-----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, QEioTNQS2UQRgfkQsn72a1Wkt9UzgZQT5aQ63ErFgHBmNUATQTNmqLoOdlb4BkT0 4xXGqTkl/vogLeoqE7gCGg== 0001015402-01-000678.txt : 20010307 0001015402-01-000678.hdr.sgml : 20010307 ACCESSION NUMBER: 0001015402-01-000678 CONFORMED SUBMISSION TYPE: 20FR12G PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 20010301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIDE HOLDINGS INC CENTRAL INDEX KEY: 0001135443 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 20FR12G SEC ACT: SEC FILE NUMBER: 000-32411 FILM NUMBER: 1558799 BUSINESS ADDRESS: STREET 1: SUITE 1260 609 GRANVILLE STREET STREET 2: VANCOUVER V7Y 1G5 CITY: BRITISH COLUMBIA BUSINESS PHONE: 6046870888 MAIL ADDRESS: STREET 1: SUITE 1260 609 GRANVILLE STREET STREET 2: VANCOUVER V7Y 1GS CITY: BRITISH COLUMBIA 20FR12G 1 0001.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________ FORM 20-F [ X ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934 or [ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended __________,or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to________________ COMMISSION FILE NO. ______________________ INSIDE HOLDINGS INC. -------------------- (Exact name of Registrant as specified in its charter) Yukon Territory, Canada ----------------------- (Jurisdiction of incorporation organization) Suite 1260, 609 Granville Street, Vancouver, B.C. Canada, V7Y 1G5 ----------------------------------------------------------------- (Address of principal executive office) (604) 687-0888 -------------- (Registrant's telephone number, including area code) Securities registered or to be registered pursuant to Section 12(b) of the Act: None Securities registered or to be registered pursuant to Section 12(g) of the Act: _________________________ COMMON SHARES, WITHOUT PAR VALUE (Title of Class) _________________________ Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: As at December 31, 2000 the Company had 4,637,600 issued shares of common stock. There is no present market for the Company's common shares. Based upon the last price at which common shares of the Company were purchased from treasury by arms-length subscribers the market value of common shares held by non-affiliates is C$54,800. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate by check mark which financial statement item the Registrant has elected to follow. Item 17 [ ] Item 18 [X] INTRODUCTION This filing statement, including all exhibits, consists of 101 pages. The Exhibit Index is displayed on page 33. Inside Holdings Inc. (the "Company") is incorporated under the laws of the Yukon Territory, Canada. Over 50% of the Company's common shares are held by non-United States citizens and residents, all of its officers and directors are non-United States citizens and residents and the Company has no assets located in the United States. As a result, the Company believes that it qualifies as a "foreign private issuer" for registering its common shares using this Form 20-F registration statement. The Company is filing this Registration Statement with the Securities and Exchange Commission voluntarily to qualify its shares for trading in the United States secondary market. The Company believes that the registration of the Company's common shares will make the Company a more attractive vehicle to prospective investors. No assurances can be given that a trading market for the Company's shares will ever develop in the United States or, if such a market does develop, that it will continue. FORWARD-LOOKING INFORMATION Statements in this form, to the extent that they are not based on historical events, constitute forward-looking statements. These statements appear in a number of different places in this form and include statements regarding the intent, belief or current expectations of the Company and its directors or officers, primarily with respect to the future market size and future operating performance of the Company. When used in this document, the words "anticipate," "believe," "estimate," "expect," "intend," "plan," and "project" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Forward-looking statements include, without limitation, statements regarding the outlook for future operations, forecasts of future costs and expenditures, evaluation of market conditions, the outcome of legal proceedings, the adequacy of reserves, or other business plans. Investors are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties, and that actual results may differ from those in the forward-looking statements as a result of various factors such as general economic and business conditions, including changes in interest rates, prices and other economic conditions; actions by competitors; natural phenomena; actions by government authorities, including changes in government regulation; uncertainties associated with legal proceedings; technological development; future decisions by management in response to changing conditions; the ability to execute prospective business plans; and misjudgments in the course of preparing forward-looking statements. The Company does not intend or assume any obligation to update these forward-looking statements. ACCOUNTING PRINCIPLES The Company's financial statements included herein were prepared in accordance with Canadian generally accepted accounted principles. They also comply, in all material respects, with the accounting principles accepted in the United States and the rules and regulations of the Securities and Exchange Commission. -2- CURRENCY TRANSLATION Unless otherwise indicated, all monetary amounts referred to in this registration statement are in Canadian dollars. At December 31, 2000 one U.S. dollar equaled approximately Canadian $1.4995. Included in this Registration Statement are interim comparative financial statements for the six months ended October 31. At October 31, 2000 and 1999 one U.S. dollar equaled approximately Canadian $1.5225 and $1.4773 respectively. The following table sets forth a history of the exchange rates for the US dollar vs. Canadian dollar for each month form July through December 2000. Month Average Low/High Month End --------- ------- ------------- --------- July 1.4779 1.4634/1.4924 1.4870 August 1.4825 1.4713/1.4910 1.4715 September 1.4862 1.4685/1.5085 1.5035 October 1.5123 1.4922/1.5320 1.5225 November 1.5422 1.5275/1.5632 1.5360 December 1.5224 1.4946/1.5531 1.4995 The following table sets forth a history of the exchange rates for the US dollar vs. Canadian dollar during the Company's past five fiscal years. Year Average Low/High April 30 ---- ------- ------------- -------- 2000 1.4694 1.4353/1.5127 1.4772 1999 1.5080 1.4310/1.5795 1.4543 1998 1.4052 1.3663/1.4651 1.4291 1997 1.3640 1.3295/1.4005 1.3957 1996 1.3616 1.3285/1.3855 1.3609 -3- TABLE OF CONTENTS INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS . . . 5 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE . . . . . . . . . . 5 ITEM 3. KEY INFORMATION . . . . . . . . . . . . . . . . . . . . . . 5 ITEM 4. INFORMATION ON THE COMPANY. . . . . . . . . . . . . . . . . 10 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS. . . . . . . . 15 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES. . . . . . . . . 18 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS . . . . . 20 ITEM 8. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 22 ITEM 9. THE OFFER AND LISTING . . . . . . . . . . . . . . . . . . . 23 ITEM 10. ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . 24 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES . . 30 ITEM 17. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 31 ITEM 18. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 31 ITEM 19. EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 47 EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 -4- PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS A. DIRECTORS AND SENIOR MANAGEMENT NAME AND BUSINESS ADDRESS POSITION WITH COMPANY Leonard Petersen (1) C.E.O., President and Director 1260-609 Granville Street Vancouver, Canada William D. McCartney (1) Director 1260-609 Granville Street Vancouver, Canada Murray J. Oliver (1) Director 1260-609 Granville Street Vancouver, Canada Paul A. Visosky Secretary 3400-666 Burrard Street Vancouver, Canada (1) Member of Audit Committee B. ADVISERS Not applicable C. AUDITORS Davidson & Company, chartered accountants, has been the Company's auditor for each of the last three fiscal years. Their address is Suite 1200, 609 Granville Street, Vancouver, Canada. They are members of the Institute of Chartered Accountants of British Columbia and the Canadian Institute of Chartered Accountants. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not Applicable ITEM 3. KEY INFORMATION -5- A. SELECTED FINANCIAL DATA The following represents selected financial data for the Company for the six months ending October 31, 2000 and 1999 and for each of the past five fiscal years ending April 30, prepared in accordance with generally accepted accounting principles in the United States. All amounts are expressed in Canadian dollars. Exchange rate information is presented in the introduction to this Registration Statement. SIX MONTHS ENDED OCTOBER 31 (UNAUDITED) 2000 1999 ------------------------ Revenues $ - $ - Net loss (57,964) (37,702) Total assets 47,402 105,900 Total liabilities 63,100 119,323 Shareholders' equity (15,698) (13,423) Capital stock 3,368,694 3,163,181 Common shares outstanding (1) 4,637,600 500,487 Net loss per share (0.01) (0.38) Cash dividends - -
YEARS ENDED APRIL 30 (AUDITED) 2000 1999 1998 1997 1996 ----------- ----------- ----------- ----------- ----------- Revenues $ - $ - $ - $ - $ - Net loss (187,526) (94,464) (119,625) (98,949) (74,567) Total assets 299 108,865 153,649 75,467 118,943 Total liabilities 163,546 84,586 34,906 31,199 621,726 Shareholders' equity (163,247) 24,279 118,743 44,268 (502,783) Capital stock 3,163,181 3,163,181 3,163,181 2,969,081 2,323,081 Common shares outstanding (1) 500,487 500,487 501,139 423,499 170,372 Net loss per share (0.38) (0.19) (0.26) (0.32) (0.44) Cash dividends - - - - - (1) Adjusted for a reverse split and subsequent forward split that, on net basis, resulted in the issue of one new share for every ten old shares in October 2000.
The financial data presented above is only a summary and should be read together with the Company's financial statements, which accompany this registration statement. -6- B. CAPITALIZATION AND INDEBTEDNESS The following table sets for the capitalization of the Company as at December 31, 2000. Current indebtedness $ 67,741 Long-term debt - Shareholders' equity Capital stock Authorized 100,000,000 common shares without par value Issued 4,637,600 common shares 3,368,694 Deficit accumulated during development stage (68,800) Deficit (3,326,428) ------------ $ 41,207 ============ C. REASONS FOR THE OFFER AND USE OF PROCEEDS Not applicable D. RISK FACTORS The Company has identified the following risk factors as significant. The order in which they appear is intended to reflect management's opinion of their order of priority to the Company. Readers should, however, carefully review all of the risk factors in assessing the Company's prospects. Some information is presented as of the date hereof and is subject to change, completion or amendment without notice. LIQUIDITY AND CAPITAL RESOURCES. As at December 31, 2000, total cash was $13,827; current liabilities exceeded current assets by $53,200; and total assets exceeded total liabilities by $26,534. The Company's ability to satisfy projected working capital requirements is dependent upon its ability to secure additional funding through public or private sales of securities, including equity securities of the Company. There is no assurance that the Company will be able to secure the necessary capital on terms acceptable to the Company or on any terms. NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS. The Company's intended business is in its early developmental and promotional stages, and the Company only recently acquired its Principal Asset. There have been no revenues or earnings from operations and the Company has no significant tangible assets or financial resources. The Company will, in all likelihood, sustain operating expenses without corresponding revenues at least until the Company secures significant capital and human resources and successfully implements its business strategies, of which there are no assurances. There is also no assurance that the Company will generate revenues and be profitable in the future, or that profitability, if achieved, will be sustained. -7- SPECULATIVE NATURE OF THE COMPANY'S PROPOSED OPERATIONS. The success of the Company's proposed plan of operation will depend to a great extent on its ability to secure interest amongst prospective network affiliates, which are themselves successful, of which there is no assurance. While management intends to pursue relationships with enterprises having established operating histories, it is likely that, at this stage of the Company's development, prospective affiliates will be start-up enterprises with unproven management, limited assets, limited potential for earnings or other negative characteristics. The success of the Company's operations will therefore be dependent, at least in part, upon the success of such start-up enterprises, which is not assured. As a consequence, the Company's Board of Directors will closely monitor the Company's progress and reassess its plan and strategies on a regular basis, which may result in the Company choosing to discontinue its proposed business in the future and combine with another business, which may also be highly speculative in nature. The Company has not engaged in any discussions concerning potential business combinations and has no immediate plans to identify and negotiate with prospective businesses. SIGNIFICANT FUTURE CAPITAL NEEDS. The Company requires significant additional capital to finance the implementation of its business plan and strategies. The ability of the Company to secure the necessary capital in the future will depend in part on the prevailing capital market conditions as well as the Company's performance in signing network affiliates to join the network. As a consequence of these and other factors, there is no assurance that further funding will be available to the Company on acceptable terms, or at all, to meet future capital requirements. NO AGREEMENTS WITH PROSPECTIVE NETWORK AFFILIATES. The Company has no current arrangement, agreement or understanding with any prospective network affiliate and there is no assurance that agreements with prospective network affiliates will be made on terms acceptable to the Company or on any terms. In addition, the Company has not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria, which it will require a prospective affiliate to have achieved, or without which, the Company would not consider making an agreement with such prospective affiliate. Accordingly, the Company may enter into agreements with business entities having no significant operating history, losses, limited or no potential for earnings, limited assets, negative net worth or other negative characteristics. ESTABLISHING AND MAINTAINING BRAND AWARENESS. The Company must establish and maintain brand awareness for its Principal Asset in order to attract prospective network affiliates. Name recognition will also be important in the future because of the growing number of Internet companies that will compete directly with network affiliates. Promotion and enhancement of the Company's brand names will depend largely upon the Company's ability to secure relationships with network affiliates that provide consistently high-quality products, services and content and the successful implementation of effective marketing strategies in concert with such affiliates, which are not assured. COMPETITION. The marketplace for e-commerce solutions and the providers of online navigational services has numerous competitors. In a particular, the Company faces significant competition from dominant Internet portal companies such as Yahoo and Excite and network companies such as America Online and CMGI. These competitors, among others, have significantly greater financial, technological, marketing and personnel resources than the Company. There can be no assurance that the Company's proposed business will be able to compete successfully or that competition will not have a material adverse effect on the Company's business plan, financial condition and results of operations. -8- CONFLICTS OF INTEREST. The directors and officers of the Company will not devote all their time to the affairs of the Company. They are presently and will continue to be engaged in other business ventures. As a result, situations may arise where one or more directors and officers will be in direct or indirect competition with the Company. Notwithstanding the combined limited experience and time commitment of management, loss of the services of any of these individuals would adversely affect development of the Company's business and its likelihood of continuing operations. DEPENDENCE ON USE OF INTERNET. The success of the Company depends on increased use of the Internet for advertising, marketing, providing services and conducting business. Commercial use of the Internet is currently at an early stage of development and the future of the Internet, as a means for conducting commerce, is not clear. EXCHANGE RATE FLUCTUATIONS. The Company's business is operated from its head office in Vancouver, Canada. Accordingly, most of its costs and assets are in Canadian dollars. Any significant increase or decrease in the value of the Canadian dollar compared to the U.S. dollar would have a significant impact on the financial position of the Company. Similar exchange rate risks will arise should the Company's business expand into other markets and its business involves other currencies. The Company does not engage in any foreign currency hedging activities. GOVERNMENTAL REGULATION. The Company is not currently subject to direct regulation by any government agency, other than applicable securities laws and regulations applicable to business generally. However, it is possible that a number of laws and regulations may be adopted with respect to regulating user privacy, pricing and consumer protection, which may impose additional burdens on companies in this industry conducting business and thus increase the Company's cost of doing business. There can be no assurance that any such new legislation or regulation will not be enacted, nor that the application of laws or regulations from jurisdictions whose laws do not currently apply to the Company's business will subsequently become applicable. REGULATION UNDER INVESTMENT COMPANY ACT. Although the Company will be subject to regulation under the Securities and Exchange Act of 1934, the Company believes it will not be subject to regulation under the Investment Company Act of 1940, insofar as the Company will not be engaged primarily in the business of investing or trading in securities. The Company may, however, hold minority interests in a number of affiliates and as a consequence the Company could be subject to regulation under the Investment Company Act of 1940. In such event, the Company would be required to register as an investment company and could be expected to incur significant registration and compliance costs. The Company has obtained no formal determination from the Securities and Exchange Commission as to the status of the Company under the Investment Company Act of 1940 and, consequently, any violation of such Act could subject the Company to material adverse consequences. MARKET RISK. The Company's common shares do not presently trade on any recognized stock exchange or other organized securities market. The Company may make application to the National Association of Securities Dealers to have its common shares listed for trading on the NASD OTC Bulletin Board after this Registration Statement becomes effective; however, there is no assurance that such application will be accepted or that a market for the common shares of the Company will ever develop in the United States or, if such a market does develop, that it will continue or that the trading price of the shares will not be subject to significant price fluctuations. Accordingly, an investment in common shares of the Company should only be considered by those investors who do not require liquidity and can afford to suffer a total loss of their investment. An investor should consult with professional advisers before making such an investment. -9- NO DIVIDENDS TO BE PAID. The Company has not paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. The Board of Directors has sole authority to declare dividends payable to the Company's stockholders. The fact that it has not and does not plan to pay dividends indicates that the Company must use all of its funds generated by operations for reinvestment in operating activities and also emphasizes that the Company may not continue as a going concern. Prospective shareholders also must evaluate an investment in the Company solely on the basis of anticipated capital gains. ITEM 4. INFORMATION ON THE COMPANY A. HISTORY AND DEVELOPMENT OF THE COMPANY The Company was formed as Coast Falcon Resources Ltd. under the Company Act of British Columbia, Canada, on July 7, 1992, pursuant to a statutory merger of McConnell-Peel Resources Ltd. and Sheba Copper Mines Limited (together, the "Predecessor Companies"). On September 11, 2000, the Company changed its name to Inside Holdings Inc., and on October 6, 2000 it was continued under the Business Corporations Act of the Yukon Territory, Canada. The Company's registered records office is located at Suite 308, 204 Black Street, Whitehorse, Yukon, Canada, Y1A 2M9, and its head office is located at Suite 1260, 609 Granville Street, Vancouver, B.C., Canada, V7Y 1G5. Telephone: (604) 687-0888. The Predecessor Companies were engaged in the exploration, development and exploitation of mineral resource properties in Canada, without commercial success. Each Predecessor Company ceased all such activities and abandoned their respective resource property interests prior to the formation of the Company by way of merger of the Predecessor Companies. The balance sheets of the Predecessor Companies were carried over at historical cost. Since its formation, the Company raised additional private equity capital to settle certain indebtedness and explore new lines of business. Except as described below, the Company did not carry on or acquire any business or property. All costs associated with identifying, researching and negotiating with prospective businesses were expensed in the year they were incurred. In 1996, the Company entered into a conditional agreement to acquire, from arms-length parties, all of the issued capital stock of Kryton Products Inc., a Canadian private company ("Kryton"), by way of merger. In contemplation of the proposed merger the Company loaned Kryton the aggregate sum of $104,873. The proposed merger was never consummated. Prior management of the Company determined that the loan balance was not collectible and expensed it during the Company's most recent fiscal year ended April 30, 2000. The Company entered into an agreement, dated May 1, 2000, to purchase its Principal Asset and thereupon commenced a new developmental stage. The Company's proposed business has no prior history of operations. (Attached hereto as Exhibit 4.3.) -10- The Company recently completed a reorganization, which was approved by shareholders of the Company at a general meeting of shareholders held in Vancouver, Canada on September 6, 2000, to better position the Company to carry on its new business. The reorganization included the following steps: (1) a new Board of Directors of the Company was appointed by shareholders and new management by the Board of Directors; (2) the Company changed its name to Inside Holdings Inc. to more properly describe the new business direction of the Company; (3) the Company changed its governing jurisdiction from the Province of British Columbia to the Yukon Territory where there is no requirement that a majority of directors reside in Canada; (4) the Company reverse-split and then forward-split its common shares and issued, on a net basis, one new share for every ten old shares and eliminated fractional shareholders to reduce otherwise significant shareholder reporting costs; (5) the Company issued 3,500,000 post split common shares at approximately $0.04 per share to settle debts owing to related parties in the aggregate amount of $140,513; and (6) the Company completed a private placement and issued 650,000 post split common shares at $0.10 per share to five investors in Canada, including directors and officers of the Company, for aggregate proceeds of $65,000. The proceeds from the private placement were used primarily to pay certain debts, complete the reorganization and to provide the Company with initial working capital. The Company is a "reporting issuer" in the Province of British Columbia, Canada, as that term is defined under the British Columbia Securities Act. The Company is presently required to file annual and quarterly financial statements together with certain other non-financial information with the British Columbia Securities Commission. The Company is filing this Registration Statement with the Securities and Exchange Commission voluntarily to qualify its shares for trading in the United States secondary market. The Company believes that the registration of the Company's common shares will make the Company a more attractive vehicle to prospective investors. No assurances can be given that a trading market for the Company's shares will ever develop in the United States or, if such a market does develop, that it will continue. -11- B. BUSINESS OVERVIEW GENERAL The Company is in its early developmental stage and has not commenced commercial operations. Since its formation, the Company's only activities have been organizational in nature directed at acquiring its principal asset, which is described below, raising capital and developing its business plan. It has no full time employees and owns no real property or other tangible assets other than cash. Should the Company determine that the plan is feasible, and sufficient capital is made available, it intends to create, brand, market and manage a network of web-based affiliated businesses and content providers to whom the Company will offer a range of business consulting and marketing services. There is no assurance that the Company will secure the necessary capital to effectively implement its business strategies or be able to attract and secure a sufficient number of appropriate network affiliates to meet its objective. BUSINESS STRATEGIES To facilitate the creation of a network brand, the Company recently acquired and is the beneficial owner of 400 Internet domain names all ending with the suffix "inside.com" (the "Principal Asset"). For example, the Company has the right to use, sell, lease or license the names "finditinside.com", "investinside.com" and "newyorkinside.com", among others. The names include many geographical and