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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of The Securities Exchange Act of 1934
SUMMEDIA.COM INC.
(Name of Small Business Issuer in its Charter)
<TABLE>
<S> <C>
COLORADO 95-4734398
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(State or Other Jurisdiction of Incorporation or (I.R.S Employer Identification No.)
Organization)
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1200-1055 WEST HASTINGS STREET
VANCOUVER B.C. CANADA V6E 2E9 V6E 2E9
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(Address of principal executive officers) (Zip Code)
Issuer's telephone number: (604) 605-0901
Securities to be registered pursuant to Section 12(b) of the Act.
Title of each Class Name of exchange on which
registered
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Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT
In December 1990, Pursuit Ventures Corporation was incorporated in the
State of Delaware. In August 1998, Pursuit Ventures Corporation merged with
Remington Assets Limited, a Colorado corporation incorporated in March 1997.
Under the terms of the merger, Pursuit Ventures Corporation became the surviving
entity. In September 1998, Pursuit Ventures Corporation changed its name to
Reliance Resources Inc. On August 6, 1999, Reliance Resources Inc. entered into
a share exchange agreement with SUM Media Corp. (formerly known as E-Com Media
Corp.), a British Columbia, Canada Internet media and marketing company.
Pursuant to the terms of the exchange agreement, Reliance Resources Inc. issued
3,200,000 common shares to acquire all of the issued and outstanding shares of
SUM Media Corp. Immediately after the share exchange, Reliance Resources Inc.
focused its operations on Internet media and marketing. From inception to the
date of the share exchange, Reliance Resources Inc. was an inactive company. On
August 25, 1999, Reliance Resources Inc. changed its name to SUMmedia.com Inc.
(the "Company" or "SUMmedia.com")
On August 30, 1999, SUMmedia.com received approval to change its
trading symbol on the over-the-counter bulletin board from "PSVC" to "ISUM."
SUMmedia.com is a development stage company.
(b) BUSINESS OF THE ISSUER
Business
SUMmedia.com is an Internet media and marketing company that provides
online coupons, or "eCoupons," for small businesses through its portal,
savingumoney.com. SUMmedia.com's goal is to provide Internet marketing
initiatives for smaller businesses lacking the expertise or financial resources
to carry on "eCommerce." In addition to its current eCoupon operations,
SUMmedia.com receives revenue from the sale of banner advertisement space on its
websites and from the sale of web sites it custom develops for its customers.
SUMmedia.com plans to develop, market and support online marketing and
promotional activities for web site hosting, as well as online shopping
"storefronts" that enable small businesses to cost effectively utilize the
Internet, regardless of their size, resources or global address.
SUMmedia.com plans to address the following issues that are frequently
encountered by development stage companies in new and rapidly evolving markets:
o protecting and enhancing its corporate brand, SUMmedia.com, through
investment relationships, strategic links, public relations and
traditional trademark protection protocols;
o protecting and enhancing its eCoupon web site, savingumoney.com,
through aggressive marketing and contracting with a search engine
optimization specialist;
o expanding its products and services and increasing the value of its
eCouponing services;
o increasing the amount of Internet traffic to SUMmedia.com and
savingumoney.com, as well as other company web sites currently under
development;
o increasing the number and types of its business customers;
o attracting, retaining and motivating qualified personnel; and
o developing the company's financial, information technology and
operations infrastructure.
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PROTECTING AND ENHANCING ITS CORPORATE BRAND, SUMMEDIA.COM.
The business partnerships and relationships that SUMmedia.com intends
to create are important components of protecting and enhancing its corporate
brand. These relationships will provide brand enhancing benefits, including:
o credibility in current and future markets;
o newspaper and online advertising space on a contra basis; and
o product innovations, including wireless applications and secured
eCoupons.
Another tool SUMmedia.com uses to protect and enhance its corporate
brand is the seamless integration of the SUMmedia.com brand into all of its web
sites. From its savingumoney.com web site, to the sites developed and hosted for
its customers, corporate branding will be reinforced via a "powered by
SUMmedia.com" message that will directly link to SUMmedia.com's corporate web
site.
SUMmedia.com also utilizes traditional public relations methods to
enhance its corporate brand. SUMmedia.com's news releases, press conferences and
editorial coverage include specifics about SUMmedia.com designed to reinforce
its corporate brand with the investment community and prospective customers and
eCoupon users.
Lastly, SUMmedia.com has endeavored to protect all of its various
brands through traditional trademark protection protocols.
PROTECTING AND ENHANCING ITS ECOUPON WEB SITE, SAVINGUMONEY.COM.
SUMmedia.com's primary web site, savingumoney.com, is now operational
in several Canadian markets, either directly or through business alliances with
third parties. In addition, support offices are open in the following locations:
o Seattle, Washington: U.S. corporate office; Seattle marketing launched
in mid-February 2000;
o Hong Kong: joint venture; marketing launch anticipated in early March
2000; and
o Sydney, Australia: joint venture; marketing launch pursuant to a non
binding agreement with ISEC Ltd. anticipated in early April 2000.
It is anticipated that the opening of new markets will protect and
enhance the savingumoney.com brand by providing broader geographic coverage.
However, management believes that the key component of enhancing the brand is to
secure its place on the consciousness of consumers. To this end, the following
marketing communications plans, at a total estimated cost of $10.7 million U.S.,
are in place:
o Canada: an online and traditional media launch at a cost of $3 million
for 2000;
o Seattle: a five-week online and traditional media launch at a cost of
$500,000, with an additional $1 million expected to be spent through
year end;
o U.S.: new U.S. territory initial advertising launches at a cost of $3
million to be spent through the year for territories yet to be
defined;
o Hong Kong: a five-week integrated media launch at a cost of $400,000,
with another $800,000 expenditure expected through the remainder of
the year; and
o Sydney: an integrated, five-week launch at a cost of $500,000, plus an
additional $1.5 million expenditure through year end.
In addition to the marketing launches listed above, SUMmedia.com's
management anticipates that a worldwide launch of its products to commence
during the next year would add at least another $50 million U.S. to its total
costs.
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EXPANDING SUMMEDIA.COM'S PRODUCTS AND SERVICES AND INCREASING THE VALUE OF ITS
ECOUPONING SERVICES.
Several product and service enhancements and innovations are at various
stages of their respective development cycles. The following are product and
service enhancements relating to savingumoney.com:
o easier to use design;
o data-driven eCoupons with improved consumer functionality;
o value-added services for members, such as email date reminders,
personalization and shopping lists;
o pop-up advertising features to be sold to eCoupon customers;
o "mini-Web sites" to be sold to customers desiring to expand their
eCoupon presence on SUMmedia.com's site;
o secured eCoupons aimed at satisfying the "retailer abuse" concerns
of major packaged goods manufacturers; and
o savingumoney.com "eMalls" in which eCoupon customers will be able to
sell their products online at themed online malls.
SUMideas.com, SUMmedia.com's Web site development/hosting service,
through which SUMmedia.com will introduce new services, such as a low-priced
entry level site design and hosting program (enabling customers to order and buy
online, as well as through SUMmedia.com's sales force), is also expected to
accelerate growth.
INCREASING THE AMOUNT OF INTERNET TRAFFIC TO SUMMEDIA.COM AND SAVINGUMONEY.COM
The amount of traffic driven to SUMmedia.com's web sites will be
increased through SUMmedia.com's efforts to enhance its corporate and eCoupon
web site brands using the various marketing and other initiatives described
above. In addition, SUMmedia.com plans to use strategic alliances and business
partnerships to further enhance the traffic to its company website.
SUMmedia.com also intends to contract for the services of a search
engine optimization specialist to promote savingumoney.com to higher search
engine rankings.
INCREASING THE NUMBER AND TYPES OF BUSINESS CUSTOMERS
Unlike the majority of its competitors, SUMmedia.com caters to the vast
number of smaller businesses and does not focus on Fortune 500-type companies.
The number of small businesses that are potential customers of SUMmedia.com is
continually growing, as new businesses are created every day. In addition,
management believes that many of these smaller businesses will be most likely to
use SUMmedia.com's ability to quickly and easily bring a business online.
Notwithstanding its targeted appeal to small businesses, SUMmedia.com
has also identified a strategy to attract large national/multinational brands to
its services. Management believes that there are many large companies that
remain skeptical of online couponing. While they are attracted by the timely and
inexpensive delivery of coupons via the Internet, large companies are concerned
about potential abuse by retailers. For example, one of their recurring concerns
is that retailers may simply print online coupons themselves and fraudulently
submit them for reimbursement by the manufacturers.
To address this issue, SUMmedia.com's senior information technology and
marketing personnel are working closely with SUMmedia.com's technology partners
to develop a potentially patentable solution. If this solution is put in place,
SUMmedia.com could attract large consumer packaged goods manufacturers as
eCoupon customers and also act as their coupon redemption clearing house,
thereby creating an entirely new revenue stream for SUMmedia.com.
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ATTRACTING, RETAINING AND MOTIVATING QUALIFIED PERSONNEL
In order to attract, retain and motivate qualified personnel,
SUMmedia.com is adopting highly competitive and innovative human resource
policies. Salary structures and benefit programs will be equivalent to or
supersede those offered by others in similar businesses. In addition, most
employees will be offered employee stock options when they join SUMmedia.com.
Management believes that one of the keys to the success of the business is the
quality of its people. The policies and procedures of the Company will reflect
this belief.
DEVELOPING THE COMPANY'S FINANCIAL, INFORMATION TECHNOLOGY AND OPERATIONS
INFRASTRUCTURE
In order to support SUMmedia.com's operations in the areas of Internet
research, growth and maintenance of internal operations and geographical
expansion, the Company expects to spend approximately $4.0 million in the next
year. Internet research consists of staying current with technological changes
related to the Internet and ensuring that the Company's web site has competitive
content. The Company expects to employ 10 additional employees in the next year
to conduct ongoing Internet research. The growth and maintenance of internal
operations is required to match the expected growth in sales in the upcoming
year. Also, SUMmedia.com expects to spend approximately $1 million for hardware,
approximately $500,000 for software and add approximately 15 people to the
information technology team to meet the needs of its expected growth in internal
operations. In addition, SUMmedia.com expects to spend approximately $1 million
on hardware, $500,000 on software, and add 10 employees in order to undertake
its planned geographical expansion. Total salaries for the additional
information technology employees required is anticipated to be approximately $1
million.
In addition to the technological staff requirements, management
anticipates that an additional 40 administration staff members will be required
to support the growth in other areas of SUMmedia.com's business. To handle the
new staff levels, management also anticipates requiring additional office space
and furniture. In total, the additions to administration staff and facilities
could add $5 million to SUMmedia.com's operational costs.
Product Offerings
Of its services, SUMmedia.com anticipates that eCoupons will be its
major source of revenue for the foreseeable future. SUMmedia.com's eCoupon
offerings are still in their infancy, and, as a result, the effectiveness of
eCoupons, as compared to traditional methods of reaching customers, cannot yet
be determined. SUMmedia.com hopes to demonstrate to corporate customers that its
eCoupons will increase the rate at which comparison shoppers become purchasers,
improve customer satisfaction on SUMmedia.com's web sites and offer a
cost-effective alternative to newspaper and magazine advertising. If
SUMmedia.com is unable to do this, its ability to attract and retain corporate
customers will likely be impaired.
SUMmedia.com offers three types of eCoupon contracts. In the first type
of contract, the "millennium special," the customer pays the company in advance
a non-refundable one-year fee to have its eCoupon posted on SUMmedia.com's web
site for a period of one year. The second type of contract that SUMmedia.com
offers provides for a one-year commitment in which the customer pays a monthly
fee to have its eCoupon posted on SUMmedia.com's web site. In this contract, the
customer obtains the first three months at no cost and does not have the right
to cancel. The third type of contract SUMmedia.com offers provides 90 days of
free service to the customer, after which time the customer may decide if they
want to enter into a one-year contract. If SUMmedia.com is unable to offer
sufficient value to its customers during the term of the 90-day contract, the
customers may not renew their contracts. If SUMmedia.com does not obtain a
sufficient amount of contract renewals, or if such renewal contracts are
obtained on terms less favorable than the original contracts, its business will
be materially adversely affected.
Revenues related to eCoupon contracts are recognized by SUMmedia.com
ratably over the duration of the contract. For contracts where customers have a
90-day free trial with the right to cancel, no revenue is recognized until the
customer enters into a one-year contract.
Currently, SUMmedia.com has approximately 3,200 eCoupon customers. Of
SUMmedia.com's 3,200 eCoupon customers, approximately 3,050 are doing business
under a 90-day promotional program (all figures represent eCoupon customers who
have signed a one year contract). All customers have contracts that span at
least one year. Less than five percent of the customers have contracts greater
than one year.
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SUMmedia.com also generates revenues from web page design and
development. The amount charged to the customer for the web page design is based
on the length of time required to develop the customer's web pages. All details
of the web page design are outlined in a contract which is signed and approved
by the customer. Upon signing the contract, the customer is required to make a
50% non-refundable deposit. Upon completion of the web page and approval by the
customer, the remaining 50% is payable. The market for the creation of web pages
is very competitive. Management hopes to use the contacts it has established
through its eCoupon business to obtain web page development work. SUMmedia.com
recognizes revenues related to the development of customer web pages using the
completed contract method. To date, revenues from this source have been
insignificant.
A third source of revenue for SUMmedia.com is regional exclusivity
fees. Regional exclusivity fees represent amounts paid to the company for the
exclusive right to market the company's products in a predefined geographic
region. The exclusivity fee charge depends on the number of customers in the
region being granted and the percentage of those customers who are expected to
use the Internet. Revenues from regional exclusivity fees are recognized when
the initial set up and training services are complete and the company is
satisfied that all significant obligations in accordance with the terms of the
arrangement have been met and collectibility of the related fees is reasonably
assured.
An incidental revenue source for SUMmedia.com is banner ad advertising,
pursuant to which SUMmedia.com customers pay for the right to advertise on one
of the SUMmedia.com web sites. Generally, contracts for banner ads range from
one month to one year in duration. Currently, over 90% of SUMmedia.com's banner
ad contracts are for periods from one to three months. The company recognizes
revenues related to banner ads ratably over the term of the banner ad contract.
To date, revenues from this source have been insignificant. It is anticipated
that revenues from Internet advertising, as opposed to eCoupon revenue, will
provide an incidental portion of SUMmedia.com's future revenues. Because the
Internet advertising market is new and rapidly evolving, SUMmedia.com cannot yet
gauge its effectiveness, as compared to traditional advertising media.
Advertisers that have traditionally relied on other advertising media may be
reluctant to advertise on the Internet in the belief that Internet advertising
is less effective than traditional advertising media for promoting their
products and services. Consequently, advertisers may allocate only limited
portions of their advertising budgets to Internet advertising. Another risk lies
in the deep discounting offered by online advertising, a strategy that
SUMmedia.com believes it must match for the foreseeable future in order to
penetrate this market. Deep discounting occurs when companies charge rates that
are barely profitable, or even loss-leading rates, in order to gain a presence
on the web. SUMmedia.com expects that, as the Internet matures, deep discounting
will subside. Since Internet advertising is not expected to be a significant
revenue source, the effect of deep discounting on SUMmedia.com's operations will
likely be negligible.
Sales Channels
SUMmedia.com employs a direct sales team of approximately 60 full-time
employees in North America. The sales team are paid with a base salary and a
commission based on products sold. The direct sales team gains and retains
customers through door-to-door, phone, Internet and mail solicitation.
Additionally, via its web site, SUMmedia.com offers users the ability to
recommend the service to friends and associates. SUMmedia.com is also currently
exploring an employee referral program. In the future, SUMmedia.com plans to use
strategic business alliances and partnerships to help increase its customer base
further.
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Currently, SUMmedia.com offers its services to Canadian customers
through its British Columbia, Alberta and Ontario eCoupon portals. Additionally,
SUMmedia.com offers its services to U.S. customers directly via its Seattle
eCoupon portal, launched in February 2000, and through Canadian companies that
are marketing to the traveling public, including U.S. travelers. SUMmedia.com is
currently identifying other key market opportunities in the U.S. and expects to
rollout in these markets throughout the current year.
SUMmedia.com also anticipates adding customers in Australia, Hong Kong,
Japan, Malaysia, Singapore and Europe, based on anticipated rollouts in those
countries throughout 2000. It is anticipated that, in all rollouts, the product
lines and services offered will be virtually identical to the products and
services presently offered by the Company.
Competition
There are a significant number of sites on the Internet offering
coupons for use online and offline. Two of SUMmedia.com's most significant
competitors are ValuPage.com and CoolSavings.com. ValuPage.com is a grocery-only
coupon site, while CoolSavings.com is exclusively focused on nationally branded
products and national retail chains. CoolSavings.com carries coupons for
approximately 300 companies. In addition to these two significant competitors,
there are numerous smaller online coupon sites, as well as companies using
traditional media such as newspaper inserts, direct mail flyers and co-op
envelopes to distribute their coupons. Many of SUMmedia.com's existing
competitors, as well as potential new competitors, have longer operating
histories, greater name recognition, larger customer bases and significantly
greater financial, technical and marketing resources than SUMmedia.com.
Intellectual Property
SUMmedia.com is attempting to be proactive in protecting its
intellectual property rights. It has filed five trademark applications in
Canada, Hong Kong, the U.S. and the European Union and is in the process of
filing applications in Australia and additional ones in the U.S. SUMmedia.com
filed copyright registrations in Canada for its web site designs in February
2000. SUMmedia.com owns approximately 20 domain names and is in the process of
protecting them with trademarks. SUMmedia.com is in the process of applying for
a U.S. patent for certain elements of its technology.
Pursuant to Canadian intellectual property laws, copyright protection,
at a base level, is acquired automatically in Canada for the computer programs
and web site designs developed by SUMmedia.com employees. Canadian law provides
a higher level of copyright protection once the copyright is registered.
SUMmedia.com anticipates filing copyright applications for SUMMEDIA and SAVING U
MONEY in the near future.
In general, SUMmedia.com plans to protect its copyrights, service
marks, trademarks, and trade secrets through a combination of laws and
contractual restrictions, including confidentiality and non-disclosure
agreements. For example, SUMmedia.com may elect to register its trademarks and
service marks in the United States and internationally. However, effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which SUMmedia.com's services are made available
online. Because SUMmedia.com is devoting significant resources to building its
brands, primarily "savingumoney.com" and "SUMmedia.com," through media
advertising campaigns, if it is not granted registered status for the trade and
service marks for which it has applied, or if it is unable to defend its
intellectual property rights, its business may be materially and adversely
affected.
Computer programs and web site designs, or portions thereof, that have
been developed by independent contractors and consultants engaged by
SUMmedia.com are supported by the proper agreements to transfer the copyright
and ownership rights to SUMmedia.com. Non-disclosure, assignment of invention
and non-competition agreements are required to be delivered by all employees and
consultants of SUMmedia.com to ensure that any individual ownership rights in
intellectual property are transferred to SUMmedia.com.
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Regulation
Any new law or regulation pertaining to the Internet, or the
application or interpretation of existing laws, could decrease the demand for
SUMmedia.com's services, increase its cost of doing business or otherwise have a
material adverse effect on its business. There is, and will likely continue to
be, an increasing number of laws and regulations pertaining to the Internet.
These laws or regulations may relate to liability for information retrieved from
or transmitted over the Internet, online content regulation, user privacy,
taxation, and the quality of products and services. Furthermore, the growth and
development of electronic commerce may prompt popular demand for more stringent
consumer protection laws that may impose additional burdens on electronic
commerce companies. Moreover, the applicability to the Internet of existing laws
governing intellectual property ownership and infringement, copyright,
trademark, trade secret, obscenity, libel, employment, personal privacy and
other issues is uncertain and developing.
SUMmedia.com will file tax returns in such jurisdictions as required by
law based on principles applicable to traditional businesses. However, one or
more jurisdictions could seek to impose additional income tax obligations or
sales tax collection obligations on foreign companies, such as SUMmedia.com,
which engage in or facilitate electronic commerce. A number of proposals have
been made at state and local levels that could impose such taxes on the sale of
products and services through the Internet or the income derived from such
sales. Such proposals, if adopted, could substantially impair the growth of
electronic commerce and adversely affect SUMmedia.com's business.
Research and Development
During the year ended December 31, 1999, SUMmedia.com expended $97,014
on research and development. No costs were incurred in prior years. Research and
development costs consisted primarily of payments to outside contractors and
associated expenses related to engineering design work and testing of
SUMmedia.com's technology. SUMmedia.com expects to spend approximately $500,000
on research and development and related activities in the year 2000. These
activities include the design of new company web pages and the development of
new coupon delivery technologies. Amounts expended will consist primarily of
salaries to company employees and fees paid to consultants.
Employees
As of December 31, 1999, SUMmedia.com had 89 employees (including 16 in
Toronto, Ontario, 57 in Vancouver, British Columbia, and 16 in Seattle,
Washington). SUMmedia.com has never experienced an employee organized work
stoppage, and no employees are represented under collective bargaining
agreements. SUMmedia.com considers relations with its employees to be good.
SUMmedia.com plans to open corporate or joint venture sales offices in 15 new
cities or regions over the next 12 months. Each launch of a business in a new
region is expected to require the addition of approximately 25 employees. As a
result, the company expects to add approximately 375 additional employees during
the next year.
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ITEM 2. MANAGEMENT'S PLAN OF OPERATION
Forward-Looking Statements
This document contains certain forward-looking statements that involve
risks and uncertainties, such as statements of SUMmedia.com's plans, objectives,
expectations and intentions. When used in this document, the words "expects,"
"anticipates," "intends," "plans" and similar expressions are intended to
identify certain of these forward-looking statements. The cautionary statements
made in this document should be read as being applicable to all related forward
- -looking statements wherever they appear in this document. SUMmedia.com's actual
results could differ materially from those discussed in this document.
Cash requirements
SUMmedia.com believes that its existing cash and cash sources will not
be sufficient to fund its losses from operations, its capital expenditures and
other obligations beyond the next three months. If SUMmedia.com is not
successful in generating sufficient cash flow from operations or in raising
additional capital when required in sufficient amounts and on terms acceptable
to SUMmedia.com, its business, financial condition and operating results will be
materially adversely affected.
As detailed in previous sections, SUMmedia.com anticipates that at
least $70 million U.S. will be required over the next 12 months to fund the
following: opening of new markets and generating brand awareness ($10.7
million), worldwide launch of SUMmedia.com products ($50 million), expansion and
improvement of the company's financial and information technology infrastructure
($4.0 million), expansion and improvement of the Company's operations
infrastructure ($5.0 million), and continued research and development activities
($0.5 million).
In order to meet the expected cash deficiency and liquidity issues,
SUMmedia.com's management team is aggressively pursuing third-party investors
and strategic alliances. In addition, previously completed private sales of
securities included warrants that allowed investors to invest an additional $13
million in SUMmedia.com within one-year of the date of the purchase of the
warrant.
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Research and Development
During the next 12 months, SUMmedia.com intends to expend approximately
$500,000 in the pursuit of Internet research and development. These expenditures
will relate to the development of new company web pages and the development of
new coupon delivery technologies. Amounts to be expended include salaries for
company employees and fees paid to consultants.
Purchases of significant equipment
SUMmedia.com had commitments of approximately $810,000 related to
capital expenditures at December 31, 1999. Such expenditures will primarily be
for computer equipment and software for SUMmedia.com's enterprise-wide systems.
SUMmedia.com also has total minimum lease obligations of $1,264,663 under
certain operating leases, and $72,257 in capital leases, through October 2004.
Results of Operations
SUMmedia.com commenced operations as an Internet media and marketing
company on August 6, 1999 with its purchase of all the issued and outstanding
shares of SUM Media Corp. From inception (December 7, 1990) to August 6, 1999,
SUMmedia.com was an inactive "shell" with no operations or revenues; it had an
accumulated deficit of approximately $60,000, comprised mainly of general and
administrative costs (legal, audit, etc.). As a result, comparative figures are
not meaningful and are, therefore, not included in this discussion.
SUMmedia.com reports in its financial statements in the U.S. dollar,
but in 1999 its functional currency shifted to the Canadian dollar due to a
change in SUMmedia.com's principal business activity. While management expects
SUMmedia.com's functional currency to soon return to the U.S. dollar, it does
not anticipate exchange rate or inflation forces to be material until that time
because historical analysis of the two currencies shows relative stability.
SUMmedia.com incurred a deficit of $7.6 million from August 6, 1999 to
December 31, 1999, due to stock based compensation, operating expenses,
marketing and branding development, goodwill amortization and continuing costs
of raising capital.
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Revenues for the year ended December 31, 1999 were $132,051.
Approximately 36% of SUMmedia.com's revenues for the year ended December 31,
1999 were derived from exclusivity fees from Canadian businesses. The balance of
SUMmedia.com's revenues were derived from eCoupon sales (approximately 37%),
website development (approximately 18%) and online advertising on SUMmedia.com's
web site (approximately 9%).
General and administrative expenses for the year ended December 31,
1999 were $2.4 million. These expenses are generally attributed to the hiring of
over 55 administrative staff to build the infrastructure of SUMmedia.com in
areas of executive management, administrative personnel and technical support
for SUMmedia.com's offices, at a cost of approximately $600,000. Another
significant expenditure was travel expenses associated with trips to the United
States, Australia and Asia to secure financing and business partners for
SUMmedia.com at a cost of approximately $300,000. Leased office space consisted
of approximately 16,200 square feet at December 31, 1999, resulting in a cost of
approximately $130,000. General and administrative expenses also include
approximately $260,000 relating to startup and business expansion costs relating
to SUMmedia.com's Hong Kong joint venture interest. SUMmedia.com anticipates
that general and administrative expenses will continue to increase as
SUMmedia.com pursues its product rollouts by expanding to new cities and
regions.
In conjunction with the acquisition of SUM Media Corp. on August 6,
1999 (the "Acquisition"), the following transactions occurred concurrently with
the Acquisition. Tigerlily Financial Inc. ("Tigerlily") and Cambridge Asset
Holdings S.A. ("Cambridge"), consultants to the companies in arranging the
transaction, each acquired 1,125,000 common shares of SUM Media Corp. for
nominal consideration from two significant shareholders. These common shares
were immediately exchanged for a total of 800,000 common shares of the company
pursuant to the Acquisition. Tigerlily and Cambridge invested a total of
$1,000,000 in the company for 1,000,000 units consisting of one common share and
one share purchase warrant entitling the holder to purchase one common share at
a price of $3 per share for a period of 24 months. These units were transferred
by Tigerlily and Cambridge to two significant shareholders of the company who
were officers and directors of the company. Based on the above, the Company
recorded an issuance of 800,000 common shares to Tigerlily and Cambridge for
cash proceeds of $1,000,000. The fair value of the 800,000 common shares, based
on the quoted market value of the Company's stock on the OTC bulletin board of
$3.75 per share at the time the private placement was announced, exceeded the
proceeds received by the Company by $2,000,000. Of this amount $1,000,000 has
been allocated as a direct cost of the Acquisition and the remaining $1,000,000
has been recorded as stock based compensation related to other services provided
to the Company and its shareholders prior to the Acquisition. The two
significant shareholders effectively received the 200,000 common shares and
1,000,000 share purchase warrants which have been recorded as stock based
compensation expense in the amount of $1,500,000.
Research and development costs amounted to $97,000 for the year ended
December 31, 1999. Research and development costs were primarily comprised of
payments to outside contractors and expenses related to engineering design work
and testing of SUMmedia.com's technology. Product development expenses are
expected to increase to approximately $500,000, primarily due to the payment of
consulting fees and salaries related to the development of additional web sites
and new eCoupon technologies.
During the year ended December 31, 1999, SUMmedia.com incurred $1.4
million on various sales and marketing costs, of which $450,000 was spent on
salaries for over 40 new sales and marketing employees, with the remainder being
spent on promotional activities. SUMmedia.com's sales and marketing expenses are
comprised primarily of compensation for SUMmedia.com's sales and marketing
personnel, advertising, tradeshow and other promotional costs and expenses for
creative design of SUMmedia.com's websites. These costs resulted primarily from
growth in the number of personnel, increases in online, radio, and international
advertising and third-party services. Sales and marketing expenses are expected
to increase in the near term due to branding, advertising and marketing
expenses, as well as incremental expenses associated with personnel additions
expected to be made in the next year.
Amortization expense related to property and equipment was $97,000 for
the year ended December 31, 1999 during which period SUMmedia.com purchased
computers, office equipment, furniture and fixtures and software at a total cost
of $1.6 million. In addition, on the purchase of SUM Media Corp. SUMmedia.com
acquired $283,000 of property and equipment consisting primarily of computer
equipment ($168,000) and a leased promotional vehicle (a large four-wheel drive
military style truck decorated with the savingumoney.com logo) ($107,000).
Amortization expense related to Goodwill on the purchase of SUM Media Corp. was
$1.0 million for the year ended December 31, 1999.
- --------------------------------------------------------------------------------
page 11
<PAGE> 12
Liquidity and Capital Resources
At December 31, 1999, SUMmedia.com had $2,108,167 in cash, working
capital of $997,998 and shareholders' equity of $15,190,780. Net cash used in
SUMmedia.com's operating activities was $3,082,010 for the year ended December
31, 1999. Net cash flows used in operating activities consisted primarily of a
loss for the year of $7,594,282. The loss for the year was offset by non-cash
stock-based compensation charges of $2,500,000 and amortization of property and
equipment and goodwill of $1,178,152. The change in the Company's net working
capital also contributed $834,120 to operating cash flows.
Cash flows from financing activities of $6,562,834 were derived
primarily from $7,309,000 of proceeds received from the issuance of common
shares.
Cash flows used in investing activities of $1,340,712 related primarily
to purchases of property and equipment of $1,558,017. This amount was offset by
$212,591 of cash received on the acquisition of SUM Media Corp.
Since SUMmedia.com has no significant revenues, working capital will
continue to be depleted by operating expenses. In an effort to improve the
company's working capital going forward, the company's management is attempting
to increase revenues through marketing and branding efforts and through the use
of strategic alliances. The anticipated shortfall in working capital for the
next year is expected to be eliminated through the aggressive pursuit of
third-party investors and strategic relationships by company management.
For the year ended December 31, 1999, SUMmedia.com financed its
operations primarily through private sales of securities and unsecured advances
from the founders of SUM Media Corp. Dilutive equity issuances completed during
the year, including options granted to employees and warrants granted in private
sales of securities to third party investors, will, to the extent they are
exercised, improve the company's liquidity and capital resources.
SUMmedia.com's funding needs may vary depending upon a number of
factors, including the number and nature of the marketing and sales launch
initiatives; progress of SUMmedia.com's research and development programs; the
number and breadth of these programs; the progress of the development and
commercialization efforts of new products; and competing technological and
market developments. In the future, SUMmedia.com will need to raise substantial
additional funds to continue to conduct its branding, marketing plans, research
and development, and to implement enterprise-wide infrastructure programs.
