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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES
EXCHANGE ACT OF 1934
CITYXPRESS.COM CORP.
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(Exact name of registrant as specified in its charter)
Florida None
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1727 West Broadway, Suite 200
Vancouver, BC Canada V6J 4W6
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(Address of principal executive offices) (Postal Code)
Registrant's telephone number: (604) 638-3811
Securities to be registered under Section 12(b) of the Act:
None None
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Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Shares, Par Value of $0.001 per Share
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(Title of Class)
Not Applicable
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(Title of Class)
PAGE 1 OF 218 PAGES.
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TABLE OF CONTENTS
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PART I...................................................................................................4
ITEM 1. DESCRIPTION OF BUSINESS....................................................................4
ITEM 2. DESCRIPTION OF PROPERTIES.................................................................19
ITEM 3. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS..............................20
ITEM 4. DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES..................................21
ITEM 5. REMUNERATION OF DIRECTORS AND OFFICERS....................................................24
ITEM 6. INTEREST OF MANAGEMENT AND OTHERS IN TRANSACTIONS.........................................27
ITEM 7. DESCRIPTIONS OF REGISTRANT'S SECURITIES TO BE REGISTERED..................................28
PART II.................................................................................................29
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.......................................................................29
ITEM 2. LEGAL PROCEEDINGS.........................................................................30
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE................................................................................30
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES...................................................30
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.................................................34
PART F/S................................................................................................36
FINANCIAL STATEMENTS.................................................................................36
PART III EXHIBITS.......................................................................................37
LIST OF SUBSIDIARIES OF THE REGISTRANT..................................................................38
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NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for statements of historical fact, certain information contained
in this registration statement constitutes "forward-looking statements,"
including without limitation statements containing the words "believes,"
"anticipates," "intends," "expects" and words of similar import, as well as all
projections of future results. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results or achievements of the Company to be materially different from any
future results or achievements of the Company expressed or implied by such
forward-looking statements. Such factors include, but are not limited to the
following: the Company's limited operating history; undercapitalization; risks
involving new product development; unpredictability of future revenues;
competition; management of business growth; risks of technological change; the
Company's dependence on key personnel; ability to develop marketing
relationships with strategic partners; dependence on continued growth in use of
the Internet; the Company's ability to protect its intellectual property rights
and uncertainty regarding infringing intellectual property rights of others;
government regulations; and the other risks and uncertainties described in this
registration statement.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
CityXpress.com Corp. (the "Company") is a software developer and
Internet publisher. The Company intends to be the preferred means by which
Internet consumers can locate and purchase products and services from businesses
in their regional markets. This goal will be met by building alliances with
media companies that are establishing regional portals and providing them with a
suite of Internet services that can be profitably sold to businesses looking for
cost-effective means of establishing and promoting an eCommerce presence in
their regional markets. The Company has developed a regional directory of
business listings and a search engine that allows web users to locate businesses
within a designated region that fit given search criteria. The Company has also
developed a comprehensive suite of eCommerce products that allow businesses to
build online storefronts and to create web sites, and a suite of advertising and
promotion products, which include systems for connecting a discount coupon
displayed in a banner ad to a vendor's eCommerce shopping basket and for
developing private-label flyers that contain a collection of discount coupons.
(a full description of the Company's products is provided under the heading
"CityXpress.com Products" hereto) The Company's products are designed to work
together by drawing web consumers to the businesses promoting their products and
services through the regional sites of our media partners.
CityXpress.com's media partners will sell the Company's products to
small and mid-sized businesses throughout North America. These businesses
require affordable ways for their customers to find them in their local markets
and effective means to sell their products and services online. The Company's
line of products provide these businesses with the means of targeting
advertising and promotions to regional Internet consumers through our business
directory and of establishing cost-effective eCommerce storefronts through which
to conduct online commerce.
CORPORATE HISTORY
The Company was incorporated as a Florida corporation on January
15,1981 as Wicked Wings of Buffalo (Wicked Wings), a non-operating company
traded on the NASDAQ OTC Bulletin Board. Pursuant to a share purchase agreement
dated January 7, 1999, the shareholders of WelcomeTo Search Engine Inc. sold
their 100% interest in WelcomeTo Search Engine Inc. to the Company in
consideration for 8,510,000 shares of the Company, which represented a
controlling interest of 62.5%. This transaction was considered an acquisition of
the Company by WelcomeTo Search Engine and was treated as a recapitalization of
WelcomeTo Search Engine and the reverse acquisition of the Company by WelcomeTo
Search Engine for accounting purposes. For purposes of acquisition, the fair
value of the net assets of the Company amounted to $724,989 and was ascribed to
the 5,100,000 previously outstanding common shares of the Company deemed to be
issued in the acquisition. The reverse acquisition resulted in one-time costs of
$225,000 for finder's fees pertaining to the acquisition of WelcomeTo and Xceedx
Technologies Inc. which was paid for by the issuance of 450,000 common shares
issued in an offering exempt from registration under Regulation S promulgated
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under the Securities Act to two Canadian companies. (Also see page 29 Item # 4
Recent Sales of Unregistered Securities, first paragraph). The cost of
recapitalization has been charged against stockholders' equity.
For accounting purposes October 27, 1997 is used as the date of
inception of WelcomeTo Search Engine as this is the original incorporation date
of WelcomeTo Search Engine.
On January 27, 1999, the Company acquired 100% of the issued and
outstanding shares of Xceedx Technologies Inc., a private British Columbia,
Canada company incorporated on February 11, 1994 whose principal business was
providing Internet technology services and eCommerce software solutions. The
acquisition was accounted for by the purchase accounting method in which the
results of operations have been included in the Company's accounts from the date
of acquisition. The Company issued 6,250,000 common shares for net assets of
$562,500.
On August 27, 1999, the Company changed its name to CityXpress.com
Corp. The Company's web site is located at www.cityxpress.com. Information
contained in the web site does not constitute a part of this filing.
CORPORATE STRUCTURE
CityXpress.com Corp. has the following corporate structure:
- A Florida registered public company called CityXpress.com Corp.
- CityXpress.com has two private Canadian based subsidiaries:
WelcomeTo Search Engine Inc. and Xceedx Technologies Inc.
All financial reporting for the Company is a consolidation of these three
companies.
INDUSTRY BACKGROUND.
The Company operates in the eCommerce industry, providing tools and
services that allow small businesses to build an online Internet presence
through which they may promote the goods and services they sell. The eCommerce
industry is undergoing rapid growth driven by the increasing numbers of
consumers who are using the Internet.
Electronic commerce encompasses a broad spectrum of transactions that
are completed on the Internet, including online banking, buying and selling
stocks and the purchase of goods or services by individual consumers from
businesses. The Company currently competes in the latter niche of the eCommerce
market, providing software products and services that can be used by companies
to facilitate the sale of their products and services online. The Company
currently offers its products and services to the North American market. As it
implements media partner sites it activates the search capabilities for the
specific states being served by these sites. Presently, there are five web sites
that serve five states Arizona, Nebraska, Iowa, Montana and Oregon. The Company
is in active negotiations with other media companies. Should these negotiations
be successful the company will be expanding its US geographic presence. This
will result in a larger number of US states being searchable on our web site.
The Company intends to market its products and services internationally, when
the English
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speaking population in these markets has the same level of Internet users as the
US market. To secure a strong international position the Company needs to
establish itself in Canada and US with a strong base of media partners.
Extensive development would be required to compete in other languages.
MARKET SIZE
The Internet market has increased substantially since the World Wide
Web became available for commercial use in 1992. In 1999, eMarketer estimated
that there were over 62 million Americans, or 29 per cent of the US population
connected to the Internet and projected that number to increase to 95.1 million
users or 42% of the population by 2002. International Data Corp. estimated that
world-wide users would increase from 69 million in 1997 to 320 million by 2002
and that online buyers would increase from 18 million or 26 percent of total
users to 128 million or 40 per cent of total users during that time. Although
such projections vary, there is general agreement that growth of Internet usage
and electronic commerce will be rapid and sustained.
MARKET OPPORTUNITY
Dun & Bradstreet reports that of the 40 million businesses that exist
world-wide, about 2 million have commercial web sites, and 381,500 of these
online businesses have active web sites - that is, those that engage customers
via two-way communications, customer service and/or electronic commerce. So,
presently less than two percent of business web sites can be considered active
in this way.
The eCommerce market is divided into two primary segments, the
business-to-business segment (composed of companies whose customers are composed
of other businesses) and the business-to consumer segment (composed of retailers
selling to individual end users). The major growth to date has taken place in
the business-to-business market but the business-to consumer segment is
projected to undergo significant growth over the next two years. Revenues in the
business-to-consumer segment are forecast to rise from US$4.5 billion in
December 1998 to US$15 billion by 2000, and $35 billion by 2002. And, while the
US has led the way in Internet and eCommerce penetration, non-US sectors
represent a significant longer-term opportunity for CityXpress.com because of
the large population base outside the US. As the growth in Internet expands to
non-US countries the market opportunities for CityXpress.com products will
increase.
Small businesses accounted for only 16% of all consumer eCommerce
revenues in 1998, though that was expected to grow to 18% in 1999 and 24% by
2002. Because it is relatively expensive and complicated for individual
retailers to drive traffic to their web sites, small businesses have been less
successful at capturing eCommerce revenue than large national and multinational
consumer products and services companies. This situation creates a compelling
opportunity for the Company to meet a very real market need for products that
will assist small businesses to build an Internet presence and promote their
products and services in their regional markets.
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MARKET SEGMENTS
STANDALONE STOREFRONTS
This market segment consists of online storefronts that list only the
products or services sold by an individual retailer or wholesaler. These include
storefronts that have been established by companies that have a 'bricks and
mortar' presence, such as EddieBauer.com, or whose business is conducted
entirely on the Internet, such as Amazon.com. These storefronts typically
include functionality that allows a purchaser to browse the products listed in
the catalog, save items of interest in a shopping cart, and pay for items in the
shopping cart by using a credit card.
ONLINE SHOPPING MALLS
An online shopping mall offers consumers a collection of standalone
storefronts aggregated under "one roof" where consumers can locate merchants and
browse for goods, but must go to the merchant's site to complete the
transaction. Online shopping malls were the first response to the problem that
smaller merchants were facing of being found on the Internet by consumers. By
joining a mall, merchants had the opportunity to share in the traffic that the
mall was generating through its own promotional efforts.
ONLINE DEPARTMENT STORES
Online Department Stores offer consumers a variety of merchandise from
multiple vendors and the ability to purchase goods from one or more vendors
through a single shopping cart and checkout procedure (rather than going to
multiple merchant's sites to complete each purchase). Department stores offer
the merchant an entry-level online solution, as the merchant is buying
shelf-space along with other merchants in the department store, rather than
building and maintaining a standalone storefront. As well, the merchant is not
solely responsible for promoting the site and building traffic to it.
MARKET TRENDS
Market penetration rates are highest in the upper tier of the market,
with major corporations having introduced web-based storefronts, and lowest
amongst small and mid-sized business. The difficulty and expense of promoting an
online storefront have been inhibitors to development of such sites. This is
projected to change over the next two years, as more cost-effective means of
promoting a storefront's presence, particularly within its regional market,
become available.
Regional portal sites are forecast to provide the vehicle for the
growth of regional eCommerce. Jupiter Communications has stated that regional
portals will in fact represent "the main avenue through which online customers
travel." Regional portals are sites that provide online users with access to
information for their geographic communities, featuring news, weather, sports,
entertainment, and related local information. Media companies (newspapers,
television stations) that have traditionally provided local information to their
customers are driving the growth of regional portals. Over the past two years,
media companies have devoted considerable resources to building regional
Internet sites that offer online users access to the information already being
gathered and disseminated through their existing print and broadcast media
properties. This trend was first driven by the need to defend traditional
sources of
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revenue, particularly classified advertising revenues, that was being threatened
by Internet start-ups offering similar services. As the Internet market
developed, media companies saw the opportunity to build new sources of revenue
in the online world. The increasing volume of traffic being drawn to their sites
meant that they could offer their traditional retail advertisers a range of
web-based products analogous to their traditional print offerings. These
products, initially banner advertising on the media company's portal site, could
readily be integrated into the product line cards carried by their print and
broadcast sales forces.
As the portal sites offered by media companies evolve, a group of
promotional products will be offered to allow local business to divert traffic
coming into the portal to their eCommerce sites and convert new viewers to
customers. These products include:
BANNER ADVERTISING
Banner advertising consists of small ads that are rotated and displayed
on web pages served up as viewers navigate from page to page on a site. Although
still small compared to print and media advertising, banner advertising is
growing. In 1999, it represented a $3.1 billion industry, according to
eMarketer, who predicts that it will grow to $13.29 billion by 2003 when it will
represent 4.7% of total advertising spending.
National firms currently place the majority of banner advertising but,
as the Internet becomes increasingly focussed on providing regional sources of
information, the percentage of banner advertising that is placed by regional
companies will grow. Because 80 per cent of consumer spending takes place within
20 miles of home, local advertising captures 30 per cent or $60 billion of the
$200 billion spent on advertising each year in the US. In spite of the fact that
online local advertising is growing slowly, Forrester Research projects an
eightfold increase from $186 million in 1998 to $1.5 billion in 2001.
ONLINE COUPONS
Another promotional tool that is growing in popularity on the Internet
is the online coupon that offers the consumer a discount on the purchase of a
product or service. Online coupon promotions currently call for the customer to
print the coupon and present it later at a bricks-and-mortar store for
redemption. It is expected that coupon promotions will be increasingly offered
online, so that the customer can actually redeem the coupon at an online
storefront. Coupon-enabling banner ads will thus become an effective means of
driving customers to a storefront to purchase promoted products and will help
reduce the high cost of Internet customer acquisition. Regional portals with
their ability to draw large numbers of online viewers will be able to offer
online coupon promotions to local retailers to help convert these viewers into
customers.
LOYALTY PROGRAMS
Loyalty programs have experienced rapid growth over the past 20 years
as companies have searched for ways to retain customers in an increasingly
value-conscious consumer market. Extending such programs to the web is a natural
step in the evolution of these programs. Loyalty products will include points
programs where customers are rewarded for purchases by accruing points that can
be used to acquire other products or services and member-only flyer sites where
merchants communicate current promotions to their customers in a timely fashion
through the site or through e-mail notifications.
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CITYXPRESS.COM PRODUCTS
The Company has developed a regional business directory, a unique
coupon-enabling banner ad system, and eCommerce tools for businesses.
The Company's regional business directory includes a proprietary search
engine. The regional business directory technology was developed by the Company
to provide an easy way for Internet users to find businesses in a regional
market. This service is similar to an online yellow pages. The directory
utilizes listings for approximately 12 million businesses provided under a
license agreement that the Company has signed with Dun & Bradstreet. Basic
business listings are provided free-of charge in the directory, however a
business may purchase a Premier Listing to better profile itself. The business
directory allows for multiple searching means and the display of search results
depends on the listing types under any one category. Premier Listings are
displayed at the top of any search followed by basic listings. Banner Ads can
also be sold in various positions throughout the directory, allowing businesses
to advertise their products and services. The regional business directory is
also integrated with CityXpress.com's other eCommerce products.
The Company's suite of eCommerce products includes:
XpressDepartment Store: XpressDepartment Store is an Internet software
product that allows multi-vendor department stores to be created, product
listings to be managed, and orders accepted through a single shopping cart.
Orders are split and sent to the appropriate vendor(s). Revenue is generated on
a monthly basis by selling product listings in the department store. Presently
our media partner is selling a five-product listing in the department store for
$50.00 per month.
XpressStores Online: XpressStores Online is an Internet software
product that allows businesses to build an electronic storefront or catalog
through a browser-based Internet application. The business can then administer
the site through a browser-based administrative module. This module allows the
user to add detailed product information such as part number, description, sale
prices and product graphics. Revenue is generated monthly based on the size of
the catalog and number of listings in the catalog. Presently our media partner
is selling a 50 product online store at $50 per month and a 200 product online
store for $100 per month.
XpressStores Pro: XpressStores Pro is a software application that
allows business users to enhance an electronic storefront or catalog built
through XpressStores Online by adding additional features and functionality.
These include features such as customer-based pricing options, customer-specific
catalog views, customized listing forms, and custom buttons and backgrounds.
Revenue is generated monthly based on the size of the catalog and number of
listings in the catalog. Presently our media partner is selling a 50 product
online store at $50 per month and a 200 product online store for $100 per month.
XpressStores Enterprise: XpressStores Enterprise is a product that
allows web developers to create sophisticated catalogues or storefronts or to
customize the business functionality and look-and-feel of an electronic
storefront or catalog built through XpressStores Online or XpressStores Pro and
populate/manage the site's
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product listings through a browser-based administrative module. Revenue is
generated monthly based on the size of the catalog and number of listings in the
catalog. Presently our media partner is selling a 250 product online store at
$200 per month and a 500 product online store for $500 per month.
The Company's promotional products include:
XpressListings: Basic business listings in the business directory
include company name, address, and telephone number and business web site
address. A business may choose to list itself under up to 5 business categories.
A business may optionally choose to purchase a Premier Listing that highlights
its listing and provides a 250-character business description. Premier listings
are displayed at the top of any search results. Revenue is generated by selling
Premier Listings on an annual basis. Annual revenue is amortized monthly over
the listing year. Presently our media partner is selling a Premier XpressListing
for $360 per year.
XpressAds: XpressAds consist of banner ads that can be placed in the
regional business directory within assigned categories and/or regional markets.
XpressAds allow businesses to promote themselves within business categories they
target and provide a means for them to generate traffic to their web sites.
Revenue is generated by selling banner ads on a monthly basis throughout the
business directory and multi-vendor department store. Revenue is recognized in
the month in which the ad runs. Presently our media partner is pricing XpressAds
dependent on their regional market. The range for XpressAds is $300 to $900 per
month depending on city, ad size and ad position on the web site.
XpressCoupons: The XpressCoupon system provides online businesses with
the ability to link a banner ad promoting a specific product directly to the
shopping basket of a vendor's eCommerce site. The XpressCoupon system allows the
business to set up a discount for the order or against a specific product and
interacts with the eCommerce site so that the shopping basket displays both the
product and the discount. The XpressCoupons system is designed to build traffic
to a company's eCommerce site and decrease the cost of customer acquisition.
Revenue is generated by XpressCoupons on a click-through or transactional basis.
Each time a user clicks on a XpressCoupon ad, the advertiser is charged a fee of
$0.30. Revenue is recognized in the month in which the transaction fee is
generated.
XpressFlyers: XpressFlyers provide companies with an ability to build
and maintain a flyer site containing coupons offering discounts on a range of
products. Each company's flyer site can be private labeled or branded, so that
the site uses the same look-and-feel as that of their marketing collateral.
Flyer sites can be password restricted, so the company can restrict discounts to
their club members. Revenue is generated by creating XpressFlyers for companies
and charging a transaction fee of $0.30 each time a coupon in the flyer is
clicked through.
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PRODUCT FAMILY DIAGRAM
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Regional Business Directory and Search Engine
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Business Search
Listings Engine
<CAPTION>
Advertising and Promotion Services
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Xpress Xpress Xpress Xpress
Listings Ads Coupons Flyers
<CAPTION>
Electronic Commerce Products
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Xpress Xpress Stores Xpress Stores Xpress Stores
Dept Store Online Pro Enterprise
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PRODUCT DEVELOPMENT
The Company's products have been developed by its internal software
development staff. It is a member of the Microsoft Developer Network and is a
Microsoft Independent Software Vendor. The Company's product development is
based upon industry-standard Microsoft technologies, including Microsoft NT
Server, SQL Server and Internet Information Server. As of December 31, 1999, the
Company employed 12 developers and software engineers.
The Company estimates that it has spent on company-sponsored research
and development activities $404,000 for the year ended June 30, 1999 and $70,000
for the period from October 27, 1997 (inception) to June 30, 1998.
The Company's development efforts focus on extending its products'
capabilities in a number of areas, all coupled with its plan of offering
regionally-specific value to businesses and consumers.
To support its products and services and to enhance the content of its
media partners' regional portals, the Company has developed business
relationships with a number of companies.
The Company has developed a business relationship with Dun &
Bradstreet. Under this business relationship, Dun & Bradstreet provides to the
Company business listing content for the Company's regional business directory
under an annual License Agreement. This represents approximately 12 million
business listings for North America. This information is updated quarterly by
Dun & Bradstreet.
The Company has an agreement with CyberCash, Inc. to provide the
Company's customers with secure online credit card processing services when they
use any version of XpressStores.
SALES AND MARKETING.
The Company began actively promoting its products in June 1999. The Company's
sales strategy is based on developing and leveraging alliances with media
partners and using their sales force to market its products and services to
small and mid-sized businesses in their territories. Media partners incorporate
our products into their regional portal sites, which typically feature content
such as news, weather, business, sports, and entertainment information. As well
as providing a local sales force, each media partner promotes their portal
within their regional market to build a steady stream of new and repeat traffic
to the site. In addition to distributing its products through media companies,
the Company is also building other third party relationships to market
XpressCoupons and XpressFlyers to large retailers and Internet advertisers.
In October 1999, the Company signed its first agreement with a media
company, Lee Enterprises Inc. Under this agreement, the Company provides its
suite of products and support and training for the Lee sales force. Revenue
generated from the sale of the Company's products by the Lee sales force is
shared by the Company and Lee Enterprises.
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Beginning in November 1999, Lee Enterprises began preparation for the
initial roll out the Company's products to a group of its television stations
and newspaper sites in four states and 10 locations. By December 1999, Lee
Enterprises had completed a roll out to two selected cities. Lee Enterprises
operates in 20 states and has 21 daily newspapers, 75 other weekly publications
and 9 television stations. Lee has indicated to the Company that it intends to
roll out the Company's products to all its media locations. The Company has not
received any revenue or cash from the agreement to date and does not expect to
until early 2000. At this time no forecasts have been prepared to estimate the
revenue potential from this agreement with Lee Enterprises.
CLIENT SERVICES
The Company provides levels of customer support appropriate to each of
its products. Each media partner's individual properties are offered a training
program developed by the Company to train its sales representatives on the
Company's products and selling techniques for each product. Customer support for
software usage issues is provided by a small team and delivered via e-mail and
telephone. Listing administrators are assigned to each portal site to validate
requests for new regional directory listings and revisions to existing listings,
and to schedule banner ads.
At December 31, 1999, 3 persons were involved in the Company's client
services department.
COMPETITION
The market for regional eCommerce portal sites has been developing
rapidly. Significant competitors include:
Zip2, located in Mountain View, California, offers Internet
directory solutions. Zip2 is owned by Compaq and has a large number of media
alliances and strategic partners.
Ticketmaster Online-CitySearch, Inc., located in Pasadena,
California is a leading provider of local city guides, local advertising, local
news and entertainment and live event ticketing on the internet.
In addition, several web sites, including major search engines such as
Yahoo! and Excite, offer information and news at a city or regional level. The
Company believes that it enjoys a competitive advantage over such search engines
because of the underlying ability of its search engine to provide business
information at a very granular level, down to specific sub-categories and
community levels.
These competitors are larger and have greater financial and other
resources than the Company. They do not currently offer integrated eCommerce
products, so at this time management of the Company believes that it has a
competitive advantage based on its ability to offer businesses a very localized
and well-integrated suite of products.
The market for eCommerce tools is highly competitive. A number of
companies offer eCommerce tools which enable small businesses to set up online
shops, including Yahoo Store, iCat Commerce Online and Open Market. However,
these competitive eCommerce products do not have the advantage of being linked
with a regional
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business directory and search engine offering integrated coupon and flyer
technology such as that developed by the Company. The Company believes that its
eCommerce tools effectively compete with other eCommerce tools and that it
enjoys a competitive advantage because it can offer its customers products
designed to drive traffic to their storefronts.
There are a number of companies offering electronic coupon-related
products on the Internet. These range from "locate-and-print" coupons offered by
companies such as HotCoupons and CoolSavings and coupon flyers offered by
E-centives that link the coupon to a merchant's web site or a special
promotional page. The Company enjoys several competitive advantages with
XpressCoupons. As well as a higher degree of coupon-usage security, the
Company's products are unique in offering the means of coupon-enabling a banner
ad outside the confines of a dedicated flyer site. This means a XpressCoupon can
be placed on any high traffic web site and be linked back to the XpressCoupon
flyer. Also XpressCoupons and XpressFlyers can be packaged as private branded
sites for merchants looking to build a loyalty program for their customers.
Although the Company continues to aggressively develop the promotional
and marketing tools that set it apart from its competition, its competitors are
larger and have the resources to introduce competitive offerings similar to
those the Company markets.
INTELLECTUAL PROPERTY.
The Company regards its software as proprietary and attempts to protect
it with a combination of copyright, trademark and trade secret laws, employee
and third-party non-disclosure agreements, licensing agreements and other
methods of protection. Despite these precautions, it may be possible for
unauthorized third parties to copy certain portions of the Company's products or
reverse engineer or obtain and use information the Company regards as
proprietary. While the Company's competitive position may be affected by its
ability to protect its proprietary information, the Company believes that trade
secret and other protections are less significant to the Company's success than
other factors. These include the knowledge, ability and experience of the
Company's personnel and management team, the relationships with its media
partners, and its responsive product development programs.
As the number of software products in the industry increases and the
functionality of these products further overlaps, the Company believes that
software programs will increasingly become subject to infringement claims. There
can be no assurance that third parties will not assert infringement claims
against the Company in the future. Any such assertion could require the Company
to enter into royalty arrangements or result in costly litigation.
EMPLOYEES
As of December 31, 1999, the Company had 22 full-time employees,
including 12 in product development, 4 in sales and marketing, 3 in client
services and 3 in management and administration. The Company believes that its
employee relations historically have been good. The Company's employees are not
represented by a collective bargaining organization, and the Company has never
experienced a work stoppage.
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FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The consolidated operating results and financial position of the
Company are presented in the following tabulated format. The selected financial
data has been derived from our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States ("US GAAP"). See Financial Information and Summary of Operational
results." The following selected financial data is qualified in its entirety by,
and should be read in conjunction with, the audited consolidated financial
statements for the year ended June 30, 1999 and the period from October 27, 1997
(inception) to June 30, 1998, and notes thereto included elsewhere in this
registration statement and the unaudited consolidated financial statements of
the Company for the six months ended December 31, 1999. All figures are
presented in U.S. Currency, unless otherwise stated.
<TABLE>
<CAPTION>
===================================================================================================================
Fiscal Year Period Oct. 27,1997 Six months Six months
Ended (date of inception) Ended Ended
to
June 30,1999 June 30, 1998 Dec.31, 1999 Dec.31, 1998
- -------------------------------------------------------------------------------------------------------------------
$ $ $ $
===================================================================================================================
<S> <C> <C> <C> <C>
Net Sales 11,710 0 10,403 0
Operating Expenses 1,725,041 1,096,067 1,205,702 372,424
Net Loss from Operations (1,713,331) (1,096,067) (1195,299) (372,424)
Net Loss per Share (0.12) (0.13) (0.05) (0.04)
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================
As at As at As at
June 30, 1999 June 30,1998 Dec. 31, 1999
- -------------------------------------------------------------------------------------------------------------------
$ $ $
===================================================================================================================
<S> <C> <C> <C>
Cash 234,214 60,778 0
Total Current Assets 302,326 77,372 133,723
Total Assets 1,621,829 100,175 1,201,040
Total Current Liabilities 367,047 893,815 409,273
Deferred Tax Liability 413,100 0 333,100
Stockholders' Equity (Deficit) 841,682 (793,640) 458,667
Cash Dividends 0 0 0
===================================================================================================================
</TABLE>
15
<PAGE> 16
SUMMARY OF OPERATIONAL RESULTS
The Company incurred a net loss for the year ended June 30, 1999 of
$1,642,078 as compared to a loss of $1,096,067 for the period from October 27,
1997 (date of inception) to June 30, 1998. Revenue of $11,710 represented
eCommerce product sales from Xceedx for the period January 27, 1999 to June 30,
1999. The increase in net loss of $546,011 in the year ended June 30 1999 is
attributable to the following factors:
- Increase of amortization and depreciation for the year of $225,188.
- Increase cost of employees for the year caused by internal growth
and acquisition of companies amounted to $376,000 for the year.
Sales and marketing costs increased dramatically over the year as the
Company beta tested its regional business directory in Vancouver, British
Columbia, Canada from March 1999 to July 1999. During this period the Company
assembled marketing and sales employees to find companies to utilize the
selected products that would later be sold by the sales forces of our media
partners. During the beta program the Company gave away its regional business
portal products to stress test the regional business directory prior to
finalizing the product. In the previous year, the Company had little marketing
and sales expenses as it was only developing products. Product development and
technology includes the cost of developing the Company's product offerings. All
product development costs are expensed as incurred during the year. The
acquisition of Xceedx resulted in the capitalization of $1,416,484, which
represents eCommerce technology. This asset is being amortized over three years
straight line and charged to the product development and technology cost center.
As of June 30, 1999 the accumulated amortization was $196,750 and as of December
31, 1999 it was $432,850.
The year ended June 30, 1999 was spent developing the Company's core
Internet technologies, consolidating operations and defining its core market
segments. The Company has determined that for it to be successful in its core
business market it must partner with media companies which own newspaper and/or
television stations in regional markets. As of December 31, 1999, the Company
signed an agreement with Lee Enterprises, a media company operating in 20 states
with 21 daily newspapers, 80 weekly publications and 9 TV stations. Under this
agreement the Company is implementing 10 regional business portals in 10 cities
in four states. Four of these cities were active by December 31, 1999 and
generating revenue. The balance of their locations will be rolled out on a
phased basis.
In the six months ended December 31, 1999 the Company finalized the
development of its back office administration tool for the eCommerce business
portal and completed the development of XpressCoupons and XpressFlyers. It also
began the implementation of four regional business portal sites for Lee
Enterprises. During the six months ended December 31, 1999, the Company incurred
a net loss for the period of $1,114,885 compared to $372,424 for the same six
period in 1998, an increase of $742,461. This increase in net loss is the result
of increased expenses resulting primarily from the following items in the six
months ended December 31, 1999:
- Depreciation and amortization of $258,711.
16
<PAGE> 17
- Cost of the listing information for the database of $137,500
- Salary and consulting costs of $235,000.
- Promotion and marketing materials of $82,199
- Increase in general office expenses caused by the increase in
employee count of $38,000
FINANCING AND LIQUIDITY
At June 30 1999, the Company had cash of $234,214, and a working
capital deficiency of $64,721 that included a loan payable of $72,704. The loan
payable is a demand term loan bearing interest at the Canadian Imperial Banks
prime rate plus 1% per annum, with monthly principal payments of $445 per month.
The Company also has a revolving demand credit with interest at the Canadian
Imperial Bank's prime rate plus 1%; at December 31, 1999 the amount outstanding
under this facility was $26,506. As of December 31, 1999, the Company had a cash
overdraft of $26,506, a working capital deficiency of $275,551 that included a
loan payable of $70,036 and accounts payables and accrued liabilities of
$310,135. At December 31, 1999, the Company was in default of one of the loan
covenants for minimum stockholders' equity. During December 1999 the Company was
negotiating with the bank to restructure its credit facilities so that this loan
is transferred from its subsidiary Xceedx Technologies to the Company. At
December 31, 1999, the bank was still classifying this loan as a term loan and
the bank is being repaid at an average six-month payment of $445 per month.
As of January 14, 2000, the Company obtained a Demand Installment Loan
of $169,687 ($250,000 Cdn.)from the Canadian Imperial Bank of Commerce.
Borrowings by the Company bear interest at the rate of the Bank's Prime Rate
plus 1% per year. Unless the Bank makes demand for repayment, the indebtedness
is repaid in 180 regular monthly payments of $1,573 ($2,317.80 Cdn.) each
beginning March 15, 2000. The indebtedness is secured by all personal property
of the Company and is personally guaranteed by Mr. Phil Dubois and Mr. Ken
Bradley, officers of the Company.
In the six months ended December 31,1999, the Company raised in nine
separate private placements a total of $727,353, representing an additional
1,159,856 common shares of which 244,781 were issued by December 31, 1999 and
915,075 are included in the common stock to be issued total of 915,075 at
December 31, 1999. These shares were issued subsequent to December 31, 1999.
Subsequent to December 31, 1999, the Company raised an additional
$319,000 by private placement, representing 638,000 common shares.
Based on the quarterly expenditures for the six months ended December
31, 1999, the Company forecasts minimum annual operating cash requirements of
approximately $1.7 million. The Company presently does not have sufficient
financial resources to maintain current operations or to undertake all of its
planned development programs and capital equipment purchases during the upcoming
year. Revenue generated under agreements with a media companies will help to
offset the Company's cash flow shortfall. The Company is actively seeking
private placements to fund operations.
17
<PAGE> 18
PLAN OF OPERATION
The Company is dependent on obtaining new financing for ongoing
operation, capital expenditures and working capital. There is no assurance that
such financing will be available when required by or under terms favorable to
the Company.
Based on the private placements of its securities in January 2000 and
the increased credit available after restructuring its credit facilities, the
Company has sufficient cash for five months operations without requiring
additional sources of funding. The Company will continue to seek additional
capital through offerings of its securities to improve its cash flow and to
provide working capital. The Company anticipates that cash flow from its media
partnership with Lee will increase as more of their regional portal sites adopt
and begin to sell our products. The Company is implementing a business
development program with Lee that will include a CityXpress.com business
development employee working with each city's sales manager to maximize the
Internet revenue opportunities using CityXpress.com products.
The Company is actively calling on other media companies regarding its'
products offerings. Each additional media company agreement will generate
additional revenue and cash flow. Management is confident it will be successful
in closing additional media agreements.
The Company believes that its current cash and cash equivalents and its
operating revenue together with the proceeds from future securities offerings
and amounts available under its existing credit facility will be sufficient to
meet its anticipated cash needs to fund operations until December 31, 2000.
BUSINESS RISKS
The Company faces three significant business risks on a going forward
bases:
- Raising the equity financing needed to operate the Company at its
current operating level and providing the operating funds, capital
additions and repayment of liabilities in a timely manner. If the
Company is unsuccessful in this regard it will be required to
reduce operating expenditures to a level that will be in line with
cash flows.
- The Company may be unsuccessful in obtaining additional media
partners or the Lee agreement may be unsuccessful in generating
revenues. In either case, the Company would have to re-evaluate
its business model to determine if there was another partnership
arrangement that would provide the economic, cash flow or business
advantages it currently believes will be provided by media
companies. The Company at this time cannot assess whether it could
find other business partners and negotiate favorable terms that
would provide the necessary revenue and cash flow required by the
Company.
- A major competitor or new company could dominate the market sector
being targeted by the Company. The Company would then have to
assess the impact of the situation. The regional eCommerce market
sector is large and there may be room for two suppliers to media
companies. If not, then the
18
<PAGE> 19
Company would have to assess what other market sector it could
successfully target.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's principal business office is located at Suite 200, 1727
West Broadway, Vancouver, British Columbia, Canada V6J 4W6. The Company signed a
lease agreement for four years commencing on May 1, 1999. Our monthly payments
are approximately $8,000 U.S.
We do not presently own or lease any other property or real estate.
19
<PAGE> 20
ITEM 3. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning the
number of shares of our common stock owned beneficially as of December 31, 1999
by (i) each of the Company's directors; (ii) each of the Company's named
executive officers; and (iii) all directors and executive officers of the
Company as a group; and (iv) each person (including any group) known to us to
own more than five percent (5%) of any class of our Voting securities. Unless
otherwise indicated, the shareholders listed possess sole voting and investment
power with respect to the shares shown.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Title of Class Name and Address of Amount and Nature of Percentage of
Beneficial Owner Beneficial Ownership Class
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Shares Phil Dubois 2,561,250(1) 11.5%
Suite 200 - 1727 West Broadway
Vancouver, B.C.
V6J 4W6
---------------------------------------------------------------------------------------------------
Common Shares Ken Bradley 2,561,250(1) 11.5%
Suite 200 - 1727 West Broadway
Vancouver, B.C.
V6J 4W6
---------------------------------------------------------------------------------------------------
Common Shares Brent Forgeron 1,130,000(1) 5.1%
23-1243 Thurlow Street
Vancouver, B.C.
V6E 1X4
---------------------------------------------------------------------------------------------------
Common Shares Greg Beaudin 1,130,000(1) 5.1%
321 Cartelier Road
North Vancouver, B.C.
V7N 3B6
---------------------------------------------------------------------------------------------------
Common Shares Freddy Fuller 1,130,000 5.1%
2538 Ross Road
Abbotsford, B.C.
V4X 1J3
- ------------------------------------------------------------------------------------------------------
All officers and directors as a group (6) 7,382,500 33.2%(2)
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain of these shares are subject to transfer restrictions.
(2) The percentages in this table are based on a total number of outstanding
common shares equal to 22,319,049. This number does not include shares
issuable under outstanding warrants. No options or warrants have been
granted to any executives, officers, directors or beneficial owners listed
in this table.
20
<PAGE> 21
SECURITY OWNERSHIP OF MANAGEMENT
We are not aware of any arrangement that might result in a change in
control in the future.
ITEM 4. DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES
DIRECTORS AND OFFICERS
All directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until successors are
duly elected and qualified, unless they resign or cease to be directors in
accordance with the Company's Articles and Bylaws. The date of our next Annual
General Meeting has not been determined. The executive officers of the Company
are appointed by the Board of Directors.
At our last Annual General Meeting on August 25, 1999, the following
persons were directors and/or executive officers:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DIRECTOR/OFFICER
NAME AND PRESENT OFFICE HELD EMPLOYEE SINCE
- ----------------------------------------------------------------------------------------------------
<S> <C>
Phil M Dubois January 27, 1999
President & CEO, Director
- ----------------------------------------------------------------------------------------------------
Ken R Bradley January 27, 1999
Chief Operating Officer & CFO, Director
- ----------------------------------------------------------------------------------------------------
Brent Forgeron January 27, 1999
Vice President
- ----------------------------------------------------------------------------------------------------
Ken Spencer August 3, 1999
Chairman, Director
- ----------------------------------------------------------------------------------------------------
Bob Smart August 25, 1999
Director
- ----------------------------------------------------------------------------------------------------
Ian Thomas August 25, 1999
Director
- ----------------------------------------------------------------------------------------------------
</TABLE>
The following is a brief biography of each of the executive officers
and directors listed above:
PHIL M. DUBOIS, age 53, has served as President, CEO and a director of the
Company since the acquisition of Xceedx on January 27, 1999. From January 1996
to present, Mr. Dubois serves as President and CEO of Xceedx a company he
co-founded in 1996. Xceedx is a provider of Internet technology services and
eCommerce software solutions. From September 1994 to December 1995, Mr. Dubois
was an independent consultant providing consulting services to technology
companies. From May 1992 to August 1994, Mr. Dubois served as President and CEO
of Modatech Systems Inc., a company in the North American sales force automation
marketplace. From May 1989 to May 1992, Mr. Dubois served as Vice President of
Development of Modatech. From May 1989 to August 1994, Mr. Dubois was a director
of Modatech. Mr. Dubois is the chair and a director of AceTech, a not-for-profit
association of high tech CEOs, and a director of the
21
<PAGE> 22
BC Softworld Society; a not-for-profit organization dedicated to the growth of
the software industry in the province of British Columbia.
KEN R. BRADLEY, age 52, has served as Chief Operating Officer, CFO and a
director of the Company since the acquisition of Xceedx on January 27, 1999.
From January 1996 to present, Mr. Bradley serves as Vice President Finance and
Vice President of Operations of Xceedx a company he co-founded in 1996. From
September 1994 to December 1995, Mr. Bradley was an independent consultant
providing consulting services to technology companies. From September 1990 to
August 1994, Mr. Bradley was Vice President Finance and Administration at
Modatech Systems Inc., a company in the North American sales force automation
marketplace. Mr. Bradley's past experience also includes serving as Regional
Controller at Domtar Packaging, a national company involved in the manufacturing
of corrugated containers. From February 1983 to January 1997, Mr. Bradley served
as Manager of Finance and Administration at Mobile Data International Inc., a
company that developed mobile data terminals that operated over radio frequency.
From February 1979 to February 1983, Mr. Bradley served as Corporate Controller
at Canadian Auto Carriers a specialized carrier of automobiles in western
Canada. Mr. Bradley is a Certified Management Accountant.
BRENT FORGERON, age 30, co-founded WelcomeTo Search Engine Inc. in October 1997
after completing graduate degrees in business from both Simon Fraser University
and the British Columbia Institute of Technology. Since January 1999, he has
served as Vice President Business Development and is responsible for developing
the strategic media alliances the Company is now pursing. From October 1997 to
October 1998 Mr. Forgeron served as Vice President of WelcomeTo Search Engine
Inc. with responsibility for strategic business relationships. From October 1998
to January 27, 1999, Mr. Forgeron served as President of WelcomeTo Search Engine
Inc. guiding WelcomeTo financing, growth and development. From October 1998 to
August 1999, Mr. Forgeron was a director of the Company.
KEN SPENCER, age 55, has served as Chairman and a director of the Company since
August 3, 1999. In 1983, Mr. Spencer co-founded Creo Products, a company that
manufactures complex, high-value equipment utilizing precision mechanics,
digital design, lasers, optics and software for the printing industry. He served
as CEO of Creo Products from 1985 to 1995, and as Chairman of the Creo Products
Board of Directors from 1985 to 1996. Mr. Spencer remains a director of Creo
Products. Mr. Spencer also serves as a director of De Novo Enzymes, a
bio-technology company, Science World, a government organization that promotes
science and technology throughout the province of British Columbia and the BC
Institute of Technology and as Chairman of the Board of Spectrum Signal
Processing, a position he has held since December, 1997.
BOB SMART, age 49, has served as a director since August 25, 1999. Bob has over
20 years of senior management experience in a variety of businesses. He
currently is a Partner in the consulting firm of Radford & Smart, a position he
has held since February 1999. From June 1998 to February 1999, he served as
Executive Vice President and a director of Bargain Castle International Discount
Centres Ltd., a wholesale and retail products liquidator. From December 1997 to
June 1998, Mr. Smart served as President of Webcastsystems Inc., a software
developer. From October 1996 to December 1997, he served as President of
ActionView Advertising Ltd. an outdoor advertising media company. From October
1994 to October 1996 Mr. Smart served as Vice President
22
<PAGE> 23
Corporate Development of Imperial Ginseng Products Ltd. a grower and distributor
of ginseng and ginseng products.
IAN THOMAS, age 53, has served as a director since August 25, 1999. In 1979, he
founded Thomas Consultants Inc., which presently operates offices in Vancouver
Canada and the Gold Coast Australia. Mr. Thomas serves as CEO of Thomas
Consultants Inc. a position he has held since the company was founded. Thomas
Consultants Inc. specializes in the planning and development of large-scale
retail projects and undertakes strategic planning assignments for major national
and international retailers, and currently works in over 30 countries. Mr.
Thomas sits on the Board of Trustees of the International Council of Shopping
Center's Education Foundation in New York, and is a director of Future Shop,
North America's third largest electronics chain, a position he has held since
August since 1993.
Members of the Board of Directors are elected by the Company's
shareholders. The Board of Directors meets periodically to review significant
developments affecting the Company and to act on matters requiring Board
approval. Although the Board of Directors delegates many matters to others, it
reserves certain powers and functions to itself. The Company's Audit Committee
comprises Ken Spencer, Bob Smart and Phil Dubois. The Audit Committee is
directed to review the scope, costs and results of the independent audit of the
Company's books and records, the results of the annual audit with management and
the adequacy of the Company's accounting, financial and operating controls; to
recommend annually to the Board of Directors the selection of the independent
auditors; to consider proposals made by the Company's independent auditors for
consulting work; and to report to the Board of Directors, when so requested, on
any accounting or financial matters. The Compensation Committee consists of Ken
Spencer, Ian Thomas and Ken Bradley. The role of this committee is to set
executive compensation for the senior executives and administer the 0ptions Plan
for executive officers and employees.
None of our directors or executive officers is a party to any
arrangement or understanding with any other person pursuant to which he was
elected as a director or officer. None of our directors or executive officers
has any family relationship with any other officer or director.
None of our officers or directors have been involved in the past five
years in any of the following: (1) bankruptcy proceedings; (2) subject to
criminal proceedings or convicted of a criminal act; (3) subject to any order,
or decree entered by any court limiting in any way his or her involvement in any
type of business, securities or banking activities; or (4) subject to any order
for violation of federal or state securities laws or commodities laws.
23
<PAGE> 24
ITEM 5. REMUNERATION OF DIRECTORS AND OFFICERS
As of January 27, 1999, the Company's executive officers consisted of
Phil Dubois, President and CEO, Ken R. Bradley, Chief Operating Officer and CFO,
and Brent Forgeron, Vice President.
During the year ended June 30, 1999, salary compensation was paid to
our executive officers. The following table contains information concerning
compensation paid to named executive officers for the financial year ended June
30, 1999 and for the period ended June 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
- -------------------------------------------------------------------------------------------------------------------
AWARDS PAY-OUTS
-----------------------------------------------------
OTHER SECURITIES LTIP
ANNUAL RESTRICTED- UNDER- PAYOUTS ALL OTHER
COMPEN- STOCK LYING COMPEN-
NAME AND SALARY BONUS SATION AWARD(S) OPTIONS/ SATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) SARS(#) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phil Dubois 1999 21,846 nil nil nil nil
President & CEO 1998 nil nil nil nil nil
- -------------------------------------------------------------------------------------------------------------------
Ken Bradley, 1999 21,846 nil nil nil nil
COO & CFO 1998 nil nil nil nil nil
- -------------------------------------------------------------------------------------------------------------------
Brent Forgeron 1999 32,769 nil nil nil nil
Vice President 1998 nil nil nil nil(1) nil
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1 Mr. Forgeron was an executive officer of WelcomeTo Search Engine Inc.,
the private company acquired by the Company on January 7, 1999. For services
rendered by Mr. Forgeron during the period from October 27, 1997 through June
30, 1998, salary compensation of $10,867 was paid to Mr. Forgeron and 1,129,800
common shares of WelcomeTo Search Engine Inc. were issued to him. The stock
award was priced at $0.19 per share, and the compensation expense is noted in
note 8(a)(vii) to the Company's audited financial statements. Mr. Forgeron
became an executive officer of the Company in January 1999.
STOCK OPTIONS
During the year ended June 30, 1999, no stock options or share purchase
options were granted to or exercised by any of our executive officers and no
long-term incentive plans were made to our executive officers. Therefore, no
share purchase options were outstanding during the year ended June 30, 1999.
Also, we do not have a defined benefit or actuarial plan.
24
<PAGE> 25
At the Annual General Meeting on August 25, 1999, the shareholders
approved a stock option plan, which reserved the granting of 2,000,000-share
purchase options under the plan. Subsequently, 675,000 share purchase options
were granted to acquire common shares to employees. The stock option plan is
exercisable over a four-year period ending on July 13, 2003 at an exercise price
of $1.50 per common share. The options are exercisable on a cumulative basis at
1/3 per year commencing July 13, 2000. As of December 31, 1999 no share purchase
options have been granted to any officers or directors of the Company.
The following table summarizes information concerning options granted
and or paid to named executive officers during the Company's financial year
ended June 30, 1999 and to December 31, 1999.