subject matter references, which allows for simple navigation of the Internet by using such generic references as opposed to conventional search means. (See Schedule "A" attached to Exhibit 4.3 for a complete listing of Internet domain names acquired.) The Company's business strategies include the sale, lease or license of these domain names to selected network affiliates and then deploying, together with such affiliates, conventional marketing techniques in traditional channels to promote and enhance the network brand. The value of any particular domain name, not presently in use, is generally a function of its perceived market appeal. Generally, short, generic, intuitive, easy to spell names are more marketable and hence more valuable than names that do not share these characteristics. The Company believes the "inside" designation, is intuitive and easy to bear in mind, making it a superior branding opportunity. A network affiliate may be a start-up or an already existing operation that is directed at a particular niche constituency. In the case of an existing operation, a domain name having descriptive relevance to such operations, can be used as a forwarding or directional link and in the case of a start-up as a destination web address. Each affiliate would be responsible for developing and managing site content, increasing site 'stickiness' and promoting the network 'brand'. The Company's intends to promote opportunities for strategic business relationships among network affiliates within and across industry segments. A typical website of an affiliate would promote direct links to other affiliates, with which a strategic relationship has been established, and to the Company, which would serve as a portal to the entire network. As the network expands, the Company will attempt to leverage the combined Internet traffic of the network affiliates and the prospective purchasing power represented by such traffic to obtain benefits for its network affiliates such as discounts for goods and services. -12- In addition, the Company would seek opportunities to generate capital through the selective sale, from time to time, of its investments in network affiliates to increase shareholder value and to generate capital for reinvestment. The Company's main sources of revenues in the future are expected to come from: 1. the sale, license or lease of the Company's domain names; 2. the provision of business consulting and marketing services; and 3. the selective sale of investments in network affiliates. PLAN OF OPERATION In order to pursue the Company's principal business objectives, and because the Company has limited financial and human resources, the Company proposes to take an incremental approach towards implementing its business strategies and has developed the following limited plan of operation. For the balance of the Company's fiscal year and during the following fiscal year management's focus will be to secure necessary human and capital resources and to research, identify and secure conditional agreements with prospective network affiliates. These affiliates may be start-up enterprises, in which case the Company expects to negotiate a minority or majority equity interest, or existing web-based enterprises. The substantive terms of each agreement with prospective affiliates will likely vary significantly, particularly at this early stage of the Company's development. Management believes the Company must secure agreements with a minimum of ten prospective network affiliates, with fully operational websites, before a network launch is feasible and a fully integrated business plan can be developed, financed and implemented. Should the Company fail to secure such agreements in a reasonable time period, which shall be determined by the Board of Directors, the Company may have to discontinue its current business plan and consider an alternate business plan, which may also be highly speculative. Management of the Company anticipates seeking out prospective network affiliates that are established web-based businesses through solicitation. Such solicitation may include newspaper or magazine advertisements, mailings and other distributions to existing businesses, law firms, accounting firms, investment bankers, marketers and similar persons, the use of one or more World Wide Web sites and similar methods. No estimate can be made as to the number of persons who will be contacted or solicited. Management may also assist with the organization, development and management of prospective network affiliates, which are start-up businesses. The Company has no current arrangement, agreement or understanding with any prospective network affiliate and there is no assurance that agreements with prospective network affiliates will be made on terms acceptable to the Company or on any terms. -13- The Company has no full time employees to implement its plan. Management has agreed to allocate a portion of their time to the activities of the Company, however, it is expected that conflicts of interest will arise with respect to the limited time commitment by management. As a consequence, the Company intends to pursue new sources of capital over the six months following the effective date of this Registration Statement and, if successful in securing such capital, anticipates hiring one or more full time persons or engaging the services of outside professionals to work with management to further develop the Company's plan of operation and pursue agreements with prospective network affiliates. The amount of new capital, its intended use, and the terms under which it may be made available are subject to future negotiations and therefore are not presently determinable. The Company is filing this Registration Statement with the Securities and Exchange Commission voluntarily to qualify its shares for trading in the United States secondary market. The Company believes that the registration of the Company's common shares will make the Company a more attractive vehicle to prospective investors. COMPETITION The electronic commerce industry is new, rapidly evolving and intensely competitive, and the Company expects competition to intensify in the future. The Company will likely remain an insignificant participant among the many enterprises, which are attempting to establish or have established a network presence on the World Wide Web. The most significant potential for competition facing the Company comes from dominant Internet portal companies such as Yahoo and Excite and network companies such as America Online and CMGI, which have already been successfully branded and are positioned to offer substantially greater benefits to prospective affiliates. These and many other established companies have significantly greater financial and personnel resources and technical expertise than the Company. The Company believes that its Principal Asset provides it with a unique competitive position in establishing brand awareness and that the market is large enough to accommodate many new entrants such as the Company. However, in view of the Company's combined extremely limited financial resources and limited management availability, the Company will continue to be at a significant competitive disadvantage compared to the Company's competitors. C. ORGANIZATIONAL STRUCTURE The Company is majority owned by Pemcorp Management Inc., a Canadian private company. (See "Item 7. Major Shareholders and Related Party Transactions") The Company has no operating subsidiaries. -14- D. PROPERTY, PLANTS AND EQUIPMENT The Company owns no property, plant or equipment and there are no current plans to purchase any in the near future. The Company currently utilizes office space in a commercial building located in Vancouver, British Columbia, Canada. The space is shared with several other companies, which share common management. The Company currently pays no rent. The present facilities are believed to be adequate for meeting the Company's needs for the immediate future. If required in the future, the Company does not anticipate that it will have any difficulty in obtaining additional space at reasonable lease rates. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion and analysis of the financial condition and operating results of the Company for the six months ended October 31, 2000 and 1999 and the three fiscal years ended April 30, 2000, 1999 and 1998 should be read in conjunction with the financial statements and related notes included in this Registration Statement. (See Item 18 - Financial Statements.) The Company's financial statements included herein were prepared in accordance with Canadian generally accepted accounted principles. They also comply, in all material respects, with the accounting principles accepted in the United States and the rules and regulations of the Securities and Exchange Commission. The Company has received no revenues and has had no active business operations in any of its last three fiscal years. In the past, the Company has acquired necessary capital through the limited issuance of its common shares, increasing indebtedness and through advances from related parties. There is no assurance that these sources will continue to be available in the future. Commencing May 1, 2000, the Company entered into a new development stage with the acquisition of its Principal Asset. In order to carry out its proposed business plan the Company will need to secure additional capital from the issuance of securities, including equity securities, of the Company. There is no assurance that the Company will secure the necessary capital on terms acceptable to the Company or at all. As a consequence of this uncertainty, the Company may have to discontinue its present business plan and consider an alternative business plan, which may also be highly speculative. The Company has not engaged in any discussions concerning other potential businesses and has no immediate plans to identify and negotiate with prospective businesses. A. OPERATING RESULTS Six Months ended October 31, 2000 Compared to Six Months ended October 31, 1999 The Company's net loss for 2000 was $57,964 compared to a net loss of $37,702 for 1999. Substantially all of the Company's expenses during these periods were administrative in nature and are expected to remain the Company's largest expenditure unless and until the Company secures the requisite capital to implement its proposed business plan. -15- The increase in the Company's net loss from 1999 to 2000 was primarily as a result of an amortization charge in the current year of $10,000 and increased professional fees incurred in connection with the Company's reorganization. Year ended April 30, 2000 Compared to Year ended April 30, 1999 The Company's net loss for 2000 was $187,526 compared to a net loss of $94,464 for 1999. The primary reason for the increase in the Company's net loss from 1999 to 2000 was a one-time write-off of a loan receivable in the amount of $104,873. The loan was made in contemplation of a merger with a private Canadian company. The proposed merger was never consummated and prior management of the Company determined that the loan balance was not collectible. Administrative expenses, also included in the determination of the Company's net loss in each year, decreased from $94,464 in 1999 to $82,653 in 2000, primarily because of reduced professional and transfer agent fees. Management and consulting fees of $60,000 in the aggregate made up the majority of these administrative expenses in each year. Year ended April 30, 1999 Compared to Year ended April 30, 1998 The Company's net loss for 1999 was $94,464 compared to a net loss of $119,625 for 1998. The net loss of each year was entirely as a result of administrative expenses and decreased from 1998 to 1999 primarily as a consequence of reduced professional fees. Management and consulting fees of $60,000 in the aggregate made up the majority of these administrative expenses in each year. B. LIQUIDITY AND CAPITAL RESOURCES As at December 31, 2000, total cash was $13,827; current liabilities exceeded current assets by $53,200; and total liabilities exceeded total assets by $26,534. Included in current and total liabilities is $53,375 due to related parties. The Company recently carried out a capital reorganization and derived its current operating capital from the issuance of common shares and from increasing indebtedness. (See "Item 4. Information on the Company-History and development of the company") The Company has no planned capital expenditures at this time. The Company is contractually committed to pay $2,500 per month for management services. (See "Item 7. Major Shareholders and Related Party Transactions"). This contract may be cancelled by the Company at any time on 30 days written notice. The contracted party has agreed that fees payable under the contract may be accrued and not paid until such time when the Company has adequate working capital, as determined by the Board of Directors at its sole discretion. The balance owing, included in current liabilities, was $13,375 at December 31, 2000. The Company is obligated to pay the cost of renewing the registration of each domain name as it comes due. Current registration fees vary between US$15 and US$35 per name. The registration of 119 of the names expires between April 25 and May 2, 2001. The registration of the remaining 281 names expires between February and April of 2002. The Board of Directors will decide at the appropriate time whether or not to renew the registration. -16- During each of the last three fiscal years, the Company derived most of its operating capital from increasing indebtedness. As at April 30, 2000, current assets were $299, compared to $3,292 and $49,076 at April 30, 1999 and 1998 respectively. Current liabilities were $163,546 at April 30, 2000 compared to $84,586 and $34,906 at April 30, 1999 and 1998 respectively. The increase in the Company's working capital deficit over the period was primarily the result of continuing operating losses. Subsequent to April 30, 2000, the Company issued 3,500,000 common shares in full settlement and satisfaction of a majority of its current liabilities. The Company's current working capital is insufficient to meet its business objectives. The Company's ability to satisfy projected working capital requirements is dependent upon its ability to secure additional funding through public or private sales of securities, including equity securities of the Company. There is no assurance that the Company will be able to secure the necessary capital on terms acceptable to the Company or on any terms. The Board of Directors and senior management have agreed that they will advance to the Company any additional funds, which the Company requires to pay costs associated with this Registration Statement and subsequent regulatory filings over the next twelve months while it attempts to secure the necessary capital to carry out its business plan. Such advances will be made with an expectation of repayment. C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES Not applicable D. TREND INFORMATION The success of the Company depends on increased use of the Internet for advertising, marketing, providing services and conducting business. Commercial use of the Internet is currently at an early stage of development and the future of the Internet, as a means for conducting commerce, is not clear. Recently, companies that are dependent upon the use of the Internet have experienced great difficulty in securing the necessary capital to carry out their business plans. Many such companies have ceased operations and been forced into liquidation. The market value of Internet domain names has, as a result, been significantly reduced over the last twelve months and interest in financing start-up Internet businesses has diminished. This trend represents a significant challenge to the Company proposed operations. As a consequence, the Company's Board of Directors will closely monitor the Company's progress and reassess its plans and strategies on a regular basis, which may result in the Company choosing to discontinue its proposed business in the future and combine with another business, which may also be highly speculative in nature. The Company has not engaged in any discussions concerning potential business combinations and has no immediate plans to identify and negotiate with prospective businesses. -17- ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. DIRECTORS AND SENIOR MANAGEMENT The following are the names, ages and place of residence of the directors and executive officers of the Company and their respective positions with the Company and their principal occupations during the past five years. Leonard Petersen - Mr. Petersen, age 46, is C.E.O, president and a director of the Company and has held these positions since September 6, 2000. He is also secretary and a director of Pemcorp Management Inc. ("Pemcorp"), a Canadian private management consulting services company, and has held these positions since 1990. Mr. Petersen is a chartered accountant in the Province of British Columbia, Canada and a citizen and resident of Canada. William D. McCartney - Mr. McCartney, age 45, is a director of the Company and has held this position since September 6, 2000. He is the president and a director of Pemcorp, and has held these positions since 1990. Mr. McCartney is a chartered accountant in the Province of British Columbia, Canada and a citizen and resident of Canada. Murray J. Oliver - Mr. Oliver, age 34, is a director of the Company and has held this position since September 6, 2000. He is also the sole proprietor of North Star Consulting, an unincorporated consulting services business and has carried on this business since 1993. Mr. Oliver is a citizen and resident of Canada. Paul A. Visosky - Mr. Visosky, age 45, is secretary of the Company and has held this position since September 6, 2000. He has been a practicing attorney since 1983 and is a principal in the law firm of Nexus Venture Capital Lawyers, which is licensed to carry on business in the Province of British Columbia, Canada. Mr. Visosky is a citizen and resident of Canada. None of the directors or officers of the Company are related and there were no arrangements or understandings between any director or officer of the Company and any other person pursuant to which he was selected as a director or officer. B. COMPENSATION In each of the last three fiscal years, the Company paid or accrued management fees of $30,000 to its former chief executive officer, Vernon G. Meyer. Mr. Meyer resigned as chief executive officer on September 6, 2000 and the Company's agreement to pay management fees to Mr. Meyer was terminated by mutual consent effective July 31, 2000. No cash or non-cash compensation was paid or distributed to any officer or director of the Company during the last three fiscal years under any pension, stock option or other plans nor is there any plan for such payments or distributions during the next fiscal year. No monies were set aside or accrued by the Company during the last three fiscal years and no plan presently exists to provide pension, retirement or similar benefits for directors or officers of the Company. -18- Presently, there are no standard or other arrangements under which directors or officers of the Company will be compensated directly for their services in their capacity as directors or officers, except that they are each entitled to be reimbursed for their out-of-pocket expenses. The Company is party to a management agreement with Pemcorp (attached hereto as Exhibit 4.4), which is controlled by two directors of the Company. The Company has no compensatory plan or arrangement to compensate directors or officers of the Company in the event of their termination or following a change in control of the Company. C. BOARD PRACTICES The Company's directors are elected by the shareholders at each annual general meeting and typically hold office until the next annual general meeting at which time they may be re-elected or replaced. The current Board of Directors was elected at the Company's last annual general meeting held on September 6, 2000. The By-laws of the Company permit the directors to appoint directors to fill any casual vacancies that may occur due to resignation of directors. Individuals appointed as directors to fill casual vacancies hold office like any other director until the next annual general meeting at which time they may be re-elected or replaced. The chief executive officer and the secretary of the Company were appointed on September 6, 2000 and hold their respective offices at the discretion of the Board of Directors. The Company's audit committee presently includes three directors, two of which are not officers of the Company, as follows: Leonard Petersen C.E.O., President and Director William D. McCartney Director Murray J. Oliver Director The audit committee reviews the Company's annual and interim financial statements, meets with the Company's auditors, when applicable, and makes recommendations to the Board of Directors. The Company does not presently have a compensation committee. There are no director service contracts that provide for benefits upon termination of service. D. EMPLOYEES The Company has no full or part time employees, except for senior management and the Board of Directors. -19- E. SHARE OWNERSHIP As at December 31, 2000, the present directors and senior management of the Company, as a group own, directly or indirectly a total of 4,089,200 shares representing 88% of the issued and outstanding common shares, as follows: PERCENT TITLE OWNED OF CLASS IDENTITY OF PERSON AMOUNT OF CLASS Common Leonard Petersen 3,239,200 (1) 69.8% Common William D. McCartney 3,239,200 (1) 69.8% Common Murray J. Oliver 150,000 3.2% Common Paul Visosky 100,000 2.1% (1) Includes 2,639,200 owned by Pemcorp, a private Canadian company, indirectly controlled 50% by William D. McCartney and 50% by Leonard Petersen, and 600,000 shares owned indirectly by each of McCartney and Petersen. There are no outstanding options or warrants to purchase securities from the Company and no present arrangements to grant options to any director, officer or employee of the Company. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. MAJOR SHAREHOLDERS To the best of the Company's knowledge, it is not indirectly owned or controlled by any other corporation, except as disclosed below, or foreign government. As of the date of this Registration Statement, there are no persons or groups known to the Company to be the owners of more than 5% of the Company's issued and outstanding shares except as disclosed below. PERCENT TITLE OWNED OF CLASS IDENTITY OF SHAREHOLDER AMOUNT OF CLASS Common Pemcorp Management Inc. 2,639,200 (1) 56.9% Common Petersen Management Inc. 600,000 (2) 12.9% Common WMC Equities Inc. 600,000 (3) 12.9% Common William D. McCartney 3,239,200 (4) 69.8% Common Leonard Petersen 3,239,200 (5) 69.8% (1) Pemcorp, a private Canadian company, is indirectly controlled 50% by William D. McCartney and 50% by Leonard Petersen, both of whom are directors of the Company. (2) Petersen Management Inc., a Canadian private company, is 100% controlled by Leonard Petersen, a director of the Company. (3) WMC Equities Inc., a Canadian private company, is 100% controlled by William D. McCartney, a director of the Company. (4) The number of shares includes all of the shares held by WMC Equities Inc. and Pemcorp. (5) The number of shares includes all of the shares held by Petersen Management Inc. and Pemcorp. -20- At the end of the Company's last fiscal year, Pemcorp owned 139,200 common shares of the Company, adjusted for a reverse split and a forward split that resulted, on a net basis, in the issue of one new share for each ten old shares. The balance of the shares held by major shareholders were issued in October 2000 in connection with the Company' reorganization previously described. (See "Item 4. Information on the Company-History and development of the company") As of December 31, 2000, there were a total of 113 holders of record of the Company's common shares and a total of 4,637,600 common shares were outstanding. Approximately 97,500 common shares, or 2% of the Company's total common shares issued, were held by 23 persons residing in the United States. These numbers do not include shareholders who hold the shares in street name. None of the above persons have different voting rights from other shareholders of the Company. There are no arrangements, known to the Company, the operation of which could result in a change in control of the Company. B. RELATED PARTY TRANSACTIONS The Company paid or accrued consulting fees of $20,000 to Pemcorp from the beginning of the current fiscal year to December 31, 2000 and $30,000 to Pemcorp in each of the last three fiscal years in connection with researching, identifying and negotiating with prospective business acquisitions on behalf of the Company. Pemcorp is a private Canadian company controlled by William D. McCartney and Leonard Petersen both of whom became directors of the Company on September 6, 2000. The Company formalized its relationship with Pemcorp by way of written agreement made effective August 1, 2000, which provides for the payment of $2,500 per month for general management services to be provided by Messrs McCartney and Petersen. The agreement may be cancelled by the Company on 30 days written notice. Pemcorp has agreed that fees payable under the agreement may be accrued and not paid until such time when the Company has adequate working capital, as determined by the Board of Directors at its sole discretion. (Attached hereto as Exhibit 4.4.) The Company entered into an agreement, dated May 1, 2000, to purchase its Principal Asset from a private company (the "Vendor") controlled by William D. McCartney, Leonard Petersen, Murray J. Oliver, all of whom became directors of the Company on September 6, 2000, and/or their respective spouses. The purchase agreement was approved by shareholders of the Company. The purchase consideration consisted of a note in the amount of $40,000 payable without interest on the earlier of: (1) the date on which the Company is in receipt of proceeds totaling $40,000 from the sale, lease or license of any of the assets purchased; (2) the date on which the Company is in receipt of proceeds totaling $200,000 from the sale and issuance of common shares; and (3) June 30, 2001. In addition, the Company agreed to pay the Vendor a royalty over five years equal to 15% of the gross proceeds received from the sale, lease or license of any of the domain names purchased under the agreement to a maximum of $1 million and to pay the cost of renewing the registration of each domain name as it comes due. Current registration fees vary between US$15 and US$35 per name. The registration of 119 of the names expires between April 25 and May 2, 2001. The registration of the remaining 281 names expires between February and April of 2002. (Attached hereto as Exhibit 4.3.) -21- At July 31, 2000, the Company owed Pemcorp and the Company's former chief executive officer $80,250 and $81,663 respectively. These amounts were unsecured, non-interest bearing and without fixed terms of repayment. The Company