SUMmedia.com intends to seek additional funding through public or private
financing and up-front licensing fees of its technology. There can be no
assurance that such funds will be available on favorable terms, if at all. If
adequate funding is not available, SUMmedia.com may be required to delay, reduce
or eliminate one or more of its marketing strategies or research and development
programs. These changes may also require SUMmedia.com to seek funding on less
favorable terms than it would otherwise.
- --------------------------------------------------------------------------------
page 12
<PAGE> 13
Year 2000 Issues
Some currently installed computer systems and software products are
coded to accept only two-digit entries in the date code field and cannot
reliably distinguish dates beginning on January 1, 2000 or January 1, 2001 from
dates prior to the year 2000 or 2001. Many companies' software and computer
systems may need to be upgraded or replaced in order to correctly process dates
beginning in 2000 or 2001 and to comply with the "Year 2000" requirements.
SUMmedia.com has reviewed its internal programs and has determined that there
are no significant Year 2000 issues within SUMmedia.com's systems or services.
SUMmedia.com has completed modifications to its internal systems to fix
identified Year 2000 issues in an attempt to ensure Year 2000 compliance. The
costs of these modifications have not been material and have involved a
reallocation of internal resources rather than incremental expenditures.
SUMmedia.com believes that its own software is Year 2000 compliant. However,
while SUMmedia.com has not experienced Year 2000 related problems in the past,
it could face unexpected expenses to fix any Year 2000 issues or unanticipated
website outages, either of which would harm its business. In addition,
SUMmedia.com uses third-party equipment and software that may not be Year 2000
compliant. SUMmedia.com is also conducting a further review of third-party
software and embedded systems used in its online business. In addition,
SUMmedia.com expects that the incremental cost of all of these reviews will not
exceed $50,000. The cost of any necessary upgrades or changes cannot currently
be estimated. SUMmedia.com may be harmed if necessary upgrades or changes are
not identified, or, if identified, are not timely and successfully implemented
at an acceptable cost. SUMmedia.com also may be harmed by Year 2000 problems of
its vendors and business partners. For example, SUMmedia.com may rely on credit
card companies to collect the majority of its revenues from users. Due to the
nature of the credit card system, some industry analysts have questioned the
effect of the year 2000 on credit card processing and billing. Failure of
SUMmedia.com's credit card vendors or other third-party equipment or software
vendors to properly process dates for the year 2000 and thereafter could require
it to incur unanticipated expenses in seeking alternative means of payment or
hardware or software replacements. It also could result in loss of revenues or
unanticipated website outages. SUMmedia.com's marketing efforts are also
dependent on the continued operation of Internet portals and other Internet
sites on which it advertises.
Although SUMmedia.com has not yet developed contingency plans with
respect to collecting payment under these circumstances, it is unable to make
such contingency plans if any significant number of the computers constituting
the Internet fail to process dates properly for the year 2000 or 2001 and there
is a system-wide slowdown or breakdown. SUMmedia.com's business is dependent on
the continued successful operation of the Internet. Any interruption or
significant degradation of Internet operations due to Year 2000 problems could
harm SUMmedia.com's business.
- --------------------------------------------------------------------------------
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<PAGE> 14
Quantitative and Qualitative Disclosure about Market Risk
SUMmedia.com's exposure to market risk is principally confined to its
cash and cash equivalents and available-for-sale securities, which have short
maturities and are held with high credit quality financial institutions and,
therefore, are believed to involve minimal market risk.
Business Overview
SUMmedia.com is an Internet media and marketing company that provides
online coupons, or eCoupons, for small businesses through its portal,
savingumoney.com. SUMmedia.com's goal is to provide Internet marketing
initiatives for smaller businesses lacking the expertise to exploit eCommerce
opportunities.
Future Acquisitions
SUMmedia.com will consider strategic acquisitions of companies with
a strong brand identity and with customer and product information databases that
augment its databases. It will be SUMmedia.com's practice to allow the acquired
company's management team to retain responsibility for critical front-end
business functions such as merchandising, creative presentation and marketing,
while consolidating operational functions under its organization to realize
economies of scale.
ITEM 3. DESCRIPTION OF PROPERTY
SUMmedia.com conducts all of its operations from leased and sub-leased
facilities at various locations. SUMmedia.com believes that its current
facilities will be adequate for its current and foreseeable future needs,
although future additions will be required with the establishment of any new
offices under SUMmedia.com's expansion plans.
The following table sets forth certain information relating to SUMmedia.com's
facilities:
<TABLE>
<CAPTION>
Location Size (sq. ft) Use Lease Expiration
<S> <C> <C> <C>
Vancouver, BC, Canada 8,800 Headquarters and sales office July 31, 2003
Toronto, ON, Canada 3,500 Sales office September 30, 2004
Seattle, WA, USA 3,900 Sales office October 31, 2004
</TABLE>
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page 14
<PAGE> 15
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of SUMmedia.com's common stock as of February 25, 2000 for:
o each person or entity known by SUMmedia.com to beneficially own more
than 5% of its outstanding common stock;
o each of its directors and named executive officers; and
o all of SUMmedia.com's directors and named executive officers as a
group.
Unless otherwise indicated, the address for each of the individuals listed
in the table is care of SUMmedia.com, 1200 - 1055 West Hastings Street,
Vancouver, B.C., V6E 2E9, Canada. Unless otherwise indicated by footnote, the
persons named in the table have sole voting and sole investment power with
respect to all shares of common stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT OF
OR NAME OF OFFICER OR DIRECTOR BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
------------------------------------ -------------------- -------------------
<S> <C> <C>
Grant M. Petersen(2) 4,951,994 26.2%
John E. Veltheer(3) 148,000 *
Philip Kunsberg(4) 12,000 *
Frank Palmer(5) 24,000 *
Derrick Bulawa(6) 12,000 *
Arvid C. Petersen(7) 24,000 *
Johnson Chan(8) 24,000 *
All Officers and directors as a group
(7 persons) 5,195,994 27.3%
Dennis Molloy(9) 4,932,794 26.2%
Charmford Limited(10) 2,016,000 10.4%
Hollinger Digital Inc.(11) 2,000,000 10.4%
</TABLE>
- --------------------
* Less than one percent.
(1) Percentage of beneficial ownership is based on 18,310,400 shares of common
stock issued and outstanding as of February 25, 2000.
(2) Includes stock options for 67,000 shares currently exercisable, or
exercisable within 60 days and warrants for 500,000 shares exercisable or
exercisable within 60 days. Includes 3,029,794 shares owned of record on
August 6, 1999 by nominees for Mr. Petersen as to which shares Mr.
Petersen effectively possesses sole voting and investment powers. None of
such nominee relationships were initially embodied in formal written
agreements. Mr. Petersen has subsequently obtained stock powers covering
786,439 shares formerly owned of record by certain of the nominees.
(3) Includes options for 48,000 shares currently exercisable or exercisable
within 60 days.
(4) Mr. Kunsberg's address is Suite 600, 270 Lafayette St., New York, NY.
Includes options for 12,000 shares currently exercisable or exercisable
within 60 days.
(5) Mr. Palmer's address is Suite 600, 777 Hornby St., Vancouver, BC. Includes
options for 24,000 shares currently exercisable or exercisable within 60
days.
(6) Mr. Bulawa's address is Suite 2101-3, K. Wah Centre, 191 Java Road, North
Point, Hong Kong. Includes options for 12,000 shares currently exercisable
or exercisable within 60 days.
(7) Mr. Petersen's address is 6 Carrington Ave., Mosman, NSW, Australia.
Includes options for 24,000 shares currently exercisable or exercisable
within 60 days.
(8) Mr. Chan's address is Suite 1276, 1 Trademart Drive, Cowloon Bay, Hong
Kong. Includes options for 24,000 shares currently exercisable or
exercisable within 60 days.
(9) Mr. Molloy's address is 24446 80th Avenue, Langley, B.C., Canada. Includes
48,000 shares underlying stock options currently exercisable, or
exercisable within 60 days and warrants for 500,000 shares currently
exercisable or exercisable within 60 days. Includes 3,029,794 shares owned
of record on August 6, 1999 by nominees for Mr. Molloy as to which shares
Mr. Molloy effectively possesses sole voting and investment powers. None
of such nominee relationships were initially embodied in formal written
agreements. Mr. Molloy has subsequently obtained stock powers covering
786,439 shares formerly owned of record by certain of the nominees.
(10) Charmford Limited's address is Suite 2101-3, K. Wah Centre, 191 Java Road,
North Point, Hong Kong. Includes warrants for 1,008,000 shares currently
exercisable or exercisable within 60 days.
(11) Hollinger Digital Inc's address is Suite 600, 270 Lafayette St.,
New York, NY. Includes warrants for 1,000,000 shares currently exercisable
or exercisable within 60 days.
- --------------------------------------------------------------------------------
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<PAGE> 16
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth information regarding the executive
officers and directors and key employees of SUMmedia.com as of February 25,
2000:
<TABLE>
<CAPTION>
NAME AND POSITION AGE HELD POSITION SINCE
<S> <C> <C>
Grant M. Petersen, Chairman of the Board, and 43 1999
Chief Executive Officer
John E. Veltheer, President and Director 34 1999
Philip Kunsberg, Director __ 2000
Johnson Chan, Director __ 2000
Arvid C. Petersen, Director 48 2000
Derrick Bulawa, Director __ 2000
Frank Palmer, Director 60 2000
David R. Lewis, Chief Financial Officer, 55 1999
Secretary and Treasurer
Andre Dragon, Chief Operating Officer 41 1999
David R. Noble, Chief Information Officer 38 1999
Albert C. Szajman, Vice President, Marketing 42 1999
David E. Jubb, Vice President, ePartnering 56 1999
Ean H. Jackson, Vice President, eBusiness 42 2000
</TABLE>
The SUMmedia.com board is divided into three classes designated as Class I,
Class II and Class III and its directors will be assigned to each class by the
board. At the first annual meeting of stockholders following the effectiveness
of this registration statement, the term of office of the Class I directors will
expire and Class I directors will be elected for a full term of three years;
Class II directors will be elected for a full term of two years; and Class III
directors will be elected for a full term of one year. At the second annual
meeting of stockholders following the effectiveness of this registration
statement, the term of office of the Class III directors will expire and Class
III directors will be elected for a full term of three years. At the third
annual meeting of stockholders following the effectiveness of this registration
statement, the term of office of the Class II directors will expire and Class II
directors will be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors will be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting. The Class I directors are Grant Petersen and John Veltheer;
there are no Class II or Class III directors as of December 31, 1999. Arvid C.
Petersen is the brother of Grant M. Petersen.
- --------------------------------------------------------------------------------
page 16
<PAGE> 17
The following is a brief summary of the business experience of each
director and officer over the last five years:
GRANT M. PETERSEN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Petersen has been an officer and director of the Company since
August 1999. Over the past five years, Mr. Petersen has been an investor in
various enterprises for his own account and has not had operational or executive
responsibilities in these endeavors.
JOHN E. VELTHEER
PRESIDENT AND DIRECTOR
Dr. Veltheer has been an officer and a director of the Company since
August 1999. From 1998 to June 1999, Dr. Veltheer was manager of shareholder
relations at Softwex Technologies Inc., a Vancouver, B.C. based software
company, and remains the principal of Iridium Capital, a Vancouver-based venture
capital company. From September 1996 to 1998, he worked on a consulting basis
with numerous technology companies providing investor relations, business
planning and financial analysis services. From September 1995 to September 1996,
Dr. Veltheer was research associate at the University of British Columbia. From
September 1993 to August 1995, he was a post-doctoral fellow at the University
of California, Berkeley. Dr. Veltheer has a Ph.D. in Chemistry from University
of British Columbia.
PHILIP KUNSBERG
DIRECTOR
Mr. Kunsberg has been a director of SUMmedia.com since January 2000.
Since 1995, Mr. Kunsberg has been the Executive Vice President of Hollinger
Digital Inc.
ARVID C. PETERSEN
DIRECTOR
Mr. Petersen has been a director of SUMmedia.com since February 2000.
Since 1995, Mr. Petersen has been the Managing Director and a co-owner of Study
Group Australia PTY. Limited, Australia's second largest private provider of
education and training. Mr. Petersen graduated from the British Columbia
Institute of Technology.
DERRICK BULAWA
DIRECTOR
Mr. Bulawa has been a director of SUMmedia.com since February 2000.
Since 1998, Mr. Bulawa has been the Chief Operating Officer of Unifi
Communications Inc., a Hong Kong based company. From 1995 to 1999, Mr. Bulawa
has been the President of East Asian operations of Unifi Communications Inc. Mr.
Bulawa received a bachelor of science degree in electronic engineering
technology.
FRANK PALMER
DIRECTOR
Mr. Palmer has been a director of SUMmedia.com since January 2000.
Since 1998, Mr. Palmer has been the Chairman and Chief Executive Officer of DDB
Canada Group (a division of American Canada Inc.). He has been President of
Palmer Jarvis DDB (since DDB's merger with Palmer Jarvis) since 1998 and was
President of Palmer Jarvis (which he co-founded) since its inception in 1969.
All of these companies are in the advertising business. Mr.Palmer graduated from
Vancouver School of Art.
DAVID R. LEWIS
CHIEF FINANCIAL OFFICER
Mr. Lewis has been an officer of the Company since July 1999. He was a
director of the company from August 1999 to December 1999. Prior to joining
SUMmedia.com in July 1999, Mr. Lewis was the Chief Financial Officer at Alya
International Inc., a publicly traded developer of advanced security and
building management systems for large facilities. In 1998, he was the Chief
Financial Officer and a director at Net Nanny Software International Inc., a
publicly-traded a developer of Internet and Web filtering software. From
mid-1994 to early 1998, Mr. Lewis provided management consulting to various
startup companies to help them achieve their operational and financial
objectives through the design and implementation of practical financial and
productivity solutions. Mr. Lewis has a degree in Metallurgical Engineering from
Dalhousie University in Halifax, Nova Scotia and a Chartered Accountant
designation obtained while with Coopers & Lybrand in Toronto, Ontario.
ANDRE DRAGON
CHIEF OPERATING OFFICER
Mr. Dragon has been an officer of the Company since July 1999. From May
1997 to June 1999, Mr. Dragon was the National Director, Sales and Marketing, of
Nextport Media, a subsidiary of Bell Actimedia, a marketing, printing and
publishing group. From October 1994 to November 1996, Mr. Dragon was Director,
International Expansion and Regional General Manager at Interactive Media
- --------------------------------------------------------------------------------
page 17
<PAGE> 18
Group, a Toronto, Ontario developer of interactive communications solutions. Mr.
Dragon holds a Masters of Business Administration degree from Concordia
University in Montreal, Quebec.
DAVID R. NOBLE
CHIEF INFORMATION OFFICER
Mr. Noble joined SUMmedia.com in November 1999 from Oracle Corporation,
where he was a Technical Manager responsible for Internet Development from the
beginning of 1999. From 1994 to 1998, Mr. Noble was with Sierra Systems
Consultants Inc, where he was a principal and Technology Leader for the Public
Sector Practice and responsible for the Oracle Technology Partnership. Mr. Noble
received an honours degree in Computer Science and Information Processing at
Brock University, St. Catharines, Ontario (with a minor in Business Management)
and a Communications Diploma at Napier College in Scotland.
ALBERT C. SZAJMAN
VICE PRESIDENT, MARKETING
Mr. Szajman joined the Company in August 1999 and has been an officer
since that time. From 1997 to 1999, he was Vice President of Palmer Jarvis DDB,
an advertising firm in Vancouver, BC. From 1991 to 1997, Mr. Szajman was with
Bryant, Fulton & Shee, Baird Advertising where he rose from Account Director to
Promotional Marketing Director. Mr. Szajman is a graduate of the Advertising and
Marketing program at British Columbia Institute of Technology.
DAVID E. JUBB
VICE PRESIDENT, EPARTNERING
Mr. Jubb has been an officer of the Company since September 1999. From
1992 to 1996 and from 1998 to late 1999, Mr. Jubb was Vice President, Sales of
Liberty Integration Software, a software company in Vancouver, BC. From 1996 to
1998, he was also the founder and proprietor of a local sales consultancy
operation for more than two years. Mr. Jubb received a Bachelor of Arts degree
from the University of North Carolina. Mr. Jubb spent four years in the U.S.
Marine Corps, before beginning a career in high tech sales management.
EAN H. JACKSON
VICE PRESIDENT, EBUSINESS
Mr. Jackson has been an officer since February 2000. In 1999, Mr.
Jackson was the Territory Manager for Oracle Corp. From 1994 to 1998, Mr.
Jackson was involved in numerous Internet start-up companies providing sales and
marketing expertise. Mr. Jackson graduated from the University of Western
Ontario and received a Masters of Science degree in engineering and
telecommunications from Southern Methodist University. Mr. Jackson has also
received a certificate in Internet Marketing from the University of British
Columbia.
- --------------------------------------------------------------------------------
page 18
<PAGE> 19
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
During the year ended December 31, 1998, no executive officer of
SUMmedia.com received a salary. The following table sets forth information
concerning compensation earned in the years ended December 31, 1999 and December
31, 1998 by Patrick Brooks, SUMmedia.com's President and only officer to June
1999, by Julia A. Petersen, SUMmedia.com's President and only officer from June
1999 to August 1999 and by Grant M. Petersen, SUMmedia.com's Chief Executive
Officer from August 1999. The information in the table includes salaries,
bonuses, stock options granted and other miscellaneous compensation.
Annual Compensation
<TABLE>
<CAPTION>
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary($) Bonus($) Compensation($) Options Compensation($)
------------------ ---- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Patrick Brooks, President 1999 -- -- -- -- --
to June 1999 1998 -- -- -- -- --
Julia A. Petersen, President 1999 -- -- -- -- --
June 1999 to August 1999
Grant M. Petersen 1999 133,458 -- -- 280,000 --
Chairman and Chief Executive
Officer from August 1999
-------- --------------- ---------- --------------
</TABLE>
Mr. Petersen's salary was paid to 505362 B.C. Ltd., a company wholly
owned by Mr. Petersen and his spouse Julia A. Petersen.
OPTION GRANTS IN LAST FISCAL YEAR
The following table represents the grants of stock options in the
fiscal year ended December 31, 1999 to Grant M. Petersen.
<TABLE>
<CAPTION>
Percent of
Number of Total Options Exercise
Securities Granted to of Base
Underlying Employees in Price Expiration
Name Options (#) Fiscal Year ($/Sh) Date
- ---- ----------- ------------- -------- -----------
<S> <C> <C> <C> <C>
Grant M. Petersen 280,000 11% $3.44 2009
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUE TABLE
The following table represents the exercise of stock options in the
fiscal year ended December 31, 1999 and the fiscal year end value of unexercised
options to Grant M. Petersen.
<TABLE>
<CAPTION>
Number of
Unexercised Value of
Securities Unexercised
Underlying In-The-Money
Options at Options at
Shares FY-end (#) FY-end ($)
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Grant M. Petersen -- -- 67,200/212,800 $436,800/$1,383,200
</TABLE>
- --------------------------------------------------------------------------------
page 19
<PAGE> 20
Director Compensation
Currently, SUMmedia.com's directors do not receive any compensation for
their services as directors. In the near future, SUMmedia.com expects to
establish a compensation plan for non-employee directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of SUMmedia.com's executive officers serve as members of the board
of directors or compensation committee of any entity that has one or more
executive officers who serve on SUMmedia.com's board or compensation committee.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1999, Grant M. Petersen, the Chief
Executive Officer and a director of SUMmedia.com, and Dennis Molloy, together
loaned SUMmedia.com $56,436 without interest and without stated terms of
repayment.
During the fiscal year ended December 31, 1999, SUMmedia.com paid
$133,458 for management consulting and related services to 505362 B.C. Ltd.,
wholly owned by Mr. Petersen and his spouse Julia A. Petersen.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
SUMmedia.com is authorized to issue 65,500,000 shares of $0.01 par
value common stock, of which 16,142,000 shares are issued and outstanding as of
December 31, 1999. As of December 31, 1999, SUMmedia.com had approximately 50
holders of record of its common stock. Holders of record of SUMmedia.com's
common stock did not include persons whose shares are held in their securities
brokerage accounts. Holders of shares of common stock are entitled to one vote
per share on all matters submitted to vote of the shareholders of SUMmedia.com.
However, in the election of directors, each holder of shares of common stock is
entitled to have as many votes for each share owned as there are directors to be
elected. There is no right to accumulate votes in the election of directors. A
majority of the votes entitled to be cast on a matter by a voting group
constitutes a vote for action on a matter. Subject to preferences that may apply
to shares of preferred stock outstanding, the holders of shares of common stock
are entitled to receive dividends out of assets legally available at such time
and in such amounts as the board of directors may from time to time determine.
Upon the occurrence of a liquidation, dissolution or winding up of the assets of
SUMmedia.com, the holders of shares of common stock will be entitled to share
ratably in the distribution of all assets remaining available for distribution
after satisfaction of all liability and the payment of any liquidation
preference on any outstanding preferred stock.
- --------------------------------------------------------------------------------
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<PAGE> 21
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
MARKET INFORMATION.
SUMmedia.com's common stock trades on the OTC Bulletin Board. The range
of high and low bid quotations for the year ended December 31, 1999 was between
$6.75 and $1.875. These quotations represent prices between dealers and do not
include retail markups, markdowns or commissions and may not necessarily
represent actual transactions. The source of the high and low bid information is
The Nasdaq Stock Market, Inc. Management has been unable to locate any trading
information for the quarterly periods ended between December 31, 1997 and July
9, 1999.
The market in which SUMmedia.com's common stock trades is commonly
referred to as the electronic bulletin board. In this market, an investor may
find it more difficult to dispose of or to obtain accurate quotations as to the
market value of SUMmedia.com's common stock. In addition, SUMmedia.com is
subject to a rule promulgated by the Securities and Exchange Commission that
provides that, if SUMmedia.com fails to meet certain criteria set forth in such
rule, various sales practice requirements are imposed on broker/dealers who sell
SUMmedia.com's common stock to persons other than established customers and
accredited investors. For these types of transactions, the broker/dealer has to
make a special investor suitability determination for the purchaser and to have
received the purchaser's written consent to the transactions prior to sale.
Consequently, the rule may have an adverse effect on the ability of
broker/dealers to sell SUMmedia.com's common stock, which may, in turn, have an
adverse effect on the ability of purchasers to sell SUMmedia.com's common stock
in the market.
HOLDERS
As of December 31, 1999, SUMmedia.com had approximately 50 holders of
record of its common stock.
DIVIDENDS
SUMmedia.com has not declared cash dividends on its common stock since
its inception. SUMmedia.com does not anticipate paying any dividends on its
common stock in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
Subsequent to December 31, 1999, a legal action was brought against the
company by a former officer and director of the company for unfair dismissal.
Management intends to diligently prosecute this action and expects to ultimately
prevail. The company is not party to any other material legal proceedings.
- --------------------------------------------------------------------------------
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<PAGE> 22
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
A decision to change SUMmedia.com's principal independent accountant
was recommended by the board of directors and was approved by the shareholders
on August 20, 1999. This change is the result of SUMmedia.com's desire to engage
a global accounting firm. In January 2000, SUMmedia.com appointed
PricewaterhouseCoopers LLP as its independent accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
All sales of unregistered securities issued by SUMmedia.com were
denominated in U.S. dollars. Each issuance was priced according to variables
such as market price, trading volume and prevailing financial conditions.
On August 6, 1999, SUMmedia.com issued 3,200,000 shares of its common
stock for 9,000,001 shares (100%) of SUM Media Corp. Issuance of the shares was
made in reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act of 1933, as amended ("1933 Act"). The purchaser was an
accredited investor and had access to full information concerning SUMmedia.com
and represented that it purchased the shares for the purchaser's own account and
not for the purpose of distribution. The shares contained a restrictive legend
advising that the securities represented by the shares may not be offered for
sale, sold or otherwise transferred without having first being registered under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act.
No underwriters were involved in the transaction.
In August 1999, SUMmedia.com issued 500,000 units each to Tigerlily
Financial Inc. and Cambridge Asset Holdings S.A. for gross proceeds of
$1,000,000. Each unit consisted of one share of common stock and one common
stock purchase warrant. Each warrant is exercisable for 24 months for one share
of common stock at an exercise price of $3.00 per share. Issuance of the units
was made in reliance upon the exemption from registration provided by Section
4(2) of the 1933 Act. The purchaser was an accredited investor and had access to
full information concerning SUMmedia.com and represented that it purchased the
units for the purchaser's own account and not for the purpose of distribution.
The units contained a restrictive legend advising that the securities
represented by the units may not be offered for sale, sold or otherwise
transferred without having first being registered under the 1933 Act or pursuant
to an exemption from registration under the 1933 Act. No underwriters were
involved in the transaction.
In September 1999, SUMmedia.com issued 500,000 units to Startech
Corporation for gross cash proceeds of $1,500,000. Each unit consisted of one
share of common stock and common stock purchase warrant. Each warrant is
exercisable for 12 months for one share of common stock at an exercise price of
$4.50 per share. Issuance of the units was made in reliance upon the exemption
from registration provided by Section 4(2) of the
- --------------------------------------------------------------------------------
page 22
<PAGE> 23
1933 Act. The purchaser was an accredited investor and had access to full
information concerning SUMmedia.com and represented that it purchased the units
for the purchaser's own account and not for the purpose of distribution. The
units contained a restrictive legend advising that the securities represented by
the units may not be offered for sale, sold or otherwise transferred without
having first being registered under the 1933 Act or pursuant to an exemption
from registration under the 1933 Act. No underwriters were involved in the
transaction.
In September 1999, SUMmedia.com issued 500,000 units to Valdar
Enterprises Ltd. for gross cash proceeds of $1,500,000. Each unit consisted of
one share of common stock and common stock purchase warrant. Each warrant is
exercisable for 12 months for one share of common stock at an exercise price of
$4.50 per share. Issuance of the units was made in reliance upon the exemption
from registration provided by Section 4(2) of the 1933 Act. The purchaser was an
accredited investor and had access to full information concerning SUMmedia.com
and represented that it purchased the units for the purchaser's own account and
not for the purpose of distribution. The units contained a restrictive legend
advising that the securities represented by the units may not be offered for
sale, sold or otherwise transferred without having first being registered under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act.
No underwriters were involved in the transaction.
In December 1999, SUMmedia.com issued 31,000 units to R.F. Hauser Shows
Ltd. for gross proceeds of $100,750. Each unit consisted of one share of common
stock and one common stock purchase warrant. Each warrant is exercisable for 12
months for one share of common stock at an exercise price of $4.00 per share.
Issuance of the units was made in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act. The purchaser was an accredited
investor and had access to full information concerning SUMmedia.com and
represented that it purchased the units for the purchaser's own account and not
for the purpose of distribution. The units contained a restrictive legend
advising that the securities represented by the units may not be offered for
sale, sold or otherwise transferred without having first being registered under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act.
No underwriters were involved in the transaction.
- --------------------------------------------------------------------------------
page 23
<PAGE> 24
In December 1999, SUMmedia.com issued 716,668 units to H. High Tech
Investments Ltd. for gross cash proceeds of $2,150,004. Each unit consisted of
one share of common stock and common stock purchase warrant. Each warrant is
exercisable for 12 months for one share of common stock at an exercise price of
$5.00 per share. Issuance of the units was made in reliance upon the exemption
from registration provided by Section 4(2) of the 1933 Act. The purchaser was an
accredited investor and had access to full information concerning SUMmedia.com
and represented that it purchased the units for the purchaser's own account and
not for the purpose of distribution. The units contained a restrictive legend
advising that the securities represented by the units may not be offered for
sale, sold or otherwise transferred without having first being registered under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act.
No underwriters were involved in the transaction.
In December 1999, SUMmedia.com issued 116,666 units to Yi-Ming Wu for
gross cash proceeds of $349,998. Each unit consisted of one share of common
stock and common stock purchase warrant. Each warrant is exercisable for 12
months for one share of common stock at an exercise price of $5.00 per share.
Issuance of the units was made in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act. The purchaser was an accredited
investor and had access to full information concerning SUMmedia.com and
represented that it purchased the units for the purchaser's own account and not
for the purpose of distribution. The units contained a restrictive legend
advising that the securities represented by the units may not be offered for
sale, sold or otherwise transferred without having first being registered under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act.
No underwriters were involved in the transaction.
In December 1999, SUMmedia.com issued 166,666 units to Shih-I Chow for
gross cash proceeds of $499,998. Each unit consisted of one share of common
stock and common stock purchase warrant. Each warrant is exercisable for 12
months for one share of common stock at an exercise price of $5.00 per share.
Issuance of the units was made in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act. The purchaser was an accredited
investor and had access to full information concerning SUMmedia.com and
represented that it purchased the units for the purchaser's own account and not
for the purpose of distribution. The units contained a restrictive legend
advising that the securities represented by the units may not be offered for
sale, sold or otherwise transferred without having first being registered under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act.
No underwriters were involved in the transaction.
In December 1999, SUMmedia.com issued 100,000 units to Avtar T. Bains
for gross cash proceeds of $325,000. Each unit consisted of one share of common
stock and common stock purchase warrant. Each warrant is exercisable for 12
months for one share of common stock at an exercise price of $4.25 per share.
Issuance of the units was made in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act. The purchaser was an accredited
investor and had access to full information concerning SUMmedia.com and
represented that it purchased the units for the purchaser's own account and not
for the purpose of distribution. The units contained a restrictive legend
advising that the securities represented by the units may not be offered for
sale, sold or otherwise transferred without having first being registered under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act.
No underwriters were involved in the transaction.
In December 1999, SUMmedia.com issued 21,000 units for gross cash
proceeds of $68,250 to Rypeter Fishing Ltd. Each unit consisted of one share of
common stock and common stock purchase warrant. Each warrant is exercisable for
12 months for one share of common stock at an exercise price of $4.00 per share.
Issuance of the units was made in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act. The purchaser was an accredited
investor and had access to full information concerning SUMmedia.com and
represented that it purchased the units for the purchaser's own account and not
for the purpose of distribution. The units contained a restrictive legend
advising that the securities represented by the units may not be offered for
sale, sold or otherwise transferred without having first being registered under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act.
No underwriters were involved in the transaction.
- --------------------------------------------------------------------------------
page 24
<PAGE> 25
In January 2000, SUMmedia.com issued 308,000 units to Enrich Investment
Holdings Ltd. for gross cash proceeds of $1,001,000. Each unit consisted of one
share of common stock and common stock purchase warrant. Each warrant is
exercisable for 12 months for $4.25 for one share of common stock. Issuance of
the units was made in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. The purchaser was an accredited investor and had
access to full information concerning SUMmedia.com and represented that it
purchased the units for the purchaser's own account and not for the purpose of
distribution. The units contained a restrictive legend advising that the
securities represented by the units may not be offered for sale, sold or
otherwise transferred without having first being registered under the 1933 Act
or pursuant to an exemption from registration under the 1933 Act. No
underwriters were involved in the transaction.
