<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 2000
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
E-AUCTION GLOBAL TRADING INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Nevada 7389 (Services- Business Services) n/a
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
181 BAY STREET
BCE PLACE, SUITE 3730
TORONTO, ONTARIO
CANADA M5J 2T3
(613) 214-1587
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
DAVID HACKETT
181 BAY STREET
BCE PLACE, SUITE 3730
TORONTO, ONTARIO
CANADA M5J 2T3
(613) 214-1587
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------ --------------- -------------------------- ------------------------ -------------------------
Title of Each Class of Securities Amount to be Aggregate Offering Amount of Registration
to be registered Registered Offering Price Per Unit Price Fee
- ------------------------------------ --------------- -------------------------- ------------------------ -------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per 55,719,030
share shares $3.625 (1) $201,981,483.70 $53,323.11
- ------------------------------------ --------------- -------------------------- ------------------------ -------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the high and low sales price of the
Common shares on February 18, 2000.
<PAGE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS (SUBJECT TO COMPLETION)
DATED FEBRUARY 28, 2000
e-AUCTION GLOBAL TRADING INC.
55,719,030 COMMON SHARES
This prospectus relates to the sale of up to 55,719,030 shares (the
"Shares') of common stock, $0.01 par value per share (the "Common Shares") of
e-Auction Global Trading Inc. (the "Company" or "e-Auction"). The Shares may
be offered by certain stockholders of the Company (the "Selling
Stockholders") or by their pledgees, donees, distributees or other
successors-in-interest, from time to time in transactions (which may include
block transactions) on the quotation system operated by the National
Quotation Bureau, LLC, known as the Pink Sheets, or on one or more other
securities markets and exchanges, in privately negotiated transactions, or
otherwise, at fixed prices that may be changed, at market prices prevailing
at the time of sale, at prices relating to such prevailing market prices or
at negotiated prices. The Selling Stockholders may effect such transactions
by selling the Shares directly to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions
or commissions from the Selling Stockholders and/or the purchasers of the
Shares for whom such broker-dealers may act as agents or to whom they may
sell as principals, or both (which compensation as to a particular
broker-dealer may be in excess of customary commissions). See "Selling
Stockholders" and "Plan of Distribution."
The Company issued the Shares to the Selling Shareholders as a
result of certain private placements as follows: (i) on February 26, 1999 in
connection with the acquisition by the Company of e-Auction Global Trading
Inc. (Barbados) (the "RTO Transaction"); (ii) on August 13, 1999 as
consideration for the payment of a fee and interest to Millenium Advisors
Inc. ("Loan Transaction") in connection with a $1 million loan to the
Company; (iii) on January 10, 2000 in connection with the acquisition by the
Company, through a wholly-owned subsidiary, of all of the shares of
Schelfhout Computer Systemen N.V. ("Schelfhout") (the "SCS Transaction"); and
(iv) on January 7, 2000 in connection with the issuance of common shares of
the Company on the exercise of 16,885,447 special warrants previously issued
by the Company (the "Special Warrant Transaction"). (Collectively, the RTO
Transaction, The Loan Transaction, the SCS Transaction and the Special
Warrant Transaction shall be referred to as the "Transactions".) The Shares
issued in connection with the Transactions constitute the Shares being
registered hereunder. In connection with any sales, the Selling Shareholders
and any brokers participating in such sales may be deemed to be
"underwriters" within the meaning of the SECURITIES ACT OF 1933, as amended
(the "1933 Act"). See "Selling Shareholders").
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company has agreed to bear
all expenses (other than broker's commissions and similar charges) in
connection with the registration and sale of the Shares being offered by the
Selling Stockholders that initially were issued as a result of the
Transactions. The Company has agreed to indemnify the Selling Stockholders
and any broker-dealers who act in connection with the sale of the Shares
hereunder that initially were issued as a result of the Transactions against
certain liabilities, including liabilities under the 1933 Act.
The Company's outstanding Common Shares are quoted on the quotation
system operated by the National Quotation Bureau, LLC, known as the Pink
Sheets under the symbol "EAUC". Prior to January 19, 2000, the Company's
outstanding Common Shares were quoted on the OTCBB under the symbol "EAUC".
On February 25, 2000, the closing price for the Common Shares as reported on
the Pink Sheets was $3.94 per share.
<PAGE>
FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE ___.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is February 28, 2000.
All other trademarks or service marks appearing in this Prospectus are
trademarks or service marks of the respective companies that utilize them.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMMON SHARES
OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
THE COMPANY
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 Austrailian 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".
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 8, 1998 TO YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1999
-----------------------------------------
Audited Unaudited
<S> <C> <C>
Consolidated Statement of Operations Data:
Total Revenues $0 $685
Income - (Loss) from Operations $(291,569) $(1,537,432)
Income - (Loss) $(291,569) $(1,537,432)
Pro forma basic and diluted net income per share $(0.068) $(0.045)
Shares used in computing pro forma basic and
diluted net income per share 4,266,704 34,432,329
<CAPTION>
DECEMBER 31, 1999
ACTUAL
<S> <C>
CONSOLIDATED BALANCE SHEET DATA
Cash and cash equivalents $100,181
Long-term debt, less current portion $0
Total shareholders' equity $(50,319)
</TABLE>
- ----------------------
<PAGE>
(1) Based on the number of shares outstanding as of December 31, 1999.
Excludes 4,300,000 shares issuable upon exercise of outstanding stock
options as of December 31, 1999 granted under the Company's Stock Option
Plan. See "Management -- Stock Option Plan."
RISK FACTORS
IN ADDITION TO OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS IN EVALUATING
INVESTMENT IN THE COMPANY AND BEFORE PURCHASING ANY COMMON SHARES OFFERED
HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. WHEN USED IN THIS PROSPECTUS, THE WORDS "WILL", "ANTICIPATE",
"BELIEVE", " ESTIMATE", "EXPECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENT MAY DIFFER MATERIALLY FROM THE RESULTS, PERFORMANCE
OR ACHIEVEMENT DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW
IN "RISK FACTORS", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" AND "BUSINESS" AS WELL AS THOSE DISCUSSED ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, A REFERENCE TO e-AUCTION OR THE
COMPANY INCLUDES e-AUCTION AND ALL OF ITS SUBSIDIARIES INCLUDING SCHELFHOUT.
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, WITH
THE 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 completion of the acquisition of Schelfhout provides the
Company with more extensive operating knowledge, e-Auction has a limited
operating history under its current business model upon which it can be
evaluated. There can be no assurance that the Company will be successful in
addressing the risks inherent in its business model and the failure to do so
could have a material adverse effect on the Company's business, operating
results and financial condition.
DEPENDENCE ON EMERGING MARKET FOR APPLICATIONS
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 acceptance of
Internet based applications for wide spread commercial use in server based
environments.
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 and services by the market, as well
as e-Auction's ability to enhance its products and services 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 and services, 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.
<PAGE>
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.
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.
BROAD MANAGEMENT DISCRETION AS TO USE OF PROCEEDS
A substantial portion of the net proceeds to be received by the Company
in connection with the offering is allocated to working capital and general
corporate purposes. Accordingly, management will have broad discretion with
respect to the expenditure of such proceeds. Purchasers of Common Shares offered
hereby will be entrusting their funds to the Company's management, upon whose
judgment they must depend, with limited information concerning the specific
working capital requirements and general corporate purposes to which the funds
will ultimately be applied. See "Use of Proceeds."
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,
<PAGE>
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 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.
USE OF PROCEEDS
The Company is not receiving any of the proceeds from the sale of the
Shares being registered hereunder.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its
capital stock. The Company currently intends to retain any future earnings of
its business, and therefore does not anticipate paying any cash dividends in the
foreseeable future.
CAPITALIZATION
The following table sets forth as of December 31, 1999 (i) the actual
capitalization of the Company; (ii) the capitalization of the Company giving pro
forma effect to the issuance of Common Shares on the acquisition of Schelfhout;
and (iii) the pro forma capitalization of the Company as adjusted to reflect the
issue of 16,885,447 common shares of the Company on the exercise of Special
Warrants issued in the Special Warrant Transaction
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1999 1999
--------------------------------------------------------------
ACTUAL(i) WITH SCHELFHOUT (ii) WITH WARRANTS (iii)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Stockholders' equity:
Common Shares, no par value, 250,000,000 authorized:
39,820,000 issued and outstanding, actual..... $39,820 $43,456 $60,394
Contributed Surplus.................................... $235,930 $6,232,292 $14,511,260
Retained earnings (Deficit)............................ $(1,829,001) $(1,829,001) $(1,829,001)
------------ ------------ ------------
Total shareholders' equity......................... $(1,553,251) $4,446,749 $12,742,653
------------ ------------ ------------
</TABLE>
- --------------------------
(1) See Notes to Consolidated Financial Statements.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Company's consolidated financial statements and related
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus. The
consolidated statement of operations data for the period from January 8, 1998 to
December 31, 1998 and the 12 month period ended December 31, 1999, and the
consolidated balance sheet data at December 31, 1998 and 1999 are derived from
the audited consolidated financial statements included elsewhere in this
Prospectus. Historical results are not necessarily indicative of results to be
expected in the future.
<TABLE>
<CAPTION>
---------------------------------------------
PERIOD FROM
INCORPORATION ON YEAR ENDED
JANUARY 8, 1998 TO DECEMBER 31, 1999
DECEMBER 31, 1998
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<S> <C> <C>
Revenue: $0 $685
Expense:
Salaries and Benefits $- $646,370
Legal $23,005 $87,345
Sales, General and Administration $218,564 $804,402
---------------------------------------------
Net Income (Loss) $(291,569) $(1,537,432)
<CAPTION>
---------------------------------------------
CONSOLIDATED BALANCE SHEET DATA: 1998 1999
<S> <C> <C>
Cash $100,181 $301,164
Deposit in Schelfhout $- $1,000,000
Total Assets $102,181 $1,371,911
Payables and Accruals $152,500 $1,725,162
Loan Payable $- $1,000,000
Shareholders' Equity $(50,319) $(1,553,251)
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF e-AUCTION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS," AND ELSEWHERE IN THIS PROSPECTUS.