entered into agreements, made effective July 31, 2000, with each creditor to settle and satisfy their respective claims in full in exchange for a total of 3,500,000 common shares of the Company and the payment of $21,400. These shares were issued on October 26, 2000. (Attached hereto as Exhibit 4.1 and 4.2.) The Company has paid or accrued legal fees of $6,878 to Nexus Venture Capital Lawyers for legal services rendered to December 31, 2000. Nexus is a law firm controlled by Paul Visosky, who became secretary of the Company on September 6, 2000. On October 26, 2000 the Company also issued 450,000 common shares to four directors and senior officers of the Company in connection with a private placement of 650,000 common shares to five Canadian resident investors. C. INTERESTS OF EXPERTS AND COUNSEL Not applicable ITEM 8. FINANCIAL INFORMATION A. FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION FINANCIAL STATEMENTS The Company's interim unaudited financial statements for the six months ended October 31, 2000 and 1999 and audited financial statements for the three fiscal years ended April 30, 2000, 1999 and 1998 together with the auditors' report are included as exhibits to this Registration Statement. These financial statements were prepared in accordance with Canadian generally accepted accounted principles. They also comply, in all material respects, with the accounting principles accepted in the United States and the rules and regulations of the Securities and Exchange Commission. LEGAL PROCEEDINGS The Company is not presently involved in, nor is it aware of any pending legal proceedings, which could have a material adverse effect upon its business or financial position. To the best of the Company's knowledge, there are no legal proceedings contemplated by any governmental or regulatory authority. DIVIDEND POLICY The Company has not paid dividends in any of its last five fiscal years and the Company has no plans to pay dividends in the foreseeable future. -22- B. SIGNIFICANT CHANGES Since April 30, 2000, the end of the Company's most recent fiscal year, the Company completed a reorganization, changed its business and commenced a new development stage. (See "Item 4. Information on the Company-History and development of the company") ITEM 9. THE OFFER AND LISTING A. OFFER AND LISTING DETAILS The Company is not presently offering securities to the public. There is no assurance that an organized market for the common stock of the Company will ever develop and therefore a holder of the common stock of the Company may not be able to readily liquidate his or her investment. B. PLAN OF DISTRIBUTION Not applicable C. MARKETS The Company's common shares do not presently trade on any recognized stock exchange in any other organized securities market. The Company may make application to the National Association of Securities Dealers ("NASD") to have its common shares listed for trading on the NASD OTC Bulletin Board ("OTC") after this Registration Statement becomes effective, however, there is no assurance that a market for the common shares of the Company will ever develop in the United States or, if such a market does develop, that it will continue. The Company believes that having its common shares eligible to trade on the OTC would enhance its ability to secure the requisite capital to carry out its business plan and strategies. The OTC market differs from national and regional stock exchanges in that it (1) is not situated in a single location but operates through communication of bids, offers and confirmations between broker-dealers and (2) securities admitted to quotation are offered by one or more broker-dealers rather than the "specialist" common to stock exchanges. To qualify for listing on the OTC, an equity security must have one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor the company for listing on the OTC. There is no assurance that the Company will successfully engage the services of a registered broker-dealer to sponsor the Company's application to list its common shares on the OTC. D. SELLING SHAREHOLDERS Not applicable E. DILUTION Not applicable -23- F. EXPENSES OF ISSUE Not applicable ITEM 10. ADDITIONAL INFORMATION A. SHARE CAPITAL The Company has an authorized capital of 100,000,000 common shares without par value, of which 500,486 shares were outstanding as of April 30, 2000, the Company's last fiscal year, and 4,637,600 shares were outstanding as of October 31 and December 31, 2000. The common shares are not subject to any future call or assessment and they all have equal voting rights of one vote per share. There are no special rights or restrictions of any nature attached to any of the shares and they all rank equally, as to all benefits that might accrue to the holder thereof. There are no outstanding options or warrants to purchase commons shares of the Company or other securities convertible into common shares of the Company, and the Company is not presently party to any agreement to issue securities of the Company in the future. There were no material changes to the Company's share capital during the last three fiscal years ending April 30, 2000. (See Item 18 - Financial Statements) Since April 30, 2000, the Company completed a reorganization, which included a reverse split and forward split of its issued common shares resulting in the issue, on a net basis, of one new share for ten old shares. In addition, the Company settled certain indebtedness in exchange for common shares of the Company and completed a private placement of common shares for cash as follows: a. the Company issued 3,500,000 post split common shares (representing approximately 75% of the current issued shares) at approximately $0.04 per share to settle debts owing to related parties in the aggregate amount of $140,513; and b. the Company completed a private placement and issued 650,000 post split common shares (representing approximately 14% of the current issued shares) at $0.10 per share to five investors in Canada, including directors and officers of the Company, for aggregate proceeds of $65,000 which proceeds were used primarily to pay certain debts, complete the reorganization and to provide the Company with initial working capital. The prices at which the debts were settled and the private placement completed were arbitrarily chosen. (See "Item 4. Information on the Company-History and development of the Company" and the Company's interim financial statements attached to this Registration Statement as an exhibit for a more complete description of changes to share capital during this period.) -24- B. MEMORANDUM AND ARTICLES OF ASSOCIATION ORGANIZATION AND REGISTOR The Company is a corporation organized in the Yukon Territory, Canada, under the Yukon Business Corporations Act as of October 6, 2000 under No. 28380 by way of Articles of Continuance. OBJECTS AND PURPOSES The Company does not have any objects or purposes stated in its Articles or By-laws. Under Yukon law, the Company can carry on any business except, as set out in Section 5 of the Company's Articles, the Company is restricted from carrying on the business of a railway, steamship, air transport, canal, telegraph, telephone, or irrigation company. DIRECTORS Every director and officer of a Yukon corporation in exercising his powers and discharging his duties must: (a) act honestly and in good faith with a view to the best interests of the corporation, and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. No provision in a contract, the Articles, the By-laws or a resolution relieves a director or officer from the duty to act in accordance with the Act or relieves him from liability for a breach of that duty. The Company's By-laws do not require a director to abstain from voting on a proposal, arrangement or contract in which the director is materially interested. Pursuant to Yukon law, a director or officer of a corporation who: (a) is a party to a material contract or proposed material contract with the corporation, or (b) is a director or an officer of or has a material interest in any person who is a party to a material contract or proposed material contract with the corporation, shall disclose in writing to the corporation or request to have entered in the minutes of meetings of directors the nature and extent of his interest. The By-laws permit the directors to vote on compensation to themselves or any member of their body without independent quorum. Yukon law states that, subject to the Articles, the By-laws or any unanimous shareholder agreement, the directors of a corporation may fix the remuneration of the directors, officers and employees of the corporation. -25- The By-laws provide that the directors may, from time to time, authorize the Company to make any bonds, debentures or other debt obligations issued by the Company. The borrowing powers may be varied by resolution of the directors and ratified by shareholders of the Company. Yukon law states that, unless the Articles or By-laws of, or a unanimous shareholder agreement relating to, a corporation otherwise provide, the directors of a corporation may, without authorization of the shareholders, (a) borrow money on the credit of the corporation, (b) issue, reissue, sell or pledge debt obligations of the corporation, (c) mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the corporation, owned or subsequently acquired, to secure any obligation of the corporation. Unless the articles or bylaws of or a unanimous shareholder agreement relating to a corporation otherwise provide, the directors may, by resolution, delegate the powers referred to above to a director, a committee of directors or an officer. The By-laws do not contain an age limit for retirement of directors and do not contain a requirement that directors own shares of the Company. There is no reference in Yukon law to the agent limit for retirement of directors but the law does state, unless the articles otherwise provide, that a director of a corporation is not required to hold shares issued by the corporation. The By-Laws state that Directors do not stand for re-election at staggered intervals and there is no cumulative voting permitted. Yukon law states that it is not necessary that all directors elected at a meeting of shareholders hold office for the same term and that a director not elected for an expressly stated term ceases to hold office at the close of the first annual meeting of shareholders following his election. COMMON SHARES The Company's authorized share capital consists of 100,000,000 common shares without par value. The Company's shares register is administered by Pacific Corporate Trust Company of Vancouver, British Columbia, as registrar and transfer agent. The holders of the common shares are entitled to vote at any meeting of the shareholders of the Company and have one vote in respect of each common share held by them. In the event of a liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, holders of common shares shall be entitled to receive any remaining property of the Company. Yukon law states that if, in the course of liquidation of a corporation, the shareholders resolve or the liquidator proposes to: (a) exchange all or substantially all the property of the corporation for securities of another body corporate that are to be distributed to the shareholders, or (b) distribute all or part of the property of the corporation to the shareholders in kind, -26- a shareholder may apply to the Supreme Court for an order requiring the distribution of the property of the corporation to be in money. The common shares do not have any redemption or sinking-fund provisions and are not subject to any further capital calls by the Company. There are no provisions discriminating against any existing or perspective holder of common shares as a result of such shareholder owning a substantial number of shares. A meeting of all holders of common shares is required to change the rights of holders of the common shares. DIVIDENDS Holders of common shares are entitled to receive, out of profits and surplus available for dividend, any dividends declared by the directors on the common shares. Any dividend unclaimed after a period of six years from the date on which the dividend has been declared to be payable shall be forfeited and shall revert to the Company. VOTING RIGHTS Each common share represents one vote. The By-laws of the Company state that cumulative voting is not permitted. The Company's By-laws and Yukon law provide that resolutions are passed at shareholder meetings by a simple majority of votes cast, unless a higher vote is required by law. SHAREHOLDER MEETINGS The By-laws of the Company provide that the annual meeting of shareholders shall be held at any location in North America specified by the directors in a notice of meeting. The directors determine the timing of the meeting. The only persons entitled to be present at a meeting of the shareholders shall be those persons entitled to vote thereat. A quorum of shareholders consists of the holders of 5% of the shares entitled to vote at the meeting present in person or represented by proxy. There are no limitations on the right to own securities, including the rights of non-resident or foreign shareholders, to hold or exercise voting rights on the securities imposed by foreign law or by the charter or other constituent documents of the Company. CHANGE IN CONTROL There are no provisions in the Company's Articles of Continuance or By-laws that would have the effect of delaying, deferring or preventing a change of control of the Company. -27- DISCLOSURE OF SHARE HOLDINGS There are no provisions in the By-laws governing the ownership threshold above which shareholder ownership must be disclosed. C. MATERIAL CONTRACTS The Company paid or accrued consulting fees to Pemcorp from the beginning of the current fiscal year to December 31, 2000 and in each of the last three fiscal years in connection with researching, identifying and negotiating with prospective business acquisitions on behalf of the Company. Pemcorp is a private Canadian company controlled by William D. McCartney and Leonard Petersen both of who became directors of the Company on September 6, 2000. The Company formalized its relationship with Pemcorp by way of written agreement made effective August 1, 2000, which provides for the payment of $2,500 per month for general management services to be provided by Messrs McCartney and Petersen. The agreement may be cancelled by the Company with one month written notice. Pemcorp has agreed that fees payable under the agreement may be accrued and not paid until such time when the Company has adequate working capital, as determined by the Board of Directors at its sole discretion. (Attached hereto as Exhibit 4.4.) The Company entered into an agreement, dated May 1, 2000, to purchase its Principal Asset. The purchase consideration consisted of a note in the amount of $40,000 payable without interest on the earlier of: a. the date on which the Company is in receipt of proceeds totaling $40,000 from the sale, lease or license of any of the assets purchased; b. the date on which the Company is in receipt of proceeds totaling $200,000 from the sale and issue of common shares; and c. June 30, 2001. In addition, the Company agreed to pay the Vendor a royalty over five years equal to 15% of the gross proceeds received from the sale, lease or license of any of the domain names purchased under the agreement to a maximum of $1 million and to pay the cost of renewing the registration of each domain name as it comes due. Current registration fees vary between US$15 and US$35 per name. The registration of 119 of the names expires between April 25 and May 2, 2001. The registration of the remaining 281 names expires between February and April of 2002. (Attached hereto as Exhibit 4.3.) D. EXCHANGE CONTROLS There are no governmental laws, decrees or regulations in Canada relating to restrictions on the export of capital affecting the remittance of interest, dividends or other payments to nonresident holders of the Company's shares. Any such remittances, however, are subject to withholding tax. -28- There are no limitations under the laws of Canada, the Yukon Territory or in the charter or any other constituent documents of the Company on the right of foreigners to hold or vote the shares of the Company. However, under the provisions of the Investment Canada Act, when control of a Canadian business is acquired by a non-Canadian, the transaction may be reviewable in certain circumstances by Investment Canada, an agency of the federal government of Canada. Reviewable transactions are those in which a non-Canadian acquires the assets of a Canadian business or the voting shares of a Canadian corporation the value of which assets or shares exceeds $5 million (Canadian). Also, certain transactions are specifically exempted from review. E. TAXATION TAXATION ON DIVIDENDS Generally, cash dividends paid by Canadian corporations to nonresident shareholders are subject to a withholding tax of 25 percent. However, pursuant to Article X[2] of the Canada-United States tax treaty, dividends paid to a resident of the United States are only subject to a 15 percent withholding tax. Further, if the United States resident owns 10 percent or more of the voting shares of the Canadian company paying the dividends, the withholding tax is reduced to 10 percent. In addition to dividend withholding, interest paid to United States residents is subject to a 15 percent withholding tax pursuant to Article XI[2] of the Canada-United States tax treaty. TAXATION ON CAPITAL GAINS A nonresident purchaser who holds shares of the Company as capital property will not be subject to Canadian tax on capital gains realized on the disposition of such shares unless such shares are "taxable Canadian property" within the meaning of the Income Tax Act (Canada) and no relief is afforded under any applicable tax treaty. The shares of the Company would be taxable Canadian property of a nonresident purchaser if the nonresident purchaser used the shares in carrying on a business in Canada or if at any time during the five-year period immediately preceding the disposition not less than 25 percent of the issued shares of any class of the Company belonged to the particular purchaser, persons with whom the purchaser did not deal at arm's length or any combination thereof. Holders of common shares of the Company should seek independent advice from their own professional tax advisors with respect to the Canadian Income Tax consequences arising from the holding of Common Shares of the Company. F. DIVIDENDS AND PAYING AGENTS The Company has not paid dividends in any of its last five fiscal years and the Company has no plans to pay dividends in the foreseeable future. G. STATEMENT BY EXPERTS Not applicable H. DOCUMENTS ON DISPLAY All documents concerning the Company, which are referred to in this Registration Statement are available for inspection at the offices of Nexus Venture Capital Lawyers: Suite 3400, 666 Burrard Street, Vancouver, Canada. -29- I. SUBSIDIARY INFORMATION Not applicable ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is a small business issuer as defined in Rule 405 of the Securities Act of 1933, as amended, and Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and therefore need not provide the information requested by this item. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133. "Accounting For Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 will be effective for the Company's fiscal year beginning May 1, 2000. Because the Company is not involved in any activities covered by SFAS No. 133, the adoption of SFAS No. 133 is not expected to have a material effect on the Company's financial position or results of operations. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not applicable PART II Not applicable -30- PART III ITEM 17. FINANCIAL STATEMENTS Reference is made to Item 18. "Financial Statements". ITEM 18. FINANCIAL STATEMENTS The Company's Financial Statements, Auditor's Reports, if applicable, and Notes to the Financial Statements, which are required to be filed hereunder, are contained on pages 32 through 46 as follows: Page ---- Auditors' Report dated June 20, 2000. . . . . . . . . . . . . . . . 32 Balance Sheets as at April 30, 2000 and 1999 (Audited) and October 31, 2000 (Unaudited). . . . . . . . . . . . . . . . . . . . . . 33, 40 Statements of Operations and Deficit for the six months ended the years ended April 30, 2000, 1999 and 1998 (Audited) and October 31, 2000 (Unaudited) . . . . . . . . . . . . . . . . . . . . 34, 41 Statements of Cash Flows the years ended April 30, 2000, 1999 and 1998 (Audited) and for the six months ended October 31, 2000 (Unaudited). . . . . . . . . . . . . . . . . . . . . 35, 42 Statements of Shareholders Equity since inception to April 30, 2000 (audited) and the six months ended October 31, 2000 (Unaudited). . . . . . . . . . . . . . . . . . . . . 36, 43 Notes to the Financial Statements for the for the year ended April 30, 2000 (Audited) and six months ended October 31, 2000 (Unaudited) . . . . . . . . . . . . . . . . . 37, 44 -31- DAVIDSON & COMPANY Chartered Accountants A Partnership of ==== ================== Incorporated Professionals ========================== AUDITORS' REPORT To the Shareholders of Coast Falcon Resources Ltd. (A Development Stage Company) We have audited the balance sheets of Coast Falcon Resources Ltd. as at April 30, 2000 and 1999 and the statements of operations and deficit, cash flows and shareholders' equity for the years ended April 30, 2000, 1999 and 1998 and the period from the date of formation on July 7, 1992 to April 30, 2000. 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 an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at April 30, 2000 and 1999 and the results of its operations, cash flows and shareholders' equity for the years ended April 30, 2000, 1999 and 1998 and the period from the date of formation on July 7, 1992 to April 30, 2000 in accordance with generally accepted accounting principles in Canada. As required by the Company Act of British Columbia, we report that, in our opinion, these principles have been applied on a consistent basis. "DAVIDSON & COMPANY" Vancouver, Canada Chartered Accountants June 20, 2000 A Member of SC INTERNATIONAL ============================ Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC, Canada, V7Y 1G6 TELEPHONE (604) 687-0947 FAX (604) 687-6172 -32-
COAST FALCON RESOURCES LTD. BALANCE SHEETS (Expressed in Canadian Dollars) (A Development Stage Company) AS AT APRIL 30 =================================================================================== 2000 1999 - ----------------------------------------------------------------------------------- ASSETS CURRENT Cash $ 299 $ 3,292 LOAN RECEIVABLE - 105,573 ------------ ------------ $ 299 $ 108,865 =================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities $ 18,933 $ 5,273 Due to related parties 144,613 79,313 ------------ ------------ 163,546 84,586 ------------ ------------ SHAREHOLDERS' EQUITY Capital stock Authorized 50,000,000 shares without par value Issued April 30, 1999 and 2000 - 5,004, 867 common shares 3,163,181 3,163,181 Deficit accumulated during development stage (3,326,428) (3,138,902) ------------ ------------ (163,247) 24,279 ------------ ------------ $ 299 $ 108,865 ===================================================================================
ON BEHALF OF THE BOARD: /s/ Vernon G. Meyer Director /s/ Kenneth I. Potter Director - ------------------------- -------------------------------- The accompanying notes are an integral part of these financial statements. -33-
COAST FALCON RESOURCES LTD. STATEMENTS OF OPERATIONS AND DEFICIT (Expressed in Canadian Dollars) (A Development Stage Company) ======================================================================================== Cumulative Amounts From Formation on July 7, 1992 to Year Ended April 30 April 30, ---------------------------------------- 2000 2000 1999 1998 ------------ ------------ ------------ ------------ - ---------------------------------------------------------------------------------------- EXPENSES Consulting $ 122,100 $ 30,000 $ 30,000 $ 30,000 Listing and transfer agent fees 64,329 4,923 8,105 8,632 Management fees 216,000 30,000 30,000 30,000 Office and general 67,090 6,441 10,062 7,050 Professional fees 139,330 11,289 16,297 43,943 ------------ ------------ ------------ ------------ LOSS BEFORE OTHER ITEM (608,849) (82,653) (94,464) (119,625) OTHER ITEM Write-off of loan receivable (104,873) (104,873) - - ------------ ------------ ------------ ------------ LOSS FOR THE PERIOD (713,722) (187,526) (94,464) (119,625) DEFICIT, BEGINNING OF PERIOD (2,612,706) (3,138,902) (3,044,438) (2,924,813) ------------ ------------ ------------ ------------ DEFICIT, END OF PERIOD $(3,326,428) $(3,326,428) $(3,138,902) $(3,044,438) ======================================================================================== LOSS PER SHARE $ (0.038) $ (0.019) $ (0.026) ========================================================================================
The accompanying notes are an integral part of these financial statements. -34-
COAST FALCON RESOURCES LTD. STATEMENTS OF CASH FLOWS (Expressed in Canadian Dollars) (A Development Stage Company) ================================================================================================ Cumulative Amounts From Formation on July 7, 1992 to Year Ended April 30 April 30, --------------------------------- 2000 2000 1999 1998 - ------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year $ (713,722) $(187,526) $(94,464) $(119,625) Item not involving cash: Write-off of loan receivable 104,873 104,873 - - Change in non-cash working capital items: Decrease in prepaids - - - 3,460 Increase (decrease) in accounts payable (174,461) 13,660 5,080 (1,968) Increase in due to related parties 48,382 65,300 44,600 5,675 ----------- ---------- --------- ---------- Cash used in operating activities (734,928) (3,693) (44,784) (112,458) ----------- ---------- --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of capital stock 840,100 - - 194,100 ----------- ---------- --------- ---------- Cash provided by financing activities 840,100 - - 194,100 ----------- ---------- --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Loan receivable (104,873) 700 (1,000) (40,340) ----------- ---------- --------- ---------- Cash provided by (used in) investing activities (104,873) 700 (1,000) (40,340) ----------- ---------- --------- ---------- INCREASE (DECREASE) IN CASH FOR THE PERIOD 299 (2,993) (45,784) 41,302 CASH, BEGINNING OF PERIOD - 3,292 49,076 7,774 ----------- ---------- --------- ---------- CASH, END OF PERIOD $ 299 $ 299 $ 3,292 $ 49,076 ================================================================================================ CASH PAID FOR INCOME TAXES $ - $ - $ - $ - ================================================================================================ CASH PAID FOR INTEREST $ - $ - $ - $ - ================================================================================================ There were no non-cash financing and investing transactions during the years ended April 30, 2000, 1999 and 1998.
