UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: March 20, 2000
QUEST NET CORP.
---------------
(Exact Name of Registrant as Specified in its Charter)
2999 NE 191ST STREET, PH-8
AVENTURA, FLORIDA 33180
-----------------------
(Address of principal executive offices)
(305) 935-1080
--------------
Registrant's telephone number
PARPUTT ENTERPRISES, INC.
12835 E. ARAPAHOE ROAD
TOWER I, PENTHOUSE
ENGLEWOOD, COLORADO 80112
-------------------------
(Former name and former address)
Florida 000-24447 84-1331134
------- --------- ----------
(State of Incorporation) (Commission File Number) (IRS Employer
I.D. Number)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
dated as of March 13, 2000 between Parputt Enterprises, Inc. ("PEI"), a Nevada
corporation, and Quest Net Corp., a Florida corporation ('Quest") all the
outstanding shares of common stock of PEI were exchanged for 275,000 shares of
common stock of Quest in a transaction in which Quest was the surviving company.
The Merger Agreement was adopted by the unanimous consent of the Board of
Directors of PEI and approved by the unanimous consent of the shareholders of
PEI on March 13, 2000 The Merger Agreement was adopted by the unanimous consent
of the Board of Directors of Quest on March 13, 2000. Pursuant to Florida, law
the consent of the shareholders of Quest was not required.
Prior to the merger, PEI had 500,000 shares of common stock outstanding,
which shares were exchanged for 275,000 shares of common stock of Quest. By
virtue of the merger, Quest acquired 100% of the issued and outstanding common
stock of PEI.
Prior to the effectiveness of the merger, Quest had an aggregate of
22,786,022 shares of common stock issued and outstanding, and 30,000 shares of
preferred stock outstanding. The preferred stock has a preference on dividends,
liquidation, and merger at $10.00 per share. The preferred stock has no voting
or conversion rights.
Upon effectiveness of the merger, Quest had an aggregate of 23,061,022
shares of common stock outstanding.
The officers of Quest will continue as officers of the successor issuer. See
"Management" below. The officers, directors, and by-laws of Quest will continue
without change as the officers, directors, and by-laws of the successor issuer.
A copy of the Merger Agreement and the Articles of Merger and Plan of
Merger are filed as an exhibit to this Form 8-K and is incorporated in its
entirety herein. The foregoing description is modified by such reference.
(b) The following table contains information regarding the shareholdings of
Quest's current directors and executive officers and those persons or entities
who beneficially own more than 5% of its common stock.
Beneficial Owner Beneficially Shares of Common Stock
- ---------------- ------------ ----------------------
Simplex LTDA 1,200,000 5.2%
Rua P-25 No. 774
Setor dos Funcionarios
Goiania Gois 74.000 Brazil
David Block, Director 16,180 *
2999 NE 191st Street, PH-8
Aventura, Florida 33180
Charles Wainer, Officer & Director 360,000 1.6%
2999 NE 191st Street, PH-8
Aventura, Florida 33180
Paul K. Zeller, Officer 5,000 *
2999 NE 191st Street, PH-8
Aventura, Florida 33180
Thomas Magill, Officer 1,000 *
2999 NE 191st Street, PH-8
Aventura, Florida 33180
All officers and directors 625,180 2.7%
as a group (6) persons
*Represents less than 1% of the outstanding shares of common stock.
- Except as indicated below, based on information provided by such
persons, the persons named in the table above have sole voting power
and investment power with respect to all shares of common stock shown
beneficially owned by them.
- Percentage of ownership is based on 23,061,022 shares of common stock
outstanding as of March 17, 2000, plus each person's options that are
exercisable within 60 days. Shares of common stock subject to stock
options that are exercisable within 60 days of March 17, 2000 are
deemed outstanding for computing the percentage of that person and the
group.
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the Merger Agreement was
negotiated between PEI and Quest.
2
In evaluating Quest as a candidate for the proposed merger, PEI used
criteria such as the value of the assets of Quest, its business operations, plan
of operation, the demand for wireless Internet service Quest's current business
operations and anticipated operations, and Quest's business name and reputation.
PEI determined that the consideration for the merger was reasonable.
(b) Quest intends to continue developing and marketing it Wireless Internet
and Internet related services in Florida.
BUSINESS
INTRODUCTION
Quest Net Corp. is a development stage company based in Miami, Florida. The
Company providers secure, full-service global Internet and Intranet broadband
digital and wireless networking solutions for businesses and individuals. Quest
Net has a high bandwidth, low-delay connection to the Internet Web referred to
as an ATM).
Quest Net offers:
- Dedicated high speed Internet access.
- Metropolitan and wide area network data transport services,
including virtual private networks.
- Wireless Internet connection.
The solutions provided by Quest Net include:
- Dedicated and wireless Internet connectivity.
- Co-location, hosting, content, e-commerce, and search engine
services.
The Company anticipates that in the future it will be able to provide
discounted long distance services.
BACKGROUND OF QUEST NET CORP
The Company was incorporated in the State of Colorado in November 1995,
under the name A.P. Sales Inc. Its proposed business was to engage in the
purchasing, reconditioning, selling, moving, and repairing of office equipment
and furniture, including, primarily, filing and storage cabinets, and
workstations. Until July of 1998, its operations were primarily organizational
in nature or related to raising capital. In July 1998, the Company acquired
certain of the assets of Pact Communication Group, Inc., a privately held
Florida corporation. Pact was a provider of Internet system and network
management solutions. Pact's solutions include server hosting, Internet
connectivity, collaborative management, and Internet technology.
The Company provides or will provide these services through four
subsidiaries, each with its own market and customer base. It sells dial-up and
dedicated Internet access services through IPQuest Corp. and wireless Internet
services through Quest Wireless Corp. In addition, the Company provides Internet
content, e-commerce and search engine development through GlobalBot Corp., and
provide international long distance phone services through CWTel, Inc.
3
Of the four subsidiaries, Quest Net has named Quest Wireless as its core
subsidiary. The Three remaining operational subsidiaries are IP Quest, an ISP to
both commercial and residential clients, CWTel, Inc., a long distance service
reseller, and GlobalBot, an e-commerce search engine currently focused on its
wingsonline.con site.
The subsidiaries are described below.
QUEST WIRELESS CORP.
- --------------------
This subsidiary provides wireless broadband telecommunications services
using point-to-point microwave transmissions in the license free radio spectrum.
Quest Wireless is seeking to address the growing demand for high speed, high
capacity digital telecommunications services on the part of business and
residential end users who require cost effective, high bandwidth local access to
video, data and Internet services. Quest Net has recently decided to center its
expansion strategy for the next three years primarily on its Internet wireless
business.
After an intense review of its operations, revenues and costs, Quest
decided that its operations were too wide-spread and that the Company was
expending substantial management, sales and marketing efforts and money to
service, maintain and market to customers in a large geographic area. In June
1999, the Company decided to streamline its operations and curtail expenses by
concentrating its effort on providing and marketing its services in Florida,
with gradual managed growth to other areas.
In pursuing its business objective of shaping and leading the global market
for total solutions for Internet connections in December, 1999, Quest Net has
named Quest Wireless as its core business, and is currently focusing on
expanding its wireless operations throughout the State of Florida, and
eventually nationwide. The Company plans to expand its capabilities through
in-house growth, selective strategic alliances and acquisitions.
The Quest Wireless Solution
Today most Internet connections are made via regular telephone lines. Quest
Wireless utilizes the latest wireless technology to allow high speed Internet
connectivity. The Company believes that the future of dedicated services is in
wireless technology. Wireless technology provides innovative, highquality
solutions for local connectivity and allows it to provide leading-edge
technology to its customer base. The Company's main focus is concentrated on
offering Internet Wireless Service in South Florida through its Quest Wireless
subsidiary. These services are designed to meet the expanding needs of local
area network/Wide area network (LANMAN) users that include:
- Need for mobility and anytime, anywhere computing.
- Configuration flexibility for moves, add-ons or changes.
- Quick implementation.
- Lower cost.
To meet these needs, the Company's Internet wireless services are designed
to replace or complement wired networks, are ideal for providing network access
in areas difficult or impossible to wire, allow mobile applications to work with
traditional wired LAN applications, and are non-invasive and aesthetic. In
short, they are the only LAN solution for true mobile devices, simultaneously
providing both mobility and Internet connectivity.
4
Quest's Wireless Technology
The Wireless Internet System operates using microwave frequencies, which do
not require a license. The Company' establishes a link to its Internet network
by installing a microwave antenna and wireless router at the customer's
location. The company provides the hardware for the duration of the service. The
wireless router, in turn, provides firewall and routing services to connect the
customers' computers to the Internet. For security, the wireless router assigns
non-routable addresses that cannot be reached from the outside, but allows the
machines to access resources outside of the customers' network. The effective
distance of wireless transmission depends on the antenna, power (amps) and
environment. Quest Wireless products connect at a speed of up to 8 Mbps to a
distance of 10-15 miles, which can be increased by relay hops.
In June 1999, the Company signed an agreement with Wireless Inc., a leader
in wireless networking, for wireless access equipment, installation and
consulting services valued at $2.5 million. Initially, this equipment will be
used to complete the expansion of the Company's wireless network throughout
South Florida. The South Florida installation of the WaveNet IP central units
has begun and the Company expects the South Florida installations to be
completed within one year.
The second stage will be to deploy the network on the entire East Coast of
Florida and eventually the entire State of Florida. Quest Wireless plans to
establish a presence in several major metropolitan cities, including
Jacksonville, Tampa and Orlando by the end of July 2000. This will allow it to
build a wireless infrastructure throughout the area that will provide the
business community with dedicated high-speed wireless connections at a fraction
of the cost of conventional dedicated services. Management believes that this
new expansion plan, combined with the wire infrastructure development already
underway on the East Coast, will provide the framework and foundation to be a
dominant force for dedicated services to the residential, tourist and business
communities Florida.
Sales and Marketing
The market for Quest Wireless services is new and rapidly growing. In
developing its sales and marketing strategies, the Company is focused on
attracting users in commercial and residential buildings, initially throughout
the State of Florida. The Company believes that the principal competitive
factors for companies seeking to attract users for its Internet wireless
connection services are line quality, speed of connection, quality customer
service and broad demographic focus. The Company's strategy builds brand
recognition, and fosters user affinity, and loyalty.
The Company is developing its customer base through an active sales and
marketing campaign, primarily centered on recruiting multi-story buildings as
Quest Wireless IQ Buildings, which consist of a microwave satellite receiver on
the roof of the building with a line to a central position in the building. From
there, lines are run to individual suites and computers. The result is Internet
connection speeds far beyond what can be delivered through telephone lines and
modems. To date, sales and marketing efforts have been somewhat constrained due
to the Company's limited capital. The Company has an in-house sales force,
headed by a Vice President of Sales and Marketing, to market the services in
South Florida, focusing first on Broward, Palm Beach and Miami/Dade. In
addition, the Company will enhance its marketing efforts by billboard and radio
advertisements, trade show exhibitions, direct mailings and other high
visibility advertising techniques.
5
WIRELESS SERVICE PRICING STRUCTURE
ONE TIME ONE TIME
SERVICE TYPE PRICE PER MONTH INSTALLATION FEE ACTIVATION FEE
Shared Account $189.00 None for up to 3 $99.00
computers per
account. $189.00 per
computer in excess
of 3 per account.
Dedicated Account $699.00 Same as Shared $2,500
Account.
Expansion Strategy
Quest Net's expansion strategy capitalizes on its competencies. The
strategy is summarized as follows:
- Develop a community of /Q Buildings, including hotels, throughout
the State of Florida and eventually nationwide.
- Develop strategic contractual agreements with entities
providing access to either potential customers or critical
wireless transmission points.
- Develop strategic marketing relationships.
- Increase usage of services through "bundling".
- Expand through acquisition.
- Introduce new products and services
- Grow businesses with increasing broadband requirements
Recent Business Developments
In 1999, the Company achieved several significant milestones that have
greatly furthered its expansion efforts. In June, the Company teamed with
Wireless, Inc. to supply the Company wireless access equipment valued at $2.5
million. Using Wireless, Inc.'s WaveNet IP 2458, point-tomultipoint wireless
access routers, the Company will utilize the equipment to initially expand its
wireless network from Miami up to Jupiter, Florida.
Another step in furthering this strategy is the Company's recent signing of
an agreement with American Tower Corp (NYSE: AMT) to use American Tower as the
primary transmission tower provider for Quest Wireless. With 1999 revenues of
over $169 million, American Tower is one of the leaders in transmission towers
in the U.S. and currently owns and operates 9,400 towers in 44 states and the
District of Columbia. The Company also signed a multi-year contract to place its
wireless communications equipment on the first of a series of strategically
located South Florida towers. Management believes this move will offer a
competitive advantage of a 10-15 mile radius from point of origin without
repeaters, and will open a market niche for its wireless services for smaller
buildings that are blocked from microwave transmission from conventional
heights.
6
Significant achievements in customer base creation include Quest Wireless'
designation by the Archdiocese of Miami Schools as their wireless provider of
choice. In addition, Quest Wireless has converted or is in the process of
converting several historic landmark buildings such as the Hollywood Bread
Building in Hollywood, Florida, the Sailboat Key Building in Miami, and the
Senator Executive and Law Center in downtown Miami, to IQ Buildings
IPQUEST CORP.
- -------------
This subsidiary provides Internet wired connection (access) services that
require a local network connection from a customer to an Internet service
provider's local facilities. For large, communication-intensive users, these
connections are typically dedicated connections direct from the customer to the
Internet service provider. For residential, small, and medium sized business
users, these connections are generally connections obtained by dialing into a
local exchange. Once a local connection is made to the Internet service
provider's local facilities, information can be transmitted and obtained over a
packet-switched data network. This network may consist of segments provided by
many interconnected networks operated by a number of Internet service providers.
This collection of interconnected networks makes up the Internet.
Communications on the Internet are governed by Internet protocol, an
inter-networking standard that enables communication across the Internet
regardless of the hardware and software used.
Wired connection services to the Internet are provided through its IPQuest
subsidiary. The Internet connection or access market is comprised of Internet
Service Providers, Internet Presence Providers (IPPs), Internet Content
Providers (ICPs) and large corporations, organizations and small office home
office ("SOHO"), up to a T-3 (45 Mbps) connection level. The Internet connection
services afforded to this customer base include dial-up, hosting, and
co-location services.
In April 1999, the Company entered into a three-year contract with e.spire
Communications, Inc. to purchase PRI's in Florida. Presently the Company is
operating six lines. Customers call into its POP located in Aventura Florida,
via one of six PRI's provided by e.spire, they will then be routed to the
Internet via a high speed dedicated Internet connection.