SELECTED FINANCIAL INFORMATION
The Company's consolidated financial statements are prepared in
accordance with Canadian generally accepted accounting principles. The following
table sets forth selected financial information of the Company extracted from
the Company's unaudited and audited consolidated financial statements.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA:
- --------------------------------------------------------------------------------------------------
1999 (1) 1998 (2)
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Salaries and Benefits $646,370 $-
- --------------------------------------------------------------------------------------------------
Legal $87,345 $23,005
- --------------------------------------------------------------------------------------------------
Sales, General and Administration $804,402 $218,564
- --------------------------------------------------------------------------------------------------
Loss $(1,537,432) $(291,569)
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Loss per Common Share $(0.045) $(0.068)
- --------------------------------------------------------------------------------------------------
Weighted Average Common Shares Outstanding 34,432,329 4,266,704
- --------------------------------------------------------------------------------------------------
Accumulated deficit $(1,829,001) $(50,319)
- --------------------------------------------------------------------------------------------------
<CAPTION>
BALANCE SHEET DATA:
- --------------------------------------------------------------------------------------------------
As at December 31
- --------------------------------------------------------------------------------------------------
1999 (1) 1998 (2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
Cash $301,164 $100,181
- --------------------------------------------------------------------------------------------------
Deposit in Schelfhout $1,000,000 $-
- --------------------------------------------------------------------------------------------------
Total Assets $1,371,911 $102,181
- --------------------------------------------------------------------------------------------------
Payables and Accruals $1,725,162 $152,500
- --------------------------------------------------------------------------------------------------
Loan Payable $1,000,000 $-
- --------------------------------------------------------------------------------------------------
Shareholders' Equity $(1,553,251) $(50,319)
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) This information was extracted from the Company's unaudited financial
statements contained in this prospectus.
(2) This information was extracted from the Company's audited financial
statements contained in this prospectus.
LIQUIDITY AND CAPITAL RESOURCES
Changes in non-cash operating accounts at December 31, 1999 was $1,061,869
compared to $2,500 for the previous period from January 8, 1998 to December 31,
1998. The increase in non-cash operating accounts was due to an increase in
payables of $861,869. The company also increased its amount due to Ventures
North Investment Partners by $860,793. Prior to the completion of the January
fund raising, Ventures North Investment Partners has been funding the day to day
operations of the Company. The amounts are payable on demand and bear interest
at 0% per annum. At year end the Company held cash of $301,164. Subsequent to
year end the Company raised an additional $2.5 million, net of expenses, through
a special warrant financing and $2.2 million convertible debenture financing,
the proceeds of which are being used to complete the Schelfhout acquisition and
to fund ongoing operations. See "Business - Completion of Debenture Offering".
RESULTS OF OPERATIONS
<PAGE>
Nineteen ninety nine was a year of business development for e-Auction. The
company spent considerable time and effort in defining its market space and in
acquiring Schelfhout Computer Systemen N.V. (which closed on January 7, 2000).
During the year the company spent $1,537,432 in operating expenses (compared to
$241,569 for the period of January 8, 1998 (date of incorporation) to December
31, 1999). The majority of these costs were in relation to business development
efforts.
On February 26, 1999 Kazari International, Inc. was involved in a Share
Exchange Agreement with e-Auction Global Trading Inc. (Barbados) and Kazari
International, Inc. subsequently changed its name to e-Auction Global Trading
Inc. The financial effect of the purchase of e-Auction Global Trading Inc. is
accounted for as a reverse takeover, as the shareholders of e-Auction Global
Trading Inc. (Barbados) now control e-Auction Global Trading Inc.
- - RESEARCH AND DEVELOPMENT
On February 1, 1999, e-Auction (Barbados) acquired the internet auctioning
software, technology and other intellectual property assets of Generated
Solutions Ltd. ("GSL"). 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 intellectual property assets
of National Electronic Marketing Inc. ("NEMI"). NEMI assets included the
exclusive rights to market GSL's internet auctioning software outside of North
America and 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.
- - SELLING, GENERAL AND ADMINISTRATIVE
Selling, General and Administrative increased from $218,564 in 1998 to
$804,402 in 1999. The 1999 SG&A is consistent with the Company's business
development growth. In June, with the continued growth the Company hired David
Hackett as the Chief Financial Officer. Mr. Hackett is responsible for the
Finance and Administration department as well as the day to day operations of
the Company. In January 2000, with the completion of the Schelfhout acquisition,
the Company hired Daniel McKenzie as the Chief Executive Officer and the
Chairman of the Board.
- - RISKS AND UNCERTAINTIES
e-Auction's business plan is largely dependent upon the perishable
commodity auction marketplace and the business to business electronic commerce
marketplace. This marketplace has been experiencing a dramatic increase in size
over the past few years. The Company believes in the strengths of its
capabilities, and in its ability to adapt to changes in this marketplace
environment. However there is no assurance that the perishable commodity auction
marketplace and the business to business electronic commerce marketplace will
continue to exist or that the skills of the Company will not become obsolete, or
be circumvented. Due to the significant and rapid technological changes in the
perishable commodity auction marketplace and the business to business electronic
commerce there can be no assurance that the introduction of new products or the
development of technologies by other entities will not render the Companies
products and services obsolete or unmarketable.
- - OUTLOOK
e-Auction will continue to focus on delivering to the perishable commodity
auction marketplace and the business to business electronic commerce
marketplace.
Management is committed to grow by providing products and services that
meet the needs of its customer base.
BUSINESS
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
<PAGE>
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.
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.
[GRAPHIC]
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 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 intellectual property assets of National Electronic Marketing Inc.
("NEMI"). NEMI assets included the exclusive rights to market GSL's internet
auctioning software outside of North America and 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.
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.
<PAGE>
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 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 good 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:
<PAGE>
(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.
REVENUE FROM FINANCIAL SERVICE
e-Auction's intention is not to disintermediate the auction house, but
rather 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 Schelfhout was established in 1983, it 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,
<PAGE>
* 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
[GRAPHIC]
EURONET PORTALS
As the acquisition of Schelfhout has been completed, e-Auction and
Schelfhout are to 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:
- - 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
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.
<PAGE>
[GRAPHIC]
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.
<PAGE>
BENEFITS OF EURONET TRADING PORTALS
[GRAPHIC]
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
* Better prices through transparency;
* Increased number of purchasers; and
* Guaranteed payment.
INTELLECTUAL PROPERTY
The Company relies primarily on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary technology. For example, the Company
licenses its software pursuant to signed license agreements, which impose
certain restrictions on the licensee's ability to utilize the software.
Additionally, the Company seeks to avoid disclosure of its trade secrets,
including requiring those persons with access to the Company's proprietary
information to execute confidentiality agreements and restricting access to the
Company's source code. The Company seeks to protect its software,
<PAGE>
documentation and other written materials under trade secret and copyright
laws, which afford only limited protection. The Company currently has no
patents or patent applications pending.
Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products,
obtain or use information that the Company regards as proprietary or use or make
copies of the Company's products in violation of license agreements. Policing
unauthorized use of the Company's products is difficult. In addition, the laws
of many jurisdictions do not protect the Company's proprietary rights to as
great an extent as do the laws of the United States. There can be no assurance
that the Company's means of protecting its proprietary rights will be adequate
or that the Company's competitors will not independently develop similar
technology.
To date, the Company has not been notified that its products infringe
the proprietary rights of any third parties, but there can be no assurance that
third parties will not claim that the Company's current or future products
infringe such rights. The Company expects that developers of object-oriented
technology will be increasingly subject to infringement claims as to the number
of products, competitors and patents in the Company's industry segment grows.
Any such claim, whether meritorious or not, could be time-consuming, result in
costly litigation, cause product shipment delays or require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements might
not be available on terms acceptable to the Company or at all, which could have
a material adverse effect upon the Company's business, operating results and
financial condition.
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, FairMarket-SM-, 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.
FairMarket-SM-, 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
<PAGE>
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 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 machinings, 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.
FACILITIES
e-Auction currently has no properties and has not entered into any
agreements to acquire any properties. e-Auction has offices located at 181 Bay
Street, Suite 3730, BCE Place, Toronto, Ontario, Canada, M5J 2T3 and at Bormte
204/A, Stekene, Belgium 9190. The offices at 181 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 metre 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.
<PAGE>
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.
(i) 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, 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.
(ii) 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 fidiciary duties to
the Plaintiff. As such, the Plaintiff claims that the
defendants' actions have damaged the Plaintiff totaling
several millions of dollars.
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 to 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.
<PAGE>
MANAGEMENT
The following table sets forth the names, positions and ages of the
executive officers and directors of e-Auction as at February 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.
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.
<PAGE>
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 Instuctor 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. (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
<PAGE>
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.
DIRECTOR COMPENSATION
The Company has not yet instituted any standard arrangement for the
compensation of its directors. On August 29, 1999 Michael Gilley, a former
Director, 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 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
4,600,000 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>
<CAPTION>
Date Number Price
- ---- ------ -----
<S> <C> <C>
March 1, 1999 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
----------------
Total 4,600,000
----------------
</TABLE>
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 $100,000 (collectively, the "Named Executive
Officers").