The accompanying notes are an integral part of these financial statements. -35-
COAST FALCON RESOURCES LTD. STATEMENTS OF SHAREHOLDERS' EQUITY (Expressed in Canadian Dollars) (A Development Stage Company) ========================================================================================== Common Common Deficit Shares Shares Accumulated Issued and Issued and During Fully Paid Fully Paid Development (Number) (Amount) Stage Total - ------------------------------------------------------------------------------------------ Issued upon formation (July 7, 1992) 1,703,719 $ 2,323,081 $ (2,612,706) $(289,625) Loss for the period - - (22,569) (22,569) ----------- ------------ ------------- ---------- Balance, April 30, 1993 1,703,719 2,323,081 (2,635,275) (312,194) Loss for the year - - (62,142) (62,142) ----------- ------------ ------------- ---------- Balance, April 30, 1994 1,703,719 2,323,081 (2,697,417) (374,336) Loss for the year - - (53,880) (53,880) ----------- ------------ ------------- ---------- Balance, April 30, 1995 1,703,719 2,323,081 (2,751,297) (428,216) Loss for the year - - (74,567) (74,567) ----------- ------------ ------------- ---------- Balance, April 30, 1996 1,703,719 2,323,081 (2,825,864) (502,783) Shares issued for cash 2,584,000 646,000 - 646,000 Cancellation of shares (52,726) - - - Loss for the year - - (98,949) (98,949) ----------- ------------ ------------- ---------- Balance, April 30, 1997 4,234,993 2,969,081 (2,924,813) 44,268 Shares issued for cash 776,400 194,100 - 194,100 Loss for the year - - (119,625) (119,625) ----------- ------------ ------------- ---------- Balance, April 30, 1998 5,011,393 3,163,181 (3,044,438) 118,743 Cancellation of shares (6,526) - - - Loss for the year - - (94,464) (94,464) ----------- ------------ ------------- ---------- Balance, April 30, 1999 5,004,867 3,163,181 (3,138,902) 24,279 Loss for the year - - (187,526) (187,526) ----------- ------------ ------------- ---------- Balance, April 30, 2000 5,004,867 $ 3,163,181 $ (3,326,428) $(163,247) ==========================================================================================
The accompanying notes are an integral part of these financial statements. -36- COAST FALCON RESOURCES LTD. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (A Development Stage Company) APRIL 30, 2000 ================================================================================ 1. FORMATION AND SUBSEQUENT EVENT NATURE OF OPERATIONS The Company was formed under the laws of the province of British Columbia, Canada, on July 7, 1992 pursuant to a statutory amalgamation of two predecessor companies previously engaged in the exploration and development of mineral resource properties in Canada. The balance sheets of the predecessor companies were carried over at historical cost. Since the date of formation the Company raised additional private equity capital to settle certain indebtedness and for the further purpose of exploring new lines of business. The Company has yet to conclude a business acquisition or combination. All costs associated with identifying, researching and negotiating with prospective businesses have been charged to earnings in the year they were incurred. The Company will remain dormant until additional financing is secured and new business operations are determined. MANAGEMENT PLANS ON CONTINUED EXISTENCE AND SUBSEQUENT EVENT These financial statements have been prepared in accordance with generally accepted accounting principles in Canada, which contemplates the continuation of the Company as a going concern. However, the Company sustained substantial operating losses and used substantial amounts of working capital in its prior operations. As of April 30, 2000, current liabilities exceeded current assets by $163,247. The Company's ability to continue as a going concern is dependant upon, among other things, its ability to reorganize its current capital, raise additional capital and successfully develop a new line of business, which is not assured. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company entered into an agreement, made effective May 1, 2000, to purchase 400 registered internet domain names each ending with the suffix "inside.com" from a privately held company (the "Vendor"). Total purchase consideration consists of a note in the amount of $40,000 payable without interest on the earlier of; (1) the date on which the Company is in receipt of proceeds totalling $40,000 from the sale or lease of any of its domain names; (2) the date on which the Company is in receipt of proceeds exceeding $200,000 from the sale and issue of common shares; and (3) June 30, 2001. In addition, the Company agrees to pay to the Vendor a royalty over five years equal to 15% of the gross proceeds received from the sale or lease of any of its domain names to a maximum of $1 million. The Company intends, subject to shareholder approval, to reorganize the capital of the Company, change its name to Inside Holdings Inc., or such other name that is acceptable to the relevant governing authorities and the board of directors of the Company, and to carry on the business of developing a network of affiliated destination web sites for transacting e-commerce within several industry segments under a singular brand. The Vendor is a related party by virtue of common share ownership. CANADIAN ACCOUNTING PRINCIPLES The financial statements have been prepared in accordance with generally accepted accounting principles in Canada. All dollar amounts are in Canadian dollars unless otherwise indicated. -37- COAST FALCON RESOURCES LTD. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (A Development Stage Company) APRIL 30, 2000 ================================================================================ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash, loan receivable, accounts payable, accrued liabilities and due to related parties. Unless otherwise noted, it is management's opinion that the fair value of these financial instruments approximate their carrying values and the Company is not exposed to significant interest currency or credit risks arising from these financial instruments. The fair value of amounts due to related parties is not determinable, as there are no stated terms of repayment. LOSS PER SHARE Basic loss per share is calculated based upon the weighted average number of common shares outstanding during the period. 3. INCOME TAXES At April 30, 2000, the Company has income tax benefits which have not been recognized in the Company's accounts relating to the following: Non-capital losses for Canadian income tax purposes of $586,280 may be utilized to reduce taxes on future income from business or property. Unless utilized, the tax benefit of these losses will expire in the following years: 2001 $ 82,653 2002 94,464 2003 119,625 2004 98,949 2005 74,567 2006 53,880 2007 62,142 --------- $ 586,280 ========= Capital losses of $104,873 may be utilized to reduce taxes on future capital gains. Any income tax benefits relating to these losses have been fully reserved and will be recorded as recovery of income taxes in the period of realization. The benefit of these losses may also expire upon a change in control of the Company, which is contemplated in its capital reorganization plans and change of business as previously described in Note 1. -38- COAST FALCON RESOURCES LTD. NOTES TO THE FINANCIAL STATEMENTS (Expressed in Canadian Dollars) (A Development Stage Company) APRIL 30, 2000 ================================================================================ 4. RECONCILIATION OF U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO CANADIAN GAAP These financial statements have been prepared in accordance with generally accepted accounting principles in Canada. These financial statements also comply, in all material respects, with accounting principles generally accepted in the United States and the rules and regulations of the Securities and Exchange Commission. 5. RELATED PARTY TRANSACTIONS The Company paid or accrued $30,000 (1999 - $30,000; 1998 - $30,000) in management fees to a director of the Company and $30,000 (1999 - $30,000; 1998 - $30,000) in consulting fees to a significant shareholder of the Company. -39-
INSIDE HOLDINGS INC. (formerly Coast Falcon Resources Ltd.) BALANCE SHEET (Expressed in Canadian Dollars) (A Development Stage Company) (Unaudited - Prepared by Management) AS AT OCTOBER 31 ==================================================================================================== 2000 1999 - ---------------------------------------------------------------------------------------------------- ASSETS CURRENT Cash $ 14,144 $ 1,027 Receivable 3,258 - ------------ ------------ 17,402 1,027 LOAN RECEIVABLE - 104,873 INTELLECTUAL PROPERTY (Note 3) 30,000 - ------------ ------------ $ 47,402 $ 105,900 ==================================================================================================== ==================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities $ 15,075 $ 7,759 Due to related parties 48,025 111,564 ------------ ------------ 63,100 119,323 ------------ ------------ SHAREHOLDERS' EQUITY Capital stock Authorized 100,000,000 shares without par value Issued October 31, 1999 and 2000 - 5,004, 867 and 4,637,600 common shares 3,368,694 3,163,181 Deficit accumulated during development stage (57,964) - Deficit (3,326,428) (3,176,604) ------------ ------------ (15,698) (13,423) ------------ ------------ $ 47,402 $ 105,900 ====================================================================================================
The accompanying notes are an integral part of these financial statements. -40-
INSIDE HOLDINGS INC. (formerly Coast Falcon Resources Ltd.) STATEMENTS OF OPERATIONS AND DEFICIT (Unaudited - Prepared by Management) (Expressed in Canadian Dollars) (A Development Stage Company) =========================================================================== Cumulative Amounts Six Month Period Ended During October 31 Development -------------------------- Stage 2000 1999 ------------- ------------ ------------ EXPENSES Amortization $ 10,000 $ 10,000 $ - Consulting 7,500 7,500 15,000 Listing and transfer agent fees 7,724 7,724 2,141 Management fees 15,000 15,000 15,000 Office and general 6,447 6,447 3,051 Professional fees 11,293 11,293 2,510 ------------- ------------ ------------ LOSS FOR THE PERIOD (57,964) (57,964) (37,702) DEFICIT, BEGINNING OF PERIOD (3,326,428) (3,326,428) (3,138,902) ------------- ------------ ------------ DEFICIT, END OF PERIOD $ (3,384,392) $(3,384,392) $(3,176,604) =========================================================================== LOSS PER SHARE $ (0.01) $ (0.01) ===========================================================================
The accompanying notes are an integral part of these financial statements. -41-
INSIDE HOLDINGS INC. (formerly Coast Falcon Resources Ltd.) STATEMENT OF CASH FLOWS (Unaudited - Prepared by Management) (Expressed in Canadian Dollars) (A Development Stage Company) ====================================================================================== Cumulative Amounts Six Month Period Ended During October 31 Development --------------------- Stage 2000 1999 - -------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year $ (57,964) $ (57,964) $(37,702) Item not affecting cash Amortization 10,000 10,000 - Change in non-cash working capital items: Increase in receivables (3,258) (3,258) - Increase (decrease) in accounts payable (3,858) (3,858) 2,486 Increase (decrease) in due to related parties (96,588) (96,588) 32,251 ------------- ---------- --------- Cash used in operating activities (151,668) (151,668) (2,965) ------------- ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of capital stock 205,513 205,513 - ------------- ---------- --------- Cash provided by financing activities 205,513 205,513 - ------------- ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of intellectual property (40,000) (40,000) - Loan receivable - - 700 ------------- ---------- --------- Cash used in investing activities (40,000) (40,000) 700 ------------- ---------- --------- INCREASE (DECREASE) IN CASH FOR THE PERIOD 13,845 13,845 (2,265) CASH, BEGINNING OF PERIOD 299 299 3,292 ------------- ---------- --------- CASH, END OF PERIOD $ 14,144 $ 14,144 $ 1,027 ====================================================================================== CASH PAID FOR INCOME TAXES $ - $ - $ - ====================================================================================== CASH PAID FOR INTEREST $ - $ - $ - ======================================================================================
There were no non-cash financing and investing transactions during the six month period ended October 31, 2000 and 1999. The accompanying notes are an integral part of these financial statements. -42-
INSIDE HOLDINGS INC. (formerly Coast Falcon Resources Ltd.) STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited - Prepared by Management) (Expressed in Canadian Dollars) (A Development Stage Company) ======================================================================================================= Common Common Deficit Shares Shares Accumulated Issued and Issued and During Fully Paid Fully Paid Development (Number) (Amount) Stage Deficit Total - ------------------------------------------------------------------------------------------------------- Issued upon formation (July 7, 1992) 1,703,719 $ 2,323,081 $ - $(2,612,706) $(289,625) Loss for the period - - - (22,569) (22,569) ----------- ------------ ------------- ------------ ---------- Balance, April 30, 1993 1,703,719 2,323,081 - (2,635,275) (312,194) Loss for the year - - - (62,142) (62,142) ----------- ------------ ------------- ------------ ---------- Balance, April 30, 1994 1,703,719 2,323,081 - (2,697,417) (374,336) Loss for the year - - - (53,880) (53,880) ----------- ------------ ------------- ------------ ---------- Balance, April 30, 1995 1,703,719 2,323,081 - (2,751,297) (428,216) Loss for the year - - - (74,567) (74,567) ----------- ------------ ------------- ------------ ---------- Balance, April 30, 1996 1,703,719 2,323,081 - (2,825,864) (502,783) Shares issued for cash 2,584,000 646,000 - - 646,000 Cancellation of shares (52,726) - - - - Loss for the year - - - (98,949) (98,949) ----------- ------------ ------------- ------------ ---------- Balance, April 30, 1997 4,234,993 2,969,081 - (2,924,813) 44,268 Shares issued for cash 776,400 194,100 - - 194,100 Loss for the year - - - (119,625) (119,625) ----------- ------------ ------------- ------------ ---------- Balance, April 30, 1998 5,011,393 3,163,181 - (3,044,438) 118,743 Cancellation of shares (6,526) - - - - Loss for the year - - - (94,464) (94,464) ----------- ------------ ------------- ------------ ---------- Balance, April 30, 1999 5,004,867 3,163,181 - (3,138,902) 24,279 Loss for the year - - - (187,526) (187,526) ----------- ------------ ------------- ------------ ---------- Balance, April 30, 2000 5,004,867 3,163,181 - (3,326,428) (163,247) Consolidation (10:1) (4,517,267) - - - - Shares issued for cash 650,000 65,000 - - 65,000 Shares issued for debt settlement 3,500,000 140,513 - - 140,513 Loss for the period - - (57,964) - (57,964) ----------- ------------ ------------- ------------ ---------- Balance, October 31, 2000 4,637,600 $ 3,368,694 $ (57,964) $(3,326,428) $ (15,698) =======================================================================================================
The accompanying notes are an integral part of these financial statements. -43- INSIDE HOLDINGS INC. (formerly Coast Falcon Resources Ltd.) NOTES TO THE FINANCIAL STATEMENTS (Unaudited - Prepared by Management) (Expressed in Canadian Dollars) (A Development Stage Company) OCTOBER 31, 2000 ================================================================================ 1. FORMATION AND SUBSEQUENT EVENT NATURE OF OPERATIONS The Company was formed under the laws of the province of British Columbia, Canada, on July 7, 1992 pursuant to a statutory amalgamation of two predecessor companies previously engaged in the exploration and development of mineral resource properties in Canada and was continued into Yukon on October 6, 2000. The balance sheets of the predecessor companies were carried over at historical cost. Since the date of formation the Company raised additional private equity capital to settle certain indebtedness and for the further purpose of exploring new lines of business. All costs associated with identifying, researching and negotiating with prospective businesses have been charged to earnings in the year they were incurred. MANAGEMENT PLANS ON CONTINUED EXISTENCE AND SUBSEQUENT EVENT These financial statements have been prepared in accordance with generally accepted accounting principles in Canada, which contemplates the continuation of the Company as a going concern. However, the Company sustained substantial operating losses and used substantial amounts of working capital in its prior operations. As of October 31, 2000, current liabilities exceeded current assets by $45,698. The Company's ability to continue as a going concern is dependant upon, among other things, its ability to reorganize its current capital, raise additional capital and successfully develop the new line of business, which is not assured. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. On May 1, 2000, the Company purchased 400 registered internet domain names each ending with the suffix "inside.com" from a privately held company (the "Vendor"). Total purchase consideration consists of a note in the amount of $40,000 payable without interest on the earlier of; (1) the date on which the Company is in receipt of proceeds totalling $40,000 from the sale or lease of any of its domain names; (2) the date on which the Company is in receipt of proceeds exceeding $200,000 from the sale and issue of common shares; and (3) June 30, 2001. In addition, the Company agrees to pay to the Vendor a royalty over five years equal to 15% of the gross proceeds received from the sale or lease of any of its domain names to a maximum of $1 million. The Company intends to carry on the business of developing a network of affiliated destination web sites for transacting e-commerce within several industry segments under a singular brand. As a consequence of the agreement and the Company's plans, these financial statements have been prepared to reflect a new development stage commencing on May 1, 2000. The Vendor is a related party by virtue of common share ownership. CANADIAN ACCOUNTING PRINCIPLES The financial statements have been prepared in accordance with generally accepted accounting principles in Canada. All dollar amounts are in Canadian dollars unless otherwise indicated. -44- INSIDE HOLDINGS INC. (FORMERLY COAST FALCON RESOURCES LTD.) NOTES TO THE FINANCIAL STATEMENTS (Unaudited - Prepared by Management) (Expressed in Canadian Dollars) (A Development Stage Company) OCTOBER 31, 2000 ================================================================================ 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash, loan receivable, accounts payable, accrued liabilities and due to related parties. Unless otherwise noted, it is management's opinion that the fair value of these financial instruments approximate their carrying values and the Company is not exposed to significant interest currency or credit risks arising from these financial instruments. The fair value of amounts due to related parties is not determinable, as there are no stated terms of repayment. INTELLECTUAL PROPERTY Intellectual property is recorded at cost and is amortized over two years. LOSS PER SHARE Basic loss per share is calculated based upon the weighted average number of common shares outstanding during the period. 3. INTELLECTUAL PROPERTY ========================================================================== Net Book Value Accumulated -------------- Cost Amortization 2000 1999 -------------------------------------------------------------------------- Domain names $ 40,000 $ 10,000 $ 30,000 $ - ========================================================================== 4. INCOME TAXES The benefit of any losses previously recognized expired upon a change in control of the Company. -45- INSIDE HOLDINGS INC. (formerly Coast Falcon Resources Ltd.) NOTES TO THE FINANCIAL STATEMENTS (Unaudited - Prepared by Management) (Expressed in Canadian Dollars) (A Development Stage Company) OCTOBER 31, 2000 ================================================================================ 5. RECONCILIATION OF U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO CANADIAN GAAP These financial statements have been prepared in accordance with generally accepted accounting principles in Canada. These financial statements also comply, in all material respects, with accounting principles generally accepted in the United States and the rules and regulations of the Securities and Exchange Commission. 6. RELATED PARTY TRANSACTIONS The Company paid or accrued $15,000 (1999 - $7,500) in management fees to a former director of the Company and to a company controlled by directors of the Company and $7,500 (1999 - $7,500) in consulting fees to a significant shareholder of the Company. -46- ITEM 19. EXHIBITS Page ---- 1.1 Amalgamation Agreement dated February 26, 1992 between McConnell-Peel Resources Ltd. and Sheba Copper Mines Limited . . . . 50 1.2 Amendment to the Memorandum dated September 11, 2000 changing the Company's name, consolidating, subdividing and increasing its authorized capital. . . . . . . . . . . . . . . . . . 58 1.3 Certificate of Change of Name dated September 11, 2000 . . . 61 1.4 The Articles of Continuance of the Company dated October 6, 2000 . . 62 1.5 Bylaws of the Company . . . . . . . . . . . . . . . . . . . . . .65 1.6 Certificate of Continuance dated October 6, 2000 . . . . . . .77 2.1 Specimen Share Certificate . . . . . . . . . . . . . . . . . . . .78 4.1 Assignment and Settlement Agreement dated July 31, 2000 between the Company, Vernon Meyer, WMC Equities Inc., Petersen Management Inc. and Pemcorp Management Inc . . . . . . . . . . . . .80 4.2 Settlement Agreement dated July 31, 2000 between the Company and Pemcorp Management Inc. . . . . . .. . . . . . . . . . . . . . 84 4.3 Asset Purchase Agreement dated May 1, 2000 between 596319 B.C. Ltd. and the Company . . . . . . . . . . . . . . . . . . . . . .87 4.4 Management Agreement dated August 1, 2000 between the Company and Pemcorp Management Inc . . . . . . . .. . .. . . . . . 98 -47- SIGNATURES The Company hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf. INSIDE HOLDINGS INC. /s/ Leonard Petersen - ------------------------------- By: Leonard Petersen Its: President Dated: February 27, 2001 -48- EXHIBIT INDEX Page ---- 1.1 Amalgamation Agreement dated February 26, 1992 between McConnell-Peel Resources Ltd. and Sheba Copper Mines Limited . . . . 50 1.2 Amendment to the Memorandum dated September 11, 2000 changing the Company's name, consolidating, subdividing and increasing its authorized capital. . . . . . . . . . . . . . . . . . 58 1.3 Certificate of Change of Name dated September 11, 2000 . . . 61 1.4 The Articles of Continuance of the Company dated October 6, 2000 . . 62 1.5 Bylaws of the Company . . . . . . . . . . . . . . . . . . . . . .65 1.6 Certificate of Continuance dated October 6, 2000 . . . . . . .77 2.1 Specimen Share Certificate . . . . . . . . . . . . . . . . . . . .78 4.1 Assignment and Settlement Agreement dated July 31, 2000 between the Company, Vernon Meyer, WMC Equities Inc., Petersen Management Inc. and Pemcorp Management Inc . . . . . . . . . . . . .80 4.2 Settlement Agreement dated July 31, 2000 between the Company and Pemcorp Management Inc. . . . . . .. . . . . . . . . . . . . . 84 4.3 Asset Purchase Agreement dated May 1, 2000 between 596319 B.C. Ltd. and the Company . . . . . . . . . . . . . . . . . . . . . .87 4.4 Management Agreement dated August 1, 2000 between the Company and Pemcorp Management Inc . . . . . . . .. . .. . . . . . 