OPTIONS/SAR GRANTS IN LAST FINANCIAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL EXERCISE OR MARKET VALUE OF COMMON
SECURITIES OPTIONS/SARS BASE PRICE SHARES UNDERLYING OPTIONS
NAME UNDERLYING GRANTED TO ($/SH) EXPIRATION ON THE DATE OF GRANT
OPTIONS/SARS EMPLOYEES IN DATE ($/COMMON SHARE)
GRANTED FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phil Dubois (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Bradley (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Brent Forgeron (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: (1) There were no options granted by the Company to executive officers
during the year ended June 30, 1999 and to December 31,1999
The following is a summary of the share purchase options exercised by
the Company's directors, officers, and employees during the financial year ended
June 30, 1999 and to December 31, 1999:
AGGREGATED OPTION/SAR EXERCISES DURING THE LAST
FINANCIAL YEAR END AND FINANCIAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
VALUE OF
COMMON SHARES UNEXERCISED OPTIONS UNEXERCISED
NAME ACQUIRED ON AGGREGATE VALUE AT FINANCIAL IN-THE-MONEY
EXERCISE (#) REALIZED ($) YEAR-END OPTIONS/SARS AT
FINANCIAL YEAR-END
($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Phil Dubois (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Bradley (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Brent Forgeron (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Spencer (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Bob Smart (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ian Thomas (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
NOTE: (1) There were no options granted by the Company to executive officers
during the year ended June 30, 1999 and to December 31,1999
The following is a summary of long-term incentive plans granted to the
Company's directors, officers and employees during the financial year ended June
30, 1999 and to December 31, 1999:
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF PERFORMANCE
SHARES, UNITS OR OTHER
NAME OR OTHER PERIOD UNTIL THRESHOLD TARGET MAXIMUM
RIGHTS MATURATION OR ($ OR #) ($ OR #) ($ OR #)
# PAY-OUT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phil Dubois (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Bradley (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Brent Forgeron (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Spencer (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Bob Smart (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ian Thomas (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: (1) There were no options granted by us during the year ended June 30,
1999 and to December 31,1999
DESCRIPTION OF 1999 STOCK OPTION PLAN
The Company's 1999 Stock Option Plan (the "Stock Option Plan") was
adopted by the Board of Directors and approved by the Company's shareholders in
August 1999. The purpose of the Plan is to reward the contributions made to the
Company by employees, directors and consultants, to provide such persons with
additional incentive to devote themselves to the future success of the Company,
and to improve the ability of the Company to attract, retain and motivate
individuals upon whom the Company's sustained growth and financial success
depend. Pursuant to the Stock Option Plan, the Company may grant or issue stock
options to directors, officers, advisors and employees of the Company or any
other person or company engaged to provide ongoing services to the Company. As
of December 1, 1999, the Company has granted a total of 675,000 share purchase
options to employees. The stock option plan is exercisable over a four-year
period ending on July 13, 2003 at an exercise price of $1.50 per common share.
The options are exercisable on a cumulative basis at 1/3 per year commencing
July 13, 2000.
A total of 2,000,000 shares of Common Stock have been reserved for
issuance under the Stock Option Plan of which 675,000 have been granted to
employees. The Board of Directors determines the terms and provisions of the
stock options granted under the Stock Option Plan.
The Stock Option Plan may be amended at any time by the Board of
Directors, although certain amendments may require shareholder approval. The
Board of Directors may terminate the Stock Option Plan at any time.
26
<PAGE> 27
COMPENSATION OF DIRECTORS
Directors receive no compensation for serving as Directors.
EXECUTIVE OFFICERS CONSULTING AGREEMENT
On January 21, 1999, the Company entered into separate Consulting
Agreements with Phil Dubois, and with Ken Bradley, named executive officers of
the Company. Pursuant to these Consulting Agreements, Mr. Dubois and Mr. Bradley
provide corporate financing and business strategy consulting services to and on
behalf of the Company and each receive compensation of $6,000 Canadian per
month.
Each consulting agreement is for a term of two years. The Company may
renew either or both of the consulting agreements for successive terms of a
duration decided by the Company by written notice to the other party. Absent
agreement by the parties or notice by the Company, each of the Consulting
Agreements automatically renews for a one-year term. Each consulting agreement
contains confidentiality and certain non-compete provisions. Each consulting
agreement provides that the Company determines what corporate benefit plans and
programs Mr. Dubois or Mr. Bradley will participate in and the terms of such
participation.
The Company has the right to terminate Mr. Dubois at any time for legal
cause without notice or payment to him. If the Company terminates the consulting
agreement of Mr. Dubois without cause, the Company is obligated to pay him
$12,000 Canadian for each month remaining in the term of the Consulting
Agreement.
The Company has the right to terminate Mr. Bradley at any time for
legal cause without notice or payment to him. If the Company terminates the
Consulting Agreement of Mr. Bradley without cause, the Company is obligated to
pay him $12,000 Canadian for each month remaining in the term of the Consulting
Agreement.
Either Mr. Dubois or Mr. Bradley may terminate his Consulting Agreement
on three- (3) month's prior notice to the Company.
ITEM 6. INTEREST OF MANAGEMENT AND OTHERS IN TRANSACTIONS
Except for (a) the issuance of shares of its stock to Mr. Forgeron
pursuant to the Acquisition Agreement between WelcomeTo Search Engine, Inc. and
the Company and the issuance of shares of its stock to Messrs. Dubois and
Bradley pursuant to the Acquisition Agreement between Xceedex Technologies, Inc.
and the Company, (b) the compensation described herein, and (c) advances to and
by certain officers to cover expenses, all of which were reimbursed or repaid
without interest, no director, executive officer, holder of ten percent of the
Company's outstanding common stock, or any relative or spouse of any of the
foregoing persons, or any relative of such spouse, who has the same house as
such person or who is a director or officer of any parent or subsidiary of the
Company, to the Company's knowledge, had a material interest either direct or
indirect, in any particular transaction or series of transactions to which the
27
<PAGE> 28
Company or any subsidiary was a party, during the two fiscal years ended June
30, 1998 and 1999, and to December 31, 1999.
ITEM 7. DESCRIPTIONS OF REGISTRANT'S SECURITIES TO BE REGISTERED
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, par value $0.001 per share.
Holders of Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of shareholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor. Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company available after the payment of all debts and other
liabilities. Holders of Common Stock, as such, have no preemptive, subscription,
redemption or conversion rights, and there are no sinking fund provisions
applicable to the Common Stock.
The transfer agent and registrar for the Company's Common Stock is
Interwest Transfer Co. Inc.
28
<PAGE> 29
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Shares of the Company's Common Stock trade on the OTCBB under the
symbol CYXP. The following table at month end sets forth the range of high and
low bid quotations (as reported by NASDAQ) for the period October 30, 1998 to
April 30, 2000:
<TABLE>
<CAPTION>
MONTH HIGH BID LOW BID
ENDED -------- -------
- -----
<S> <C> <C>
October 30, 1998 4.0625 2.7500
November 30, 1998 3.0000 2.5625
December 31, 1998 2.1250 2.0000
January 29, 1999 7.2500 5.8750
February 26, 1999 4.0625 3.8750
March 31, 1999 6.4375 4.9375
April 30, 1999 3.9688 3.8438
May 28, 1999 2.9688 2.7500
June 30, 1999 2.4375 2.0625
July 30, 1999 2.5000 2.4375
August 31, 1999 1.7500 1.6875
September 30, 1999 1.5000 1.3750
October 31, 1999 1.2500 1.1250
November 30, 1999 0.8438 0.6875
December 31, 1999 0.3750 0.3600
January 31, 2000 0.7500 0.5900
February 29, 2000 0.6200 0.6000
March 31, 2000 0.5100 0.4500
April 30, 2000 0.3400 0.3100
</TABLE>
On December 31, 1999 the last reported sale price of the Common Stock,
as reported by NASDAQ was $0.3750 per share.
As of December 31, 1999 there were 186 holders of record of shares of
the Company's Common Stock.
The Company has not declared or paid any cash dividends on its Common
Stock since inception, and the Company's Board of Directors currently intends to
retain all earnings for use in the business for the foreseeable future. Any
future payment of dividends will depend upon results of operations, financial
condition, cash requirements and other factors deemed relevant by the Company's
Board of Directors.
29
<PAGE> 30
ITEM 2. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party,
which could have a material adverse effect on the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
PricewaterhouseCoopers was engaged by WelcomeTo Search Engine, Inc. to
audit its financial statements as of June 30, 1998 and for the period October
27, 1997 (the date of incorporation of WelcomeTo Search Engine Inc.) through
June 30, 1998. PricewaterhouseCoopers resigned on January 28, 1999.
PricewaterhouseCoopers report on the financial statements referenced above did
not contain an adverse opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles.
The decision to change accountants was approved by the Board of
Directors on March 29, 1999.
During the period of its engagement there was no disagreements with
PricewaterhouseCoopers on any matter of accounting principles, financial
statement disclosure or auditing scope or procedures.
The Company engaged Ernst & Young, LLP as its principal accountant on
March 30, 1999. Ernst & Young LLP were appointed as accountants at the Annual
General Meeting on August 25, 1999.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Prior to the acquisition of WelcomeTo Search Engine Inc. by the Company
WelcomeTo Search Engine Inc. had issued 8,510,000 common shares for cash,
services and charitable donations in private offerings under Section 4(2) of the
Securities Act of 1933 as amended (the "Securities Act") and under Regulation S
promulgated under the Securities Act. The 8,510,000 common shares issued by
WelcomeTo Search Engine Inc. can be summarized as follows. On October 27, 1999,
800 common shares were issued to four non-U.S. persons upon incorporation of
WelcomeTo Search Engine Inc. for total consideration of $5. From October 27,
1997 to January 6, 1999, WelcomeTo Search Engine Inc. issued 5,836,448 common
shares at an average price of $0.19 per share for services rendered to
employees, an officer and a director. A total compensation expense of $1,117,654
was recorded, $863,718 in the period from October 27, 1997 (inception) to June
30, 1998 and $253,936 in the year ended June 30, 1999. This offering was made to
twenty-six non-U.S. persons outside the United States. The offering was exempt
from registration under Regulation S promulgated under the Securities Act. No
placement agent was retained in connection with the offering. No fees or
commissions were paid in connection with the transaction. During the year ended
June 30, 1999, an additional 2,392,752 common shares were issued at an average
price of $.18 per share for a total cash consideration of $459,118. This
offering was made to fifty non-U.S. persons outside the United States. The
offering was exempt from registration under Regulation S promulgated under the
Securities Act. A commission of $32,487 was paid to a Canadian firm relating to
this offering of securities resulting in net cash proceeds of $426,631.
($459,118 less $32,487). During the year ended June 30, 1999, an additional
160,000 common shares were issued for consulting services at an average price of
$.19 per share for a total cash consideration of $30,521. This offering was made
to four non-U.S. persons outside the United States. The offering was exempt from
30
<PAGE> 31
registration under Regulation S promulgated under the Securities Act. During the
year ended June 30, 1999, an additional 40,000 common shares were issued for an
investment in Golf Escape at an average price of $.09 per share for $3,406 which
has been written off in the year ended June 30, 1998. This offering was made to
one non-U.S. person outside the United States. The offering was exempt from
registration under Regulation S promulgated under the Securities Act. In
November 1998, WelcomeTo Search Engine Inc. donated 80,000 common shares to two
Canadian charitable organizations for purposes of this donation each common
share was valued at $0.19 for a total donation of $15,207. This offering was
made outside the United States. The offering was exempt from registration under
Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction.
Pursuant to a share purchase agreement dated January 7, 1999, the
shareholders of WelcomeTo sold their 100% interest in WelcomeTo to
CityXpress.com for 8,510,000 shares in CityXpress.com which represented a
controlling interest of approximately 62.5%. For accounting purposes this
transaction was considered the recapitization of WelcomeTo and the acquisition
of CityXpress.com by WelcomeTo. The reverse acquisition resulted in one-time
costs of $225,000 for finders fees pertaining to the acquisition of Xceedx and
WelcomeTo, which was paid for by the issuance of 450,000 common shares issued in
an offering exempt from registration under Regulation S promulgated under the
Securities Act to two Canadian companies outside the United States. Each common
share was valued at $0.50. These shares were issued after the year-end June 30,
1999 and are included in the total to be issued of 627,860 shares at June 30,
1999.
At the time of acquisition, CityXpress.com had outstanding shares
totaling 5,100,000. After the acquisition total common shares outstanding were
13,610,000.
In January 1999, CityXpress.com acquired all of the issued and
outstanding shares of Xceedx by exchanging one share of CityXpress.com for each
share of common stock of Xceedx. As a result CityXpress.com issued 6,250,000
shares of common stock in a private offering under section 4(2) of the
Securities Act. No fees or commissions were paid in connection with the
transaction.
In March 1999, the Company issued 33,333 shares of common stock at a
purchase price of $3.00 per share for a total offering of $99,999. This offering
was made to seven subscribers outside the United States. The offering was not
underwritten. The offering was exempt from registration under Regulation S
promulgated under the Securities Act. No placement agent was retained in
connection with the offering. No fees or commissions were paid in connection
with the transaction.
In June 1999, the Company accepted subscription agreements for 177,860
shares of common stock at a purchase price of $1.50 per share for a total
offering of $266,790. The shares were issued after the year ended June 30, 1999
and are included
31
<PAGE> 32
in the total to be issued at June 30, 1999 of 627,860 shares. This offering was
made to five subscribers outside the United States. The offering was not
underwritten. The sale was exempt from registration under Regulation S
promulgated under the Securities Act. No placement agent was retained in
connection with the offering. No fees or commissions were paid in connection
with the transaction. Each common share issued has an attached warrant which
entitles the holder to acquire one common share for $1.50 each during the first
year and $2.00 during the second year. The warrants expire on June 10, 2000 and
June 10, 2001 respectively.
In July 1999, the Company issued 45,260 shares of common stock at a
purchase price of $1.50 per share for a total offering of $67,890. This offering
was made to one subscriber outside the United States. The offering was not
underwritten. The sale was exempt from registration under Regulation S
promulgated under the Securities Act. No placement agent was retained in
connection with the offering. No fees or commissions were paid in connection
with the transaction. Each common share issued has an attached warrant which
entitles the holder to acquire one common share for $1.50 each during the first
year and $2.00 during the second year. The warrants expire on July 14, 2000 and
July 14, 2001 respectively.
In August 1999, the Company accepted a subscription agreement for
100,000 shares of common stock at a purchase price of $1.50 per share for a
total offering of $150,000. This offering was made to one subscriber outside the
United States. The offering was not underwritten. The sale was exempt from
registration under Regulation S promulgated under the Securities Act. No
placement agent was retained in connection with the offering. No fees or
commissions were paid in connection with the transaction. Each common share
issued has an attached warrant which entitles the holder to acquire one common
share for $1.50 each during the first year and $2.00 during the second year. The
warrants expire on August 15, 2000 and August 15, 2001 respectively.
In September 1999, the Company accepted a subscription agreement for
46,666 shares of common stock at a purchase price of $1.50 per share for a total
offering of $70,000. This offering was made to one subscriber outside the United
States. The offering was not underwritten. The sale was exempt from registration
under Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $1.50 each
during the first year and $2.00 during the second year. The warrants expire on
September 30, 2000 and September 30, 2001 respectively. This subscription
agreement provided that the Company could issue additional shares if subsequent
subscriptions were accepted by the Company at a lower purchase price per share
than $1.50 until March 31, 2000. After December 31, 1999, the Company issued an
additional 93,334 common shares to the subscriber and the exercise prices of the
warrants have been reduced from $1.50 to $0.50 per share during the first year
and from $2.00 to $0.75 during the second year. The effect of issuing additional
93,334 common shares results in an average share price of $0.50 per share. The
additional 93,334 shares is reflected in the to be issued total of 172,617 at
December 31, 1999.
In September 1999, the Company accepted a subscription agreement for
325,800 shares of common stock at a purchase price of $0.50 per share for a
total offering of $162,900. The shares were issued after the quarter ending
December 31, 1999 and are included in the total to be issued amount of 742,458
at December
32
<PAGE> 33
31, 1999. This offering was made to two subscribers outside the United States.
The offering was not underwritten. The sale was exempt from registration under
Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $0.50 each
during the first year and $0.75 during the second year. The warrants expire on
September 30, 2000 and September 30, 2001 respectively.
In October 1999, the Company accepted a subscription agreement for
52,855 shares of common stock at a purchase price of $1.25 per share for a total
offering of $66,069. This offering was made to one subscriber outside the United
States. The offering was not underwritten. The sale was exempt from registration
under Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $1.25 each
during the first year and $2.00 during the second year. The warrants expire on
October 13, 2000 and October 13, 2001 respectively. This subscription agreement
provided that the Company could issue additional shares if subsequent
subscriptions were accepted by the Company at a lower purchase price per share
than $1.25 until March 31, 2000. After December 31, 1999, the Company issued an
additional 79,283 common shares to the subscriber and the exercise prices of the
warrants have been reduced from $1.25 to $0.50 per share during the first year
and from $2.00 to $0.75 during the second year. The effect of issuing additional
79,283 common shares results in an average share price of $0.50 per share. The
additional 79,283 shares is reflected in the to be issued total of 172,617 at
December 31, 1999.
In December 1999, the Company accepted a subscription agreement for
408,000 shares of common stock at a purchase price of $0.50 per share for a
total offering of $204,000. The shares were issued after the quarter ending
December 31, 1999 and are included in the total to be issued of 742,458 at
December 31, 1999. This offering was made to two subscribers outside the United
States. The offering was not underwritten. The sale was exempt from registration
under Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $0.50 each
during the first year and $0.75 during the second year. The warrants expire on
December 10, 2000 and December 10, 2001 respectively.
In December 1999, the Company accepted a subscription agreement for
8,658 shares of common stock at a purchase price of $0.75 per share for a total
offering of $6,494. The shares were issued after December 31, 1999 and are
included in the to be issued total of 742,458 at December 31, 1999. This
offering was made to one subscriber outside the United States. The offering was
not underwritten. The sale was exempt from registration under Regulation S
promulgated under the Securities Act. No placement agent was retained in
connection with the offering. No fees or commissions were paid in connection
with the transaction.
In January 2000, the Company accepted a subscription agreement for
138,000 shares of common stock at a purchase price of $0.50 per share for a
total offering of $69,000. This offering was made to one subscriber outside the
United States. The offering was not underwritten. The sale was exempt from
registration under Regulation S
33
<PAGE> 34
promulgated under the Securities Act. No placement agent was retained in
connection with the offering. No fees or commissions were paid in connection
with the transaction. Each common share issued has an attached warrant which
entitles the holder to acquire one common share for $0.50 each during the first
year and $0.75 during the second year. The warrants expire on January 18, 2001
and January 18, 2002 respectively.
In January 2000, the Company accepted a subscription agreement for
500,000 shares of common stock at a purchase price of $0.50 per share for a
total offering of $250,000. This offering was made to two subscribers outside
the United States. The offering was not underwritten. The sale was exempt from
registration under Regulation S promulgated under the Securities Act. No
placement agent was retained in connection with the offering. No fees or
commissions were paid in connection with the transaction. Each common share
issued has an attached warrant which entitles the holder to acquire one common
share for $0.50 each during the first year and $0.75 during the second year. The
warrants expire on January 31, 2001 and January 31, 2002 respectively.
Tabular information regarding the warrants issued in these securities
placements is contained in the unaudited consolidated financial statements for
the six months ended December 31, 1999 note 3(d) attached hereto.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that no director or
officer of the Company shall be personally liable to the Company or its
shareholders for damages for breach of any duty owed to the Company or its
shareholders. Section 607.0831 of the Florida 1989 Business Corporation Act (the
"Florida Act") provides that a director is not personally liable for monetary
damages to the Company or any other person for any statement, vote, decision, or
failure to act, regarding corporate management or policy, by a director, unless:
(a) the director breach or failed to perform his or her duties as a director;
and (b) the director's breach of, or failure to perform, those duties
constitutes: (1) a violation of the criminal law, unless the director had
reasonable cause to believe his or her conduct was lawful or had no reasonable
cause to believe his or her conduct was unlawful; (2) a transaction from which
the director derived an improper personal benefit, either directly or
indirectly; (3) a circumstance under which the liability provisions of Section
607.0834 (liability for unlawful distributions); (4) in a proceeding by or in
the right of the Company to procure a judgment in its favor or by or in the
right of a shareholder, conscious disregard for the best interest of the
Company, or willful misconduct; or (5) in a proceeding by or in the right of
someone other than the Company or a shareholder, recklessness or an act or
omission which was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights, safety or
property.
The Company's Articles of Incorporation provide that the Company has
the power, in its bylaws or in any resolution of its shareholders or directors,
to undertake to indemnify the officers and directors of the Company against any
contingency or peril as may be determined to be in the best interest of the
Company, and in conjunction therewith, to procure, at the Company's expense,
policies of insurance.
Section 607.0850 of the Florida Act provides that the Company has the
power to: (a) indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the Company), by reason of the
fact that he or she is or was a
34
<PAGE> 35
director, officer, employee, or agent of the Company or is or was serving at the
request of the Company as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof, if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interest of the Company and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful; and (b) indemnify any person who was or is a
party to any proceeding by, or in the right of, the Company to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee, or agent of the Company or is or was serving at the
request of the Company as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
expenses and amounts paid in settlement not exceeding, in the judgment of the
Company's Board of Directors, the estimated expense of litigating the proceeding
to conclusion, actually and reasonably incurred in connection with the defense
or settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized, if such person acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interest of the Company, except that no indemnification shall be made under this
subsection in respect of any claim, issue, or matter as to which such person
shall have been adjudged to be liable unless, and only to the extent that, the
court in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application, that, despite the adjudication
of liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses. which such court shall
deem proper. To the extent that a director, officer, employee, or agent of the
Company has been successful on the merits or otherwise in defense of any
proceeding referred to in (a) or (b) above, or in defense of any claim, issue,
or matter therein, he or she shall be indemnified against expenses actually and
reasonably incurred by him or her in connection therewith.
In addition, expenses incurred by an officer or director in defending a
civil or criminal proceeding may be paid by the Company in advance of the final
disposition of such proceeding, upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if he or she is ultimately
found not to be entitled to indemnification by the Company pursuant to Section
607.0850.
Pursuant to Section 607.0850(9) of the Florida Act, unless the
Company's Articles of Incorporation provide otherwise, (the Company's Articles
of Incorporation do not provide otherwise) notwithstanding the failure of the
Company to provide indemnification, and despite any contrary determination of
the Company's Board of Directors or shareholders in the specific case, a
director, officer, employee or agent of the Company who is or was a party to a
proceeding may apply for indemnification or advancement of expense, or both, to
the court conducting the proceeding or to another court of competent
jurisdiction.
Pursuant to Section 607.0850(12) of the Florida Act, the Company is
empowered to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee, or agent of the Company or is or was serving
at the request of the Company as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against any liability asserted against the person and incurred by him or her in
any such capacity or arising out of his or her status as
35
<PAGE> 36
such, whether or not the Company would have the power to indemnify the person
against such liability under the provisions of Section 607.0850 of the Florida
Act.
The Company has not agreed to indemnify its officers and directors as
permitted by Section 607.0850 of the Florida Act. The Company does not maintain
indemnification insurance for its officers and directors.
PART F/S
FINANCIAL STATEMENTS
Audited Consolidated Financial Statements of CityXpress.com Corp.
(formerly WelcomeTo Search Engine, Inc.) as at June 30, 1999.
Audited Combined Financial Statements of Xceedx Technologies Inc.
for the years ended January 14, 1999 and 1998.
Unaudited Consolidated Financial Statements of CityXpress.com Corp.
as at December 31, 1999 and 1998.
Unaudited Consolidated Pro Forma Statement of Operations of
CityXpress.com Corp. for the year ended June 30, 1999.
36
<PAGE> 37
CONSOLIDATED FINANCIAL STATEMENTS
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
(FORMERLY WELCOMETO SEARCH ENGINE, INC.)
JUNE 30, 1999
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
CITYXPRESS.COM CORP.
We have audited the accompanying consolidated balance sheets of CITYXPRESS.COM
CORP. (a development stage enterprise) as at June 30, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the year ended June 30, 1999 and for each of the periods from
October 27, 1997 (date of incorporation) to June 30, 1999 and through June 30,
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 audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CityXpress.com
Corp. at June 30, 1999 and 1998 and the consolidated results of its operations
and its cash flows for the year ended June 30, 1999 and for each of the periods
from October 27, 1997 (date of incorporation) to June 30, 1999 and 1998, in
conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is in the development stage, has no
established source of revenue and is dependent on its ability to raise capital
from shareholders or other sources to sustain operations. These factors, along
with other matters as set forth in Note 1, raise substantial doubt that the
Company will be able to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Ernst & Young LLP
Vancouver, Canada,
September 24, 1999. Chartered Accountants
<PAGE> 39
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
[See Nature of Business and Liquidity - Note 1]
<TABLE>
<CAPTION>
As at June 30 (expressed in U.S. dollars)
1999 1998
$ $
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS [note 7]
CURRENT
Cash 234,214 60,778
Accounts and other receivables 29,350 15,072
Prepaid expenses and deposits 38,762 1,522
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 302,326 77,372
- ------------------------------------------------------------------------------------------------------------------------------
Property and equipment, net [note 4] 99,769 22,803
eCommerce technology, net [note 5] 1,219,734 --
- ------------------------------------------------------------------------------------------------------------------------------
1,621,829 100,175
==============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Bank indebtedness [note 7] 7,999 --
Accounts payable and accrued liabilities [note 6] 280,154 893,815
Deferred revenue 6,190 --
Loan payable [note 7] 72,704 --
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 367,047 893,815
- ------------------------------------------------------------------------------------------------------------------------------
Deferred tax liability [note 10] 413,100 --
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 780,147 893,815
- ------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies [note 9]
STOCKHOLDERS' EQUITY
Share stock [note 8]
Common stock, $0.001 par value, 50,000,000
authorized, issued and outstanding - 19,893,333 in 1999
and 800 in 1998 11,383 --
Common stock to be issued - 627,860 at June 30, 1999
and 1,756,380 at June 30, 1998 266,790 276,903
Additional paid in capital 3,282,029 5
Other accumulated comprehensive income [note 2[g]] 19,625 25,519
Deficit accumulated during the development stage (2,738,145) (1,096,067)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 841,682 (793,640)
- ------------------------------------------------------------------------------------------------------------------------------
1,621,829 100,175
==============================================================================================================================
</TABLE>
See accompanying notes
On behalf of the Board:
Director Director
<PAGE> 40
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(expressed in U.S. dollars)
PERIOD FROM PERIOD FROM
OCTOBER 27, 1997 OCTOBER 27, 1997
YEAR ENDED (INCEPTION) TO (INCEPTION) TO
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999
$ $ $
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE 11,710 -- 11,710
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Sales and marketing 154,903 3,886 158,789
Product development and technology 509,372 73,223 582,595
Finance and administration 1,060,766 1,018,958 2,079,724
- --------------------------------------------------------------------------------------------------------------------------------
1,725,041 1,096,067 2,821,108
- --------------------------------------------------------------------------------------------------------------------------------
Net losses from operations (1,713,331) (1,096,067) (2,809,398)
Interest and miscellaneous income 2,353 -- 2,353
Deferred income tax recovery [note 10] 68,900 -- 68,900
- --------------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD (1,642,078) (1,096,067) (2,738,145)
================================================================================================================================
COMPREHENSIVE LOSS
Net loss for the period (1,642,078) (1,096,067) (2,738,145)
Foreign currency translation (5,894) 25,519 19,625
- --------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS (1,647,972) (1,070,548) (2,718,520)
- --------------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per share [note 8[b]] (0.12) (0.13)
================================================================================================================================
</TABLE>
See accompanying notes
<PAGE> 41
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
(expressed in U.S. dollars)
COMMON COMMON
COMMON STOCK TO BE STOCK ISSUED
STOCK ISSUED AND OUTSTANDING
# # $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[note 1[b]]
Deemed common shares issued to founders for cash [note 8[a][i]] 800 -- --
Deemed common shares issued for services [note 8[a][ii]] 50 -- --
Deemed common shares issued for cash [note 8[a][iii]] 50 -- --
Deemed common shares issued for investment [note 8[a][iv]] 10 -- --
Acquisition and cancellation of shares [note 8[a][v]] (110) 360,000 --
Deemed common shares to be issued [note 8[a][vi]] -- 1,396,380 --
Issue costs [note 8[a][vi]] -- -- --
Net loss for the period -- -- --
Foreign currency translation -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of June 30, 1998 [note 1[b]] 800 1,756,380 --
Deemed common shares issued for cash received in the prior year [note 8[a][v]] 160,000 (160,000) --
Deemed common shares issued for services rendered in the prior year [note 8[a][v]] 160,000 (160,000) --
Deemed common shares issued for investment in the prior year [note 8[a][v]] 40,000 (40,000) --
Deemed common shares issued for services rendered
in prior year [note 8[a][vii]] 4,499,200 -- --
Deemed common shares issued for services rendered
in current year [note 8[a][vii]] 1,337,248 -- --
Deemed common shares issued for cash [note 8[a][viii]] 237,667 -- --
Deemed common shares issued to
charitable organizations [note 8[a][ix]] 80,000 -- --
Prior year's subscription shares issued in current year [note 8[a][vi]] 1,396,380 (1,396,380) --
Deemed common shares issued pursuant to private placement [note 8[a][x]] 598,705 -- --
Issue costs [note 8[a][x]] -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of January 7, 1999 8,510,000 -- --
Acquisition of CityXpress.com by WelcomeTo [note 1[b]] 5,100,000 -- 5,100
Acquisition of Xceedx [note 3] 6,250,000 -- 6,250
Shares to be issued for services rendered [notes 1 and 8[a][xi]] -- 450,000 --
Finders fees acquisition costs [notes 1 and 8[a][xi]] -- -- --
Shares issued pursuant to private placement [note 8[a][xii]] 33,333 -- 33
Shares to be issued [notes 8[a][xiii]] -- 177,860 --
Net loss for the period -- -- --
Foreign currency translation -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding as of June 30, 1999 19,893,333 627,860 11,383
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(expressed in U.S. dollars)
OTHER
COMMON ADDITIONAL ACCUMULATED
STOCK TO BE PAID-IN COMPREHENSIVE
ISSUED CAPITAL LOSS
$ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[note 1[b]]
Deemed common shares issued to founders for cash [note 8[a][i]] -- 5 --
Deemed common shares issued for services [note 8[a][ii]] -- 30,521 --
Deemed common shares issued for cash [note 8[a][iii]] -- 17,033 --
Deemed common shares issued for investment [note 8[a][iv]] -- 3,406 --
Acquisition and cancellation of shares [note 8[a][v]] 50,960 (50,960) --
Deemed common shares to be issued [note 8[a][vi]] 236,130 -- --
Issue costs [note 8[a][vi]] (10,187) -- --
Net loss for the period -- -- --
Foreign currency translation -- -- 25,519
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of June 30, 1998 [note 1[b]] 276,903 5 25,519
Deemed common shares issued for cash received in the prior year [note 8[a][v]] (17,033) 17,033 --
Deemed common shares issued for services rendered in the prior year [note 8[a][v]] (30,521) 30,521 --
Deemed common shares issued for investment in the prior year [note 8[a][v]] (3,406) 3,406 --
Deemed common shares issued for services rendered
in prior year [note 8[a][vii]] -- 863,718 --
Deemed common shares issued for services rendered
in current year [note 8[a][vii]] -- 253,936 --
Deemed common shares issued for cash [note 8[a][viii]] -- 40,337 --
Deemed common shares issued to
charitable organizations [note 8[a][ix]] -- 15,207 --
Prior year's subscription shares issued in current year [note 8[a][vi]] (225,943) 225,943 --
Deemed common shares issued pursuant to private placement [note 8[a][x]] -- 175,805 --
Issue costs [note 8[a][x]] -- (32,487) --
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of January 7, 1999 -- 1,593,424 25,519
Acquisition of CityXpress.com by WelcomeTo [note 1[b]] -- 719,889 --
Acquisition of Xceedx [note 3] -- 868,750 --
Shares to be issued for services rendered [notes 1 and 8[a][xi]] -- 225,000 --
Finders fees acquisition costs [notes 1 and 8[a][xi]] -- (225,000) --
Shares issued pursuant to private placement [note 8[a][xii]] -- 99,966 --
Shares to be issued [notes 8[a][xiii]] 266,790 -- --
Net loss for the period -- -- --
Foreign currency translation -- -- (5,894)
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding as of June 30, 1999 266,790 3,282,029 19,625
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(expressed in U.S. dollars)
ACCUMULATED TOTAL
DEVELOPMENT STOCKHOLDERS'
STAGE DEFICIT EQUITY
$ $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[note 1[b]]
Deemed common shares issued to founders for cash [note 8[a][i]] -- 5
Deemed common shares issued for services [note 8[a][ii]] -- 30,521
Deemed common shares issued for cash [note 8[a][iii]] -- 17,033
Deemed common shares issued for investment [note 8[a][iv]] -- 3,406
Acquisition and cancellation of shares [note 8[a][v]] -- --
Deemed common shares to be issued [note 8[a][vi]] -- 236,130
Issue costs [note 8[a][vi]] -- (10,187)
Net loss for the period (1,096,067) (1,096,067)
Foreign currency translation -- 25,519
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of June 30, 1998 [note 1[b]] (1,096,067) (793,640)
Deemed common shares issued for cash received in the prior year [note 8[a][v]] -- --
Deemed common shares issued for services rendered in the prior year [note 8[a][v]] -- --
Deemed common shares issued for investment in the prior year [note 8[a][v]] -- --
Deemed common shares issued for services rendered
in prior year [note 8[a][vii]] -- 863,718
Deemed common shares issued for services rendered
in current year [note 8[a][vii]] -- 253,936
Deemed common shares issued for cash [note 8[a][viii]] -- 40,337
Deemed common shares issued to
charitable organizations [note 8[a][ix]] -- 15,207
Prior year's subscription shares issued in current year [note 8[a][vi]] -- --
Deemed common shares issued pursuant to private placement [note 8[a][x]] -- 175,805
Issue costs [note 8[a][x]] -- (32,487)
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of January 7, 1999 (1,096,067) 522,876
Acquisition of CityXpress.com by WelcomeTo [note 1[b]] -- 724,989
Acquisition of Xceedx [note 3] -- 875,000
Shares to be issued for services rendered [notes 1 and 8[a][xi]] -- --
Finders fees acquisition costs [notes 1 and 8[a][xi]] -- --
Shares issued pursuant to private placement [note 8[a][xii]] -- 99,999
Shares to be issued [notes 8[a][xiii]] -- 266,790
Net loss for the period (1,642,078) (1,642,078)
Foreign currency translation -- (5,894)
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding as of June 30, 1999 (2,738,145) 841,682
===================================================================================================================================
</TABLE>
See accompanying notes
<PAGE> 42
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
OCTOBER 27, 1997 OCTOBER 27, 1997
YEAR ENDED (INCEPTION) TO (INCEPTION) TO
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999
$ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Loss for the period (1,642,078) (1,096,067) (2,738,145)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization [note 5] 196,750 -- 196,750
Depreciation [note 4] 28,801 363 29,164
Gain on disposal of assets (28) -- (28)
Shares issued for services 269,143 30,521 299,664
Write-down of investment -- 3,406 3,406
Deferred income tax recovery (68,900) -- (68,900)
Changes in operating assets and liabilities
Accounts and other amounts receivable (778) (15,347) (16,125)
Prepaid expenses and deposits (37,240) (1,557) (38,797)
Accounts payable and accrued liabilities 202,303 915,659 1,117,962
Deferred revenue 6,190 -- 6,190
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (1,045,837) (163,022) (1,208,859)
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Repayment of loan payable (2,662) -- (2,662)
Proceeds from stock issued and to be issued, net 510,107 248,720 758,827
Proceeds from exercise of warrants 40,337 -- 40,337
Borrowings under bank indebtedness 7,999 -- 7,999
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 555,781 248,720 804,501
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds on disposition of property and equipment 1,221 -- 1,221
Acquisition of property and equipment (99,040) (23,797) (122,837)
Cash acquired on acquisition of subsidiaries
[notes 1 and 3] 763,500 -- 763,500
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES 665,681 (23,797) 641,884
- -----------------------------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash (2,189) (1,123) (3,312)
NET INCREASE IN CASH DURING THE PERIOD 173,436 60,778 234,214
Cash, beginning of period 60,778 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH, END OF PERIOD 234,214 60,778 234,214
===================================================================================================================================
</TABLE>
See accompanying notes
<PAGE> 43
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
1. NATURE OF BUSINESS AND LIQUIDITY
[a] NATURE OF OPERATIONS AND CONTINUING ENTITY
These consolidated financial statements are the continuing financial statements
of WelcomeTo Search Engine ("WelcomeTo") (a development stage enterprise), a
British Columbia corporation which was incorporated on October 27, 1997. On
January 7, 1999, WelcomeTo acquired the net assets of CityXpress.com Corp.
(formerly Wicked Wings of Buffalo) ("CityXpress.com"), a United States
non-operating company traded on the NASDAQ OTC Bulletin Board. After the
acquisition, the accounting entity continued under the name of CityXpress.com
[note 1[b]].
[b] REVERSE ACQUISITION OF CITYXPRESS.COM
Pursuant to a share purchase agreement dated January 7, 1999, the shareholders
of WelcomeTo sold their 100% interest in WelcomeTo to CityXpress.com in
consideration for 8,510,000 shares of CityXpress.com which represented a
controlling interest of approximately 62.5%. This transaction is considered an
acquisition of CityXpress.com (the accounting subsidiary/legal parent) by
WelcomeTo (the accounting parent/legal subsidiary) and has been accounted for as
a purchase of the net assets of CityXpress.com by WelcomeTo in these
consolidated financial statements because CityXpress.com had no business
operations at the time of the acquisition. The reverse acquisition resulted in
approximately $225,000 of one-time costs which were paid by the issuance of
shares. The costs of recapitalization have been charged against shareholders'
equity.
These consolidated financial statements are issued under the name of
CityXpress.com, but are a continuation of the financial statements of the
accounting acquirer, WelcomeTo. WelcomeTo's assets and liabilities are included
in the consolidated financial statements at their historical carrying amounts.
For purposes of the acquisition, the fair value of the net assets of
CityXpress.com of $724,989 is ascribed to the 5,100,000 previously outstanding
common shares of CityXpress.com deemed to be issued in the acquisition as
follows:
<TABLE>
<CAPTION>
$
- -------------------------------------------------------------------------------
<S> <C>
Net assets acquired
Cash 750,000
Accounts payable 25,011
- -------------------------------------------------------------------------------
724,989
Deemed consideration
5,100,000 shares of CityXpress.com 724,989
===============================================================================
</TABLE>
1
<PAGE> 44
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
1. NATURE OF BUSINESS AND LIQUIDITY (CONT'D.)
Prior to the reverse acquisition on January 7, 1999, the deemed number of
outstanding shares of CityXpress.com was equal to the 8,510,000 which were
issued to the shareholders of WelcomeTo in the acquisition. These shares have
been allocated to the changes in the combined issued and outstanding and
additional paid-in-capital common stock of WelcomeTo to January 7, 1999.
The Company's main products are a search engine for the internet and a suite of
internet applications. The search engine allows users to focus their search
within a specific geographic location. The internet applications allow companies
or end users to build e-commerce directories, catalogues and classified business
systems for small and mid-sized organizations. The Company currently operates in
only one industry segment and its marketing efforts are currently targeted to
the North American market.
The Company's consolidated financial statements for the year ended June 30, 1999
have been prepared on a going concern basis which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business. The Company incurred a loss of $1,642,078 for the year ended June
30, 1999. The Company is still a development stage enterprise and is expected to
incur losses and expenditures prior to the commencement of full-scale operations
in future years. The ability of the Company to continue as a going concern is
dependent upon its ability to achieve profitable operations and to obtain
additional capital. Management expects to raise additional capital through
private placements. The outcome of these matters cannot be predicted at this
time. No assurances can be given that the Company will be successful in raising
sufficient additional capital. Further, there can be no assurance, assuming the
Company successfully raises additional funds, that the Company will achieve
positive cash flow. If the Company is unable to obtain adequate additional
financing, management will be required to curtail the Company's operating
expenses. These financial statements do not include any adjustments to the
specific amounts and classifications of assets and liabilities which might be
necessary should the Company be unable to continue in business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared by management in accordance with
generally accepted accounting principles in the United States. The Company's
significant accounting policies are summarized below.
[a] PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CityXpress.com
Corp. and its wholly-owned subsidiaries, WelcomeTo Search Engine Inc. (British
Columbia) and Xceedx Technologies Inc. (British Columbia).
2
<PAGE> 45
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
[b] USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
[c] PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are being depreciated over their
useful lives on the following terms:
<TABLE>
<S> <C>
Computer equipment and software 3 years straight line
Office furniture and office equipment 5 years straight line
Leasehold improvements over the remaining lease period
</TABLE>
[d] ECOMMERCE TECHNOLOGY
eCommerce technology arose as part of the acquisition of Xceedx Technologies
Inc. and is being amortized on a straight-line basis over its useful life, which
is 36 months. The Company continually evaluates whether events and circumstances
have occurred indicating the remaining estimated useful life of this asset may
warrant revision, or may not be recoverable. If factors indicate that the value
of the eCommerce technology has been impaired, the Company uses an estimate of
the remaining recoverable value, based on undiscounted cash flows. Unrecoverable
amounts are charged to operations in the applicable period.
[e] PRODUCT DEVELOPMENT COSTS
Product development costs are expensed as incurred and are included in operating
expenses in the category "product development and technology".
[f] STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation based on the provisions of
Accounting Principles Board Opinion #25 whereby the intrinsic value of options
granted is recorded at the measurement date. The Company has elected to only
disclose the effects of the fair value method of accounting for stock options
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123.
3
<PAGE> 46
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
[g] FOREIGN EXCHANGE
The functional currency of the Company is the Canadian dollar, while the
reporting currency in the consolidated financial statements is in the U.S.
dollar. Asset and liability accounts are translated into United States dollars
at the exchange rate in effect at the balance sheet date. Revenue and expense
amounts are translated at the average exchange rate for the year. Gains or
losses resulting from this process are recorded in stockholders' equity as an
adjustment to other accumulated comprehensive income.
[h] REVENUE RECOGNITION
The Company's revenue is derived from various sources, resulting in the
following types of revenue recognition:
- - Initial set-up fee revenue for Xpress/sites eCommerce stores is
recognized when the client's web site is activated for the world wide
web, at which time the Company retains no material conditions or
obligations to our client.
- - Professional service revenue is recognized as the services are performed
for the client.
- - Hosting revenue is recognized monthly and amortized over the contract
period for hosting service.
- - Email revenue is recognized monthly and amortized over the contract
period for e-mail service.
[i] ADVERTISING COSTS
Advertising costs are expensed as incurred and amounted to $38,694 in the year
ended June 30, 1999 [1998 - $547].
[j] DEFERRED REVENUE
Deferred revenue reflects the cash received in advance of services rendered for
website hosting and e-mail.
4
<PAGE> 47
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
[k] INCOME TAXES
The Company uses the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that are expected to be in effect
when the differences are expected to reverse. Recognition of deferred tax assets
is limited to amounts considered by management to be more likely than not of
realization in future periods.
[l] FINANCIAL INSTRUMENTS
Amounts reported for cash, accounts receivable, accounts payable and accrued
liabilities and loans payable are considered to approximate fair value primarily
due to their short maturities and current interest rates.
[m] COMPUTATION OF LOSS PER COMMON SHARE
The basic loss per share figures are calculated on the following basis:
- - The number of shares outstanding from the beginning of the fiscal period to
the date of the reverse acquisition on January 7, 1999, are deemed to be
the number of shares issued by CityXpress.com to WelcomeTo.
- - The number of shares outstanding from the date of the reverse acquisition
to the end of each of the fiscal periods are deemed to be the weighted
average number of shares of CityXpress.com outstanding in each period.
Diluted loss per share is computed giving effect to all dilutive potential
common shares that were outstanding during the period. For the periods ended
June 30, 1999 and 1998, there were no dilutive potential common shares
outstanding.
[n] RECENT PRONOUNCEMENT
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). SFAS 133 will be effective for the Company's June 30,
2000 year end. The Company has not determined the impact, if any, of these
pronouncements on its consolidated financial statements.
5
<PAGE> 48
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
3. BUSINESS ACQUISITION
On January 27, 1999 the Company acquired 100% of the issued and outstanding
share stock of Xceedx Technologies Inc., a company whose principal business was
developing and selling eCommerce software products. The acquisition will be
accounted for by the purchase accounting method, in which the results of
operations are included in the Company's accounts from the date of acquisition.
Details of this acquisition are as follows:
<TABLE>
<CAPTION>
#
OF SHARES $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchase price 875,000
=================================================================================================
Consideration given:
Common shares issued January 27, 1999 6,250,000 875,000
=================================================================================================
</TABLE>
The purchase price has been allocated according to the estimated fair values of
the assets and liabilities of Xceedx Technologies Inc. as follows:
<TABLE>
<CAPTION>
$
- -------------------------------------------------------------------------------------------------
<S> <C>
Cash 13,500
Accounts receivable and prepaids 10,822
Property and equipment 6,727
eCommerce technology [note 5] 1,416,484
Accounts payable and accrued liabilities (22,643)
Loan payable (67,890)
Deferred tax liability (482,000)
- -------------------------------------------------------------------------------------------------
Net assets 875,000
=================================================================================================
</TABLE>
The allocation to net assets includes incurred liabilities of $9,352 in respect
of acquisition costs.
Unaudited pro forma financial information for the acquisition as if the
business had been acquired at the beginning of each respective fiscal period is
presented as follows:
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue 92,423 36,307
Net loss 1,905,084 1,393,217
- -------------------------------------------------------------------------------------------------
Net loss per common share (0.11) (0.09)
=================================================================================================
</TABLE>
6
<PAGE> 49
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
3. BUSINESS ACQUISITION (CONT'D.)
The unaudited pro forma information does not include the operating savings or
synergies anticipated as a result of the combined operations.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ---------------------------
ACCUMULATED ACCUMULATED
COST DEPRECIATION COST DEPRECIATION
$ $ $ $
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment and software 116,628 28,501 19,471 363
Office furniture and equipment 4,579 189 3,695 --
Leasehold improvements 7,753 501 -- --
- ---------------------------------------------------------------------------------------------------
128,960 29,191 23,166 363
- ---------------------------------------------------------------------------------------------------
NET BOOK VALUE 99,769 22,803
===================================================================================================
</TABLE>
5. eCOMMERCE TECHNOLOGY
<TABLE>
<CAPTION>
1999 1998
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
eCommerce technology [note 3] 1,416,484 --
Accumulated amortization 196,750 --
- --------------------------------------------------------------------------------------------------
NET BOOK VALUE 1,219,734 --
==================================================================================================
</TABLE>
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Trade accounts 245,019 14,803
Employee compensation 7,980 849,000
Accrued liabilities 27,155 30,012
- -------------------------------------------------------------------------------------------------
280,154 893,815
=================================================================================================
</TABLE>
7
<PAGE> 50
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
7. LOAN PAYABLE
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Canadian Imperial Bank of Commerce demand instalment loan 72,704 --
- -------------------------------------------------------------------------------------------------
72,704 --
=================================================================================================
</TABLE>
Interest paid during the year ended June 30, 1999 amounted to $2,257 [1998 -
$nil]. Interest on the loan is charged at the Canadian prime rate plus 1%,
which was 6.25% at June 30, 1999.
As collateral for the instalment loan, Xceedx Technologies Inc. has provided
the bank with a General Security Agreement on all property of Xceedx
Technologies Inc. In addition, personal guarantees have been provided by two of
the directors, supported by CIBC Business Loans Life Insurance.
CREDIT FACILITY
The Company's subsidiary has a credit facility available with the Canadian
Imperial Bank of Commerce. This credit facility is arranged in three types of
credits as follows:
Credit A A $10,183 revolving demand credit with interest at the bank's
prime rate plus 1% per annum. As at June 30, 1999, the amount
outstanding under this facility was $7,999 [1998 - $nil].
Credit B $75,809 of demand term loan with interest the bank's prime rate
plus 1% per annum, with monthly principal instalments of $445 per
month. As at June 30, 1999, the amount outstanding under this
facility was $72,704 [1998 - $nil].
Credit C $6,110 pledged in favour of CIBC Merchant VISA against
potential liability from account operations in accepting VISA and
Mastercard deposits. As at June 1999 and 1998, this facility was
not utilized.
Covenants under this credit facility require the Company's subsidiary to
maintain a minimum stockholders' equity in excess of a specified amount, not to
make capital expenditures in excess of a specified amount; and to obtain
approval prior to payment of dividends and advancing loans to other parties. As
at June 30, 1999, the Company's subsidiary was not in compliance with the
covenant related to minimum stockholders' equity. The Company is in the process
of restructuring the credit facility with the bank such that the facility will
be transferred from the subsidiary to the parent.
8
<PAGE> 51
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
8. SHARE STOCK
[a] ISSUANCE OF SHARES
[i] On October 27, 1997, the Company issued 800 common shares to the
founders of the Company at $0.01 per share ($0.01 Cdn.).
[ii] On October 27, 1997, the Company issued 50 shares in exchange for
consulting services provided by third parties. These shares were
recorded at the approximate fair value of the consulting services
provided of $610 per share ($900 Cdn.).