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------------
Long-term compensation
- -------------------------------------------------------------------------------------------------------------------------
Annual compensation Awards Payouts
- -------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------- ------- ------------ --------- --------------- ------------ -------------- ---------- ---------------
Restricted Securities
Other annual stock underlying LTIP All other
Name and Salary Bonus compensation awards options/ SARs payouts compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------- ------- ------------ --------- --------------- ------------ -------------- ---------- ---------------
<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.
(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.
<PAGE>
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>
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
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>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 10, 2000, e-Auction, though 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 was 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.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Shares as of February 1, 2000, by (i) each
person who is known by the Company to own beneficially more than five percent of
the Company's Common Shares, (ii) each of the Named Executive Officers, and
(iii) each of the Company's directors.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(1) PERCENTAGE OF CLASS
- ------------------------------------------------------------------------ ------------------ ----------------------
<S> <C> <C>
J. Andrews in Trust for the Shareholders of Sanga International Inc.
C/O Blake, Cassels & Graydon
45 O'Connor Street, Ottawa, Ontario K1P 1A4 16,500,000 27.2%
- ------------------------------------------------------------------------ ------------------ ----------------------
QFG Holding Limited
P.O. Box 659, Roadtown, Tortola, BVI 8,474,193 14.0%
- ------------------------------------------------------------------------ ------------------ ----------------------
Luc Schelfhout(2)
Bornte 204/A, Stekene, Belgium 9190 3,636,364 6.0%
- ------------------------------------------------------------------------ ------------------ ----------------------
Daniel McKenzie (3)
RR5, Georgetown, Ontario L5G 4S8 161,987 0.27%
- ------------------------------------------------------------------------ ------------------ ----------------------
David Hackett(4)
20 Astley Avenue, Toronto, Ontario M4W 3B4 236,987 0.39%
- ------------------------------------------------------------------------ ------------------ ----------------------
</TABLE>
1. The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rule,
beneficial ownership includes any share as to which the individual or
entity has voting power or investment power. Unless otherwise indicated,
each person or entity has sole voting and investment power with respect to
shares shown as beneficially owned. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days, whether pursuant to the exercise of options, conversion of
securities or otherwise.
2. Includes 1,818,182 common shares held by Mr. Schelfhout's spouse, Hilde de
Laet.
3. Includes 161,987 common shares held by a holding company.
4. Includes 236,987 common shares held by a holding company for Mr. Hackett's
wife and children.
<PAGE>
SELLING STOCKHOLDERS
The following table provides certain information regarding the Selling
Stockholders and the number of Shares being offered by them as of February 28,
2000.
Shares Beneficially Owned Prior To Offering
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Percentage of
Common Shares That May
Stock Be Sold (1)
Name Amount Outstanding
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
J. Andrews itf Shareholders of Sanga International 16,500,000 27.23% 16,500,000
Inc.
Q.F.G. Holdings Limited 8,474,193 14.0% 9,076,693
Flynn, Von Shubert & Associates Attorneys 2,250,000 3.71% 2,250,000
Escrow Account
v-Wholesaler.com Inc. 2,000,000 3.30% 2,000,000
Ventures North Investment Partners Inc. 2,000,000 3.30% 2,000,000
e-Ventures Investments Inc. 2,000,000 3.30% 2,000,000
Online Global Commodities Exchange Limited 2,000,000 3.30% 2,000,000
Institute of Global Trading Communities Limited 2,000,000 3.30% 2,000,000
Luc Schelfhout 1,818,182 3.00% 1,818,182
Hilde de Laet 1,818,182 3.00% 1,818,182
Zorba Holdings Limited 1,500,000 2.48% 1,500,000
Platinium Capital Management Inc. 1,500,000 2.48% 1,500,000
e-Auction Global Trading Inc. (BVI) 1,500,000 2.48% 1,500,000
BFM Enterprises 1,500,000 2.48% 1,500,000
Platinium Capital Management Inc. Trust for John 1,000,000 1.65% 1,000,000
Andrews
Troy Lalonde 901,530 1.49% 901,530
Hartford Group Holdings Limited 830,000 1.37% 830,000
Web CCB (BVI) 750,000 1.24% 750,000
Assayriska Investments Inc. 642,500 1.06% 642,500
Tradwinds Investments Ltd. 550,000 0.91% 550,000
T.F Fred Tham 500,000 0.83% 500,000
Hartford Holdings Limited 500,000 0.83% 500,000
SABE Holdings Inc. 376,304 0.62% 376,304
John & Victoria O'Toole 239,727 0.40% 239,727
Brian Antonen 205,480 0.34% 205,480
Parkplace Finance Limited as trustee for the 205,479 0.34% 205,479
Parkplace Trust
Nesbit Burns in Trust For Trophy Foods Inc. 205,479 0.34% 205,479
HSBC Securities (Canada) Inc. 205,479 0.34% 205,479
Hani Rasid 200,000 0.33% 200,000
Edith M. Michel 200,000 0.33% 200,000
Millenium Advisors Inc. 197,219 0.33% 197,219
Ron Engineering & Consruction (Eastern) Ltd. 150,000 0.25% 150,000
Shenkman Corporation. In Trust 100,000 0.17% 100,000
Sabe Holdings, Inc. 100,000 0.17% 100,000
Elias Haloute 100,000 0.17% 100,000
Albert Haloute 100,000 0.17% 100,000
<PAGE>
Stephen Greenberg 50,000 0.08% 50,000
John Naime 50,000 0.08% 50,000
John O'Toole & Victoria O'Toole 43,602 0.07% 43,602
Soloway Holdings Limited 40,000 0.07% 40,000
S&O Building Partnership 40,000 0.07% 40,000
Richard J. Valentine & Penny E. Valentine 40,000 0.07% 40,000
JTWROS ###-##-####
Frederick H. Stierheim TTEE FBO Frederick H. 33,000 0.05% 33,000
Stierheim Revocable Living Trust
Murray Hill Investments Limited 20,000 0.03% 20,000
Ana Teresa Segarra 20,000 0.03% 20,000
Efthymios Kyriakopoulos 19,000 0.03% 19,000
FR Holdings, Ltd. 12,000 0.02% 12,000
Scott Family Investments 11,335 0.02% 11,335
Trendafile Rose Ahmet 10,989 0.02% 10,989
Michael Williamson 10,967 0.02% 10,967
Jeff Figliuzzi 10,902 0.02% 10,902
Bruno Figliuzzi 10,902 0.02% 10,902
Richard G. Harrington,Jr. 10,000 0.02% 10,000
Peter F. Anderson 10,000 0.02% 10,000
LJ, Inc. Of Central Florida 10,000 0.02% 10,000
Dennis A. Lavia 10,000 0.02% 10,000
John F. Doen 8,333 0.01% 8,333
Linda Morrison 8,000 0.01% 8,000
Sterling A. Farmer 7,000 0.01% 7,000
Mark Alex Marchque 6,667 0.01% 6,667
Julie Duffy 6,500 0.01% 6,500
Bill Duffy 6,500 0.01% 6,500
Frank Marceau 6,181 0.01% 6,181
Everen Securities C/F William Racine IRA 6,000 0.01% 6,000
Rollover Account #838-5798
Scott C. Basnan 5,000 0.01% 5,000
Robert Dorsey 5,000 0.01% 5,000
Patrick McNerney 5,000 0.01% 5,000
Lee Jensen 5,000 0.01% 5,000
Hugh Dorsey IRA 5,000 0.01% 5,000
Donald Dandelski 5,000 0.01% 5,000
Brian Griffin 5,000 0.01% 5,000
Douglas Andrews 4,000 0.01% 4,000
Bob Peterson 4,000 0.01% 4,000
Andre Bourgon 4,000 0.01% 4,000
Mark Morrison 3,400 0.01% 3,400
Gary Windt 3,400 0.01% 3,400
Geoff Mather 3,333 0.01% 3,333
David Griffin 3,333 0.01% 3,333
Ken Mulvaney & Brian Mulvaney JTWROS 3,000 0.00% 3,000
Mike Marshall 2,000 0.00% 2,000
Michelle Saber & Jeff Knight JTWROS 2,000 0.00% 2,000
Anton Hammerschmidt 2,000 0.00% 2,000
Jandy Kerby-Miller 1,666 0.00% 1,666
Gretchen Bastian 1,666 0.00% 1,666
<PAGE>
Robert Davies 1,600 0.00% 1,600
Bruce Andree 1,400 0.00% 1,400
Tim Over 1,000 0.00% 1,000
Sheila Davies 1,000 0.00% 1,000
Kasie Worrel 1,000 0.00% 1,000
John Morrison 1,000 0.00% 1,000
David Williamson 1,000 0.00% 1,000
Victor Chapman 400 0.00% 400
Cindy Phoel 200 0.00% 200
---------- ----------
Total 55,719,030 92.0% 55,719,030
---------- ---- ----------
---------- ---- ----------
</TABLE>
(1) Assumes the sale of all of the Shares offered by each of the Selling
Shareholders.
The Selling Stockholders have represented to the Company that they
acquired the Shares for their own account for investment only and not with a
view toward the public sale or distribution thereof, except pursuant to sales
registered under the 1933 Act or exemptions therefrom. In recognition of the
fact that the Selling Stockholders, even though acquiring the Shares for
investment, may wish to be legally permitted to sell their Shares when they deem
appropriate, the Company agreed with the Selling Stockholders to file with the
Commission under the 1933 Act a Registration Statement with respect to the
resale of the Shares from time to time and agreed to prepare and file such
amendments and supplements to the Registration Statement as may be necessary to
keep the Registration Statement effective during the periods while the
registration statement is effective. See "Plan of Distribution."
