principles of consolidation
The accompanying financial statements consolidate the accounts of
the Company and its wholly owned subsidiaries, e-Auction Belgium
N.V., e-Auction Global Trading Inc. (Barbados) and their wholly
owned subsidiary e-Auction Global Trading Inc. (Canada).
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
a) Foreign currency translation
The Company's functional currency and reporting currency are U.S.
dollars. The Company follows SFAS 52 where all foreign currency
transactions are translated using the exchange rate in effect at
the date of the transaction. At each balance sheet date, recorded
balances denominated in a currency other than U.S.
b) Loss per common share
The weighted average number of shares used for calculating loss
per share is 32,616,703. Loss per share for the period from
January 1, 1999 to September 30, 1999 is $0.067.
c) Measurement uncertainty
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant areas requiring the use of management
estimates relate to the determination of impairment of assets and
useful lives for depreciation and amortization. Financial results
as determined by actual events could differ from those estimates.
d) Financial instruments
The Company's financial instruments consist of cash, accounts
payable due to related parties, loans payable and a convertible
loan, the fair market value of which approximates their carrying
value.
e) Amortization
<PAGE>
Amortization of capital assets. Amortization is provided at the
following annual rates:
Software Straight-line over 5 years
f) Related party transactions
Related party transactions are recorded at their exchange amounts,
which approximate fair market value.
g) 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. 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.
h) Income taxes
The Company would record a deferred tax asset subject to an
evaluation allowance where that asset is impaired or not expected
to be realized. The Company's valuation allowance would be equal
to the amount of the deferred tax assets.
Therefore, there have been no amounts booked in the accounts of
the Company.
- --------------------------------------------------------------------------------
4. INVESTMENT IN SCHELFHOUT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
Deposit 1,000,000 -
========= ======
</TABLE>
Pursuant to a share purchase agreement dated January 7, 2000, the
Company paid a deposit on the purchase of 100% of the issued and
outstanding share capital of Schelfhout Computer Systemen N.V.
("Schelfhout").
The purchase price is $10,000,000 and is to be paid as follows:
<TABLE>
<S> <C>
Refundable deposit $ 1,000,000 paid
Cash on closing 3,000,000 paid subsequent to year end
Common shares issued on closing (3,636,364) 6,000,000 issued subsequent to year end
----------
$10,000,000
==========
</TABLE>
The 3,636,364 common shares are not free trading and are subject to a
timed release formula which allows for release of 454,545 shares worth
$750,000 on each of the 6, 12, 18 and 24 month anniversary of the
closing and 606,061 shares with a deemed value $1,000,000 on each of
the 36, 48 and 60 month anniversary of the closing. If the Company's
shares are not freely trading on any given release date the equivalent
cash is to be paid by the Company and the shares returned to the
treasury.
(SEE NOTE 15)
- --------------------------------------------------------------------------------
5. CAPITAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<PAGE>
1999 1998
$ $
---- ----
<S> <C> <C>
Software 34,247 -
====== ======
</TABLE>
No amortization has been taken for the year as the software was put into
use until after year end.
- --------------------------------------------------------------------------------
6. DEFERRED REVENUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C>
200,000 -
======= ======
</TABLE>
In September of 1999 the Company entered into a Software Licence and
Non-Competition Agreement to grant an exclusive licence to use its
technology to commercially exploit electronic auctions in the region of
Australia and New Zealand.
The Agreement called for a payment of $200,000 by December 31, 1999 and
royalties of 20% of gross revenue less gross operating costs.
The $200,000 is being recorded as deferred revenue until the Company
ships the software at which time it will be taken into income.
- --------------------------------------------------------------------------------
7. DUE TO RELATED PARTIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
Ventures North Investment Partners Inc. ("Ventures") 726,901 -
======= =======
</TABLE>
The majority of the Company's operations during the year were funded by
Ventures. Ventures is related through significant common shareholdings.
The amounts advanced are non-interest bearing with no fixed terms of
repayment. (SEE NOTE 12)
- --------------------------------------------------------------------------------
8. LOANS PAYABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
Millennium Advisors Inc. (i)
Loan payable 1,000,000 -
Financing fee payable 1,000,000 -
--------- -------
2,000,000 -
KCL Advisors Inc. 4,750 -
--------- -------
2,004,750 -
========= =======
KCL Advisors Inc.
</TABLE>
<PAGE>
(i) On August 12, 1999 the Company received a loan of $1,000,000 from
Millennium Advisors Inc. ("Millennium"), a company related through
a common director, acting as agent for undisclosed lenders. The
loan was to be repaid within 30 days. In consideration for the loan
Millennium received 197,219 common shares of the Company with a
deemed value of $1,000,000 as a financing fee. The number of shares
issued was based on the weighted average closing price in a 5 day
range when the loan was granted. These shares were issued in
January, 2000. (SEE NOTE 15) At the audit report date the loan had
not been repaid.
The Company also entered into a contract for services whereby
Millennium would be paid 25% of any funds raised by the sale of
equity or issuance of debt by the Company in excess of the amount
reasonably required by the Company to complete the Schelfhout
acquisition. To date no additional amounts have been paid.
- --------------------------------------------------------------------------------
9. SHARE CAPITAL AND CONTRIBUTED SURPLUS
- --------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
NUMBER OF 1999 CONTRIBUTED TOTAL
SHARES $ SURPLUS $
------------ ------ ------------- ------
<S> <C> <C> <C> <C>
b) Issued -
Balance, beginning of year 5,320,000 5,320 (5,319) 1
Share exchange agreement (NOTE 11) 34,500,000 34,500 (34,500) -
---------- ------ ------- -------
Balance, end of year 39,820,000 39,820 (39,819) 1
========== ====== ======= ===========
</TABLE>
The number of shares outstanding at the beginning of the year are the
shares of the legal parent, e-Auction Global Trading Inc. (Nevada)
while the dollar amount is the share capital of e-Auction Global
Trading Inc. (Barbados).
c) Share capital and contributed surplus since inception
<TABLE>
<CAPTION>
CONTRIBUTED
NUMBER SURPLUS
DATE ISSUED OF SHARES $ $
----------- --------- ---- ------------
<S> <C> <C> <C>
January 8, 1998 1,250,000 1,250 -
April 12, 1998 4,000,000 4,000 36,000
June 1, 1998 70,000 70 209,930
Share issue costs - - (10,000)
----------- ------- --------
5,320,000 5,320 235,930
Adjustment to reflect reverse takeover - - (241,249)
----------- ------- -------
5,320,000 5,320 (5,319)
February 26, 1999 34,500,000 34,500 (34,500)
---------- ------ --------
39,820,000 39,820 ( 39,819)
========== ====== =========
d) Stock options
</TABLE>
On March 1, 1999 the Company adopted a stock option plan which
reserved 6,000,000 shares. Vesting requirements are determined by a
Committee when the options are granted. No option may be exercisable
after 10 years. The exercise price of an option may not be less than
the fair market value on the date of grant.
<TABLE>
<CAPTION>
DATE OF EXERCISE EXPIRY
GRANT NUMBER PRICE DATE RESTRICTIONS
----- ------ ----- ---- ------------
<S> <C> <C> <C> <C>
March 1, 1999 1,000,000 $0.01 December 1, 2003 None
August 29, 1999 250,000 $5.00 August 29, 2009 Vest equally over 3 years
<PAGE>
December 1, 1999 3,000,000 $0.85 December 1, 2009 50% vest immediately
50% vested exercisable over 3 years
December 1, 1999 50,000 $0.85 December 1, 2009 Vest equally over 3 years
</TABLE>
The weighted average exercise price of the options is $0.90/share.
The weighted average grant date fair value of options granted during the
year is $1.39/share.
- --------------------------------------------------------------------------------
10. ACQUISITION
- --------------------------------------------------------------------------------
On February 26, 1999 the Company entered into a Share Exchange Agreement
between itself, e-Auction Global Trading Inc. ("Barbados") and QFG
Holdings Limited ("QFG"), a significant shareholder of Barbados.
The Agreement required the Company to purchase 100% of the issued and
outstanding shares of Barbados for 34,500,000 shares of the Company. Also
contemplated in the agreement was the adoption of 1,000,000 options at
$0.01/share outstanding in Barbados.
At the time Barbados' only assets were two purchases of intellectual
property negotiated by QFG and assigned to Barbados. The first purchase
was for the exclusive rights to market the operation and management of an
on-line auction system for $300 Cdn. paid in the form of 30,000 options
at a price of $0.01 in the share capital of Barbados. In connection with
this acquisition a consulting agreement was entered into where a company
associated with the vendor would be paid $5,000 Cdn. per month to be
expensed as consulting fees when paid. Additionally on December 1, 1998,
the vendor received options to acquire 65,000 common shares at
$0.01/share in Barbados.
The second purchase was for intellectual property rights relating to the
operation and management of on-line auction for $50,000 Cdn. in cash. In
connection with this acquisition a management services agreement was
entered into where $1,000 Cdn. per month would be paid to the vendor.
These fees will be expensed as consulting fees when paid. Additionally on
December 1, 1998 the vendor received options to acquire 80,000 common
shares at $0.01/share in Barbados.
Subsequent to the acquisitions, Barbados transferred the intellectual
property to its Canadian subsidiary e-Global Auction Trading Inc. The
$50,000 cash purchase price was not paid prior to the share exchange
agreement and is now being paid by the Canadian subsidiary.
At the time of the Agreement, Barbados through QFG had entered into a
three way letter agreement with Jameson Investment Corporation
("Jameson") to acquire 100% of the outstanding shares of Jameson
International Foreign Corporation for a purchase price of $7,500,000.
During the ongoing negotiations QFG agreed to pay Jameson a $2,000,000
Canadian deposit to extend the closing date to October 15,1999. Funds
totaling $1,400,000 were borrowed by QFG from Millennium Advisors Inc.
("Millennium"), a company related through common directors. These funds
were deposited into the Company's trust account and paid to Jameson.
During the fall of 1999 the deal failed to close and the deposit provided
by QFG was forfeited. QFG has accepted responsibility for repaying the
funds they borrowed from Millennium. The Company paid $88,785 in
professional fees in connection with this proposed acquisition.
The options issued in connection with the two purchases of intellectual
property are included in the 1,000,000 options adopted from Barbados.
Since both companies had no net tangible assets, the value assigned to
the 34,500,000 shares issued is nil.
- --------------------------------------------------------------------------------
11. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
Loan fee charged by a company with a common director 1,000,000 -
<PAGE>
Consulting fees charged by an individual who subsequently
became a director 13,501 -
Expenses paid on behalf of the Company and allocations of
expenses charged to the Company by companies with significant
common shareholdings and common directors 900,479 -
</TABLE>
- --------------------------------------------------------------------------------
12. COMPARATIVE FIGURES
- --------------------------------------------------------------------------------
Comparative figures are for the period from April 30, 1998 (date of
incorporation) of e-Auction Global Trading Inc. ("Barbados") to December
31,1998. Certain of the comparative figures have been reclassified to
conform to the current presentation.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
a) On January 7, 2000 the Company completed its acquisition of
Schelfhout Computer Systemen N.V. Proforma financial statements are
provided under Note 16.
b) On January 7, 2000 the Company completed a private placement of
16,885,447 shares at $0.50/share. 10,000,000 of the shares were
issued to Ventures North Investment Partners Inc., a company related
through significant common shareholdings and four companies related
to them in exchange for their settling the Company's debts to
Millennium Advisors Inc. of $1,000,000, Halium Hongorzul of 2,200,000
and Ventures North Investment Partners Inc. of $777,126.
c) On January 7, 2000 the Company issued 197,219 shares to Millennium
Advisors Inc. as a financing fee. (SEE NOTE 8)
d) On February 17, 2000 the Company repaid its convertible loan in the
amount of $2,200,000 with interest of $21,698 and a finders fee of
$200,000 to a shareholder of a company.
e) On January 20, 2000 the Company granted 300,000 options with an
exercise price of $2/share and on March 1, 2000 the Company granted
1,300,000 options with an exercise price of $4.38/share.
- --------------------------------------------------------------------------------
14. CONTINGENCIES
- --------------------------------------------------------------------------------
a) A shareholder derivative action was brought against the Company on
November 17, 1999 in the United States District Court against the
Company, its subsidiaries, two of its directors and several other
companies and individuals.
The action alleges Sanga International, Inc.'s ("Sanga") reputation
was damaged by the Defendants (i) engaging in conversion (ii)
engaging in fraud (iii) interfering with Sanga's prospective business
advantage (iv) breach of contract (v) violating California usury laws
and (vi) breach of fiduciary duty.
The plaintiff claims the defendants' actions have not only damaged
Sanga but also the plaintiff and the remaining shareholders of Sanga
by as much as $100 million dollars.
The Action was stayed on November 29, 1999 as a result of Sanga
filing for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court.
Exposure to the Company is not determinable at this time.
<PAGE>
b) On February 7, 2000 a second action was brought against the Company,
its subsidiaries, two of its former directors. QFG Holdings Limited,
Ventures North International Inc. and several other individuals and
companies in the United States District Court.
The action alleges they breached their fiduciary duty to the
plaintiff, a shareholder of Sanga International Inc. The plaintiff
claims that the defendants' actions have damaged the plaintiff
totaling several millions of dollars.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
(IN U.S. FUNDS)
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
In our opinion, the balance sheet and the related statements of operations and
deficit and cash flows present fairly, in all material respects, the financial
position of e-Auction Global Trading Inc. at December 31, 1998, and the results
of their operations and their cash flows for the period from June 2, 1998 to
December 31, 1998, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
VANCOUVER, B.C.
DECEMBER 17, 1999 CHARTERED ACCOUNTANTS
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
BALANCE SHEET - DECEMBER 31, 1998
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, JUNE 1,
1998 1998
$ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 100,181 211,222
INCORPORATION COSTS 2,000 2,000
- ------------------------------------------------------------------------------------------------------------------------------------
102,181 213,222
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable 2,500 10,700
Due to related parties (NOTE 4) 150,000 20,275
------- --------
152,500 30,975
------- --------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (NOTE 5) 5,320 5,320
CONTRIBUTED SURPLUS (NOTE 5) 235,930 235,930
------- -------
241,250 241,250
DEFICIT, ACCUMULATED DURING DEVELOPMENT STAGE (291,569) (59,003)
------- -------
(50,319) 182,247
- ------------------------------------------------------------------------------------------------------------------------------------
102,181 213,222
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTINGENCY (NOTE 9)
APPROVED BY THE DIRECTORS
DIRECTOR
- -----------------------------
DIRECTOR
- -----------------------------
SEE ACCOMPANYING NOTES
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
STATEMENT OF OPERATIONS AND DEFICIT
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, JUNE 1,
1998 1998
$ $
(NOTE 7)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EXPENSES
Accounting, audit and bookkeeping 2,841 3,200
Bank charges 602 118
Consulting fees 110,000 687
Entertainment 1,608 1,378
Legal 19,505 3,500
Office and printing 3,969 3,105
Management fees 39,500 37,500
Telephone 1,537 2,489
Travel and lodging 3,004 7,026
--------- ---------
182,566 59,003
------- --------
LOSS BEFORE OTHER ITEM 182,566 59,003
OTHER ITEM
Allowance for loan receivable (NOTE 3) 50,000 -
-------- ---------
NET LOSS FOR THE PERIOD 232,566 59,003
DEFICIT, beginning of period 59,003 -
- ------------------------------------------------------------------------------------------------------------------------------------
DEFICIT, end of period 291,569 59,003
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER SHARE (NOTE 6) 0.06 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, JUNE 1,
1998 1998
$ $
(NOTE 7)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (232,566) (59,003)
Add items not affecting cash
Allowance for loan receivable 50,000 -
Net changes in non-cash operating accounts
Accounts payable (8,200) 10,700
------- -------
(190,766) (48,303)
------- -------
FINANCING ACTIVITIES
Due to related parties 129,725 20,275
Issuance of share capital - 251,250
Share issue costs - (10,000)
------- -------
129,725 261,525
------- -------
INVESTING ACTIVITIES
Incorporation costs - (2,000)
Loan receivable (50,000) -
------- ---------
(50,000) (2,000)
------- ---------
INCREASE (DECREASE) IN CASH (111,041) 211,222
CASH, beginning of period 211,222 -
- ------------------------------------------------------------------------------------------------------------------------------------
CASH, end of period 100,181 211,222
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
1. INCORPORATION AND NATURE OF BUSINESS
- -------------------------------------------------------------------------------
The Company was incorporated on January 8, 1998 in Nevada, U.S.A. On
March 23, 1999 the directors acting in lieu of a special meeting approved
the name change to e-Auction Global Trading Inc.
The Company is a development stage entity and was organized with the
intent to be a holding company which will acquire and/or form joint
ventures with corporate entities conducting various types of businesses
throughout the world. (NOTE 9)
- -------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
a) Foreign currency translation
The Company's functional currency and reporting currency are U.S.
dollars. The Company follows SFAS 52 where all foreign currency
transactions are translated using the exchange rate in effect at
the date of the transaction. At each balance sheet date, recorded
balances denominated in a currency other than U.S. dollars are
adjusted to reflect the year end exchange rate.
b) Loss per common share
The weighted average number of shares used for calculating loss
per share is 4,266,704 for the period ended December 31, 1998 and
2,638,889 for the period ended June 1, 1998.
c) Measurement uncertainty
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant areas requiring the use of management
estimates relate to the determination of impairment of assets and
useful lives for depreciation and amortization. Financial results
as determined by actual events could differ from those estimates.
d) Financial instruments
The Company's financial instruments consist of cash, loan
receivable and accounts payable, the fair market value of which
approximates their carrying value.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
- -------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
- -------------------------------------------------------------------------------
e) Related party transactions
Related party transactions are recorded at their exchange amounts
which approximate fair market value.
f) 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. 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.
g) Income taxes
The Company would record a deferred tax asset subject to an
evaluation allowance where that asset is impaired or not expected
to be realized. The Company has deferred tax assets of
approximately $78,800. The Company's valuation allowance would be
equal to the amount of the deferred tax assets. Therefore, there
have been no amounts booked in the accounts of the Company.
- -------------------------------------------------------------------------------
3. LOAN RECEIVABLE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 1,
1998 1998
$ $
------------ -------
<S> <C> <C>
Due from Intrepidus, Inc. 50,000 -
Less: allowance (50,000) -
------ ------
- -
====== ======
</TABLE>
During the period the Company signed a letter of intent to merge with
Intrepidus, Inc. ("Intrepidus"). As part of the deal the Company
entered into a Bridge Loan Agreement whereby $150,000 was to be made
available to Intrepidus. The balance of the funds were advanced
subsequent to year end. (SEE NOTE 9)
<PAGE>
Subsequent to period end the Company's management decided not to
proceed with the merger. The advance then became a receivable with a
due date of June 22, 2000. The loan bears interest at 10% per annum.
The loan has been provided for in full.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
- -------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 1,
1998 1998
$ $
------------- -----------
<S> <C> <C>
Management fees paid to directors and a company controlled
by a director 39,500 37,500
Reimbursement to the directors for expenses incurred on
behalf of the Company 13,393 13,998
Consulting fees paid to shareholders of the Company 110,000 -
</TABLE>
The amounts due to related parties are non-interest bearing, unsecured,
and have no specific terms of repayment (SEE NOTE 9)
- -------------------------------------------------------------------------------
5. SHARE CAPITAL AND CONTRIBUTED SURPLUS
- -------------------------------------------------------------------------------
a) Authorized - 40,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 1,
NUMBER OF 1998 CONTRIBUTED NUMBER OF 1998 CONTRIBUTED
SHARES $ SURPLUS SHARES $ SURPLUS
--------------------------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
b) Issued -
Balance,
beginning
of period 5,320,000 5,320 235,930 - - -
Private
placement - - - 1,250,000 1,250 -
Private
placement - - - 4,000,000 4,000 36,000
Private
placement - - - 70,000 70 209,930
--------- --------- ------------- ----------- -------- -------
5,320,000 5,320 235,930 5,320,000 5,320 245,930
Share issue
Costs - - - - - (10,000)
--------- ---------- ------------ ---------------- ---------- -------
Balance, end
of period 5,320,000 5,320 235,930 5,320,000 5,320 235,930
========= ===== ======= ========= ===== =======
</TABLE>
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
- -------------------------------------------------------------------------------
5. SHARE CAPITAL AND CONTRIBUTED SURPLUS - CONT'D
- -------------------------------------------------------------------------------
c) Share capital and contributed surplus since inception
<TABLE>
<CAPTION>
Contributed
Number Surplus
Date Issued of shares $ $
----------- --------- ---- ------------
<S> <C> <C> <C>
January 8, 1998 1,250,000 1,250 -
April 12, 1998 4,000,000 4,000 36,000
June 1, 1998 70,000 70 209,930
Share issue costs (10,000)
--------- ------- -------
5,320,000 5,320 235,930
========= ======= =======
</TABLE>
(SEE NOTE 9)
- --------------------------------------------------------------------------------
6. LOSS PER SHARE
- --------------------------------------------------------------------------------
Loss per share for the period from January 8, 1998 (date of
incorporation) to December 31, 1998 is $0.07.
- --------------------------------------------------------------------------------
7. COMPARATIVE FIGURES
- --------------------------------------------------------------------------------
Comparative figures are for the period from January 8, 1998 (date of
incorporation) to June 1, 1998. Certain of the comparative figures have
been reclassified to conform to the current presentation.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
8. CUMULATIVE STATEMENTS
- --------------------------------------------------------------------------------
a) CUMULATIVE STATEMENT OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
$
----
<S> <C>
EXPENSES
Accounting, audit and bookkeeping 6,041
Bank charges 720
Consulting fees 110,687
Entertainment 2,986
Legal 23,005
Office and printing 7,074
Management fees 77,000
Telephone 4,026
Travel and lodging 10,030
--------
241,569
--------
LOSS BEFORE OTHER ITEM 241,569
OTHER ITEM
Allowance for loan receivable 50,000
--------
CUMULATIVE NET LOSS, being deficit accumulated during
development stage 291,569
--------
--------
b) CUMULATIVE STATEMENT OF CASH FLOWS
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (291,569)
Add item not affecting cash
Allowance for loan receivable 50,000
Net changes in non-cash operating accounts
Accounts payable 2,500
--------
(239,069)
--------
FINANCING ACTIVITIES
Due to related parties 150,000
Issuance of share capital 251,250
Share issue costs (10,000)
--------
391,250
--------
INVESTING ACTIVITIES
Incorporation costs (2,000)
Loan receivable (50,000)
--------
(52,000)
--------
CASH, end of year 100,181
--------
--------
</TABLE>
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
9. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
Subsequent to year end:
a) The Company entered into an agreement to acquire 100% of the issued
and outstanding shares of e-Auction Global Trading Inc., a Barbados
company (the legal subsidiary). The purchase price was 34,500,000
common shares of the Company. The acquisition will be accounted for
as a reverse takeover where the financial statements will be issued
under the name of the legal parent but will be a continuation of the
financial statements of the legal subsidiary. As preparation for the
acquisition the Company increased its authorized capital stock to
250,000,000 shares of common stock.
In connection with the acquisition of the Barbados subsidiary the
company granted 1,000,000 stock options with an exercise price of
$0.01 per share to the former employees, officers and directors of
this company.
b) The Company entered into an agreement to acquire 100% of the issued
and outstanding shares of Schelfhout Computer Systemen
N.V.("Schelfhout"), a Belgian company. The purchase price is to be
$10,000,000 and is to be paid as follows:
<TABLE>
<S> <C> <C>
Refundable deposit $1,000,000 (paid)
At closing $3,000,000 cash
At closing $6,000,000 in common shares of the Company
</TABLE>
The $6,000,000 in shares are not free trading and are subject to a
timed release formula. The number of shares to be issued will be
based on weighted average of a 5 day range when the agreement is
finalized. If the Company's shares are not freely trading on any
given release date the equivalent cash is to be paid by the Company
and the shares are to be returned to the Treasury. The number of
shares to be issued will be determined by the fair market value of
the shares on the date the agreement is finalized.
The agreement is still subject to final approval by all parties
which is expected early in 2000.
c) In connection with the Schelfhout acquisition the Company received a
loan of $1,000,000 from Millennium Advisors Inc., ("Millennium") a
company related through a common director, acting as agent for
undisclosed lenders. In addition Millennium received 197,219 common
shares of the Company worth $1,000,000 as a financing fee. The
number of shares issued based on the weighted average closing price
in a 5 day range when the loan was granted.
The Company also entered into a contract for services whereby
Millenium would be paid 25% of any funds raised by the sale of
equity or issuance of debt by the Company in excess of the amount
reasonably required by the Company to complete the Schelfhout
acquisition.
<PAGE>
The Company also entered into an agreement on March 1, 1999 to pay
Millennium consulting fees of $20,000 per month for one year.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
9. SUBSEQUENT EVENTS - CONT'D
- --------------------------------------------------------------------------------
d) The Company, through its Canadian subsidiary, made two purchases of
intellectual property. The first purchase was for exclusive rights
to market the operation and management of an on-line auctioning
system for $300 Cdn. paid in the form of 30,000 options for common
shares with an exercise price of $0.01 U.S. per share. In connection
with this acquisition the Company entered into a consulting
agreement where a company associated with the vendor would be paid
$5,000 Cdn. per month to be expensed as consulting fees and would
also receive 65,000 options for common shares with an exercise price
of $0.01 U.S. per share.
The second purchase was for intellectual property rights relating to
the operation and management of on-line auctions for $50,000 Cdn. in
cash. In connection with this acquisition the Company entered into a
management services agreement where $1,000 Cdn. per month would be
paid to the vendor which will be expensed as consulting fees, who
also received 80,000 options for common shares with an exercise
price of $0.01 Cdn. per share.
These options are included in the 1,000,000 stock options under
Note 9(a).
e) Approved a stock option plan where 6,000,000 common shares are
reserved for issuance on the exercise of options. Options are
exercisable for a period of 10 years from the date of the grant.
f) Granted a director of the Company 250,000 stock options with an
exercise price of $5 per share based on agreed price which exceeded
market value on the date granted. Granted employees 3,050,000 stock
options with an exercise price of $0.85 per share which equaled the
market value on the day before the options were granted.
g) The Company advanced a further $100,000 to Intrepidus, Inc. in
connection with the Bridge loan agreement.
h) The Company's lawyer received in trust an additional $2,200,000 on
December 14, 1999 in the form of a convertible debenture, the terms
of which still have to be finalized. Terms are expected to be
finalized in January of 2000.
- --------------------------------------------------------------------------------
10. CONTINGENCY
- --------------------------------------------------------------------------------
A shareholder derivative action was brought against the Company on
November 17, 1999 in the United States District Court against the
Company, its subsidiaries, two of its directors and several other
companies and individuals.
The action alleges Sanga International, Inc.'s ("Sanga") reputation was
damaged by the Defendants (i) engaging in conversion (ii) engaging in
fraud (iii) interfering with Sanga's prospective business advantage (iv)
breach of contract (v) violating California usury laws and (vi) breach of
fiduciary duty.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 2, 1998 TO DECEMBER 31, 1998
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
10. CONTINGENCY - CONT'D
- --------------------------------------------------------------------------------
The plaintiff claims the defendants' actions have not only damaged Sanga
but also the plaintiff and the remaining shareholders of Sanga by as much
as $100 million dollars.
