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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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 number: 0-21037
SoloPoint.com, Inc.
(Exact name of registrant as specified in its charter)
California 77-0337580
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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130-B Knowles Drive, Los Gatos, CA 95032
(Address of principal executive office) (Zip Code)
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Registrant's telephone number, including area code: (408) 364-8850
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
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 [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The aggregate market value of the voting stock of the issuer held by non-
affiliates of the issuer on March 29, 2000 was approximately $9,962,568, based
upon the closing price of such stock on March 27, 2000 as published by the
National Quotation Bureau on the over the counter pink sheets.
As of March 29, 2000, 4,981,284 shares of Common Stock of the registrant were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Items 5, 9, 10, 11 and 12 of Form 10-KSB is
incorporated by reference from the Registrant's Definitive Proxy Statement for
the 2000 Annual Meeting of Shareholders, which will be filed with the Securities
and Exchange Commission within 120 days after the close of the Registrant's
fiscal year ended December 31, 1999.
Transitional Small Business Disclosure Format: Yes [_] No [X]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
The following section contains forward-looking statements that involve risks
and uncertainties, including those referring to the period of time the
Company's existing capital resources will meet the Company's future capital
needs, the Company's future operating results, the market acceptance of the
products of the Company, the Company's efforts to establish and maintain
distribution partners, the development of new products, and the Company's
planned investment in the marketing and distribution of its current products and
research and development with regard to future products. The Company's actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors including: the ability of the Company
to obtain additional funding, dependence on market acceptance of the Company's
products; dependence on a limited number of customers; lack of significant sales
and distribution channels; the Company's ability to timely develop new products;
business conditions and growth in the personal communications management
industry and general economy; competitive factors, such as rival providers of
personal communications management products and services and price pressures;
compatibility with a wide variety of switching configurations; reliance on sole
source contract manufacturers and component suppliers; dependence on a limited
number of key personnel; rapid technological changes; as well as other factors
set forth elsewhere in this Form 10-KSB.
Founded in 1993, SoloPoint.com, Inc. ("SoloPoint" or the "Company")
designs, develops and markets innovative and easy-to-use personal communications
management products that connect people more effectively. The Company markets
its current products to customers of the residential Regional Bell Operating
Companies ("RBOC") and Local Exchange Carriers ("LEC"), Small Office Home Office
("SOHO") professionals and professionals in corporate satellite offices.
From inception (March 26, 1993) through December 31, 1999, SoloPoint has
incurred cumulative net losses of $17,218,121, and expects to incur substantial
losses over at least the next year. We have insufficient cash to continue our
operations beyond June 30, 2000 at our projected level of operations. Our
ability to continue as a going concern is dependent upon successfully raising
additional capital through equity or debt financings and, ultimately, upon
achieving profitable operations. However, we cannot assure you that additional
funding will be available to us on acceptable terms, if at all, or that we will
achieve profitable operations. The accompanying disclosures have been prepared
assuming SoloPoint will continue as a going concern and do not include any
adjustments that might result from the outcome of this uncertainty.
Industry Overview
The market for traditional enhanced communications services changed
dramatically during the past year. The RBOCs and LECs changed their marketing
focus from traditional CPE (customer premises equipment) add-on services to
bundled service offerings, and developed new Internet based strategies designed
to deploy broadband DSL as quickly as possible. As a result, demand for
traditional CPE products has significantly diminished.
Traditional Regional Bell Operating Companies (RBOCs) and Local Exchange
Carriers (LECs) see the convergence of voice and data as the next new wave of
residential services. Since the passage of the Telecom Reform Act in 1996, the
monopoly over residential customers, previously held by these incumbent
providers, has been challenged by a new group of providers known as Competitive
Local Exchange Carriers (CLECs). All of these providers are now focused on
delivering broadband services as quickly as possible. At the same point that
infrastructure costs have come down to a reasonable level, the demand for higher
speed services has increased. Internet content has become more sophisticated
and new multi-media content such as broadcast audio and video has become
available. With the tremendous bandwidth the backbone Internet infrastructure
now has the capacity to deliver, deployment of broadband services such as DSL
and cable modems will enable the next generation Internet experience for
consumers.
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Products
The Company currently offers three products in its personal communications
management product line: SmartScreen, which allows a residential RBOC or LEC
Voice Mail customer to locally screen an incoming call and take the call, if
desired; SmartMonitor, which allows a mobile professional to remotely monitor
and take office calls from a cellular or PCS phone; and SmartCenter, which
provides a feature rich call management environment for SOHO professionals and
professionals in corporate satellite offices.
SmartScreen S-100: The SmartScreen S-100 is currently sold by Pacific Bell for
$49.95 and is also available through the Company's web store and various retail
outlets for $69.95. The S-100 enables a residential RBOC or LEC Voice Mail user
to screen and manage incoming calls while callers are leaving messages on the
user's RBOC or LEC Voice Mail. The user can connect with a caller while he/she
is leaving a Voice Mail message at any time during the call.
SmartScreen S-210: The S-210 manages your telephone company Voice Mail through
simple, intuitive buttons. It also lets you screen your calls and visually
alerts you when you have messages.
S-310 Caller ID/Voice Mail Manager: The S-310 contains a number of helpful
features that will simplify and enhance your use of Caller ID, Voice Mail, and
features such as 3-Way Calling, Call Waiting and Call Forwarding.
SmartMonitor M-100: The SmartMonitor M-100 currently retails for $199.95 and
is designed to meet the needs of mobile professionals who have a direct access
office number and an answering machine. The M-100 enables users to screen
incoming office calls from either their cellular or PCS telephone. When a caller
dials the user's office number, SmartMonitor simultaneously rings the user's
office number and cellular or PCS telephone. The user can optionally monitor
calls as messages are being left on the user's office answering machine. The
user can also elect to instantly connect to callers by simply pushing a button.
A key benefit of the M-100 is that it enables users to be more accessible to
their customers without disclosing their cellular or PCS numbers or the user's
current location. Since the user's office telephone and Cellular or PCS
telephone ring simultaneously, the user can answer either telephone without
having to disable or enable any of the screening features of the M-100, an
advantage over RBOC or LEC Call Forwarding.
SmartMonitor M-200: The M-200 currently retails for $249.95 and is designed to
meet the needs of high-end mobile professionals who have a direct access office
number and RBOC or LEC Voice Mail or answering machines. When used with RBOC or
LEC Voice Mail, the M-200 requires RBOC or LEC Three-Way Calling service.
SmartCenter Family
The SmartCenter C-120 currently retails for $495 per unit and is a complete,
multifunction, communications management platform designed to meet the needs of
mobile, communications-dependent SOHO individuals. The SmartCenter C-120 is an
integrated communications management hardware device that fits under a
telephone, connects to two analog telephone lines and provides four general-
purpose extensions for connecting personal office telephone equipment.
The A-200 provides a complete automated attendant system for small businesses
with enhanced features such as call filtering, scheduling, and fax handling for
up to 2 incoming telephone lines. The A-400 provides the same features for up
to 4 incoming telephone lines. Additional modules may be added, in 2 line
increments, to a maximum of 10 lines.
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Sales and Marketing
Since March 1996, the Company has introduced three product lines that are
designed to address specific market segments and customers. The Company's
current products are sold to residential RBOC and LEC Voice Mail customers,
mobile professionals and SOHO professionals and professionals in corporate
satellite offices.
The Company's distribution strategy for its current product line is to enter
into co-marketing or reseller agreements with established RBOCs and LECs, as
well as to sell directly to end user customers. In May 1997, the Company
entered into a marketing agreement with Pacific Bell to market a co-branded
version of the S-100 to Pacific Bell's residential Voice Mail customers. In
September 1999, the Company entered into a reseller agreement with Cincinnati
Bell for the S-310 Caller ID/Voice Mail Manager. No other co-marketing or
reseller agreements have been established for the Company's current product
line.
Manufacturing
The Company is planning to fulfill all existing agreements for shipment and
support of existing personal communications management products; however, it
does not intend to continue to actively market and sell its existing product
line. Consequently, it does not intend to manufacture any additional units of
its personal communications management product line.
Research and Development
Since its inception, the Company has made a substantial investment of
$6,364,793 from its inception through December 31, 1999 in research and
development. This investment has resulted in the modular hardware and software
technology which the Company has utilized in its three product lines:
SmartCenter, SmartMonitor and SmartScreen. The Company is currently developing
Connectivity For Living, a new product line that integrates communications,
localized content and advertising through a portal over always-on broadband
services to special Lifestyle(TM) appliances located throughout the home. The
Company intends to design these appliances to not only provide access to local
content and family information, but also to serve as communication centers by
integrating the functions of additionally separate devices such as telephones,
clock radios, pagers, intercoms and PCs. While the Company believes that its
future success, if any, will depend in large part on its ability to fully
develop the technology for its Connectivity For Living potential future
products, the Company expects to continue to derive substantially all of its
revenues, if any, over the next 12 months from the sale of its existing
products. As of December 31, 1999, the Company's product development staff
consisted of three engineers. Two additional engineers have joined the Company
since December 31, 1999. The Company also utilizes consultants on a project
basis from time to time. The Company's total expenses for research and
development for the years ended December 31, 1999 and 1998 were $695,990 and
$929,542 respectively.
Competition
The market for Internet broadband services is highly competitive and
characterized by rapid technological change, frequent new product introductions,
short product life cycles, evolving industry standards and significant price
erosion over the life of a product or service. The Company believes that the
principal competitive factors affecting this market include product features,
compatibility with a wide variety of devices, price, ease of use, quality,
customer service and support, as well as company and product reputation.
There are many competitive trends that will impact the Company's Connectivity
For Living future product line, including the accelerated acceptance of e-mail
and instant messaging as a communications method for the masses, the eventual
convergence of voice and data, the technology acceptance and movement of the PC
into the home, and
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technology advances in both hardware and software that allow "Internet
appliances" to be developed for mass consumer consumption. These trends will
all help to accelerate the convergence of the telephone, PC and Internet.
SoloPoint will see competition from companies that are pursuing one or more of
these industry trends.
Most of the Company's present and potential competitors have substantially
greater financial, marketing, technical and other resources than the Company.
Furthermore, the Company also expects to compete with companies that have
substantial manufacturing, marketing and distribution capabilities, areas in
which the Company has limited or no experience. Increased competition, direct
and indirect, could materially adversely affect the Company's revenues and
profitability through pricing pressure and loss of market share. There can be no
assurance that the Company will be able to compete successfully against existing
and new competitors as the market evolves and the level of competition
increases. The failure to compete successfully against existing and new
competitors would have a material adverse effect upon the Company's business,
financial condition, and results of operations.
Current and potential competitors have established and may establish
cooperative relationships with third parties to increase the ability of their
products to address the needs of the Company's prospective customers. To the
extent such third parties enter into such relationships with competitors of the
Company, such third parties are likely to be unable or unwilling to enter into
similar relationships with the Company. It is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. As a result, such competitors may be able to respond more quickly to new
or emerging technologies and to changes in customer requirements or to devote
greater resources to the development, promotion and sales of their products than
can the Company. There can be no assurance that these competitive pressures will
not materially adversely affect the Company's business, financial condition and
results of operations.
Risk Factors
Going Concern Assumptions; Future Capital Needs Uncertain; No Assurance of
Future Financing
The Company has incurred cumulative net losses of $17,218,121 as of
December 31, 1999 and has never achieved profitability. We expect to incur
substantial losses for the foreseeable future and may never become profitable.