PLAN OF DISTRIBUTION
All the Shares offered hereby may be sold from time to time by the Selling
Stockholders, or by their pledgees, donees, distributees, transferees or other
successors-in-interest. The sale of the Shares by the Selling Stockholders may
be effected from time to time in one or more types of transactions (which may
include block transactions) on the quotation system operated by the National
Quotation Bureau, LLC, known as the Pink Sheets, or on one or more other
securities markets and exchanges, in privately negotiated transactions, through
put or call options transactions relating to the Shares, through short sales of
Shares, or through a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
relating to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect the above-mentioned transactions by selling the Shares
directly to purchasers, acting as principals for their own accounts, or by or
through broker-dealers acting as agents for the Selling Stockholders, or to
broker-dealers who may purchase Shares as principals and thereafter sell such
Securities from time to time in transactions on any exchange or market on which
such securities are listed or quoted, as applicable, in negotiated transactions,
through a combination of such methods of sale, or otherwise. Such broker-dealers
may receive compensation in the form of discounts, concessions or commissions
from the Selling Stockholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they may sell as principals, or both
(which compensation as to a particular broker- dealer may be in excess of
customary commissions). None of the proceeds from the sale of the Shares by the
Selling Stockholders will be received by the Company. In addition, any of the
Shares that qualify for sale pursuant to Rule 144 promulgated under the 1933 Act
may be sold in transactions complying with such Rule, rather than pursuant to
this Prospectus.
In connection with distributions of the Shares or otherwise, the
Selling Stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Shares in the course of hedging the positions they assume with Selling
Stockholders. The Selling Stockholders may also sell shares short and redeliver
the Shares to close out such short positions. The Selling Stockholders may also
enter into option or other transactions with broker-dealers which require the
delivery to the broker-dealer of the Shares, which the broker-dealer may resell
or otherwise transfer pursuant to this Prospectus. The Selling Stockholder may
also loan or pledge the Shares to a broker-dealer and the broker-dealer may sell
the Shares so loaned or upon a default the broker-dealer may effect sales of the
pledged Shares pursuant to this Prospectus.
<PAGE>
The Selling Stockholders and any broker-dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the 1933 Act, and any commissions received by
them and profit on any resale of the Shares as principal may be deemed to be
underwriting discounts and commissions under the 1933 Act. The Company has
agreed to bear all reasonable expenses (other than broker's commissions and
similar charges) in connection with the registration and sale of the Shares
being offered by the Selling Stockholders that initially were issued as a result
of the Transactions. The Company has agreed to indemnify the Selling
Stockholders and any agent, dealer or broker-dealer who acts in connection with
the sale of the Shares hereunder that initially were issued as a result of the
Transactions against certain liabilities, including liabilities under the 1933
Act.
If one or more Selling Stockholders shall propose to sell Shares
pursuant to this Prospectus, such Selling Stockholders shall deliver to the
Company at least three full trading days prior to such proposed sale a written
notice notifying the Company of their intent to sell (including the proposed
manner and timing of all sales), and the provision of such notice to the Company
shall conclusively be deemed to establish and confirm an agreement by such
Selling Stockholders to sell such Shares, in whole, in part or not at all,
within a period ending on the tenth trading day following the first such sale
and to comply with the other contractual registration provisions. To the extent
the Company has not exercised its rights to suspend (as described below), the
Company shall provide written notice to each of the other Selling Stockholders
regarding the availability of such ten trading day period.
The Company has the right to suspend use of this Prospectus for certain
periods of time (which may or may not last for a period of weeks) under certain
circumstances. The Company has agreed to use reasonable efforts to ensure that
the Selling Stockholders shall have an aggregate of at least ten trading days
(prorated for partial fiscal quarters) under this Prospectus during each fiscal
quarter during the effective period hereof.
Upon the Company being notified by a Selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Stockholder and of
the participating broker-dealer(s), (ii) the number of Shares involved, (iii)
the price at which such Shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
forth or incorporated by reference in this Prospectus, and (vi) other facts
material to the transaction. In addition, upon the Company being notified by a
Selling Stockholder that a donee or pledgee intends to sell more than 500
Shares, a supplement to this Prospectus will be filed. In addition, to the
extent required, the number of the Shares to be sold, purchase prices, public
offering prices, the names of any agents, dealers or underwriters, and any
applicable commissions or discounts with respect to a particular offer will be
set forth by the Company in a supplement to this Prospectus or, if appropriate,
a post-effective amendment to the Registration Statement.
Offers or sales of the Shares have not been registered or qualified
under the laws of any country other than the United States. To comply with
certain states' securities laws, if applicable, the Shares will be offered or
sold in such jurisdictions only through registered or licensed brokers or
dealers.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may be limited in its ability to
engage in market activities with respect to such Shares. In addition and without
limiting the foregoing, each Selling Stockholder will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the Shares by
the Selling Stockholders. The foregoing may affect the marketability of the
Shares.
There can be no assurance that the Selling Stockholders will sell any
or all of the Shares offered by them hereunder.
DESCRIPTION OF CAPITAL STOCK
e-Auction is authorized to issue two hundred and fifty million
(250,000,000) shares of common stock, of which 60,591,530 common shares are
currently issued and outstanding. The holders of common stock are entitled
<PAGE>
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 4,300,000 options outstanding.
TRANSFER AGENT AND REGISTRAR
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.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 60,539,030 outstanding shares of common stock of e-Auction,
4,800,000 are free trading shares as of the date of filing this Registration
Statement and 55,719,030 shares of common stock are restricted securities as
that term is defined in Rule 144 promulgated under the Securities Exchange Act
of 1934 ("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 Exchange Act of 1934. 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, if this
Registration Statement becomes effective, approximately 55,779,030 of the
Restricted Securities will be eligible to be sold without limitation. No
prediction can be made as to the effect, if any, that sales
<PAGE>
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.
Any employee of the Company who has been granted options to purchase
Shares or who has purchased Shares pursuant to a written compensatory plan or
written contract prior to the date of this offering pursuant to Rule 701 will be
entitled to rely on the resale provisions of Rule 701, which permits such
persons who are not "affiliates" of the Company to sell such Shares without
compliance with the public information, holding-period, volume limitation or
notice provisions of Rule 144 and permits such persons who are "affiliates" to
sell such Shares without compliance with the Rule 144 holding period
restrictions, in each case commencing 90 days after the date of this Prospectus.
Shortly after this Registration Statement becomes effective, the
Company intends to file a registration statement on Form S-8 under the
Securities Act to register Shares reserved for issuance under the stock option,
the Purchase Plan and the Savings Plan including, in some cases, Shares for
which an exemption under Rule 144 or Rule 701 would also be available, thus
permitting the resale of Shares issued under those Plans by non-affiliates in
the public market without restriction under the Securities Act. Such
registration statement will become effective immediately upon filing. As of
February 25, 2000, stock options to purchase 4,300,000 Shares were outstanding.
EXPERTS
The consolidated financial statements and related schedules for each of the
period between June 2, 1998 and December 31, 1998, and the 12 month period ended
December 31, 1999, appearing in this Prospectus and Registration Statement have
been audited by Dale Matheson Carr-Hilton, Chartered Accountants, independent
auditors, as set forth in their respective reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firms as experts in accounting and auditing.
The consolidated financial statements and related schedules for the period
between January 8, 1998 and June 1, 1998, appearing in this Prospectus and
Registration Statement has been audited by David A. Cox, a Chartered Accountant,
independent auditor, as set forth in his report thereon appearing elsewhere
herein, and is included in reliance upon such report given upon the authority of
such individual as expert in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement, of
which this Prospectus constitutes a part, under the Securities Act with respect
to the shares of Common Stock offered hereby. This Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement and the exhibits thereto for further information with
respect to the Company and the Common Stock offered hereby. Statements contained
herein concerning the provisions of any documents are not necessarily complete,
and in each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference. The Registration Statement, including exhibits filed
therewith, may be inspected without charge at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the Public Reference Section of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as the Company, that file
electronically with the Commission.
<PAGE>
e-AUCTION GLOBAL TRADING INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Dale Matheson Carr-Hilton, Chartered Accountants, Independent Auditors..................... 35
Consolidated Balance Sheets as of December 31, 1998.................................................. 36
Consolidated Statements of Operations for the period from June 2, 1998 to December 31, 1998.......... 37
Consolidated Statements of Cash Flows for the period from June 2, 1998 to December 31, 1998.......... 38
Notes to Consolidated Financial Statements for the period from June 2, 1998 to December 31, 1998..... 39
Report of David A. Cox, Chartered Accountant, Independent Auditors................................... 46
Consolidated Balance Sheet as of June 1, 1998........................................................ 47
Statement of Income and Deficit for the period from January 8, 1998 to June 1, 1998.................. 48
Statement of Changes in Cash for the period from January 8, 1998 to June 1, 1998..................... 49
Notes to Interim Financial Statements for the period from January 8, 1998 to June 1, 1998............ 50
Interim Financial Statements (unaudited) for the three month period ended March 31, 1999............. 52
Interim Financial Statements (unaudited) for the six month period ended June 30, 1999................ 57
Interim Financial Statements (unaudited) for the nine month period ended September 30, 1999.......... 62
</TABLE>
<PAGE>
e-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
(A NEVADA CORPORATION)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
(IN U.S. FUNDS)
<PAGE>
AUDITORS' REPORT
TO THE SHAREHOLDERS
e-AUCTION GLOBAL TRADING INC.
(FORMERLY KAZARI INTERNATIONAL, INC.)
We have audited the balance sheet of e-AUCTION GLOBAL TRADING INC. (formerly
Kazari International, Inc.) as at December 31, 1998 and the statements of
operations and deficit and cash flows for the period June 2, 1998 to December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1998 and the
results of its operations and cash flows for the period from June 2, 1998 to
December 31, 1998 in accordance with Canadian generally accepted accounting
principles.