[iii] On November 13, 1997, the Company issued 50 common shares for cash
at $340 per share ($500 Cdn.).
[iv] On November 13, 1997, the Company issued 10 common shares in
exchange for an investment in Golf Escape Ltd. These shares were
recorded at the fair value of the investment received or $340 per
share ($500 Cdn.).
[v] On June 10, 1998, the Company agreed to reacquire and cancel 110
common shares of the Company from certain shareholders. In exchange
for these shares, the Company agreed to issue 360,000 common shares
upon amendment of the authorized capital of the Company. The cost
to reacquire these shares and commitment to issue new shares was
recorded as a reduction in common stock and corresponding increase
in stock subscriptions. This transaction was recorded using the
carrying values of the common stock reacquired of $50,960. The
360,000 common shares were issued on November 15, 1998.
[vi] Pursuant to stock subscription agreements received from November
1997 through June 1998, on November 15, 1998, Company issued
1,396,380 common shares at $0.17 (Cdn. $0.25) per share. These
shares were issued for total cash proceeds of $236,130 less issue
costs of $10,187.
[vii] On November 15, 1998, the Company issued 4,499,200 common shares to
certain officers, directors and employees of the Company in
exchange for services provided in the period ended June 30, 1998.
In addition, the Company issued 1,337,248 common shares to certain
officers, directors and employees of the Company in exchange for
services provided in July and August 1998. These common shares were
issued at the fair value of the common stock of approximately $0.19
(Cdn. $0.28) per share, which was based on third party stock
subscriptions. For the year ended June 30, 1999, the Company
recorded $253,936 [1998 - $863,718] of compensation expense.
9
<PAGE> 52
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
8. SHARE STOCK (CONT'D.)
[viii] Pursuant to stock subscription agreements received in August 1998,
on November 15, 1998, the Company issued 237,667 common shares at
$0.17 (Cdn. $0.25) per share for cash proceeds of $40,337.
[ix] Pursuant to services rendered in August 1998, on November 15, 1998,
the Company issued 80,000 shares to two charitable organizations
for services rendered in July and August 1998. These shares were
recorded at the fair value of the common stock of approximately
$0.19 per share (Cdn $0.28), which was based on third party stock
subscription agreements.
[x] Pursuant to stock subscription agreements received from July
through October 1998, on November 15, 1998, the Company issued
274,900 common shares at $0.17 (Cdn. $0.25) per share, 210,471
common shares at $0.34 (Cdn. $0.50) per share, and 113,334 common
shares at $0.51 (Cdn. $0.75) per share pursuant to third party
stock subscription agreements. The Company received total cash
proceeds of $175,805 less issue costs of $32,487.
[xi] On January 7, 1999, the Company incurred one-time finders fee costs
of $225,000 related to the reverse acquisition of the Company.
These costs were paid by the issuance of 450,000 common shares at
$0.50 (Cdn. $0.74) per share, after the year ended June 30, 1999.
[xii] On March 15, 1999, the Company issued 33,333 common shares pursuant
to stock subscription agreements at a price of $3.00 per share for
cash of $99,999.
[xiii] As at June 30, 1999, the Company received cash, net of financing
commissions payable, of $266,790 for stock subscriptions of 177,860
common shares at $1.50 per share. Each common share issued has an
attached warrant which entitles the holder to acquire one common
share for $1.50 each after a one year period, and $2.00 each after
two years. The warrants expire on June 10, 2000 and June 10, 2001
respectively. These common shares were issued on August 2, 1999.
10
<PAGE> 53
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
8. SHARE STOCK (CONT'D.)
[b] BASIC AND DILUTED LOSS PER SHARE
The basic and diluted loss per share is based on the following:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 27, 1997
YEAR ENDED (INCEPTION)
JUNE 30, TO JUNE 30
1999 1998
$ $
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss for the period (1,642,078) (1,096,067)
Weighted average number of common shares used
in computation 13,588,904 8,510,000
Basic and diluted loss per common share (0.12) (0.13)
=====================================================================================================
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company has the following future minimum lease commitments for premises and
equipment.
<TABLE>
<CAPTION>
$
- -------------------------------------------------------------------------------------------------
<S> <C>
2000 120,637
2001 138,202
2002 127,087
2003 83,582
- -------------------------------------------------------------------------------------------------
469,508
=================================================================================================
</TABLE>
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.
11
<PAGE> 54
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
10. INCOME TAXES
The Company is subject to United States Federal Taxes at an approximate rate of
35%. In 1999, it is also subject to Canadian Federal and British Columbia
provincial taxes of approximately 45%. (In 1998, the Company qualified as a
Canadian Controlled Private Corporation and as a result was subject to a lower
tax rate of 22%. The Company is no longer eligible for this low tax rate). No
current provision or benefit for income taxes has been recorded for the period
ended June 30, 1998 or the year ended June 30, 1999 as the Company has incurred
a net operating loss and has no carryback potential.
The Company's deferred income tax recovery comprises:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 27, 1997
YEAR ENDED (INCEPTION)
JUNE 30, TO JUNE 30
1999 1998
$ $
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
United States -- --
Canada (68,900) --
- -----------------------------------------------------------------------------------------------------
(68,900) --
=====================================================================================================
</TABLE>
The reconciliation of income tax attributable to continuing operations computed
at the U.S. federal statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Tax at U.S. statutory rates (599,000) (384,000)
Lower (higher) effective income taxes of other country (171,000) 142,000
Net operating losses not recognized for accounting purposes 670,000 37,000
Non-deductible expenses 1,000 202,000
Other 30,100 3,000
- -------------------------------------------------------------------------------------------------
Income tax recovery (68,900) --
=================================================================================================
</TABLE>
12
<PAGE> 55
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
10. INCOME TAXES (CONT'D.)
Net deferred tax assets (liabilities) comprises of the following:
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS
Loss carryforwards 720,000 37,000
Valuation allowance for future tax assets (720,000) (37,000)
- -------------------------------------------------------------------------------------------------
Net deferred tax assets -- --
- -------------------------------------------------------------------------------------------------
DEFERRED TAX LIABILITY
Excess book versus tax difference on eCommerce technology 413,100 --
=================================================================================================
</TABLE>
The tax losses expire as follows:
<TABLE>
<CAPTION>
$
- -------------------------------------------------------------------------------------------------
<S> <C>
CANADIAN
2004 170,000
2005 1,360,000
U.S.
2014 70,000
- -------------------------------------------------------------------------------------------------
1,600,000
=================================================================================================
</TABLE>
11. SUBSEQUENT EVENTS
[a] Subsequent to year end, the Company raised $217,890 for stock
subscriptions of 145,260 common shares. Each share has one attached
warrant which entitles the holder to acquire one common share for an
exercise price of $1.50 each after the first year and $2.00 each after the
second year.
[b] At the Company's Annual General Meeting (AGM), held on August 25, 1999,
shareholders voted to approve the Company's name change to CityXpress.com
Corp.
13
<PAGE> 56
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1999 (expressed in U.S. dollars)
11. SUBSEQUENT EVENTS (CONT'D.)
[c] At the AGM, shareholders approved a stock option plan which reserved the
granting of 2,000,000 options under the plan. Subsequently, options were
granted to acquire common shares as follows:
<TABLE>
<CAPTION>
NO. OF COMMON EXERCISE PRICE
SHARES ISSUABLE $ EXERCISABLE DATES DATE OF EXPIRY
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
225,000 1.50 July 13, 2000 July 13, 2003
225,000 1.50 July 13, 2001 July 13, 2003
225,000 1.50 July 13, 2002 July 13, 2003
----------------------------------------------------------------------------------------
675,000
========================================================================================
</TABLE>
The stock options are exercisable over a four-year period ending July 13,
2003 at an exercise price of $1.50 per common share. The options are
exercisable on a cumulative basis at 1/3 per year commencing July 13,
2000.
14
<PAGE> 57
COMBINED FINANCIAL STATEMENTS
XCEEDX TECHNOLOGIES INC.
JANUARY 14, 1999 AND 1998
<PAGE> 58
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
XCEEDX TECHNOLOGIES INC.
We have audited the accompanying combined balance sheets as of January 14, 1999
and 1998 of the corporation and partnership listed in Note 1, and the related
combined statements of operations, stockholders' deficit and cash flows for the
years then ended. These financial statements are the responsibility of the
entities' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position at January 14, 1999 and 1998 of
the corporation and partnership listed in Note 1, and the combined results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has no established source of revenue and is
dependent on its ability to raise capital from shareholders or other sources to
sustain operations. These factors, along with other matters as set forth in
Note 1, raise substantial doubt that the Company will be able to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
Vancouver, Canada,
September 24, 1999. Chartered Accountants
<PAGE> 59
XCEEDX TECHNOLOGIES INC.
COMBINED BALANCE SHEETS
As at January 14 (expressed in U.S. dollars)
<TABLE>
<CAPTION>
1999 1998
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS [note 5]
CURRENT
Cash 10,772 333
Accounts and other receivables 6,940 4,751
Grant receivable 3,210 --
Prepaid expenses and deposits 3,288 2,667
- --------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 24,210 7,751
- --------------------------------------------------------------------------------------------------
Property and equipment, net [note 3] 7,046 11,714
- --------------------------------------------------------------------------------------------------
31,256 19,465
==================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT
Accounts payable and accrued liabilities [note 4] 16,047 77,263
Loan payable [note 5] 72,737 78,093
Deferred revenue 1,331 1,083
- --------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 90,115 156,439
- --------------------------------------------------------------------------------------------------
Shareholder loan [note 6] -- 10,393
- --------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 90,115 166,832
- --------------------------------------------------------------------------------------------------
Commitments and contingencies [note 8]
STOCKHOLDERS' DEFICIT
Share stock [note 7]
Common stock, no par value, 20,000,000 authorized,
5,602,500 [1998 - 5,572,500] issued and outstanding 14,728 2
Preferred stock
Class A, no par value 5,000,000 authorized,
647,200 [1998 - 140,000] issued and outstanding 220,966 50,740
Class B, no par value 5,000,000 authorized, none issued
Additional paid in capital 571,510 459,044
Other accumulated comprehensive income [note 2[d]] 16,617 5,018
Deficit (882,680) (662,171)
- --------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (58,859) (147,367)
- --------------------------------------------------------------------------------------------------
31,256 19,465
==================================================================================================
</TABLE>
See accompanying notes
On behalf of the Board:
Director Director
<PAGE> 60
XCEEDX TECHNOLOGIES INC.
COMBINED STATEMENTS OF OPERATIONS
Years ended January 14 (expressed in U.S. dollars)
<TABLE>
<CAPTION>
1999 1998
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE
Professional services 52,641 8,565
Government grant 6,080 14,307
Equipment sales 22,652 12,319
Other 17,916 --
- --------------------------------------------------------------------------------------------------
99,289 35,191
- --------------------------------------------------------------------------------------------------
COST OF SALES
Professional services 2,030 2,083
Equipment sales 15,256 --
Royalties and other 551 496
- --------------------------------------------------------------------------------------------------
17,837 2,579
- --------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Sales and marketing 96,330 81,300
Product development and technology 85,239 103,803
Finance and administration 97,802 59,172
- --------------------------------------------------------------------------------------------------
279,371 244,275
- --------------------------------------------------------------------------------------------------
NET LOSS FOR THE YEAR (197,919) (211,663)
Deficit, beginning of year (662,171) (426,936)
Distributions [note 1] (22,590) (23,572)
- --------------------------------------------------------------------------------------------------
DEFICIT, END OF YEAR (882,680) (662,171)
==================================================================================================
COMPREHENSIVE LOSS
Net loss for the year (197,919) (211,663)
Foreign currency translation 11,599 5,018
- --------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS (186,320) (206,645)
==================================================================================================
Basic and diluted loss per share [note 7[c]] (0.04) (0.05)
==================================================================================================
</TABLE>
See accompanying notes
<PAGE> 61
XCEEDX TECHNOLOGIES INC.
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED SHARES ADDITIONAL
------------ ---------------- PAID IN CAPITAL
# $ # $ $
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 14, 1997 2,572,500 1 -- -- 421,698
Shares issued for services rendered
[note 7[b][i]] 3,000,000 1 -- -- --
Issuance of preferred shares -- -- 140,000 50,740 --
Net loss for the period -- -- -- -- --
Contributions -- -- -- -- 37,346
Distributions -- -- -- -- --
Foreign currency translation -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Balance, January 14, 1998 5,572,500 2 140,000 50,740 459,044
Issuance of common stock 30,000 14,726 -- -- --
Issuance of preferred shares -- -- 457,500 155,882 --
Preferred shares issued for conversion
of shareholder loan [note 6] -- -- 50,000 14,344 --
Net loss for the period -- -- -- -- --
Contributions -- -- -- -- 112,466
Distributions -- -- -- -- --
Foreign currency translation -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
5,602,500 14,728 647,500 220,966 571,510
=======================================================================================================================
<CAPTION>
OTHER
ACCUMULATED TOTAL
COMPREHENSIVE ACCUMULATED STOCKHOLDERS'
LOSS DEFICIT EQUITY
$ $ $
- ---------------------------------------------------------------------------------------------------
Balance, January 14, 1997 -- (426,936) (5,237)
Shares issued for services rendered
[note 7[b][i]] -- -- 1
Issuance of preferred shares -- -- 50,740
Net loss for the period -- (211,663) (211,663)
Contributions -- -- 37,346
Distributions -- (23,572) (23,572)
Foreign currency translation 5,018 -- 5,018
- ---------------------------------------------------------------------------------------------------
Balance, January 14, 1998 5,018 (662,171) (147,367)
Issuance of common stock -- -- 14,726
Issuance of preferred shares -- -- 155,882
Preferred shares issued for conversion
of shareholder loan [note 6] -- -- 14,344
Net loss for the period -- (197,919) (197,919)
Contributions -- -- 112,466
Distributions -- (22,590) (22,590)
Foreign currency translation 11,599 -- 11,599
- ---------------------------------------------------------------------------------------------------
16,617 (882,680) (58,859)
===================================================================================================
</TABLE>
See accompanying notes
<PAGE> 62
XCEEDX TECHNOLOGIES INC.
COMBINED STATEMENTS OF CASH FLOWS
Years ended January 14 (expressed in U.S. dollars)
<TABLE>
<CAPTION>
1999 1998
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the year (197,919) (211,663)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 6,919 8,999
Debt conversion expense 4,618 --
Changes in operating assets and liabilities
Accounts and other receivables (2,189) (1,676)
Grant receivable (3,210) --
Prepaid expenses and deposits (621) (719)
Accounts payable and accrued liabilities (61,217) 44,470
Deferred revenue 248 --
- --------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (253,371) (160,589)
- --------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Repayment of operating loan (43,646) --
Borrowing of loan payable 38,290 78,093
Capital contributions 89,876 13,774
Proceeds from common stock issued 14,727 --
Proceeds from preferred stock issued 155,882 50,561
Shareholder loan -- 10,393
- --------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 255,129 152,821
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of property and equipment (2,251) (11,452)
- --------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (2,251) (11,452)
- --------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash 10,932 13,341
NET INCREASE (DECREASE) IN CASH DURING THE YEAR 10,439 (5,879)
Cash, beginning of year 333 6,212
- --------------------------------------------------------------------------------------------------
NET CASH, END OF YEAR 10,772 333
==================================================================================================
</TABLE>
See accompanying notes
<PAGE> 63
XCEEDX TECHNOLOGIES INC.
NOTES TO COMBINED
FINANCIAL STATEMENTS
January 14, 1999 (expressed in U.S. dollars)
1. NATURE OF BUSINESS AND LIQUIDITY
NATURE OF OPERATIONS AND CONTINUING ENTITY
On January 5, 1999, Xceedx Technologies Inc. ("Xceedx") (a British Columbia
company incorporated on February 11, 1994 as 465155 BC Ltd., which changed its
name to Xceedx Technologies Inc. on October 25, 1994) completed the acquisition
of the assets of the Bradley and DuBois Partnership ("the Partnership") (a
British Columbia partnership which was founded on January 6, 1995 by the
shareholders of Xceedx).
Due to the common ownership of both Xceedx and the Partnership, this
acquisition has been accounted for in a manner similar to a pooling of
interests. Accordingly, the financial statements of Xceedx and the Partnership,
("the Company") have been restated to include the combined operations of Xceedx
and the Partnership as if they had combined at the beginning of the first
fiscal period presented. Contributions to, and distributions from the
partnership have been reflected in these financial statements as additional
paid in capital and distributions, respectively.
The Company provides professional consulting and technology support services.
Previously, Xceedx's main business was to develop eCommerce internet
applications while the Partnership's main business was to be a general purpose
technology supplier of products and services.
The Company's financial statements for the years ended January 14, 1999 and
1998 have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Company incurred a net loss of $197,919 for the
year ended January 14, 1999. The ability of the Company to continue as a going
concern is dependent upon its ability to achieve profitable operations and to
obtain additional capital. The outcome of these matters cannot be predicted at
this time. No assurances can be given that the Company will be successful in
raising sufficient additional capital. Further, there can be no assurance,
assuming the Company successfully raises additional funds, that the Company
will achieve positive cash flow. If the Company is unable to obtain adequate
additional financing, management will be required to sharply curtail the
Company's operating expenses. These financial statements do not include any
adjustments to the specific amounts and classifications of assets and
liabilities which might be necessary should the Company be unable to continue
in business.
<PAGE> 64
XCEEDX TECHNOLOGIES INC.
NOTES TO COMBINED
FINANCIAL STATEMENTS
January 14, 1999 (expressed in U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared by management in accordance with
generally accepted accounting principles in the United States. The Company's
significant accounting policies are summarized below.
[A] USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates.
[B] PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are being depreciated over their
useful lives on the following terms:
<TABLE>
<S> <C>
Computer equipment and software 3 years straight line
Office furniture and office equipment 5 years straight line
Leasehold improvements over the remaining lease period
</TABLE>
[C] PRODUCT DEVELOPMENT COSTS
Product development costs are expensed as incurred and are included in
operating expenses in the category "product development and technology".
[D] FOREIGN EXCHANGE
The functional currency of the Company is the Canadian dollar, while the
reporting currency in the financial statements is in the U.S. dollar. Asset and
liability accounts are translated into United States dollars at the exchange
rate in effect at the balance sheet date. Revenue and expense amounts are
translated at the average exchange rate for the year. Gains or losses resulting
from this process are recorded in stockholders' equity as an adjustment to
other accumulated comprehensive income.
[E] REVENUE RECOGNITION
The Company's revenue is primarily derived from professional services. Revenue
for professional service are recognized as the services are performed for the
client.
2
<PAGE> 65
XCEEDX TECHNOLOGIES INC.
NOTES TO COMBINED
FINANCIAL STATEMENTS
January 14, 1999 (expressed in U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
[F] ADVERTISING COSTS
Advertising costs are expensed as incurred and amounted to $2,856 in the year
ended January 14, 1999 [1998 - $1,004].
[G] DEFERRED REVENUE
Deferred revenue reflects the cash received in advance of services rendered.
[H] INCOME TAXES
The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be
in effect when the differences are expected to reverse. Recognition of deferred
tax assets is limited to amounts considered by management to be more likely
than not of realization in future periods.
[I] STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation based on the provision of
Accounting Principles Board Opinion #25 whereby the intrinsic value of options
granted is recorded at the measurement date. The Company has elected to only
disclose the effects of the fair value method of accounting for stock options
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123.
[J] COMPUTATION OF LOSS PER COMMON SHARE
Basic loss per share is computed by dividing the net loss attributable to
common stockholders by the weighted average number of common shares outstanding
for that period. Diluted loss per share is computed giving effect to all
dilutive potential common shares that were outstanding during the period. For
the periods ended January 14, 1999 and 1998, the diluted loss per share will be
equivalent to the basic loss per share since the Company is in a loss position.
3
<PAGE> 66
XCEEDX TECHNOLOGIES INC.
NOTES TO COMBINED
FINANCIAL STATEMENTS
January 14, 1999 (expressed in U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
[K] RECENT PRONOUNCEMENT
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) and the AICPA has issued Statement of Position 98-1
"Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SFAS 133 will be effective for the Company's January
14, 2000 year end and SOP 98-1 will be effective for the Company's January 14,
2001 year end. The Company has not determined the impact, if any, of these
pronouncements on its financial statements.
[L] LEASES
Leases which transfer substantially all the benefits and risks of ownership of
the leased property are accounted for as capital leases whereby the property is
recorded as an asset and the obligation incurred is recorded as a liability.
Under this method of accounting for leases the asset is amortized on a
straight-line basis over its estimated useful life and the obligation,
including interest thereon, is amortized over the life of the lease. Operating
lease payments are expensed as incurred.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1999 1998
------------------------------ --------------------------
ACCUMULATED ACCUMULATED
COST DEPRECIATION COST DEPRECIATION
$ $ $ $
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment and software 20,139 15,620 18,528 10,648
Office furniture and equipment 11,447 9,963 12,103 8,748
Leasehold improvements 4,819 3,776 4,121 3,642
- ---------------------------------------------------------------------------------------------------
36,405 29,359 34,752 23,038
- ---------------------------------------------------------------------------------------------------
NET BOOK VALUE 7,046 11,714
===================================================================================================
</TABLE>
4
<PAGE> 67
XCEEDX TECHNOLOGIES INC.
NOTES TO COMBINED
FINANCIAL STATEMENTS
January 14, 1999 (expressed in U.S. dollars)
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Trade accounts 5,597 75,535
Accrued liabilities 10,450 1,728
- -------------------------------------------------------------------------------------------------
16,047 77,263
=================================================================================================
</TABLE>
5. LOAN PAYABLE
Interest paid on the Canadian Imperial Bank of Commerce demand instalment loan
during the year ended January 14, 1999 amounted to $6,259 [1998 - $4,796].
Interest on the loan is charged at the Canadian prime rate plus 1%, which was
6.75% at January 14, 1998 [1998 - 6.00%].
As collateral for the instalment loan, the Company has provided the bank with a
General Security Agreement on all property of the Company. In addition,
personal guarantees have been provided by two of the directors, supported by
CIBC Business Loans Life Insurance.
CREDIT FACILITY
The Company has a credit facility available with the Canadian Imperial Bank of
Commerce. This credit facility is arranged in three types of credits as
follows:
Credit A A $10,183 [1998 - $45,032] revolving demand credit with
interest at the bank's prime rate plus 1% per annum. As at
January 14, 1999, there was no amount outstanding under this
facility [1998 - $43,646].
Credit B $75,809 [1998 - $34,640] of demand instalment loan with
interest the bank's prime rate plus 1% per annum, with monthly
principal instalments of $445 [1998 - $192] per month. As at
January 14, 1999, the amount outstanding under this facility was
$72,737 [1998 - $34,447].
Credit C $6,110 [1998 - nil] pledged in favour of CIBC Merchant VISA
against potential liability from account operations in accepting
VISA and Mastercard deposits. As at January 14, 1999, this
facility was not utilized.
5
<PAGE> 68
XCEEDX TECHNOLOGIES INC.
NOTES TO COMBINED
FINANCIAL STATEMENTS
January 14, 1999 (expressed in U.S. dollars)
5. LOAN PAYABLE (CONT'D.)
Covenants under this credit facility require the Company to maintain a minimum
stockholders' equity in excess of a specified amount, not to make capital
expenditures in excess of a specified amount; and to obtain approval prior to
payment of dividends and advancing loans to other parties. As at January 14,
1999 and January 14, 1998, the Company was not in compliance with the covenant
related to minimum stockholders' equity. The Company is in the process of
restructuring the credit facility with the bank such that the facility will be
transferred from the subsidiary to the parent.
6. RELATED PARTY TRANSACTION
The amount due to shareholder bears interest at 10% per annum and has no
specific terms of repayment. During 1999 the loan was converted to 50,000
preferred shares at $0.29 per share.
7. SHARE STOCK
[A] AUTHORIZED SHARE CAPITAL
On April 30, 1997, the authorized share capital was increased from 10,000
common shares to 20,000,000 common shares without par value, 5,000,000 Class A
Preferred stock without par value and 5,000,000 Class B Preferred Stock without
par value.
The Preferred stock is non-voting and redeemable at the option of the Company
at an amount specified by the Directors Resolutions.
[B] ISSUANCE OF SHARES
[i] During the year ended January 14, 1998, prior to the commencement of
business operations, the Company issued 3,000,000 common shares to
certain officers and directors of the Company for a nominal value of
$1.
6
<PAGE> 69
XCEEDX TECHNOLOGIES INC.
NOTES TO COMBINED
FINANCIAL STATEMENTS
January 14, 1999 (expressed in U.S. dollars)
7. SHARE STOCK (CONT'D.)
[C] BASIC AND DILUTED LOSS PER SHARE
The basic and diluted loss per share is based on the following:
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss for the period (197,919) (211,633)
Weighted average number of common shares used
in computation 5,572,582 4,701,267
Basic and diluted loss per common share (0.04) (0.05)
=================================================================================================
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
The Company has the following future minimum lease commitments for premises and
equipment.
<TABLE>
<CAPTION>
$
- --------------------------------------------------------------------
<S> <C>
2000 30,901
2001 32,125
2002 27,645
2003 9,708
- --------------------------------------------------------------------
100,379
====================================================================
</TABLE>
Rent costs are expensed as incurred and amounted to $23,428 in the year ended
January 14, 1999 [1998 - $24,787].
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.
7
<PAGE> 70
XCEEDX TECHNOLOGIES INC.
NOTES TO COMBINED
FINANCIAL STATEMENTS
January 14, 1999 (expressed in U.S. dollars)
9. INCOME TAXES
The Company is subject to Canadian Federal and British Columbia provincial
taxes at an approximate rate of 45%. (In 1998, the Company qualified as a
Canadian Controlled Private Corporation and as a result was subject to a lower
tax rate of 22%. The Company is no longer eligible for this low tax rate). No
current provision or benefit for income taxes has been recorded for the year
ended January 14, 1999 or 1998 as the Company has incurred a net operating loss
and has no carryback potential.
The reconciliation of income tax attributable to continuing operations computed
at the U.S. federal statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Tax at U.S. statutory rates (68,000) (72,000)
Lower (higher) effective income taxes of other country (19,000) 27,000
Net operating losses not recognized for accounting purposes 2,000 12,000
Partnership losses not deductible in the corporation [note 1] 78,000 33,000
Other 7,000 --
- -------------------------------------------------------------------------------------------------
Income tax expense -- --
=================================================================================================
</TABLE>
Net deferred tax assets comprises of the following:
<TABLE>
<CAPTION>
1999 1998
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS
Loss carryforwards 27,000 12,000
Excess tax value over book value 5,000 --
Valuation allowance for future tax assets (32,000) (12,000)
- -------------------------------------------------------------------------------------------------
Net deferred tax assets -- --
=================================================================================================
</TABLE>
The tax losses expire as follows:
<TABLE>
<CAPTION>
$
- -------------------------------------------------------------------------------------------------
<S> <C>
2005 55,000
2006 6,000
- -------------------------------------------------------------------------------------------------
61,000
=================================================================================================
</TABLE>
8
<PAGE> 71
CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
DECEMBER 31, 1999
<PAGE> 72
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
[See Nature of Business and Liquidity - Note 1]
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1999 1999
$ $
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash -- 234,214
Accounts and other receivables 10,436 29,350
Prepaid expenses and deposits 123,287 38,762
- ---------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 133,723 302,326
- ---------------------------------------------------------------------------------------------------
Property and equipment, net 83,683 99,769
eCommerce technology, net 983,634 1,219,734
- ---------------------------------------------------------------------------------------------------
1,201,040 1,621,829
===================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Bank indebtedness 26,506 7,999
Accounts payable and accrued liabilities 310,135 280,154
Deferred revenue 2,596 6,190
Loan payable [note 2] 70,036 72,704
- ---------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 409,273 367,047
- ---------------------------------------------------------------------------------------------------
Deferred tax liability 333,100 413,100
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 742,373 780,147
- ---------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock [note 3]
Common stock, $0.001 par value, 50,000,000 12,256 11,383
authorized, issued and outstanding - 20,765,974 at December 31,
1999 and 19,893,333 at June 30, 1999
Common stock to be issued - 915,075 at December 31, 1999
and 627,860 at June 30, 1999 373,394 266,790
Additional paid in capital 3,901,905 3,282,029
Other accumulated comprehensive income 24,142 19,625
Deficit accumulated during the development stage (3,853,030) (2,738,145)
- ---------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 458,667 841,682
- ---------------------------------------------------------------------------------------------------
1,201,040 1,621,829
===================================================================================================
</TABLE>
See accompanying notes
<PAGE> 73
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS SIX MONTHS OCTOBER 27, 1997
ENDED ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999
$ $ $
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE 10,403 -- 22,113
- -------------------------------------------------------------------------------
OPERATING EXPENSES
Sales and marketing 137,606 71,172 296,395
Product development and technology 488,710 133,574 1,071,305
Finance and administration 579,386 167,678 2,659,110
- -------------------------------------------------------------------------------
1,205,702 372,424 4,026,810
- -------------------------------------------------------------------------------
Net loss from operations (1,195,299) (372,424) (4,004,697)
Interest and miscellaneous income 414 -- 2,767
Deferred income tax recovery 80,000 -- 148,900
- -------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD (1,114,885) (372,424) (3,853,030)
===============================================================================
COMPREHENSIVE LOSS
Net loss for the period (1,114,885) (372,424) (3,853,030)
Foreign currency translation 4,517 -- 24,142
- -------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD (1,110,368) (372,424) (3,828,888)
===============================================================================
Basic and diluted loss per share (0.05) (0.04)
===============================================================================
</TABLE>
See accompanying notes
<PAGE> 74
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' DEFICIT (EQUITY)
(UNAUDITED)
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
COMMON STOCK COMMON COMMON
COMMON TO BE STOCK ISSUED STOCK TO BE
STOCK ISSUED AND OUTSTANDING ISSUED
# # $ $
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deemed outstanding as of June 30, 1998 800 -- -- --
Deemed common shares issued for services rendered in prior year 4,739,200 -- -- --
Deemed common shares issued for services rendered in current year 1,337,248 -- -- --
Deemed common shares issued for cash pursuant to warrants exercised 237,667 -- -- --
Deemed common shares issued to charitable organizations 80,000 -- -- --
Prior year's subscription shares issued in current year 1,516,380 -- -- --
Deemed common shares issued pursuant to private placement 598,705 -- -- --
Issue costs -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of January 7, 1999 8,510,000 -- -- --
Acquisition of CityXpress.com by WelcomeTo 5,100,000 -- 5,100 --
Acquisition of Xceedx 6,250,000 -- 6,250 --
Shares to be issued for services rendered -- -- -- --
Finders fees acquisition costs -- -- -- --
Shares issued pursuant to private placement 33,333 -- 33 --
Net loss for the period -- -- -- --
Foreign currency translation -- -- -- --
Shares to be issued -- 627,860 -- 266,790
- -------------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of June 30, 1999 19,893,333 627,860 11,383 266,790
Shares issued pursuant to share subscriptions [note 3(a)(i)] 177,860 (177,860) 178 (266,790)
Shares issued for services [note 3(a)(i)] 450,000 (450,000) 450 --
Shares issued pursuant to private placement [note 3(a)(ii)] 145,260 -- 145 --
Shares issued pursuant to private placement [note 3(a)(iii)] 46,666 -- 47 --
Shares issued pursuant to private placement [note 3(a)(iv)] 52,855 -- 53 --
Net loss for the period -- -- -- --
Foreign currency translation -- -- -- --
Additional shares to be issued [note 3(a)(vi)] -- 172,617 -- --
Shares to be issued [note 3(a)(v)] -- 742,458 -- 373,394
- -------------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of December 31, 1999 20,765,974 915,075 12,256 373,394
===============================================================================================================================
<CAPTION>
OTHER
ADDITIONAL ACCUMULATED ACCUMULATED TOTAL
PAID IN COMPREHENSIVE DEVELOPMENT STOCKHOLDERS'
CAPITAL LOSS STAGE DEFICIT EQUITY
$ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deemed outstanding as of June 30, 1998 276,908 25,519 (1,096,067) (793,640)
Deemed common shares issued for services rendered in prior year 863,718 -- -- 863,718
Deemed common shares issued for services rendered in current year 253,936 -- -- 253,936
Deemed common shares issued for cash pursuant to warrants exercised 40,337 -- -- 40,337
Deemed common shares issued to charitable organizations 15,207 -- -- 15,207
Prior year's subscription shares issued in current year -- -- -- --
Deemed common shares issued pursuant to private placement 175,805 -- -- 175,805
Issue costs (32,487) -- -- (32,487)
- ------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of January 7, 1999 1,593,424 25,519 (1,096,067) 522,876
Acquisition of CityXpress.com by WelcomeTo 719,889 -- -- 724,989
Acquisition of Xceedx 868,750 -- -- 875,000
Shares to be issued for services rendered 225,000 -- -- --
Finders fees acquisition costs (225,000) -- -- --
Shares issued pursuant to private placement 99,996 -- -- 99,999
Net loss for the period -- -- (1,642,078) (1,642,078)
Foreign currency translation -- (5,894) -- (5,894)
Shares to be issued -- -- -- 266,790
- ------------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of June 30, 1999 3,282,029 19,625 (2,738,145) 841,682
Shares issued pursuant to share subscriptions [note 3(a)(i)] 266,612 -- -- --
Shares issued for services [note 3(a)(i)] (450) -- -- --
Shares issued pursuant to private placement [note 3(a)(ii)] 217,745 -- -- 217,890
Shares issued pursuant to private placement [note 3(a)(iii)] 69,953 -- -- 70,000
Shares issued pursuant to private placement [note 3(a)(iv)] 66,016 -- -- 66,069
Net loss for the period -- -- (1,114,885) (1,114,885)
Foreign currency translation -- 4,517 -- 4,517
Additional shares to be issued [note 3(a)(vi)] -- -- -- --
Shares to be issued [note 3(a)(v)] -- -- -- 373,394
- ------------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of December 31, 1999 3,901,905 24,142 (3,853,030) 458,667
==============================================================================================================================
</TABLE>
See accompanying notes
<PAGE> 75
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS SIX MONTHS OCTOBER 27, 1997
ENDED ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999
$ $ $
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss for the period (1,114,885) (372,424) (3,853,030)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization 236,100 -- 432,850
Depreciation 22,611 9,019 51,775
Gain on disposal of assets -- -- (28)
Shares issued for services -- 17,799 299,664
Write-down of investment -- -- 3,406
Deferred income tax recovery (80,000) -- (148,900)
Changes in operating assets and liabilities
Accounts and other receivable 18,914 15,072 2,789
Prepaid expenses and deposits (84,525) (576) (123,322)
Accounts payable and accrued liabilities 29,981 454,019 1,147,943
Deferred revenue (3,594) -- 2,596
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (975,398) 122,909 (2,184,257)
- -----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Repayment of loan payable (2,668) -- (5,330)
Proceeds from stock issued and to be issued, net 727,353 136,151 1,486,180
Proceeds from exercise of warrants -- 23,007 40,337
Borrowings under bank indebtedness 18,507 -- 26,506
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 743,192 159,158 1,547,693
- -----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds on disposition of property and equipment -- -- 1,221
Acquisition of property and equipment (6,605) (42,634) (129,442)
Cash acquired on acquisition of subsidiaries -- -- 763,500
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (6,605) (42,634) 635,279
- -----------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash 4,597 (94) 1,285
NET INCREASE (DECREASE) IN CASH DURING THE PERIOD (234,214) 239,339 --
Cash, beginning of period 234,214 60,778 --
- -----------------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD -- 300,117 --
=================================================================================================================
</TABLE>
See accompanying notes
<PAGE> 76
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at December 31, 1999 and for the six months ended December 31,
1999 and 1998 is unaudited.
1. NATURE OF BUSINESS AND LIQUIDITY
These consolidated financial statements are the continuing financial statements
of WelcomeTo Search Engine ("WelcomeTo") (a development stage enterprise), a
British Columbia corporation which was incorporated on October 27, 1997. On
January 7, 1999, WelcomeTo acquired the net assets of CityXpress.com Corp.
(formerly Wicked Wings of Buffalo) ("CityXpress.com"), a United States
non-operating company traded on the NASDAQ OTC Bulletin Board. After the
acquisition, the accounting entity continued under the name of CityXpress.com.
CityXpress.com Corp (the Company) is a software developer and Internet
publisher. The Company intends to be the preferred means by which Internet
consumers can locate and purchase products and services from online companies
in their regional markets. This goal will be met by building alliances with
media companies who own newspaper and television stations and providing them
with a suite of Internet products that can be profitably sold to businesses
looking for cost-effective means of establishing and promoting an eCommerce
presence in both their regional markets.
The Company's consolidated financial statements for the period ended December
31, 1999 have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Company incurred a loss of $1,114,885 for the
six months ended December 31, 1999, has a net working capital deficit of
$275,550 at December 31, 1999 ($64,721 at June 30, 1999). The Company is still
a development stage enterprise and is expected to incur losses and expenditures
prior to the commencement of full-scale operations in the future. The ability
of the Company to continue as a going concern is dependent upon its ability to
achieve profitable operations and to obtain additional capital. The outcome of
these matters cannot be predicted at this time. No assurances can be given that
the Company will be successful in raising sufficient additional capital.
Further, there can be no assurance, assuming the Company successfully raises
additional funds, that the Company will achieve positive cash flow. If the
Company is unable to obtain adequate additional financing, management will be
required to sharply curtail the Company's operating expenses. These financial
statements do not include any adjustments to the specific amounts and
classifications of assets and liabilities which might be necessary should the
Company be unable to continue in business.
1. NATURE OF BUSINESS AND LIQUIDITY (CONT'D.)
These financial statements have been prepared by management in accordance with
generally accepted accounting principles in the United States and in the
opinion of management reflect all adjustments, which consist only of normal and
recurring adjustments necessary to present fairly the financial position and
results of operations and cash flows.
1
<PAGE> 77
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at December 31, 1999 and for the six months ended December 31,
1999 and 1998 is unaudited.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended June 30,
1999.
2. LOAN PAYABLE
Covenants under the credit facility with the Canadian Imperial Bank of Commerce
requires the Company's subsidiary to maintain a minimum stockholders' equity in
excess of a specified amount, not to make capital expenditures in excess of a
specified amount; and to obtain approval prior to payment of dividends and
advancing loans to other parties. As at December 31, 1999, the Company's
subsidiary was not in compliance with the covenant related to minimum
stockholders' equity.
On January 14, 2000, the Company restructured its credit facility with the bank
such that the convenant regarding minimum stockholders' equity was removed. In
addition the existing loan was refinanced into a Demand installment loan
pursuant to which the Company received $169,687 ($250,000 Cdn) with terms
consisting of principal and interest payments of $1,573 ($2,318 Cdn) per month,
starting March 15, 2000.
3. SHARE STOCK
[A] ISSUANCE OF SHARES
[i] In July 1999, the company issued 177,860 common shares pursuant
to share subscriptions of $266,790 received prior to June 30,
1999. In addition, the Company issued 450,000 common shares in
respect of finders' fees incurred prior to June 30, 1999.
[ii] In July and August 1999, the Company issued 145,260 common
shares for cash $217,890. Each common share has one attached
warrant which entitles the holder to acquire one common share
for an exercise price of $1.50 during the first year and $2.00
during the second year. The warrants expire July 14, 2001 to
August 15, 2001.
2. SHARE STOCK (CONT'D)
[A] ISSUANCE OF SHARES (CONT'D)
[iii] In September 1999, the Company received a subscription for
46,666 common shares for $70,000. The shares were issued in
December 1999. Pursuant to the subscription agreement, if at any
time until March 31, 2000 the Company issues common shares at a
share price of less than $1.50 per share, then additional common
shares will be issued to such investors, such that the effective
issue price of the common shares issued is equal to the lower
price paid [see note 3(a)(vi)]. Each common share has one
attached warrant which entitles the holder to acquire one common
share for an exercise price of $1.50 during the first year and
$2.00
2
<PAGE> 78
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at December 31, 1999 and for the six months ended December 31,
1999 and 1998 is unaudited.
during the second year. [see note 3(a)(vi)]. The warrants expire
September 30, 2001.
[iv] In October 1999, the Company issued 52,855 common shares for
$66,069. Pursuant to the subscription agreement , if at any time
until March 31, 2000 the Company issues common shares at a share
price of less than $1.25 per share, then additional common
shares will be issued to such investors, such that the effective
issue price of the common shares issued is equal to the lower
price paid [see note 3(a)(vi)]. Each common share has one
attached warrant which entitles the holder to acquire one common
share for an exercise price of $1.25 during the first year and
$2.00 during the second year. [see note 3(a)(vi)]. The warrants
expire October 13, 2001.
[v] In September and December 1999, the Company received
subscriptions for 733,800 common shares for $366,900. In
addition, in December 1999, the Company received subscriptions
for 8,658 common shares for $6,494. These shares were issued
after December 31, 1999.
With respect to the subscriptions for the 733,800 common shares,
each common share has one attached warrant which entitles the
holder to acquire one common share for an exercise price of
$0.50 during the first year and $0.75 during the second year.
The warrants expire September 30, 2001 to December 10, 2001.
[vi] Pursuant to the agreements referred to in notes 3(iii) and (iv)
above, the Company is required to issue an additional 172,617
common shares for no additional consideration. These shares were
issued after December 31, 1999. In addition, the number of
warrants granted was increased by 93,334 to 140,000 and by
79,283 to 132,138, respectively, and the exercise price
decreased to $0.50 during the first year and $0.75 during the
second year.
3. SHARE STOCK (CONT'D)
[B] BASIC AND DILUTED LOSS PER SHARE
The basic loss per share figures are calculated using the weighted average
number of common shares outstanding. Diluted loss per share is computed giving
effect to all dilutive potential common shares that were outstanding during the
period. For the periods ended December 31, 1999 and 1998, there were no
dilutive potential common shares outstanding.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31 DECEMBER 31
1999 1998
$ $
- -------------------------------------------------------------------------------
<S> <C> <C>
Net loss for the period (1,114,885) (372,424)
Weighted average number of common shares used
in computation 20,666,214 8,510,000
Basic and diluted loss per common share (0.05) (0.04)
- -----------------------------------------------------------------------------
</TABLE>
3
<PAGE> 79
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at December 31, 1999 and for the six months ended December 31,
1999 and 1998 is unaudited.
[C] STOCK OPTIONS
At the Annual General Meeting on August 25, 1999, shareholders approved a stock
option plan which reserved the granting of 2,000,000 options under the plan.
Options were granted to acquire common shares as follows:
<TABLE>
<CAPTION>
NO. OF COMMON EXERCISE PRICE
SHARES ISSUABLE $ EXERCISABLE DATES DATE OF EXPIRY
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
225,000 1.50 July 13, 2000 July 13, 2003
225,000 1.50 July 13, 2001 July 13, 2003
225,000 1.50 July 13, 2002 July 13, 2003
- -------------------------------------------------------------------------------
675,000
===============================================================================
</TABLE>
The stock options are exercisable over a four-year period ending July 13,
2003 at an exercise price of $1.50 per common share. The options are
exercisable on a cumulative basis at 1/3 per year commencing July 13,
2000.
3. SHARE STOCK (CONT'D)
[D] WARRANTS
At December 31, 1999, the Company has the following warrants outstanding, all
of which expire two years after the grant date.
<TABLE>
<CAPTION>
SHARES TO BE WARRANT GRANT WARRANT PRICE WARRANT PRICE
ISSUED DATE DURING YEAR 1 DURING YEAR 2
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
177,860 June 10, 1999 $1.50 $2.00
45,260 July 14, 1999 $1.50 $2.00
100,000 August 15, 1999 $1.50 $2.00
140,000 September 30, 1999 $0.50 $0.75
132,138 October 13, 1999 $0.50 $0.75
325,800 September 30, 1999 $0.50 $0.75
408,000 December 10, 1999 $0.50 $0.75
---------
1,329,058
---------
</TABLE>
4. SUBSEQUENT EVENTS
In January 2000, the Company raised $319,000 stock subscriptions for 638,000
common shares. Each share has one attached warrant which entitles the holder to
acquire one common share for an exercise price of $0.50 during the first year
and $0.75 during the second year.
4
<PAGE> 80
PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS (UNAUDITED)
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
(FORMERLY WELCOMETO SEARCH ENGINE, INC.)
JUNE 30, 1999
<PAGE> 81
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS (UNAUDITED)
Year ended June 30, 1999
<TABLE>
<CAPTION>
XCEEDX
CITYXPRESS.COM TECHNOLOGIES PRO FORMA PRO FORMA
CORP. INC. ADJUSTMENTS CONSOLIDATED
$ $ $ NOTES $
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE 11,710 92,423 (11,710) 2[c] 92,423
- -------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Sales and marketing 154,903 85,686 (29,356) 2[c] 211,233
Product development and
technology 509,372 151,691 (96,104) 2[c] 564,959
Finance and administration 1,060,766 103,019 224,783 2[a]&[c] 1,388,568
- -------------------------------------------------------------------------------------------------------
1,725,041 340,396 99,323 2,164,760
- -------------------------------------------------------------------------------------------------------
Net losses from operations (1,713,331) (247,973) (111,033) (2,072,337)
Interest and miscellaneous
income 2,353 -- -- 2,353
Deferred income tax recovery 68,900 -- 96,000 2[b] 164,900
- -------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD (1,642,078) (247,973) (15,033) (1,905,084)
=======================================================================================================
Basic and diluted loss per
share (0.12) (0.04) 2[d] ($0.11)
=======================================================================================================
Weighted average number of
common shares
outstanding 13,588,904 5,572,582 17,201,918
=======================================================================================================
</TABLE>
See accompanying notes
<PAGE> 82
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS (UNAUDITED)
Year ended June 30, 1999
1. BASIS OF PRESENTATION
The accompanying pro forma consolidated statement of operations gives effect to
the acquisition of Xceedx Technologies Inc. ("Xceedx") by CityXpress.com Corp.
("the Company") and the issuance of 6,250,000 common shares of the Company for
net proceeds of $875,500, as described in the audited consolidated financial
statements of the Company for the year ended June 30, 1999.
The accompanying pro forma consolidated statement of operations has been
prepared by management of the Company and is derived from: the audited
consolidated financial statements of the Company for the year ended June 30,
1999; the audited combined financial statements of Xceedx as of January 14,
1999 and 1998, and the unaudited combined financial statements of Xceedx for
the year ended June 30, 1999. The accounting policies used in the preparation
of the pro forma consolidated statement of operations are those disclosed in
the Company's audited consolidated financial statements. Management has
determined that no adjustments are necessary to conform Xceedx's combined
financial statements with the accounting policies used by the Company in the
preparation of its financial statements.
The pro forma consolidated statement of operations is not necessarily
indicative of the results that actually would have been achieved if the
transactions reflected therein had been completed on the dates indicated or the
results which may be obtained in the future. In preparing this pro forma
consolidated statement of operations no adjustments have been made to reflect
the operating benefits or the general and administrative cost savings that may
have resulted from the earlier combination of the operations of Xceedx and the
Company.
The pro forma consolidated financial statements should be read in conjunction
with the audited consolidated financial statements of the Company and the
audited combined financial statements of Xceedx, including the notes thereto.
1
<PAGE> 83
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS (UNAUDITED)
Year ended June 30, 1999
2. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
This pro forma consolidated statement of operations gives effect to the
completion of the acquisition of Xceedx as if it had occurred on July 1, 1998.
On January 27, 1999 the Company acquired 100% of the issued and outstanding
share stock of Xceedx. The acquisition was accounted for by the purchase
accounting method, in which the results of operations are included in the
Company's accounts from the date of acquisition. Details of this acquisition
are as follows:
<TABLE>
<CAPTION>
#
OF SHARES $
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchase price 875,000
===================================================================================================================
Consideration given:
Common shares issued January 27, 1999 6,250,000 875,000
===================================================================================================================
</TABLE>
The purchase price has been allocated according to the estimated fair values of
the assets and liabilities of Xceedx as follows:
<TABLE>
<CAPTION>
$
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash 13,500
Accounts receivable and prepaids 10,822
Property and equipment 6,727
eCommerce technology 1,416,484
Accounts payable and accrued liabilities (22,643)
Loan payable (67,890)
Deferred tax liability (482,000)
- -------------------------------------------------------------------------------------------------------------------
Net assets 875,000
===================================================================================================================
</TABLE>
The allocation to net assets includes incurred liabilities of $9,352 in respect
of acquisition costs.