The Action was stayed on November 29, 1999 as a result of Sanga filing
for Chapter 11 bankruptcy protection in the United States Bankruptcy
Court.
Exposure to the Company is not determinable at this time.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(IN U.S. FUNDS)
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
E-AUCTION GLOBAL TRADING INC.
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations and deficit and cash flows present fairly, in all
material respects, the financial position of e-Auction Global Trading Inc. at
December 31, 1999, and the results of their operations and their cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management, our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
VANCOUVER, B.C.
FEBRUARY 1, 2000 CHARTERED ACCOUNTANTS
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1999
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998
$ $
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash 4,179,394 1
INVESTMENT IN SCHELFHOUT (NOTE 4) 1,000,000 -
CAPITAL ASSETS (NOTE 5) 34,247 -
- -----------------------------------------------------------------------------------------------------------------------------------
5,213,641 1
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable 749,050 -
Deferred revenue (NOTE 6) 200,000 -
Due to related party (NOTE 7) 860,793 -
Loans payable (NOTE 8) 2,000,000 -
Shareholder's loan (NOTE 9) 2,200,000 -
Share subscriptions received 1,858,229 -
--------- -----------
7,868,072 -
--------- -----------
SHAREHOLDERS' EQUITY
SHARE CAPITAL AND CONTRIBUTED SURPLUS (NOTE 10) 1 1
DEFICIT, ACCUMULATED DURING DEVELOPMENT STAGE (2,654,432) -
--------- -----------
(2,654,431) 1
- -----------------------------------------------------------------------------------------------------------------------------------
5,213,641 1
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTINGENCIES (NOTE 17)
APPROVED BY THE DIRECTORS
________________________________ DIRECTOR
________________________________ DIRECTOR
SEE ACCOMPANYING NOTES
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
$ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EXPENSES
Advertising and promotion 19,221 -
Bank charges 277 -
Consulting fees 426,158 -
Insurance 3,698 -
Investor relations 316,567 -
Loan fee (NOTE 8) 1,000,000 -
Office and miscellaneous 31,685 -
Professional fees 241,748 -
Rent 59,874 -
Salaries 458,924 -
Telephone 59,136 -
Travel 37,144 -
--------- -----------
2,654,432 -
--------- -----------
NET LOSS 2,654,432 -
DEFICIT, beginning of year - -
- ------------------------------------------------------------------------------------------------------------------------------------
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE, end of year 2,654,432 -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER SHARE (NOTE 6) 0.08 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998
$ $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (2,654,432) -
Net changes in non-cash operating accounts
Accounts payable 749,050 -
Deferred revenue 200,000 -
---------- ----------
(1,705,382) -
---------- ----------
FINANCING ACTIVITIES
Due to related parties 860,793 -
Issuance of share capital - 1
Share subscriptions received 1,858,229 -
Loans received 2,000,000 -
Shareholder's loan received 2,200,000 -
---------- ----------
6,919,022 1
---------- ----------
INVESTING ACTIVITIES
Deposit on Schelfhout acquisition (1,000,000) -
Acquisition of capital assets (34,247) -
---------- ----------
(1,034,247) -
---------- ----------
INCREASE (DECREASE) IN CASH 4,179,393 -
CASH, beginning of year 1 -
- -----------------------------------------------------------------------------------------------------------------------------------
CASH, end of year 4,179,394 1
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CASH
Held in trust by lawyers 3,877,933 -
Cash 301,461 1
- -----------------------------------------------------------------------------------------------------------------------------------
4,179,394 1
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
E-AUCTION GLOBAL TRADING INC.
.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
1. INCORPORATION AND NATURE OF BUSINESS
- --------------------------------------------------------------------------------
The Company was incorporated on January 8, 1998 in Nevada, U.S.A.
The Company is a development stage entity and was organized with the
intent to be a holding company which will acquire and/or form joint
ventures with corporate entities conducting various types of businesses
throughout the world.
- --------------------------------------------------------------------------------
2. ORGANIZATION AND BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
a) Reverse takeover
Pursuant to a Share Exchange Agreement dated February 26, 1999,
e-Auction Global Trading Inc. (formerly Kazari International Inc.)
("Nevada"), a Nevada company, acquired 100% of the issued and
outstanding shares of e-Auction Global Trading Inc., ("Barbados"),
a Barbados company, for the issuance of 34,500,000 common shares.
As a result of the transaction, control of the Company passed to
Barbados. Accordingly, the share exchange has been accounted for as
a reverse takeover of Nevada by Barbados.
Application of reverse takeover accounting results in the
following:
i) The consolidated financial statements of the combined entity
are issued under the name of the legal parent, e-Auction Global
Trading Inc. (formerly Kazari International Inc.), but are
considered a continuation of the financial statements of the
legal subsidiary (Barbados).
ii) As Barbados is deemed to be the acquirer for accounting
purposes, its assets and liabilities are included in the
consolidated financial statements of the continuing entity at
their carrying value.
(SEE NOTE 11)
b) Principles of consolidation
The accompanying financial statements consolidate the accounts of
the Company and its wholly owned subsidiaries, e-Auction Belgium
N.V., e-Auction Global Trading Inc. (Barbados) and their wholly
owned subsidiary e-Auction Global Trading Inc. (Canada).
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
a) Foreign currency translation
The Company's functional currency and reporting currency are U.S.
dollars. The Company follows SFAS 52 where all foreign currency
transactions are translated using the exchange rate in effect at
the date of the transaction. At each balance sheet date, recorded
balances denominated in a currency other than U.S. dollars are
adjusted to reflect the year end exchange rate.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
- --------------------------------------------------------------------------------
b) Loss per common share
The weighted average number of shares used for calculating loss
per share is 34,432,239.
c) Measurement uncertainty
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant areas requiring the use of management
estimates relate to the determination of impairment of assets and
useful lives for depreciation and amortization. Financial results
as determined by actual events could differ from those estimates.
d) Financial instruments
The Company's financial instruments consist of cash, accounts
payable, due to related parties, loans payable and a shareholder's
loan, the fair market value of which approximates their carrying
value.
e) Amortization
Amortization of capital assets. Amortization is provided at the
following annual rates:
Software Straight-line over 5 years
f) Related party transactions
Related party transactions are recorded at their exchange amounts
which approximate fair market value.
g) 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. 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.
h) Income taxes
The Company would record a deferred tax asset subject to an
evaluation allowance where that asset is impaired or not expected
to be realized. The Company has deferred tax assets of
approximately $1,194,494. The Company's valuation allowance would
be equal to the amount of the deferred tax assets. Therefore,
there have been no amounts booked in the accounts of the Company.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
4. INVESTMENT IN SCHELFHOUT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
Deposit 1,000,000 -
--------- ----
--------- ----
</TABLE>
Pursuant to a share purchase agreement dated January 7, 2000, the
Company paid a deposit on the purchase of 100% of the issued and
outstanding share capital of Schelfhout Computer Systemen N.V.
("Schelfhout").
The purchase price is $10,000,000 and is to be paid as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Refundable deposit $ 1,000,000 paid
Cash on closing 3,000,000 paid subsequent to year end
Common shares issued on closing (3,636,364) 6,000,000 issued subsequent to year end
----------
$10,000,000
----------
----------
</TABLE>
The 3,636,364 common shares are not free trading and are subject to a
timed release formula which allows for release of 454,545 shares worth
$750,000 on each of the 6, 12, 18 and 24 month anniversary of the
closing and 606,061 shares with a deemed value of $1,000,000 on each of
the 36, 48 and 60 month anniversary of the closing. If the Company's
shares are not freely trading on any given release date the equivalent
cash is to be paid by the Company and the shares returned to the
treasury.
(SEE NOTE 15)
- --------------------------------------------------------------------------------
5. CAPITAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
Software 34,247 -
------ ----
------ ----
</TABLE>
No amortization has been taken for the year as the software was put into
use until after year end.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
6. DEFERRED REVENUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
200,000 -
------- ----
------- ----
</TABLE>
In September of 1999 the Company entered into a Software Licence and
Non-Competition Agreement to grant an exclusive licence to use its
technology to commercially exploit electronic auctions in the region of
Australia and New Zealand.
The Agreement called for a payment of $200,000 by December 31, 1999 and
royalties of 20% of gross revenue less gross operating costs.
The $200,000 is being recorded as deferred revenue until the Company
ships the software at which time it will be taken into income.
- --------------------------------------------------------------------------------
7. DUE TO RELATED PARTIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
Ventures North Investment Partners Inc. ("Ventures") 860,793 -
------- ----
------- ----
</TABLE>
The majority of the Company's operations during the year were funded by
Ventures. Ventures is related through significant common shareholdings.
The amounts advanced are non-interest bearing with no fixed terms of
repayment. (SEE NOTE 12)
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
8. LOANS PAYABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
Millennium Advisors Inc.
Loan payable 1,000,000 -
Financing fee payable 1,000,000 -
--------- ----
2,000,000 -
--------- ----
--------- ----
</TABLE>
On August 12, 1999 the Company received a loan of $1,000,000 from
Millennium Advisors Inc. ("Millennium"), a company related through a
common director, acting as agent for undisclosed lenders. The loan was to
be repaid within 30 days. In consideration for the loan Millennium
received 197,219 common shares of the Company with a deemed value of
$1,000,000 as a financing fee. The number of shares issued was based on
the weighted average closing price in a 5 day range when the loan was
granted. These shares were issued in January, 2000. (SEE NOTE 15)
The Company also entered into a contract for services whereby Millennium
would be paid 25% of any funds raised by the sale of equity or issuance
of debt by the Company in excess of the amount reasonably required by the
Company to complete the Schelfhout acquisition. To date no additional
amounts have been paid. The Company also entered into an agreement on
March 1, 1999 to pay Millennium consulting fees of $20,000 per month for
one year.
(SEE NOTE 12)
- --------------------------------------------------------------------------------
9. SHAREHOLDER'S LOAN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<S> <C> <C>
Halium Hongorzul 2,200,000 -
--------- ----
--------- ----
</TABLE>
The loan was originally set up to be convertible to common shares. Prior
to December 31, 1999 the loan was non-interest bearing. Subsequent to
year end, in February, 2000 the loan was repaid with $21,698 in interest.
A finders fee of $200,000 in connection with the loan was paid to the
shareholder subsequent to year end.
(SEE NOTE 15)
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
10. SHARE CAPITAL AND CONTRIBUTED SURPLUS
- --------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
NUMBER OF 1999 CONTRIBUTED TOTAL
SHARES $ SURPLUS $
------------ ------ ------------- ------
<S> <C> <C> <C> <C>
b) Issued -
Balance, beginning of year 5,320,000 5,320 (5,319) 1
Share exchange agreement (NOTE 11) 34,500,000 34,500 (34,500) -
---------- ------ -------- -------
Balance, end of year 39,820,000 39,820 (39,819) 1
---------- ------ -------- -------
---------- ------ -------- -------
</TABLE>
The number of shares outstanding at the beginning of the year are the
shares of the legal parent, e-Auction Global Trading Inc. (Nevada)
while the dollar amount is the share capital of e-Auction Global
Trading Inc. (Barbados).
c) Share capital and contributed surplus since inception
<TABLE>
<CAPTION>
CONTRIBUTED
NUMBER SURPLUS
DATE ISSUED OF SHARES $ $
----------- --------- ---- ------------
<S> <C> <C> <C>
January 8, 1998 1,250,000 1,250 -
April 12, 1998 4,000,000 4,000 36,000
June 1, 1998 70,000 70 209,930
Share issue costs - - (10,000)
----------- ------- --------
5,320,000 5,320 235,930
Adjustment to reflect reverse takeover - - (241,249)
----------- ------- --------
5,320,000 5,320 (5,319)
February 26, 1999 34,500,000 34,500 (34,500)
----------- ------- --------
39,820,000 39,820 ( 39,819)
----------- ------- --------
----------- ------- --------
</TABLE>
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
10. SHARE CAPITAL AND CONTRIBUTED SURPLUS - CONT'D
- --------------------------------------------------------------------------------
d) Stock options
On March 1, 1999 the Company adopted a stock option plan which
reserved 6,000,000 shares. Vesting requirements are determined by a
Committee when the options are granted. No option may be exercisable
after 10 years. The exercise price of an option may not be less than
the fair market value on the date of grant.
<TABLE>
<CAPTION>
DATE OF EXERCISE EXPIRY
GRANT NUMBER PRICE DATE RESTRICTIONS
----- ------ ----- ---- ------------
<S> <C> <C> <C> <C>
March 1, 1999 1,000,000 $0.01 December 1, 2003 None
August 29, 1999 250,000 $5.00 August 29, 2009 Vest equally over 3 years
December 1, 1999 3,000,000 $0.85 December 1, 2009 50% vest immediately
50% vested exercisable over 3 years
December 1, 1999 50,000 $0.85 December 1, 2009 Vest equally over 3 years
</TABLE>
The weighted average exercise price of the options is $0.90/share.
The weighted average grant date fair value of options granted during the
year is $1.39/share.
(SEE NOTE 15)
- --------------------------------------------------------------------------------
11. ACQUISITION
- --------------------------------------------------------------------------------
On February 26, 1999 the Company entered into a Share Exchange Agreement
between itself, e-Auction Global Trading Inc. ("Barbados") and QFG
Holdings Limited ("QFG"), a significant shareholder of Barbados.
The Agreement required the Company to purchase 100% of the issued and
outstanding shares of Barbados for 34,500,000 shares of the Company. Also
contemplated in the agreement was the adoption of 1,000,000 options at
$0.01/share outstanding in Barbados.
At the time Barbados' only assets were two purchases of intellectual
property negotiated by QFG and assigned to Barbados. The first purchase
was for the exclusive rights to market the operation and management of an
on-line auction system for $300 Cdn. paid in the form of 30,000 options
at a price of $0.01 in the share capital of Barbados. In connection with
this acquisition a consulting agreement was entered into where a company
associated with the vendor would be paid $5,000 Cdn. per month to be
expensed as consulting fees when paid. Additionally on December 1, 1998,
the vendor received options to acquire 65,000 common shares at
$0.01/share in Barbados.
The second purchase was for intellectual property rights relating to the
operation and management of on-line auction for $50,000 Cdn. in cash. In
connection with this acquisition a management services agreement was
entered into where $1,000 Cdn. per month would be paid to the vendor.
These fees will be expensed as consulting fees when paid. Additionally on
December 1, 1998 the vendor received options to acquire 80,000 common
shares at $0.01/share in Barbados.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
11. ACQUISITION - CONT'D
- --------------------------------------------------------------------------------
Subsequent to the acquisitions, Barbados transferred the intellectual
property to its Canadian subsidiary e-Global Auction Trading Inc. The
$50,000 cash purchase price was not paid prior to the share exchange
agreement and is now being paid by the Canadian subsidiary.
At the time of the Agreement, Barbados through QFG had entered into a
three way letter agreement with Jameson Investment Corporation
("Jameson") to acquire 100% of the outstanding shares of Jameson
International Foreign Corporation for a purchase price of $7,500,000.
During the ongoing negotiations QFG agreed to pay Jameson a $2,000,000
Canadian deposit to extend the closing date to October 15,1999. Funds
totalling $1,400,000 were borrowed by QFG from Millennium Advisors Inc.
("Millennium"), a company related through common directors. These funds
were deposited into the Company's trust account and paid to Jameson.
During the fall of 1999 the deal failed to close and the deposit provided
by QFG was forfeited. QFG has accepted responsibility for repaying the
funds they borrowed from Millennium. The Company paid $88,785 in
professional fees in connection with this proposed acquisition.
The options issued in connection with the two purchases of intellectual
property are included in the 1,000,000 options adopted from Barbados.
Since both companies had no net tangible assets, the value assigned to
the 34,500,000 shares issued is nil.
- --------------------------------------------------------------------------------
12. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
---- ----
<C> <C> <C>
Loan fee charged by a company with a common director 1,000,000 -
Consulting fees paid to a company with a common director 180,000 -
Consulting fees charged by an individual who subsequently
became a director 13,501 -
Expenses paid on behalf of the Company and allocations of
expenses charged to the Company by companies with significant
common shareholdings and common directors 900,479 -
</TABLE>
- --------------------------------------------------------------------------------
13. COMPARATIVE FIGURES
- --------------------------------------------------------------------------------
Comparative figures are for the period from April 30, 1998 (date of
incorporation) of e-Auction Global Trading Inc. ("Barbados") to December
31, 1998. Certain of the comparative figures have been reclassified to
conform to the current presentation.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
14. CUMULATIVE STATEMENTS
- --------------------------------------------------------------------------------
a) CUMULATIVE STATEMENT OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
$
------
<S> <C>
EXPENSES
Advertising and promotion 19,221
Bank charges 277
Consulting fees 426,158
Insurance 3,698
Loan fee 1,000,000
Office and miscellaneous 31,685
Professional fees 241,748
Rent 59,874
Salaries 458,924
Telephone 59,136
Travel 37,144
-----------
2,654,432
-----------
CUMULATIVE NET LOSS, being deficit accumulated during
development stage 2,654,432
-----------
-----------
b) CUMULATIVE STATEMENT OF CASH FLOWS
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (2,654,432)
Net changes in non-cash operating accounts
Accounts payable 749,050
Deferred revenue 200,000
-----------
(1,705,382)
-----------
FINANCING ACTIVITIES
Due to related parties 860,793
Issuance of share capital 1
Share subscriptions received 1,858,229
Loans received 2,000,000
Shareholder's loan received 2,200,000
-----------
6,919,023
-----------
INVESTING ACTIVITIES
Deposit of Schelfhout acquisition (1,000,000)
Acquisition of capital assets (34,247)
-----------
(1,034,247)
-----------
CASH, end of year 4,179,394
-----------
</TABLE>
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
15. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
a) On January 7, 2000 the Company completed its acquisition of
Schelfhout Computer Systemen N.V. Proforma financial statements are
provided under Note 16.
b) On January 7, 2000 the Company completed a private placement of
16,885,447 shares at $0.50/share. 10,000,000 of the shares were
issued to Ventures North Investment Partners Inc., a company related
through significant common shareholdings and four companies related
to them in exchange for their settling the Company's debts to
Millennium Advisors Inc. of $1,000,000, Acquila Consultants Ltd. of
2,200,000 and Ventures North Investment Partners Inc. of $777,126.
c) On January 7, 2000 the Company issued 197,219 shares to Millennium
Advisors Inc. as a financing fee. (SEE NOTE 8)
d) On February 17, 2000 the Company repaid its shareholder's loan in the
amount of $2,200,000 with interest of $21,698 and a finders fee of
$200,000 to the shareholder.
e) On January 20, 2000 the Company granted 300,000 options with an
exercise price of $2/share and on March 1, 2000 the Company granted
1,300,000 options with an exercise price of $4.38/share.
- --------------------------------------------------------------------------------
16. PROFORMA FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On January 7, 2000 the Company completed the acquisition of 100% of the
issued and outstanding shares of Schelfhout Computer Systems N.V.
("SCS"). The following condensed proforma balance sheet reflects the
acquisition as if it took place on December 31, 1999.
<TABLE>
<CAPTION>
PROFORMA
E-AUCTION SCS ADJUSTMENTS PROFORMA
--------- --- ----------- --------
$ $ $ $
<S> <C> <C> <C> <C>
ASSETS
Current assets 4,179,394 1,588,878 (3,000,000) 2,768,272
Investment in SCS 1,000,000 - (1,000,000) -
Tangible assets 34,247 709,546 - 743,793
Goodwill - - 9,195,956 9,195,956
--------- --------- ---------- ----------
5,213,641 2,298,424 5,195,956 12,708,021
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
16. PROFORMA FINANCIAL STATEMENTS - CONT'D
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROFORMA
E-AUCTION SCS ADJUSTMENTS PROFORMA
$ $ $ $
--------- --- ----------- --------
<S> <C> <C> <C> <C>
LIABILITIES
Current liabilities 987,050 1,309,975 - 2,297,025
Loans and advances for
related parties 5,060,793 - - 5,060,793
Share subscriptions received 1,858,229 - - 1,858,229
----------- ---------- ----------- ----------
7,906,072 1,309,775 - 9,216,047
Long-term debt - 184,405 - 184,405
----------- ---------- ----------- ----------
7,906,072 1,494,380 - 9,400,452
----------- ---------- ----------- ----------
Share capital 1 883,340 6,000,000 6,000,001
(883,340)
Deficit (2,692,432) (79,296) 79,296 (2,692,432)
----------- ---------- ----------- ----------
(2,692,431) 804,044 5,195,956 3,307,569
----------- ---------- ----------- ----------
5,213,641 2,298,424 5,195,956 12,708,021
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
$
-----
Purchase price 10,000,000
$
Net tangible assets of SCS acquired -----
Total Assets 2,298,424
Less: Liabilities 1,494,380 804,044
---------- -----------
Excess of purchase price over net tangible assets, being goodwill 9,195,956
-----------
-----------
</TABLE>
The financial information for the respective companies is based on
audited financial statements. The information from SCS was reported on by
other auditors without reservation.
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
- --------------------------------------------------------------------------------
17. CONTINGENCIES
- --------------------------------------------------------------------------------
a) A shareholder derivative action was brought against the Company on
November 17, 1999 in the United States District Court against the
Company, its subsidiaries, two of its directors and several other
companies and individuals.
The action alleges Sanga International, Inc.'s ("Sanga") reputation
was damaged by the Defendants (i) engaging in conversion (ii)
engaging in fraud (iii) interfering with Sanga's prospective business
advantage (iv) breach of contract (v) violating California usury laws
and (vi) breach of fiduciary duty.
The plaintiff claims the defendants' actions have not only damaged
Sanga but also the plaintiff and the remaining shareholders of Sanga
by as much as $100 million dollars.
The Action was stayed on November 29, 1999 as a result of Sanga
filing for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court.
Exposure to the Company is not determinable at this time.
b) On February 7, 2000 a second action was brought against the Company,
its subsidiaries, two of its former directors. QFG Holdings Limited,
Ventures North International Inc. and several other individuals and
companies in the United States District Court.
The action alleges they breached their fiduciary duty to the
plaintiff, a shareholder of Sanga International Inc. The plaintiff
claims that the defendants' actions have damaged the plaintiff
totalling several millions of dollars.
<PAGE>
-26-
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT # EXHIBIT NAME NOTES
- --------- ------------ -----
<S> <C> <C>
Exhibit 2(i) Articles of Incorporation
Exhibit 3(ii) By-laws
Exhibit 4 Instruments defining the rights of security holders Form of Common Share Certificate
Exhibit 6(i) Material agreement Share Exchange Agreement
Exhibit 6(ii) Material agreement Agreement with Millennium Advisors
Exhibit 6(iii) Material agreement Stock Option Plan
Exhibit 6(iv) Material agreement Schelfhout Share Purchase Agreement
Exhibit 15 Subsidiaries of the registrant
Exhibit 16 Letter of Past Auditor Consent to Registration Statement
Language
Exhibit 27 Financial Data Schedule
</TABLE>
ITEM 2. DESCRIPTION OF EXHIBITS
The Exhibits required by this item are included as set forth in the Exhibit
Index.
SIGNATURES
Pursuant to the requirements of Section 12 of the SECURITIES EXCHANGE ACT OF
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
E-AUCTION GLOBAL TRADING INC.
<TABLE>
<CAPTION>
March 6, 2000
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Dan Mckenzie Chief Executive Officer, President & Director
----------------------
Dan McKenzie
/s/ David Hackett Chief Financial Officer
----------------------
David Hackett
/s/ Philip Lapp Director
-------------------------
Philip Lapp
/s/ Phil MacDonnell Director
-------------------------
Phil MacDonnell
/s/ Eric White Director
-----------------------
Eric White
</TABLE>
<PAGE>
SECRETARY OF STATE
[NEVADA STATE SEAL]
STATE OF NEVADA
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that KAZARI INTERNATIONAL, INC. did on JANUARY 8, 1998 file in
this office the original Articles of Incorporation; that said Articles are
now on file and of record in the office of the Secretary of State of the
State of Nevade, and further, that said Articles contain all the provisions
required by the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed the Great Seal of State, at my office,
in Carson City, Nevada, on January 8, 1998.
/s/ Dean Heller
[SEAL]
Secretary of State
By /s/ Illegible
Certification Clerk
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
ARTICLES OF INCORPORATION
JAN 08 1998
OF
NO. C-353-98
--------------- KAZARI INTERNATIONAL, INC.
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
I, the person hereinafter named as incorporator, for the purpose of
associating to establish a corporation under the provisions and subject to
the requirements of Title 7, Chapter 78 of Nevada Revised Statutes, and the
acts amendatory thereof, and hereinafter sometimes referred to as the General
Corporation Law of the State of Nevada, do hereby adopt and make the
following Articles of Incorporation:
ARTICLE I.
NAME
The name of this corporation is Kazari International, Inc.
ARTICLE II.
AGENT FOR SERVICE OF PROCESS
The name of this corporation's initial agent in the State of Nevada for
service of process is CSC Services of Nevada, Inc. The address of the agent
is 502 East John Street, Carson City, Nevada 89706.
ARTICLE III.
STOCK
The corporation is authorized to issue only one class of shares of
stock, to be known as "common stock." The total number of shares that the
corporation is authorized to issue is Forty Million (40,000,000), all of
which are of a par value of $.001 each.
ARTICLE IV.
DIRECTORS
The governing board of the corporation shall be styled as a "Board of
Directors," and any member of the Board shall be styled as a "Director."
<PAGE>
The number of members constituting the first Board of Directors of the
corporation is two (2). The names and post office boxes or street addresses,
either residence or business, of said members are as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
T.F. Fred Tham 1304 Pik Hoi House
Choi Hung Estate
Kowloon, Hong Kong
Terry Woo 745 E. 50th Ave.
Vancouver, B.C.
Canada V5X 1B4
</TABLE>
The number of directors of the corporation may be increased or decreased
in the manner provided in the Bylaws of the corporation; provided, that the
number of directors shall never be less than one. In the interim between
elections of directors by stockholders entitled to vote, all vacancies,
including vacancies caused by an increase in the number of directors and
including vacancies resulting from the removal of directors by the
stockholders entitled to vote which are not filled by said stockholders, may
be filled by the remaining directors, though less than a quorum.
ARTICLE V.
LIMITATION OF DIRECTOR LIABILITY
The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permissible under the General Corporation
Law of the State of Nevada, as the same may be amended and supplemented.
ARTICLE VI.
INDEMNIFICATION
The corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented (the "Law"), indemnify any and all persons whom it shall have
power to indemnify under the Law from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by the Law.
The indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person,
-2-
<PAGE>
[LETTERHEAD]
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY
RESIDENT AGENT
In the matter of
KAZARI INTERNATIONAL, INC.
- ------------------------------------------------------------------------------
Name of Corporation
I, CSC SERVICES OF NEVADA, INC. with address at Suite F
---------------------------- ------------------------,
Name of Resident Agent
Street 502 E JOHN ST
----------------------------------------------------------------------,
City of CARSON CITY, State of Nevada, Zip Code 89706
------------- ------------------------------,
hereby accept appointment as resident agent of the above-named corporation in
accordance with NRS 78.090.