In January 2000, SUMmedia.com issued 1,000,000 units to Hollinger
Digital Inc. for gross cash proceeds of $4,000,000. Each unit consisted of one
share of common stock and common stock purchase warrant. Each warrant is
exercisable for 12 months for $6.00 for one share of common stock. Issuance of
the units was made in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. The purchaser was an accredited investor and had
access to full information concerning SUMmedia.com and represented that it
purchased the units for the purchaser's own account and not for the purpose of
distribution. The units contained a restrictive legend advising that the
securities represented by the units may not be offered for sale, sold or
otherwise transferred without having first being registered under the 1933 Act
or pursuant to an exemption from registration under the 1933 Act. No
underwriters were involved in the transaction.
In January 2000, SUMmedia.com issued 159,900 shares of its common stock
to Core Pacific - Yamaichi International (H.K.) Limited pursuant to an option
exercise at $3.00 per share for gross cash proceeds of $479,700. Issuance of the
shares was made in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. The purchaser was an accredited investor and had
access to full information concerning SUMmedia.com and represented that it
purchased the shares for the purchaser's own account and not for the purpose of
distribution. The shares contained a restrictive legend advising that they may
not be offered for sale, sold or otherwise transferred without having first
being registered under the 1933 Act or pursuant to an exemption from
registration under the 1933 Act. No underwriters were involved in the
transaction.
In February 2000, SUMmedia.com issued 700,000 units to e-Kong Group
Ltd. for gross cash proceeds of $3,675,000. Each unit consisted of one share of
common stock and common stock purchase warrant. Each warrant is exercisable for
12 months for $7.00 for one share of common stock. Issuance of the units was
made in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. The purchaser was an accredited investor and had access to full
information concerning SUMmedia.com and represented that it purchased the units
for the purchaser's own account and not for the purpose of distribution. The
units contained a restrictive legend advising that the securities represented by
the units may not be offered for sale, sold or otherwise transferred without
having first being registered under the 1933 Act or pursuant to an exemption
from registration under the 1933 Act. No underwriters were involved in the
transaction.
In February 2000, SUMmedia.com issued 20,000 units to Eastern Dragon
Enterprises Ltd. for gross cash proceeds of $105,000. Each unit consisted of one
share of common stock and common stock purchase warrant. Each warrant is
exercisable for 12 months for $7.00 for one share of common stock. Issuance of
the units was made in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. The purchaser was an accredited investor and had
access to full information concerning SUMmedia.com and represented that it
purchased the units for the purchaser's own account and not for the purpose of
distribution. The units contained a restrictive legend advising that the
securities represented by the units may not be offered for sale, sold or
otherwise transferred without having first being registered under the 1933 Act
or pursuant to an exemption from registration under the 1933 Act. No
underwriters were involved in the transaction.
- --------------------------------------------------------------------------------
page 25
<PAGE> 26
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In February 2000, SUMmedia.com obtained $1.0 million of directors' and
officers' liability insurance. This policy insures the past, present and future
directors and officers of SUMmedia.com, with certain exceptions, from claims
arising out of any error, omission, misstatement, misleading statement, neglect
or breach of duty or act by any of the officers or directors of SUMmedia.com
while acting in their respective capacities as such. Claims include claims
arising under federal and state securities laws.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
SUMmedia.com pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Section 7-109-102 of the Colorado Business Corporation Act permits a
Colorado corporation to indemnify any director against liability if such person
acted in good faith and, in the case of conduct in an official capacity with the
corporation, that the directors conduct was in the corporation's best interest
and, in all other cases, that the director's conduct was at least not opposed to
the best interests of the corporation or, with regard to criminal proceedings,
the director had no reasonable cause to believe the director's conduct was
unlawful.
SUMmedia.com's Amended and Restated Articles of Incorporation provide
that a corporation shall, to the fullest extent permitted by the laws of the
state of Colorado, indemnify any person who was or is a party or threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, and whether formal or informal by reason of the fact that he or
she is or was a director, officer, fiduciary agent of the corporation or is or
was serving at the request of the corporation as a director, officer, fiduciary
or agent of any other foreign or domestic corporation or of any partnership,
joint venture, trust, other enterprise or employee benefit plan. In addition,
the Amended and Restated Articles of Incorporation state that the corporation
shall have the right, in its sole discretion, to indemnify any other person to
the fullest extent allowed by the laws of the state of Colorado, except as may
be limited by law from time to time in effect.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
SUMMEDIA.COM INC.
Date: March 2, 2000 /s/ David R. Lewis
----------------------------
David R. Lewis,
Chief Financial Officer
PART F/S
The financial statements located in the Company's Annual Reports on
Form 10-KSB for the years ended December 31, 1998 and 1997 are incorporated into
this registration statement by reference.
- --------------------------------------------------------------------------------
page 26
<PAGE> 27
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMmedia.com Inc. (formerly Reliance Resources Inc.) Pro forma
Consolidated Statement of Operations (Unaudited) December 31, 1999 and 1998 PF-1
SUMmedia.com Inc. (formerly Reliance Resources Inc.) Consolidated financial
statements December 31, 1999 and 1998 F-1
SUM Media Corp. (formerly E-Com Media Corp.) financial statements August 6, 1999 F-23
</TABLE>
- --------------------------------------------------------------------------------
page 27
<PAGE> 28
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Pro forma Consolidated Statement of Operations
(Unaudited)
DECEMBER 31, 1999
(expressed in U.S. dollars)
PF-1
<PAGE> 29
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Pro Forma Consolidated Statement of Operations
(UNAUDITED) FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
SUMmedia.com INC. SUM MEDIA CORP.
JANUARY 1, MARCH 23, PRO FORMA
1999 TO 1999 TO PRO FORMA CONSOLIDATED
DECEMBER 31, AUGUST 6, ADJUSTMENT STATEMENT OF
1999 1999 SUB TOTAL (NOTE 1) OPERATIONS
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
SALES 132,051 16,515 148,566 -- 148,566
COST OF SALES 117,940 8,574 126,514 -- 126,514
---------- ---------- ----------- ---------- -----------
GROSS PROFIT 14,111 7,941 22,052 -- 22,052
---------- ---------- ----------- ---------- -----------
OPERATING EXPENSES
Stock based compensation 2,500,000 2,581,031 5,081,031 -- 5,081,031
General and administrative 2,405,678 258,980 2,664,668 -- 2,664,658
Marketing 1,427,549 204,509 1,632,058 -- 1,632,058
Research and development 97,014 -- 97,014 -- 97,014
Amortization of goodwill 1,080,734 -- 1,080,734 1,602,721 2,683,455
Amortization of property and
equipment 97,418 17,754 115,172 -- 115,172
---------- ---------- ----------- ---------- -----------
7,608,393 3,062,274 10,670,667 1,602,721 12,273,388
---------- ---------- ----------- ---------- -----------
LOSS FOR THE YEAR (7,594,282) (3,054,333) (10,648,615) (1,602,721) (12,251,336)
========== ========== =========== ========== ===========
</TABLE>
PF-2
<PAGE> 30
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Pro Forma Consolidated Financial Statements
(UNAUDITED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
1 PRO FORMA TRANSACTION
On August 6, 1999, SUMmedia.com Inc. (formerly Reliance Resources Inc.)
("the company") entered into a share exchange agreement with SUM Media
Corp. (formerly E-Com Media Corp.), a British Columbia, Canada company.
Pursuant to the terms of the agreement, the company issued 3,200,000 common
shares for all of the issued and outstanding shares of SUM Media Corp. This
transaction has been accounted for using the purchase method whereby the
fair value of the common shares issued by the company have been allocated
to the net identifiable assets of SUM Media Corp. based on their fair
values. The purchase price allocation also resulted in goodwill of
$13,417,275 including an allocation of $1,000,000 relating to acquisition
costs. Prior to this transaction, the company was inactive.
The pro forma consolidated statement of operations gives effect to the
share exchange as if it had occurred on January 1, 1999. Accordingly, the
pro forma consolidated statement of operations reflects a pro forma
adjustment recording the amortization of goodwill for the period from
January 1, 1999 to August 6, 1999. This adjustment results in the
amortization of $2,683,455 of goodwill for the year ended December 31,
1999. Amortization is provided on a straight-line basis over five years.
2 BASIS OF PRESENTATION
The unaudited pro forma consolidated statement of operations has been
prepared by management in accordance with generally accepted accounting
principles in the United States and the pro forma assumption and adjustment
described in note 1.
The pro forma consolidated statement of operations for the year ended
December 31, 1999 is based on the historical consolidated statement of
operations of the company for year ended December 31, 1999, and the
historical statement of operations of the SUM Media Corp. for the period
from March 23, 1999 to August 6, 1999.
The unaudited pro forma consolidated statement of operations is not
necessarily indicative of the results that actually would have resulted if
the transactions reflected herein had been completed on the dates indicated
or the results which may be obtained in the future. The unaudited pro forma
consolidated statement of operations should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements of the company and
financial statements of SUM Media Corp., including the respective notes
thereto, included elsewhere herein.
3 SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used in the preparation of the pro
forma consolidated statement of operations include those disclosed in the
audited financial statements of the company.
(1)
PF-3
<PAGE> 31
SUMmedia.com Inc.
(formerly Reliance Resources Inc.)
(a development stage company)
Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
(expressed in U.S. dollars)
F-1
<PAGE> 32
INDEPENDENT REPORT OF ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SUMmedia.com Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, cash flows and shareholders' equity
(deficit), present fairly, in all material respects, the financial position of
SUMmedia.com INC. (formerly Reliance Resources Inc.) at December 31, 1999 and
the results of its operations and its cash flows for the year ended December 31,
1999 in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with auditing standards generally accepted in the United States,
which required that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
The financial statements of SUMmedia.com INC. (formerly Reliance Resources Inc.)
for the year ended December 31, 1998 were audited by other independent
accountants whose report dated March 31, 1999 expressed an unqualified opinion
on those statements.
The accompanying consolidated financial statements have been prepared assuming
that the company will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, the company has suffered recurring losses
from operations that raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
PRICEWATERHOUSECOOPERS LLP
Vancouver, Canada
January 21, 2000
(except as to note 11 which is as at February 28, 2000)
F-2
<PAGE> 33
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Consolidated Balance Sheets
AS AT DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 2,108,167 --
Accounts receivable (note 4) 65,830 --
Sales tax recoverable (note 4) 173,519 --
Prepaid expenses (note 4) 231,460 --
---------- -------
2,578,976 --
OTHER ASSETS (note 4) 74,359 --
PROPERTY AND EQUIPMENT (note 4) 1,840,821 --
GOODWILL, NET OF ACCUMULATED AMORTIZATION OF $1,080,734 (note 3) 12,336,541 --
---------- -------
16,830,697 --
========== =======
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (note 4) 1,407,212 4,500
Due to related parties (note 5) 56,436 --
Deferred revenue 104,012 --
Current portion of obligation under capital lease (note 6) 13,318 --
---------- -------
1,580,978 4,500
OBLIGATION UNDER CAPITAL LEASE (note 6) 58,939 --
---------- -------
1,639,917 --
SHAREHOLDERS' EQUITY (DEFICIT)
CAPITAL STOCK
Authorized
1,000,000 (1998 - 10,000,000) preferred shares, $0.01 par value (note 8)
65,500,000 (1998 - 50,000,000) common shares, $0.01 par value
(1998 - $0.001) (note 8)
Issued
16,142,000 (1998 - 64,000,000) common shares 63,826 2,000
ADDITIONAL PAID-IN CAPITAL 20,372,653 53,230
WARRANTS ISSUED IN CONNECTION WITH PRIVATE PLACEMENTS (note 8) 2,552,751 --
SHARE SUBSCRIPTIONS (note 8) (125,000) --
DEFICIT (7,654,012) (59,730)
ACCUMULATED OTHER COMPREHENSIVE INCOME (19,438) --
---------- -------
15,190,780 (4,500)
---------- -------
16,830,697 --
========== =======
NATURE OF OPERATIONS AND BASIS OF PRESENTATION (note 1)
COMMITMENTS (note 6)
SUBSEQUENT EVENTS (note 11)
</TABLE>
APPROVED BY THE BOARD OF DIRECTORS
- --------------------------- ---------------------------
Director Director
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE> 34
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 7, 1990
(DATE OF
YEAR ENDED DECEMBER 31, INCORPORATION)
------------------------------- TO
DECEMBER 31,
1999 1998 1999
$ $ $
<S> <C> <C> <C>
SALES 132,051 -- 132,051
COST OF SALES 117,940 -- 117,940
---------- ------ ----------
GROSS PROFIT 14,111 -- 14,111
---------- ------ ----------
OPERATING EXPENSES
Stock based compensation 2,500,000 - 2,500,000
General and administrative 2,405,678 4,500 2,465,408
Marketing 1,427,549 - 1,427,549
Amortization of goodwill 1,080,734 - 1,080,734
Amortization of property and equipment 97,418 - 97,418
Research and development 97,014 - 97,014
---------- ------ ----------
7,608,393 4,500 7,668,123
---------- ------ ----------
LOSS FOR THE YEAR (7,594,282) (4,500) (7,654,012)
========== ====== ==========
BASIC AND FULLY DILUTED LOSS PER SHARE (0.22) (0.01)
========== ======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE> 35
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Consolidated Statement of Changes in Shareholders' Equity (Deficit)
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
WARRANTS ACCUMULATED
ISSUED IN OTHER TOTAL
COMMON STOCK ADDITIONAL CONNECTION COMPRE- SHAREHOLDERS'
-------------------- PAID IN WITH PRIVATE SHARE HENSIVE EQUITY
SHARES AMOUNT CAPITAL PLACEMENTS SUBSCRIPTIONS DEFICIT INCOME (DEFICIT)
$ $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 7, 1990 (DATE OF
INCORPORATION)
Issuance of 270,000 units
(consisting of one share
of common stock and one
warrant) 8,640,000 270 4,730 -- -- -- -- 5,000
LOSS FOR THE YEAR ENDED
DECEMBER 31, 1990 -- -- -- -- -- (12,368) -- (12,368)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1990 8,640,000 270 4,730 -- -- (12,368) -- (7,368)
Loss for the year ended
December 31, 1991 -- -- -- -- -- (5,877) -- (5,877)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1991 8,640,000 270 4,730 -- -- (18,245) -- (13,245)
Loss for the year ended
December 31, 1992 -- -- -- -- -- (9,391) -- (9,391)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1992 8,640,000 270 4,730 -- -- (27,636) -- (22,636)
Paid in capital arising on
cancellation of note to
shareholder -- -- 30,000 -- -- -- -- 30,000
Loss for the year ended
December 31, 1993 -- -- -- -- -- (5,846) -- (5,846)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1993 8,640,000 270 34,730 -- -- (33,482) -- 1,518
Loss for the year ended
December 31, 1994 -- -- -- -- -- (6,600) -- (6,600)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1994 8,640,000 270 34,730 -- -- (40,082) -- (5,082)
Loss for the year ended
December 31, 1995 -- -- -- -- -- (4,418) -- (4,418)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1995 8,640,000 270 34,730 -- -- (44,500) -- (9,500)
Loss for the year ended
December 31, 1996 -- -- -- -- -- (3,500) -- (3,500)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1996 8,640,000 270 34,730 -- -- (48,000) -- (13,000)
Stock issued for officer
and director fees 7,360,000 230 -- -- -- -- -- 230
Loss for the year ended
December 31, 1997 -- -- -- -- -- (7,230) -- (7,230)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1997 16,000,000 500 34,730 -- -- (55,230) -- (20,000)
Shares issued to officer
for management services 48,000,000 1,500 18,500 -- -- -- -- 20,000
Loss for the year ended
December 31, 1998 -- -- -- -- -- (4,500) -- (4,500)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1998 64,000,000 2,000 55,230 -- -- (59,730) -- (4,500)
Cancellation of shares
issued to officer for
cancellation of debt in
June 1998 (note 8) (48,000,000) (1,500) 1,500 -- -- -- -- --
Cancellation of shares to
sole officer (note 8) (6,210,000) (194) 194 -- -- -- -- --
Acquisition of SUM Media
Corp. (note 8) 3,200,000 32,000 12,968,000 -- -- -- -- 13,000,000
Private placement #1
(note 8) 1,000,000 10,000 645,480 344,520 -- -- -- 1,000,000
Stock based compensation
(note 8) -- -- 1,000,000 -- -- -- -- 1,000,000
Stock based compensation
(note 8) -- -- 750,000 750,000 -- -- -- 1,500,000
Private placement #2
(note 8) 500,000 5,000 1,221,344 273,656 -- -- -- 1,500,000
Private placement #3
(note 8) 500,000 5,000 1,221,344 273,656 (125,000) -- -- 1,375,000
Private placement #4
(note 8) 1,000,000 10,000 2,156,146 773,854 -- -- -- 2,940,000
Private placement #5
(note 8) 100,000 1,000 228,522 95,478 -- -- -- 325,000
Private placement #6
(note 8) 31,000 310 79,639 20,801 -- -- -- 100,750
Private placement #7
(note 8) 21,000 210 47,254 20,786 -- -- -- 68,250
Foreign currency
translation adjustment -- -- -- -- -- -- (19,438) (19,438)
Loss for the year -- -- -- -- -- (7,594,282) -- (7,594,282)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
Total comprehensive income -- -- -- -- -- -- -- (7,613,720)
----------- ------ ---------- ------------ ------------ ---------- ----------- -------------
BALANCE - DECEMBER 31, 1999 16,142,000 63,826 20,372,653 2,552,751 (125,000) (7,654,012) (19,438) 15,190,780
=========== ====== ========== ============ ============ ========== =========== =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 36
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 7, 1990
(DATE OF
INCORPORATION)
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------- ----------------
1999 1998 1999
$ $ $
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the year (7,594,282) (4,500) (7,654,012)
Adjustments to reconcile loss for the year to net cash used in
operating activities
Stock based compensation 2,500,000 -- 2,500,000
Amortization of property and equipment and goodwill 1,178,152 -- 1,178,152
Changes in non-cash working capital items
Accounts receivable (61,672) -- (61,672)
Sales tax recoverable (144,588) -- (144,588)
Prepaid expenses (223,228) -- (223,228)
Accounts payable and accrued liabilities 1,288,708 4,500 1,293,208
Deferred revenue (25,100) -- (25,100)
---------- ------ ----------
(3,082,010) -- (3,137,240)
---------- ------ ----------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Proceeds from issuance of common shares 7,309,000 -- 7,364,230
Due to related parties (741,100) -- (741,100)
Repayment of capital lease obligations (5,066) -- (5,066)
---------- ------ ----------
6,562,834 -- 6,618,064
---------- ------ ----------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Other Assets 4,714 -- 4,714
Purchase of property and equipment (1,558,017) -- (1,558,017)
Cash acquired on acquisition of SUM Media Corp. 212,591 -- 212,591
---------- ------ ----------
(1,340,712) -- (1,340,712)
---------- ------ ----------
FOREIGN EXCHANGE EFFECT ON CASH (31,945) -- (31,945)
---------- ------ ----------
INCREASE IN CASH AND CASH EQUIVALENTS BEING CASH AND CASH
EQUIVALENTS - END OF YEAR 2,108,167 -- 2,108,167
========== ====== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 37
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
THE COMPANY
SUMmedia.com Inc. (the "company" or "SUMmedia.com") is an Internet media
and marketing company that provides online coupons for small and medium
sized businesses through its portal, savingumoney.com. The company's
business consists of providing Internet marketing initiatives including
coupons, advertising banners, discount shopping and website design and
hosting, as well as selling exclusive regional rights to market the
company's products. For the year ended December 31, 1999, the majority of
the company's customers were located in Canada.
The company was incorporated on December 7, 1990, under the laws of the
State of Delaware as Pursuit Ventures Corporation ("Pursuit"). Under a Plan
and Agreement of Merger dated August 21, 1998, Pursuit merged with
Remington Assets Limited, a Colorado corporation that was incorporated on
March 20, 1997. Under the terms of the Agreement of Merger, Pursuit became
the surviving company. Effective September 8, 1998, Pursuit changed its
name to Reliance Resources Inc. ("Reliance"). In June 1999, Reliance
completed a 1:32 forward stock split. These consolidated financial
statements have been presented on a post stock split basis (note 8).
On August 6, 1999, Reliance entered into a share exchange agreement with
SUM Media Corp. (formerly E-Com Media Corp.), a British Columbia, Canada
company. Pursuant to the terms of the agreement, Reliance issued 3,200,000
common shares to acquire 100% of the issued and outstanding shares of SUM
Media Corp. (note 3). On August 25, 1999, Reliance changed its name to
SUMmedia.com Inc.
GOING CONCERN
The company has not yet generated significant revenues and has no assurance
of future profitability. Even if marketing efforts are successful,
substantial time may pass before profitability will be achieved. During
this time, the company will require additional financing. The company has
losses from operations that raise substantial doubt about its ability to
continue as a going concern.
These audited consolidated financial statements have been prepared on the
basis of accounting principles applicable to a going concern which assumes
the realization of assets and discharge of liabilities in the normal course
of business. The company is in discussions with financing institutions with
respect to securing equity financing. However, there are no assurances that
the company will be successful in closing such financing transactions.
The company's ability to continue as a going concern is dependent upon
obtaining additional financing and upon its ability to attain profitable
operations. These consolidated financial statements do not give effect to
any adjustments that would be necessary should the company not be able to
continue as a going concern.
(1)
F-7
<PAGE> 38
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
Development stage
The company's activities, subsequent to its acquisition of SUM Media Corp.,
have primarily consisted of establishing facilities, recruiting personnel,
conducting research and development, developing business and financial
plans and raising capital. Accordingly, the company is considered to be in
the development stage. The accompanying financial statements should not be
regarded as typical for a normal operating period. Prior to its acquisition
of SUM Media Corp., the company was inactive incurring only general and
administrative expenses.
2 SIGNIFICANT ACCOUNTING POLICIES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States.
BASIS OF CONSOLIDATION
These consolidated financial statements include the accounts of the company
and its wholly-owned Canadian subsidiary, SUM Media Corp. All significant
intercompany balances and transactions have been eliminated on
consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires the company's
management to make estimates and assumptions which affect the amounts
reported in these financial statements and the notes thereto. Actual
results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The company's principal operations are carried out by its Canadian
subsidiary. The functional currency of the Canadian subsidiary is the
Canadian dollar. Assets and liabilities denominated in a currency other
than the U.S. dollar are translated into U.S. dollars using period end
exchange rates and revenues and expenses denominated in other than the U.S.
dollar are translated using average exchange rates for the period.
Translation gains and losses are deferred and accumulated as a separate
component of comprehensive income in shareholders' equity (deficit). Net
gains and losses resulting from foreign exchange transactions are included
in the consolidated statement of operations.
(2)
F-8
<PAGE> 39
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on deposit and highly liquid
short-term interest bearing securities with maturities at the date of
purchase of three months or less. Interest earned is recognized immediately
in the consolidated statement of operations.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the company to a significant
concentration of credit risk consist primarily of cash and cash
equivalents, accounts receivable and sales tax recoverable which are not
collateralized. The company limits its exposure to credit loss by placing
its cash and cash equivalents with high credit quality financial
institutions. Concentrations of credit risk with respect to accounts
receivable are considered to be limited due to the low average billing and
large number of customers comprising the company's customer base. The
company performs ongoing credit evaluations of its customers financial
condition to determine the need for an allowance for doubtful accounts. The
company has not experienced significant credit losses to date.
Concentrations of credit risk with respect to sales tax recoverable are
considered to be limited as these amounts are owed to the company by a
branch of Canadian Federal Government.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The company's financial instruments, including cash and cash equivalents,
accounts receivable, sales tax recoverable, accounts payable and accrued
liabilities, due to related parties and obligations under capital lease are
carried at cost, which approximates their fair value.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated amortization.
Property and equipment are amortized on a straight line basis over their
estimated useful lives as follows:
Software 1 to 5 years
Computer equipment 2 years
Leased automobile 3 years
Office equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements the remaining lease term
Software includes operating systems development programs, financial systems
and the company's website system. The company capitalizes certain
expenditures on software used in its operations in accordance with
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use".
(3)
F-9
<PAGE> 40
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
IMPAIRMENT OF LONG-LIVED ASSETS
The company evaluates the recoverability of long-lived assets in accordance
with Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" ("SFAS"). SFAS No. 121 requires recognition of impairment of
long-lived assets in the event the net book value of such assets exceeds
the future undiscounted cash flows attributable to such assets.
GOODWILL
Goodwill, which is the excess of the purchase price of the company's
interest in its subsidiary over the fair value of the underlying assets
acquired and liabilities assumed on the acquisition, is amortized on a
straight-line basis over five years. Periodically, management reviews the
carrying value of goodwill by considering the expected undiscounted future
cash flows of the related business. Permanent impairments in the value of
the unamortized portion of goodwill are written down and charged to the
consolidated statement of operations in the periods in which the impairment
is determined.
REVENUE RECOGNITION
Revenues from the placement of customers' online coupons and advertising
banners on the company's website for fixed or determinable fees are
recognized rateably over the period of the contract unless collection is
not reasonably assured in which case revenues are recognized when cash
payments are received. Revenues related to the design and production of a
customer's website are recognized at the time the customer has accepted the
completed website and collection is reasonably assured. Revenues related to
hosting customers' websites are recognized rateably over the period of the
contract unless collection is not reasonably assured in which case revenues
are recognized when cash payments are received. Revenues from regional
exclusivity fees for the exclusive right to market the company's products
in predefined regions are recognized when the initial set-up and training
services are completed and the company is satisfied all significant
obligations in accordance with the terms of the arrangement have been met
and collectibility of the related fees is reasonably assured. To the extent
that uncertainties exist in connection with the company's obligations
related to regional exclusivity fees, the company only records revenues to
the extent of costs incurred. In such circumstances, amounts received in
excess of revenue recognized are included in deferred revenue.
ADVERTISING EXPENSE
The company recognizes advertising costs in accordance with Statement of
Position ("SOP") 93-7 "Reporting on Advertising Costs." As such the company
expenses the cost of producing advertisements at the time production
occurs, and expenses the cost of communicating advertising in the period in
which the advertising space or airtime is used. Advertising expenses
totalled $nil, and $866,441 during the years ended December 31, 1998 and
1999, respectively.
(4)
F-10
<PAGE> 41
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
STOCK BASED COMPENSATION
The company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees", ("APB No. 25") and complies
with the disclosure provisions of Statement of Financial Accounting
Standard No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). Under APB No. 25, compensation expense is recognized based on the
difference, if any, on the date of grant between the estimated fair value
of the company's stock and the amount an employee must pay to acquire the
stock. Compensation expense is recognized immediately for past services and
rateably for future services over the option vesting period.
The company accounts for equity instruments issued in exchange for the
receipt of goods or services from other than employees in accordance with
SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force
in Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring or in Conjunction with Selling, Goods or
Services" (EITF 96-18). Costs are measured at the estimated fair market
value of the consideration received or the estimated fair value of the
equity instruments issued, whichever is more reliably measurable. The value
of equity instruments issued for consideration other than employee services
is determined on the date on which there first exists a firm commitment for
performance by the provider of goods or services as defined by EITF 96-18.
For purposes of valuing the company's stock-based compensation
transactions, the company uses the market price of its common shares, as
quoted on the OTC-bulletin board, on the measurement date for the
applicable transaction.
INCOME TAXES
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current
period and deferred tax liabilities and assets for future tax consequences
of events that have been recognized in the company's financial statements
or tax returns. The measurement of current and deferred tax liabilities and
assets are based on provisions of enacted tax laws; the effects of future
changes in tax laws or rates are not anticipated. The measurement of
deferred tax assets is reduced, if necessary, by a valuation allowance,
where, based on available evidence, the probability of realization of the
deferred tax asset does not meet a more likely than not criterion.
LOSS PER COMMON SHARE
Loss per share computations are in accordance with SFAS No. 128, "Earnings
Per Share" and Staff Accounting Bulletin ("SAB") No. 98. Basic net loss per
share is computed using the weighted average number of common shares
outstanding, after giving retroactive effect to the 1:32 forward stock
split, as described in note 1. Diluted loss per share is computed using the
weighted average number of common and potentially dilutive shares
outstanding.
(5)
F-11
<PAGE> 42
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
COMPREHENSIVE INCOME
Comprehensive income is defined as the change in equity from transactions
and other events and circumstances other than those resulting from
investments by owners and distributions to owners. Comprehensive income
consists of net income and other comprehensive income. The accumulated
balance of other comprehensive income is included in the equity section of
the balance sheet. The company's other comprehensive income consists of
foreign exchange translation adjustments.
SEGMENT INFORMATION
The company identifies its operating segments based on business activities,
management responsibility and geographical location. During the year ended
December 31, 1999, the company operated within a single operating segment,
being online couponing services, and operated in only one geographic area,
being Canada. In addition, substantially all of the company's assets are
located in Canada and substantially all of its revenues are earned in
Canada.
RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP98-1"). SOP98-1
provides guidance for determining whether computer software is internal-use
software and accounting for the proceeds of computer software originally
developed or obtained for internal use and then subsequently sold to the
public. It also provides guidance on capitalization of the costs incurred
for computer software developed or obtained for internal use. The
disclosures prescribed by SOP98-1 are effective for the year ended December
31, 1999 consolidated financial statements. The adoption of SOP98-1 did not
have a material impact on the company's consolidated financial statements.
The company adopted the American Institute of Certified Public Accountants'
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
(SOP 98-5) effective January 1, 1999. SOP 98-5 requires that all start-up
costs be expensed and that the effect of adopting SOP 98-5 be reported as
the cumulative effect of a change in accounting principle. The adoption of
SOP 98-5 did not have a material impact on the company's consolidated
financial statements.
In June 1998, the FASB issued Statement Number 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
establishes accounting and reporting standards for derivative instruments,
embedded in other contracts, and for hedging activities. It requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. The accounting for changes in fair value of the derivative depends
on the intended use of the derivative and the resulting designation. The
company does not expect that the adoption of SFAS 133 will have a material
impact on its consolidated financial statements.
(6)
F-12
<PAGE> 43
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
3 ACQUISITION
On August 6, 1999, the company acquired 100% of the issued and outstanding
shares of SUM Media Corp. (formerly E-Com Media Corp.), a British Columbia,
Canada company, in exchange for 3,200,000 common shares of the company. The
acquisition has been accounted for using the purchase method, whereby the
value of the consideration given has been allocated to the assets and
liabilities of SUM Media Corp. based on their estimated fair values. The
value of consideration given by the company of $13,000,000 was based on the
quoted market price of the company's common stock on the OTC-bulletin board
on the date the terms of the acquisition were agreed to including an
allocation of acquisition costs of $1,000,000 (note 8). The results of
operations of SUM Media Corp. have been included in these consolidated
financial statements from the date of acquisition. The net assets acquired
and consideration given are as follows:
<TABLE>
<CAPTION>
$
<S> <C>
Net assets acquired at fair value on acquisition
Current assets acquired 240,065
Non-current assets acquired 399,008
Current liabilities assumed (210,344)
Non-current liabilities assumed (846,004)
Goodwill 13,417,275
------------
13,000,000
------------
Total consideration in common shares including allocation
of acquisition costs of $1 million (note 8) 13,000,000
============
Cash acquired 212,519
============
</TABLE>
4 BALANCE SHEET COMPONENTS
ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
$
<S> <C>
Trade receivables 74,042
Less: Allowance for doubtful accounts (11,133)
Other 2,921
------------
65,830
============
</TABLE>
(7)
F-13
<PAGE> 44
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
SALES TAX RECOVERABLE
Sales tax recoverable relates to Canadian Goods and Services Taxes paid by
the company's Canadian subsidiary, SUM Media Corp., on purchases of goods
and services for operations.
