-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OLOGHyQ/d1n5wI2Uyzq4G/aGdqfJnv4JExvoqRydJ9OSf5v7hN1Lvx9v0K99RPhd qfZc5OD0l+RnBIT+JMxtgg== 0001005444-00-000093.txt : 20000421 0001005444-00-000093.hdr.sgml : 20000421 ACCESSION NUMBER: 0001005444-00-000093 CONFORMED SUBMISSION TYPE: 10SB12G/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYBERECORD INC CENTRAL INDEX KEY: 0001096563 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10SB12G/A SEC ACT: SEC FILE NUMBER: 000-27807 FILM NUMBER: 606110 BUSINESS ADDRESS: STREET 1: 10900 NE 8TH STREET STREET 2: SUITE 900 CITY: BELLEVUE STATE: WA ZIP: 98004 BUSINESS PHONE: 4259905920 MAIL ADDRESS: STREET 1: 10900 NE 8TH STREET STREET 2: SUITE 900 CITY: BELLEVUE STATE: WA ZIP: 98004 10SB12G/A 1 AMENDMENT #2 TO FORM 10-SB FOR CYBERECORD, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 2 TO FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS Under section 12(b) or (g) of the Securities Exchange Act of 1934 Under Section 12(b) or (g) of The Securities Exchange Act of 1934 CybeRecord, Inc. --------------------------------------------------------------------------- (Name of Small Business Issuer in its charter) Florida 91-1985843 ------------------------------- ------------------------------------- (State or other jurisdiction of (I. R. S. Employer Identification No.) incorporation or organization) 800 Bellevue Way NE, 4th Floor, Bellevue, WA 98004 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Issuer's telephone number (425) 990-5593 ------------- Securities to be registered pursuant to Section 12(b) of the Act. Title of each class Name of each exchange on which registered None None - ----------------------------- -------------------------------- - ----------------------------- -------------------------------- Securities to be registered pursuant to Section 12(g) of the Act. Common Stock $.01 par value ------------------------------------------------------------------------------ (Title of Class) CybeRecord, Inc. Form 10-SB TABLE OF CONTENTS PART I........................................................................1 Item 1. Description of Business..............................................1 Item 2. Plan of Operation....................................................9 Item 3. Description of Property.............................................11 Item 4. Security Ownership of Certain Beneficial Owners and Management......11 Item 5. Directors and Executive Officers, Promoters and Control Persons.....12 Item 6. Executive Compensation..............................................14 Item 7. Certain Relationships and Related Transactions......................15 Item 8. Description of Securities...........................................17 PART II......................................................................18 Item 1. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters.............................18 Item 2. Legal Proceedings...................................................19 Item 3. Changes in and Disagreements with Accountants.......................19 Item 4. Recent Sales of Unregistered Securities.............................19 Item 5. Indemnification of Directors and Officers...........................20 PART F/S Financial Statements........................................................F-1 PART III Items 1 and 2. Index to Exhibits and Description of Exhibits................21 SIGNATURES...................................................................21 PART I CybeRecord, Inc. (which we refer to in this registration statement as "we" or the "Company" or "CybeRecord") submitted two previous filings to the Securities and Exchange Commission (the "SEC") on Form 10-SB. The first filing, our original Form 10-SB, was filed electronically on EDGAR on October 26, 1999. The second filing, an amended Form 10-SB, was filed on EDGAR on February 11, 2000. Due to our inexperience with SEC disclosure requirements, our previous filings on Form 10-SB contained information under Part I, Items 1 and 2, that was unclear and beyond the scope of what was required for a Form 10-SB filing. THE INFORMATION SET FORTH UNDER ITEMS 1 AND 2 BELOW REPLACES, IN ITS ENTIRETY, THE INFORMATION CONTAINED IN OUR OCTOBER 26, 1999 AND FEBRUARY 11, 2000 FORM 10-SB FILINGS. THE PUBLIC SHOULD RELY ON THE INFORMATION CONTAINED IN THIS REGISTRATION STATEMENT AND NOT ON THE INFORMATION CONTAINED IN PART I, ITEMS 1 AND 2 IN OUR OCTOBER 26, 1999 AND FEBRUARY 11, 2000 FORM 10-SB FILINGS. Item 1. Description of Business. Form and Year of Organization CybeRecord is the continuation of a corporation that was first formed on February 17, 1969 under Florida law. Our Company was first named Flexi-Built Modular Housing Corporation. In March 1984, we changed our name to Flexicare, Inc., and then in September 1996 we changed it again to Pillar Entertainment Group Inc. In November 1997 we acquired all of the outstanding stock of Chrysalis Hotels and Resorts Corp. and changed our name to Chrysalis Hotels and Resorts Corp. None of our predecessor corporations engaged in any significant business activities. In April 1999 we acquired a group assets from people who were working independently to develop technology relating to microfilm scanning device design. The people from whom we acquired the assets were James J. Lucas, Glenn and Paulette Kimball, Marek Niczyporuk, James L. and Barbara Baker Quinn, Herbert and Patricia Walker, and Alva D. and Kirsten Cravens. These people were not part of a company, but they were coordinating their work and for convenience we will refer to them as the "Kristal Group." The assets we acquired from the Kristal Group in April 1999 all related to the development, production, and marketing of our key product: a low-cost, high-speed automated microfilm scanning device, which we have named "ScanServer." The assets we acquired included: (a) owned and licensed intellectual property rights for the device's overall design, and all hardware design; (b) computer programming code and all software developed including (but not limited to) all software needed to allow ScanServer to operate reliably and 1 with commercial quality and efficiency; (c) programs software, including all related trademarks and intellectual property, in machine readable or human readable form (or both); (d) rights to, and any rights to apply for and register, patents and patent applications, copyrights, trademarks, trade secrets and all other proprietary rights relating the intellectual property we acquired; (e) records and files relating to manufacturing, quality control, sales, marketing, customer support, and designs for the intellectual property we acquired; (f) derivative works of intellectual property; and (g) all related documentation. We also acquired hardware patents, rights to hardware patents, customer lists, contracts, agreements, licenses or license agreements, commitments, warranties, claims, and other existing and inchoate rights. We treated the costs of these asset as research and development expenses because we determined that the assets had not, at the time we acquired them, reached technological feasibility. We issued Company common stock to pay for the assets we acquired from the Kristal Group in April 1999. In May 1999 we changed our name to CybeRecord, Inc. Since April 1999 we have continued to conduct our research and development and marketing activities under the name CybeRecord, Inc. As of the filing date of this registration statement, we are in the early stages of starting to manufacture ScanServers for commercial distribution. Forward-Looking Statements In explaining our business in this registration statement, some of what we say will be "forward- looking statements." Words such as "expect," "anticipate," "intend," "believe," "plan," "objective," "target," "goal," and similar expressions indicate that a statement is forward- looking. Our forward-looking statements reflect our management's beliefs and assumptions based on the information we currently have available. Because our forward-looking statements are based on what we know and expect at the time we are preparing this registration statement, we cannot be sure that the actual course of our business activities will correspond to what we say in our forward-looking statements. There are many risks and uncertainties that could cause the assumptions we have used to formulate our business plans to turn out to be wrong. If our assumptions turn out to be wrong, our business's actual performance could be much worse than we anticipate based on our current assumptions. If our business does not perform as well as investors expect, or analysts or investors develop concerns about how well our business will perform, the trading prices for our stock are likely to decline, perhaps substantially. As explained in more detail below, our business is to develop, manufacture, and market a low- cost, high-speed automated microfilm scanner. The following are some of the key risks and uncertainties that could have a serious negative effect on our business, or at least delay our progress. While we are not currently aware of circumstances that would produce the potential problems and delays we describe below, we recognize that we cannot foresee what adverse events our business might encounter. If our business does encounter unexpected problems because of risks and uncertainties, investors could lose some or all of their investments in our business. 2 Potential Risks Relating to Production As reflected in our financial statements, we are currently a development stage company. As of the filing date of this registration statement, we are in the early stages of moving to limited production of ScanServers for commercial distribution. We have never generated any revenues from sales. If, as we begin our transition to the initial stages of commercial production, we encounter problems, we will not progress from development to revenue-generation in the time frame we have planned on as set forth in Part I, Item 2 below. Problems could come from being unable to identify reliable and affordable sources of quality parts necessary to build our scanners, being unable to assemble scanners on schedule even if parts arrive on time and in sufficient quantities, or producing scanners that do not meet necessary quality-control standards. Potential Risks Relating to Cash-Flow We need cash to continue funding our operations. If we have problems moving to commercial production, it will delay our ability to generate revenue from operations. If during a delay, we cannot obtain sufficient funding to keep operating our business, our business will most likely fail or have to be sold. Furthermore, even if the beginning of our commercial production phase goes smoothly, there will be a delay before we can generate sufficient cash from operations to meet our on-going expenses. If we cannot obtain adequate credit or sufficient cash from selling additional stock while we are trying to build up our production and revenue stream, it will delay or limit our activities and hurt our business. Also, if the securities markets in the United States experience a downturn, it will most likely be harder for us to raise cash by selling stock than it would be if securities markets were strong and rising. Potential Risks Relating to Key Technology We have developed our key technology with the goal of creating a microfilm scanner that can automatically recognize individual images, locate the boundaries between images, and accurately convert images into digital form. We have been testing and refining our technology, but we cannot be certain that we have identified and corrected all the potential problems that could prevent ScanServer's hardware or software from functioning properly. If we do encounter serious problems with our critical technology, it will hurt our ability to market the ScanServer to new customers and our existing customer relationships are likely to suffer also. Potential Risks Relating to Key Personnel Our current engineering and technical employees, as well as our President and Chief Executive Officer, have specialized knowledge and experience relating to the ScanServer and to the microfilm scanner industry generally. Our future success depends heavily on our ability to retain our key management and technical personnel. Competition for skilled technical and management employees is intense within and among high-technology industries. We therefore may not be able to retain our existing key management and technical personnel. We also may not be able to attract additional qualified employees in the future. If we lose 3 key management or technical employees or cannot attract qualified new employees, it could have a serious negative effect on our business's future growth and operating results. Potential Risks Relating to Patent Protection We have applied for patents to protect technology relating to the ScanServer. If the United States Patent and Trademark Office does not grant the patents for which we have applied, that will expose us to competition from other businesses that try to take advantage of our technology. Even if we receive all the patents for which we have applied, if are not able to protect our rights under those patents, we could be seriously hurt by competitors taking advantage of our patented technology. Need for Governmental Approvals and Agency Listings Our ScanServers include electronic components for which we must obtain evidence of compliance with Federal Communications Commission ("FCC") standards concerning radio frequency emissions (under Part 15 of the FCC's rules). Our electrical components should also receive safety listings from Underwriters' Laboratories ("UL"). To the extent we seek to place our ScanServers into service in Canada, the United Kingdom, and other parts of Europe and the rest of the world, there are similar requirements for testing and approval. We have not yet applied for FCC approval or a UL listing in the United States or for similar approvals in any other country. If we are delayed in obtaining necessary approvals or clearances, it will delay our ability to distribute ScanServers in the affected locations. If we are unable to obtain a required approval or clearance, we will either have to forego marketing our ScanServer in the affected locations or expend the time and money to change our ScanServer until it meets the applicable requirements. Delay or failures in obtaining governmental or agency approvals or listings could have a significant negative impact on the development of our business. Potential Risks Relating to General Economic Conditions Like many other businesses, our business will be sensitive to general economic conditions that affect us or our potential customers or both. For example, if interest rates rise and our expenses in running our business increase because of that, it will be harder for us to price our scanner competitively and still generate a profit. If the businesses, agencies, and organizations that we plan to target as our customers experience financial constraints for any reason, they may decide that using our scanner to convert their microfilm records to digital form is an expense they prefer to forego or delay. If we are not able to place as many scanners with customers as we expect, our revenues will be lower than we anticipate and this will impede the continuing development of our business. 4 Principal Product Our business is to develop, manufacture, and market a low-cost high-speed automated microfilm scanner. We believe the key drivers for microfilm conversion are the desire to have speedier and more convenient access to records, and the desire to share and transmit images electronically. Our ScanServer technology create images that can be transmitted across the Internet or placed on a server and made accessible by intra-net. Users can select the standard image format they wish to use for their converted microfilm images, which are stored on a computer hard-drive. Among the standard image formats available are "tif," "jpg," and bit map files. The stored images can be cataloged, viewed, and transmitted electronically using standard "off-the-shelf" software. Our ScanServer does not produce a computer file that can be edited as text or other types of data. The digital record is essentially an electronic picture of the original microfilm image. A converted image, if it consists of text, could, if a customer chose, be loaded into an optical character recognition (OCR) device or program. This step is not part of what ScanServer provides to its users, however. It would require customers to use separate applications with the necessary capabilities. We envision that in the future we may find opportunities to develop alliances with other types of information management businesses, such as in the areas of conversion to word-processible documents or databases that could be edited, sorted, or searched. We do not presently have any alliances of this type in place or under development. We have incorporated nothing into ScanSaver's current design to mesh with or enable other conversion processes, except the ability of ScanServer software to improve the clarity and contrast of imperfect or deteriorated microfilm images. We plan to rent our microfilm scanners to customers who can use them to convert their microfilm records to digital form. We currently do not intend to encourage customers to purchase ScanServers. We plan to base the fees we charge our customers on the number of images they convert from microfilm to digital format. We call this per-image fee a "click- charge." Competitive Business Conditions, Position in Industry, and Methods of Competition Offering customers the ability to rent rather than buy or lease our ScanServer, and to pay based on the number of images converted, are two of the key factors we believe will allow us to offer an attractive alternative to other options customers may consider. We believe our target customers have essentially two alternatives to renting our ScanServer: outsourcing their records to a third party (such as a service bureau) for conversion or purchasing or leasing other producers' microfilm scanners. In our view, outsourcing has the drawback of taking critical, potentially irreplaceable records away from the customer's premises and out of the customer's control. This means that while the records are being converted, the customer does not have access to them. In addition, the charges for conversion through outsourcing can be significant for customers that have millions of records to convert. The information we have from potential customers on their 5 expected costs for service bureau conversion range from 5(cent) to 15(cent) per image converted or more. We plan to offer a "click charge" pricing structure with a sliding scale based on the number of images converted. We expect that the high end of our pricing scale will meet the lowest prices service bureaus can offer. We expect that for customers whose volume places them in the middle or lower end of our sliding scale, the per-image charge will be lower than the least expensive service bureau charges. At the same time, our customers will not need to surrender control of and access to their records during the conversion process. Our customers will be able to use the ScanServer at their places of business. A chief drawback we perceive with respect to purchase or leasing our competitors' scanners is the need for businesses to include purchase or leasing costs in their capital planning cycles. Another drawback is the potentially limited usefulness of any purchased or leased scanners after the initial conversion process is completed. A business may be required to purchase or lease a large number of scanners to complete initial conversion in a timely manner, but need fewer machines to keep up with on-going microfilm conversion. With our proposed rental arrangement based on click-charges, there is no need for capital budget treatment and no need to procure more scanners than are required to meet a business's current needs. We envision that many potential customers may prefer to rent several ScanServers for a limited period to facilitate conversion of microfilm images over a shorter time period. In this way, a customer does not have to endure an extended disruption to records access and does not have to devote as much personnel attention to the conversion process. Our click-charge approach facilitates use of multiple scanners in a way we believe purchase or lease arrangements do not. Our currently available information on prices for other companies' microfilm scanners indicates that they range from $50,000 to $160,000 for a single scanner. We believe that SunRise Imaging, Inc. and Mekel are presently the leaders in the microfilm scanner market. Fuji also offers a proprietary scanner limited to its own 16mm blipped roll film. Both SunRise Imaging and Mekel have recently been acquired by other companies. We believe that the effect of these acquisitions is likely to make them less competitive than they were before. So far as we know, none of the existing microfilm scanner companies place their products without a sales contract or third party lease, both of which require capital purchase approval and capital. The exception is a Fuji film scanner that sells for around $16,000, but the scanner is limited to16mm Fuji blipped roll-film and is therefore in our view not a competitor for the general microfilm scanning market. The other important distinctions between our ScanServer and the other microfilm scanners with which we are familiar are the degree of automation, simplicity of use, multiple film format capability, and quality of converted images. Our ScanServer incorporates two key software components that we believe will give our product a significant competitive advantage. We call them "ImageFinder" and "ImageRestore." ImageFinder is designed to automatically detect and distinguish between images on microfilm. As explained in a November 30, 1999 press release available 6 through our Website (www.cyberecord.com), we tested ImageFinder in November 1999 using microfilm samples we selected specifically to challenge ImageFinder's capabilities. The sample included overlapping images and films that had different size images intermixed with each other. We were very pleased with the results of our test. Our ImageFinder software partitioned the images on the test samples with 100% accuracy, without the need for operator intervention. ScanServer's ability to accurately locate and distinguish