2
<PAGE> 84
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS (UNAUDITED)
Year ended June 30, 1999
2. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS (CONT'D.)
The following adjustments have been made to reflect the transactions described
above:
[a] To reflect amortization of the eCommerce technology from July 1, 1998 to
the acquisition date in the amount of $275,000.
[b] To reflect the deferred income tax recovery resulting from the additional
amortization of the eCommerce technology, as noted in 2[a] above.
[c] To remove the results of operations of Xceedx for the period January 27,
1999 to June 30, 1999.
[d] The loss per share has been calculated on the basis of the weighted average
number of the Company's common shares outstanding as if the acquisition of
Xceedx had occurred on July 1, 1998.
3
<PAGE> 85
PART III EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------------------------------------------------------------------------
<S> <C>
1. Articles of Incorporation of Wicked Wings of Buffalo Inc. effective
January 15, 1981.
2. Articles of amendment of Wicked Wings of Buffalo Inc. effective
August 3, 1998.
3. Articles of name change from Wicked Wings of Buffalo to WelcomeTo
Search Engine, Inc. effective January 7, 1999.
4. Articles of name change from WelcomeTo Search Engine, Inc. to
CityXpress.com Corp. effective August 25, 1999.
5. Bylaws of CityXpress.com Corp.
6. Acquisition Agreement by and between WelcomeTo Search Engine, Inc.
and Xceedx Technologies Inc. dated January 27, 1999.
7. Acquisition Agreement by and between WelcomeTo Search Engine, Inc.
and WelcomeTo Search Engine Inc. dated January 7, 1999.
8. Pooling Agreement by and between The Shareholders of WelcomeTo
Search Engine, Inc. listed on Schedule A to the Agreement and Russell
& DuMoulin dated as of December 11, 1999.
9. Voluntary Pooling Agreement by and between the undersigned
Shareholders of WelcomeTo Search Engine, Inc., WelcomeTo Search
Engine, Inc. and Russell & DuMoulin dated as of December 11, 1999.
10. Stock Option Agreement.
11. Service Agreement by and between WelcomeTo Search Engine, Inc. and
Phil Dubois, dated January 27, 1999.
12. Service Agreement by and between WelcomeTo Search Engine, Inc. and
Ken R. Bradley, dated January 27, 1999.
13. Data and service Agreement by and between WelcomeTo Search Engine,
Inc. and Dun and Bradstreet dated March 5, 1999.
14. Strategic Partner Agreement by and between CityXpress.com Corp. and Lee
Enterprises Incorporated.
15. Ernst & Young consent letter.
</TABLE>
37
<PAGE> 86
<TABLE>
<S> <C>
16. Canadian Imperial Bank of Commerce Credit Agreement with the Company.
17. Canadian Imperial Bank of Commerce Securities Pledge Agreement
with the Company.
18. Canadian Imperial Bank of Commerce Security Agreement with the Company.
19. Guarantee of Mr. Phil Dubois.
20. Guarantee of Mr. Ken Bradley
21. CyberCash Agreement.
22. CityXpress.com Corp. specimen share certificate.
</TABLE>
LIST OF SUBSIDIARIES OF THE REGISTRANT
1. WelcomeTo Search Engine Inc.
2. Xceedx Technologies Inc.
38
<PAGE> 1
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
WICKED WINGS OF BUFFALO, INC.
The undersigned subscriber to these Articles of Incorporation, a
natural person competent to contract, hereby forms a corporation under the laws
of the State of Florida.
ARTICLE I. NAME
The name of the corporation shall be: WICKED WINGS OF BUFFALO, INC.
ARTICLE II. NATURE OF BUSINESS
This corporation may engage or transact in any or all lawful activities
or business permitted under the laws of the United States, the State of Florida
or any other state, country, territory or nation.
ARTICLE III. CAPITAL STOCK
The maximum number of shares of stock that this corporation is
authorized to have outstanding at any one time is 200 shares of common stock
having a par value of $1 per share.
ARTICLE IV. ADDRESS
The street address of the initial registered office of the corporation
shall be 216 South Duval Street, Suite 208, Tallahassee, Florida 32301, and the
name of the initial registered agent of the corporation at that address is
Corporation Information Services, Inc. - Betty Young.
ARTICLE V. TERM OF EXISTENCE
This corporation is to exist perpetually.
ARTICLE VI. SPECIAL PROVISION
The stock of this corporation is intended to qualify under the
requirements of Section 1244 of the Internal Revenue Code and the regulations
issued thereunder. Such actions as are necessary will be taken by the
appropriate officers to accomplish this compliance.
ARTICLE VII. DIRECTORS
This corporation shall have one directors, initially. The name and
street addresses of the initial members of the Board of Directors are:
Leslie P. Roth 2139 C Hidden Lake Drive, Tampa, Florida 33612
<PAGE> 2
ARTICLE VIII. OFFICERS
The names and addresses of the initial officers of the corporation who
shall hold office for the first year of the corporation, or until their
successors are elected or appointed are:
Leslie P. Roth 2139 C Hidden Lake Drive, Tampa, Florida 33612
Pres./Sec.
ARTICLE IX. SUBSCRIBER
The name and street address of the subscriber to these Articles of
Incorporation is:
Betty Young 216 South Duval Street, Suite 208, Tallahassee,
Florida 32301
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
on this 15th day of January, 1981.
/s/ Betty Young (SEAL)
<PAGE> 1
EXHIBIT 2
ARTICLES OF AMENDMENT
TO
WICKED WINGS OF BUFFALO, INC.
THE UNDERSIGNED, being the sole director and president of Wicked Wings of
Buffalo, Inc., does hereby amend its Articles of incorporation as follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation is Wicked Wings of Buffalo, Inc.
ARTICLE II
PURPOSE
The Corporation shall be organized for any and all purposes authorized
under the laws of the state of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue perpetual.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000
shares of common stock, $0.001 par value.
ARTICLE V
PLACE OF BUSINESS
The initial address of the principal place of business of this
corporation in the State of Florida shall be 200 E. Robinson St. Suite 450,
Orlando, FL 32801. The Board of directors may at any time and from time move the
principal office of this corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
Directors. The number of such directors shall not be less than one (1) and,
subject to such minimum may be increased or decreased from time to time in the
manner provided in the By-Laws.
<PAGE> 2
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No share holder shall have any right to acquire share or other
securities of the corporation except to the extent to such right may be granted
by an amendment to these Articles of Incorporation or by a resolution of the
Board of Directors.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Anything in these Articles of Incorporation, the By-Laws, or the
Florida Corporation Act notwithstanding, by-laws not be adopted, modified,
amended or repealed by the shareholders of the Corporation except upon the
affirmative vote of a simple majority vote of the holders of all the issued and
outstanding shares of the corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1 Inspection of books. The Board of Directors shall make the
reasonable rules to determine at what times and place and under what conditions
the books of the Corporation shall be open to inspection by shareholders or a
duly appointed representative of a shareholder.
9.2 Control Share Acquisition. The provisions relating to any control
share acquisition as contained in Florida Statutes now, or hereinafter amended,
and any successor provision shall not be applied to the Corporation.
9.3 Quorum. The holders of shares entitled to one-third of the votes at
a meeting of shareholder's shall constitute a quorum.
9.4 Required Vote. Acts of shareholders shall require the approval of
holders of 50.01% of the outstanding votes of shareholders.
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by law, no director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owed to the Corporation or its shareholders.
In addition the Corporation shall have the power, in its by-laws or in any
resolution of its stockholders or directors, to undertake to indemnify the
officers and directors of this corporation against any contingency or peril as
may be determined to be in the best interest of this corporation, and in
conjunction therewith, to procure, at this corporation's expense, policies of
insurance.
<PAGE> 3
ARTICLE XI
CONTRACTS
No contract or other transaction between this corporation and any
person, firm or corporation shall be affected by the fact that any officer or
director of this corporation is such other party or is, or at some time in the
future becomes, an officer, director or partner of such other contracting party,
or has now or hereafter a direct or indirect interest in such contract.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on July 29, 1998 and that the
number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed the
Articles of Incorporation on this 29th day of July 1998.
/s/ Pamela Wilkinson, Sole Director
President
The foregoing instrument was acknowledged before me on July 29, 1998,
by Pamela Wilkinson, who is personally known to me.
/s/ Nicole Johnson, Notary Public
My Commission Expires:
<PAGE> 1
EXHIBIT 3
ARTICLES OF AMENDMENT TO
WICKED WINGS OF BUFFALO, INC.
THE UNDERSIGNED, being the president of Wicked Wings of Buffalo, Inc.,
does hereby amend its Articles of Incorporation as follows:
ARTICLE I
CORPORATE NAME
The name of Corporation shall be WelcomeTo Search Engine, Inc.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on October 17, 1998 and that
the number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation on October 17, 1998.
/s/ Pamela J. Wilkinson, President
The foregoing instrument was acknowledged before me on October 17,
1998, by Pamela J. Wilkinson, who is personally known to me.
/s/ Nicole Johnson
Notary Public
My Commission expires:
<PAGE> 1
EXHIBIT 4
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
WELCOME TO SEARCH ENGINE, INC.
Pursuant to the provisions of section 607.1006, Florida Statues, this Florida
profit corporation adopts the following articles of amendment to its articles of
incorporation:
ARTICLE I
The name of the corporation shall be CityXpress.com Corp
The date of the amendment adoption: August 25, 1999.
The amendment was approved by the shareholders. The number of votes
cast for the amendment was sufficient for approval.
Signed this 27th day of August, 1999.
Signature: /s/ Phil Dubois
President
<PAGE> 1
EXHIBIT 5
BY-LAWS
OF
WICKED WINGS OF BUFFALO, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of
this corporation shall be held on the 30th day of June of each year or at such
other time and place designated by the Board of Directors of the corporation.
Business transacted at the annual meeting shall include the election of
directors of the corporation. If the designated day shall fall on a Sunday or
legal holiday, then the meeting shall be held on the first business day
thereafter.
Section 2. Special Meetings. Special meetings of the shareholders shall
be held when directed by the President or the Board of Directors, or when
requested in writing by the holders of not less than 10% of all the shares
entitled to vote at the meeting. A meeting requested by shareholders shall be
called for a date not less than 3 nor more than 30 days after the request is
made, unless the shareholders requesting the meeting designate a later date. The
call for the meeting shall be issued by the Secretary, unless the President,
Board of Directors, or shareholders requesting the meeting shall designate
another person to do so.
Section 3. Place. Meetings of shareholders shall be held at the
principal place of business of the corporation or at such other place as may be
designated by the Board of Directors.
Section 4. Notice. Written notice stating the place, day and hour of
the meeting and in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than 3 nor more than 30
days before the meeting, either personally or by first class mail, or by the
direction of the President, the Secretary or the officer or persons calling the
meeting to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
Section 5. Notice of Adjourned Meeting. When a meeting is adjourned to
another time or place, it shall not be necessary to give any- notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this Article to each shareholder
of record on a new record date entitled to vote at such meeting.
Section 6. Shareholder Quorum and Voting. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders unless otherwise provided by
law.
<PAGE> 2
Section 7. Voting of Shares. Each outstanding share shall be entitled
to one vote on each matter submitted to a vote at a meeting of shareholders.
Section 8. Proxies. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or his duly authorized attorney-in-fact.
No proxy shall be valid after the duration of 11 months from the date thereof
unless otherwise provided in the proxy.
Section 9. Action by Shareholders Without a Meeting. Any action
required by law or authorized by these by-laws or the Articles of Incorporation
of this corporation or taken or to be taken at any annual or special meeting of
shareholders, or any action which may be taken at any annual or special meeting
of shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock 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.
ARTICLE II. DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.
Section 2. Qualification. Directors need not be residents of this state
or shareholders of this corporation.
Section 3. Compensation. The Board of Directors shall have authority to
fix the compensation of directors.
Section 4. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
votes against such action or abstains from voting in respect thereto because of
an asserted conflict of interest.
Section 5. Number. This corporation shall have a minimum of 1 director
but no more than 7.
Section 6. Election and Term. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
first annual meeting of shareholders, and until his successor shall have been
elected and qualified or until his earlier resignation, removal from office or
death. At the first annual meeting of shareholders and at each annual meeting
thereafter the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for a term for which
he is elected and until his successor shall have been elected and qualified or
until his earlier resignation, removal from office or death.
<PAGE> 3
Section 7. Vacancies. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
Section 8. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may be
removed, with or without 4 cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
Section 9. Quorum and Voting. A majority of the number of directors
fixed by these by-laws shall constitute a quorum for the transaction of
business. The act of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 10. Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one or more other committees
each of which, to the extent provided in such resolution shall have and may
exercise all the authority of the Board of Directors, except as is provided by
law.
Section 11. Place of Meeting. Regular and special meetings of the Board
of Directors shall be held at the principal place of business of the corporation
or as otherwise determined by the Directors.
Section 12. Time. Notice and Call of Meetings. Regular meetings of the
Board of Directors shall be held without notice on the first Monday of the
calendar month two (2) months following the end of the corporation's fiscal, or
if the said first Monday is a legal holiday, then on the next business day.
Written notice of the time and place of special meetings of the Board of
Directors shall be given to each director by either personal delivery, telegram
or cablegram at least three (3) days before the meeting or by notice mailed to
the director at least 3 days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose, of any
regular or special meeting of the Board of Directors need be specified in the
notice of waiver of notice of such meeting. A majority of the directors present,
whether or not a quorum exists, may adjourn any meeting of the Board of
Directors to another time and place. Notice of any such adjourned meeting shall
be given to the directors who were not present at the time of the adjournment,
and unless the time
<PAGE> 4
and place of adjourned meeting are announced at the time of the adjournment, to
the other directors. Meetings of the Board of Directors may be called by the
chairman of the board, by the president of the corporation or by any two
directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
Section 13. Action Without a Meeting. Any action, required to be taken
at a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, is
signed by such number of the directors, or such number of the members of the
committee, as the case may be, as would constitute the requisite majority
thereof for the taking of such actions, is filed in the minutes of the
proceedings of the board or of the committee. Such actions shall then be deemed
taken with the same force and effect as though taken at a meeting of such board
or committee whereat all members were present and voting throughout and those
who signed such action shall have voted in the affirmative shall have voted in
the negative. For informational purposes, a copy of such signed actions shall be
Mailed to all members of the board or committee who did not sign said action,
provided however, that the failure to mail said notices shall in no way
prejudice the actions of the board or committee.
ARTICLE III. OFFICERS
Section 1. Officers. The officers of this corporation shall consist of
a president, a secretary and a treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as may
be deemed necessary may be elected or appointed by the Board of Directors from
time to time. Any two or more offices may be held by the same person.
Section 2. Duties. The officers of this corporation shall have the
following duties: The President shall be the chief executive officer of the
corporation, shall have general and active management of the business and
affairs of the corporation subject to the directions of the Board of Directors,
and shall preside at all meetings of the shareholders and Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the shareholders and Board of directors, send all notices of all meetings and
perform such other duties as may be prescribed by the Board of Directors or the
President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of shareholders and whenever else
required by the Board of Directors or the President, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
<PAGE> 5
Section 3. Removal of Officers. officer or agent elected or appointed
by the Board of Directors may be removed by the board whenever in its judgment
the best interests of the corporation will be served thereby. -Any vacancy in
any office may be filed by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
Section 1. Issuance. Every holder of shares in this corporation shall
be entitled to have a certificate representing all shares to which he is
entitled. No certificate shall be issued for any share until such share is fully
paid.
Section 2. Form. Certificates representing shares in this corporation
shall be signed by the President or Vice President and the Secretary or an
Assistant Secretary and may be sealed with the seal of this corporation or a
facsimile thereof.
Section 3. Transfer of Stock. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney.
Section 4. Lost, Stolen or Destroyed Certificates. If the shareholder
shall claim to have lost or destroyed a certificate of shares issued by the
corporation, a new certificate shall be issued upon the making of an affidavit
that fact by the person claiming the certificate of stock to be lost, stolen or
destroyed, and, at the discretion of the Board of Directors, upon the deposit of
a bond or other indemnity in such amount and with such sureties, if any, as the
board may reasonably require.
ARTICLE V. BOOKS AND RECORDS
Section 1. Books and Records. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders, Board of Directors and committee of directors.
This corporation shall keep at its registered office, or principal
place of business a record of its shareholders, giving the names and addresses
of all shareholders and the number of the shares held by each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
Section 2. Shareholders' Inspection Rights. Any person who shall have
been a holder of record of shares of voting trust certificates therefor at least
six months immediately preceding his demand or shall be the holder of record of,
or the holder of record of voting trust certificates for, at least five percent
of the outstanding shares of the corporation, upon written demand stating the
purpose thereof, shall have the right to examine, in person or by agent or
attorney, at any reasonable time or times, for any proper purpose its relevant
books and records of accounts, minutes and records of shareholders and to make
extracts therefrom.
<PAGE> 6
Section 3. Financial Information. Not later than four months after the
close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial condition of the corporation as of
the close of its fiscal year, and a profit and loss statement showing the
results of the operations of the corporation during the fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to each
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement. The balance sheets and profit
and loss statements shall be filed in the registered office of the corporation
in this state, shall be kept for at least five years, and shall be subject to
inspection during business hours by any shareholder or holder of voting trust
certificates, in person or by agent.
ARTICLE VI. DIVIDENDS
The Board of Directors of this corporation may, from time to time,
declare and the corporation may pay dividends on its shares in cash, property or
its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent subject to the provisions of the
Florida Statutes.
ARTICLE VII. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be in
circular form.
ARTICLE VIII. AMENDMENT
These by-laws may be altered, amended or repealed, and new by-laws may
be adopted by the a majority vote of the directors of the corporation.
<PAGE> 1
EXHIBIT 6
WELCOMETO SEARCH ENGINE, INC.
555-425 Carrall Street
Vancouver, British Columbia
V6B 6E3
- --------------------------------------------------------------------------------
January 21, 1999
XCEEDX TECHNOLOGIES INC. and
THE COMMON AND PREFERRED
SHAREHOLDERS OF
XCEEDX TECHNOLOGIES INC.
c/o 211-4240 Manor Street
Burnaby, British Columbia
V5G 1B2
Attention: Mr. Phil Dubois, President
Dear Sirs:
RE: WELCOMETO SEARCH ENGINE, INC. ("WELCOMETO")
-OFFER TO ACQUIRE 100% OF THE OUTSTANDING COMMON SHARES
OF XCEEDX TECHNOLOGIES INC. ("XCEEDX")
We write to set out the offer of WelcomeTo to XCEEDX and the common and
preferred shareholders of XCEEDX (the "Shareholders") to acquire 100% of the
outstanding common and preferred shares of XCEEDX.
This offer is on the terms and is subject to the conditions set forth in this
letter. If this offer is acceptable, we ask that you indicate your agreement by
signing this letter where indicated below, completing the required information
and returning an executed copy to us. This offer is open for acceptance until
4:00 p.m. (Pacific Time) on January 21, 1999 (the "Expiry Time"), at which time
this offer will terminate unless accepted in writing.
WelcomeTo's offer is as follows:
1. OFFER TO PURCHASE
1.1 WelcomeTo offers to purchase from each Shareholder all of the common
and preferred shares of XCEEDX held by the Shareholder (the "Shares") on the
terms and subject to the conditions set forth in this offer, for an aggregate
fair market value purchase price for the Shares of $1,250,000 ($CDN).
WelcomeTo's obligation to purchase the Shares held by any Shareholder is
conditional upon Shareholders holding at least 90% of the outstanding common
shares and 90% of the outstanding preferred shares of XCEEDX accepting this
offer by the Expiry Time.
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2. PAYMENT FOR THE SHARES
2.1 WelcomeTo will pay the purchase price by issuing to each Shareholder
accepting this offer (each an "Accepting Shareholder") one (1) common share of
WelcomeTo (each a "WelcomeTo Share") for each common and preferred share of
XCEEDX held by the Accepting Shareholder. (For example: A shareholder of XCEEDX
accepting this offer will receive 1,000 common shares of WelcomeTo on closing
for each 1,000 common shares of XCEEDX held by the Shareholder.)
3. CLOSING DATE
The date of the closing of the purchase and sale of the Shares of each Accepting
Shareholder will be the 21st day of January, 1999 (the "Closing Date"), or such
other date as may be agreed upon in writing by the parties hereto.
4. REPRESENTATIONS AND WARRANTIES OF EACH ACCEPTING SHAREHOLDER
4.1 WelcomeTo's purchase will be based on the following representations and
warranties by each Accepting Shareholder, each of which will survive closing:
(a) XCEEDX is a corporation duly organized, validly existing and in good
standing under the British Columbia Company Act;
(b) all Shares owned by the Accepting Shareholder are owned free and clear
of all liens, charges, encumbrances and security interests;
(c) there is no shareholders' agreement between the shareholders of XCEEDX
to which the Accepting Shareholder is party and there is no other
shareholders' agreement between any of the shareholders XCEEDX of
which the Accepting Shareholder has knowledge;
(d) except as disclosed in XCEEDX's financial statements as at January 14,
1999 attached hereto as Schedule "A" (the "XCEEDX Financial
Statements"), XCEEDX has no indebtedness, debt or other liability to
the Accepting Shareholder and to the best knowledge of the Accepting
Shareholder, to any other shareholder or any officer or director of
XCEEDX;
(e) the Accepting Shareholder has no option, warrant or other right to
acquire any shares of XCEEDX;
(f) no person, firm or corporation has any agreement or option or any
right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option for the purchase from the
Accepting Shareholder any of the Shares;
(g) each Accepting Shareholder acknowledges and understands that the
WelcomeTo Shares have not been, nor will be registered or qualified
under and are being sold in reliance on exemptions provided for in
applicable securities laws, rules and regulations and that WelcomeTo
will thereby be exempt from certain disclosure obligations otherwise
applicable under such securities laws, rules and regulations, and
that, as a result:
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(i) the Accepting Shareholders will be restricted from using most of
the civil remedies available under such laws and regulations;
(ii) the Accepting Shareholders may not receive information that
would otherwise be required to be provided to them under such
securities laws and regulations;
(iii) WelcomeTo is relieved from certain obligations that would
otherwise apply under such laws and regulations;
(iv) the Accepting Shareholders will not receive the benefits
associated with a purchase of securities distributed under a
filed prospectus or other offering document, including the
review of material by securities regulatory authorities and may
not receive information that would otherwise be required to be
provided to each Accepting Shareholder under such laws and
regulations;
(v) the WelcomeTo Shares will be subject to resale restrictions with
which the Accepting Shareholders will comply, and in particular,
the WelcomeTo Shares may not be transferred, encumbered, sold,
hypothecated, or otherwise disposed of, if such disposition will
violate any federal and/or state securities acts. Disposition
shall include, but is not limited to acts of selling, assigning,
transferring, pledging, encumbering, hypothecating, giving, and
any form of conveying, whether voluntary or not; and
(vi) the Accepting Shareholders understand that there is not any
market for the WelcomeTo Shares and that no assurance has been
given that a market will ever develop, that the transferability
of the WelcomeTo Shares will be affected by resale restrictions
imposed by applicable securities laws, rules and regulations and
that, accordingly, it may not be possible for the Accepting
Shareholders to liquidate their investments in the WelcomeTo
Shares readily, if at all;
(h) each Accepting Shareholder further acknowledges and understands that
the XCEEDX Shares are being exchanged for WelcomeTo Shares pursuant to
section 4(2) of the Securities Act of 1933 (U.S.) and therefore are
"restricted" securities as that term is defined in Rule 144 of the
Securities Act of 1933. As such, each Accepting Shareholder
acknowledges and understands that the WelcomeTo Shares cannot be
re-sold for a period of 12 months from the Closing Date and thereafter
can only be sold in compliance with Rule 144 of the Securities Act of
1933;
(i) each Accepting Shareholder acknowledges that the WelcomeTo Shares HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION; ANY STATE SECURITIES AGENCY; OR ANY FOREIGN
SECURITIES AGENCY, and that the WelcomeTo Shares have not been
registered under the Securities Act of 1933 and may not be offered or
sold in the United States unless registered under the Securities Act
of 1933 and the securities laws of all applicable states of the United
States or an exemption from such registration requirements is
available, and that WelcomeTo is under no obligation to register or
seek an exemption under any federal securities act, state securities
act, or any foreign securities act for any of the
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WelcomeTo Shares or to cause or to permit the WelcomeTo Shares to be
transferred in the absence of any such registration or exemption;
(j) each Accepting Shareholder further acknowledges and understands that
in addition to the restrictions placed on the WelcomeTo Shares by the
Securities Act of 1933, the British Columbia Securities Act will place
resale restrictions on the WelcomeTo Shares which will result in
Accepting Shareholders who are residents of British Columbia acquiring
WelcomeTo Shares subject to a 12 month hold period, such hold period
commencing from the date that WelcomeTo becomes a reporting issuer in
British Columbia. Each Accepting Shareholder further acknowledges and
understands that WelcomeTo has no obligation or present intention of
becoming a reporting issuer in British Columbia and no representations
to the contrary have been made to the Accepting Shareholders;
(k) each Accepting Shareholder has been independently advised as to the
applicable hold periods imposed in respect of the WelcomeTo Shares by
applicable securities legislation and regulatory policies and confirms
that no representations have been made by WelcomeTo or any other
individuals respecting the hold periods applicable to the WelcomeTo
Shares and is aware of the risks and other characteristics of the
WelcomeTo Shares and of the fact that the Accepting Shareholder may
not be able to resell the WelcomeTo Shares purchased by it except in
accordance with the applicable securities legislation and regulatory
policies;
(l) if required by applicable securities legislation, policy or order or
by any securities commission, stock exchange or other regulatory
authority, the Accepting Shareholder will execute, deliver, file and
otherwise assist WelcomeTo in filing such reports, undertakings, and
other documents with respect to the issue of the WelcomeTo Shares as
may be required;
(m) all certificates for common shares of WelcomeTo received in exchange
will be endorsed with the following legend pursuant to the Securities
Act of 1933 and the British Columbia Securities Act:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), AND ARE BEING OFFERED
AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED
FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE
REGISTERED UNDER THE APPLICABLE PROVISIONS OF THE ACT OR ARE
EXEMPT FROM SUCH REGISTRATION. THE SECURITIES REPRESENTED BY
THIS SHARE CERTIFICATE ARE SUBJECT TO A HOLD PERIOD AND MAY
NOT BE TRADED IN BRITISH COLUMBIA UNTIL THE EXPIRY OF THE HOLD
PERIOD (EXCEPT AS PERMITTED BY THE SECURITIES ACT BRITISH
COLUMBIA) AND THE REGULATIONS MADE UNDER THE ACT;
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(n) to the extent that any federal and/or state securities laws shall
require, the Accepting Shareholder hereby agrees that any WelcomeTo
Shares acquired pursuant to this offer shall be without preference as
to assets;
(o) the Accepting Shareholder is not an underwriter and would be acquiring
the WelcomeTo Shares solely for investment for his or her own account
and not with a view to, or for, resale in connection with any
distribution within the meaning of any federal securities act, state
securities act or any other applicable federal or state laws;
(p) the Accepting Shareholder understands the speculative nature and risks
of investments associated with the WelcomeTo Shares, and confirms that
the WelcomeTo Shares would be suitable and consistent with his or her
investment program; that his or her financial position enable him or
her to bear the risks of this investment; and, that there is no public
market for the WelcomeTo Shares;
(q) the Accepting Shareholder has had the opportunity to ask questions of
WelcomeTo, has received additional information from WelcomeTo to the
extent that WelcomeTo possessed such information, necessary to
evaluate the merits and risks of any investment in the WelcomeTo
Shares. Further, the Accepting Shareholder has been given: (1) All
material books, records and financial statements of WelcomeTo; (2) all
material contracts and documents relating to the proposed transaction;
and (3) an opportunity to question the appropriate executive officers
of WelcomeTo;
(r) the Accepting Shareholder has satisfied the suitability standards
imposed by his or her applicable state or provincial laws and has a
preexisting personal and business relationship with WelcomeTo;
(s) the Accepting Shareholder has adequate means of providing for his
current needs and personal contingencies and has no need to sell the
WelcomeTo Shares in the foreseeable future (that is at the time of the
investment, the Accepting Shareholder can afford to hold the WelcomeTo
Shares for an indefinite period of time);
(t) the Accepting Shareholder has sufficient knowledge and experience in
financial matters to evaluate the merits and risks of the WelcomeTo
Shares and further, the Accepting Shareholder is capable of reading
and interpreting financial statements;
4.2 In addition to the above representations and warranties, WelcomeTo's
purchase will be based on the representations and warranties of each Accepting
Shareholder as follows, provided that if the Accepting Shareholder is not a
director or officer of XCEEDX, such representations and warranties will be
limited to the best knowledge of the Accepting Shareholder and each of which
will survive closing:
(a) the issued and outstanding capital of XCEEDX consists of 5,632,500
common shares and 617,500 preferred shares, which Shares are held by
the individuals set out at Schedule "B".
(b) no firm, corporation or individual has any agreement or option,
including convertible securities, warrants or convertible obligations
of any nature, or any
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right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option for the purchase,
subscription, allotment or issuance of any of the unissued shares in
the capital of XCEEDX or of any securities of XCEEDX.
(c) the books and records and the XCEEDX Financial Statements fairly and
correctly set out and disclose in all material respects, in accordance
with generally accepted accounting principles, the financial position
of XCEEDX as at the date hereof, and all material financial
transactions of XCEEDX relating to its business have been accurately
recorded in such books and records;
(d) the XCEEDX Financial Statements have been prepared in accordance with
generally accepted accounting principles and present fairly and
correctly the assets, liabilities (whether accrued, absolute,
contingent or otherwise) and the financial condition of XCEEDX as at
the date thereof and there will not be, prior to the Closing Date, any
increase in such liabilities or other material change other than in
the ordinary course of business;
(e) the business of XCEEDX has been carried on in the ordinary and normal
course by XCEEDX since the date of the XCEEDX Financial Statements and
will be carried on in the ordinary and normal course up to the Closing
Date;
(f) XCEEDX has duly and in a timely manner filed and remitted all
applicable taxes and source deduction remittances when required;
(g) XCEEDX owns, possesses and has good and marketable title to its
undertaking, property and assets, and without restricting the
generality of the foregoing, all those assets described in the balance
sheet included in the XCEEDX Financial Statements are, except as
disclosed in the Financial Statements and this Agreement, free and
clear of any and all mortgages, liens, pledges, charges, security
interests, encumbrances, actions, claims or demands of any nature
whatsoever or howsoever arising;
(h) the liabilities and indebtedness of XCEEDX do not exceed the
liabilities disclosed on the XCEEDX Financial Statements and there
will not be any increase in such liabilities prior to the Closing Date
other than in the ordinary course of business;
(i) XCEEDX does not have any outstanding material agreements (including
employment agreements) contracts or commitments, whether written or
oral, of any nature or kind whatsoever, except:
(i) agreements, contracts and commitments in the ordinary course of
business;
(ii) consultant, management or employment agreements between XCEEDX
and its consultants, management and employees, each of which
can be terminated by XCEEDX on not more than 30 days written
notice;
(iii) the lease for XCEEDX's premises, effective until February 28,
2001, at 211-4240 Manor Street, Burnaby, British Columbia; and
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(iv) a licence agreement dated December 12, 1996 with Unisys for the
use of certain proprietary technology.
(j) XCEEDX is not bound by any guarantee of the obligations of any other
person, firm or corporation;
(k) XCEEDX is not in material default or breach of any contracts,
agreements, written or oral, indentures or other instruments to which
it is a party and there exists no state of facts which after notice or
lapse of time or both would constitute such a default or breach; and
(l) except as otherwise disclosed in this Agreement or the Schedules
thereto, there are no actions, suits or proceedings pending or
threatened against or affecting XCEEDX and the Accepting Shareholder
is not aware of any existing ground on which any such action, suit or
proceeding might be commenced with any reasonable likelihood of
success.
5. REPRESENTATIONS AND WARRANTIES OF WELCOMETO
5.1 The Accepting Shareholders' sale will be based on the representations
and warranties by WelcomeTo, each of which will survive closing, that:
(a) WelcomeTo is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and with respect
to all filings required pursuant to the listing of its securities on
the NASD OTC Bulletin Board, and a true copy of its Certificate of
Incorporation, Articles of Incorporation, By-laws and any other
charter documents, and all amendments thereto, have been provided to
XCEEDX;
(b) upon issue, the WelcomeTo Shares will be fully paid and non-assessable
shares in the capital of WelcomeTo;
(c) the authorized capital stock of WelcomeTo is 50,000,000 common shares
and the issued and outstanding shares of WelcomeTo will be between
13,105,000 and 13,510,000 common shares.
(d) WelcomeTo has the legal capacity to enter into and to perform its
obligations under this Agreement and all necessary resolutions of
shareholders and directors have been duly passed in order to authorize
WelcomeTo to execute and deliver this Agreement;
(e) the books and records of WelcomeTo fairly and correctly set out and
disclose in all material respects, in accordance with generally
accepted accounting principles, the financial position of WelcomeTo as
at the date hereof, and all material financial transactions of
WelcomeTo relating to its business have been accurately recorded in
such books and records which have been made available to XCEEDX for
its review; and
(f) except as disclosed in Schedule "C" hereto, there are no actions,
suits or proceedings by or before any Court or regulatory authority
(including any securities regulatory authority) pending or threatened
against or affecting WelcomeTo or any person who is or has been a
director or officer of WelcomeTo
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and WelcomeTo is not aware of any existing ground on which any such
action, suit or proceeding might be commenced with any reasonable
likelihood of success.
6. CONDITIONS PRECEDENT TO CLOSING
6.1 WelcomeTo's obligation to complete the purchase of the Shares held by
each Accepting Shareholder is subject to each of the following conditions:
(a) all representations and warranties of each Accepting Shareholder will
be true and correct in all material respects on the Closing Date;
(b) there shall have been no material adverse change to the business of
XCEEDX between the date of acceptance and the Closing Date;
(c) XCEEDX and each Accepting Shareholder will have made the deliveries
contemplated in this offer on the Closing Date;
(d) WelcomeTo will have received an appropriate indemnity from Phil Dubois
and Ken Bradley with respect to any liabilities of XCEEDX not
disclosed in the XCEEDX Financial Statements exceeding 10 percent of
the said disclosed liabilities;
(e) WelcomeTo will have entered into management services contracts,
non-competition agreements and confidentiality agreements with Phil
Dubois and Ken Bradley on terms acceptable to WelcomeTo;
(f) all necessary approvals from the British Columbia Securities
Commission and the Securities Exchange Commission will have been
received by WelcomeTo; and
(g) this offer being accepted by Shareholders holding not less than 90% of
the issued and outstanding common shares in the capital of XCEEDX;
6.2 Each of the above conditions precedent is for the sole benefit of
WelcomeTo and may be waived by WelcomeTo. In the event that any of the above
conditions has not been satisfied or waived by the Closing Date, WelcomeTo may
elect to terminate this Agreement and will have no further liability to the
Accepting Shareholders.
7. FURTHER CONDITIONS PRECEDENT TO CLOSING
7.1 The obligation of each of the Accepting Shareholders to complete the
sale of the Shares to WelcomeTo is subject to the following conditions:
(a) all representations and warranties of WelcomeTo will be true and
correct in all material respects on the Closing Date;
(b) there shall have been no material change to the assets, liabilities or
financial condition of WelcomeTo between the date of acceptance and
the Closing Date; and
(c) WelcomeTo will have made the deliveries contemplated in this offer on
the Closing Date.
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7.2 The above conditions are for the benefit of each Accepting Shareholder
and may be waived by each such shareholder. In the event that the above
conditions have not been satisfied or waived by all Accepting Shareholders by
the Closing Date, any Accepting Shareholder may elect to terminate his
obligation under this Agreement and will have no further liability to WelcomeTo.
8. APPOINTMENT OF DIRECTORS
8.1 At closing, Greg Chapman and Collin Hall will resign as directors of
WelcomeTo and Phil Dubois and Ken Bradley (the "New Directors") will be
appointed as directors in their place so that the directors and officers of
WelcomeTo will be as follows:
<TABLE>
<CAPTION>
NAME OFFICE
<S> <C>
Brent Forgeron Director and Executive Vice President,
Search Engine Division
Greg Beaudin Director and Vice President
Phil Dubois Director, President and Chief Executive Officer
Ken Bradley Director and Executive Vice President,
E-Commerce Division
Joe D. Wurz Chief Financial Officer
</TABLE>
8.2 At closing, Brent Forgeron and Greg Beaudin will be appointed
directors of XCEEDX and the directors and officers of XCEEDX will be as follows:
<TABLE>
<CAPTION>
NAME OFFICE
<S> <C>
Phil Dubois Director, President and Chief Executive Officer
Ken Bradley Director and Vice President
Brent Forgeron Director and Vice President
Greg Beaudin Director and Vice President
</TABLE>
8.3 After closing Brent Forgeron and Greg Beaudin may jointly appoint one
additional director of WelcomeTo (the "WelcomeTo Nominee"); Phil Dubois and Ken
Bradley may jointly appoint one additional director of WelcomeTo (the "XCEEDX
Nominee"); the New Directors of WelcomeTo, including the WelcomeTo and XCEEDX
Nominees, if any, may jointly appoint one additional director of WelcomeTo and
jointly designate a director of WelcomeTo to act as Chairman of the Board of
WelcomeTo;
9. CLOSING DELIVERIES
9.1 On the Closing Date, the Accepting Shareholders will deliver or will
cause XCEEDX to deliver to WelcomeTo:
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(a) share certificates representing 5,632,500 common shares and
617,500 preferred shares held by the Accepting Shareholders,
duly endorsed for transfer to WelcomeTo;
(b) written confirmation by each Accepting Shareholder as to the
truth and correctness of the representations and warranties of
the Accepting Shareholder as of the Closing Date;
(c) a directors resolution of XCEEDX authorizing the sale of the
Shares;
(d) an executed copy of the directors and members resolution of
XCEEDX setting the number of XCEEDX directors at four and
appointing new directors of XCEEDX as follows:
(i) Brent Forgeron; and
(ii) Greg Beaudin;
(e) a resolution of the directors of XCEEDX appointing new
officers of XCEEDX as follows:
(i) Phil Dubois - Director, President and Chief
Executive Officer
(ii) Ken Bradley - Director and Vice President
(iii) Brent Forgeron - Director and Vice President
(iv) Greg Beaudin - Director and Vice President
(f) an indemnity in which Phil Dubois and Ken Bradley agree to
indemnify WelcomeTo to the extent of any liabilities of XCEEDX
not disclosed in the XCEEDX Financial Statements exceeding 10
percent of the said disclosed liabilities; and
(g) all other corporate resolutions, agreements, assignments,
consents and documentation as deemed necessary by WelcomeTo's
solicitors, acting reasonably, to give effect to the
transactions contemplated by this Agreement in accordance with
accepted commercial practice.
(h) written confirmation from Phil Dubois, president and director
of XCEEDX, as to the truth and correctness of the
representations and warranties of XCEEDX at the Closing Date;
(i) a certified copy of XCEEDX's Share Register showing the
registered holders of all of the issued and outstanding shares
in XCEEDX prior to the Closing Date and confirming that the
number of XCEEDX's issued and outstanding shares immediately
prior to the Closing Date is 5,632,500 common shares and
617,500 preferred shares;
(j) share certificates for 5,632,500 common shares and 617,500
preferred shares of XCEEDX registered in the name of
WelcomeTo; and
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(k) a certified copy of XCEEDX's Share Register showing WelcomeTo
as the registered holder of 5,632,500 common shares and
617,500 preferred shares of XCEEDX; and
9.2 On the Closing Date, WelcomeTo will deliver
(a) to each Accepting Shareholder, an Acknowledgement of
Acceptance executed by WelcomeTo confirming that it will
deliver the certificates representing WelcomeTo Shares to
which the Accepting Shareholder is entitled;
(b) to each Accepting Shareholder, a certified copy of the Share
Register of the Common Shareholders of WelcomeTo showing each
Accepting Shareholder as a registered holder of the WelcomeTo
Shares to which the Accepting Shareholder is entitled;
(c) to XCEEDX all other corporate resolutions, agreements,
assignments, consents and documentation as deemed necessary by
XCEEDX's solicitors, acting reasonably, to give effect to the
transactions contemplated by this Agreement in accordance with
accepted commercial practice;
10. ACCEPTANCE
10.1 If a Shareholder wishes to accept this offer, the Shareholder
must:
(a) execute this offer where indicated below;
(b) complete all information;
(c) deliver a copy of the Accepting Shareholder's acceptance to
WelcomeTo at a closing to be held on the Closing Date at the
offices of WelcomeTo's counsel, Russell & DuMoulin, 2100 -
1075 West Georgia Street, Vancouver, B.C.
Yours truly,
WELCOMETO SEARCH ENGINE, INC.
Per:
--------------------------------
Brent Forgeron, President
XCEEDX TECHNOLOGIES INC.
Per:
---------------------------------
Phil Dubois, President
<PAGE> 12
This offer is accepted and agreed to this 21st day of January, 1999.
SIGNATURE OF SHAREHOLDER:
-------------------------------------------
(Sign)
NUMBER OF SHARES HELD:
-------------------------------------------
(Number of Shares of XCEEDX)
TYPE OF SHARES:
-------------------------------------------
(State if Preferred or Common shares)
NAME OF SHAREHOLDER:
-------------------------------------------
(Print Name)
ADDRESS OF SHAREHOLDER:
-------------------------------------------
(Print Address)
<PAGE> 1
EXHIBIT 7
WELCOMETO SEARCH ENGINE, INC.
(FORMERLY WICKED WINGS OF BUFFALO, INC.)
A FLORIDA CORPORATION
November 30, 1998
THE COMMON SHAREHOLDERS OF
WELCOMETO SEARCH ENGINE INC.
c/o WelcomeTo Search Engine Inc.
#555 - 425 Carrall Street
Vancouver, British Columbia
Canada V6B 6E3
Attention: Mr. Brent Forgeron, President
Dear Sirs:
RE: WELCOMETO SEARCH ENGINE, INC. (FLORIDA) (THE "COMPANY")
OFFER TO ACQUIRE 100% OF THE OUTSTANDING COMMON SHARES
OF WELCOMETO SEARCH ENGINE INC. (BRITISH COLUMBIA) ("WELCOMETO")
We write to set out the offer of the Company to the common shareholders of
WelcomeTo (the "Shareholders") to acquire 100% of the outstanding common shares
of WelcomeTo.
This offer is on the terms and is subject to the conditions set forth in this
letter. If this offer is acceptable, we ask that you indicate your agreement by
signing this letter where indicated below, completing the required information
and returning an executed copy to us. This offer is open for acceptance until
12:00 p.m. (Pacific Time) on December 11, 1998 (the "Expiry Time"), at which
time this offer will terminate unless accepted in writing.
All dollar references herein are to United States dollars.
The Company's offer is as follows:
1. OFFER TO PURCHASE
The Company offers to purchase from each Shareholder all common shares of
WelcomeTo held by the Shareholder (the "Shares") on the terms and subject to
the conditions set forth in this offer. The Company's obligation to purchase
the Shares held by any Shareholder is conditional upon Shareholders holding at
least 90% of the outstanding common shares of WelcomeTo accepting this offer by
the Expiry Time.
2. PAYMENT FOR THE SHARES
The Company will issue to each Shareholder accepting this offer (each an
"Accepting Shareholder") one (1) common share of the Company (each a "Company
Share") for each common share of WelcomeTo held by the Accepting Shareholder.
(For example: A shareholder of WelcomeTo accepting this offer will receive
1,000 common shares of the Company on closing for each 1,000 common shares of
WelcomeTo held by the Shareholder.)
<PAGE> 2
Each Accepting Shareholder acknowledges that the Company Shares will be issued
pursuant to available exemptions from the prospectus and registration
requirements of each of the Securities Act (British Columbia) and the United
States Securities Act of 1933 (the "Act"). The Accepting Shareholder agrees to
abide by all applicable resale restrictions and hold periods imposed by such
statutes.
All certificates for common shares of the Company received in exchange will be
endorsed with the following legend pursuant to the Act and the British Columbia
Securities Act:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), AND ARE BEING OFFERED
AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED
FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE
REGISTERED UNDER THE APPLICABLE PROVISIONS OF THE ACT OR ARE
EXEMPT FROM SUCH REGISTRATION. THE SECURITIES REPRESENTED BY
THIS SHARE CERTIFICATE ARE SUBJECT TO A HOLD PERIOD AND MAY
NOT BE TRADED IN BRITISH COLUMBIA UNTIL THE EXPIRY OF THE
HOLD PERIOD (EXCEPT AS PERMITTED BY THE SECURITIES ACT
BRITISH COLUMBIA) AND THE REGULATIONS MADE UNDER THE ACT.
The Accepting Shareholder acknowledges that the Company has issued or will
issue prior to the Closing Date a total of 4,800,000 common shares for nominal
consideration, 800,000 of which are "restricted securities" under the Act and
4,000,000 of which are free trading.
3. ESCROW AND POOLING AGREEMENTS AND FINANCING
The Company acknowledges and agrees that the agreement of the Accepting
Shareholders to complete the sale of the Shares to the Company is conditional
upon certain shareholders of the Company holding 1,000,000 common shares (the
"Escrow Shareholders") agreeing to place such 1,000,000 common shares of the
Company in escrow (the "Escrow Shares") on the condition that in the event that
the following financing (the "Financing") is not completed, then the shares are
to be returned to the Company for cancellation for nominal consideration as
follows:
<PAGE> 3
-1-
<TABLE>
<CAPTION>
Date for Completion Required Minimum Price per Escrow Shares
- ------------------- Net Proceeds Common share Allocated to
of Financing ----------------- Financing
------------ ---------
<S> <C> <C> <C>
45 days from Closing $750,000(2) $2.50 1,000,000
Date(1)
</TABLE>
Note
(1) The parties acknowledge that all reasonable efforts will be made to
complete the Financing earlier, if possible.
(2) Any monies advanced to WelcomeTo by Trent Jordan, Jim Decker or the
Company before the Closing Date are considered part of the Financing.
The parties hereto acknowledge and agree that Trent Jordan and Jim Decker will
be responsible for arranging the Financing and that the Financing will involve
the Company distributing 300,000 common shares from treasury as fully paid and
non-assessable at and for a price of $2.50 per share for total net proceeds to
the Company of $750,000. The Financing will be completed pursuant to Reg. 504
of the Act.
The Company also acknowledges and agrees that the agreement of the Accepting
Shareholders to complete the sale of the Shares to the Company is subject to
certain shareholders of the Company agreeing to place in pool 1,000,000 shares
of the Company held by then (the "Pooled Shares") pursuant to a Pooling
Agreement in substantially the form attached hereto as Schedule A. The
Accepting Shareholders acknowledge and agree that the agreement of the Company
to complete the purchase of the Shares from the Accepting Shareholders is
subject to all Accepting Shareholders agreeing to pool the Shares for a period
of one year from the Closing Date pursuant to the Pooling Agreement attached
hereto as Schedule B.
Upon completion of the Financing, the number of common shares allocated to the
Financing and held in escrow will be released to the Escrow Shareholders. In
the event that the Financing fails to complete within the required time, the
number of common shares allocated to the Financing and held in escrow will be
returned to the Company for cancellation for nominal consideration, provided
that such shares will not be returned to treasury and will be released to the
Escrow Shareholders in the event that a Financing is not completed due to any
of the following reasons:
(A) the Board of Directors of the Company resolving not to proceed
with the Financing; or
(B) the Company proceeding with an alternate financing, except where
the alternate financing arises due to the failure of Trent Jordan
and Jim Decker to secure the required Financing.
The Company will cause to be delivered on closing the written agreement of each
of the Escrow Shareholders as to the escrow and the release of shares from
escrow in the manner contemplated by this Agreement and the escrow agreement
attached hereto as Schedule C (the "Escrow Agreement"), together with the share
certificates representing the Escrowed Shares, which shares shall be held in
trust by WelcomeTo's solicitors pursuant to the Escrow
<PAGE> 4
-2-
Agreement. The Escrow Agreement will provide that the votes attached to the
Escrow Shares will not be voted by the escrow agent and will otherwise be in
form reasonably acceptable to WelcomeTo.
Each Accepting Shareholder acknowledges and agrees that the Financing will be
realized by the issue by the Company of common shares of the Company at the
minimum prices set forth above, all of which will be in addition to the
4,800,000 common shares of the Company to be outstanding on the Closing Date.