We also expect to continue to incur significant capital expenditures and
anticipate that our expenses will increase substantially in the foreseeable
future as we increase our sales and marketing activities, acquire or develop new
technology, expand our existing product lines and develop and market our
Connectivity For Living potential future product line, implement additional
internal systems and infrastructure, and hire additional personnel. We also
expect to experience negative operating cash flow for the foreseeable future as
we fund our operating losses and capital expenditures. We will need to generate
significant revenues to achieve and maintain profitability. We cannot be certain
that we will achieve profitability in the future. Our failure to achieve or
maintain profitability could negatively impact the market price of our common
stock.
The Company will require additional funding in 2000 in order to continue
operations. In the absence of receiving additional funding, the Company
anticipates that its existing capital resources and cash generated from
operations, if any, will be adequate to meet the Company's cash requirements
until June, 2000 at its anticipated level of operations. The Company's future
capital requirements will depend upon numerous factors, including the amount of
revenues generated from operations and the Company's level of operating
expenses, none of which can be predicted with any certainty. The Company intends
to seek additional funding during the next three months and will possibly seek
additional funding after that time. There can be no assurance that any
additional financing will be available on acceptable terms, if at all, when such
financing is required. Moreover, if additional financing is unavailable, the
Company could be required to reduce or suspend its operations, seek an
acquisition partner or sell securities on terms that may be highly dilutive or
otherwise disadvantageous to investors.
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Change in Product Direction; Emerging Market; Dependence on Market Acceptance of
Products; Lack of Adequate Marketing Resources
To date, the market for personal communications management products has
developed at a significantly slower rate than the Company had originally
anticipated. As a result, the Company is changing its product development
direction to develop products for the Internet broadband services market. If
the Internet broadband services market fails to grow or grows at a slower rate
than the Company currently anticipates, or if the Company fails to achieve
sufficient market penetration, the Company's business, financial condition and
results of operations will be materially adversely affected. Even if the market
for Internet broadband services does grow, there can be no assurance that the
Company's current products or any future Internet broadband services products,
including but not limited to its Connectivity For Living product line, which may
be introduced by the Company will achieve commercial acceptance within such a
market. Marketing newly introduced products such as those of the Company in a
developing market requires extensive financial resources and marketing efforts.
To date, the Company has not had sufficient financial resources to adequately
market its products and there can be no assurance that the Company will be able
to secure sufficient funds to enable the Company to adequately market its
products.
Discontinuation of Product Development in Personal Communications Management
Products; Future Revenue Dependent on New Product Development
The Company will fulfill all existing agreements for shipment and support
of existing personal communications management products; however, it does not
intend to continue to actively market and sell its existing product line.
Future revenue, if any, will be comprised of sales of the remaining inventory of
existing personal communications management products, as well as sales of the
Connectivity For Living product line currently under development. Any factors
adversely affecting the pricing of, demand for or market acceptance of these
products, including competition or technological change, could negatively affect
our results of operations. Factors that may affect the market acceptance of our
products, some of which are beyond our control, include the adoption of Internet
broadband services over competing technologies, the growth and changing
requirements of the market for Internet broadband services, the successful
development of our relationships with Internet service providers and Internet
content providers, the performance, quality, price and total cost of ownership
of our products and services, and the performance, quality, price, total cost of
ownership and availability of competing products and services. If we are not
successful in developing and marketing new and enhanced Internet broadband
services products that keep pace with technology and our customer's needs, our
operating results will suffer. The market for our products is new and emerging,
and is characterized by rapid technological advances, changing customer needs
and evolving industry standards. Accordingly, to realize our expectations
regarding our operating results, we depend on our ability to develop, in a
timely manner, new products that keep pace with developments in technology, meet
evolving customer requirements, and enhance our current product offerings and
deliver those products through appropriate distribution channels. Developing
new products and product enhancements requires significant additional
expenditures in research and development. We may not be successful in developing
and marketing, on a timely and cost-effective basis, either enhancements to our
products or new products that respond to technological advances and satisfy
increasingly sophisticated customer needs. If we fail to introduce new products,
or enhancements to existing products, our operating results will suffer. In
addition, if new industry standards emerge that we do not anticipate or adapt
to, our products could be rendered obsolete and our business could be harmed.
Risks Associated with Strategic Relationships
The Company believes that its future success, if any, will be largely
dependent on its ability to either sell its products to or enter into joint
marketing arrangements with Internet Service Providers (ISPs) and Internet
Content Providers in the United States. A failure by the Company to develop
significant relationships with Internet Service Providers or Internet Content
Providers would have a materially adverse effect on the Company's business and
operating results. Even if the Company is successful in establishing alliances
or relationships with ISPs, Internet Content Providers or other strategic
partners, there can be no assurance that such alliances or relationships will
result in an increase in the Company's distribution channels or product revenues
or otherwise provide any benefit to the Company. In addition, the strategic
partners may be in direct or indirect competition with the Company or among each
other. The presence of potential or actual conflicts of interest could
materially adversely affect the Company's relationships with potential strategic
partners, which in turn could have a material adverse effect on the Company's
business, financial condition and results of operations.
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Assessing future viability of the business; limited ability to forecast revenues
The Company is entering the new emerging market for Internet broadband
services which consequently may make it difficult for you to assess its future
viability. We cannot be certain that our business strategy will be successful.
In addition, because we have not yet begun commercial shipment of our
Connectivity For Living product line currently under development, and are
planning on phasing out the marketing and distribution of our existing personal
communications management product line, we may have limited insight into trends
that may emerge and affect our business. If we fail to respond to such trends
and execute our business strategy, our operating results will suffer. Because of
our limited operating history in the Internet Broadband Services market and
because the market for Internet Broadband Services is new and rapidly evolving,
we may not be able to forecast our quarterly revenues. A significant percentage
of our expenses, particularly salaries and rent, do not vary with our revenues.
If we experience a shortfall in revenues in relation to our expenses, we may be
unable to reduce our expenses quickly enough to avoid lower than anticipated
quarterly operating results. In addition, our expenses have increased, and will
continue to increase, with the anticipated growth in our business. We do not
know whether our revenues will grow rapidly enough to absorb these costs. As a
result, our quarterly operating results could fluctuate, and such fluctuation
could cause the market price of our common stock to decline. We do not believe
that period-to-period comparisons of our revenues and operating results are
necessarily meaningful. You should not rely on the results of any one quarter as
an indication of future performance.
Dependence on Limited Number of Customers
During the year ended December 31, 1999, two customers accounted for
approximately 73% and 25% of the Company's net revenues. The Company expects
that sales to relatively few customers will continue to account for a
significant percentage of the Company's revenues at least through calendar year
2000. Substantially all of the Company's sales are made on a purchase order
basis, and none of the Company's customers has entered into an agreement
requiring them to purchase the Company's products. The loss of, or any reduction
in orders or returns of product from a current customer could have a material
adverse effect on the Company's business, financial condition and results of
operations in the near term.
The Company's ability to increase its sales will depend upon its ability to
develop and bring to market its Connectivity For Living potential future
products. The Company intends to continue marketing its current products as long
as there is existing demand, but does not intend to dedicate substantial
resources to the expansion of sales to existing or new customers for current
products. In the event that the Company is unsuccessful in developing and
marketing its Connectivity For Living product line, the Company's business,
financial condition and results of operations would be materially adversely
affected.
Delisting of Securities from the Nasdaq Market; Limited Liquidity of Trading
Market
On November 2, 1999 it was determined that the Company was unable to
maintain the standards required for continued quotation on the Nasdaq Small-Cap
Market. Consequently, its Common Stock was delisted from the Nasdaq Small-Cap
Market. Trading, if any, in the Common Stock is now conducted in the over-the-
counter market on an electronic bulletin board established for securities that
do not meet the Nasdaq Small-Cap Market listing requirements, or in what are
commonly referred to as the ''pink sheets.'' As a result, an investor will find
it more difficult to dispose of, or to obtain accurate quotations of the price
of, the Company's Common Stock. Nasdaq has recently promulgated new rules which
make continued listing of companies on the Nasdaq SmallCap Market more difficult
and has significantly increased its enforcement efforts with regard to the
Nasdaq standards for such listing. The Company's Common Stock is now subject to
so-called ''penny stock'' rules that impose additional sales practice and market
making requirements on broker-dealers who sell and/or make a market in such
securities. This could affect the ability or willingness of broker-dealers to
sell and/or make a market in the Company's Common Stock and the ability of
purchasers of the Company's Common Stock to sell their securities in the
secondary market.
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Forward-looking Statements
This Form 10-KSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements may be deemed to include
the Company's plans to enter the Internet broadband services market, establish
strategic alliances and business relationships, implement a multichannel
distribution strategy, expend resources to create end-user demand and brand name
recognition and file additional patent applications. Such forward-looking
statements may also be deemed to include the Company's expectations concerning
factors affecting the market for its current products and any future personal
communications management products it may develop, including growth in the
personal communications management product marketplace, the dependence of mobile
individuals on the ability to manage business communications effectively in a
mobile environment and the shortcomings of commercially available personal
communications management products. Actual results could differ from those
projected in any forward-looking statements for the reasons detailed in the
other sections of this Form 10-KSB. The forward-looking statements are made as
of the date of this Form 10-KSB and the Company assumes no obligation to update
the forward-looking statements, or to update the reasons why actual results
could differ from those projected in the forward-looking statements.
Year 2000 Compliance
The Company experienced no disruptions in mission critical information
technology and non-information technology systems and thus believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from the Year 2000 issues, either with
its products, its internal systems, or the products and services of third
parties upon who we are dependent. The Company intends to continue monitoring
its mission critical computer applications and those of its suppliers and
vendors throughout the year 2000 to ensure that any Year 2000 matters that may
arise are addressed promptly.
Intellectual Property Rights
The Company relies upon a combination of patents, trademarks and non-
disclosure agreements in order to establish and protect its proprietary rights.
The Company has received four patents and intends to continue to file
applications, as appropriate, for any of the Company's future products. There
can be no assurance that patents will be issued from any of its pending
applications or, if patents are issued, that the claims allowed will be
sufficiently broad to protect the Company's technology. In addition, there can
be no assurance that any patents issued to the Company will not be challenged,
invalidated or circumvented, or that the right granted there under will provide
proprietary protection to the Company. Since United States patent applications
are maintained in secrecy until patents issue and since the publication of
inventions in technical or patent literature tend to lag behind such inventions
by several months, the Company cannot be certain that it was the first creator
of inventions covered by its pending patent applications, that it was the first
to file patent applications for such inventions or that the Company is not
infringing on the patents of others.
The Company has in the past and intends in the future to trademark some of its
proprietary product names and logos and claims copyright protection for its
proprietary software. There can be no assurance that the Company can obtain
additional trademarks or that any copyright protection will be adequate.
Litigation may be necessary to enforce the Company's patents, if issued,
trademarks, copyrights or other intellectual property rights, to protect the
Company's trade secrets, to determine the validity and scope of the proprietary
rights of others or to defend against claims of infringement. Such litigation
could result in substantial costs and diversion of resources and could have a
material adverse effect on the Company's business, financial condition and
results of operations regardless of the final outcome of such litigation.
Despite the Company's efforts to safeguard and maintain its proprietary rights,
there can be no assurance that the Company will be successful in doing so or
that the Company's competitors will not independently develop or patent
technologies that are substantially equivalent or superior to the Company's
technologies. In addition, the laws of certain foreign countries do not protect
the Company's intellectual property rights to the same extent, as do the laws of
the United States. Although the Company continues to implement protective
measures and intends to defend its proprietary rights vigorously, there can be
no assurance that these
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efforts will be successful. In the absence of effective protection of its
intellectual property, there can be no assurance that third parties will not
develop and market copies of the Company's products.