(mailing address if different: )
------------------------------------------------
JAN 8 1998 BY: /s/ [Illegible]
- -------------- -- ------------------------------------------------------
Signature of Resident Agent
NRS 78.090. Except during any period of vacancy described in NRS 78.097,
every corporation must have a resident agent, who may be either a natural
person or a corporation, resident, or located in this state. Every resident
agent must have a street address, where he maintains an office for the
service of process, and may have a separate mailing address such as a Post
Office Box, which may be different from the street address. The address of the
resident agent is the registered office of the corporation in this state. The
resident agent may be any bank or banking corporation or other corporation
located and doing business in this state. The Certificate of Acceptance must
be filed at the time of the initial filing of the corporate papers.
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
KAZARI INTERNATIONAL, INC.
Pursuant to the provisions of Nevada Revised Statutes, Title 7, Chapter
78, it is hereby certified that:
FIRST: The name of the Corporation is Kazari International, Inc.
SECOND: The Board of Directors of the corporation duly adopted the
following resolutions on March 23, 1999:
"RESOLVED FURTHER that Article 1 of the Articles of Incorporation of the
Corporation be amended to read in full as follows:
Article I. NAME The name of this corporation is e-Auction Global
Trading Inc."
THIRD: The total number of outstanding shares having voting power of
the corporation is 39,820,000 and the total number of votes entitled to be
cast by the holders of all of said outstanding shares is 39,820,000.
FOURTH: The holders of at least a majority of the aforesaid total
number of outstanding shares having voting power, to wit, 34,500,000 shares,
dispensed with the holding of a meeting of stockholders and adopted the
amendment herein certified by a consent in writing signed by such majority in
accordance with the provisions of Nevada Revised Statutes, Title 7, Section
78.320.
IN WITNESS WHEREOF the undersigned President and Secretary of Kazari
International, Inc. have executed this certificate on this 24 day of March,
1999.
/s/ Shane Maine
------------------------------------
SHANE MAINE, President
/s/ Michael Gilley
------------------------------------
MICHAEL GILLEY, Secretary
<PAGE>
City of Toronto )
) ss
Province of Ontario )
On April 1, 1999 before me, the undersigned a notary public personally
appeared Shane Maine, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s) or the entity upon behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal,
/s/ Alex Moore
- ------------------------------------
Name of Notary Public
Notary Expiration Date: N/A [SEAL]
------------
* * * * *
City of Vancouver )
) ss
Province of British Columbia )
On March 24, 1999 before me, the undersigned a notary public personally
appeared Michael Gilley, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s) or the entity upon behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal,
/s/ Joel A. Guralnick
- ------------------------------------
Name of Notary Public
Notary Expiration Date: N/A [SEAL]
-------------
-2-
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
KAZARI INTERNATIONAL, INC.
Pursuant to the provisions of Nevada Revised Statutes. Title 7, Chapter
78, it is hereby certified that:
FIRST: The name of the Corporation is Kazari International, Inc.
SECOND: The Board of Directors of the corporation duly adopted the
following resolutions on March 23, 1999;
"RESOLVED FURTHER that Article 1 of the Articles of Incorporation of the
Corporation be amended to read in full as follows:
Article 1. NAME The name of the corporation is "Auction Global
Trading, Inc."
THIRD: The total number of outstanding shares having voting power of
the corporation is 39,820,000 and the total number of votes entitled to be
cast by the holders of all of said outstanding shares is 39,820,000.
FOURTH: The holders of at least a majority of the aforesaid total
number of outstanding shares having voting power, to wit, 34,500,000 shares,
dispensed with the holding of a meeting of stockholders and adopted the
amendment herein certified by a consent in writing signed by such majority
in accordance with the provisions of Nevada Revised Statutes, Title 7,
Section 78.32D.
IN WITNESS WHEREOF the undersigned President and Secretary of Kazari
International, Inc. have executed this certificate on this 24 day of March
1999.
/s/ Shane Maine
--------------------------
SHANE MAINE, President
/s/ Michael Gilley
--------------------------
MICHAEL GILLEY, Secretary
<PAGE>
City of Toronto )
) ss
Province of Ontario )
On April 1, 1999 before me, the undersigned a notary public personally
appeared Shane Maine personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the
name in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s) or the entity upon behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
[ILLEGIBLE]
- ------------------------
Name of Notary Public
Notary Expiration Date: N/A [SEAL]
* * * * *
City of Vancouver )
) ss
Province of British Columbia )
On March 24, 1999 before me, the undersigned a notary public personally
appeared Michael Gilley personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the
name in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s) or the entity upon behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
[ILLEGIBLE]
- ------------------------ [STAMP]
Name of Notary Public
Notary Expiration Date: N/A [SEAL]
-2-
<PAGE>
OFFICERS' CERTIFICATE OF KAZARI INTERNATIONAL, INC.
We, the undersigned President and Secretary of Kazari International,
Inc., a Nevada [ILLEGIBLE] (the "Company"), in accordance with Sections
78.207 and 78.209 of the Nevada General Corporation Law, do hereby certify:
(1) that the Board of Directors of the Company has authorized the
cancellation of the reverse split of all of its issued and
outstanding shares of Common Stock of the Company (the "Common Stock")
that took effect on January 29, 1999 (the "Reverse Split") pursuant to
that certain Officers' Certificate of the Company that was filed with
the Secretary of State of Nevada on January 22, 1999;
(2) that the Board of Directors has authorized an increase in the number
of authorized shares of Common Stock of the Company from 40,000,000
shares of Common Stock to 250,000,000 shares of Common Stock; and
(3) as follows:
(a) that the number of authorized shares of the Company prior to the
Reverse Split was 40,000,000 shares of Common Stock, par value
$0.001;
(b) that effective as of the Reverse Split, the number of authorized
shares of the Company remained at 40,000,000 shares of Common
Stock, par value $0.001;
(c) that there were no exchanges of stock certificates in accordance
with the Reverse Split whereby for every two (2) existing issued
and outstanding shares of Common Stock held, the holder was to
receive one (1) share of new Common Stock, par value $0.001 per
share; and
(d) that effective as of the filing of this Officers' Certificate,
the number of authorized shares of the Company shall increase from
40,000,000 shares of Common Stock, par value of $0.001 to
250,000,000 shares of Common Stock, par value of $0.001.
IN WITNESS WHEREOF, we have executed this Officers' Certificate on this
24 day of March, 1999.
/s/ Shane Maine
------------------------------------
SHANE MAINE
President
/s/ Michael Gilley
------------------------------------
MICHAEL GILLEY
Secretary
<PAGE>
City of Toronto )
) as
Province of Ontario )
On April 1, 1999 before me, the undersigned a notary public in and for said
county and state, personally appeared Shane Maine, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed
the instrument.
WITNESS My hand and Official Seal
/s/ John Alexander Moore
- -------------------------------------
John Alexander Moore
- -------------------------------------
Printed Name of Notary Public
My Commission Expires N/A [SEAL]
------------
- ------------------------------------------------------------------------------
City of Vancouver )
) as
Province of British Columbia )
On March 29, 1999 before me, the undersigned a notary public in and for said
county and state, personally appeared Michael Gilley, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed
the instrument.
WITNESS My hand and Official Seal
/s/ Joel A. [ILLEGIBLE]
- -------------------------------------
Joel A. [ILLEGIBLE]
- -------------------------------------
Printed Name of Notary Public
My Commission Expires N/A [SEAL]
------------
<PAGE>
BYLAWS
FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION,
OF
KAZARI INTERNATIONAL, INC.
(A NEVADA CORPORATION)
ARTICLE I. OFFICES.
Section 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of the Corporation shall be fixed and located at such place as the Board of
Directors (herein referred to as the "Board") shall determine. The Board is
granted full power and authority to change said principal executive office from
one location to another.
Section 2. OTHER OFFICES. Branch or subordinate offices may be
established at any time by the Board at any place or places.
ARTICLE II. SHAREHOLDERS.
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held on
the principal executive office of the Corporation unless another place within or
without the State of Nevada is designated by the Board.
Section 2. ANNUAL MEETINGS. The annual meetings of shareholders shall
be held on the last Friday in August of each year, at 10:00 A.M., local time, or
such other date or such other time as may be fixed by the Board, provided,
however, that should said day fall upon a Saturday, Sunday or legal holiday
observed by the Corporation at its principal executive office, then any such
annual meeting of shareholders shall be held at the same time and place on the
next day thereafter ensuing which is a business day. At such meetings, directors
shall be elected and any other proper business may be transacted.
1
<PAGE>
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time by the Board, the Chairman of the Board, the President or
by the holders of shares entitled to cast not less than ten percent of the votes
at such meeting.
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Written notice of each
annual or special meeting of shareholders shall be given not less than 10 nor
more than 60 days before the date of the meeting to each shareholder entitled to
vote thereat.
Such notice shall be given either personally or by first-class mail,
postage prepaid, or by other means of written communication, addressed to the
shareholder at the address of such shareholder appearing on the books of the
Corporation or given by the shareholder to the Corporation for the purpose of
notice, or if no such address appears or is given, at the place where the
principal executive office of the Corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located. After notice is given by mail, the
Secretary or the Assistant Secretary, if any, or transfer agent, shall execute
an affidavit of mailing in accordance with this section.
The notice shall state the place, date and hour of the meeting and (i)
in the case of a special meeting, the general nature of the business to be
transacted, and no other business may be transacted, or (ii) in the case of the
annual meeting, those matters which the Board, at the time of the mailing of the
notice, intends to present for action by the shareholders, but, subject to the
provisions of applicable law, any proper matter may be presented at the meeting
for such action. The notice of any meeting at which directors are to be elected,
shall include the names of nominees intended at the time of notice to be
presented by the Board for election.
Section 5. QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting of
the shareholders. Subject to the Articles of Incorporation of the Corporation
(herein referred to as the "Articles of Incorporation"), the shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave
2
<PAGE>
less than a quorum, if any action taken (other than adjournment) is approved
by at lease a majority of the shares required to constitute a quorum.
Section 6. ADJOURNED MEETINGS AND NOTICE THEREOF. Any meeting of
shareholders, whether or not a quorum is present, may be adjourned from time to
time by the vote of a majority of the shares, the holders of which are either
present in person or represented by proxy thereat, but in the absence of a
quorum (except as provided in Section 5 of this Article) no other business may
be transacted at such meeting.
It shall not be necessary to give any notice of the time and place of
the adjourned meeting or of the business to be transacted thereat, other than by
announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders' meeting is adjourned for more than 45 days or,
if after adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given as in the case of an original
meeting.
Section 7. VOTING. The shareholders entitled to notice of any meeting
or to vote at any such meeting shall be only those persons in whose names shares
are registered in the stock records of the Corporation on the record date
determined in accordance with Section 8 of this Article.
Except as provided below and except as may be otherwise provided in
the Articles of Incorporation, each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote of
shareholders. Subject to the requirements of the next sentence, every
shareholder entitled to vote at any election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
such shareholder's shares are normally entitled, or distribute the
shareholder's votes on the same principle among as many candidates as the
shareholder thinks fit. No shareholder shall be entitled to cumulate votes
(i.e., cast for any candidate a number of votes greater than the number of
votes which such shareholder normally is entitled to cast) unless such
candidate or candidates' names have been placed in nomination prior
3
<PAGE>
to the voting and any shareholder has given notice at the meeting prior to
the voting of such shareholder's intention to cumulate the shareholder's votes.
Any holder of shares entitled to vote on any matter may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, other than elections to office, but, if the
shareholder fails to specify the number of shares such shareholder is voting
affirmatively, it will be conclusively presumed that the shareholder's approving
vote is with respect to all shares such shareholder is entitled to vote.
Elections for directors need not be by ballot unless a shareholder
demands election by ballot at the meeting and before the voting begins.
Provided that the quorum requirements of Section 5 above are satisfied:
the affirmative vote of a majority of the shares represented and voting at a
duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or voting by
classes is required by the Nevada General Corporation Law or the Articles of
Incorporation, provided that whenever under the Nevada General Corporation Law
shares are disqualified from voting on any matter, they shall not be considered
outstanding for the purposes of the determination of a quorum at any meeting to
act upon, or the required vote to approve action upon any matter; and in any
election of directors, the candidates receiving the highest number of
affirmative votes of the shares entitled to be voted for them, up to the number
of directors to be elected by such shares, are elected; votes against the
director and votes withheld shall have no legal effect.
Section 8. RECORD DATE. The Board may fix, in advance, a record date
for the determination of the shareholders entitled to notice of, or to vote at,
any meeting of the shareholders, or the shareholders entitled to receive payment
of any dividend or other distribution, or any allotment of rights, or to
exercise rights in respect of any other lawful action.
4
<PAGE>
The record date so fixed shall be not more than 60 days nor less than 10 days
prior to the date of the meeting nor more than 60 days prior to any other
action.
If no record date is fixed by the Board, (i) the record date for
determining shareholders entitled to notice of, or to vote at, a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held, and (ii) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board has been taken, shall be the day on which the first written consent
is given.
A determination of shareholders of record entitled to notice of, or to
vote at, a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board fixes a new record date for the adjourned meeting. The board
shall fix a new record date if the meeting is adjourned for more than 45 days
from the date set for the original meeting.
Section 9. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting, or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Neither the business to be transacted at nor the purpose
of any annual or special meeting of shareholders, need be specified in any
written waiver of notice, except as provided in the Nevada General Corporation
Law.
Section 10. ACTION WITHOUT MEETING. Subject to the applicable section
of the Nevada General Corporation Law, any action which, under any provision of
the Nevada General Corporation Law, any be taken at any annual or special
meeting of shareholders, may be taken without a meeting and without prior notice
if a consent in writing, setting forth the action so
5
<PAGE>
taken, shall be signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Section 11. PROXIES. Every person entitled to vote shares shall have
the right to do so either in person or by one or more persons authorized by a
valid written proxy signed by such person or such person's attorney in fact and
filed with the Secretary. Subject to the provision of this bylaw and applicable
law, any duly executed proxy continues in full force and effect until revoked by
the person executing it prior to the vote pursuant thereto.
Section 12. INSPECTORS OF ELECTION. Prior to any meeting of
shareholders, the Board may appoint inspectors of election to act at the
meeting or any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of the meeting may, and on the request of any shareholder or his
proxy shall, appoint inspectors of election or persons to replace those who
fail to appear or refuse to act at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one
or more shareholders or proxies, the holders of a majority of shares or their
proxies present at the meeting shall determine whether one or three
inspectors are to be appointed. The inspectors of election shall (i)
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies, (ii) receive votes, ballots or
consents, (iii) hear and determine all challenges and questions in any way
arising in connection with the right to vote, (iv) count and tabulate all
votes or consents, (v) determine when the poll shall close and the election
result and (vi) do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
The inspectors of election shall perform their duties impartially,
in good faith, to the best of their ability and as expeditiously as it is
practicable. If there are three inspectors of election,
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<PAGE>
the decision, act or certificate of majority is effective in all respects as
the decision, act or certificate of all.
ARTICLE III. DIRECTORS.
Section 1. POWERS. Subject to limitations of the Articles of
Incorporation, these Bylaws and the Nevada General Corporation Law relating to
actions required to be approved by the shareholders or by the outstanding
shares, the business and affairs of the Corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board.
Section 2. COMMITTEES. The Board may, by resolution adopted by a
majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the
pleasure of the Board. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent member of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
such committee, to the extent provided in the resolution of the Board, shall
have all the authority of the Board, except with respect to (i) the approval
of any action required to be approved by the shareholders or by the
outstanding shares under the Nevada General Corporation Law, (ii) the filling
of vacancies on the Board or in any committee, (iii) the fixing of
compensation of the directors for serving on the Board or on any committee,
(iv) the adoption, amendment or repeal of Bylaws, (v) the amendment or repeal
of any resolution of the Board which by its express terms is not so amendable
or repealable, (vi) a distribution to the shareholders, except at a rate or
in a periodic amount or within a price range determined by the Board and
(viii) the appointment of other committees of the Board or the members
thereof.
Section 3. NUMBER OF DIRECTORS. The authorized number of directors
shall be two (2) until changed by an amendment of the Articles of Incorporation
or this Section 3 duly approved by the shareholders, subject to the Nevada
General Corporation Law. However, any
7
<PAGE>
reduction of the authorized number of directors does not remove any director
prior to the expiration of such director's term of office.
Section 4. ELECTION AND TERM OF OFFICE. The directors shall be elected
at each annual meeting of the shareholders, but if any such annual meeting is
not held or the directors are not elected thereat, the directors may be elected
at any special meeting of shareholders held for that purpose. Subject to Section
5 of this Article, each director shall hold office until the next annual meeting
and until a successor has been elected and qualified.
Section 5. VACANCIES. A vacancy or vacancies in the Board shall be
deemed to exist in case of the death, resignation or removal of any director, if
the authorized number of directors be increased or if the shareholders fail at
any annual or special meeting of shareholders at which any directors are
elected, to elect the full authorized number of directors to be voted at that
meeting.
Vacancies in the board, except those existing as a result of a removal
of a director, may be filled by a majority of the remaining directors, or, if
the number of remaining directors is less than a quorum, by (i) the unanimous
written consent of the remaining directors, (ii) the affirmative vote of a
majority of the remaining directors at a meeting held pursuant to notice or
waivers of notice complying with the applicable section of the Nevada General
Corporation Law, or (iii) by a sole remaining director, and each director so
elected shall hold office until the next annual meeting and until such
director's successor has been elected and qualified.
Vacancies in the Board created by the removal of a director may be
filled only by the affirmative vote of a majority of the shares represented and
voting at a duly held meeting at which quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum) or by
the unanimous written consent of all shares entitled to vote for the election of
directors.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such election by
written consent other than to fill a
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<PAGE>
vacancy created by removal requires the consent of a majority of the
outstanding shares entitled to vote.
Section 6. RESIGNATION. Any director may resign effective upon giving
written notice to the President, the Secretary or the Board, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
Section 7. PLACE OF MEETINGS. Regular or special meetings of the Board
shall be held at any place with or without the State of Nevada which has been
designated in the notice of the meeting or, if not stated therein, as designated
by resolution of the Board. In the absence of such designation, meetings shall
be held at the principal executive office of the Corporation.
Section 8. ANNUAL MEETINGS. Immediately following each annual meeting
of shareholders, the Board may, but shall not be required to, hold an annual
meeting at the same place, or at any other place that has been designated by the
Board, for the purpose of organization, election of officers or transaction of
other business as the Board may determine. Call and notice of this meeting of
the Board shall be in the manner for the conduct of special meetings as provided
in Section 9 unless the board has determined by resolution to conduct a regular
meeting at such time and place, in which event call and notice of this meeting
of the Board shall not be required unless some place other than the place of the
annual shareholders' meeting has been designated.
Section 9. SPECIAL MEETINGS. Special meetings of the Board for any
purpose or purposes may be called at any time by the Chairman of the Board, the
President, the Secretary or by any two directors upon four days' notice by mail
or 48 hours' notice given personally or by telephone, telegraph, telex or other
similar means of communication. Any such notice shall be addressed or delivered
to each director at such director's address as it is shown upon the records of
the Corporation or as may have been given to the Corporation by the director for
purposes of notice.
9
<PAGE>
Section 10. QUORUM. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which quorum is
present shall be regarded as the act of the Board, unless a greater number be
required by law or by the Articles. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority of the
required quorum for such meeting.
Section 11. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members
of the Board may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear one another.
Section 12. WAIVER OF NOTICE. Notice of a meeting need not be given to
any director who signs a waiver of notice or a consent to holding the meeting or
an approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13. ADJOURNMENT. A majority of the directors present, whether
or not a quorum is present, may adjourn any directors' meeting to another time
and place. If a meeting is adjourned for more than 24 hours, notice of any
adjournment to another time or place shall be given prior to the time of the
adjourned meeting to the directors that were not present at the time of
adjournment.
Section 14. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services, and
such reimbursement for expenses, as may be fixed or determined by the Board.
10
<PAGE>
Section 15. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board may be taken without a meeting if all members of the
Board shall individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
effect as a unanimous vote of the members of the Board.
ARTICLE IV. OFFICERS.
Section 1. OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board, a Chairman, one or more Vice Presidents,
one or more Assistant Secretaries, one or more Assistant Financial Officers and
such other officers as may be elected or appointed in accordance with the
provisions of Section 3 of this Article.
Section 2. ELECTION. The officers of the Corporation, except such
officers as may be elected or appointed in accordance with the provisions of
Section 3 or Section 5 of this Article, shall be chosen by, and shall serve at
the pleasure of, the Board, and shall hold their respective offices until their
resignation, removal or other disqualification from service, or until their
respective successors shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS. The Board may elect, and may empower
the President to appoint, such other officers as the business of the Corporation
may require, each of whom shall hold office for such period, have such authority
and perform such duties as are provided in these Bylaws or as the Board may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by the Board at any time. Any officer may resign at any
time upon written notice to the Corporation without prejudice to the rights, if
any, of the Corporation under any contract to which the office is a party.
11
<PAGE>
Section 5. VACANCIES. A vacany in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular election or appointment to such
office.
Section 6. PRESIDENT. The President is the general manager and chief
executive officer of the Corporation and has, subject to the control of the
Board, general supervision, direction and control of the business and officers
of the Corporation. The President shall preside at all meetings of the
shareholders and at all meetings of the Board. The President has the general
powers and duties of management usually vested in the office of president and
general manager of a corporation and such other powers and duties as may be
prescribed by the Board.
Section 7. VICE PRESIDENTS. In the absence or disability of the
President, unless a Chairman has been elected, the Vice Presidents in order of
their rank as fixed by the Board or, if not ranked, the Vice President
designated by the Board, shall perform all the duties of the President and, when
so acting, shall have all the powers of and be subject to all the restrictions
upon the President. The Vice Presidents shall have such other powers and perform
such other duties as from time to time may be prescribed for them respectively
by the Board.
Section 8. SECRETARY. The Secretary shall keep or cause to be kept, at
the principal executive office and such other place as the Board may order, a
book of minutes of all meeting of shareholders and the Board, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present or represented at meetings
of shareholders, and the proceedings thereof. The Secretary shall keep, or cause
to be kept, a copy of the Bylaws of the Corporation at the principal executive
office or business office in accordance with the applicable section of the
Nevada General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, if one be appointed, a share register, or a duplicate share register,
showing the names of the shareholders and their addresses, the number
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<PAGE>
and classes of shares held by each, the number and date of certificates
issued for the same, and the number and date of cancellation of every
certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and the Board required by these Bylaws or by law to be
given, shall keep the seal of the Corporation in safe custody, and shall have
such other powers and perform such other duties as may be prescribed by the
Board.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
accounts of the properties and business transactions of the Corporation, and
shall send or cause to be sent to the shareholders of the Corporation such
financial statements and reports as are by law or these Bylaws required to be
sent to them. The books of account shall at all times be open to inspection by
any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board. The Chief Financial Officer
shall disburse the funds of the Corporation as may be ordered by the Board,
shall render to the President and directors, upon their request, an account of
all transactions as Chief Financial Officer and of the financial condition of
the Corporation, and shall have such other powers and perform such other duties
as may be prescribed by the Board.
Section 10. CHAIRMAN OF THE BOARD. If such an officer be elected, the
Chairman of the Board shall preside at meetings of the board of directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the board of directors or prescribed by the Bylaws. In the
absence of the President, or if there is no President, the Chairman of the Board
shall, in addition, be the chief executive officer of the Corporation and shall
have the powers and duties described in Section 6 above.
ARTICLE V. OTHER PROVISIONS.
Section 1. INSPECTION OF CORPORATE RECORDS. The record of shareholders
shall be open to inspection and copying, and the accounting books and records
and minutes of
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<PAGE>
proceedings of the shareholders and the Board and committees of the Board, if
any, shall be open to inspection, upon written demand on the Corporation of
any shareholder at any reasonable time during usual business hours, for a
purpose reasonably related to such holder's interests as a shareholder.
Section 2. INSPECTION OF BYLAWS. The Corporation shall keep at its
principal executive office in the State of Nevada, or if its principal executive
office is not in Nevada, at its principal business office in Nevada, the
original or a copy of these Bylaws as amended to date, which shall be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the Corporation is outside Nevada and the
Corporation has no principal business office in Nevada, it shall upon the
written request of any shareholder furnish to such shareholder a copy of these
Bylaws as amended to date.
Section 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, initial transaction statement or written statement,
conveyance or other instrument in writing and any assignment or endorsement
thereof executed or entered into between the Corporation and any other person
shall be valid and binding on the Corporation, when signed by the Chairman, the
President or any Vice President and the Secretary, any Assistant Secretary, the
Chief Financial Officer or any Assistant Financial Officer of the Corporation
unless the other party knew that the signing officers had no authority to
execute the same. Any such instruments may be signed by any other person or
persons and in such manner as from time to time shall be determined by the
Board, and, unless so authorized by the Board, no officer, agent or employee
shall have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose or
amount.
Section 4. CERTIFICATES OF STOCK. Every holder of shares of the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation by the President or a Vice President and by the Chief Financial
Officer or an Assistant Financial Officer or the
14
<PAGE>
Secretary or an Assistant Secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all of the
signatures on the certificate may be facsimile.
Except as provided in this Section, no new certificate for shares shall
be issued in lieu of an old one unless the latter is surrendered and cancelled
at the same time. The Board may, however, if any certificate for shares is
alleged to have been lost, stolen or destroyed, authorize the issuance of a new
certificate in lieu thereof, and the Corporation may require that the
Corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including expense or
liability) on account of the alleged loss, theft or destruction of such
certificate or the issuance of such new certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board or by the
President are each authorized to vote, represent and exercise on behalf of the
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the Corporation. The authority herein
granted may be exercised either by any such officer in person or by any other
person authorized so to do by proxy or power of attorney duly executed by said
officer.
Section 6. ANNUAL REPORT TO SHAREHOLDERS. The requirement of sending an
annual report to shareholders which is set forth in the Nevada General
Corporation Law is expressly waived, but nothing herein shall be interpreted as
prohibiting the Board from issuing annual or other periodic reports to
shareholders.
Notwithstanding the immediately preceeding paragraph, if the
Corporation has 100 or more holders of record of its shares (determined as
provided in the Nevada General Corporation Law), the Board shall cause an annual
report to be sent to the shareholders not later than 120 days after the close of
the fiscal year. Such report, in addition to such information as may be required
by the Nevada General Corporation Law, shall contain a balance sheet as of the
end of that fiscal year and an income statement and statement of changes in
financial position for that fiscal year, accompanied by any report thereon of
independent accountants or, if there is no such report, the
15
<PAGE>
certificate of an authorized officer of the Corporation that the statements
were prepared without audit from the books and records of the Corporation.
The requirement of sending such report to the shareholders at least 15 (or,
if sent by third-class mail, 35) days prior to the annual meeting of
shareholders to be held during the next fiscal year is expressly waived.
Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the General Provisions of the Nevada Corporations Code and in the
Nevada General Corporation Law shall govern the construction of these Bylaws.
Section 8. COMPENSATION. The salaries of all officers and agents
of the Corporation shall be fixed by the Board.