PREPAID EXPENSES
Prepaid expenses relate primarily to monthly fees paid in advance for
product support, maintenance and upgrades of the company's enterprise
business system.
OTHER ASSETS
Other assets consist primarily of security deposits related to the
company's leased offices. Also included is a deposit in the amount $31,317
that the company is required to maintain as a condition under an office
sublease. The deposit may be accessed by the sublandlord in the event the
company defaults on a lease payment. The deposit must be maintained by the
company for the duration of the sublease period which expires in July 2003.
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
ACCUMULATED
COST AMORTIZATION NET
$ $ $
<S> <C> <C> <C>
Software 1,251,266 24,868 1,226,398
Computer equipment 417,152 75,223 341,929
Leased automobile 107,107 11,353 95,754
Office equipment 63,130 2,930 60,200
Furniture and fixtures 54,113 2,141 51,972
Leasehold improvements 66,546 1,978 64,568
---------- ------------ ----------
1,959,314 118,493 1,840,821
========== ============ ==========
</TABLE>
Software for the year ended December 31, 1999 includes $1,106,720 related
to the purchase of licences for an enterprise business system. No
amortization has been recorded for the year ended December 31, 1999
(1998 - $nil) related to the enterprise business system as it was not
available for use as at December 31, 1999.
For the period from December 7, 1990 (date of incorporation) to December
31, 1998, the company did not own property and equipment.
(8)
F-14
<PAGE> 45
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
$
<S> <C>
Trade accounts payable 1,268,991
Vacation accrual 43,061
Employee payroll deductions 95,160
---------
1,407,212
=========
</TABLE>
5 RELATED PARTY TRANSACTIONS
During the year ended December 31, 1999, two shareholders advanced the
company $56,436 (1998 - $nil). The advances are unsecured, non-interest
bearing, and without stated terms of repayment.
The company incurred $133,458 for management consulting and related
services to a company controlled by a significant shareholder of the
company during the year ended December 31, 1999 (1998 - $nil). This
amount has been included in general and administrative expenses.
6 COMMITMENTS
a) The company has the following annual commitments for the rental of
office premises under the terms of operating leases:
<TABLE>
<CAPTION>
$
<S> <C>
2000 305,097
2001 305,097
2002 305,750
2003 237,742
2004 110,977
---------
1,264,663
=========
</TABLE>
Office lease payments for the year ended December 31, 1999 of $132,700
were included in general and administrative costs.
(9)
F-15
<PAGE> 46
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
b) The company has the following annual lease commitments for the company
automobile under the terms of a capital lease:
<TABLE>
<CAPTION>
CAPITAL
$
<S> <C>
2000 19,114
2001 19,114
2002 19,114
2003 29,650
---------
86,992
Amount representing interest (14,735)
---------
72,257
Less: Current portion (13,318)
---------
58,939
=========
</TABLE>
c) During November 1999, the company entered into an agreement with
Oracle Corporation Canada Inc. ("Oracle") for the purchase and
implementation of Oracle's enterprise business system software. Under
the terms of the agreement, the company agreed to purchase licences,
support, education and consulting services totalling $1,708,000. As at
December 31, 1999, the company had remaining commitments of
approximately $400,000. Also, under the terms of the agreement, the
company is to receive $104,000 related to advertising on the company's
website. The company is recognizing these revenues as the underlying
services are provided. As at December 31, 1999, the company recognized
revenue of $9,000 related to this agreement.
d) During December 1999, the company entered into an agreement with a
computer hardware manufacturer to purchase $410,000 of computer
equipment and consulting services. As at December 31, 1999, the
company has not received any of the computer equipment or related
consulting services and has not paid any amounts. Also, under the
terms of the agreement, the company is to receive $46,000 related to
advertising on the company's website. The company is recognizing these
revenues as the underlying services are provided. As at December 31,
1999, the company has not recognized any revenues related to this
agreement.
7 INCOME TAXES
The company is subject to U.S. federal and Colorado State income taxes in
the U.S. and Canadian federal, and Ontario and British Columbia provincial
taxes in Canada.
At December 31, 1999, the company has net operating loss carryforwards of
approximately $3,806,000, arising from Canadian operations, available to
reduce future Canadian taxable income and approximately $299,000, arising
from U.S. operations available to reduce future U.S. taxable income. The
Canadian losses expire in
(10)
F-16
<PAGE> 47
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
2006 and the U.S. losses expire in 2019. The potential benefits relating to
these losses have not been recognized in these consolidated financial
statements.
Net deferred tax assets are composed of the following:
<TABLE>
<CAPTION>
1999
$
<S> <C>
Net operating loss carryforwards 1,834,000
Gross deferred tax assets 992,000
Deferred tax asset valuation allowance (2,826,000)
----------
Net deferred tax assets --
==========
</TABLE>
Based on a number of factors including, the lack of a history of profits,
management believes that there is sufficient uncertainty regarding the
realization of deferred tax assets such that a full valuation allowance has
been provided.
The income tax provision for the year ended December 31, 1999, differs from
the amount obtained by applying the applicable statutory income tax rates
to loss before income taxes as follows:
<TABLE>
<CAPTION>
$
<S> <C>
Statutory income tax rate 40.72%
Income tax recovery based on the statutory rate (3,092,000)
Non-deductible expenses 530,000
Differences from statutory rate relating to tax effect
of loss benefits which have been recorded 2,562,000
----------
--
==========
</TABLE>
8 CAPITAL STOCK
COMMON SHARES
Holders of common shares are entitled to one vote per share on all matters
submitted to a vote of the shareholders of the company. Subject to
preferences that may apply to preferred shares outstanding, the holders of
common shares are entitled to receive dividends out of assets legally
available at such time and in such amounts as the Board of Directors may
from time to time determine. Upon the occurrence of a liquidation,
dissolution or winding up of the assets of the company, the holders of
common shares will be entitled to share rateably in the distribution of all
assets remaining available for distribution after satisfaction of all
liabilities and the payment of any liquidation preference on any
outstanding preferred shares.
(11)
F-17
<PAGE> 48
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
As at December 31, 1998, the authorized common shares of the company
consisted of 50,000,000 common shares with a par value of $0.001 of which
2,000,000 common shares were issued and outstanding and 10,000,000
preferred shares of which none were issued and outstanding. Pursuant to a
June 4, 1999 Board of Directors resolution, the sole director and officer
of the company agreed to the cancellation of 1,500,000 shares previously
issued as compensation for management services. On June 16, 1999, the Board
of Directors passed a resolution to adopt a forward stock split at a ratio
of 1:32 with the effect that the total issued and outstanding shares
increased to 16,000,000. Concurrently, the sole director and officer of the
company executed a formal waiver of the right to receive 6,210,000
post-split shares. As a result, the number of issued and outstanding shares
then totalled 9,790,000. The forward stock split has been applied
retroactively to all periods presented.
On June 24, 1999, the company's Articles of Incorporation were amended to
increase the company's authorized common shares to 65,500,000 shares,
decrease the company's authorized preferred shares to 1,000,000 shares and
increase the company's common share par value to $0.01.
PREFERRED SHARES
All series of preferred shares shall be alike except that there may be
variations, as determined by the Board of Directors, as to:
a) right of dividend;
b) terms, conditions, and price of redemption;
c) amounts payable upon either voluntary and/or involuntary liquidation;
d) sinking fund provisions, if any, for the call or redemption of the
shares;
e) terms and conditions of conversion, if any; and
f) voting rights consistent with Colorado law.
Before issuing any shares of a class or series, the preferences,
limitations and relative rights of which are determined by the Board of
Directors, the company shall deliver to the Colorado Secretary of State
appropriate Articles of Amendment, as required by law.
As at December 31, 1999, no preferred shares were issued and outstanding.
(12)
F-18
<PAGE> 49
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
PRIVATE PLACEMENTS
ISSUE CASH PROCEEDS WARRANT
PRICE PER AND SHARE EXERCISE WARRANT
EQUITY UNIT SUBSCRIPTIONS PRICE EXPIRY FROM
DATE OF ISSUANCE UNITS* $ $ $ ISSUANCE DATE
(000's)
<S> <C> <C> <C> <C> <C>
August 1999 1,000,000 1.00(i) 1,000 3.00 24 months
September 1999 500,000 3.00(ii) 1,500 4.50 12 months
September 1999 500,000 3.00 1,500 4.50 12 months
December 1999 1,000,000 3.00(iii) 3,000 5.00 12 months
December 1999 100,000 3.25 325 4.25 12 months
December 1999 31,000 3.25 101 4.00 12 months
December 1999 21,000 3.25 68 4.00 12 months
</TABLE>
(*) Equity units are comprised of one common share plus one share purchase
warrant
i) In conjunction with the acquisition of SUM Media Corp. (note 3)
on August 6, 1999 (the "Acquisition"), the following
transactions occurred concurrently with the Acquisition.
Tigerlily Financial Inc. ("Tigerlily") and Cambridge Asset
Holdings S.A. ("Cambridge"), consultants to the companies in
arranging the transaction, each acquired 1,125,000 common shares
of SUM Media Corp. for nominal consideration from two
significant shareholders. These common shares were immediately
exchanged for a total of 800,000 common shares of the company
pursuant to the Acquisition. Tigerlily and Cambridge invested a
total of $1,000,000 in the company for 1,000,000 units
consisting of one common share and one share purchase warrant
entitling the holder to purchase one common share at a price of
$3 per share for a period of 24 months. These units were
transferred by Tigerlily and Cambridge to two significant
shareholders of the company who were officers and directors of
the company. Based on these facts, the Company recorded an
issuance of 800,000 common shares to Tigerlily and Cambridge for
cash proceeds of $1,000,000. The fair value of the 800,000
common shares, based on the quoted market value of the Company's
stock on the OTC bulletin board of $3.75 per share at the time
the private placement was announced, exceeded the proceeds
received by the Company by $2,000,000. Of this amount $1,000,000
has been allocated as a direct cost of the Acquisition and the
remaining $1,000,000 has been recorded as stock based
compensation related to other services provided to the Company
and its shareholders prior to the Acquisition. The two
significant shareholders effectively received the remaining
200,000 common shares and 1,000,000 share purchase warrants
which have been recorded as stock based compensation expense in
the amount of $1,500,000.
ii) At December 31, 1999, $125,000 has not been received and
recorded as subscriptions receivable.
iii) Consists of three separate private placements completed
concurrently. In conjunction with these private placements, the
company issued 159,900 options entitling the holder to purchase
one common share at a price of $3 per share. The options expire
September 9, 2002. The exercise price for the options granted
was equal to the market value of the underlying stock quoted on
the OTC-bulletin board at the date of grant. The company also
incurred finders' fees of $60,000 related to these private
placements.
<TABLE>
<CAPTION>
WARRANTS
NUMBER OF EXERCISE PRICE
EXPIRY DATE COMMON SHARES $
<S> <C> <C>
September 2000 1,000,000 4.50
December 2000 1,000,000 5.00
December 2000 100,000 4.25
December 2000 52,000 4.00
August 2001 1,000,000 3.00
September 2002 159,900 3.00
</TABLE>
(13)
F-19
<PAGE> 50
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
STOCK OPTION PLAN
In October 1999, the company's Board of Directors adopted the 1999 Stock
Option Plan (the "Plan"). The Plan provides for the issuance of up to 20%
of the issued and outstanding common shares of the company in connection
with incentive and non-statutory stock option awards granted to employees,
directors and consultants to the company. Options will be issued in
amounts in accordance with terms and conditions as determined by the
company's Board of Directors. The stock option plan is subject to
regulatory shareholder approval.
A summary of activity under the plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
COMMON PER SHARE
SHARES $
<S> <C> <C>
Balance - January 1, 1999 -- --
Granted November 4, 1999 2,339,000 3.12
Granted November 4, 1999 (a) 483,000 3.44
---------- ------------
Balance - December 31, 1999 2,822,000 3.12 - 3.44
========== ============
</TABLE>
(a) These options were issued to shareholders/officers holding more
than 10% of total issued capital at the grant date. As such, the
option exercise price was set at a 10% premium to the market
value on that day pursuant to the terms of the stock option
plan.
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS OPTIONS EXERCISABLE
------------------------------------------------------ -----------------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER OF WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1999 LIFE PRICE 1999 PRICE
$ $
<S> <C> <C> <C> <C> <C>
$3.12 - $3.44 2,822,000 10 years 3.17 677,280 3.17
</TABLE>
Of the options granted during the year, 593,280 vested immediately, an
additional 988,800 vest November 4, 2000 and the remainder vest equally
over the following twelve months. Once vested, the options may be
exercised for a period of up to ten years from the date of grant. The
exercise price for the options granted approximated the market value of
the underlying stock quoted on the OTC-bulletin board at the date of
grant.
(14)
F-20
<PAGE> 51
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
STOCK-BASED COMPENSATION
The company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees". This method recognizes
compensation cost as the amount by which the fair value of the stock
exceeds the exercise price at the date of grant.
Had the company determined compensation costs based on fair value at the
date of grant for its awards under a method prescribed by Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-based
Compensation" the company's loss and loss per share would be as follows:
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>
Loss for the period (7,594,282) (4,500)
Additional compensation expense (3,539,852) --
-------------- ------------
Pro forma loss for the period (11,134,134) (4,500)
============== ============
Pro forma basic and fully diluted loss per share (0.32) --
============== ============
</TABLE>
The pro forma compensation expense reflected above has been estimated
using the Black-Scholes option-pricing model. Assumptions used in the
pricing model included:
a) risk free interest rate of 5.9%,
b) expected volatility of 80%;
c) expected dividend yield of nil; and
d) an estimated average life of two years.
9 REGIONAL EXCLUSIVITY FEES
During the year ended December 31, 1999, revenue of $46,756 (1998 - $nil)
from regional exclusivity fees was recognized, and offset by a
corresponding amount of cost of sales related to the sale of marketing
rights in three regions.
(15)
F-21
<PAGE> 52
SUMmedia.com INC.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Consolidated Financial Statements
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
10 SUPPLEMENTAL CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 7,
1990 (INCEPTION
OF DEVELOPMENT
STAGE) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999
$ $ $
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes -- -- --
Cash paid for interest 4,794 -- 4,794
SUPPLEMENTAL NON-CASH INVESTING AND
FINANCING ACTIVITIES
Issuance of common shares for acquisition of
SUM Media Corp. 12,000,000 -- 12,000,000
Stock based compensation 2,500,000 -- 2,500,000
Share subscriptions receivable 125,000 -- 125,000
</TABLE>
4 SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the company:
a) Received proceeds of $479,700 and issued 159,900 common shares related to
the exercise of 159,900 options.
b) Completed a $4,000,000 private placement, with a publication company, of
1,000,000 units, whereby each unit consists of one common share and one
share purchase warrant. Each warrant allows the holder to purchase one
common share for $6.00 per share for a period of 12 months. Concurrent
with the receipt of these proceeds, the company paid $4,000,000, to the
publication company, for advertising services to be provided in fiscal
2000.
c) Completed a $1,001,000 private placement of 308,000 units, each unit
consisting of one common share and one share purchase warrant. Each
warrant allows the holder to purchase one common share for $4.25 for a
period of 12 months.
d) Completed a $3,675,000 private placement of 700,000 units, each unit
consisting of one common share and one share purchase warrant. Each
warrant allows the holder to purchase one common share for $7.00 for a
period of 12 months.
e) Completed a $105,000 private placement of 20,000 units, each unit
consisting of one common share and one share purchase warrant. Each
warrant allows the holder to purchase one common share for $7.00 for a
period of 12 months.
f) Granted 50,000 stock options to directors of the company. These stock
options have an exercise price of $5.25 and expire in February of 2010.
g) Was notified of a legal action which was filed against the company by
a former officer and director of the company for unfair dismissal. The
amount and timing of any potential claim cannot be reasonably estimated at
this time.
(16)
F-22
<PAGE> 53
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Financial Statements
AUGUST 6, 1999
(expressed in U.S. dollars)
F-23
<PAGE> 54
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
SUM MEDIA CORP.
In our opinion, the accompanying statements of operations, cash flows and
shareholders' equity (deficit), present fairly, in all material respects, the
results of SUM MEDIA CORP.'S (formerly E-Com Media Corp.) operations and its
cash flows for the period from March 23, 1999 (date of incorporation) to August
6, 1999 in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States, which required that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
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 suffered a loss from operations that
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
PRICEWATERHOUSECOOPERS LLP
Vancouver, Canada
January 21, 2000
F-24
<PAGE> 55
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Statement of Operations
FOR THE PERIOD FROM MARCH 23, 1999 (DATE OF INCORPORATION) TO AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
$
<S> <C>
SALES (note 3) 16,515
COST OF SALES 8,574
-----------
GROSS PROFIT 7,941
-----------
OPERATING EXPENSES
Stock based compensation 2,581,031
General and administrative 258,980
Marketing 204,509
Amortization of property and equipment 17,754
-----------
3,062,274
-----------
LOSS FOR THE PERIOD (3,054,333)
===========
</TABLE>
SUBSEQUENT EVENT (note 1)
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 56
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Statement of Cash Flows
FOR THE PERIOD FROM MARCH 23, 1999 (DATE OF INCORPORATION) TO AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
$
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Loss for the period (3,054,333)
Adjustments to reconcile loss for the period to net cash used in
operating activities
Amortization of property and equipment 17,754
Stock based compensation 2,581,031
Changes in non-cash working capital
Accounts receivable (2,266)
Sales tax recoverable (23,874)
Prepaid expenses (1,605)
Accounts payable and accrued liabilities 73,322
Deferred revenue 125,646
-----------
(284,325)
-----------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Proceeds from issuance of common shares 59,749
Loan from SUMmedia.com Inc. (note 4) 524,429
Due to related parties 268,987
Repayment of capital lease obligations including initial deposit (23,425)
-----------
829,740
-----------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Other assets (76,647)
Purchases of property and equipment (245,659)
-----------
(322,306)
-----------
FOREIGN EXCHANGE EFFECT ON CASH (10,518)
-----------
INCREASE IN CASH AND CASH EQUIVALENTS BEING CASH AND CASH EQUIVALENTS - END OF
PERIOD 212,591
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 57
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Statement of Shareholders' Equity (Deficit)
FOR THE PERIOD FROM MARCH 23, 1999 (DATE OF INCORPORATION) TO AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER TOTAL
------------------------------ COMPRE- SHAREHOLDERS'
HENSIVE EQUITY
SHARES AMOUNT DEFICIT INCOME (DEFICIT)
------------ ------------ ------------ ------------ -------------
$ $ $ $
<S> <C> <C> <C> <C> <C>
BALANCE - MARCH 23, 1999 -- -- -- -- --
Issuance of 9,000,001 common shares for
Cdn. $0.01 cash per share 9,000,001 59,749 -- -- 59,749
Stock-based compensation (note 7) -- 2,581,031 -- -- 2,581,031
Foreign currency translation adjustment -- -- -- (3,722) (3,722)
Loss for the period -- -- (3,054,333) -- (3,054,033)
------------ ------------ ------------ ------------ ------------
Total comprehensive income -- -- -- -- (3,058,055)
------------ ------------ ------------ ------------ ------------
BALANCE - AUGUST 6, 1999 9,000,001 2,640,780 (3,054,333) (3,772) (417,275)
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 58
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Notes to Financial Statements
AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
THE COMPANY
SUM Media Corp. (the "company" or "SUM Media") is an Internet media and
marketing company that provides online coupons for small and medium sized
businesses through its portal, savingumoney.com. The company's business
consists of providing Internet marketing initiatives including coupons,
discount shopping and website design and hosting, as well as selling
exclusive regional rights to market the company's products. For the period
ended August 6, 1999, the majority of the company's customers were located
in Canada.
The company was incorporated on March 23, 1999, as E-Com Media Corp. under
the laws of the Province of British Columbia, Canada and on March 26, 1999
changed its name to SUM Media Corp. On August 6, 1999, SUM Media entered
into a share exchange agreement with Reliance Resources Inc. ("Reliance"),
a Colorado company, quoted on the OTC-bulletin board. Pursuant to the
terms of the agreement, Reliance issued 3,200,000 common shares to acquire
100% of the issued and outstanding shares of SUM Media. Subsequent to the
share exchange, Reliance changed its name to SUMmedia.com Inc. ("SUM").
GOING CONCERN
The company has not yet generated significant revenues and has no
assurance of future profitability. Even if marketing efforts are
successful, substantial time may pass before profitability will be
achieved. During this time, the company will require additional financing.
The company has losses from operations that raise substantial doubt about
its ability to continue as a going concern.
These audited financial statements have been prepared on the basis of
accounting principles applicable to a going concern which assume the
realization of assets and discharge of liabilities in the normal course of
business. The company is in discussions with financing institutions with
respect to securing equity financing. However, there are no assurances
that the company will be successful in closing such financing
transactions.
The company's ability to continue as a going concern is dependent upon
obtaining additional financing through its parent company or otherwise and
upon its ability to attain profitable operations. These financial
statements do not give effect to any adjustments that would be necessary
should the company not be able to continue as a going concern.
DEVELOPMENT STAGE
The company's activities since incorporation on March 23, 1999, have
primarily consisted of establishing facilities, recruiting personnel,
conducting research and development and developing business and financial
plans. Accordingly, the company is considered to be in the development
stage. The accompanying financial statements should not be regarded as
typical for a normal operating period.
(1)
F-28
<PAGE> 59
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Notes to Financial Statements
AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
2 SIGNIFICANT ACCOUNTING POLICIES
GENERALLY ACCEPTED ACCOUNTING POLICIES
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires the company's
management to make estimates and assumptions which affect the amounts
reported in these financial statements and the notes thereto. Actual
results could differ from those estimates.
FOREIGN CURRENCY TRANSACTIONS
The company's functional currency is the Canadian dollar. The financial
statements are translated to United States dollars using the period-end
exchange rate for assets and liabilities and weighted-average exchange
rates for the period for revenues and expenses. Translation losses are
deferred and accumulated as a component of other comprehensive income in
shareholders' equity (deficit). Net gains and losses resulting from
foreign exchange transactions are included in the statement of operations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on deposit and highly liquid
short-term interest bearing securities with maturities at the date of
purchase of three months or less. Interest earned is recognized
immediately in the statement of operations.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the company to a
significant concentration of credit risk consist primarily of cash and
cash equivalents, accounts receivable and sales tax recoverable which are
not collateralized. The company limits its exposure to credit loss by
placing its cash and cash equivalents with high credit quality financial
institutions. Concentrations of credit risk with respect to accounts
receivable are considered to be limited due to the low average billing and
large number of customers comprising the company's customer base. The
company performs ongoing credit evaluations of its customers' financial
condition to determine the need for an allowance for doubtful accounts.
The company has not experienced significant credit losses to date.
(2)
F-29
<PAGE> 60
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Notes to Financial Statements
AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated amortization.
Property and equipment are amortized on a straight-line basis over their
estimated useful lives as follows:
<TABLE>
<S> <C>
Software 1 year
Computer equipment 2 years
Leased automobile 3 years
Office equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements the remaining lease term
</TABLE>
REVENUE RECOGNITION
Revenues from the placement of customers' online coupons on the company's
website for fixed or determinable fees are recognized rateably over the
period of the contract unless collection is not reasonably assured in
which case revenues are recognized when cash payments are received.
Revenues from regional exclusivity fees for the exclusive right to market
the company's products in predefined regions are recognized when the
initial set-up and training services are completed and the company is
satisfied that all significant obligations under the terms of the
agreements have been met and collectibility of the related fees is
reasonably assured. To the extent uncertainties exist in connection with
the company's obligations related to regional exclusivity fees, the
company only records revenues to the extent of costs incurred. In such
circumstances, amounts received in excess of revenue recognized are
included in deferred revenue.
STOCK BASED COMPENSATION
The company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees", ("APB No. 25") and
complies with the disclosure provisions of Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
("SFAS No. 123"). Under APB No. 25, compensation expense is recognized
based on the difference, if any, on the date of grant between the
estimated fair value of the company's stock and the amount an employee
must pay to acquire the stock. Compensation expense is recognized
immediately for past services and rateably for future services over the
option vesting period.
For purposes of valuing the company's stock-based compensation
transactions, the company used the market price of SUM's common stock, as
quoted on the OTC-bulletin board, on the measurement date for the
applicable transaction. SUM's common stock price was used as management
believes this to be the most objective indicator of the fair value of the
company's common stock due to the share exchange transaction (note 1)
announced on July 7, 1999.
(3)
F-30
<PAGE> 61
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Notes to Financial Statements
AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
COMPREHENSIVE INCOME
Comprehensive income is defined as the change in equity from transactions
and other events and circumstances other than those resulting from
investments by owners and distributions to owners. Comprehensive income
consists of net income and other comprehensive income. The accumulated
balance of other comprehensive income is included in the statement of
shareholders' equity (deficit). The company's other comprehensive income
consists of foreign currency translation adjustments.
SEGMENT INFORMATION
The company identifies its operating segments based on business
activities, management responsibility and geographical location. During
the period ended August 6, 1999, the company operated within a single
operating segment being online couponing services and operated in only one
geographic area being Canada. In addition, substantially all of the
company's assets are located in Canada and substantially all of its
revenues are earned in Canada.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement Number 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
establishes accounting and reporting standards for derivative instruments,
embedded in other contracts, and for hedging activities. It requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. The accounting for changes in fair value of the derivative depends
on the intended use of the derivative and the resulting designation. The
company does not expect that the adoption of SFAS 133 will have a material
impact on its financial statements.
3 REGIONAL EXCLUSIVITY FEES
During the period ended August 6, 1999, revenue of $8,574 from regional
exclusivity fees was recognized, and offset by a corresponding amount of
cost of sales related to the sale of marketing rights in three regions.
4 RELATED PARTY TRANSACTIONS
During the period ended August 6, 1999, SUMmedia.com Inc., which became
the company's parent company on August 6, 1999, advanced the company
$524,429. The advance is unsecured, non-interest bearing, and without
stated terms of repayment.
The company incurred $65,701 for management consulting and related
services to a company controlled by a shareholder of the company for the
period from March 23, 1999 to August 6, 1999. This amount has been
included in general and administrative expenses.
(4)
F-31
<PAGE> 62
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Notes to Financial Statements
AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
5 COMMITMENTS
The company has the following annual commitments for the rental of office
premises under the terms of operating leases:
<TABLE>
<CAPTION>
$
<S> <C>
2000 113,157
2001 113,157
2002 113,157
2003 66,009
--------
405,480
========
</TABLE>
Office lease payments for the period from March 23, 1999 to August 6, 1999
of $26,593 were included in general and administrative costs.
The company has the following annual lease commitments for the company
automobile under capital lease:
<TABLE>
<CAPTION>
CAPITAL
$
<S> <C>
1999 7,631
2000 18,315
2001 18,315
2002 18,315
2003 28,410
-------
90,986
Amount representing interest (16,754)
-------
74,232
Less: Current portion (13,318)
-------
60,914
=======
</TABLE>
6 INCOME TAXES
The company is subject to Canadian federal taxes, and Ontario and British
Columbia provincial taxes in Canada.
At August 6, 1999, the company had net operating loss carryforwards of
approximately $450,000 available to reduce future taxable income. These
losses expire in 2006. The potential benefits relating to these losses
have not been recognized in the financial statements. Net deferred tax
assets are composed of the following:
(5)
F-32
<PAGE> 63
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Notes to Financial Statements
AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
$
<S> <C>
Net operating loss carryforwards 205,000
Temporary difference -amortization of property and equipment 8,000
Deferred tax asset valuation allowance (213,000)
----------
Net deferred tax assets --
==========
</TABLE>
Based on a number of factors, including the lack of a history of profits,
management believes that there is sufficient uncertainty regarding the
realization of deferred tax assets such that a full valuation allowance
has been provided.
The income tax provision for the period ended August 6, 1999 differs from
the amount obtained by applying the statutory Canadian federal and
provincial income tax rate to loss before income taxes as follows:
<TABLE>
<CAPTION>
$
<S> <C>
Statutory Canadian federal and provincial income tax rate 45.52%
Income tax recovery based on the statutory rate (1,390,000)
Non-deductible expenses 1,175,000
Differences from statutory rate relating to tax effect of loss
benefits which have been recorded 215,000
------------
--
============
</TABLE>
7 CAPITAL STOCK
Authorized capital consists of 30,000,000 common shares without par value
of which 9,000,001 shares were issued and outstanding as at August 6,
1999.
STOCK BASED COMPENSATION
For the period ended August 6, 1999, a significant shareholder transferred
1,940,625 common shares to certain key executives of the company for $nil
cash consideration. These common shares were subsequently exchanged for
690,000 shares of SUMmedia.com Inc. as part of the share exchange
transaction described in note 1. Management estimated the fair value of
these shares at the time of issuance to be $1.33 per share after taking
into account the share exchange ratio for the transaction. As such, the
company recorded $2,581,031 of stock based compensation expense in the
period.
(6)
F-33
<PAGE> 64
SUM MEDIA CORP.
(formerly E-Com Media Corp.)
(a development stage company)
Notes to Financial Statements
AUGUST 6, 1999
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
8 SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
$
<S> <C>
CASH PAID FOR INTEREST --
CASH PAID FOR INCOME TAXES --
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations 98,388
Issuance of common stock
Stock based compensation 2,581,031
Share subscription receivable 59,749
</TABLE>
(7)
F-34
<PAGE> 65
PART III
ITEM 1. INDEX TO EXHIBITS
The following is a list of all exhibits filed as a part of this
registration statement or, as noted, incorporated by reference to this
registration statement:
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description and Method of Filing
----------- --------------------------------
<S> <C>
Exhibit 2.1 Share Purchase Agreement between JCC Consulting
Services, Ltd., Corbridge Asset Holdings S.A.,
Tigerlily Financial Inc., Grant Peterson,
Jihong Zhang, Andre Dragon, Dennis Malloy.
Albert Szajman, John Veltheer, David Lewis,
Reliance Resources Inc. and SUMmedia Corp.
dated June 11, 1999.
Exhibit 3.1.1 Amended and Restated Articles of Incorporation
dated June 23, 1999.