among microfilm images is central to our marketing strategy. Our goal is to offer a scanner that requires minimal human supervision, so that our customers will incur lower personnel costs and less work disruption than will other scanners. To accomplish this goal, our scanner has to provide reliable, automatic image recognition. Our ImageFinder software is designed to meet this need. Furthermore, the ScanServer works with a range of microfilm formats, including fiche, jacketed and cut film, reel and cartridge formats, and aperture cards. The ScanServer's second key software component is ImageRestore. ImageRestore is designed to automatically restore contrast, clarity, and content to digital images produced from microfilm records. As described in an August 3, 1999 press release available through our Website, when we tested ImageRestore on a variety of microfilm samples, we obtained very good results. The images we tested not only had improved clarity, but extraneous marks such as scratches and specks had been removed. Another advantage we believe we can offer customers with ScanSaver is simplicity of use. We have designed ScanServer to be easy enough to operate to allow an unskilled clerk to use it correctly with minimal training. Our ScanServer is no more difficult to operate than a simple photocopier. A set of microfilm records is placed into the ScanServer, the operator chooses the copying options, presses the start button, and the ScanServer carries out the conversion process automatically. We consider this is a significant improvement over other currently available scanners, which we believe are complicated and cumbersome to operate and require substantial training. Our competitors' scanners require an operator to manually process each image in microfilm format, particularly difficult images. By "difficult," we mean images that are overlapping, have unclear borders, are non-standard shapes or sizes or are skewed within their frames. Our ScanServer is designed to automatically detect even difficult images. If other scanners are less reliable in accurately and consistently recognizing individual microfilm images, they have to be much more closely attended because an operator has to manually check and compensate for any image recognition errors. Even though we believe that our click-charge approach will enable customers to more quickly and efficiently convert existing microfilm records to digital form, we anticipate that many businesses and agencies will continue to generate records on microfilm in the future. This is because microfilm is considered one of the most durable and economical methods of storing large quantities of information. Microfilm has been in successful use for more than one-hundred years, and does not depend on computer programming to make it accessible. Microfilm therefore does not carry the risk that it could become unretrievable because of outmoded software the way computer-generated data can. Therefore, we 7 believe businesses will most likely continue to keep critical records on microfilm because of its durability. At the same time, we expect that for ease of access, management, and distribution, they will also want to create duplicate records in digital form. Potential Customers and Markets In identifying the scope of our target market and potential customers, we have relied on widely- recognized sources in the information-management field (such as the Association for Information and Image Management or "AIIM"), as well direct contacts with customers and the substantial experience of our management, research and development, and sales personnel. According to information posted on AIIM's public Website (www.aiim.org), AIIM is the successor to the National Microfilm Association, which was founded in 1945. AIIM claims membership of more that 650 corporations and 9,000 individuals. Based on our management's long experience in the information and imaging industries and the information we have about AIIM, we believe AIIM to be a respected and reliable source of information. AIIM has commissioned and published substantial studies of the magnitude, make-up, and growth rate of the market for document imaging and information management, which are available through AIIM's Website. The information published by AIIM and other industry sources provides independent confirmation of what our own experience and marketing efforts have indicated: that a vast array of businesses, organizations, and agencies worldwide have stored and continue to generate enormous quantities of critical information in various microfilm formats. These include banks and financial services institutions, insurance companies, libraries, government and law enforcement agencies (federal, state, and local), educational and research institutions, and private businesses. The types of information these potential customers have in their microfilm records include such documents as mortgage records, customer service and loan records, insurance policies, personnel and human resources records, claims files, intelligence data, IRS records, birth, death, and marriage certificates, arrest and fingerprint records, medical records of all kinds, and so forth. Initially, we expect to focus our marketing efforts most heavily on government agencies (including law enforcement), banking, insurance, and title companies. To help us establish ourselves in these areas, we have focused on recruiting and hiring sales and marketing personnel with experience and contacts in each of these sectors. Methods of Distribution and Marketing We currently expect to distribute our ScanSaver through direct sales channels. We also plan to work to develop relationships with resellers, value-added resellers, and system integrators as viable opportunities emerge. Our marketing strategy is to use in-person and telephone sales calls, advertising, direct mail, and trade show appearances. We plan to target our advertising in trade magazines aimed at the types of businesses and agencies we have identified for our initial marketing focus, such as government, banking, insurance, and title companies. 8 Sources and Availability of Raw Materials Manufacturing the ScanServer requires three types of basic materials: metal parts for the structural and exterior components, optical elements, and computer parts. We expect to purchase optical components for our ScanServers from commercially available sources. The computer parts are available from over-the-counter computer stores. Most of the metal components require custom manufacturing, for which we have arranged with a third-party contractor. We do not expect to be dependent on any single or few sources for raw materials. Dependence on One or a Few Major Customers We do not anticipate that we will be dependent on a single or very small number of customers. Patent, Trademark, and Service Mark Applications and Research and Development Activities We currently have a number of United States and foreign patent applications pending with respect to our ScanServer's technology. We have also applied for trademark and service mark protection for the words "cyberecord" and "4eyes." Since acquiring the assets of the Kristal Group in April 1999, essentially all of our activities have been focused on research and development, but none of the associated costs have been or will be borne directly by our customers. Governmental Regulation and Environmental Compliance We are not aware of any current or pending federal, state, or local environmental laws or regulations that are likely to have a significant impact on our business operations. We do not anticipate any significant governmental regulation unique to our business, other than the matters described above under the subheadings "Need for Governmental Approvals and Agency Listings" and "Patent, Trademark, and Service Mark Applications and Research and Development Activities." Employees We currently have 18 employees, all of whom work full time for CybeRecord or one of its wholly owned subsidiaries. Item 2. Plan of Operation. In February 2000 we produced two prototype ScanServers that will be used for testing and evaluation. Over the next 12 months, our goal is to move from a development stage company to commercial production of the ScanServer. As of the beginning of April 2000, we have ordered sufficient hardware components to assemble 30 ScanServers and sufficient computer and electronic components for 10 9 ScanServers. (We ordered hardware for a larger number of ScanServers because these components require custom manufacturing.) We have arranged for a subcontractor in southern California to build ScanServer units for commercial shipping with an initial target of 10 units to be completed by the end of May 2000. After May, our goal is to achieve a continuing production rate of approximately 20 units per month. If the parts arrive as expected, the assembly process proceeds without significant delays, and we obtain necessary FCC approval and UL listings, we expect to begin shipping commercial production units by the end of May 2000. Our initial target geographical market is the United States, to be followed by Canada, the United Kingdom, Columbia, Brazil, and Mexico. Based on cash raised from stock sales between February 11 and March 3, 2000 (as described in Part II, Item 4 below), we believe we have sufficient cash available to meet our current manufacturing and marketing schedule. If we are able to implement our production plans as we intend, we believe that we will be able to generate adequate revenues from placing ScanServer units into service to maintain operations at the modest level described in the preceding paragraph. Without raising additional funds through stock sales, we do not expect to be able to expand the scale of our production and marketing efforts quickly, but we believe we could sustain our business and grow slowly. Additional capital investment in our business during the next 12 months would influence our activities in three key respects: how much advertising we are able to do, how quickly we can expand the scale of our production operations, and how quickly we can enter additional geographical markets. If we are able to secure additional funding through stock sales, we would expect to pursue these areas to the extent we considered it feasible. We cannot, however, be certain of placing enough ScanServers into service over the next 12 months to meet our operating requirements. If we do not place enough units, then we will need to either obtain adequate commercial credit arrangements or sell additional stock to fund our continuing operations. We do not currently have commitments in place for obtaining credit or selling additional stock. As of April 2000, we do not intend to conduct significant new research and development efforts over the next 12 months. We plan to focus our efforts on manufacturing ScanServers and placing them into commercial service. As an integral part of moving from product development to production, we expect to conduct on-going evaluation of possible ways to improve production and lower costs. We will also be watching for opportunities to further develop or build on our core technology in ways that complement our microfilm scanning business. We do not currently have any concrete plans in this regard, however. We do not anticipate acquiring significant new plant or equipment during the next 12 months. We plan to contract with third parties to assemble our ScanServers, rather than acquiring infrastructure to build them ourselves. We do not currently expect to hire a significant number of additional employees during the next 12 months. We believe that overall, the complement of management, technical, and sales and marketing personnel we currently employ should enable us to proceed with production and marketing at our initial target levels over the next 12 months. 10 Item 3. Description of Property. The Company leases offices at 800 Bellevue Way, N.E., Suite 400, Bellevue, Washington under a written lease, which runs through December 31, 2000. The Company has the right to terminate the lease early (on June 30, 2000) by providing 30 days' prior written notice. Unless terminated, after December 31, 2000 our lease will automatically renew for successive one-year terms, with annual seven-percent increases in the monthly rental. The terms of our lease provide for office space, communication services, and office furniture. Our lease is with Vantas Bellevue, 800 Bellevue Way, NE, 4th Floor, Bellevue, Washington 98004, telephone number (425) 462-4059. Item 4. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth, as of March 31, 2000, the stock ownership of each executive officer and director of CybeRecord, of all executive officers and directors of CybeRecord as a group, and of each person known by CybeRecord to be a beneficial owner of five percent or more of its common stock. Except as otherwise noted, each person listed below is the sole beneficial owner of the shares listed opposite his or her name and has sole investment and voting power for those shares. No person listed below has any options, warrants, or other rights to acquire additional securities of the Company except as otherwise indicated. Name and Address Number of Shares of Beneficial Owner (1) Beneficially Owned Percentage of Class - -------------------------------------------------------------------------------- James J. Lucas 401 -- 100th NE, #316 1,500,000 8.96 Bellevue, WA 98004-5456 Glenn Kimball* 2850 College Avenue 1,500,000 8.96 Modesto, CA 95350 Marek A. Niczyporuk 962 Elsinore Drive 1,300,000 7.77 Palo Alto, CA 94303 Brent Nelson 5395 176th Place 1,225,000** 6.90 Bellevue, WA 98004 Thomas Morikawa 1737 14th Avenue 1,115,000 6.66 Seattle, WA 98122 James L. Quinn*** 3419 Evergreen Point Road 1,100,000 6.57 Medina, WA 98039 11 Name and Address Number of Shares of Beneficial Owner (1) Beneficially Owned Percentage of Class - -------------------------------------------------------------------------------- Alva D. Cravens 17235 Deerpark Road 100,000 0.60 Los Gatos, CA 95032 William S. Altieri 675 Sharon Park Drive none n/a Menlo Park, CA 94025 All directors and executive officers as a group (7 persons) 6,725,000 37.89 - -------------------------------------------------------------------------------- * Shares held jointly with Mr. Kimball's wife, Paulette Kimball ** Includes 1,000,000 shares that may be acquired by Northwest Capital Partners, L.L.C. for $.01 per share under a consulting agreement with CybeRecord if conditions specified in the consulting agreement are satisfied. Mr. Nelson is the president and sole owner of Northwest Capital Partners, L.L.C. *** Shares held jointly with Mr. Quinn's wife, Barbara Quinn (1) For purposes of this table, a person is considered to "beneficially own" any shares with respect to which he or she directly or indirectly has or shares voting or investment power or of which he or she has the right to acquire the beneficial ownership within 60 days. Unless otherwise indicated above and subject to applicable community property law, voting and investment power are exercised solely by the person named above or shared with members of his or her household. Item 5. Directors and Executive Officers, Promoters and Control Persons. The directors and executive officers of the Company and their ages as of the filing date of this registration statement are as follows: Name Age Position - ---- --- -------- William S. Altieri 71 Director Alva D. Cravens 59 Director James J. Lucas 58 Director, Chief Executive Officer, and President Brent Nelson 38 Director and Secretary James L. Quinn 63 Vice President of Sales Glenn S. Kimball 67 Vice President of Engineering Marek Niczyporuk 34 Vice President of Software Development 12 William S. Altieri, Director -- Mr. Altieri was appointed a Director on November 15, 1999. Since 1975, he has been a self-employed marketing and sales consultant for clients in a variety of business areas, including franchising, computer services, soft drinks, automobile products, and food products. Mr. Altieri's experience encompasses domestic and international product branding, corporate and product positioning, and advertising and general marketing for consumer, industrial, and high-technology products. He has been employed as a Brand Manager for Procter and Gamble's Joy detergent. He later joined Norman, Craig and Kummel Advertising in New York City as a Vice President and was promoted to Senior Vice President of European Operations directing marketing programs for Colgate Palmolive, Chesebrough-Ponds, and American-Cyanamid. Subsequently, he became a senior partner and Managing Director of London's Jack Tinker Advertising, where he was responsible for adapting U.S. marketing efforts into European marketing programs for Coca-Cola, Exxon, Miles Laboratories, and Nabisco. Mr. Altieri holds an MBA from Stanford University. As a Lieutenant in the United States Navy, he served on an UDT (Underwater Demolition Team), now called a SEAL (Sea Air Land) team. Mr. Altieri's term as Director runs through the next annual shareholders' meeting. As of the filing date of this registration statement, the Company's Board of Directors has not yet set a date for the next annual shareholders' meeting. Alva D. Cravens, Director -- Mr. Cravens was appointed a Director of the Company on November 15, 1999. Since January 1999 he has been Vice President of Worldwide Marketing for AdForce, an Internet ad-serving firm recently ranked ninth in Inter@ctive Week magazine's top ten advertising and marketing companies. From March 1998 to January 1999, Mr. Cravens was President of OpenGrid (formerly Ensemble Solutions, Inc.), an electronic distribution company. From April 1996 to January 1998, he served as Vice President of Marketing at Adaptec, Inc., a manufacturer of SCSI, fiber channel, and RAID products. Between August 1992 and March 1996, Mr. Cravens was Vice President of Marketing for Radius, Inc. (now Digital Origin, Inc.), a developer and manufacturer of computer displays and graphic and video technologies. Mr. Cravens has more than 20 years of executive experience in strategic marketing, communications, positioning, branding, and advertising for technology companies. Mr. Cravens holds both a B.A. and an M.A. in communications from San Jose State University. Mr. Cravens' term as Director runs through the next annual shareholders' meeting. James J. Lucas, Director, Chief Executive Officer, and President -- Mr. Lucas has more than 20 years of senior management experience in digital imaging markets. He joined CybeRecord as President and CEO May 1999, and was appointed a Director on November 15, 1999. From June 1998 to May 1999, Mr. Lucas was Director of National Sales, Seybold Seminars, for ZD Events. From May 1996 to October 1998, Mr. Lucas served as Vice President of Sales and Marketing for SunRise Imaging, Inc. in Foster City, California, and from May 1994 to May 1996 he was Vice President of Sales and Marketing for ScanView, Inc. in Foster City, California. Mr. Lucas' career highlights also include positions as vice president of product marketing and vice president of advertising and public relations for General Electric Company, Calma Division, and vice president of special markets for Eastman Kodak Company, Atex Division. In 1981, he developed the original business and product concepts for Qubix Graphic Systems, a venture-funded company that went public and was subsequently acquired. Mr. Lucas' term as Director runs through the next annual shareholders' meeting. 13 Brent Nelson, Director and Secretary -- Mr. Nelson has served as a Director and as Secretary of the Company since October 1997. For more than the past five years, Mr. Nelson has been president of Northwest Capital Partners, L.L.C., a venture capital firm located in Bellevue, Washington. Within the past five years Mr. Nelson has also been Chief Executive Officer of PanPacific Containers L.L.C. and Director of Business Development for Waterwood Mountain Hotel Resort & Spa Ltd. and Waterwood International Spa Resorts, Inc. (both Canadian companies). In addition to CybeRecord, Mr. Nelson presently serves on the boards of directors of the following reporting companies: Interactive Objects, Inc., a software development firm, Eclipse Entertainment Group, Inc., a film development, production, and distribution company, and Mobile PET Systems, Inc., a medical company. He earned a diploma in marketing from Douglas College, Vancouver, B.C., Canada in 1983. Mr. Nelson has over 15 years of experience in corporate project financing. Mr. Nelson's term as Director runs through the next annual shareholders' meeting. James Quinn, Vice President of Sales -- From December 1994 until he joined CybeRecord in August 1999, Mr. Quinn was Director of International Sales for Tally Printer Corporation, Kent, Washington. Mr. Quinn graduated from Franklin Marshall University in 1958. Glenn Kimball, Vice President of Engineering -- For more than five years before joining CybeRecord in May 1999, Mr. Kimball operated an independent consultant business, Kimball Engineering. Mr. Kimball has more than 20 years of experience in imaging product development, primarily for large government organizations. He developed image-processing techniques to separate and enhance poor quality, overlapping bank endorsements and a series of test documents, enabling performance of high-speed check reader- sorters for the Federal Reserve. He managed development and production of seven multimillion-dollar topographic map compilation systems that performed at micron accuracy for the United States Defense Mapping Agency. Marek Niczyporuk, Vice President of Software Development -- Mr. Niczyporuk was appointed Vice President of Software Development on April 7, 2000. From May 1, 1999 until April 7, 2000, he served as CybeRecord's Director of Imaging Systems. For more than five years before joining CybeRecord, Mr. Niczyporuk conducted a private software consulting business. He is a leading machine vision and computer image processing scientist with expertise in incorporating advanced image processing methods into successful medical, commercial, and industrial applications. His cardiovascular imaging systems to detect and reconstruct real-time, three-dimensional shapes of the heart surface have been in daily operation since 1989. Mr. Niczyporuk has also developed a system to analyze Doppler ultrasound images, software to interpret retinal topography, machine vision systems for inspection and quality control in the printing industry, and color image analysis programs for a variety of manufacturing environments. 