Section 9. INDEMNIFICATION OF AGENTS OF THE CORPORATION; PURCHASE OF
LIABILITY INSURANCE. For purposes of this Section 9, "agent" means any person
who is or was a director, officer, employee or other agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise, or was a director, officer, employee or
agent of a foreign or domestic corporation which was a predecessor corporation
of the Corporation or of another enterprise at the request of such predecessor
corporation; "proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative; and
"expenses" includes without limitation, attorneys' fees and any expenses of
establishing a right to indemnification under this Section 9.
The Corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Corporation to procure a judgment in its favor)
by reason of the fact that such person is or was an agent of the Corporation,
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding to the fullest extent
16
<PAGE>
permitted under the General Corporation Law of the State of Nevada, as amended
from time to time.
Section 10. CORPORATE LOANS AND GUARANTEES TO DIRECTORS AND OFFICERS.
The Corporation shall not make any loan of money or property to, or guarantee
the obligation of, any director or officer of the Corporation or of its parent,
if any, unless the transaction, or an employee benefit plan authorizing the
loans or guarantees after disclosure of the right under such a plan to include
officers or directors, is approved by a majority of the shareholders entitled to
act thereon.
The Corporation shall not make any loan of money or property to, or
guarantee the obligation of, any person upon the security of shares of the
Corporation or of its parent, if any, if the Corporation's recourse in the event
of default is limited to the security for the loan or guaranty, unless the loan
or guaranty is adequately secured without considering these shares, or the loan
or guaranty is approved by a majority of the shareholders entitled to act
thereon.
Notwithstanding the first paragraph of this Section 10, the Corporation
may advance money to a director or officer of the Corporation or of its parent,
if any, for any expenses reasonably anticipated to be incurred in the
performance of the duties of the director or officer, provided that in the
absence of the advance the director or officer would be entitled to be
reimbursed for the expenses by the Corporation, its parent, or subsidiary, if
any.
The provisions of the first paragraph of this Section 10 do not apply
to the payment of premiums in whole or in part by the Corporation on a life
insurance policy on the life of a director or officer so long as repayment to
the Corporation of the amount paid by it is secured by the proceeds of the
policy and its cash surrender value.
The provisions of this Section 10 do not apply to any transaction, plan
or agreement permitted under the applicable section of the Nevada General
Corporation Law relating to employee stock purchase plans.
17
<PAGE>
For the purposes of this Section, " approval by a majority of the
shareholders entitled to act" means either (1) written consent of a majority of
the outstanding shares without counting as outstanding or as consenting any
shares owned by any officer or director eligible to participate in the plan or
transaction that is subject to this approval, (2) the affirmative vote of a
majority of the shares present and voting at a duly held meeting at which a
quorum is otherwise present, without counting for purposes of the vote as either
present or voting any shares owned by any officer or director eligible to
participate in the plan or transaction that is subject to the approval, or (3)
the unanimous vote or written consent of the shareholders. If the Corporation
has more than one class or series of shares outstanding, the "shareholders
entitled to act" within the meaning of this Section includes only holders of
those classes or series entitled under the articles to vote on all matters
before the shareholders or to vote on the subject matter of this Section, and
includes a requirement for separate class or series voting, or for more or less
than one vote per share, only to the extent required by the Articles.
ARTICLES VI. AMENDMENTS.
These Bylaws may be amended or repealed either by approval of the
outstanding shares or by the approval of the Board; provided, however, that
after the issuance of shares, a Bylaw specifying or changing a fixed number of
directors or the maximum or minimum number or changing from a fixed to a
variable number of directors or vice versa may be adopted only by approval of
the outstanding shares.
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<PAGE>
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT INCORPORATED UNDER THE
LAWS OF THE STATE OF NEVADA [ILLEGIBLE] REPRESENTATION UNDER THE UNITED STATES
SECURITIES ACT OF 1935, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN A ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS."
CUSIP NO. 26822X 10 8
NUMBER e-AUCTION SHARES
GLOBAL TRADING INC.
AUTHORIZED COMMON STOCK: 250,000,000 SHARES
PAR VALUE: $.001 PER SHARE
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
--Shares of e-AUCTION GLOBAL TRADING INC. Common Stock--
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated: JULY 22, 1999
[SEAL]
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
-------------------------- --------------------------
SECRETARY PRESIDENT
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in
the inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations.
<TABLE>
<S> <C>
TEN COM -- as tenants in UNIF GIFT MIN ACT -- .......Custodian........
common (Cust) (Minor)
under Uniform Gifts to Minors
TEN ENT -- as tenants by Act.....................
the entireties (State)
JT TEN -- as joint tenants
with right of
survivorship and
not as tenants
in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
---------------------------------------
---------------------------------------
---------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
-----------------------------------------------------Shares of the
capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
-----------------------------------------------------Attorney to transfer
the said stock on the books of the within named Corporation with full power
of substitution in the premises
Dated
----------------------------
----------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN A ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS."
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT is made effective as at the 26th day of
February, 1999.
BETWEEN:
QFG HOLDINGS LIMITED, on behalf of itself and on behalf of the
other shareholders of e-Auction Global Trading Inc.
(hereinafter called the "Vendor"),
AND:
KAZARI INTERNATIONAL INC., a Nevada Corporation, a company
whose common shares are eligible for trading on the NASDAQ OTC
system
(hereinafter called the "Purchaser")
AND:
e-AUCTION GLOBAL TRADING INC., a company duly incorporated
under the laws of Barbados
(hereinafter called the "Company")
WHEREAS:
A. The Vendor either holds the proxy to vote or is the owner of 34,500,000
common shares of e-Auction Global Trading Inc. (the "Company"), representing all
of the issued and outstanding shares in the capital of e-Auction;
B. The Vendor, on behalf of itself and on behalf of the other shareholders of
e-Auction executed a binding letter of intent dated February 26, 1999 with the
Purchaser pursuant to which the Purchaser has agreed to purchase all of the
issued and outstanding shares in the capital of e-Auction in exchange for
34,500,000 common shares of the Purchaser being issued from treasury to the
shareholders of e-Auction on a one for one basis;
<PAGE>
C. Based upon the representations and warranties set forth herein, the Vendor
has agreed to sell to the Purchaser the Vendor's Shares (as hereinafter defined)
and the Purchaser has agreed to purchase the same from the Vendor, on the terms
and conditions and for the consideration set forth herein;
WITNESSETH THAT in consideration of the premises and of the respective
warranties, representations, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
INTERPRETATION AND DEFINITIONS
1.1 DEFINITIONS
For all purposes of this Agreement:
(i) "BUSINESS" means the business carried on by the Company which
primarily involves the provision of an electronic auction
service;
(ii) "CLOSING" means the definition set forth in Article 6.1 hereof;
(iii) "CLOSING DATE" means the date of the Closing referred to in
Article 6.1 hereof;
(iv) "COMPANY" means e-Auction Global Trading Inc.;
(v) "INTELLECTUAL PROPERTY" means all rights to and interests in:
(a) all business and trade names, corporate names, brand names
and slogans Related to the Business;
(b) all inventions, patents, patent rights, patent applications
(including all reissues, divisions, continuations,
continuations-in-part and extensions of any patent or patent
application), industrial designs and applications for
registration of industrial designs Related to the Business;
(c) all copyrights and trade marks (whether used with wares or
services and including the goodwill attaching to such trade
marks), registrations and applications for trade marks and
copyrights (and all future income from such trade marks and
copyrights) Related to the Business;
(d) all rights and interests in and to processes, lab journals,
notebooks, data, trade secrets, designs, know-how, product
formulae and information, manufacturing, engineering and
other drawings and manuals, technology,
<PAGE>
blue prints, research and development reports, agency
agreements, technical information, technical assistance,
engineering data, design and engineering specifications, and
similar materials recording and evidencing expertise or
information Related to the Business;
(e) all of the intellectual property listed in Schedule 2.1;
(f) all other intellectual and industrial property rights
throughout the world Related to the Business;
(g) all licenses of the intellectual property listed in items
(a) to (f) above;
(h) all future income and proceeds from any of the intellectual
property listed in items (a) to (f) above and the licenses
listed in item (g) above; and
(i) all rights to damages and profits by reason of the
infringement of any of the intellectual property listed in
items (a) to (g) above.
(vi) "PAYMENT SHARES" means 34,500,000 common shares without par
value in the capital of the Purchaser described in Article 5.2
hereof;
(vii) "PURCHASER" means Kazari International Inc.;
(vii) "RELATED TO THE BUSINESS" means, directly or indirectly, used
in, arising from or relating in any manner to the Business;
(viii) "VENDOR" means QFG Holdings Limited; and
(ix) "VENDORS SHARES" means the 34,500,000 shares in the capital of
the Company as set forth in Article 2.1(i) hereof.
1.2 INTERPRETATION
For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) "this Agreement" means this Agreement and all Schedules attached
hereto;
(ii) any reference in this Agreement to a designated "Article",
"Section", "Schedule" or other subdivision refers to the
designated Article, Section, Schedule or other subdivision of
this Agreement;
<PAGE>
(iii) the words "herein" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision of this
Agreement;
(iv) the word "including", when following any general statement term
or matter, is not to be construed to limit such general
statement, term or matter to the specific items or matters set
forth immediately following such word or to similar items or
matters, whether or not non-limited language (such as "without
limitation" or "but not limited to" or words of similar import)
is used with reference thereto but rather refers to all other
items or matters that could reasonably fall within the broadest
possible scope of such general statement, term or matter;
(v) any reference to a statute includes and, unless otherwise
specified herein, is a reference to such statute and to the
regulations made pursuant thereto, with all amendments made
thereto and in force from time to time, and to any statute or
regulations that may be passed which has the effect of
supplementing or superseding such statute or such regulation;
and
(vi) words importing the masculine gender include the feminine or
neuter gender and words in the singular include the plural, and
vice versa.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE VENDORS AND THE COMPANY
2.1 REPRESENTATIONS AND WARRANTIES
The Vendor and the Company represent and warrant, jointly and
severally, to the Purchaser, as continuing representations and warranties which
are true and correct on the date hereto or, if any such representation and
warranty is expressed to be made and given in respect of a particular date other
than the date hereto, then such representation and warranty shall be true and
correct on the earlier of such date or the Closing Date, and all representations
and warranties herein shall be true and correct on each day thereafter to and
including the Closing Date with the same effect as if made and given on and as
of each such day that:
(i) each of the following is the beneficial and recorded owner of
such number of common shares in the capital of the Company as is
hereinafter set opposite each Vendor's name (collectively the
"Vendor's Shares");
<PAGE>
<TABLE>
<CAPTION>
NAME OF VENDOR NO. OF SHARES
-------------- -------------
<S> <C>
Platinum Capital Management Inc. 2,500,000
Platinum Capital Management Inc. 1,000,000
in trust for John Andrews
Zorba Holdings Limited 1,500,000
e-Auction Global Trading Inc. (BVI) 1,500,000
QFG Holdings Limited 4,000,000
China Capital Financial Corp 1,500,000
Web CCB (BVI) 750,000
CCS Technologies Inc. 750,000
Hartford Holdings Limited 3,000,000
BFM Enterprises Inc. 1,500,000
John Andrews in trust for the 16,500,00
Shareholders of Sanga International
Inc.
</TABLE>
(ii) the Vendor's Shares are free and clear of any liens, charges,
claims, options, set-offs, encumbrances, voting agreements,
voting trusts, escrow restrictions or other limitations or
restrictions of any nature whatsoever, except as expressly
provided for or disclosed herein;
(iii) the Vendor's Shares represent 100% of the Company's issued and
outstanding share capital;
(iv) no person, firm or corporation has any right, agreement or
option, present or future, contingent or absolute, or any
right capable of becoming a right, agreement or option to
purchase or otherwise acquire any of the Vendor's Shares;
(v) the Vendor has the full and absolute right, power and
authority to enter into this Agreement on the terms and
subject to the conditions herein set forth, to carry out the
transactions contemplated hereby and to transfer, or cause to
be transferred, on the Closing Date, legal and beneficial
title and ownership of the Vendor's Shares to the Purchaser.
(vi) the Company is duly incorporated, validly existing and in good
standing under the laws of Barbados and in each other
jurisdiction in which it carries on business or hold assets
and the Company has the necessary corporate capacity to carry
on the business which it now carries on in such jurisdictions
and to own the assets which it now owns;
<PAGE>
(vii) the authorized capital of the Company consists of an unlimited
number of common shares without par value, of which a total of
34,500,000 common shares have been validly issued, are
outstanding and are fully paid and non-assessable;
(viii) no person, firm or corporation has any right, agreement or
option, present or future, contingent or absolute, or any
right capable of becoming a right, agreement or option to
require the Company to issue any shares in its capital or to
convert any securities of the Company or of any other company
into shares in the capital of the Company;
(ix) the corporate records of the Company, as required to be
maintained by it under its statute of incorporation and
constating documents, are accurate, complete and up-to-date in
all material respects and all material transactions of the
Company have been promptly and properly recorded in their
books or filed with their records;
(x) the Company does not have any liability, due or accruing,
contingent or absolute, and is not directly or indirectly
subject to any guarantee, indemnity or other contingent or
indirect obligation with respect to the obligation of any
other person or company, other than any such liability,
guarantee, indemnity or obligation incurred or assumed by it
in the course of their normal and ordinary day to day business
and no such liability, guarantee, indemnity or obligation has
been paid or discharged by the Company other than in the
course of their normal and ordinary day to day business;
(xi) the Company does not beneficially own, directly or indirectly,
shares in any other corporate entity;
(xii) the Company has good and marketable title to all of its
assets, and such assets are free and clear of any material
financial encumbrances;
(xiii) the Company holds all permits, licenses, consents and
authorizations issued by any government or governmental
authority which are necessary in connection with the operation
of its business and the ownership of its properties and
assets;
(xiv) the Company has filed all necessary tax returns in all
jurisdictions required to be filed by them, all returns
affecting workers, compensation with the appropriate agency,
corporation capital tax returns, if required, and any other
material reports and information required to be filed by the
Company with any governmental authority; the Company has paid
all income, sales and capital taxes payable by them as and
when due; the Company has withheld and remitted to tax
collection authorities such taxes as are required by law to be
<PAGE>
withheld and remitted as and when due; the Company has paid
all instalments of corporate taxes due and payable, and there
is not presently outstanding and nor does the Company expect
to receive any notice of re-assessment from any applicable tax
collecting authority;
(xv) the Company has not declared or paid any dividends of any kind
or declared or made any other distributions of any kind
whatsoever including, without limitation, by way of
redemption, repurchase or reduction of its authorized capital;
(xvi) the Company has not engaged in any transaction or made any
disbursement or assumed or incurred any liability or
obligation or made any commitment, including, without
limitation, any forward purchase commitment or similar
obligation, to make any expenditure which would materially
affect their operations, property, assets or financial
condition;
(xvii) the Company has not waived or surrendered any right of
substantial value and has not made any gift of money or of any
of its property or assets;
(xviii) the Company has carried on business in the normal course;
(xix) the Vendor has entered into a letter agreement ("Letter
Agreement") dated February 2, 1999 with Jameson Investment
Corporation ("Jameson") pursuant to which the Vendor is to
obtain from Jameson all of the issued and outstanding shares
in the capital of Jameson International Foreign Corporation
("JFX"), a copy of such Letter Agreement has been previously
delivered to the Purchaser. The Letter Agreement is in full
force and effect and neither party thereto is in breach of any
provision. The Vendor is entitled to the full benefit and
advantage of the Letter Agreement in accordance with its
terms. The Vendor has not received any notice of default by
the Vendor or a dispute between the Vendor and any other party
in respect of the Letter Agreement and the parties are
continuing to proceed to a closing. There has not occurred any
event which, with the lapse of time or giving of notice or
both, would constitute a default under the Letter Agreement by
the Vendor or any other party to the Letter Agreement. At or
before the closing of the transaction contemplated in the
Letter Agreement, the Vendor shall immediately transfer and
assign absolutely all of the shares of JFX to the Company. The
Vendor hereby assigns all of its interest in the Letter
Agreement to the Company. Except as described above, the
Company does not have outstanding any material continuing
contractual obligations whatsoever relating to or affecting
the conduct of its business or any of its property or assets
or for the purchase, sale or leasing of any property other
than those contracts entered into by the Company in the course
of their normal and ordinary day to day business;
<PAGE>
(xx) there are no material management contracts or consulting
contracts to which the Company is a party or by which either
is bound, and no amount is payable or has been agreed to be
paid by the Company to any persons as remuneration, pension,
bonus, share of profits or other similar benefit and no
director, officer or member, or former director, officer or
member, of the Company, nor any associate or affiliate of any
such person, has any claim of any nature against, or is
indebted to, the Company;
(xxii) the Company is not in default under or in breach of, or
would, after notice or lapse of time or both, be in default
under any contract, agreement, indenture or other instrument
to which it is a party or by which it is bound nor will the
consummation of the transactions contemplated hereby conflict
with, constitute a default under, result in a breach of,
entitle any person or company to a right of termination under,
or result in the creation or imposition of any lien,
encumbrance or restriction of any nature whatsoever upon or
against the property or assets of the Company, under their
constating documents, any contract, agreement, indenture or
other instrument to which the Company is a party or by which
either is bound, any law, judgment, order, writ, injunction or
decree of any court, administrative agency or other tribunal
or any regulation of any governmental authority, and all such
contracts, agreements, indentures, or other instruments are in
good standing and the Company is entitled to all benefits
thereunder;
(xxiii) there are no claims threatened or against or affecting the
Company nor are there any actions, suits, judgments,
proceedings or investigations pending or, threatened against
or affecting the Company, at law or in equity, before or by
any Court, administrative agency or other tribunal or any
governmental authority;
(xviii) Intellectual Property:
(a) Schedule 2.1 lists the Intellectual Property and such
Intellectual Property is sufficient to allow the Company
to conduct the Business. The Vendor obtained the
Intellectual Property pursuant to an asset purchase
agreement dated the 1st day of February, 1999 between
the Vendor and Generated Solutions (1993) Ltd. and an
asset purchase agreement dated the 1st day of February,
1999 between the Vendor and National Electronic
Marketing Inc., copies of such agreements have been
previously provided to the Purchaser, which transactions
have closed and the Intellectual Property has been
transferred. The Vendor has further transferred all of
its rights
<PAGE>
to the Intellectual Property to the Company and such
transfer has been completed.
(b) The Company is the owner of the Intellectual Property
and is entitled to the exclusive and uninterrupted use
of the Intellectual Property without payment of any
royalty or other fees. No Person has any right, title or
interest in any of the Intellectual Property and all
such persons have waived their moral rights in any
copyright works within the Intellectual Property. The
Company has diligently protected its legal rights to the
exclusive use of the Intellectual Property.
(c) The Company has not permitted or licensed any Person to
use any of the Intellectual Property.
(d) No person has challenged the Company's rights to any of
the Intellectual Property.
(e) Neither the use of the Intellectual Property nor the
conduct of the Business has infringed or currently
infringes upon the industrial or intellectual property
rights of any other person.
(f) No other person has infringed the Company's rights to
the Intellectual Property.
(g) There is no government prohibition or restriction on the
use of Intellectual Property.
(h) Neither the Company, the Vendor or any of the other
shareholders of the Company are aware of any
infringement by the Company of any registered patent,
trademark or copyright;
(xix) the Company shall obtain and maintain until the Closing Date
such insurance against loss or damage to their assets and with
respect to public liability as is reasonably prudent for
companies carrying on businesses similar to that of the
Company;
(xx) the Vendor has duly and validly authorized, executed and
delivered this Agreement; and
(xxi) the Vendor has the power and capacity to enter into this
Agreement and to carry out its obligations hereunder.
<PAGE>
2.2 COVENANTS OF THE VENDOR AND THE COMPANY
Each of the Vendor and the Company, joint and severally,
covenant and agree with the Purchaser that:
(i) both before and after the Closing Date, each of the Vendor and
the Company shall execute and do all such further deeds, acts,
things and give such assurances as may be required in the
reasonable opinion of the Purchaser's counsel for more
perfectly consummating the transactions contemplated hereby
and referenced herein.
2.3 COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchaser that the
Company shall not, prior to the Closing Date, except with the prior consent of
the Purchaser:
(i) make or permit to be made any employment contracts or other
arrangements with any directors, officers, agents, servants or
employees of the Company;
(ii) make or assume or permit to be made or assumed any commitment,
obligation or liability which is outside of the usual and
ordinary course of the business of the Company, and for the
purpose of carrying on the same, but the Company will operate
its properties and carry on its business as heretofore and
will maintain all of its properties, rights and assets in good
standing, order, and repair;
(iii) declare or pay any dividends or make any other distributions
or appropriations of profits or capital or make any other
distributions or appropriations of its profits or of its
capital;
(iv) create or assume any indebtedness other than in the ordinary
course of business or guarantee the obligations of any third
party other than in the ordinary course of its business; or
(v) sell or otherwise in any way alienate or dispose of or
encumber any of its assets;
provided however, that the Company shall, both before and after the Closing
Date, execute and do all such further deeds, acts, things and give such
assurances as may be required in the reasonable opinion of the Purchaser's
counsel for more perfectly consummating the transactions contemplated herein,
and shall, without limitation, use its best efforts to obtain any approvals from
third parties as may be required to all of the transactions contemplated hereby
and referenced herein.
<PAGE>
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE PURCHASER
3.1 REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Vendor, as
continuing representations and warranties which are true and correct on the date
hereof or, if any such representation and warranty is expressed to be made and
given in respect of a particular date other than the date hereof, then such
representation and warranty shall be true and correct on such date, and all
representations and warranties herein shall be true and correct on each day
thereafter to and including the Closing Date with the same effect as if made and
given on and as of each such day, that:
(i) subject to fulfilment of the conditions hereinafter
enumerated, the Purchaser has the power and capacity to enter
into this Agreement and to carry out its obligations
hereunder;
(ii) the Purchaser has duly and validly authorized, executed and
delivered this Agreement;
(iii) the Purchaser is a company duly incorporated, validly existing
and in good standing under the laws of Nevada, United States
and has the necessary corporate capacity and is fully
qualified in the State of Nevada and each other jurisdiction
in which it carries on business or holds assets to carry on
the business which it now carries on and to hold the assets
which it now holds;
(iv) the authorized capital of the Purchaser consists of 40,000,000
common shares without par value, of which 5,320,000 shares
have been validly issued and are outstanding and are fully
paid and non-assessable;
(v) no person or company has any right, agreement or option,
present or future, contingent or absolute, or any right
capable of becoming a right, agreement or option to require
the Purchaser to issue any share in its capital or to convert
any securities of the Purchaser of any other company into
shares in its capital;
(vi) the Purchaser holds all permits, licenses, consents and
authorities issued by any government or governmental authority
which are necessary in connection with the operations of its
business and of the ownership of its business and of the
ownership of its properties and assets;
(vii) the Purchaser has filed all necessary federal and provincial
tax returns affecting workers compensation with the
appropriate agency, corporation capital tax
<PAGE>
returns and any other reports and information required to be
filed by the Purchaser with any governmental authority; the
Purchaser has paid all federal, state and foreign income,
sales and capital taxes payable by it; the Purchaser has
withheld and remitted the appropriate taxes to the Internal
Revenue Service or any other applicable governmental
authority; the purchaser has paid all instalments of corporate
taxes due and payable, and there is not presently outstanding
any notice of re-assessment from the Internal Revenue Service
or any applicable tax collecting authority;
(viii) the Purchaser has not declared or paid any dividends of any
kind nor declared nor made any other distributions of any kind
whatsoever including, without limitation, by way of redemption
or repurchase of the Purchaser's common shares or deduction of
capital;
(ix) the Purchaser has no liability, due or accruing, contingent or
absolute, and is not directly or indirectly subject to any
guarantee, indemnity or other contingent or indirect
obligation with respect to the obligation of any other person
or company, other than any such liability, guarantee,
indemnity or obligation incurred or assumed by the Purchaser
in the course of its normal and ordinary day to day business
and no such liability, guarantee, indemnity or obligation has
been paid or discharged by the Purchaser after the date of the
Financial Statements of the Purchaser other than in the course
of the Purchaser's normal and ordinary day to day business;
(x) the Purchaser has not waived or surrendered any right of
substantial value and has not made any gift of money or of any
of its property or assets;
(xi) the Purchaser has carried on its business in the normal
course;
(xii) the Purchaser does not have outstanding any material
continuing contractual obligations whatsoever relating to or
affecting the conduct of its business or any of its property
or assets or for the purchase, sale or leasing of any property
other than those contracts entered into by it in the course of
its normal and ordinary day to day business;
(xiii) there are no material management contracts or consulting
contracts to which the Purchaser is a party or by which it is
bound, no amount is payable or has been agreed to be paid by
the Purchaser to any person as remuneration, pension, bonus,
share of profits or other similar benefit, and no director,
officer or member, or former director, officer or member, of
the Purchaser, nor any associate or affiliate of any such
person, has any claims of any nature against, or is indebted
to the Purchaser;
<PAGE>
(xiv) the Purchaser is not in default under or in breach of, or
would, after notice or lapse of time or both, be in default
under or in breach of, and neither this Agreement nor the
consummation of the transactions contemplated hereby will
conflict with, constitute a default under, result in a breach
of, entitle any person or company to a right of termination
under, or result in the creation or imposition of any lien,
encumbrance or restriction of any nature whatsoever upon or
against the property or assets of the Purchaser, under its
constating documents, any contract, agreement, indenture or
other instrument to which it is a party or by which it is
bound, any law, judgment, order, writ, injunction or decree of
any court, administrative agency or other tribunal or any
regulation of any governmental authority, and all such
contracts, agreements, indentures, or other instruments are in
good standing and the Purchaser is entitled to all benefits
thereunder;
(xv) there are no actions, suits, proceedings or investigations
pending or, to the knowledge of the Purchaser, threatened
against or affecting the Purchaser, at law or in equity,
before or by any court, administrative agency or other
tribunal or any governmental authority;
(xvi) the Purchaser has good and marketable title or leasehold title
to all of its properties and assets and such properties and
assets are free and clear of any liens, charges or
encumbrances;
(xvii) the Purchaser does not beneficially own, directly or
indirectly, shares of any corporate entity or any interest in
a partnership, joint venture or other business entity;
(xviii) the Purchaser has filed annual reports and documents required
to be filed with the NASDAQ OTC market, the United States
Securities and Exchange Commission (but is not a reporting
company in any jurisdiction) and any other applicable
corporate or securities authority and is not in default of any
applicable law or regulation; and
(xix) At the Closing Date, the Payment Shares shall be issued and
outstanding as fully paid and non-assessable common shares of
the Purchaser duly registered in the names of those persons
listed in section 6.2 hereof, and such persons shall have good
and marketable title to the Payment Shares, free and clear of
all liens, encumbrances, charges or security interests
whatsoever.
3.2 COVENANTS OF THE PURCHASER
The Purchaser covenants and agrees with the Vendor that:
<PAGE>
(i) the Purchaser will forthwith use its best efforts to obtain
the necessary approvals of any applicable regulatory
authorities of the terms of this Agreement; and
(ii) the Purchaser will, both before and after the Closing Date,
execute and do all such further deeds, things and assurances
as may be required in the reasonable opinion of the Vendor's
counsel for more perfectly consummating the transactions
contemplated hereby and referenced herein.