Dial Up Services
- ----------------
DIAL-UP SERVICE PRICING STRUCTURE
---------------------------------
Service Type Price Per Month Terms
No Frills- So. Florida $9.95 Monthly
U.S. Customers 19.95 Monthly
Dial on Demand (ETRN 49.95 Monthly
T1 Frame (56K 150.00 Local Loop & Installation
T1 Frame (1.5 Mbps) 895.00 2 Year Contract, Local Loop
7
The No-Frills $9.95 per month unlimited Internet access, which includes one
E-mail address per subscriber became available in Dade and Broward Counties on
February 1, 2000.
Hosting Services
- ----------------
IPQuest provides technical support while giving the end user the fastest
possible connection to the Internet through T1 and T3 connections. It also
provides the latest in cutting edge marketing for customized Web sites,
including a complete Internet Commerce Solution (ICS). The Company will work
with their customers' in-house resources and will handle everything from setup
to a search engine registration to provide the customers' a Web presence with a
minimum of effort.
Quest Net offers its customers three pricing options to accommodate
multiple customer needs and budgets as described in the following table.
HOSTING SERVICES PRICING STRUCTURE
- ----------------------------------
SERVICE TYPE TERMS PRICE PER MONTH TERMS
Value Plan $24.99 Set-up @ $39.99
E-Commerce Plan $49.95 Set-up @ $99.00
Co-Location Plan $99.00 Port Fee Set-up @ $500.00
Each plan is individually described below.
Value Plan This plan is designed to attract individuals and small business
entities and offers the following:
- Includes the first 2,500 Mb, plus 3 cents per Mb thereafter.
- 10 Mb of disk space.
- 2E-mail accounts (POP3).
- Account control panel via Web.
- Unlimited FTP updates. Choice of UNIX or Windows NT hosting.
- Microsoft Front Page support.
- Telenet access to the server (UNIX hosting).
- Personal CGI Directory for personalized scripts.
- Site counter as well as detailed statistics.
- E-mail forwarding, auto responders, and vacation reply.
- Domain name registration. InterNIC fees are additional.
Commerce Plan This plan is designed to attract companies selling products and
services on the Internet and offers the following:
- Includes the first 5,000 Mb, plus 3 cents per Mb thereafter.
- Storage Limit: 100 MB (Extra storage at $0.40/Mb/Month).
- 10 E-mail accounts (POP3)
- Secure Socket Layer (SSL) for credit card transactions.
8
- Shopping Card application, fully configurable.
- SQL support for database applications.
- Database utilities such as search engine, guest books, feedback
forms, mailing lists, and mass E-mail conferencing.
- Domain name registration (www. customersname. com). InterNIC fees
are additional.
Co-Location Plan
This plan is designed to attract companies or individual business entities
running their own servers and offers the following:
- Includes the first 1,000 Mb, plus 3 cents per Mb thereafter.
- Connect into a 100 Mbps network.
- 10 IPs per server (Extra IP available at $9.99/Month).
- Server available for lease for an extra $69.00 per month.
DEDICATED LINE SERVICES
Dedicated lines consist of anything over 64K of dedicated connection that
stay on continuously. These lines may be either wireless or hard-wired with
point-to-point connectivity.
In April 1999, the Company was chosen to host the new Volkswagen Press Room
Website and Intranet. The Press Room will be used facilitate communication
between these Volkswagen managers that are spread all over the world and will
enable the users to have instant access to "the tools of their trade". Web
Solutions and Johan Wagner, the South AfHcan PIR manager for Audi, conceived
this Website.
GLOBALBOT CORP.
Quest Net has recently launched its GlobalBot subsidiary, which develops
and operates dedicated search engines and also offers Web site platforms for
e-commerce transactions. The Company believes that current search engines are
clogged up and have lost their focus and that dedicated search engines will
bring order to the present chaotic collection of multimedia and resources on the
Internet.
The Internet was not designed to support and organize publications and the
accurate retrieval of information, as a library would. A dedicated search engine
that can facilitate automated indexing much like a human indexer will be able to
retrieve specific information based on author names, length of document, subject
matter and date of publication, allowing the user efficient access to the
specific information he is seeking. Once the user has found that specific
information site, the user becomes a captive audience for those vendors selling
products related to that specific topic. Herein lies a tremendous opportunity to
generate advertising revenues. GlobalBot's search engines are designed to
organize the Net's storehouse of information (books, newsprint, raw scientific
data, menus, meeting minutes, advertisements, video and audio recordings,
transcripts or interactive conversations) in a manner similar to a traditional
library.
GlobalBot is in the final stages of developing search engines, which
combine librarian's skill with the computers ability to automate and index
information. A prototype can be evaluated at globalbot.net.
9
In February and March 1999, the Company acquired three industry-specific,
e-commerce sites, namely, wingsonline.com, an aircraft e-commerce sites,
boatsonline.com, a boat marketplace and resource center, and carsonline.com an
automobile market place. At present wingsonline.com is the only site that is
operational and generating revenues. Moreover, Wing Online, Inc., a wholly owned
subsidiary of GlobalBot, is GlobalBot's only source of revenue at this time.
Wingsonline.com is used as a marketplace to purchase airplanes, parts, and
accessories, locate aviation services, financing, or insurance, and as an
employment forum for those seeking employment in the aviation industry.
Wingsonline.com normally charges $25 per month per listing for a two-month
listing. The monthly charge to dealers is individually negotiated.
The boatsonline.com and carsonline.com sites are not currently operational,
but management believes they will be equivalent in the potential to generate
listing and advertising revenues. The company is converting both of these sites
to the same streamlined, user-friendly format as used by wingsonline.com and
will apply a similar pricing structure.
The Company has recently completed the acquisition of the registered
domains for the following proposed e-commerce sites, yachtonline.com and
motorbikesonline.com. These sites are under construction and will follow the
same format as the wingsonline.com site.
CWTEL, INC..
CWTel, Inc. was incorporated in February of 1998 in the State of Florida.
Based in Hallandale, Florida, the company provides communication services to
commercial and residential customers. The company is a switch-based carrier for
local and long distance voice calls. Utilizing conventional transmission methods
and Voice over IP protocols.
CWTel, Inc. also provides high speed Internet service, dial-up Internet
access and web hosting.
The company markets its services in the tri-county area of South Florida.
CWTel, Inc. offers local dial tone, long distance calling and high speed
Internet access to tenants located in commercial buildings; Agreements are
previously signed with the landlord or the management of such buildings, then
tenants are offered discounted services.
Currently competing with BellSouth, Teligent, E-Spire and others, CWTel,
Inc. offers local dial tone at a flat fee of $ 30.00 per line, including all
features, compared to BellSouth average business line cost of $ 61.00. Current
Long Distance prices includes calling to anywhere in the USA or to Canada or to
the UK for $ 0.07 per minute, billed in six seconds increments, at any time of
the day. Most European countries at $ 0.15 per minute, and the rest of the
countries at very competitive rates.
CWTel, Inc. equipment includes a class 4 and 5 Harris tandem switch with
capacity for 10,000 ports, Cisco routers and Compaq servers. A state of the art
billing and accounting package guarantees accurate and timely invoicing of the
services provided.
CWTel, Inc. has activated approximately 1,300 accounts. CWTel, Inc. became a
wholly owned subsidiary of Quest Net Corp., in March of 2000.
10
SALES AND MARKETING
Overview
- --------
The market for Quest Wireless services is new and rapidly growing. In
developing its sales and marketing strategies, the Company has focused on
commercial and residential tenants in high rise buildings and new high rise
building developers to build demand for its wireless services. The Company
believes that the principal competitive factors for companies seeking to attract
users for their Internet wireless connection services are signal quality, speed
and reliability of connection, quality customer service and broad service range.
Customer Base
- -------------
The Company is developing its customer base through an active sales and
marketing campaign, primarily centered on building relationships with existing
commercial and residential building owners and new property developers
throughout the State of Florida, and eventually nationwide. At present, the
Company is concentrating its efforts in the South Florida region, and plans to
expand throughout the rest of the State within the next 3 years. Targeted major
metropolitan cities include Jacksonville, Tampa/St. Pete, and Orlando.
Sales Strategy
- --------------
The Company relies primarily on direct sales to generate new wireless
customers and to maintain relationships with existing customers. At present,
there is a small South Florida sales force headed by a a Vice President of Sales
and Marketing. To meet growing capacity and operations, the Company plans to
hire additional sales personnel as needed. By December 2000, the Company expects
to have a sales force of 25 sales people to cover a 3-county range consisting of
Dade, Broward and Palm Beach counties. Sales efforts will focus mainly on the
commercial sector, selling the Quest Wireless IQ Building concept. The IQ
Building, a Quest Wireless origination, is a completely hi-tech, wired, and
wireless Intemet Voice and Data building. The IQ Building is equipped with
advanced communications technology such as fiber optics, maximum bandwidth, and
other leading edge telecommunication services.
To leverage the value-added services provided by Quest Net's other
subsidiaries, Quest Wireless is also able to offer CONNECTION, ADVERTISING,
ACCESS, AND CONTENT SERVICES as a bundled package deal to Wireless customers and
their employees. In the future, the Company will also include office and
residential discounted international long distance service in the service
package. In addition, the Company is test marketing the feasibility of including
computers and monitors in the wireless marketing package.
The Company also takes advantage of the need for this technology by
marketing its wireless service package to small businesses and larger
corporations that require fast and reliable access to the Internet but would
rather not have the expense of hard wiring and maintenance or the connection
setup delays.
11
Marketing Strategy
- ------------------
The Company plans to utilize a variety of marketing techniques to generate
awareness and inquiries.
- Direct Mail
The Company plans to conduct a direct mail campaign targeting
potential customers in new geographic areas in a six to twelve week cycle.
It will employ appropriate and creative printing and mailing services. The
promotional materials will be produced in the most cost effective manner
without sacrificing quality. The Company also plans direct mail campaigns
for existing territories to stimulate incremental usage by new and existing
customers and to build awareness. In addition, it plans to establish an
in-bound telesales customer service department designed to supplement its
direct mail marketing strategy. Once established, customer service
representatives will be available 24 hours a day, 7 days a week to answer
marketing inquiries generated by its marketing campaigns, as well as
supporting existing customers.
- Magazine/Professional Journal/Newspaper Advertisement
The Company plans to advertise in major telecommunications and
Internet magazines throughout the country using postcard inserts and other
mail-in techniques to foster inquiries and to solicit sales.
- Trade Shows
Trade shows are a critical component for generating awareness because
of their popularity among Internet users. Thousands of enthusiasts who surf
the Net attend trade shows each year, as well as vendors and product
manufacturers. The Company plans to participate in several annual local
shows and events, as well as one national show starting in fiscal year
2000. It plans to have a booth that is staffed with it in-house business
development, technical, and sales people. In addition, the Company will
host a hospitality suite. Attending trade shows also gives sales people the
opportunity to gather competitor information and keep current regarding
industry needs and trends. Management estimates that the cost of exhibiting
at a national trade show ranges from $20,000 to $30,000 and the cost of
exhibiting at a local trade show is between $1,000 and $2,000.
- Sponsorships
The Company also plans to sponsor Internet programs at local
universities. In one program being considered, it will underwrite Internet
connection services (both wired and wireless) for local universities so
that its students can access the Net in the university's computer room. The
Company will distribute promotional literature to the students describing
its products and services, and also detailing similar for-fee services that
the students can purchase for home or business use. These sponsorships are
at a minimal cost to the Company and provide an excellent means of good
public relations.
The Company has a website (www.questnetcorp.com) where information
about the Company and its services can be obtained. Users can also E-mail
to request contact by one of the Company's sales representative. Interested
parties can also call a toll-free number (800-952-6638) and request
informational literature to be sent to them.
12
PUBLIC RELATIONS AND ADVERTISING
The Company has retained a public relations firm and an advertising firm to
assist in gaining attention from the media and establishing a corporate and
product identity for Quest Net Corp., and in particular Quest Wireless, which is
its designated core business.
Most of the public relations activities will be focused on trade press,
primarily those catering to the telecommunications industry. Management
estimates that the cost of public relations will be $1,500 per month. The
Company also periodically distributes press releases, regarding new acquisitions
and agreements and describing its services.
The Company's initial advertising activities will consist of billboard,
print, radio and other media corporate recognition activities.
TRADEMARKS
Quest has no patents or licenses. Quest has certain trademarked and copy
righted names and proprietary secrets as regards the various beverage
formulations. It is believed that the various trademarked and copyrighted
material are unique to the Company but that replacement identities are
available.
PROPERTY
Quest PROPERTY
Quest currently leases its offices located at 2999 NE 191st Street, PH-8,
Aventura, Florida 33180. In January 1999, we signed a five-year lease for 3,000
square feet of corporate office space at a base rent of $2,980 per month plus
common area maintenance costs. We also lease additional office space at a base
rent of $1,028.50 and $2,887.17 per month plus common area maintenance fees. The
additional space houses our Internet operations, our sales staff, and our
GlobalBot subsidiary. These leases expire five years from their date of
commencement. In addition, CWTel, Inc. leases approximately 800 square feet of
office space in Hallandale Florida, at a monthly rental cost of $1,800. This
lease expires in May 2002.
The Company intends to relocate its offices, including CWTel to 3001 West
Hallandale Beach Blvd., Pembroke Park, Florida as soon as the build out on this
space is completed. The lease will be for a period of five year. We will lease
9,681 sq. feet of office space for $12,000 per month. The Company has already
sublet the offices, except for CWTel, that will be vacated at the present
location. The Company anticipates that it will be able to sublease the CWTel
office space with out a problem. Our telephone number is (305) 935-1080.
13
LEGAL PROCEEDING
Secure Transaction International Corp. et al.
- --------------------------------------------
In April 1999, Quest filed a lawsuit in the Circuit Court of the 17th
Judicial Circuit in and for Broward County, Florida against Secure Transaction
International Corp., its subsidiaries and principals, the accounting firm of
Margolis, Fink & Wichrowski, Barry A Fink, C.P.A., P.A., Mark V. Wichrowski,
C.P.A. and Barry A. Fink and Mark Wichrowski, individually, alleging violation
of the Florida securities laws, negligent misrepresentations, breach of contract
payment of accounts, and conversion.
The lawsuit stems from several contracts entered into with Secure
Transaction and its subsidiaries for bandwidth, consulting services and
software. As payment for the services, Secure Transaction and its subsidiaries
issued redeemable preferred stock that was convertible into Secure Transaction
common stock.
Quest provided the services as required and the appropriate amount of
convertible stock was not redeemed or converted. The amount due us under these
various agreements is approximately $867,842.