The Company has received letters from two third parties asserting certain
patents for various telephone call processing products and seeking to enter into
licensing agreements with the Company with respect to such patents. The Company
has had discussions with one of the parties and has reached an understanding as
to a licensing agreement. The Company is currently reviewing the second matter
to determine the need for any such licensing agreements. While there has been no
action taken by either third party during the past twelve months, there can be
no assurance that the Company will not be obligated to defend itself in court
against allegations of infringement of third-party patents or that the Company
would prevail in any such litigation seeking either damages or an injunction
against the sale of the Company's products. An adverse outcome in such a suit
could subject the Company to significant liabilities to third parties, require
disputed rights to be licensed from third parties or require the Company to
cease using such technology.
Personnel
As of December 31, 1999, the Company employed 12 people on a full-time basis.
Of these, three were responsible for research and development, two were in
customer support and quality assurance, three were responsible for sales and
marketing, two were responsible for finance and administration and two were
responsible for operations. The Company also utilizes consultants to fulfill
certain projects in the area of engineering as well as corporate marketing. The
Company's employees are not represented by a union and the Company considers its
relationship with its employees to be good.
The Company's future success depends substantially upon the efforts of certain
of its executive officers and key technical and other employees, none of whom
are covered by key man life insurance. Edward M. Esber, Jr. joined the Company
in October 1995 as President, Chief Executive Officer, Chief Financial Officer
and Director. In January 1998 Mr. Esber was elected as Chairman of the Board and
relinquished his responsibilities as President & CEO. Arthur G. Chang joined the
Company in February 1996 as Chief Operating Officer and Vice President of
Research and Development. In January 1998 Mr. Chang was elected President and
CEO. Donald Nanneman joined the Company in January 1997 as Vice President of
Marketing. Thomas J. Muise joined the Company in January 2000 as Vice President
of Finance and Chief Financial Officer.
The Company's ability to successfully market and distribute its existing and
any future personal communications management products will require it to
attract, retain and motivate additional key employees, including product
support, research and development and sales and marketing personnel. There can
be no assurance that the Company will be successful in achieving any of these
goals, and the failure to do so would have a material adverse effect on the
Company's business, financial conditions and results of operations.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases approximately 8,200 square feet in a facility in Los Gatos,
California. The facility is subject to a lease which expires in September 2000.
The current monthly rent is $14,722. The Company has the option to renew the
lease for an additional two years. The rent in option year one shall be $15,540
per month and in option year two shall be $16,358 per month. The Company
believes that its current facilities are sufficient to meet its needs for the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Results of a special meeting of shareholders held on October 26, 1999:
1. Approval of an increase in the number of shares of Common Stock reserved for
issuance under the Company's 1993 Incentive Stock Plan from 949,250 to
1,549,250.
2. Rejection an amendment to the Company's Articles of Incorporation to
effect a one-for-three reverse stock split of the Company's outstanding
Common Stock.
3. Approval of a change to the name of the Company to SoloPoint.com, Inc.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Since the Company's initial public offering on August 6, 1996, until November
2, 1999 the Company's Common Stock was traded on the NASDAQ "Small Cap" Market
System under the symbol "SLPT". On November 2, 1999 the Company was delisted
from the Nasdaq Stock market and began trading on the Over The Counter Bulletin
Board under the symbol "SLPTC". As of December 31, 1999 there were 4,981,284
shares of Common Stock outstanding and 35,000,000 shares of Common Stock were
authorized.
The following table sets forth the range of the high and the low closing sales
price for each of the periods indicated for shares of the Company's Common
Stock.
<TABLE>
<CAPTION>
1999
Quarter Ended High Low
------- -------
<S> <C> <C>
March 31, 1999.................................................................................. $2.88 $1.31
June 30, 1999................................................................................... $2.13 $0.91
September 30, 1999.............................................................................. $1.50 $0.56
December 31, 1999............................................................................... $1.50 $0.25
1998
Quarter Ended High Low
------- -------
March 31, 1998.................................................................................. $4.50 $2.00
June 30, 1998................................................................................... $3.00 $1.00
September 30, 1998.............................................................................. $1.75 $0.59
December 31, 1998............................................................................... $9.00 $0.22
1997
Quarter Ended High Low
------- -------
March 31, 1997.................................................................................. $13.52 $7.00
June 30, 1997................................................................................... $14.00 $6.52
September 30, 1997.............................................................................. $15.24 $7.52
December 31, 1997............................................................................... $10.24 $3.00
</TABLE>
As of December 31, 1999 there were 198 holders of record of Common Stock.
Dividend Policy
The Company has never paid cash dividends and does not anticipate paying any
cash dividends in the foreseeable future. The Company intends to retain
earnings, if any, for future growth and expansion of its business.
8
<PAGE>
Recent Sales of Unregistered Securities
Information required by this item, recent sales of unregistered securities,
will be contained in the Company's Notice of 2000 Annual Meeting of Shareholders
and Proxy Statement, pursuant to Regulation 14A, to be filed with the Securities
and Exchange Commission within 120 days after December 31, 1999. Such
information is incorporated herein by reference.
9
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following section contains forward-looking statements that involve risks
and uncertainties, including those referring to the period of time the
Company's existing capital resources will meet the Company's future capital
needs, the Company's future operating results, the market acceptance of the
products of the Company, the Company's efforts to establish and maintain
distribution partners, the development of new products, and the Company's
planned investment in the marketing and distribution of its current products and
research and development with regard to future products. The Company's actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including: the ability of the Company
to obtain additional funding, dependence on market acceptance of multifunction
personal communications management products; dependence on a limited number of
customers; lack of significant sales and distribution channels; the Company's
ability to timely develop new products; business conditions and growth in the
personal communications management industry and general economy; competitive
factors, such as rival providers of personal communications management products
and services and price pressures; compatibility with a wide variety of switching
configurations; reliance on sole source contract manufacturers and component
suppliers; dependence on a limited number of key personnel; rapid technological
changes; as well as other factors set forth elsewhere in this Form 10-KSB.
To date, SoloPoint's working capital requirements have been met through the
sale of equity and debt securities and minimal revenues from product sales.
SoloPoint has sustained significant operating losses in every fiscal period
since inception and expects to incur substantial quarterly losses at least
through the end of calendar year 2000 and possibly longer. The Company has
insufficient cash to continue its operations beyond June 2000 at its projected
level of operations. SoloPoint's ability to continue as a going concern is
dependent upon it successfully rasing additional equity or debt financing and,
ultimately, upon achieving profitable operations. However, we cannot assure you
that additional funding will be available to us on acceptable terms, if at all,
or that we will achieve profitable operations.
Results of Operations
Net Revenues
Since inception, the Company's focus has been on the design and development of
personal communications management solutions for communications-dependent
individuals. The Company introduced its first product, SmartCenter at the end of
March 1996 and made initial shipments of its second product, SmartMonitor, at
the end of September 1996. The Company recorded its initial revenues in the
quarter ended June 30, 1996. The Company's products currently have a 30-day,
unconditional, money-back guarantee. We recognize revenue when our products are
shipped and the 30-day money-back guarantee period has lapsed. One major
customer does not have this 30 day money back guarantee and therefore revenues
are recognized upon shipment. Allowances are provided for product returns based
on estimated future product returns, the timing of expected new product
introductions and other factors. These allowances are recorded as direct
reductions of revenue and accounts receivable.
Net revenues for the year ended December 31, 1999, were $1,621,622 compared to
$571,791 for the year ended December 31, 1998, a 184% increase. The increase in
net revenues is mainly attributable to revenues derived from the sale of the our
S-310 Caller ID/Voice Mail Manager through our reseller agreement with
Cincinnati Bell.
Dependence on Key Customers
During the year ended December 31, 1999, two customers, Cincinnati Bell and
Innotrac/Pacific Bell, accounted for approximately 73% and 25%, respectively, of
SoloPoint's net revenues. There can be no assurance
10
<PAGE>
that such customers will continue to order similar volume of product from the
Company. A significant reduction in sales volume attributable to the loss of any
of the Company's customers, or the Company's inability to collect accounts
receivable from any major customer could have a materially adverse effect on the
Company's business, financial condition and results of operations.
Gross Margin
Cost of sales, which consists mainly of product cost and inventory
adjustments, was $1,810,153 or 112% of revenue for the year ended December 31,
1999, as compared to $634,141 or 111% of revenue for the year ended December 31,
1998. The high percentage of cost of sales for the years ended December 31, 1999
and 1998 was due to increases in inventory reserves of approximately $211,000
during the fourth quarter of 1999 and $207,000 during the fourth quarter of
1998. The increase in inventory reserves during the fourth quarter of 1999
relates to the Company's change in business strategy to the Connectivity For
Living product line while the increase in the fourth quarter of 1998 relates to
the Company's change in distribution strategy and lower than anticipated sales.
Operating Expenses
Research and Development
Research and development expenses, which consist primarily of personnel
related and consulting expenses, were $695,990 for the year ended December 31,
1999 as compared to $929,542 for the year ended December 31, 1998. This decrease
of 25% was primarily a result of lower utilization of outside consultants and
design service firms. The Company anticipates that research and development
expenses may increase in the future in order to develop the Connectivity For
Living future product line should the Company be successful in raising
additional capital in calendar year 2000.
Sales and Marketing
Sales and marketing expenses which consist primarily of advertising, public
relations, marketing communications, conferences and trade shows, travel and
personnel expenses were $474,193 for the year ended December 31, 1999 as
compared to $625,286 for the year ended December 31, 1998. This decrease of 24%
was primarily a result of decreased expenses related to a reduction in personnel
and related costs, reduced advertising and marketing efforts, and less
attendance at trade shows and conferences. The Company anticipates that sales
and marketing expenses may increase in the future in the event of the successful
development and subsequent market launch of the Connectivity For Living future
product line should the Company be successful in raising additional capital in
calendar year 2000.
General and Administrative
General and administrative expenses which include personnel, professional
services, bad debt, depreciation, and consultant expenses were $1,144,403 for
the year ended December 31, 1999 as compared to $1,163,480 for the year ended
December 31, 1998. This decrease of 2% was primarily a result of decreased
personnel and professional services costs. The Company anticipates that general
and administrative expenses may grow in absolute dollars, but may decrease as a
percentage of revenue, as it adds the infrastructure necessary to accommodate
expanded operations associated with the Connectivity For Living future product
line should the Company be successful in raising additional capital in calendar
year 2000.
Other Income (Expense)
Other income (expense) is comprised primarily of interest income on cash
balances, which had been nominal until the completion of the sale of an
additional 2,904,829 shares of the Company's common stock in a private placement
transaction in September 1999. The net proceeds from the private placement
earned interest through investment in money market funds and high grade
commercial paper. For the year ended December 31, 1999 the Company earned
interest income of $42,199 compared with interest income of $108,284 for the
year ended
11
<PAGE>
December 31, 1998. The decrease in interest income from 1998 to 1999 of $66,085
or 61% was the result of lower average cash balances. This was offset by
interest expense of $18,318 and $32,980 for the years ended December 31, 1999
and 1998, respectively.
Provision for Income Taxes
There was no provision for federal or state income taxes for the years ended
December 31, 1999 and December 31, 1998 as the Company incurred net operating
losses. At December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $9,800,000 and $9,300,000, respectively. The
Company also had federal and state research and development tax credit
carryforwards of approximately $150,000. The net operating loss and research and
development tax credit carryforwards will expire at various dates beginning in
2000 through 2019, if not utilized. The utilization of the net operating losses
and credits may be subject to a substantial annual limitation due to the
ownership change limitations provided by the Internal Revenue Code of 1986 (the
"Code") and similar state provisions. The annual limitation may result in the
expiration of net operating loss and tax credit carryforwards before
utilization.