3.3 NEGATIVE COVENANTS
The Purchaser further covenants and agrees with the Vendors
that it will not, prior to the Closing Date, except with the prior consent of
the Vendor:
(i) make or assume any commitment, obligation or liability which
is outside of the usual and ordinary course of the business of
the Purchaser and for the purpose of carrying on the same, but
the Purchaser will operate its properties and carry on its
business as heretofore and will maintain all of its
properties, rights and assets in good order and repair;
(ii) declare or pay any dividends on its common shares or make any
other distributions or appropriations of profits or capital;
(iii) create or assume any indebtedness or guarantee the obligations
of any third party, other than in the ordinary course of its
business;
(iv) sell or otherwise in any way alienate or dispose of any of its
assets other than in the ordinary course of business; or
(v) issue any shares in its capital to any person.
ARTICLE 4
CONDITIONS
4.1 PURCHASER'S CONDITIONS
The obligations of the Purchaser to complete the transactions
contemplated hereby are subject to the following conditions (which are for the
exclusive benefit of the Purchaser) having been satisfied or expressly waived in
writing by the Purchaser:
(i) prior to the Closing Date neither the Vendor nor the Company
shall have breached any of the warranties and representations
of the Vendor and the Company set forth in this Agreement;
<PAGE>
(ii) all of the covenants and agreements of the Vendors and the
Company to be observed or performed on or before the Closing
Date pursuant to the terms hereof shall have been duly
observed or performed;
(iii) all of the transactions contemplated by this Agreement, shall
have been properly and duly approved; and
(iv) on the Closing Date the Company shall have delivered to the
Purchaser a certificate of an officer or director of the
Company, dated the Closing Date and certifying the truth,
accuracy and correctness of the representations and warranties
contained in this Agreement and the other closing documents
referenced in sections 6.2(i) and (ii) hereof;
4.2 VENDOR'S CONDITIONS
The obligations of the Vendor to complete the transactions
contemplated hereby are subject to the following conditions (which are for the
exclusive benefit of the Vendor) having been satisfied or expressly waived in
writing by the Vendor:
(i) prior to or on the Closing Date the Purchaser shall not have
breached any breach of any of the warranties and
representations of the Purchaser set forth in this Agreement;
(ii) all of the covenants and agreements of the Purchaser to be
observed or performed on or before the Closing Date pursuant
to the terms hereof shall have been duly observed or
performed;
(iii) all of the transactions contemplated by this Agreement, shall
have been properly and duly approved; and
(iv) on the Closing Date the Purchaser shall have delivered to the
Vendor a certificate of an officer or director of the
Purchaser, dated the Closing Date and certifying the truth,
accuracy and correctness of the representations and warranties
contained in this Agreement and the rest of the closing
documents referenced in section 6.1(iii) hereof.
<PAGE>
ARTICLE 5
PURCHASE AND SALE
5.1 PURCHASE AND SALE
Based upon the representations, warranties and covenants of
the parties herein contained and subject to the conditions herein contained, the
Purchaser hereby purchases and the Vendor hereby transfers, assigns and sells,
or will cause such transfer, assignment and sale, to the Purchaser on the
Closing Date, all rights, titles and interests in and to the Vendor's Shares
free and clear of all liens, charges and encumbrances.
5.2 CONSIDERATION
In consideration of the purchase and sale herein contemplated
and in complete satisfaction of the purchase price for the Vendor's Shares, the
Purchaser hereby agrees to issue to the Vendor and the other shareholders of the
Company, a total of 34,500,000 common shares without par value in the capital of
the Purchaser (the "Payment Shares") as follows:
<TABLE>
<CAPTION>
Name of Vendor No. of Common Shares
-------------- --------------------
<S> <C>
Platinum Capital Management Inc. 2,500,000
Platinum Capital Management Inc. 1,000,000
in trust for John Andrews
Zorba Holdings Limited 1,500,000
e-Auction Global Trading Inc. (BVI) 1,500,000
QFG Holdings Limited 4,000,000
China Capital Financial Corp 1,500,000
Web CCB (BVI) 750,000
CCS Technologies Inc. 750,000
Hartford Holdings Limited 3,000,000
BFM Enterprises Inc. 1,500,000
John Andrews in trust for the 16,500,00
Shareholders of Sanga International
Inc.
</TABLE>
5.3 DELIVERY OF PAYMENT SHARES
The Purchaser shall deliver the Payment Shares to the Vendors
on the Closing Date in the following manner:
(i) the Purchaser shall deliver to the Vendor, or to its
direction, share certificates registered in the respective
names for such number of Payment Shares in the Purchaser as is
set opposite each name in Article 5.2 hereof.
<PAGE>
5.4 HOLD PERIOD REQUIREMENT
The Vendor acknowledges and agrees that the Payment Shares
will be subject to applicable hold periods as provided under applicable United
States securities laws and regulations, and will be legended accordingly.
ARTICLE 6
CLOSING
6.1 CLOSING DATE
The completion of the transactions contemplated hereby (the
"Closing"), to be effective as at February 26, 1999, shall occur at the offices
of Blake, Cassels & Graydon, 20th Floor, 45 O'Connor Street, Ottawa, Ontario on
the Closing Date, which shall take place as soon as possible following the
execution of this Agreement on a date as agreed to between the Vendor and the
Purchaser.
6.2 DELIVERIES ON CLOSING
On the Closing Date:
(i) the Vendor shall:
1. deliver to the Purchaser a share certificate
representing 34,500,000 common shares of the Company,
duly recorded in the name of the Purchaser;
(ii) the Company and the Vendor shall deliver to the Purchaser the
following:
1. the certificate of an officer or director of the Company
contemplated in Article 4.1(iv) hereof;
2. a certified extract of a resolution of the directors of
the Company approving the transfer of the Vendor's
shares to the Purchaser;
3. the written resignations of each director and officer of
the Company;
4. share certificates representing the Vendors' Shares duly
endorsed for transfer.
(iii) the Purchaser shall deliver or cause to be delivered to the
Vendor the following:
<PAGE>
1. share certificates representing the Payment Shares.
2. the certificate of an officer or director of the
Purchaser contemplated in Article 4.2(iv) hereof.
ARTICLE 7
MISCELLANEOUS
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All of the representations, warranties and, covenants of the
Vendor and the Company contained in Article 2 of the Agreement and the
representations, warranties and covenants of the Purchaser contained in Article
3 of this Agreement shall survive the Closing Date for a period of six (6)
months only and continue in full force and effect for that time for the benefit
of the party to which it was given regardless of any knowledge or investigation
by or on behalf of any party with respect thereto.
7.2 NON-MERGER
Each party hereby agrees that all provisions of this
Agreement, other than the representations, warranties and covenants of the
Vendor and Company in Article 2 and the Purchaser in Article 3 hereof (which
shall be subject section 7.1 hereof), shall forever survive the execution,
delivery and performance of this Agreement, Closing and the execution, delivery
and performance of any and all documents delivered in connection with this
Agreement.
7.3 INDEMNITY
The Vendor and the Company, jointly and severally, shall
indemnify and save the Purchaser harmless from any loss or damage sustained by
the Purchaser arising out of or in connection with any breach of any
representation, warranty, covenant, agreement or condition of the Vendor or the
Company contained herein, and the same rights shall apply to the Vendors against
the Purchaser mutatis mutandis.
7.4 NOTICE
Any notice, document or communication required or permitted to
be given hereunder shall be in writing at the addresses as indicated on the
execution page of this Agreement or such other addresses as the parties may
specify in writing.
Notices shall be effective and deemed to have been duly given
and received if delivered personally or by telecopier.
<PAGE>
7.5 TIME
Time shall be of the essence hereof.
7.6 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior contracts, agreements and understandings
between the parties. There are no representations warranties, collateral
agreements or conditions affecting this transaction other than as are expressed
or referred to herein in writing.
7.7 CONSENT OF THE COMPANY AND THE PURCHASER
The Company and the Purchaser and the Vendor consent to the
transactions contemplated herein and hereby acknowledge and agree to execute and
perform all such further deeds, acts, things and give such assurances as may be
required in the reasonable opinion of counsel for more perfectly consummating
the transactions contemplated herein, and shall, without limitation, use their
best efforts to obtain as required, approval from such parties as may be
required to give their approval to the transactions contemplated hereby and
herein referenced.
7.8 GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario.
7.9 ENUREMENT
This Agreement shall enure to the benefit of and be binding
upon the respective heirs, successors and assigns of the parties hereto.
7.10 HEADINGS
The headings in this Agreement have been inserted for
convenience only, and do not define, limit, alter or enlarge the meaning of any
provision of this Agreement.
7.11 SCHEDULES
Wherever any term or conditions, expressed or implied, in such
schedules conflicts or is at variance with any term or conditions of this
Agreement, the terms or conditions of this Agreement shall prevail.
<PAGE>
7.12 SEVERABILITY
If a provision of this Agreement is deemed to be wholly or
partly invalid, this Agreement will be interpreted as if the invalid provision
had not been a part thereof.
7.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts
which, when so executed, by facsimile signature or otherwise, shall be read
together and be construed as one agreement.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day
and year first set forth above.
QFG HOLDINGS LIMITED
Per:
-------------------------------
Address:
---------------------------
---------------------------
---------------------------
Facsimile:
---------------------------
KAZARI INTERNATIONAL INC.
Per:
-------------------------------
Address:
---------------------------
---------------------------
---------------------------
Facsimile:
---------------------------
E-AUCTION GLOBAL TRADING INC.
Per:
-------------------------------
Address:
---------------------------
---------------------------
---------------------------
Facsimile:
---------------------------
<PAGE>
SCHEDULE 2.1
INTELLECTUAL PROPERTY
(i) Interactive Auction Software
The Auction Server - multi-threaded C++ Windows NT application that supports
multiple Java clients using its own communications protocol
The Client - a Java applet written in JDK 1.02
Administrative Web Pages
(ii) Bid and Offer Software
Active Server Pages - hosted on Windows NT Webserver (IIS 4.0)
(iii) Other
Microsoft Access Database and schema to support both types of auction
<PAGE>
THIS CONSULTING AGREEMENT is made effective as of the 1st day of March, 1999
BETWEEN:
KAZARI INTERNATIONAL INC.
(hereinafter referred to as the "Company")
OF THE FIRST PART
AND:
MILLENIUM ADVISORS INC.
(hereinafter referred to as the "Consultant")
OF THE SECOND PART
WHEREAS the Company desires to retain the Consultant to provide advice and
services with respect to: mergers and acquisitions, corporate structuring,
corporate administration, raising financing, and such other advice and services
as may be reasonably requested from time to time pursuant to the terms of this
Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
convenants and promises set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged be
each, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT AND AUTHORITY OF CONSULTANT
1.1 APPOINTMENT OF CONSULTANT
The Company hereby appoints the consultant to provide advice
and services for the benefit to the Company as hereinafter set forth, and the
Company hereby authorizes the Consultant to exercise such powers as provided
under this Agreement. The Consultant accepts such appointment on the terms and
conditions herein set forth.
1.2 AUTHORITY OF CONSULTANT
The Consultant shall have no right or authority, express or
implied, to commit or otherwise obligate the Company in any manner whatsoever
except to the extent specifically provided herein or specifically authorized in
writing by the Company.
<PAGE>
1.3 INDEPENDENT CONTRACTOR
In performing its services hereunder, the Consultant shall be
an independent contractor and not an employee or agent of the Company, except
that the Consultant shall be the agent of the Company solely in circumstances
where the Consultant must be the agent to carry out its obligations as set forth
in this Agreement.
Nothing in this Agreement shall be deemed to require the
Consultant to provide its services exclusively to the Company and the Consultant
hereby acknowledges that the Company is not required and shall not be required
to make any remittances and payments required of employers by statute on the
Consultant's behalf and the Consultant or any of its agents or employees shall
not be entitled to any benefits proved by the Company to its employees.
The Company acknowledges that since the Consultant is an
independent contractor and not an employee of the Company, the Consultant shall
have direction and control of the manner, methods, techniques and procedures
used by its agents or employees to perform the services described herein,
notwithstanding Article 2.1(d) of this Agreement.
ARTICLE 2
CONSULTANT'S AGREEMENT
2.1 CONSULTANT'S ACTIVITIES
The Consultant shall:
(a) provide the Company with advice with respect to mergers and
acquisitions, corporate structuring, and corporate
administration;
(b) assist the Company in raising financing for which the
consultant will be paid finders' fees as described in Appendix
"A" Finders Fee Agreement;
(c) provide such other advice and services as may be reasonably
requested from time to time pursuant to the terms of this
Agreement; and
(d) at all times be subject to the direction of the Company, and
shall keep the Company informed as to all matters concerning
the Consultant's activities.
2.2 BOOKS AND RECORDS
At all times during the term of this Agreement, the Consultant
shall cause accurate books and records of all expenditures made by it in
connection with the activities being performed for the Company under this
Agreement to be kept and keep all invoices, receipts and vouchers relating
thereto.
<PAGE>
2.3 EXPENSE STATEMENTS
The Consultant shall be entitled, subject to proper
documentation, reimbursement by the Company for all reasonable expenses incurred
by the Consultant in carrying out its duties hereunder. The Consultant shall
obtain from the C.F.O. of Kazari pre-approved for any expenditure over
US$500.00.
ARTICLE 3
COMPANY'S AGREEMENTS
3.1 COMPENSATION OF CONSULTANT
As compensation for the services rendered by the Consultant
pursuant to this Agreement, the Company shall pay to the Consultant, in addition
to reasonable expenses to be reimbursed to the Consultant in accordance with
Section 2.3, the sum of TWENTY THOUSAND DOLLARS in the lawful currency of the
United States of America (US$20,000) per month, payable as to one half on the
15th and 30th of each month, or if a Saturday, Sunday or holiday the next
following business day.
ARTICLE 4
DURATION, TERMINATION AND DEFAULT
4.1 EFFECTIVE DATE
This Agreement shall become effective as of the 1st day of
March, 1999 and shall remain in force for a period of one year.
4.2 TERMINATION
This Agreement may be terminated by either party by giving the
other sixty (60) days written notice of such termination.
4.3 DUTIES UPON TERMINATION
Upon termination of this Agreement for any reason, the
Consultant shall upon receipt of all sums due and owing, promptly deliver the
following in accordance with the directions of the Company:
(a) a final accounting, reflecting the balance of expenses
incurred on behalf of the Company as of the date of
termination; and
(b) all documents pertaining to the Company or this Agreement,
including but not limited to, all books of account,
correspondence and contracts.
<PAGE>
4.4 COMPENSATION OF CONSULTANT ON TERMINATION
Upon termination of this Agreement, the Consultant shall be
entitled to receive as its full and sole compensation in discharge of
obligations of the Company to the Consultant under this Agreement, all sums due
and payable under this Agreement to the date of termination and the Consultant
shall have no right to receive any further payments; provided, however, that the
Company shall have the right to offset against any payment owing to the
Consultant under this Agreement any damages, liabilities, costs or expenses
suffered by the Company by reason of the fraud, negligence or wilful act of the
Consultant to the extent such right have not been waived by the Company.
ARTICLE 5
CONFIDENTIALITY
5.1 OWNERSHIP OF WORK PRODUCT
All reports, documents, concepts, products and processes
together with any marketing schemes, business or sales contracts, or any
business opportunities prepared, produced developed, or acquired, by or at the
direction of the Consultant, directly or indirectly, in connection with or
otherwise developed by the Consultant in accordance with this Agreement
(collectively, the "Work Product") shall belong exclusively to the Company which
shall be entitled to all moral rights, interest, profits or benefits in respect
thereof. No copies, summaries or other reproductions or any Work Product shall
be made by the Consultant or any of its agents or employees without the express
permission of the Company.
5.2 CONFIDENTIALITY
The Consultant shall not, except as authorized or required by
his duties, reveal or divulge to any person or companies any of the trade
secrets, secret or confidential operations, processes or dealings or any
information concerning the organization, business, finances, transactions or
other affairs of the Company, which may come to the knowledge of the Consultant
during the term of this Agreement and shall keep in complete secrecy all
confidential information entrusted to the Consultant and shall not use or
attempt to use any such information in any manner which may injure or cause
loss, either directly or indirectly, to the Company's business or may be likely
so to do. This restriction shall continue to apply after the termination of this
Agreement without limit to point of time but shall cease to apply to information
or knowledge which may come into public domain.
The Consultant shall comply, and shall cause its agents and
employees to comply, with this Section 5.2 and with such directions as the
Company shall make to ensure the safeguarding or confidentiality of all such
information. The Company may require that any agent or employee of the
Consultant execute an agreement with the Company regarding the confidentiality
of all such information.
<PAGE>
ARTICLE 6
REGULATORY REQUIREMENTS
6.1 AGREEMENT SUBJECT TO APPLICABLE REGULATORY REQUIREMENTS
The parties hereto agree that this Agreement will be subject
to all applicable regulatory requirements and regulatory approvals, if any, and
will take all steps necessary to comply with and obtain any such requirements or
approvals.
ARTICLE 7
MISCELLANEOUS
7.1 WAIVER OR CONSENTS
No consent , approval or waiver, express or implied, by either
party hereto, to or of any breach of default by the other party in the
performance by the other party of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other party of the same or any other obligations of such
other party or to declare the other party in default, irrespective of how long
such failure continues, shall not constitute a general waiver by such party of
its rights under this Agreement, and the granting of any consent or approval in
any one instance by or on behalf of the Company shall not be construed to waiver
or limit the need for such consent in any other or subsequent instance.
7.2 GOVERNING LAW
This Agreement shall be governed by the laws of Ontario.
7.3 SUCCESSORS, ETC.
This Agreement shall enure to the benefit of and be binding
upon each of the parties hereto and their respective heirs, successors and
permitted assigns.
7.4 SUBCONTRACTS AND ASSIGNMENT
The Consultant may delegate or subcontract any duties or
obligations or arising hereunder, or any portion thereof. However, no such
delegation or subcontracting shall relieve the Consultant from any of its
obligations under this Agreement and a subcontractor shall, as between the
Company and the Consultant, be deemed to the agent of the Consultant.
This Agreement may not be assigned by any party except with
the prior written consent of the other party hereto.
In the event that this Agreement or any portion thereof is
assigned or subcontracted, any such assignment or subcontract shall be made
subject to the terms of this Agreement and the Consultant shall require the
assignee or subcontractor, as the case may be, to
<PAGE>
acknowledge such terms in writing at the time the assignment or subcontract
agreement is executed.
7.5 ENTIRE AGREEMENT AND MODIFICATION
This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements and undertakings, whether
oral or written, relative to the subject matter hereof. To be effective, any
modification of this Agreement must be in writing and signed by both parties
hereto.
7.6 HEADINGS
The headings of the Sections and Articles of this Agreement
are inserted for convenience of reference only and shall not in any manner
affect the construction or meaning of anything contained or govern the rights or
liabilities of the parties hereto.
7.7 NOTICES
All notices, requests and communications required or permitted
hereunder shall be in writing and shall be sufficiently given and deemed to have
been received upon personal delivery or, if mailed, upon the first to occur of
actual receipt or forty-eight (48) hours after being placed in the mail, postage
prepaid, registered or certified mail, return receipt requested, respectively
addressed to the Company or the Consultant as follows:
The Company:
KAZARI INTERNATIONAL INC.
BCE PLACE
181 Bay Street
Suite 3730
Toronto, ON M5J 2T3
Fax number: 416 214-0585
Attention: CEO or President
The Consultant:
MILLENIUM ADVISORS INC.
50 Prince Arthur Street
Suite 102
Toronto, ON
Fax number: 416 921-7039
or such other address as may be specified in writing to the other party, but
notice of a change of address shall be effective only upon the actual receipt.
<PAGE>
7.8 TIME OF THE ESSENCE
Time is of the essence.
7.9 FURTHER ASSURANCES
The parties herein agree from time to time after all the
execution hereof to make, do, execute or cause or permit to be made, done or
executed all such further and other lawful acts, deeds, things, devices and
assurances in law whatsoever as may be required to carry out the true intention
and to give full force and effect to this Agreement.
7.10 EXCEPTIONS
This Agreement may be executed in several counterparts, each
of which will be deemed to be an original and all of which will together
constitute one and the same instrument.
Delivery of an executed copy of this Agreement by electronic
facsimile transmission or other means of electronic communication capable of
producing a printed copy will be deemed to be execution and delivery of this
Agreement as of the day and year first above written.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
KAZARI INTERNATIONAL INC. MILLENIUM ADVISORS INC.
Per: Per:
- ------------------------------- ----------------------------
Authorized Signatory Authorized Signatory
<PAGE>
e-AUCTION GLOBAL TRADING INC.
1999 STOCK OPTION PLAN
AS ADOPTED MARCH 1, 1999
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options. Capitalized terms not defined in
the text are defined in Section 21. This Plan is intended to be a written
compensatory benefit plan within the meaning of Rule 701 promulgated under the
Securities Act.
2. SHARES SUBJECT TO THE PLAN.
2.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2 and
16, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 6,000,000 Shares. Subject to Sections 2.2 and 16,
Shares will again be available for grant and issuance in connection with future
Options under this Plan that are subject to issuance upon exercise of an Option
but cease to be subject to such Option for any reason other than exercise of
such Option. At all times the Company will reserve and keep available a
sufficient number of Shares as will be required to satisfy the requirements of
all outstanding Options granted under this Plan.
2.2 ADJUSTMENT OF SHARES. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan and (b) the
Exercise Prices of and number of Shares subject to outstanding Options, will be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
PROVIDED, HOWEVER, that fractions of a Share will not be issued but will either
be paid in cash at Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. Nonqualified Stock
Options (as defined in Section 5 below) may be granted to employees, officers,
directors and consultants of the Company or any Parent or Subsidiary of the
Company; provided such consultants render bona fide services not in connection
with the offer and sale of securities in a capital-raising transaction. A person
may be granted more than one Option under this Plan.
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. This Plan will be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Stock Option
Agreement (as defined in Section 5 below) and any
other agreement or document executed pursuant to this
Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan;
(c) select persons to receive Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares or other consideration
subject to Options;
<PAGE>
(f) determine whether Options will be granted singly, in
combination with, in tandem with, in replacement of,
or as alternatives to, any other incentive or
compensation plan of the Company or any Parent or
Subsidiary of the Company;
(g) grant waivers of Plan or Option conditions;
(h) determine the vesting and exercisability of Options;
(i) correct any defect, supply any omission, or reconcile
any inconsistency in this Plan, any Option, any Stock
Option Agreement (as defined in Section 5 below) or
any Exercise Agreement (as defined in Section 5
below);
(j) determine whether an Option has been earned; and
(k) make all other determinations necessary or
advisable for the administration of this Plan.
4.2 COMMITTEE DISCRETION. Any determination made by the
Committee with respect to any Option will be made in its sole discretion at the
time of grant of the Option or, unless in contravention of any express term of
this Plan or Option, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Option under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Option under this Plan to Participants who are not
Insiders of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOS") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 FORM OF OPTION GRANT. Each Option granted under this Plan
will be evidenced by an Agreement which will expressly identify the Option as an
ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 DATE OF GRANT. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 EXERCISE PERIOD. Options may be exercisable immediately
(subject to repurchase pursuant to Section 10 of this Plan) or may be
exercisable within the times or upon the events determined by the Committee as
set forth in the Stock Option Agreement governing such Option; PROVIDED,
HOWEVER, that no Option will be exercisable after the expiration of ten (10)
years from the date the Option is granted; and PROVIDED FURTHER that no ISO
granted to a person who directly or by attribution owns more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any Parent or Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") will
be exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for Options to become exercisable at one
time or from time to time, periodically or otherwise, in such number of Shares
or percentage of Shares as the Committee determines. Subject to earlier
termination of the Option as provided herein, each Participant shall have the
right to exercise an Option granted hereunder at the rate of at least twenty
percent (20%) per year over five (5) years from the date such Option is granted.
<PAGE>
5.4 EXERCISE PRICE. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
the Fair Market Value of the Shares on the date of grant; provided that (i) the
Exercise Price of an ISO will not be less than 100% of the Fair Market Value of
the Shares on the date of grant and (ii) the Exercise Price of any Option
granted to a Ten Percent Shareholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 6 of this Plan.
5.5 METHOD OF EXERCISE. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.
5.6 TERMINATION. Subject to earlier termination pursuant to
Subsection 16.1 and notwithstanding the exercise periods set forth in the Stock
Option Agreement, exercise of an Option will always be subject to the following:
(a) If the Participant is Terminated for any reason
except death or Disability, then the Participant may
exercise such Participant's Options, only to the
extent that such Options would have been exercisable
upon the Termination Date, no later than three (3)
months after the Termination Date (or such shorter
time period, not less than thirty (30) days, as may
be specified in the Stock Option Agreement) or such
longer time period not exceeding five (5) years
after the Termination Date as may be determined by
the Committee, with any exercise beyond three (3)
months after the Termination Date deemed to be an
NQSO, but in any event, no later than the expiration
date of the Options.
(b) If the Participant is Terminated because of
Participant's death or Disability (or the
Participant dies within three (3) months after a
Termination other than because of Participant's
death or Disability), then Participant's Options may
be exercised, only to the extent that such Options
would have been exercisable by Participant on the
Termination Date and must be exercised by
Participant (or Participant's legal representative
or authorized assignee), no later than twelve (12)
months after the Termination Date (or such shorter
time period, not less than six (6) months, as may be
specified in the Stock Option Agreement) or such
longer time period not exceeding five (5) years
after the Termination Date as may be determined by
the Committee, with any exercise beyond (a) three
(3) months after the Termination Date when the
Termination is for any reason other than the
Participant's death or disability, within the
meaning of Section 22(e)(3) of the Code, or (b)
twelve (12) months after the Termination Date when
the Termination is for Participant's death or
disability, within the meaning of Section 22(e)(3)
of the Code, deemed to be an NQSO, but in any event
no later than the expiration date of the Options.
5.7 LIMITATIONS ON EXERCISE. The Committee may specify a
reasonable minimum number of Shares that may be purchased on exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 LIMITATIONS ON ISOS. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to
<PAGE>
which ISOs are exercisable for the first time by a Participant during any
calendar year exceeds $100,000, then the Options for the first $100,000 worth of
Shares to become exercisable in such calendar year will be ISOs and the Options
for the amount in excess of $100,000 that become exercisable in that calendar
year will be NQSOs. In the event that the Code or the regulations promulgated
thereunder are amended after the Effective Date (as defined in Section 17 below)
of this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, then such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.
5.9 MODIFICATION, EXTENSION OR RENEWAL. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; PROVIDED, HOWEVER, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 NO DISQUALIFICATION. Notwithstanding any other provision
in this Plan, no term of this Plan relating to ISOs will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
5.11 The following restrictions shall also apply to this Plan:
(i) the aggregate number of Shares reserved for issuance
pursuant to Options granted to Insiders shall not
exceed 10% of the Outstanding Issue;
(ii) Insiders shall not be issued, within any one year
period, a number of Shares which exceeds 10% of the
Outstanding Issue;
(iii) no Participant together with such Participant's
Associates shall be issued, within any one year
period, a number of Shares which exceeds 15% of the
Outstanding Issue; and
(iv) the number of Shares reserved for issuance pursuant
to Options to any one Participant shall not exceed
5% of the Outstanding Issue.