98 -49- EX-1.1 2 0002.txt EXHIBIT 1.1 AMALGAMATION AGREEMENT ---------------------- THIS AGREEMENT made as of the 26th day of February , 1992. BETWEEN: McCONNELL-PEEL RESOURCES LTD., a Company duly --------------------------------- incorporated under the laws of the Province of British Columbia, and having its Head Office situate at Suite 1610, 675 West Hastings Street, in the City of Vancouver, Province of British Columbia, V65 1N2; (hereinafter called "McPeel") OF THE FIRST PART AND: SHEBA COPPER MINES LIMITED a Company duly incorporated -------------------------- under the laws of the Province of British Columbia, and having its Head Office situate at Suite 1610, 675 West Hastings Street, in the City of Vancouver, Province of British Columbia, V6B 1N2; (hereinafter called "Sheba") OF THE SECOND PART WHEREAS: A. McPeel was incorporated pursuant to the Act and is authorized to issue Two Hundred Million (200,000,000) Shares divided into One Hundred Million (100,000,000) Common Class "A" Shares without par value of which 7,203,904 shares are issued and outstanding and One Hundred Million (100,000,000) Preferred Class "B" Shares, with a par value of $5.00 each, and having attached thereto the special rights and restrictions set forth in the Articles of the Company, of which none are issued and outstanding; B. Sheba was incorporated pursuant to the Act and is authorized to issue One Hundred and Fifty Million (150,000,000) Shares divided into One Hundred Million (100,000,000) Common Class "A" Shares without par value of which 9,420,779 shares are issued and outstanding arid Fifty Million (50,000,000) Preferred Class "B" Shares, with a par value of $5.00 each and having attached thereto the special rights and restrictions set forth in the Articles of the Company, of which none are issued and outstanding; NOW THEREFORE the parties hereto agree as follows: This is exhibit "B" referred to --- In the affidavit of PE HOGAN -------- sworn before me this 25th ---- day of June 1992 --------- -- /s/ ------------------------------------ A Commissioner for taking Affidavits for British Colombia -50- ARTICLE 1 DEFINITIONS 1.1 For the purposes of this Agreement: (a) "Act" means the Company Act of British Columbia; (b) "Agreement" means this Amalgamation Agreement and includes the Schedules attached hereto; (c) "Amalgamated Company" means the company continuing from the Amalgamation; (d) "Amalgamating Companies" means McConnell.-Peel Resources Ltd. arid Sheba Copper Mines Limited; (e) "Amalgamation" means the amalgamation of the Amalgamating Companies as contemplated in this Agreement; (f) "Amalgamation Circular" means the joint management information circular of McPeel and Sheba providing material disclosure with respect to the proposed Amalgamation and dated (g) "Effective Date" means the date of the Amalgamation as set forth in the Certificate of Amalgamation to be issued to the Amalgamated Company pursuant to the Act; (h) "McPeel common shares" means the common class "A" shares of McPeel as the same are constituted on the date hereof and on the Effective Date; (i) "Sheba common shares" means the common class "A" shares of Sheba as the same are constituted on the date hereof and on the Effective Date; (j) "McPeel Incentive Options" means incentive stock options granted to directors and employees of McPeel to purchase McPeel common shares which are outstanding on the Effective Date; (k) "Sheba Incentive Options" means incentive stock options granted to directors and employees of Sheba to purchase Sheba common shares which are outstanding on the Effective Date; Words and phrases used herein and defined in the Act shall have the same meaning herein as in the Act unless the Context otherwise requires. -51- ARTICLE 2 AMALGAMATION 2.1 Agreement --------- The Amalgamating Companies agree to amalgamate pursuant to the provisions of Section 272 of the Act as of the Effective Date and to continue as one corporation on the terms and conditions are herein described. 2.2 Effective Date of the Amalgamation -------------------------------------- On the Effective Date, the Amalgamation becomes effective and the Amalgamating Companies shall be amalgamated and continued as one corporation under the terms and conditions or the Agreement. ARTICLE 3 AMALGAMATED COMPANY 3.1 Name ---- The name of the Amalgamated Company shall be "Coast Falcon Resources Ltd." 3.2 Business -------- There shall be no restrictions on the business that the Amalgamated Company may carry on. 3.3 Registered Office ------------------ The registered office of the Amalgamated Company shall be 1083 Lodge Road, North Vancouver, British Columbia, V7R 1W7. 3.4 Authorized Capital ------------------- The authorized share capital of the Amalgamated Company shall consist of Fifty Million (50,000,000) common shares without par value. 3.5 Memorandum and Articles ------------------------- The Memorandum and Articles of the Amalgamated Company shall be as set out in Schedule I and II, respectively, and as approved in writing by the Registrar under the Act in accordance with Section 272 of the Act. -52- 3.6 Restriction on Transfer ------------------------- The Amalgamated Company shall be a "reporting company" as defined by the Act and there shall be no restrictions upon the right to transfer any shares of the Amalgamated Company. 3.7 Directors (a) Number: The number of directors of the Amalgamated Company ------ shall be determined at Four (4): (b) First Directors: The first directors of the Amalgamated ---------------- Company shall be the persons whose names, addresses and occupations appear below: Full Name and Address Occupation ------------------------ ---------- Vernon George Meyer Businessman 42 - 1216 Johnston Street, Coquitlam, B.C. V3B 4T2 Kenneth I. Potter Businessman 286B Hart Street, Coquitlam, B.C. V3K 4A9 A. Newell Smith Business 5336 - 4A Avenue, Consultant Tsawwassen, B.C. V4M 1115 G. Barrie Johnston Banker, CIBC 4284 Madely Road, (Retired) North Vancouver, B.C. V7N 1E9 3.8 Management ---------- Upon the Effective Date, the Amalgamated Company shall be managed and operated in accordance with the Act. 3.9 First Annual General Meeting ------------------------------- The first Annual General Meeting of the Amalgamated Company shall be held within twelve (12) months of the Effective Date. -53- ARTICLE 4 CONVERSION OF SECURITIES INTO THOSE OF THE AMALGAMATED COMPANY 4.1 Conversion of Securities -------------------------- The securities in the capital of the Amalgamating Companies which are issued and outstanding immediately prior to the Effective Date shall, on and from the effective Date, be converted into securities of the Amalgamated Company as follows: (a) The 7.203,904 issued shares of McPeel shall be exchanged for 720,390 shares of the Amalgamated Company on the basis of One (1) share of the Amalgamated company for every Ten (10) shares of McPeel held; (b) The 9,420,779 issued shares of Sheba shall be exchanged for 942,078 shares of the Amalgamated Company on the basis of One (1) share of the Amalgamated Company for every Ten (10) shares of Sheba held; (c) All McPeel Incentive Options shall entitle the holders thereof to purchase common shares of the Amalgamated Company upon the same terms and conditions as such options were first issued; (d) All Sheba Incentive Options shall entitle the holders thereof to purchase common shares of the Amalgamated Company upon the same terms and conditions as such options were first issued; (e) All of the Incentive Options shall entitle the holders to purchase common shares of the Amalgamated Company upon the basis of One (1) Amalgamated Company share for each Ten (10) share for which the option was granted at an exercise price equal to one tenth of the exercise price specified in the respective agreements granting such Incentive Options. After filing of the Memorandum and Articles of the Amalgamated Company and the issue of a Certificate of Amalgamation in respect thereof, the shareholders of the Amalgamating Companies, when requested by the Amalgamated Company, shall surrender the certificates representing the shares held by them in such Amalgamating Companies and, subject to the provisions of the Act, shall be entitled in return to receive certificates for shares -of the Amalgamated Company on the basis aforesaid. -54- ARTICLE 5 COURT APPROVAL 5.1 Court Approval --------------- Upon the shareholders of each of the Amalgamating Companies approving this Agreement by special resolution in accordance with the Act, the Amalgamating Companies shall jointly apply to the Supreme Court of British Columbia no later than June 24th, 1992, for an order approving the Amalgamation in accordance with Section 273 of the Act. ARTICLE 6 MUTUAL CONDITIONS PRECEDENT 6.1 Approvals --------- The respective obligations of the Amalgamating Companies to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment of the following conditions: (a) this Agreement shall have been approved by special resolutions passed at special meetings of the shareholders of the Amalgamating Companies, each called and held in accordance with the provisions of the Act; (b) the Amalgamation shall have been approved by order of the Supreme Court of British Columbia; and (c) this Agreement, the Memorandum and Articles of the Amalgamated Company and other documents as are required shall have been delivered to the Registrar under the Act for registration; ARTICLE 7 GENERAL 7.1 Assets and Liabilities ------------------------ Each of the Amalgamating Companies shall contribute to the Amalgamated Company all of its assets, subject to its liabilities, as they exist immediately before the Amalgamation. -55- The Amalgamated Company shall possess all the property, rights, privileges and franchises, as they exist immediately before the Amalgamation, and shall be subject to all the liabilities, contracts, disabilities and debts of each of the Amalgamating Companies, as they exist immediately before the Amalgamation. All rights of creditors against the property, assets, rights, privilege, and franchises of the Amalgamating Companies and all liens upon their property, rights and assets shall be unimpaired by the Amalgamation and all debts, contracts, liabilities and duties of the Amalgamating Companies shall thenceforth attach to and may be enforced against the Amalgamated Company. No action or proceeding by or against any of the Amalgamating Companies shall abate or be affected by the Amalgamation, but, for all purposes of such action or proceeding, the name of the Amalgamated Company shall be substituted in such action or proceeding in the place of the name of the relevant Amalgamating Companies. 7.2 Registrar and Transfer Agent ---------------------------- The Registrar and Transfer Agent for the securities of the Amalgamated Company shall be Montreal Trust Company at its principal office in Vancouver, British Columbia. 7.3 Auditors -------- The Auditors of the Amalgamated Company shall be Davidson & Company, Chartered Accountants, and their remuneration may be fixed from time to time by the directors of the Amalgamated Company. 7.4 Modifications ------------- Each of the Amalgamating Companies may: (a) by special resolution of each of them, assent to any alteration or modification of this Agreement, and (b) by a resolution of their respective directors, assent to any alteration or modification of this Agreement which the Registrar under the Act or the Supreme Court of British Columbia may require and all alterations or modifications so assented to shall be binding upon the Amalgamating Companies. 7.5 Termination ----------- This Agreement may be terminated by the mutual agreement of the Amalgamating Companies at any time prior to the issuance of a certificate of amalgamation by the Registrar under the Act. -56- 7.6 Governing Law -------------- This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable thereto. 7.7 Entire Agreement ---------------- This Agreement constitutes the entire agreement among the parties relating to the subject matter hereof and supersedes all prior agreements and understandings, oral and written, between the parties thereto with respect to the subject matter hereof IN WITNESS WHERETO the parties hereto have hereunto executed this Agreement the day and year first above written. The Corporate Seal of McCONNELL- ) PEEL RESOURCES LTD. was hereunto ) affixed in the presence of: ) ) /s/ K.L. Potter ) - ----------------------------------- ) ) ) K.L. Potter ) - ----------------------------------- ) ) The Corporate Seal of SHEBA COPPER ) MINES LIMITED was hereunto ) affixed in the presence of: ) ) /s/ K.L. Potter ) - ----------------------------------- ) ) ) K.L. Potter ) - ----------------------------------- ) ) -57- EX-1.2 3 0003.txt EXHIBIT 1.2 I CERTIFY THIS IS A COPY OF A DOCUMENT FILED ON FORM 19 SEP 11 2000 (Section 343) COMPANY ACT /s/ JOHN S. POWELL 12 JOHN S. POWELL REGISTRAR OF COMPANIES Special Resolution Certificate of PROVINCE OF BRITISH COLOMBIA Incorporation No. 428549 The following special resolution was passed by the company referred to below on the date stated: Name of company: Coast Falcon Resources Ltd. Date resolution passed: September 6, 2000 Resolution: "CHANGE OF NAME RESOLVED, AS A SPECIAL RESOLUTION, THAT: 1. pursuant to section 223(1) of the Company Act (British Columbia), the name of the Company be changed from Coast Falcon Resources Ltd. to inside Holdings Inc.; and 2. the Memorandum of the Company be altered to reflect the change of name of the Company from Coast Falcon Resources Ltd. to Inside Holdings Inc. CONSOLIDATION OF SHARE CAPITAL RESOLVED, AS A SPECIAL RESOLUTION, THAT: 1. pursuant to section 231(l) of the Company Act (British Columbia), all of the 50,000,000 Common Shares without par value, both issued and unissued, be consolidated into 50,000 Common Shares without par value, every 1,000 of such shares before consolidation being consolidated into one share with all fractions being rounded down and no payment being required to be made in respect thereof by the Company; 2. that paragraph 2 of the Memorandum of the Company be altered to read as follows: '2. The authorized capital of the Company consists of 50,000 Common Shares without par value.'. 3. the directors of the Company be authorized not to proceed with the consolidation at any time if, in their sole discretion, they believe it is not in the best interest of the Company. SUBDIVISION OF SHARE CAPITAL RESOLVED, AS A SPECIAL RESOLUTION, THAT: 1. pursuant to section 231(1) of the Company Act (British Columbia), all of the 50,000 Common Shares without par value, both issued and unissued, be subdivided into 5,000,000 Common Shares without par value, every one of such shares before subdivision being subdivided into 100 shares; -58- 2. that paragraph 2 of the Memorandum of the Company be altered to read as follows: '2. The authorized capital of the Company consists of 5,000,000 Common Shares without par value.'. 3. the directors of the Company be authorized not to proceed with the subdivision at any time if, in their sole discretion, they believe it is not in the best interest of the Company. INCREASE IN AUTHORIZED CAPITAL RESOLVED, AS A SPECIAL RESOLUTION, THAT: 1. pursuant to section 230(1) of the Company Act (British Columbia), the authorized capital of the Company be increased from 5,000,000 Common Shares without par value to 100,000,000 Common Shares without par value by creating an additional 95,000,000 Common Shares without par value; and; 2. that paragraph 2 of the Memorandum of the Company, in the form attached hereto as Schedule "A", be altered to read as follows: '2. The authorized capital of the Company consists of 100,000,000 Common Shares without par value.'" Certified a true copy this 8th day of September, 2000. ----- (Signature) /s/ Paul A. Visosky ---------------------- (Relationship company) Solicitor -59- SCHEDULE MEMORANDUM Of INSIDE HOLDINGS INC. (as altered by a Special Resolution dated the 6th day of September, 2000) 1. The name of the Company is "Inside Holdings Inc."; 2. The authorized capital of the Company consists of 100,000,000 Common Shares without par value. -60- EX-1.3 4 0004.txt EXHIBIT 1.3 NUMBER 428549 BRITISH COLUMBIA CERTIFICATE OF CHANGE OF NAME COMPANY ACT I Hereby Certify that COAST FALCON RESOURCES LTD. has this day changed its name to INSIDE HOLDINGS INC. Issued under my hand at Victoria, British Columbia on September 11, 2000 /s/ JOHN S. POWELL JOHN S. POWELL Registrar of Companies PROVINCE OF BRITISH COLUMBIA CANADA -61- EX-1.4 5 0005.txt EXHIBIT 1.4 YUKON BUSINESS CORPORATIONS ACT (Section 190) Form 3-01 ARTICLES OF CONTINUANCE ________________________________________________________________________________ 1. Name of Corporation: INSIDE HOLDINGS INC. ________________________________________________________________________________ 2. The classes and any maximum number of shares that the Corporation is authorized to issue: The attached Schedule "A" is incorporated and forms part of the Articles of Continuance. ________________________________________________________________________________ 3. Restrictions, if any, on share transfers: There are no restrictions on the share transfers. ________________________________________________________________________________ 4. Number (or minimum and maximum number) of Directors: Not less than three (3), nor more than fifteen (15) ________________________________________________________________________________ 5. Restrictions, if any, on business the Corporation may carry on: The Corporation is restricted from carrying on the business of a railway, steamship, air transport, canal, telegraph, telephone or irrigation company. ________________________________________________________________________________ 6. If change of name effected, previous name: NOT APPLICABLE ________________________________________________________________________________ 7. Details of incorporation: Amalgamated in British Columbia on July 7, 1992 under number 428549. ________________________________________________________________________________ 8. Other provisions, if any: The attached Schedule "B" is incorporated and forms part of the Articles of Continuance. ________________________________________________________________________________ 9. Date: October 4, 2000 ---------------------------- Signature /s/ Paul A. Visosky Title: Secretary -------------------------------- ------------------------ ________________________________________________________________________________ -62- SCHEDULE "A" INSIDE HOLDINGS INC. The classes and any maximum number of shares that the Corporation is authorized to issue: The Corporation is authorized to issue 100,000,000 Common shares without nominal or par value and the authorized capital of the Corporation is: 1. Common shares shall have attached thereto the following preferences, rights, conditions, restrictions, limitations, or prohibitions: (a) Voting ------ Holders of Common shares shall be entitled to vote at any meeting of the shareholders of the Corporation and have one vote in respect of each Common share held by them. (b) Dividends --------- Holders of Common shares shall be entitled to receive, out of all profits or surplus available for dividends, any dividend declared by the Corporation on the Common shares. (c) Participation in Assets on Dissolution ------------------------------------------ In the event of liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, holders of Common shares shall be entitled to receive the remaining property of the Corporation. -63- SCHEDULE "B" INSIDE HOLDINGS INC. Other provisions, if any: 1. A meeting of the shareholders of the Corporation may, in the Directors' unfettered discretion, be held at any location in North America specified by the Directors in the Notice of such meeting. 2. The Directors may, between annual general meetings, appoint one or more additional Directors of the Corporation to serve until the next annual general meeting, but the number of additional Directors shall not at any time exceed one third of the number of Directors who held office at the expiration of the last annual general meeting of the Corporation, provided that the total number of directors shall not exceed the maximum number of directors fixed pursuant to the Articles. -64- EX-1.5 6 0006.txt EXHIBIT 1.5 BYLAW NO. 1 INSIDE HOLDINGS INC. TABLE OF CONTENTS 1. INTERPRETATION 1.1 INTERPRETATION 1.2 CONFLICT WITH ACT OR ARTICLES 1.3 HEADINGS 2. BUSINESS OF THE CORPORATION 2.1 CORPORATE SEAL 2.2 EXECUTION OF INSTRUMENTS 2.3 BANKING AND FINANCIAL ARRANGEMENTS 2.4 VOTING RIGHTS IN OTHER BODIES CORPORATE 2.5 WITHHOLDING INFORMATION FROM SHAREHOLDERS 3. DIRECTORS AND BOARD 3.1 CHAIRMAN AND ALTERNATE 3.2 MEETINGS - PROCEDURE - CASTING VOTE 3.3 MEETINGS BY CONFERENCE TELEPHONE 3.4 NOTICE OF MEETING 3.5 WAIVER OF NOTICE OF MEETING 3.6 QUORUM 3.7 CONTINUING DIRECTORS MAY ACT DURING VACANCY 3.8 VALIDITY OF ACTS OF DIRECTORS 3.9 RESOLUTION IN WRITING EFFECTIVE 3.10 RESOLUTIONS NEED NOT BE SECONDED AND CHAIRMAN MAY MOVE A MOTION 3.11 REMUNERATION AND EXPENSES 3.12 ALTERNATE DIRECTORS 4. EXECUTIVE AND OTHER COMMITTEE 4.1 APPOINTMENT OF EXECUTIVE COMMITTEE 4.2 APPOINTMENT OF COMMITTEES 4.3 PROCEDURE AT MEETINGS 5. POWERS AND DUTIES OF THE DIRECTORS 5.1 MANAGEMENT OF AFFAIRS AND BUSINESS 5.2 APPOINTMENT OF ATTORNEY 6. OFFICERS 6.1 APPOINTMENT 6.2 DELEGATION -65- 6.3 CHAIRMAN OF THE BOARD 6.4 MANAGING DIRECTOR 6.5 PRESIDENT 6.6 VICE PRESIDENT 6.7 SECRETARY 6.8 TREASURER 6.9 OTHER OFFICERS 6.10 VARIATION OF THE POWERS AND DUTIES 6.11 REMOVAL AND DISCHARGE 6.12 TERM OF OFFICE 6.13 TERMS OF EMPLOYMENT AND REMUNERATION 6.14 AGENTS AND ATTORNEYS 6.15 FIDELITY BONDS 7. INDEMNIFICATION 7.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS AGAINST ACTION BY THIRD PARTIES 7.2 INDEMNIFICATION OF DIRECTORS AND OFFICERS AGAINST ACTIONS BY THE CORPORATION 7.3 RIGHT OF INDEMNITY NOT EXCLUSIVE 7.4 INSURANCE 8. SHARES 8.1 ISSUANCE AND OPTIONS 8.2 NON-RECOGNITION OF TRUSTS 8.3 JOINT SHAREHOLDERS 9. BORROWING POWERS AND FINANCIAL ASSISTANCE 9.1 POWERS OF DIRECTORS 9.2 NEGOTIABILITY OF DEBT OBLIGATION 9.3 SPECIAL RIGHTS ATTACHED TO DEBT OBLIGATION 10. DIVIDENDS AND RIGHTS 10.1 DIVIDEND CHEQUES 10.2 JOINT SHAREHOLDERS 10.3 NON-RECEIPT OF CHEQUES 10.4 UNCLAIMED DIVIDENDS 11. MEETINGS OF SHAREHOLDERS 11.1 ANNUAL MEETINGS 11.2 TIME FOR DEPOSIT OF PROXIES 11.3 PERSONS ENTITLED TO BE PRESENT 11.4 QUORUM 11.5 ADJOURNMENT 11.6 CHAIRMAN 11.7 SECRETARY OF MEETING 11.8 MOTIONS 11.9 CHAIRMAN'S CASTING VOTE 11.10 CHAIRMAN'S DECLARATION -66- 11.11 VOTING BY BALLOT 11.12 SCRUTINEERS 12. NOTICES 12.1 NOTICES 12.2 NOTICE OF JOINT SHAREHOLDERS 12.3 CHANGE OF ADDRESS 12.4 SIGNATURE ON NOTICE 13. EFFECTIVE DATE AND AMENDMENT 13.1 EFFECTIVE DATE 13.2 AMENDING BYLAW -67- BYLAW NO. 1 A Bylaw relating generally to the transaction of the business and affairs of INSIDE HOLDINGS INC. (the "Corporation") SECTION ONE - INTERPRETATION 1.1 INTERPRETATION. Words and expressions defined in the Business Corporations Act, Revised Statutes of the Yukon 1986, Chapter 15 as amended from time to time, and any Statute that may be substituted therefor, as amended from time to time (the "Act") have the same meanings when used in the Bylaws. Words importing the singular number include the plural and vice versa and words importing gender include masculine, feminine and neuter genders as required by the context. 1.2 CONFLICT WITH ACT OR ARTICLES. The Bylaws are subject to the provisions of the Act and the articles of the Corporation and in the event of conflict between the provisions of any Bylaws and the provisions of the Act or the articles, the provisions of the Act or the articles shall prevail over the Bylaws. 