Exhibit 3.1.2 Articles of Amendment dated August 20, 1999
(incorporated by reference to the registrant's
Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1999).
Exhibit 3.2 Bylaws adopted by registrant on August 10, 1998.
Exhibit 10.1 Software License and Services Agreement between
SUMmedia.com and Oracle Corporation Canada Inc.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 27 Financial data schedule.
Exhibit 99.1 Financial Statements from the Annual Report on
Form 10-KSB for the year ended December 31,
1997 incorporated by reference to the same.
Exhibit 99.2 Financial Statements from the Annual Report on
Form 10-KSB for the year ended December 31,
1998 incorporated by reference to the same.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
SHARE PURCHASE AGREEMENT
THIS AGREEMENT dated for reference the ____ day of __________, 1999.
BETWEEN:7
JCC CONSULTING SERVICES LTD., CAMBRIDGE ASSET HOLDINGS S.A.,
TIGERLILY FINANCIAL INC., GRANT PETERSEN, JIHONG ZHANG, ANDRE
DRAGON, DENNIS MOLLOY, ALBERT SZAJMAN, JOHN VELTHEER, DAVID
LEWIS
(hereinafter collectively called the "Vendors")
AND:
RELIANCE RESOURCES INC., a Colorado corporation with a
registered office in the State of Colorado, USA, located at
1560 Broadway, Suite 200, Denver, CO, USA, 80202, and a head
office within BC located at Suite 1200, 1055 West Hastings
Street, Vancouver
(hereinafter called the "Purchaser")
AND:
SUM MEDIA CORP., a company duly incorporated under the laws of
BC and having an office and place of business at Suite 1200,
1055 West Hastings Street, Vancouver
(hereinafter called the "Company")
WITNESSES THAT WHEREAS:
A. The Vendors are the legal and/or beneficial owners of an aggregate of
9,000,001 common shares in the capital of the Company (the "Shares"),
allocated as follows:
<TABLE>
<S> <C>
JCC Consulting Services Ltd. 562,500
Albert Szajman 112,500
John Veltheer 281,250
David Lewis 281,250
Cambridge Asset Holdings S.A. 1,125,000
Tigerlily Financial Inc. 1,125,000
Grant Petersen 2,404,688
Jihong Zhang 562,500
Andre Dragon 140,625
Dennis Molloy 2,404,688
---------
TOTAL 9,000,001
</TABLE>
B. The Vendors have each agreed to sell and the Purchaser has agreed to
purchase the Shares upon the terms and conditions herein set forth;
NOW THEREFORE in consideration of the premises, the covenants and agreements and
warranties hereinafter set forth, it is hereby agreed as follows:
-1-
<PAGE> 2
SALE AND PURCHASE
1. Based on and relying upon the representations and warranties herein, the
Vendors hereby each agree to sell the Shares to the Purchaser and the
Purchaser hereby agrees to purchase the Shares from the Vendors on the
terms and conditions herein contained.
2. The purchase price payable by the Purchaser to the Vendors for the Shares
shall be US $600,000 (the "Purchase Price") payable on the Closing Date by
the issuance of 3,200,000 common shares in the capital stock of the
Purchaser (the "Exchangeable Shares") as per the allocation table set out
in Schedule "A", to be issued in exchange for the Shares held by the
Vendors in the Company.
3. The Exchangeable Shares will be issued pursuant to exemptions under
Regulation S promulgated under the US SECURITIES ACT 1933 and under the
British Columbia SECURITIES ACT.
COMPANY AND VENDORS' REPRESENTATIONS AND WARRANTIES
4. The Company and the Vendors, jointly and severally, represent and warrant
to the Purchaser, to the best of their knowledge, information and belief
after making due inquiry that:
(a) the Company is a company duly incorporated under the laws of the
Province of British Columbia, is not a reporting company and is a valid
and subsisting company in good standing with all regulatory
authorities;
(b) the authorized capital of the Company consists of 30,000,000 Common
Shares without par value, of which there are 9,000,001 Common Shares
issued and outstanding;
(c) the Shares are free and clear of all liens, claims, charges and
encumbrances of every nature and kind whatsoever;
(d) the Shares are duly authorized, validly issued and outstanding as fully
paid and non-assessable shares;
(e) the Vendors are the sole registered and/or beneficial owners of the
Shares and have due and sufficient right and authority to transfer the
legal and beneficial title and ownership of the Shares to the
Purchaser, and each of the Vendors and the Company has due and
sufficient right, power and authority (including any and all necessary
corporate and/or shareholder authorizations) to enter into this
Agreement on the terms and conditions herein set forth, and this
Agreement, when executed and delivered by the Vendors and Company, will
constitute a legal and binding obligation of each such party
enforceable against it in accordance with its terms;
(f) no person, firm or corporation has any agreement or option or a right
capable of becoming an agreement for the purchase of the Shares or any
other shares in the capital of the Company owned by the Vendors or any
right capable of becoming an agreement for the purchase, subscription
or issuance of any of the unissued shares in the capital of the
Company;
(g) the Company has the full corporate power and authority to carry on the
business presently being carried on by it and as proposed to be carried
on by it;
(h) the Company holds all licenses and permits as may be requisite for
carrying on its business in the manner in which it has heretofore been
carried on.
(i) there are no material liabilities, contingent or otherwise, of the
other than as set forth in Schedule "B" attached hereto;
(j) at the Time of Closing, the Company shall not have any material
liabilities, contingent or otherwise other than those liabilities set
forth in Schedule "B" attached hereto;
(k) the books and records of the Company fairly and correctly set out and
disclose in all material respects, in accordance with Canadian
generally accepted accounting principles, the financial position of the
-2-
<PAGE> 3
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;
(l) no payments of any kind have been made or authorized to or on behalf of
the Vendors or any of them or to or on behalf of officers, directors or
shareholders of the Company or under any management agreements with the
Company which are not recorded in the books or records of the Company
or which have not been disclosed in writing to the Purchaser other than
payments made in the normal course of business;
(m) there is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the
knowledge of the Company or the Vendors, jointly or severally,
threatened against or affecting the Company at law or in equity or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau or agency;
(n) to the best of the Vendors' knowledge, the Company is not in breach of
any laws, ordinances, statutes, regulations, by-laws, orders or decrees
to which it is subject or which apply to it;
(o) the Company is not a party to any collective agreement with any labour
union or other association or employees and no attempt has been made to
organize or certify the employees of the Company as a bargaining unit;
(p) there are no pensions, profit sharing, group insurance or similar plans
or other deferred compensation plans affecting the Company;
(q) the Company is not indebted to any employee of the Company or other
workers engaged in the business of the Company and the Company has not
received or been notified of any general wage claims;
(r) the Company is the sole beneficial owner and has good and marketable
title to all its properties and assets free and clear of all liens,
mortgages, pledges, deeds of trust, conditional sale agreements,
encumbrances, charges or claims of every kind and nature whatsoever;
(s) the Company has not experienced nor is it aware of any occurrence or
event which has had, or might reasonably be expected to have, a
materially adverse affect on its business or the results of its
operations;
(t) neither the Vendors nor any officer, director, employee or shareholder
of the Company is now indebted or under obligation to the Company on
any account whatsoever; and the Company is not indebted or under
obligation to the Vendors or any officer, director, employee or
shareholder of the Company.
(u) this Agreement once duly executed and delivered by the Vendors and the
Company will constitute a legal, valid and binding obligation of the
Vendors and the Company; enforceable against the Vendors and the
Company in accordance with its terms;
5. The Vendors hereby jointly and severally represent and warrant to the
Purchaser as follows that:
(a) the Vendors have the capacity to protect their own interests in
connection with the acquisition of the common Shares of the Purchaser
and are capable of evaluating the merits and risks of an investment in
the Purchaser by reason of their business and financial knowledge and
experience;
(b) the Vendors are acquiring the shares of common stock of the Purchaser
for investment for their own account, not as a nominee or agent, and
not with the view to, or for resale in connection with, any
distribution thereof. The Vendors understand that the shares of common
stock of the Purchaser have not been, and will not be, registered under
the US SECURITIES ACT 1933, as amended (the "Securities Act"), by
reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy
of the Vendors' representations as expressed herein;
-3-
<PAGE> 4
(c) each Vendor acknowledges that the shares of common stock of the
Purchaser must be held indefinitely unless subsequently registered
under the Securities Act or unless an exemption from such registration
is available. Each Vendor is aware of the restrictions and limitations
on resale of the shares of common stock of the Purchaser into the
United States or to a US Person pursuant to the provisions of
Regulation S promulgated under the Securities Act. In addition, each
Vendor is aware of the provisions of Rule 144 promulgated under the
Securities Act ("Rule 144") which permit limited resales in the US of
shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the existence of a
public market for the shares of common stock of the Purchaser, the
availability of certain current public information about the Purchaser,
the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three-month
period not exceeding specified limitations;
(d) each of the Vendors has had an opportunity to discuss the Purchaser's
business, management and financial affairs with the Company's
management and has also had an opportunity to ask questions of the
Purchaser's officers, which questions were answered to the Vendors'
satisfaction. Each Vendor has been furnished with or has had access to
such information as a sophisticated investor would customarily require
to evaluate the merits and risks of the proposed investment together
with such additional information as is necessary to verify the accuracy
of the information supplied. The Vendors represent and acknowledge that
they have been solely responsible for their own due-diligence
investigation of the Purchaser and its management and business, for its
own analysis of the merits and risks of this investment, and for its
own analysis of the terms of the investment, and that in taking any
action or performing any role relative to the proposed investment, it
has acted solely in its own interest, and that neither it nor any of
its agents or employees has acted as an agent, employee, partner or
fiduciary of any other person, or as an agent of the Purchaser, or as
an issuer, underwriter, broker, dealer or investment advisor relative
to this investment;
(e) each of the Vendors understands that the Purchaser has no operating
history, and that investment in the Purchaser involves substantial
risks. The Vendors further understand that the acquisition of the
shares of common stock of the Purchaser will be a highly speculative
investment. Each of the Vendors is able, without impairing his
financial condition, to hold the shares of common stock of the
Purchaser for an indefinite period of time and to suffer a complete
loss of his investment;
(f) each of the Vendors agrees to indemnify and hold harmless the Purchaser
and its officers, directors and agents for any costs, liabilities or
losses caused by any misstatement of material fact by such Vendor with
respect to the representations and warranties contained in this Section
or any other written information provided to the Purchaser by such
Vendor in connection with the investment contemplated by this
Agreement; and
(g) each Vendor represents and warrants to the Purchaser that he is not a
US Person as defined in Regulation S as promulgated under the
Securities Act and that the buy order for the common shares of the
Purchaser originated by each Vendor outside of the US.
VENDORS' COVENANTS
6. The Vendors jointly and severally covenant and agree that:
(a) the representations and warranties contained in this Agreement shall be
true at and as of the Time of Closing as if such representations and
warranties were made as of such time;
(b) the Vendors will permit the Purchaser or whoever it directs on its
behalf to examine the records, statements and accounts of the Company
on regular business days and during regular business hours up to and
including the Closing Date and make such audit of the books of account
of the Company and physical verification of the inventory of the
Company as the Purchaser may see fit;
-4-
<PAGE> 5
(c) the representations, warranties, covenants and agreements contained
herein shall survive the Closing Date and notwithstanding the Closing
of the purchase and sale herein contemplated, shall continue in full
force and effect;
(d) the Vendors will, jointly and severally, prior to Closing, take all
steps and proceedings and execute such further assurances and documents
as may be required to obtain the transfer and registration of the
Shares into the name of the Purchaser provided that all terms and
conditions to be observed and performed by the Purchaser at the Time of
Closing have been observed and performed;
PURCHASERS' REPRESENTATIONS AND WARRANTIES
7. As an inducement to the Company and each of the Vendors to enter into this
Agreement and to consummate the transactions provided for herein, the
Purchaser represents and warrants to the Company and each of the Vendors,
to the best of its knowledge, information and belief after making due
inquiry that:
(a) the Purchaser was incorporated on December 7, 1990 under the laws of
the State of Delaware as Pursuit Ventures Corporation. Under a Plan and
Agreement of Merger, effective August 21, 1998, the Purchaser merged
with a Colorado corporation. The Colorado corporation was incorporated
on March 20, 1997, under the name Remington Assets Limited, and,
effective August 11, 1998, changed its name to Pursuit Ventures
Corporation. Effective with the terms of the Agreement of Merger,
Pursuit Ventures Corporation, Colorado, became the surviving company.
The Purchaser filed for a name change with the Colorado Secretary of
State to Reliance Resources Inc., which became effective September 8,
1998;
(b) the Purchaser is duly incorporated, validly existing and in good
standing under the laws of the State of Colorado;
(c) the Purchaser is now and as of the Closing Date will be traded on the
OTC Bulletin Board and no further action must be taken before the
Closing Date for continued trading on the Bulletin Board except for the
filing of a registration statement with the U.S. Securities and
Exchange Commission, on Form 10-SB or similar prescribed form, such
filing to be the responsibility of the Purchasers new management
following the Closing Date;
(d) it has full and absolute right, power and authority to enter into this
Agreement on the terms and conditions herein set forth, to carry out
the transactions contemplated hereby and, to transfer on the Closing
Date to the vendors all legal and beneficial ownership in and to the
Exchangeable Shares;
(e) this Agreement once duly executed and delivered by the Purchaser will
constitute a legal, valid and binding obligation of the Purchaser;
enforceable against the Purchaser in accordance with its terms;
(f) no proceedings have been taken or authorized by the purchaser, or to
the knowledge of the purchaser, by any person, with respect to the
bankruptcy, insolvency, liquidation, dissolution or winding-up of the
Purchaser or with respect to any amalgamation, merger, consolidation,
arrangement or reorganization relating to the Purchaser;
(g) the authorized capital stock of the Purchaser consisted of 50,000,000
shares of common stock with a par value of US $0.001 per share, of
which 500,000 were issued and outstanding. On June 16, 1999, the Board
of Directors passed a unanimous resolution to adopt a forward stock
split at the ratio of 32 to 1. On June 24, 1999 the Secretary of the
State of Colorado received the amendment of the Purchaser's Articles of
Incorporation, under which its authorized capital stock is now
65,500,000 shares of common stock with a par value of US $0.01 per
share. Pursuant to a Stock Purchase Agreement dated June 11, 1999,
between Caribbean Avionics Ltd. et al, the Purchaser and Patrick C.
Brooks (a copy of which is attached hereto as Schedule "C"), on June
16, 1999, Patrick C. Brooks cancelled and returned to the Purchaser
6,210,000 post-split shares of common stock. The Purchaser's issued and
outstanding post-split shares of common stock, on the Closing Date,
shall be 10,790,000 which, includes 1,000,000 shares of common stock to
be issued pursuant to the private placement referred to in subsection
7(p). The authorized capital stock of the
-5-
<PAGE> 6
Purchaser also consists of 1,000,000 shares of preferred stock, with a
par value of US $0.01 per share, none of which are issued and
outstanding;
(h) following the forward stock split, and the cancellation of 6,210,000
post-split shares of common stock referred to in subsection 7(g), there
are no persons or group of persons acting in concert, that directly or
indirectly hold shares of the Purchaser that would constitute a control
block;
(i) other than the 1,000,000 share purchase warrants referred to in
subsection 7(p), on the Closing Date there will not be outstanding (i)
any options, warrants, rights of first refusal or other rights to
purchase any shares of the Purchaser, (ii) any securities convertible
into or exchangeable for such shares, or (iii) any other commitments of
any kind for the issuance of additional shares of the Purchaser or
options warrants or other securities of the Purchaser;
(j) all of the issued and outstanding shares of the Purchaser have been
duly and validly authorized and issued in accordance with applicable
laws and are validly outstanding, fully paid and non-assessable;
(k) all of the Exchangeable Shares which will be issued to the Vendors
hereunder in compliance with applicable laws and the articles of the
Purchaser, and will be issued fully paid and non-assessable, and free
and clear of all liens, charges, encumbrances and trading restrictions
other than as may be imposed by applicable U.S. Federal and State laws,
and the laws of British Columbia;
(l) the Purchaser has no subsidiaries;
(m) the officers and directors of the Purchaser are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Julia Petersen Director, President, Secretary
</TABLE>
(n) attached hereto as Schedule "D" are true and complete copies of the
Purchasers audited financial statements for the fiscal year ended on
December 31, 1998 and unaudited financial statements as contained in
the Purchasers' Form 10-QSB for the fiscal quarter ending on March 31,
1999 (the "Purchasers Financial Statements"). The Purchasers Financial
Statements have been prepared in accordance with American GAAP and
present fairly the financial position, results of operations and
statements of changes in the Parent's financial position for the period
indicated;
(o) no adverse material changes in the affairs of the purchaser have
occurred since April 1, 1999;
(p) the Purchaser is in the process of obtaining irrevocable subscriptions
from purchasers not residents or citizens of Canada or the United
States, for the purchase of 1,000,000 units of the Purchaser at US
$1.00 per unit pursuant to Rule 504 (the "Rule 504 Offering"). Each
unit consists of 1 share of common stock and 1 two-year warrant. Each
warrant entitles the holder to purchase, within 2 years from the date
of the subscription agreement, 1 additional share of common stock at
the price of US $3.00 per share, for total proceeds of US $1,000,000,
such subscriptions being made in accordance with an exemption from the
registration requirements of the US SECURITIES ACT 1933 and applicable
U.S. state legislation, and will bear a restrictive legend pursuant to
restrictions on resale under Rule 144;
(q) there are no liabilities, contingent or otherwise of the Purchaser
which are not disclosed or reflected in its Financial Statements or as
set forth in Schedule "D" attached hereto;
(r) at the time of Closing the Purchaser shall not have any liabilities,
contingent or otherwise, other than those liabilities set forth in
Schedule "E" attached hereto;
(s) there are no employment, consulting, severance pay, continuation pay,
termination pay, indemnification agreements, collective agreements,
employee benefit plans or other similar agreement of any nature
whatsoever affecting the Purchaser;
-6-
<PAGE> 7
(t) there is no litigation, proceeding, or investigation pending or
threatened against the Purchaser, nor does the Purchaser know, or have
grounds to know, of any basis for any litigation, proceeding or
investigation against the Purchaser, except as disclosed in writing to
the Vendors;
(u) since April 1, 1999, the Purchaser's business has been operated
substantially in accordance with all laws, rules, regulations, orders
of competent regulatory authorities, and there has not been:
(i) any event or change in circumstances that has had, or which
the Purchaser may expect to have, a material adverse effect on
the Purchaser or its business;
(ii) any change in liabilities of the Purchaser that has had, or
which the Purchaser may expect to have, a material adverse
effect on the Purchaser or its business;
(iii) any incidence, assumption or guarantee of any indebtedness for
borrowed money by the Purchaser;
(iv) any payments by the Purchaser in respect of any indebtedness
of the Purchaser for borrowed money or in satisfaction of any
liabilities of the Purchaser, other than in the ordinary
course of business;
(v) the creation, assumption or sufferance of the existence of any
lien on any assets reflected on the Purchaser Financial
Statements;
(vi) any transaction or commitment made, or any contract entered
into, by the Purchaser other than the Stock Purchase Agreement
attached hereto as Schedule "C";
(vii) any grant of any severance, continuation or termination pay to
any director, officer, stockholder or employee of the
Purchaser; or any entering into of an employment, deferred
compensation or other similar agreement, or amendment or
variation to any such existing agreement;
(viii) any change by the Purchaser in its accounting principles,
methods or practices or in the manner it keeps its books and
records;
(ix) any distribution, dividend, bonus, management fee or other
payment by the Purchaser to any of its respective officers,
directors stockholders or affiliates, or any of their
respective affiliates or associates; and
(x) any material capital expenditure or commitment by the
Purchaser or material sale, assignment, transfer, lease or
other disposition of or agreement to sell, assign, transfer
lease or otherwise dispose of any asset or property by the
Purchaser other than in the ordinary course of business.
(v) the Purchaser does not own or lease any real property or material
assets;
(w) the Purchaser currently has no operating business and has not had an
operating business since December 7, 1990, being the date the Purchaser
was organized under the laws of Delaware as Pursuit Ventures
Corporation;
(x) there are no contracts or indebtedness between the Purchaser and any of
its shareholders, or affiliates or associates of any of its
shareholders;
(y) there are no material contracts to which the Purchaser is a party other
than as specified in this Agreement;
(z) the operation of the Purchaser's business has not violated or infringed
any U.S. Federal or State securities laws or regulations;
-7-
<PAGE> 8
(aa) all tax returns and reports of the Purchaser required by law to be
filed prior to the date hereof have been filed and are substantially
true, complete and correct, and all taxes and other government charges
have been paid or accrued in the Purchaser Financial Statements;
(bb) the information contained in the documents, certificates and written
statements (including this Agreement and the attachments thereto)
furnished by the Purchasers to the Vendors are true and complete in all
material respects and do not omit to state any material fact necessary
in order to make the statements therein; and
(cc) there is no fact known to the Purchaser that has not been disclosed to
the Vendors in writing that could reasonably have a material adverse
effect on the Purchaser.
PURCHASERS COVENANTS
8. The Purchaser covenants and agrees as follows:
(a) on the Closing Date, Julia Petersen shall resign as Director, President
and Secretary and the following persons will be appointed the directors
and officers of the Purchaser:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
John Veltheer Director, President
David Lewis Director, Secretary
Grant Petersen Director
</TABLE>
(b) on the Closing Date, and provided that all terms and conditions to be
observed and performed by the Vendors at the Time of Closing have been
observed and performed, the Purchaser will issue the Exchangeable
Shares to the Vendors, such Exchangeable Shares to be issued free and
clear of any liens, encumbrances and charges, but subject to applicable
trading restrictions imposed by U.S. securities legislation, and
imposed under such other securities legislation applicable in the each
jurisdiction where any of the Vendors are resident;
(c) the Purchaser shall not disseminate to any third party any information,
by press-release or otherwise, without the prior written consent of the
Vendors and the Company;
(d) to forthwith deliver to Vendors or legal counsel designated by the
Vendor, a copy of the corporate records and minute books of the
Purchaser, a copy of all documents filed with US State and Federal
securities regulatory authorities since the date of incorporation of
the Purchaser, a current copy of the shareholder list kept by the
transfer agent of the Purchaser and all such documents as the Vendors
or its legal counsel may request as part of their due diligence
investigation of the Purchaser. The Purchaser agrees to provide access
to all corporate records and otherwise assist the Vendors in the
completion of their due diligence;
(e) the Purchaser agrees to sign all documents required, and otherwise
assist the Vendors, to transfer of signing authority over all bank
accounts of the Purchaser.
CONDITIONS PRECEDENT FOR THE VENDORS
9. The joint and several obligations of the Vendors to carry out the terms of
this Agreement and to complete the sale contemplated herein is subject to
the following conditions:
(a) the Purchaser shall have performed and satisfied each of its
obligations hereunder required to be performed and satisfied by it on
or prior to the Closing Date and each of the representations and
warranties of the Purchaser contained herein shall have been true and
correct and contained no misstatement or omission that would make any
such representation or warrant misleading when made, and shall be true
and correct and contain no misstatement or omission that would make any
such representation or warranty misleading at and as of the Closing
Date with the same force and effect as if made as of the Closing Date;
-8-
<PAGE> 9
(b) the Vendors shall have had the opportunity to complete their due
diligence, and all matters arising therefrom shall have been resolved
by the Purchaser. The Vendors, acting reasonably, may in their sole
discretion terminate this Agreement without further obligation or
liability to the Purchaser, if matters arising from the due diligence
investigation of the Purchaser are considered to be materially adverse
to the interests of the Vendors or the Company, and such matters cannot
be cured or otherwise rectified promptly by the Purchaser;
(c) the transactions contemplated by this Agreement shall not violate any
applicable law and there shall be no pending actions or proceedings by
any State, U.S. Federal or Provincial regulatory authority or by any
other person challenging or seeking to materially restrict or prohibit
the transfer and exchange contemplated hereby or the consummation of
the transactions contemplated by this Agreement;
(d) subsequent to the date hereof and prior to the Closing Date, there
shall not have been any event, occurrence, development or state of
circumstances or facts that has had or that may be reasonably expected
to have a material adverse effect on the Purchaser;
(e) the Purchaser's Board of Directors, by proper and sufficient vote
respectively, shall have approved this Agreement and the transactions
contemplated hereby;
(f) prior to the Closing Date, the Purchaser shall have taken all steps
legally necessary to:
(i) effect the forward stock split of the Purchaser's shares of
common stock at the ratio of 32 to 1;
(ii) amend its Articles of Incorporation; and
(iii) cancel the 6,210,000 post-split shares of common stock in the
capital of the Purchaser held by Patrick C. Brooks; and
(g) the Purchaser shall have completed the Rule 504 Offering and issued the
shares to the investors thereunder and the Purchaser shall have filed
the appropriate Form D with the U.S. Securities and Exchange Commission
and any state securities regulatory authority, as required by
applicable Federal and State securities laws.
CONDITIONS PRECEDENT FOR THE PURCHASER
10. All obligations of the Purchaser under this Agreement are subject to the
fulfillment on or prior to Closing, of each of the following conditions to
the satisfaction of the Purchaser's solicitor:
(a) all covenants, warranties and agreements of the Vendors to be performed
on or before the Closing Date pursuant to the terms and conditions of
this Agreement have been duly performed;
(b) the Vendors shall transfer the Shares to the Purchaser and such Shares
shall be registered on the books of the Company in the name of the
Purchaser at the Time of Closing; and
(c) the representations and warranties of the Vendors set forth in this
Agreement shall be true and correct as of the date of the Agreement and
shall be true and correct as at the Date of Closing as if made by the
Vendors on the Closing Date.
11. The Vendors jointly and severally agree that the foregoing conditions in
section 10 are inserted for the exclusive benefit of the Purchaser and may
be waived by the Purchaser in whole or in part at any time.
12. In the event any of the conditions set forth in section 10, are not met by
the Closing Date for whatever reason, the Purchaser at his option, may
elect not to proceed with the purchase of the Shares contemplated herein
without prejudice to any other rights and remedies.
-9-
<PAGE> 10
SHARE CERTIFICATE LEGENDS
13. It is understood that the certificates evidencing the Purchaser's shares of
common stock may bear one or more legends in substantially the following
forms, as well as any other legend required by the laws of any applicable
jurisdiction:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE U.S. OR TO US PERSONS IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER
SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED. HEDGING TRANSACTIONS FOR SUCH SECURITIES
MAY NOT BE MADE UNLESS IN COMPLIANCE WITH SUCH ACT.
THE SHARES ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD IN THE U.S. OR TO US PERSONS EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
The Purchaser need not record a transfer of the shares, unless the
conditions specified in any applicable legends are satisfied. The Purchaser
may also instruct its transfer agent not to record the transfer of any of
the shares unless the conditions specified in the applicable legends are
satisfied.
14. The legend relating to the Securities Act endorsed on a stock certificate
pursuant to this Agreement and the stop transfer instructions with respect
to the shares represented by such certificate shall be removed and the
Purchaser shall issue a certificate without such legend to the holder of
such shares if such shares are registered under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is
available or if such holder provides to the Purchaser an opinion of counsel
reasonably satisfactory to the Purchaser, or a no-action letter or
interpretive opinion of the staff of the Securities and Exchange Commission
(the "SEC") to the effect that a public sale, transfer or assignment of
shares may be made without registration and without compliance with any
restriction such as Rule 144.
CLOSING
15. The sale and purchase of the Shares shall be closed on July 30, 1999, or on
such other date agreed by all of the parties hereunder, at the office of
Morton & Company, or at any other place agreed to by all of the Parties,
which date and time are referred to herein as the "Date of Closing", the
"Closing Date", the "Closing" and the "Time of Closing".
16. At Closing, the Vendors shall deliver to the Purchaser:
(a) share certificates duly endorsed for transfer of 9,000,001 Common
Shares without par value in the capital of the Company into the
Purchaser's name representing the Shares;
(b) certified copies of resolutions of the directors of the Company
authorizing and approving the transfer of the Shares, registration of
the Shares in the name of the Purchaser, authorizing the issue of new
share certificates representing the Shares in the name of the
Purchaser, and entry of the name and address of the Purchaser into the
Register of Members and Register of Directors of the Company;
(c) all corporate records and books of account of the Company, including,
without limitation, the minute book, corporate seal, share register
books, share certificate books and annual reports of the Company;
(d) certified copies of such resolutions of the shareholders and directors
of the Company as are to be passed to authorize the execution, delivery
and implementation of this Agreement and of all documents to be
delivered by the Vendor pursuant thereto;
-10-
<PAGE> 11
(e) a certificate signed by the Vendors that all covenants, warranties and
agreements of the Vendors pursuant to the terms of this Agreement have
been duly performed and that the representations and warranties of the
Vendors set forth in this Agreement are true and correct as at the Date
of Closing;
17. On Closing the Purchaser shall deliver to the Vendor the following:
(a) share certificates representing the Exchangeable Shares in the names
and denominations set out in Schedule "A" hereto;
(b) certified copies of resolutions of the directors of the Purchaser
authorizing and approving the issuance of the Exchangeable Shares,
registration of the Exchangeable Shares in the name of the Vendors in
accordance with Schedule "A" hereto and authorizing the issue of the
new share certificates representing such Exchangeable Shares;
(c) all corporate records and books of account of the Company, including
without limitation, the minute book;
(d) certified copies of such resolutions of the directors of the Purchaser
as are to be passed to authorize the execution, delivery and
implementation of this Agreement and of all documents to be delivered
to the Vendors pursuant thereto;
(e) a certificate signed by a duly authorized officer of the Purchaser that
all covenants, warranties and agreements of the Purchaser pursuant to
the terms of this Agreement have been duly performed and that the
representations and warranties of the Purchaser set forth in this
Agreement are true and correct as at the Closing;
(f) the signed resignations of Julia Petersen as director, President and
corporate secretary of the Purchaser and good evidence of proper
termination of all employment or consulting contracts to which the
Purchaser is a party; and
(g) a certified cheque from Global Securities Corporation in the amount of
US $1,000,000, less any amounts previously forwarded (as at August 4,
1999 approximately US $550,000 has been forwarded to the Company)
payable to SUM Media Corp., or as the Company may otherwise direct,
representing the proceeds of the Rule 504 Offering.
INDEMNITY
18. The Purchaser shall be indemnified and held harmless by the Vendors in
respect of any and all damages incurred by the Purchaser as a result of any
inaccuracy or misrepresentation in or breach of any representation or
warranty, covenant or agreement made in this Agreement by the Vendors.
19. The Vendors shall each be indemnified and held harmless by the Purchaser in
respect of any and all damages incurred by any of such Vendors as a result
of any inaccuracy or misrepresentation in or breach of any representation,
warranty, covenant or agreement made by the Purchaser in this Agreement.
SURVIVAL OF REPRESENTATION, WARRANTIES AND COVENANTS
20. Except as hereinafter provided, all representations, warranties, covenants,
agreements and obligations of the parties hereto shall survive the Closing
and shall expire one year following the Closing Date.