14 Item 6. Executive Compensation. The table below sets forth all compensation paid to the Company's executive officers during 1999 (the Company's most recently completed fiscal year). Other than as indicated in the table below, none of the Company's executive officers received any benefits or compensation in any form (including stock, stock options, stock appreciation rights, long-term incentive plan payouts, etc.) for service as executive officers of the Company during 1999. Compensation Paid During 1999 Other Position Salary Bonus Compensation - -------- ------ ----- -------------- James Lucas, Pres. & CEO* $ 105,000 $12,500 Glenn Kimball, VP Engineering* $ 72,000 $12,500 James Quinn, VP Sales* $ 55,000 Tom Morikawa, Exec. VP of Operations** $ 71,875 $25,000 and Chief Financial Officer Brent Nelson, Secretary*** $ 5,000 * Salary payments to Mr. Lucas began on May 16, 1999. Salary payments to Mr. Kimball began on May 1, 1999. Salary payments to Mr. Quinn began on August 1, 1999. The amounts stated in the table above reflect actual payments made to these officers from the beginning of their salary payments through December 31, 1999. Had the Company's executive officers been on the Company's payroll for the entire 1999 fiscal year at the same salary rate they received from the beginning of their salary payments through December 1999, their annual base compensation would have been as follows: $168,000 for Mr. Lucas; $108,000 for Mr. Kimball, and $132,000 for Mr. Quinn. ** Mr. Morikawa was a Director and the Chief Executive Officer of Chrysalis Hotels and Resorts Corp. (which was the name under which the Company operated until April 1999) through April 1999, and then Director, Executive Vice President of Operations, and Chief Financial Officer for CybeRecord until November 15, 1999. Since November 15, 1999, Mr. Morikawa has been a consultant to the Company and during 1999 received retainer payments under his consulting agreement of $25,000. These consulting payments are included under "Other Compensation" in the table above. *** Mr. Nelson was a Director and Secretary of Chrysalis Hotels and Resorts Corp. (the last name under which the Company operated before changing its name to CybeRecord, Inc. in April 1999). He is one of the Company's current Directors and shareholders, as well as its Secretary. Mr. Nelson received compensation through payments the Company made to Northwest Capital Partners, L.L.C. under the Consulting Agreement described below under Item 7. These consulting payments are included under "Other Compensation" in the table above. 15 Item 7. Certain Relationships and Related Transactions. 1. As described above under Part I, Item 1, in April 1999 the Company issued stock to acquire a group assets from the Kristal Group. Several members of the Kristal Group are now officers or directors, as well as shareholders, of the Company. These include James J. Lucas, who is President and CEO of CybeRecord as well as a director; James L. Quinn, who is Vice President of Sales for CybeRecord; Glenn S. Kimball, our Vice President of Engineering; Marek Niczyporuk, our Vice President of Software Development; and Alva D. Cravens, who is one of the Company's current directors. The Company issued 6,000,000 shares of common stock to acquire assets from the Kristal Group. The common stock was valued at $.50 per share, based on stock sales in the same time period. The number of shares issued was based on negotiations between the Company and the individuals who made up the Kristal Group. As part of these negotiations, certain shareholders contributed 5,000,000 shares of common stock back to the Company so that, when the transaction was completed, the parties' ownership percentages in CybeRecord would be as agreed upon within the Kristal Group. 2. In March 1999, the President of CybeRecord, Inc., a Nevada corporation ("CybeRecord Nevada") executed a Consulting Agreement (the "Agreement") with Brent Nelson on behalf of Northwest Capital Partners, L.L.C. ("Northwest"). Brent Nelson is the sole member of Northwest. Brent Nelson is also a director and officer of CybeRecord Nevada. The Board of Directors of CybeRecord Nevada has not yet approved the Agreement. The Agreement, which runs through February 2002, provides for Northwest to assist in obtaining financing for CybeRecord Nevada. In return for consulting services under the Agreement, CybeRecord Nevada agreed to pay the consultant $500 per month. Provision is made for this payment to increase to $1,000 per month. The Agreement also provides that the consultant is to be issued 500,000 shares of common stock for $0.01 per share when the market capitalization of CybeRecord Nevada reaches $100,000,000 and is to be issued an additional 500,000 shares of common stock at $0.01 per share when the market capitalization of CybeRecord Nevada reaches $200,000,000. Any shares issued under the Agreement will be restricted shares, and will have "piggy-back" rights, so that the shares will be registered upon CybeRecord Nevada's first registration after the shares are issued. Two CybeRecord, Inc. exist in the United States: CybeRecord, Inc., a Florida corporation ("CybeRecord Florida") and CybeRecord Nevada. We are CybeRecord Florida. Brent Nelson is a director and officer of both corporations. Brent Nelson is also a shareholder of CybeRecord Florida. Both companies share the same President. Neither company owns the stock of the other. However, both companies have taken steps to merge CybeRecord Florida into CybeRecord Nevada, but the merger has not been completed. 16 While Northwest's contract is with CybeRecord Nevada, Northwest has performed services for CybeRecord Florida. CybeRecord Florida has paid Northwest $500 per month ($5,000 in 1999). CybeRecord Florida's Board of Directors has not approved a contract with Northwest. CybeRecord Florida and Northwest are working to identify the terms upon Northwest will provide services to CybeRecord Florida. Since December 31, 1999, CybeRecord Florida has reached a market capitalization that exceeds $200,000,000. If CybeRecord Florida and Northwest enter into a consulting agreement with stock provisions similar to the provisions contained in CybeRecord Nevada's Agreement, or CybeRecord Florida assumes CybeRecord Nevada's obligations under the Agreement, then Northwest will have the right to purchase the stock from CybeRecord Florida. 3. Tom Morikawa, one of the shareholders named in the table of beneficial security owners under Item 4 above and also a former director and chief executive officer of the Company, is currently a consultant to the Company. Under our consulting agreement with Mr. Morikawa, we pay Mr. Morikawa a monthly retainer of $12,500. The consulting agreement with Mr. Morikawa remains in effect through May 15, 2000. 4. After January 1, 2000, the Company borrowed $100,000 from Brent Nelson, who is one of the Company's directors and shareholders, as well as its secretary. The Company has repaid this loan, which was due on demand, unsecured, and bore no interest. Item 8. Description of Securities. Common Stock The Company has authorized 20,000,000 shares of Common Stock, par value $.01. Under its Articles of Incorporation, the Company is also authorized to issue 1,500,000 shares of Class B Common Stock, par value $.10 per share. The Company has not, however, issued any Class B Common Stock and has not registered any Class B Common Stock under Section 12 of the Securities Exchange Act of 1934. Each outstanding share of Common Stock, par value $.01 is entitled to one vote, either in person or by proxy, on all matters that may be voted upon by holders of the Company's Common Stock at meetings of the Company's shareholders. The holders of Common Stock (i) have equal ratable rights to dividends from funds legally available for payment of dividends, when and if declared by the Company's Board of Directors; (ii) are entitled to share ratably in all of the assets of the Company available for distribution to holders of Common Stock upon liquidation, dissolution, or winding up of the affairs of the Company; (iii) do not have preemptive, subscription, or conversion rights, or redemption or sinking fund provisions applicable thereto; and (iv) are entitled to one non-cumulative vote per share on all matters on which shareholders may vote at all meetings of shareholders. All of the issued and outstanding shares of Common Stock are, and all unissued shares when sold will be, duly authorized, validly issued, fully paid, and non-assessable. To the extent that additional shares of the Company's Common Stock are issued, the relative interests of the then-existing shareholders may be diluted. 17 PART II Item 1. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters. Market Information The Company's Common Stock ($.01 par value) is publicly traded on the over-the-counter market. It is presently traded in the OTC "Pink Sheets." Although the Company's Common Stock is not currently listed on a national exchange, we are voluntarily registering our Common Stock under Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") at the request of the SEC. It is our understanding that during 1999, the SEC contacted numerous companies with securities trading on electronic bulletin boards. The SEC requested that these companies register as reporting companies under Section 12(g) of the Exchange Act to facilitate more thorough and timely disclosure of business and financial information to investors. At the time we received the SEC's request, our Common Stock was trading on an electronic bulletin board, although as of the filing date of this registration statement, it is currently traded only in the OTC "Pink Sheets." It is in response to the SEC's request that we are filing this registration statement. The Company's principal market makers are Olsen Payne & Company, Paragon Capital Corporation, Sharpe Capital Corp., and Hill, Thomson Magid and Company. The high-low bid information for the Company's stock for the period January 1998 to December 1999 as reported by the "Wall Street City" website (www.wallstreetcity.com) of Telescan, Inc. follows: Monthly prices (January 1998 to December 1999) Date High Low Close - ---- ---- --- ----- Dec-99 2.125 0.812 2.125 Nov-99 1.375 0.625 1.250 Oct-99 1.750 0.625 1.062 Sep-99 1.000 0.500 0.875 Aug-99 1.250 0.937 1.000 Jul-99 1.562 1.125 1.187 Jun-99 1.875 0.937 1.625 May-99 1.437 0.500 1.093 Apr-99 1.000 0.406 0.875 Mar-99 0.812 0.125 0.562 Feb-99 0.375 0.187 0.375 Jan-99 0.250 0.125 0.250 Dec-98 0.375 0.125 0.218 Nov-98 0.593 0.250 0.312 Oct-98 0.531 0.218 0.218 Sep-98 0.750 0.250 0.500 Aug-98 0.937 0.500 0.625 Jul-98 1.125 0.750 0.937 Jun-98 1.250 0.687 0.900 May-98 1.187 0.437 1.000 Apr-98 0.687 0.500 0.500 Mar-98 0.750 0.375 0.593 Feb-98 0.750 0.500 0.687 Jan-98 0.750 0.375 0.640 18 Holders The approximate number of record holders of the Company's Common Stock as of December 31, 1999 was 330, inclusive of those brokerage firms and/or clearinghouses holding the Company's common shares for their clientele (with each such brokerage house and/or clearinghouse being considered as one holder). The aggregate number of shares of Common Stock outstanding as of December 31, 1999 was 15,471,864 shares. Dividends The Company has not paid or declared any cash dividends on its Common Stock since its inception and does not anticipate paying cash any dividends on its Common Stock in the foreseeable future. Item 2. Legal Proceedings. The Company is not presently a party to any material litigation, and, to the Company's knowledge, there is no material litigation currently threatened against the Company. Item 3. Changes in and Disagreements with Accountants. The Company has had no changes in or disagreements with accountants on accounting or financial disclosure. Item 4. Recent Sales of Unregistered Securities. The Company has issued the following shares of its Common Stock during past three years without registration under the Securities Act of 1933, as amended (the "Act"): 1. On October 1, 1997, the Company issued 4,000,000 shares to fifty-one non-affiliates at a price of $.06 per share for aggregate consideration of $240,000 pursuant to an exemption from registration under Regulation D, Rule 504 of the Act. In connection with this October 1, 1997 transaction, the Company redeemed and canceled (without compensation) 700,000 of the 4,000,000 shares that were issued. 2. On October 11, 1997, the Company issued 8,000,000 shares to seventeen affiliates. These shares were issued by one of the Company's predecessor corporations, Pillar Entertainment Group Inc., in exchange for all of the outstanding shares of Chrysalis Hotels and Resorts Corp. Following the exchange Pillar Entertainment Group Inc. changed its name to Chrysalis Hotels and Resorts Corp. The shares issued in this exchange transaction were exempt from registration pursuant to Section 4(2) of the Act. 19 3. On March 24, 1999, the Company issued 1,970,000 shares to ten non-affiliates pursuant to an exemption from registration under Regulation D, Rule 504 of the Act, at a price of $.50 per share for total consideration of $985,000. In consideration for legal services rendered, 46,000 shares were issued to two non-affiliates pursuant to an exemption from registration under Regulation D, Rule 504 of the Act. 4. On April 20, 1999, the Company issued 6,000,000 shares to seven affiliates. These shares were issued by one of the Company's predecessor corporations, Chrysalis Hotels and Resorts Corp., in exchange for assets acquired from the Kristal Group. An additional 50,000 shares were issued as a finder's fee in the transaction. Following the asset acquisition, Chrysalis Hotels and Resorts Corp. changed its name to CybeRecord, Inc. The shares issued in this transaction were exempt from registration pursuant to Section 4(2) of the Act. 5. In November 1999, the Company issued 70,000 shares to two non-affiliates in exchange for legal services. The shares were exempt from registration pursuant to Section 4(2) of the Act. 6. Between February 11 and March 3, 2000, the Company issued 1,275,000 shares to 17 non-affiliates pursuant to an exemption from registration under Regulation D, Rule 506 of the Act, at a price of $1.75 per share for aggregate consideration of $2,231,250. Item 5. Indemnification of Directors and Officers. The Certificate of Incorporation and Bylaws of the Company contain provisions limiting or eliminating the liability of directors of the Company to the Company or its stockholders to the fullest extent permitted by the General Corporation Law of Florida and indemnifying officers and directors of the Company to the fullest extent permitted by the General Corporation Law of Florida. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act") may be permitted to directors, officers, and controlling persons of the Company pursuant to the foregoing provisions or otherwise, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer, or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the purchase or sale of the Company's Common Stock, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act, and will be governed by the final adjudication of such issue. 20 PART F/S The Company's financial statements required by Regulation S-B begin on page F-1 and are incorporated into this part of this Amendment No. 2 to Form 10-SB by this reference. PART III Items 1 and 2. Index to Exhibits and Description of Exhibits. 3.1 Articles of Incorporation with Amendments 3.2 By-Laws 10.2 Consulting Agreement with Northwest Capital Partners, L.L.C. 10.3 Asset Purchase Agreement Relating to Purchase of Kristal Group Assets 27 Financial Data Schedule SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. CybeRecord, Inc. ------------------- (Registrant) Date: April 20, 2000 By: /s/ JAMES J. LUCAS ----------------- ------------------------------- James J. Lucas, President & CEO 21 CYBERECORD, INC. FINANCIAL REPORT DECEMBER 31, 1999 C O N T E N T S Page INDEPENDENT AUDITORS' REPORT F-1 FINANCIAL STATEMENTS Balance sheets F-2 Statements of operations F-3 Statements of stockholders' equity F-4 Statements of cash flows F-5 Notes to financial statements F-6 - F-12 INDEPENDENT AUDITORS' REPORT To the Board of Directors CybeRecord, Inc. Bellevue, Washington We have audited the accompanying balance sheets of CybeRecord, Inc. (a development stage company) as of December 31, 1999 and 1998, and the related statements of operations, stockholders' equity, and cash flows for the years ended December 31, 1999 and 1998, and for the period from September 27, 1996 to December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CybeRecord, Inc. (a development stage company) as of December 31, 1999 and 1998, and the results of its operations and its cash flows for the years ended December 31, 1999 and 1998, and for the period from September 27, 1996 to December 31, 1999, in conformity with generally accepted accounting principles. March 15, 2000 F-1 CYBERECORD, INC. (A Development Stage Company) BALANCE SHEETS December 31, 1999 and 1998
ASSETS 1999 1998 ----------------- ----------------- Current Assets Cash $ 111,154 $ 1,307 Prepaid expenses and deposits 15,194 ----------------- ----------------- Total current assets 126,348 1,307 Furniture and Equipment, at cost, less accumulated depreciation of $3,940 25,328 ----------------- ----------------- $ 151,676 $ 1,307 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 21,436 $ - Stockholders' Equity Common stock, par value $.01 154,719 123,359 Additional paid-in capital 4,342,269 309,079 Deficit accumulated during the development stage (4,366,748) (431,131) ----------------- ----------------- 130,240 1,307 ----------------- ----------------- $ 151,676 $ 1,307 ================= =================
See Notes to Financial Statements F-2 CYBERECORD, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS For the Years Ended December 31, 1999 and 1998, and the Period From September 27, 1996 to December 31, 1999
Total Accumulated During Development Stage (September 27, 1996 to December 31, 1999 1998 1999) ----------------- ----------------- ----------------- Revenues $ - $ - $ - Expenses Write-off of acquired research and development 3,000,000 3,000,000 Research and development 175,425 175,425 General and administrative 760,192 82,251 1,191,323 ----------------- ----------------- ----------------- 3,935,617 82,251 4,366,748 ----------------- ----------------- ----------------- Net loss $ (3,935,617) $ (82,251) $ (4,366,748) ================= ================= ================= Basic loss per share of common stock $ (0.27) $ (0.01) $ (0.36) ================= ================= =================
See Notes to Financial Statements F-3 CYBERECORD, INC. (A Development Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY For the Years Ended December 31, 1999 and 1998, and the Period From September 27, 1996 to December 31, 1999
Deficit Accumulated Additional During the Common Common Paid-in Development Shares Stock Capital Stage Total ------------ ---------- ---------- ------------ ------------ Balances, September 27, 1996 335,864 $ 3,359 $ 769 $ - $ 4,128 Issuance of common stock (October and November 1996) 8,700,000 8,700 49,410 58,110 Net loss (3,192) (3,192) ------------ ---------- ---------- ----------- ------------ Balances, December 31, 1996 9,035,864 12,059 50,179 (3,192) 59,046 Issuance of common stock, net of effects of exchange of Chrysalis shares for Pillar shares (October 1997) 3,300,000 111,300 128,700 240,000 Additional capital contributed by shareholders 46,700 46,700 Net loss (345,688) (345,688) ------------ ---------- ---------- ----------- ------------ Balances, December 31, 1997 12,335,864 123,359 225,579 (348,880) 58 Additional capital contributed by shareholders 83,500 83,500 Net loss (82,251) (82,251) ------------ ---------- ---------- ----------- ------------ Balances, December 31, 1998 12,335,864 123,359 309,079 (431,131) 1,307 Issuance of common stock in exchange for cash (March 1999) 1,970,000 19,700 965,300 985,000 Issuance of common stock in exchange for services (March and April 1999) 96,000 960 39,040 40,000 Contribution of shares back to the corporation by shareholders (April 1999) (5,000,000) (50,000) 50,000 Issuance of common stock in exchange for Kristal Group assets (April 1999) 6,000,000 60,000 2,940,000 3,000,000 Issuance of common stock in exchange for services (November 1999) 70,000 700 30,800 31,500 Additional capital contributed by shareholders 8,050 8,050 Net loss (3,935,617) (3,935,617) ------------ ---------- ---------- ----------- ------------ Balances, December 31, 1999 15,471,864 $ 154,719 $4,342,269 $(4,366,748) $ 130,240 ============ ========== ========== =========== ============
See Notes to Financial Statements F-4 CYBERECORD, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1999 and 1998, and the Period From September 27, 1996 to December 31, 1999
Total Accumulated During Development Stage (September 27, 1996 to December 31, 1999 1998 1999) ----------------- ----------------- ----------------- Cash Flows From Operating Activities Net loss $ (3,935,617) $ (82,251) $ (4,366,748) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 3,940 3,940 Write-off of purchased in-process research and development that had not reached technological feasibility 3,000,000 3,000,000 Professional fees exchanged for common stock 71,500 71,500 Changes in operating assets and liabilities Prepaid expenses and deposits (15,194) (15,194) Accounts payable 21,436 21,436 ----------------- ----------------- ----------------- Cash used in operating activities (853,935) (82,251) (1,285,066) Cash Flows From Investing Activity Purchase of equipment (29,268) (29,268) Cash Flows From Financing Activities Issuance of common stock 985,000 1,283,110 Capital contribution 8,050 83,500 138,250 ----------------- ----------------- ----------------- Cash provided by financing activities 993,050 83,500 1,421,360 ----------------- ----------------- ----------------- Net increase in cash 109,847 1,249 107,026 Cash, beginning of period 1,307 58 4,128 ----------------- ----------------- ----------------- Cash, end of period $ 111,154 $ 1,307 $ 111,154 ================= ================= =================