Quest has also alleged that the Financial Statements provided, negligently
misrepresented the financial condition of Secure Transaction and its
subsidiaries. Quest has asked the court for rescission, compensatory damages,
attorneys' fees, costs, and expenses.
The defendants filed a motion to dismiss, which was denied. The defendants
have filed an answer to our complaint. The lawsuit is in the discovery stage. At
present, we are unable to predict the outcome this lawsuit.
Herman Henin
- ------------
In January 1999, Herman Henin, a shareholder of Pact Communications Group,
Inc., filed a lawsuit against Quest in the Circuit Court of the 17th Judicial
Circuit in and for Broward County, Florida. Mr. Henin alleged that he did not
receive a proper distribution of Quest shares from Pact after Quest's
acquisition of certain of the assets of Pact, and that, somehow, Quest is
responsible.
Mr. Henin has demanded that we issue him the additional shares that Pact
allegedly did not issue plus the dividend for those shares.
Quest filed a motion to dismiss/for more definite statement. On July 29,
1999, the motion to dismiss was granted. On August 14, 1999, Mr. Henin filed an
Amended Complaint alleging that the transaction between Quest and Pact was a "de
facto merger" and that Quest assumed all of Pact's liabilities.
On August 17, 1999, we filed a Motion to Dismiss/Strike on the grounds that
the Amended Complaint failed to state a claim, upon which relief could be
granted, for alleging immaterial and impertinent matters, and for failure to
join an indispensable party (Pact). All
14
counts were dismissed except specific performance and breech of contract, which
rely on whether a de-facto merger took place. We contend that a "de facto
merger" never took place and that the Asset Purchase and Sale Agreement
specifically states that the transaction was not a "de facto merger and that we
did not assume any debts, liabilities or obligations of Pact.
Autonomy, Inc.
- --------------
In September 1999, Autonomy, Inc, filed suite against Pact Communication
Group, Inc. and Quest Net Corp. in the Circuit Court of the 17th Judicial
Circuit in and for Broward County, Florida. The lawsuit stems from an alleged
contract with Pact for a non-transferable, non-sublicenseable, and non-exclusive
license for the use of Autonomy's software and other related services. Autonomy
has alleged that:
- Autonomy's computer software has been installed on computer servers
owned and being operated by Quest.
- Quest is a successor in interest to Pact.
The complaint asks for:
- injunctive relief against Quest to enjoin it from use of the software
and providing Autonomy's software to other parties
- Replevin (return of the software)
- Damages for unjust enrichment
Quest denies all of the allegations and intends to vigorously defend this
lawsuit. The lawsuit is in the discovery stage. At present, we are unable to
predict the outcome this lawsuit.
Securities and Exchange Commission
- ----------------------------------
Quest has been advised by the Securities and Commission (the "Commission")
that they have issued an order directing a private investigation of possible
violations of Sections 17(a) of the Securities Act and Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated there under by
certain unnamed persons. The Commission has also advised Quest that the
investigation should not be construed as an indication by the Commission or its
staff that any violation of law has occurred, nor as a reflection upon any
person, entity, or security.
MARKET FOR QUEST'S SECURITIES
Quest has been a non-reporting publicly traded company with certain of its
securities exempt from registration under the Securities Act of 1933 pursuant to
Regulation D. Quest's common stock is traded on the OTC Bulletin Board operated
by Nasdaq under the symbol QNET. Quest does not have an effective registration
statement filed with the Securities and Exchange Commission and has not been a
reporting company under the Securities Exchange Act of 1934. The Nasdaq Stock
Market has implemented a change in its rules requiring all companies trading
securities on the OTC Bulletin Board to become reporting companies under the
Securities Exchange Act of 1934. Until such registration is achieved, the
Company's trading symbol is QNETE to indicate its non-reporting status.
15
Quest was required to become a reporting company by the close of business
on March 22, 2000 or no longer be listed on the OTC Bulletin Board. Quest has
effected the merger with PEI and has become a successor issuer thereto in order
to comply with the reporting company requirements implemented by the Nasdaq
Stock Market. There has been trading in our common stock since July 10, 1998.
The following table sets forth, for each of the fiscal periods indicated,
the high and low bid prices for the common stock, as reported on the OTC
Bulletin Board. These per share quotations reflect inter-dealer prices in the
over-the-counter market without real mark-up, markdown, or commissions and may
not necessarily represent actual transactions.
QUARTER ENDING HIGH/BID LOW/BID
FISCAL YEAR 1998
September 1998 $ 3.0625 $ .8128
December 1998 $ 9.75 $ .51
March 1999 $15.00 $5.00
June 1999 $10.1255 $4.56
FISCAL YEAR 1999
September 1999 $ 9.250 $2.875
December 1999 $ 3.375 $2.00
On March 16, 2000, the closing trade price of the common stock as reported on
the OTC Bulletin Board was $2.06. As of such date, there were in excess of 300
holders of record of our common stock.
MANAGEMENT
The following table sets forth certain information concerning our directors
and executive officers:
Name Age Term Position
- ---- --- ---- --------
Charles Wainer 38 2000 President, Interim
Chief Executive Officer and
Director
Paul K. Zeller 46 1999-2000 Executive Vice-President/Sales
Thomas Magill 56 2000 Executive Vice
President/President of GlobalBot
David Block 32 1999-2000 Director
16
Our Directors hold office until the next annual meeting of shareholders and
the election and qualification of their successors. Officers serve at the
discretion of the board. Quest has scheduled its annual meeting of shareholders
for August 15, 2000, at which time the shareholders will elect the Board of
Directions.
Charles Wainer, President
- -------------------------
Mr. Wainer was appointed President/Interim Chief Executive Officer and a
Director of Quest in February 2000. From February 1998 to present, Mr. Wainer
was Chief Executive Officer of CWTel, Inc., a telecommunications company located
in Hallandale Florida. Quest purchased CWTel, Inc. in February 2000. From
December 1992 to February 1998, Mr. Wainer was Chief Executive Officer of World
Pass Communication Corp., a Telecommunication Company located in Aventura,
Florida.
Mr. Wainer received a Bachelor of Science Degree in Electronics Engineering
from Tel-Aviv University in 1982.
Paul K. Zeller, Executive Vice President/Sales
- ----------------------------------------------
Paul K. Zeller joined Quest Net Corp. on September 7, 1999. Mr. Zeller is
Executive Vice President of Sales.
From 1996 till joining Quest, Mr. Zeller was founder and President of Zelco
Enterprises, Inc., a Florida corporation that specialized in financial and
management consulting to both private and public corporations.
From 1985 to 1994, Mr. Zeller served as Vice President Corporate
Administration for W.R. Grace & Co. in New York City. His responsibilities were
global in nature. At that time, Grace had 117,000 employees and over $7 Billion
in revenues.
Upon leaving Grace in 1994, Mr. Zeller was asked to accept a key project
assignment for Ryder System Inc. in Miami, as the Assistant to the Executive VP
Human Resources. In 1995, a developmental stage corporation, Sky Scientific,
Inc. a now-defunct public company that was located in Boca Raton, Florida,
recruited him as their Executive Vice President and Chief Operating Officer, to
assist them with a operating and financial strategic turn around.
Mr. Zeller received his Bachelor's Degree in 1974 from The Citadel and his
Master's Degree in 1976 from New York University.
Thomas K. Magill, Executive Vice President, and President of GlobalBot
- ----------------------------------------------------------------------
Mr. Magill became President of GlobalBot, Quest's wholly owned subsidiary
in October 1999 and an Executive Vice President of Quest in March 2000.
From October 1997 to October 1999, Mr. Magill was the principal of Magill
Business Consulting, a management, and consulting company located in Highland
Beach, Florida.
17
From December 1994 to September 1997, Mr. Magill was General Manager of
Fritz Companies, an international freight forwarding, custom brokerage, and
transportation and distribution company located in Miami Florida.
Mr. Magill was Director of Transportation and Distribution for Office Depot
from October 1990 to October 1994.
Mr. Magill received a Bachelor of Art Degree from Mancalester College in
1996.
David J. Block, Esq., Outside Director
- --------------------------------------
David Block has been a director of Quest since July 1998. From March 1997
to present, Mr. Block has been employed by H. Hertner Associates, a Miami Lakes,
Florida recruiting firm, as a legal recruiter. From May 1996 to March 1997, he
was an attorney with the law office of Singer & Block, which was located in
Miami, Florida. From October 1994 to January 1996, he was a Supervising Attorney
for the United States Small Business Administration, in their Florida and
California offices delivering agency relief to disaster victims of Hurricanes
Andrew, Erin, Opal, and the Northridge earthquakes.
Mr. Block is a 1992 graduate of the University of Miami School of Law,
where he served as Vice President of Entertainment and Sports Law Society from
1999-1991. Mr. Block is a member of the Florida Bar. Mr. Block's affiliations
within the legal community provide him with insight into the ever-changing legal
market.
Limited Liability of Directors
Provisions included in our certificate of incorporation, as amended,
protect our directors against personal liability for monetary damages from
breaches of their duty of care. As a result, our directors will not be liable
for monetary damages from negligence and gross negligence in the performance of
their duties. They remain liable for monetary damages for any breach of their
duty of loyalty to us, and our stockholders, as well as acts or omissions not
made in good faith or which involve intentional misconduct or a knowing
violation of law and for transactions from which a director derives improper
personal benefit. The liability of our directors under federal or applicable
state securities laws is also unaffected. We carry officers and directors'
liability insurance in the amount of $1,000,000.
While our directors have protection from awards of monetary damages for
breaches of the duty of care, that does not eliminate their duty of care.
Equitable remedies, such as an injunction or rescission based upon a director's
breach of the duty of care, are still available.
EXECUTIVE COMPENSATION
Charles Wainer, as president, receives an annual salary of $100,000. In
addition, Mr. Wainer received incentive options to purchase up to an aggregate
of 1,000,000 shares of the Company's common stock at an exercise price of $ 2.26
(110% of the fair market value on the date
18
of grant. Mr. Wainer also received a stock grant of 50,000 shares of the
Company's common stock.
Mr. Zeller and Mr. Magill received an annual salary of $ 75,000 and $
65,000, respectively. In addition, they received options to purchase 90,000 and
19,800 shares of common stock at $ 3.25 and $ 2.03 respectively (110 % of the
fair market value at date of grant.
RISK FACTORS
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR AN INVESTOR TO EVALUATE OUR
BUSINESS AND PROSPECTS
We have minimal business history that investors can analyze to help them
decide whether or not to invest in us. Any investment in us should be considered
a high-risk investment because investors will be placing their funds at risk in
an unseasoned development stage company with unforeseen costs, expenses and
problems often experienced by development stage companies.
WE HAVE HAD HISTORY OF A LIMITED CUSTOMER BASE AND THIS MAY CONTINUE TO BE THE
CASE.
At present, our customer base is limited. Our ability to operate profitably
depends on increasing our customer base and achieving sufficient gross profit
margins. We cannot assure you that we will be able to increase our customer base
or to operate profitably.
WE ARE SUBJECT TO ALL OF THE SUBSTANTIAL RISKS INHERENT IN AN INTERNET BUSINESS,
WHICH MAY HARM OUR ABILITY TO OPERATE SUCCESSFULLY.
We are subject to all of the substantial risks inherent in an Internet
related business, any one of which may harm our ability to operate successfully.
These include, but are not limited to:
- Our inability to develop, maintain and/or increase levels of traffic
on our Internet sites.
- Our inability to attract or retain customers.
- Our inability to generate significant Web-based revenue from our
customers.
- Our failure to anticipate and adapt to a developing market and the
level of use of the Internet and online services for the purchase of
consumer products and in general.
- Our inability to upgrade and develop competitive systems and
infrastructures.
- The failure of our servers and networking systems to efficiently
handle our Web traffic.
- Technical difficulties and system downtime or Internet brownouts.
IF WE CANNOT MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS COULD BE HARMED.
We are currently experiencing a period of significant growth. As part of
this growth, we will have to:
- Implement new operational procedures and controls.
19
- Train and manage our employees.
- Expand and coordinate the operations of our various subsidiaries.
- Expand our wireless network throughout Florida and into other states.
- Hire additional staff.
- Expand existing offices and open new offices.
If we cannot manage the growth of our network, staff, offices, and business
and coordinate the activities of our technical, accounting, finance, marketing,
and sales staff effectively, we will:
- Commit funds that may not produce revenue.
- Increase our operational overhead.
- Expend management time and effort on operations that may not succeed.
IF WE CANNOT INTEGRATE NEW BUSINESSES, OPERATIONS, TECHNOLOGY, AND PERSONNEL,
OUR GROWTH AND OUR BUSINESS COULD BE HARMED.
If we acquire new businesses, we will need to integrate new operations,
technologies and personnel. Acquisitions and business combinations entail
numerous operational risks, including:
- Difficulty in the assimilation of acquired operations, technologies
or products.
- Diversion of management's attention from other business operations.
- Risks of entering markets in which we have limited or no experience.
- Potential loss of key employees of acquired businesses.
IF WE RAISE ADDITION CAPITAL THROUGH THE ISSUANCE OF EQUITY OR CONVERTIBLE DEBT,
YOUR PROPORTIONATE INTEREST WILL BE DILUTED.
We will need more working capital to expand our operations. If we raise
additional capital by issuing equity or convertible debt securities, the
percentage ownership of our then-current stockholders will be reduced, and such
securities may have senior rights, preferences, or privileges.
WE MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL ON THE MOST FAVORABLE TERMS
We may not be able to obtain financing on favorable terms, or at all, which
will limit our ability to:
- Expand.
- Take advantage of unanticipated opportunities, develop, or enhance
services.
- Otherwise, respond to competitive pressures.
This limitation could harm our business and decrease the value of the
shares or cause us to go out of business. If we are unable to continue our
operations, your entire investment in us will be lost. See "Management's
Discussion and Analysis of Financial Condition and Results of
20
Operations--Liquidity and Capital Resources" for a discussion of our working
capital and capital expenditures.
OUR DATA CENTERS AND THE NETWORKS ON WHICH WE RELY ARE SENSITIVE TO HARM FROM
HUMAN FACTIONS AND NATURAL DISASTERS. ANY RESULTING DISRUPTION COULD
SIGNIFICANTLY DAMAGE OUR BUSINESS AND REPUTATION.
Our reputation for providing reliable service largely depends on the
performance and security of our data centers equipment and the network
infrastructure on which we rely. Our customers often maintain confidential
information on our servers.
Our data centers, equipment and networks, and our customers' information
are subject to damage and unauthorized access from:
- Human error and tampering.
- Breaches of security.
- Natural disasters.
- Power loss.
- Capacity limitations.
- Software defects.
- Telecommunications failures.