The financial statements as at June 1, 1998 and for the period then ended were
audited by another auditor who expressed an opinion without reservation on these
financial statements.
/s/ Alvin F. Dale, Ltd.
Dale Matheson Carr-Hilton
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 (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
$ $
- ------------------------------------------------------------------------------------------------------------
<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
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</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
$ $
- ------------------------------------------------------------------------------------------------------------
<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 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 8)
- -------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
a) Foreign currency translation
The Company follows the "temporal" method of accounting for
foreign currency translations. Balance sheet items are translated
into Canadian dollars at exchange rates prevailing at the balance
sheet date for monetary items and at exchange rates in effect at
the transaction date for non-monetary items. Income statement
items are translated at average rates prevailing during the year.
Unrealized gains and losses are deferred and amortized over their
expected life. Realized gains and losses are charged to
operations.
b) Loss per common share
Loss per common share on a fully diluted basis is not presented as
it would be anti-dilutive.
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.
- -------------------------------------------------------------------------------
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 8)
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 8)
- -------------------------------------------------------------------------------
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>
(SEE NOTE 8)
<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)
- -------------------------------------------------------------------------------
6. LOSS PER SHARE
- -------------------------------------------------------------------------------
Loss per share for the period from January 8, 1998 (date of
incorporation) to December 31, 1998 is $0.06.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
8. 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>
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. 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 agreement is still subject to final approval by all parties.
<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. SUBSEQUENT EVENTS - CONT'D
- -------------------------------------------------------------------------------
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 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.
d) The Company, through its Canadian subsidiary, made two purchases of
intellectual property. The first purchase was for $300 Cdn. paid in
the form of 30,000 options for common shares with an exercise price
of $0.01 Cdn. 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 and
would also receive 65,000 options for common shares with an exercise
price of $0.01 Cdn. per share.
The second purchase was 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
who also received 80,000 options for common shares with an exercise
price of $0.01 Cdn. per share.
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. Granted employees 3,050,000 stock
options with an exercise price of $0.85 per share.
g) The Company advanced a further $100,000 to Intrepidus, Inc. in
connection with the Bridge loan agreement.
h) The Company received an additional $2,200,000 in the form of a
convertible debenture, the terms of which still have to be
finalized.
- -------------------------------------------------------------------------------
9. 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)
- -------------------------------------------------------------------------------
9. 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.
- -------------------------------------------------------------------------------
10. RECONCILIATION OF UNITED STATES TO CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
- -------------------------------------------------------------------------------
a) Basic and diluted loss per share under U.S. GAAP are equal to the
loss per share under Canadian GAAP. The weighted average number of
shares for calculating loss per share is 4,266,704.
b) Under U.S. GAAP, 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.
<PAGE>
KAZARI INTERNATIONAL, INC.
(a Nevada Corporation)
REPORT AND INTERIM FINANCIAL STATEMENTS
JUNE 1, 1998
(in U.S. funds)
<TABLE>
<CAPTION>
CONTENTS: PAGE
<S> <C>
Auditor's Report 1
Interim Balance Sheet 2
Interim Statement of Income and Deficit 3
Interim Statement of Changes in Cash 4
Notes to Interim Financial Statements 5,6
</TABLE>
<PAGE>
AUDITOR'S REPORT
TO THE SHAREHOLDERS,
KAZARI INTERNATIONAL, INC.
I have audited the interim balance sheet of KAZARI INTERNATIONAL, INC. as at
JUNE 1, 1998 and the interim statements of income and deficit and changes in
cash for the period from the date of incorporation on January 8, 1998 to June 1,
1998. These interim financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these interim
financial statements based on my audit.
I conducted my audit in accordance with Canadian generally accepted auditing
standards. Those standards require that I plan to perform an audit to obtain
reasonable assurance whether the interim financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the interim financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall interim
financial statement presentation.
In my opinion, these interim financial statements present fairly, in all
material respects, the financial position of the company as at June 1, 1998 and
the results of its operations and the changes in its financial position from the
period from the date of incorporation on January 8, 1998 to June 1, 1998 in
accordance with Canadian generally accepted accounting principles.
/s/ David A. Cox
Vancouver, British Columbia
June 8, 1998
Chartered Accountant
Suite 1500-701 West Georgia Street
Vancouver, B.C. V7Y 1C6
<PAGE>
KAZARI INTERNATIONAL, INC.
(a Nevada Corporation)
INTERIM BALANCE SHEET
AS AT JUNE 1, 1998
(in U.S. funds)
<TABLE>
<CAPTION>
1998
<S> <C>
ASSETS
CURRENT
Cash $211,222
INCORPORATION COSTS 2,000
------------
$ 213,222
------------
LIABILITIES
CURRENT
Accounts payable, audit and bookkeeping $ 10,700
Due to a director (note 2) 20,275
------------
30,975
------------
EQUITY
CAPITAL STOCK (NOTE 3)
Authorized: 40,000,000 common shares, with a par value of $.001
Issued and outstanding: 5,320,000 common shares, with a par value of $.001 5,320
CONTRIBUTE SURPLUS (NOTE 3) 235,930
DEFICIT (59,003)
------------
182,247
------------
------------
$ 213,222
------------
</TABLE>
APPROVED BY THE DIRECTORS:
/s/ Fred Tham Chief Executive Officer
/s/ Shelley James Chief Financial Officer
See accompanying notes to financial statements
<PAGE>
KAZARI INTERNATIONAL, INC.
(a Nevada Corporation)
INTERIM STATEMENT OF INCOME AND DEFICIT
FOR THE PERIOD FROM THE DATE OF INCORPORATION ON JANUARY 8,1998 TO JUNE 1, 1998
(in U.S. funds)
<TABLE>
<CAPTION>
1998
<S> <C>
EXPENSES
Accounting, audit and bookkeeping $ 3,200
Bank charges 118
Consulting fees 687
Entertainment 1,378
Legal 3,500
Office and printing 3,105
Management fees 37,500
Telephone 2,489
Travel and lodging 7,026
------------
59,003
------------
NET LOSS FOR THE PERIOD 59,003
DEFICIT AT THE BEGINNING OF PERIOD -
------------
DEFICIT AT END OF PERIOD $ 59,003
------------
</TABLE>
See accompanying notes to financial statements
<PAGE>
KAZARI INTERNATIONAL, INC.
(a Nevada Corporation)
INTERIM STATEMENT OF CHANGES IN CASH
FOR THE PERIOD FROM THE DATE OF INCORPORATION ON
JANUARY 8, 1998 TO JUNE 1, 1998
(in U.S. funds)
<TABLE>
<CAPTION>
1998
<S> <C>
OPERATING ACTIVITIES
Net loss for the period (59,003)
Net decrease in non-cash working capital balances 30,975
------------
(28,028)
------------
FINANCING ACTIVITIES
Issuance of capital stock 251,250
Share issue costs (10,000)
------------
241,250
------------
INVESTING ACTIVITIES
Incorporation costs (2,000)
------------
CHANGE IN CASH DURING THE PERIOD 211,222
CASH AT BEGINNING OF PERIOD -
------------
CASH AT END OF PERIOD $ 211,222
------------
</TABLE>
See accompanying notes to financial statements
<PAGE>
KAZARI INTERNATIONAL, INC.
(a Nevada Corporation)
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE1, 1998
(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 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 business throughout the world.
2.RELATED PARTY TRANSACTIONS
During the period, the Company incurred $7,500 in management fees to a director.
Also during the period, the Company reimbursed $13,998 to the directors for
expenses incurred on behalf of Kazari International, Inc.
The amount due to a director is non-interest bearing, unsecured, and has no
specific terms of repayment.
3. CAPITAL STOCK AND CONTRIBUTED SURPLUS
During the period the company issued the following common shares:
<TABLE>
<CAPTION>
Capital stock at
#Shares Total proceeds Par Value Contributed Surplus
-------
<S> <C> <C> <C>
1,250,000 at 0.001each $ 1,250 $ 1,250 $ -
4,000,000 at 0.010each 40,000 4,000 36,000
70,000 at 3.000each 210,000 70 209,930
- --------------- -------------------- --------------------- --------------------
5,320,000 $ 251,250 $ 5,320 $ 245,930
- ---------------
Less share issue costs: 10,000 10,000
-------------------- --------------------- --------------------
-------------------- --------------------- --------------------
$ 241,250 $ 5,320 $ 235,930
-------------------- --------------------- --------------------
</TABLE>
<PAGE>
KAZARI INTERNATIONAL, INC.
(a Nevada Corporation)
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 1, 1998
(in U.S funds)
4. INCOME TAXES
The Company has an interim net loss and other expenditures which may give rise
to future tax benefits. The potential benefit from these losses has not been
reflected in the financial statements.
5. LOSS PER SHARE
Loss per share information is not disclosed as it is not considered meaningful
at this stage of the Company's development.
6. CONTINUING OPERATIONS
These financial statements have been based upon accounting principles which
presume the realization of assets and the settlement of liabilities as they
become due in the course of continuing operations. The Company's ability to
maintain operations is contingent upon successful completion of additional
financing arrangements.