1.3 HEADINGS. The headings and indices used in the Bylaws are inserted for convenience of reference only and do not affect the interpretation of the Bylaws or any part thereof. SECTION TWO - BUSINESS OF THE CORPORATION 2.1 CORPORATE SEAL. The Board of Directors of the Corporation (the "Board") may adopt and change a corporate seal which shall contain the name of the Corporation and the Board may cause to be created as many duplicates thereof as the Board shall determine. 2.2 EXECUTION OF INSTRUMENTS. The Board may from time to time direct the manner in which, and the person or persons by whom, any particular document or class of documents may or shall be signed and delivered. In the absence of a directors' resolution concerning the execution of any particular documents, documents shall be signed and delivered on behalf of the Corporation by one person, who holds the office of Chairman of the Board, President, Managing Director, Vice-President, Director, Secretary, Treasurer, Assistant-Secretary or Assistant-Treasurer or any other office created by bylaw or by resolution of the Board, including affixing the corporate seal to all such documents as may require the same. 2.3 BANKING AND FINANCIAL ARRANGEMENTS. The banking and financial business of the Corporation including, without limitation, the borrowing of money and the giving of security therefor, shall be transacted with such banks, trust companies or other bodies corporate or organizations as may from time to time be designated by or under the authority of the Board. Such banking and financial business or any part thereof shall be transacted under such agreements, instructions and delegations of powers as the Board may from time to time prescribe or authorize. 2.4 VOTING RIGHTS IN OTHER BODIES CORPORATE. The signing officers of the Corporation may execute and deliver proxies and arrange for the issuance of voting certificates or other evidence of the right to exercise the voting rights attaching to any securities held by the Corporation. Such instruments, certificates or other evidence shall be in favour of such person or persons as may be determined by the officers executing such proxies or arranging for the issuance of voting certificates or such other evidence of the right to exercise such voting rights. In addition, the Board may from time to time direct the manner in which, and the person or persons by whom, any particular voting rights or class of voting rights may or shall be exercised. 2.5 WITHHOLDING INFORMATION FROM SHAREHOLDERS. Subject to the provisions of the Act, no shareholder shall be entitled to discovery of any information respecting any details or conduct of the Corporation's business which, in the opinion of the Board, it would be inexpedient in the interests of the shareholders or the Corporation to communicate to the public. The Board may from time to time determine whether and to what extent and at what time and place and under what conditions or regulations the accounts, records and documents of the Corporation shall be open to the inspection of shareholders and no shareholder shall have any right of inspection of any account, record or document of the Corporation except as conferred by the Act or authorized by the Board or by resolution passed at a general meeting of shareholders. -68- SECTION THREE - DIRECTORS AND BOARD 3.1 CHAIRMAN AND ALTERNATE. The Chairman of the Board, if any, or in his absence the President, shall preside as chairman at every meeting of the Directors, or if there is no Chairman of the Board or neither the Chairman of Board nor the President is present within fifteen minutes of the time appointed for holding the meeting or is willing to act as chairman, or, if the Chairman of the Board, if any, and the President have advised the Secretary that they will not be present at the meeting, the Directors present shall choose one of their number to be chairman of the meeting. With the consent of the meeting, the solicitor of the Corporation may act as Chairman of a meeting of the Directors. 3.2 MEETINGS - PROCEDURE - CASTING VOTE. The Directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings, as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the chairman shall not have a second or casting vote. Meetings of the Board held at regular intervals may be held at such place, at such time and upon such notice (if any) as the Board may by resolution from time to time determine. 3.3 MEETINGS BY CONFERENCE TELEPHONE. A Director may participate in a meeting of the Board or of any committee of the Directors by means of conference telephones or other communications facilities by means of which all Directors participating in the meeting can hear each other. A Director participating in a meeting in accordance with this Bylaw shall be deemed to be present at the meeting and to have so agreed and shall be counted in the quorum therefor and be entitled to speak and vote thereat. 3.4 NOTICE OF MEETING. A Director may, and the Secretary or an Assistant Secretary upon request of a Director shall, call a meeting of the Board at any time. Reasonable notice shall be given for any meeting specifying the place, day and hour of such meeting and shall be given by mail, postage prepaid, addressed to each of the Directors and alternate Directors at his address as it appears on the books of the Corporation or by leaving it at his usual business or residential address or by telephone, telegram, telex, facsimile or any method of transmitting legibly recorded messages. It shall not be necessary to give notice of a meeting of Directors to any Director or alternate Director if such meeting is to be held immediately following a general meeting at which such Director shall have been elected or is the meeting of Directors at which such Director is appointed. Accidental omission to give notice of a meeting of Directors to, or by the non-receipt of notice by, any Director shall not invalidate the proceedings at that meeting. 3.5 WAIVER OF NOTICE OF MEETING. Any Director of the Corporation may file with the Secretary a document executed by him waiving notice of any past, present or future meeting or meetings of the Directors being, or required to have been, sent to him and may at any time withdraw such waiver with respect to meetings held thereafter. After the filing of such waiver with respect to future meetings, and until such waiver is withdrawn, no notice of any meeting of the Directors need be given to such Director or, unless the Director otherwise requires in writing to the Secretary, to his alternate Director, and all meetings of the Directors so held shall be deemed not to be improperly called or constituted by reason of notice not having been given to such Director or alternate Director. 3.6 QUORUM. The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and if not so fixed shall be a majority of the Directors or, if the number of Directors is fixed at one, shall be one Director. 3.7 CONTINUING DIRECTORS MAY ACT DURING VACANCY. The Directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed pursuant to these Bylaws as the necessary quorum of Directors, the Directors may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Corporation, but for no other purpose. 3.8 VALIDITY OF ACTS OF DIRECTORS . Subject to the provisions of the Act, all acts done at any meeting of the Directors or of a committee of Directors, or by any person acting as a Director, shall, not-withstanding that it be afterwards discovered that there was some defect in the qualification, election or appointment of any such Directors or of the members of such committee or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly elected or appointed and was qualified to be a Director. -69- 3.9 RESOLUTION IN WRITING EFFECTIVE. A resolution consented to in writing, whether by document, telegram, telex, facsimile or any method of transmitting legibly recorded messages, by all of the Directors or their alternates shall be as valid and effectual as if it had been passed at a meeting of the Directors duly called and held. Such resolution may be in two or more counterparts which together shall be deemed to constitute one resolution in writing. Such resolution shall be filed with the minutes of the proceedings of the Directors and shall be effective on the date stated thereon. 3.10 RESOLUTIONS NEED NOT BE SECONDED AND CHAIRMAN MAY MOVE A MOTION. No resolution proposed at a meeting of Directors need be seconded, and the chairman of any meeting may move or propose a resolution. 3.11 REMUNERATION AND EXPENSES. The directors shall be paid such remuneration for their services and reimbursed for expenses properly incurred by them as the Board may from time to time determine. Nothing herein contained shall preclude any director from serving the Corporation in any other capacity and receiving remuneration therefor. 3.12 ALTERNATE DIRECTORS. Any Director may by instrument in writing delivered to the Corporation appoint any person to be his alternate to act in his place at meetings of the Directors at which he is not present unless the Directors shall have reasonably disapproved the appointment of such person as an alternate Director and shall have given notice to that effect to the Director appointing the alternate Director within a reasonable time after delivery of such instrument to the Corporation. Every such alternate shall be entitled to notice of meetings of the Directors and to attend and vote as a Director at a meeting at which the person appointing him is not personally present, and, if he is a Director, to have a separate vote on behalf of the Director he is representing in addition to his own vote. A Director may at any time by instrument, telegram, telex, facsimile or any method of transmitting legibly recorded messages delivered to the Corporation revoke the appointment of an alternate appointed by him. The remuneration payable to such an alternate shall be payable out of the remuneration of the Director appointing him. SECTION FOUR - EXECUTIVE AND OTHER COMMITTEES 4.1 APPOINTMENT OF EXECUTIVE COMMITTEE. The Directors may by resolution appoint an Executive Committee to consist of such member or members of their body as they think fit, which Committee shall have, and may exercise during the intervals between the meetings of the Board, all the powers vested in the Board except the power to fill vacancies in the Board, the power to change the membership of, or fill vacancies in, said Committee or any other committee of the Board and such other powers, if any, as may be specified in the resolution. The said Committee shall keep regular minutes of its transactions and shall cause them to be recorded in books kept for that purpose, and shall report the same to the Board of Directors at such times as the Board of Directors may from time to time require. The Board shall have the power at any time to revoke or override the authority given to or acts done by the Executive Committee, except as to acts done before such revocation or overriding, and to terminate the appointment or change the membership of such Committee and to fill vacancies in it. The Executive Committee may make rules for the conduct of its business and may appoint such assistants as it may deem necessary. A majority of the members of said Committee shall constitute a quorum thereof. 4.2 APPOINTMENT OF COMMITTEES. The Directors may by resolution appoint one or more committees consisting of such member or members of their body as they think fit and may delegate to any such committee between meetings of the Board such powers of the Board (except the power to fill vacancies in the Board and the power to change the membership of or fill vacancies in any committee of the Board and the power to appoint or remove Officers appointed by the Board) subject to such conditions as may be prescribed in such resolution, and all committees so appointed shall keep regular minutes of their transactions and shall cause them to be recorded in books kept for that purpose, and shall report the same to the Board of Directors at such times as the Board of Directors may from time to time require. The Directors shall also have power at any time to revoke or override any authority given to or acts to be done by any such committees except as to acts done before such revocation or overriding and to terminate the appointment or change the membership of a committee and to fill vacancies in it. Committees may make rules for the conduct of their business and may appoint such assistants as they may deem necessary. A majority of the members of a committee shall constitute a quorum thereof. 4.3 PROCEDURE AT MEETINGS. The Executive Committee and any other committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members of the committee present, and in case of an equality of votes the chairman shall not have a second or casting vote. A resolution approved in writing by all the members of the Executive Committee or any other committee shall be as valid and effective as if it had been passed at a meeting of such Committee duly called and constituted. Such resolution may be in two or more counterparts which together shall be deemed to constitute one resolution in writing. Such resolution shall be filed with the minutes of the proceedings of the committee and shall be effective on the date stated thereon. -70- SECTION FIVE - POWERS AND DUTIES OF THE DIRECTORS 5.1 MANAGEMENT OF AFFAIRS AND BUSINESS. The Directors shall manage or supervise the management of the affairs and business of the Corporation and shall have the authority to exercise all such powers of the Corporation as are not, by the Act or by the Articles or these Bylaws, required to be exercised by the Corporation in general meeting. 5.2 APPOINTMENT OF ATTORNEY. The Directors may from time to time by power of attorney or other instrument under seal appoint any person to be the attorney of the Corporation for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Bylaws and excepting the powers of the Directors relating to the constitution of the Board and of any of its committees and the appointment or removal of Officers and the power to declare dividends) and for such period, with such remuneration and subject to such conditions as the Directors may think fit, and any such appointment may be made in favour of any of the Directors or any of the members of the Corporation or in favour of any corporation, or of any of the members, Directors, nominees or managers of any corporation, firm or joint venture and any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the Directors think fit. Any such attorney may be authorized by the Directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in him. SECTION SIX - OFFICERS 6.1 APPOINTMENT. The Board may from time to time appoint a Chairman of the Board, a President, one or more Vice-Presidents (to which title may be added words indicating seniority or function), a Secretary, a Treasurer and such other officers as the Board may determine, including one or more assistants to any of the officers so appointed. Subject to those powers and authority which pursuant to the Act may only be exercised by the directors, the officers of the Corporation may exercise, respectively, such powers and authority and shall perform such duties, in addition to those specified in the Articles, as may from time to time be prescribed by the Board. Except for the Chairman of the Board, if appointed, and the Managing Director, if appointed, an officer may, but need not be, a director. 6.2 DELEGATION. In case of the absence of any officer or employee of the Corporation or for any other reason that the Board may deem sufficient, the Board may delegate for the time being the powers and authority of such officer or employee to any other officer or employee or to any director of the Corporation. 6.3 CHAIRMAN OF THE BOARD. The Chairman of the Board, if appointed, shall be a director of the Corporation. The Chairman of the Board shall exercise such powers and authority and shall perform the duties which the directors may from time to time prescribe. During the absence or disability of the Chairman of the Board, his or her duties shall be performed and his or her powers exercised by the Managing Director, if any, or if no Managing Director, by the President. 6.4 MANAGING DIRECTOR. The Managing Director, if appointed, shall be a director of the Corporation, shall manage the operations of the Corporation generally, and may exercise such other powers and authority and shall perform such other duties as may from time to time be prescribed by the Board. During the absence or disability of the Chairman of the Board and/or the President, or if no Chairman of the Board and/or President have been appointed, the Managing Director shall also have the powers and duties of the Chairman of the Board and/or the President. 6.5 PRESIDENT. The President shall, subject to the authority of the Board, be responsible for the general supervision of the business and affairs of the Corporation and shall have such other powers and duties as the Board may specify. During the absence or disability of the Chairman of the Board and/or the Managing Director, or if no Chairman of the Board and/or Managing Director have been appointed, in the event the President is a Director of the Corporation, the President shall also have the powers and duties of the Chairman of the Board and/or the Managing Director. 6.6 VICE-PRESIDENT. The Vice-President, or if more than one Vice-President has been appointed, the Vice-Presidents, may exercise such powers and authority and shall perform such duties as may from time to time be prescribed by the Board. Subject to Sections 4.3 and 4.4, one of the Vice-Presidents, being a shareholder and/or director, as the case may be, where required by the Act or these Bylaws, may exercise the powers and perform the duties of the Chairman of the Board and/or the Managing Director and/or the President during the absence or disability of the Chairman of the Board, the Managing Director and/or for the President. -71- 6.7 SECRETARY. Except as may be otherwise determined from time to time by the Board, the Secretary shall attend and be the secretary to all meetings of the Board, shareholders and committees of the Board and shall enter or cause to be entered in records kept for that purpose minutes of all proceedings at such meetings. The Secretary shall give or cause to be given as and when instructed all notices to shareholders, directors, officers, auditors and members of committees of the Board. The Secretary shall be the custodian of the corporate seal, if any, of the Corporation and shall have charge of all books, papers, reports, certificates, records, documents, registers and instruments belonging to the Corporation, except when some other officer or agent has been appointed for that purpose and may exercise such other powers and authority and shall perform such other duties as may from time to time be prescribed by the Board or by the President. 6.8 TREASURER. The Treasurer shall be responsible for the keeping of proper accounting records in compliance with the Act and shall be responsible for the deposit of monies and other valuable effects of the Corporation in the name and to the credit of the Corporation in such banks or other depositories as the Board may from time to time designate and shall be responsible for the disbursement of the funds of the Corporation. The Treasurer shall render to the Board whenever so directed an account of all financial transactions and of the financial position of the Corporation. The Treasurer may exercise such other duties as may from time to time be prescribed by the Board or by the President. 6.9 OTHER OFFICERS. The powers and duties of all other officers shall be those prescribed by the Board from time to time. Any of the powers and duties of an officer to whom an assistant has been appointed may be exercised and performed by such assistant, unless the Board or the President otherwise direct. 6.10 VARIATION OF THE POWERS AND DUTIES. The Board may from time to time vary, add to or limit the powers, authority and duties of any officer. 6.11 REMOVAL AND DISCHARGE. The Board may remove any officer of the Corporation, with or without cause, at any meeting called for that purpose and may elect or appoint others in their place or places. Any officer or employee of the Corporation, not being a member of the Board, may also be removed and discharged, either with or without cause, by the Chairman of the Board or the President. If, however, there be a contract with an officer or employee derogating from the provisions of this Section, such removal or discharge shall be subject to the provisions of such contract. 6.12 TERM OF OFFICE. Each officer appointed by the Board shall hold office until a successor is appointed, or until his earlier resignation or removal by the Board. 6.13 TERMS OF EMPLOYMENT AND REMUNERATION. The terms of employment and the remuneration of officers appointed by the Board shall be settled by the Board from time to time. 6.14 AGENTS AND ATTORNEYS. The Board, the Chairman of the Board or the President may also from time to time appoint other agents, attorneys, officers and employees of the Corporation within or without Canada, who may be given such titles and who may exercise such powers and authority (including the power of subdelegation) and shall perform such duties of management or otherwise, as the Board may from time to time prescribe. 6.15 FIDELITY BONDS. The Board, the Chairman of the Board or the President may require such officers, employees and agents of the Corporation as the Board deems advisable to furnish bonds for the faithful performance of their powers and duties, in such form and with such surety as the Board may from time to time determine. SECTION SEVEN - INDEMNIFICATION 7.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS AGAINST ACTIONS BY THIRD PARTIES. Except in respect of an action by or on behalf of the Corporation or body corporate to procure a judgment in its favour, the Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or a person who acts or acted at the Corporation's request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor, or a person who undertakes or has undertaken any liability on behalf of the Corporation or any such body corporate, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of that Corporation or body corporate, if: -72- a) He acted honestly and in good faith with a view to the best interests of the Corporation; and b) In the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful. 7.2 INDEMNIFICATION OF DIRECTORS AND OFFICERS AGAINST ACTIONS BY THE CORPORATION. The Corporation may with the approval of the Supreme Court of the Yukon Territory indemnify a person referred to in paragraph 5.1 in respect of an action by or on behalf of the Corporation or body corporate to procure a judgment in its favour, to which he is made a party by reason of being or having been a director or an officer of the Corporation or body corporate, against all costs, charges and expenses reasonably incurred by him in connection with the action if he fulfills the conditions set out in subparagraphs 5.1(a) and (b). 7.3 RIGHT OF INDEMNITY NOT EXCLUSIVE. The provisions for indemnification contained in the Bylaws shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any Bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to an action in his official capacity and as to an action in any other capacity while holding such office. This section shall also apply to a person who has ceased to be a director or officer, and shall enure to the benefit of the heirs and legal representatives of such person. 