- Intentional acts of vandalism, including computer viruses.
All of which, will cause interruptions in service or reduced capacity for our
customers. These events could potentially jeopardize the security of our
customers' confidential information such as credit card and bank account
numbers.
Despite precautions we have taken and plan to take, the occurrence of any
one of the events listed above or other unanticipated problems could seriously
damage our business and reputation and cause us to lose customers.
The time and expense required to eliminate computer viruses and alleviate
other security problems could be significant and could impair our service
quality.
In the event of any resulting harm to customers, we could be held liable
for damages. Awards for such damages might exceed our $1,000,000 liability
insurance policy by an unknown but significant amount and could seriously harm
our business.
WE COULD NOT PROVIDE ADEQUATE SERVICE TO OUR CUSTOMERS IF WE WERE UNABLE TO
SECURE SUFFICIENT NETWORK CAPACITY TO MEET OUR FUTURE NEEDS ON REASONABLE TERMS
OR AT ALL.
Our failure to achieve or maintain high capacity data transmission could
negatively impact service levels to our existing customers and limit our ability
to attract new customers,
21
which would harm our business.
WE ARE DEPENDENT ON INTERNET NETWORK ACCESS SERVICES WE RECEIVE FROM OTHERS, ANY
DISRUPTION OF THESE SERVICES COULD HARM OUR BUSINESS
We rely on third-party networks, local telephone companies, and other
companies to provide data communications capacity. Any disruption of these
services could cause our customers to find other providers and prohibit us from
obtaining new customers.
OUR BUSINESS DEPENDS IN PART ON OUR NETWORK SERVICE PROVIDER'S NUMEROUS PEERING
RELATIONSHIPS. THEIR INABILITY TO MAINTAIN THEIR PEERING RELATIONSHIPS COULD BE
COSTLY AND HARMFUL TO OUR BUSINESS.
The Internet is composed of many Internet service providers that operate
their own networks and interconnect with other Internet Service Providers at
various peering points.
If our network service provider's network or infrastructure fails to
continue to meet industry requirements for peering or it loses its peering
relationships for any reason, our transmission rates could be reduced, resulting
in a decrease in the quality of service we provide to our customers.
POTENTIAL LACK OF LIQUIDITY OF OUR COMMON STOCK
Our common stock trades on the OTC Electronic Bulletin Board. Stocks
trading on the OTC Electronic Bulletin Board generally attract a smaller number
of market makers and a less active public market.
Moreover, since our common stock is traded on the OTC Electronic Bulletin
Board, investors may find it difficult to dispose of or obtain accurate
quotations as to the value of our common stock.
WE ARE SUBJECT TO PENNY STOCK REGULATIONS AND RESTRICTIONS
The Securities Exchange Commission has adopted regulations, which generally
define Penny Stocks to be an Equity Security that has a market price less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exemptions. As of November 26 1999, the closing trade price of our
common stock was $4.56 per share and therefore is designated as a "penny stock".
Such a designation requires any broker or dealer selling such securities to
disclose certain information concerning the transaction, obtain a written
agreement from the purchaser, and determine that the purchaser is reasonably
suitable to purchase such securities. These rules will restrict the ability of
Broker / Dealers to sell our common stock and may affect the ability of
Investors to sell their shares.
OUR ARTICLES OF INCORPORATION ALLOW AUTHORIZATION AND DISCRETIONARY ISSUANCE OF
PREFERRED STOCK
Our Articles of Incorporation authorize the issuance of "blank check",
preferred stock. The board of directors is empowered, without stockholder
approval, to designate and issue
22
additional series of preferred stock with dividend, liquidation, conversion,
voting, or other rights, including the right to issue convertible securities
with no limitations on conversion. Any such designations and issuances, could:
- Adversely affect the voting power or other rights of the holders of our
common stock.
- Substantially dilute the common shareholder's interest.
- Depress the price of our common stock.
THE ISSUANCE OF "BLANK CHECK" PREFERRED STOCK COULD DELAY, DETER, OR PREVENT A
TAKE OVER, MERGER OR CHANGE OF CONTROL AND MAY PREVENT YOU FROM REALIZING A
PREMIUM RETURN
Our Certificate of Incorporation gives the Board of Directors the sole
authority to issue "blank check" preferred stock. The issuance of "blank check"
preferred stock could have the effect of delaying, deterring, or preventing a
merger, take over or change in control without any action by the shareholders.
The Board of Directors, by the issuance of preferred stock, could make it more
difficult for a third party to acquire us, even if the acquisition would be
beneficial to you. You may not realize the premium return that stockholders may
realize in conjunction with corporate takeovers.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR TO CONTINUE
USING INTELLECTUAL PROPERTY THAT WE LICENSE FROM OTHERS.
We rely and will rely on a combination of copyright, trademark, service
mark, and trade secret laws and contractual restrictions to establish and
protect certain of our proprietary rights. We have no patented technology that
would bar competitors from our market. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain
and use our data or technology.
THE UNCERTAINTY ASSOCIATED WITH UNPROVEN BUSINESS MODELS
Since Quest Net's business model is relatively new and unproven, we may not
be able to anticipate and adapt to a developing market, or may be unable to
manage its network infrastructure (including server, hardware, and software, to
handle our Internet traffic, or to effectively manage our rapidly expanding
operations.
WE LACK UNIQUE SERVICES OR MARKET NICHE IN AN INDUSTRY CHARACTERIZED BY
SIGNIFICANT OVERCAPACITY FOR CURRENT DEMAND
The market for Internet access is highly competitive and fragmented with
over 4,800 Internet service providers, primarily in local markets and averaging
less than 5,000 customers each. Multiple Internet access providers serve every
local market we have entered, or intend to enter. We offer the same type of
services as other Internet service providers. Due to our lack of working capital
in the past, we have not obtained any significant market share.
23
WE CANNOT BE CERTAIN THAT WE WILL BE ABLE TO COMPETE WITH SIGNIFICANT PRICING
PRESSURE BY OUR COMPETITORS.
As a result of increased competition in our industry, we expect to
encounter significant pricing pressure. We cannot be certain that we will be
able to offset the effects of any required price reductions through an increase
in the number of our subscribers, higher revenues from our business services,
cost reductions or otherwise, or that we will have the resources to continue to
compete successfully.
WE MAY NOT BE ABLE TO COMPETE IN THE INTERNET SERVICE MARKET
We operate in the Internet services market, which is extremely competitive.
Our current and prospective competitors include many large companies that have
substantially greater market presence, financial, technical, marketing, and
other resources than we have. We compete directly or indirectly with the
following categories of companies:
- Established online services, such as America Online, the Microsoft
Network, CompuServe, and Prodigy.
- Local, regional, and national Internet service providers, such as
MindSpring, Earthlink, Network, Inc., Internet America, and PSINet.
- National telecommunications companies, such as AT&T Corp., MCI
WorldCom, Inc., Sprint, and GTE.
- Regional Bell operating companies, such as BellSouth and SBC
Communications.
Our competition is likely to increase. We believe this will probably
happen as large diversified telecommunications and media companies acquire
Internet service providers and as Internet service providers consolidate into
larger, more competitive companies.
Diversified competitors may bundle other services and products with
Internet connectivity services, potentially placing us at a significant
competitive disadvantage. As a result, our business may suffer.
WE MAY NOT BE ABLE TO COMPETE IN THE LONG-DISTANCE TELEPHONE MARKET
Quest, through its wholly owned subsidiary CWTel, is a reseller of long
distance telephone service. We compete with long distance carriers and other
long distance resellers and providers, including large carriers such as AT&T,
MCI WorldCom and Sprint and new entrants to the long distance market. Many of
our competitors are significantly larger and have substantially greater market
presence and financial, technical, operational, marketing and other resources.
We will face stiff price competition and may not be able to compete.
QUEST HAS LIMITED MARKETING AND SALES CAPABILITY.
Because of our limited working capital in the past, we have not had the
resources to develop a marketing and sales force.
In order to increase our revenues, we are in the process of developing
marketing and sales force with technical expertise and marketing capability.
There can be no assurance that we will
24
be able to: o Establish such sales force.
- Gain market acceptance for our services.
- Retain a qualified Director of Sales.
- Develop our sales force.
- Obtain and retain qualified sales personnel on acceptable terms, if at
all.
- Meet our proposed marketing schedules or plans.
To the extent that we arrange with third parties to market our services,
the success of such products may depend on the efforts of such third parties.
DEPENDENCE ON QUALIFIED PERSONNEL.
Due to the specialized nature of our business, we are highly dependent upon
our ability to attract and retain qualified technical and managerial personnel.
Therefore, we have entered into employment agreements with certain of our
executive officers. The loss of the services of existing personnel, especially
Mr. Wainer, our President as well as the failure to recruit key technical and
managerial personnel in a timely manner would be detrimental and could have an
adverse impact upon our business affairs or finances.
Our anticipated growth and expansion into areas and activities requiring
additional expertise, such as marketing, will require the addition of new
management personnel. Competition for qualified personnel is intense and there
can be no assurance that we will be able to continue to attract and retain
qualified personnel necessary for the development of our business.
THIS REPORT INCLUDES FORWARD-LOOKING STATEMENTS, WHICH COULD DIFFER FROM ACTUAL
FUTURE RESULTS.
Some of the information in this Report may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect", "anticipate", "continue", or other
similar words. These statements discuss future expectations, contain projections
of results of operations or of financial condition, or state other
"forward-looking" information.
Examples of forward-looking statements include discussions relating to:
- Plans to expand our existing wireless operations.
- Plans to enter the international optical fiber market.
- Introductions of new products and services.
- Estimates of market sizes and addressable markets for our services
and products.
- Anticipated revenues from designated markets during 1999 and later
years.
- Statements regarding the Year 2000 issue.
We wish to caution you that all the forward-looking statements contained in
this Report are only estimates and predictions. Our actual results could differ
materially from those anticipated in the forward-looking statements due to
risks, uncertainties, or actual events
25
differing from the assumptions underlying these statements. Such risks,
uncertainties, and assumptions include, but are not limited to, those discussed
in this Report.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5 OTHER EVENTS
Successor Issuer Election.
--------------------------
Upon effectiveness of the merger, pursuant to Rule 12g-3(a) of the General
Rules and Regulations of the Securities and Exchange Commission, Quest became
the successor issuer to PEI for reporting purposes under the Securities Exchange
Act of 1934 and elects to report under the Act effective on March .17,2000.
ITEM 6 RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS
No financial statements are filed herewith. The Registrant shall file
financial statements by amendment hereto not later than 60 days after the date
that this initial report on Form 8-K must be filed.
ITEM 8. CHANGE IN FISCAL YEAR
The successor issuer will keep its present fiscal year end of June 30. The
Company will file a transitional annual report as required.
EXHIBITS
1.1 Agreement and Plan of Merger between Parputt Enterprises, Inc. and
Quest Net Corp.
1.2 Articles of Merger
1.3 Certificate of Incorporation of Quest Net Corp.
1.4 Bylaws of Quest Net Corp.
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized officer.
QUEST NET CORP.
By /s/ Charles Wainer, President
Date: March 20, 2000
27
EXHIBIT 1.1
AGREEMENT AND OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
by and between
PARPUTT ENTERPRISES, INC.
a Nevada corporation
and
QUEST NET CORP.
a Florida corporation
Effective as of March 13, 2000
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated March 13, 2000, by and
between PARPUTT ENTERPRISES, INC., INC., a Nevada corporation ("PEI"), and QUEST
NET CORP., a Florida corporation ("QNC"), PEI and QNC being sometimes referred
to herein as the "Constituent Corporations", who hereby agree as follows.
Premises
WHEREAS, this Agreement provides for the merger of PEI into QNC, and in
connection therewith, the conversion of the outstanding common stock of PEI into
shares of common voting stock of QNC, all for the purpose of effecting a
tax-free reorganization pursuant to section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended; and
WHEREAS, the boards of directors of PEI and QNC have determined, subject to
the terms and conditions set forth in this Agreement and the approval of PEI's
shareholders, that the merger contemplated hereby is desirable and in the best
interests of their respective corporations. This Agreement is being entered into
for the purpose of setting forth the terms and conditions of the proposed
merger.
Agreement
NOW, THEREFORE, in consideration of the premises and the respective mutual
covenants, representations and warranties herein contained, the parties agree as
follows:
1. SURVIVING CORPORATION. PEI shall be merged with and into QNC which shall
be the surviving reporting corporation (hereinafter the "Surviving Corporation")
in accordance with the applicable laws of the United States, as well as the
States of Nevada and Florida, respectively.
2. MERGER DATE. The Merger shall become effective (the "Merger Date") upon
the completion of:
2.1 Adoption of this Agreement by the shareholders of PEI pursuant to
the Nevada Revised Statutes and by the Board of Directors of QNC, pursuant
to the Florida Business Corporation Act.
2.2 Execution and filing of the Certificate of Merger with the
Secretary of State of the States of Nevada and Florida in accordance with
the respective laws of such states.
3. TIME OF FILINGS. The Certificate of Merger shall be filed with the
Secretary of State of Nevada and Florida upon the approval of this Agreement by
the shareholders of PEI and the Directors of QNC and the fulfillment or waiver
of the terms and conditions herein.
4. GOVERNING LAW. The Surviving Corporation shall be governed by the laws
of the State of Florida.
5. ARTICLES OF INCORPORATION. The Articles of Incorporation of QNC shall be
the Articles of Incorporation of the Surviving Corporation from and after the
Merger Date.
6. BYLAWS. The Bylaws of the Surviving Corporation shall be the Bylaws of
QNC as in effect on the date of this Agreement.
7. NAME OF SURVIVING CORPORATION. The Surviving Corporation will continue
to use its name "QUEST NET CORP." or such name as it may choose and shall be
available.
8. CONVERSION. The mode of carrying the merger into effect and the manner
and basis of converting the shares of PEI into shares of the Surviving
Corporation are as follows:
8.1 The aggregate number of shares of PEI Common Stock issued and
outstanding on the Merger Date shall, by virtue of the merger and without
any action on the part of the holders thereof, be converted into an
aggregate of 275,000 shares of QNC Common Stock adjusted by any increase
for fractional shares and reduced by any Dissenting Shares (defined below).
8.2 As of the date hereof, there are approximately 22,786,022 shares
of QNC's common stock issued and outstanding and 30,000 shares of Preferred
Stock issued and outstanding.
8.3 The QNC Common Stock to be issued herein shall be issued to the
holders of such PEI Common Stock in exchange for their shares on a pro rata
basis in accordance with each holder's relative ownership of the PEI Common
Stock that is being exchanged.