GENERAL
21. This Agreement and the terms hereunder shall be treated as confidential
information and no disclosure thereof can be made without the written
consent of the Vendors and the Company.
-11-
<PAGE> 12
22. This Agreement shall be governed by and be construed in accordance with the
laws of the Province of British Columbia.
23. Any notice to be given to a party hereto shall be in writing and signed by
or on behalf of such party and shall be given to the other party by
delivery thereto, or by sending by prepaid registered mail, telex,
facsimile, telegram or cable to the address of the other as hereinbefore
set forth or to such other address of which notice is given, and any notice
shall be deemed not to have been sufficiently given until it is received.
Any notice or other communication contemplated herein shall be deemed to
have been received on the day delivered, if delivered; on the seventh
business day following the mailing thereof, if sent by registered mail; and
on the business day following the transmittal thereof, if sent by telex,
facsimile, telegram or cable. If normal mail, telex, facsimile, telegram or
cable service shall be interrupted by strike, slow down, force majeure or
other cause, the party sending the notice shall utilize any of the other
such services which have not been so interrupted or shall deliver such
notice in order to ensure prompt receipt of same by the other party.
24. The parties shall execute such further assurances and other documents and
instruments and do such further and other things as may be necessary to
implement and carry out the intent of this Agreement.
25. The provisions herein contained constitute the entire agreement between the
parties hereto and supersede all previous expectations, understandings,
communications, representations and agreements whether verbal or written
between parties.
26. This Agreement may be amended by a written instrument signed by the party
against whom enforcement of the amendment is sought and any waivers made on
the part of the Purchaser with respect to any terms or conditions herein
must be in writing and signed by them.
27. If any provision of this Agreement is unenforceable or invalid for any
reason whatever, such unenforceability or invalidity shall not effect the
enforceability or validity of the remaining provisions of this Agreement
and such provision shall be severable from the remainder of this Agreement.
28. Time shall be of the essence hereof.
29. The headings appearing in this Agreement are inserted for convenience of
reference only and shall not affect the interpretation of this Agreement.
30. This Agreement shall enure to the benefit of and be binding upon the
parties and their successors and permitted assigns.
-12-
<PAGE> 13
31. This Agreement may be executed in as many counterparts as may be necessary
or by facsimile and each such agreement or facsimile so executed shall be
deemed to be an original and such counterparts together shall constitute
one and the same Agreement.
IN WITNESS WHEREOF the parties hereto have caused this indenture to be executed
as of the day and year first above written.
CAMBRIDGE ASSET HOLDINGS S.A.
Per:
- -----------------------------------------
Authorized Signatory
- -----------------------------------------
Authorized Signatory
TIGERLILY FINANCIAL INC.
Per:
- -----------------------------------------
Authorized Signatory
- -----------------------------------------
Authorized Signatory
JCC CONSULTING SERVICES LTD.
Per:
- -----------------------------------------
Authorized Signatory
- -----------------------------------------
Authorized Signatory
SIGNED, SEALED and DELIVERED by Grant )
Petersen in the presence of: )
)
)
)
- ----------------------------------------- ) --------------------------------
witness name ) GRANT PETERSEN
)
)
)
)
- ----------------------------------------- )
witness address )
-13-
<PAGE> 14
SIGNED, SEALED and DELIVERED by
Albert Szajman in the presence of: )
)
)
)
- ----------------------------------------- ) --------------------------------
witness name ) ALBERT SZAJMAN
)
)
)
)
- ----------------------------------------- )
witness address )
SIGNED, SEALED and DELIVERED by
John Veltheer in the presence of: )
)
)
)
- ----------------------------------------- ) --------------------------------
witness name ) JOHN VELTHEER
)
)
)
)
- -----------------------------------------
witness address
- -----------------------------------------
witness occupation
SIGNED, SEALED and DELIVERED by David Lewis
in the presence of: )
)
)
)
- ----------------------------------------- ) --------------------------------
witness name ) DAVID LEWIS
)
)
)
)
- ----------------------------------------- )
witness address )
)
)
- ----------------------------------------- )
witness occupation )
-14-
<PAGE> 15
SIGNED, SEALED and DELIVERED by
Jihong Zhang in the presence of: )
)
)
)
- ----------------------------------------- ) --------------------------------
witness name ) JIHONG ZHANG
)
)
)
)
- ----------------------------------------- )
witness address )
)
)
- ----------------------------------------- )
witness occupation
SIGNED, SEALED and DELIVERED by
Andre Dragon in the presence of: )
)
)
- ----------------------------------------- ) --------------------------------
witness name ) ANDRE DRAGON
)
)
)
)
- ----------------------------------------- )
witness address )
)
)
- ----------------------------------------- )
witness occupation
SIGNED, SEALED and DELIVERED by
Dennis Molloy in the presence of: )
)
)
- ----------------------------------------- ) --------------------------------
witness name ) DENNIS MOLLOY
)
)
)
)
- ----------------------------------------- )
witness address )
)
)
- ----------------------------------------- )
witness occupation
-15-
<PAGE> 16
RELIANCE RESOURCES INC.
Per:
- -----------------------------------------
Authorized Signatory
- -----------------------------------------
Authorized Signatory
SUM MEDIA CORP.
Per:
- -----------------------------------------
Authorized Signatory
- -----------------------------------------
Authorized Signatory
-16-
<PAGE> 17
SCHEDULE "A"
Share Allocation Table for shares of the Purchaser to be issued to the Vendors
<TABLE>
<CAPTION>
NAME NO. OF SHARES
---- -------------
<S> <C>
JCC Consulting Services Ltd. 200,000
Albert Szajman 40,000
John Veltheer 100,000
David Lewis 100,000
Cambridge Asset Holdings S.A. 400,000
Tigerlily Financial Inc. 400,000
Grant Petersen 855,000
Jihong Zhang 200,000
Andre Dragon 50,000
Dennis Molloy 855,000
-------
TOTAL 3,200,000
</TABLE>
-17-
<PAGE> 18
SCHEDULE "B"
Current Material Liabilities of
Sum Media Corp.
As of _____________, Sum Media Corp. has no current material
liabilities, contingent or otherwise except for the following:
-18-
<PAGE> 19
SCHEDULE "C"
Stock Purchase Agreement re Patrick C. Brooks
-19-
<PAGE> 20
SCHEDULE "D"
Financial Statements of Reliance Resources Inc. for the
year ended December 31, 1998
and the quarter ended March 31, 1999
-20-
<PAGE> 21
SCHEDULE "E"
Current Liabilities of Reliance Resources Inc.
As at _____________, Reliance Resources Inc. had no current
liabilities, contingent or otherwise, except for the following:
Nil
-21-
<PAGE> 1
EXHIBIT 3.1.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
RELIANCE RESOURCES, INC.,
a Colorado corporation
The undersigned, constituting all members of the corporation's board of
directors, and acting pursuant to C.R.S. Section 7-110-107(2), hereby amend and
restate the corporation's Articles of incorporation, declaring these Amended and
Restated Articles of Incorporation effective as of the date of filing with the
Colorado Secretary of State. These Amended and Restated Articles of
Incorporation were adopted by the corporation's shareholders, the votes cast
approving adoption by each voting group entitled to vote separately on the
question sufficient for approval by each such voting group.
ARTICLE I
Name
The name of the Corporation is RELIANCE RESOURCES, INC.
ARTICLE II
Purposes and Power
The Corporation shall have and may exercise all of the rights, powers
and privileges now or hereafter conferred upon corporations organized under the
laws of the State of Colorado, and shall have and may exercise all powers
necessary or convenient to effect any of the purposes for which the Corporation
has been organized.
ARTICLE III
Capital Structure
3.1. Aggregate Shares. Classes and Series. The aggregate number of
shares of capital stock which the Corporation shall have the authority to issue
is sixty-five million five hundred thousand (65,500,000) shares of stock
designated "Common Stock", par value $0.01, and one- million (1,000,000) shares
of stock designated "Preferred Stock", par value $0.01.
The increase in the authorized amount of Common Stock from fifty
million to sixty-five million, five hundred thousand (65,500,000) shares is
accomplished by first converting each share issued and outstanding as of the
effective date of these Amended and Restated Articles of Incorporation, which
shares number five hundred thousand (500,000), into thirty-two (32) shares of
Common Stock (1:32), thereby increasing the total number of authorized shares to
sixty-five million, five hundred thousand (65,500,000), with the number issued
and outstanding as of the effective date equal to sixteen million (16,000,000).
All shares of any one series shall be alike in every particular. In
establishing a series, the Board of Directors shall give to it a distinctive
designation so as to distinguish it from the shares of all other series and-
classes, shall fix the number of shares in such series, and as to Preferred
<PAGE> 2
Stock fix the preferences, rights and restrictions thereof. Shares of Common
Stock shall, in any case, have unlimited voting rights and unfettered rights to
receive the net assets of the Corporation upon dissolution, regardless of series
designations, which rights may nonetheless be shared with other classes of
stock. All series of Preferred Stock shall be alike except that there may be
variations, as determined by the Board of Directors, as to: (1), right of
dividend; (2), terms, conditions, and price of redemption; (3), amounts payable
upon either voluntary and/or involuntary liquidation, (4), sinking fund
provisions, if any, for the call or redemption of the shares; (5), terms and
conditions of conversion, if any, and (6), voting rights consistent with
Colorado law. Before issuing any shares of a class or series, the preferences,
limitations and relative rights of which are determined by the Board of
Directors, the Corporation shall deliver to the Colorado Secretary of State
appropriate Articles of Amendment, as required by law.
3.2 Consideration for Shares. Each share of stock, when issued, shall
be My paid and nonassessable. The shares of the Corporation shall be issued for
such consideration expressed in dollars as shall be fixed from time to time by
the Board of Directors of the Corporation. The consideration for the issuance of
shares may be paid, in whole or in park in money, in other property, tangible or
intangible, or in labor or services actually performed for the Corporation. The
promise of future services shall not constitute payment or part payment for
shares of the Corporation, and neither the promissory note of a subscriber or
direct purchaser of shares from the Corporation, nor the unsecured or
nonnegotiable promissory note of any other person shall constitute payment or
part payment for shares of the Corporation. The judgment of the Board of
Directors as to the value of any property or services received shall, in the
absence of fraud or bad faith, be conclusive upon all persons.
ARTICLE IV
Voting of Share
Each shareholder of record shall have one vote for each share of stock
standing in his or her name on the books of the Corporation and entitled to
vote, except in the election of directors he or she shall have the right to vote
such number of shares for as many persons as there are directors to be elected.
Cumulative voting shall not be allowed in the election of directors or for any
other purpose.
ARTICLE V
Preemptive Rights
No holder of shares of the Corporation of any class shall have any
preemptive or preferential right in or preemptive or preferential right to
subscribe to or for or acquire any new or additional shares, or any subsequent
issue of shares, or any unissued or treasury shares of the Corporation, whether
now or hereafter authorized, or any securities convertible into or carrying a
right to subscribe to or for or acquire any such shares, whether now or
hereafter authorized.
-2-
<PAGE> 3
ARTICLE VI
Regulation of Internal Affairs
6.1 Bylaws. The initial bylaws shall be adopted by the Board of
Directors. The Board of directors may amend or repeal the bylaws unless the
shareholders, in amending or repealing a particular bylaw, provide expressly
that the directors may not amend or repeal such bylaw The shareholders may amend
or repeal the bylaws even though the bylaws may also be amended or repealed by
the Board of Directors. The bylaws may contain any provisions for the regulation
and management of the affairs of the Corporation not inconsistent with law or
these articles of incorporation.
6.2 Quorum of Shareholders and Vote Required. At all meetings of the
shareholders, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum, unless the quorum required for the
meeting has been fixed by order of a court pursuant to C.R.S. Section 7-107-103,
and at any meeting at which 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 the vote of a
greater proportion or number is required by the Colorado Business Corporation
Act.
6.3 Registered Holder of Shares. The Corporation shall be entitled to
treat the record holder of any shares of the Corporation as the owner thereof
for all purposes, including all rights deriving from the shares. The Corporation
shall not be bound to recognize any equitable or other claim to or interest in
the shares or rights deriving from the shares on the part of any other person,
including, without limitation, a purchaser, assignee or transferee of such
shares or rights deriving from the shares, unless and until the purchaser,
assignee, transferee or other person becomes the record holder of the shares,
whether or not the Corporation shall have either actual or constructive notice
of the interest. Until the purchaser, assignee or transferee of any of the
shares of the Corporation has become the record holder of the shares, he or she
shall not be entitled to receive notice of meetings, examine fists of the
shareholders, receive dividends or other sums payable to shareholders, or own,
enjoy and exercise any other property or rights deriving from the shares of the
Corporation.
6.4 Indemnification. The Corporation shall, to the fullest extent
permitted by the laws of the State of Colorado, indemnify any person who was or
is a party or threatened to be made a party to any threatened, pending or
completed action, wit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, and whether formal or informal, by reason of the
fact that he or she is or was a director, officer, fiduciary or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, fiduciary or agent of any other foreign or domestic
corporation or of any partnership, joint venture, trust, other enterprise or
employee benefit plan. The right of indemnification shall inure to the benefit
of the heirs, executors, administrators and personal representatives of such
person. The Corporation shall have the right, in its sole discretion, to
indemnify any other person to the fullest extent allowed by the laws of the
State of Colorado, except as may be limited by the bylaws from time to time in
effect.
-3-
<PAGE> 4
6.5 Insurance. The Corporation shall have the power, consistent with
Colorado law, to purchase And maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the Corporation, or who is Or
was serving at the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him or her and incurred by
him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have authority to indemnify him or her
against the liability under the provisions of these articles, or under law.
ARTICLE VII
Offices and Agents
7.1 Initial Registered Office and Agent. The address of the initial
registered office of the Corporation is: c/o Frascona, Joiner & Goodman, P.C.,
4750 Table Mesa Drive, Boulder, Colorado, 80303-5575. The name of the initial
registered agent at that address is Richard Byron Peddie.
7.1.2 Consent. I, Richard Byron Peddie, give my consent to
serve and act as initial registered agent:
-------------------------------
Richard Byron Peddie
7.2 Principal Office. The principal office of the Corporation is: Suite
1200 - 1055 West Hastings Street, Vancouver, British Columbia V6E 2E9 CANADA.
ARTICLE VIII
Directors
8.1 Number. Increase and Decrease. The number of directors may be
increased or decreased by the adoption of the amendment to, or in the manner
provided in, the bylaws, but no decrease shall have the effect of shortening the
term of any incumbent director. In the absence of any provision in the bylaws
fixing the number of directors, the number shall be the same as provided in
these articles of incorporation. The number of directors shall be one; in no
case shall the number of directors exceed nine. Directors shall serve for the
term for which they are elected and thereafter until successors are elected and
qualified.
8.2 Limitation of Personal Liability of Directors. To the extent
permitted by Section 7-108- 402 of the Colorado Business Corporation Act, as the
same may be amended and supplemented, no director of the Corporation shall be
personally liable to the Corporation or to its shareholders for monetary damages
for breach of fiduciary duty as a director, except that the foregoing shall not
eliminate or limit the liability of a director to the Corporation or to its
shareholders for monetary damages: (i) for any breach of the director's duty of
loyalty to the Corporation or to its shareholders; (H) for acts or omissions not
in good faith or which involve intentional misconduct
-4-
<PAGE> 5
or a knowing violation of law, (iii) for acts specified in Section 7-108-403 of
the Colorado Business Corporation Act; or (iv) for any transaction from which
the director derived an improper personal benefit.
* * * * *
These Amended and Restated Articles of Incorporation are effective as
of their filing with the Secretary of State of the State of Colorado.
Our hands and seals this ____ day of __________, 1999:
----------------------------------
President
----------------------------------
Chair, Board of Directors
Attest:
----------------------------------
Secretary
-5-
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
PURSUIT VENTURE CORPORATION
ARTICLE ON
OFFICES
1.01 Principal Office. The principal office of the corporation in the
State of Colorado shall be located in the City of Boulder, Boulder. The
corporation may have such other offices either within or without the State of
Colorado as the Board of Directors may designate or the business of the
corporation may require from time to time.
1.02 Registered Office. The registered office of the corporation,
required by the Colorado Corporation Code to be maintained in the State of
Colorado, may be, but need not be, identical with the principal office in the
State of Colorado, and the address of the registered office may be changed from
time to time by the Board of Directors.
ARTICLE TWO
SHAREHOLDERS
2.01 Annual Meeting. The annual meeting of the shareholders shall be
held at such time on such day as shall be fixed by the Board of Directors, for
the purpose of electing Directors and for the transaction of such other business
as may come before the meeting. If the day fixed for the annual meeting shall be
a legal holiday in the State of Colorado, such meeting shall be held on the next
succeeding business day. f the election of Directors shall not be held on the
day designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as may be
convenient.
2.02 Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or by the Board of Directors, and shall be called by the President
at the request of the holders of not less than one-tenth (1/10) of all
outstanding shares of the corporation entitled to vote at the meeting.
2.03 Place of and Notice of Meeting. The Board of Directors may
designate any place either within or without the State of Colorado as a place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the corporation in
the State of Colorado. Written notice stating the place, day and hour of the
meeting of shareholders and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall, unless otherwise prescribed by
statute, be delivered not less than ten (10) nor more
<PAGE> 2
than fifty (50) days before the date of the meeting, either-personally or by
mail, by or at the direction of the President, or the Secretary, or the Officer
or other persons calling the meeting, to each shareholder of record entitled to
vote at such meeting; provided however that if the authorized shares of the
corporation are to be increased, at least thirty (30) days notice shall be
given, and if sale of all or substantially all assets are to be voted upon, at
least twenty (20) days notice shall be given. 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.
2.04 Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders except as otherwise provided by the Colorado
Corporation Code and the Articles of Incorporation. In the absence of a quorum
at any such meeting, the majority of the shares so represented may adjourn the
meeting from time to time for a period not to exceed sixty (60) days without
further notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders present at a duly organized
meeting may continue to transact business until adjourned, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
2.05 Meeting of All Shareholders. If all of the shareholders shall meet
at any time and place, either within or outside of the State of Colorado, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or notice, and at such meeting any corporate action may be
taken.
2.06 Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other purpose, the Board of Directors of the corporation
may provide that the share transfer books shall be closed for a stated period
but not to exceed, in any case, fifty days. If the share transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
days immediately preceding such meeting. In lieu of closing the share transfer
books, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than fifty days and, in case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the share transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
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<PAGE> 3
2.07 Voting. 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 a vote of a greater
proportion or number of votes by classes is otherwise required by statute, or by
the Articles of Incorporation, or by these Bylaws. At all meetings of
shareholders, a shareholder may vote in person or by proxy executed in writing
by the shareholder or by his duly authorized attorney in fact. Such proxy shall
be filed with the Secretary of the corporation before or at the time of the
meeting. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy.
The original stock transfer books shall be the prima facie evidence as
to who are the shareholders entitled to examine the record or transfer books or
to vote at any meeting of shareholders.
2.08 Manner of Acting. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless the vote of a
greater proportion or number or voting by classes is otherwise required by
statute or by the Articles of Incorporation or these Bylaws.
2.09 Voting of Shares. Unless otherwise provided by these Bylaws or
Articles of Incorporation, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, and each fractional share shall be entitled to a corresponding
fractional vote on each such matter.
2.10 Voting of Shares by Certain Shareholder. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
Bylaws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such other corporation may determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by an administrator, executor, Court appointed
guardian or conservator, either in person or by proxy without a transfer of such
shares into the name of such administrator, executor, Court appointed guardian
or conservator. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into the trustee name if authority so to
do be contained in an appropriate order of the Court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
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<PAGE> 4
Neither shares of its own stock belonging to this corporation, nor
shares of its own stock held by it in a fiduciary capacity, nor shares of its
own stock held by another corporation if the majority of shares entitled to vote
for the election of directors of such corporation is held by that corporation
may be voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time.
Redeemable shares which have been called for redemption shall not be
entitled to vote on any matter and shall not be deemed outstanding shares on and
after the latter of the date on which written notice of redemption has been
mailed to shareholders and a sum sufficient to redeem such shares has been
deposited with a bank or trust company with irrevocable instruction and
authority to pay the redemption price to the holders of the shares upon
surrender of certificates therefore.
2.11 Voting by Ballot. Voting on any question or in any election may be
by voice vote unless the presiding officer shall order or any shareholder shall
demand that voting be by ballot.
2.12 Informal Action by Shareholders. Any action required or permitted
to be taken at a meeting of the shareholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
2.13 No Cumulative Voting. No shareholder shall be permitted to
cumulate his votes by giving one candidate as many votes as the number of such
directors multiplied by the number of his shares shall equal, or by distributing
such votes on the same principle among any number of candidates.
ARTICLE THREE
BOARD OF DIRECTORS
3.01 General Powers. The business and affairs of the corporation shall
be managed by its Board of Directors.
3.02 Number of Directors, Tenure and Qualification. The number of
directors of the corporation shall be fixed from time to time by a resolution of
the Board of Directors but shall not be less than one (1), or that number
otherwise required by law. Each director shall hold office until his successor
shall have been elected and qualified. Directors need not be residents of the
State of Colorado or shareholders of the corporation.
The Board of Directors shall be divided into three classes as nearly
equal in number as possible. The initial terms of directors elected in 1997
shall expire as of the annual meeting of shareholders for the years indicated
below:
Class I Directors ..........................2000
Class II Directors..........................1999
Class III Directors.........................1998
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<PAGE> 5
Upon expiration of the initial term specified for each class of
directors, their successors shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain or attain, if possible, the equality of the
number of directors in each class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. If an equality in
number is not possible, the increase or decrease shall be apportioned among the
classes in such a way that the difference in the number of directors in any
class shall not exceed one.
3.03 Chairman of the Board. There shall be a Chairman of the Board, who
has been elected from among the directors. He shall preside at all meetings of
the stockholders and of the Board of Directors. He shall have such other powers
and duties as may be prescribed by the Board of Directors.
3.04 Regular Meetings. Regular meeting of the Board of Directors shall
be held without other notice than this Bylaw immediately after, and at the same
place, as the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place either within or without the State of
Colorado, for the holding of additional regular meetings without other notice
than such resolution.
3.05 Special Meeting. Special meetings of the Board of Directors may be
called by or at the request of the President or any director. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Colorado, as the place for
holding any special meeting of the Board of Directors called by them.
3.06 Notice. Written notice of any special meeting of directors shall
be given as follows: (a) by mail to each director at his business address at
least three (3) days prior to the meeting, or (b) by personal delivery or
telegram at least twenty-four (24) hours prior to the meeting to the business
address of each director, if any, but in the event such notice is given on
Saturday, Sunday or a holiday, personal delivery to the residence address of
each director. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, so addressed, with postage thereon
pre-paid. If notice be given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company. Any director
may waive notice of any meeting. The attendance of a director at any meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
3.07 Quorum. A majority of the number of directors fixed by or pursuant
to Section 3.02 of this Article III shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if less
than such majority is present at a meeting, a majority of the directors present
may adjourn the meeting from time to time without further notice.
3.08 Participation by Electronic Means. Any member of the Board of
Directors or any committee designated by such board may participate in a meeting
of the Board of Directors or a committee by means of telephone conference or
similar communications equipment by which all persons participating in a meeting
can hear each other at the same time. Such participation shall constitute the
presence of the person at the meeting.
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<PAGE> 6
3.09 Manner of Acting. Except as otherwise required by law or by the
Articles of Incorporation, the act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
3.10 Informal Action by Directors. Any action required or permitted to
be taken by the Board of Directors or in a committee thereof at a meeting may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors or all of the committee members
entitled to vote with respect to the subject matter thereof.
3.11 Vacancies. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors through
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the Board of Directors for a term of
office continuing only until the next election by the shareholders.
3.12 Resignation. Any director of the corporation may resign at any
time by giving written notice to the President or the Secretary of the
corporation. The resignation of any director shall take effect upon receipt of
notice thereof or at such later time as shall be specified in such notice; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. When one or more directors shall resign from
the board, effective at a future date, a majority of the- directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective.
3.13 Removal. Any director or directors of the corporation may be
removed at any time, with or without cause, in the manner provided in the
Colorado Corporation Code.
3.14 Committees. By resolution adopted by a majority of the Board of
Directors, the directors may designate two or more directors to constitute a
committee, any of which shall have such authority in the management of the
corporation as the Board of Directors shall designate and as shall be prescribed
by the Colorado Corporation Code.
3.15 Compensation. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, each director may
be paid his expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated salary as director or a fixed sum for
attendance of each meeting of the Board of Directors or both. No such payment
shall preclude any director from serving the corporation in any other capacity
and receiving any other compensation therefor.
3.16 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
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
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<PAGE> 7
ARTICLE FOUR
OFFICERS
4.01 Number of Officers. The officers of the corporation shall be a
President, Vice President, a Secretary and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
Any two (2) or more offices may be held by the same person. Officers need not be
residents of the State of Colorado or shareholders of the corporation.
4.02 Election and Term of Office. The officers of the corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after the annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as practicable.
Each officer shall hold office until his successor shall have been duly elected
and shall have qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided.
4.03 Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
4.04 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise may be filled by the Board of Directors
for the unexpired portion of the term.
4.05 President. The President shall be the Chief Executive Officer of
the corporation and subject to the control of the Board of Directors shall, in
general, supervise and control all of the business and affairs of the
corporation. He may sign, with the Secretary or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares of the corporation and deeds, mortgages, bonds, contracts or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed, and
in general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.
4.06 Vice-President. If elected or appointed by the Board of Directors,
the Vice-President (or in the event there be more than one vice-president, the
vice-presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall, in the
absence of the President or in the event of his death, inability or refusal to
act, perform all duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. Any
Vice-President may sign, with the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, certificates for shares of the corporation;
and shall perform such other duties as from time to time may be assigned to him
by the President or by the Board of Directors.
4.07 The Secretary. The Secretary shall: a) Keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one (1) or more
books provided for that purpose, b) See that all notices are duly given in
accordance with provisions of these Bylaws or as required by law, c) Be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal
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<PAGE> 8
is duly authorized, d) Keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder, e)
Sign with the President for certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors, f) Have general charge of the stock transfer books of the
corporation, and g) In general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned by the
President or by the Board of Directors.
4..08 Treasurer. The Treasurer shall: a) Have charge and custody of and
be responsible for all funds and securities of the corporation; b) Receive and
give receipts for money due and payable to the corporation from any source
whatsoever, and deposit all such monies in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article Five of these Bylaws; and c) In general, perform
all duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the President or by the Board of
Directors.
4.09 Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries, when authorized by the Board of Directors, may sign with the
Chairman or Vice-Chairman of the Board of Directors or the President or
Vice-President certificates for shares of the corporation the issuance of which
shall have been authorized by a resolution of the Board of Directors. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
4.10 Bonds. If the Board of Directors by resolution shall so require,
any officer or agent of the corporation shall give bond to the corporation in
such amount and with such surety as the Board of Directors may deem sufficient,
conditioned upon the faithful performance of their respective duties and
offices.
4.11 Salaries. The salaries of the officers shall be fixed from time to
time by the Board of Directors. An officer shall not be prevented from receiving
such salary by reason of the fact that he is also a director of the corporation.
4.12 Excessive Compensation. Officers will return to the corporation
any and all compensation that is deemed excessive by the IRS or the Courts.
4.13 Reimbursement of Expense. Officers will reimburse the corporation
for any and all expenses that are subsequently deemed by the IRS or the Courts
to be personal rather than corporate in nature.
ARTICLE FIVE
CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.01 Contract. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on be-half of the corporation, and such authority
may be general or confined to specific instances.
5.02 Loan. No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the Board of Directors.
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<PAGE> 9
.Such authority may be general or confined to specific instances.
5.03 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
5.04 Deposit. All funds of the corporation not otherwise shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
ARTICLE SIX
SHARES AND CERTIFICATES FOR SHARES AND TRANSFER OF SHARES
6.01 Share Certificate. Certificates representing shares of the
corporation shall be respectively numbered serially for each class of shares or
series thereof as they are issued, shall be impressed with the corporate seal or
a facsimile thereof, and shall be signed by the President or Vice- President and
by the Secretary or Treasurer; provided that such signatures may be facsimile if
the certificate is countersigned by a transfer agent. Each certificate shall
state the name of the corporation, the fact that the corporation is organized or
incorporated under the laws of the State of Colorado, the name of the person-to
whom issued, the date of issue, the class (or series of any class), the number
of shares represented thereby and the par value of the shares represented
thereby or a statement that such shares are without par value.
A statement of the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
class shall be set forth in full or summarized on the face or back of the
certificates which the corporation shall issue, or in lieu thereof, the
certificate may set forth that such a statement or summary will be furnished to
any shareholder upon request without charge. Each certificate shall be otherwise
in such form as may be prescribed by the Board of Directors and as such shall
conform to the rules of any stock exchange on which the shares may be listed.
The corporation shall not issue certificates representing fractional
shares and shall not be obligated to make any transfers creating a fractional
interest in a share of stock. The corporation may, but shall not be obligated
to, issue scrip in lieu of any fractional shares, such scrip to have terms and
conditions specified by the Board of Directors.
6.02 Cancellation of Certificates. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificates shall be
issued in lieu thereof until the former certificate for a like number of shares
shall have been surrendered and canceled, except as herein provided with respect
to lost, stolen or destroyed certificates.
6.03 Transfer of Shares. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of the
corporation shall be transferable on the books of the corporation by the holder
thereof in person or by his duly authorized attorney, upon the surrender and
cancellation of the certificate or certificates for a like number of shares.
Upon presentation and surrender of a certificate for shares properly endorsed
and payment of all taxes therefor, the transferee shall be entitled to a new
certificate or
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<PAGE> 10
certificates in lieu thereof. As against the corporation, the transfer of shares
will be made only on the books of the corporation and in the manner hereinabove
provided, and the corporation shall be entitled to treat the holder of record of
any share as the owner thereof and shall not be bound to recognize any equitable
or other claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, save as expressly
provided by the statutes of the State of Colorado.
6.04 Lost, Stolen or Destroyed Certificates. Any shareholder claiming
that his certificate for shares is lost, stolen or destroyed may make an
affidavit or affirmation of that fact and lodge the same with the Secretary of
the corporation, accompanied by signed application for a new certificate,
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation), a
new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
6.05 Regulation. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
ARTICLE SEVEN
FISCAL YEAR
The fiscal year of the corporation shall be the calendar year, unless
otherwise established by the Board of Directors.
ARTICLE EIGHT
DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE NINE
CORPORATE SEAL
The Board of Directors shall be authorized, but not required, to use a
corporate seal, which if used shall be circular in form and contain the name of
the corporation and the words "Corporate Seal".
ARTICLE TEN
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of
these Bylaws or under the provisions of the Articles of Incorporation or under
the provisions of the Colorado Corporate Code, or otherwise, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether
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<PAGE> 11
before or after the event or other circumstance requiring such notice, shall be
deemed equivalent to the giving of such notice.