<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 7,571
--------------------------------------
TOTAL EXPENSES 132,477 7,571
--------------------------------------
--------------------------------------
Net Loss (132,477) (7,571)
--------------------------------------
Opening retained earnings (deficit) (291,569) -
Closing retained earnings (deficit) (424,046) (7,571)
</TABLE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
BALANCE SHEET AS AT MARCH 31 1999 1998
- ----------------------------------------------------------------------------------------------------------
UNAUDITED - PREPARED BY MANAGEMENT (IN US DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash - 249
Accounts Receivable - -
--------------------------------------
- 249
Deposit in Schelfhout - -
Software Assets 68,747 -
Incorporation Costs 2,000 422
--------------------------------------
70,747 422
--------------------------------------
70,747 671
--------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable & Accruals 136,566 2,992
Due to Related Parties - 4,000
Due to Ventures North Investment Partners 82,477 -
Loan Payable - -
--------------------------------------
219,043 6,992
EQUITY
Share Capital 39,820 1,250
Contributed Surplus 235,930 -
Retained Earnings (Deficit) (424,046) (7,571)
--------------------------------------
(148,296) (6,321)
--------------------------------------
70,747 671
--------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
STATEMENT OF CASH FLOWS 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>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (132,477) (7,571)
Add items not affecting cash
Allowance for loan receivable - -
Net changes in non-cash operating accounts
Accounts payable 134,066 2,992
--------------------------------------
1,588 (4,579)
--------------------------------------
FINANCING ACTIVITIES
Due to related parties (67,523) 4,000
Issuance of share capital 34,500 1,250
Share issue costs - -
--------------------------------------
(33,023) 5,250
--------------------------------------
INVESTING ACTIVITIES
Incorporation costs - (422)
Software assets (68,747) -
Deposit in Schelfhout - -
--------------------------------------
(68,747) (422)
--------------------------------------
INCREASE (DECREASE) IN CASH (100,181) 249
CASH, beginning of period 100,181 -
--------------------------------------
CASH, end of period - 249
--------------------------------------
</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. 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 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 5)
<PAGE>
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
a) Foreign currency translation
The Company follows the "temporal" method of accounting for
foreign currency translations. Balance sheet items are translated
into Canadian dollars at exchange rates prevailing at the balance
sheet date for monetary items and at exchange rates in effect at
the transaction date for non-monetary items. Income statement
items are translated at average rates prevailing during the year.
Unrealized gains and losses are deferred and amortized over their
expected life. Realized gains and losses are charged to
operations.
b) Loss per common share
Loss per common share on a fully diluted basis is not presented as
it would be anti-dilutive.
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.
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.
- --------------------------------------------------------------------------------
3. SHARE CAPITAL AND CONTRIBUTED SURPLUS
- --------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
MARCH 31,
NUMBER OF 1999 CONTRIBUTED
SHARES $ SURPLUS
<S> <C> <C> <C>
b) Issued -
Balance,
January 1,
1999 5,320,000 5,320 235,930
<PAGE>
Share Exchange
Agreement 34,500,000 34,500 -
---------- -------- -------
Balance, end
of period 39,820,000 39,820 235,930
========== ======== =======
</TABLE>
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.
(SEE NOTE 5)
- --------------------------------------------------------------------------------
4. LOSS PER SHARE
- --------------------------------------------------------------------------------
Loss per share for the period from January 1, 1999 to March 31, 1999 is
$0.01.
- --------------------------------------------------------------------------------
5. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
Subsequent to quarter end:
a) 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>
Deposit $1,000,000 (paid in August 1999)
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. 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 agreement is still subject to final approval by all parties.
b) 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 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.
c) The Company, through its Canadian subsidiary, made two purchases of
intellectual property. The first purchase was for $300 Cdn. paid in
the form of 30,000 options for common shares with an exercise price
of $0.01 Cdn. 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 and
would also receive 65,000 options for common shares with an exercise
price of $0.01 Cdn. per share.
<PAGE>
The second purchase was 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
who also received 80,000 options for common shares with an exercise
price of $0.01 Cdn. per share.
d) 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. Granted employees 3,050,000 stock
options with an exercise price of $0.85 per share.
g) The Company advanced a further $100,000 to Intrepidus, Inc. in
connection with the Bridge loan agreement.
h) The Company received an additional $2,200,000 in the form of a
convertible debenture, the terms of which still have to be
finalized.
- --------------------------------------------------------------------------------
6. 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.
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.
- --------------------------------------------------------------------------------
7. RECONCILIATION OF UNITED STATES TO CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
- --------------------------------------------------------------------------------
a) Basic and diluted loss per share under U.S. GAAP are equal to the
loss per share under Canadian GAAP. The weighted average number of
shares for calculating loss per share is 17,970,000.
b) Under U.S. GAAP, 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.
<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 315,351 250,442 - -
Legal 33,254 27,538 3,500 3,500
Sales, general and administrative 289,646 227,794 73,232 65,661
---------------------------------------------------------------
TOTAL EXPENSES 638,251 505,774 76,732 69,161
---------------------------------------------------------------
---------------------------------------------------------------
Net Loss (638,251) (505,774) (76,732) (69,161)
---------------------------------------------------------------
Opening retained earnings (deficit) (291,569) (424,046) - (7,571)
Closing retained earnings (deficit) (929,820) (929,820) (76,732) (76,732)
</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 1,023 173,293
Accounts Receivable - -
----------------------------------
1,023 173,293
Deposit in Schelfhout - -
Software Assets 68,747 -
Incorporation Costs 2,000 2,000
----------------------------------
70,747 2,000
----------------------------------
71,770 175,293
----------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable & Accruals 335,912 -
Due to Related Parties - 10,775
Due to Ventures North Investment Partners 389,928 -
Loan Payable - -
----------------------------------
725,840 10,775
EQUITY
Share Capital 39,820 5,320
Contributed Surplus 235,930 235,930
Retained Earnings (Deficit) (929,820) (76,732)
----------------------------------
(654,070) 164,518
----------------------------------
71,770 175,293
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
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) (76,732) (69,161)
Add items not affecting cash
Allowance for loan receivable - - - -
Net changes in non-cash operating accounts
Accounts payable 333,412 199,346 - (2,992)
----------------------------------------------------------------
(304,839) (306,427) (76,732) (72,153)
----------------------------------------------------------------
FINANCING ACTIVITIES
Due to related parties 239,928 307,451 10,775 6,775
Issuance of share capital 34,500 - 251,250 250,000
Share issue costs - - (10,000) (10,000)
----------------------------------------------------------------
274,428 307,451 252,025 246,775
----------------------------------------------------------------
INVESTING ACTIVITIES
Incorporation costs - - (2,000) (1,578)
Software assets (68,747) - - -
Deposit in Schelfhout - - - -
----------------------------------------------------------------
(68,747) - (2,000) (1,578)
----------------------------------------------------------------
INCREASE (DECREASE) IN CASH (99,158) 1,023 173,293 173,044
CASH, beginning of period 100,181 - - 249
----------------------------------------------------------------
CASH, end of period 1,023 1,023 173,293 173,293
----------------------------------------------------------------
</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. 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 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 5)
<PAGE>
- -------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
a) Foreign currency translation
The Company follows the "temporal" method of accounting for
foreign currency translations. Balance sheet items are translated
into Canadian dollars at exchange rates prevailing at the balance
sheet date for monetary items and at exchange rates in effect at
the transaction date for non-monetary items. Income statement
items are translated at average rates prevailing during the year.
Unrealized gains and losses are deferred and amortized over their
expected life. Realized gains and losses are charged to
operations.
b) Loss per common share
Loss per common share on a fully diluted basis is not presented as
it would be anti-dilutive.
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.
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.
- -------------------------------------------------------------------------------
3. SHARE CAPITAL AND CONTRIBUTED SURPLUS
- -------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
JUNE 30,
NUMBER OF 1999 CONTRIBUTED
SHARES $ SURPLUS
--------- ----------- ---------
<S> <C> <C> <C>
b) Issued -
Balance,
<PAGE>
January 1,
1999 5,320,000 5,320 235,930
Share Exchange
Agreement 34,500,000 34,500 -
---------- ------ -------
Balance, end
of period 39,820,000 39,820 235,930
========== ====== =======
</TABLE>
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.
(SEE NOTE 5)
- -------------------------------------------------------------------------------
4. LOSS PER SHARE
- -------------------------------------------------------------------------------
Loss per share for the period from January 1, 1999 to June 30, 1999 is
$0.02.
- -------------------------------------------------------------------------------
5. SUBSEQUENT EVENTS
- -------------------------------------------------------------------------------
Subsequent to quarter end:
a) 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>
Deposit $1,000,000 (paid in August 1999)
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. 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 agreement is still subject to final approval by all parties.
b) 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 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.
c) The Company, through its Canadian subsidiary, made two purchases of
intellectual property. The first purchase was for $300 Cdn. paid in
the form of 30,000 options for common shares with an exercise price
of $0.01 Cdn. 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 and
would also receive 65,000 options for common shares with an exercise
price of $0.01 Cdn. per share.
<PAGE>
The second purchase was 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
who also received 80,000 options for common shares with an exercise
price of $0.01 Cdn. per share.
d) 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. Granted employees 3,050,000 stock
options with an exercise price of $0.85 per share.
g) The Company advanced a further $100,000 to Intrepidus, Inc. in
connection with the Bridge loan agreement.
h) The Company received an additional $2,200,000 in the form of a
convertible debenture, the terms of which still have to be
finalized.
- -------------------------------------------------------------------------------
6. 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.
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.
- -------------------------------------------------------------------------------
7. RECONCILIATION OF UNITED STATES TO CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
- -------------------------------------------------------------------------------
a) Basic and diluted loss per share under U.S. GAAP are equal to the
loss per share under Canadian GAAP. The weighted average number of
shares for calculating loss per share is 28,955,359.
b) Under U.S. GAAP, 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.