8.4 The shares of QNC Common Stock to be issued in exchange for PEI
Common Stock hereunder shall be proportionately reduced by any shares owned
by PEI shareholders who shall have timely objected to the merger (the
"Dissenting Shares") in accordance with the provisions of the Nevada
Revised Statutes which objections will be dealt with as provided in those
applicable sections.
8.5 Each share of PEI Common Stock that is issued and outstanding and
owned by PEI on the Merger Date shall, by virtue of the merger and without
any action on the part of PEI, be retired and canceled.
8.6 Each certificate evidencing ownership of shares of QNC Common
Stock issued and outstanding on the Merger Date or held by QNC in its
treasury shall continue to evidence ownership of the same number of shares
of QNC Common Stock.
9. EXCHANGE OF CERTIFICATES. As promptly as practicable after the Merger
Date, each holder of an outstanding certificate or certificates theretofore
representing shares of PEI Common Stock (other than certificates representing
Dissenting Shares) shall surrender such certificate(s) for cancellation to the
party designated by the Surviving Corporation to handle such exchange (the
"Exchange Agent"), and shall receive in exchange a certificate or certificates
2
representing the number of full shares of QNC Common Stock into which the shares
of PEI Common Stock represented by the certificate or certificates so
surrendered shall have been converted.
10. UNEXCHANGED CERTIFICATES. Until surrendered, each outstanding
certificate that prior to the Merger Date represented PEI Common Stock (other
than certificates representing Dissenting Shares) shall be deemed for all
purposes, other than the payment of dividends or other distributions, to
evidence ownership of the number of shares of QNC Common Stock into which it was
converted. No dividend or other distribution payable to holders of QNC Common
Stock as of any date subsequent to the Merger Date shall be paid to the holders
of outstanding certificates of PEI Common Stock; provided, however, that upon
surrender and exchange of such outstanding certificates (other than certificates
representing Dissenting Shares), there shall be paid to the record holders of
the certificates issued in exchange therefor the amount, without interest
thereon, of dividends and other distributions that would have been payable
subsequent to the Merger Date with respect to the shares of QNC Common Stock
represented thereby.
11. BOARD OF DIRECTORS AND OFFICERS. The members of the board of directors
of the Surviving Corporation shall be the members of the board of directors of
QNC on the Merger Date or such others as QNC may designate. The officers of the
Surviving Corporation shall be the officers of QNC on the Merger Date or such
others as QNC may designate.
12. EFFECT OF THE MERGER. On the Merger Date, the separate existence of PEI
shall cease (except insofar as continued by statute), and it shall be merged
with and into the Surviving Corporation. All the property, real, personal, and
mixed, of each of the Constituent Corporations, and all debts due to either of
them, shall be transferred to and vested in the Surviving Corporation, without
further act or deed. The Surviving Corporation shall thenceforth be responsible
and liable for all the liabilities and obligations, including liabilities to
holders of Dissenting Shares, of each of the Constituent Corporations, and any
claim or judgment against either of the Constituent Corporations may be enforced
against the Surviving Corporation.
13. APPROVAL OF SHAREHOLDERS. This Agreement shall be adopted by the
shareholders of PEI at a meeting of such shareholders called for that purpose or
by written consent pursuant to the laws applicable thereto. There shall be
required for the adoption of this Agreement the affirmative vote of the holders
of at least a majority of the holders of all the shares of the Common Stock
issued and outstanding and entitled to vote. Approval of QNC's shareholders is
not required by Florida law.
14. REPRESENTATIONS AND WARRANTIES OF PEI. PEI represents and warrants
that:
14.1 CORPORATE ORGANIZATION AND GOOD STANDING. PEI is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of Nevada, and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
14.2 REPORTING COMPANY. PEI has filed with the Securities and Exchange
3
Commission a registration statement on Form 10-SB which became effective
pursuant to the Securities Exchange Act of 1934 and is a reporting company
pursuant to Section 12 thereunder.
14.3 REPORTING COMPANY STATUS. PEI is current on all reports required
to be filed by it pursuant to Section 12(g) of the Securities Exchange Act
of 1934.
14.4 CAPITALIZATION. PEI's authorized capital stock consists of
100,000,000 shares of Common Stock, par value $0.0001 per share and
25,000,000 shares of Preferred Stock, par value $0.001 per share. As of the
date hereof, there are 500,000 common shares issued and outstanding and no
shares of preferred stock issued or outstanding.
14.5 ISSUANCE OF STOCK. All the outstanding shares of its Common Stock
are duly authorized and validly issued, fully paid and non-assessable.
14.6 STOCK RIGHTS. There are no stock grants, options, rights,
warrants or other rights to purchase or obtain the PEI Common or Preferred
Stock issued or committed to be issued.
14.7 CORPORATE AUTHORITY. PEI has all requisite corporate power and
authority to own, operate and lease its properties, to carry on its
business as it is now being conducted and to execute, deliver, perform and
conclude the transactions contemplated by this Agreement and all other
agreements and instruments related to this Agreement.
14.8 AUTHORIZATION. Execution of this Agreement has been duly
authorized and approved by PEI's board of directors.
14.9 SUBSIDIARIES. PEI has no subsidiaries.
14.10 FINANCIAL STATEMENTS. PEI's audited financial statements dated
September 30, 1999 and PEI's unaudited financial statements for the three
month period ended December 31, 1999, copies of which will have been
delivered by PEI to QNC prior to the Merger Date (the "PEI Financial
Statements"), fairly present the financial condition of PEI as of the date
therein and the results of its operations for the periods then ended in
conformity with generally accepted accounting principles consistently
applied.
14.11 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the PEI Financial Statements, PEI did not
have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
14.12 NO MATERIAL CHANGES. There has been no material adverse change
in the business, properties, or financial condition of PEI since the date
of the PEI Financial Statements.
4
14.13 LITIGATION. There is not, to the knowledge of PEI, any pending,
threatened, or existing litigation, bankruptcy, criminal, civil, or
regulatory proceeding or investigation, threatened or contemplated against
PEI or against any of its officers.
14.14 CONTRACTS. PEI is not a party to any material contract not in
the ordinary course of business that is to be performed in whole or in part
at or after the date of this Agreement.
14.15 TITLE. PEI has good and marketable title to all the real
property and good and valid title to all other property included in the PEI
Financial Statements. Except as set out in the balance sheet thereof, the
properties of PEI are not subject to any mortgage, encumbrance, or lien of
any kind except minor encumbrances that do not materially interfere with
the use of the property in the conduct of the business of PEI.
14.16 NO VIOLATION. Consummation of the merger will not constitute or
result in a breach or default under any provision of any charter, bylaw,
indenture, mortgage, lease, or agreement, or any order, judgment, decree,
law, or regulation to which any property of PEI is subject or by which PEI
is bound.
15. REPRESENTATIONS AND WARRANTIES OF QNC. QNC represents and warrants
that:
15.1 CORPORATE ORGANIZATION AND GOOD STANDING. QNC is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of Florida and is qualified to do business as a foreign
corporation in each jurisdiction, if any, in which its property or business
requires such qualification.
15.2 CAPITALIZATION. QNC's authorized capital stock consists of
5,000,000 shares of Preferred Stock, no par value per share, of which
30,000 shares are issued and outstanding and 50,000,000 shares of Common
Stock, no par value per share, of which approximately 22,786,022 shares are
issued and outstanding
15.3 ISSUED STOCK. All the outstanding shares of its Common Stock are
duly authorized and validly issued, fully paid and non-assessable.
15.4 CORPORATE AUTHORITY. QNC has all requisite corporate power and
authority to own, operate and lease its properties, to carry on its
business as it is now being conducted and to execute, deliver, perform and
conclude the transactions contemplated by this Agreement and all other
agreements and instruments related to this Agreement.
15.5 AUTHORIZATION. Execution of this Agreement has been duly
authorized and approved by QNC's board of directors.
15.6 SUBSIDIARIES. QNC has five (5) subsidiary companies.
15.7 FINANCIAL STATEMENTS. QNC's unaudited financial statements of
5
December 31, 1999, copies of which will have been delivered by QNC to PEI
by the Merger Date (the "QNC Financial Statements"), are believed to be
substantially correct and fairly present the financial condition of QNC as
of the date therein and the results of its operations for the periods then
ended in conformity with generally accepted accounting principles
consistently applied.
15.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the QNC Financial Statements, QNC did not
have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted accounting
principles.
15.9 NO MATERIAL CHANGES. There has been no material adverse change in
the business, properties, or financial condition of QNC since the date of
the QNC Financial Statements.
15.10 LITIGATION. Except as previously disclosed in writing to PEI,
there is not, to the best knowledge of QNC, any other pending, threatened,
or existing litigation, bankruptcy, criminal, civil, or regulatory
proceeding or investigation, threatened or contemplated against QNC or
against any of its officers relevant to their capacity as an officer and/or
director of QNC.
15.11 CONTRACTS. QNC is not a party to any material contract not in
the ordinary course of business that is to be performed in whole or in part
at or after the date of this Agreement.
15.12 TITLE. QNC has good and marketable title to all the real
property and good and valid title to all other property included in the QNC
Financial Statements. Except as set out in the balance sheet thereof, the
properties of QNC are not subject to any mortgage, encumbrance, or lien of
any kind except minor encumbrances that do not materially interfere with
the use of the property in the conduct of the business of QNC.
15.13 NO VIOLATION. Consummation of the merger will not constitute or
result in a breach or default under any provision of any charter, bylaw,
indenture, mortgage, lease, or agreement, or any order, judgment, decree,
law, or regulation to which any property of QNC is subject or by which QNC
is bound.
15.14 UNDERTAKING. Management of QNC hereby undertakes to PEI and its
shareholders to exercise good faith in their efforts to file all reports
required to be filed by the Surviving Corporation with the Securities and
Exchange Commission or any other governmental agency, in a timely manner.
16. CONDUCT OF PEI PENDING THE MERGER DATE. PEI covenants that between the
date of this Agreement and the Merger Date:
16.1 No change will be made in PEI's articles of incorporation or
bylaws.
6
16.2 PEI will not make any change in its authorized or issued capital
stock, declare or pay any dividend or other distribution or issue,
encumber, purchase, or otherwise acquire any of its capital stock other
than as provided herein.
16.3 PEI will submit this Agreement for its shareholders' approval
with a favorable recommendation by its board of directors and will use its
best efforts to obtain the requisite shareholder approval.
16.4 PEI will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and
will not enter into any material commitment except in the ordinary course
of business.
17. CONDUCT OF QNC PENDING THE MERGER DATE. QNC covenants that between the
date of this Agreement and the Merger Date:
17.1 Other than as disclosed by QNC to PEI, no other changes will be
made in QNC's certificate of incorporation or bylaws.
17.2 QNC will not make any change in its authorized or issued capital
stock, declare or pay any dividend or other distribution or issue,
encumber, purchase, or otherwise acquire any of its capital stock otherwise
than as provided herein.
17.3 QNC will submit this Agreement for approval by its board of
directors and will use its best efforts to obtain the board's approval.
17.4 QNC will use its best efforts to maintain and preserve its
business organization, employee relationships, and goodwill intact, and
will not enter into any material commitment except in the ordinary course
of business.
18. CONDITIONS PRECEDENT TO OBLIGATION OF PEI. PEI's obligation to
consummate this merger shall be subject to fulfillment on or before the Merger
Date of each of the following conditions, unless waived in writing by PEI:
18.1 QNC'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of QNC set forth herein shall be true and correct at the Merger
Date as though made at and as of that date, except as affected by
transactions contemplated hereby.
18.2 QNC'S COVENANTS. QNC shall have performed all covenants required
by this Agreement to be performed by it on or before the Merger Date.
18.3 SHAREHOLDER APPROVAL. This Agreement shall have been approved by
the required number of shareholders of the Constituent Corporations.
18.4 SUPPORTING DOCUMENTS OF QNC. QNC shall have delivered to PEI
supporting documents in form and substance satisfactory to PEI to the
effect that:
7
(i) QNC is a corporation duly organized, validly existing, and in
good standing.
(ii) QNC's authorized and issued capital stock is as set forth
herein.
(iii) The execution and consummation of this Agreement have been
duly authorized and approved by QNC's board of directors.
19. CONDITIONS PRECEDENT TO OBLIGATION OF QNC. QNC's obligation to
consummate this merger shall be subject to fulfillment on or before the Merger
Date of each of the following conditions, unless waived in writing by QNC:
19.1 PEI'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of PEI set forth herein shall be true and correct at the Merger
Date as though made at and as of that date, except as affected by
transactions contemplated hereby.
19.2 PEI'S COVENANTS. PEI shall have performed all covenants required
by this Agreement to be performed by it on or before the Merger Date.
19.3 SHAREHOLDER APPROVAL. This Agreement shall have been approved by
the required number of shareholders of PEIs.
19.4 SUPPORTING DOCUMENTS OF PEI. PEI shall have delivered to QNC
supporting documents in form and substance satisfactory to QNC to the
effect that:
(i) PEI is a corporation duly organized, validly existing, and in
good standing.
(ii) PEI's authorized and issued capital stock is as set forth
herein.
(iii) The execution and consummation of this Agreement have been
duly authorized and approved by PEI's board of directors.
20. ACCESS. From the date hereof to the Merger Date, QNC and PEI shall
provide each other with such information and permit each other's officers and
representatives such access to its properties and books and records as the other
may from time to time reasonably request. If the merger is not consummated, all
documents received in connection with this Agreement shall be returned to the
party furnishing such documents, and all information so received shall be
treated as confidential.
21. CLOSING. The transfers and deliveries to be made pursuant to this
Agreement (the "Closing") shall be made by and take place at such location
designated by the Constituent Corporations without requiring the meeting of the
parties hereof. All proceedings to be taken and all documents to be executed at
the Closing shall be deemed to have been taken, delivered and executed
simultaneously, and no proceeding shall be deemed taken nor documents deemed
8
executed or delivered until all have been taken, delivered and executed.
21.1 Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission required by this Agreement or
any signature required thereon may be used in lieu of an original writing
or transmission or signature for any and all purposes for which the
original could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of
the entire original writing or transmission or original signature.
21.2 At the Closing, PEI shall deliver to QNC in satisfactory form, if
not already delivered to QNC:
(i) A list of the holders of the shares of PEI Common Stock being
exchanged with an itemization of the number of shares held by each,
the address of each holder, and the aggregate number of shares of QNC
Common Stock to be issued to each holder;
(ii) Evidence of the consent of shareholders of PEI to this
Agreement;
(iii) Certificate of the Secretary of State of Nevada as of a
recent date as to the good standing of PEI;
(iv) Certified copies of the resolutions of the board of
directors of PEI authorizing the execution of this Agreement and the
consummation of the Merger;
(v) The PEI Financial Statements;
(vi) Secretary's certificate of incumbency of the officers and
directors of PEI; and
(vii) Any document as may be specified herein or required to
satisfy the conditions, representations and warranties enumerated
elsewhere herein.