4. CLOSING DATE
The date of the closing of the purchase and sale of the Shares of each
Accepting Shareholder will be the 11th day of December, 1998 (the "Closing
Date"), or such other date as may be agreed upon in writing by the parties
hereto.
5. REPRESENTATIONS AND WARRANTIES OF EACH ACCEPTING SHAREHOLDER
The Company's purchase will be based on the representations and warranties by
each Accepting Shareholder, each of which will survive closing, that:
(A) WelcomeTo is a corporation duly organized, validly existing and in
good standing under the British Columbia Company Act;
(B) all Shares owned by the Accepting Shareholder are owned free and
clear of all liens, charges, encumbrances and security interests;
(C) there is no shareholders' agreement between the Shareholders of the
Company to which the Accepting Shareholder is party and there is no
other shareholders' agreement between any of the shareholders of
the Company of which the Accepting Shareholder has knowledge;
(D) except as disclosed in WelcomeTo's audited financial statements as
at June 30, 1998 attached hereto as Schedule D (the "WelcomeTo
Financial Statements"), WelcomeTo has no indebtedness, debt or
other liability to the Accepting Shareholder and to the best
knowledge of the Accepting Shareholder, to any other shareholder or
any officer or director of WelcomeTo; and
(E) the Accepting Shareholder has no option, warrant or other right to
acquire any shares of WelcomeTo.
In addition to the above representations and warranties, the Company's purchase
will be based on the representations and warranties of each Accepting
Shareholder as follows, provided that if the Accepting Shareholder is not a
director or officer of WelcomeTo, such representations and warranties will be
limited to the best knowledge of the Accepting Shareholder, that:
(F) the issued and outstanding capital of WelcomeTo consists of
8,510,000 common shares.
(G) no firm or corporation has any agreement or option, including
convertible securities, warrants or convertible obligations of any
nature, or any right or privilege (whether by law, pre-emptive or
contractual) capable of becoming an agreement or option for the
purchase, subscription, allotment or issuance of any
<PAGE> 5
-3-
of the unissued shares in the capital of WelcomeTo or of any
securities of WelcomeTo.
(H) the books and records of WelcomeTo fairly and correctly set out and
disclose in all material respects, in accordance with generally
accepted accounting principles, the financial position of WelcomeTo
as at the date hereof, and all material financial transactions of
WelcomeTo relating to its business have been accurately recorded in
such books and records;
(I) the WelcomeTo Financial Statements have been prepared in accordance
with generally accepted accounting principles and present fairly
and correctly the assets, liabilities (whether accrued, absolute,
contingent or otherwise) and the financial condition of WelcomeTo
as at the date thereof and there will not be, prior to the Closing
Date, any increase in such liabilities or other material change
other than in the ordinary course of business;
(J) the business of WelcomeTo has been carried on in the ordinary and
normal course by WelcomeTo since the date of the WelcomeTo
Financial Statements and will be carried on in the ordinary and
normal course up to the Closing Date;
(K) except as disclosed in Schedule E hereto, WelcomeTo owns, possesses
and has good and marketable title to its undertaking, property and
assets, and without restricting the generality of the foregoing,
all those assets described in the balance sheet included in the
WelcomeTo Financial Statements, free and clear of any and all
mortgages, liens, pledges, charges, security interests,
encumbrances, actions, claims or demands of any nature whatsoever
or howsoever arising;
(L) the liabilities and indebtedness of WelcomeTo do not exceed the
liabilities disclosed on the WelcomeTo Financial Statements and
there will not be any increase in such liabilities prior to the
Closing Date other than in the ordinary course of business;
(M) WelcomeTo does not have any outstanding material agreements
(including employment agreements) contracts or commitments, whether
written or oral, of any nature or kind whatsoever, except:
(i) agreements, contracts and commitments in the ordinary course
of business;
(ii) consultant, management or employment agreements between
WelcomeTo and its consultants, management and employees, each
of which can be terminated by WelcomeTo on not more than 30
days written notice;
(iii) the lease for WelcomeTo's premises, effective until December
1, 1998, at #555 - 425 Carrall Street, Vancouver, British
Columbia;
(iv) the lease for WelcomeTo's production office, effective until
September 1, 2000, at #206 - 425 Carrall Street, Vancouver,
British Columbia; and
<PAGE> 6
-4-
(v) the License Agreement dated December 1, 1997, attached hereto
as Schedule F, between Freddy Fuller, Susie Fuller and
WelcomeTo relating to WelcomeTo's trademarks, symbols, logos,
graphic designs and other marks and WelcomeTo's search
engine, links web sites, uniform resource locators and all of
the computer software comprising the foregoing;
(N) WelcomeTo is not in material default or breach of any contracts,
agreements, written or oral, indentures or other instruments to
which it is a party and there exists no state of facts which after
notice or lapse of time or both would constitute such a default or
breach;
(O) except as otherwise disclosed in this Agreement or the Schedules
thereto, there are no actions, suits or proceedings pending or
threatened against or affecting WelcomeTo and the Accepting
Shareholder is not aware of any existing ground on which any such
action, suit or proceeding might be commenced with any reasonable
likelihood of success;
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Accepting Shareholders' sale will be based on the representations and
warranties by the Company, each of which will survive closing, that:
(A) the Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida, and a true
copy of its Certificate of Incorporation, Articles of
Incorporation, By-laws and any other charter documents, and all
amendments thereto, have been provided to WelcomeTo;
(B) the following is a list of all persons who are or have been
directors or officers of the Company since its incorporation:
<TABLE>
<CAPTION>
Name Office held Dates of Appointment and
---- ----------- Resignation or Removal
----------------------
<S> <C> <C>
Pamela Wilkinson President and Director October 19, 1998 - Resignation
</TABLE>
(C) upon issue, the common shares of the Company will be fully paid and
non-assessable shares in the capital of the Company;
(D) the authorized capital stock of the Company is 50,000,000 common
shares and the issued and outstanding shares of the Company will be
4,800,000 common shares immediately prior to the closing, which
shares will be held as set out in Schedule G.
(E) no person has any option, warrant or other right to acquire any
shares of the Company;
(F) the Company has the legal capacity to enter into and to perform its
obligations under this Agreement and all necessary resolutions of
shareholders and directors
<PAGE> 7
-5-
have been duly passed in order to authorize the Company to execute
and deliver this Agreement;
(G) except as disclosed in the Company's audited financial statement
for the periods ending August 5, 1998, December 31, 1997 and
December 31, 1996 attached as Schedule H hereto, the Company has,
since its incorporation, incurred no liabilities and has not
entered into or become liable under any contracts or commitments.
(H) the books and records of the Company fairly and correctly set out
and disclose in all material respects, in accordance with generally
accepted accounting principles, the financial position of the
Company as at the date hereof, and all material financial
transactions of the Company relating to its business have been
accurately recorded in such books and records which have been made
available to WelcomeTo for its review;
(I) the Company is not an issuer subject to the reporting requirements
of section 13 or 15(d) of the Securities Exchange Act of 1934, is
not an investment company or development stage company as set out
in Reg. 504 of the Act and has not issued any shares other than the
4,800,000 shares of the Company currently issued and outstanding as
disclosed herein;
(J) there are no actions, suits or proceedings by or before any Court
or regulatory authority (including any securities regulatory
authority) pending or threatened against or affecting the Company
or any person who is or has been a director or officer of the
Company and the Company is not aware of any existing ground on
which any such action, suit or proceeding might be commenced with
any reasonable likelihood of success; and
(K) the Company has retained Lumiere Securities of 12835 East Arapahoe
Road, Tower One Penthouse, Englewood, Colorado, 80122, a registered
NASD broker-dealer, to obtain a quotation for its common shares on
the NASD OTC Bulletin Board (the "OTC BB") and the Company's
securities have been cleared for an unpriced quotation on the OTC
BB by the NASD.
7. CONDITIONS PRECEDENT TO CLOSING
The Company's obligation to complete the purchase of the Shares held by each
Accepting Shareholder is subject to each of the following conditions:
(A) all representations and warranties of each Accepting Shareholder
will be true and correct in all material respects on the Closing
Date;
(B) there shall have been no material adverse change to the business of
WelcomeTo between the date of acceptance and the Closing Date;
(C) each Accepting Shareholder will have made the deliveries
contemplated in this offer on the Closing Date;
(D) this offer will be accepted by Shareholders holding not less than
95% of the issued and outstanding common shares in the capital of
WelcomeTo;
<PAGE> 8
-6-
Each of the above conditions precedent is for the sole benefit of the Company
and may be waived by the Company. In the event that any of the above conditions
has not been satisfied or waived by the Closing Date, the Company may elect to
terminate this Agreement and will have no further liability to the Accepting
Shareholders.
8. FURTHER CONDITIONS PRECEDENT TO CLOSING
The obligation of each of the Accepting Shareholders to complete the sale of
the Shares to the Company is subject to the following conditions:
(A) all representations and warranties of the Company will be true and
correct in all material respects on the Closing Date;
(B) there shall have been no material change to the assets, liabilities
or financial condition of the Company between the date of
acceptance and the Closing Date;
(C) the Company will have made the deliveries contemplated in this
offer on the Closing Date;
(D) the agreement of the Shareholders and the share certificate or
certificates for the 1,000,000 Escrow Shares and the 1,000,000
Pooled Shares referred to in paragraph 3 have been received by
WelcomeTo's solicitors;
(E) the Company having received an appropriate indemnity from Trent
Jordan and Jim Decker with respect to the out of pocket costs,
including legal and broker-dealer fees, incidental to the Company's
obtaining a priced quotation on the OTC BB; and
(F) WelcomeTo having received from its U.S. counsel, on behalf of the
Accepting Shareholders, an opinion that:
(i) all officers and directors of the Company since its
incorporation have been validly appointed and authorized and
the Company is otherwise an appropriate vehicle with which to
effect the share exchange contemplated by this Agreement; and
(ii) the Company can effect the share exchange contemplated by
this Agreement in reliance on the exemption provided by Reg.
504 of the Act and that appropriate exemptions are available
in all U.S. states in which the Accepting Shareholders reside
to allow the Company to effect the share exchange
contemplated by this Agreement in compliance with the
securities laws of those states.
The above conditions are for the benefit of each Accepting Shareholder and may
be waived by each such shareholder. In the event that the above conditions have
not been satisfied or waived by all Accepting Shareholders by the Closing Date,
any Accepting Shareholder may elect to terminate his obligation under this
Agreement and will have no further liability to the Company.
9. CLOSING DELIVERIES
On the Closing Date, each Accepting Shareholder will deliver to the Company:
<PAGE> 9
-7-
(A) the certificates for the Shares held by the Accepting Shareholder,
duly endorsed for transfer to the Company;
(B) written confirmation by the Accepting Shareholder as to the truth
and correctness of the representations and warranties of the
Accepting Shareholder as of the Closing Date;
(C) all other corporate resolutions, agreements, assignments, consents
and documentation as deemed necessary by the Company's solicitors,
acting reasonably, to give effect to the transactions contemplated
by this Agreement in accordance with accepted commercial practice.
On the Closing Date, the Company will deliver:
(D) to each Accepting Shareholder, an Acknowledgement of Acceptance
executed by the Company confirming that it will deliver the
certificates representing the Company Shares to which the Accepting
Shareholder is entitled;
(E) all other corporate resolutions, agreements, assignments, consents
and documentation as deemed necessary by WelcomeTo's solicitors,
acting reasonably, to give effect to the transactions contemplated
by this Agreement in accordance with accepted commercial practice;
(F) the Escrow Agreement executed by each Escrow Shareholder and the
Company; and
(G) written confirmation by Trent Jordan, President and Director of the
Company, as to the truth and correctness of the representations and
warranties of the Company as of the Closing Date.
10. APPOINTMENT OF DIRECTORS
At closing, the following will be appointed the officers and directors of
WelcomeTo and the Company:
<TABLE>
<S> <C>
Name Office
Brent Forgeron Director and President
Greg Beaudin Director and Vice-President
Greg Chapman Director
Colin Hall Director
Joe D. Wurz Chief Financial Officer
</TABLE>
11. ACCEPTANCE
If a Shareholder wishes to accept this offer, the Shareholder must:
(A) execute this offer where indicated below;
<PAGE> 10
-8-
(B) complete all information;
(C) deliver a copy of the Accepting Shareholder's acceptance to the
Company at a closing to be held on the Closing Date at the offices
of WelcomeTo's counsel, Russell & DuMoulin, 2100 - 1075 West
Georgia Street, Vancouver, B.C.
Yours truly,
WELCOMETO SEARCH ENGINE, INC.
Per:
----------------------------
Trent Jordan, President
This offer is accepted and agreed to this ____ day of _________________,1998.
SIGNATURE OF SHAREHOLDER:
-----------------------------------------
(Sign)
NUMBER OF COMMON SHARES HELD:
-----------------------------------------
(Number of Common Shares of WelcomeTo)
NAME OF SHAREHOLDER:
-----------------------------------------
(Print Name)
ADDRESS OF SHAREHOLDER:
-----------------------------------------
(Print Address)
<PAGE> 1
EXHIBIT 8
SCHEDULE B
POOLING AGREEMENT
THIS AGREEMENT is dated for reference the 11th day of December, 1998.
BETWEEN:
THE SHAREHOLDERS OF WELCOMETO SEARCH
ENGINE, INC. LISTED ON SCHEDULE A TO THIS AGREEMENT
(collectively referred to as the "Shareholders" and individually
as "Shareholder")
OF THE FIRST PART
AND:
RUSSELL& DUMOULIN, Barristers & Solicitors of 2100 - 1075
West Georgia Street, Vancouver, B.C., V6E 3G2
(hereinafter called the "Trustee")
OF THE SECOND PART
WHEREAS pursuant to a Share Exchange Agreement dated December 11, 1998
(the "Share Exchange Agreement") between the Shareholders and WelcomeTo Search
Engine, Inc. (the "Company") the Shareholders have acquired from the Company
the number of shares set opposite the Shareholder's name in Schedule A to this
Agreement (the "Shares");
AND WHEREAS pursuant to the Share Exchange Agreement the Shareholders
have agreed to place the Shares in Pool upon and subject to the terms and
conditions contained in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and in consideration of the sum of Ten Dollars ($10.00) now paid by
the parties hereto, each to the other, (the receipt whereof is hereby
acknowledged) and in further consideration of the mutual covenants and
conditions hereinafter contained, the parties hereto agree as follows:
1. PLACEMENT OF SHARES IN POOL
The Shareholders hereby severally agree each with the other and with the
Trustee, that they will respectively deliver or cause to be delivered to the
Trustee on or before the date of this Agreement certificates for their Shares
in the Company as set out in the said Schedule "A" to be held by the Trustee on
the terms contained herein, or, in the event that share certificates for the
Shares are not available as of the date of this Agreement, the Shareholders
agree that the Company will instruct the Company's transfer agent to deliver
share certificates for the Shares directly to the Trustee as soon as they are
available.
<PAGE> 2
2. RELEASE OF SHARES FROM POOL
The Shares shall be released and returned to the Shareholders, subject to the
terms of this Agreement, one year from the completion of the share exchange
detailed in the Share Exchange Agreement. The Trustee may deliver the share
certificates for the Shares so released directly to the Company, in trust, for
delivery by the Company to the Shareholders.
3. ALTERATIONS OF CAPITAL
The parties hereto agree that the provisions of this agreement relating to the
Shares shall apply mutatis mutandis to any shares or securities into which the
Shares may be converted, changed, reclassified, redivided, redesignated,
subdivided or consolidated and to any shares or securities of the Company or of
any successor or continuing company or corporation of the Company that may be
received by the registered holder of the Shares on a reorganization,
amalgamation, consolidation or merger, statutory or otherwise, including the
release calculation which will be adjusted so that the proportion of the Shares
available for release is unaffected by the alteration of the capital of the
Company.
4. TRANSFER OF SHARES WITHIN POOL
No transfer of Shares by any Shareholder shall be effective and no application
shall be made to the Company to register any such transfer until the proposed
transferee enters into an agreement with the other parties hereto to the same
effect as this Agreement. The Trustee shall not effect a transfer of the Shares
within pool unless the Trustee has received a copy of an Acknowledgement in the
form attached hereto as Schedule B executed by the person to whom the Shares
are to be transferred. Notwithstanding the execution of an Acknowledgement by
such a person, the transferor shall not be released from its obligations under
this Agreement unless it has transferred all of its Shares.
5. DIVIDENDS, DISTRIBUTIONS AND VOTING OF SHARES
The Shareholders will be entitled to receive all dividend payments and
distributions of capital, if any, from the Shares while the Shares are subject
to this Agreement, and may exercise all voting rights attached to the Shares.
6. AMENDMENT OF AGREEMENT
Schedule A to this Agreement shall be amended upon a transfer of Shares
pursuant to section 4, and the Trustee shall note the amendment on the Schedule
A in its possession.
7. SCOPE OF TRUSTEE'S DUTIES AND INDEMNIFICATION OF TRUSTEE
In exercising its duties and obligations as set forth in this Agreement, the
Trustee will act in good faith and with impartiality towards each of the
Company and the Shareholders.
The Trustee will have no duties or obligations in respect of the Shares other
than those specifically set forth herein. The Trustee will not be bound in any
way by any other contract or agreement between the parties hereto (except to
the extent that the Trustee will consider the terms of the
<PAGE> 3
Share Exchange Agreement) whether or not the Trustee has knowledge thereof or
of its terms and conditions and the Trustee's only duty, liability and
responsibility shall be to hold and deal with the Shares in accordance with
this Agreement. The Trustee will be entitled, unless it has knowledge to the
contrary, to assume that any notice and evidence received pursuant to these
instructions from either the Company or the Shareholders has been duly executed
by the party by whom it purports to have been signed and the Trustee will not
be obligated to enquire into the sufficiency or authority of any signatures
appearing on such notice or evidence. In the event that the Trustee is given
written notice of any disagreement between the Company and the Shareholders
resulting in adverse claims or demands being made in connection with the Shares
or a disagreement as to the Shares to be released by the Trustee, the Trustee
will not release the Shares until:
(a) the rights of all parties shall have been fully and finally
adjudicated by a court of competent jurisdiction; or
(b) the Company and the Shareholders give the Trustee written
notice as to their agreement as to the release of the Shares.
In the event that the Trustee is given notice of any disagreement between the
Company and the Shareholders resulting in adverse claims or demand being made
in connection with the Shares or a disagreement as to the Shares to be released
by the Trustee, the Trustee may, at its discretion, interpleas the Shares by
delivering the Shares to a court of competent jurisdiction.
The Company will pay the Trustee on the basis of the Trustee's hourly rates for
legal services, plus taxes and disbursements, for the performance of the
Trustee's duties pursuant to this Agreement.
The Company and the Shareholders, jointly and severally, release, indemnify and
save harmless the Trustee from all costs, charges, claims, demands, damages,
losses and expenses resulting from the Trustee's compliance in good faith with
this agreement.
8. TRUSTEE NOT OBLIGED TO DEFEND ACTIONS
It is further agreed by and between the parties hereto, and without restricting
the foregoing indemnity, that in case proceedings should hereafter be taken in
any Court respecting the Shares hereby pooled, the Trustee shall not be obliged
to defend any such action or submit its rights to the Court until it shall have
been indemnified by other good and sufficient security in addition to the
indemnity hereinbefore given against costs of such proceedings.
9. RESIGNATION OF TRUSTEE
(a) If the Trustee wishes to resign as Trustee in respect of the
Shares, the Trustee shall give notice to the Shareholders;
(b) If the Shareholders wish the Trustee to resign as Trustee in
respect of the Shares, the Shareholders shall give notice to
the Trustee;
(c) A notice referred to in subsection (a) or (b) hereof shall be
in writing and delivered
<PAGE> 4
to the Shareholders or the Trustee at their respective
addresses set out on the first page or Schedule A of this
agreement, and the notice shall be deemed to have been
received on the date of delivery. The Shareholders or the
Trustee may change their address for notice by giving notice
to the other party in accordance with this agreement;
(d) The resignation of the Trustee shall be effective and the
Trustee shall cease to be bound by this agreement on the date
that is 30 days after the date of receipt of the notice
referred to in subsection (a) or (b) hereof or on such other
date as the Trustee and the Shareholders may agree upon.
10. FURTHER ASSURANCES
The parties hereto shall execute and deliver any further documents and perform
any acts necessary to carry out the intent of this agreement.
11. TIME
Time is of the essence of this agreement.
12. GOVERNING LAWS
This agreement shall be construed in accordance with and bound by the laws of
British Columbia and the laws of Canada applicable in British Columbia.
13. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the parties
hereto and each of their heirs, executors, administrators, successors and
permitted assigns.
14. EXECUTION IN COUNTERPART AND BY FACSIMILE
This Agreement may be executed in several parts in the same form, and by
facsimile, and such part as so executed shall together constitute one original
agreement, and such parts, if more than one, shall be read together and
construed as if all the signing parties hereto had executed one copy of this
Agreement.
IN WITNESS WHEREOF the parties hereto have executed these presents as
and from the day and year first above written.
RUSSELL & DUMOULIN
Per:
----------------------------------
Authorized Signatory
<PAGE> 5
SCHEDULE A
TO A POOLING AGREEMENT DATED THE 11TH DAY OF DECEMBER, 1998
<TABLE>
<CAPTION>
Shareholder's Name No. of Shares Signature
- ------------------ ------------- ---------
<S> <C> <C>
Greg Beaudin 1,130,000 -----------------------
13-150 West 10th Avenue
Vancouver BC V5Y 1R8
Lorin Bordeville 80,000 -----------------------
1889 Bradner Road
Abbotsford BC V4X 1E1
Brooke Bouchard 40,000 -----------------------
421 Lamont Blvd
Winnipeg MB R3P 0G4
Dolores Brathwaite 21,054 -----------------------
65-73 162nd Street, Apt. 2L
Flushing NY 11365-2640
Ellen Braverman 10,000 -----------------------
3637 Cambie Street, #109
Vancouver BC V5Z 2X3
Scott & Kelly Bryll 60,000 -----------------------
P.O. Box 472
Gillam MB ROB 0L0
Alan Campney 25,000 -----------------------
1975 Hosmer Avenue
Vancouver BC V6J 2S7
Maurice Caouette 128,000 -----------------------
P.O. Box 63
Sorrento BC V0E 2W0
Allison & Don Caron 40,000 -----------------------
#171 Oakdean Blvd
Winnipeg MB R3J 3N8
Jim Cassidy 10,00 -----------------------
#2806-930 Cambie Street
Vancouver BC V6B 5X6
Doug Chapman 280,000 -----------------------
2881 West 8th Avenue
Vancouver BC V6K 2B8
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Shareholder's Name No. of Shares Signature
- ------------------ ------------- ---------
<S> <C> <C>
George Chapman 20,000 -------------------------
1864 Portage Avenue
Winnipeg MB R3J 0H2
Glenn Collins 40,000 -------------------------
3915 Bedwell Bay
Belcarra BC V3H 4P8
Kevin Coughlin 100,000 -------------------------
104 Wordsworth Way
Winnipeg MB R3K 0K4
Zhenzhong Dai 10,000 -------------------------
2135 Tower Court
Port Coquitlam BC V3C 5E3
Scott Despot 20,000 -------------------------
Apt. #25
1091 Broughton Street
Vancouver BC V6G 2A9
Deborah DesRivieres 40,000 -------------------------
Box 900, RR2
Ste. Anne MB R5H 1R2
Louise Dolnik 80,000 -------------------------
6036 Inglewood Place
Delta BC V4E 2Y6
Craig Donoghue 40,000 -------------------------
S.37 C.1 RR#1
Okanagan Falls BC V0H 1R0
Michael Doyle 67,000 -------------------------
2-2524 West 7th Avenue
Vancouver BC V6K 1Y9
Darin Fauth 13,334 -------------------------
196 Rivercrest Close SE
Calgary AB T2C 4H3
Aline Fillion 40,000 -------------------------
77 Moore Avenue
Winnipeg MB R2M 2C3
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Shareholder's Name No. of Shares Signature
- ------------------ ------------- ---------
<S> <C> <C>
Brent Forgeron 1,130,000 -------------------------
2041 Parkhurst Road
North Vancouver BC V7J 1J1
Sally Forgeron 40,000 -------------------------
36 Sansome Avenue
Winnipeg MB R3K 0P2
Lawrence Fox 25,000 -------------------------
360 South Borough Drive
West Vancouver BC V7S 1M1
Tzvi Freeman 5,000 -------------------------
5729 Montgomery Street
Vancouver BC V6M 2X3
Freddy Fuller 1,207,667 -------------------------
2538 Ross Road
Abbotsford BC V4X 1J3
Frederick Fuller Foundation 40,000 -------------------------
2538 Ross Road
Abbotsford BC V4X 1J3
Susie Fuller 40,000 -------------------------
2538 Ross Road
Abbotsford BC V4X 1J3
F.O.C.U.S. Inc. 50,417 -------------------------
3551 Sylvan Edge Drive
Tampa Bay, FL 34685
Chris Gagnon 56,000 -------------------------
2374 Kilmamock Crescent
North Vancouver BC V7J 2Z3
Jeanette Greenhut 40,000 -------------------------
878 West 45th Avenue
Vancouver BC V5Z 2P9
Joan Guttormasson 40,000 -------------------------
Suite 5
230 Hugo Street North
Winnipeg MB R3M 2N4
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Shareholder's Name No. of Shares Signature
- ------------------ ------------- ---------
<S> <C> <C>
Kris Guttormsson 250,000 -----------------------
1777 Frances Street, Apt. 213
Vancouver BC V5L 4Y6
Saline Guttormsson 40,000 -----------------------
227 Cordova Street
Winnipeg MB R3N 1A3
Colin Hall 730,000 -----------------------
M2-601 West Broadway
Vancouver BC V5Z 4C2
Marni Hardin 5,000 -----------------------
6835 Laurel Street
Vancouver BC V6P 3T6
Rosalee and Marni Hardin 40,000 -----------------------
6835 Laurel Street
Vancouver BC V6P 3T6
Tamara Harvey 5,000 -----------------------
#303-2755 Cooperative Way
Vancouver BC V5M 4S4
Dave Hodgson 40,000 -----------------------
4612 Blackcomb Way
Whistler BC V0N 1B4
Dale Hopfner 40,000 -----------------------
Box 328
Saint Rose MB R0L 1S0
Gaston Howard 40,000 -----------------------
9167 146A Street
Surrey BC V3R 6Z6
Joel Katzevman 15,248 -----------------------
Unit 312
1655 Nelson Street
Vancouver BC V6G 1M4
Max Kesmodel 72,900 -----------------------
2105 1/2 South Beverly Glen
Los Angeles CA 90025
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
Shareholder's Name No. of Shares Signature
- ------------------ ------------- ---------
<S> <C> <C>
Lauren Investments Ltd. 50,000 ------------------------
Suite 407
1490 Pennyfarthing Drive
Vancouver BC V6J 4Z3
Michael Lightheart 200,000 ------------------------
75-3031 Williams Road
Richmond BC V7E 4E9
M & M Film Stunts Ltd. 40,000 ------------------------
2512 Ottawa Avenue
West Vancouver BC V7V 2T4
James Milligan 52,380 ------------------------
518 Big Hill
Hope ID 83836
Sharalee Milligan 40,000 ------------------------
980 County Road W S-1204
Fremont NE 68025-7914
Brad Muise 40,000 ------------------------
9421 Snowberry Court
Burnaby BC V5A 4A6
N&R Hopfner Farms Ltd. 40,000 ------------------------
P.O. Box 454
STe. Rose Du Lac MB
R0L 1S0
Gary Newsham 20,000 ------------------------
102 Devos Road
Winnipeg MB R3T 5Y1
Krista Peak 40,000 ------------------------
15480 Juniper Drive
Marne MI 49435
Pedro Eiler Pederson 80,000 ------------------------
1809 Arborlynn Drive
North Vancouver BC V7J 2V7
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Shareholder's Name No. of Shares Signature
- ------------------ ------------- ---------
<S> <C> <C>
Penstar Management 50,000 -------------------------
Incorporated
Attention: Joe Wurz
5544 Woodchuck Place
North Vancouver BC V7R 4P1
Nelson Phillips 40,000 -------------------------
P.O. Box 1043
Whistler BC V0N 1B0
Dale Regan 10,000 -------------------------
#23-777 Burrard Street
Vancouver BC V6Z 1X7
Eric Roy 24,000 -------------------------
1356 Arbutus Street
Vancouver BC V6J 3W8
Helen Rygmyr 90,000 -------------------------
8865 River Heights Way
Inver Grove Heights MN 5507
Spartan Capital Inc. 100,000 -------------------------
(Attention: Damon Poole)
7 Prince Street
Belize City, Belize
Michael Spear 10,000 -------------------------
Box 57 Peterson-Betts Road
Louis Creek BC V0E 2E0
Shawn Stuart 11,000 -------------------------
8200 Sheares Road
Delta BC V4C 8G4
Cliff Sweeney 115,000 -------------------------
2915 Dollarton Highway
North Vancouver BC V7H 1B1
T-Bone Productions Inc. 20,000 -------------------------
501-1159 Main Street
Vancouver BC V6A 4B6
Brenda Thompson 40,000 -------------------------
4 Waterford Bay
Winnipeg MB R3T 1H5
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
Shareholder's Name No. of Shares Signature
- ------------------ ------------- ---------
<S> <C> <C>
Gerald & Margared Trayturik 40,000 -------------------------
123 Harris Blvd
Winnipeg MB R3J 3P3
Diane Ukranic 40,000 -------------------------
#6-1375 West 14th Avenue
Vancouver BC V6H 1R2
Bing Wu 11,000 -------------------------
3993 Edinburgh Street
Burnaby BC V5C 1R4
Bo Yang 10,000 -------------------------
9897-132A Street
Surrey BC V3T 5E8
Zequn (Trevor) Zhuang 120,000 -------------------------
#3-6592 Telford Avenue
Burnaby BC V5H 2Z2
</TABLE>
<PAGE> 1
EXHIBIT 9
SCHEDULE A
VOLUNTARY POOLING AGREEMENT
THIS AGREEMENT is dated for reference the 11th day of
December, 1998.
BETWEEN:
THE UNDERSIGNED SHAREHOLDERS OF WELCOMETO SEARCH ENGINE, INC.
(collectively referred to as the "Shareholders" and
individually as "Shareholder")
OF THE FIRST PART
AND:
WELCOMETO SEARCH ENGINE, INC., a Florida company having an
office at Suite 1000 - 355 Burrard Street, Vancouver, British
Columbia, V6C 2G8
(hereinafter called the "Company")
OF THE SECOND PART
AND:
RUSSELL & DUMOULIN, Barristers & Solicitors of 2100 - 1075
West Georgia Street, Vancouver, B.C., V6E 3G2
(hereinafter called the "Trustee")
OF THE THIRD PART
WHEREAS the Shareholders are desirous of placing in Pool
certain shares held by them, being in respect of each of the Shareholders the
number of shares set opposite its name in Schedule "A" to this Agreement (the
"Shares"), upon and subject to the terms and conditions hereinafter more
particularly set out;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the premises and in consideration of the sum of Ten Dollars ($10.00) now paid
by the parties hereto, each to the other, (the receipt whereof is hereby
acknowledged) and in further consideration of the mutual covenants and
conditions hereinafter contained, the parties hereto agree as follows:
<PAGE> 2
-2-
1. DEPOSIT OF SHARES
The Shareholders hereby agree each with the other and with the Trustee, that
they will respectively deliver or cause to be delivered to the Trustee a
certificate or certificates for their Shares in the Company as set out in
Schedule "A" to be held by the Trustee and released pursuant to the provisions
of section 2 of this Agreement.
2. RELEASE OF SHARES
The parties hereto agree, each with the other and with the Trustee, that 750,000
of the 1,000,000 Shares (the "Incentive Shares") will be held by the Trustee and
will be used for the benefit of the Company to attract qualified individuals who
will be employed as employees of the Company or who will serve in a management
or consulting capacity with the Company, and who, in the case of individuals who
are serving in a management or consulting capacity, will fall within the
definition of "consultant" contained in B.C. Securities Commission BOR #96/15.
The remaining 250,000 Shares (the "Non-Incentive Shares") shall be held in pool
but shall not be available to attract qualified individuals for the Company.
While the Incentive Shares remain subject to the terms of this Agreement, Trent
Jordan on behalf of the Shareholders, and the Company on its own behalf, will
each suggest individuals who may be of assistance in advancing the Company's
business and who the Company may wish to hire or retain as employees or
consultants. The Incentive Shares shall be used solely as an incentive to
attract such individuals. The Incentive Shares may only be transferred to such
individuals as are mutually agreed upon by Trent Jordan and the Company, in such
amounts and at prices as are mutually agreeable to Trent Jordan and the Company,
provided that any such transfer shall be in compliance with all applicable
securities laws and will only take place with the written consent of the Company
and Trent Jordan. Any Incentive Shares transferred to such an individual shall
be transferred from the Shareholders pro rata and shall be released from pool on
the completion of the transfer. Any amount paid for the Incentive Shares shall
be paid to the Shareholders pro rata.
The Non-Incentive Shares shall be held in pool and be subject to the terms of
this Agreement for a period of one year from the date of this Agreement. At the
end of that one year period the Non-Incentive Shares will be delivered to the
Shareholders solicitor, Jeffs & Company, in trust for the Shareholders.
<PAGE> 3
-3-
The Incentive Shares shall be held in Pool and be available to attract
individuals for a period of 18 months from the date of this Agreement. At the
end of the 18 month period one-half of the Incentive Shares that remain in pool
and have not been transferred will be delivered to Jeffs & Company in trust for
the Shareholders. The remaining one-half of the Incentive Shares that are not
delivered to Jeffs & Company (the "Remaining Incentive Shares") shall remain in
Pool and shall be used to attract individuals for the Company. The Company shall
have the sole authority to select individuals to whom it may wish to transfer
the Remaining Incentive Shares and shall have the sole authority to transfer the
Remaining Incentive Shares.
3. ALTERATIONS OF CAPITAL
The parties hereto agree that the provisions of this agreement relating to the
Shares shall apply mutatis mutandis to any shares or securities into which the
Shares may be converted, changed, reclassified, redivided, redesignated,
subdivided or consolidated and to any shares or securities of the Company or of
any successor or continuing company or corporation of the Company that may be
received by the registered holder of the Shares on a reorganization,
amalgamation, consolidation or merger, statutory or otherwise, including the
release calculation which will be adjusted so that the proportion of the Shares
available for release is unaffected by the alteration of the capital of the
Company.
4. DIVIDENDS, DISTRIBUTIONS AND VOTING OF SHARES
The Shareholders will not be entitled to receive any dividend payments or
distributions of capital, if any, from the Shares while the Shares are subject
to this Agreement, and may not exercise any voting rights attached to the
Shares.
5. AMENDMENT OF AGREEMENT
Schedule A to this agreement shall be amended upon a release of Shares from pool
pursuant to section 2 and the Trustee shall note the amendment on the Schedule A
in its possession.
6. SCOPE OF TRUSTEE'S DUTIES AND INDEMNIFICATION OF TRUSTEE
In exercising its duties and obligations as set forth in this Agreement, the
Trustee will act in good faith and with impartiality towards each of the Company
and the Shareholders.
The Trustee will have no duties or obligations in respect of the Shares other
than those specifically set forth herein. The Trustee will not be bound in any
way by any other contract or agreement between the parties hereto whether or not
the Trustee has knowledge thereof or of its terms and conditions and the
Trustee's only duty, liability and responsibility shall be to hold and deal with
the Shares in accordance with this Agreement. The Trustee will be entitled,
unless it has knowledge to the contrary, to assume that any notice and evidence
received pursuant to these instructions from either the Company or the
Shareholders has been duly executed by the party by whom it purports to have
been signed and the Trustee will not be obligated to enquire into the
sufficiency or authority of any signatures appearing on such notice or evidence.
In the event that the Trustee is given written notice of any disagreement
between the Company and the
<PAGE> 4
-4-
Shareholders resulting in adverse claims or demands being made in connection
with the Shares or a disagreement as to the Shares to be released by the
Trustee, the Trustee will not release the Shares until:
(a) the rights of all parties shall have been fully and finally
adjudicated by a court of competent jurisdiction; or
(b) the Company and the Shareholders give the Trustee written
notice as to their agreement as to the release of the Shares.
In the event that the Trustee is given notice of any disagreement between the
Company and the Shareholders resulting in adverse claims or demand being made in
connection with the Shares or a disagreement as to the Shares to be released by
the Trustee, the Trustee may, at its discretion, interplead the Shares by
delivering the Shares to a court of competent jurisdiction.
The Company will pay the Trustee on the basis of the Trustee's hourly rates for
legal services, plus taxes and disbursements, for the performance of the
Trustee's duties pursuant to this Agreement.
The Company and the Shareholders, jointly and severally, release, indemnify and
save harmless the Trustee from all costs, charges, claims, demands, damages,
losses and expenses resulting from the Trustee's compliance in good faith with
this agreement.
7. TRUSTEE NOT OBLIGED TO DEFEND ACTIONS
It is further agreed by and between the parties hereto, and without restricting
the foregoing indemnity, that in case proceedings should hereafter be taken in
any Court respecting the Shares hereby pooled, the Trustee shall not be obliged
to defend any such action or submit its rights to the Court until it shall have
been indemnified by other good and sufficient security in addition to the
indemnity hereinbefore given against costs of such proceedings.
8. RESIGNATION OF TRUSTEE
(a) If the Trustee wishes to resign as Trustee in respect of the
Shares, the Trustee shall give notice to the Shareholders;
(b) If the Shareholders wish the Trustee to resign as Trustee in
respect of the Shares, the Shareholders shall give notice to
the Trustee;
(c) A notice referred to in subsection (a) or (b) hereof shall be
in writing and delivered to the Shareholders or the Trustee at
their respective addresses set out on the first page or
Schedule A of this agreement, and the notice shall be deemed
to have been received on the date of delivery. The
Shareholders or the Trustee may change their address for
notice by giving notice to the other party in accordance with
this agreement;
<PAGE> 5
-5-
(d) The resignation of the Trustee shall be effective and the
Trustee shall cease to be bound by this agreement on the date
that is 30 days after the date of receipt of the notice
referred to in subsection (a) or (b) hereof or on such other
date as the Trustee and the Shareholders may agree upon.
9. FURTHER ASSURANCES
The parties hereto shall execute and deliver any further documents and perform
any acts necessary to carry out the intent of this agreement.
10. TIME
Time is of the essence of this agreement.
11. GOVERNING LAWS
This agreement shall be construed in accordance with and bound by the laws of
British Columbia and the laws of Canada applicable in British Columbia.
12. ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the parties
hereto and each of their heirs, executors, administrators, successors and
permitted assigns.
13. EXECUTION IN COUNTERPART
This Agreement may be executed in several parts in the same form and such part
as so executed shall together constitute one original agreement, and such parts,
if more than one, shall be read together and construed as if all the signing
parties hereto had executed one copy of this Agreement.
IN WITNESS WHEREOF the Undersigned and the Trustee have
executed these presents as and from the day and year first above written.
SIGNED, SEALED & DELIVERED by
PAMELA WILKINSON in the presence of: )
)
)
- ---------------------------- )
Witness )
) ----------------------------
- ---------------------------- ) PAMELA WILKINSON
Name )
)
- ---------------------------- )
Address )
<PAGE> 6
-6-
SIGNED, SEALED & DELIVERED by
MATTHEW EMERY in the presence of: )
)
)
- ---------------------------- )
Witness )
) ----------------------------
- ---------------------------- ) MATTHEW EMERY
Name )
)
- ---------------------------- )
Address )
WELCOMETO SEARCH ENGINE, INC.
Per:
------------------------
Authorized Signatory
RUSSELL & DUMOULIN
Per:
------------------------
Authorized Signatory
<PAGE> 7
SCHEDULE "A"
TO A VOLUNTARY POOLING AGREEMENT DATED THE 11TH DAY OF DECEMBER, 1998
<TABLE>
<CAPTION>
Number of Class "A"
Name of Shareholder Common Shares held
- ------------------- -------------------
<S> <C>
Pamela Wilkinson 800,000
Name (please print)
9152 Balmoral Mewes Square
Windermere, Florida
- --------------------------
Address
Matthew Emery 200,000
- --------------------------
Name (please print)
702 - 930 Cambie Street
Vancouver, B.C. V6B 5X6
- --------------------------
Address
-------------------
TOTAL 1,000,000
</TABLE>
<PAGE> 1
EXHIBIT 10
WELCOMETO SEARCH ENGINE, INC.
STOCK OPTION PLAN
1. Purpose of the Plan
1.1 The purpose of the Plan is to assist the Corporation in attracting and
retaining superior directors, officers, advisors, employees and other persons or
companies engaged to provide ongoing services to the Corporation, to provide a
strong incentive for such persons to put forth maximum effort for the continued
success and growth of the Corporation, and in combination with these goals, to
encourage their equity participation in the Corporation.
2. Definitions
2.1 For the purposes of the Plan, the following terms have the respective
meanings set forth below:
(a) "Board" means the board of directors of the Corporation;
(b) "Corporation" means WelcomeTo Search Engine, Inc., a Florida
corporation, or its successors;
(c) "Disability" means a physical or mental incapacity of a nature
which the Plan Administrator determines prevents or would
prevent the Optionee from satisfactorily performing the
substantial and material duties of his or her position with
the Corporation;
(d) "Eligible Person" means, from time to time, any director,
officer, advisor or employee of the Corporation or other
person or company engaged to provide ongoing services to the
Corporation:
(e) "Exchange" means any exchange or electronic quotation system
upon which the Shares are listed or quoted;
(f) "Exemption Order" means exemption order BOR #96/15, dated
August 29, 1996, of the British Columbia Securities
Commission, as amended or replaced from time to time;
(g) "Grant Date" has the meaning ascribed to that term in
Subsection 5.1 hereof;
(h) "Option" means an option, granted pursuant to Section 5
hereof, to purchase a Share;
(i) "Option Period" has the meaning ascribed to that term in
Subsection 6.3 hereof;
(j) "Option Price" means the price per Share at which Shares may
be purchased under the Option, as determined pursuant to
Paragraph 5.1(b) hereof and as may be adjusted in accordance
with Section 10 hereof;
<PAGE> 2
- 2 -
(k) "Optionee" means an Eligible Person to whom an Option has been
granted;
(l) "Permitted Consultant" means an Eligible Person who is a
"permitted consultant" as that term is used in the Exemption
Order;
(m) "Plan" means the Incentive Stock Option Plan of the
Corporation as set forth herein as the same may be amended
and/or restated from time to time;
(n) "Plan Administrator" has the meaning ascribed to that term in
section 3.1 hereof;
(o) "Retirement" has the meaning ascribed to that term in
Subsection 8.1 hereof;
(p) "Securities Regulators" has the meaning ascribed to that term
in Section 11 hereof;
(q) "Share" means, subject to Section 10 hereof, a Common share
without nominal or par value in the capital of the
Corporation.
2.2 Unless otherwise indicated, all dollar amounts referred to in this
Option Plan are in U.S. funds.
2.3 As used in this Plan, words importing the masculine gender shall
include the feminine and neuter genders and words importing the singular shall
include the plural and vice versa, unless the context otherwise requires.
3. Administration of the Plan
3.1 The Plan shall be administered by the Board, or by one or more
committees appointed by the Board (the "Plan Administrator").
3.2 The members of any committee appointed to administer the Plan shall be
appointed from time to time by, and serve at the pleasure of, the Board.
3.3 The chief executive officer of the Corporation shall periodically make
recommendations to the Plan Administrator as to the grant of Options.
3.4 The Plan Administrator may wait until such time as the financial
statements of the preceding fiscal year are approved by the Board before making
any determination regarding the grant of Options.
3.5 The interpretation and construction by the Plan Administrator of any
provisions of the Plan or any Option granted hereunder shall be biding and
conclusive on all participants and on
<PAGE> 3
- 3 -
their legal representatives and beneficiaries. The Plan Administrator shall have
the full power and authority to take all actions and to make all determinations
required or provided for under the Plan, any Option or any agreement with
respect to any Option entered into hereunder and all such other actions and
determinations not inconsistent with the specific terms and provisions of the
Plan deemed by such Plan Administrator to be necessary or appropriate to the
administration of the Plan, any Option or any agreement with respect to an
Option entered into hereunder. No member of the Plan Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan, any Option, or of any agreement with respect to any Option entered into
hereunder.
3.6 The Plan Administrator may authorize one or more officers of the
Corporation to execute and deliver and to receive documents on behalf of the
Corporation.
4. Shares Subject to the Plan
4.1 The maximum aggregate number of Options which may be issued under the
Plan shall not exceed two million (2,000,000), subject to adjustment as provided
in Section 10 hereof. Shares in respect of which Options have expired shall be
available for subsequent Options under the Plan. No fractional Shares may be
purchased or issued under the Plan.
5. Grants of Options
5.1 Subject to the provisions of the Plan, the Plan Administrator shall, in
its sole discretion and from time to time, determine those Eligible Persons to
whom Options shall be granted and the date on which such Options are to be
granted (the "Grant Date"). The Plan Administrator shall also determine, in
connection with each grant of Options:
(a) the number of Options to be granted;
(b) the Option Price applicable to each Option, which Option Price
shall comply with all applicable securities laws; and
(c) the other terms and conditions (which need not be identical
and which, without limitation, may include non-competition
provisions) of all Options covered by any grant.
6. Eligibility, Vesting and Terms of Options
6.1 Options may be granted to Eligible Persons only.
6.2 Subject to the adjustments provided for in Section 10 hereof, each
Option shall entitle the Optionee to purchase one Share.
<PAGE> 4
- 4 -
6.3 The option period (the "Option Period") of each Option shall be
determined by the Plan Administrator. The Option Period set for each Option
shall comply with all applicable securities laws and shall commence on the Grant
Date. Where the Exemption Order is relied on by the Corporation in trading an
Option to a Permitted Consultant, the Option Period shall expire on the fifth
anniversary of the Grant Date.
6.4 An Option which has vested may be exercised (in each case to the
nearest full Share) at any time during the Option Period.
6.5 Options shall vest as determined by the Plan Administrator. In the
event of a sale of all or substantially all of the business assets of the
Corporation to another person or the merger or other business combination of the
Corporation with another person or persons in which the Corporation is not the
surviving person or entity or in the event of a change in control of the
Corporation as defined in subsection 8.3 hereof, all options held by Eligible
Persons or Permitted Consultants granted under the Stock Option Plan shall
immediately vest.
6.6 The total number of Shares to be optioned to any Optionee under this
Plan together with any Shares reserved for issuance under options or warrants
for services and employee stock purchase plans or any other share compensation
arrangements to such Optionee shall not exceed 5% of the issued and outstanding
Shares of the Corporation at the Grant Date of the Option.
6.7 Where the Exemption Order is or has been relied on by the Corporation
in trading an Option to a Permitted Consultant, the total number of Shares to be
optioned to Permitted Consultants under this Plan, together with any Shares
reserved for issuance under options or warrants for services and employee stock
purchase plans or any other share compensation arrangements to Permitted
Consultants shall not exceed 2% of the issued and outstanding Shares of the
Corporation at the Grant Date of the Option.
6.8 An Option is personal to the Optionee and is non-assignable and
non-transferrable otherwise than by will or by the laws governing the devolution
of property in the event of death of the Optionee.
7. Option Agreement
7.1 Upon the grant of an Option, the Corporation and the Optionee shall
enter into an option agreement, in a form approved by the Plan Administrator,
subject to the terms and conditions of the Plan, which agreement shall set out
the Optionee's agreement that the Options are subject to the terms and
conditions set forth in the Plan as it may be amended or replaced from time to
time, the Grant Date, the name of the Optionee, the Optionee's position with the
Corporation, the number of Options, the Option Price, payment of the Option
Price, the expiry date of the Option Period and such other terms and conditions
as the Plan Administrator may deem appropriate.
<PAGE> 5
- 5 -
8. Termination of Employment, Engagement or Directorship
8.1 Any Optionee whose employment, engagement or directorship with the
Corporation is terminated due to retirement on or after such Optionee's normal
retirement date under the applicable retirement plan or policy of his or her
employer or due to early retirement with the consent of the Plan Administrator
(collectively, "Retirement") shall have 365 days from the date of such
termination to exercise any Option granted hereunder to the extent such Option
was exercisable and had vested on such date of termination; the Plan
Administrator shall have the discretion to increase or decrease the 365 day
period, provided, however, that no Option shall be exercisable following the
expiration of the Option Period applicable thereto.