Liquidity and Capital Resources
As of December 31, 1999, the Company had cash, cash equivalents, and short-
term investments of $2,086,262 and working capital of $1,689,113 as compared to
cash, cash equivalents, and short-term investments of $1,005,845 and working
capital of $975,728 at December 31, 1998. The Company used cash of $1,863,935 in
its operating activities for the year ended December 31, 1999. Principal uses of
cash were to fund the Company's net loss. The principal source of cash was the
$3,053,125 net proceeds from the Septemeber 1999 private placement of common
stock.
The Company expects to incur additional substantial losses at least through
the end of calendar year 2000. The Company will need to seek additional funding
during calendar 2000 in order to complete the Connectivity For Living product
development and enter the Internet broadband services market. There can be no
assurance that the Company will be able to raise such additional funding. In the
absence of receiving additional funding, the Company anticipates that its
existing capital resources and cash generated from operations, if any, will be
adequate to meet the Company's cash requirements through June 30, 2000 at its
anticipated level of operations. Failure to obtain funding would have a material
adverse effect on the Company's business, financial condition and results of
operations and could force management to curtail operations, shelve planned
development activities, lay off personnel, seek an acquisition partner or even
cease operations. As of December 31, 1999 the Company did not have any
significant commitments for capital or other expenditures.
SoloPoint's capital requirements depend on many factors including market
aceptance of its products, the amount of money it invests in research and
development of new and enhanced products, the amount of money it invests in
increased marketing and sales activities, the amount of inventory it carries as
well as other factors. The Company received a report from its independent
auditors on their audit of our financial statements as of December 31, 1999
containing an explanatory paragraph that describes the uncertainty as to the
Company's ability to continue as a going concern due to its lack of sufficient
cash to meet its projected operating expenditures for the next twelve months.
As noted above, the Company will need to seek additional equity or debt
financing in 2000. The sale of additional equity or convertible debt securities
could result in additional dilution to the Company's shareholders. We cannot
assure you that financing will be available in amounts or on terms acceptable to
the Company, if at all.
Future Operating Results
Since its inception in 1993, the Company has incurred significant losses, has
had substantial negative cash flow, and has realized limited revenues. At
December 31, 1999, the Company had an accumulated deficit of $17,251,238, and
had incurred operating losses of $2,503,117 and $2,780,658 for the years ended
December 31, 1999 and 1998, respectively. The Company expects to continue to
incur substantial operating losses at least through its fiscal year ending
December 31, 2000.
12
<PAGE>
Potential Fluctuations in Quarterly Results
The Company has experienced and expects to continue to experience fluctuations
in operating results. Fluctuations in operating results may result in volatility
in the price of the Company's common stock. Operating results may fluctuate as a
result of many factors, including:
* the volume and timing of orders received or product returns, if any, during
the period;
* the timing of commercial introduction of future products and enhancements;
* competitive products and the impact of price competition on the Company's
average selling prices;
* product announcements by the Company and its competition;
* the Company's level of research and development and sales and marketing
activities;
Many of these factors are beyond the Company's control. In addition, due to the
short product life cycles that characterize the personal communications
management market, the Company's failure to introduce competitive new and
enhanced products in a timely manner would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's operating and other expenses are relatively fixed in the short
term. As a result, variations in timing of revenues, if any, will cause
significant variations in quarterly results of operations. Notwithstanding the
difficulty in forecasting future sales, the Company generally must undertake its
sales and marketing and research and development activities and other
commitments months or years in advance. Accordingly, any shortfall in product
revenues, if any, in a given quarter may materially adversely affect the
Company's business, financial condition and results of operations due to the
inability to adjust expenses during the quarter to match the level of product
revenues, if any, for the quarter. In addition, the Company's sales expectations
are based entirely on its internal estimates of future demand. Due to these and
other factors, the Company believes that quarter to quarter comparisons of its
results of operations are not necessarily meaningful, and should not be relied
upon as indications of future performance.
ITEM 7. FINANCIAL STATEMENTS
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
SoloPoint.com, Inc.
We have audited the accompanying balance sheets of SoloPoint.com, Inc. (a
development stage company, formerly SoloPoint, Inc.) as of December 31, 1999 and
1998 and the related statements of operations, redeemable convertible preferred
stock and shareholders' equity (net capital deficiency), and cash flows for the
years then ended and for the period from inception (March 26, 1993) to December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
13
<PAGE>
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SoloPoint.com, Inc. (a
development stage company) at December 31, 1999 and 1998 and the results of its
operations and its cash flows for the years then ended and for the period from
inception (March 26, 1993) to December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that
SoloPoint.com, Inc. will continue as a going concern. As more fully described in
Note 1, the Company has incurred recurring operating losses since inception and
has insufficient cash to continue its operations beyond June 30, 2000 at its
projected level of operations. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustmentss to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
Palo Alto, California
February 15, 2000
14
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
--------------- ----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents........................................................... $ 622,362 $ 1,005,845
Short term investments.............................................................. 1,463,900 --
Accounts receivable, net of allowances of $174,173 in 1999 and $116,997 in 1998.... 62,637 152,577
Inventories......................................................................... 245,742 256,954
Other current assets................................................................ 72,282 72,788
------------ ------------
Total current assets................................................................. 2,466,923 1,488,164
Furniture and equipment, at cost:
Computers and software.............................................................. 292,789 275,150
Furniture and fixtures.............................................................. 280,763 280,763
------------ ------------
573,552 555,913
Accumulated depreciation and amortization........................................... (542,326) (408,838)
------------ ------------
31,226 147,075
Deposits and other assets............................................................ 37,997 37,997
------------ ------------
Total assets......................................................................... $ 2,536,146 $ 1,673,236
============ ============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable.................................................................... $ 638,378 $ 239,978
Accrued compensation................................................................ 30,218 12,433
Bank line of credit.............................................................. -- 100,000
Notes payable, current portion................................................... 38,915 53,696
Deferred revenue................................................................. 19,485 58,145
Other accrued liabilities........................................................... 50,814 48,184
------------ ------------
Total current liabilities............................................................ 777,810 512,436
Notes payable, non-current portion................................................... -- 36,123
Commitments and contingencies
Shareholders' equity:
Common stock, no par value:
Authorized shares--35,000,000
Issued and outstanding shares--4,981,284 in 1999 and 2,076,455 in 1998............. 19,009,574 15,956,449
Deficit accumulated during the development stage.................................... (17,251,238) (14,772,002)
Notes receivable from shareholders.................................................. -- (59,770)
------------ ------------
Total shareholders' equity........................................................... 1,758,336 1,124,677
------------ ------------
Total liabilities and shareholders' equity........................................... $ 2,536,146 $ 1,673,236
============ ============
</TABLE>
See accompanying notes.
15
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
March 26, 1993
(Inception)
Year ended December 31, Trough
1999 1998 December 31, 1999
------------- ----------- ------------------
<S> <C> <C> <C>
Net revenues....................................................... $ 1,621,622 $ 571,791 $ 3,065,786
Cost of sales...................................................... 1,810,153 634,141 3,674,166
----------- ----------- ------------
Gross margin................................................... (188,531) ( 62,350) (608,380)
Operating expenses:
Research and development.......................................... 695,990 929,542 6,364,793
Sales and marketing............................................... 474,193 625,286 4,417,480
General and administrative........................................ 1,144,403 1,163,480 6,025,497
----------- ----------- ------------
Total operating expenses........................................... 2,314,586 2,718,308 16,807,770
----------- ----------- ------------
Loss from operations............................................... 2,503,117 2,780,658 17,416,150
Other income (expense):
Interest income................................................... 42,199 108,284 352,857
Interest expense.................................................. (18,318) (32,980) (154,828)
----------- ----------- ------------
Net loss........................................................... $(2,479,236) $(2,705,354) $(17,218,121)
=========== =========== ============
Basic and diluted net loss per share............................... $ (0.85) $ (1.30)
=========== ===========
Shares used in computing basic and diluted net loss per share...... 2,928,008 2,076,455
=========== ===========
</TABLE>
See accompanying notes
16
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
<TABLE>
<CAPTION>
Redeemable Deficit
Convertible Common Accumulated
Preferred Stock Stock During the
----------------- -------------------- Development
Shares Amount Shares Amount Stage
------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Issuance of founders' stock in November 1993 at
$.001 per share.......................................... -- $ -- 75,000 $ 300 $ --
Common stock to be issued in January 1994................. -- -- -- 3,675 --
Series A-1 redeemable preferred stock to be issued
in January 1994.......................................... -- 250,000 -- -- --
Issuance of Series A-1 redeemable preferred stock......... 25,000 -- -- -- --
Recapitalization exchange of common stock for
Series A-1 redeemable preferred stock at $.04
per share................................................ 7,500 300 (75,000) (300) --
Issuance of Series A-1 redeemable preferred stock
in exchange for services in January 1994 at
$10.00 per share......................................... 13 125 -- -- --
Issuance of common stock from January 1994
through April 1994 at $.01 per share..................... -- -- 99,025 286 --
Issuance of common stock in exchange for services,
from February 1994 through October 1994 at
prices ranging from $.01 to $.40 per share............... -- -- 4218 4,935 --
Issuance of Series A-2 redeemable preferred stock
in May 1994 at $3.50 per share, less issuance
costs of $8,653.......................................... 78,571 266,347 -- -- --
Issuance of Series A-2 redeemable preferred stock
in May 1994 at $3.50 per share in exchange for
interest payable......................................... 956 3,345 -- -- --
Issuance of Series A-3 redeemable preferred stock
in July and August of 1994 at $4.00 per share,
less issuance costs of $13,292........................... 143,750 561,708 -- -- --
Issuance of Series A-4 redeemable preferred stock
in December 1994 at $4.50 per share, less
issuance costs of $6,587................................. 82,378 364,114 -- -- --
Issuance of common stock in exchange for services
from January 1995 through December 1995 at
prices ranging from $.40 to $.50 per share............... -- -- 3521 6,873 --
Issuance of common stock from July 1995 through
November 1995 at $.50 per share.......................... -- -- 600 1,200 --
Exercise of stock options................................. -- -- 594 950 --
Repurchase of common stock................................ -- -- (1,667) (67) --
Issuance of Series A-4 redeemable preferred stock
in January 1995 at $4.50 per share, less issuance
costs of $3,583.......................................... 18,417 79,295 -- -- --
Issuance of Series A-5 redeemable preferred stock
from March 1995 through May 1995 at $5.00
per share, less issuance costs of $13,227................ 154,000 756,773 -- -- --
Issuance of Series A-6 redeemable preferred stock
in June 1995 at $6.00 per share, less issuance
costs of $15,572......................................... 85,000 494,428 -- -- --
------- -------- -------- ---------- ------------
Net loss through December 31, 1995........................ -- -- -- -- (3,764,539)
Accretion of redeemable preferred stock................... -- 22,078 -- -- (22,078)
<CAPTION>
Total
Notes Shareholders'
Receivable Equity (Net
from Capital
Shareholders Deficiency)
------------ --------------
<S> <C> <C>
Issuance of founders' stock in November 1993 at
$.001 per share.......................................... $ -- $ 300
Common stock to be issued in January 1994................. -- 3,675
Series A-1 redeemable preferred stock to be issued
in January 1994.......................................... -- --
Issuance of Series A-1 redeemable preferred stock......... -- --
Recapitalization exchange of common stock for
Series A-1 redeemable preferred stock at $.04
per share................................................ -- (300)
Issuance of Series A-1 redeemable preferred stock
in exchange for services in January 1994 at
$10.00 per share......................................... -- --
Issuance of common stock from January 1994
through April 1994 at $.01 per share..................... -- 286
Issuance of common stock in exchange for services,
from February 1994 through October 1994 at
prices ranging from $.01 to $.40 per share............... -- 4,935
Issuance of Series A-2 redeemable preferred stock
in May 1994 at $3.50 per share, less issuance
costs of $8,653.......................................... -- --
Issuance of Series A-2 redeemable preferred stock
in May 1994 at $3.50 per share in exchange for
interest payable......................................... -- --
Issuance of Series A-3 redeemable preferred stock
in July and August of 1994 at $4.00 per share,
less issuance costs of $13,292........................... -- --
Issuance of Series A-4 redeemable preferred stock
in December 1994 at $4.50 per share, less
issuance costs of $6,587................................. -- --
Issuance of common stock in exchange for services
from January 1995 through December 1995 at
prices ranging from $.40 to $.50 per share............... -- 6,873
Issuance of common stock from July 1995 through
November 1995 at $.50 per share.......................... -- 1,200
Exercise of stock options................................. -- 950
Repurchase of common stock................................ -- (67)
Issuance of Series A-4 redeemable preferred stock
in January 1995 at $4.50 per share, less issuance
costs of $3,583.......................................... -- --
Issuance of Series A-5 redeemable preferred stock
from March 1995 through May 1995 at $5.00
per share, less issuance costs of $13,227................ -- --
Issuance of Series A-6 redeemable preferred stock
in June 1995 at $6.00 per share, less issuance
costs of $15,572......................................... -- --
------------ --------------
Net loss through December 31, 1995........................ -- (3,764,539)
Accretion of redeemable preferred stock................... -- (22,078)
</TABLE>
SoloPoint.com, Inc.