See Notes to Financial Statements F-5 NOTES TO FINANCIAL STATEMENTS Note 1. Organization and Significant Accounting Policies Organization/Development Stage Company CybeRecord, Inc. ("CybeRecord") was previously known as Chrysalis Hotels and Resorts, Corp. ("Chrysalis"). Chrysalis was previously known as Pillar Entertainment, Inc. ("Pillar"). Pillar was a corporation with very little financial activity for many years. In October 1997, Pillar exchanged its common stock for all the outstanding stock of Chrysalis. As Pillar and Chrysalis were related corporations (Pillar's president was a major stockholder in Chrysalis), the transaction was accounted for at a historical cost basis. Pillar then changed its name to Chrysalis. These financial statements are prepared as if the companies were combined as of September 27, 1996 (the date Chrysalis was incorporated). In April 1999, Chrysalis issued common stock to acquire in-process research and development from ten individuals: Glenn Kimball, Paulette Kimball, Marek Niczyporuk, James J. Lucas, James L. Quinn, Barbara Baker Quinn, Herbert J. Walker, Patricia A. Walker, Alva D. Cravens, and Kristin Cravens (hereinafter referred to as the "Kristal Group" for the sake of convenience). Chrysalis then changed its name to CybeRecord. In conjunction with the acquisition of the Kristal Group's assets, CybeRecord is working toward the development of product that will enhance paper and microfilm records when converted to digital documents. This will allow these records to be shared electronically over the Internet and within company Intranet systems. As of December 31, 1999, products developed by CybeRecord have not reached the stage of technological feasibility as defined by Statements of Financial Accounting Standards ("SFAS") 86. Accordingly, the cost of the assets acquired from the Kristal Group and all costs associated with product development have been charged to expense as research and development. CybeRecord intends to market the product it is developing. Revenue recognition policies for product sales will be established when products are ready for distribution. These financial statements have been prepared treating CybeRecord as a development stage company. CybeRecord has not generated any revenues through December 31, 1999. For the purpose of these financial statements, it is assumed the development stage started September 27, 1996, which is the date of inception for Chrysalis. F-6 Note 1. (Continued) Cash Cash includes cash balances held at a bank and all highly liquid debt instruments with original maturities of three months or less. Cash balances are in excess of amounts insured by the Federal Deposit Insurance Corporation. No cash payments for interest or income taxes were made during the years ended December 31, 1999 and 1998. Furniture and Equipment Furniture and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets. Research and Development Research and development costs are expensed as incurred. When products being developed reach technological feasibility, costs associated with these products will be capitalized and amortized over their estimated useful lives. Taxes on Income CybeRecord accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for expected future tax consequences of events that have been recognized in CybeRecord's financial statements or tax returns. In estimating future tax consequences, CybeRecord generally considers all expected future events other than enactments of changes in the tax laws or rates. Earnings Per Share Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares. There are no potentially dilutive common shares at December 31, 1999 and 1998. The weighted average number of shares was 14,559,531 and 12,335,864 for the years ended December 31, 1999 and 1998. The weighted average number of shares was 12,004,685 for the period from September 27, 1996 to December 31, 1999. F-7 Note 1. (Continued) Stock-Based Compensation Although there has been no stock-based compensation, CybeRecord accounts for stock-based compensation using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, compensation cost for stock options granted to employees is measured as the excess, if any, of the quoted market price of CybeRecord's stock at the date of the grant over the amount an employee is required to pay for the stock. Comprehensive Income There are no reconciling items between the net loss presented in the Statements of Operations and comprehensive loss as defined by SFAS No. 130, "Reporting Comprehensive Income." Segment Reporting Management considers CybeRecord to operate on only one business segment. Accordingly, any disclosures required by SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," are already incorporated in other financial statement disclosures. New Accounting Standards New accounting standards issued through the date of the independent auditors' report do not have an effect on these financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from the estimates that were used. F-8 Note 2. Capital Stock December 31, 1999 December 31, 1998 ----------------- ----------------- Shares authorized 20,000,000 20,000,000 ================= ================= Shares issued and outstanding 15,471,864 12,335,864 ================= ================= Note 3. Non-Cash Transactions In 1999, CybeRecord issued 6,000,000 shares of common stock in conjunction with the acquisition of the Kristal Group's assets (See Note 1). The common stock was valued at $.50 per share. This value was based on stock sales in the same time period. The number of shares issued was based on negotiations between CybeRecord and the various owners of the Kristal Group's assets. As part of these negotiations, certain shareholders contributed 5,000,000 shares of common stock back to CybeRecord. These shareholders contributed the stock back to CybeRecord so that ownership percentages in CybeRecord subsequent to this transaction were in accordance with percentages that were agreed upon with the Kristal Group. In 1999, CybeRecord issued 46,000 shares in exchange for legal services. These shares were valued at $.50 per share, as they were issued at approximately the same time that shares were issued for the Kristal Group's assets. In 1999, CybeRecord issued 50,000 shares in exchange for consulting services. These shares were valued at $12,000, as they were issued to settle a $12,000 invoice. In November 1999, CybeRecord issued 70,000 shares in exchange for legal services. These shares were valued at the closing market price on November 2, 1999, as discounted because the shares were restricted. Note 4. Income Taxes The reconciliation of income tax on income computed at the federal statutory rates to income tax expense is as follows: December 31, 1999 December 31, 1998 ----------------- ------------------ Tax at statutory rate $ (1,338,109) $ (27,966) Change in valuation allowance for deferred tax asset 1,338,109 27,966 ----------------- ---------------- Income tax expense $ - $ - ================= ================ F-9 Note 4. (Continued) CybeRecord's deferred tax asset is as follows:
December 31, December 31, 1999 1998 ---------------- ------------------- Net operating loss carryforwards (before valuation allowance) $ 425,626 $ 144,713 Acquired research and development costs expensed for financial statement purposes, but capitalized for income tax purposes 1,200,000 Other 39,068 1,872 Less valuation allowance for deferred tax asset (1,484,694) (146,585) -------------- --------------- Net deferred tax asset $ - $ - ============== ===============
CybeRecord has net operating loss carryforwards of $1,206,000 at December 31, 1999. Most of these losses expire in 2019. Note 5. Consulting Contracts In March 1999, the President of CybeRecord, Inc., a Nevada corporation ("CybeRecord Nevada") executed a Consulting Agreement (the "Agreement") with Brent Nelson on behalf of Northwest Capital Partners, LLC ("Northwest"). Brent Nelson is the sole member of Northwest. Brent Nelson is also a director and officer of CybeRecord Nevada. The Board of Directors of CybeRecord Nevada has not yet approved the Agreement. The Agreement, which runs through February 2002, provides for Northwest to assist in obtaining financing for CybeRecord Nevada. In return for consulting services under the Agreement, CybeRecord Nevada agreed to pay the consultant $500 per month. Provision is made for this payment to increase to $1,000 per month. The Agreement also provides that the consultant is to be issued 500,000 shares of common stock for $0.01 per share when the market capitalization of CybeRecord Nevada reaches $100,000,000 and is to be issued an additional 500,000 shares of common stock at $0.01 per share when the market capitalization of CybeRecord Nevada reaches $200,000,000. Any shares issued under the Agreement will be restricted shares, and will have "piggy-back" rights, so that the shares will be registered upon CybeRecord Nevada's first registration after the shares are issued. F-10 Note 5. (Continued) Two CybeRecord, Inc. exist in the United States: CybeRecord, Inc., a Florida corporation ("CybeRecord Florida") and CybeRecord Nevada. We are CybeRecord Florida. Brent Nelson is a director and officer of both corporations. Brent Nelson is also a shareholder of CybeRecord Florida. Both companies share the same President. Neither company owns the stock of the other. However, both companies have taken steps to merge CybeRecord Florida into CybeRecord Nevada, but the merger has not been completed. While Northwest's contract is with CybeRecord Nevada, Northwest has performed services for CybeRecord Florida. CybeRecord Florida has paid Northwest $500 per month ($5,000 in 1999 and none in 1998). CybeRecord Florida's Board of Directors has not approved a contract with Northwest. CybeRecord Florida and Northwest are working to identify the terms upon Northwest will provide services to CybeRecord Florida. Since December 31, 1999, CybeRecord Florida has reached a market capitalization that exceeds $200,000,000. If CybeRecord Florida and Northwest enter into a consulting agreement with stock provisions similar to the provisions contained in CybeRecord Nevada's Agreement, or CybeRecord Florida assumes CybeRecord Nevada's obligations under the Agreement, then Northwest will have the right to purchase the stock from CybeRecord Florida. Emerging Issue Task Force ("EITF") No. 96-18 states that CybeRecord Florida would account for this stock arrangement by estimating the fair value of the arrangement as of the "measurement date" and recognizing the consulting expense over the term of the consulting agreement. Based on guidance contained in EITF No. 96-18, management has determined that the appropriate date to measure the fair value of this stock arrangement is March 1999 (If CybeRecord Florida assumes CybeRecord Nevada's agreement), or the date that CybeRecord Florida enters into a consulting agreement with Northwest. CybeRecord also has a consulting agreement for services with a shareholder and former chief executive officer. The consultant received $25,000 in 1999 and will receive an additional $62,500 through May 2000. F-11 Note 6. Subsequent Events Subsequent to December 31, 1999, CybeRecord issued 1,275,000 shares of common stock to unrelated parties at a price of $1.75 per share resulting in total proceeds of $2,231,250. In addition, CybeRecord borrowed $100,000 from a company owned by a member of the board of directors. The loan is due on demand, unsecured and bears no interest. F-12 EX-3.1 2 ARTICLES OF INCORPORATION WITH AMENDMENTS ARTICLES OF INCORPORATION OF FLEXI-BUILT MODULAR HOUSING CORPORATION We, the undersigned, hereby associate ourselves for the purpose of becoming and forming a body corporate under the laws of the State of Florida, under and by virtue of the following articles of incorporation. ARTICLE I The name of the corporation shall be: FLEXI-BUILT MODULAR HOUSING CORPORATION. ARTICLE II The general nature and the objects of the business and the purposes proposed to be transacted and varried on are to do any and all things mentioned herein as fully and to the same extent as natural persons might or could do, viz: 1) To manufacture, buy, sell, transport, erect, or construct prefabricated homes and buildings, mobile or permanent, of every kind, nature and description. 2) To exercise any power and authority which may be done by a private corporation organized and existing under and by virtue of Chapter 608, Florida Statutes, it being the intention that this corporation may conduct and transact any business lawfully authorized and not prohibited by Chapter 608, Florida Statutes. ARTICLE III The maximum number of shares of the capital stock which this corporation shall be authorized to have outstanding at any time is fifty (50) shares of common with a par value of Ten Dollars ($10.00) per share. ARTICLE IV The amount of capital with which this corporation shall begin business is not less than Five Hundred ($500.00) Dollars. ARTICLE V The existence of this Corporation shall be perpetual. ARTICLE VI The business of this corporation shall be conducted by a board of directors which shall consist of not less than three (3) nor more than seven (7) members, the exact number to be fixed from time to time by the By-Laws of this Corporation. ARTICLE VII The initial post office address of the corporation shall be 550 Seybold Building, Miami, Florida, 33132. ARTICLE VIII The names and addresses of the first Board of Directors who shall hold office for the first year of the corporation's existence, or until their successors are elected and have qualified, are as follows: Martin Fried 550 Seybold Building Miami, Florida 33132 Joel Rubin 550 Seybold Building Miami, Florida 33132 Albert D. Greenfield 550 Seybold Building Miami, Florida 33132 ARTICLE IX The names and post office address of each subscriber to these Articles of Incorporation and a statement of the number of shares of stock which each agrees to take, are as follows: Name Post Office Address No. of Shares - ---- ------------------- --------------- Martin Fried 550 Seybold Building 20 $200.00 Miami, Florida 33132 Joel Rubin 550 Seybold Building 20 $200.00 Miami, Florida 33132 Albert D. Greenfield 550 Seybold Building 10 $100.00 Miami, Florida 33132 ARTICLE X A director of this corporation shall not be disqualified by dealing with or contracting with this corporation. ARTICLE XI The By-Laws of this corporation may provide that less than a majority of the Board of Directors shall constitute a quorum for the transaction of business. IN WITNESS WHEREOF, we the undersigned, herein have made, subscribed and acknowledged these Articles of Incorporation this 11th day of February, 1969. /s/ Martin Fried ------------------------- (SEAL) Martin Fried /s/ Joel Rubin ------------------------- (SEAL) Joel Rubin /s/ Albert D. Greenfield ------------------------- (SEAL) Albert D. Greenfield STATE OF FLORIDA } : SS.: COUNTY OF DADE } Before me, the undersigned authority, personally appeared MARTIN FRIED, JOEL RUBIN and ALBERT D. GREENFIELD, to me known to be the persons described in and who executed the foregoing Articles of Incorporation, and each of them acknowledged before me, according to law, that he executed the same for the purposes therein mentioned and set forth. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 11th day of February, 1969. /s/ Robert H. Carthill ---------------------- Robert H. Carthill Notary Public, State of Florida at Large CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION FLEXI-BUILT MODULAR HOUSING CORPORATION, a corporation organized and existing under and by virtue of the provisions of Chapter 608 of the Florida Statutes, the Certificate of Incorporation of which was filed in the office of the Secretary of State on February 17, 1969; the principal office of which corporation is at 1451 North Bayshore Drive, Miami, Florida 33132; pursuant to the provisions of Chapter 608.18 of the Florida Statutes, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation unanimously approved and proposed to the stockholders, and the persons holding all of the issued and outstanding shares of stock of the said corporation did consent in writing to the following resolution: RESOLVED, that the Article III of the Articles of Incorporation of this corporation is hereby stricken in its entirety and the following is substituted in lieu thereof as said Article III. "ARTICLE III. The total number of shares which this Corporation is authorized to issue is 3,000,000 shares, all of the par value of one cent ($.01) each, all of one class." SECOND: That the said amendment was duly adopted in accordance with the provisions of Chapter 608.18 of the Florida Statutus. THIRD: That the capital of said corporation will not be reduced under or by reason of said proposed amendment. IN WITNESS WHEREOF, the said FLEXI-BUILT MODULAR HOUSING CORPORATION has caused its corporate seal to be hereunto affixed and this Certificate signed by HAROLD GOLDBURG, its President and ALBERT D. GREENFIELD, its Secretary this day of May, 1969. FLEXI-BUILT MODULAR HOUSING CORPORATION By: /s/ Harold Goldberg -------------------- Harold Goldberg Attest: /s/ Albert D. Greenfield ------------------------- Albert D. Greenfield I, ALBERT D. GREENFIELD, Secretary of FLEXI-BUILT MODULAR HOUSING CORPORATION, a corporation organized and existing under the laws of the State of Florida, do hereby certify, as the Secretary of the meeting of all the shareholders of the said corporation on May 8, 1969 called and held for the purpose of considering the above Amendment to the Articles of Incorporation of the said corporation, that all of the shareholders of the said corporation approved, by affirmative vote, the said Amendment. By: /s/ Albert D. Greenfield ------------------------ Albert D. Greenfield, Secretary STATE OF FLORIDA } : SS.: COUNTY OF DADE } Before me personally appeared HAROLD GOLDBERG and ALBERT D. GREENFIELD, to me well-known and known to me to be the individuals described in and who executed the foregoing instrument as President and Secretary of FLEXI-BUILT MODULAR HOUSING CORPORATION, and severally acknowledged such instrument as President and Secretary, respectively of said corporation, and the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that it was affixed to said instrument by due and regular corporate authority, and the said instrument is the free act, deed and agreement of said corporation. WITNESS my hand and official seal this day of May, 1969. /s/ Dean Ramey --------------- Dean Ramey Notary Public, State of Florida at Large CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION FLEXI-BUILT MODULAR HOUSING CORPORATION, a corporation organized and existing under and by virtue of the provisions of Chapter 607 of the Florida Statutes, the Certificate of Incorporation of which was filed in the office of the Secretary of State on February 17, 1969; the principal office of which corporation is at Suite 801 Brickell Centre, 799 Brickell Plaza, Miami, Florida 33131; pursuant to the provisions of Chapter 607.181 of the Florida Statutes, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation unanimously approved and proposed to the stockholders, and the persons holding the majority of the issued and outstanding shares of stock of the said corporation did consent at a Special Meeting to the following resolution: RESOLVED that the name of this corporation shall be changed to FLEXICARE, INC. SECOND: That the said amendment was duly adopted in accordance with the provisions of Chapter 607.181 of the Florida Statutes. THIRD: That the capital of said corporation will not be reduced under or by reason of said proposed amendment. IN WITNESS WHEREOF, the said FLEXI-BUILT MODULAR HOUSING CORPORATION has caused its corporate seal to be hereunto affixed and this certificate signed by MARCIA LYNN HUNTER, its Vice President and ALBERT D. GREENFIELD, its Secretary this 12th day of March 1984. FLEXI-BUILT MODULAR HOUSING CORPORATION By: /s/ Marcia Lynn Hunter ------------------------ Marcia Lynn Hunter Attest: /s/ Albert D. Greenfield --------------------------- Albert D. Greenfield I, ALBERT D. GREENFIELD, Secretary of FLEXI-BUILT MODULAR HOUSING CORPORATION, a corporation organized and existing under the laws of the State of Florida, do hereby certify, as the Secretary of the meeting of all the shareholders of the said corporation on March 12, 1984 called and held for the purpose of considering the above Amendment to the Articles of Incorporation of the said corporation, that in excess of a majority of the Shareholders of the said corporation approved, by affirmative vote, the said Amendment. By: /s/ Albert D. Greenfield -------------------------- Albert D. Greenfield Secretary STATE OF FLORIDA } COUNTY OF DADE } Before me personally appeared MARCIA LYNN HUNTER and ALBERT D. GREENFIELD, to me well known and known to me to be the individuals described in and who executed the foregoing instrument as Vice President and Secretary of FLEXI-BUILT MODULAR HOUSING CORPORATION and severally acknowledged such instrument as Vice President and Secretary, respectively, of said corporation, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that it was affixed to said instrument by due and regular corporate authority, and that said instrument is the free act, deed and agreement of said corporation. WITNESS my hand and official seal this 13th day of March 1984. /s/ Kathlene M. Brandon -------------------------- Kathlene M. Brandon Notary Public State of Florida at Large CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION FLEXI-BUILT MODULAR HOUSING CORPORATION, a corporation organized and existing under and by virtue of the provisions of Chapter 607 of the Florida Statutes, the Certificate of Incorporation of which was filed in the office of the Secretary of State on February 17, 1969 and whose name was changed to FLEXICARE, INC. by a Name-Change Amendment which was filed on March 14, 1984: the principal office of which corporation is at Suite 801 Brickell Centre, 799 Brickell Plaza, Miami, Florida 33131; pursuant to the provisions of Chapter 607.181 of the Florida Statutes, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation unanimously approved and proposed to the stockholders, and the persons holding the majority of the issued and outstanding shares of stock of the said corporation did consent at a Special Meeting to the following resolution: RESOLVED, that the Article III of the Articles of Incorporation of this corporation is hereby stricken in its entirety and the following is substituted in lieu thereof as said Article III. "ARTICLE III. The total number of shares which this Corporation is authorized to issue is 10,000,000 shares, all the par value of one cent ($.01) each, all of one class." SECOND: That the said amendment was duly adopted in accordance with the provisions of Chapter 607.181 of the Florida Statutes. THIRD: That the capital of said corporation will not be reduced under or by reason of said proposed amendment. IN WITNESS WHEREOF, the said FLEXICARE, INC. has caused its corporate seal to be hereunto affixed and this certificate signed by MARCIA LYNN HUNTER, its Vice President and ALBERT D. GREENFIELD, its Secretary this 30th day of March, 1984. FLEXICARE, INC. By: /s/ Marcia Lynn Hunter ------------------------ Marcia Lynn Hunter Attest: /s/ Albert D. Greenfield --------------------------- Albert D. Greenfield I, ALBERT D. GREENFIELD, Secretary of FLEXICARE, INC., a corporation organized and existing under the laws of the State of Florida, do hereby certify, as the Secretary of the meeting of all the shareholders of the said corporation on March 12, 1984 called and held for the purpose of considering the above Amendment to the Articles of Incorporation of the said corporation, that in excess of a majority of the Shareholders of the said corporation approved, by affirmative vote, the said Amendment. By: /s/ Albert D. Greenfield -------------------------- Albert D. Greenfield Secretary STATE OF FLORIDA } COUNTY OF DATE } Before me personally appeared MARCIA LYNN HUNTER and ALBERT D. GREENFIELD, to me well known and known to me to be the individuals described in and who executed the foregoing instrument as Vice President and Secretary of FLEXI-BUILT MODULAR HOUSING CORPORATION and severally acknowledged such instrument as Vice President and Secretary, respectively, of said corporation, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that it was affixed to said instrument by due and regular corporate authority, and that said instrument is the free act, deed and agreement of said corporation. WITNESS my hand and official seal this 30th day of March 1984. /s/ Kathlene M. Brandon -------------------------- Kathlene M. Brandon Notary Public State of Florida at Large ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF FLEXICARE, INC. Pursuant to the provisions of the Florida Business Corporation Act, the undersigned corporation adopts the following amendment to the Corporation's Articles of Incorporation, which amendment was adopted by the shareholders of the Corporation on June 13, 1994 by the holders of the outstanding common stock, the only voting group entitled to vote thereon, by written consent pursuant to Section 607.0704 of the Florida Business Corporation Act. The number of shares adopting the amendment was sufficient for approval by that group. 