6. PAYMENT FOR SHARE PURCHASES.
6.1 PAYMENT. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been
owned by the Participant for more than six (6) months
and have been paid for within the meaning of SEC Rule
144 (and, if such shares were purchased from the
Company by use of a promissory note, such note has
been fully paid with respect to such shares); or (2)
were obtained by the Participant in the public
market;
(c) by waiver of compensation due or accrued to the
Participant for services rendered;
(d) provided that a public market for the Company's stock
exists:
<PAGE>
(1) through a "same day sale" commitment from
the Participant and a broker-dealer that is
a member of the National Association of
Securities Dealers (an "NASD DEALER")
whereby the Participant irrevocably elects
to exercise the Option and to sell a portion
of the Shares so purchased to pay for the
Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such
Shares to forward the Exercise Price
directly to the Company; or
(2) through a "margin" commitment from the
Participant and an NASD Dealer whereby the
Participant irrevocably elects to exercise
the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin
account as security for a loan from the NASD
Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to
forward the Exercise Price directly to the
Company; or
(e) by any combination of the foregoing.
6.2 LOAN GUARANTEES. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
7. WITHHOLDING TAXES.
7.1 WITHHOLDING GENERALLY. Whenever Shares are to be issued in
satisfaction of Options granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Options are to be made in cash, such payment will be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
7.2 STOCK WITHHOLDING. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Option that is subject to tax withholding and the Participant is obligated
to pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
8. PRIVILEGES OF STOCK OWNERSHIP.
8.1 VOTING AND DIVIDENDS. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; PROVIDED, that the
Participant will have no right to retain such stock dividends or stock
distributions with respect to Unvested Shares that are repurchased pursuant to
Section 10.
8.2 FINANCIAL STATEMENTS. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Options outstanding, or as otherwise required or permitted under
Section 260.140.46 of Title 10 of the California Code of Regulations.
Notwithstanding the foregoing, the Company will not be required to provide such
financial statements to Participants whose services in connection with the
Company assure them access to equivalent information.
<PAGE>
9. TRANSFERABILITY. Options granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Option will be exercisable only by the Participant, and any
elections with respect to an Option, may be made only by the Participant.
10. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Stock Option
Agreement (a) a right of first refusal to purchase all Shares that a Participant
(or a subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
and/or (b) a right to repurchase Unvested Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after
Participant's Termination Date for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price, PROVIDED, that such right of
repurchase lapses at the rate of at least twenty percent (20%) per year over
five (5) years from the date of grant of the Option. If such right of repurchase
is assigned, the assignee must pay the Company upon assignment of the right
(unless the assignee is a one hundred percent (100%) owned subsidiary of the
Company or is the parent of the Company owning one hundred percent (100%) of the
Company) cash equal to the difference between the Exercise Price and the Fair
Market Value of the Shares, if the Exercise Price is less than the Fair Market
Value of the Shares.
11. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or other
Securities Commissions or any stock exchange or automated quotation system upon
which the Shares may be listed or quoted.
12. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; PROVIDED, HOWEVER, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
13. EXCHANGE AND BUYOUT OF OPTIONS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Options in exchange for the surrender and
cancellation of any or all outstanding Options. The Committee may at any time
buy from a Participant an Option previously granted with payment in cash, Shares
(including restricted stock) or other consideration, based on such terms and
conditions as the Committee and the Participant may agree.
14. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is
intended to comply with Section 25102(o) of the California Corporations Code.
Any provision of the Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Option will not be
effective unless such Option is in compliance with all applicable federal, state
and provincial securities laws, rules and regulations of any governmental body
or commission, and the requirements of any stock exchange or automated quotation
system upon which the Shares may then be listed or quoted, as they are in effect
on the date of grant of the Option and also
<PAGE>
on the date of exercise or other issuance. Notwithstanding any other provision
in this Plan, the Company will have no obligation to issue or deliver
certificates for Shares under this Plan prior to (a) obtaining any approvals
from governmental agencies that the Company determines are necessary or
advisable, and/or (b) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state, federal or
provincial law or ruling of any governmental body that the Company determines to
be necessary or advisable. The Company will be under no obligation to register
the Shares with the SEC or to effect compliance with the exemption,
registration, qualification or listing requirements of any state or provincial
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
15. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
16. CORPORATE TRANSACTIONS.
16.1 ASSUMPTION OR REPLACEMENT OF OPTIONS BY SUCCESSOR. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (OTHER THAN
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the shareholders of the Company or their relative stock
holdings and the Options granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which shareholders of the Company immediately prior to such merger
(other than any shareholder which merges, or which owns or controls another
corporation which merges, with the Company in such merger) cease to own their
shares or other equity interests in the Company, or (d) the sale of
substantially all of the assets of the Company, any or all outstanding Options
may be assumed, converted or replaced by the successor corporation (if any),
which assumption, conversion or replacement will be binding on all Participants.
In the alternative, the successor corporation may substitute equivalent Options
or provide substantially similar consideration to Participants as was provided
to shareholders (after taking into account the existing provisions of the
Options). The successor corporation may also issue, in place of outstanding
Shares of the Company held by the Participant, substantially similar shares or
other property subject to repurchase restrictions and other provisions no less
favorable to the Participant than those which applied to such outstanding Shares
immediately prior to such transaction described in this Subsection 16.1. The
Committee has the discretion to include in any Participant's Stock Option
Agreement a provision stating that, pursuant to a transaction described in this
Subsection 16.1, then notwithstanding any other provision in this Plan to the
contrary, the vesting of such Options will accelerate and the Options will
become exercisable in full prior to the consummation of such event at such times
and on such conditions as the Committee determines, and if such Options are not
exercised prior to the consummation of the corporate transaction, they shall
terminate in accordance with the provisions of this Plan.
16.2 OTHER TREATMENT OF OPTIONS. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 16, in
the event of the occurrence of any transaction described in Section 16.1, any
outstanding Options will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation or sale of assets.
16.3 ASSUMPTION OF OPTIONS BY THE COMPANY. The Company, from
time to time, also may substitute or assume outstanding options granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Option under this Plan in substitution
of such other company's option, or (b) assuming such option as if it had been
granted under this Plan if the terms of such assumed option could be applied to
an Option granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed option would have been
eligible to be granted an Option under this Plan if the other company had
applied the rules of this Plan to such grant. In the event the Company
<PAGE>
assumes an option granted by another company, the terms and conditions of such
option will remain unchanged (EXCEPT that the exercise price and the number and
nature of shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to Section 424(a) of the Code). In the event the Company
elects to grant a new Option rather than assuming an existing option, such new
Option may be granted with a similarly adjusted Exercise Price.
17. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective
on the date that it is adopted by the Board (the "EFFECTIVE DATE"). This Plan
will be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Options pursuant to this Plan; PROVIDED, HOWEVER, that no Option may
be exercised prior to shareholder approval of this Plan.
18. TERM OF PLAN. Unless earlier terminated as provided herein, this
Plan will terminate ten (10) years from the Effective Date or, if earlier, the
date of shareholder approval.
19. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Stock Option Agreement or instrument to be executed
pursuant to this Plan; PROVIDED, HOWEVER, that the Board will not, without the
approval of the shareholders of the Company, amend this Plan in any manner that
requires such shareholder approval pursuant to the Code or the regulations
promulgated thereunder as such provisions apply to ISO plans or pursuant to the
requirements of any stock exchange or automated quotation system upon which the
Shares are listed.
20. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
the Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
21. DEFINITIONS. As used in this Plan, the following terms will have
the following meanings:
"ASSOCIATE" has the meaning ascribed thereto in the Securities
Act (Ontario) as amended from time to time.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer this Plan, or if no committee is appointed, the Board.
"COMPANY" means e-Auction Global Trading Inc. or any
successor corporation.
"DISABILITY" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
<PAGE>
(a) if such Common Stock is then quoted on the NASDAQ
National Market, its closing price on the NASDAQ
National Market or if such Common Stock is then
listed on the Toronto Stock Exchange, its closing
price on the Toronto Stock Exchange on the date of
determination as reported in THE WALL STREET JOURNAL;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common
Stock is listed or admitted to trading as reported in
THE WALL STREET JOURNAL;
(c) if such Common Stock is publicly traded but is not
quoted on the NASDAQ National Market nor listed or
admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on the date of determination as reported by
THE WALL STREET JOURNAL (or, if not so reported, as
otherwise reported by any newspaper or other source
as the Board may determine); or
(d) if none of the foregoing is applicable, by the
Committee in good faith.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act, or is an insider of the Company as defined by
the Securities Act (Ontario) as amended from time to time.
"OUTSTANDING ISSUE" means the number of shares of capital
stock of the Company that are outstanding immediately prior to any issuance of
Options under this Plan or any issuance of Shares, as the case may be, excluding
Shares issued pursuant to the Plan during the preceding one year period.
"OPTION" means an award of an option to purchase Shares
pursuant to Section 5.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"PARTICIPANT" means a person who receives an Option under this
Plan.
"PLAN" means this e-Auction Global Trading Inc. 1999 Stock
Option Plan, as amended from time to time.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 16, and any
successor security.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. An employee will not be deemed to have
ceased to provide services in the case of (i) sick leave, (ii) military leave,
or (iii) any other leave of absence approved by the
<PAGE>
Committee, provided that such leave is for a period of not more than 90 days
unless reemployment upon the expiration of such leave is guaranteed by contract
or statute, or unless provided otherwise pursuant to formal policy adopted from
time to time by the Company and issued and promulgated to employees in writing.
In the case of any employee on an approved leave of absence, the Committee may
make such provisions respecting suspension of vesting of the Option while on
leave from the employ of the Company or a Subsidiary as it may deem appropriate,
except that in no event may an Option be exercised after the expiration of the
term set forth in the Stock Option Agreement. The Committee will have sole
discretion to determine whether a Participant has ceased to provide services and
the effective date on which the Participant ceased to provide services (the
"TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in
Section 2.2 of the Stock Option Agreement.
"VESTED SHARES" means "Vested Shares" as defined in
Section 2.2 of the Stock Option Agreement.
<PAGE>
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 7th day of January, 2000.
BETWEEN:
LUC SCHELFHOUT, of Stekene
(hereinafter referred to as "L. Schelfhout")
- and -
HILDE DE LAET, of Stekene
(hereinafter referred to as "H. De Laet")
- and -
e-AUCTION BELGIUM N.V., a corporation incorporated under the
laws of Belgium
(hereinafter referred to as the "Purchaser")
- and -
e-AUCTION GLOBAL TRADING INC., a corporation incorporated
under the laws of the State of Nevada
(hereinafter referred to as "e-Auction")
- and -
WHEREAS L. Schelfhout, H. De Laet, and Schelfhout-De Laet (collectively
referred to as the "Vendors") are the registered and beneficial owners of all
the issued and outstanding share capital of Schelfhout Computer Systemen N.V.
("Schelfhout").
AND WHEREAS the Purchaser is willing to purchase and the Vendors are
willing to sell all of the issued and outstanding share capital of Schelfhout on
the terms and conditions contained in this Agreement;
NOW THEREFORE this Agreement witnesses that, in consideration of the
mutual covenants and agreements contained herein, the parties covenant and agree
as follows:
ARTICLE 1
INTERPRETATION
<PAGE>
-2-
1.1 DEFINITIONS. In this Agreement or in any amendment hereto, the following
terms shall have the meanings set out below unless the context requires
otherwise:
(a) "AFFILIATE" means, with respect to any Person, any other
Person who directly or indirectly controls, is controlled by,
or is under direct or indirect common control with, such
Person, and includes any Person in like relation to an
Affiliate. A Person shall be deemed to control a Person if
such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the term
"controlled" shall have a similar meaning.
(b) "AGREEMENT" means this Agreement, including the Schedules to
this Agreement, as it or they may be amended or supplemented
from time to time, and the expressions "HEREOF", "HEREIN",
"HERETO", "HEREUNDER", "HEREBY" and similar expressions refer
to this Agreement and not to any particular Section or other
portion of this Agreement.
(c) "APPLICABLE LAW" means, with respect to any Person, property,
transaction, event or other matter, any law, rule, statute,
regulation, order, judgement, decree, treaty or other
requirement having the force of law (collectively, the "LAW")
relating or applicable to such Person, property, transaction,
event or other matter. Applicable Law also includes, where
appropriate, any interpretation of the Law (or any part
thereof) by any Person having jurisdiction over it, or charged
with its administration or interpretation.
(d) "ASSETS" means all of the property, assets, interests and
rights of Schelfhout of every kind and description and
wherever situated including, without limiting the generality
of the foregoing, the following:
(i) the Real Property;
(ii) the Personal Property;
(iii) the Inventories;
(iv) the Receivables;
(v) all rights and interests under or pursuant to all
warranties, representations and guarantees, express,
implied or otherwise, of or made by suppliers or
others in connection with the Assets or otherwise
Related to the Business;
(vi) the Intellectual Property;
(vii) the Material Contracts;
(viii) the Licences and Permits;
(ix) the Books and Records;
(x) all goodwill Related to the Business, the present
telephone numbers, internet domain addresses and
other communications numbers and addresses of
Schelfhout; and
(xi) all proceeds of any or all of the foregoing received
or receivable after the Closing Time.
<PAGE>
-3-
(e) "BOOKS AND RECORDS" means all books, records, files and papers
of Schelfhout, Related to the Business including without
limitation, financial, operating, inventory, legal and payroll
information, drawings, engineering information, computer
programs (including source code), software programs, manuals
and data, sales and advertising materials, sales and purchases
correspondence, trade association files, research and
development records, lists of present and former customers and
suppliers, personnel, employment and other records, and the
minute and share certificate books of Schelfhout, and all
copies and recordings of the foregoing.
(f) "BUSINESS" means the business carried on by Schelfhout which
primarily involves the facilitating of electronic auctions of
perishable commodities (fish, flowers, fruits and vegetables).
(g) "BUSINESS DAY" means any day except Saturday, Sunday, a
statutory holiday in the Province of Ontario or any other day
on which banks are generally not open for business in the City
of Toronto, Ontario.
(h) "CLAIM" has the meaning ascribed thereto in Section 6.1.
(i) "CLOSING" means the completion of the purchase and sale of the
Shares in accordance with the provisions of this Agreement.
(j) "CLOSING DATE" means January 7, 2000 or such earlier or later
date as may be agreed upon in writing by the parties to this
Agreement.
(k) "CLOSING TIME" means the time of closing on the Closing Date
provided for in Section 3.1.
(l) "CONDITION OF THE BUSINESS" means the condition (financial or
otherwise) of the Business taken as a whole, having regard to
its earnings, Assets, Liabilities, properties, operations and
prospects.
(m) "CONSENTS AND APPROVALS" means all consents and approvals
required to be obtained in connection with the execution and
delivery of this Agreement and the completion of the
transactions contemplated by this Agreement including any and
all third party consents required under any of the Contracts
in connection with or as a result of the transfer of the
Assets and Shares to the Purchaser.
(n) "DEPOSIT" has the meaning ascribed thereto in Section 2.3.
(o) "DIRECT CLAIM" shall have the meaning ascribed thereto in
Section 6.4.
<PAGE>
-4-
(p) "e-AUCTION SHARES" means 3,636,364 common shares in the
capital of e-Auction Global Trading Inc. to be delivered to
the Vendors pursuant to section 2.4(c) hereof.
(q) "EMPLOYEES" means an individual who is employed by Schelfhout
in the Business, and "EMPLOYEES" means every Employee.
(r) "INDEMNIFIED PARTY" means a Person whom Schelfhout, the
Purchaser or e-Auction, as the case may be, has agreed to
indemnify under Article 6.
(s) "INDEMNIFYING PARTY" means, in relation to an Indemnified
Party, the party to this Agreement which has agreed to
indemnify that Indemnified Party under Article 6.
(s1) "INITIAL SHARE VALUE" shall have the meaning ascribed thereto
in section 2.4 hereof.
(t) "INTELLECTUAL PROPERTY" means all rights to and interests in:
(i) all business and trade names, corporate names, brand
names and slogans Related to the Business;
(ii) all inventions, patents, patent rights, patent
applications (including all reissues, divisions,
continuations, continuations-in-part and extensions
of any patent or patent application), industrial
designs and applications for registration of
industrial designs Related to the Business and
developed by Schelfhout;
(iii) all copyrights and trade-marks (whether used with
wares or services and including the goodwill
attaching to such trade-marks), registrations and
applications for trade-marks and copyrights (and all
future income from such trade-marks and copyrights)
Related to the Business and developed by Schelfhout;
(iv) all rights and interests in and to processes, lab
journals, notebooks, data, trade secrets, designs,
know-how, product formulae and information,
manufacturing, engineering and other drawings and
manuals, technology, blue prints, research and
development reports, agency agreements, technical
information, technical assistance, engineering data,
design and engineering specifications, and similar
materials recording or evidencing expertise or
information Related to the Business and developed by
Schelfhout;
(v) all of the intellectual property listed in Schedule
5.1(q)(i);
<PAGE>
-5-
(vi) all other intellectual and industrial property rights
throughout the world Related to the Business and
developed by Schelfhout;
(vii) all licences of the intellectual property listed in
items (i) to (vi) above;
(viii) all future income and proceeds from any of the
intellectual property listed in items (i) to (vi)
above and the licences listed in item (vii) above;
and
(ix) all rights to damages and profits by reason of the
infringement of any of the intellectual property
listed in items (i) to (vii) above.
(u) "INTERIM PERIOD" means the period commencing on June 30, 1999
and ending at the Closing Time;
(v) "LIABILITIES" means all costs, expenses, charges, debts,
liabilities, claims, demands and obligations, whether primary
or secondary, direct or indirect, fixed, contingent, absolute
or otherwise, under or in respect of any contract, agreement,
arrangement, lease, commitment, undertaking, Applicable Law or
Taxes.
(w) "LICENCES AND PERMITS" means all licences, permits, filings,
authorizations, approvals or indicia of authority Related to
the Business or required for the ownership and/or operation of
the Business and/or the Assets.
(x) "LIEN" means any lien, mortgage, charge, hypothec, pledge,
security interest, prior assignment, option, warrant, lease,
sublease, right to possession, encumbrance, claim, right or
restriction which affects, by way of a conflicting ownership
interest or otherwise, the right, title or interest in or to
any particular property.
(y) "MATERIAL ADVERSE CHANGE" means a change in the business,
operations or capital of Schelfhout or e-Auction which has had
or could reasonably be expected to have a significant adverse
effect on the value of the Business or the Shares.
(z) "MATERIAL CONTRACT" means an agreement (whether oral or
written) Related to the Business to which Schelfhout is a
party or by which Schelfhout or any of the Assets or the
Business is bound or affected except an agreement which
involves or may reasonably be expected to involve the payment
to or by Schelfhout of less than US$25,000 over the term of
the agreement and is not otherwise material to the Condition
of the Business.
(aa) "PARTY" means a party to this Agreement and any reference to a
party includes its successors and permitted assigns; and
"PARTIES" means every party.
(bb) "PERSON" is to be broadly interpreted and includes an
individual, a corporation, a partnership, a trust, an
unincorporated organization, and the successors, assigns,
<PAGE>
-6-
executors, heirs, administrators or other legal
representatives of an individual in such capacity.
(cc) "PERSONAL PROPERTY" means, without limitation, all machinery,
equipment, furniture, fixtures, fittings, motor vehicles and
other chattels Related to the Business (including those in
possession of third parties).
(dd) "PERSONAL PROPERTY LEASES" means all chattel leases, equipment
leases, rental agreements, conditional sales contracts and
other similar agreements.
(ee) "PRO-RATA BASIS" means, with respect to each Vendor, the
proportion of his holdings of shares in the capital of
Schelfhout, as set out in the recitals to this Agreement, to
the total number of shares in the capital of Schelflout
outstanding as at the Closing Time, being 50% each.
(ff) "PURCHASE PRICE" has the meaning ascribed thereto in Section
2.4.
(gg) "PURCHASER" means e-Auction Belgium N.V., a corporation
incorporated under the laws of Belgium.
(hh) "REAL PROPERTY" means all real property owned or used by
Schelfhout Related to the Business including, without
limitation, the Improvements.
(ii) "RECEIVABLES" means all accounts receivable, bills receivable,
trade accounts, book debts and insurance claims Related to the
Business together with any unpaid interest accrued on such
items and any security or collateral for such items, including
recoverable deposits.
(jj) "RELATED TO THE BUSINESS" means, directly or indirectly, used
in, arising from or relating in any manner to the Business.
(kk) "SCHELFHOUT" means Schelfhout Computer Systemen N.V., a
corporation incorporated under the laws of Belgium.
(ll) "SHARES" means all of the issued and outstanding share capital
of Schelfhout more specifically set out in the recitals to
this Agreement.
(mm) "TAXES" means all taxes, charges, fees, levies, imposts and
other assessments, including all income, sales, use, goods and
services, value added, capital, capital gains, alternative,
net worth, transfer, profits, withholding, payroll, employer
health, excise, franchise, real property and personal property
taxes, and any other taxes, customs duties, fees, assessments
or similar charges in the nature of a tax including pension
plan contributions, unemployment insurance payments and
workers' compensation premiums, together with any installments
with respect thereto, and any interest, fines and penalties
imposed by any governmental
<PAGE>
-7-
authority (including federal, state, provincial, municipal
and foreign governmental authorities), and whether disputed
or not.
(nn) "THIRD PARTY" has the meaning given in Section 6.6.
(oo) "THIRD PARTY CLAIM" has the meaning given in Section 6.4.
(pp) "VENDORS" means collectively L. Schelfhout and H. De Laet.
1.2 HEADINGS. The division of this Agreement into Articles and Sections and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement.
1.3 NUMBER AND GENDER. Unless the context requires otherwise, words importing
the singular include the plural and vice versa and words importing gender
include all genders.
1.4 BUSINESS DAYS. If any payment is required to be made or other action is
required to be taken pursuant to this Agreement on a day which is not a Business
Day, then such payment or action shall be made or taken on the next Business
Day.
1.5 CURRENCY AND PAYMENT OBLIGATIONS. All dollar amounts referred to in this
Agreement are stated in United States Dollars and any payment required to be
made hereunder shall be made by electronic transfer or any other method as
agreed to from time to time by the parties hereto that provides immediately
available funds. In the case of the Vendors, payment by certified cheque, bank
draft or electronic transfer shall be made payable to the order of or to the
account of each Vendor, on a Pro-Rata Basis, or as they may otherwise direct in
writing.
1.6 STATUTE REFERENCES. Any reference in this Agreement to any statute or any
section thereof shall, unless otherwise expressly stated, be deemed to be a
reference to such statute or section as amended, restated or re-enacted from
time to time.
1.7 SECTION AND SCHEDULE REFERENCES. Unless the context requires otherwise,
references in this Agreement to Sections or Schedules are to Sections or
Schedules of this Agreement. The Schedules to this Agreement are as follows:
<TABLE>
<CAPTION>
SCHEDULES
---------
<S> <C>
Schedule 5.1(i) - Financial Statements of Schelfhout
Schedule 5.1(l) - Real Property
Schedule 5.1(n) - Insurance
Schedule 5.1(o) - Material Contracts
Schedule 5.1(p) - List of Receivables
Schedule 5.1(q) - Intellectual Property
Schedule 5.1(y)(i) - Employees
Schedule 5.1(y)(vii) - Benefit Plan
</TABLE>
<PAGE>
-8-
ARTICLE 2
PURCHASE OF SHARES
2.1 AGREEMENT TO PURCHASE AND SELL. At the Closing Time, subject to the
terms and conditions hereof, the Vendors shall sell to the Purchaser and the
Purchaser shall purchase from the Vendors, the Shares.
2.2 AMOUNT OF PURCHASE PRICE. The purchase price (the "Purchase Price")
payable by the Purchaser to the Vendors for the Shares shall be the sum of
ten million dollars (US$10,000,000) in United States funds.
2.3 DEPOSIT. The Vendors acknowledge and agree that the Purchaser has
already deposited the sum of one million dollars (US$1,000,000) in United
States funds in trust with L. Schelfhout and H. De Laet (the "Deposit"),
which Deposit shall be applied towards the payment of the Purchase Price.
2.4 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid and
satisfied by the Purchaser to the Vendors as follows:
(a) at the Closing Time, the Deposit shall be paid to the Vendors,
on a Pro-Rata Basis, by L. Schelfhout and H. De Laet and
credited against the Purchase Price;
(b) at the Closing Time, by delivery to the Vendors, on a Pro-Rata
basis, of an aggregate of three million dollars (US$3,000,000)
in United States funds; and
(c) at the Closing Time, by delivery to the Vendors, on a Pro-Rata
Basis, of an aggregate of 3,636,364 common shares in the
capital of e-Auction, which shares shall at the Closing Time
have an aggregate value of six million dollars (US$6,000,000)
in United States funds, and a per share value equal to US$1.65
("Initial Share Value"), subject to the terms and conditions
contained in Section 2.5 below.
2.5 e-AUCTION SHARES. The Vendors agree not to sell, transfer, convey or
dispose ("Sell") of any of the e-Auction Shares delivered to the Vendors
pursuant to Section 2.4(c) above except on the following basis:
(a) the Vendors shall not Sell any of the e-Auction Shares until
the date which is six (6) months after the Closing Date, and
following such date the Vendors shall only be entitled to sell
their Pro-rata Share of such number of e-Auction Shares having
an aggregate value, calculated on the basis of a per share
value equal to the Initial Share Value, of seven hundred and
fifty thousand dollars (US$750,000) in United States funds
(454,545 common shares in the aggregate), on each of the six
(6) month, twelve (12) month, eighteen (18) month and twenty
four (24) month anniversary of the Closing Date; and
<PAGE>
-9-
(b) the Vendors shall be entitled to Sell their Pro-rata Share of
such number of e-Auction Shares having an aggregate value,
calculated on the basis of a per share value equal to the
Initial Share Value, of one million dollars (US$1,000,000) in
United States funds (606,061 common shares in the aggregate),
on each of the thirty six (36) month, forty-eight (48) month
and sixty (60) month anniversary of the Closing Date.
The Vendors agree to allow a legend to be placed upon the e-Auction
Shares referencing the above restrictions which legend shall remain
until the date which is sixty (60) months following the Closing Date.
2.6 FREELY TRADABLE e-AUCTION SHARES.
(a) Subject to (c) below, in the event that the e-Auction Shares
referred to in Section 2.5(a) above are not freely tradable on any one of the
six (6), twelve (12), eighteen (18) or twenty four (24) month anniversary of the
Closing Date, the Purchaser agrees to pay to the Vendors, by way of electronic
transfer, within ten (10) Business Days after the date of the applicable
anniversary, an amount equal to seven hundred and fifty thousand dollars
(US$750,000) in United States funds.
(b) Subject to (c) below, in the event that the e-Auction Shares
referred to in Section 2.5(b) above are not freely tradable on any one of the
thirty six (36), forty eight (48) or sixty (60) month anniversary of the Closing
Date, the Purchaser agrees to pay to the Vendors, by way of electronic transfer,
within ten (10) Business Days after the date of the applicable anniversary, an
amount equal to one million dollars (US$1,000,000) in United States funds.
(c) Upon any payment by the Purchaser pursuant to Section 2.6 (a) or
Section 2.6(b), the Vendors agree to transfer ownership to the Purchaser, within
ten (10) Business Days after receipt of any payment, such number of e-Auction
Shares equal to the amount paid by the Purchaser to the Vendors, with each share
having a value equal to the Initial Share Value.