(a development stage company)
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) (Continued)
<TABLE>
<CAPTION>
Redeemable Deficit
Convertible Accumulated
Preferred Stock Common Stock During the
------------------------- ---------------------- Development
Shares Amount Shares Amount Stage
----------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995................ 595,585 $ 2,798,513 106,291 $ 17,852 $ (3,786,617)
----------- ------------ -------- ------------ --------------
Exercise of stock options.................. -- -- 6,535 11,281 --
Repurchase of common stock................. -- -- (13,203) (528) --
Conversion of A-6 to A-7
redeemable preferred stock................ 17,000 -- -- -- --
Issuance of common stock at $.50
per share................................. -- -- 2,750 5,500 --
Issuance of Series A-7 redeemable
preferred stock for bridge notes
in February 1996.......................... 286,600 1,433,000 -- -- --
Issuance of Series A-7 redeemable
preferred stock from February
1996 through March 1996 at
$5.00 per share, less issuance 239,500 1,178,657 -- -- --
costs of $18,843..........................
Issuance of common stock for notes
receivable................................ -- -- 78,750 157,500 --
Issuance of redeemable preferred
stock in exchange for services
from January 1996 through July 8,004 40,000 -- -- --
1996......................................
Issuance of Series A-7 redeemable
preferred stock in March 1996 at
$5.00 per share in exchange for 6,753 33,767 -- -- --
interest payable..........................
Accretion of redeemable preferred
stock..................................... -- 11,040 -- -- (11,040)
Issuance of common stock in
exchange for services for 1996............ -- -- 4,076 26,767 --
Issuance of common stock in
exchange for bridge note.................. -- -- 75,000 1,500,000 --
Issuance of common stock in
exchange for interest associated
with bridge note.......................... -- -- 636 12,720 --
Shares repurchased......................... (5,000) (20,000) (10,500) (63,000) --
Conversion of redeemable preferred
stock to common stock upon
public offering in August 1996............ (1,148,442) (5,474,977) 287,110 5,474,977 --
Issuance of common stock upon the
initial public offering net of
issuance costs of $1,483,064.............. -- -- 337,500 5,266,936 --
Net loss................................... -- -- -- -- (3,593,612)
----------- ------------ -------- ------------ --------------
Balance at December 31, 1996................ -- -- 874,945 12,410,005 (7,391,269)
Exercise of stock options.............. -- -- 98 1,831 --
Issuance of common stock in exchange
for services for 1997............. -- -- 1,412 12,000 --
Proceeds from note receivable from
shareholders...................... -- -- -- -- --
Net loss............................... -- -- -- -- (4,675,379)
----------- ------------ -------- ------------ --------------
Balance at December 31, 1997................ -- -- 876,455 $12,423,836 $(12,066,648)
<CAPTION>
Total
Notes Shareholders'
Receivable Equity (Net
from Capital
Shareholders Deficiency)
------------- --------------
<S> <C> <C>
Balance at December 31, 1995................ $ $(3,768,765)
------------- --------------
Exercise of stock options.................. -- 11,281
Repurchase of common stock................. -- (528)
Conversion of A-6 to A-7
redeemable preferred stock................ -- --
Issuance of common stock at $.50
per share................................. -- 5,500
Issuance of Series A-7 redeemable
preferred stock for bridge notes
in February 1996.......................... -- --
Issuance of Series A-7 redeemable
preferred stock from February
1996 through March 1996 at
$5.00 per share, less issuance -- --
costs of $18,843..........................
Issuance of common stock for notes
receivable................................ (157,500) --
Issuance of redeemable preferred
stock in exchange for services
from January 1996 through July -- --
1996......................................
Issuance of Series A-7 redeemable
preferred stock in March 1996 at
$5.00 per share in exchange for -- --
interest payable..........................
Accretion of redeemable preferred
stock..................................... -- (11,040)
Issuance of common stock in
exchange for services for 1996............ -- 26,767
Issuance of common stock in
exchange for bridge note.................. -- 1,500,000
Issuance of common stock in
exchange for interest associated
with bridge note.......................... -- 12,720
Shares repurchased......................... -- (63,000)
Conversion of redeemable preferred
stock to common stock upon
public offering in August 1996............ -- 5,474,977
Issuance of common stock upon the
initial public offering net of
issuance costs of $1,483,064.............. -- 5,266,936
Net loss................................... -- (3,593,612)
Balance at December 31, 1996................ (157,500) 4,861,236
Exercise of stock options.............. -- 1,831
Issuance of common stock in exchange
for services for 1997............. -- 12,000
Proceeds from note receivable from
shareholders...................... 72,000 72,000
Net loss............................... -- (4,675,379)
------------- --------------
Balance at December 31, 1997................ $ (85,500) $ 271,688
</TABLE>
17
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) (Continued)
<TABLE>
<CAPTION>
Redeemable Deficit Total
Convertible Accumulated Notes Shareholders'
Preferred Stock Common Stock During the Receivable Equity (Net
--------------- ---------------------- Development from Capital
Shares Amount Shares Amount Stage Shareholders Deficiency)
------ ------- --------- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997............... 876,455 $12,423,836 $(12,066,648) $(85,500) $ 271,688
--------- ----------- ------------- ------------- --------------
Proceeds from note receivable from 25,730 25,730
shareholders..................... -- -- -- -- --
Proceeds from secondary offering net of 1,200,000 3,532,613 3,532,613
Issuance costs........................ -- -- -- --
Net loss............................... -- -- -- -- (2,705,354) -- (2,705,354)
------------- --------------
Balance at December 31, 1998............... -- -- 2,076,455 15,956,449 (14,772,002) (59,770) 1,124,677
Proceeds from note receivable from
shareholders.............................. -- -- -- -- -- 59,770 59,770
Proceeds from private placement offering 2,904,829 3,053,125 3,053,125
net of issuance costs.................... -- -- -- --
Net loss............................... -- -- -- -- (2,479,236) -- (2,479,236)
------ ------ --------- ----------- -------------- ------------- --------------
Balance at December 31, 1999............... -- -- 4,981,284 $19,009,574 $(17,251,238) -- $ 1,758,336
</TABLE>
18
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
March 26, 1993
(Inception)
Year ended December 31, Through
1999 1998 December 31, 1999
------------- ------------- ------------------
<S> <C> <C> <C>
Operating activities
Net loss.................................................................... $(2,479,236) $(2,705,354) $(17,218,120)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock and preferred stock issued for services....................... -- -- 90,700
Common stock and preferred stock issued for interest payable............... -- -- 49,832
Depreciation............................................................... 133,488 88,807 542,326
Provision for inventory reserves........................................ 16,335 207,419 823,754
Changes in operating assets and liabilities:
Accounts............................................................... 89,940 11,009 (62,637)
receivable.............................................................
Inventories............................................................... (5,123) (60,844) (1,069,496)
Other assets.............................................................. 506 244,498 (72,282)
Accounts payable and accrued compensation................................. 416,185 (459,263) 668,596
Deferred revenue.......................................................... (38,660) 49,128 19,485
Other liabilities......................................................... 2,630 31,893 50,814
Net cash used in operating activities....................................... (1,863,935) (2,592,707) (16,177,028)
Investing activities
Acquisitions of furniture and equipment..................................... (17,639) (77,155) (559,155)
Loan to shareholder......................................................... -- -- (35,000)
Payment received from shareholder........................................... -- -- 1,500
Purchase of short-term investments.......................................... (1,463,900) -- (1,463,900)
Deposits and other assets................................................... -- -- (37,997)
Net cash used in investing activities....................................... (1,481,539) (77,155) (2,094,552)
Financing activities
Proceeds from convertible notes payable to shareholders..................... -- -- 1,120,000
Proceeds from bank line of credit........................................... -- 100,000 100,000
Proceeds from convertible notes payable..................................... -- -- 1,813,000
Proceeds from notes payable................................................. -- -- 191,496
Principal payments on capital lease obligation.............................. (50,904) (48,494) (166,976)
Proceeds from sale of preferred stock, net of issuance costs................ -- -- 3,951,622
Proceeds from note receivable from shareholders............................. 59,770 25,730 157,500
Issuance of common stock, net of repurchases and issuance costs,............ 3,053,125 3,532,613 11,827,300
Principal payment on bank line of credit (100,000) -- (100,000)
Net cash provided by financing activities................................... 2,961,991 3,609,849 18,893,942
Net increase (decrease) in cash............................................ (383,483) 939,987 622,362
Cash and cash equivalents at beginning of period............................ 1,005,845 65,858
Cash and cash equivalents at end of period.................................. $ 622,362 $ 1,005,845 $ 622,362
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest................................................................... $ 18,166 $ 32,980 $ 133,969
=========== =========== ============
Income taxes............................................................... $ 800 $ 800 $ 7,200
=========== =========== ============
Supplemental disclosures of noncash investing and financing activities
Equipment acquired under capital lease financing............................ $ -- $ -- $ 14,397
=========== =========== ============
Conversion of preferred stock to common stock............................... $ -- $ -- $ 5,474,977
=========== =========== ============
Accretion of preferred stock................................................ $ -- $ -- $ 33,118
=========== =========== ============
Common stock issued for note receivable from shareholder.................... $ -- $ -- $ 157,500
=========== =========== ============
Common and preferred stock forfeited for note receivable.................... $ -- $ -- $ 33,500
=========== =========== ============
Conversion of notes payable to common stock................................. $ -- $ -- $ 1,500,000
=========== =========== ============
Conversion of notes payable to preferred stock.............................. $ -- $ -- $ 1,433,000
=========== =========== ============
</TABLE>
See accompanying notes
19
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Summary of Significant Accounting Policies
Organization
SoloPoint.com, Inc. (the "Company") was incorporated on March 26, 1993. The
Company changed its name from SoHo Networks, Inc. to SoHo Communications, Inc.
in September 1993, from SoHo Communications, Inc. to SoloPoint, Inc. in October
1995, and from SoloPoint, Inc. to SoloPoint.com, Inc. in February of 2000. The
Company designs, develops and markets personal communications management
solutions and is implementing a new strategy by entering the Internet broadband
services market. Through December 31, 1995, the Company was active in product
development, financial planning, the acquisition of facilities and equipment,
raising capital and had begun to build inventory. The Company began shipping its
first product in March 1996 with its second product shipping in September 1996.