(viii) An opinion of counsel in a form reasonably acceptable to
QNC's counsel that:
(a) PEI is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Nevada, and
is qualified to do business as a foreign corporation in each
jurisdiction, if any, in which its property or business requires
such qualification.
(b) PEI has filed with the Securities and Exchange
Commission a registration statement on Form 10-SB which became
effective pursuant to the Securities Exchange Act of 1934 and is
a reporting company pursuant to Section 12 thereunder.
9
(c) PEI is current on all reports required to be filed by it
pursuant to Section 12(g) of the Securities Exchange Act of 1934.
(d) PEI's authorized capital stock consists of 100,000,000
shares of Common Stock, par value $0.0001 per share and
25,000,000 shares of Preferred Stock, par value $0.001 per share.
As of the date hereof, there are 500,000 common shares issued and
outstanding and no shares of preferred stock issued or
outstanding.
(e) All the outstanding shares of PEI's Common Stock are
duly authorized and validly issued, fully paid and
non-assessable.
(f) There are no stock grants, options, rights, warrants or
other rights to purchase or obtain the PEI Common or Preferred
Stock issued or committed to be issued.
(g). PEI has all requisite corporate power and authority to
own, operate and lease its properties, to carry on its business
as it is now being conducted and to execute, deliver, perform and
conclude the transactions contemplated by this Agreement and all
other agreements and instruments related to this Agreement.
(h) Execution of this Agreement has been duly authorized and
approved by PEI's board of directors.
(i) PEI has no subsidiaries.
(j) To the best of such counsels knowledge, after due
inquiry, the execution, delivery and performance of the Agreement
and Plan of reorganization and the performance of its obligations
there under do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default
under or conflict with or violate any provision of (i) PEI's
Certificate of Incorporation or By-Laws, (ii) any indenture,
mortgage, deed of trust, agreement or other instrument to which
PEI is a party or by which it or any of its property is bound,
(iii) any applicable statute or regulation, (iv) or any judgment,
decree or other of any court or governmental body having
jurisdiction over PEI or any of its property.
(k) Except to the extent reflected or reserved against in
the PEI Financial Statements, PEI did not have at that date any
liabilities or obligations (secured, unsecured, contingent, or
otherwise) of a nature customarily reflected in a corporate
balance sheet prepared in accordance with generally accepted
accounting principles.
(l) There has been no material adverse change in the
business,
10
properties, or financial condition of PEI since the date of the
PEI Financial Statements.
(m) There is not, to such counsel's knowledge any pending,
threatened, or existing litigation, bankruptcy, criminal, civil,
or regulatory proceeding or investigation, threatened or
contemplated against PEI or against any of its officers.
(n) PEI is not a party to any material contract not in the
ordinary course of business that is to be performed in whole or
in part at or after the date of this Agreement.
(o) PEI has good and marketable title to all the real
property and good and valid title to all other property included
in the PEI Financial Statements. Except as set out in the balance
sheet thereof, the properties of PEI are not subject to any
mortgage, encumbrance, or lien of any kind except minor
encumbrances that do not materially interfere with the use of the
property in the conduct of the business of PEI.
(p). Consummation of the merger will not constitute or
result in a breach or default under any provision of any charter,
bylaw, indenture, mortgage, lease, or agreement, or any order,
judgment, decree, law, or regulation to which any property of PEI
is subject or by which PEI is bound.
(q) All Registration Statement, Reports and other documents
filed with the Securities and Exchange Commission and/or any
state commission or other regulatory agency, and any amendments
or supplements thereto (collectively the "Reports"), contained
all statements which are required to be stated therein in
accordance with the Securities Act of 1933 and the Securities
Exchange Act of 1934 and the Rules and Regulations there under,
and neither the Reports nor any amendment or supplement thereto,
contained any untrue statement of a material fact or omited to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
21.3 At the Closing, QNC shall deliver to PEI in satisfactory form, if
not already delivered to PEI:
(i) Certificate of the Secretary of State of Florida as of a
recent date as to the good standing of QNC;
(ii) Certified copies of the resolutions of the board of
directors of QNC authorizing the execution of this Agreement and the
consummation of the merger;
11
(iii) The QNC Financial Statements;
(iv) Secretary's certificate of incumbency of the officers and
directors of QNC; and
(v) Any document as may be specified herein or required to
satisfy the conditions, representations and warranties enumerated
elsewhere herein.
(vi) An opinion of counsel in a form reasonably acceptable to
PEI's counsel that to the best of such counsels knowledge:
(a) QNC is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Florida and
is qualified to do business as a foreign corporation in each
jurisdiction, if any, in which its property or business requires
such qualification.
(b) QNC's authorized capital stock consists of 5,000,000
shares of Preferred Stock, no par value per share, of which
30,000 shares are issued and outstanding and 50,000,000 shares of
Common Stock, no par value per share, of which approximately
22,786,022 shares are issued and outstanding
(c) All the outstanding shares of QNC's Common Stock are
duly authorized and validly issued, fully paid and
non-assessable.
(d). QNC has all requisite corporate power and authority to
own, operate and lease its properties, to carry on its business
as it is now being conducted and to execute, deliver, perform and
conclude the transactions contemplated by this Agreement and all
other agreements and instruments related to this Agreement.
(e) Execution of this Agreement has been duly authorized and
approved by QNC's board of directors.
(f) QNC has five (5) subsidiary companies.
(g) Except as previously disclosed in writing to PEI, there
is not, to the best knowledge of such counsel any other pending,
threatened, or existing litigation, bankruptcy, criminal, civil,
or regulatory proceeding or investigation, threatened or
contemplated against QNC or against any of its officers relevant
to their capacity as an officer and/or director of QNC.
(h) QNC is not a party to any material contract not in the
ordinary course of business that is to be performed in whole or
in part at or after the date of this Agreement.
(i) QNC has good and marketable title to all the real
property and
12
good and valid title to all other property included in the QNC
Financial Statements. Except as set out in the balance sheet
thereof, the properties of QNC are not subject to any mortgage,
encumbrance, or lien of any kind except minor encumbrances that
do not materially interfere with the use of the property in the
conduct of the business of QNC.
(j) Execution of this Agreement has been duly authorized and
approved by QNC's board of directors.
(k) To the best of such counsels knowledge, after due
inquiry, the execution, delivery and performance of the Agreement
and Plan of Reorganization and the performance of its obligations
thereunder do not and will not constitute a breach or violation
of any of the terms and provisions of, or constitute a default
under or conflict with or violate any provision of (i) QNC's
Certificate of Incorporation or By-Laws, (ii) any indenture,
mortgage, deed of trust, agreement or other instrument to which
QNC is a party or by which it or any of its property is bound,
(iii) any applicable statute or regulation, (iv) or any judgment,
decree or other of any court or governmental body having
jurisdiction over QNC or any of its property.
22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Constituent Corporations set out herein shall survive the
Merger Date.
23. ARBITRATION.
23.1 SCOPE. The parties hereby agree that any and all claims (except
only for requests for injunctive or other equitable relief) whether
existing now, in the past or in the future as to which the parties or any
affiliates may be adverse parties, and whether arising out of this
agreement or from any other cause, will be resolved by arbitration before
the American Arbitration Association.
23.2 CONSENT TO JURISDICTION, SITUS AND JUDGEMENT. The parties hereby
irrevocably consent to the jurisdiction of the American Arbitration
Association and the situs of the arbitration within the State of Florida
Any award in arbitration may be entered in any domestic or foreign court
having jurisdiction over the enforcement of such awards.
23.3 APPLICABLE LAW. The law applicable to the arbitration and this
agreement shall be that of the State of Florida determined without regard
to its provisions which would otherwise apply to a question of conflict of
laws.
23.4 DISCLOSURE AND DISCOVERY. The arbitrator may, in its discretion,
allow the parties to make reasonable disclosure and discovery in regard to
any matters which are the subject of the arbitration and to compel
compliance with such disclosure and discovery order. The arbitrator may
order the parties to comply with all or any of the
13
disclosure and discovery provisions of the Federal Rules of Civil
Procedure, as they then exist, as may be modified by the arbitrator
consistent with the desire to simplify the conduct and minimize the expense
of the arbitration.
23.5 RULES OF LAW. Regardless of any practices of arbitration to the
contrary, the arbitrator will apply the rules of contract and other law of
the jurisdiction whose law applies to the arbitration so that the decision
of the arbitrator will be, as much as possible, the same as if the dispute
had been determined by a court of competent jurisdiction.
23.6 FINALITY AND FEES. Any award or decision by the American
Arbitration Association shall be final, binding and non-appealable except
as to errors of law or the failure of the arbitrator to adhere to the
arbitration provisions contained in this agreement. Each party to the
arbitration shall pay its own costs and counsel fees except as specifically
provided otherwise in this agreement.
23.7 MEASURE OF DAMAGES. In any adverse action, the parties shall
restrict themselves to claims for compensatory damages and/or securities
issued or to be issued and no claims shall be made by any party or
affiliate for lost profits, punitive or multiple damages.
23.8 COVENANT NOT TO SUE. The parties covenant that under no
conditions will any party or any affiliate file any action against the
other (except only requests for injunctive or other equitable relief) in
any forum other than before the American Arbitration Association, and the
parties agree that any such action, if filed, shall be dismissed upon
application and shall be referred for arbitration hereunder with costs and
attorney's fees to the prevailing party.
23.9 INTENTION. It is the intention of the parties and their
affiliates that all disputes of any nature between them, whenever arising,
whether in regard to this agreement or any other matter, from whatever
cause, based on whatever law, rule or regulation, whether statutory or
common law, and however characterized, be decided by arbitration as
provided herein and that no party or affiliate be required to litigate in
any other forum any disputes or other matters except for requests for
injunctive or equitable relief. This agreement shall be interpreted in
conformance with this stated intent of the parties and their affiliates.
14
23.10 SURVIVAL. The provisions for arbitration contained herein shall
survive the termination of this agreement for any reason.
24. GENERAL PROVISIONS.
24.1 FURTHER ASSURANCES. From time to time, each party will execute
such additional instruments and take such actions as may be reasonably
required to carry out the intent and purposes of this Agreement.
24.2 WAIVER. Any failure on the part of either party hereto to comply
with any of its obligations, agreements, or conditions hereunder may be
waived in writing by the party to whom such compliance is owed.
24.3 BROKERS. Each party agrees to indemnify and hold harmless the
other party against any fee, loss, or expense arising out of claims by
brokers or finders employed or alleged to have been employed by the
indemnifying party.
24.4 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or
sent by prepaid first-class certified mail, return receipt requested, or
recognized commercial courier service, as follows:
If to PEI, to: Parputt Enterprises, Inc.
12835 E. Arapahoe Road
Tower I, Penthouse
Englewood, Colorado 80112
If to QNC, to Quest Net Corp.
2999 NE 191st Street
Penthouse #8
Aventura, FL 33180
With copy to: Rebecca J. Del Medico, Esq.
6281 Floridian Circle
Lake Worth, Florida 33463
25. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida.
26. ASSIGNMENT. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided,
however, that any assignment by either party of its rights under this Agreement
without the written consent of the other party shall be void.
27. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures sent by
facsimile transmission shall be deemed to be
15
evidence of the original execution thereof.
28. CLOSING DATE. Closing shall take place on March 13, 2000, or as soon
thereafter as practicable. The date of Closing may be accelerated or extended by
agreement of the parties.
29. EFFECTIVE DATE. This effective date of this Agreement shall be the
Merger Date.
30. ATTORNEYS' FEES. In the event that any party institutes any action or
suit to enforce this Agreement or to secure relief from any default hereunder or
breach hereof, the breaching party or parties shall reimburse the non-breaching
party or parties for all costs, including reasonable attorneys' fees, incurred
in connection therewith and in enforcing or collecting any judgment rendered
therein.
31. SEVERABILITY. In the event that any particular provision or provisions
of this Agreement or the other agreements contained herein shall for any reason
hereafter be determined to be unenforceable, or in violation of any law,
governmental order or regulation, such unenforceability or violation shall not
affect the remaining provisions of such agreements, which shall continue in full
force and effect and be binding upon the respective parties hereto.
16
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement
to be executed by their respective officers, hereunto duly authorized, and
entered into as of the date first above written.
PARPUTT ENTERPRISES, INC.
By:/s/Andrew Telsey
Its: President
QUEST NET CORP.
By:/s/ Charles Wainer
Its President
17
EXHIBIT 1.2
ARTICLES OF MERGER
Quest Net Corp., a Florida corporation, and Parputt Enterprises, Inc., a
Nevada corporation, desiring to merge pursuant to ss.607.1107 Florida Statutes
submit these Articles of Merger pursuant to section 607.1105 Florida Statutes.
Article I
---------
Surviving Corporation
---------------------
Quest Net Corp., a Florida corporation (the "Quest"), will be the surviving
corporation.
Article II
----------
Merging Corporation
-------------------
Parputt Enterprises, Inc., a Nevada Corporation, ("Parputt"), will be the
merging corporation.
Article III
-----------
Plan of Merger
--------------
The Agreement and Plan of Merger is attached as Exhibit A hereto.
Article IV
----------
Effective Date
--------------
The merger of the Parputt with and into the Quest will become effective
upon the filing of these Articles with the Department of State of Florida.
Article V
---------
Adoption of Merger by Surviving Corporation
-------------------------------------------
The Plan of Merger was adopted by the Board of Directors of Quest Net Corp.
on March 13, 2000 and Shareholder approval was not required.
Article VI
----------
Adoption of Merger by Merging Corporation
-----------------------------------------
The Plan of Merger was adopted by the Shareholders of Parputt Enterprises,
Inc., on March 13,
2000.
IN WITNESS HEREOF, the parties hereto have set their hands and seals this
13 day of March 2000.
Quest Net Corp.,
A Florida corporation
By:/s/ Charles Wainer, President
Parputt Enterprises, Inc.,
By:/s/ Andrew Telsey, President
2
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
This Agreement is made this 13th day of March 2000 by and between Quest Net
Corp., a Florida corporation, and Parputt Enterprises, Inc., a Nevada
corporation , said corporations being sometimes hereinafter collectively
referred to as "Constituent Corporations".
WHEREAS, the Board of Directors of Quest Net Corp. (the "Surviving
Corporation") and the shareholders of Parputt Enterprises, Inc. (the Merging
Corporation"), deem it advisable that the Merging Corporation be merged with and
into the Surviving Corporation under the laws of the state of Florida and the
Laws of the State of Nevada, in the manner provided therefore pursuant to
Section 607.1107 of the Florida Statutes and the Nevada Revised Statutes.