(d) As security for the cash payments which may be due to the Vendors
pursuant to (a) or (b) above, the Purchaser agrees to pledge a portion of the
Shares pursuant to the terms of the pledge agreement referred to in section
4.3(h) below. In the event that the Purchaser fails to make a payment referred
to above in (a) or (b), the Vendors shall be entitled to be transferred from the
Purchaser the portion of the Shares which are used to secure the applicable
amount as their sole and exclusive remedy all in accordance with the terms of
the pledge agreement referred ot in section 4.3(h) below.
2.7 GUARANTEE. e-Auction unconditionally and irrevocably guarantees the
prompt payment to the Vendors of all the indebtedness, liabilities and
obligations of any kind whatsoever which the Purchaser is under an obligation
to pay to the Vendors pursuant to Sections 2.4 and 2.6 above.
<PAGE>
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ARTICLE 3
CLOSING ARRANGEMENTS
3.1 CLOSING. The Closing shall take place at 2:00 p.m. (the "Closing
Time") on the Closing Date at the offices of the auditor of Schelfhout,
Gislenus Bats & Co. b.v.b.a., located at Europark-Oost 7, B-9100
Sint-Niklaas, Belgium, or at such other time or place as may be agreed upon
orally or in writing by the parties to this Agreement.
3.2 VENDORS' CLOSING DELIVERIES. At the Closing Time, the Vendors shall
deliver or cause to be delivered to the Purchaser the following:
(a) the certificate of registration of the Purchaser in the
register of shareholders of Schelfhout as owner of the Shares;
(b) a certified copy of a resolution of the board of directors of
Schelfhout authorizing the transfer of the Shares from the
Vendors to the Purchaser;
(c) a certificate executed by each of the Vendors certifying that
the representations, warranties and covenants in Section 5.1
are true and correct as at the Closing;
(d) a release of all claims against Schelfhout in favour of the
Purchaser and Schelfhout in the form attached hereto as
Schedule 3.2(e), duly executed by each of the Vendors; and
(e) all such other assurances, consents, agreements, documents and
instruments as may be reasonably required by the Purchaser to
complete the transactions provided for in this Agreement.
3.3 PURCHASER'S CLOSING DELIVERIES. At the Closing, the Purchaser shall
deliver or cause to be delivered to the Vendors the following:
(a) the payments referred to in Sections 2.4 above;
(b) the certificate or certificates representing the e-Auction
Shares, duly registered in the names of each Vendor, on a
Pro-rata Basis;
(c) a certificate executed by the Purchaser certifying that the
representations, warranties and covenants in Section 5.2 are
true and correct as at the Closing;
(d) evidence in a form satisfactory to the Vendors, acting
reasonably, that the Purchaser was incorporated and acquired
legal status and that the person signing on the Purchaser's
behalf has the power to represent the Purchaser; and
<PAGE>
-11-
(e) all such other assurances, consents, agreements, documents and
instruments as may be reasonably required by the Vendors to
complete the transactions provided for in this Agreement.
3.4 POST CLOSING DELIVERIES. Within fifteen (15) Business Days following
the Closing Date, the Vendors shall deliver or cause to be delivered to the
Purchaser the following:
(a) copies of any applicable schedule referenced in this Agreement
which the Vendors are unable to deliver to the Purchaser on
the Closing Date; and
(b) legal opinion of the Vendors' solicitors (lawyers) addressed
to the Purchaser and the Purchaser's solicitors (lawyers) in a
form satisfactory to the Purchaser acting reasonably.
ARTICLE 4
CONDITIONS OF CLOSING
4.1 PURCHASER'S CONDITIONS. The Purchaser shall not be obliged to
complete the purchase and sale of the Shares pursuant to this Agreement
unless, at or before the Closing Time, each of the following conditions have
been satisfied, it being understood that the following conditions are
included for the exclusive benefit of the Purchaser and may be waived, in
whole or in part, in writing by the Purchaser at any time; and each of the
Vendors hereby, jointly and severally, covenant and agree with the Purchaser
to take all such actions, steps and proceedings as are reasonably within
their control as may be necessary to ensure that the following conditions are
fulfilled at or before the Closing Time:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations,
warranties and covenants of the Vendors in Section 5.1 shall be true and correct
at the Closing Time.
(b) VENDORS' COMPLIANCE. The Vendors shall have performed and complied
with, or caused to be performed or complied with, all of the terms and
conditions in this Agreement on their part to be performed or complied with at
or before Closing Time and shall have executed and delivered or caused to have
been executed and delivered to the Purchaser at the Closing Time all the
documents contemplated in Section 3.2 or elsewhere in this Agreement.
(c) GOOD TITLE. The Vendors shall have good and marketable title to the
Shares, free and clear of any and all Liens of any kind and nature whatsoever.
(d) MATERIAL ADVERSE CHANGE. During the Interim Period, there shall
have been no Material Adverse Change.
(e) CONSENTS AND APPROVALS. All the Consents and Approvals have been
obtained.
(f) NO LITIGATION. Except as set out below, there shall be no
litigation or proceedings:
<PAGE>
-12-
(i) pending or threatened against any of the Vendors or
against Schelfhout or any of its directors or
officers, for the purpose of enjoining, preventing or
restraining the completion of the transactions
contemplated by this Agreement; and
(ii) pending or threatened against any of the Vendors or
against Schelfhout or any of its directors or
officers which:
(1) if decided adversely, could adversely affect
the right of the Purchaser to acquire or
retain the Shares; or
(2) in the judgement of the Purchaser, acting
reasonably, would make the completion of the
transactions contemplated by this Agreement
inadvisable;
except for (i) Menillo v. Schelfhout which is presently under
appeal, in which the French Court ordered Schelfhout and the
Chamber of Commerce of Cherbourg on November 6, 1998 to pay
damages to Menillo in the amount of FRF200.000; and
(ii)Menillo v. Schelfhout (II): in this case, Menillo has
withdrawn its suit and the Court of Rennes (France) condemned
Menillo to pay the costs of the procedure and (iii) UNIT 4
BELGIUM N.V., in which UNIT 4 BELGIUM N.V. lodged on May 12,
1998 an appeal against the judgement of the Commercial Court
of Dendermonde, division of Sint-Niklaas, of 28.04.1998 and
lodged a counterclaim as follows:
- payment of invoice nr. 97 0335 of 6.6.97 ad
247,953 BEF;
- the cancellation of the contract at the
charge of Schelfhout;
- the restitution of the software, manual and
demonstration version;
- damages of 1,000,000 BEF.
4.2 CONDITION NOT FULFILLED. If any condition in Section 4.1 has not
been fulfilled at or before the Closing Time, then the Purchaser in its sole
discretion may, without limiting any rights or remedies available to the
Purchaser at law or in equity, either:
(a) terminate this Agreement by notice to the Vendors, in which
event the Purchaser shall be released from its obligations
under this Agreement to complete the purchase of the Shares;
or
(b) waive compliance with any such condition in whole or in part
without prejudice to its right of termination in the event of
non-fulfilment of any other condition in whole or in part.
4.3 VENDORS' CONDITIONS. The Vendors shall not be obliged to complete
the purchase and sale of the shares pursuant to this Agreement and to
complete the transactions contemplated by this Agreement unless, at or before
the Closing Time each of the following conditions have been satisfied, it
being understood that the following conditions are included for the exclusive
benefit
<PAGE>
-13-
of the Vendors, and may be waived, in whole or in part, in writing by the
Vendors at any time; and the Purchaser hereby covenants and agrees with the
Vendors to take all such actions, steps and proceedings as are reasonably
within the Purchaser's control as may be necessary to ensure that the
following conditions are fulfilled at or before the Closing Time:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations,
warranties and covenants of the Purchaser in Section 5.2 shall be true and
correct at the Closing Time.
(b) PURCHASER'S COMPLIANCE. The Purchaser shall have performed and
complied with all of the terms and conditions in this Agreement on its part to
be performed or complied with at or before the Closing Time and shall have
executed and delivered or caused to have been executed and delivered to the
Vendors at the Closing Time all the documents contemplated in Section 3.3 or
elsewhere in this Agreement.
(c) GOOD TITLE. The Purchaser shall have good and marketable title to
the e-Auction Shares, free and clear of any and all Liens of any kind and nature
whatsoever.
(d) MATERIAL ADVERSE CHANGE. During the Interim Period, there shall
have been no Material Adverse Change in the business and assets of e-Auction.
(e) NO LITIGATION. There shall be no litigation or proceedings pending
or threatened against e-Auction or the Purchaser or any of its directors and
officers which, in the judgement of the Vendors, acting reasonably, would make
the completing of the transactions contemplated by this Agreement inadvisable.
(f) INCORPORATION OF THE PURCHASER. The Purchaser shall have been
incorporated and shall have acquired legal status.
(g) CONTRIBUTION IN KIND AND CAPITAL DECREASE. Schelfhout shall have
decreased its capital for the amount of 15,864,040 BEF.
(h) PLEDGE AGREEMENT. The Purchaser shall have completed a pledge
agreement with the Vendors, by which the Shares are pledged to the Vendors, and
shall have been registered the pledge in the shareholders register.
(i) LEASE. Schelfhout shall have taken the commitment to rent the
premises where Schelfhout currently operates and carries on business at a rate
of 2,400 BEF/m2 for office space, 1,800 BEF/m2 for the work room and 1,200
BEF/m2 for the warehouse, for a term of ten years, on terms and conditions which
shall correspond to the normal commercial terms and conditions at that moment.
4.4 CONDITION NOT FULFILLED. If any condition in Section 4.3 shall not
have been fulfilled at or before the Closing Time, then the Vendors, in their
sole discretion may, without limiting any rights or remedies available to the
Vendors at law or in equity, either:
<PAGE>
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(a) terminate this Agreement by notice to the Purchaser in which
event the Vendors shall be released from all obligations under
this Agreement to complete the sale of the Shares; or
(b) waive compliance with any such condition in whole or in part
without prejudice to its right of termination in the event of
non-fulfilment of any other condition in whole or in part.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE VENDORS. As a
material inducement to the Purchaser entering into this Agreement and
completing the transactions contemplated by this Agreement and acknowledging
that the Purchaser is entering into this Agreement in reliance upon the
representations, warranties and covenants of the Vendors, the Vendors hereby,
jointly and severally, represent, warrant and covenant to and with the
Purchaser as follows:
(a) OWNERSHIP OF SHARES. The Vendors are, and at the Closing Time will
be, the registered and beneficial owners of the Shares, with good and marketable
title thereto, free and clear of all Liens of any kind and nature whatsoever. No
Person, other than the Purchaser, has any agreement, option, right or privilege
of any kind capable of becoming an agreement for the purchase from the Vendors
of any of the Shares.
(b) ENFORCEABILITY OF OBLIGATIONS. This Agreement constitutes a valid
and binding obligation of each of the Vendors enforceable against each of them
in accordance with its terms, subject however, to limitations with respect to
enforcement imposed by law in connection with bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally and to the
extent that equitable remedies such as specific performance and injunction are
only available in the discretion of the court from which they are sought.
(c) AUTHORIZATION BY THE VENDORS. Each of the Vendors has the legal
capacity to enter into this Agreement and all other agreements and instruments
to be executed by any of them as contemplated by this Agreement and to carry out
their respective obligations under this Agreement and such other agreements and
instruments and the Vendors have the exclusive right, power and authority to
sell the Shares in accordance with the terms of this Agreement.
(d) BANKRUPTCY. Neither Schelfhout nor any Vendor has committed an act
of bankruptcy (within the meaning of the BANKRUPTCY AND INSOLVENCY ACT (Canada)
or similar laws of any other jurisdiction) nor made an assignment in favour of
its creditors nor made a proposal in bankruptcy to its creditors or any class
thereof nor had any petition for a receiving order presented in respect of it.
Neither Schelfhout nor any Vendor has initiated proceedings with respect to a
compromise or arrangement with its creditors nor initiated any proceedings for
its winding up, liquidation or dissolution. No receiver has been appointed in
respect of Schelfhout
<PAGE>
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or any Vendor or any of the Assets or Shares and no execution or distress has
been levied upon any of the Assets or Shares.
(e) INCORPORATION AND POWER. Schelfhout is a corporation duly
incorporated, organized, validly subsisting and in good standing under the laws
of Belgium. Schelfhout is duly licensed, registered and qualified to do business
and is in good standing under the laws of Belgium. Schelfhout has the full
corporate power and authority to carry on the Business and to own, lease and
operate the Assets and the Business as now carried on and owned, leased and
operated by it.
(f) SHARE CAPITAL. The authorized capital of Schelfhout consists of 640
shares and there are 640 shares issued and outstanding. Schelfhout does not have
a stock option plan and there are no outstanding securities convertible into or
exchangeable for any shares of capital stock or any rights (either pre-emptive
or other) to subscribe for or to purchase, or any options, rights or warrants
for the purchase of, or any agreements providing for the issuance of, or any
calls, commitments, agreements or claims of any character relating to the
issuance of, any securities in the capital of Schelfhout, except for the usual
preferential rights for the existing shareholders of Schelfhout in the case of
capital increases as provided for in Article 7 of the articles of incorporation
of Schelfhout.
(g) TITLE TO ASSETS. Schelfhout has good and marketable title to all
the Assets, free and clear of any and all Liens. All machines, machinery,
equipment, tools or other moveable or mechanical property forming part of the
Assets are in good operating condition and are in a state of good repair and
maintenance, reasonable wear and tear excepted. The Assets are sufficient to
permit the continued operation of the Business in substantially the same manner
as now being conducted. There is no agreement, option or other right or
privilege outstanding in favour of any Person for the purchase from Schelfhout
of the Business or of any of the Assets out of the ordinary course of Business.
(h) NO SUBSIDIARY. Schelfhout has no subsidiaries or agreements of any
nature to acquire any subsidiary or to acquire or lease any other business
operations, except for the shares in the company into which the buildings were
contributed.
(i) FINANCIAL STATEMENTS. The Purchaser has been furnished with the
financial statements of Schelfhout for the 1996, 1997 and 1998 fiscal years
ending December 31, (the "Financial Statements") prepared in accordance with
Belgium generally accepted accounting principles (GAAP), copies of which are
attached hereto as Schedule 5.1(i). The balance sheets contained in such
Financial Statements fairly present in all material respects the financial
position of Schelfhout as of its date and the statements of earnings and
retained earnings contained in the Financial Statements fairly present in all
material respects the results of operations for the period indicated. Since
December 31, 1998, Schelfhout has carried on its business in the ordinary course
and there has been no Material Adverse Change in the Business, financial
condition, Assets, results of operations or prospects of Schelfhout, except for
the contribution in kind of the building.
<PAGE>
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(j) CORPORATE RECORDS. The minute books of Schelfhout contain
true, correct and complete copies of its articles, its by-laws, the minutes
of every meeting of its board of directors and every committee thereof and of
its shareholders and every written resolution of its directors and
shareholders. The register of shareholders of Schelfhout is complete and
accurate in all material respects.
(k) PERSONAL PROPERTY. All Personal Property is in good operating
condition, and repair, ordinary wear and tear excepted.
(l) REAL PROPERTY. Schedule 5.1(l) lists the municipal address
for and a general description of each parcel of land owned, leased or used in
the Business. The Real Property and the current use thereof comply with
Applicable Law. No notice of violation of any Applicable Law or of any
covenant, restriction or easement affecting the Real Property or with respect
to the use or occupancy of the Real Property, has been given by any
governmental authority having jurisdiction over the Real Property or by any
other Person entitled to enforce the same.
(m) PERSONAL PROPERTY LEASES. Each Personal Property Lease is in
full force and effect and has not been amended, and Schelfhout is entitled to
the full benefit and advantage of each Personal Property Lease in accordance
with its terms. Each Personal Property Lease used in the Business is in good
standing and there has not been any default by any party under any Personal
Property Lease nor any dispute between Schelfhout and any other party under
any Personal Property Lease.
(n) INSURANCE. The Business, properties and Assets of Schelfhout
are insured for the benefit of Schelfhout in amounts deemed adequate by
Schelfhout's management against risk usually insured against by Persons
operating a business similar to the Business of Schelfhout in the localities
where such properties are located. Particulars of the policies of insurance
maintained by Schelfhout as at the Closing Date are set out in Schedule
5.1(n) hereto. All policies are in full force and effect and Schelfhout is
not in default, whether as to payment of premiums or otherwise, under the
terms of such policies.
(o) MATERIAL CONTRACTS. Schedule 5.1(o) lists all the Material
Contracts. Schelfhout is not in default under any Material Contract and
neither Schelfhout nor the Vendors have received notice of a default and
there has not occurred any event which, with the lapse of time or giving of
notice or both, would constitute a default under any Material Contract by
Schelfhout or any other party to the Material Contract. Each Material
Contract is in full force and effect, unamended by written or oral agreement,
and Schelfhout is entitled to the full benefit and advantage of each Material
Contract in accordance with its terms. Each Material Contract is in good
standing and there has not been any default by any party under any Material
Contract nor any dispute between Schelfhout and any other party under any
Material Contract, except for the Material Contract with GPLM (Groupement des
Producteurs de Legumees de la Manche, S.C. AGRICOLE) (France) of April 3,
1996. Parties entered into a formal serrement agreement on December 18, 1999.
<PAGE>
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(p) RECEIVABLES. Schedule 5.1(p) lists all of the Receivables as
at the Closing Date. The Receivables are valid obligations which arose in the
ordinary course of business and are enforceable and fully collectable
accounts not subject to any setoff or counterclaim. None of the Receivables
are due from a Person with whom Schelfhout does not deal at arm's length.
(q) INTELLECTUAL PROPERTY.
(i) Schedule 5.1(q)(i) lists the Intellectual Property
for products developed by Schelfhout. The
Intellectual Property, and all registrations of the
Intellectual Property, are valid and subsisting. All
of the registrations and applications for
registration of the Intellectual Property are in good
standing and are recorded in the name of Schelfhout.
No application for registration of any of the
Intellectual Property has been rejected.
(ii) Schelfhout is the first and only owner of the
Intellectual Property and is entitled to the
uninterrupted use of the Intellectual Property
without payment of any royalty or other fees. No
Person has any right, title or interest in any of the
Intellectual Property and all such persons have
waived their moral rights in any copyright works
within the Intellectual Property. Schelfhout has
diligently protected its legal rights to the
exclusive use of the Intellectual Property.
(iii) There is no current litigation pending or threatened
against or relating to the Intellectual Property.
(iv) Schelfhout has not permitted or licensed any Person
to use any of the Intellectual Property, except for
Schelfhout's customers.
(v) No Person has challenged the validity of any
registrations for the Intellectual Property or the
rights of Schelfhout to any of the Intellectual
Property, except for the litigation Menillo v.
Schelfhout II in which Menillo finally has withdrawn
its suit (art. 4.1 f).
(vi) To the best of the knowledge of the Vendors, neither
the use of the Intellectual Property (which includes
products, processes, methods, substances, parts and
other materials presently sold by or used by
Schelfhout in connection with the Business) nor the
conduct of the Business has infringed or currently
infringes upon the industrial or intellectual
property rights of any other Person.
(vii) To the best of the knowledge of the Vendors, no other
Person has infringed the Schelfhout rights to the
Intellectual Property.
(viii) There is no governmental prohibition or restriction
on the use of the Intellectual Property.
<PAGE>
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(r) LICENCES AND PERMITS. Schelfhout is registered with the
Ministry of Finance of Belgium by decision dated January 1, 1990 as a
building contractor under the number 429.285.178.06.26.12. Schelfhout holds
this registration free and clear of any and all Liens. This registration is
in good standing and in full force and effect, Schelfhout is not in violation
of any term or provision or requirement of such registration, and no Person
has threatened to revoke, amend or impose any condition in respect of, or
commenced proceedings to revoke, amend or impose conditions in respect of
this registration. Schelfhout does not hold any Licenses or Permits other
than described in this Section 5.1(r).
(s) UNDISCLOSED LIABILITIES. Schelfhout does not have any other
liabilities, obligations, indebtedness or commitments, whether accrued,
absolute, contingent or otherwise, other than the liabilities which have been
previously disclosed in writing to the Purchaser and which do not exceed in
the aggregate twenty thousand dollars (US$20,000) in United States funds.
(t) CONSENTS AND APPROVALS. No consent or approval of any
Person is required in connection with the execution and delivery of this
Agreement and the completion of the transactions contemplated by this
Agreement or to permit Schelfhout to carry on the Business after the Closing
as the Business is currently carried on by it.
(u) NOTICES. no Notices are required to be delivered to any
Person in connection with the execution and delivery of this Agreement and
the completion of the transactions contemplated by this Agreement or to
permit Schelfhout to carry on the Business after the Closing as the Business
is currently carried on by Schelfhout.
(v) ABSENCE OF CONFLICTING AGREEMENTS. The execution, delivery
and performance of this Agreement by the Vendors and the completion (with any
required Consents and Approvals) of the transactions contemplated by this
Agreement do not and will not result in or constitute any of the following:
(i) a default, breach or violation or an event that, with
notice or lapse of time or both, would be a default,
breach or violation of any of the terms, conditions
or provisions of the articles or by-laws of
Schelfhout;
(ii) an event which, pursuant to the terms of any Material
Contract or Licence and Permit, causes any right or
interest of Schelfhout to come to an end or be
amended in any way that is detrimental to the
Business or entitles any other Person to terminate or
amend any such right or interest;
(iii) the creation or imposition of any Lien on any
Asset; or
(iv) the violation of any Applicable Law by the Vendors or
Schelfhout.
<PAGE>
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(w) LITIGATION. There is no action, suit, proceeding, claim,
application, complaint or investigation in any court or before any arbitrator
or before or by any regulatory body or governmental or non-governmental body
pending or threatened by or against the Vendors or Schelfhout, or Related to
the Business or affecting the Business or the operations or capital of
Schelfhout or the transactions contemplated by this Agreement, and there is
no factual or legal basis which could give rise to any such action, suit,
proceeding, claim, application, complaint or investigation except for (i)
Menillo v. Schelfhout which is presently under appeal, in which the French
Court ordered Schelfhout and the Chamber of Commerce of Cherbourg on January
1, 1999 to pay damages to Menillo in the amount of FRF200.000; and (ii)
Menillo v. Schelfhout (II): in this case, Menillo has withdrawn its suit and
the Court of Rennes (France) condemned Menillo to pay the costs of the
procedure and (iii) UNIT 4 BELGIUM N.V., in which UNIT 4 BELGIUM N.V. lodged
on May 12, 1998 an appeal against the judgement of the Commercial Court of
Dendermonde, division of Sint-Niklaas, of 28.04.1998 and lodged a
counterclaim as follows:
- payment of invoice nr. 97 0335 of 6.6.97 ad 247,953
BEF;
- the cancellation of the contract at the charge of
Schelfhout;
- the restitution of the software, manual and
demonstration version;
- damages of 1,000,000 BEF.
(x) NO CONFLICT. No current director or officer of Schelfhout
(nor anyone who was a director or officer of Schelfhout in the last fiscal
year) and, to the knowledge of each Vendor, no current shareholder of
Schelfhout, nor any associate of any such Person, is presently, directly or
indirectly through his or her affiliation with any other Person, a party to
any transaction with Schelfhout providing for the furnishing of services by
or to (except services related to such person acting as a director or officer
of Schelfhout), or rental of real or personal property from or to, or
otherwise requiring cash payments to or by any such Person except for (i)
either: an agreement between Infomar C.V.B.A. and Schelfhout for the
furnishing of management, consulting and related services by Infomar C.V.B.A.
or an employment agreement between Hilde De Laet and Schelfhout and an
agreement between Infomar C.V.B.A. and Schelfhout for the furnishing of
management, consulting and related services by Infomar C.V.B.A. or an
employment agreement between Hilde De Laet and Schelfhout and between Luc
Schelfhout and Schelfhout; (ii) the Lease Agreement referred to in Section
5.1(hh), and (iii) the option to acquire the shares in the company into which
the buildings were contributed and (iv) the agreement of September 1, 1998,
between Schelfhout and European Auction Builders c.v.b.a. at present INFOMAR
c.v.b.a. providing the payment by Schelfhout of 90,000 Euro, at the moment
that Schelfhout receives the last payment from the European Community via
VEGA Plc. (which will exceed said 90,000 Euro).
(y) EMPLOYEES.
(i) Schedule 5.1(y)(i), which will be provided to the
Purchaser on the Closing Date, lists all the
Employees and the age, position, status, length of
service, compensation and all other benefits of each
of them,
<PAGE>
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respectively. The Purchaser has been provided
with the opportunity to review all contracts or
arrangements with or relating to any Employee and
will be provided with copies of such contracts or
arrangements on the Closing Date. All Employees
have written employment agreements.
(ii) There is no labour strike, dispute, slowdown or
stoppage actually pending or involving or, to the
best of the knowledge of each Vendor, threatened
against Schelfhout with respect to the Business;
(iii) No union representation question exists respecting
the Employees in connection with the Business and no
collective bargaining agreement is in place or
currently being negotiated by Schelfhout;
(iv) Other than as set out in their written contracts of
employment with Schelfhout, no Employee has any
agreement as to length of notice required to
terminate his or her employment;
(v) All required withholding of amounts from the
employees have been paid to the appropriate authority
in compliance with Applicable Law.
(vi) No notice has been received by Schelfhout or any
Vendor of any complaint which has not been resolved,
filed by any of its employees claiming that
Schelfhout has violated any applicable employee or
human rights or similar legislation in any
jurisdictions in which Schelfhout operates), or of
any complaints or proceedings which have not been
resolved of any kind involving Schelfhout or, to the
Vendors' knowledge, after due inquiry, any of the
Employees before any labour relations board. There
are no outstanding orders or charges against
Schelfhout under any applicable health and safety
legislation in any jurisdictions in which Schelfhout
carries on business). All levies, assessments and
penalties made against Schelfhout pursuant to the
workers' compensation legislation in the
jurisdictions in which Schelfhout carries on business
have been paid by Schelfhout and Schelfhout has not
been reassessed under any such legislation except
such as have been resolved.
(vii) The only benefit plans of Schelfhout (the "Benefit
Plans") are listed in Schedule 5.1(y)(vii) hereto.
All contributions or premiums required to be made by
Schelfhout under the terms of the Benefit Plans have
been made. Schelfhout may terminate the Benefit
Plans. Schelfhout has furnished to the Purchaser all
related documentation and plan summaries, booklets
and personal manuals related to the Benefit Plans. No
material changes have occurred to the Benefit Plans
or are expected to occur which would affect the
actuarial reports or financial statements provided to
the Purchaser, except for the hospitalisation and
group insurance which will be introduced by
Schelfhout on or about January 1, 1999 as far as the
group
<PAGE>
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insurance is concerned for two of the employees and
January 1, 2000 as far as hospitalisation is
concerned.
(z) Intentionally omitted.
(aa) CUSTOMERS. None of the Vendors is aware of, nor has any of
them received notice of, any intention on the part of any such customer to
cease doing business with Schelfhout or to modify or change in any material
manner any existing arrangement with Schelfhout for the purchase of any
products or services. The relationships of Schelfhout with each of their
respective principal customers are satisfactory, and there are no unresolved
disputes with any such customer.
(bb) AFFILIATED TRANSACTIONS. Schelfhout is not liable in
respect of advances, loans, guarantees to or on behalf of any shareholder,
officer, director, employee or any other Person with whom Schelfhout does not
deal at arm's length.