1. The name of the Corporation is FLEXICARE, INC. 2. Article III of the Articles of Incorporation of the Corporation is hereby amended to read as follows: ARTICLE III Capital Stock The total amount of capital stock which this Corporation has the authority to issue is as follows: 20,000,000 shares of Common Stock, $.01 par value per share; and 1,500,000 shares of Class B Common Stock, $.10 par value per share. The Class B Common Stock shall have the powers, rights, qualifications, limitations and restrictions as follows: (i) Dividends and Other Distributions. The Class B Common Stock shall be entitled to receive a dividend pari passu to any dividends and other distributions to the Common Stock of the Corporation. (ii) Liquidation. Upon dissolution, liquidation or winding up of the Corporation, the holders of the Class B Common Stock shall be entitled to receive distributions pari passu to any distributions made to the holders of shares of Common Stock of the Corporation, share for share. (iii) Voting. Shares of Class B Common Stock shall be entitled to vote as a class with the Common Stock. (iv) Conversion. (a) Subject to the provisions for adjustment hereinafter set forth, shares of Class B Common Stock shall be convertible at any time at the option of the holder thereof, upon surrender of certificate or certificates evidencing the shares so to be converted, into fully paid and nonassessable shares of Common Stock of the Corporation at the rate of ten (10) shares of Common Stock for each shares of Class B Common Stock so surrendered for conversion provided, however, that any such shares issued in connection with any corporation acquisition may not be converted until such shares have been released from any escrow agreement in connection with such acquisition. (b) The number of shares of Common Stock into which a share of Class B Common Stock is convertible shall be subject to adjustment from time to time only as follows: (i) If after the date on which shares of Class B Common Stock are first issued the number of outstanding shares of Common Stock is increased by a dividend declared payable in shares of Common Stock to all holders of its Common Stock or by a subdivision of shares of Common Stock, the number of shares of Common Stock into which a share of Class B Common Stock is convertible shall be increased in proportion to such increase in the outstanding shares of Common Stock. Such adjustment shall become effective immediately after the opening to business on the day following the date on which the Corporation takes a record of the holders of Common Stock for the purpose of entitling them to receive such dividend or the day upon which such subdivision becomes effective. (ii) If after the date on which shares of Class B Common Stock are first issued the number of outstanding shares of Common Stock is decreased by a combination of shares of Common Stock, the number of shares of Common Stock into which a share of Class B Common Stock is convertible shall be decreased in proportion to such decrease in the outstanding shares of Common Stock. Such adjustment shall become effective immediately after the opening of business on the day upon which such combination becomes effective. (iii) For the purposes of making the adjustments referred to in subparagraphs (i) and (ii) above, the books of the Corporation shall control absolutely in determining the number of outstanding shares of Common Stock and the number of additional shares issued or decrease in shares as a result of any stock dividend, subdivision or combination. (iv) In case of any consolidation or merger of the Corporation with or into another corporation or in case of any sale or conveyance to another corporation of all or substantially all the assets of the Corporation or in case the Corporation issues by reclassification or recapitalization of its Common Stock any shares of the Corporation, the holder of each share of Class B Common Stock then outstanding shall have the right thereafter, so long as his conversion right hereunder shall exist, to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale, conveyance, reclassification or recapitalization by a holder of the number of shares of Common Stock into which such share might have been converted immediately prior to such consolidation, merger, sale, conveyance, reclassification or recapitalization and shall have no other conversion rights under these provisions; provided, that effective provision shall be made, in the Articles or Certificate of Incorporation of the resulting or surviving corporation or otherwise, so that the provisions set forth herein for the protection of the conversions rights of the shares of Class B Common Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of the shares of Class B Common Stock remaining outstanding or other convertible securities received by the holders in place thereof; and provided further that any such resulting or surviving corporation shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, other securities or property as the holders of the shares of Class B Common Stock remaining outstanding, or other convertible securities received by the holders in place thereof, shall be entitled to receive pursuant to these provisions, and to make provisions for the protection of the conversion right as above provided. In case securities or property other than Common Stock shall be issuable or deliverable upon conversion, then all references in this Section (v) shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities or property. (v) No fractional share of Common Stock shall be issued upon any conversion but, in lieu thereof, there shall be paid to the holder of the shares of Class B Common Stock surrendered for conversion as soon as practicable after the date such shares are surrendered for conversion, an amount in cash equal to the same fraction of the current market price per share of Common Stock, unless the Board of Directors shall determine to adjust fractional shares in some other manner. (vi) No adjustment in the number of shares of Common Stock into which each share of Class B Common Stock is convertible shall be required unless such adjustment would require an increase or decrease of at least 1/25th of a share in the number of shares of Common Stock into which such share is then convertible; provided, however, that any adjustments which by reason of this sub paragraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment. (vii) Whenever an adjustment is required in the shares into which each share of Class B Common Stock is convertible, the Corporation shall forthwith (i) file with the transfer agent, if any, for the Class B Common Stock a statement describing in reasonable detail the adjustment and the method of calculation used and (ii) cause a copy of such notice to be mailed to the holders of record of the shares of Class B Common Stock. (c) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares the full number of shares of Common Stock into which all shares of Class B Common Stock from time to time outstanding are convertible. (d) The Corporation will pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of shares of Class B Common Stock. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of Common Stock in a name other than that in which the shares of Class B Common Stock is converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. FLEXICARE, INC. By: /s/ Dominick Inodara --------------------- Dominick Inodara President June 15, 1994 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF FLEXICARE, INC. Pursuant to the provision of section 607.1005, Florida Statutes, the undersigned corporation adopts the following articles of amendment to its articles of incorporation: FIRST: Amendment(s) adopted: Name Change to Pillar Entertainment group, Inc. SECOND: If an amendment provides for an exchange, reclassification or cancellation of issued shares, provisions for implementing the amendment if not contained in the amendment itself, are as follows: THIRD: The date of each amendment's adoption: 3-15-96. FOURTH: Adoption of Amendment(s) (check one) ____ The amendment(s) was/were adopted by the incorporators or board of directors without shareholder action and shareholder action was not required. ___X___ The amendment(s) was/were approved by the shareholders. The number of votes cast for the amendment(s) was/were sufficient for approval. ______ The amendment(s) was/were approved by the shareholders through voting groups. (The following statement must be separately provided for each voting group entitled to vote separately on the amendment(s).) The number of votes cast for the amendment(s) was/were sufficient for approval by _________. (voting group) (continued) Signed this 18 day of March 1996. FLEXICARE, INC. ------------------------- Corporation Name By: /s/ G.F. Labrozzi ---------------------- G.F. Labrozzi Secretary/Director ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF Pilar Entertainment Group, Inc. Pursuant to the provisions of section 607.1006, Florida Statutes, This Florida profit corporation adopts the following articles of amendment to its articles of incorporation: FIRST: Amendment(s) adopted: (indicate article number(s) being amended, added or deleted) Name change to: FLEXICARE, INC. SECOND: If an amendment provides for an exchange, reclassification or cancellation of issued shares, provisions for implementing the amendment if not contained in the amendment itself, are as follows: THIRD: The date of each amendment's adoption : 7/10/96. FOURTH: Adoption of Amendment(s) (CHECK ONE) _X_ The amendment(s) was/were approved by the shareholders. The number of votes cast for the amendment(s) was/were sufficient for approval. ___ The amendment(s) was/were approved by the shareholders through voting groups. The following statement must be separately provided for each voting group entitled to vote separately on the amendment(s): " The number of votes cast the amendment(s) was/were sufficient for approval by _________________________________________." voting group ___ The amendment(s) was/were adopted by the board of directors without shareholder action and shareholder action was not required. ___ The amendment(s) was/were adopted by the incorporators without shareholder action and shareholder action was not required. Signed this 31 day of July, 1996 By: /s/ M. Fried -------------------- M. Fried Secretary/Director ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF FLEXICARE, INC. Pursuant to the provisions of Section 607.1006, Florida Statutes, the undersigned corporation adopts the following articles of amendment to its articles of incorporation: FIRST: Amendments adopted: Name change to: Pillar Entertainment Group, Inc. Officers and Directors G.F. Labrozzi - Chief Executive Officer, Chairman of the Board Gregory L. Paige - President, Director Address for each is 801 Brickell Avenue, Suite 932, Miami FL 33131 SECOND: If an amendment provides for an exchange, reclassification or cancellation of issued shares, provisions for implementing the amendment if not contained in the amendment itself, are as follows: THIRD: The date of each amendment's adoption: September 9, 1996. FOURTH: Adoption of Amendment(s) (CHECK ONE) ___ The amendment(s) was/were adopted by the incorporators or board of directors without shareholder action and shareholder action was not required. _X_ The amendment(s) was/were approved by the shareholders. The number of votes cast for the amendment(s) was/were sufficient for approval. ___ The amendment(s) was/were approved by the shareholders through voting groups. (The following statement must be separately provided for each voting group entitled to vote separately on the amendment(s)). The number of votes case the amendment(s) was/were sufficient for approval by _________________________________________. voting group (Continued) Signed this 9 day of Sept., 1996. FLEXICARE, INC. By: /s/ G.F. Labrozzi ----------------------- G.F. Labrozzi Chairman ----------------------- (Title) ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF PILLAR ENTERTAINMENT GROUP, INC. THE UNDERSIGNED, the President of PILLAR ENTERTAINMENT GROUP, INC. a Florida Corporation, does hereby certify that: FIRST: "That the Board of Directors of said Corporation, by written consent filed with the minutes of the Board, adopted the following resolution proposing and declaring advisible the following amendment to the Certificate of Incorporation of said Corporation: "That Article FIRST of the Certificate of Incorporation be amended and, as amended, read a follows: 'FIRST: The name of the Corporation is "CHRYSALIS HOTELS AND RESORTS CORP."; SECOND: That the aforesaid amendment was duly adopted by consent of the requisite majority of the shareholders of this Corporation in accordance with the applicable provisions of Section 607 of the Business Corporation Act of the State of Florida. The number of votes cast by the shareholders was sufficient for approval. THIRD: Prompt notice of the taking of this corporate action is being given to all stockholders who did not consent in writing, in accordance with Section 607 of the Business Corporation Act of the State of Florida. The date adoption was October 31, 1997. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Brent Nelson, its President and Secretary this 3rd day of November 1997. PILLAR ENTERTAINMENT GROUP, INC. By: /s/ Brent Nelson ------------------------ Brent Nelson, President ATTEST: By: /s/ Brent Nelson ------------------------- Brent Nelson, Secretary STATE OF WASHINGTON COUNTY OF KING On this 3rd day of November, 1997 before me the undersigned officer, personally appeared BRENT NELSON who, being first duly sworn by me, declared that he is the President of the PILLAR ENTERTAINMENT GROUP, INC., and that he being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as such officer; and that the statements therein contained are true. IN WITNESS WHEREOF I have hereunto set me hand and official seal. By: /s/ Carol A. Barden ------------------------------ Carol A. Barden, Notary Public ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF CHRYSALIS HOTELS & RESORTS CORP. THE UNDERSIGNED, the President of CHRYSALIS HOTELS & RESORTS, CORP. a Florida corporation, does hereby certify that: FIRST: That the Board of Directors of said Corporation, by written consent filed with the minutes of the Board, adopted the following resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said Corporation: "That Article I of the Articles of Incorporation be amended and, as amended, read as follows: 'I - NAME: The name of the Corporation is "CYBERECORD, INC."; SECOND: That the aforesaid amendment was duly adopted by consent of the requisite majority of the shareholders of this Corporation in accordance with the applicable provisions of Section 607 of the Business Corporation Act of the State of Florida, on May 6, 1999. FORTH: Prompt notice of the taking of this corporate action is being given to all stockholders who did not consent in writing, in accordance with Section 607 of the Business Corporation Act of the State of Florida. IN WITNESS WHEREOF, the Corporation has caused this Articles of Amendment to be signed by Thomas Morikawa, its President, this 6th day of May 1999. CHRYSALIS HOTELS & RESORTS, CORP. By: /s/ Thomas Morikawa -------------------- Thomas Morikawa, President EX-3.2 3 BYLAWS OF FLEXI-BUILT MODULAR HOUSING CORPORATION BYLAWS OF FLEXI-BUILT MODULAR HOUSING CORPORATION ARTICLE A. OFFICES The Corporation may have offices at such places within or without the State of Florida as the board may, from time to time, establish. ARTICLE B. SHAREHOLDERS 1. Annual Meeting. The annual meeting of the Shareholders of this Corporation shall be held annually on a date and a time and place designated from time to time by the Board of Directors of the Corporation. Business transacted at the annual meeting shall include the election of Directors of the Corporation and the transaction of any other proper business. If the designated day shall fall on a Sunday or legal holiday, then the meeting shall be held on the first business day thereafter. 2. Special Meetings. Special Meetings of the Shareholders shall be held when directed by the President or the Board of Directors, or when requested in writing by the holders of not less than ten percent (10%) of all the shares entitled to vote at the meeting. Such written request must be signed, dated and delivered to the Secretary of the Corporation. A meeting requested by Shareholders shall be called for a date not less than ten (10) nor more than sixty (60) days after the request is made unless the Shareholders requesting the meeting designate a later date. The call for the Special Meeting shall be issued by the Secretary, unless the President, Board of Directors, or Shareholders requesting the Special Meeting shall designate another person to do so. Such a request for a Special Meeting shall state the purpose of the proposed Special Meeting. Business transacted at any Special Meeting shall be limited to the purpose stated in the notice thereof. 3. Place of Meeting. Meetings of Shareholders shall be held at the principal place of business of the Corporation or at such other place as may be designated by the Board of Directors. 4. Notice of Meeting. Written notice to each Shareholder of record entitled to vote stating the place, day and hour of the meeting and, in the case of a Special Meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the meeting either personally, by mail, telegram or overnight carrier. if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the Shareholder at the Shareholder's address as it appears on the stock transfer books of the Corporation, with postage prepaid. If notice is given by telegram or overnight courier, such notice shall be deemed to be delivered when the telegram or overnight carrier is delivered to the telegraph company or overnight carrier. If any Shareholder shall transfer such Shareholder's stock after notice, it shall not be necessary to notify the transferee. Any Shareholder may waive notice of any meeting either before, during or after the meeting. The attendance of a Shareholder at a meeting shall constitute a waiver of notice of such meeting, except where a Shareholder attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. 5. Notice of Adjourned Meeting. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken; and any business may be transacted at.the adjourned meeting that might have been transacted on the original date of the meeting. If, however, after adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given as provided in paragraph 4 of this Article to each Shareholder of record on the new record date entitled to vote at such meeting. 1 6. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten (10) days before each meeting of Shareholders, a complete list of Shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the principal office of the Corporation and shall be subject to inspection by any Shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any Shareholder during the whole time of the meeting. The original stock transfer book shall be prima facie evidence as to who are the Shareholders entitled to examine such list or to vote at any meeting of the Shareholders. 7. Transfer Books and Record Date. For the purposes of determining Shareholders entitled to notice of, or 'to vote at any meeting, 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 close the stock transfer books of the Corporation as provided by law. 8. Quorum. Except as otherwise provided in these Bylaws, or as required by the Articles of Incorporation, the majority of the shares entitled to vote (50% + 1), 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 one third (1/3) of the shares entitled to vote at the meeting. After a Quorum has been established at a Shareholders, meeting, the subsequent withdrawal of Shareholders, so as to reduce the number of shares entitled to vote at the meeting below the number required for a Quorum, shall not effect the validity of any action taken at the meeting or any adjournment thereof. 