NOW, THEREFORE, in consideration of the premises and of the mutual promises
herein, the Constituent Corporations do hereby agree, to merge upon the terms
and conditions below stated.
1. Agreement to Merger. The Constituent Corporations hereby agree that
Parputt Enterprises, Inc. shall be merged with and into Quest Net Corp.
2. Name of Surviving Corporation. The name of the Surviving Corporation is
Quest Net Corp., a Florida Corporation.
3. Name of Merging Corporation. The name of the Merging Corporation is
Parputt Enterprises, Inc., a Nevada Corporation.
4. Manner and Basis for Conversion of Shares. The manner and basis of
converting the shares of the Merging Corporation into shares of the Surviving
Corporation, shall be as follows:
(a) Each share of the Merging Corporation shall become .55 shares of
the Surviving Corporation, increased for fractional shares and reduced
by any Dissenting Shares of the Merging Corporation, in accordance with
the provisions of the Nevada Revised Statutes which objections will be
dealt with as provided in those applicable sections.
(b) Each Share of the Merging Corporation's common stock that is issued
and outstanding and owned by the Merging Corporation on the Merger Date
shall, by virtue of the merger and without any action on the part of
the Merging Corporation, be retired and canceled.
(c) Each certificate evidencing ownership of shares of the Surviving
Corporation's common stock, issued and outstanding on the Merger Date,
or held by the Surviving Corporation in its treasury, shall continue to
evidence ownership of the same number of shares of the Surviving
Corporation's common Stock.
2
5. Articles of Incorporation.The articles of incorporation, of the Quest
Net Corp. shall continue to be the articles of the Surviving Corporation as it
is presently filed.
6. Effective Date of Agreement. This Agreement shall become effective as of
the date hereof, and the merger shall be effective upon the filing of the
articles of merger with the Secretary of State of Florida and the Secretary of
State of Nevada.
7. Assets and Liabilities. All assets and liabilities of the Merging
Corporation shall become the assets and liabilities of the Surviving Corporation
IN WITNESS HEREOF, the Constituent Corporations have caused their
respective corporate names to be signed hereto, by their respective presidents
and secretaries, thereunto duly authorized by the respective boards of directors
and shareholders of the Constituent Corporations.
Quest Net Corp.,
A Florida corporation
By:/s/ Charles Wainer, President
Parputt Enterprises, Inc.
By: /s/ Andrew Telsey, President
ARTICLES OF INCORPORATION
QUEST NET CORP.
Article I
Name The name of this corporation is Quest Net Corp.
Article II Principal Address
2999 NE 191 Street Suite 1008
Aventura, Florida 33180
Article III Commencement
This corporation shall commence on the date of the filing of these Articles.
Article IV Purpose
This corporation is organized for the purpose of transacting any or all lawful
business.
Article V Capital Stock
This corporation is authorized to issue 50,000,000 shares of, $.0001 par value,
common stock and 5,000,000 shares of, $.0001 Par value, Preferred Stock, the
rights and preferences of which shall be established by the corporation's Board
of Directors.
Article VI - Initial Registered Office and Agent
The street address of the initial registered office of this corporation is 2999
NE 191 Street, Suite 1008, Aventura, 33180 Florida and the name and address of
the initial registered agent is Robert Leff, Esq., 2999 NE 191 Street, Suite
1008, Aventura, 33180, Florida.
Article VII Board of Directors
The number of directors shall be established by the bylaws and may be either
increased or diminished from time to time as provided in the bylaws.
Article VIII - Incorporator
The name and address of the person signing these articles is:
Robert Leff
2999 NE 191 Street, Suite 1008
Aventura Florida 33180
Article IX - Bylaws
The power to adopt, alter, amend or repeal bylaws shall be vested in the board
of directors.
Article X - Indemnification
Subject to the qualifications contained in Section 607.0850, Florida Statutes,
the corporation shall indemnify its officers and directors and former officers
and directors against expenses (including attorneys fees), judgements, fines and
amounts paid in settlement arising out of his or her services as an officer or
director of the corporation.
Article XI - Amendment
The corporation reserves the right to amend or repeal any provisions contained
in these Articles of Incorporation, or any amendment hereto, and any right
conferred upon the shareholders is subject to this reservation.
Article XII - Affiliated Transactions
This corporation elects not to be subject to the provisions of Section 607.0901,
Florida Statutes, regarding affiliated transactions.
Article XIII - Control-Share Acquisitions
This corporation elects not to be subject to the provisions of Section 607.0902,
Florida Statutes, regarding control-share acquisitions.
Article XIV - Preemptive Rights
The Shareholders of the corporation shall have no preemptive rights.
IN WITNESS WHEREOF, the undersigned incorporator has executed these article
of incorporation this 23rd day of December 1998.
/s/ Robert Leff
-----------------------------
Robert Leff, Incorporator
2
CERTIFICATE DESIGNATING PLACE OF BUSINESS OR DOMICILE FOR THE SERVICE OF PROCESS
WITHIN FLORIDA, NAMING AGENT UPON WHOM PROCESS MAY BE SERVED.
IN COMPLIANCE WITH SECTION 48.091 FLORIDA STATUTES, THE FOLLOWING IS
SUBMITTED:
FIRST-THAT QUEST NET CORP.
DESIRING TO ORGANIZE OR QUALIFY UNDER THE LAWS OF THE STATE OF FLORIDA, WITH ITS
PRINCIPAL PLACE OF BUSINESS AT THE CITY OF AVENTURA, STATE OF FLORIDA, HAS NAMED
ROBERT LEFF LOCATED AT 2999 NE 191 STREET SUITE 1008, AVENTURA, 33180, FLORIDA,
STATE OF FLORIDA, AS ITS AGENT TO ACCEPT SERVICE OF PROCESS WITHIN FLORIDA.
SIGNATURE: /s/ Robert Leff
------------------------
Robert Leff
TITLE: President/Incorporator
DATE: 12/23/98
HAVING BEEN NAMED TO ACCEPT SERVICE OF PROCESS FOR THE ABOVE STATED
CORPORATION, AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY AGREE TO ACT
IN THIS CAPACITY, AND I FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL
STATUTES RELATIVE TO THE PROPER AND COMPLETE PERFORMANCE OF MY DUTIES.
SIGNATURE: /s/ Robert Leff
------------------------
Robert Leff
DATE: 12/29/98
3
EXHIBIT 1.4
AMENDED AND RESTATED BYLAWS
OF
QUEST NET CORP.
Article I.-Meeting of Shareholders
Section 1. Annual Meetings. The annual meeting of the shareholders of this
Corporation shall be held in August at the time and place designated by the
Board of Directors of the Corporation. The annual meeting of shareholders for
any year shall be held no later than 13 months after the last preceding annual
meeting of shareholders. Business transacted at the annual meeting shall include
the election of directors of the Corporation.
Section 2. Special Meetings. Special meetings of the shareholders shall be
held when directed by the Board of Directors, or when holders of not less than
10 percent of all the shares entitled to vote at the meeting deliver to the
Corporation's secretary one or more written demands to concur the meeting
describing the purpose or purposes for which it will be held. Only business
within the purpose or purposes described in the special meeting notice may be
conducted at a special meeting.
Section 3. Place. Meetings of shareholders may be held within or without
the State of Florida.
Section 4. Notice. Written notice stating the date, time and place of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than 10 nor more than 60 days
before the meeting, either personally by telegraph, teletype, or other form of
electronic communication, or by first class mail, by or at the direction of the
president, the secretary, or the officer or persons calling the meeting to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the Corporation, with postage thereon prepaid. The provisions of
Florida Statutes Section 607.0706 as to waiver of notice are applicable.
Notwithstanding the foregoing, no notice of a shareholders' meeting need be
given to a shareholder if: (i) an annual report and proxy statements for two
consecutive annual meetings of shareholders or (ii) all, and at least two checks
in payment of dividends or interest on securities during a 12-month period have
been sent by first-class United States mail, addressed to the shareholder at his
address as it appears on the share transfer books of the Corporation, and
returned undeliverable. The obligation of the Corporation to give notice of a
shareholders' meeting to any such shareholder shall be reinstated once the
corporation has received a new address for such shareholder for entry on its
share transfer books.
Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the new date, time and place are announced at the meeting
before an adjournment is taken, and any business may be transacted at the
adjourned meeting that might have been transacted on the original date of the
meeting. If, however, after the adjournment the Board of Directors fixes a new
record date for the adjourned meeting, a notice of adjourned meeting, shall be
given as provided in this section to each shareholder of record on the new
record date entitled to vote at such meeting.
Section 6. 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 entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other purpose, the Board
of Directors may fix in advance a date as the record date for the determination
of shareholders, such date in any case to be not more than 70 days before the
meeting or action requiring a determination of shareholders but in no event may
a record date fixed by the Board of Directors be a date preceding the date upon
which the resolution fixing the record date was adopted.
The record date for determining shareholders entitled to demand a special
meeting is 40 days before the Corporation first receives a demand to convene a
special meeting.
If no prior action is required by the Board of Directors, the record date
for determining shareholders entitled to take action without a meeting is 40
days before the date the first signed written consent is delivered to the
Corporation under Florida Statutes Section 607.0704. If not otherwise fixed, and
prior action is required by the Board of Directors, the record date for
determining shareholders entitled to take action without a meeting is at the
close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
If no record date is fixed for the determination of shareholders entitled
to notice of or to vote at a meeting of shareholders, then the record date for
determining shareholders entitled to notice of and to vote at an annual or
special shareholders' meeting is 40 days before the first notice is delivered to
shareholders.
A determination of shareholders entitled to notice of or to vote at a
shareholders' meeting shall be effective for any adjournment of the meeting
unless the Board of Directors fixes a new record date, which it must do if the
meeting is adjourned to a date more than 120 days after the date fixed for the
original meeting.
Section 7. Shareholder Quorum and Voting. Except as provided by law, a
majority of the outstanding shares of each class or series of voting stock then
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders but in no event shall a quorum consist of less than
1/3 of the shares of each class or series of voting stock then entitled to vote.
When a specified item of business is required to be voted on by a class or
series of stock, a majority of the outstanding shares of such class or series
shall constitute a quorum for the transaction of such item of business by that
class or series.
If a quorum is present, the affirmative vote of the majority of those
shares represented at the meeting in person or by proxy of each class or series
of voting stock and entitled to vote on the subject matter shall be the act of
the shareholders unless otherwise provided by law.
After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of
shareholders entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof.
Section 8. Voting of Shares. Each outstanding voting share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders.
Shares of stock of this Corporation owned by another corporation, the
majority of the voting stock of which is owned or controlled by this
Corporation, shall not be voted, directly or indirectly, at any meeting.
Provided however that nothing contained herein shall limit the power of a
2
corporation to vote any shares, including its own shares, held by it in a
fiduciary capacity.
A shareholder may vote either in person or by proxy executed in writing by
the shareholder or his duly authorized attorney-in-fact.
At each election for directors every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected at
that time and for whose election he has a right to vote.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by the officer, agent, or proxy designated by the bylaws of the
corporate shareholder, or, in the absence of any applicable bylaw, by such
person as the Board of Directors of the corporate shareholder may designate.
Proof of such designation may be made by presentation of a certified copy of the
bylaws or other instrument of the corporate shareholder. In the absence of any
such designation, or in case of conflicting designation by the corporate
shareholder, the chairman of the board, president, any vice president, secretary
and treasurer of the corporate shareholder shall be presumed to possess, in that
order, authority to vote such shares.
Shares held by an administrator, executor, guardian, or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. 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 or the name of his
nominee.
Shares held by or under the control of a receiver or a trustee in a
bankruptcy proceeding or any assignee for the benefit of creditors may be voted
by him without the transfer thereof into his name.
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 or his nominee shall be entitled to vote the shares so
transferred.
Redeemable shares are not entitled to vote on any matter, and shall not be
deemed to be outstanding, after notice of redemption is mailed to the holders
thereof and a sum sufficient to redeem such shares has been deposited with a
bank, trust company, or other financial institution upon an irrevocable
obligation to pay the holders the redemption price upon surrender of the shares.
If a share or shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety, or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the secretary of the
Corporation is given notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, then acts with respect to voting have the following effect: (i) if
only one votes, in person or by proxy, his act binds all; (ii) if more than one
vote, in person or by proxy, the act of the majority so voting binds all; (iii)
if more than one vote, in person or by proxy, but the vote is evenly split on
any particular matter, each faction is entitled to vote the share or shares in
question proportionally; (iv) if the instrument or order so filed shows that any
such tenancy is held in unequal interest, a majority or a vote evenly split for
purposes of this subsection shall be a majority or a vote evenly split in
interest; (v) trustees or other fiduciaries holding shares
3
registered in the name of a nominee may cause such shares to be voted by such
nominee as the trustee or other fiduciary may direct. Such nominee may vote
shares as directed by a trustee or other fiduciary without the necessity of
transferring the shares to the name of the trustee or other fiduciary.
Section 9. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting of a
shareholders' duly authorized attorney-in-fact may authorize another person or
persons to act for him by proxy by signing an appointment form either personally
or by his attorney in-fact. An executed telegram or cablegram appearing to have
been transmitted by such person, or a photographic, Photostat, facsimile or
equivalent reproduction of an appointment form is a sufficient appointment form.
An appointment of proxy is effective when received by the secretary or
other officer or agent authorized to tabulate votes. An appointment is valid for
up to 11 months unless a longer period is expressly provided in the appointment
form.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the Corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment. Every proxy shall be revocable at the pleasure of the
shareholder executing it, except as otherwise provided by law.
If a proxy for the same shares confers authority upon two or more persons
and does not otherwise provide, a majority of them present at the meeting, or if
only one is present then that one, may exercise all the powers conferred by the
proxy, but if the proxy holders present at the meeting are equally divided as to
the right and manner of voting in any particular case, the voting of such shares
shall be prorated.
If a proxy expressly provides, any proxy holder may appoint in writing a
substitute to act in his place.
Section 10. Action by Shareholders without a Meeting. Any action required
by law, these bylaws, or the articles of incorporation of this Corporation to be
taken at any annual or special meeting of shareholders of the Corporation, or
any action which may be taken at any annual or special meeting of such
shareholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing setting forth the action so taken, shall be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. If any class
of shares is entitled to vote thereon as a class, such written consent shall be
required of the holders of a majority of the shares of each class of shares
entitled to vote as a class thereon and of the total shares entitled to vote
thereon. In order to be effective, the action must be evidenced by one or more
written consents describing the action taken, dated and signed by approving
shareholders having the requisite number of votes of each voting group entitled
to vote thereon, and delivered to the Corporation. No written consent shall be
effective to take the corporate action referred to therein unless, within 60
days of the date of the earliest dated consent delivered in the manner required
by this section, written consent signed by the number of holders required to
take action is delivered to the Corporation. Any written consent may be revoked
prior to the date that the Corporation receives the required number of consents
to authorize the proposed action. No revocation shall be effective unless in
writing and until received by the Corporation.