(cc) TAXES. Schelfhout has filed with appropriate taxing
authorities on a timely basis all returns, reports and estimates relating to
Taxes which are required to be filed by or on behalf of Schelfhout to the
date hereof, and each such return, report and estimate is complete and
accurate in all material respects. Schelfhout has paid, or made adequate
provision in accordance with generally accepted accounting principles for the
payment of, all Taxes which are shown to be due on such returns, reports or
estimates. There are no current assessments, liens or claims issued by any
taxing authority regarding any Taxes of Schelfhout. All assessments of Taxes
with respect to Schelfhout have either been paid or provided for or are being
contested in good faith by appropriate proceedings as to which adequate
reserves have been provided. No action, proceeding or investigation has been
threatened by any governmental authority for the assessment or collection of
any Taxes for which Schelfhout would be liable.
(dd) ACTION DURING INTERIM PERIOD. During the Interim Period,
Schelfhout has not:
(i) made or agreed to make any change in the compensation
of any director, officer or Employee, except for the
normal increases which are necessary in the Business
to retain Employees, and has not paid or agreed to
pay or set aside any bonus, profit sharing,
retirement, insurance, death, severance, fringe
benefit, or other extraordinary or indirect
compensation to, for, or on behalf of any director,
officer or Employee, except for the hospitalisation
and group insurance for Employees which will be
introduced by Schelfhout on or about January 1, 1999
as far as the group insurance is concerned for two of
the employees and January 1, 2000 as far as
hospitalisation is concerned;
(ii) suffered any Material Adverse Change;
<PAGE>
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(iii) declared or made any payment of any dividend or other
distribution in respect of its shares and has not
redeemed, purchased or otherwise acquired any shares;
(iv) issued or sold any shares or other securities or
issued, sold or granted any option, warranty or right
to purchase any shares or other securities of
Schelfhout or its Affiliates;
(v) sold, assigned, transferred, mortgaged, pledged,
granted a security interest in or otherwise
encumbered any of the Assets except sales of
Inventories in the normal course of business which,
individually and in the aggregate are not material to
the financial condition of the operation of the
Business, except for the contribution by Schelfhout
of the building according to Section 4.3(g) and
except for the granting of an irrevocable option on
the shares in the company into which the buildings
were contributed;
(vi) changed any accounting or costing systems or methods
in any material respect;
(vii) suffered any extraordinary loss or cancelled or
waived any debt, claim or other right;
(viii) incurred or assumed any liabilities, obligations or
indebtedness (whether accrued, absolute, contingent
or otherwise), except unsecured current liabilities,
obligations and indebtedness incurred in the normal
course of business;
(ix) entered into any Material Contract or any other
transaction that was not in the normal course of
business; or
(x) terminated, cancelled or modified in any material
respect or received notice or a request for
termination, cancellation or modification in any
material respect of any Material Contract, including
any policy of insurance which related to Schelfhout
or any of the Assets, except for the maintenance
contract with Socave-Vergt which was terminated on
August 17, 1999.
(ee) DIRECTORS AND OFFICERS. At the request of the Purchaser any
time on or following the Closing Date, the Vendors shall cause their nominees
on the board of directors of Schelfhout to tender resignations.
(ff) E-AUCTION SHARES. The Vendors acknowledge that:
<PAGE>
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(i) the e-Auction Shares were issued in accordance with
Rule 144 pursuant to the UNITED STATES SECURITIES ACT
of 1933 (the "1933 Act") and are known as restricted
shares;
(ii) the Vendors may only make offers or sales of the
e-Auction Shares to non-U.S. Persons outside the
United States pursuant to Rule 904 of Regulation S of
the 1933 Act. The Vendors may offer or sell the
e-Auction Shares only: outside the United States in
accordance with the provisions of Rule 904 of
Regulation S; pursuant to registration of the
e-Auction Shares under the 1933 Act; or in the United
States pursuant to an available exemption from the
registration requirements of the 1933 Act. Such an
exemption would be available for persons who are not
Underwriters, Distributors or Affiliates of
e-Auction. The foregoing is only a summary of the
applicable United States securities laws and
regulations governing the resale of the e-Auction
Shares within the United States. The determination of
the status of the Vendors for such purpose and the
availability of any exemption from registration will
depend on the prevailing facts and circumstances.
Accordingly, the Vendors should consult appropriate
United States counsel prior to any resale of the
e-Auction Shares within the United States;
(iii) the e-Auction Shares acquired pursuant to this
Agreement may be resold in other jurisdictions not
listed above only in accordance with applicable
securities laws in effect in that jurisdiction;
(iv) upon the original issuance thereof, and until such
time as the same is no longer required under
applicable requirements of the 1933 Act or applicable
state laws, the certificates representing the
e-Auction Shares sold in the United States, and all
certificates issued in exchange therefor or in
substitution thereof, shall bear the following
legend:
"No sale, offer to sale, or transfer of the
shares represented by this certificate shall
be made unless a registration statement
under the FEDERAL SECURITIES ACT of 1993, as
amended, with respect to such shares is then
in effect or an exemption from the
registration requirements of said Act is
then in fact applicable to said shares."
(v) pursuant to applicable securities legislation it may
be necessary to place a legend, different or in
addition to the one listed in paragraph 5.1(ff)(vi)
above, relating to resale restrictions on the
certificates representing the e-Auction Shares
purchased hereunder and to the extent that such is
required by applicable securities legislation, and
the Vendors consent to the same.
<PAGE>
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(gg) FULL DISCLOSURE. None of the foregoing representations and
warranties and no document furnished by or on behalf of Schelfhout and the
Vendors to the Purchaser in connection with the negotiation of the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omit to state any material fact necessary to make any such
statement or representation not misleading to a prospective purchaser of the
Shares seeking full information as to Schelfhout and its respective
properties, businesses and affairs. Except for those matters disclosed in
this Agreement, there are no facts not disclosed in this Agreement which, if
learned by the Purchaser, might reasonably be expected to materially diminish
its evaluation of the value of the Shares and the Business or to deter the
Purchaser from completing the transactions contemplated by this Agreement on
the terms of this Agreement.
(hh) LEASE. The Vendors acknowledge and agree that Schelfhout
shall be entitled to remain on the premises where Schelfhout currently
operates and carries on business for a period of twelve (12) months following
the Closing Date on a rent free basis and that following such twelve (12)
month period, the Vendors or the company into which the building were
contributed shall lease the building to Schelfhout at a rate of 2,400 BEF per
square metre for office space, 1,800 BEF per square metre for the work room
and 1,200 per square metre for the warehouse, for a term of 10 years (the
"Lease Agreement"), which terms of the lease can be considered as normal at
the Closing Date.
5.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND E-AUCTION. As a
material inducement to the Vendors entering into this Agreement and
completing the transactions contemplated by this Agreement and acknowledging
that the Vendors are entering into this Agreement in reliance upon the
representations, warranties and covenants of the Purchaser and e-Auction, the
Purchaser and e-Auction hereby represents, warrants and covenants to the
Vendors as follows:
(a) INCORPORATION. The Purchaser is a corporation duly
incorporated and validly subsisting and in good standing under the laws of
Belgium.
(b) DUE AUTHORIZATION. The Purchaser has all necessary corporate
power, authority and capacity to enter into, execute and deliver this
Agreement and all other agreements and instruments required to be delivered
hereunder and to perform its obligations hereunder and under such other
agreements and instruments. The execution and delivery by the Purchaser of
this Agreement and such other agreements and instruments to be delivered
hereunder, and the completion of the transactions contemplated by this
Agreement and under such other agreements and instruments have been duly
authorized and approved by all necessary corporate action on the part of the
Purchaser.
(c) ENFORCEABILITY OF OBLIGATIONS. This Agreement constitutes a
valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms subject, however, to limitations on
enforcement imposed by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally and to the extent that equitable
remedies such as specific performance and injunctions are only available in
the discretion of the court from which they are sought.
<PAGE>
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(d) OWNERSHIP OF SHARES. The Purchasers at the Closing Time will
be the registered and beneficial owners of the e-Auction Shares, with good
and marketable title thereto, free and clear of all Liens of any kind and
nature whatsoever. No Person, other than the Purchaser, has any agreement,
option, right or privilege of any kind capable of becoming an agreement for
the purchase from the Purchaser of any of the e-Auction Shares.
(e) BANKRUPTCY. The Purchaser and e-Auction has not committed an
act of bankruptcy (within the meaning of the BANKRUPTCY AND INSOLVENCY ACT
(Canada) or similar laws of any other jurisdiction) nor made an assignment in
favour of its creditors nor made a proposal in bankruptcy to its creditors or
any class thereof nor had any petition for a receiving order presented in
respect of it. The Purchaser and e-Auction has not initiated proceedings with
respect to a compromise or arrangement with its creditors nor initiated any
proceedings for its winding up, liquidation or dissolution. No receiver has
been appointed in respect of the Purchaser and e-Auction or any of the assets
or shares of the Purchaser or e-Auction and no execution or distress has been
levied upon any of the assets or shares.
(f) LITIGATION. There is no action, suit, proceeding, claim,
application, complaint or investigation in any court or before any arbitrator
or before or by any regulatory body or governmental or non-governmental body
pending or threatened by or against the Purchaser or e-Auction, related to
its business or affecting the business or the operations or capital of the
Purchaser or e-Auction or the transactions contemplated by this Agreement,
and there is no factual or legal basis which could give rise to any such
action, suit, proceeding, claim, application, complaint or investigation.
(g) CORPORATE RECORDS. The minute books of the Purchaser contain
true, correct and complete copies of its articles, its by-laws, the minutes
of every meeting of its board of directors and every committee thereof and of
its shareholders and every written resolution of its directors and
shareholders. The share certificate book, register of shareholders, register
of transfers and register of directors and officers of the Purchaser are
complete and accurate in all material respects.
(h) FULL DISCLOSURE. None of the foregoing representations and
warranties and no document furnished by or on behalf of the Purchaser and
e-Auction in connection with the negotiation of the transactions contemplated
by this Agreement contain any untrue statement of a material fact or omit to
state any material fact necessary to make any such statement or
representation not misleading to the Vendors seeking full information as to
e-Auction and its respective properties, businesses and affairs. Except for
those matters disclosed in this Agreement, there are no facts not disclosed
in this Agreement which, if learned by the Vendors, might reasonably be
expected to deter the Vendors from completing the transactions contemplated
by this Agreement on the terms of this Agreement.
(i) NO TRANSFER OF SHARES. The Purchaser shall not, during a
period of thirteen (13) months following the Closing Date, transfer any or
all of the Shares in any way whatsoever which would make article 90, 9e and
94 of the Belgium Income Tax Code applicable. The
<PAGE>
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Purchaser shall be accountable for any breach of this covenant, whether by
the Purchaser itself, one of its assigns, successors or creditors.
(j) CONTRIBUTION IN KIND The Purchaser and e-Auction acknowledge
and agree that Schelfhout shall contribute the buildings of Schelfhout into
S.D.L. INVEST N.V., a company to be incorporated, for their bookkeeping value
as per 31.12.99, i.e. 19,503,468 BEF. As compensation, S.D.L. INVEST N.V.
will take over the balance of the debt related to the buildings (4,214,646
BEF) and receive shares in S.D.L. INVEST N.V. for 15,288,822 BEF.
5.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Vendors contained
in this Agreement or contained in any agreement, certificate or other
document delivered or given pursuant to or in connection with this Agreement
or the transactions provided for herein shall survive the Closing, and
regardless of any investigation by or on behalf of the Purchaser with respect
thereto, shall continue in full force and effect for the benefit of the
Purchaser for a period of two (2) years from the Closing Date.
(b) The representations and warranties of the Purchaser and
e-Auction contained in this Agreement or contained in any agreement,
certificate or document delivered or given pursuant to or in connection with
this Agreement or the transactions provided for herein shall survive the
Closing, and regardless of any investigation by or on behalf of the Vendors
with respect thereto, shall continue in full force and effect for the benefit
of the Vendors for a period of two (2) years from the Closing Date.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNITY BY THE VENDORS. The Vendors shall, jointly and severally,
indemnify and hold the Purchaser and e-Auction, its directors, officers,
employees, agents, representatives, assigns and the Purchaser's Affiliates,
and their respective directors, officers and employees harmless in respect of
any claim, demand, action, cause of action, damage, loss, cost, liability or
expense (hereinafter referred to as "Claim") which may be made or brought
against an Indemnified Party or which it may suffer or incur directly or
indirectly as a result of, in respect of or arising out of:
(a) any incorrectness in or breach of any representation or
warranty of the Vendors contained in this Agreement or in any
other agreement, certificate or instrument executed and
delivered pursuant to this Agreement; or
(b) any breach of or any non-fulfillment of any covenant or
agreement on the part of the Vendors under this Agreement or
under any other agreement, certificate or instrument executed
and delivered pursuant to this Agreement;
6.2 INDEMNITY BY THE PURCHASER AND E-AUCTION. The Purchaser and
e-Auction shall indemnify and hold the Vendors and their respective heirs and
legal representatives harmless in
<PAGE>
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respect of any Claim which may be made or brought against an Indemnified
Party or which it may suffer or incur directly or indirectly as a result of
in respect of or arising out of:
(a) any incorrectness in or breach of any representation or
warranty of the Purchaser or e-Auction, contained in this
Agreement or in any other agreement, certificate or instrument
executed and delivered pursuant to this Agreement;
(b) any breach of or any non-fulfillment of any covenant or
agreement on the part of the Purchaser or e-Auction under this
Agreement or under any other agreement, certificate or
instrument executed and delivered pursuant to this Agreement;
or
(c) in the event of a breach of Section 5.2(i) above, the
Purchaser and e-Auction, their assigns and creditors, agree to
pay to the Vendors ispo jure, an indemnity equal to the taxes
to be paid by the Vendors, including any and all fines,
interest and increases thereof. The Purchaser and e-Auction
agree to pay this indemnity to the Vendors within fourteen
(14) days of the receipt of the copy of the notice of
assessment provided by the Vendors.
6.3 LIMITATIONS. No party shall have any Liability for indemnification
pursuant to Sections 6.1 or 6.2 unless and until the accumulated aggregate
amount of Claims of the Indemnified Party exceeds twenty thousand dollars
(US$20,000) in United States funds, following which all such accumulated
Claims and all further Claims of the Indemnified Party shall be recoverable
as provided in this Agreement.
6.4 NOTICE OF CLAIM. If an Indemnified Party becomes aware of a Claim in
respect of which indemnification is provided for pursuant to either of
Section 6.1 or 6.2, as the case may be, the Indemnified Party shall promptly
give written notice of the Claim to the Indemnifying Party. Such notice shall
specify whether the Claim arises as a result of a claim by a Person against
the Indemnified Party (a "Third Party Claim") or whether the Claim does not
so arise (a "Direct Claim"), and shall also specify with reasonable
particularity (to the extent that the information is available):
(a) the factual basis for the Claim; and
(b) the amount of the Claim, if known.
If, through the fault of the Indemnified Party, the Indemnifying Party does
not receive notice of any Claim in time effectively to contest the
determination of any liability susceptible of being contested, then the
Liability of the Indemnifying Party to the Indemnified Party under this
Article shall be reduced by the amount of any losses incurred by the
Indemnifying Party resulting from the Indemnified Party's failure to give
such notice on a timely basis.
6.5 DIRECT CLAIMS. In the case of a Direct Claim, the Indemnifying Party
shall have sixty (60) days from receipt of notice of the Claim within which
to make such investigation of the Claim as the Indemnifying Party considers
necessary or desirable. For the purpose of such investigation, the
Indemnified Party shall make available to the Indemnifying Party the
<PAGE>
-28-
information relied upon by the Indemnified Party to substantiate the Claim,
together with all such other information as the Indemnifying Party may
reasonably request. If both parties agree at or before the expiration of such
sixty (60) day period (or any mutually agreed upon extension thereof) to the
validity and amount of such Claim, the Indemnifying Party shall immediately
pay to the Indemnified Party the full agreed upon amount of the Claim,
failing which the matter shall be referred to binding arbitration in such
manner as the parties may agree or shall be determined by a court of
competent jurisdiction.
6.6 THIRD PARTY CLAIMS. In the case of a Third Party Claim, the
Indemnifying Party shall have the right, at its expense, to participate in or
assume control of the negotiation, settlement or defence of the Claim and, in
such event, the Indemnifying Party shall reimburse the Indemnified Party for
all of the Indemnified Party's out-of-pocket expenses as a result of such
participation or assumption. If the Indemnifying Party elects to assume such
control, the Indemnified Party shall have the right to participate in the
negotiation, settlement or defence of such Third Party Claim and to retain
counsel to act on its behalf, provided that the fees and disbursements of
such counsel shall be paid by the Indemnified Party unless the Indemnifying
Party consents to the retention of such counsel at its expense or unless the
named parties to any action or proceeding include both the Indemnifying Party
and the Indemnified Party and a representation of both the Indemnifying Party
and the Indemnified Party by the same counsel would be inappropriate due to
the actual or potential differing interests between them (such as the
availability of different defences). If the Indemnifying Party, having
elected to assume such control, thereafter fails to defend the Third Party
Claim within a reasonable time, the Indemnified Party shall be entitled to
assume such control and the Indemnifying Party shall be bound by the results
obtained by the Indemnified Party with respect to such Third Party Claim. If
any Third Party Claim is of a nature such that (i) the Indemnified Party is
required by Applicable Law or the order of any court, tribunal or regulatory
body having jurisdiction, or (ii) it is necessary in the reasonable view of
the Indemnified Party acting in good faith and in a manner consistent with
reasonable commercial practices, in respect of (A) a Third Party Claim by a
customer relating to products or services supplied by the Business or (B) a
Third Party Claim relating to any Contract which is necessary to the ongoing
operations of the Business or any material part thereof in order to avoid
material damage to the relationship between the Indemnified Party and any of
its major customers or to preserve the rights of the Indemnified Party under
such an essential Contract, to make a payment to any Person (a "Third Party")
with respect to the Third Party Claim before the completion of settlement
negotiations or related legal proceedings, as the case may be, the
Indemnified Party may make such payment and the Indemnifying Party shall,
promptly after demand by the Indemnified Party, reimburse the Indemnified
Party for such payment. If the amount of any liability of the Indemnified
Party under the Third Party Claim in respect of which such a payment was
made, as finally determined, is less than the amount which was paid by the
Indemnifying Party to the Indemnified Party, the Indemnified Party shall,
promptly after receipt of the difference from the Third Party, pay the amount
of such difference to the Indemnifying Party. If such a payment, by resulting
in settlement of the Third Party Claim, precludes a final determination of
the merits of the Third Party Claim and the Indemnified Party and the
Indemnifying Party are unable to agree whether such payment was unreasonable
in the circumstances having regard to the amount and merits of the Third
Party Claim, then such
<PAGE>
-29-
dispute shall be referred to and finally settled by binding arbitration from
which there shall be no appeal.
6.7 SETTLEMENT OF THIRD PARTY CLAIMS. If the Indemnifying Party fails to
assume control of the defence of any Third Party Claim, the Indemnified Party
shall have the exclusive right to contest, settle or pay the amount claimed.
Whether or not the Indemnifying Party assumes control of the negotiation,
settlement or defence of any Third Party Claim, the Indemnifying Party shall
not settle any Third Party Claim without the written consent of the
Indemnified Party, which consent shall not be unreasonably withheld or
delayed; provided, however, that the liability of the Indemnifying Party
shall be limited to the proposed settlement amount if any such consent is not
obtained for any reason within a reasonable time after the request therefor.
6.8 SET-OFF. The Purchaser shall be entitled to set-off the amount of
any Claim submitted under Section 6.1 as damages or by way of indemnification
against any other amounts payable by the Purchaser to the Vendors whether
under this Agreement or otherwise.
ARTICLE 7
DISPUTE RESOLUTION
7.1 ARBITRATION. Any dispute concerning the validity, the interpretation
or the execution of this Agreement or any agreement or document entered into
pursuant to this Agreement, shall be definitively settled in accordance with
the Rules of the Cepani, by one or several arbitrators appointed in
accordance these Rules. The Arbitration Tribunal shall be composed of three
arbitrators. The place of the arbitration shall be Sint-Niklaas, Belgium.
ARTICLE 8
GENERAL
8.1 FURTHER ASSURANCES. Each of the parties hereto from time to time at
the request and expense of any other party hereto and without further
consideration, shall execute and deliver such other instruments of transfer,
conveyance and assignment and take such further action as the other party may
require to more effectively complete any matter provided for herein.
8.2 EXPENSES. Unless otherwise provided in this Agreement, each of the
parties hereto shall bear its or his own expenses (including those of legal
counsel and advisors) incurred in connection with this Agreement and the
transactions contemplated by this Agreement.
8.3 ENTIRE AGREEMENT. This Agreement and the Schedules hereto together
with any agreements referenced herein constitute the entire agreement between
the parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties respecting the subject matter hereof and there are no
implied representations, warranties or conditions, statutory or otherwise,
except as expressly set forth herein. There are no oral representations or
warranties among the parties
<PAGE>
-30-
hereto of any kind. This Agreement may not be amended or modified in any
respect except by written instrument signed by all the parties hereto.
8.4 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
8.5 NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and shall be effectively given if (i) delivered
personally or (ii) sent by fax or other similar means of electronic
communication, in each case to the applicable address set out on the
execution page of this Agreement. Any notice so given shall be deemed
conclusively to have been given and received when so personally delivered or
on the day of faxing or sending by other means of recorded electronic
communication, provided that such day in either event is a Business Day.
Otherwise, such communication shall be deemed to have been given and made and
to have been received on the next following Business Day. Any party hereto or
others mentioned above may change any particulars of its address for notice
by notice to the others in the manner aforesaid.
8.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Belgium.
8.7 SEVERABILITY. Any covenant or provision hereof determined to be void
or unenforceable in whole or in part shall not be deemed to affect or impair
the validity of any other covenant or provision hereof and the covenants and
provisions hereof are declared to be separate and distinct.
8.8 WAIVER. A waiver of any default, breach or non-compliance under this
Agreement is not effective unless in writing and signed by the party to be
bound by the waiver. No waiver shall be inferred from or implied by any
failure to act or delay in acting by a party in respect of any default,
breach or non-observance or by anything done or omitted to be done by the
other party. The waiver by a party of any default, breach or non-compliance
under this Agreement shall not operate as a waiver of that party's rights
under this Agreement in respect of any continuing or subsequent default,
breach or non-observance (whether of the same or any other nature).
8.9 SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable by
any of the parties hereto without the prior written consent of the other
parties hereto and the Agreement shall enure to the benefit of and be binding
upon the respective successors and permitted assigns of the parties hereto.
8.10 NON-MERGER. Each party hereby agrees that all provisions of this
Agreement, other than the representations and warranties contained in Article
5, and the indemnities in Sections 6.1 and 6.2 hereof (which shall be subject
to the special arrangements provided in such Articles or Sections), shall
survive the execution, delivery and performance of this Agreement, the
Closing Date and the execution, delivery and performance of any and all
documents delivered in connection with this Agreement.
8.11 COUNTERPARTS AND FACSIMILE. This Agreement may be executed by the
parties in any number of separate counterparts each of which, when so
executed and delivered, shall be an original, but all such counterparts shall
together constitute one and the same instrument. Counterparts may be executed
either in original or faxed form and the parties adopt any
<PAGE>
-31-
signatures received by a receiving fax machine as original signatures of the
parties, provided, however that any party providing its signature in such
manner shall promptly forward to the other party an original of the signed
copy of this Agreement which was so faxed.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
<PAGE>
-32-
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto.
<TABLE>
<CAPTION>
<C> <S>
/s/ Luc Schelfhout
- ---------------------------- --------------------------------------------------------
Witness LUC SCHELFHOUT
Address: 9190 STEKENE, Bormte 204/A
Facsimile: 03/779.99.89
/s/ Hilde De Laet
- ---------------------------- --------------------------------------------------------
Witness HILDE DE LAET
Address: 9190 STEKENE, Bormte 204/A
Facsimile: 03/779.99.89
E-AUCTION BELGIUM N.V.
e-Auction Global Trading Inc. (Nevada)
Per: /s/ David Hackett
-----------------------------------------
Name: David Hackett
-----------------------------------------
Address: 9190 STEKENE, Zavelstraat 7
Facsimile:
------------------------------------
e-Auction Global Trading Inc. (Canada)
Per: /s/ David Hackett
-----------------------------------------
Name: David Hackett
-----------------------------------------
Address: 9190 STEKENE, Zavelstraat 7
Facsimile:
------------------------------------
E-AUCTION GLOBAL TRADING INC.
Per: /s/ David Hackett
-----------------------------------------
Name: David Hackett
-----------------------------------------
Address: 181 Bay Street, BCE Place, Suite 3730
Wellington Tower, Toronto, Ontario
M5J 2T3
Facsimile: 416-214-0585
</TABLE>
<PAGE>
Exhibit 15
SUBSIDIARIES OF e-AUCITON GLOBAL TRADING INC.
1. e-Auction Global Trading Inc., a Barbados corporation, wholly owned by
the Company
2. e-Auction Global Trading Inc., a Canadian corporation, wholly owned by
e-Auction Global Trading Inc. (Barbados)
3. e-Auction Belgium N.V., a Belgium Company, wholly owned by the Company
and e-Auction Global Trading Inc. (Canada)
4. Schelfhout Computer Systemen N.V., a Begium corporation, wholly owned by
e-Auction Belgium N.V.
5. e-Auction Austrailasia Pty Limited, an Austrailian corporation, owned
50.01% by the Company.
<PAGE>
[LETTERHEAD]
March 7, 2000
United States Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W., Mail Stop 4-4
Washington, D.C. 20549
ATTN: Steven C. Duvall
Assistant Director
Dear Mr. Duvall:
Re: e-Auction Global Trading, Inc.
Registration Statement on Form 10-SB/A
Filed January 18, 2000
File No. 0-28741
I have reviewed the disclosure set out in Item 3 -- Changes in and Disagreements
with Accountants as contained in the Form 10-SB/A of e-Auction Global Trading
Inc. as filed on or about March 6, 2000 and I am in agreement with statements
made therein. I also consent to the use of my name in the said registration
statement. I also confirm that my departure as auditor of Kazari International,
Inc. (now e-Auction Global Trading Inc.) was in no way due to any disagreements
or disputes between myself and the management of Kazari International, Inc. (now
e-Auction Global Trading Inc.).
If you require any further information from me, please do not hesitate to
contact me.
Yours very truly,
/s/ David A. Cox
David A. Cox
Chartered Accountant
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-08-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 100,181 4,179,394
<PP&E> 0 34,247
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 102,181 5,213,641
<CURRENT-LIABILITIES> 152,500 7,906,072
<BONDS> 0 4,200,000
0 0
0 0
<COMMON> 5,320 1
<OTHER-SE> (50,319) (2,692,432)
<TOTAL-LIABILITY-AND-EQUITY> 102,181 5,213,641
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 182,566 2,692,432
<LOSS-PROVISION> 50,000 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (291,569) (2,692,432)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (291,569) (2,692,432)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (291,569) (2,692,432)
<EPS-BASIC> (0.068) (0.080)
<EPS-DILUTED> (0.068) (0.080)
</TABLE>