ARTICLE ELEVEN
AMENDMENTS
These Bylaws may be altered, amended or repealed and new By-laws may be
adopted by a majority of the Directors present at any meeting of the Board of
Directors of the corporation at which a quorum is present.
ARTICLE TWELVE
EMERGENCY BYLAWS
13.01 The Emergency Bylaws provided in this Article shall be operative
during any emergency in the conduct of the business of the corporation resulting
from an attack on the United States or any nuclear or atomic disaster,
notwithstanding any different provision in the preceding Articles of the Bylaws
or in the Articles of Incorporation of the corporation or in the Colorado
Corporation Code. To the extent not inconsistent with the provisions of this
Article, the Bylaws provided in the preceding articles shall remain in effect
during such emergency and upon its termination the Emergency Bylaws shall cease
to be operative.
During any such emergency:
(a) A meeting of the Board of Directors may be called by any officer or
director of the corporation. Notice of the time and place of the meeting shall
be given by the person calling the meeting to such of the directors as may be
feasible to reach by any available means of communication. Such notice shall be
given at such time in advance of the meeting as circumstances permit in the
judgment of the person calling the meeting.
(b) At any such meeting of the Board of Directors, a quorum shall
consist of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such emergency,
may, effective in the emergency, change the principal office or designate
several alternative principal offices or regional offices, or authorize the
officers so to do.
(d) The Board of Directors, either before or during any such emergency,
may provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the corporation shall
for any reason be rendered incapable of discharging their duties.
(e) No officer, director or employee acting in accordance with these
Emergency Bylaws shall be liable except for willful misconduct.
(f) These Emergency Bylaws shall be subject to repeal or change by
further action of the Board of Directors or by action of the shareholders, but
no such repeal or change shall modify the
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<PAGE> 12
provisions of the next preceding paragraph with regard to action taken prior to
the time of such repeal or change any amendment of these Emergency Bylaws may
make any further or different provision that may be practical and necessary for
the circumstances of the emergency.
ARTICLE THIRTEEN
INDEMNIFICATION
The corporation shall indemnify any person (including his estate) made
or threatened to be made a party to any suit or proceeding, whether civil or
criminal, by reason of the fact that he was a director or officer of the
corporation or served at its request as a director or officer of another
corporation, against judgments, fines, amounts paid in settlement and reasonably
expenses, including attorney fees actually and necessarily incurred as a result
of such threat, suit or proceeding, or any appeal therein, to the full extent
permitted by the Colorado Corporation Code.
Certificate
I hereby certify that the foregoing Bylaws, consisting of eleven (11)
pages, including this page, constitute the Bylaws of Pursuit Venture
Corporation, adopted by the Board of Directors of the corporation as of August
10th, 1998.
- ---------------------------------
Corporate Secretary
-12-
<PAGE> 1
EXHIBIT 10.1
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
CUSTOMER: 1200-1055 W. Hastings St. PURCHASE ORDER NO.:
ADDRESS: Vancouver, BC V6E 2E9 PURCHASE ORDER DATE:
ORACLE AGREEMENT NO:.
CONFIGURATION ID (CID):
- --------------------------------------------------------------------------------------------------------------------------------
# OF NUMBER
COPIES OF USER LICENSE LEVEL OF
PRODUCTS AND SERVICES TO SHIP USERS TYPE TYPE LICENSE FEES SUPPORT SUPPORT FEES
- ----------------------------------------------------- -------- ------- ------ ------- --------------- --------- ----------------
(cont'd from previous page)
Oracle JDeveloper Suite 1 1 D F S
Oracle Developer 1 1 D F S
Subtotal $ 2,121,065.00 $ 512,520.00
Less discount $ (615,108.85) (148,630.80)
Less discount $ (151,620.50)
Less discount $ (60,648.20)
Total $ 1,354,335.65 $ 303,241.00
- --------------------------------------------------------------------------------------------------------------------------------
TAXES WILL BE BILLED TO CUSTOMER UNLESS EXEMPTION IS CERTIFIED. CHECK IF NON-TAXABLE: GST: [ ] PST: [ ]
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE AND OPERATING SYSTEM USER TYPE LICENSE TYPE LEVEL OF SUPPORT
- -------------------------------------- --------- ------------ ----------------
MAKE/MODEL: Intel NT unless specified (C) CONCURRENT (F) FULL USE (B) BRONZE
OPERATING SYSTEM: NT (N) NAMED (A) APPLICATION (S) SILVER
SPECIFIC
MACHINE REFERENCE: (CO) COMPUTER (W) WEB SPECIFIC
SOFTWARE MEDIA : CD (CA) CASUAL (WA) WEB APPLICATION SPECIFIC
CPU LOCATION: Customer Site (P) POWER UNIT
FOR APPLICATION SPECIFIC ONLY - CUSTOMER APPLICATION:
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
CONTRACT ADMINISTRATOR TECHNICAL SUPPORT CONTACT
NAME: David Noble NAME: David Noble
ADDRESS: 1200-1055 W. Hastings St. ADDRESS: 1200-1055 W. Hastings St.
Vancouver, BC V6E 2E9 Vancouver, BC V6E 2E9
PHONE: 604-618-2317 PHONE: 604-618-2317
BILLING/ACCOUNTS PAYABLE CONTACT SHIP TO
NAME: David Lewis NAME: David Noble
ADDRESS: 1200-1055 W. Hastings St. ADDRESS: 1200-1055 W. Hastings St.
Vancouver, BC V6E 2E9 Vancouver, BC V6E 2E9
PHONE: 604-605-0901 PHONE: 604-648-2317
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
SPECIAL NOTES: UNLESS OTHERWISE SPECIFIED HEREIN OR IN AN ORDER FORM, CUSTOMER IS LICENSED TO USE THE PROGRAMS IN CANADA
ONLY.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
CUSTOMER: SUMmedia.com ORACLE CORPORATION CANADA INC.
- --------------------------------------------------------------------------------------------------------------------------------
AUTHORIZED SIGNATURE: AUTHORIZED SIGNATURE:
- --------------------------------------------------------------------------------------------------------------------------------
NAME: NAME:
- --------------------------------------------------------------------------------------------------------------------------------
TITLE: TITLE:
- --------------------------------------------------------------------------------------------------------------------------------
DATE: DATE:
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EFFECTIVE DATE OF THIS AGREEMENT SHALL BE ______________, 19__ , OR IF LEFT
BLANK THE EARLIER OF THE DATES SET OUT ABOVE. THIS ORDER IS PLACED SUBJECT TO
THE TERMS AND CONDITIONS ABOVE AND ON THE FOLLOWING PAGES.
Page 1 of 6
<PAGE> 2
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
TERMS AND CONDITIONS
This Software License and Services Agreement (the "Agreement") is between Oracle
Corporation Canada Inc. with its principal place of business at 110 Matheson
Blvd., West, Suite 100, Mississauga, Ontario, L5R 3P4 ("Oracle") and the
customer identified on the signature page of this Agreement ("Customer"). The
terms of this Agreement shall apply to each Program license granted and to all
Services provided by Oracle under this Agreement and any Order Form.
I DEFINITIONS
1.1 "APPLICATION SPECIFIC PROGRAM" shall mean one or more of the Programs
with the following restrictions:
(a) limited for use solely for the purpose of executing the Customer
application identified in an Order Form (the "Application");
(b) may not be used to create new tables or alter tables except to the
extent necessary to implement the Application and may not allow
use of the Program's "Create" or "Alter" commands or any other
command to create or alter tables outside the scope of that which
is necessary for the operation of the Application; and
(c) may not be used to build or modify reports or with other
applications.
1.2 "CASUAL USER" shall mean an individual authorized by the Customer to only
run queries or reports against Oracle Application Programs. Casual Users
are licensed to use any of the Oracle Applications and Extensions to
Oracle Applications for which Customer has acquired Named User licenses."
1.3 "COMMENCEMENT DATE" shall mean the date on which the Programs are
delivered by Oracle to Customer or, if no delivery is necessary, the
Effective Date set forth on the relevant Order Form.
1.4 "CONCURRENT DEVICES" shall mean the maximum number of input devices
accessing the Programs at any given point in time. If multiplexing
software or hardware (e.g. a TP monitor, webserver product) is used, this
number must be measured at the multiplexing front-end.
1.5 "DESIGNATED SYSTEM" shall mean the computer hardware and operating system
designated on the relevant Order Form.
1.6 "DOCUMENTATION" shall mean the user guides and manuals for installation
and use of the Program software. Documentation is provided in CD-ROM or
bound form, whichever is generally available.
1.7 "FULL-USE PROGRAMS" shall mean unaltered versions of the Programs with
all functions intact.
1.8 "LIMITED PRODUCTION PROGRAM" shall mean a Program which does not appear
on the Price List or which is designated as Limited Production by Oracle.
1.9 "ORDER FORM" shall mean the document in hard copy or electronic form by
which Customer orders Program licenses and/or Services and which is
agreed to by the parties. The Order Form shall reference the Effective
Date of this Agreement.
1.10 "PRICE LIST" shall mean Oracle's applicable standard commercial fee
schedule that is in effect when a Program license or any other product or
service is ordered by Customer.
1.11 "PROGRAM" shall mean the software in object code form distributed by
Oracle for which Customer is granted a license pursuant to this
Agreement, the media, the Documentation and Updates.
1.12 "SERVICES" shall mean Technical Support, training, consulting or other
services provided by Oracle to Customer under this Agreement.
1.13 "SUPPORTED PROGRAM LICENSE" shall mean a Program license for which
Customer has ordered Technical Support for the relevant time period.
1.14 "TECHNICAL SUPPORT" shall mean Program support provided under Oracle's
policies in effect on the date Technical Support is ordered.
1.15 "UPDATE" shall mean a subsequent release of the Program which is
generally made available for Supported Program Licenses at no additional
charge other than media and handling charges. Update shall not include
any release, option or future product which Oracle licenses separately.
1.16 "USER," unless otherwise specified on the Order Form, shall mean a person
authorized by Customer to use specified Programs, regardless of whether
the individual is actively using the Programs at any given time.
II. PROGRAM LICENSE
2.1. RIGHTS GRANTED
A. Oracle grants to Customer a nonexclusive license to use the
Programs Customer obtains under this Agreement, as of the
Commencement Date as follows:
i. to use the Programs solely for Customer's operations on the
Designated System or on a backup system if the Designated
System is inoperative, consistent with the use and/or User
limitations specified or referenced in this Agreement, an
Order Form and the Documentation. Customer may not
re-license, rent or lease the Programs or use the Programs
for third-party training, commercial time-sharing, rental
or service bureau use;
ii. to use the Documentation in support of Customer's
authorized use of the Programs;
iii. to copy the Programs for archival or backup purposes and to
make a sufficient number of copies for the User limitations
specified in the Order Form. All titles, trademarks,
copyright and restricted rights notices shall be reproduced
in such copies. All archival and backup copies of the
Programs are subject to the terms of this Agreement;
iv. to modify the Programs and combine them with other software
products; and
v. to allow third parties to use the Programs for Customer's
operations so long as Customer
Page 2 of 6
<PAGE> 3
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
ensures that use of the Programs is in accordance with the
terms of this Agreement.
Customer shall not copy or use the Programs except as otherwise
specified in this Agreement or an Order Form.
In the event that the number of copies of the Programs shipped to
Customer is less than the number actually licensed pursuant to
this Agreement, then Customer shall have the right to make copies
of the Programs up to the number licensed hereunder. In the event
Customer does not, for any reason whatsoever, make and/or use the
number of copies actually licensed pursuant to this Agreement, it
shall, nevertheless, pay to Oracle all license fees due hereunder.
In the event Customer specifies that no shipment of media is
required for any Program, then Customer shall have been deemed to
have a master copy of such Program and no additional shipment is
required.
Customer shall have no right to use any other Oracle software
program that may be delivered with the Programs.
B. Customer agrees not to cause or permit the reverse engineering,
disassembly or decompilation of the Programs, except to the extent
required to obtain interoperability with other independently
created software or as specified by law.
C. Oracle shall retain all title, copyright and other proprietary
rights in the Programs. Customer does not acquire any rights,
express or implied, in the Programs, other than those specified in
this Agreement.
2.2. NETWORK LICENSE
Customer may order a Network license for Programs using a
Network Order Form which shall have the following additional rights
granted:
A. To use the Programs on up to five (5) Server operating systems. If
the number of Server operating systems specified in a Network
Order Form is less than five (5), Customer may, by written notice
to Oracle during the one-year period commencing on the effective
date of the Network Order Form, request Oracle to deliver, (at a
charge of One Thousand Dollars ($1000) per Server operating system
to cover media, documentation, shipping and handling charges), the
corresponding software media and Documentation for the Network
Program Set, for such additional Server operating system(s), up to
a maximum of five (5), added by Customer to the Network; provided
that: i) the Programs licensed hereunder are available in
production release status on the additional Server operating
system(s) at the time Customer elects to add such additional
Server operating system(s); and ii) Customer has continuously
maintained Technical Support for the Network Program Set on the
Server operating systems being used prior to such written notice.
B. The addition of new Server operating systems beyond the five (5)
provided for in this Agreement shall, in addition to the
provisions set out in 2.2A above, be subject to payment by
Customer to Oracle of ten percent (10%) of the net license fees
for the Network Program Set as set forth in a Price Addendum in
effect, or, in the absence of a valid Price Addendum, under
Oracle's standard Price List in effect at the time of such
addition. Payment shall be due and payable on the date Customer
exercises this option.
C. Despite anything to the contrary contained in this Agreement,
Customer shall not be required to report to Oracle which Programs
included in the Network Program Set are installed on which Server
or how many Servers are included in the Network. Customer may
freely transfer the Programs between Servers in the Network at no
additional charge; however substitutions of Server operating
systems licensed under this Agreement may be made (at a charge of
One Thousand Dollars ($1000) per Server operating system to cover
media, documentation, shipping and handling charges) for a period
of three (3) years from the effective date of the applicable
Network Order Form provided that: i) Customer has maintained
continuous Technical Support for the Programs, ii) notifies Oracle
in writing of any such change in Server operating systems; and
iii) the total number of Server operating systems on which the
Network Program Set is run does not exceed five (5). Thereafter
such changes may require the payment of additional fees in
accordance with Oracle's standard license transfer policies then
in effect.
D. Notwithstanding the foregoing, Oracle makes no representation or
guarantee with respect to the future availability of the Programs
on any operating system and Oracle shall not be liable for any
expenditures incurred, or loss suffered, as a result of Customer
relying on the future delivery by Oracle of the Programs on any
operating system.
All fees paid pursuant to this Section 2.2 are non-cancellable and the
sum paid non-refundable.
2.3. TRANSFER AND ASSIGNMENT
A. Customer may transfer a Program license within its organization
upon notice to Oracle. Transfers are subject to the terms and fees
specified in Oracle's transfer policy in effect at the time of the
transfer.
B. Program licenses are personal to Customer. Customer may not assign
this Agreement or a Program license, or any interest in either, to
a legal entity separate from Customer except as part of a merger
or other sale of Customer's business. Such assignment requires the
prior written consent or Oracle, which shall not be unreasonably
withheld.
2.4. VERIFICATION
At Oracle's written request, not more frequently than annually, Customer
shall furnish Oracle with a signed certification verifying that the
Programs are being used pursuant to the provisions of this Agreement.
Oracle may, at its expense, audit Customer's use of the Programs. Any
such audit shall be conducted during regular business hours at Customer's
facilities and shall not unreasonably interfere with Customer's business
activities. Customer agrees to co-operate in the audit, including
providing access to servers, employees and information reasonably
requested by Oracle. If an audit reveals that Customer has underpaid fees
to Oracle, Customer shall be invoiced for such underpaid fees based on
the Price List in effect at the time the audit is completed. Audits shall
be conducted no more than once annually.
III. SERVICES
3.1. TECHNICAL SUPPORT SERVICES
Page 3 of 6
<PAGE> 4
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
Technical Support ordered by Customer will be provided under Oracle's
Technical Support policies in effect on the date Technical Support is
ordered, subject to the payment by Customer of the applicable fees.
3.2. CONSULTING, TRAINING AND OTHER SERVICES
A. PROVISION OF SERVICES Oracle will provide consulting, training and
other services agreed to by the parties under the terms of this
Agreement. Consulting services shall be billed on a time and
materials basis unless the parties expressly agree otherwise in
writing.
B. DIRECTION OF SERVICES Unless otherwise specifically agreed in
writing, Customer shall be responsible for the direction of the
services.
C. NON-SOLICITATION
During the term of an Oracle employee's work or assignment in
connection with Services, and for a period of six (6) months after
such work or assignment terminates, Customer agrees not to
directly or indirectly solicit, recruit for employment or offer
sub-contracting opportunities to or knowingly employ any such
employee, without the prior written consent of Oracle. In the
event of a breach of this provision by Customer, Customer shall
pay Oracle as liquidated damages and not as a penalty, an amount
equal to twelve (12) months salary for the employee engaged by the
Customer.
D. CHANGES Oracle shall not be in breach of any warranties provided
for in this Agreement if any of the relevant software, hardware,
products, goals or related system environment has been changed by
Customer or any other person without Oracle's specific consent in
writing. Where such unauthorized changes impede or make more
costly the provision of Technical Support or consulting services
hereunder, Oracle shall take such corrective action only if
Customer agrees to bear such additional cost, at Oracle's then
prevailing rates.
E. COOPERATION Customer acknowledges that the timely provision of and
access to office accommodations, facilities, equipment,
assistance, cooperation, complete and accurate information and
data from its officers, agents, and employees, and suitably
configured computer products are essential to performance of any
Services and that Oracle's ability to complete any Services is
dependent upon same. If the relevant requirement(s), project
plan(s), schedule, scope, specification(s), design(s), software,
hardware product(s), or related system environment(s) or
architecture are changed by Customer or any other person, Oracle
shall not be responsible for the change unless Customer and Oracle
specifically consent to the change, scheduling, and additional
charges, if any, in writing.
3.3. INCIDENTAL EXPENSES
For any on-site Services requested by Customer, Customer shall reimburse
Oracle for actual, reasonable travel and out-of-pocket expenses incurred.
IV. TERM AND TERMINATION
4.1. TERM
If not otherwise specified on the Order Form, each Program license shall
remain in effect perpetually unless the license or this Agreement is
terminated as provided in Section 4.2 or 4.3.
4.2. TERMINATION BY CUSTOMER
Customer may terminate any Program license at any time; however,
termination shall not relieve Customer's obligations specified in Section
4.4.
4.3. TERMINATION BY ORACLE
Oracle may terminate this Agreement or any Program license upon written
notice if Customer breaches this Agreement and fails to correct such
breach within 30 days following written notice thereof.
4.4. EFFECT OF TERMINATION
Termination of this Agreement or any license shall not limit either party
from pursuing other remedies available to it, including injunctive
relief, nor shall such termination relieve Customer's obligation to pay
all fees that have accrued or are otherwise owed by Customer under any
Order Form or other similar ordering document under this Agreement. The
parties' rights and obligations under Sections 2.1B, 2.1C, 2.2B and 2.3,
and Articles IV, V, VI and VII shall survive termination of this
Agreement.
4.5. HANDLING OF PROGRAMS UPON TERMINATION.
If a license granted under this Agreement terminates, Customer shall: (a)
cease using the applicable Programs; and (b) certify to Oracle within one
month after termination that Customer has destroyed or has returned to
Oracle the Programs and all copies. This requirement applies to copies in
all forms, partial and complete, in all types of media and computer
memory, and whether or not modified or merged into other materials.
V. INDEMNITY, WARRANTIES, REMEDIES
5.1. INFRINGEMENT INDEMNITY
Oracle will defend and indemnify Customer against a claim that the
Programs infringe a copyright or patent, provided that: (a) Customer
notifies Oracle in writing within 30 days of the claim; (b) Oracle has
sole control of the defense and all related settlement negotiations; and
(c) Customer provides Oracle with the assistance, information and
authority necessary to perform Oracle's obligations under this Section.
Reasonable out-of-pocket expenses incurred by Customer in providing such
assistance will be reimbursed by Oracle. Oracle shall have no liability
for any claim of infringement based on use of a superseded or an altered
release of a Program if the infringement would have been avoided by the
use of a current unaltered release of the Program which Oracle provides
to Customer.
In the event a Program is held or is believed by Oracle to infringe,
Oracle shall have the option, at its expense, to; (a) modify the Program
to be non-infringing; or (b) obtain for Customer a license to continue
using the Program. If it is not commercially reasonable to perform either
of the above options, then Oracle may terminate the license for the
infringing Program and refund the license fees paid for the Program. This
Section 5.1 states Oracle's entire liability and Customer's exclusive
remedy for infringement.
Page 4 of 6
<PAGE> 5
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
5.2. WARRANTIES AND DISCLAIMERS
A. PROGRAM WARRANTY
Oracle warrants for a period of one year from the Commencement Date that
each unmodified Program will perform the functions described in the
Documentation.
Oracle warrants that the current production version of the Programs will,
to the extent applicable as set forth in the Documentation, fully comply
with the following millennium compliance statement when configured and
used according to the documented instructions. The definition of
compliance is the ability to:
(a) correctly handle date information before, during and after 1
January 2000 accepting date input, providing date output and
performing calculation on dates or portions of dates;
(b) function according to the Documentation, during and after 1
January 2000 without changes in operation resulting from the
advent of the new century assuming correct configuration;
(c) where appropriate, respond to two digit date input in a way
that resolves the ambiguity as to century in a disclosed,
defined and predetermined manner;
(d) store and provide output of date information in ways that are
unambiguous as to century; and
(e) manage the leap year occurring in the year 2000, following the
quad-centennial rule.
Oracle shall have no liability for any alleged or actual breach of the
"year 2000" warranty provided in the preceding sentence if such claim is
based upon a superseded or altered release of Programs and such claim
would have been avoided by the use of a current unaltered release of
Programs which Oracle provides to Customer. Any breach of this warranty
is subject to the exclusive remedies as set forth in Section 5.3 of the
Agreement
B. MEDIA WARRANTY
Oracle warrants the tapes, diskettes or other media to be free of defects
in materials and workmanship under normal use for 90 days from the
Commencement Date.
C. SERVICES WARRANTY
Oracle warrants that Services will be performed in accordance with
generally accepted industry standards. This warranty shall be valid for
90 days from the performance of such Services.
D. DISCLAIMERS
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES AND
CONDITIONS OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
ORACLE DOES NOT WARRANT THAT THE PROGRAMS WILL MEET CUSTOMER'S
REQUIREMENTS, THAT THE PROGRAMS WILL OPERATE IN THE COMBINATIONS WHICH
CUSTOMER MAY SELECT FOR USE, THAT THE OPERATION OF THE PROGRAMS WILL BE
UNINTERRUPTED OR ERROR-FREE, OR THAT ALL PROGRAM ERRORS WILL BE
CORRECTED. LIMITED PRODUCTION PROGRAMS, PRE-PRODUCTION RELEASES OF
PROGRAMS, AND COMPUTER-BASED TRAINING PRODUCTS ARE DISTRIBUTED "AS IS."
5.3. EXCLUSIVE REMEDIES
For any breach of the warranties contained in Section 5.2, Customer's
exclusive remedy, and Oracle's entire liability, shall be:
A. FOR PROGRAMS
The correction of Program errors that cause breach of the warranty
or, if Oracle is unable to make the Program operate as warranted,
Customer shall be entitled to terminate the Program license and
recover the fees paid to Oracle for the Program license.
B. FOR MEDIA
The replacement of defective media returned within 90 days from the
Commencement Date.
C. FOR SERVICES
The re-performance of the Services or, if Oracle is unable to perform
the Services as warranted, Customer shall be entitled to recover the
fees paid to Oracle for the unsatisfactory Services.
VI. PAYMENT PROVISIONS
6.1. INVOICING AND PAYMENT
All fees for Programs and Services provided hereunder shall be due and
payable 30 days from the date of Oracle's invoice. Any amounts payable by
Customer hereunder which remain unpaid after the due date shall be
subject to a late charge equal to 12% per annum, calculated from the due
date until such amounts are paid. Customer agrees to pay applicable media
and shipping charges. Customer shall issue a purchase order or
alternative document acceptable to Oracle, on or before the Effective
Date of the applicable Order Form.
6.2. TAXES
The fees listed in this Agreement do not include taxes; if Oracle is
required to pay sales, use, goods and services or other taxes based on
the licenses granted or Services provided pursuant to this Agreement or
on Customer's use of Programs or Services, then such taxes shall be
billed to and paid by Customer. This Section shall not apply to taxes
based on Oracle's income.
VII. GENERAL TERMS
7.1 NONDISCLOSURE
By virtue of this Agreement, the parties may have access to information
that is confidential to one another ("Confidential Information").
Confidential Information shall be limited to the Programs, the terms and
pricing contained in this Agreement, and all information clearly
identified as confidential. A party's Confidential Information shall not
include information that: (a) is or becomes a part of the public domain
through no act or omission of the other party; (b) was in the other
party's lawful possession prior to the disclosure and had not been
obtained by the other party either directly or indirectly from the
disclosing party; (c) is lawfully disclosed to the other party by a third
party without restriction on disclosure; or (d) is independently
developed by the other party. Customer shall not disclose the results of
any benchmark tests of the Programs to any third party without Oracle's
prior written approval. The parties agree to hold each other's
Confidential Information in confidence during the term of this Agreement
and for a period of two years after termination of this Agreement. The
parties agree, unless required by law, not to make each other's
Confidential Information available in any form to any third party or to
use each other's Confidential Information for any purpose other than the
implementation of this Agreement. Each party agrees to take all
reasonable steps to ensure that Confidential Information is not disclosed
or distributed by its employees or agents in violation of the terms of
this Agreement.
7.2 GOVERNING LAW
Page 5 of 6
<PAGE> 6
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
This Agreement and all matters arising out of or relating to this
Agreement shall be governed by the laws of the Province of Ontario.
7.3 JURISDICTION
Any legal action or proceeding relating to this Agreement shall be
instituted in a court in Toronto, Ontario. Oracle and Customer agree to
submit to the jurisdiction of, and agree that venue is proper in, these
courts in any such legal action or proceeding.
7.4 NOTICE
All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been received
on the third business day following mailing by first class mail to the
first address listed in the relevant Order Form (if to Customer) or to
the Oracle address on the Order Form (if to Oracle). To expedite order
processing, Customer agrees that Oracle may treat documents faxed by
Customer to Oracle as original documents; nevertheless, either party may
require the other to exchange original signed documents.
7.5 LIMITATION OF LIABILITY
In no event shall either party be liable for any indirect, incidental,
special or consequential damages, or damages for loss of profits,
revenue, data or use, incurred by either party or any third party,
whether in an action in contract or tort, even if the other party has
been advised of the possibility of such damages or even if such damages
were reasonably foreseeable. Oracle's liability for damages hereunder
shall in no event exceed the amount of fees paid by Customer under the
relevant Order Form, and if such damages result from Customer's use of
the Programs or the provision of Services such liability shall be limited
to fees paid for the relevant Program or Services giving rise to the
liability. The provisions of this Agreement allocate the risks between
Oracle and Customer. Oracle's pricing reflects this allocation of risk
and the limitation of liability specified herein.
7.6 SEVERABILITY
In the event any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions thereof will remain in full
force.
7.7 WAIVER
The waiver by either party of any default or breach of this Agreement
shall not constitute a waiver of any other or subsequent default or
breach. Except for actions for non-payment or breach of Oracle's
proprietary rights in the Programs, no action, regardless of form,
arising out of this Agreement may be brought by either party more than
one year after the cause of action has arisen.
7.8 EXPORT ADMINISTRATION
Customer agrees to comply fully with all relevant export laws and
regulations of Canada and the United States ("Export Laws") to assure
that neither the Programs nor any direct product thereof are (1)
exported, directly or indirectly, in violation of Export Laws; or (2) are
intended to be used for any purposes prohibited by the Export Laws
including, without limitation, nuclear, chemical or biological weapons
proliferation.
7.9 RELATIONSHIP BETWEEN THE PARTIES
Nothing in this Agreement shall be construed to create a partnership,
joint venture or agency relationship between the parties.
7.10 ENTIRE AGREEMENT
This Agreement constitutes the complete agreement between the parties and
supersedes all prior or contemporaneous agreements or representations,
written or oral, concerning the subject matter of this Agreement. This
Agreement may not be modified or amended except in writing signed by a
duly authorized representative of each party; no other act, document,
usage or custom shall be deemed to amend or modify this Agreement. It is
expressly agreed that the terms of this Agreement and any Order Form
shall supersede the terms contained in any Customer purchase order or
other ordering document. This Agreement shall also supersede the terms of
any unsigned or "shrinkwrap" license included in any package, media, or
electronic version of Oracle-furnished software and any such software
shall be licensed under the terms of this Agreement, provided that the
use limitations contained in any unsigned ordering document shall be
effective for the specified licenses.
7.11 SEPARATION OF LICENSES AND SERVICES
Any Services acquired by Customer from Oracle are deemed to have been bid
and acquired separately from any Program licenses granted under this
Agreement, with Customer having the right to acquire such Services and
Program licenses without acquiring the other.
Oracle is a registered trademark of ORACLE CORPORATION
REDWOOD CITY, CA, USA
ORACLE CORPORATION CANADA INC.