Only limited revenues were realized through December 31, 1996. The Company
introduced additional products during 1997. During 1997, the Company made a
strategic decision to shift its distribution strategy and again realized only
limited revenue for the year ended December 31, 1997. During 1998, the Company
continued on its new distribution strategy and began growing revenues slightly
but again realized only limited revenue. During 1999, the Company grew its
revenue substantially on a percentage basis, but still reported a significant
operating loss. As a result, the Company is still considered to be in the
development stage.
Basis of Presentation
During its development stage (March 26, 1993) through December 31, 1999, the
Company has incurred cumulative net losses of $17,218,121 and expects to incur
substantial losses over at least the next year. The Company has insufficient
cash to continue its operations beyond June 30, 2000 at its projected level of
operations. The Company's ability to continue as a going concern is dependent
upon it successfully raising additional capital through equity or debt
financings and, ultimately, upon achieving profitable operations. However, there
is no assurance that additional funding will be available to the Company on
accepatable terms, if at all, or that the Company will achieve profitable
operations. The accompanying financial statements have been prepared assuming
the Company will continue as a going concern and do not include any adjustments
that might result from the outcome of this uncertainty.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity date
of three months or less at the date of purchase to be cash equivalents. Cash
equivalents generally consist of corporate bonds, commerical paper, and money
market funds.
20
<PAGE>
Short-term Investments
The Company invests excess cash in high quality instruments. All of the
Company's marketable investments are classified as available-for-sale and the
Company uses its available-for-sale portfolio for use in its current operations.
Accordingly, the Company has classified all investments as short-term.
Available-for-sale securities are stated at fair market value, with unrealized
gains and losses, net of tax, reported as a component of shareholders' equity.
The cost of securities sold is based upon the specific identification method.
Realized gains and losses and declines in value judged to be other than
temporary are included in interest income. There was no difference between
market value and cost at December 31, 1999.
Concentration of Credit Risk
Financial instruments that subject the Company to concentrations of credit
risk consist primarily of trade accounts receivable. The Company conducts
business with companies principally in the telecommunications industry in the
United States. The Company performs ongoing credit evaluations of its customers
and generally does not require collateral. Reserves are maintained for
potential credit losses. The Company provided $79,443 and $159,639 in additions
to the allowance for doubtful accounts for the years ended December 31, 1999 and
1998.
Inventories
Inventories consist principally of fabricated boards and integrated circuits
and are valued at the lower of cost (determined on the first-in, first-out
(FIFO) basis) or market. The Company's inventory reserve level is considered to
be adequate as of December 31, 1999. Realization of the value of inventories is
dependent upon the Company achieving adequate levels of revenues. Inventories at
December 31, 1999 and 1998 consist of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Raw materials................................................ $ 34,350 $133,644
Work-in-process.............................................. -- 49,776
Finished goods............................................... 211,392 73,534
-------- --------
$245,742 $256,954
======== ========
</TABLE>
Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation is computed using the
straight-line method over the assets' estimated useful lives of three to five
years.
In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of", whenever events or changes
in circumstances indicate that the carrying amount of long-lived assets may not
be recoverable, this carrying amount is compared with management's best
estimates of the future cash flows expected to result from the use of the assets
and their eventual disposition. If the sum of expected future cash flows is
less than the carrying amount of the assets, an impairment loss is recognized
based on the fair value of the assets; when a market value is not available, the
fair value is generally estimated as the present value of expected future cash
flows.
Software Development Costs
The Company expenses software development costs incurred prior to establishing
technological feasibility as incurred. Software development expenses that would
be capitalized pursuant to Statement of Financial Accounting
21
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Standards (SFAS) No. 86, "Software Development Costs," which have been incurred
after the product has reached technological feasibility have not been material
and, accordingly, have been charged to operations as incurred.
Revenue Recognition
The Company's products currently have a 30-day, unconditional, money-back
guarantee. We recognize revenue when our products are shipped and the 30-day
money-back guarantee period has lapsed. One major customer does not have this
30 day money back guarantee and therefore revenues are recognized upon shipment.
Allowances are provided for product returns based on estimated future product
returns, the timing of expected new product introductions and other factors.
These allowances are recorded as direct reductions of revenue and accounts
receivable. The Company establishes allowances, including allowances for stock
balancing and product rotation, based upon estimated future returns of product
and after taking into account channel inventory levels, the timing of new
product introductions and other factors. While the Company maintains measures to
monitor these factors and to provide appropriate allowances, actual product
returns may differ from the Company's reserve estimates and such differences
could be material to the financial statements.
Stock-Based Compensation
The Company accounts for stock-based awards to employees under the intrinsic
value method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and has adopted the disclosure-only
alternative of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation."
Advertising Expense
All advertising costs are expensed when incurred. Advertising costs, which
are included in sales and marketing expense, were $405 and $32,591 for the years
ended December 31, 1999 and 1998, respectively.
Net Loss per Share
The Company computes net loss per share in conformity with the Statement of
Financial Accounting Standards No. 128 "Earnings per Share," ("SFAS 128"). In
accordance with SFAS 128, basic net loss per share excludes dilutive common
stock equivalents and is calculated as net income (loss) divided by the weighted
average number of common shares outstanding. Diluted net income (loss) per
share is computed using the weighted average number of common shares outstanding
and dilutive common stock equivalents outstanding during the period.
Common equivalent shares from stock options and warrants were as follows at
December 31:
Shares Excluded
---------------
1999.................. 2,191,013
1998.................. 505,060
Common equivalent shares from stock options and warrants (using the treasury
stock method) are excluded from the calculation of net loss per share as their
effect is anti-dilutive.
22
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130"), which sets
standards for reporting and displaying comprehensive income and its components
in a full set of general purpose financial statements. Comprehensive income
includes changes in the balances of items that are reported directly in a
separate component of shareholders'equity on the balance sheet. Adoption of
SFAS 130 has had no impact on the Company's financial position, shareholders'
equity, results of operations or cash flows. The Company does not have any
items reported directly in a separate component of shareholders' equity.
Accordingly, the Company's comprehensive loss for the years ended December 31,
1999 and 1998 and for the period from March 26, 1993 (inception) through
December 31, 1999 is equal to its reported net loss.
Segment Reporting
Effective January 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 establishes annual and interim reporting
standards for an enterprise's operating segments and related disclosures about
its products, services, geographic areas and major customers. The Company has
determined that it operated in only one segment. Based on the criteria of FAS
131, the Company identified its operating committee as the chief decision-makers
for the period ended December 31, 1999. The Company's operating committee
evaluated revenue performance based on the one segment. Within the operating
committee, employee headcount and operating costs are managed by functional area
(i.e. general and aministrative, research and development, and sales and
marketing) and only reviewed these metrics on a company-wide basis. Thus, FAS
131 does not require any additional disclosures for either revenues or costs.
Accordingly, adoption of this Statement did not affect the Company's financial
statements.
Recently Issued Pronouncements
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 "Revenue Recognition" ("SAB 101"), which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB 101 outlines the basic criteria that must be
met to recognize revenue and provides guidance for disclosures related to
revenue recognition policies. Management believes that the Company's revenue
recognition policy is in compliance with the provisions of SAB 101 and that the
adoption of SAB 101 will have no material effect on the financial position or
results of operations of the Company.
Note 2. Notes Receivable from Shareholders
In February and May 1996, the Company issued a total of 53,750 and 25,000
shares respectively, of common stock at $2.00 per share to certain officers in
exchange for promissory notes totalling $100,000 and $57,500 respectively,
secured by the stock. These notes receivable were recorded as an offset to
shareholders' equity in the balance sheet. In 1999, the remaining balances of
the notes receivable were paid off.
Note 3. Notes Payable
Notes payable consist of notes payable to Venture Lending and Leasing due
in monthly installments totaling $5,381 including interest at rates ranging from
12% to 15.53% per annum; secured by the Company's furniture and equipment. In
connection with the notes, the Company issued to the lender a warrant to
purchase the Company's common stock in the amount of 32,000 shares at $20.00 per
share. All of the notes mature in 2000 and are thus classified as current
liabilities at December 31, 1999.
23
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 4. Bank Line of Credit
In 1998, the Company had a line of credit with a bank permitting short-term
borrowings up to $1,000,000 based on 80% of eligible accounts receivable
(subject to a borrowing base test) and secured by the Company's accounts
receivable balances. At December 1998, the Company had borrowed $100,000 under
the line of credit. In 1999, the Company repaid its obligation and the line of
credit expired in March 1999.
Note 5. Income Taxes
There was no provision for federal or state income taxes for the years
ended December 31, 1999 and 1998 due to net operating losses.
The reconciliation of the income tax benefit computed at the U.S. federal
statutory tax rate to the effective tax rate at December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Income tax benefit at U.S. Statutory rate ($846,928) ($918,120)
Valuation allowance for deferred tax assets 846,928 918,120
---------- ---------
$ -- $ --
========== =========
</TABLE>
As of December 31, 1999, the Company had federal and state net operating loss
carryforwards of approximately $9,800,000 and $9,300,000, respectivley. The
Company had research and development tax credit carryforwards of approximately
$150,000 for both federal and state purposes. The net operating loss and tax
credit carryforwards will expire at various dates beginning on 2000 through
2019, if not utilized.
Utilization of the net operating loss and tax credit carryforwards is
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986 as amended, and
similar state provisions. The annual limitation may result in the expiration of
net operating loss and tax credit carryforwards before utilization.
Deferred income taxes reflect the net tax effects of carryforwards and
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets at December 31, are
as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 3,900,000 $ 3,100,000
Research credits.............................. 250,000 200,000
Capitalized research costs.................. 2,500,000 2,300,000
Other............................................. 200,000 300,000
----------- -----------
Total deferred tax assets............................... 6,850,000 5,900,000
Valuation allowance for deferred tax assets (6,850,000) (5,900,000)
----------- -----------
Net deferred tax assets......................... $ $
=========== ===========
</TABLE>
Realization of deferred tax assets is dependent upon future earnings, if
any, the timing and amount of which are uncertain. Accordingly, a valuation
allowance in an amount equal to the net deferred tax assets has been established
to reflect these uncertainties. The valuation allowance increased by $950,000
and $900,000 for 1999 and 1998, respectively.
24
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 6. Shareholders' Equity
In June 1998, the Company's shareholders approved an amendment to the
Company's Articles of Incorporation to effect a one-for-four reverse stock split
of the Company's outstanding common stock. All share and per share information
has been restated, as appropriate to reflect the split.
Preferred Stock
The Board of Directors has the authority to issue up to 5,000,000 shares of
undesignated preferred stock and to determine the rights, preferences,
privileges and restrictions of such shares without any further vote or action by
the shareholders. At December 31, 1999 and 1998, no shares of preferred stock
are issued and outstanding.
Employee Stock Option Plan
The Company's 1993 Incentive Stock Plan (the "Plan") provides for the grant of
incentive stock options and nonstatutory stock options to employees, directors
and consultants of the Company. Incentive stock options may be granted at prices
ranging from 100% to 110% (depending on the type of grant) of the fair market
value of the common stock on the date of grant as determined by the Board of
Directors. The price for nonstatutory stock options is determined by the Board
of Directors. The options generally vest at a rate of 25% one year after the
grant date and one forty-eighth every month thereafter. The vesting and exercise
provisions of the option grants are determined by the Board of Directors.
In October 1999, the shareholders approved an increase to the number of shares
in the Plan to 1,549,250.