7.4 INSURANCE. Subject to the limitations contained in the Act, the Corporation may purchase and maintain such insurance for the benefit of its directors and officers as the Board may from time to time determine. SECTION EIGHT - SHARES 8.1 ISSUANCE AND OPTIONS. Subject to the Act and the rights of the current holders of the shares of the Corporation, the Board may from time to time allot, issue, sell, grant options to purchase or otherwise dispose of the whole or any part of the authorized and unissued shares of the Corporation at such times and to such persons and for such consideration as the Board shall determine, provided that no share shall be issued until it is fully paid as provided in the Act. 8.2 NON-RECOGNITION OF TRUSTS. The Corporation shall treat as absolute owner of any share the person in whose name the share is registered in the securities register as if that person had full legal capacity and authority to exercise a right of ownership, irrespective of any indication to the contrary through knowledge or notice or description in the Corporation's records or on the share certificate. 8.3 JOINT SHAREHOLDERS. If two or more persons are registered as joint holders of any share, any one of such persons may give effectual receipts for the certificate issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant issuable in respect of such share. SECTION NINE - BORROWING POWERS AND FINANCIAL ASSISTANCE 9.1 POWERS OF DIRECTORS. Subject to the provisions of the Act, the Directors may from time to time authorize the Corporation to: 9.2 NEGOTIABILITY OF DEBT OBLIGATION . The Directors may make any bonds, debentures or other debt obligations issued by the Corporation by their terms assignable free from any equities between the Corporation and the person to whom they may be issued or any other person who lawfully acquires them by assignment, purchase or otherwise. 9.3 SPECIAL RIGHTS ATTACHED TO DEBT OBLIGATION. The Directors may authorize the issue of any bonds, debentures or other debt obligations of the Corporation at a discount, premium or otherwise and with special or other rights or privileges as to redemption, surrender, drawings, allotment of or conversion into or exchange for shares, attending at general meetings of the Corporation and otherwise as the Directors may determine at or before the time of issue. -73- SECTION TEN - DIVIDENDS AND RIGHTS 10.1 DIVIDEND CHEQUES. A dividend payable in cash shall be paid by cheque drawn on the Corporation's bankers or one of them to the order of each registered holder of shares of the class or series in respect of which a dividend has been declared, and mailed by prepaid ordinary mail to such registered holder at the address shown in the records of the Corporation, unless such holder otherwise directs. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold. 10.2 JOINT SHAREHOLDERS. In the case of joint holders, a cheque for payment of dividends, bonuses, returns of capital or other money payable, shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and mailed to them at the address shown in the records of the Corporation. 10.3 NON-RECEIPT OF CHEQUES. In the event of non-receipt of any dividend cheque by the person to whom it is sent as aforesaid, the Corporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and of title as the Board may from time to time prescribe, whether generally or in any particular case. 10.4 UNCLAIMED DIVIDENDS. Any dividend unclaimed after a period of six (6) years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Corporation. SECTION ELEVEN - MEETINGS OF SHAREHOLDERS 11.1 ANNUAL MEETINGS. The annual meeting of shareholders shall be held at such time in each year and, subject to the Articles of the Corporation, at such place as the Board, or failing it, the Chairman of the Board, the Managing Director or the President, may from time to time determine. 11.2 TIME FOR DEPOSIT OF PROXIES. The Board may specify in a notice calling a meeting of shareholders a time, preceding the time of such meeting by not more than 48 hours exclusive of non-business days, before which proxies to be used at such meeting must be deposited. A proxy shall be acted upon only if, prior to the time so specified, it shall have been deposited with the Corporation or an agent thereof specified in such notice, or if no such time is specified in such notice, unless it has been received by the Secretary of the Corporation or by the chairman of the meeting or any adjournment thereof prior to the time of voting. 11.3 PERSONS ENTITLED TO BE PRESENT. The only persons entitled to be present at a meeting of the shareholders shall be those persons entitled to vote thereat, the directors and auditor (if any) of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the articles or Bylaws to be present at the meeting. Any other persons may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting. 11.4 QUORUM. A quorum of shareholders is present at a meeting of shareholders, irrespective of the number of persons actually present at the meeting, if the holder or holders of five percent (5%) of the shares entitled to vote at the meeting are present in person or represented by proxy. No business shall be transacted at any meeting unless the requisite quorum is present at the time of the transaction of such business. 11.5 ADJOURNMENT. Should a quorum not be present at any meeting of shareholders, those present in person or by proxy and entitled to vote shall have power to adjourn the meeting for a period of not more than 30 days without notice other than announcement at the meeting. At any such adjourned meeting, provided a quorum is present, any business may be transacted which might have been transacted at the meeting adjourned. Notice of meetings adjourned for more than 30 days and for more than 90 days shall be given as required by the Act. 11.6 CHAIRMAN. The chairman of any meeting of the shareholders shall be the first mentioned of such of the following officers as have been appointed and who is present at the meeting: a) the Chairman of the Board; -74- b) the President; c) any Vice-President (and where more than one Vice-President is present at the meeting, then the priority to act as chairman as between them shall be in order of their appointment to the office of Vice-President). If no such officer is present within 15 minutes from the time fixed for the holding of the meeting of the shareholders, the persons present and entitled to vote shall choose one of their number then present to be chairman of that meeting. 11.7 SECRETARY OF MEETING. If the Secretary of the Corporation is absent, the chairman of a meeting of shareholders shall appoint some person, who need not be a shareholder, to act as secretary of the meeting. 11.8 MOTIONS. No motion proposed at a general meeting need be seconded and the Chairman may propose or second a motion. 11.9 CHAIRMAN'S CASTING VOTE. At any meeting of shareholders every question shall be determined by the majority of the votes cast on the question. In the case of an equality of votes at a meeting of shareholders, the chairman of the meeting shall not be entitled to a second or casting vote in addition to the vote or votes to which he may be entitled as a shareholder. 11.10 CHAIRMAN'S DECLARATION. At any meeting of shareholders, unless a ballot is demanded, a declaration by the chairman of the meeting that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact without proof of the number or proportion of votes recorded in favour of or against the motion. 11.11 VOTING BY BALLOT. If a ballot is demanded by a shareholder or proxy holder entitled to vote at a shareholder's meeting and the demand is not withdrawn, the ballot upon the motion shall be taken in such manner as the chairman of the meeting shall direct. Upon a ballot each shareholder who is present in person or represented by proxy shall be entitled, in respect of the shares which he is entitled to vote at the meeting upon the question, to that number of votes provided by the Act or the articles. The declaration by the Chairman of the meeting that the vote upon the question has been carried, or carried unanimously or by a particular majority, or lost or not carried by a particular majority and an entry in the minutes of the meeting shall be prima facie evidence of the fact without proof of the number or proportion of votes recorded in favour of or against any resolution or question. 11.12 SCRUTINEERS. The chairman or the secretary at any meeting of the shareholders or the shareholders then present may appoint one or more scrutineers, who need not be shareholders, to count and report upon the results of the voting which is done by ballot. SECTION TWELVE - NOTICES 12.1 NOTICES. In addition to any other method of service permitted by the Act, any notice or document required by the Act, the regulations, the articles or the Bylaws may be sent to any person entitled to receive same in the manner set out in the Act for service upon a shareholder or director and by any means of telecommunication, including electronic mail, with respect to which a written record is made. A notice sent by means of telecommunication shall be deemed to have been given on the first business day after the date upon which the written record is made. 12.2 NOTICE TO JOINT SHAREHOLDERS. If two or more persons hold shares jointly, notice may be given to one of such persons and such notice shall be sufficient notice to all of them. 12.3 CHANGE OF ADDRESS. The Secretary or Assistant Secretary may change or cause to be changed the address in the records of the Corporation of any shareholder, director, officer, auditor or member of a committee of the Board in accordance with any information believed by him to be reliable. 12.4 SIGNATURE ON NOTICE. The signature on any notice to be given by the Corporation may be lithographed, written, printed or otherwise mechanically reproduced. -75- SECTION THIRTEEN - EFFECTIVE DATE AND AMENDMENT 13.1 EFFECTIVE DATE. This Bylaw is effective from the date of the resolution of the Board adopting same and shall continue to be effective, unless amended by the Board, until the next meeting of shareholders of the Corporation, whereupon if same is confirmed or confirmed as amended, this Bylaw shall continue in effect in the form in which it was so confirmed. 13.2 AMENDING BYLAW. The Board may by resolution amend or repeal this Bylaw and such amendment or repeal shall have force and effect until confirmed by ordinary resolution of the shareholders entitled to vote at an annual general meeting. -76- EX-1.6 7 0007.txt EXHIBIT 1.6 YUKON BUSINESS CORPORATIONS ACT JUSTICE FORM 3 CERTIFICATE OF CONTINUANCE INSIDE HOLDINGS INC. I hereby certify that the above-mentioned corporation was continued into Yukon, as set out in the attached Articles of Continuance, under section 190 of the Business Corporations Act. /s/ M. Richard Roberts -------------------------------- Corporate Access Number:28380 M. Richard Roberts Date of Continuance:2000-10-06 Registrar of Corporations -77- EX-2.1 8 0008.txt EXHIBIT 2.1 NUMBER SHARES INCORPORATED (BY CONTINUANCE) UNDER THE BUSINESS CORPORATIONS ACT (YUKON TERRITORY) INSIDE HOLDINGS INC. CUSIP 45769S 10 4 THIS CERTIFIES THAT Is the registered holder of FULLY PAID AND NON-ASSESSABLE COMMON SHARES WITHOUT PAR VALUE in the Capital of the above named Corporation subject to the Articles of Continuance and By-Laws of the Corporation transferable on the books of the Corporation by the registered holder in person or by Attorney duly authorized in writing upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent and Registrar Of the Corporation. IN WITNESS WHEREOF the Corporation has caused this certificate to be signed on its behalf by the facsimile signatures or its duly authorized officers at Vancouver, British Columbia. DATED /s/ Leonard Peterson President MONTREAL TRUST COMPANY OF CANADA VANCOUVER TRANSFER AGENT AND REGISTRAR By SPECIMEN ------------------------------ Authorized Officer /s/ Paul A. Visosky Secretary The Shares represented by this certificate are transferable at the offices of Montreal Trust Company of Canada, Vancouver, B.C. -78- FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL INSURANCE NUMBER OF TRANSFEREE - - --- --- --- --- --- --- --- --- --- ________________________________________________________________________________ (Name and address of transferee) ________________________________________________________________________________ ________________________________________________________________________________ ______________________________________________ shares registered in the name of the undersigned on the books of the Corporation named on the face of this certificate and represented hereby, and irrevocably constitutes and appoints ________________________________________________ the attorney of the undersigned to transfer the said shares on the register of transfers and books of the Corporation with full power of substitution hereunder. DATED: ______________________________________ ______________________________________ (Signature of Witness) (Signature of Shareholder) NOTICE: The signature of this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatsoever, and must be guaranteed by a chartered bank or an eligible guarantor institution with membership in an approved signature guarantee medallion program. Signature Guaranteed by: -79- EX-4.1 9 0009.txt EXHIBIT 4.1 ASSIGNMENT AND SETTLEMENT AGREEMENT THIS AGREEMENT made effective the 31st day of July, 2000 BETWEEN: COAST FALCON RESOURCES LTD. ------------------------------ A British Columbia Company (the "Company") AND: VERNON MEYER ------------- a director and officer of the Company (the "Assignor") AND: WMC EQUITIES INC. ------------------- a British Columbia Company ("WMC") AND: PETERSEN MANAGEMENT INC. -------------------------- a British Columbia Company ("PMI") AND: PEMCORP MANAGEMENT INC. ------------------------- A British Columbia Company ("Pemcorp") ("Pemcorp" together with WMC and PMI, the "Assignees") WHEREAS: A. As of the date of this Agreement, the Company owes the Assignor the sum of $81,663.24 primarily for management consulting services for the thirty months ended July 31, 2000 (the "Debt"); B. The Assignor wishes to assign, effective as of the date of this Agreement, to the Assignees, all of the Assignor's right, title and interest in and to the Debt; and C. The Assignees understand and acknowledge that the Company is experiencing financial difficulty and does not have the ability to pay the Debt and as a consequence have agreed to accept common shares of the Company having nominal value in full settlement and satisfaction of the Debt. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and the covenants contained herein the parties hereto agree as follows: 1. For the purpose of this Agreement, "Settlement Date" means the date that is 5 business days after the date on which the Company receives approval from its shareholders to issue the "Settlement Shares" in full settlement and satisfaction of the Debt in accordance with the terms of this Agreement. -80- 2. The Creditor and the Company represent and warrant to the Assignees that the Debt is outstanding and payable to the Creditor as at the effective date hereof. 3. The Creditor represents and warrants to the Assignees that he has the right to assign the Debt to the Assignees, as herein contemplated, and that the Debt is free and clear of any and all charges, liens and encumbrances of any nature or kind. 4. For the sum of $10.00, the sufficiency and receipt of which is hereby acknowledged by the Assignor, the Assignor hereby sells, assigns and transfers to the Assignees and the Assignees hereby accept all of the Assignor's right, title and beneficial interest in and to the Debt. 5. The Company hereby acknowledges and agrees to the within assignment of the Debt to the Assignees. 6. The Assignees hereby agree to accept 2,028,750 non-assessable shares in the common stock of the Company, after the Company gives effect to a minimum ten (old shares) for one (new share) reverse split of its common stock (the "Reverse Split"), at a deemed price of approximately $0.04 per share, post reverse split, (the "Settlement Shares"), in full settlement and satisfaction of the Debt. The number of Settlement Shares be issued to each of the Assignees is set out on Schedule A hereto. 7. The Assignees hereby agree and acknowledge that the number of shares of the Company issued in full settlement of the Debt is arbitrary and was arrived at through negotiations, there is no active market for the shares of the Company and the Company has not represented to the Assignees that the Settlement Shares have or will ever have a realizable value equal to the face amount of the Debt or any realizable value whatsoever. 8. Subject to the issuance and receipt of the Settlement Shares on the Settlement Date, the Assignor and the Assignees hereby forever release and discharge the Company from the Debt. 9. The consummation of the transaction contemplated hereby is subject the Company receives approval from its shareholders to issue the "Settlement Shares" and the Reverse Split. If such approval is not obtained and the Reverse Split is not made effective by September 15, 2000 this Agreement shall be terminated and have no further force or effect unless the parties hereto agree otherwise. 10. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective heirs, successors and assigns. 11. Time is of the essence of this Agreement. 12. This Agreement shall be construed in accordance with the laws of the province of British Columbia. 13. The undersigned have the requisite authority to enter into this Agreement. 14. This Agreement may be executed in as many counterparts as may be necessary and by facsimile, each of such counterparts so executed will be deemed to be an original and such counterparts together will constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the day and year first above written. -81- 15. This Agreement represents the entire agreement between the parties. /s/ Vernon Meyer /s/ Bill McCartney - ------------------------------ -------------------------- Vernon Meyer, Director Bill McCartney, Director Coast Falcon Resources Ltd. WMC Equities Inc. /s/ Leonard Petersen /s/ Vernon Meyer - ------------------------------ -------------------------- Leonard Petersen, Director Vernon Meyer Petersen Management Inc. /s/ Leonard Petersen - -------------------------- Leonard Petersen, Director Pemcorp Management Inc. -82- SCHEDULE "A" ASSIGNMENT AND SETTLEMENT AGREEMENT ASSIGNEE NUMBER OF SETTLEMENT SHARES WMC Equities Inc. 500,000 Petersen Management Inc. 500,000 Pemcorp Management Inc. 1,028,750 ---------- 2,028,750 ========== -83- EX-4.2 10 0010.txt EHIBIT 4.2 SETTLEMENT AGREEMENT THIS AGREEMENT made effective the 31st day of July, 2000 BETWEEN: COAST FALCON RESOURCES LTD. ------------------------------ A British Columbia Company (the "Company") AND: PEMCORP MANAGEMENT INC. ------------------------- A British Columbia Company (the "Creditor") WHEREAS: A. As of the date of this Agreement, the Company owes the Creditor the sum of $80,250 for management consulting services for the thirty months ended July 31, 2000 (the "Debt"); B. The Creditor understands and acknowledges that the Company is experiencing financial difficulty and does not have the ability to pay the Debt and as a consequence has agreed to accept common shares of the Company having nominal value and a note in full settlement and satisfaction of the Debt. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and the covenants contained herein the parties hereto agree as follows: 1. For the purpose of this Agreement, "Settlement Date" means the date that is 5 business days after the date on which the Company receives approval from its shareholders to issue the "Settlement Shares" in partial settlement and satisfaction of the Debt in accordance with the terms of this Agreement. 2. The Creditor hereby agrees to accept a promissory note in the amount of $21,400, substantially in the form attached hereto as Schedule A (the "Note"), and 1,471,250 non-assessable shares in the common stock of the Company, after the Company gives effect to a minimum ten (old shares) for one (new share) reverse split of its common stock (the "Reverse Split"), at a deemed price of $0.04 per share, post reverse split, (the "Settlement Shares"), in full settlement and satisfaction of the Debt. 3. The Creditor hereby agrees and acknowledges that the number of shares of the Company issued in settlement of $58,850 of the Debt is arbitrary and was arrived at through negotiations, there is no active market for the shares of the Company and the Company has not represented to the Creditor that the Settlement Shares have or will ever have a realizable value equal to the face amount of the Debt or any realizable value whatsoever. -84- 4. Subject to the issuance and receipt of the Note and the Settlement Shares on the Settlement Date, the Creditor hereby forever releases and discharges the Company from the Debt. 5. The consummation of the transaction contemplated hereby is subject the Company receives approval from its shareholders to issue the Settlement Shares and the Reverse Split. If such approval is not obtained and the Reverse Split is not made effective by September 15, 2000 this Agreement shall be terminated and have no further force or effect unless the parties hereto agree otherwise. 6. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective heirs, successors and assigns. 7. Time is of the essence of this Agreement. 8. This Agreement shall be construed in accordance with the laws of the province of British Columbia. 9. The undersigned have the requisite authority to enter into this Agreement. 10. This Agreement may be executed in as many counterparts as may be necessary and by facsimile, each of such counterparts so executed will be deemed to be an original and such counterparts together will constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the day and year first above written. 11. This Agreement represents the entire agreement between the parties. /s/ Vernon Meyer - ---------------------------- Vernon Meyer, Director Coast Falcon Resources Ltd. /s/ Leonard Petersen - ---------------------------- Leonard Petersen, Director Pemcorp Management Inc. -85- SCHEDULE "A" PROMISSORY NOTE As required by the Settlement Agreement made by and between the undersigned and Pemcorp Management Inc. ("PMI") effective July 31, 2000, the undersigned hereby promises to pay, on or after September ___, 2000 upon demand without interest, the sum of TWENTY ONE THOUSAND FOUR HUNDRED DOLLARS ($21,400.00) to PMI. DATED at Vancouver, B.C. this ____ day of September, 2000. COAST FALCON RESOURCES LTD. As per: ______________________________ Authorized Signatory -86- EX-4.3 11 0011.txt EHIBIT 4.3 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT is made effective as of May 1, 2000, by and among 596319 B.C. LTD., a British Columbia corporation (the "Vendor") and COAST FALCON RESOURCES LTD. (the "Purchaser"). RECITALS A. The Vendor owns certain rights to a number registered internet domain names set out on Schedule A hereto (the "Names"). B. The Vendor desires to sell and the Purchaser desires to purchase the Names, pursuant to the terms and conditions set forth below. AGREEMENT NOW THEREFORE, in consideration of the mutual agreements, covenants, conditions, representations and warranties contained in this Agreement, the sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Purchase of Assets. --------------------- 1.1 Purchase and Sale. On the Closing Date (as defined below), the Purchaser shall purchase from the Vendor, and the Vendor shall sell, convey, transfer and assign to the Purchaser, the Vendor's right and beneficial interest in and to the Names. 1.2 Trust Declaration. The Vendor shall continue hold legal title to the Names, after the Closing Date, in trust for the sole benefit and use of the Purchaser in accordance with the provisions set out in Section 4 of this Agreement. 