8.2 Any Optionee whose employment, engagement or directorship with the
Corporation is terminated due to Disability shall have 365 days from the date of
such termination to exercise any Option granted hereunder to the extent such
Option was exercisable and had vested on such date of termination; the Plan
Administrator shall have the discretion to increase or decrease the 365 day
period, provided, however, that no Option shall be exercisable following the
expiration of the Option Period applicable thereto.
8.3 Any Optionee whose employment, engagement or directorship with the
Corporation is terminated at any time in the six months following a change of
control of the Corporation (as hereinafter defined) shall have 365 days from the
date of such termination to exercise any Option granted hereunder to the extent
such Option was exercisable and had vested on the date of such termination;
provided, however, that no Option shall be exercisable following the expiration
of the Option Period applicable thereto. For the purposes of this Subsection
8.3, "change of control" shall mean the acquisition by a person, or combination
of persons acting in concert, of:
(a) a sufficient number of the voting rights attached to the
outstanding voting securities of the Corporation at the time
of such acquisition, to affect materially the control of the
Corporation; or
(b) more than 40% of the voting rights attached to the outstanding
voting securities of the Corporation at the time of such
acquisition.
8.4 In the event of the death of an Optionee, either while in the
employment or engagement or while a director of the Corporation or after
Retirement, the Optionee's estate may, within 365 days from the date of the
Optionee's death, exercise any Option granted hereunder to the extent such
Option was exercisable and had vested on the date of such termination; provided,
however, that no Option shall be exercisable following the expiration of the
Option Period applicable thereto. The Optionee's estate shall include only the
executors or administrators of such estate and persons who have acquired the
right to exercise such Option directly from the optionee by bequest or
inheritance.
<PAGE> 6
- 6 -
8.5 In the event an Optionee's employment, engagement or directorship is
terminated for cause, each Option held by the Optionee that has not been
effectively exercised prior to such termination shall lapse and become null and
void immediately upon such termination.
8.6 In the event an Optionee's employment, engagement or directorship
terminates for any reason other than death, Disability, Retirement, cause or in
the circumstances described in Subsection 8.3 hereof, the Optionee may exercise
any Option granted hereunder to the extent such Option was exercisable and had
vested on the date of such termination; no later than thirty (30) days after
such termination or such later date within the Option Period first established
by the Plan Administrator for such Option as the Plan Administrator may fix.
8.7 The Plan Administrator may also in its sole discretion increase the
periods permitted to exercise all or any of the Options covered by any Grant
following a termination of employment, engagement or directorship as provided in
Subsections 8.1, 8.2, 8.3, 8.4, 8.5 or 8.6 above, if allowable under applicable
law; provided, however, that in no event shall any Option be exercisable
following the expiration of the Option Period applicable thereto.
8.8 The Plan shall not confer upon any Optionee any right with respect to a
continuation of employment or engagement by, or directorship of, the Corporation
nor shall it interfere in any way with the right of the Corporation to terminate
any Optionee's employment or engagement at any time.
9. Exercise of Options
9.1 Subject to the provisions of the Plan, an Option may be exercised from
time to time by delivery to the Corporation at its registered office of a
written notice of exercise addressed to the Secretary of the Corporation
specifying the number of Shares with respect to which the Option is being
exercised, together with a certified cheque or bank draft for the aggregate of
the Option Prices to be paid for the Shares to be purchased. Certificates for
such Shares shall be issued and delivered to the Optionee within a reasonable
time following the receipt of such notice and payment.
9.2 No less than 100 Options may be exercised at any one time, except where
a smaller number of Options is or remains exercisable pursuant to a grant, in
which case, such smaller number of Options must be exercised at one time.
10. Adjustment on Alteration of Share Capital
10.1 In the event of a subdivision, consolidation or reclassification of
outstanding Shares or other capital adjustment, or the payment of a stock
dividend thereon, the number of Shares reserved or authorized to be reserved
under the Plan, the number of Shares receivable on the exercise of an Option and
the Option Price therefor shall be increased or reduced proportionately and such
other adjustments shall be made as may be deemed necessary or equitable by the
Plan Administrator.
<PAGE> 7
- 7 -
10.2 If the Corporation amalgamates, consolidates with or merges with or
into another body corporate, whether by way of amalgamation, statutory
arrangement or otherwise (the right to do so being hereby expressly reserved),
any Share receivable on the exercise of an Option shall be converted into the
securities, property or cash which the Optionee would have received upon such
amalgamation, consolidation or merger if the Optionee had exercised his or her
Option immediately prior to the effective date of such amalgamation,
consolidation or merger and the Option Price shall be adjusted appropriately by
the Plan Administrator and such adjustment shall be binding for all purposes of
the Plan.
10.3 In the event of a change in the Corporation's currently authorized
Shares which is limited to a change in the designation thereof, the shares
resulting from any such change shall be deemed to be Shares within the meaning
of the Plan.
10.4 In the event of any other change affecting the Shares, such adjustment,
if any, shall be made as may be deemed equitable by the Plan Administrator to
properly reflect such event.
10.5 No adjustment provided in this Section 10 shall require the Corporation
to issue a fractional Share and the total adjustment with respect to each Option
shall be limited accordingly.
11. Regulatory Approval
11.1 Notwithstanding any of the provisions contained in the Plan or any
Option, the Corporation's obligation to issue Shares and to issue and deliver
certificates for such Shares to an Optionee pursuant to the exercise of an
Option shall be subject to:
(a) compliance with all applicable laws, regulations, rules,
orders of governmental or regulatory authorities in Canada and
the United States ("Securities Regulators")
(b) compliance with the requirements of an Exchange; and
(c) receipt from the Optionee of such covenants, agreements,
representations and undertakings, including as to future
dealings in such Shares, as the Corporation determines to be
necessary or advisable in order to safeguard against the
violation of the securities laws of any jurisdiction.
11.2 The Corporation shall in no event be obligated to take any action in
order to cause the issuance and delivery of such certificates to comply with any
laws, regulations, rules, orders or requirements.
11.3 If any amendment, modification or termination to the provisions hereof
or any Option made pursuant hereto are required by any Securities Regulators or
an Exchange as a condition of approval to a distribution to the public of any
Shares or to obtain a listing of any Shares, the
<PAGE> 8
- 8 -
Plan Administrator is authorized to make such amendments and thereupon the terms
of the Plan, any Options, including any option agreement made pursuant hereto,
shall be deemed to be amended accordingly without requiring the consent or
agreement of any Optionee.
12. Miscellaneous
12.1 An Optionee entitled to Shares as a result of the exercise of an Option
shall not be deemed for any purpose to be, or to have rights as, a shareholder
of the Corporation by such exercise, except to the extent Shares are issued
therefor and then only from the date such Shares are issued. No adjustment shall
be made for dividends or distributions or other rights which the record date is
prior to the date such Shares are issued.
12.2 The Corporation may require an Optionee, as a condition of exercise of
an Option, to pay or reimburse any taxes which are required to be withheld in
connection with the exercise of such Option.
13. Effective Date, Amendment and Termination
13.1 The Plan shall become effective upon its adoption by the Board, subject
to approval by the shareholders of the Corporation. If the shareholders do not
approve the Plan, the Plan shall not be effective and any and all action taken
prior thereto, including the making of any grants of Options, shall be fully
rescinded and be null and void.
13.2 The Board may, subject to required Securities Regulators and/or
Exchange approval, from time to time amend, modify, suspend or terminate the
Plan in whole or in part; provided, however, that no amendment or modification
may become effective without approval of the amendment or modification by the
shareholders, if shareholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements, or if the Corporation, on
the advice of counsel, determines that shareholder approval is otherwise
necessary or desirable.
13.3 No action by the Board to terminate the Plan pursuant to this Section
13 shall affect any Options granted hereunder which became effective pursuant to
the Plan prior to such action.
13.4 The Plan Administrator may amend, modify or terminate any outstanding
Option, including, but not limited to, substituting another award of the same or
of a different type or changing the date of exercise; provided, however that,
the Optionee's consent to such action shall be required unless the Plan
Administrator determines that the action, when taken with any related action,
would not materially and adversely affect the Optionee or is made pursuant to
Section 11 hereof.
<PAGE> 1
EXHIBIT 11
WELCOMETO SEARCH ENGINE, INC.
555-425 Carrall Street
Vancouver, British Columbia
V6B 6E3
January 21, 1999
Phil Dubois
6832 Linden Avenue
Burnaby, B.C. VSE 1B2
Dear Phil Dubois,
Re: YOUR AGREEMENT TO PROVIDE SERVICES TO WELCOME TO SEARCH ENGINE, INC.
The purpose of this letter is to confirm our understanding on the terms of your
agreement to provides services to WelcomeTo Search Engine, Inc. (the
"WelcomeTo"). We agree that, as between you and WelcomeTo, the following terms
apply.
1. Independent Contractor Relationship
1.1 We are pleased to confirm that your relationship with WelcomeTo will be
on the basis of you being engaged as an arm's length independent contractor
providing management services to WelcomeTo. We expect you will devote the whole
of your occupational energies toward the business of WelcomeTo.
1.2 Your engagement will commence on the date that this agreement is
executed.
1.3 You will be solely responsible for deducting and remitting all
withholding taxes, income taxes, Canada Pension Plan deductions, Employment
Insurance deductions, and all the deductions required by any applicable
statute. Further, you will be solely responsible for and will file all returns
required under all applicable federal and provincial statutes, including but
not limited to the Income Tax Act, the Canada Pension Plan, and the Employment
Insurance Act. You will indemnify WelcomeTo against all claims or assessments
for income tax or other statutory deductions which are made under statutory
authority arising out of your provision of services to WelcomeTo.
2. Compensation
2.1 Your compensation for the services provided pursuant to this agreement
will be $6,000 per month. You authorize WelcomeTo to deduct from any payment
due to you at any time, including any payments with respect to the termination
of this agreement, any amounts owed to you by reason of purchases, advances,
loans or in recompense for damage to or loss of WelcomeTo's property. Your
compensation will be reviewed each time WelcomeTo obtains a
<PAGE> 2
new financing.
2.2 Benefit levels and compensation will be at WelcomeTo's sole discretion
as decided by the from time to time.
3. Your Obligations to Welcome To
3.1 You agree that you will comply with WelcomeTo policies as amended from
time to time.
3.2 In the course of your duties, you will obtain knowledge of WelcomeTo
matters which are confidential and are not to be disclosed by you at any time
except with the approval of WelcomeTo. We confirm you are in a fiduciary
relationship with WelcomeTo.
3.3 You acknowledge that, by reason of your agreement to provide services
to WelcomeTo, you will acquire certain skills, knowledge and experience, as
well as contacts with customers of WelcomeTo and other employees of WelcomeTo
who are engaged in the business of WelcomeTo. As a consequence, you agree that,
during the performance of the services that are the subject to this agreement,
you will not, for any reason, either directly or indirectly, either as an
individual or as a parker or joint venturer or as an employee, principal,
consultant, agent, shareholder, officer, director or representative for any
person, association, organization, or in any manner:
(a) solicit, service, obtain, or accept orders for products or
services competitive with those of WelcomeTo from any of WelcomeTo's actual or
prospective customers; or
(b) commence, engage in, or participate in any business
competitive with that of WelcomeTo within the geographic area in which
WelcomeTo does business; or
(c) solicit, divert, take away, interfere with, or attempt to
induce any employee or agent of WelcomeTo to leave his/her employ or other
relationship with WelcomeTo in order to participate in any business competitive
with WelcomeTo; or
(d) take any steps or make any pans whatsoever to commence or join
any person or entity concerned with or engaged or interested in a business
which is the same as, or competitive with, the business of WelcomeTo.
3.4 You acknowledge and agree that without prejudice to any and all other
rights of WelcomeTo, in the event of your violation of any of the covenants
contained in this agreement, an injunction or other like remedy, including an
interim injunction, will be the only effective remedy to protect WelcomeTo's
rights and property.
4. Termination for Cause
4.1 Your relationship with WelcomeTo may be terminated by WelcomeTo at any
time for legal cause without notice or payment in lieu of notice.
<PAGE> 3
5. Termination Without Cause
5.1 At any time, WelcomeTo may terminate your employment without cause by
providing notice to you. In the event this agreement is terminated by WelcomeTo
on or before January 21, 2000 through WelcomeTo providing you written notice of
termination without cause, WelcomeTo is required to pay you $500,000. In the
event you are terminated by WelcomeTo providing you written notice of
termination without cause, WelcomeTo will pay you $12,000 for each month
remaining in the term of this agreement at the time of termination.
6.1 You may terminate this agreement by providing WelcomeTo with 3 months
notice. WelcomeTo may elect to waive the requirement that you provide notice,
in which case the agreement would end forthwith.
7. Term of This Relationship
7.1 The term of this agreement will be a two-year duration commencing on
the date that this agreement is executed. WelcomeTo may, in its sole
discretion, renew this agreement for successive terms of a duration decided by
WelcomeTo by providing written notice to you. Absent agreement or notice to you
regarding renewal or nonrenewal, this agreement will be deemed to be renewed
immediately prior to its expiration for a one-year term.
7.2 While it is the hope of WelcomeTo that you continue in a long term
relationship, your commencement of this relationship should not be construed as
any guarantee or promise of continued relationship with WelcomeTo.
8. General
8.1 In the event that any provision of this agreement is declared to be
void or invalid by a court of competent jurisdiction or any other adjudicative
body whatsoever the remaining provisions or parts of the agreement remain in
full force and effect.
8.2 This agreement is governed by and is to be construed according to the
laws of the Province of British Columbia.
8.3 A waiver expressed or implied by WelcomeTo of any default by you in the
observance or performance of this agreement does not constitute and is not to
be construed as a waiver or condonation of any subsequent or other default.
8.4 No modification of this agreement is valid unless made in writing and
signed by both parties.
8.5 Time is of the essence of this agreement.
We trust the terms of this letter are agreeable to you. We confirm that you
have been provided the opportunity to obtain independent legal advice with
respect to this agreement Please signify your acceptance of these terms by
signing below.
<PAGE> 4
Yours very truly,
WELCOMETO SEARCH ENGINE, INC.
Per: /S/ Brent Forgeron, President
I accept and agree to the terms of this agreement this 21st day of January,
1999.
/S/ Phil M. Dubois
[Signature]
Phil M. Dubois
[print name]
<PAGE> 1
EXHIBIT 12
WELCOMETO SEARCH ENGINE, INC.
555-425 Carrall Street
Vancouver, British Columbia
V6B 6E3
January 21, 1999
Ken Bradley
2-1176 West 15th Avenue
Vancouver, B.C. V6H 1R8
Dear Ken Bradley,
Re: YOUR AGREEMENT TO PROVIDE SERVICES TO WELCOME TO SEARCH ENGINE, INC.
The purpose of this letter is to confirm our understanding on the terms of your
agreement to provides services to WelcomeTo Search Engine, Inc. (the
"WelcomeTo"). We agree that, as between you and WelcomeTo, the following terms
apply.
1. Independent Contractor Relationship
1.1 We are pleased to confirm that your relationship with WelcomeTo will be
on the basis of you being engaged as an arm's length independent contractor
providing management services to WelcomeTo. We expect you will devote the whole
of your occupational energies toward the business of WelcomeTo.
1.2 Your engagement will commence on the date that this agreement is
executed.
1.3 You will be solely responsible for deducting and remitting all
withholding taxes, income taxes, Canada Pension Plan deductions, Employment
Insurance deductions, and all the deductions required by any applicable
statute. Further, you will be solely responsible for and will file all returns
required under all applicable federal and provincial statutes, including but
not limited to the Income Tax Act, the Canada Pension Plan, and the Employment
Insurance Act. You will indemnify WelcomeTo against all claims or assessments
for income tax or other statutory deductions which are made under statutory
authority arising out of your provision of services to WelcomeTo.
2. Compensation
2.1 Your compensation for the services provided pursuant to this agreement
will be $6,000 per month. You authorize WelcomeTo to deduct from any payment
due to you at any time, including any payments with respect to the termination
of this agreement, any amounts owed to you by reason of purchases, advances,
loans or in recompense for damage to or loss of
<PAGE> 2
WelcomeTo's property. Your compensation will be reviewed each time WelcomeTo
obtains a new financing.
2.2 Benefit levels and compensation will be at WelcomeTo's sole discretion
as decided by the from time to time.
3. Your Obligations to WelcomeTo
3.1 You agree that you will comply with WelcomeTo policies as amended from
time to time.
3.2 In the course of your duties, you will obtain knowledge of WelcomeTo
matters which are confidential and are not to be disclosed by you at any time
except with the approval of WelcomeTo. We confirm you are in a fiduciary
relationship with WelcomeTo.
3.3 You acknowledge that, by reason of your agreement to provide services
to WelcomeTo, you will acquire certain skills, knowledge and experience, as
well as contacts with customers of WelcomeTo and other employees of WelcomeTo
who are engaged in the business of WelcomeTo. As a consequence, you agree that,
during the performance of the services that are the subject to this agreement,
you will not, for any reason, either directly or indirectly, either as an
individual or as a partner or joint venturer or as an employee, principal,
consultant, agent, shareholder, officer, director or representative for any
person, association, organization, or in any manner:
(a) solicit, service, obtain, or accept orders for products or
services competitive with those of WelcomeTo from any of WelcomeTo's actual or
prospective customers; or
(b) commence, engage in, or participate in any business
competitive win Mat of WelcomeTo within the geographic area in which WelcomeTo
does business; or
(c) solicit, divert, take away, interfere with, or attempt to
induce any employee or agent of WelcomeTo to leave his/her employ or other
relationship with WelcomeTo in order to participate in any business competitive
with WelcomeTo; or
(d) take any steps or make any plans whatsoever to commence or
join any person or entity concerned with or engaged or interested in a business
which is the same as, or competitive with, the business of WelcomeTo.
3.4 You acknowledge and agree that without prejudice to any and all other
rights of WelcomeTo, in the event of your violation of any of the covenants
contained in this agreement, an injunction or other like remedy, including an
interim injunction, will be the only effective remedy to protect WelcomeTo's
rights and property.
4 Termination for Cause
4.1 Your relationship with WelcomeTo may be terminated by WelcomeTo at any
time for legal cause without notice or payment in lieu of notice.
<PAGE> 3
5. Termination Without Came
5.1 At any time, WelcomeTo may terminate your employment without cause by
providing notice to you. In the event this agreement is terminated by WelcomeTo
on or before January 21, 2000 through WelcomeTo providing you written notice of
termination without cause, WelcomeTo is required to pay you $500,000. In the
event you are terminated by WelcomeTo providing you written notice of
termination without cause, WelcomeTo will pay you $12,000 for each month
remaining in the term of this agreement at the time of termination.
6. Termination by You
6.1 You may terminate this agreement by providing WelcomeTo with 3 months
notice. WelcomeTo may elect to waive the requirement that you provide notice,
in which case the agreement would end forthwith.
7. Term of This Relationship
7.1 The term of this agreement will be a two-year duration commencing on
the date that this agreement is executed. WelcomeTo may, in its sole
discretion, renew this agreement for successive terms of a duration decided by
WelcomeTo by providing written notice to you. Absent agreement or notice to you
regarding renewal or nonrenewal, this agreement will be deemed to be renewed
immediately prior to its expiration for a one-year term.
7.2 While it is the hope of WelcomeTo that you continue in a long term
relationship, your commencement of this relationship should not be construed as
any guarantee or promise of continued relationship with WelcomeTo.
8. General
8.1 In the event that any provision of this agreement is declared to be
void or invalid by a court of competent jurisdiction or any other adjudicative
body whatsoever the remaining provisions or parts of the agreement remain in
full force and effect.
8.2 This agreement is governed by and is to be construed according to the
laws of the Province of British Columbia.
8.3 A waiver expressed or implied by WelcomeTo of any default by you in the
observance or performance of this agreement does not constitute and is not to
be construed as a waiver or condonation of any subsequent or other default.
8.4 No modification of this agreement is valid unless made in writing and
signed by both parties.
8.5 Time is of the essence of this agreement.
We trust the terms of this letter are agreeable to you. We confirm that you
have been provided
<PAGE> 4
the opportunity to obtain independent legal advice with respect to this
agreement. Please signify your acceptance of these terms by signing below.
Yours very truly,
WELCOMETO SEARCH ENGINE, INC.
Per: /S/ Brent Forgeron, President
I accept and agree to the terms of this agreement this 21st day of January,
1999.
/S/ Ken Bradley
[signature]
Ken Bradley
[Print name]
<PAGE> 1
EXHIBIT 13
INFORMATION PROVIDER AGREEMENT
(ELECTRONIC YELLOW PAGES DIRECTORIES)
This Information Provider Agreement ("Agreement") is entered into the
7th day of March, 1999 by and between WelcomeTo Search Engine, Inc.
("Company"), with its office at 555-425 Carrall Street, Vancouver, British
Columbia V6B 6E3 and Dun & Bradstreet, Inc. ("Provider"), with its office at
One Diamond Hill Road, Murray Hill, New Jersey 07974.
1. DEFINITIONS. The definition of terms set forth in this Section shall
apply in this Agreement.
(a) "D&B Data" means Provider's proprietary information on
individual businesses located in the United States and Canada and made up of
the data elements (if available) and containing the number of records set forth
on Schedule A.
(b) "Company Directory" means an electronic "yellow pages"
directory of businesses located in the United States and Canada using D&B Data
as the source of such information to be accessed via a graphical interface on
the "Internet" commonly known as the "world wide web", which directory is not
intended to be used as a source of marketing or telemarketing lists.
(c) "Company Directory Users" means users of the Company
Directory.
2. LICENSE.
(a) During the term of this Agreement, subject to the terms and
conditions hereof. Provider hereby grants to Company, a non-exclusive,
non-transferable license as follows:
(i) to reasonably use, reproduce and display the D&B Data
internally for development of the Company Directory.
herein.
(ii) to reproduce and display D&B Data in the Company
Directory as set forth
(iii) to present the Company Internet Directory solely on
the Company's website located at the Internet address of
www.welcometosearch.com or any other Internet address that shall be registered
by Company. If Company decides to change its Internet address, Company agrees
to notify Provider at least ten (10) days before making the Internet site
commercially available.
(b) Except as set forth herein, no right to use or distribute any
D&B Data is granted herein, including for internal direct mail applications.
Provider agrees that Company shall be permitted to use up to 50,000 records to
conduct telemarketing campaigns to solicit business. If Company wishes to
utilize more than 50,000 records, Company agrees to notify Provider, in
writing, and agrees to pay additional fees as set forth in Schedule B. The
license granted herein only permits the use of the D&B Data by Company in the
Company Directory and to support telemarketing effort as described herein. The
D&B Data may not be provided to any third party,
<PAGE> 2
except to Company Directory Users and except as otherwise set forth herein, it
being agreed that the D&B Data is being licensed solely for the use of Company
solely in the Company Directory application and the telemarketing effort as set
forth herein.
(c) The license granted herein permits Company's subcontractors
who are assisting Company in the development of the Company Directory to have
limited access to the D&B Data solely for the purpose of assisting Company in
the creation of the Company Directory subject to the following: (i) Company
identifies such subcontractor(s) to Provider and they are reasonably acceptable
to Provider, (ii) such subcontractor(s) execute non-disclosure agreements with
Company that are acceptable to Provider, and (iii) such subcontractors shall
only have access to D&B Data on Company's premises, shall not be permitted to
remove any D&B Data from Company's premises and shall only be permitted to
access such amounts of D&B Data as are reasonably necessary under the
circumstances. Company shall be liable for any breach of the above requirements
or the terms of the aforementioned non-disclosure agreements by such
subcontractor.
3. ROYALTIES. BILLING, PAYMENT, AND AUDIT RIGHTS.
(a) Royalties payable to D&B by Company for the license granted
herein shall be as stated in Schedule B attached hereto ("Royalties").
(b) If Royalties are not paid when due, Company will be subject to
interest on any unpaid balances at the rate of one and one-half percent (1.5%)
per month.
(c) Provider shall have the right at its expense on reasonable
notice to enter Company's offices to audit Company's records to determine its
compliance with any of the terms and conditions of this Agreement.
4. OBLIGATIONS AND RESTRICTIONS.
(a) Company shall only use D&B Data in the Company Directory in
the manner set forth herein and will only permit access and searching of D&B
Data as set forth herein. Downloading of D&B Data from the Company Directory
shall not be permitted.
(b) Company will provide Provider with an opportunity to review
the format and functionality of the Company Directory to determine its
compliance with the terms of this Agreement prior to and after implementation
and will incorporate changes necessary to bring the Company Directory into
compliance with this Agreement. Provider agrees to complete this review within
five (5) business days of receipt of notification from Company that website is
ready to be reviewed
(c) D&B Data may only be displayed in "hypertext markup language"
(d) Company will make reasonable efforts to monitor access to the
Company Directory by Company Directory Users and shall provide written notice
(which notice shall contain the IP address and the number of searches executed)
to Provider on a weekly basis when any single IP address has executed over one
hundred (100) searches in any one (1) calendar week. Provider may then request
that Company deny further access to such Company Directory User and
<PAGE> 3
Company shall promptly deny access.
(e) SIC codes of businesses contained in the D&B Data shall not be
displayed. The D&B Data may only be searchable by Company Directory Users by
description of business operations and geographic location (city, state,
province) or graphical representation of geographic location.
(f) No data or information from another business information
provider shall be added to the D&B Data by Company.
(g) Search results displayed to Company Directory Users will be
limited to fifteen (15) candidates per search. The parties agree to discuss
such limitation in good faith during the term of this Agreement and to modify
it if mutually agreed to. The list of candidates will be presented on two (2)
sequential screens. The first screen will contain a list of all candidates and
for each candidate will display company name, telephone number, street address,
city and state or province. Any additional data on a candidate will be
contained and displayed on the second screen and will only be accessible on a
one-at-a time basis. Such additional candidate data will be ZIP code and any
other additional information Company adds to the D&B Data and will be
accessible only via hypertext link or check box.
(h) Company shall have the right to cosmetically reformat the D&B
Data via using bold type, producing candidate lists in the order specified by
Company and by other reasonable cosmetic means.
(i) Company shall have the right to link the D&B Data to the
advertisements of the subject of such D&B Data record and display such
advertisement adjacent to the D&B Data.
(j) The D&B Data shall be housed at Company's Internet Service
Provider ("ISP") locations only. The ISP may make one (1) copy of the D&B
Data for backup purposes only. Company agrees to obtain ISP's signature on
D&B's Processor's Agreement as set forth on Schedule D before providing D&B
Data to its ISP.
(k) The first screen of the Company Directory will prominently
display the following language: "The information contained in the Company
Directory ("Information") is provided for business lookup purposes and is not
be to used for marketing or telemarketing applications. The information may not
be copied or redistributed and is provided "AS IS" without warranty of any
kind. In no event will WelcomeTo Search Engine, Inc. or its suppliers be liable
in any way with regard to such information. Your use of the Company Directory
indicates your agreement to these terms. If you do not agree to these terms,
please exit the Company Directory now."
(l) Company agrees to develop and implement, prior to the
commercial availability of the Company Directory, and on an ongoing basis
thereafter, reasonable technical devices to protect the D&B Data from
unauthorized access and use.
5. DELIVERER. Provider shall provide Company with an initial copy of the
D&B Data no later than , 1999 and shall provide Company with quarterly
updates on dates to be agreed upon by the parties. When Provider provides
Company with updates, (company agrees to promptly load same into its copy of
such file and to make same commercially available in the Company Directory.
<PAGE> 4
6. DISCLAIMER OF WARRANTY. LIMITATION OF LIABILITY, INDEMNITY.
(a) PROVIDER DOES NOT GUARANTEE OR WARRANT THE CORRECTNESS,
COMPLETENESS, CURRENTNESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OF THE D&B DATA AND SHALL NOT BE LIABLE TO COMPANY OR COMPANY DIRECTORY USERS
FOR ANY LOSS OR INJURY ARISING OUT OF OR CAUSED IN WHOLE OR IN PART BY
PROVIDER'S NEGLIGENT ACTS OR OMISSIONS IN PROCURING, COMPILING, COLLECTING,
INTERPRETING, REPORTING, COMMUNICATING, OR DELIVERING THE D&B DATA OR IN
OTHERWISE PERFORMING ITS OBLIGATIONS UNDER THIS AGREEMENT. PROVIDER WILL HAVE
NO LIABILITY WHATSOEVER FOR CONSEQUENTIAL, PUNITIVE, INDIRECT OR INCIDENTAL
DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(b) PROVIDER'S LIABILITY FOR ANY AND ALL LOSSES OR INJURIES TO
COMPANY ARISING OUT OF ANY ACTS OR OMISSIONS OF PROVIDER IN CONNECTION WITH
ANYTHING TO BE DONE OR FURNISHED UNDER THIS AGREEMENT, REGARDLESS OF THE CAUSE
OF THE LOSS OR INJURY (INCLUDING NEGLIGENCE) AND REGARDLESS OF THE NATURE OF
THE LEGAL OR EQUITABLE RIGHT CLAIMED TO HAVE BEEN VIOLATED (WHETHER IN CONTRACT
OR IN TORT), SHALL NOT EXCEED THE AMOUNT OF ROYALTIES RECEIVED BY PROVIDER
HEREUNDER.
(c) Notwithstanding anything to the contrary set forth herein,
Company agrees to fully indemnify, defend and hold Provider harmless from
liability resulting from or bearing on any and all claims, suits and causes of
action asserted or brought against Provider by a Company Directory User or any
third party based on any allegation regarding the Company Directory but
unrelated to the D&B Data contained in the Company Directory.
(d) Notwithstanding anything to the contrary set forth herein,
each party shall defend, indemnify and save the other harmless from and against
all costs, losses, damages and liabilities, including without limitation
reasonable attorneys' fees, which may be incurred by such party on account of
the breach by the other of any of such party's warranties contained in this
Agreement, as applicable. In addition, (i) Provider shall indemnify Company
under this paragraph from and against any claim that the D&B Data infringes on
the United States copyright, trade secret or trademark rights of any third
party (provided that the D&B Data is used as permitted by this Agreement) and
(ii) Company shall indemnify Provider under this paragraph from any claim that
the Company Directory (except for the D&B Data contained therein) or any of the
technology utilized by Company in developing, creating or distributing the
Company Directory infringes the copyright, patent, trademark or trade secret
rights of any third party.
(e) The foregoing indemnities are conditioned upon prompt written
notice to the indemnifying party by the indemnified party of any claim or
proceeding subject to indemnity; reasonable cooperation by the indemnified
party in the defense and settlement of such claim at the expense of the
indemnifying party; and prior written approval by both parties of any
settlement or compromise of the claim, which approval shall not be unreasonably
withheld. An indemnified party may elect to take control of the defense of a
claim or proceeding at its expense.
<PAGE> 5
7. PROPRIETARY RIGHTS OF PROVIDER. Company acknowledges that the D&B Data
is proprietary to Provider and comprises: (a) works of original authorship,
including compiled information containing the Provider's selection, arrangement
and coordination and expression of such information or pre-existing material it
has created, gathered or assembled; (b) confidential and trade secret
information; and (c) information that has been created, developed and
maintained by the Provider at its expense such that misappropriation or
unauthorized use by others for commercial gain would harm Provider. Company
shall not commit, nor assist Company Directory Users to commit any act or
omission that would impair Provider's rights in the D&B Data.
8. USE OF PROVIDER'S NAME. Company shall not use the Provider's name or
trademarks in any way under this Agreement without Provider's prior written
consent.
9. TERM AND TERMINATION.
(a) This Agreement and the license granted herein shall commence
on the date of execution and shall continue in force for a period of one (1)
year from such date.
(b) This Agreement may be terminated as follows: Paragraph 12.
(i) by either party in the event of the default by the
other party as provided in
(ii) by either party immediately upon written notice to
the other party if the other party becomes insolvent, makes an assignment for
the benefit of creditors, suffers or permits the appointment of a receiver for
its business or assets, files or otherwise becomes the subject of any
proceeding under any bankruptcy or insolvency law, or has wound up or
liquidated its business.
(iii) by Provider upon ten (10) days written notice to
Company if Company becomes affiliated through common ownership or control with
any of the entities set forth on Schedule C.
(iv) by Provider on ten (10) days notice if Provider has
reasonable evidence that Company Directory Users are accessing and downloading
D&B Data for use in direct marketing or telemarketing applications.
(v) by Provider immediately if Company charges Company
Directory Users for accessing, searching or obtaining D&B Data.
(vi) by either party on written notice if the other party
is indicted or subject to adverse publicity such that the terminating party
reasonably believes that it is no longer in its interest to maintain this
relationship.
(c) Termination of this Agreement in accordance with its terms
shall not affect the rights or obligations of either party that are vested as
of the effective date of such termination or intended by the parties to survive
such termination.
<PAGE> 6
(d) Upon expiration or termination of this Agreement, Company
shall immediately stop using the D&B Data and shall return it and all copies
thereof to Provider.
10. PROTECTION OF PROPRIETARY RIGHTS.
(a) Provider acknowledges that the tangible and intangible
information specifically designated by Company as confidential, including the
design, plans, specifications, software manuals, customer lists, supplier data,
customer data, cost and price data, marketing information (other than D&B Data)
and other information relating to the Company Directory that is designated as
confidential, whether disclosed to Provider in connection with this Agreement
or otherwise, constitutes valuable confidential and proprietary information of
Company (collectively, "Company Confidential Information"). Notwithstanding the
foregoing, Company Confidential Information shall not include information that
was lawfully disclosed to Provider free of any obligation to keep it
confidential, information that is or that becomes publicly available by other
than unauthorized disclosure and information that is independently developed by
Provider. Provider shall not use or disclose and shall not suffer or permit its
employees, agents or any other parties to use or disclose such Company
Confidential Information other than as contemplated by this Agreement without
Company's prior written consent. Provider shall inform Company promptly after
discovery of any unauthorized use or disclosure of any of the Company
Confidential Information and shall furnish to Company all available information
and reasonably cooperate with Company regarding such disclosure.
(b) Company acknowledges that the tangible and intangible
information specifically designated by Provider as confidential, including data
formats and layouts, the terms of this Agreement, and other information
relating to the D&B Data, whether disclosed to Company in connection with this
Agreement or otherwise, constitutes valuable confidential and proprietary
information of Provider (collectively, "Provider Confidential Information").
Notwithstanding the foregoing, Provider Confidential Information shall not
include information that was lawfully disclosed to Company free of any
obligation to keep it confidential, information that is or that becomes
publicly available by other than unauthorized disclosure and information that
is independently developed by Company. Company shall not use or disclose and
shall not suffer or permit its employees, agents or any other parties to use or
disclose such Provider Confidential Information other than as contemplated by
this Agreement without Provider's prior written consent. Company shall inform
Provider promptly after discovery of any unauthorized use or disclosure of any
Provider Confidential Information and shall furnish to Provider all available
information and reasonably cooperate with Provider regarding such disclosure.
(c) Each party recognizes and agrees that its breach of the
provisions of this Paragraph 10 may cause immediate and irreparable harm to the
other party, and that in the event of such breach, the other party, in addition
to any damages to which it may be entitled, shall have the right to seek
injunctive relief against the other party.
11. ENTIRE AGREEMENT. This Agreement, including all Schedules, embodies the
entire understanding between the parties with respect to the subject matter
hereof and supersedes any and all prior understandings and agreements, oral or
written, relating thereto. Any amendment to this Agreement, including its
Schedules, must be in writing and signed by each party.
12. DEFAULT. Upon the breach of any material obligation under this
Agreement by either party,
<PAGE> 7
the aggrieved party may give to the defaulting party written notice of such
breach, which notice shall specify the exact nature of the breach and shall
expressly state the aggrieved party's intention to terminate this Agreement in
the event the breach is not remedied and any damages to be paid within ten (10)
days after the receipt of such notice. If, after the expiration of such period,
the defaulting party has failed or refuses to remedy such breach and to pay the
damages caused thereby, this Agreement may be terminated forthwith, effective
upon dispatch of notice by the aggrieved party to the defaulting party. The
right of either party to terminate this Agreement on default is not an
exclusive remedy, and an aggrieved park shall be entitled alternatively or
cumulatively to seek damages for breach of this Agreement, to seek an order
requiring performance of the obligations of this Agreement, or to seek any
other appropriate remedy.
13. NOTICES. Every notice or other communication required or contemplated
by this Agreement by either party shall be delivered in person or sent by
postage prepaid mail, which shall be air mail if posted in a country other than
that of the addressee, telex, facsimile transmission, express delivery or
courier, addressed to the party for whom intended at the address specified at
the beginning of this Agreement or at such other address as the intended
recipient previously shall have designated by written notice to the other
party. Notice shall be effective on delivery. Notice not given in writing shall
be effective only if explicitly or implicitly acknowledged in writing by the
party to whom it was given.
14. ASSIGNMENT. This Agreement shall not be assigned by either party
without the other party's prior written consent, except that Provider may
assign this Agreement to a successor corporation that results from a merger or
corporate reorganization, or to its parent or any affiliate, without such
consent.
15. SEVERABILITY. Should any provision of this Agreement be held to be
void, invalid, unenforceable or illegal by a court, the validity and
enforceability of the other provisions shall not be affected thereby.
16. NO WAIVER. Failure of either party at any time to require performance
by the other party of any obligation under this Agreement shall not affect the
right of such party to require performance of that obligation. Any waiver by
either party of any breach of any provision of this Agreement shall not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver or modification of the provision itself, or a waiver of modification
of any right under this Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed under
the law of the State of New Jersey.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
WELCOMETO SEARCH ENGINE, INC. DUN & BRADSTREET, INC.
By: By:
Title: Title:
<PAGE> 8
LIST OF SCHEDULES
A - List of Data Elements
B - Royalties
C - List of Restricted Entities
D - D&B Processor's Agreement
<PAGE> 9
SCHEDULE A
List of Data Elements
Provider shall supply Company with approximately 11.1 million United States and
Canadian records from Provider's Marketing File, which will consist of the
following data elements (where available):
Company Name
Tradestyle Name
Address City, State and ZIP Code
Telephone Number
Primary SIC Code*
Line of Business Description
Latitude and Longitude
In addition, Company has the option of licensing the URL from D&B and may
request this data element either during the initial delivery of the records or
at the time Company receives a quarterly update.
* Note: SIC Code may not be displayed on Company's website. Company may use the
SIC Code to derive an industry classifications/headings.
<PAGE> 10
SCHEDULE B
Royalties
a) Internet Directory
Company agrees to pay Provider an annual license fee of $275,000 for use of the
D&B Data as described in this Agreement. Payments of this annual license fee
will be exercised according to the following schedules:
Schedule 1:
D&B Data for British Columbia to be delivered on or about March 5, 1999
$5,110 due upon execution of the Agreement
$5,110 due ninety (90) days after date of execution of Agreement
$10,220 due one hundred eighty (180) days after date of execution of Agreement
Schedule 2:
U.S. D&B Data and balance of Canadian D&B Data to be delivered on or about
May 1, 1999
$63,640 due May 1, 1999
$63,640 due August 1, 1999
$127,280 due November 1, 1999
If Company decides to exercise the option of including URL data, as described
on Schedule A of this Agreement, Company agrees to pay Provider an additional
$10,000. This additional payment shall be due and payable upon delivery of the
URL data.
In addition, Company agrees to pay Provider a royalty of two percent (2%) for
the banner advertising revenue Company generates during the term of this
Agreement. Payments of these royalties shall be due and payable to Provider on
a monthly basis.
b) Telemarketing Campaign
As described in Paragraph 2 (b) of the Agreement, Company has the right to use
up to 50,000 records to support its telemarketing efforts. If Company wishes to
use more than 50,000 records, Company agrees to pay Provider for these
additional records at a rate of $65 per thousand records used. Company shall
notify Provider, in writing, that it shall be using additional records, shall
indicate the number of records to be used and shall pay Provider within thirty
(30) days.
<PAGE> 11
SCHEDULE C
List of Restricted Entities
<TABLE>
<S> <C>
American Business Information infoCanada
American Business Lists infoUSA
American List Counsel, Inc. International Business Lists
CCX/Acxiom Lead Source
Customer Decision Corp. List America
Chiiton Publishing MAGI
Claritas/NPDC Market Pulse/Praxis
CMP Metromail CorDoration
Compilers Plus May & Speh
Computer Intelligence Names and Addresses, Inc.
Contacts Influential Names in the News
Customer Insight National Decision Systems
Metromail/R.R. Donnelley & Sons Co. National Register Publishing
Customized Mailing List Inc. Neodata
Database America, Inc. Pagex
Direct Marketing Technologies, Inc. PCS Mailing List Co.
Direct Media, Inc. Penton Publishing
Dunhill International List Co., Inc. R.L. Polk & Co.
Ed Baurnett Consultants Research Projects Corporation
Edith Roman Associates, Inc. Standard & Poor's
EDS (Electronic Data Systems Technimetrics (Finex)
Epsilon United Insurance
Experian (TRW Target Mkting Svcs.) Unibase
Equifax Walter Karl Co.
Fred Woolfe List Co. Worlddata
Great Universal Stores (GUS) Zeller & Letica
Harte Hanks Ziff Davis list Services
Hugo Dunhill Mailing Lists, Inc.
IDG Publishing
</TABLE>
<PAGE> 12
SCHEDULE D
PROCESSOR'S AGREEMENT
This D&B/Processor Data Processing Agreement is entered into this __
day of _________, 199_, by and among Dun & Bradstreet, Inc., acting for itself
and on behalf of all other companies of The Dun & Bradstreet Corporation, Three
Sylvan Way, Parsippany, New Jersey 07054 ("D&B"),_______________________ having
an address at ____________________________ ("Processor") ___________________
and _______________________________ ("Customer").
This D&B/Processor Data Processing Agreement is based upon the
following:
A. D&B is the owner of a valuable, proprietary and copyrighted
database containing information on businesses that D&B licenses to third
parties for use in their credit, marketing and other business decision-making.
B. D&B and Customer are parties to a Master Agreement dated , 19_
(the "License Agreement") under which D&B is licensing information from its
database to Customer for Customer's sole use. The "Licensed Information", as
that term is used herein, means all or any portion of the information that is
licensed to Customer pursuant to the License Agreement.
C. Customer wishes to provide the Licensed Information to
Processor solely for processing and handling for and on behalf of Customer. D&B
is willing to permit Customer to provide the Licensed Information to Processor
for this purpose subject to Customer's and Processor's joint and several
agreement to the terms and conditions of this D&B/Processor Data Processing
Agreement.
NOW, THEREFORE, in consideration of the foregoing, and with the intent
to be legally bound hereby, the parties agree as follows:
1. All Licensed Information provided to Processor is and shall
remain the property of D&B and is and shall be subject to the copyright of D&B
that covers the gathering of large amounts of information, the selection
therefrom and the rendition thereof into usable forms and formats. Processor
shall do nothing inconsistent with the copyright or other proprietary rights of
D&B in and to the Licensed Information.
2. No Licensed Information, whether provided directly to
Processor by D&B or provided to Processor by Customer, shall be either
duplicated by Processor or integrated with information belonging to Processor
or any parent, subsidiary or affiliate of Processor for the benefit of
Processor, or any parent, subsidiary or affiliate of Processor or any third
party other than Customer or be made available by Processor to any parent,
subsidiary or affiliate of Processor or any third party other than Customer.
3. All Licensed Information, including all copies thereof, shall
be returned to D&B at the expiration or earlier termination of the License
Agreement and none of the Licensed Information shall be retained by Processor.
In addition, if Customer is provided with one or more periodic updates of the
Licensed Information during the term of the License Agreement, then Processor
shall promptly return all previously-provided Licensed Information, including
all copies
<PAGE> 13
thereof, upon its receipt of an update thereof.
4. Upon the expiration or earlier termination of this
D&B/Processor Data Processing Agreement, Processor shall provide D&B with a
letter, signed by an officer of Processor, certifying that Processor has fully
complied with all of the terms and conditions of this D&B/Processor Data
Processing Agreement.
5. (a) Except as expressly authorized by subparagraph 5(b)
below, Processor shall not analyze or otherwise use the Licensed Information to
familiarize itself with the nature, character or quality of the Licensed
Information nor shall Processor use any information it obtains as a result of
its handling, processing or possession of the Licensed Information for its
benefit, for the benefit of any parent, subsidiary or affiliate or for the
benefit of any third party other than Customer. Without limiting the generality
of the foregoing, Processor shall not use the Licensed Information or
information obtained as a result of its handling, processing or possession of
the Licensed Information in connection with the creation, testing, enhancement,
promotion, marketing, selling and/or licensing of products or services offered
by Processor, any parent, subsidiary or affiliate of Processor or any third
party other than Customer.
(b) Notwithstanding the prohibitions contained in
subparagraph 5(a) above, D&B agrees that Processor may analyze the Licensed
Information for the sole benefit of Customer, provided that Customer promptly
provides D&B with copies of all reports that Processor provides Customer that
in any way refer to or reflect upon the results of such analysis.
6. During the term of this D&B/Processor Data Processing
Agreement, and for a period of five years thereafter, D&B shall have the right,
from time to time and without advance notice, to enter Processor's premises to
conduct an audit to determine if Processor has complied with the terms of this
D&B/Processor Data Processing Agreement. Such audit may include, without
limitation, an examination of all files in Processor's possession, including
all hard copy and machine readable databases. Processor agrees to fully
cooperate with D&B in connection with each such audit and to make the files in
its possession accessible to D&B and its auditors.
7. Customer agrees to indemnify D&B from any losses or damages
that D&B may incur as a result of Processor's failure or refusal to comply with
any of the terms and conditions of this D&B/Processor Data Processing
Agreement.
8. Processor may terminate this D&B/Processor Data Processing
Agreement upon written notice to D&B and Customer. This D&B/Processor Data
Processing Agreement shall also terminate automatically upon the expiration or
earlier termination of the underlying contract or other arrangement under which
Customer engages Processor to process the Licensed Information. Customer shall
give D&B prompt written notice of any such expiration or earlier termination.
No termination of this D&B/Processor Data Processing Agreement shall be
effective, however, until Processor has complied with its obligations under
paragraphs 3 and 4 above.
9. This D&B/Processor Data Processing Agreement represents the
entire agreement among Customer, Processor and D&B with regard to the subject
matter hereto and there are merged herein all prior and collateral promises,
terms and conditions. D&B and Customer acknowledge- that they are parties to
another Agreement that also concerns the subject matter hereof but that the
two-party agreement is not affected by the foregoing "merger" provision. This
<PAGE> 14
D&B/Processor Data Processing Agreement shall bind and inure to the benefit of
the parties and their successors and permitted assigns. This D&B/Processor Data
Processing Agreement may not be assigned, nor may any party's obligations
hereunder be subcontracted, without the prior written consent of the other
parties, except that no consent shall be required for either an assignment of
this D&B/Processor Data Processing Agreement by D&B to another company of The
Dun & Bradstreet Corporation as a subcontractor. This D&B/Processor Data
Processing Agreement may not be amended, nor shall any waiver of rights
hereunder be effective, unless the amendment or waiver is in writing and is
signed by all of the parties hereto. If any provision of this Agreement is
found bye court of competent jurisdiction to be unenforceable, then the court
is hereby authorized to modify that provision to make it enforceable and,
failing that, to reform the contract by removing the unenforceable provision.
This Agreement shall be governed by the law of the State of New Jersey, without
giving effect to its conflicts of laws provisions.
Customer: Processor:
- ------------------------------- ----------------------------------
[Type or print legal name] [Type or print legal name]
By: By:
---------------------------- --------------------------------
Name: Name:
-------------------------- -----------------------------
Title: Title:
------------------------- ----------------------------
Accepted By:
DUN & BRADSTREET, INC.
By:
----------------------------
Name:
--------------------------
Date:
--------------------------
<PAGE> 1
EXHIBIT 14
LETTER OF AGREEMENT
This Letter of Agreement sets out the terms of an Agreement ("the Agreement")
between Lee Enterprises Inc. ("Lee") and CityXpress.com Corp. (CityXpress)
under which the parties agree to provide the following services to one another
this 20th day of October, 1999:
CITYXPRESS SERVICES:
Under the Agreement, CityXpress will provide the following services to Lee:
1. Web site hosting and access to the CityXpress.com Regional Business
Directory for states in which Lee rolls out an online web site, with
the initial state being Oregon. CityXpress will provide a functional
template for the CityXpress.com Find It and Buy It sections and will
provide web development support to assist Lee's online publications
with the integration of the CityXpress.com Find It and Buy It
sections.