9. Voting of Shares. Each Shareholder entitled to vote shall at every meeting of Shareholders be entitled to one (1) vote for each share of voting stock held by them. 10. Proxy. Every Shareholder entitled to vote at a meeting of Shareholders, or to express consent or dissent without a meeting, or the Shareholder's duly authorized attorney-in-fact, may authorize another person or persons to act for the Shareholder by Proxy. The Proxy must be signed by the Shareholders or their attorney-in-fact. No Proxy shall be valid after the expiration of eleven (11) months from the date thereof, unless otherwise provided in the Proxy or by Florida law. ii. Informal Action by Shareholders. Unless otherwise provided by law or by the Articles of Incorporation, any action required to be taken at a regular meeting of the Shareholders, or any other action which may be taken at a Special Meeting of the Shareholders may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize such action at a meeting at which all shares entitled to vote thereon were present and voted. Within ten (10) days after obtaining such authorization by written consent, notice must be given to those Shareholders who have not consented in writing. The notice shall fairly summarize the material features of the authorized action and, if the action shall have been such that dissenters, rights are provided under Florida law, 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 certain further provisions of such Florida law regarding the rights of dissenting Shareholders. 2 ARTICLE C. BOARD OF DIRECTORS 1. General Powers. The business of the Corporation shall be managed and its corporate powers exercised by its Board of Directors. 2. Number, Tenure and Qualifications. The Board of Directors shall consist of at least one (1) director. The number may be altered from time to time by the Shareholders. Directors shall be elected at the annual meeting of Shareholders and each Director elected shall hold office until such Director's successor has been elected and qualified, or until their prior resignation or removal. It shall not be necessary for Directors to be Shareholders. 3. Vacancies. If the office of any Director, member of a committee or other officer becomes vacant, the remaining Directors in office, by a majority (50% + 1) vote, though this may constitute less than a quorum of the Board of Directors, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until their successor shall be duly elected and has qualified. 4. Removal of Directors. Any or all of the Directors may be removed with or without cause by vote of a majority (50% + 1) of all of the shares outstanding and entitled to vote at a Special Meeting of Shareholders called for that purpose. 5. Resignation. A Director may resign at any time by giving written notice to the Board, the President or the Secretary of the Corporation. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the Board of Directors or of such officer, and the acceptance of the resignation shall not be necessary to make it effective. 6. Quorum of Directors. A majority of the Directors (50% + 1) shall constitute a quorum for the transaction of business. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned. 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. 7. Place and Time of Board Meetings. The Board may hold its meetings at the office of the Corporation or at such other place, either within or without the State of Florida as it may, from time to time, determine. 8. Notice of Meetings of The Board. A regular annual meeting of the Board may be held without notice at such time and place as it shall, from time to time, determine. Special Meetings of the Board shall be held upon notice to the Directors and may be called by the President upon two (2) days, notice to each Director, either personally or by mail or by wire. Special Meetings shall be called by the President or by the Secretary in a like manner on written request of a Director. Any Special Meeting may be held by telephone conference as set forth in Section 11 hereof. Notice of a meeting need not be given to any Director who submits a waiver of notice whether before or after the meeting, or who attends the meeting without protesting prior thereto, or at its commencement, the lack of notice to him. 9. Annual Meeting. An annual meeting of the Board shall be held immediately following, and at the same place as, the annual meeting of Shareholders. 10. Compensation. No compensation shall be paid to Directors, as such, for their services, but by resolution of the Board, a fixed sum and expenses for actual attendance, at each regular or Special Meeting of the Board may be authorized. Nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. 3 11. Action by Telephonic Conference. The Directors may act at a meeting by means of a conference by telephone or similar communications equipment by means of which all persons participating in the meeting can communicate with each other at the same time. Participation by such means shall constitute presence in person at a meeting. 12. Presumption of Assent. A Director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action unless he voted against such action or abstains from voting in respect thereto because of an asserted conflict of interest. 13. Informal Action by Board. Any action required or permitted to be taken by any provision of law, of the Articles of Incorporation or of these Bylaws at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if a written consent thereto is signed by all members of the Board or of such committee, as the case may be. ARTICLE D. OFFICERS 1. Officers, Election and Term. The Board may elect or appoint a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers as it may determine, who shall have such duties and powers as hereinafter provided. All officers shall be elected or appointed to hold office until the meeting of the Board following the next annual meeting of Shareholders and until their successors have been elected or appointed and qualified. Any two (2) or more offices may be held by the same person. 2. Removal, Resignation. Salary. Etc. Any officer elected or appointed by the Board may be removed by the Board with or without cause. In the event of the death, resignation or removal of an officer, the Board, in its discretion, may elect or appoint a successor to fill the unexpired term. Any officer elected by the Shareholders may be removed only by vote of the Shareholders unless otherwise provided by the Shareholders. The salaries of all officers shall be fixed by the Board. The Directors may require any Officer to give security for the faithful performance of his duties. 3. Duties. The officers of this Corporation shall have the following duties: The President shall be the chief executive officer of the Corporation and shall have general and active management of the business and affairs of the Corporation subject to the directions of the Board of Directors, and shall preside at all meetings of the Shareholders and Board of Directors. The Vice-President shall possess and may exercise, such power and authority, and shall perform such duties as may from time to time be assigned to him or her by the Board of Directors or the President. The Secretary shall have custody of and maintain all of the corporate records except the financial records; shall record the minutes of all meetings of the Shareholders and Board of Directors, and send all notices of all meetings 4 and perform such other duties as may be prescribed by the Board of Directors or the President and shall perform such duties as may from time to time be assigned to him or her by the Board of Directors or the President. The Treasurer shall have custody of all corporate funds and maintain all of the financial records and shall keep accurate financial records and shall render reports thereof of the annual meetings of Shareholders and at other times when requested to do so by the Board of Directors and shall perform such duties as may from time to time be assigned to him or her by the Board of Directors or the President. 4. Removal of officers. An officer or agent elected or appointed by the Board of Directors may be removed with or without cause by the Board whenever in the Board's judgment, the best interests of the Corporation will be served thereby. Any vacancy in any office may be filled by the Board of Directors for the unexpired term. ARTICLE E. EXECUTIVE AND OTHER COMMITTEES 1. Creation of Committees. The Board of Directors may, by resolution, passed by a majority of the Board, designate an executive committee and one or more other committees, each to consist of two (2) or more of the Directors of the Corporation. 2. Executive Committee. The executive committee, if there shall be one, shall consult with and advise the officers of the Corporation in the management of its business and shall have and may exercise, to the extent provided in the resolution of the Board of Directors creating such executive committee, such powers of the Board of Directors as can be lawfully delegated by the Board. 3. Other Committees. Such other committees shall have such functions and may exercise the powers of the Board of Directors as can be lawfully delegated and to the extent provided in the resolution or resolutions creating such"committee or committees. 4. Meetings of Committees. Regular meetings of the executive committee and other committees may be held without notice at such time and at such place as shall from time to time be determined by the executive committee or such other committees, and Special Meetings of the executive committee or such other committees may be called by any member thereof upon two (2) days' notice to each of the other members of such committee, or on such shorter notice as may be agreed to in writing by each of the members of such committee, given either personally or in the manner provided in Section 8 of Article III of these Bylaws (pertaining to notice for Directors, meetings). 5. Vacancies on Committees. Vacancies on the executive committee or on such other committees shall be filled by the Board of Directors then in office at any regular or Special Meeting. 6. Quorum on Committees. At all meetings of the executive committee or such other committees, a majority (50% + 1) of the committee's members then in office shall constitute a quorum for the transaction of business. 7. Manner of Action of Committees. The acts of a majority (50% + 1) of the members of the executive committee or such other committees, present at any meeting at which there is a quorum, shall be the act of such committee. 8. Minutes of Committees. The executive committee, if there shall be one, and such other committees shall keep regular minutes of their proceedings and report the same to the Board of Directors when requested. 5 9 Compensation. Members of the executive committee and such other committees may be paid compensation in accordance with the provisions of Articles III, Section 10 of these bylaws (pertaining to compensation of Directors). ARTICLE F. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Corporation shall indemnify any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by, or in the right of, the Corporation) , brought to impose a liability or penalty on such person in his capacity of Director, officer, employee or agent of this Corporation, or of any other corporation which such person serves as such at the request of this Corporation, against judgments, fines, amounts paid in settlement and expenses, including attorney's fees, actually and reasonably incurred as a result of such action, suit or proceeding, or any appeal thereof, if they acted in good faith in the reasonable belief that such action was in the best interest of this Corporation, and in criminal actions or proceedings without reasonable ground for belief that such action was unlawful. The termination of any such civil or criminal action, suit or proceedings by judgment, settlement, conviction or upon a plea of nolo contenders shall not in itself create a presumption that any Director or officer did not act in good faith in the reasonable belief that such action was in the best interests of this Corporation or that they had reasonable ground for belief that such action was unlawful. The foregoing rights of indemnification shall apply to the heirs and personal representatives of any such Director, officer, employee or agent and shall not be exclusive of other rights to which they may be entitled. ARTICLE G. CERTIFICATE OF STOCK 1. Issuance. Unless otherwise determined by the Board of Directors, every holder of shares in this Corporation shall be entitled to have a certificate representing all shares of which they are entitled. No certificate shall be issued for any share until such share is fully paid. 2. Form. Certificates representing shares in this Corporation shall be signed by the President or Vice President and the Secretary or an Assistant Secretary and may be sealed with the seal of this Corporation or a facsimile thereof. 3. Transfer of Shares. Transfers of shares of the Corporation shall be made upon the Corporation's books by the holder of the shares in person or by the holder's lawfully constituted representative, upon surrender of the certificate of stock for cancellation. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not the Corporation shall have express or other notice thereof, unless otherwise provided by the laws of the State of Florida. Every certificate representing shares which are restricted as to sale, disposition or other transfer shall state that such shares are restricted as to such transfer or disposition and shall set forth or fairly summarize upon the certificate, or state that the Corporation will furnish to any holder thereof, upon request and without charge, a full statement of such restrictions. 4. Facsimile Signature. Where a certificate is signed (1) by a transfer agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf of the Corporation and a registrar, the signature of any such Chairman of the Board, President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates and have ceased to be such officer or officers then such certificate or certificates may nevertheless be adopted by the Corporation 6 and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. 5. Lost, Stolen or Destroyed Certificates. If a Shareholder shall claim to have lost or destroyed a certificate of shares issued by the Corporation, a new certificate shall be issued upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed, and, at the discretion of the Board of Directors, upon the deposit of a bond or other indemnity in such amount and with such sureties, if any, as the Board may reasonable require. ARTICLE H. BOOKS AND RECORDS 1. General. This Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its Shareholders, Board of Directors and committees of Directors. 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. 2. Inspection. All Shareholders who are entitled to inspect the Corporation's books and records pursuant to Florida law shall have such inspection rights as prescribed by the most recent Florida law available when the request is made. ARTICLE I. DISTRIBUTIONS The Board of Directors of the Corporation may, from time to time, declare, and the Corporation may make, distributions to the Shareholders, subject to the restrictions of applicable law. ARTICLE J. CORPORATE SEAL The seal of the Corporation shall be circular in form and bear the name of the Corporation, the year of its organization and the words "CORPORATE SEAL, FLORIDA." The seal may be used by causing it to be impressed directly on the instrument or writing to be sealed, or upon adhesive substance affixed thereto. The seal on the certificates for shares or on any corporate obligation for the payment of money may be facsimile, engraved or printed. ARTICLE K. EXECUTION All corporate instruments and documents shall be signed or countersigned, executed, verified or acknowledged by such officer or officers or other person or persons as the Board may, from time to time, designate. 7 ARTICLE L. FISCAL YEAR The fiscal year of the Corporation shall be the 12-month period selected by the Board of Directors as the taxable year of the Corporation for federal income tax purposes. ARTICLE M. NOTICE AND WAIVER OF NOTICE Whenever any notice is required by these Bylaws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the post office box in a sealed post-paid wrapper, addressed to the person entitled thereto at his last known post office address, and such notice shall be deemed to have been given on the day of such mailing. Shareholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by Florida Law. Whenever any notice is required to be given under the provisions of any law or under the provisions of the Articles of incorporation of the Corporation, or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE N. CONSTRUCTION Whenever a conflict arises between the language of these Bylaws and the Articles of Incorporation, the Articles of Incorporation shall govern. ARTICLE 0. BUSINESS 1. Conduct of Business Without Meetings. Any action of the Shareholders, Directors and any committee may be taken without a meeting if consent in writing setting forth the action so taken shall be signed by all persons who would be entitled to vote on such action at a meeting and filed with the Secretary of the Corporation as part of the proceedings of the Shareholders, Directors or committees, as the case may be. 2. Management by Shareholder. In the event the Shareholders are named in the Articles of Incorporation and are empowered therein to manage the affairs of the Corporation in lieu of Directors, the Shareholders of the Corporation shall be deemed Directors for the purposes of these Bylaws, and wherever the words "directors, 11 "Board of Directors" or "Board" appear in these Bylaws, those words shall be taken to mean Shareholders. The Shareholders may, by majority vote (50!k + 1) , create a Board of Directors to manage the business of the Corporation and exercise its corporate powers. ARTICLE P. AMENDMENTS 1. By Shareholders. The Bylaws shall be subject to alteration or repeal, and new Bylaws may be made, by the affirmative vote of Shareholders holding of record in the aggregate at least a majority of the outstanding shares entitled to vote,in the election of Directors at any annual or Special Meeting of Shareholders, provided that the notice or waiver of notice of such meeting shall have summarized or set forth in full therein the proposed amendment. 8 2. By Directors. The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, the Bylaws of the Corporation; provided, however, that the Shareholders entitled to vote with respect thereto as in this Article XVI above provided, may alter, amend or repeal Bylaws made by the Board of Directors, except that the Board of Directors shall have no power to change the quorum for meetings of Shareholders or of the Board of Directors, or the change any provisions of the Bylaws with respect to the removal of Directors or the filling of vacancies in the Board resulting from the removal by the Shareholders. If any Bylaw regulating an impending election of Directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of Directors, the bylaw so adopted, amended or repealed together with a concise statement of the changes made. 9 EX-10.2 4 CONSULTING AGREEMENT CONSULTING AGREEMENT This Agreement is made and entered into this _____ day of March, 1999, between CybeRecord, Inc. (Nevada) (the "Company") and Northwest Capital Partners, L.L.C. (the "Consultant"), and sets forth the terms and conditions upon which the Consultant will act as financial advisor to the Company in connection with the completion of the financing described in Exhibit "A" attached hereto (the "Financing"). In consideration for the mutual promises and covenants contained herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. PURPOSE. The Company hereby engages the Consultant during the term hereof to arrange financing, as a finder, for the Company upon terms and conditions as set forth herein and in accordance with the requirements set forth in Exhibit "A" (the "Financing"). Consultant shall also have a right of first refusal to consult with the Company regarding appropriate financings subsequent to the Financings set forth in Exhibit "A" for a period of three years following the term of this Agreement. 2. TERM. The term of this Agreement shall be for a period of 36 months, provided that the first Interim Financing shall be completed within 30 days of the Company's approval and, following the quotation of the Company's common stock on the NASD OTC Bulletin Board. The second Interim Financing shall be completed within 180 days of the Company's approval, following the quotation of the Company's common stock on the NASD OTC Bulletin Board. This offering will be pursuant to Rule 504 or other applicable Rule adopted pursuant to the Securities Act of 1933, as amended (the "Act"). A third round of financing, if required, shall be negotiated and completed after the 180 day period following the date the Company's common stock is quoted on the NASD OTC Bull tin Board. 