25
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Activity under the Plan was as follows:
<TABLE>
<CAPTION>
Options Outstanding
---------------------------------
Weighted
Number Average Exercise
of Shares Price
------------ -------------------
<S> <C> <C>
Balance at March 26, 1993 -- $ --
Granted..................................................... 16,175 $ 1.60
Balance at December 31, 1994................................. 16,175 $ 1.60
Granted..................................................... 15,575 $ 2.00
Exercised................................................... (594) $ 1.60
Balance at December 31, 1995................................. 31,156 $ 1.80
Granted..................................................... 40,417 $12.28
Exercised................................................... (6,535) $ 1.76
Canceled.................................................... (18,765) $ 1.84
Options outstanding at December 31, 1996..................... 46,273 $11.08
Granted..................................................... 134,228 $ 5.20
Exercised................................................... (98) $ 2.00
Canceled.................................................... (66,841) $11.60
Options outstanding at December 31, 1997..................... 113,562 $ 3.88
Granted..................................................... 157,938 $ 1.16
Options outstanding at December 31, 1998..................... 271,500 $ 3.85
Granted..................................................... 502,500 $ 1.03
Canceled.................................................... (82,797) $ 2.48
------------
Options outstanding at December 31, 1999..................... 691,203 $ 1.35
============
Shares available for grant at December 31, 1999.............. 827,492
============
Outstanding options exercisable at December 31, 1999......... 156,644
============
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------------------------------
Weighted Average
Remaining
Range of Number of Contract Weighted Average Number of Weighted Average
Exercise Price Shares Life in Years Exercise Price Shares Exercise Price
- ------------------------ ---------- ----------------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
$ .22-$1.60 600,117 8.5 $1.01 95,351 $0.60
$2.00-$3.75 88,086 7.8 $3.44 59,480 $3.41
$8.50 3,000 7.5 $8.50 1,813 $8.50
------- -------
691,203 156,644
======= =======
</TABLE>
Stock-based Compensation
Pro forma information regarding net income and earnings per share is required
by SFAS No. 123. This information is required to be determined as if the
Company had accounted for its employee stock options granted subsequent to
December 24, 1994 under the fair value method of that statement. The fair value
of options granted during 1999 and 1998 reported below, has been estimated at
the date of grant using Black-Scholes option pricing model with the following
weighted average assumptions:
26
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Options to Purchase Common Stock 1999 1998
- ------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Expected life (in years)................................. 4.00 4.00
Expected volatility...................................... 2.20 4.11
Risk free interest rate.................................. 5.99% 4.97%
Fair value............................................... $0.97 $1.16
Expected dividend rate................................... 0% 0%
</TABLE>
Pro forma net loss represents the difference between compensation expense
recognized under APB 25 and the related expense using the fair value method of
SFAS No. 123 taking into account any additional tax effects of applying SFAS No.
123. The effects on pro forma disclosures of applying SFAS No. 123 for all
years presented are not likely to be representative of the effects on pro forma
disclosures of future years.
Had compensation cost for the Company's stock option plan been determined
consistent with SFAS No. 123, the Company's reported net loss of $2,479,236 and
net loss per share of $0.85 for the year ended December 31, 1999, would have
been increased to $2,578,400 and $0.88, respectively, on a pro forma basis. The
Company's reported net loss of $2,705,354 and net loss per share of $1.30 for
the year ended December 31, 1998, would have been increased to $2,885,923 and
$1.39, respectively, on a pro forma basis.
Warrants
Warrants outstanding at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Exercise
Number of Price
Type of Shares Shares Per Share Expiration Date
- ---------------------------------------------- ----------- ----------- --------------------------
<S> <C> <C> <C>
Common.................................. 2,142 $14.00 November 2003
Common.................................. 1,600 $20.00 December 2005
Common.................................. 27,318 $20.00 March 2000
Common.................................. 15,000 $20.00 June 2000
Common.................................. 33,750 $24.00 August 2000
Common.................................. 120,000 $ 4.80 January 2002
Common.................................. 1,300,000 $ 3.00 February 2001
</TABLE>
The Company believes that the value of these warrants at the date of issuance
was not material and no value has been attributed to them in these financial
statements.
27
<PAGE>
SoloPoint.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Common Stock Reserved
follows:
<TABLE>
<S> <C>
Warrants.................................................................. 1,499,810
Stock option plan......................................................... 1,518,695
---------
3,018,505
=========
</TABLE>
Note 7. Retirement Plan
The Company has a deferred compensation plan for all full-time employees which
qualifies under Section 401(k) of the Internal Revenue Code. Participants can
contribute up to 20% of their annual salary up to a maximum of $10,000 for the
year ended December 31, 1999. The plan provides for discretionary employer
contributions to the plan. As of December 31, 1999 there have been no employer
contributions to the plan.
Note 8. Commitment and Contingencies
The Company leases its facilities under a noncancelable operating lease that
expires on September 30, 2000. Total rent expense for the years ended December
31, 1999 and 1998 was $152,651 and $116,374, respectively. Future minimum lease
payments under the noncancelable facilities lease total $132,498 and are all due
in 2000. The Company has the option to renew the lease for an additional two
years. The rent in option year one shall be $15,540 per month and in option
year two shall be $16,358 per month. The Company believes that its current
facilities are sufficient to meet its needs for the foreseeable future.
The Company has received notification from various parties regarding patent
matters in the normal course of business activities. In management's opinion,
resolution of these matters is not expected to have a material adverse impact on
the Company's results of operations or its financial position. However,
depending on the amount and timing, an unfavorable resolution of a matter could
materially affect the Company's future results of operations or cash flows in a
particular period.
Note 9. Major Customers
During the year ended December 31, 1999, two customers accounted for
approximately 73% and 25% of net sales. During the year ended December 31,
1998, two customers accounted for approximately 47% and 18% of net sales.
28
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Information about the Company's directors required by this item will be
contained in the Company's Notice of 2000 Annual Meeting of Shareholders and
Proxy Statement, pursuant to Regulation 14A, to be filed with the Securities and
Exchange Commission within 120 days after December 31, 1999. Such information is
incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
Information required by this item will be contained in the Company's Notice of
2000 Annual Meeting of Shareholders and Proxy Statement, pursuant to Regulation
14A, to be filed with the Securities and Exchange Commission within 120 days
after December 31, 1999. Such information is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item will be contained in the Company's Notice of
2000 Annual Meeting of Shareholders and Proxy Statement, pursuant to Regulation
14A, to be filed with the Securities and Exchange Commission within 120 days
after December 31, 1999. Such information is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item will be contained in the Company's Notice of
2000 Annual Meeting of Shareholders and Proxy Statement, pursuant to Regulation
14A, to be filed with the Securities and Exchange Commission within 120 days
after December 31, 1999. Such information is incorporated herein by reference.
29
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Exhibits
The following exhibits are filed as part of, or incorporated by
reference into, this report.
<TABLE>
<CAPTION>
Exhibit
Number Description of Documents
- -------- ------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Company's Articles of Incorporation, as currently in effect.
* 3.2 Company's Bylaws, as currently in effect.
* 4.1 Specimen Certificate of Company's Common Stock.
* 4.2 Form of Representative's Warrant.
* 4.3 Amended and Restated Information and Registration Rights Agreement (included in Exhibit 10.9).
* 4.4 Form of Series A-2 Preferred Stock Warrant and Warrant Amendment Agreement.
* 4.5 Form of Series A-7 Preferred Stock Warrant.
* 9.1 Voting Agreement (included in Exhibit 10.9).
10.1 Multi-Tenant Net Lease Agreement dated August 24, 1995, between the Company and Dell
Enterprises, as amended.
*10.2 Form of Indemnification Agreement.
10.5 Amended and Restated 1993 Incentive Stock Plan.
*10.6 1995 Profit Sharing 401(k) Plan.
*10.7 Employment Letter dated October 26, 1995, between the Company and Edward M. Esber, Jr.
*10.8 Loan Agreement dated as of December 11, 1995, between SoloPoint, Inc. and Venture Lending &
Leasing, Inc.
*10.9 Bridge Loan and Warrant Purchase Agreement dated June 14, 1996, by and between Ameritech
Corporation, 4C Ventures, L.P., and the Company, including a Security Agreement, a Patent Security
Agreement, a Voting Agreement, an Amended and Restated Information and Registration Rights
Agreement, Warrants and Secured Convertible Promissory Notes.
*10.10 Employment Letter dated February 1, 1996, between the Company and Arthur Chang.
10.14 Commitment letter dated March 22, 1999 between Cinncinati Bell Telephone and the Company.
10.15 Financing agreement dated August 10, 1999 between Purchasers and the Company, including a Common
Stock Subscription Agreement, Escrow Agreement, Registration Rights Agreement, and Warrant Agreement.
10.16 Employment Letter dated December 8, 1999, between the Company and Thomas J. Muise.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney included on page 29 of this Form 10-KSB.
27.1 Financial Data Schedule.
</TABLE>
- ------------
* Incorporated by reference to the same-numbered exhibit in Registrant's
Registration Statement on Form SB-2, (commission file number 333-5056-LA),
declared effective by the Securities and Exchange Commission on
August 6, 1996.
(b) Reports on Form 8-K:
On September 14, 1999 the Company filed a Form 8-K reporting that the
Company sold 2,904,829 shares of its Common Stock at a price of $1.0844 per
share to a group of investors including certain directors and a lead investor
venture capital organization. In connection with the issuance of the shares the
Company agreed to issue 1,300,000 warrants at a price of $3.00 per share. The
warrants shall be exercisable during the 18-month period commencing September
13, 1999. As of the closing of the financing, September 13, 1999, the lead
investor will currently own approximately 46% of the issued and outstanding
shares of Common Stock of the Company.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SOLOPOINT.COM, INC.
a California Corporation
By: /s/ Arthur G. Chang
-------------------------------------
Arthur G. Chang
President and Chief Executive Officer
Date: March 30, 2000
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Arthur G. Chang and Thomas J. Muise, jointly and
severally his attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any amendment to this Report on Form 10-KSB, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------- ----------------------------------------------- ------------------
<S> * <C> <C>
- ---------------------------- Chairman of the Board of Directors March 30, 2000
Edward M. Esber, Jr.
/s/ Thomas J. Muise Chief Financial Officer and Vice President of March 30, 2000
- ---------------------------- Finance (Principal Financial and
Thomas J. Muise Accounting Officer)
/s/ Arthur G. Chang
- ---------------------------- President and Chief Executive Officer March 30, 2000
Arthur G. Chang
*
- ---------------------------- Director March 30, 2000
Kenneth Tai
*
- ---------------------------- Director March 30, 2000
Murali Narayanan
</TABLE>
31
<PAGE>
Corporate and Shareholder Information
Board of Directors Corporate Officers
Edward M. Esber, Jr. Arthur Chang
Chairman of the Board President, Chief Executive Officer
and Director
Patrick Grady Thomas J. Muise
Chairman of the Board Chief Financial Officer and
Portivity, Inc. Vice President of Finance
Murali Narayanan
Vice President, Program Management/
Market Readiness/Advanced Application
SkyTel Corp.
Kenneth Tai
Chairman of the Board
InveStar Capital, Inc.
Legal Counsel Corporate Offices
Wilson Sonsini Goodrich & Rosati 130-B Knowles Drive
650 Page Mill Road Los Gatos, CA 95032
Palo Alto, California 94304 (408) 364-8850
(650) 493-9300
Independent Auditors Transfer Agent
Ernst & Young LLP Chase Mellon Shareholder Services, L.C.C.
1451 California Avenue 85 Challenger Road
Palo Alto, California 94304 Ridgefield Park, New Jersey 07660
(650) 496-1600 (201) 329-8931
Common Stock
The Company's Common Stock trades on the Over The Counter Bulletin Board under
the symbol "SLPT".