2. CityXpress will provide access to business listings for the
CityXpress.com Regional Business Directory through its licensing
agreement with Dun & Bradstreet and will provide ongoing maintenance
and updates for these business listings.
3. CityXpress will provide data entry and maintenance services for Basic
Listings and for Highlight and Premier Priority Listings for the
Regional Business Directory.
4. CityXpress will provide ad-scheduling services for banner advertising
within the CityXpress.com Regional Business Directory.
5. CityXpress will provide creative services as required, at an
additional cost, for the design and development of banner ads or
micro-web pages sold by Lee.
6. CityXpress will provide data entry and maintenance services for the
Buy It section of CityXpress.com.
7. CityXpress will host and support online storefronts built through
CityXpress's Xpress/Sites storefront products. CityXpress will handle
inquiries generated from sales and promotional efforts by Lee of the
Xpress/Sites products.
8. CityXpress will provide creative and web development services as
required, at an additional cost, for the design and development of
online storefronts sold by Lee to its customers.
9. CityXpress will host and support the Xpress/Sites Department Store, a
multi-vendor mall in which vendors may purchase product "shelf-space",
and configure the store to support a number of special or seasonal
events (e.g., Best of Oregon Christmas Mall).
10. CityXpress will provide a link to its CityXpress.com site to allow Lee
customers to access business listings (Find It) and links to
storefronts (buy It) outside geographic regions for
<PAGE> 2
which each Lee online site provides coverage.
11. CityXpress will provide support services for the Lee sales force
including initial training, ongoing support during regular business
hours, and master copies in electronic format of CityXpress.com
collateral material.
Lee Services
1. Lee will sell priority listings, banner ads and micro-web pages for
the CityXpress.com Regional Business Directory through selected Lee
direct and third party sales forces to its customers. Lee will invoice
customers for such services and provide CityXpress with a monthly
statement of revenues by publication/customer, except as these
services are performed by agreement with CityXpress.com.
2. Lee online publications will co-brand the CityXpress.com Find It and
Buy It sections of their sites.
3. Lee will promote and sell online storefronts to its customers through
participating sales representatives. Lee will sell and invoice product
listings for each specialized multi-vendor department store and will
promote the site to its print and online customers, except as these
services are performed by agreement with CityXpress.com.
REVENUES
1. Lee will invoice its customers for priority listings, banner ads and
micro-web pages in the CityXpress.com Regional Business Directory.
Revenues realized from the sale of such services will be split on an
equal basis for three months immediately following the rollout of each
online site.
2. Lee will invoice its customers for product listings in the
multi-vendor mall. Revenues realized from the sale of such services
will be split on an equal basis for three months immediately following
the rollout of each online site. Lee will invoice monthly hosting to
storefront customers whose sites were sold by the Lee sales force or
through accessing the store building software from a Lee web site.
Revenues realized from the sale of such services will be split on an
equal basis for the first three months immediately following the
rollout of each online site.
3. Lee will invoice monthly hosting to storefront customers whose sites
were sold by the Lee sales force or through accessing the store
building software form a Lee web site. Revenues realized from the sale
of such services will be split on an equal basis for the first three
months immediately following the rollout of each online site.
4. Service revenues derived by CityXpress for the design and development
of banner ads, micro-web pages, or storefronts will be retained fully
by CityXpress and will not be subject to revenue sharing.
<PAGE> 3
5. After three months, the parties agree to review the revenue split
contained in this agreement to ensure a more equitable division of the
proceeds.
Miscellaneous
1. TERM OF THE AGREEMENT. The Agreement is valid for one year from the
date of the Agreement and may be renewed anytime within 90 days before
the expiration of the Agreement by mutual consent of the parties. This
Agreement may be cancelled by the parties after the first three
months, should the parties not reach reasonable agreement on revenue
sharing at that time.
2. SERVICE INTERRUPTION: IN NO EVENT SHALL CityXpress BE LIABLE FOR AM
EXEMPLARY, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES TO LEE FOR
SERVICE BUREAU SERVICES PROVIDED BY THIS AGREEMENT.
3. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the parties and supersedes any and all prior agreements
whether oral or written. This Agreement may not be changed except in
writing signed by the parties.
4. ASSIGNMENT AND SUBLEASE. The Agreement may not be assigned by either
party without the written consent of the other.
5. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Iowa. In the event suit is brought with
respect to this Agreement, the prevailing party shall be entitled to
costs and attorney's fees.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CITYXPRESS.COM CORP. LEE ENTERPRISES, INC.
By: /s/ Phil Dubois By: /S/
Its: President & CEO Its:
<PAGE> 1
EXHIBIT 15
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our reports dated September 24, 1999 in the
Registration Statement on Form 10-SB of CityXpress.com Corp., with respect to
the consolidated financial statements of CityXpress.com Corp. and the combined
financial statements of Xceedx Technologies Inc.
/s/ Ernst & Young LLP
Vancouver, Canada,
May 2, 2000 Chartered Accountants
<PAGE> 1
EXHIBIT 16
[CIBC LOGO]
Mike Parlow
February 16, 2000
CityXpress.com Corp
Suite 200
1727 W. Broadway
Vancouver, B.C.
V6J 4S5
Attention: Phil Dubois & Ken Bradley:
Dear Mr. Dubois & Mr. Bradley:
We, Canadian Imperial Bank of Commerce ("CIBC"), are pleased to
establish the following Credits for you, our customer.
CREDIT A: DEMAND INSTALMENT LOAN
Loan Amount: $250,000
Purpose: Consolidate & permanently retire existing credit
extended to Xceedx Technologies Inc. and WelcomeTo
Search Engine Inc and advance additional funds for
general business purposes.
Interest Rate: Prime Rate plus 1.0% per year.
Scheduled Payments: Unless we make demand, you will pay CIBC as follows:
180 regular monthly payments of $2,317.80 each.
The first regular monthly payment is due on March 15,
2000. The last payment, plus any outstanding
principal and interest together with any other amount
due under this Agreement, is due on February 15,
2015.
<PAGE> 2
CityXpress.com Corp FEBRUARY 16, 2000
SECURITY
Security: The following security is required:
Liquid: Liquid security as follows:
- Pledge of the following Money Market Investments:
$25,000. (Note that you may from time to time
substitute acceptable Money Market Investments
and/or Negotiable Securities for these ones.)
Security Agreement
(GSA): All personal property of the business now owned (which
includes among other things inventory, equipment and
receivables), and all personal property acquired in
the future.
Collateral mortgage: Collateral mortgage security for $250,000 giving CIBC
a 1st charge over the property at #21 - 4150 Tantulus
Way, Whistler, B.C., plus acknowledged assignment of
fire and other perils insurance, with loss payable to
CIBC as 1st mortgagee.
Guarantee: Guarantee from Philip Dubois in an amount that is
limited to $250,000 secured by collateral mortgage
as above.
Guarantee from Ken Bradley in an amount that is
limited to $250,000 secured by collateral mortgage
and money market securities as above.
Life Insurance: CIBC Business Loans Life Insurance on the life of
Phil Dubois for the Overall Credit Limit.
REPORTING REQUIREMENTS
Reporting (1) Within 30 days of the end of each fiscal quarter,
Requirements: financial statements for that fiscal quarter.
(2) Within 90 days of each fiscal year-end, financial
statements for that fiscal year on an review
basis.
(3) Within 90 days of each fiscal year-end, a
business plan/forecast for the next fiscal year,
including month-by-month projected balance
sheets, income statements and cash flow
projections.
(4) Within 90 days of each fiscal year-end,
financial statements from guarantor(s).
FEES
Set-up: A fee of $250. (payable on acceptance of this offer).
Review: A fee of $250. (payable on the Scheduled Review Date).
2 of 3
<PAGE> 3
CityXpress.com Corp
February 16, 2000
OTHER PROVISIONS
Next Scheduled
Review Date: July 31, 2000
Standard Credit Terms: The attached Schedule - Standard Credit Terms forms part
of this Agreement.
General: You agree that (a) you have read this Agreement
(including the Schedule - Standard Credit Terms),
(b) CIBC has explained it to you, and (c) you understand
it.
Please indicate your acceptance of these terms by returning a signed
copy of this Agreement. If we do not receive a signed copy by February 18, 2000,
then this offer will expire.
Your truly,
CANADIAN IMPERIAL BANK OF COMMERCE
by: /s/
----------------------------
Mike Parlow
Account Manager
Phone no.: 665 1593
Fax no.: 665 1015
Acknowledgement: The undersigned certifies that all information provided
to CIBC is true, and acknowledges receipt of a copy of
this Agreement (including any Schedules referred to
above).
Accepted this 14 day of January, 2000.
CityXpress.com Corp
By: /s/ Ken Bradley
---------------------------------
Name: Ken Bradley
-------------------------------
Title: Chief Operating Officer & CFO
------------------------------
3 of 3
<PAGE> 4
[CIBC LOGO]
SCHEDULE - STANDARD CREDIT TERMS
ARTICLE 1 - GENERAL
INTEREST RATE. You will pay interest on each Credit at nominal rates
per year equal to:
(a) for amounts above the Credit Limit of a Credit or a part of a Credit or for
amounts that are not paid when due, the Default Interest Rate, and
(b) for any other amounts, the rate specified in this Agreement.
1.2 VARIABLE INTEREST. Each variable interest rate provided for under this
Agreement will change automatically, without notice, whenever the Prime Rate or
the U.S. Base Rate, as the case may be, changes.
1.3 PAYMENT OF INTEREST. Interest is calculated on the daily balance of
the Credit at the end of each day. Interest is due once a month, unless the
Agreement states otherwise. Unless you have made other arrangements with us, we
will automatically debit your Operating Account for interest amounts owing. If
your Operating Account is in overdraft and you do not deposit to the account an
amount equal to the monthly interest payment, the effect is that we will be
charging interest on overdue interest (which is known as compounding). Unpaid
interest continues to compound whether or not we have demanded payment from you
or started a legal action, or get judgment, against you.
1.4 DEFAULT INTEREST. To determine whether Default Interest is to be
charged, the following rules apply:
(a) Default Interest will be charged on the amount that exceeds the Credit Limit
of any particular Credit.
(b) If there are several parts of a Credit, Default Interest will be charged if
the Credit Limit of a particular part is exceeded. For example, if Credit A's
limit is $250,000, and the limit of one part is $100,000 and the limit of that
part is exceeded by $25,000, Default Interest will be charged on that $25,000
excess, even if the total amount outstanding under Credit A is less than
$250,000.
1.5 FEES. You will pay CIBC's fees for each Credit as outlined in the
Letter. You will also reimburse us for all reasonable fees (including legal
fees) and out-of-pocket expenses incurred in registering any security, and in
enforcing our rights under this Agreement or any security. We will
automatically debit your Operating Account for fee amounts owing.
1.6 OUT RIGHTS RE DEMAND CREDITS. At CIBC, we believe that the
banker-customer relationship is based on mutual trust and respect. It is
important for us to know all the relevant information (whether good or bad)
about your business. CIBC is itself a business. Managing risks and monitoring
our customers' ability to repay is critical to us. We can only continue to lend
when we feel that we are likely to be repaid. As a result, if you do something
that jeopardizes that relationship, or if we no longer feel that you are likely
to repay all amounts borrowed, we may have to act. We may decide to act, for
example, because of something you have done, information we receive about your
business, or changes to the economy that affect your business. Some of the
actions that we may decide to take include requiring you to give us more
financial information, negotiating a change in the interest rate or fees, or
asking you to get further accounting assistance, put more cash into the
business, provide more security, or produce a satisfactory business plan. It is
important to us that your business succeeds. We may, however, at our
discretion, demand immediate repayment of any outstanding amounts under any
demand Credit. We may also, at any time and for any cause, cancel the unused
portion of any demand Credit. Under normal circumstances, however, we will give
you 30 days' notice of any of these actions.
1.7 PAYMENTS. If any payment is due on a day other than a Business Day,
then the payment is due on the next Business Day.
1.8 APPLYING MONEY RECEIVED. If you have not made payments as required by
this Agreement, or if you have failed to satisfy any term of this Agreement (or
any other agreement you have that relates to this Agreement), or at any time
before default but after we have given you appropriate notice, we may decide
how to apply any money that we receive. This means that we may choose which
Credit to apply the money against, or what mix of principal, interest, fees and
overdue amounts within any Credit will be paid.
1.9 INFORMATION REQUIREMENTS. We may from time to time reasonably require
you to provide further information about your business. We may require
information from you to be in a form acceptable to us.
1.10 INSURANCE. You will keep all your business assets and property insured
(to the full insurable value) against loss or damage by fire and all other risks
usual for property such as yours (plus for any other risks we may reasonably
require). If we request, these policies will include a loss payee clause (and if
you are giving us mortgage security, a mortgagee clause). As further security,
you assign all insurance proceeds to us. If we ask, you will give us either the
policies themselves or adequate evidence of their existence. If your insurance
coverage for any reason stops, we may (but do not have to) insure the property.
We will automatically debit your Operating Account for these amounts. Finally,
you will notify us immediately of any loss or damage to the property.
1.11 ENVIRONMENTAL. You will carry on your business, and maintain your
assets and property, in accordance with all applicable environmental laws and
regulations. If (a) there is any release, deposit, discharge or disposal of
pollutants of any sort (collectively, a "Discharge") in connection with either
your business or your property, and we pay any fines or for any clean-up, or
(b) we suffer any loss or damage as a result of any Discharge, you will
reimburse CIBC, its directors, officers, employees and agents for any and all
losses, damages, fines, costs and other amounts (including amounts spent
preparing any necessary environmental assessment or other reports, or defending
any lawsuits) that result. If we ask, you will defend any lawsuits,
investigations or prosecutions brought against CIBC or any of its directors,
officers, employees and agents in connection with any Discharge. Your
obligation to us under this section continues even after all Credits have been
repaid and this Agreement has terminated.
1.12 CONSENT TO RELEASE INFORMATION. We may from time to time give any
credit or other information about you to, or receive such information from, (a)
any financial institution, credit reporting agency, rating agency or credit
bureau, (b) any person, firm or
1 of 3
<PAGE> 5
corporation with whom you may have or propose to have financial dealings, and
(c) any person, firm or corporation in connection with any dealings you have or
propose to have with us. You agree that we may use that information to
establish and maintain your relationship with us and to offer any services as
permitted by law, including services and products offered by our subsidiaries
when it is considered that this may be suitable to you.
1.13 OUR PRICING POLICY. Fees, interest rates and other charges for your banking
arrangements are dependent upon each other. If you decide to cancel any of these
arrangements, you will have to pay us any increased or added fees, interest
rates and charges we determine and notify you of. These increased or added
amounts are effective from the date of the changes that you make.
1.14 PROOF OF DEBT. This Agreement provides the proof, between CIBC and you, of
the credit made available to you. There may be times when the type of Credit you
have requires you to sign additional documents. Throughout the time that we
provide you credit under this Agreement, our loan accounting records will
provide complete proof of all terms and conditions of your credit (such as
principal loan balances, interest calculations, and payment dates).
1.15 RENEWALS OF THIS AGREEMENT. This Agreement will remain in effect for your
Credits for as long as they remain unchanged. We have shown a Next Scheduled
Review Date in the Letter. If there are no changes to the Credits this Agreement
will continue to apply, and you will not need to sign anything further. If there
are any changes, we will provide you with either an amending agreement, or a new
replacement Letter, for you to sign.
1.16 CONFIDENTIALITY. The terms of this Agreement are confidential between you
and CIBC. You therefore agree not to disclose the contents of this Agreement to
anyone except your professional advisors.
1.17 PRE-CONDITIONS. You may use the Credits granted to you under this Agreement
only if:
(a) we have received properly signed copies of all documentation that
we may require in connection with the operation of your accounts and your
ability to borrow and give security;
(b) all the required security has been received and registered to our
satisfaction;
(c) any special provisions or conditions set forth in the Letter have
been complied with; and
(d) if applicable, you have given us the required number of days notice
for a drawing under a Credit.
1.18 NOTICES. We may give you any notice in person or by telephone, or by letter
that is sent either by fax or by mail.
1.19 INSTALMENT LOANS. The following terms apply to each Instalment Loan.
(a) NON-REVOLVING LOANS. Unless otherwise stated in the Letter, any
Instalment Loan in non-revolving. This means that any principal payment made
permanently reduces the available Loan Amount. Any payment we receive is applied
first to overdue interest, then to current interest owing, then to overdue
principal, then to any fees and charges owing, and finally to current principal.
(b) FLOATING RATE INSTALMENT LOANS. Floating Rate Instalment Loans may
have either (i) blended payments or (ii) payments of fixed principal amounts,
plus interest, as described below.
(i) BLENDED PAYMENTS. If you have a Floating Rate Loan that
has blended payments, the amount of your monthly payment is fixed for
the term of the loan, but the interest rate varies with changes in the
Prime or U.S. Base Rate (as the case may be). If the Prime or U.S. Base
Rate during any month is lower than what the rate was at the outset,
you may end up paying off the loan before the scheduled end date. If,
however, the Prime or U.S. Base Rate is higher than what it was at the
outset, the amount of principal that is paid off is reduced. As a
result, you may end up still owing principal at the end of the term
because of these changes in the Prime or U.S. Base Rate.
(ii) PAYMENTS OF PRINCIPAL PLUS INTEREST. If you have a
Floating Rate Loan that has regular principal payments, plus interest,
the principal payment amount of your Loan is due on each payment date
specified in the Letter. The interest payment is also due on the same
date, but it is debited from your Operating Account one or two banking
days later. Although the principal payment amount is fixed, your
interest payment will usually be different each month, for at least one
and possibly more reasons, namely: the reducing principal balance of
your loan, the number of days in the month, and changes to the Prime
Rate or U.S. Base Rate (as the case may be).
(c) PREPAYMENT. Unless otherwise agreed, the following terms apply to
prepayment of any Instalment Loan:
(i) FLOATING RATE INSTALMENT LOANS. You may prepay all or part
of a Floating Rate Instalment Loan (whether it is a Demand or a
Committed Loan) at any time without notice or penalty.
(ii) FIXED RATE INSTALMENT LOANS. You may prepay all or part
of a Fixed Rate Instalment Loan, on the following condition. You must
pay us, on the prepayment date, a prepayment fee equal to the interest
rate differential for the remainder of the term of the Loan, in
accordance with the standard formula used by CIBC in these situations.
(d) DEMAND OF FIXED RATE DEMAND INSTALMENT LOANS. If you have a Fixed
Rate Demand Instalment Loan and we make demand for payment, you will owe us (i)
all outstanding principal, (ii) interest, (iii) any other amount due under this
Agreement, and (iv) a prepayment fee. The prepayment fee is equal to the
interest rate differential for the remainder of the term of the loan, in
accordance with the standard formula used by CIBC in these situations.
ARTICLE 2 -- DEFINITIONS
2.1 DEFINITIONS. In this Agreement, the following terms have the following
meanings:
"Business Day" means any day (other than a Saturday or a Sunday) that the CIBC
Branch/Centre is open for business.
"CIBC Branch/Centre" means the CIBC branch or banking centre noted on the first
page of this Agreement, as changed from time to time by agreement between the
parties.
"Credit" means any credit referred to in the Letter, and if there are two or
more parts to a Credit, "Credit" includes reference to each part.
"Credit Limit" of any Credit means the amount specified in the Letter as its
Credit Limit, and if there are two or more parts to a Credit, "Credit Limit"
includes reference to each such part.
"Default Interest Rate", unless otherwise defined in the Letter, means the
Standard Overdraft Rate.
"Demand Instalment Loan" means an Instalment Loan that is payable upon demand.
Such a Loan may be either at a fixed or a floating rate of interest.
CityXpress.com Corp 2 of 3 February 16, 2000
<PAGE> 6
"Fixed Rate Instalment Loan" means an Instalment Loan that is also a Fixed
Rate Loan.
"Fixed Rate Loan" means any loan drawn down, converted or extended under a
Credit at an interest rate which was fixed for a term, instead of referenced to
a variable rate such as the Prime Rate or U.S. Base Rate, at the time of such
drawdown, conversion or extension. For purposes of certainty, a Fixed Rate Loan
includes a LIBOR Loan.
"Floating Rate Instalment Loan" means either an Instalment Loan that is
either a Prime Rate Loan or a Base Rate Loan.
"Instalment Loan" means a loan that is repayable either in fixed Instalments
of principal, plus interest, or in blended Instalments of both principal and
interest. A Demand Instalment Loan is repayable on demand. A Committed
Instalment Loan is repayable only upon the occurrence of an Event of Default.
"Letter" means the letter agreement between you and CIBC to which this Schedule
and any other Schedules are attached.
"Money Market Investments" means instruments such as GICs, bankers' acceptances,
T-bills, etc.
"Negotiable Securities" means securities traded on a publicly recognized
securities exchange in Canada or the United States, each of which has a value
at all times greater than the minimum value from time to time specified by us.
"Operating Account" means the account that you normally use for the day-to-day
cash needs of your business, and may be either or both of a Canadian dollar and
a U.S. dollar account.
"Prime Rate" means the variable reference rate of interest per year declared by
CIBC from time to time to be its prime rate for Canadian dollar loans made by
CIBC in Canada.
"Prime Rate Loan" means a Canadian dollar loan on which interest is calculated
by reference to Prime Rate.
"Standard Overdraft Rate" means the variable reference interest rate per year
declared by CIBC from time to time to be its standard overdraft rate on
overdrafts in Canadian or U.S. dollar accounts maintained with CIBC in Canada.
CityXpress.com Corp 3 of 3 February 16, 2000
<PAGE> 1
EXHIBIT 17
23-95/11 Short (Computer Generated)
(All Provinces except Quebec)
For consumer loans and business loans up to $1 million
[CIBC Logo]
Securities Pledge Agreement
<TABLE>
<CAPTION>
05910, Brentwood Shopping Centre
4567 Lougheed Hwy.
CityXpress.Com Corp Burnaby, B.C. V5C 3Z6
- --------------------------------------------------------- ------------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Last Name First Name First Initial Fund Account No. Banking Office
</TABLE>
By signing this agreement, you agree with us, CANADIAN IMPERIAL BANK OF
COMMERCE, CIBC SECURITIES INC. and CIBC TRUST (referred to in this Agreement
collectively as "CIBC"), as follows:
1. PLEDGE OF SECURITIES. As a general and continuing collateral security for the
due payment of the Debts, you pledge to CIBC, and CIBC takes a security
interest in, the following Collateral:
[ ] (a) Specific Securities: the Securities described below or on any
schedules attached to this Agreement or later given to us.
-------------------------------------------------------------------
DESCRIPTION OF SPECIFIC SECURITIES
(DESCRIBE TYPE AND NUMBER OF SECURITIES, AS WELL AS PAR VALUE,
COUPON RATE, MATURITY DATE, AS APPLICABLE.)
Money Market Investment in the amount of $25,000.00
[ ] As specified in the attached schedule(s) (if the space above is
insufficient).
- --------------------------------------------------------------------------------
Note: if mutual funds are being pledged, please state name of company, name of
mutual fund(s), account number and the specific number of units to be
hypothecated.
[ ] (b) All Securities: all Securities you now own and any you may own in the
future.
[ ] (c) All Securities; limited amount: all Securities as above, but limited to
Securities having a market value of
$25,000.00, or if mutual funds __________________________ units.
[ ] (d) Bank balance: the credit balance of your account No.________________.
[ ] (e) Bank balance; limited amount: the first _____________ of your account
No._______________________.
Note: If we, CIBC, don't tick any box and if the Description in box (a) is
blank, then box (b) will be considered to have been checked off.
2. [ ] PLEDGE OF SECURITIES IN FAVOUR OF SOMEONE ELSE. You are pledging the
Securities to us as continuing collateral security for the Debts of our
customer _____________________________________ (the "Customer"). This is the
same as a guarantee of the Customer's Debts. You should be aware that we may
make changes to the Debts without either notice to you or your consent. We
may, for example, increase the amount of the Debts; we may change the
interest rate, the Loan payment amounts, the term, or the amortization
period; we may discharge any security we hold, or let it lapse, or simply
not take or not register any security; we may give the Customer extra time
to pay the Debts; and we may make other arrangements with the Customer and
with other guarantors in any manner we consider appropriate.
NOTE: ADDITIONAL TERMS AND CONDITIONS. THE ADDITIONAL TERMS AND CONDITIONS ON
THE REVERSE FORM PART OF THIS AGREEMENT.
3. COPY OF THE AGREEMENT. You acknowledge that you have received a copy of this
Agreement.
January 31, 2000 ??????????? CEO
-------------------------------- ----------------------------------------
Date Signature
January 31, 2000 ??????????? COO & CFO
-------------------------------- ----------------------------------------
Date Signature
Note: If a corporation, the office (such as "President" or "Secretary") of the
person signing should be noted below that person's signature.
<TABLE>
<CAPTION>
PPSA INFORMATION (FOR PPSA PROVINCES): FOR INDIVIDUALS ONLY, record the following information:
<S> <C> <C>
Birth Date* Sex
First and second names in full; surname Year Month Day M/F
</TABLE>
* For Alberta, Ontario, Saskatchewan and the Yukon, record: day/month/year.
For British Columbia and Manitoba, New Brunswick and Nova Scotia record:
year/month/day.
<PAGE> 2
-2-
ADDITIONAL TERMS AND CONDITIONS
4. MANAGING YOUR SECURITIES. It is your responsibility to manage your
Securities, and take any steps you consider appropriate, even if the
Securities are in our possession. We are not responsible for taking any
of those actions for you, and we will not be liable to you if we don't.
5. OWNERSHIP AND DEALINGS.
(1) Ownership. You own the Collateral free and clear of any charges,
liens or security given by you in favour of any other lender. You
will keep the Collateral free and clear until this Agreement ends.
(2) Dealings with Collateral. You will not, without our prior consent,
pledge, sell or otherwise deal with any of the Collateral.
6. CHARGES AND EXPENSES. You will pay us on demand all expenses paid by
us as well as fees charged by us in connection with (i) making,
amending or discharging any registration of our security under this
Agreement, and (ii) exercising any of our rights under this Agreement
(including taking the Collateral and selling it). If you have not paid
all amounts that you owe under this section 6, they will be added to
the Debts and will bear interest at CIBC's prime rate.
7. REGISTRATIONS. We may register and renew our security under this
Agreement. If permitted by law, you waive the right to sign or receive
a copy of any financing statement, financing change statement, or
verification statement that relates to this Agreement. We may mail you
(or if more than two people sign this Agreement, to any one of you)
any notice relating to registration by prepaid first class mail, and
you will be considered to have received it 10 days after the mailing
date.
8. DEFAULT. In addition to our other rights (under this Agreement or any
other agreement with CIBC); and without affecting our right to demand
payment of the Debts in the appropriate circumstances, we will not
become entitled to sell the Collateral until one or more of the
following events happens (referred to in this Agreement as "Default"):
(a) any of the Debts are not paid when due;
(b) you breach any term of this Agreement or any other agreement you
have with us (and, if you are not the Customer, the Customer
breaches any term of any agreement the Customer has with us); or
(c) you become insolvent or bankrupt; or you make a proposal, or file
a notice of intention to make a proposal, under the Bankruptcy and
Insolvency Act (Canada) or any similar legislation; or a petition
in bankruptcy is filed against you (and, if you are not the
Customer, any of these things happen to the Customer).
9. RIGHTS UPON DEFAULT. Upon Default, we will (to the extent permitted by
law) have the following rights:
(1) Realization. We may take the Collateral and sell it.
(2) Proceeds. We may apply all Proceeds we receive first to repay any
amounts that you owe under section 6. The balance will be applied
against the Debts as we see fit.
10. DEFINITIONS. In this Agreement:
(1) "Collateral" means all Securities, all Related Interests, and all
Proceeds.
(2) "Debts" means all of your present and future indebtedness and
liability to us (including liability under any guarantee that you
have given or may give us) and, if you are not the Customer and
section 2 is completed, means all Debts of the Customer to us.
(3) "Proceeds" refers to what you get, or are entitled to get, from
any Securities or Related Interests, and includes (among other
things) money, dividends, other securities, interest, distribution,
warrants and options, and insurance money.
(4) "Related Interests" means any renewals of, substitutions for and
additions to any Securities.
(5) "Securities" means all securities (including among other things
shares, term deposits, GICs, mutual fund units, bonds, debentures,
warrants and options), and if box 1(d) or (e) is checked,
includes the credit balance in the bank account. The term also
includes any securities specifically described in Schedule A, plus
those described in any other schedule or listing that you may later
sign and give to us.
(6) "Unit" means a share in a mutual fund.
<PAGE> 1
EXHIBIT 18
6100 95/10 (Computer Generated)
For use in PPSA jurisdictions only
[CIBC LOGO]
05910, Brentwood Shopping Centre
4567 Lougheed Hwy.
Burnaby, B.C. V5C 3Z6
--------------------------------
Branch
SECURITY AGREEMENT
For valuable consideration, the undersigned (the "Customer") agrees with
CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC") as follows:
1. GRANT OF SECURITY. The Customer mortgages, charges and assigns to CIBC,
and grants to CIBC, and CIBC takes, a Security Interest in the property
described in the following paragraph or paragraphs of this section (as
applicable in accordance with the NOTE appearing at the end of this
section), and in all property described in any schedules, documents or
listings that the Customer may from time to time sign and provide to CIBC in
connection with this Agreement, and in all present and future Accessions to,
and all Proceeds of, any such property (collectively, the "Collateral") as a
general and continuing collateral security for the due payment and
performance of the Liabilities:
[ ] (a) SPECIFIC PERSONAL PROPERTY: the Personal Property described in
Schedule A.
[X] (b) ALL PERSONAL PROPERTY: all of the Customer's present and
after-acquired undertaking and Personal Property (including
any property that may be described in Schedule A)
[ ] (c) ALL REAL PROPERTY: all of the Customer's present and
after-acquired real property (including any property that may
be described in Schedule A), together with all buildings
placed, installed or erected on any such property, and all
fixtures.
NOTE: CHECK APPROPRIATE BOX OR BOXES TO INDICATE WHICH OF PARAGRAPHS
(A), (B) OR (C) ARE TO APPLY. IF NO BOX IS CHECKED OFF,
PARAGRAPH (B) WILL APPLY.
2. GOVERNING LAW. This agreement is governed by the laws of B.C.
ADDITIONAL TERMS AND CONDITIONS. THE ADDITIONAL TERMS AND CONDITIONS
(INCLUDING ANY SCHEDULES) ON THE FOLLOWING PAGES FORM PART OF THIS
AGREEMENT.
The Customer has signed this Agreement on January 31, 2000.
CityXpress.Com Corp
--------------------------------------
Customer's name in full
/s/ ??? CEO
--------------------------------------
Signature
/s/ ??? COO & CFO
--------------------------------------
Signature
Suite 200, 1727 West Broadway
--------------------------------------
Customer's street address
Vancouver, B.C. V6J 4W6
--------------------------------------
City/Town, Province and Postal Code
Note: If the Customer is a corporation, the office (such as "President" or
"Secretary") of the person signing should be noted below that person's
signature.
FOR INDIVIDUALS ONLY, record the following information:
<TABLE>
<S> <C> <C> <C> <C>
Birth Date* Sex
First and second names in full; surname Year Month Day M/F
- --------------------------------------- ------ ------ ---- ---
- --------------------------------------- ------ ------ ---- ---
- --------------------------------------- ------ ------ ---- ---
- --------------------------------------- ------ ------ ---- ---
- --------------------------------------- ------ ------ ---- ---
</TABLE>
* For Alberta, Ontario, Saskatchewan and the Yukon, record: day/month/year.
For British Columbia and Manitoba, New Brunswick and Nova Scotia, record:
year/month/day.
<PAGE> 2
SCHEDULE A
The following is a description of property included in the Collateral (describe
personal property by item or kind; if space is insufficient, use a separate
sheet):
SCHEDULE B
The following are the Places of Business (if space is insufficient, use a
separate sheet):
City Xpress.com Corp.
Suite 200
1727 West Broadway
Vancouver, B.C.
V6J 4W6.
-2-
<PAGE> 3
ADDITIONAL TERMS AND CONDITIONS
3. PLACES OF BUSINESS. The Customer represents and warrants that the
locations of all existing Places of Business are specified in Schedule
B. The Customer will promptly notify CIBC in writing of any additional
Places of Business as soon as they are established. Subject to section
5, the Collateral will at all times be kept at the Places of Business,
and will not be removed without CIBC's prior written consent.
4. COLLATERAL FREE OF CHARGES. The Customer represents and warrants that
the Collateral is, and agrees that the Collateral will at all times
be, free of any Charge or trust except in favour of CIBC or incurred
with CIBC's prior written consent. CIBC may, but will not have to, pay
any amount or take any action required to remove or redeem any
unauthorized Charge. The Customer will immediately reimburse CIBC for
any amount so paid and will indemnify CIBC in respect of any action so
taken.
5. USE OF COLLATERAL. The Customer will not, without CIBC's prior written
consent, sell, lease or otherwise dispose of any of the Collateral
(other than Inventory, which may be sold, leased or otherwise disposed
of in the ordinary course of the Customer's business). All Proceeds of
the Collateral (including among other things all amounts received in
respect of Receivables), whether or not arising in the ordinary course
of the Customer's business, will be received by the Customer as trustee
for CIBC and will be immediately paid to CIBC.
6. INSURANCE. The Customer will keep the Collateral insured to its full
insurable value against loss or damage by fire and such other risks as
are customarily insured for property similar to the Collateral (and
against such other risks as CIBC may reasonably require). At CIBC's
request, all policies in respect of such insurance will contain a loss
payable clause, and if the Collateral includes real property will
contain a mortgage clause, in favour of CIBC and in any event the
Customer assigns all proceeds of insurance on the Collateral to CIBC.
The Customer will, from time to time at CIBC's request, deliver such
policies (or satisfactory evidence of such policies) to CIBC. If the
Customer does not obtain or maintain such insurance, CIBC may, but will
not have to, do so. The Customer will immediately reimburse CIBC for
any amount so paid. The Customer will promptly give CIBC written notice
of any loss or damage to all or any part of the Collateral.
7. INFORMATION AND INSPECTION. The Customer will from time to time
immediately give CIBC in writing all information requested by CIBC
relating to the Collateral, the Places of Business, and the Customer's
financial or business affairs. The Customer will promptly advise CIBC
of the Serial Number, model year, make and model of each Serial Number
Good at any time included in the Collateral that is held as Equipment,
including in circumstances where the Customer ceases holding such
Serial Number Good as Inventory and begins holding it as Equipment.
CIBC may from time to time inspect any Books and Records and any
Collateral, wherever located. For that purpose CIBC may, without
charge, have access to each Place of Business and to all mechanical or
electronic equipment, devices and processes where any of them may be
stored or from which any of them may be retrieved. The Customer
authorizes any Person holding any Books and Records to make them
available to CIBC, in a readable form, upon request by CIBC.
8. RECEIVABLES. If the Collateral includes Receivables, CIBC may advise
any Person who is liable to make any payment to the Customer of the
existence of this Agreement. CIBC may from time to time confirm with
such Persons the existence and the amount of the Receivables. Upon
Default, CIBC may collect and otherwise deal with the Receivables in
such manner and upon such terms as CIBC considers appropriate.
9. RECEIPTS PRIOR TO DEFAULT. Until Default, all amounts received by CIBC
as Proceeds of the Collateral will be applied on account of the
Liabilities in such manner and at such times as CIBC may consider
appropriate or, at CIBC's option, may be held unappropriated in a
collateral account or released to the Customer.
10. DEFAULT.
(1) EVENTS OF DEFAULT. The occurrence of any of the following events or
conditions will be a Default:
(a) the Customer does not pay any of the Liabilities when due;
(b) the Customer does not observe or perform any of the
Customers's obligations under this Agreement or any other
agreement or document existing at any time between the
Customer and CIBC;
(c) any representation, warranty or statement made by or on
behalf of the Customer to CIBC is untrue in any material
respect at the time when or as of which it was made;
(d) the Customer ceases or threatens to cease to carry on in the
normal course the Customer's business or any material part
thereof;
(e) if the Customer is a corporation, there is, in CIBC's
reasonable opinion, a change in effective control of the
Customer, or if the Customer is a partnership, there is a
dissolution or change in the membership of the partnership;
(f) the Customer becomes insolvent or bankrupt or makes a proposal
or files an assignment for the benefit of creditors under the
Bankruptcy Act (Canada) or similar legislation in Canada or
any other jurisdiction; a petition in bankruptcy is filed
against the Customer; or, if the Customer is a corporation,
steps are taken under any legislation by or against the
Customer seeking its liquidation, winding-up, dissolution or
reorganization or any arrangement or composition of its debts;
-3-
<PAGE> 4
(g) a Receiver, trustee, custodian or other similar
official is appointed in respect of the Customer or
any of the Customer's property;
(h) the holder of a Charge takes possession of all or any
part of the Customer's property, or a distress,
execution or other similar process is levied against
all or any part of such property; or
(i) CIBC, in good faith and upon commercially reasonable
grounds, believes that the prospect of payment or
performance is or is about to be impaired or that the
Collateral is or is about to be placed in jeopardy.
(2) Rights upon Default. Upon Default, CIBC and a Receiver, as
applicable, will to the extent permitted by law have the
following rights.
(a) Appointment of Receiver. CIBC may by instrument in
writing appoint any Person as a Receiver of all or
any part of the Collateral. CIBC may from time to
time remove or replace a Receiver, or make
application to any court of competent jurisdiction
for the appointment of a Receiver. Any Receiver
appointed by CIBC will (for purposes relating to
responsibility for the Receiver's acts or omissions)
be considered to be the Customer's agent. CIBC may
from time to time fix the Receiver's remuneration
and the Customer will pay CIBC the amount of such
remuneration. CIBC will not be liable to the
Customer or any other Person in connection with
appointing or not appointing a Receiver or in
connection with the Receiver's actions or omissions.
(b) Dealings with the Collateral. CIBC or a Receiver may
take possession of all or any part of the Collateral
and retain it for as long as CIBC or the Receiver
considers appropriate, receive any rents and profits
from the Collateral, carry on (or concur in carrying
on) all or any part of the Customer's business or
refrain from doing so, borrow on the security of the
Collateral, repair the Collateral, process the
Collateral, prepare the Collateral for sale, lease
or other disposition, and sell or lease (or concur
in selling or leasing) or otherwise dispose of the
Collateral on such terms and conditions (including
among other things by arrangement providing for
deferred payment) as CIBC or the Receiver considers
appropriate. CIBC or the Receiver may (without
charge and to the exclusion of all other Persons
including the Customer) enter upon any Place of
Business.
(c) Realization. CIBC or a Receiver may use, collect,
sell, lease or otherwise dispose of, realize upon,
release to the Customer or other Persons and
otherwise deal with, the Collateral in such manner,
upon such terms (including among other things by
arrangement providing for deferred payment) and at
such times as CIBC or the Receiver considers
appropriate. CIBC or the Receiver may make any sale,
lease or other disposition of the Collateral in the
name of and on behalf of the Customer or otherwise.
(d) Application of Proceeds After Default. All Proceeds
of Collateral received by CIBC or a Receiver may be
applied to discharge or satisfy any expenses
(including among other things the Receiver's
remuneration and other expenses of enforcing CIBC's
rights under this Agreement), Charges, borrowings,
taxes and other outgoings affecting the Collateral
or which are considered advisable by CIBC or the
Receiver to preserve, repair, process, maintain or
enhance the Collateral or prepare it for sale, lease
or other disposition, or to keep in good standing
any Charges on the Collateral ranking in priority to
any Charge created by this Agreement, or to sell,
lease or otherwise dispose of the Collateral. The
balance of such Proceeds will be applied to the
Liabilities in such manner and at such times as CIBC
considers appropriate and thereafter will be
accounted for as required by law.
(3) Other Legal Rights. Before and after Default, CIBC will have,
in addition to the rights specifically provided in this
Agreement, the rights of a secured party under the PPSA, as
well as the rights recognized at law and in equity. No right
will be exclusive of or dependent upon or merge in any other
right, and one or more of such rights may be exercised
independently or in combination from time to time.
(4) Deficiency. The Customer will remain liable to CIBC for
payment of any Liabilities that are outstanding following
realization of all or any part of the Collateral.
11. CIBC NOT LIABLE. CIBC will not be liable to the Customer or any other
Person for any failure or delay in exercising any of its rights under
this Agreement (including among other things any failure to take
possession of, collect, or sell, lease or otherwise dispose of, any
Collateral). None of CIBC, a Receiver or any agent of CIBC (including,
in Alberta, any sheriff) is required to take, or will have any
liability for any failure to take or delay in taking, any steps
necessary or advisable to preserve rights against other Persons under
any Chattel Paper, Securities or Instrument in possession of CIBC, a
Receiver or CIBC's agent.
12. CHARGES AND EXPENSES. The Customer agrees to pay on demand all costs
and expenses incurred (including among other things legal fees on a
solicitor and client basis) and fees charged by CIBC in connection
with obtaining or discharging this Agreement or establishing or
confirming the priority of the Charges created by this Agreement or by
law, compliance with any demand by any Person under the PPSA to amend
or discharge any registration relating to this Agreement, and by CIBC
or any Receiver in exercising any remedy under this Agreement
(including among other things preserving, repairing, processing,
preparing for disposition and disposing of the Collateral by sale,
lease or otherwise) and in carrying on the Customer's business. All
such amounts will bear interest from time to time at the highest
interest rate then applicable to any of the Liabilities, and the
Customer will reimburse CIBC upon demand for any amount so paid.
-4-
<PAGE> 5
13. FURTHER ASSURANCES. The Customer will from time to time immediately upon
request by CIBC take such action (including among other things the signing
and delivery of financing statements and financing change statements, other
schedules, documents or listings describing property included in the
Collateral, further assignments and other documents, and the registration of
this Agreement or any other Charge against any of the Customer's real
property) as CIBC may require in connection with the Collateral or as CIBC
may consider necessary to give effect to this Agreement. If permitted by
law, the Customer waives the right to sign or receive a copy of any
financing statement or financing change statement, or any statement issued
by any registry that confirms any registration of a financing statement or
financing change statement, relating to this Agreement. The Customer
irrevocably appoints the Manager or the Acting Manager from time to time of
CIBC's branch specified on the first page of this Agreement as the
Customer's attorney (with full powers of substitution and delegation) to
sign, upon Default, all documents required to give effect to this section.
Nothing in this section affects the right of CIBC as secured party, or any
other Person on CIBC's behalf, to sign and file or deliver (as applicable)
all such financing statements, financing change statements, notices,
verification agreements and other documents relating to the Collateral and
this Agreement as CIBC or such other Person considers appropriate.
14. DEALINGS BY CIBC. CIBC may from time to time increase, reduce, discontinue
or otherwise vary the Customer's credit facilities, grant extensions of time
and other indulgences, take and give up any Charge, abstain from taking,
perfecting or registering any Charge, accept compositions, grant releases
and discharges and otherwise deal with the Customer, customers of the
Customer, guarantors and others, and with the Collateral and any Charges
held by CIBC, as CIBC considers appropriate without affecting the Customer's
obligations to CIBC or CIBC's rights under this Agreement.
15. DEFINITIONS. In this Agreement:
"ACCESSIONS", "ACCOUNT", "CHATTEL PAPER", "DOCUMENT OF TITLE", "EQUIPMENT",
"GOODS", "INSTRUMENT", "INTANGIBLE", "INVENTORY", "PROCEEDS",
"PURCHASE-MONEY SECURITY INTEREST" and "SECURITY INTEREST" have the
respective meanings given to them in the PPSA.
"BOOKS AND RECORDS" means all books, records, files, papers, disks,
documents and other repositories of data recording, evidencing or relating
to the Collateral to which the Customer (or any Person on the Customer's
behalf) has access.
"CHARGE" means any mortgage, charge, pledge, hypothecation, lien (statutory
or otherwise), assignment, financial lease, title retention agreement or
arrangement, security interest or other encumbrance of any nature however
arising, or any other security agreement or arrangement creating in favour
of any creditor a right in respect of a particular property that is prior to
the right of any other creditor in respect of such property.
"CONSUMER GOODS" has the meaning given to it in the PPSA, except that, if
this Agreement is governed by the laws of the Yukon, it does not include
special consumer goods as that term is defined in the Yukon PPSA.
"DEFAULT" has the meaning set out in subsection 10(1).
"LIABILITIES" means all present and future indebtedness and liability of
every kind, nature and description (whether direct or indirect, joint or
several, absolute or contingent, matured or unmatured) of the Customer to
CIBC, wherever and however incurred and any unpaid balance thereof.
"MONEY" has the meaning given to it in the PPSA or, if there is no such
definition, means a medium of exchange authorized or adopted by the
Parliament of Canada as part of the currency of Canada, or by a foreign
government as part of its currency.
"PERSON" means any natural person or artificial body (including among others
any firm, corporation or government).
"PERSONAL PROPERTY" means personal property and includes among other things
Inventory, Equipment, Receivables, Books and Records, Chattel Paper, Goods,
Documents of Title, Instruments, Intangibles (including intellectual
property), Money, and Securities, and includes all Accessions to such
property.
"PLACE OF BUSINESS" means a location where the Customer carries on business
or where any of the Collateral is located (including any location described
in Schedule B).
"PPSA" means the legislation that applies in the province or territory noted
in section 2 of this Agreement, as such legislation may be amended, renamed
or replaced from time to time (and includes all regulations from time to
time made under such legislation) as follows: in the case of Ontario, the
Personal Property Security Act, 1989; in the case of Alberta, British
Columbia, Manitoba, Prince Edward Island, Saskatchewan and the Yukon
Territory, the Personal Property Security Act; and in the case of any other
province or territory, such legislation as deals generally with Charges on
personal property.
"RECEIVABLES" means all debts, claims and choses in action (including among
other things Accounts and Chattel Paper) now or in the future due or owing
to or owned by the Customer.
"RECEIVER" means a receiver or a receiver and manager.
"SECURITIES" has the meaning given to it in the PPSA or, if there is no such
definition and the PPSA defines "security" instead, it means the plural of
that term.
-5-
<PAGE> 6
"SERIAL NUMBER" means the number that the Person who manufactured or
constructed a Serial Number Good permanently marked or attached to it
for identification purposes or, if applicable, such other number as the
PPSA stipulates as the serial number or vehicle information number to
be used for registration purposes of such Serial Number Good.
"SERIAL NUMBER GOOD" means a motor vehicle, trailer, mobile home,
aircraft airframe, aircraft engine or aircraft propeller, boat or an
outboard motor for a boat.
16. GENERAL.
(1) Reservation of the Last Day of any Lease. The Charges created by this
Agreement do not extend to the last day of the term of any lease or
agreement for lease; however, the Customer will hold such last day in
trust for CIBC and, upon the exercise by CIBC of any of its rights
under this Agreement following Default, will assign such last day as
directed by CIBC.
(2) Attachment of Security Interest. The Security Interests created by this
Agreement are intended to attach (i) to existing Collateral when the
Customer signs this Agreement, and (ii) to Collateral subsequently
acquired by the Customer, immediately upon the Customer acquiring any
rights in such Collateral. The parties do not intend to postpone the
attachment of any Security Interest created by this Agreement.
(3) Purchase-Money Security Interest. If CIBC gives value for the purpose
of enabling the Customer to acquire rights in or to any of the
Collateral, the Customer will in fact apply such value to acquire those
rights (and will provide CIBC with such evidence in this regard as CIBC
may require), and the Customer grants to CIBC, and CIBC takes, a
Purchase-Money Security Interest in such Collateral to the extent that
the value is applied to acquire such rights. A certificate or affidavit
of any of CIBC's authorized representatives is admissible in evidence
to establish the amount of any such value.
(4) Description of Collateral in Schedule A. The fact that box (b) or box
(c) of section 1 has been checked without there being any property
described in Schedule A does not affect the nature or validity of
CIBC'S security in the Collateral.
(5) Entire Agreement. CIBC has not made any representation or undertaken
any obligation in connection with the subject matter of this Agreement
other than as specifically set out in this Agreement, and in particular
nothing contained in this Agreement will require CIBC to make, renew or
extend the time for payment of any loan or other credit accommodation
to the Customer or any other Person.