3. DUTIES OF THE CONSULTANT. During the term hereof, Consultant shall provide the Company with the benefit of its best judgment and efforts to complete the Financing on a reasonable business basis in accordance with the requirements set forth in Exhibit "A." It shall be Consultant's duty to suggest and evaluate from the standpoint of financial soundness, the Company's business plans and programs, corporate financial structures, and corporate organization, and any other financial matters involving the Company. In connection with the financing contemplated by this Agreement, Consultant agrees that it will advise and work with the Company to complete the Financing successfully in accordance with Rule 504 or other applicable Rule under the Act and the related and applicable Blue Sky laws of the states in which the financing is completed. Consultant shall advise the Company of each proposed broker or other financing or referral source identified by Consultant prior to authorizing any participation in the Financing. Consultant shall use its best efforts, after receiving information from Company sufficient to comply with the informational requirements of Rule 1 5c2-l 1 under the Securities Exchange Act of 1934 (the "1934 Act"), to arrange for the shares of common stock of the Company to be quoted on the NASD OTC Bulletin Board either by direct application and approval through the NASD or by reverse merger. The Company and the Consultant shall review the potential filing of a Form 10 (1934 Act form) with the U.S. Securities and Exchange Commission following the Second Stage Financing. Company agrees that it will accept Financing amounts at each closing contemplated by Exhibit "A" which are in excess of the amounts in Exhibit "A" if Consultant is able to raise such additional amounts in accordance with the appropriate disclosure and the securities registration exemption provisions of the Act and the relevant Blue Sky laws. Consultant's duties shall also include, but not be limited to: 3.1 Assist the Company's management in the development and execution of a strategic short-term, intermediate term and long-term financial plan; 3.2 Assist the Company in the negotiation of the terms of the Financings; 3.3 Assist the management of the Company in connection with inquiries made by or on behalf 0 any proposed brokers and investors; 3.4 Assist the management of the Company in the preparation of presentation materials for the purpose of pursuing the Financing; 3.5 Using its best efforts, on terms acceptable to the Company, to arrange the Financings as described in Exhibit "A" attached hereto. 3.6 If the Company and the Consultant determine that a direct application to the NASD is not n the best interest of the Company and determine that the Company go public by way of a reverse merger with an existing publicly traded company the Consultant will be responsible for the location and acquisition of such public company including all costs associated with its acquisition. 4. CONSULTANT'S COMPENSATION. 4.1 The Company shall pay Consultant a fee of $500.00 for each month or partial month this Agreement has been in effect, providing that such payment shall be paid, as accrued, at the closing of the Interim Financing and then continuing through the closing of the Second and Third Stage Financings, as described in Exhibit "A," by the Consultant. Upon the closing of any Third Round of Financing, the fee of $500.00 will be increased to $1,000.00 per month will be extended for an additional 36 months, for duties to be mutually agreed upon by the parties. 4.2 The Company agrees to issue the Consultant 500,000 shares at a value of $0.01 per share if the Company's market capitalization achieves the value of $100,000,000.00 or more. The Company agrees to issue the Consultant an additional 500,000 shares a' a value of $0.01 per share if the Company's market capitalization achieves the value of $200,000,000.00 or more. These shares will be issued by the company as restricted shares at a value of $0.01 per share and will be granted "piggy- back" rights so that the shares will be registered upon the Company's first registration after the share's issuance. 4.3 The Company agrees that it shall reimburse Consultant for reasonable, out-of-pocket expenses incurred by Consultant in performing the services provided pursuant to this Agreement, provided that such out-of-pocket expense reimbursement shall not exceed $3,000 in any calendar month or partial month, and provided that any expenses in excess of $500 ill any calendar month shall require advance approval by the Company. Such reimbursement shall be paid upon the within 15 days of the Company's receipt of the Consultant's invoice. Such reimbursement may be claimed for any month commencing with the signing of this Agreement and monthly thereafter to the date of each closing, payable within 15 days of receipt. 4.4 If he Consultant is unsuccessful in introducing investors to the Company (either directly or through a broker) who would be willing to fund the Financings contemplated in Exhibit "A" within the time periods set forth, this Agreement may be terminated at the Company's discretion, unless otherwise extended by mutual consent. Such consent will be implied should the Company be in or continue negotiation with investors which should reasonably result in successful Financing or should the Company accept funds from one of the sources introduced to the Company by the Consultant during this period. Following termination, however, Consultant will be entitled to the consideration above as to those stages of the Financing completed and in the event that after termination a financing of any kind or amount is consummated with any party introduced to the Company by the Consultant during a period of twelve months after termination of this Agreement. 5. INDEMNIFICATION. 5.1 The Company agrees to indemnify the Consultant, its agents and employees against any and all claims, lawsuits, and litigation arising from representations of the Company made t Consultant or prospective investors concerning its business plan and financial condition. Such indemnification shall include reasonable attorney's fees to defend any such actions or claims. 5.2 The Consultant agrees to indemnify the Company, its agents and employees against any and all claims, lawsuits, and litigation arising from representations of the Consultant made to prospective investors concerning the Company except for those representations constituting information provided by the Company. Such indemnification shall include reasonable attorney's fees to defend any such actions or claims. Promptly after receipt by an indemnified party of notice of any claim or commencement of any action in respect of which indemnity may be sought, the indemnified party will notify the indemnifying party in writing of the receipt or commencement thereof and the indemnifying party shall have the right to assume the defense of any such claim or action (including the employment of counsel reasonably satisfactory to the indemnified party and the payment of fees and expenses of such counsel), after which the indemnifying party shall not be liable to the indemnified party for any legal fees incurred by the indemnified party in connection with the defense of such claim or action. Notwithstanding the prior sentence, the indemnified party shall have the right to control its defense if in the opinion of it counsel, the indemnified party's defense is unique or separate to it, as the case may be, as opposed to a defense pertaining to the indemnifying party. In such event, the indemnified party shall have the right to retain counsel reasonably satisfactory to the indemnifying party at the indemnifying party's expense, to represent it in any claim or action in respect of which indemnity may be sought and agrees to cooperate with the indemnifying party and the indemnifying party's counsel on the defense of any such claim of action, it being understood, however, that the indemnifying party shall not, in connection with any such claim or action or separate but substantially similar or related claim or action in the same jurisdiction arising out of the same general circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys, unless the defense of one indemnified party is unique or separate from that of another indemnified party subject to the same claim or action. No party shall be liable for any settlement of any claim or action effected without its written consent. 6. REPRESENTATION AND WARRANTIES. Company represents and warrants as follows: 6.1 The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the state of Nevada and is qualified as a foreign corporation where required. 6.2 The shares of common stock of the Company which will be delivered to the investors and Consultant will be duly authorized and validly issued and fully paid and nonassessable. 7. CONDITIONS PRECEDENT. Consultant's duties to use its best efforts to complete the Financings contemplated herein shall be subject to: 7.1 The Company will not change or modify the Company's capital structure without the prior written consent of Consultant, which consent shall not be unreasonably withheld. 7.2 The Company will submit quarterly budgets to Consultant during the period of the Financing and for one year after successful completion of the Financing. 7.3 The Company will provide all pertinent information in connection with the Company's assets, including, but not limited to, all tangible and intangible assets, and all copyright and trademark information. 7.4 The Company shall have received executed employment agreements from each of its officers and directors and other key individuals in a form reasonably appropriate in accordance with industry standards. 7.5 The Company will provide Consultant with all information and verifications thereof which Consultant or its legal counsel may reasonably request from the Company in a manner and form satisfactory to Consultant and its legal counsel. 7.6 Receipt by Consultant of suitable financial statements of the Company that are in form and substance satisfactory to Consultant, in its sole discretion. The Company shall provide financia1 statements consisting of a balance sheet and a related statement of income for the period then ended, which fairly present the financial condition of each as of their respective dates and for the periods involved, and such statements shall be prepared in accordance with generally accepted accounting principles consistently applied or upon such other basis as the parties shall mutually agree and for the periods mutually agreed upon among the parties. 7.7 All existing shares of the Company have or will be issued in accordance to Rule 4(2) of the 1933 Act and consequently, such securities will be "Restricted Securities" as such term is defined in Rule 144 as promulgated under the 1933 Act and thus will be subject to certain resale limitations as contained in Rule 144 and the certificates shall bear the following restrictive legend limiting their resale under Rule 144 of the Act. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED PURSUANT TO A TRANSACTION EFFECTED IN RELIANCE UPON SECTION 4(2) OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE NOT BEEN THE SUBJECT OF A REGISTRATIQN STATEMENT UNDER THE ACT OR ANY STATE SECURITIES ACT. THESE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR APPIACABLE EXEMPTION THEREFROM UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES ACT." 8. CONDITIONS SUBSEQUENT. 8.1 For a period of three years from the date of closing of a Financing arranged by Consultant pursuant to this Agreement, the Company will provide Consultant, at its expense, following a reasonable request by Consultant for the purpose of reviewing and/or protecting the Company's shareholder's interests, with copies of stock transfer sheets from the Company's Transfer Agent, as well as weekly DTC Reports from the Depository Trust Company to the extent such reports can be made available to a party that is not an affiliate of the Company, and will provide Consultant with all publicly available financial reports and publicly available reports of material developments regarding the Company and its compliance with laws and regulations applicable thereto. 8.2 For a period of three years after the date that the Company's shares of common stock commence trading on the NASD OTC Bulletin Board, the Company's executive officers and directors who own at least five percent (5%) of the Company's common stock ("Principal Stockholders") and the Company shall provide the Company with the right of first refusal with respect to any offering (public or private) of the Company's securities by either the Company or the Principal Stockholders involving more than 1000 shares of stock. For a period of three years after the date that the Company's shares of common stock commence trading on the NASD OTC Bulletin Board, the Company's executive officers and directors who own at least five percent (5%) of the Company's common stock ("Principal Stockholders") and the Company shall provide the Consultant with the second right of first refusal with respect to any offering (public or private) of the Company's securities by either the Company or the Principal Stockholders involving more than 1000 shares of stock. For a period of three years after the date that the Company's shares of common stock commence trading on the NASD OTC Bulletin Board, the Company's executive officers and directors who own at least five percent (5%) of the Company's common stock ("Principal Stockholders") and the Company shall provide the other Principal Stockholders of the Company with the third right of first refusal with respect to any offering (public or private) of the Company's securities by either the Company or the Principal Stockholders involving more than 1000 shares of stock. 8.3 The Company's officers and directors will use their best efforts to cause each Principal Shareholder and each other holder of 5% or more of the Company's common stock to enter into an agreement with Consultant pursuant to the terms of which each such person shall agree not to sell any shares owned by such person on the NASD OTC Bulletin Board, for a period of twelve months after the date that the Company's shares of common stock commence trading on the NASD OTC Bulletin Board, without Consultant's prior written consent, which consent will not be unreasonably withheld. Provided that each such person may sell up to 1,000 shares every three months after the first 180 days has passed after the date that the Company's shares of common stock commence trading on the NASD OTC Bulletin Board. 8.4 Consultant shall be entitled for a period of five years to nominate a director for the Company's board of directors which the Company's existing directors will support. Such director shall be paid the same salary as other directors (for director's duties performed) and shall participate in all bonus programs granted to the Company's board of directors. 9. TERMINATION OF RELATIONSHIP. This Agreement shall terminate upon the happening of any one of the following events: 9.1 Either party may terminate this Agreement upon ten days written notice to the other that a material breach by the other of the terms or covenants of this Agreement shall have occurred and such breach shall not have been cured within ten days after such notice. 9.2 Either party shall have the right (but not the obligation) to terminate this Agreement upon written notice to the other party if such terminating party reasonably determines that the other party or any of its directors, officers or controlling shareholders has engaged in any unlawful, wrongful, or fraudulent act against the Company or its shareholders. 9.3 Either party shall have the right (but not the obligation) to terminate this Agreement upon written notice to the other party if such terminating party shall determine that any material fact concerning the other party represented to them during the course of performing their undertakings under this Agreement are misstated or untrue or that the other party has intentionally failed to provide the terminating party with material facts concerning the other party. 9.4 Either party may terminate this Agreement at any time: (i) in the event of war; (ii) in the event of any material adverse change in the business, property or financial condition of the Company (of which terminating party shall be the sole judge); (iii) in the event of any action, suit or proceeding at law or at equity against the Company or Consultant, or by any Federal, State or other commission or agency where any unfavorable decision would materially adversely affect the business, property, financial condition or income of a party; (iv) in the event of adverse market conditions of which event the terminating party is to be the sole judge. Further, Consultant's commitment will be subject to receipt by Consultant of all information and verifications thereof which Consultant or their counsel may reasonably request from the Company in a manner and form satisfactory to Consultant. In the event of Termination by Consultant, upon grounds stated herein above, Consultant shall be entitled to accrued fees and expense reimbursements and shares otherwise payable shall be paid as though this Agreement was not terminated. 10. MISCELLANEOUS. 10.1 Authorization. This Agreement has been duly authorized, executed and delivered by and on behalf of the Company and the Consultant. 10.2. Notices. Any notice or other communication required or permitted by any provision of this Agreement shall be in writing and shall be deemed to have been given or served for all purposes if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, addressed to the parties as follows: To Consultant: Northwest Capital Partners, L.L.C. Mr. Brent Nelson 10900 NE 8th Street, Suite 900 Bellevue, Washington 98004 Tel : 425-455-1969 Fax : 425-990-5979 To the Shareholders and to the Company: CybeRecord, Inc. Nevada) Mr. James Lucas 21 El Cerrito Ave. San Mateo, California 94402 Tel : 650-343 4771 Fax: 650-343-4779 10.3 Validity; Complete Agreement. The validity and enforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision hereof. This Agreement sets forth the entire understanding and embodies the entire agreement of the parties with respect to the subject matter covered hereby and supersedes all prior or contemporaneous oral or written agreements, understandings, arrangements, negotiations or commumcations among the parties hereto. 10.4 Amendment. This Agreement shall not be modified or amended except by written agreement of the parties hereto. 10.5 Governing Law. This Agreement shall be governed by the laws of the state of Washington giving effect to that state's conflict of laws principle. In witness whereof, the parties hereto have executed this Agreement as of the date first above written. NORTHWEST CAPITAL PARTNERS, L.L.C. By: ----------------------- Brent Nelson, President CYBERECORD INC. (NEVADA) By: --------------------------- James Lucas, Chairman & CEO EXHIBIT "A" CybeRecord, Inc. (Nevada) Financing Requirements Attached hereto and made a part hereof the Agreement between CybeRecord, Inc. (Nevada) and Northwest Capital Partners, L.L.C. Dated March ___ 1999 MINIMUM AMOUNT APPROXIMATE DATE $500,000 Interim Financing June 30, 1999 $500,000 Interim Financing (1) October31, 1999 Third Stage financings as required (2) (1) The price per share of common stock shall be determined by the Company following consultation with Consultant. (1) The term "Interim Financing" as used in the Agreement shall include segment 1 above. (2) Within 6 months after the date the Company's common stock is quoted on the NASD OTC Bulletin Board, provided that the Company has subsequently filed with the U.S. Securities and Exchange Commission a Form 10 pursuant to Section 12(g) of the 1934 Act. CYBERECORD. INC. (NEVADA) APPROVAL OF CAPITAL RESTRUCTURE The undersigned hereby agree to revise the Capital Structure of CybeRecord, Inc. (Nevada) as indicated below. Furthermore, the undersigned agree to allow the CybeRecord, Inc. (Nevada) Compensation Committee to grant stock options from those shares of stock reserved in the Employee Pool to new or existing hires, in accordance. with the option package structure guidelines to be determined by the CybeRecord, Inc. (Nevada) Compensation Committee, and at the Committee's discretion. Shareholder Shares - ----------- ------ James Lucas 1,500,000 Glenn & Paulette Kimball 1,500,000 Marek Niczyporuk 1,300,000 James L. & Barbara Quinn 1,100,000 Herbert L. & Patricia A. Walker 500,000 Alva D. & Kirstin Cravens 100,000 Total Shares to be issued to CybeRecord, Inc. 6,000,000 Signed this ____ day of March, 1999 by: Brent Nelson President, Northwest Capital Partners, L.L.C. James Lucas Chairman & CEO CybeRecord, Inc. (Nevada) EX-10.3 5 ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT Conformed Copy ASSET PURCHASE AGREEMENT dated as of April 13, 1999 (the "Agreement"), by and between CHRYSALIS HOTELS & RESORTS, CORP., a Florida corporation ("CHRYSALIS"), and James Lucas, a single person, Glenn Kimball and Paulette Kimball, husband and wife, Marek Niczyporuk, a single person, James L. Quinn and Barbara Baker Quinn, husband and wife, Herbert J. Walker and Patricia A. Walker, husband and wife, Alva D. Cravens and Kirstin Cravens, husband and wife (collectively, the "KRISTAL GROUP"). RECITALS A. CHRYSALIS desires to acquire certain assets of KRISTAL GROUP (the "Acquired Assets" as defined in Section 1.1), all on the terms and subject to the conditions hereinafter set forth. B. KRISTAL GROUP desires to sell such assets to CHRYSALIS, on the terms and subject to the conditions hereinafter set forth. INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the mutual representations, warranties, covenants and agreements contained herein, CHRYSALIS and KRISTAL GROUP hereby agree as follows: ARTICLE I ACQUISITION AND DISPOSITION OF ACQUIRED ASSETS 1.1 Acquired Assets. Subject to the terms and conditions of this Agreement, at the Closing (as defined below), KRISTAL GROUP shall sell, convey, transfer, assign and deliver to CHRYSALIS, and CHRYSALIS shall purchase, acquire and accept from KRISTAL GROUP, certain assets owned by KRISTAL GROUP as follows: 1.1.1 KRISTAL GROUP Intellectual Property. "KRISTAL GROUP" Intellectual Property" which shall mean all the intellectual property (except as expressly stated below) of KRISTAL GROUP owned, licensed or otherwise used in the business conducted by KRISTAL GROUP for the microfilm, et al, scanning device design, all hardware design, and computer programming code and software owned by KRISTAL GROUP including but not limited to any and all Software needed to allow the scanning/digitizing/reading device to operate in a reliable and commercial manner, programs software (as more fully described in Schedule 1.1.1(A), including the trademarks and (and any other trademarks), and including without limitation the intellectual property listed on or related to the intellectual property listed on Schedule 1.1.1(A), in both machine readable and/or human readable form, and including: (i) rights to, and any rights to apply for and/or register, patents and patent applications, copyrights, trademarks, trade secrets and all other proprietary rights relating to such intellectual property, (ii) records and files relating to manufacturing, quality control, sales, marketing and customer support and designs for such intellectual property, (iii) Derivative Works of such KRISTAL GROUP Intellectual Property, 1 and (iv) all related Documentation. "Derivative Work" means any translation (including any translation into other computer languages), portation, modification, correction, addition, extension, upgrade, improvement, compilation, abridgment or other form prepared by or for KRISTAL GROUP and presently in the possesssion of or under the control of KRISTAL GROUP in which the KRISTAL GROUP Intellectual Property has been recast, transformed, or adopted. "Documentation" means any and all software, hardware and firmware listings, fully commented and updated source code, complete system built software and instructions related to the KRISTAL GROUP Intellectual Property in the posssession or under the control of KRISTAL GROUP, and any and all user, technical and business documentation related to the KRISTAL GROUP Intellectual Property in the possession or under the control of KRISTAL GROUP in both machine readable and/or human readable form. 1.1.2 Other Assets. "Other Assets" shall mean all of KRISTAL GROUP's hardware patents, rights to hardware patents, customer lists, contracts, agreements, licenses or license agreements, commitments, warranties, claims and other existing and inchoate rights, but excluding without limitation, cash, marketable securities, receivables and rights relating to contractual obligations. All of the above shall be referred to as the "Acquired Assets." 