4
Within 10 days after obtaining such authorization by written consent,
notice shall be given to those shareholders that have not consented in writing.
The notice shall fairly summarize the material features of the authorized
action, and, if the action be a merger, consolidation or sale or exchange of
assets for which dissenters' rights are provided under the Florida Business
Corporation Act (the "Act"), the notice shall contain a clear statement of the
right of shareholders dissenting therefrom to be paid the fair value of their
shares upon compliance with further provisions of the Act regarding the rights
of dissenting shareholders.
Consent signed under this section shall have the effect of a meeting vote
and may be described as such in any document.
The written consents of the shareholders consenting thereto or the written
reports of inspectors appointed to tabulate such consents shall be filed with
the minutes of proceedings of shareholders.
Article II.-Directors
Section 1. Function. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors.
Section 2. Qualification. Directors must be natural persons who are 18
years of age or older but need not be residents of this state or shareholders of
this Corporation.
Section 3. Compensation. The Board of Directors shall have authority to fix
the compensation of directors.
Section 4. Duties of Directors. A director shall perform his duties as a
director, including his duties as a member of any committee of the board upon
which he may serve, in good faith, in a manner he reasonably believes to be in
the best interests of the Corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
In discharging his duties, a director shall be entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, in each case prepared or presented by:
(a) one or more officers or employees of the Corporation whom the director
reasonably believes to be reliable and competent in the matters presented,
(b) counsel, public accountants or other persons as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or
(c) a committee of the board upon which he does not serve, duly designated
in accordance with a provision of the articles of incorporation or the bylaws,
as to matters within its designated authority, which committee the director
reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted.
A person who performs his duties in compliance with this section shall have
no liability by reason of being or having been a director of the Corporation.
5
Section 5. Presumption of Assent. A director of the Corporation who is
present at a meeting of its Board of Directors or a committee at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless he objects at the beginning of the meeting (or promptly upon his
arrival) to such meeting or transacting specific business thereat or he votes
against such action or abstains from the action taken.
Section 6. Number. This Corporation shall have no less than one and no more
than nine directors, the exact number of which shall be established by
resolution of the Board of Directors. The number of directors may be established
from time to time by resolution of the Board of Directors, but no decrease shall
have the effect of shortening the terms of any incumbent director.
Section 7. Election and Term. Each person named in the articles of
incorporation as a member of the initial Board of Directors and all other
directors appointed by the Board of Directors to fill vacancies thereof shall
hold office until the first annual meeting of shareholders, and until his
successor shall have been elected and qualified or until his earlier
resignation, removal from office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for the term for
which he is elected and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death.
Section 8. Vacancies. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders. A vacancy that will occur at a specific later
date may be filled before the vacancy occurs but the new director may not take
office until the vacancy occurs.
Section 9. Removal of Directors. At a meeting of the shareholders called
expressly for that purpose, any director or the entire Board of Directors may be
removed, with or without cause by a vote of the holders of a majority of the
shares of each class or series of voting stock present in person or by proxy
then entitled to vote at an election of directors.
Section 10. Quorum and Voting. A majority of the number of directors shall
constitute a quorum for the transaction of business. 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.
Section 11. Director Conflicts of Interest. No contract or other
transaction between this Corporation and one or more of its directors or any
other corporation, firm, association or entity in which one or more of the
directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
director or directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purpose, if:
(a) The fact of such relationship or interest is disclosed or known to the
Board of Directors or committee which authorizes, approves or ratifies the
contract or transaction by a vote or consent sufficient for the
6
purpose without counting the votes or consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized by the board, a committee or the
shareholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or a committee thereof, which
authorizes, approves, or ratifies such contract or transaction.
Section 12. Place of Meeting. Regular and special meetings by the Board of
Directors may be held within or without the State of Florida.
Section 13. Time, Notice and Call of Meetings. Regular meetings of the
Board of Directors shall be held without notice immediately following the annual
shareholders' meeting. Written notice of the time and place of special meetings
of the Board of Directors shall be given to each director by either personal
delivery, first class mail, facsimile transmission, or telegram at least two
days before the meeting. If mailed, such notice shall be deemed to be delivered,
when deposited in the United States mail addressed to the director at his
address as it appears on the books of the Corporation, with postage thereon
prepaid.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all obligations to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. Notice
of any such adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment to the other
directors.
Meetings of the Board of Directors may be called by the president of the
Corporation or by any director.
Members of the Board of Directors may participate in a meeting of such
Board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
Section 14. Action Without a Meeting. Any action required to be taken at a
meeting of the directors of the Corporation, or any action which may be
7
taken at a meeting of the directors, may be taken without a meeting if a consent
in writing, setting forth the action to be taken, signed by all of the
directors, is filed in the minutes of the proceedings of the Board. Action taken
by written consent shall be effective when the last director signs the consent
unless an effective date is specified in the consent. Such consent shall have
the same effect as a unanimous meeting vote.
Section 15. Committees. The Board of Directors by resolution adopted by a
majority of the full Board of Directors may designate from among its members
such committees it deems prudent, such as, but not limited to, an executive
committee, audit committee, compensation committee, finance committee and a
litigation committee. Each committee shall be comprised of two or more members
who will serve at the pleasure of the Board of Directors.
Section 16. Resignation. A director may resign at any time by delivering
notice to the Corporation. A resignation is effective when the notice is
delivered unless the notice specifies a later effective date.
Article III.-Officers
Section 1. Officers. The officers of this Corporation shall consist of a
chairman, president, one or more vice presidents, secretary, and treasurer, and
such other officers as may be designated by the Board of Directors, each of whom
shall be elected by the Board of Directors from time to time. Any two or more
offices may be held by the same person. The failure to elect any of the above
officers shall not affect the existence of this Corporation.
Section 2. Duties. The officers of this Corporation shall have the
following duties and such other duties as delegated by the Board of Directors or
chairman.
The chairman shall be the chief executive officer of the Corporation, shall
have general and active management of the business and affairs of the
Corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the stockholders and the Board of Directors.
The president shall be the chief operating officer of the Corporation, and
shall act whenever the chairman shall be unavailable.
The vice president(s) shall perform such duties as may be prescribed by the
Board of Directors or the president and shall act whenever the president shall
be unavailable.
The secretary shall have custody of and maintain all of the corporate
records except the financial records, shall record the minutes of all meetings
of the stockholders and whenever else required by the Board of Directors or the
president, and shall perform such other duties as may be prescribed by the Board
of Directors.
The treasurer shall be the chief financial and accounting officer. He shall
keep correct and complete records of account, showing accurately at all times
the financial condition of the corporation. He shall be the legal custodian of
all monies, notes, securities, and other valuables that may from time to time
come into the possession of the Corporation. He shall immediately deposit all
funds of the Corporation coming into his hands in some reliable bank or other
depository to be designated by the Board of Directors and shall keep this bank
account in the name of the Corporation. He shall furnish at meetings of the
Board of Directors, or whenever requested, a statement of the
8
financial condition of the Corporation and shall perform such other duties as
the bylaws provide or the Board of Directors may prescribe.
Section 3. Removal of Officers. Any officer or agent elected or appointed
by the Board of Directors may be removed by the Board whenever in its judgment
the best interests of the Corporation will be served thereby.
Any officer or agent elected by the stockholders may be removed only by
vote of the stockholders, unless the stockholders shall have authorized the
directors to remove such officer or agent.
Any vacancy, however, occurring, in any office may be filled by the Board
of Directors, unless the bylaws shall have expressly reserved such power to the
stockholders.
Removal of any officer shall be without prejudice to the contract rights,
if any, of the person so removed; however, election or appointment of an officer
or agent shall not of itself create contract rights.
Article IV.-Stock Certificates
Section 1. Issuance. Every holder of shares in this Corporation shall be
entitled to have a certificate, representing all shares to which he is entitled.
No certificate shall be issued for any share until such share is fully paid.
Section 2. Form. Certificates representing shares in this Corporation shall
be signed either manually or in facsimile by the president or vice president and
the secretary or an assistant secretary and may be sealed with the seal of this
Corporation or a facsimile thereof. In case any officer who signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of its
issuance.
Every certificate representing shares issued by this Corporation shall set
forth or fairly summarize upon the face or back of the certificate, or shall
state that the Corporation will furnish to any shareholder upon request and
without charge a full statement of, the designations, preferences, limitations
and relative rights of the shares of each class or series authorized to be
issued, and the variations in the relative rights and preferences between the
shares of each series so far as the same have been fixed and determined, and the
authority of the Board of Directors to fix and determine the relative rights and
preferences of subsequent series.
Every certificate representing shares which are restricted as to the sale,
disposition, or other transfer of such shares shall state that such shares are
restricted as to transfer and shall set forth or fairly summarize upon the
certificate.
Each certificate representing shares shall state upon its face: the name of
the Corporation; that the Corporation is organized under the laws of this state;
the name of the person or persons to whom issued; the number and class of
shares, and the designation of the series, if any, which such certificate
represents.
Section 3. Transfer of Stock. The Corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney, and the
9
signature of such person has been guaranteed by a commercial bank or trust
company or by a member of the New York or American Stock Exchange.
Section 4. Lost, Stolen or Destroyed Certificates. The Corporation shall
issue a new stock certificate in the place of any certificate previously issued
if the holder of record of the certificate (a) makes proof in affidavit form
that it has been lost, destroyed or wrongfully taken; (b) requests the issuance
of a new certificate before the Corporation has notice that the certificate has
been acquired by a purchaser for value in good faith and without notice of any
adverse claim; (c) gives bond in such form as the Corporation may direct, to
indemnify the Corporation, the transfer agent, and registrar against any claim
that may be made on account of the alleged loss, destruction, or theft of a
certificate; and (d) satisfies any other reasonable requirements imposed by the
Corporation.
Article V.-Corporate Records
Section 1. Corporate Records. This Corporation shall keep correct and
complete records and accurate books of account and shall keep as permanent
records minutes of all meetings and actions taken without a meeting of its
shareholders, Board of Directors and any committee of the Board of Directors.
This Corporation shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
shareholders, giving the names and addresses of all shareholders, and the
number, class and series, if any, of the shares held by each.
The Corporation shall keep a copy of the following records: (i) its
articles or restated articles of incorporation and all amendments to them
currently in effect; (ii) its bylaws or restated bylaws and all amendments to
them currently in effect; (iii) resolutions adopted by its Board of Directors
creating one or more classes or series of shares and fixing their relative
rights, preferences and limitations, if shares issued pursuant to those,
resolutions are outstanding; (iv) the minutes of all shareholders' and Board of
Directors' meetings and records of all action taken by shareholders and Board of
Directors without a meeting for the past three years; (v) written communications
to all shareholders generally or all shareholders of a class or series within
the past three years including the financial statements furnished for the past
three years; (vi) a list of the names and business street addresses of its
current directors and officers; and (vii) its most recent annual report
delivered to the Department of State.
Any books, records and minutes may be in written form or in any other form
capable of being converted into written form within a reasonable time.
Section 2. Shareholders' Inspection Rights. A shareholder of the
Corporation, his agent or attorney is entitled to inspect and copy, during
regular business hours at the Corporation's principal office, the Corporation's
articles or restated articles of incorporation and all amendments, the bylaws or
restated bylaws and all amendments, resolutions adopted by the Board of
Directors creating one or more classes or series of shares and fixing their
relative rights, preferences, and limitations if shares issued pursuant to those
resolutions are outstanding, the minutes of the shareholders meetings and
records of all actions taken by shareholders without a meeting for the past
three years, written communications to all shareholders generally or all
shareholders of a class or series within the past three years, including the
financial statements furnished for the past three years as required by law, a
list of the names and business street address of the Corporation's current
directors and officers and the Corporation's most recent annual report delivered
to the Department of State,
10
if prior to his inspection he has given the Corporation written notice of his
demand at least five business days before the date on which he wishes to inspect
and copy. A shareholder of the Corporation is entitled to inspect and copy,
during regular business hours at a reasonable location specified by the
Corporation, excerpts from minutes of any meeting of the Board of Directors,
records of any action of a committee of the Board of Directors while acting in
place of the Board of Directors on behalf of the, Corporation, minutes of any
meetings of the shareholders, and records of action,taken by the shareholders or
Board of Directors without a meeting, accounting records of the Corporation, the
records of shareholders, and any other books and records if his demand is made
in good faith and for a proper purpose, he describes with reasonable
particularity his purpose and the records he desires to inspect, the records are
directly connected with his purpose and he gives the Corporation written notice
of his demand at least five business days before the date on which he wishes to
inspect and copy.
Section 3. Financial Information. Unless ratified by resolution of the
shareholders, the Corporation shall prepare and mail to its shareholders within
120 days after the close of each fiscal year or within such additional time
thereafter as is reasonably necessary to enable the Corporation to prepare its
financial statements, annual financial statements that include a balance sheet
as of the end of the fiscal year, an income statement for that year, a statement
of cash flow for that year and if such financial statements are reported upon by
a public accountant, his report.
Article VI.-Distributions to Shareholders
The Board of Directors of this Corporation may, from time to time,
authorize and the Corporation may make distributions on its shares in cash,
property or its own shares, except when the Corporation (i) would not be able to
pay its debts as they become due in the usual course of business or (ii) the
Corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation provide otherwise) the amount that
would be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of,
shareholders whose preferential rights are superior to those receiving the
distribution or when the declaration or payment thereof would be contrary to any
restrictions contained in the articles of incorporation.
The Board of Directors may base a determination that a distribution is not
prohibited under (i) or (ii) above either on financial statements prepared on
the basis of accounting practices and principles that are reasonable in the
circumstances or on a fair valuation or other method that is reasonable in the
circumstances. In the case of any distribution based upon such a valuation, each
such distribution shall be identified as a distribution based upon a current
valuation of assets, and the amount per share paid on the basis of such
valuation shall be disclosed to the shareholders concurrent with their receipt
of the distribution.
Article VII.-Corporate Seal
The Board of Directors shall provide a corporate seal which, shall be
circular in form and shall have inscribed thereon the following:
Article VIII.-Amendment
These bylaws may be repealed or amended, and new bylaws may be adopted by
the Board of Directors.