(6) Additional Security. The Charges created by this Agreement are in
addition and without prejudice to any other Charge now or later held by
CIBC. No Charge held by CIBC will be exclusive of or dependent upon or
merge in any other Charge, and CIBC may exercise its rights under such
Charges independently or in combination.
(7) Joint and Several Liability. If more than one Person signs this
Agreement as the Customer, the obligations of such Persons will be
joint and several.
(8) Severability; Headings. Any provision of this Agreement that is void or
unenforceable is any jurisdiction, is, as to that jurisdiction,
ineffective to that extent without invalidating the remaining
provisions of this Agreement. The headings in this Agreement are for
convenience only and do not limit or extend the provisions of this
Agreement.
(9) Interpretation. When the context so requires, the singular will be
read as the plural, and vice versa.
(10) Copy of Agreement. The Customer acknowledges receipt of a copy of this
Agreement.
(11) Waivers. If this Agreement is governed by the laws of Saskatchewan and
the Customer is a corporation, the Customer agrees that The Limitation
of Civil Rights Act, The Land Contracts (Actions) Act and Part IV
(excepting only section 46) of The Saskatchewan Farm Security Act do
not apply insofar as they relate to actions as defined in those Acts,
or insofar as they relate to or affect this Agreement, the rights of
CIBC under this Agreement or any instrument, Charge, security agreement
or other document of any nature that renews, extends or is collateral
to this Agreement.
(12) Notice. CIBC may send to the Customer, by prepaid regular mail
addressed to the Customer at the Customer's address last known to CIBC,
copies of any documents required by the PPSA to be delivered by CIBC to
the Customer. Any document mailed in this manner will be deemed to have
been received by the Customer upon the earlier of actual receipt by
the Customer and the expiry of 10 days after the mailing date. A
certificate or affidavit of any of CIBC's authorized representatives is
admissible in evidence to establish the mailing date.
(13) Enurement; Assignment. This Agreement will enure to the benefit of and
be binding upon (i) CIBC, its successors and assigns, and (ii) the
Customer and the Customer's heirs, executors, administrators,
successors and permitted assigns. The Customer will not assign this
Agreement without CIBC's prior written consent.
-6-
<PAGE> 1
EXHIBIT 19
[CIBC LOGO]
05910, BRENTWOOD SHOPPING CENTRE
4567 LOUGHEED HWY.
BURNABY, B.C. V5C 3Z6
---------------------------------------------------
BANK OFFICE (insert mailing address and postal code)
GUARANTEE
FOR VALUABLE CONSIDERATION, I, the undersigned guarantor, agree with
Canadian Imperial Bank of Commerce ("CIBC") as follows:
1. CUSTOMER'S NAME. The name of the customer whose debts I am guaranteeing
is:
CityXpress.Com Corp
------------------------------------------------------- (the "Customer").
2. GUARANTEE. I guarantee payment to CIBC of all the Customer's Debts. My
liability under this Guarantee is:
(a) [ ] unlimited.
(b) [X] limited to the principal sum of $250,000.00 plus interest and
expenses in accordance with Section 5.
NOTE: IF NEITHER BOX (a) NOR BOX (b) IS CHECKED OFF, OR IF BOTH ARE CHECKED
OFF, OR IF BOX (b) IS CHECKED OFF BUT NO FIGURE IS INSERTED IN THE BLANK,
THEN BOX (a) ALONE WILL BE CONSIDERED TO HAVE BEEN CHECKED OFF.
3. GOVERNING LAW. This Guarantee is governed by the laws of BRITISH COLUMBIA
(without reference to the choice of law rules). I irrevocably agree to
submit to the non-exclusive jurisdiction of its courts.
4. COPY RECEIVED. I acknowledge having received a copy of this Guarantee.
NOTE: THE "ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE" ON THE FOLLOWING
PAGES FORM PART OF THIS GUARANTEE.
Dated January 31, 2000
-----------------------------------
James William Pflanz Philip Dubois
- ----------------------------------- ------------------------------------ Seal
WITNESS'S NAME (RECORD IN FULL) GUARANTOR'S NAME (RECORD IN FULL)
/s/ James W. Pflanz /s/ Philip Dubois
- ------------------------------------- ----------------------------------------
WITNESS'S SIGNATURE SIGNATURE
#404 - 815 Hornby Street 6832 Linden Ave.
- ------------------------------------- ----------------------------------------
WITNESS'S ADDRESS GUARANTOR'S ADDRESS
Vancouver, B.C. V6Z 2E6 Burnaby, B.C. V5E 3G4
- ------------------------------------- ----------------------------------------
(CITY/TOWN, PROVINCE AND POSTAL CODE) (CITY/TOWN, PROVINCE AND POSTAL CODE)
Note: (i) If the Guarantor is a corporation, no witness is needed. The office
(such as "President" or "Secretary") of the person signing should
be noted below that person's signature. The corporation's seal
should be affixed if the resolution so states.
(ii) If the Guarantor is an individual, a red wafer seal is advisable,
but not mandatory. (No seal required in Quebec.)
(iii) For The Guarantees Acknowledgement Act certificate in Alberta, see
page 4.
<PAGE> 2
- 2 -
ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE
5. PAYMENT ON DEMAND. I will immediately pay CIBC on demand:
(a) the amount (and in the currency) of the Customer's Debts (but if
Section 2(b) applies, subject to that limitation), plus any
expenses (including all legal fees and disbursements) incurred by
CIBC in enforcing any of CIBC's rights under this Guarantee; and
(b) interest (including interest on overdue interest, compounded
monthly) on unpaid amounts due under this Guarantee calculated
from the date on which those amounts were originally demanded
until payment in full, both before and after judgment, at the
rates (and in the currency) applicable to the corresponding
Customer's Debts.
6. MAKING DEMAND. Demand and any other notices given under this Guarantee
will be conclusively considered to have been made upon me when the
envelope containing it, addressed to me (or, if there is more than one
Person signing this Guarantee, to any one of us) at the last address
known to CIBC, is deposited, postage prepaid, first class mail, in a
post office, or is personally delivered to that address. I will give
CIBC immediate written notice, addressed to the Manager of the Bank
Office, of each and every change of my address.
7. NO SETOFF OR COUNTERCLAIM. I will make all payments required to be made
under this Guarantee without regard to any right of setoff or
counterclaim that I have or may have against the Customer or CIBC.
8. APPLICATION OF MONEYS RECEIVED. CIBC may apply all moneys received from
me, the Customer or any other Person (including under any Security that
CIBC may from time to time hold) upon such part of the Customer's Debts
as CIBC considers appropriate.
9. EXHAUSTING RECOURSE. CIBC does not need to exhaust its recourse against
the Customer or any other Person or under any Security CIBC may from
time to time hold before being entitled to full payment from me under
this Guarantee.
10. ABSOLUTE LIABILITY. My liability under this Guarantee is absolute and
unconditional. It will not be limited or reduced, nor will CIBC be
responsible or owe any duty (as a fiduciary or otherwise) to me, nor
will CIBC's rights under this Guarantee be prejudiced, by the
existence or occurrence (with or without my knowledge or consent) of
any one or more of the following events:
(a) any termination, invalidity, unenforceability or release by CIBC
of any of its rights against the Customer or against any other
Person or of any Security;
(b) any increase, reduction, renewal, substitution or other change
in, or discontinuance of, the terms relating to the Customer's
Debts or to any credit extended by CIBC to the Customer; any
agreement to any proposal or scheme of arrangement concerning, or
granting any extensions of time or any other indulgences or
concessions to, the Customer or any other Person; any taking or
giving up any Security; abstaining from taking, perfecting or
registering any Security; allowing any Security to lapse (whether
by failing to make or maintain any registration or otherwise); or
any neglect or omission by CIBC in respect of, or in the course
of, doing any of these things;
(c) accepting compositions from or granting releases or discharges to
the Customer or any other Person, or any other dealing with the
Customer or any other Person or with any Security that CIBC
considers appropriate;
(d) any unenforceability or loss of or in respect of any Security
held from time to time by CIBC from me, the Customer or any
other Person, whether the loss is due to the means or timing of
any registration, disposition or realization of any collateral
that is the subject of that Security or otherwise due to CIBC's
fault or any other reason;
(e) the death of the Customer; any change in the Customer's name; or
any reorganization (whether by way of amalgamation, merger,
transfer, sale, lease or otherwise) of the Customer or the
Customer's business;
(f) any change in my financial condition or that of the Customer or
any other Guarantor (including insolvency and bankruptcy);
(g) if I am or the Customer is a corporation, any change of effective
control, or if I am or the Customer is a partnership, a
dissolution or any change in the membership;
(h) any event, whether or not attributable to CIBC, that may be
considered to have caused or accelerated the bankruptcy or
insolvency of the Customer or any Guarantor, or to have resulted
in the initiation of any such proceedings;
(i) CIBC's filing of any claim for payment with any administrator,
provisional liquidator, conservator, trustee, receiver, custodian
or other similar office appointed for the Customer or for all or
substantially all of the Customer's assets;
(j) any failure by CIBC to abide by any of the terms and conditions
of CIBC's agreements with, or to meet any of its obligations or
duties owed to, me, the Customer or any Person, or any breach of
any duty (whether as a fiduciary or otherwise) that exists or is
alleged to exist between CIBC and me, the Customer or any Person;
<PAGE> 3
-3-
(k) any incapacity, disability, or lack or limitation of status or of
the power of the Customer or of the Customer's directors,
managers, officers, partners or agents; the discovery that the
Customer is not or may not be a legal entity; or any irregularity,
defect or informality in the incurring of any of the Customer's
Debts; or
(l) any event whatsoever that might be a defence available to, or
result in a reduction or discharge of, me, the Customer or any
other Person in respect of either the Customer's Debts or my
liability under this Guarantee.
For greater certainty, I agree that CIBC may deal with me, the Customer
and any other Person in any manner without affecting my liability under
this Guarantee.
11. PRINCIPAL DEBTOR. All moneys and liabilities (whether matured or
unmatured, present or future, direct or indirect, absolute or
contingent) obtained from CIBC will be deemed to form part of the
Customer's Debts, notwithstanding the occurrence of any one or more of
the events described in Section 10(k). I will pay CIBC as principal
debtor any amount that CIBC cannot recover from me as Guarantor
immediately following demand as provided in this Guarantee.
12. NO LIABILITY FOR NEGLIGENCE, ETC. CIBC will not be liable to me for
any negligence or any breaches or omissions on the part of CIBC, or any
of its employees, officers, directors or agents, or any receivers
appointed by CIBC, in the course of any of its or their actions.
13. CONTINUING GUARANTEE. This is a continuing guarantee of the Customer's
Debts.
14. TERMINATING FURTHER LIABILITY. I may discontinue any further liability
to pay the Customer's Debts by written notice to the Bank Office. I
will, however, continue to be liable under this Guarantee for any of
the Customer's Debts that the Customer incurs up to and including the
30th day after CIBC receives my notice.
15. STATEMENT CONCLUSIVE. Except for demonstrable errors or omissions, the
amount appearing due in any account stated by CIBC or settled between
CIBC and the Customer will be conclusive as to that amount being due.
16. CIBC'S PRIORITY.
(a) If any payment made to CIBC by the Customer or any other Person is
subsequently rendered void or must otherwise be returned for any
reason, I will be liable for that payment (but if Section 2(b)
applies, subject to that limitation). Until all of CIBC's claims
against the Customer in respect of the Customer's Debts have been
paid in full, I will not require that CIBC assign to me any
Security held, or any other rights that CIBC may have, in
connection with the Customer's Debts, and I will not assert any
right of contribution against any Guarantor, or claim repayment
from the Customer, for any payment that I make under this
Guarantee.
(b) If the Customer is bankrupt, or (if the Customer is a corporation)
liquidated or wound up, or if the Customer makes bulk sale of any
assets under applicable law, or if the Customer proposes any
composition with creditors or any scheme of arrangement, CIBC will
be entitled to all dividends and other payments until CIBC is paid
in full, and I will remain liable under this Guarantee (but if
Section 2(b) applies, subject to that limitation).
(c) If CIBC gives to any trustee in bankruptcy or receives a valuation
of, or retains, any Security that CIBC holds for payment of the
Customer's Debts, that will not be considered, as between CIBC and
me, to be a purchase of such Security or payment, satisfaction or
reduction of the Customer's Debts.
17. ASSIGNMENT AND POSTPONEMENT OF CLAIM. I postpone in favour of CIBC
all debts and liabilities that the Customer now owes or later may from
time to time owe to me in any manner until CIBC is paid in full. I
further assign to CIBC all such debts and liabilities, to the extent of
the Customer's Debts, until CIBC is paid in full. If I receive any
moneys in payment of any of such debts and liabilities, I will hold
them in trust for, and will immediately pay them to, CIBC without
reducing my liability under this Guarantee.
18. WITHHOLDING TAXES. Unless a law requires otherwise, I will make all
payments under this Guarantee without deduction or withholding for any
present or future taxes of any kind. If a law does so require, I will
pay to CIBC an additional amount as is necessary to ensure CIBC
receives the full amount CIBC would have received if no deduction or
withholding had been made.
19. JUDGEMENT CURRENCY. My liability to pay CIBC in a particular currency
(the "First Currency") will not be discharged or satisfied by any
tender or recovery under any judgement expressed in or converted into
another currency (the "Other Currency") except to the extent the tender
or recovery results in CIBC's effective receipt of the full amount of
the First Currency so payable. Accordingly, I will be liable to CIBC in
an additional cause of action to recover in the Other Currency the
amount (if any) by which that effective receipt falls short of the full
amount of the First Currency so payable, without being affected by any
judgment obtained for any other sums due.
<PAGE> 4
-4-
20. CONSENT TO DISCLOSE INFORMATION. CIBC may from time to time give any
credit or other information about me to, or receive such information
from, any credit bureau, reporting agency or other Person.
21. GENERAL. Any provision of this Guarantee that is void or unenforceable
in a jurisdiction is, as to that jurisdiction, ineffective to that
extent without invalidating the remaining provisions. If two or more
Persons sign this Guarantee, each Person's liability will be joint and
several. This Guarantee is in addition and without prejudice to any
Security of any kind now or in the future held by CIBC. There are no
representations, collateral agreements or conditions with respect to,
or affecting my liability under, this Guarantee other than as
contained in this Guarantee.
22. QUEBEC ONLY. If this Guarantee is governed by the laws of Quebec:
(a) I acknowledge that the terms and conditions of the Customer's
Debts have been expressly brought to my attention;
(b) I renounce the benefit of division and discussion;
(c) if two or more Persons sign this Guarantee, each Person's
liability will be solidary;
(d) I acknowledge that the thirty days' notice specified in
Section 14 constitutes prior and sufficient notice to CIBC;
(e) if this Guarantee is attached to the performance of special
duties, I agree that this Guarantee shall not terminate upon
cessation of such duties; and
(f) it is the express wish of the parties that this document and
any related documents be drawn up in English. Les parties aux
presentes ont expressement demande que ce document et tous
les documents s'y rattachant soient rediges en anglais.
23. DEFINITIONS. In this Guarantee:
(a) "Bank Office" means the CIBC office noted on the first page
of this Guarantee, or such address as CIBC may, from time to
time, advise me in the manner provided in Section 6;
(b) "Customer Debts" means the debts and liabilities that the
Customer has incurred or may incur with CIBC including, among
other things, those in respect of dealings between the
Customer and CIBC, as well as any other dealings by which the
Customer may become indebted or liable to CIBC in any manner
whatever;
(c) "Guarantor" means any Person who has guaranteed or later
guarantees to CIBC any or all of the Customer's Debts,
whether or not such Person has signed this Guarantee or
another document;
(d) "I", "me" and "my" mean the Person who has signed this
Guarantee, and if two or more Persons sign, each of them;
(e) "Person" includes a natural Person, personal representative,
partnership, corporation, association, organization, estate,
trade union, church or other religious organization,
syndicate, joint venture, trust, trustee in bankruptcy,
government and government body and any other entity, and,
where appropriate, specifically includes any Guarantor;
(f) "Section" means a section or paragraph of this Guarantee; and
(g) "Security" means any security held by CIBC as security for
payment of the Customer's Debts and includes, among other
things, any and all guarantees.
- --------------------------------------------------------------------------------
For Use in Alberta Only
THE GUARANTEES ACKNOWLEDGEMENT ACT (ALBERTA)
CERTIFICATE OF NOTARY PUBLIC
(BMO VIA-7-5.06,.07)
I HEREBY CERTIFY THAT:
1. ____________________________ of ____________________________, the Guarantor
in the above Guarantee, appeared in person before me and acknowledged that
he/she had executed the Guarantee;
2. I satisfied myself by examination of him/her that he/she is aware of the
contents of the Guarantee and understands it.
Given at ____________________ this ______ day of _____________________, under my
hand and seal of office.
A Notary Public in and for
_______________________________
STATEMENT OF GUARANTOR
I am the Person named in this certificate. _______________________________
Signature Of Guarantor
<PAGE> 1
EXHIBIT 20
[CIBC LOGO]
05910, BRENTWOOD SHOPPING CENTRE
4567 LOUGHEED HWY.
BURNABY, B.C. V5C 3Z6
----------------------------------------------------
BANK OFFICE (insert mailing address and postal code)
GUARANTEE
For valuable consideration, I, the undersigned guarantor, agree with
Canadian Imperial Bank of Commerce ("CIBC") as follows:
1. CUSTOMER'S NAME. The name of the customer whose debts I am guaranteeing is:
CityXpress.com Corp.(the "Customer").
2. GUARANTEE. I guarantee payment to CIBC of all the Customer's Debts. My
liability under this Guarantee is:
(a) [ ] unlimited.
(b) [X] limited to the principal sum of $250,000 plus interest and expenses
in accordance with Section 5.
NOTE: IF NEITHER BOX (a) NOR BOX (b) IS CHECKED OFF, OR IF BOTH ARE CHECKED
OFF, OR IF BOX (b) IS CHECKED OFF BUT NO FIGURE IS INSERTED IN THE BLANK,
THEN BOX (a) ALONE WILL BE CONSIDERED TO HAVE BEEN CHECKED OFF.
3. GOVERNING LAW. This Guarantee is governed by the laws of BRITISH COLUMBIA
(without reference to the choice of law rules). I irrevocably agree to
submit to the non-exclusive jurisdiction of its courts.
4. COPY RECEIVED. I acknowledge having received a copy of this Guarantee.
NOTE: THE "ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE" ON THE FOLLOWING
PAGES FORM PART OF THIS GUARANTEE.
Dated January 31, 2000
-----------------------------------
James William Pflanz Ken Bradley Seal
- ------------------------------------- --------------------------------
WITNESS'S NAME (RECORD IN FULL) GUARANTOR'S NAME (RECORD IN FULL)
/s/ James Pflanz /s/ Ken Bradley Seal
- ------------------------------------- ---------------------------------
WITNESS'S SIGNATURE SIGNATURE
James W. Pflanz
Barrister & Solicitor
#404 - 815 Hornby Street 2 - 1176 West 15th Avenue
- ------------------------------------- ------------------------------------
WITNESS'S ADDRESS GUARANTOR'S ADDRESS
Vancouver, B.C.
V6Z 2E6 VANCOUVER, BC V6H 1R8
- ------------------------------------- -------------------------------------
(CITY/TOWN, PROVINCE AND POSTAL CODE) (CITY/TOWN, PROVINCE AND POSTAL CODE)
Note: (i) If the Guarantor is a corporation, no witness is needed. The office
(such as "President" or "Secretary") of the person signing should
be noted below that person's signature. The corporation's seal
should be affixed if the resolution so states.
(ii) If the Guarantor is an individual, a red wafer seal is advisable,
but not mandatory. (No seal required in Quebec.)
(iii) For The Guarantees Acknowledgement Act certificate in Alberta, see
page 4.
<PAGE> 2
-2-
ADDITIONAL TERMS AND CONDITIONS OF THIS GUARANTEE
5. PAYMENT ON DEMAND. I will immediately pay CIBC on demand:
(a) the amount (and in the currency) of the Customer's Debts (but if
Section 2(b) applies, subject to that limitation), plus any
expenses (including all legal fees and disbursements) incurred by
CIBC in enforcing any of CIBC's rights under this Guarantee; and
(b) interest (including interest on overdue interest, compounded
monthly) on unpaid amounts due under this Guarantee calculated
from the date on which those amounts were originally demanded
until payment in full, both before and after judgment, at the
rates (and in the currency) applicable to the corresponding
Customer's Debts.
6. MAKING DEMAND. Demand and any other notices given under this Guarantee
will be conclusively considered to have been made upon me when the
envelope containing it, addressed to me (or, if there is more than one
Person signing this Guarantee, to any one of us) at the last address
known to CIBC, is deposited, postage prepaid, first class mail, in a
post office, or is personally delivered to that address. I will give
CIBC immediate written notice, addressed to the Manager of the Bank
Office, of each and every change of my address.
7. NO SETOFF OR COUNTERCLAIM. I will make all payments required to be
made under this Guarantee without regard to any right of setoff or
counterclaim that I have or may have against the Customer or CIBC.
8. APPLICATION OF MONEYS RECEIVED. CIBC may apply all moneys received
from me, the Customer or any other Person (including under any Security
that CIBC may from time to time hold) upon such part of the Customer's
Debts as CIBC considers appropriate.
9. EXHAUSTING RECOURSE. CIBC does not need to exhaust its recourse
against the Customer or any other Person or under any Security CIBC may
from time to tome hold before being entitled to full payment from me
under this Guarantee.
10. ABSOLUTE LIABILITY. My liability under this Guarantee is absolute and
unconditional. It will not be limited or reduced, nor will CIBC be
responsible or owe any duty (as a fiduciary or otherwise) to me, nor
will CIBC's rights under this Guarantee be prejudiced, by the existence
or occurrence (with or without my knowledge or consent) of any one or
more of the following events:
(a) any termination, invalidity, unenforceability or release by CIBC
of any of its rights against the Customer or against any other
Person or of any Security;
(b) any increase, reduction, renewal, substitution or other change
in, or discontinuance of, the terms relating to the Customer's
Debts or to any credit extended by CIBC to the Customer; any
agreement to any proposal or scheme or arrangement concerning, or
granting any extensions of time or any other indulgences or
concessions to, the Customer or any other Person; any taking or
giving up of any Security; abstaining from taking, perfecting or
registering any Security; allowing any Security to lapse (whether
by failing to make or maintain any registration or otherwise); or
any neglect or omission by CIBC in respect of, or in the course
of, doing any of these things;
(c) accepting compositions from or granting releases or discharges to
the Customer or any other Person, or any other dealing with the
Customer or any other Person or with any Security that CIBC
considers appropriate;
(d) any unenforceability or loss of or in respect of any Security
held from time to time by CIBC from me, the Customer or any other
Person, whether the loss is due to the means or timing of any
registration, disposition or realization of any collateral that
is the subject of that Security or otherwise due to CIBC's fault
or any other reason;
(e) the death of the Customer; any change in the Customer's name; or
any reorganization (whether by way of amalgamation, merger,
transfer, sale, lease or otherwise) of the Customer or the
Customer's business;
(f) any change in my financial condition or that of the Customer or
any other Guarantor (including insolvency and bankruptcy);
(g) if I am or the Customer is a corporation, any change of effective
control, or if I am or the customer is a partnership, a
dissolution or any change in the membership;
(h) any event, whether or not attributable to CIBC, that may be
considered to have caused or accelerated the bankruptcy or
insolvency or the Customer or any Guarantor, or to have resulted
in the initiation of any such proceedings;
(i) CIBC's filing of any claim for payment with any administrator,
provisional liquidator, conservator, trustee, receiver, custodian
or other similar officer appointed for the Customer or for all or
substantially all of the Customer's assets;
(j) any failure by CIBC to abide by any of the terms and conditions
of CIBC's agreements with, or to meet any of its obligations or
duties owed to, me, the Customer or any Person, or any breach of
any duty (whether as a fiduciary or otherwise) that exists or is
alleged to exist between CIBC and me, the Customer or any Person;
<PAGE> 3
-3-
(k) any incapacity, disability, or lack or limitation of status or of
the power of the Customer or of the Customer's directors,
managers, officers, partners or agents; the discovery that the
Customer is not or may not be a legal entity; or any irregularity,
defect or informality in the incurring of any of the Customer's
Debts; or
(l) any event whatsoever that might be a defence available to, or
result in a reduction or discharge of, me, the Customer or any
other Person in respect of either the Customer's Debts or my
liability under this Guarantee.
For greater certainty, I agree that CIBC may deal with me, the Customer
and any other Person in any manner without affecting my liability under
this Guarantee.
11. PRINCIPAL DEBTOR. All moneys and liabilities (whether matured or
unmatured, present or future, direct or indirect, absolute or
contingent) obtained from CIBC will be deemed to form part of the
Customer's Debts, notwithstanding the occurrence of any one or more of
the events described in Section 10(k). I will pay CIBC as principal
debtor any amount that CIBC cannot recover from me as Guarantor
immediately following demand as provided in this Guarantee.
12. NO LIABILITY FOR NEGLIGENCE, ETC. CIBC will not be liable to me for
any negligence or any breaches or omissions on the part of CIBC, or any
of its employees, officers, directors or agents, or any receivers
appointed by CIBC, in the course of any of its or their actions.
13. CONTINUING GUARANTEE. This is a continuing guarantee of the Customer's
Debts.
14. TERMINATING FURTHER LIABILITY. I may discontinue any further liability
to pay the Customer's Debts by written notice to the Bank Office. I
will, however, continue to be liable under this Guarantee for any of
the Customer's Debts that the Customer incurs up to and including the
30th day after CIBC receives my notice.
15. STATEMENT CONCLUSIVE. Except for demonstrable errors or omissions, the
amount appearing due in any account stated by CIBC or settled between
CIBC and the Customer will be conclusive as to that amount being due.
16. CIBC'S PRIORITY.
(a) If any payment made to CIBC by the Customer or any other Person
is subsequently rendered void or must otherwise be returned for
any reason, I will be liable for that payment (but if Section 2(b)
applies, subject to that limitation). Until all of CIBC's claims
against the Customer in respect of the Customer's Debts have been
paid in full, I will not require that CIBC assign to me any
Security held, or any other rights that CIBC may have, in
connection with the Customer's Debts, and I will not assert any
right of contribution against any Guarantor, or claim repayment
from the Customer, for any payment that I make under this
Guarantee.
(b) If the Customer is bankrupt, or (if the Customer is a corporation)
liquidated or wound up, or if the Customer makes a bulk sale of
any assets under applicable law, or if the Customer proposes any
composition with creditors or any scheme of arrangement, CIBC will
be entitled to all dividends and other payments until CIBC is paid
in full, and I will remain liable under this Guarantee (but if
Section 2(b) applies, subject to that limitation).
(c) If CIBC gives to any trustee in bankruptcy or receives a valuation
of, or retains, any Security that CIBC holds for payment of the
Customer's Debts, that will not be considered, as between CIBC and
me, to be a purchase of such Security or payment, satisfaction or
reduction of the Customer's Debts.
17. ASSIGNMENT AND POSTPONEMENT OF CLAIM. I postpone in favour of CIBC all
debts and liabilities that the Customer now owes or later may from time
to time owe to me in any manner until CIBC is paid in full. I further
assign to CIBC all such debts and liabilities, to the extent of the
Customer's Debts, until CIBC is paid in full. If I receive any moneys
in payment of any such debts and liabilities, I will hold them in trust
for, and will immediately pay them to, CIBC without reducing my
liability under this Guarantee.
18. WITHHOLDING TAXES. Unless a law requires otherwise, I will make all
payments under this Guarantee without deduction or withholding for any
present or future taxes of any kind. If a law does so require, I will
pay to CIBC an additional amount as is necessary to ensure CIBC
receives the full amount CIBC would have received if no deduction or
withholding had been made.
19. JUDGEMENT CURRENCY. My liability to pay CIBC in a particular currency
(the "First Currency") will not be discharged or satisfied by any
tender or recovery under any judgment expressed in or converted into
another currency (the "Other Currency") except to the extent the tender
or recovery results in CIBC's effective receipt of the full amount of
the First Currency so payable. Accordingly, I will be liable to CIBC in
an additional cause of action to recover in the Other Currency the
amount (if any) by which that effective receipt falls short of the full
amount of the First Currency so payable, without being affected by any
judgment obtained for any other sums due.
<PAGE> 4
-4-
20. CONSENT TO DISCLOSE INFORMATION. CIBC may from time to time give any
credit or other information about me to, or receive such information
from, any credit bureau, reporting agency or other Person.
21. GENERAL. Any provision of this Guarantee that is void or unenforceable
in a jurisdiction is, as to that jurisdiction, ineffective to that
extent without invalidating the remaining provisions. If two or more
Persons sign this Guarantee, each Person's liability will be joint and
several. This Guarantee is in addition and without prejudice to any
Security of any kind now or in the future held by CIBC. There are no
representations, collateral agreements or conditions with respect to,
or affecting my liability under, this Guarantee other than as
contained in this Guarantee.
22. QUEBEC ONLY. If this Guarantee is governed by the laws of Quebec:
(a) I acknowledge that the terms and conditions of the Customer's
Debts have been expressly brought to my attention;
(b) I renounce the benefit of division and discussion;
(c) if two or more Persons sign this Guarantee, each Person's
liability will be solidary;
(d) I acknowledge that the thirty days' notice specified in
Section 14 constitutes prior and sufficient notice to CIBC;
(e) if this Guarantee is attached to the performance of special
duties, I agree that this Guarantee shall not terminate upon
cessation of such duties; and
(f) it is the express wish of the parties that this document and
any related documents be drawn up in English. Les parties aux
presentes ont expressement demande que ce document et tous
les documents s'y rattachant soient rediges en anglais.
23. DEFINITIONS. In this Guarantee:
(a) "Bank Office" means the CIBC office noted on the first page
of this Guarantee, or such address as CIBC may, from time to
time, advise me in the manner provided in Section 6;
(b) "Customer Debts" means the debts and liabilities that the
Customer has incurred or may incur with CIBC including, among
other things, those in respect of dealings between the
Customer and CIBC, as well as any other dealings by which the
Customer may become indebted or liable to CIBC in any manner
whatever;
(c) "Guarantor" means any Person who has guaranteed or later
guarantees to CIBC any or all of the Customer's Debts,
whether or not such Person has signed this Guarantee or
another document;
(d) "I", "me" and "my" mean the Person who has signed this
Guarantee, and if two or more Persons sign, each of them;
(e) "Person" includes a natural Person, personal representative,
partnership, corporation, association, organization, estate,
trade union, church or other religious organization,
syndicate, joint venture, trust, trustee in bankruptcy,
government and government body and any other entity, and,
where appropriate, specifically includes any Guarantor;
(f) "Section" means a section or paragraph of this Guarantee; and
(g) "Security" means any security held by CIBC as security for
payment of the Customer's Debts and includes, among other
things, any and all guarantees.
- --------------------------------------------------------------------------------
For Use in Alberta Only
THE GUARANTEES ACKNOWLEDGEMENT ACT (ALBERTA)
CERTIFICATE OF NOTARY PUBLIC
(BMO VIA-7-5.06,.07)
I HEREBY CERTIFY THAT:
1. ____________________________ of ____________________________, the Guarantor
in the above Guarantee, appeared in person before me and acknowledged that
he/she had executed the Guarantee;
2. I satisfied myself by examination of him/her that he/she is aware of the
contents of the Guarantee and understands it.
Given at ____________________ this ______ day of _____________________, under my
hand and seal of office.
A Notary Public in and for
_______________________________
STATEMENT OF GUARANTOR
I am the Person named in this certificate. _______________________________
Signature Of Guarantor
<PAGE> 1
EXHIBIT 21
SDK License
021000
This agreement is a license between CyberCash, Inc. ("CyberCash") and you (the
"Licensee"). The license sets forth the rights and obligations of the parties
with respect to certain software owned by CyberCash (referred to herein as the
"SDK") that is accompanied by this License. By clicking the acceptance button
or installing the SDK, you are concenting to be bound by and are becoming a
party to this License. If you do not agree to all of the terms of this License,
click the button that indicates you do not accept the terms, and do not install
the SDK.
1. Scope of License.
a) License Grant. The SDK consists of human readable code or
script (collectively, "sample software") and object code.
Subject to limitations provided in this License, CyberCash
grants to Licensee a nonexclusive, royalty-free license to:
copy the SDK onto Licensee's server, create applications
containing object code components of the SDK and sample
software, and /or software derived from sample software
("Applications"), and use, host and/or distribute
Applications for use, hosting, or distribution by others.
b) Limitations.
i) CyberCash reserves all rights in and to the SDK.
ii) Applications may be used, distributed, and hosted solely
to facilitate access to services offered by CyberCash.
iii) Licensee shall not reverse engineer, docompile,
disassemble, separate into component files or modify
software provided in object code form, except and only
to the extent that applicable law notwithstanding this
limitation expressly permits such activity, or remove
any proprietary, trademark, or copyright markings or
confidentiality legends within the SDK or any part
thereof or any documentation.
iv) The license accompanying an Application shall be
in writing and shall include the limitations provided in
Section 1.b) (i), (ii) and (iii) above, and shall grant
CyberCash the right to enforce the terms of the license
to the extent permitted by law.
v) If the SDK or a component of the SDK is incorporated
into an Application, Licensee shall include a copyright
notice in Licensee's Connector in the form: "(C)
Copyright (Licensee's company name) (year). Portions of
this code are derived from CyberCash software. (C)
Copyright CyberCash, Inc. 1997-2000. All rights
reserved."
2. Changes. CyberCash may, in its discretion, issue updates, corrections,
and new releases (a "Change") to the SDK. Licensee's copy of the SDK
may become obsolete if Licensee fails to install a Change. CyberCash is
not responsible for any losses or expenses (a) incurred by Licensee to
install a Change, or (b) resulting from the failure of Licensee to
install a Change. If CyberCash chooses to issue a Change, the terms of
this License shall apply to such Change and the same shall be treated
as part of the SDK. Licensee may be required to agree to additional or
revised terms and conditions as a condition of use of such Change.
3. Government Use. Use, duplication or disclosure by or on behalf of U.S.
Government entities is subject to restrictions set forth in
subparagraphs (a) through (d) of the Commercial Computer-Restricted
Rights clause at FAR 52.227-19 when applicable, or in
subparagraph (c)(1)(ii) of the Rights in Technical Data and Computer
Software clause at DFARS 252.227-7013, and in similar clauses, in the
NASA AR Supplement. The contractor/manufacturer is CyberCash, Inc.,
2100 Reston Parkway, Third Floor, Reston, VA 20191.
4. Restrictions on Export. Licensee shall not export or re-export the SDK
or any Application except in full compliance with all United States
and other applicable laws and regulations. In particular, but without
limitation, the object code component of the SDK may not be downloaded
or otherwise exported or re-exported in any form (i) into (or to a
national resident of) Cuba, Iraq, Libya, Serbia, Sudan, North Korea,
Iran, Syria or the Taliban-controlled areas of Afghanistan, or to
anyone on the U.S. Treasury Department's list of Specially
Designated nationals, the U.S. Commerce Department's Table of Deny
Orders or the U.S. Commerce Department's Entity List.
5. No Warranties. THE SDK IS PROVIDED "AS IS" WITHOUT WARRANTY. CYBERCASH
AND ITS VENDORS DISCLAIM ALL IMPLIED WARRANTIES, INCLUDING BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
6. Indemnification.
a) By CyberCash. CyberCash shall indemnify, defend, and hold
harmless Licensee against all loss, damage or expense of any kind,
including attorneys' fees and costs of litigation, arising from a claim
of a third party (including claims, assertions and investigations of a
governmental agency), which claim:
i) Alleges an infringement of a patent, copyright,
trademark, or other intellectual property right by the
SDK, provided that CyberCash will not be obligated to
defend or indemnify Licensee if such claim arises from
(A) modification of the SDK by Licensee in violation of
this License if the SDK
<PAGE> 2
would not have infringed absent such modification; or
(B) practice of a patented system of method of operation
of which the SDK is a component if the practice of the
SDK alone does not infringe the patent.
ii) Arises in whole or part from the negligence or willful
misconduct of CyberCash or its employees or agents.
iii) Arises in whole or part from breach of an obligation of
CyberCash to Licensee under this Agreement.
b) By Licensee. Licensee shall indemnify, defend, and hold harmless
CyberCash against all loss, damage or expense of any kind,
including attorneys' fees and costs of litigation, arising from a
claim of a third party (including claims, assertions and
investigations of a governmental agency), which claim:
i) Alleges the infringement of a patent, copyright,
trademark, or other intellectual property by Licensee
if such claim arises from (A) modification of the SDK by
Licensee or a third party selected by Licensee in
violation of this license if the SDK would not have
infringed absent such modification or (B) the practice
of a patented system or method of operation by Licensee
of which the SDK is a component if the practice of the
SDK does not alone infringe the patent.
ii) Arises in whole or in part from the negligence or
willful misconduct of Licensee or its employees or
agents; or
iii) Arises in whole of in part from breach of an obligation
of Licensee to CyberCash under this Agreement.
c) Procedure. In the event a party becomes aware of a claim described
in Sections 6(a) or 6(b) for which it may seek indemnification (the
"Indemnified Party"), the Indemnified Party shall promptly give the
other party (the "Indemnifying Party") written notice of the claim
and permit the Indemnifying Party to assume the defense of the
claim. The Indemnified Party shall cooperate fully in defense of
the claim, and the Indemnifying Party shall pay the Indemnified
Party's costs and expenses as incurred. The Indemnifying Party
shall have no liability under this Section 6 unless the Indemnified
Party has complied with its obligations under this paragraph.
d) Prevention of Infringement. If CyberCash Service or any component
of a CyberCash Service becomes, or in option of CyberCash is
likely to become, the subject of a claim of infringement, then
Licensee shall permit CyberCash, at its option and expense, either
(i) to procure for Licensee the right to continue using the SDK as
permitted in this Agreement, or (ii) to replace or modify the
affected CyberCash Service or the infringing component of such
service so that it becomes noninfringing. If, after using
commercially reasonable efforts, CyberCash is unable to cure the
infringement, either party may terminate this Agreement upon notice
to the other.
7. Limitation of Liability. Except as provide in Section 6(a), the entire
liability of CyberCash under this License shall not exceed US$100. To the
maximum extent permitted by applicable law, in no event shall CyberCash or
its vendors be liable for any damages whatsoever (including, without
limitation, damages for loss of business profit, business interruption,
loss of business information, or any other pecuniary loss) arising out of
the use of, or inability to use, this CyberCash product, even if CyberCash
has been advised of the possibility of such damages. Because some
states/jurisdictions do not allow the exclusion or limitation of liability
for consequential or incidental damages, the above limitation may not
apply to Licensee.
8. Termination. In addition to any other rights of termination granted
herein, CyberCash may terminate this License on 30 days written notice for
material breach by Licensee of its obligations hereunder unless such
breach is cured within such 30-day period. Upon termination of this
License, Licensee will return or destroy all copies of the SDK and
Applications in Licensee's possession.
9. No Agency. Without the written consent of CyberCash, Licensee will not
represent that Licensee is an agent of CyberCash or that Licensee or its
products have been endorsed or certified by CyberCash.
10. Entire Agreement. This License constitutes the entire agreement between
Licensee and CyberCash pertaining to the subject matter hereof, and
supersedes in their entirety any and all written or oral agreements
pertaining to the SDK and its use between the parties. This License is not
an agreement to provide service and does not obligate CyberCash to provide
any services.
If the terms of this License are acceptable and you wish to agree to them and be
legally bound, select "I ACCEPT" below. If you do not wish to be bound to the
terms of this license, select "I DO NOT ACCEPT".
<PAGE> 3
SDK License
021000
This agreement is a license between CyberCash, Inc. ("CyberCash") and you (the
"Licensee"). The license sets forth the rights and obligations of the parties
with respect to certain software owned by CyberCash (referred to herein as the
"SDK") that is accompanied by this License. By clicking the acceptance button or
installing the SDK, you are consenting to be bound by and are becoming a party
to this License. If you do not agree to all of the terms of this License, click
the button that indicates you do not accept the terms, and do not install the
SDK.
1. Scope of License.
a) License Grant. The SDK consists of human readable code or script
(collectively, "sample software") and object code. Subject to
limitations provided in this License, CyberCash grants to
Licensee a nonexclusive, royalty-free license to: copy the SDK
onto Licensee's server, create applications containing object code
components of the SDK and sample software, and/or software derived
from sample software ("Applications"), and use, host and/or
distribute Applications for use, hosting, or distribution by
others.
b) Limitations.
i) CyberCash reserves all rights in and to the SDK.
ii) Applications may be used, distributed and hosted
solely to facilitate access to services offered by
CyberCash.
iii) Licensee shall not reverse engineer, decompile,
disassemble, separate into component files or modify
software provided in object code form, except and only
to the extent that applicable law notwithstanding this
limitation expressly permits such activity, or remove
any proprietary, trademark, or copyright markings or
confidentiality legends within the SDK or any part
thereof or any documentation.
iv) The license accompanying an Application shall be in
writing and shall include limitations provided in
Section 1.b)(i), (ii) and (iii) above, and shall grant
CyberCash the right to enforce the terms of the license
to the extent permitted by law.
v) If the SDK or a component of the SDK is incorporated
into an Application, Licensee shall include a copyright
notice in Licensee's Connector in the form: "(C)
Copyright (Licensee's company name)(year). Portions of
this code are derived from CyberCash software. (C)
Copyright CyberCash, Inc. 1997-2000. All rights
reserved."
2. Changes. CyberCash may, in its discretion, issue updates, corrections, and
new releases (a "Change") to the SDK. Licensee's copy of the SDK may become
obsolete if Licensee fails to install a Change. CyberCash is not responsible
for any losses or expenses (a) incurred by Licensee to install a Change, or
(b) resulting from the failure of Licensee to install a Change. If CyberCash
chooses to issue a Change, the terms of this License shall apply to such
Change and the same shall be treated as a part of the SDK. Licensee may be
required to agree to additional or revised terms and conditions as a
condition of use of such Change.
3. Government Use. Use, duplication or disclosure by or on behalf of U.S.
Government entities is subject to restrictions set forth in subparagraphs
(a) through (d) of the Commercial Computer-Restricted Rights clause at FAR
52.227-19 when applicable, or in subparagraph (c)(1)(ii) of the Rights in
Technical Data and Computer Software clause at DFARS 252.227-7013, and in
similar clauses in the NASA AR Supplement. The contractor/manufacturer is
CyberCash, Inc. 2100 Reston Parkway, Third Floor, Reston, VA 20191.
4. Restrictions on Export. Licensee shall not export or re-export the SDK or
any Application except in full compliance with all United States and other
applicable laws and regulations. In particular, but without limitation, the
object code component of the SDK may not be downloaded or otherwise exported
or re-exported in any form (i) into (or to a national resident of) Cuba,
Iraq, Libya, Serbia, Sudan, North Korea, Iran, Syria or the
Taliban-controlled areas of Afghanistan, or to anyone on the U.S. Treasury
Department's list of Specially Designated nationals, the U.S. Commerce
Department's Table of Deny Orders or the U.S. Commerce Department's Entity
List.
<PAGE> 4
5. No Warranties. THE SDK IS PROVIDED "AS IS" WITHOUT WARRANTY. CYBERCASH AND
ITS VENDORS DISCLAIM ALL IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
6. Indemnification.
a) By CyberCash. CyberCash shall indemnify, defend, and hold harmless
Licensee against all loss, damage or expense of any kind, including
attorneys' fees and costs of litigation, arising from a claim of a
third party (including claims, assertions and investigations of a
governmental agency), which claim:
i) Alleges an infringement of a patent, copyright,
trademark, or other intellectual property right by the
SDK, provided that CyberCash will not be obligated to
defend or indemnify Licensee if such claim arises from
(A) modification of the SDK by Licensee in violation of
this License if the SDK would not have infringed absent
such modification; or (B) practice of a patented system
or method of operation of which the SDK is a component if
the practice of the SDK alone does not infringe the
patent.
ii) Arises in whole or part from the negligence or willful
misconduct of CyberCash or its employees or agents.
iii) Arises in whole or part from breach of an obligation of
CyberCash to Licensee under this Agreement.
b) By Licensee. Licensee shall indemnify, defend, and hold harmless
CyberCash against all loss, damage or expense of any kind, including
attorneys' fees and costs of litigation, arising from a claim of a
third party (including claims, assertions and investigations of a
governmental agency), which claim:
i) Alleges the infringement of a patent, copyright,
trademark, or other intellectual property by Licensee if
such claim arises from (A) modification of the SDK by
Licensee or a third party selected by Licensee in
violation of this license if the SDK would not have
infringed absent such modification; or (B) the practice
of a patented system or method of operation by Licensee
of which the SDK is a component if the practice of the
SDK does not alone infringe the patent.
ii) Arises in whole or in part from the negligence or willful
misconduct of Licensee or its employees or agents; or
iii) Arises in whole or in part from breach of an obligation
of Licensee to CyberCash under this Agreement.
c) Procedure. In the event a party becomes aware of a claim described
in Sections 6(a) or 6(b) for which it may seek indemnification (the
"Indemnified Party") written notice of the claim and permit the
Indemnifying Party to assume the defense of the claim. The
Indemnified Party shall cooperate fully in defense of the claim, and
the Indemnifying Party shall pay the Indemnified Party's costs and
expenses as incurred. The Indemnifying Party shall have no liability
under this Section 6 unless the Indemnified party has complied with
its obligations under this paragraph.
d) Prevention of infringement. If CyberCash Service or any component of
a CyberCash Service becomes, or in opinion of CyberCash is likely to
become, the subject of a claim of infringement, then Licensee shall
permit CyberCash, at is option and expense, either (i) to procure
for Licensee the right to continue using the SDK as permitted in
this Agreement, or (ii) to replace or modify the affected CyberCash
Service or the infringing component of such service so that it
becomes noninfringing. If, after using commercially reasonable
efforts, CyberCash is unable to cure the infringement, either party
may terminate this Agreement upon notice to the other.
7. Limitation of Liability. Except as provide in Section 6(a), the entire
liability of CyberCash under this License shall not exceed US$100. To the
maximum extent permitted by applicable law, in no event shall CyberCash or
its vendors be liable for any damages whatsoever (including, without
limitation, damages for loss of business profit, business interruption, loss
of business information, or any other pecuniary loss) arising out of the use
of, or inability to use, this CyberCash product, even if CyberCash has been
advised of the possibility of such damages. Because some states/
jurisdictions
<PAGE> 5
do not allow the exclusion or limitation of liability for consequential
or incidental damages, the above limitation may not apply to Licensee.
8. Termination. In addition to any other rights of termination granted
herein, CyberCash may terminate this License on 30 days written notice
for material breach by Licensee of its obligations hereunder unless
such breach is cured within such 30-day period. Upon termination of
this License, Licensee will return or destroy all copies of the SDK and
Applications in Licensee's possession.
9. No Agency. Without the written consent of CyberCash, Licensee will
not represent that Licensee is an agent of CyberCash or that Licensee
or its products have been endorsed or certified by CyberCash.
10. Entire Agreement. This License constitutes the entire agreement
between Licensee and CyberCash pertaining to the subject matter
hereof, and supersedes in their entirety any and all written or oral
agreements pertaining to the SDK and its use between the parties. This
License is not an agreement to provide service and does not obligate
CyberCash to provide any services.
If the terms of this License are acceptable and you wish to agree to them and be
legally bound, select "I ACCEPT" below. If you do not wish to be bound to the
terms of this license, select "I DO NOT ACCEPT".
<PAGE> 1
EXHIBIT 22
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF
FLORIDA
NUMBER SHARES
CityXpress.com Corp.
CUSIP NO. 178786 10 9
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT
SPECIMEN
IS THE RECORD HOLDER OF
Shares of CITYXPRESS.COM CORP. Common Stock transferable on the books
of the Corporation in person or by duly authorized attorney upon surrender of
this Certificate properly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
[CITYXPRESS.COM CORP. /s/ Ken Bradley /s/
CORPORATE SEAL ------------------------ ------------------------
FLORIDA] SECRETARY PRESIDENT
<PAGE> 2
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations.
UNIF GIFT
TEN COM -- as tenants in MIN ACT -- ______ Custodian _______
common (Cust) (Minor)
TEN ENT -- as tenants by the under Uniform Gifts
entireties to Minors Act
JT TEN -- as joint tenants
with right of _________________
survivorship and (State)
not as tenants
in common
Additional abbreviations may also be used though not in the above list.
For Value Received, _____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OR ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated_________________________________
________________________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