<PAGE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
INCOME STATEMENT 1999 1999 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------
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
<S> <C> <C> <C> <C>
REVENUE - - - -
EXPENSES
Salaries and benefits 559,931 244,580 - -
Legal 86,697 53,443 21,500 18,000
Sales, general and administrative 549,958 260,312 196,955 123,724
------------------------------------------------------------------
TOTAL EXPENSES 1,196,586 558,335 218,455 141,724
------------------------------------------------------------------
------------------------------------------------------------------
Net Loss (1,196,586) (558,335) (218,455) (141,724)
------------------------------------------------------------------
Opening retained earnings (deficit) (291,569) (929,820) - (76,732)
Closing retained earnings (deficit) (1,488,155) (1,488,155) (218,455) (218,455)
</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 1,015 31,570
Accounts Receivable - -
----------------------------------
1,015 31,570
Deposit in Schelfhout 1,000,000 -
Software Assets 68,747 -
Incorporation Costs 2,000 2,000
----------------------------------
1,070,747 2,000
----------------------------------
1,071,762 33,570
----------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable & Accruals 514,864 -
Due to Related Parties - 10,775
Due to Ventures North Investment Partners 769,303 -
Loan Payable 1,000,000 -
----------------------------------
2,284,167 10,775
EQUITY
Share Capital 39,820 5,320
Contributed Surplus 235,930 235,930
Retained Earnings (Deficit) (1,488,155) (218,455)
----------------------------------
(1,212,405) 22,795
----------------------------------
1,071,762 33,570
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
e-AUCTION GLOBAL TRADING INC.
STATEMENT OF CASH FLOWS 1999 1999 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------
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
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (1,196,586) (558,335) (218,455) (141,724)
Add items not affecting cash
Allowance for loan receivable - - - -
Net changes in non-cash operating accounts
Accounts payable 512,364 178,952 - -
------------------------------------------------------------------
(684,223) (379,384) (218,455) (141,724)
------------------------------------------------------------------
FINANCING ACTIVITIES
Due to related parties 619,303 379,376 10,775 -
Loan payable 1,000,000 1,000,000 - -
Issuance of share capital 34,500 - 251,250 -
Share issue costs - - (10,000) -
------------------------------------------------------------------
1,653,803 1,379,376 252,025 -
------------------------------------------------------------------
INVESTING ACTIVITIES
Incorporation costs - - (2,000) -
Software assets (68,747) - - -
Deposit in Schelfhout (1,000,000) (1,000,000) - -
------------------------------------------------------------------
(1,068,747) (1,000,000) (2,000) -
------------------------------------------------------------------
INCREASE (DECREASE) IN CASH (99,166) (8) 31,570 (141,724)
CASH, beginning of period 100,181 1,023 - 173,293
------------------------------------------------------------------
CASH, end of period 1,015 1,015 31,570 31,570
------------------------------------------------------------------
</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. 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 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 5)
<PAGE>
- -------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
a) Foreign currency translation
The Company follows the "temporal" method of accounting for
foreign currency translations. Balance sheet items are translated
into Canadian dollars at exchange rates prevailing at the balance
sheet date for monetary items and at exchange rates in effect at
the transaction date for non-monetary items. Income statement
items are translated at average rates prevailing during the year.
Unrealized gains and losses are deferred and amortized over their
expected life. Realized gains and losses are charged to
operations.
b) Loss per common share
Loss per common share on a fully diluted basis is not presented as
it would be anti-dilutive.
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.
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.
- -------------------------------------------------------------------------------
3. SHARE CAPITAL AND CONTRIBUTED SURPLUS
- -------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
SEPTEMBER 30,
NUMBER OF 1999 CONTRIBUTED
SHARES $ SURPLUS
--------- ------------- ---------
<S> <C> <C> <C>
b) Issued -
Balance,
<PAGE>
January 1,
1999 5,320,000 5,320 235,930
Share Exchange
Agreement 34,500,000 34,500 -
---------- ------ -------
Balance, end
of period 39,820,000 39,820 235,930
========== ====== =======
</TABLE>
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.
(SEE NOTE 5)
- -------------------------------------------------------------------------------
4. LOSS PER SHARE
- -------------------------------------------------------------------------------
Loss per share for the period from January 1, 1999 to September 30,
1999 is $0.04.
- -------------------------------------------------------------------------------
5. SUBSEQUENT EVENTS
- -------------------------------------------------------------------------------
Subsequent to quarter end:
a) 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>
Deposit $1,000,000 (paid in August 1999)
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. 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 agreement is still subject to final approval by all parties.
b) 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 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.
c) The Company, through its Canadian subsidiary, made two purchases of
intellectual property. The first purchase was for $300 Cdn. paid in
the form of 30,000 options for common shares with an exercise price
of $0.01 Cdn. 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 and
would also receive 65,000 options for common shares with an exercise
price of $0.01 Cdn. per share.
<PAGE>
The second purchase was 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
who also received 80,000 options for common shares with an exercise
price of $0.01 Cdn. per share.
d) 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. Granted employees 3,050,000 stock
options with an exercise price of $0.85 per share.
g) The Company advanced a further $100,000 to Intrepidus, Inc. in
connection with the Bridge loan agreement.
h) The Company received an additional $2,200,000 in the form of a
convertible debenture, the terms of which still have to be
finalized.
- -------------------------------------------------------------------------------
6. 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.
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.
- -------------------------------------------------------------------------------
7. RECONCILIATION OF UNITED STATES TO CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
- -------------------------------------------------------------------------------
a) Basic and diluted loss per share under U.S. GAAP are equal to the
loss per share under Canadian GAAP. The weighted average number of
shares for calculating loss per share is 32,616,703.
b) Under U.S. GAAP, 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.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE COMMON SHARES OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Prospectus Summary............................... 5
Risk Factors..................................... 6
Use of Proceeds.................................. 8
Dividend Policy.................................. 8
Capitalization................................... 8
Selected Consolidated Financial Data............. 9
Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................... 10
Business......................................... 11
Management....................................... 21
Certain Relationships and Related Transactions... 26
Principal Stockholders........................... 26
Selling Stockholders............................. 27
Plan of Distribution............................. 29
Description of Capital Stock..................... 30
Transfer Agent................................... 31
Shares Eligible for Future Sale.................. 31
Experts.......................................... 32
Additional Information........................... 32
Index to Financial Statements.................... 33
</TABLE>
Until ____________ (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Shares, whether or not participating in
this distribution, may be required to deliver a Prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
55,771,530 SHARES
e-AUCTION GLOBAL
TRADING INC.
PROSPECTUS
FEBRUARY 28, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by the
Registrant in connection with the sale of Common Shares being registered. All
amounts are estimates except the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee................................................................... $53,323
Printing and engraving costs........................................................... 10,000
Legal fees and expenses................................................................ 15,000
Accounting fees and expenses........................................................... 5,000
Blue Sky fees and expenses............................................................. 1,000
Miscellaneous expenses................................................................. 10,000
-------
Total............................................................................ $94,323
=======
</TABLE>
ITEM 14. 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.
II-2
<PAGE>
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.
ITEM 15. 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 Common Shares 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 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, 2000, e-Auction issued 197,217 common shares to Millenium
Advisors Inc. as their fee and interest on a $1 million loan made to the
Company. The issuance was made in reliance on Regulations Promulgated under
the 1933 Act. e-Auction believes that Millenium 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 operating and financial condition.
On January 7, 2000, the Company issued 16,885,447 Common Shares 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 to the former
shareholders of Schelfhout pursuant to Regulation S promulgated under the
1933 Act as partial consideration for the purchase by the 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 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
II-3
<PAGE>
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
<S> <C>
3.1 Articles of the Company
3.2 By-laws of the Company
10.1 Share Exchange Agreement dated as of February 26,
1999 between Kazar International Inc. (now e-Auction
Global Trading Inc.) and QFG Holdings Inc.
10.2 Share Purchase Agreement dated Jnuary 10, 2000
between e-Auction Global Trading In., e-Auction
Belgium N.V., Luc Schelfhout, and Hilde Dee Laet
10.3 Pledge Agreement dated January 10, 2000 between
e-Auction Belgium N.V., Luc Schelfhout, and Hilde De
Laet
15.1 Letter re: unaudited financial statements
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
</TABLE>
(b) Financial Statement Schedules
All schedules are omitted because they are inapplicable or the
requested information is shown in the financial statements of the registrant or
related notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Canada on the 28th day of
February, 2000.
e-AUCTION GLOBAL TRADING INC.
By: /s/ Dan McKenzie
--------------------------------
Dan McKenzie, President & Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dan McKenzie and David Hackett and
each of them, his attorneys-in-fact, each with the power of substitution, for
him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto in all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacities and on February 28, 2000:
<TABLE>
<CAPTION>
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>
II-6
<PAGE>
CONSENT OF DALE MATHESON CARR-HILTON,
CHARTERED ACCOUNTANTS, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
and to the use of our reports dated Febt, 1999, in the Registration Statement
(Form S-1) and related Prospectus of e-Auction Global Trading Inc., for the
registration of its common shares to filed on February 28, 2000 or thereabout.
/s/ Alvin F. Dale, Ltd.
Dale Matheson Carr-Hilton
February 28, 2000
<PAGE>
CONSENT OF DAVID A. COX,
CHARTERED ACCOUNTANT, INDEPENDENT AUDITOR
I consent to the reference to myself under the caption "Experts" and
to the use of my report dated June 8, 1998, in the Registration Statement
(Form S-1) and related Prospectus of e-Auction Global Trading Inc., for the
registration of its common shares to filed on February 28, 2000 or thereabout.
/s/ David A. Cox
February 28, 2000
<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,
6
<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
8
<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
12
<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
13
<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.
18
<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: /s/ Shane Maine
-------------------------------
Address: 12 Anderson St.
---------------------------
Chelsea, UK
---------------------------
5W3 3NH
---------------------------
Facsimile:
---------------------------
KAZARI INTERNATIONAL INC.