110 MATHESON BLVD. WEST
SUITE 100
MISSISSAUGA, ONTARIO
L5R 3P4
Page 6 of 6
<PAGE> 7
Software Agreement 1
(EXHIBIT 10.1)
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
- --------------------------------------------------------------------------------
CUSTOMER: SUMmedia.com PURCHASE ORDER NO.:
ADDRESS: 1200-1055 W. Hastings St. PURCHASE ORDER DATE:
Vancouver, BC V6E 2E9 ORACLE AGREEMENT NO:
CONFIGURATION ID (CID):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
# OF
COPIES NUMBER USER LICENSE LEVEL OF
PRODUCTS AND SERVICES TO SHIP OF USERS TYPE TYPE LICENSE FEES SUPPORT SUPPORT FEES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Oracle Financials 1 20 N F S
Oracle Financials 1 5 CA F S
Oracle Financial Analyzer 1 25 N F S
Oracle Express Server 1 13 C F S
Oracle Field Sales 1 300 N R S
Oracle Sales Compensation 1 5 N F S
Oracle 8i Standard Edition for HP UX 1 40 C F S
Oracle 8i Standard Edition for HP UX 1 400 P P S
Oracle iStore 1 400 P P S
Oracle iPayment 1 400 P P S
Oracle iMarketing 1 400 P P S
Oracle Application Server Enterprise Edition 1 400 P P S
Oracle Developer Server 1 400 P P S
(cont'd) (cont'd) (cont'd)
- ------------------------------------------------------------------------------------------------------------------------
TAXES WILL BE BILLED TO CUSTOMER UNLESS EXEMPTION IS CERTIFIED. CHECK IF NON-TAXABLE: GST: [ ] PST: [ ]
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE AND OPERATING SYSTEM USER TYPE LICENSE TYPE LEVEL OF SUPPORT
- -------------------------------------- --------- ------------ ----------------
MAKE/MODEL: PC Win NT unless specified (C) CONCURRENT (F) FULL USE (B) BRONZE
OPERATING SYSTEM: NT (N) NAMED (A) APPLICATION SPECIFIC (S) SILVER
MACHINE REFERENCE: (CO) COMPUTER (W) WEB SPECIFIC
SOFTWARE MEDIA: CD (CA) CASUAL (WA) WEB APPLICATION SPECIFIC
CPU LOCATION: Customer Site (P) POWER UNIT
FOR APPLICATION SPECIFIC ONLY - CUSTOMER APPLICATION:
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
CONTRACT ADMINISTRATOR TECHNICAL SUPPORT CONTACT
- ---------------------- -------------------------
NAME: David Noble NAME: David Noble
ADDRESS: 1200-1055 W. Hastings St. ADDRESS: 1200-1055 W. Hastings St
Vancouver, BC V6E 2E9 Vancouver, BC V6E 2E9
PHONE: 604-648-2317 PHONE: 604-648-2317
BILLING/ACCOUNTS PAYABLE CONTACT SHIP TO
- -------------------------------- -------
NAME: David Lewis NAME: David Noble
ADDRESS: 1200-1055 W. Hastings St. ADDRESS: 1200-1055 W. Hastings St
Vancouver, BC V6E 2E9 Vancouver, BC V6E 2E9
PHONE: 604-605-0901 PHONE: 604-648-2317
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
SPECIAL NOTES: Unless otherwise specified herein or in an Order Form, Customer is licensed to use the Programs in
Canada only. The Oracle 8I Standard Edition will be running on one, one-processor machine with a total of 400 Mhz of
processing power (1 x 1 x 400 MHz = 400 MHz = 400 Power Units). The Oracle iStore, iPayment, iMarketing, Application
Server Enterprise Edition, and Developer Server will be running on one, one-processor machine with a total of 400 Mhz
of processing power (1 x 1 x 400 MHz = 400 MHz = 400 Power Units. Quote is valid until Nov. 24, 1999 at 5:00 pm Pacific
time.
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
CUSTOMER: ORACLE CORPORATION CANADA INC.
SUMmedia.com
- ------------------------------------------------------------------------------------------------------------------------
AUTHORIZED SIGNATURE: AUTHORIZED SIGNATURE:
- ------------------------------------------------------------------------------------------------------------------------
NAME: NAME:
- ------------------------------------------------------------------------------------------------------------------------
TITLE: TITLE:
- ------------------------------------------------------------------------------------------------------------------------
DATE: DATE:
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Effective Date of this Agreement shall be ________________________, 19___,
or if left blank the earlier of the dates set out above. This order is placed
subject to the terms and conditions above and on the following pages.
Page 1 of 6
<PAGE> 8
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
TERMS AND CONDITIONS
This Software License and Services Agreement (the "Agreement") is between Oracle
Corporation Canada Inc. with its principal place of business at 110 Matheson
Blvd., West, Suite 100, Mississauga, Ontario, L5R 3P4 ("Oracle") and the
customer identified on the signature page of this Agreement ("Customer"). The
terms of this Agreement shall apply to each Program license granted and to all
Services provided by Oracle under this Agreement and any Order Form.
I DEFINITIONS
1.1 "APPLICATION SPECIFIC PROGRAM" shall mean one or more of the Programs
with the following restrictions:
(a) limited for use solely for the purpose of executing the Customer
application identified in an Order Form (the "Application");
(b) may not be used to create new tables or alter tables except to the
extent necessary to implement the Application and may not allow use
of the Program's "Create" or "Alter" commands or any other command
to create or alter tables outside the scope of that which is
necessary for the operation of the Application; and
(c) may not be used to build or modify reports or with other
applications.
1.2 "CASUAL USER" shall mean an individual authorized by the Customer to only
run queries or reports against Oracle Application Programs. Casual Users
are licensed to use any of the Oracle Applications and Extensions to
Oracle Applications for which Customer has acquired Named User licenses."
1.3 "COMMENCEMENT DATE" shall mean the date on which the Programs are
delivered by Oracle to Customer or, if no delivery is necessary, the
Effective Date set forth on the relevant Order Form.
1.4 "CONCURRENT DEVICES" shall mean the maximum number of input devices
accessing the Programs at any given point in time. If multiplexing
software or hardware (e.g. a TP monitor, webserver product) is used, this
number must be measured at the multiplexing front-end.
1.5 "DESIGNATED SYSTEM" shall mean the computer hardware and operating system
designated on the relevant Order Form.
1.6 "DOCUMENTATION" shall mean the user guides and manuals for installation
and use of the Program software. Documentation is provided in CD-ROM or
bound form, whichever is generally available.
1.7 "FULL-USE PROGRAMS" shall mean unaltered versions of the Programs with
all functions intact.
1.8 "LIMITED PRODUCTION PROGRAM" shall mean a Program which does not appear
on the Price List or which is designated as Limited Production by Oracle.
1.9 "ORDER FORM" shall mean the document in hard copy or electronic form by
which Customer orders Program licenses and/or Services and which is
agreed to by the parties. The Order Form shall reference the Effective
Date of this Agreement.
1.10 "PRICE LIST" shall mean Oracle's applicable standard commercial fee
schedule that is in effect when a Program license or any other product or
service is ordered by Customer.
1.11 "PROGRAM" shall mean the software in object code form distributed by
Oracle for which Customer is granted a license pursuant to this
Agreement, the media, the Documentation and Updates.
1.12 "SERVICES" shall mean Technical Support, training, consulting or other
services provided by Oracle to Customer under this Agreement.
1.13 "SUPPORTED PROGRAM LICENSE" shall mean a Program license for which
Customer has ordered Technical Support for the relevant time period.
1.14 "TECHNICAL SUPPORT" shall mean Program support provided under Oracle's
policies in effect on the date Technical Support is ordered.
1.15 "UPDATE" shall mean a subsequent release of the Program which is
generally made available for Supported Program Licenses at no additional
charge other than media and handling charges. Update shall not include
any release, option or future product which Oracle licenses separately.
1.16 "USER," unless otherwise specified on the Order Form, shall mean a person
authorized by Customer to use specified Programs, regardless of whether
the individual is actively using the Programs at any given time.
II. PROGRAM LICENSE
2.1. RIGHTS GRANTED
A. Oracle grants to Customer a nonexclusive license to use the Programs
Customer obtains under this Agreement, as of the Commencement Date as
follows:
i. to use the Programs solely for Customer's operations on the
Designated System or on a backup system if the Designated System
is inoperative, consistent with the use and/or User limitations
specified or referenced in this Agreement, an Order Form and the
Documentation. Customer may not re-license, rent or lease the
Programs or use the Programs for third-party training,
commercial time-sharing, rental or service bureau use;
ii. to use the Documentation in support of Customer's authorized use
of the Programs;
iii. to copy the Programs for archival or backup purposes and to make
a sufficient number of copies for the User limitations specified
in the Order Form. All titles, trademarks, copyright and
restricted rights notices shall be reproduced in such copies.
All archival and backup copies of the Programs are subject to
the terms of this Agreement;
iv. to modify the Programs and combine them with other software
products; and
v. to allow third parties to use the Programs for Customer's
operations so long as Customer ensures that use of the Programs
is in accordance with the terms of this Agreement.
Page 2 of 6
<PAGE> 9
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
Customer shall not copy or use the Programs except as otherwise
specified in this Agreement or an Order Form.
In the event that the number of copies of the Programs shipped to
Customer is less than the number actually licensed pursuant to this
Agreement, then Customer shall have the right to make copies of the
Programs up to the number licensed hereunder. In the event Customer
does not, for any reason whatsoever, make and/or use the number of
copies actually licensed pursuant to this Agreement, it shall,
nevertheless, pay to Oracle all license fees due hereunder.
In the event Customer specifies that no shipment of media is required
for any Program, then Customer shall have been deemed to have a
master copy of such Program and no additional shipment is required.
Customer shall have no right to use any other Oracle software program
that may be delivered with the Programs.
B. Customer agrees not to cause or permit the reverse engineering,
disassembly or decompilation of the Programs, except to the extent
required to obtain interoperability with other independently created
software or as specified by law.
C. Oracle shall retain all title, copyright and other proprietary rights
in the Programs. Customer does not acquire any rights, express or
implied, in the Programs, other than those specified in this
Agreement.
2.2. NETWORK LICENSE
Customer may order a Network license for Programs using a Network Order
Form which shall have the following additional rights granted:
A. To use the Programs on up to five (5) Server operating systems. If
the number of Server operating systems specified in a Network Order
Form is less than five (5), Customer may, by written notice to Oracle
during the one-year period commencing on the effective date of the
Network Order Form, request Oracle to deliver, (at a charge of One
Thousand Dollars ($1000) per Server operating system to cover media,
documentation, shipping and handling charges), the corresponding
software media and Documentation for the Network Program Set, for
such additional Server operating system(s), up to a maximum of five
(5), added by Customer to the Network; provided that: i) the Programs
licensed hereunder are available in production release status on the
additional Server operating system(s) at the time Customer elects to
add such additional Server operating system(s); and ii) Customer has
continuously maintained Technical Support for the Network Program Set
on the Server operating systems being used prior to such written
notice.
B. The addition of new Server operating systems beyond the five (5)
provided for in this Agreement shall, in addition to the provisions
set out in 2.2A above, be subject to payment by Customer to Oracle of
ten percent (10%) of the net license fees for the Network Program Set
as set forth in a Price Addendum in effect, or, in the absence of a
valid Price Addendum, under Oracle's standard Price List in effect at
the time of such addition. Payment shall be due and payable on the
date Customer exercises this option.
C. Despite anything to the contrary contained in this Agreement,
Customer shall not be required to report to Oracle which Programs
included in the Network Program Set are installed on which Server or
how many Servers are included in the Network. Customer may freely
transfer the Programs between Servers in the Network at no additional
charge; however substitutions of Server operating systems licensed
under this Agreement may be made (at a charge of One Thousand Dollars
($1000) per Server operating system to cover media, documentation,
shipping and handling charges) for a period of three (3) years from
the effective date of the applicable Network Order Form provided
that: i) Customer has maintained continuous Technical Support for the
Programs, ii) notifies Oracle in writing of any such change in Server
operating systems; and iii) the total number of Server operating
systems on which the Network Program Set is run does not exceed five
(5). Thereafter such changes may require the payment of additional
fees in accordance with Oracle's standard license transfer policies
then in effect.
D. Notwithstanding the foregoing, Oracle makes no representation or
guarantee with respect to the future availability of the Programs on
any operating system and Oracle shall not be liable for any
expenditures incurred, or loss suffered, as a result of Customer
relying on the future delivery by Oracle of the Programs on any
operating system.
All fees paid pursuant to this Section 2.2 are non-cancellable and the
sum paid non-refundable.
2.3. TRANSFER AND ASSIGNMENT
A. Customer may transfer a Program license within its organization upon
notice to Oracle. Transfers are subject to the terms and fees
specified in Oracle's transfer policy in effect at the time of the
transfer.
B. Program licenses are personal to Customer. Customer may not assign
this Agreement or a Program license, or any interest in either, to a
legal entity separate from Customer except as part of a merger or
other sale of Customer's business. Such assignment requires the prior
written consent or Oracle, which shall not be unreasonably withheld.
2.4. VERIFICATION
At Oracle's written request, not more frequently than annually, Customer
shall furnish Oracle with a signed certification verifying that the
Programs are being used pursuant to the provisions of this Agreement.
Oracle may, at its expense, audit Customer's use of the Programs. Any
such audit shall be conducted during regular business hours at Customer's
facilities and shall not unreasonably interfere with Customer's business
activities. Customer agrees to co-operate in the audit, including
providing access to servers, employees and information reasonably
requested by Oracle. If an audit reveals that Customer has underpaid fees
to Oracle, Customer shall be invoiced for such underpaid fees based on
the Price List in effect at the time the audit is completed. Audits shall
be conducted no more than once annually.
Page 3 of 6
<PAGE> 10
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
III. SERVICES
3.1. TECHNICAL SUPPORT SERVICES
Technical Support ordered by Customer will be provided under Oracle's
Technical Support policies in effect on the date Technical Support is
ordered, subject to the payment by Customer of the applicable fees.
3.2. CONSULTING, TRAINING AND OTHER SERVICES
A. PROVISION OF SERVICES
Oracle will provide consulting, training and other services agreed to
by the parties under the terms of this Agreement. Consulting services
shall be billed on a time and materials basis unless the parties
expressly agree otherwise in writing.
B. DIRECTION OF SERVICES
Unless otherwise specifically agreed in writing, Customer shall be
responsible for the direction of the services.
C. NON-SOLICITATION
During the term of an Oracle employee's work or assignment in
connection with Services, and for a period of six (6) months after
such work or assignment terminates, Customer agrees not to directly
or indirectly solicit, recruit for employment or offer
sub-contracting opportunities to or knowingly employ any such
employee, without the prior written consent of Oracle. In the event
of a breach of this provision by Customer, Customer shall pay Oracle
as liquidated damages and not as a penalty, an amount equal to twelve
(12) months salary for the employee engaged by the Customer.
D. CHANGES
Oracle shall not be in breach of any warranties provided for in this
Agreement if any of the relevant software, hardware, products, goals
or related system environment has been changed by Customer or any
other person without Oracle's specific consent in writing. Where such
unauthorized changes impede or make more costly the provision of
Technical Support or consulting services hereunder, Oracle shall take
such corrective action only if Customer agrees to bear such
additional cost, at Oracle's then prevailing rates.
E. COOPERATION
Customer acknowledges that the timely provision of and access to
office accommodations, facilities, equipment, assistance,
cooperation, complete and accurate information and data from its
officers, agents, and employees, and suitably configured computer
products are essential to performance of any Services and that
Oracle's ability to complete any Services is dependent upon same. If
the relevant requirement(s), project plan(s), schedule, scope,
specification(s), design(s), software, hardware product(s), or
related system environment(s) or architecture are changed by Customer
or any other person, Oracle shall not be responsible for the change
unless Customer and Oracle specifically consent to the change,
scheduling, and additional charges, if any, in writing.
3.3. INCIDENTAL EXPENSES
For any on-site Services requested by Customer, Customer shall reimburse
Oracle for actual, reasonable travel and out-of-pocket expenses incurred.
IV. TERM AND TERMINATION
4.1. TERM
If not otherwise specified on the Order Form, each Program license shall
remain in effect perpetually unless the license or this Agreement is
terminated as provided in Section 4.2 or 4.3.
4.2. TERMINATION BY CUSTOMER
Customer may terminate any Program license at any time; however,
termination shall not relieve Customer's obligations specified in Section
4.4.
4.3. TERMINATION BY ORACLE
Oracle may terminate this Agreement or any Program license upon written
notice if Customer breaches this Agreement and fails to correct such
breach within 30 days following written notice thereof.
4.4. EFFECT OF TERMINATION
Termination of this Agreement or any license shall not limit either party
from pursuing other remedies available to it, including injunctive
relief, nor shall such termination relieve Customer's obligation to pay
all fees that have accrued or are otherwise owed by Customer under any
Order Form or other similar ordering document under this Agreement. The
parties' rights and obligations under Sections 2.1B, 2.1C, 2.2B and 2.3,
and Articles IV, V, VI and VII shall survive termination of this
Agreement.
4.5. HANDLING OF PROGRAMS UPON TERMINATION.
If a license granted under this Agreement terminates, Customer shall: (a)
cease using the applicable Programs; and (b) certify to Oracle within one
month after termination that Customer has destroyed or has returned to
Oracle the Programs and all copies. This requirement applies to copies in
all forms, partial and complete, in all types of media and computer
memory, and whether or not modified or merged into other materials.
V. INDEMNITY, WARRANTIES, REMEDIES
5.1. INFRINGEMENT INDEMNITY
Oracle will defend and indemnify Customer against a claim that the
Programs infringe a copyright or patent, provided that: (a) Customer
notifies Oracle in writing within 30 days of the claim; (b) Oracle has
sole control of the defense and all related settlement negotiations; and
(c) Customer provides Oracle with the assistance, information and
authority necessary to perform Oracle's obligations under this Section.
Reasonable out-of-pocket expenses incurred by Customer in providing such
assistance will be reimbursed by Oracle. Oracle shall have no liability
for any claim of infringement based on use of a superseded or an altered
release of a Program if the infringement would have been avoided by the
use of a current unaltered release of the Program which Oracle provides
to Customer.
In the event a Program is held or is believed by Oracle to infringe,
Oracle shall have the option, at its expense, to; (a) modify the Program
to be non-infringing; or (b) obtain for Customer a license to continue
using the Program. If it is not commercially reasonable to perform either
of the above options, then Oracle may terminate the license for the
infringing Program and refund the license fees paid for the Program. This
Section 5.1 states Oracle's entire liability and Customer's exclusive
remedy for infringement.
Page 4 of 6
<PAGE> 11
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
5.2. WARRANTIES AND DISCLAIMERS
A. PROGRAM WARRANTY
Oracle warrants for a period of one year from the Commencement Date that
each unmodified Program will perform the functions described in the
Documentation.
Oracle warrants that the current production version of the Programs will,
to the extent applicable as set forth in the Documentation, fully comply
with the following millennium compliance statement when configured and
used according to the documented instructions. The definition of
compliance is the ability to:
(a) correctly handle date information before, during and after 1
January 2000 accepting date input, providing date output and
performing calculation on dates or portions of dates;
(b) function according to the Documentation, during and after 1 January
2000 without changes in operation resulting from the advent of the
new century assuming correct configuration;
(c) where appropriate, respond to two digit date input in a way that
resolves the ambiguity as to century in a disclosed, defined and
predetermined manner;
(d) store and provide output of date information in ways that are
unambiguous as to century; and
(e) manage the leap year occurring in the year 2000, following the
quad-centennial rule.
Oracle shall have no liability for any alleged or actual breach of the
"year 2000" warranty provided in the preceding sentence if such claim is
based upon a superseded or altered release of Programs and such claim
would have been avoided by the use of a current unaltered release of
Programs which Oracle provides to Customer. Any breach of this warranty
is subject to the exclusive remedies as set forth in Section 5.3 of the
Agreement
B. MEDIA WARRANTY
Oracle warrants the tapes, diskettes or other media to be free of defects
in materials and workmanship under normal use for 90 days from the
Commencement Date.
C. SERVICES WARRANTY
Oracle warrants that Services will be performed in accordance with
generally accepted industry standards. This warranty shall be valid for
90 days from the performance of such Services.
D. DISCLAIMERS
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES AND
CONDITIONS OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
ORACLE DOES NOT WARRANT THAT THE PROGRAMS WILL MEET CUSTOMER'S
REQUIREMENTS, THAT THE PROGRAMS WILL OPERATE IN THE COMBINATIONS WHICH
CUSTOMER MAY SELECT FOR USE, THAT THE OPERATION OF THE PROGRAMS WILL BE
UNINTERRUPTED OR ERROR-FREE, OR THAT ALL PROGRAM ERRORS WILL BE
CORRECTED. LIMITED PRODUCTION PROGRAMS, PRE-PRODUCTION RELEASES OF
PROGRAMS, AND COMPUTER-BASED TRAINING PRODUCTS ARE DISTRIBUTED "AS IS."
5.3. EXCLUSIVE REMEDIES
For any breach of the warranties contained in Section 5.2, Customer's
exclusive remedy, and Oracle's entire liability, shall be:
A. FOR PROGRAMS
The correction of Program errors that cause breach of the warranty
or, if Oracle is unable to make the Program operate as warranted,
Customer shall be entitled to terminate the Program license and
recover the fees paid to Oracle for the Program license.
B. FOR MEDIA
The replacement of defective media returned within 90 days from the
Commencement Date.
C. FOR SERVICES
The re-performance of the Services or, if Oracle is unable to perform
the Services as warranted, Customer shall be entitled to recover the
fees paid to Oracle for the unsatisfactory Services.
VI. PAYMENT PROVISIONS
6.1. INVOICING AND PAYMENT
All fees for Programs and Services provided hereunder shall be due and
payable 30 days from the date of Oracle's invoice. Any amounts payable by
Customer hereunder which remain unpaid after the due date shall be
subject to a late charge equal to 12% per annum, calculated from the due
date until such amounts are paid. Customer agrees to pay applicable media
and shipping charges. Customer shall issue a purchase order or
alternative document acceptable to Oracle, on or before the Effective
Date of the applicable Order Form.
6.2. TAXES
The fees listed in this Agreement do not include taxes; if Oracle is
required to pay sales, use, goods and services or other taxes based on
the licenses granted or Services provided pursuant to this Agreement or
on Customer's use of Programs or Services, then such taxes shall be
billed to and paid by Customer. This Section shall not apply to taxes
based on Oracle's income.
VII. GENERAL TERMS
7.1 NONDISCLOSURE
By virtue of this Agreement, the parties may have access to information
that is confidential to one another ("Confidential Information").
Confidential Information shall be limited to the Programs, the terms and
pricing contained in this Agreement, and all information clearly
identified as confidential. A party's Confidential Information shall not
include information that: (a) is or becomes a part of the public domain
through no act or omission of the other party; (b) was in the other
party's lawful possession prior to the disclosure and had not been
obtained by the other party either directly or indirectly from the
disclosing party; (c) is lawfully disclosed to the other party by a third
party without restriction on disclosure; or (d) is independently
developed by the other party. Customer shall not disclose the results of
any benchmark tests of the Programs to any third party without Oracle's
prior written approval. The parties agree to hold each other's
Confidential Information in confidence during the term of this Agreement
and for a period of two years after termination of this Agreement. The
parties agree, unless required by law, not to make each other's
Confidential Information available in any form to any third party or to
use each other's Confidential Information for any purpose other than the
implementation of this Agreement. Each party agrees to take all
reasonable steps to ensure that Confidential Information is not disclosed
or distributed by its employees or agents in violation of the terms of
this Agreement.
Page 5 of 6
<PAGE> 12
[ORACLE LOGO] SOFTWARE LICENSE AND SERVICES AGREEMENT
7.2 GOVERNING LAW
This Agreement and all matters arising out of or relating to this
Agreement shall be governed by the laws of the Province of Ontario.
7.3 JURISDICTION
Any legal action or proceeding relating to this Agreement shall be
instituted in a court in Toronto, Ontario. Oracle and Customer agree to
submit to the jurisdiction of, and agree that venue is proper in, these
courts in any such legal action or proceeding.
7.4 NOTICE
All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been received
on the third business day following mailing by first class mail to the
first address listed in the relevant Order Form (if to Customer) or to
the Oracle address on the Order Form (if to Oracle). To expedite order
processing, Customer agrees that Oracle may treat documents faxed by
Customer to Oracle as original documents; nevertheless, either party may
require the other to exchange original signed documents.
7.5 LIMITATION OF LIABILITY
In no event shall either party be liable for any indirect, incidental,
special or consequential damages, or damages for loss of profits,
revenue, data or use, incurred by either party or any third party,
whether in an action in contract or tort, even if the other party has
been advised of the possibility of such damages or even if such damages
were reasonably foreseeable. Oracle's liability for damages hereunder
shall in no event exceed the amount of fees paid by Customer under the
relevant Order Form, and if such damages result from Customer's use of
the Programs or the provision of Services such liability shall be limited
to fees paid for the relevant Program or Services giving rise to the
liability. The provisions of this Agreement allocate the risks between
Oracle and Customer. Oracle's pricing reflects this allocation of risk
and the limitation of liability specified herein.
7.6 SEVERABILITY
In the event any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions thereof will remain in full
force.
7.7 WAIVER
The waiver by either party of any default or breach of this Agreement
shall not constitute a waiver of any other or subsequent default or
breach. Except for actions for non-payment or breach of Oracle's
proprietary rights in the Programs, no action, regardless of form,
arising out of this Agreement may be brought by either party more than
one year after the cause of action has arisen.
7.8 EXPORT ADMINISTRATION
Customer agrees to comply fully with all relevant export laws and
regulations of Canada and the United States ("Export Laws") to assure
that neither the Programs nor any direct product thereof are (1)
exported, directly or indirectly, in violation of Export Laws; or (2) are
intended to be used for any purposes prohibited by the Export Laws
including, without limitation, nuclear, chemical or biological weapons
proliferation.
7.9 RELATIONSHIP BETWEEN THE PARTIES
Nothing in this Agreement shall be construed to create a partnership,
joint venture or agency relationship between the parties.
7.10 ENTIRE AGREEMENT
This Agreement constitutes the complete agreement between the parties and
supersedes all prior or contemporaneous agreements or representations,
written or oral, concerning the subject matter of this Agreement. This
Agreement may not be modified or amended except in writing signed by a
duly authorized representative of each party; no other act, document,
usage or custom shall be deemed to amend or modify this Agreement. It is
expressly agreed that the terms of this Agreement and any Order Form
shall supersede the terms contained in any Customer purchase order or
other ordering document. This Agreement shall also supersede the terms of
any unsigned or "shrinkwrap" license included in any package, media, or
electronic version of Oracle-furnished software and any such software
shall be licensed under the terms of this Agreement, provided that the
use limitations contained in any unsigned ordering document shall be
effective for the specified licenses.
7.11 SEPARATION OF LICENSES AND SERVICES
Any Services acquired by Customer from Oracle are deemed to have been bid
and acquired separately from any Program licenses granted under this
Agreement, with Customer having the right to acquire such Services and
Program licenses without acquiring the other.
Oracle is a registered trademark of ORACLE CORPORATION
REDWOOD CITY, CA, USA
ORACLE CORPORATION CANADA INC.
110 MATHESON BLVD. WEST
SUITE 100
MISSISSAUGA, ONTARIO
L5R 3P4
Page 6 of 6
<PAGE> 13
[ORACLE LOGO] ADDENDUM
ADDENDUM NO. 1 to the Software License and Services Agreement between
SUMmedia.com ("Customer") and Oracle Corporation Canada Inc. ("Oracle") bearing
an Effective Date of ____________ (the "Agreement"). This Addendum shall only be
deemed to supersede the terms of the Agreement that are inconsistent with a term
or provision contained herein. All the defined terms contained in the Agreement
and used in this Addendum shall have the same meanings unless varied herein.
The parties hereby agree to amend the Agreement as follows:
1. The license type of the Oracle Field Sales Program listed herein is
Restricted Use. The use of this Program is restricted to utilization of
customers functionality only. In the event Customer wishes to use any additional
functionality, it must obtain a Full Use license of such Program.
This Addendum shall become effective as of ___________________, 1999.
IN WITNESS WHEREOF, the parties have executed this Addendum through their duly
authorized representatives.
<TABLE>
<S> <C> <C>
CUSTOMER: SUMMEDIA.COM ORACLE CORPORATION CANADA INC.
--------------------------------------
Signed: Signed:
--------------------------------------- --------------------------------------
Name: Name:
--------------------------------------- --------------------------------------
Title: Title:
--------------------------------------- --------------------------------------
Date: Date:
--------------------------------------- --------------------------------------
Address: 1200-1055 W. Hastings St. Address: 110 Matheson Blvd. West
--------------------------------------- Suite 100
Vancouver, BC V6E 2E9 Mississauga, Ontario L5R 3P4
---------------------------------------
</TABLE>
<PAGE> 14
[ORACLE LOGO] ADDENDUM
ADDENDUM NO. 2 to Order Form bearing an effective date of ________ under the
Software License and Services Agreement between ("Customer") and Oracle
Corporation Canada Inc.("Oracle") bearing an Effective Date of ________ (the
"Agreement"). This Addendum shall only be deemed to supersede the terms of the
Agreement that are inconsistent with a term or provision contained herein. All
the defined terms contained in the Agreement and used in this Addendum shall
have the same meanings unless varied herein.
The parties hereby agree to amend the Agreement as follows:
1. The Program(s) listed herein is licensed to Customer pursuant to the Power
Unit licensing method set out below and such Program(s) is designated as a
Web Specific Program license, also as set out below.
2. "POWER UNIT - RISC": One Power Unit - RISC is defined as one MHz of power
in all RISC processors in the computers on which the Programs are installed
and operating. The total number of Power Units - RISC is determined by
adding together the number of MHz in all the processors in all such
computers. Customer may add processors and computers, or modify existing
processors and computers, provided that if, at any time, Customer's use
exceeds the total number of licensed Power Units - RISC, Customer will
acquire licenses for the additional Power Units - RISC. At Oracle's
request, no more than once annually, Customer shall certify in writing the
Power Unit - RISC computation, including the number of relevant computers
and processors, and the MHz of each such processor. (For example: two
computers with two 400 MHz processors each would equal 1,600 Power Units -
RISC).
3. A "WEB SPECIFIC" Program is defined as a Program license which may only be
accessed by third parties via internet networking protocols and which is
limited to use solely for deployment of Customer's public web site.
Customer's application may allow third party web access to a licensed Web
Specific Program solely for viewing, querying or adding data, provided such
use is in accordance with the other terms of the Agreement.
No corporate use or internal data processing by Customer or its clients
shall be permitted with a Web Specific Program. Prohibited corporate and
internal uses shall include, but shall not be limited to, the following
types of uses: human resource, finance and administration, internal
messaging and communications, accounting, sales force management, etc
This Addendum shall become effective as of
IN WITNESS WHEREOF, the parties have executed this Addendum through their duly
authorized representatives.
<TABLE>
<S> <C>
CUSTOMER: SUMMEDIA.COM ORACLE CORPORATION CANADA INC.
---------------------------
Signed: Signed:
---------------------------- ---------------------------
Name: Name:
---------------------------- ---------------------------
Title: Title:
---------------------------- ---------------------------
Date: Date:
---------------------------- ---------------------------
Address: 1200-1055 W. Hastings St. Address: 110 Matheson Blvd. West
---------------------------- Suite 100
Vancouver, BC V6E 2E9 Mississauga, Ontario L5R 3P4
----------------------------
</TABLE>
Page 1 of 1
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
SUM Media Corp.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUMMEDIA.COM
INC.'S QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED SEPTEMBER 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 327,247
<SECURITIES> 0
<RECEIVABLES> 153,628
<ALLOWANCES> (16,438)
<INVENTORY> 0
<CURRENT-ASSETS> 520,560
<PP&E> 421,507
<DEPRECIATION> (133,493)
<TOTAL-ASSETS> 866,055
<CURRENT-LIABILITIES> 652,239
<BONDS> 0
0
0
<COMMON> 12,000
<OTHER-SE> 160,827
<TOTAL-LIABILITY-AND-EQUITY> 866,055
<SALES> 0
<TOTAL-REVENUES> 149,659
<CGS> 34,062
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,910,420
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,794,761)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,794,761)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,794,761)
<EPS-BASIC> (0.06)
<EPS-DILUTED> 0
</TABLE>