1.3 Renewal. The Purchaser acknowledges and agrees that it shall be solely responsible to renew, at its own expense, the registration of the Names as required upon the expiry of the registration term. 1.4 Obligations. Except for the obligations of the Purchaser under this Agreement, the Purchaser shall not assume, pay, perform or discharge (or cause to be paid, performed or discharged) any liabilities, expenses or obligations of the Vendor, whether fixed, unliquidated, absolute, contingent, known, unknown or otherwise. -87- 1.5 Purchase Price. On the Closing Date the Purchaser shall deliver to the Vendor a promissory note in favor of the Vendor in the amount of FORTY THOUSAND ($40,000.00) substantially in the form attached hereto as Schedule B. 1.6 Royalties. The Purchaser shall pay and deliver to the Vendor, upon receipt by the Purchaser, fifteen percent (15%) of all cash and other non-cash consideration received by the Purchaser at any time and from time to time after the effective date of the Agreement up to the close of business on April 30, 2005, to a maximum of $1,000,000 (non-cash consideration shall be valued at the time of receipt). 1.7 Closing. The consummation of the transaction contemplated herein shall take place on September 15, 2000, or at such other time the parties hereto mutually may determine (the "Closing Date"). 1.8 Conditions. The consummation of the transaction contemplated hereby is subject to the approval of the shareholders of the Vendor and the Purchaser. If such approvals are not obtained by September 15, 2000 this Agreement shall be terminated and have no further force or effect unless the parties hereto mutually determine otherwise. 2. Representations and Warranties of the Purchaser. The Purchaser represents ------------------------------------------------- and warrants to the Vendor that now and as of the Closing Date: 2.1 Organization. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the province of British Columbia, and has all requisite corporate power and authority to enter into this Agreement and perform its obligations thereunder. 2.2 Authorization. All corporate action on the part of the Purchaser, and its officers, directors and shareholders, necessary for the authorization, execution, delivery and performance of this Agreement and the consummation of the transaction contemplated therein has or will be taken prior to the Closing Date. The Company will seek to obtain shareholder approval of the transaction contemplated hereby prior to the Closing Date. 2.3 Infringement. The Purchaser acknowledges and understands that the Vendor does not own nor is it conveying hereunder any trademarks or copyrights, and that the Purchaser has made no representation or warranty that the use of the Names will not infringe upon any third party rights under existing trademarks or copyrights. 3. Representations and Warranties of the Vendor. The Vendor represents and -------------------------------------------- warrants to the Purchaser that now and as of the Closing Date: 3.1 Organization. The Vendor is a corporation duly organized, validly existing and in good standing under the laws of the province of British Columbia and has all requisite corporate power and authority to enter into this Agreement and perform its obligations thereunder. -88- 3.2 Authorization. All corporate action on the part of the Vendor, and its officers and directors, necessary for the authorization, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated therein has or will be taken prior to the Closing Date. The Company will seek to obtain shareholder approval of the transaction contemplated hereby prior to the Closing Date. 3.3 Ownership . To the best of its knowledge, understanding and belief the Vendor: (i) is the legal and beneficial owner of the Names, and (ii) has the full right to sell the Names pursuant to the terms of this Agreement. 3.4 Other Interests. To the best of its knowledge, understanding and belief, there are no royalty or other interests of any nature whatsoever in the Names, except as disclosed herein. 4. Trust Declaration. ------------------ 4.1 The Vendor hereby declares that it shall hold legal title to the Names irrevocably in trust for the use, benefit, and advantage of the Purchaser. 4.2 The Vendor represents, warrants and covenants that it shall: (i) not sell, transfer, assign, hypothecate, pledge or otherwise dispose of or encumber any of the Names without the express written consent of the Purchaser; and (ii) make such applications and execute all such documents and do all such dealings as is reasonably required by the Purchaser to protect its beneficial interest or to facilitate any request made by the Purchaser to effect a change in its beneficial interest in the Names. 4.3 The Vendor irrevocably appoints the Purchaser to be its lawful attorney in its name. 4.4 The Purchaser hereby agrees and acknowledges that it shall pay all costs of any kind or nature that arise, after the effective date hereof, in connection with the Names, including but limited to future registration costs, legal fees and taxes. 5. Indemnification. The Purchaser shall defend, indemnify and hold the --------------- Vendor and its directors, officers and representatives and their Affiliates and Associates (the "Indemnified Persons") harmless from and against, and reimburse the Vendor forthwith with respect to, any and all losses, claims, damages, liabilities, judgements, settlements, costs and expenses of every nature whatsoever, including reasonable lawyer's fees, incurred by the Vendor by reason of or arising out of or in connection with any threatened or actual legal, regulatory or other proceedings, arbitration, claims or hearings of any nature whatsoever as a result of any matters connected to the ownership, use, sale or lease of the Names. -89- 6. Competition ----------- The Purchaser acknowledges that the Vendor has retained legal and beneficial ownership to certain other internet domain names set out on Schedule C and that the Vendor may sell, transfer or use any of said assets in any manner the Vendor determines at its sole discretion without any consent or agreement of the Purchaser. 7. Miscellaneous. ------------- 7.1 Expenses. The Purchaser shall pay for all costs incurred in connection with the purchase and sale of the Names, including but not limited to legal and accounting fees. 7.2 Transfer, Sales and Property Taxes. The Purchaser shall pay any transfer, sales, purchase or use or similar tax imposed under law of any nation, province or any county, city or political subdivision thereof, arising out of the transaction contemplated by this Agreement and any filing or recording fees payable in connection with the instruments of transfer provided for herein. 7.3 Entire Agreement. This Agreement sets forth the entire agreement, and supersedes any and all prior agreements, of the parties hereto with respect to the transaction contemplated by this Agreement. 7.4 Successors and Assigns. This Agreement will be fully binding upon, inure to the benefit of and be enforceable by the parties and their respective successors, assigns and legal representatives. 7.5 Amendment. No change, obligation or amendment of any provision of this Agreement will be valid unless set forth in written amendment to this Agreement signed by both parties hereto. 7.6 Governing Law. This Agreement will be interpreted, construed and enforced in accordance with the laws of the province of British Columbia. 7.7 Remedies and Warranties Disclaimer. IN NO EVENT SHALL THE VENDOR BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, LOST REVENUES OR PROFITS, OR LOST DATA OR USE INCURRED BY ANY PARTY, HOWEVER CAUSED, NO MATTER WHAT THEORY OF LIABILITY, EVEN IF THE VENDOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT AS EXPRESSLY AND SPECIFICALLY PROVIDED IN THIS AGREEMENT, THE VENDOR DOES NOT MAKE AND HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES. 7.8 Cooperation. The parties hereto agree to execute all such further documents and to do all such further acts as may be reasonably required in order to complete any portion of the transactions contemplated hereby. -90- 7.9 Counterparts. This Agreement may be executed in as many counterparts as may be necessary and by facsimile, each of such counterparts so executed will be deemed to be an original and such counterparts together will constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the day and year first above written. IN WITNESS WHEREOF, the parties have executed this Agreement as of the 26th day of June, 2000. 596319 B.C. LTD. As per: /s/ Bill McCartney - ----------------------- Authorized Signatory COAST FALCON RESOURCES LTD. As per: /s/ Vernon Meyer - --------------------- Authorized Signatory -91- SCHEDULE "A" NAMES accessinside.com accommodationinside.com accommodationsinside.com accountantinside.com advertiseinside.com advertiseitinside.com advertisinginside.com adviceinside.com airfareinside.com airlineinside.com alabamainside.com albertainside.com amarilloinside.com anchorageinside.com anniversaryinside.com antiquesinside.com appliancesinside.com architectinside.com arizonainside.com arkansasinside.com astrologyinside.com atlantainside.com atlasinside.com attorneyinside.com auctionitinside.com auctionsinside.com automobilesinside.com autopartsinside.com autoracinginside.com autosinside.com baltimoreinside.com bankinginside.com bargaininside.com baseballinside.com basketballinside.com bcinside.com beerinside.com betinside.com bettinginside.com bikinginside.com birminghaminside.com birthdayinside.com blackjackinside.com bmxinside.com boatsinside.com boiseinside.com booksinside.com borrowinside.com bostoninside.com bowlinginside.com boxinginside.com boxofficeinside.com buffaloinside.com bungeeinside.com businessworldinside.com buyandsellinside.com calgaryinside.com californiainside.com camerasinside.com campinginside.com canadainside.com careersinside.com carsinside.com cashinside.com celebritiesinside.com charlestoninside.com chicagoinside.com childrenswearinside.com chiropractorinside.com christmasinside.com cincinnatiinside.com classifiedsinside.com clevelandinside.com clothinginside.com collectiblesinside.com cologneinside.com coloradoinside.com columbusinside.com computergamesinside.com computerinside.com computersinside.com computersoftwareinside.com connecticutinside.com connectinside.com consultantinside.com cookinginside.com cookinside.com cosmeticsinside.com crapsinside.com creditcardsinside.com cricketinside.com cruiseinside.com cruisesinside.com cyclinginside.com dallasinside.com daytradinginside.com delawareinside.com demoineinside.com dentistinside.com denverinside.com dialinside.com dietinside.com directoryinside.com discountsinside.com doctorinside.com downloaditinside.com drugsinside.com easterinside.com editorialinside.com edmontoninside.com educationinside.com -92- electronicsinside.com employmentinside.com engineerinside.com entertainmentinside.com eventsinside.com extremesportsinside.com eyesinside.com fashioninside.com fathersdayinside.com financialworldinside.com fishinginside.com fitnessinside.com fixitinside.com floridainside.com floristinside.com flowersinside.com footballinside.com fortworthinside.com freestuffinside.com furnitureinside.com gamblinginside.com gaminginside.com gardeninginside.com gardeninside.com georgiainside.com getyourassinside.com golfinginside.com graduateinside.com greenbayinside.com greetingcardsinside.com groceriesinside.com groceryinside.com haircareinside.com halloweeninside.com hardwareinside.com hartfordinside.com hawaiiinside.com healthcareinside.com hobbiesinside.com hockeyinside.com holidayinside.com holidaysinside.com homeinside.com honoluluinside.com horoscopeinside.com horseracinginside.com hotelsinside.com houstoninside.com huntinginside.com idahoinside.com illinoisinside.com incomeinside.com indianainside.com indianapolisinside.com infomercialinside.com inlineskatinginside.com insuranceinside.com investinside.com investmentbankerinside.com investmentinside.com investmentsinside.com iowainside.com ipoinside.com jacksonvilleinside.com jewelryinside.com kansascityinside.com kansasinside.com kauaiinside.com kentuckyinside.com kitcheninside.com knoxvilleinside.com ladieswearinside.com lasvegasinside.com laughlininside.com lawinside.com lawyerinside.com leaseinside.com leaseitinside.com libraryinside.com lingerieinside.com liqourinside.com littlerockinside.com lodginginside.com longdistanceinside.com losangelesinside.com louisianainside.com louisvilleinside.com luggageinside.com magazinesinside.com mailboxinside.com maineinside.com makeupinside.com mallinside.com manitobainside.com mapsinside.com marketinginside.com marylandinside.com massachusettsinside.com mauiinside.com memorabiliainside.com memphisinside.com menswearinside.com miamiinside.com michiganinside.com milwaukeeinside.com minivansinside.com minneapolisinside.com minnesotainside.com mississippiinside.com missouriinside.com montanainside.com montrealinside.com mortgageinside.com mortgagesinside.com mothersdayinside.com motorcrossinside.com motorcyclesinside.com motorsportsinside.com moviesinside.com musicworldinside.com mutualfundinside.com mutualfundsinside.com nashvilleinside.com nebraskainside.com nevadainside.com newbrunswickinside.com newfoundlandinside.com newhamsphireinside.com newjerseyinside.com -93- newmexicoinside.com neworleansinside.com newsworldinside.com newyorkinside.com newyorkinside.com northcarolinainside.com northdakotainside.com novascotiainside.com nwtinside.com oahuinside.com ohioinside.com oklahomacityinside.com oklahomainside.com onlinetradinginside.com ontarioinside.com opticalinside.com optometristinside.com oregoninside.com orlandoinside.com ottawainside.com palmbeachinside.com palmspringsinside.com peiinside.com pennsylvaniainside.com perfumeinside.com petsinside.com philadelphiainside.com phoenixinside.com phoneinside.com photographyinside.com physicianinside.com pittsburginside.com playinside.com playoffsinside.com pokerinside.com portlandinside.com postofficeinside.com prescriptionsinside.com progolfinside.com promoteitinside.com promotioninside.com prosportsinside.com psychicinside.com quebecinside.com racinginside.com readitinside.com realestateinside.com realtorinside.com recreationinside.com renoinside.com renovationsinside.com rentacarinside.com rentalcarinside.com rentalcarsinside.com rentalsinside.com rentinside.com rentitinside.com reservationsinside.com resortsinside.com rhodeislandinside.com richmondinside.com rockclimbinginside.com rodeoinside.com rollerbladinginside.com rouletteinside.com rrspinside.com rugbyinside.com runninginside.com sacramentoinside.com salesinside.com saltlakecityinside.com samplesinside.com sanantonioinside.com sandiegoinside.com sanfransicoinside.com saskatchewaninside.com schoolsinside.com scoreboardinside.com scubadivinginside.com securityinside.com seeitinside.com sellinside.com shoesinside.com shoppinginside.com showbizinside.com skateboardinginside.com skiinginside.com skincareinside.com skydivinginside.com slotsinside.com Snowboardinginside.com soccerinside.com southcarloinainside.com southdakota.com sportinggoodsinside.com sportsbookinside.com sportsnewsinside.com sportspoolinside.com sportswearinside.com sportsworldinside.com stampsinside.com stlouisinside.com stockbrokerinside.com stockmarketinside.com stockquoteinside.com stockquotesinside.com stpaulinside.com streetlugeinside.com subscribeinside.com surfinginside.com swimminginside.com tampabayinside.com tennesseeinside.com tennisinside.com texasinside.com thanksgivinginside.com theatreinside.com tiresinside.com toolsinside.com torontoinside.com tourisminside.com toursinside.com trackandfieldinside.com tradeitinside.com travelagentinside.com travelinginside.com travelworldinside.com tripsinside.com trucksinside.com -94- unitedstatesinside.com universityinside.com usedcarsinside.com utahinside.com vacationinside.com vacationsinside.com valentinesdayinside.com vancouverinside.com vansinside.com vegasinside.com vermontinside.com veterinarianinside.com victoriainside.com videogamesinside.com videosinside.com virginainside.com vitaminsinside.com volleyballinside.com washingtondcinside.com washingtoninside.com washingtoninside.com waterskiinginside.com weatherinside.com weddingsinside.com westvirginainside.com windsurfinginside.com wineinside.com wisconsininside.com wrestlinginside.com wyominginside.com yukoninside.com -95- SCHEDULE "B" PROMISSORY NOTE As required by the Asset Purchase Agreement made by and between the undersigned and 596319 B.C. Ltd. ("Vendor") effective May 1, 2000 (the "Agreement"), the undersigned hereby promises to pay the sum of FORTY THOUSAND DOLLARS ($40,000.00) to the Vendor, without interest forthwith on the earlier of: (a) the date on which the undersigned is in receipt of sale or lease proceeds, from the sale or lease of any of the internet domain names it purchased from the Vendor under the Agreement, having an aggregate value of $40,000.00; (b) the date on which the undersigned is in receipt of proceeds from the sale and issue of securities of the undersigned, after the date hereof, having an aggregate value of $200,000.00; and (c) June 30, 2001 DATED at Vancouver, B.C. this ___ day of September, 2000. COAST FALCON RESOURCES LTD. As per: ______________________________ Authorized Signatory -96- SCHEDULE "C" NAMES RETAINED BY VENDOR 1. BROKERinside.com 2. QUOTESinside.com 3. MDinside.com 4. OFFICEinside.com 5. GARAGEinside.com 6. FLYinside.com 7. LEARNinside.com 8. JOBSinside.com 9. FINDITinside.com 10. GETITinside.com 11. BUYITinside.com 12. SELLITinside.com 13. PLAYITinside.com 14. DOITinside.com 15. CHATinside.com 16. ESCORTinside.com 17. MEETMEinside.com 18. OPINIONSinside.com 19. BROADCASTinside.com 20. DEMOinside.com 21. TOYSinside.com 22. MBAinside.com 23. TRADEinside.com 24. NYCinside.com 25. LAinside.com -97- EX-4.4 12 0012.txt EXHIBIT 4.4 MANAGEMENT AGREEMENT --------------------- THIS AGREEMENT made effective the 1st day of August 2000. AMONG: COAST FALCON RESOURCES LTD., a British Columbia company having an address at 1260-609 Granville Street, Vancouver, BC, V7Y 1G5. (the "Company") ON THE FIRST PART AND: PEMCORP MANAGEMENT INC., a British Columbia company having an address at 1260-609 Granville Street, Vancouver, BC, V7Y 1G5. ("Pemcorp") ON THE SECOND PART WHEREAS: A. Pemcorp is in the business of providing corporate finance, management and administrative consulting services to private and public companies; B. The Company wishes to engage Pemcorp and Pemcorp has agreed to be engaged to provide such services to the Company in accordance with the terms and conditions of this Agreement; NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows: 1. Engagement of Manager ----------------------- The Company hereby engages Pemcorp to provide, corporate finance, management and administrative services to the Company as required by the Company from time to time. Pemcorp hereby accepts the engagement as manager and agrees to faithfully serve the Company and use its best efforts to satisfy the company's requirements for the services described above in a timely and efficient manner. -98- 2. Scope of Authority -------------------- Pemcorp shall not have authority to enter into contracts as agent for the Company in the ordinary course. 3. Use of Information -------------------- Pemcorp agrees that it; a) shall use their best efforts to promote the interests of the Company; b) shall not disclose the private affairs of the Company, or any secret of the Company, to any person other than the Directors without the prior consent of the Board of Directors; and c) shall not use for their own purposes other that those of the Company, any information they may acquire with respect to the Company's affairs. 4. Management Fee --------------- During the first year of the term of this Agreement, the Company shall pay to Pemcorp a management fee equal to $2,500 per month, plus all applicable goods and services taxes that are payable thereon, (the "Management Fee"), payable on the first day of each month effective on August 1, 2000. The management fee shall be mutually agreed upon between the Company and Pemcorp in any renewal term of this Agreement. 5. Administrative Fees and Other Expenses ------------------------------------------ In addition to the Management Fee payable hereunder to Pemcorp, the Company agrees to reimburse Pemcorp for all travelling and other direct expenses actually and properly incurred by any employee or agent of Pemcorp in connection with fulfilling the duties and responsibilities of Pemcorp hereunder. The Company shall pay such amounts to Pemcorp on a monthly basis, forthwith upon receipt of an invoice therefor plus all related statements and vouchers. 6. Term and Termination ---------------------- This Agreement shall be in effect for a term of one year from and after the date hereof, unless terminated earlier in accordance with the terms of this Agreement, and shall be automatically renewed at the end of each year for an additional year unless either party gives notice of termination in accordance with this Agreement. Either party may give to the other party one month's notice in writing of its intention to terminate this Agreement. Upon the expiration of one month's notice, this Agreement and all obligations between the parties shall be terminated, except for the Company's obligation to pay any monies due and owing to Pemcorp. -99- 7. Indemnification --------------- The Company hereby agrees to indemnify and hold harmless Pemcorp and its officers, directors, agents, officers and controlling persons (any and all of whom are referred to as an "Indemnified Party") from and against any and all losses, claims, damages or liabilities, joint and several, and all actions in respect thereof (including, but not limited to all legal or other expenses reasonably incurred by an Indemnified Party in connection with the preparation for or defence of any claim, action or proceeding, whether or not resulting in any liability) that were sustained or incurred by an Indemnified Party in connection with the performance in good faith of the obligations under this Agreement. 8. Further Assurances ------------------- The parties hall deliver to each other such further documentation and shall perform such further acts as and when the same may be required to carry out and give effect to the terms and intent of this Agreement. 9. Notices ------- All notices given in connection with this Agreement shall be in writing and shall be personally delivered by a duly authorized representative to the parties at the addresses set out above. Any such notices personally delivered shall be deemed delivered on the day of delivery. Any party hereto may change its address for service by notice in writing to the other parties hereto. 10. Waiver and Amendment ---------------------- This Agreement may only be amended by further written agreement executed and delivered by all of the parties. No waiver or consent by a party of or to any breach or default by any other party shall be effective unless evidenced in writing, executed and delivered by the party so waiving or consenting and no waiver or consent effectively given as aforesaid shall operate as a waiver of or consent to any further or other breach of default in relation to the same or any other provision of this Agreement. 11. Assignment ---------- This Agreement may not be assigned by Pemcorp without the prior written consent of the Company. 12. Entire Agreement ----------------- This Agreement contains the entire agreement among the parties pertaining to the subject matter hereof, and supersedes and replaces all previous written and oral agreements among the parties with respect to the subject matter hereof. 13. Enurement --------- This Agreement shall enure to the benefit of the parties hereto, their respective successors, personal representatives, executors and permitted assigns. -100- 14. Governing Law -------------- This Agreement shall be governed by and interpreted in accordance with the laws of the Province of British Columbia, Canada. IN WITNESSETH WHEREOF this Agreement has been executed on the date first written above. PEMCORP MANAGEMENT INC. As per /s/ Leonard Petersen - --------------------------- Authorized Signatory COAST FALCON RESOURCES LTD. As per: /s/ Vernon Meyer - --------------------------- Authorized Signatory -101- -----END PRIVACY-ENHANCED MESSAGE-----