Per: /s/ Mike Gilley
-------------------------------
Address: 1304 Pik Hoi House
---------------------------
Choi Hung Estate
---------------------------
Kowboon, Hong Kong
---------------------------
Facsimile: 604-689-3348
---------------------------
E-AUCTION GLOBAL TRADING INC.
Per: /s/ Shane Maine
-------------------------------
Address: 13 Anderson St
---------------------------
Chelsea, London, UK
---------------------------
5W3 3NH
---------------------------
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>
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>
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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.
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(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.
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(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);
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(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,
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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
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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>
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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
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(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.
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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
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(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:
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(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
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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:
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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>
-21-
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>
-22-
(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>
-26-
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>
-27-
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>
PLEDGE AGREEMENT
BETWEEN: E-Auction Belgium N.V.
Zavelstraat 7, 9190 STEKENE
Represented by e-Auction Global Trading Inc., Nevada, USA
and e-Auction Global Trading Inc., Canada,
Represented by Mr. HACKETT, David,
Hereafter referred to as "the pawner";
AND: Mr. Luc SCHELFHOUT and Mrs. Hilde DE LAET,
Living together at 9190 STEKENE, Bormte, 204A;
Hereafter referred to as "the pledgees";
Whereas the pledgees are willing to sell their shares in the share capital of
Schelfhout Computersystemen N.V. (hereinafter: "SCHELFHOUT");
In the share purchase agreement,
IN ART. 2.6 (a) subject to art. 2.6 (c) the pawner agrees, in the event that
the e-Auction shares referred to in section 2.5 (a) 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 pawner agrees to pay to the
pledgees, by way of electronic transfer, within ten (10) business days after
the date of the applicable anniversary, an amount equal to USD 750,000 in
United States funds.
IN ART. 2.6 (b) SUBJECT TO ART. 2.6 (c) the pawner agrees, in the event that
the e-Auction shares referred to in section 2.5 (b) are not freely tradable
on one of the thirty six (36), forty eight (48) or sixty (60) month
anniversary of the Closing Date, the pawner agrees to pay to the pledgees, by
way of electronic transfer, within ten (10) business days from the date of
the applicable anniversary, an amount equal to USD 1,000,000 in United States
funds.
IN ART, 6.2 (c) in the event of breach of section 5.2 (i), the pawner agrees
to pay to the pledgees ipso ure, an indemnity equal to the taxes to be paid
by the pledgees, including any and all fines, interest and increases thereof.
The pawner wishes to guarantee the good performance of these commitments by
the pledging of all the shares in the capital of SCHELFHOUT.
Now therefore the parties covenant and agree as follows:
1. The pawner pledges all the 640 shares in the capital of SCHELFHOUT to the
pledgees as guarantee for the payment of the indemnity referred to in art.
6.2,c.
<PAGE>
2
2. The pawner pledges the following shares in the capital of SCHELFHOUT to
the pledgees as guarantee for the payment of the following amounts:
- - shares numbers 1-48: the 750,000 USD which could become due on the six
(6) month anniversary of the Closing Date according to art. 2.6 (a);
- - shares numbers 49-96: the 750,000 USD which could become due on the twelve
(12) month anniversary of the Closing Date, according to art. 2.6 (a);
- - shares numbers 97-144: the 750,000 USD which could become due on the
eighteen (18) month anniversary of the Closing Date, according to art.
2.6 (a);
- - shares numbers 145-192: the 750,000 USD which could become due on the
twenty-four (24) month anniversary of the Closing Date, according to art.
2.6 (a);
- - shares numbers 193-256: the 1,000,000 USD which could become due on the
thirty-six (36) month anniversary of the Closing Date, according to art.
2.6 (b);
- - shares numbers 257-320: the 1,000,000 USD which could become due on the
forty-eight (48) month anniversary of the Closing Date, according to art.
2.6 (b);
- - shares numbers 321-384: the 1,000,000 USD which could become due on the
sixty (60) month anniversary of the Closing Date, according to art.
2.6 (b).
To that effect, the pledges put the shares into the possession of the
pledgees by the registration and the signing in the register of
shareholders of SCHELFHOUT of the following formula:
"DE AANDELEN NUMMERS 1 TOT EN MET 640 WORDEN IN PAND GEGEVEN AAN DE HER
LUC SCHELFHOUT EN MEVROUW HILDE DE LAET, VOLGENS GEREGISTREERDE
ONDERHANDSE OVEREENKOMST VAN ......... 1999.
DE PANDGEVERS DE PANDNEMERS"
TRANSLATION:
The shares number 1 until 640 are pledged to Mr. Luc SCHELFHOUT en Mrs.
Hilde DE LAET according to a private deed (private agreement signed but
not sealed) which was registered with the Registry.
3. The pawner preserves all his rights in connection with the pledged shares,
including the voting rights, the dividend rights and the preferential
rights.
<PAGE>
3
4. The pledgees will give notice of the pledging of the shares to Schelfhout
Computer Systemen N.V. by registered letter.
5. The pledgees shall only be entitled to enforce upon the pledge granted
under this pledge agreement provided they are not in default under the
share purchase agreement and the amount owed by the pawner to the
pledgees has not been set off pursuant to Art. 6.8 of the share purchase
agreement. The pledgees will be entitled again to enforce upon the
pledge granted if and as far the arbitration tribunal provided for in
art. 7 of the share purchase agreement decides that the pledgees are not
in default under the share purchase agreement.
6. In the event that the e-Auction shares referenced in section 2.6(a) or
section 2.6(b) are freely tradable on the applicable anniversary date, or
the pawner has made the applicable payment to the pledgees, the pledge
referred in section 2 as applicable to the shares referenced therein
shall cease to apply to such shares. In the event that the pledgees
enforce the pledge and take the applicable pledged shares on an
applicable anniversary date, the pledged shares shall be the pledgees'
sole remedy against the pawner under this agreement and the share
purchase agreement and the applicable payment obligation shall
be satisfied and treated as paid in full. In the event that any of the
pledged shares are not subject to a definitive pledge event, the pledgees
shall promptly deliver to the pawner the shares not used to satisfy the
obligation to the pawner.
7. In the event the pledgees enforce upon the pledge to satisfy a claim
under art. 6.2 of the share purchase agreement, the pledgees shall only
be entitled to obtain such number of the pledged shares having a fair
market value equal to the taxes paid or due by the pledgees due to a
breach by the pawner of art. 5.2 (i) of the share purchase agreement.
The fair market value of the pledged shares shall be determined by at
the time of the obligation to pay and shall be as agreed to by the
pledgee and pawner, failing which the fair market value shall be
determined in accordance with the arbitration provisions as set out in
art. 7 of the share purchase agreement. Any pledged shares not
otherwise pledged herein and not required to satisfy the tax obligation
under art. 5.2 (i), shall be returned to the pawner and the pledge under
section 1 above shall cease to apply. Notwithstanding anything to the
contrary herein, the pledge in section 1 shall cease to apply and be of
no further force and effect following the expiration of the period which
thirteen (13) months following the closing date.
8. The pledge agreement shall terminate when all of the pledged shares have
been distributed to the pawner or the pledgees or on the date which is
the later of: (i) thirteen months following the closing date, and (ii)
when all of the obligations subject to the pledge herein shall have been
satisfied. Upon termination of the pledge agreement for any reason, the
shares pledged herein shall forthwith be delivered to the pledge and the
register of shareholders shall be amended to reflect that the pledge as
to the shares being released from the pledge.
<PAGE>
4
9. All costs related to the pledging are to borne by the pawner.
10. The agreement shall be governed by and construed in accordance with the
laws of Belgium. Any dispute shall be brought before the Court competent
for Stekene.
Executed at Stekene
On January 7/00
in three counterparts, each party recognizing having received her
counterpart.
The third counterpart is for the Registry.
The pawner The pledgees
/s/ David Hackett /s/ Hilde DE LAET /s/ Luc SCHELFHOUT
David HACKETT Hilde DE LAET Luc SCHELFHOUT
<PAGE>
[LETTERHEAD]
- -------------------------------------------------------------------------------
February 25, 2000
David Hackett
e-Auction Global Trading Inc.
181 Bay Street, Suite 3730
Toronto, Ontario, Canada
M5J 2T3
Dear Sir:
RE: e-AUCTION GLOBAL TRADING INC. (FORMERLY NAMED KAZARI INTERNATIONAL, INC.)
CONSENT of David A. Cox, Chartered Accountant, INDEPENDENT AUDITOR
I consent to the reference to myself under the caption "Experts" (referring
to my audit report), and to the use of my audit report dated June 8, 1998
relating to the Interim Financial Statements of Kazari International, Inc. as
at June 1, 1998, in the Registration Statement (Form S-1) and related
Prospectus of e-Auction Global Trading Inc. to be filed on February 28, 2000
or thereabout.
/s/ David A. Cox
David A. Cox
Chartered Accountant
<PAGE>
Exhibit 21.1
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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1999 AND 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-08-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 301,164 100,181
<PP&E> 68,747 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,371,911 102,181
<CURRENT-LIABILITIES> 2,925,162 152,500
<BONDS> 1,860,793 0
0 0
0 0
<COMMON> 39,820 5,320
<OTHER-SE> (1,553,251) (50,319)
<TOTAL-LIABILITY-AND-EQUITY> 1,371,911 102,181
<SALES> 0 0
<TOTAL-REVENUES> 685 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,538,117 182,566
<LOSS-PROVISION> 0 50,000
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,537,432) (291,569)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,537,432) (291,569)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,537,432) (291,569)
<EPS-BASIC> 0.045 0.068
<EPS-DILUTED> 0.045 0.068
</TABLE>