1.2 Liabilities. CHRYSALIS shall not assume or be deemed to have assumed, or to have any obligations with respect to, any liabilities or obligations of KRISTAL GROUP of any nature whatsoever, whether such other liabilities and obligations arose or arise before or after, or mature before or after, the Closing (the "Retained Liabilities"). 1.3 Purchase Price and Payment. The purchase price (the "Purchase Price") for the Acquired Assets shall consist of the following: 1.3.1 Stock Issuance. At Closing, CHRYSALIS shall deliver to the KRISTAL GROUP 6,000,000 shares of common stock of CHRYSALIS ("CHRYSALIS" Common Shares") as follows: NUMBER OF KRISTAL GROUP CHRYSALIS SHARES ------------- ---------------- James Lucas 1,500,000 Glenn & Paulette Kimball 1,500,000 Marek Niczyporuk 1,300,000 James L. and Barbara Baker Quinn 1,100,000 Herbert L. and Patricia A. Walker 500,000 Alva D. and Kirstin Cravens 100,000 TOTAL 6,000,000 2 Immediately after the Closing, CHRYSALIS will place the Acquired Assets into a newly-formed, wholly-owned subsidiary known as CybeRecord Inc. (the "Subsidiary"), and shall cause the Subsidiary to commence operations immediately. Also, immediately after closing, CHRYSALIS Board of Directors shall cause a special shareholders meeting to be convened for the purposes of amending the corporation's articles and bylaws, as necessary, to establish a board of directors of five individuals, and to elect directors to a term of office that shall commence immediately upon election. These obligations shall survive closing. 1.4 Closing and Delivery of Acquired Assets. The closing of the transaction (the "Closing") and delivery of the Acquired Assets will take place upon execution of this Agreement (the "Closing Date"), at such date or place as agreed to by the parties hereto. 1.5 Conveyance of Acquired Assets. The sale, conveyance, transfer, assignment and delivery to CHRYSALIS of the Acquired Assets, as herein provided, shall be effected by such bills of sale, endorsements, assignments and other instruments of transfer and conveyance as may be necessary to vest in CHRYSALIS the right, title and interest of KRISTAL GROUP in and to the Acquired Assets, free and clear of all liens, claims, charges and encumbrances, except as otherwise provided in this Agreement. Such documents shall include, without limitation, a Bill of Sale and an Assignment of Rights in the forms attached hereto as Schedules 1.5(A) and (B), respectively. KRISTAL GROUP shall, at the Closing or at any time or from time to time after the Closing, upon request, perform or cause to be performed such acts, and execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such documents, as may be reasonably required or requested to effectuate the sale, conveyance, transfer, assignment and delivery to CHRYSALIS of any of the Acquired Assets or for the performance by KRISTAL GROUP of any of its obligations hereunder. ARTICLE II REPRESENTATION AND WARRANTIES 2.1 Representations and Warranties of KRISTAL GROUP. KRISTAL GROUP represents and warrants to CHRYSALIS on execution of this Agreement and on the Closing Date as follows: 2.1.1 KRISTAL GROUP Intellectual Property. KRISTAL GROUP owns all the KRISTAL GROUP Intellectual Property used or under development in KRISTAL GROUP's business as currently conducted. Schedule 1.1.1(A) lists: (i) all patents, copyrights, trademarks, trade names, service marks, and any applications therefor included in the KRISTAL GROUP Intellectual Property, 3 together with a list of all of KRISTAL GROUP's hardware and software products; and (ii) all licenses, sublicenses and other agreements to which KRISTAL GROUP is a party and pursuant to which KRISTAL GROUP or any other person is authorized to use any of the KRISTAL GROUP Intellectual Property or other trade secrets of KRISTAL GROUP, and includes the identities of the parties thereto, a description of the nature and subject matter thereof, and certain terms thereof. KRISTAL GROUP is not, nor as a result of the execution, delivery or performance of KRISTAL GROUP's obligations hereunder will be, in violation of any license, sublicense or agreement described in Schedule 1.1.1(A). KRISTAL GROUP: (i) is the sole and exclusive owner or licensee of, with all right, title and interest in and to (free and clear of any liens and encumbrances), the KRISTAL GROUP Intellectual Property; and (ii) has sole and exclusive rights to use of the KRISTAL GROUP Intellectual Property. KRISTAL GROUP is not contractually obligated to pay any compensation to any third party, nor is any third party otherwise entitled to any compensation, with respect to KRISTAL GROUP's use of the KRISTAL GROUP Intellectual Property. The manufacture, sale or use of any product or process as now used or offered by KRISTAL GROUP does not infringe any copyright, trade secret, trademark, service mark, trade names, firm names, logo, trade dress or any patent of any person. No adverse claims with respect to the KRISTAL GROUP's Intellectual Property have been asserted or, to the knowledge of KRISTAL GROUP, threatened by any person, nor are there any valid grounds for any bona fide claims (i) to the effect that the manufacture, sale or issue of any product or process as now used or offered for sale by KRISTAL GROUP infringes or will infringe on any copyright, trade secret, trademark, service mark, logo, trade dress or patent of any person, (ii) against the use by KRISTAL GROUP of any trade secrets, copyrights, trademarks, trade names, firm names, logos, trade dress patents, technology, know-how, processes or computer software programs and applications used in the business of KRISTAL GROUP relating to the Properties as currently conducted, or (iii) challenging the ownership, validity or effectiveness of any of the KRISTAL GROUP Intellectual Property. All granted and issued patents and all registered trademarks listed on Schedule 1.1.1(A) and all copyrights held by KRISTAL GROUP are valid, enforceable and subsisting. To KRISTAL GROUP's knowledge, there is and has been no material unauthorized use, infringement or misappropriation of any of the KRISTAL GROUP Intellectual Property by any third party, employee or former employee. 2.1.2 Disclosure. No representation or warranty made by KRISTAL GROUP in this Agreement, nor any document, written information, statement, financial statement, certificate or exhibit prepared and furnished by KRISTAL GROUP or its representatives pursuant hereto or in connection with the transactions contemplated hereby, when taken together, contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements or facts contained herein or therein not misleading in light of the circumstances under which they were furnished. 2.1.3 Reliance. The foregoing representations and warranties are made by KRISTAL GROUP with the knowledge and expectation that CHRYSALIS is placing reliance thereon. 4 2.2 Representations and Warranties of CHRYSALIS. CHRYSALIS represents and warrants to KRISTAL GROUP as follows: 2.2.1 Organization, Standing and Power. CHRYSALIS is a corporation duly organized, validly existing and in good standing under the laws of Florida, has all requisite power and authority to own, lease and operate its properties and to carry on its businesses as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which a failure to so qualify would have a material adverse effect on the Business Condition of CHRYSALIS. 2.2.2 Authority. The execution, delivery, and performance of this Agreement by CHRYSALIS has been duly authorized by all necessary action of the Board of Directors of CHRYSALIS. CHRYSALIS has duly and validly executed and delivered this Agreement, and this Agreement constitutes a valid, binding and enforceable obligation of CHRYSALIS in accordance with its terms. 2.2.3 Disclosure. No representation or warranty made by CHRYSALIS in this Agreement, nor any document, written information, statement, financial statement, certificate or exhibit prepared and furnished or to be prepared and furnished by CHRYSALIS or its representatives pursuant hereto or in connection with the transactions contemplated hereby, when taken together, contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements or facts contained herein or therein not misleading in light of the circumstances under which they were furnished. 2.2.4 Control. Upon Closing, the KRISTAL GROUP shall own a controlling interest of CHRYSALIS stock. KRISTAL GROUP will own 6,000,000 shares and 1,500,000 options. The KRISTAL GROUP will own no less than fifty-three percent (53%) of the outstanding stock of CHRYSALIS. 2.2.5 Reliance. The foregoing representations and warranties are made by CHRYSALIS with the knowledge and expectation that KRISTAL GROUP is placing reliance thereon. ARTICLE III CONDITIONS PRECEDENT 3.1 Conditions of Obligation of CHRYSALIS. The obligation of CHRYSALIS to effect the purchase is subject to the satisfaction of the following condition: 3.1.1 Transfer Agreement. KRISTAL GROUP shall have executed, and delivered to CHRYSALIS, a Transfer Agreement by which KRISTAL GROUP shall have irrevocably assigned and transferred to CHRYSALIS any and all right, title 5 and interest they may hold or may have held in the CHRYSALIS Intellectual Property and shall have released CHRYSALIS from any and all claims relating thereto. 3.1.2 Employment Agreements. As a condition precedent to the obligation of CHRYSALIS to perform hereunder, each of the executive officers of KRISTAL GROUP shall sign at the Closing employment agreements with KRISTAL GROUP which shall contain terms and conditions acceptable to CHRYSALIS, including, without limitation, acceptable non-competition agreements. ARTICLE IV ADDITIONAL AGREEMENTS In addition to the foregoing, CHRYSALIS and KRISTAL GROUP each agree to take the following actions after the execution of this Agreement. 4.1 Expenses. Whether or not this Agreement is closed, except as specifically provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense. 4.2 Additional Agreements. In case at any time after the Closing Date, any further action is reasonably necessary or desirable to carry out the purposes of this Agreement, the proper representatives of each party to this Agreement shall take all such necessary action, e.g., in the case of any documents required to effectuate the transfer of the Acquired Assets, or to make any governmental filings. 4.3 Taxes. Any sales or use or similar tax or levy arising from the transactions contemplated by this Agreement shall be the sole responsibility of CHRYSALIS and CHRYSALIS shall indemnify KRISTAL GROUP from and against any liability arising in connection therewith; provided, however, that KRISTAL GROUP shall pay any and all state, local, provincial, United States or Canadian income tax or excise taxes imposed on or assessed against KRISTAL GROUP as a result of this transaction, and KRISTAL GROUP shall indemnify CHRYSALIS from and against any and all liability arising in connection therewith. 4.4 Brokers and Finders. KRISTAL GROUP will be responsible for and pay any fees that may be owed to any broker previously retained (or who claims to have been retained) by KRISTAL GROUP, and shall hold CHRYSALIS harmless from any liability arising from such claim(s) with the exception of Marvin Belcher who will receive 50,000 shares of Chrysalis from Chrysalis immediately following the closing of this transaction. 6 4.5 Documentation. KRISTAL GROUP shall provide to CHRYSALIS documentation containing all specifications and design of any and all hardware and the source code and the object code of the KRISTAL GROUP Intellectual Property, where appropriate. ARTICLE V INDEMNIFICATION 5.1 Indemnification Relating to Agreement. 5.1.1. KRISTAL GROUP hereby agrees to defend, indemnify, and hold CHRYSALIS harmless from and against, and to reimburse CHRYSALIS with respect to, any and all losses, damages, liabilities, claims, judgments, settlements, fines, costs, and expenses (including attorneys' fees) ("Indemnifiable Amounts") of every nature whatsoever incurred by CHRYSALIS by reason of or arising out of or in connection with (i) any breach, or any claim (including claims by parties other than CHRYSALIS) that would, if true, constitute a breach by KRISTAL GROUP of any representation, warranty, or covenant of KRISTAL GROUP contained in this Agreement or in any agreement, certificate or other document delivered to CHRYSALIS pursuant to the provisions of this Agreement, and (ii) the failure, partial or total, of KRISTAL GROUP to perform any agreement or covenant required by this Agreement. 5.1.2. CHRYSALIS agrees to defend, indemnify, and hold KRISTAL GROUP harmless from and against, and to reimburse KRISTAL GROUP with respect to, any and all Indemnifiable Amounts of every nature whatsoever incurred by KRISTAL GROUP by reason of or arising out of or in connection with (i) any breach, or any claim (including claims by parties other than KRISTAL GROUP) that would, if true, constitute a breach by CHRYSALIS of any representation, warranty, or covenant of CHRYSALIS contained in this Agreement (including, but not limited to, CHRYSALIS's obligations with respect to the Assumed Contracts) or in any agreement, certificate or other document delivered to KRISTAL GROUP pursuant to the provisions of this Agreement, and (ii) the failure, partial or total, of CHRYSALIS to perform any agreement or covenant required by this Agreement. 5.2 Third Party Claims. For the purposes of this Section 5.2, a party seeking indemnification pursuant to Section 5.1 shall be referred to as the "Indemnified Party" and a party to whom such notice is addressed shall be referred to as the "Indemnitor." With respect to any claims or demands by third parties, whenever an Indemnified Party shall have received a written notice that such a claim or demand has been asserted or threatened, the Indemnified Party shall notify the Indemnitor of such claim or demand and of the facts within the Indemnified Party's knowledge that relate thereto within a reasonable time after receiving such written notice. The Indemnitor shall then have the right to contest, negotiate or settle any such claim or demand through counsel of their own selection, satisfactory to the Indemnified Party and solely at their own cost, risk, and expense. Notwithstanding the preceding sentence, the Indemnitor shall not settle, compromise, or offer to settle or compromise any such claim or 7 demand without the prior written consent of an Indemnified Party, which consent shall not be unreasonably withheld. By way of illustration and not limitation, it is understood that an Indemnified Party may object to a settlement or compromise which includes any provision which in its reasonable judgment may have an adverse impact on or establish an adverse precedent for the Business Condition of an Indemnified Party or any of its Subsidiaries. An Indemnified Party shall not have the right to object to a settlement which consists solely of the payment of a monetary damage amount and which is fully indemnified by KRISTAL GROUP. If the Indemnitor fails to given written notice to an Indemnified Party of its intention to contest or settle any such claim or demand within twenty (20) calendar days after the Indemnified Party has notified the Indemnitor that any such claim or demand has been made in writing and received by the Indemnified Party, or if any such notice is given but any such claim or demand is not promptly contested by the Indemnitor, the Indemnified Party shall have the right to satisfy and discharge the same by payment, compromise, or otherwise, and the Indemnitor shall be entirely liable therefor to the Indemnified Party under this indemnity. The Indemnified Party may also, if it so elects and entirely within its own discretion, defend any such claim or demand if the Indemnitor fails to give notice of their intention to contest or settle and such claim or demand, in which event the Indemnitor shall be required to indemnify the Indemnified Party and its affiliates for any and all costs, losses, liabilities, and expenses whatsoever, including without limitation attorneys' and other professional fees, that the Indemnified party may sustain, suffer, incur, or become subject to as a result of the Indemnified Party's decision to defend any such claim or demand. ARTICLE VI MISCELLANEOUS 6.1 Entire Agreement. Notwithstanding anything to the contrary, this Agreement, including the agreements, exhibits and schedules delivered pursuant to this Agreement, contain all of the terms and conditions agreed upon by the parties relating to the subject matter of this Agreement and supersedes all prior agreements, negotiations, correspondence, undertakings, and communications of the parties, whether oral or written, respecting that subject matter. 6.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York as applied to agreements entered into and entirely to be performed within that state. 6.3 Notices. All notices, requests, demands or other communications which are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if personally delivered by hand, (ii) upon the third business day after such notice is (a) deposited in the United States mail, if mailed by registered or certified mail, postage prepaid, return required, or (b) sent by a nationally recognized overnight express courier, or (iii) by facsimile upon written confirmation (other than the automatic confirmation that is received from the recipient's facsimile machine) of receipt by the recipient of such notice: 8 If to CHRYSALIS: Chrysalis Hotels & Resorts, Inc. - --------------- 10900 NE 8th Street Bellevue, Washington 98004 Telephone No. (425) 688-3031 Fax No. (425) 990-5979 With a copy to: John B. Lowy, P.C. - -------------- John B. Lowy, President 645 Fifth Avenue, 4th FL New York, NY 10022 Telephone No. (212) 371-7799 Fax No. (212) 371-8527 If to KRISTAL GROUP: KRISTAL GROUP - ------------------- James Lucas 21 El Cerrito Ave San Mateo, CA 94402 Telephone No. (650) 343-4771 Fax No. (650) 343-4779 With a copy to: Malcolm C. McLellan - -------------- Davis Arneil Law Firm 617 Washington Street Wenatchee, WA 98801 Telephone No. 509.662.9074 Fax No. 509.662.9074 Such addresses may be changed, from time to time, by means of a notice given in the manner provided in this Section 6.3. 6.4 Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be modified rather than voided, if possible, in order to achieve the intent of the parties to this Agreement to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent. 6.5 Survival of Representations and Warranties. All representations and warranties contained in this Agreement, including the exhibits and schedules delivered pursuant to this Agreement, shall survive the Closing Date. 6.6 Assignment. No party to this Agreement may assign, by operation of law or otherwise, all or any portions of its rights, obligations, or liabilities under this Agreement without the prior written consent of the other party to this Agreement, which consent may be withheld in the absolute discretion of the 9 party asked to grant such consent. Any attempted assignment in violation of this Section 6.6 shall be voidable and shall entitle the other party to this Agreement to terminate this Agreement at its option. 6.7 Counterparts. This Agreement may be executed in any number of counterparts. All such counterparts shall constitute a single document with the same force and effect as if all Parties signing a counterpart had signed all the other counterparts. 6.8 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 6.9 Interpretation. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section, Exhibit or Schedule to this Agreement unless otherwise indicated. The words "include," "includes," and "including," when used therein shall be deemed in each case to be followed by the words "without limitation." The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 6.10 No Third Party Beneficiaries. Nothing in this Agreement shall be deemed to create in any person not a signatory to this Agreement any rights (including rights as a third party beneficiary) under this Agreement. IN WITNESS WHEREOF, CHRYSALIS and KRISTAL GROUP have executed this Agreement as of the date first written above. CHRYSALIS HOTELS & RESORTS CORP. By: /s/ THOMAS MORIKAWA ---------------------- Thomas Morikawa, Chairman KRISTAL GROUP: /s/ JAMES LUCAS /s/ JAMES L. QUINN - ---------------------------------- ------------------- James Lucas James L. Quinn /s/ BARBARA BAKER QUINN /s/ HERBERT J. WALKER - ---------------------------------- ---------------------- Barbara Baker Quinn Herbert J. Walker /s/ PATRICIA A. WALKER /s/ GLENN KIMBALL - ---------------------------------- ------------------ Patricia A. Walker Glenn Kimball 10 /s/ PAULETTE KIMBALL /s/ MAREK NICZYPOURK - ----------------------------------- --------------------- Paulette Kimball Marek Niczypourk /S/ ALVA D. CRAVENS /s/ KIRSTIN CRAVENS - ----------------------------------- -------------------- Alva D. Cravens Kirstin Cravens 11 EX-27 6 FDS --
5 U.S. Dollars 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 1.000 111,154 0 0 0 0 126,358 29,268 3,940 151,676 21,436 0 0 0 154,719 (24,479) 151,676 0 0 0 0 3,935,617 0 0 (3,935,617) 0 (3,935,617) 0 0 0 (3,935,617) (0.27) (0.27)
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