Annual Shareholder's Meeting
The annual meeting of shareholders will be held at the offices of the Company
located at 130-B Knowles Drive, Los Gatos, California at 2:00 pm, local time, on
Tuesday June 20, 2000.
SEC Form 10-KSB
A copy of the Company's Annual Report on Form 10-KSB is available without charge
upon written or faxed request to: Thomas J. Muise, SoloPoint.com, 130-B Knowles
Dr., Los Gatos, CA 95032.
<PAGE>
EXHIBIT 3.1
State of California
[SEAL APPEARS HERE]
[SEAL APPEARS HERE]
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript of 3 page(s) has been compared with the
record on file in this office, of which it purports to be a copy, and that
it is full, true and correct.
IN WITNESS WHEREOF, I execute this
[SEAL APPEARS HERE] certificate and affix the Great Seal of
the State of California this day of
FEB -9 2000
-----------------------------------
/s/ Bill Jones
Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
SOLOPOINT, INC.
Arthur G. Chang and Michael J. O'Donnell certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of SoloPoint, Inc., a California corporation (the "Corporation").
2. The Article I of the Articles of Incorporation of this Corporation are
hereby amended to read as set forth in Exhibit A attached hereto.
3. The attached amendment of the Articles of Incorporation of this
Corporation has been duly approved by the Board of Directors of this
Corporation.
4. The attached amendment of the Articles of Incorporation of this
Corporation has been approved by the holders of the requisite number of shares
of this Corporation in accordance with Sections 902 and 903 of the California
Corporations Code, The total number of outstanding shares of Common Stock
entitled to vote, with respect to the attached amendment was 4,981,284 shares.
There are no shares of Preferred Stock outstanding. The number of shares voting
in favor of the attached amendment equaled or exceeded the vote required, such
required vote being a majority of the outstanding shares of the Common Stock.
<PAGE>
The undersigned further declare under penalty of perjury that the matters
set forth in this Certificate are true and correct of their own knowledge.
Executed at Palo Alto, California on January 31, 2000.
/s/ Arthur S. Chang
----------------------------
Arthur G. Chang,
President
/s/ Michael J. O'Donnell
----------------------------
Michael J. O'Donnell,
Secretary
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
SOLOPOINT, INC.
"I
The name of the Corporation is SoloPoint.com, Inc."
<PAGE>
EXHIBIT 10.1
FIFTH ADDENDUM TO LEASE DATED AUGUST 24, 1995 BY AND BETWEEN DELL ENTERPRISES
AND SOLOPOINT, INC., FOR PREMISES AT 130-B KNOWLES DRIVE, LOS GATOS,
CALIFORNIA.
Whereas Tenant wishes to renew the above referenced lease, Landlord and Tenant
agree to the following additional terms and conditions.
1. Term:
The term shall be for one (1) year commencing October 1, 1999 and ending on
September 30, 2000.
2. Rental Rate:
Monthly base rent shall be $14,722.20 NNN through the term of the Lease.
Expenses for taxes, insurance and maintenance (NNN) shall be billed
monthly.
Utilities are billed monthly, and are not part of the NNN expenses.
3. Tenant Improvements:
Tenant presently occupies the Premises, and accepts same in their "As Is"
condition.
4. Security Deposit:
Tenant shall deposit with Landlord an amount equal to $6,870,36 as
additional Security Deposit, to bring the total Security Deposit to
$14,722.20.
5. Option to renew Lease:
Tenant shall have the option to renew this Lease for 2 one (1) year
options. The rent first option year shall be $15,540.10 NNN per month; and
for the second option period $16,358.00 NNN per month.
6. Notice to renew Lease:
Tenant agrees to notify Landlord in writing not less than ninety (90) days
prior to the expiration of this Lease term, provided, Tenant wishes to
renew its Lease. If Tenant does not give such notice, Landlord shall
proceed to market said premises to other Tenants.
7. Late Charges:
If any rent is not received by Landlord within six (6) working days after
rent is due, Tenant shall pay to Landlord a late charge of FIVE PERCENT of
------------
Tenant's monthly rent as liquidated damages, in lieu of actual damages and
attorney fees and costs. The parties agree that this late charge represents
a reasonable estimate of the expenses that Landlord will incur because of
any late payment in Rent (other than interest and attorney fees and costs).
Tenant shall pay the late charge as Additional Rent with the next
installment of Rent.
Initial here for the above paragraph. Tenant: /s/ Landlord: /s/
--- ---
All other terms and conditions shall be as stated in the above referenced Lease.
LANDLORD: TENANT:
DELL ENTERPRISES, SOLOPOINT, INC.
a California limited partnership
By /s/ XXX By /s/ XXX
------- -------
Title General Partner Title Chief Financial Officer
--------------- -----------------------
Date 9/13/99 Date 9/7/99
------- ------
<PAGE>
EXHIBIT 10.5
SOLOPOINT, INC.
1993 INCENTIVE STOCK PLAN
(as amended and restated January 21, 1999
and September 24, 1999)
1. Purposes of the Plan. The purposes of this Incentive Stock Plan are
--------------------
to attract and retain the best available personnel, to provide additional
incentive to the employees of SoloPoint, Inc. (the "Company") and to promote the
success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement. The Board also has the discretion to
grant Stock Purchase Rights.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Committee, if one has been appointed,
-----
or the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
(c) "Committee" shall mean the Committee appointed by the Board
---------
of Directors in accordance with Section 4(a) of the Plan, if one is appointed.
(d) "Common Stock" shall mean the Common Stock of the Company.
------------
(e) "Company" shall mean SoloPoint, Inc., a California
-------
corporation.
(f) "Consultant" shall mean any person who is engaged by the
----------
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company
whether compensated for such services or not.
(g) "Continuous Status as an Employee, Consultant or Director"
-----------------
shall mean the absence of any interruption or termination of service as an
Employee, Consultant or Director, as applicable. Continuous Status as an
Employee, Consultant or Director shall not be considered interrupted in the case
of sick leave, military leave, or any other leave of absence approved by the
Board; provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
(h) "Director" shall mean a member of the Board of Directors of
--------
the Company.
(i) "Employee" shall mean any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
<PAGE>
(j) "Incentive Stock Option" shall mean an Option intended to
----------------------
qualify as an incentive stock option within the meaning of Section 422A of the
Code.
(k) "Nonstatutory Stock Option" shall mean an Option not
-------------------------
intended to qualify as an Incentive Stock Option.
(l) "Officer" shall mean a person who is an officer of the
-------
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(m) "Option" shall mean a stock option granted pursuant to the
------
Plan.
(n) "Optioned Stock" shall mean the Common Stock subject to an
--------------
Option.
(o) "Optionee" shall mean an Employee, Consultant or Director who
--------
receives an Option.
(p) "Parent" shall mean a "parent corporation" whether now or
------
hereafter existing, as defined in Section 425(e) of the Code.
(q) "Plan" shall mean this 1993 Incentive Stock Plan.
----
(r) "Purchaser" shall mean an Employee, Consultant or Director who
---------
exercises a Stock Purchase Right.
(s) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section Il of the Plan.
(t) "Stock Purchase Right" shall mean a right to purchase Common
--------------------
Stock pursuant to the Plan or the right to receive a bonus of Common Stock for
past services.
(u) "Subsidiary" shall mean a "subsidiary corporation," whether
----------
now or hereafter existing, as defined in Section 425(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of shares under the Plan is One Thousand
Five Hundred Forty-Nine Thousand Two Hundred Fifty (1,549,250,250) shares of
Common Stock. The Shares may be authorized, but unissued, or reacquired Common
Stock.
If an Option or Stock Purchase Right should expire or become unexercisable
for any reason without having been exercised in full, then the unpurchased
Shares which were subject thereto shall, unless the Plan shall have been
terminated, become available for future grant or sale under the Plan.
Notwithstanding any other provision of the Plan, shares issued under the Plan
and later repurchased by the Company shall not become available for future grant
or sale under the Plan.
-2-
<PAGE>
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be administered
------------------------------
by different Committees with respect to different groups of Employees and
Consultants.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy applicable laws. The Plan shall be administered
by the Board of Directors of the Company.
(b) Powers of the Board. Subject to the provisions of the Plan, the
-------------------
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, Nonstatutory Stock Options or Stock Purchase Rights; (ii) to determine,
upon review of relevant information and in accordance with Section 7 of the
Plan, the fair market value of the Common Stock; (iii) to determine the exercise
price per share of Options or Stock Purchase Rights, to be granted, which
exercise price shall be determined in accordance with Section 7 of the Plan;
(iv) to determine the Employees, Consultants or Directors to whom, and the time
or times at which, Options or Stock Purchase Rights shall be granted and the
number of shares to be represented by each Option or Stock Purchase Right; (v)
to interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and provisions of
each Option and Stock Purchase Right granted (which need not be identical) and,
with the consent of the holder thereof, modify or amend any provisions
(including provisions relating to exercise price) of any Option or Stock
Purchase Right; (viii) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option or Stock
Purchase Right previously granted by the Board; and (ix) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees,
Purchasers and any other holders of any Options or Stock Purchase Rights granted
under the Plan.
5. Eligibility.
-----------
(a) Options and Stock Purchase Rights may be granted to Employees,
Consultants and Directors, provided that Incentive Stock Options may only be
granted to Employees. An Employee, Consultant or Director who has been granted
an Option or Stock Purchase Right may, if such Employee, Consultant or Director
is otherwise eligible, be granted additional Option(s) or Stock Purchase
Right(s).
-3-
<PAGE>
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Non-statutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate fair market
value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Options shall be taken into account
in the order in which they were granted, and the fair market value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.
(d) The Plan shall not confer upon any Optionee or holder of a Stock
Purchase Right any right with respect to continuation of employment by or the
rendition of consulting services to the Company, nor shall it interfere in any
way with his or her right or the Company's right to terminate his or her
employment or services at any time, with or without cause.
(e) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options or Stock Purchase Rights to purchase more than 75,000 Shares.
Notwithstanding this limit, however, in connection with an Employee's initial
employment, he or she may be granted Options or Stock Purchase Rights to
purchase up to an additional 75,000 Shares.
(ii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 11.
(iii) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the canceled Option will be counted against the limit
set forth in Section 5(d)(i). For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by vote of the
holders of a majority of the outstanding shares of the Company entitled to vote
on the adoption of the Plan. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 14 of the Plan.
7. Exercise Price and Consideration.
--------------------------------
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option or Stock Purchase Right shall be such price as is
determined by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of
-4-
<PAGE>
all classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the fair market value per Share on
the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the fair market value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option or a Stock
Purchase Right
(A) granted to any person, the per Share exercise price
shall be no less than 100% of the fair market value per Share on the date of
grant.
For purposes of this Section 7(a), in the event that an Option or Stock
Purchase Right is amended to reduce the exercise price, the date of grant of
such Option or Stock Purchase Right shall thereafter be considered to be the
date of such amendment.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices (or the closing price per share if the Common Stock is listed on
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant, as reported
in the Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on a stock exchange,
the fair market value per Share shall be the closing price on such exchange on
the date of grant of the Option or Stock Purchase Right, as reported in the Wall
Street Journal.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option or Stock Purchase Right, including the method of payment,
shall be determined by the Board and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares of Common Stock which (i) either
have been owned by the Optionee for more than six (6) months on the date of
surrender or were not acquired directly or indirectly, from the Company, and
(ii) have a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, (5)
cashless exercise, (6) any combination of such methods of payment, (7) reduction
of any liability to Optionee, or (8) such other consideration and method of
payment for the issuance of Shares to the extent permitted under Sections 408
and 409 of the California General Corporation Law. In making its determination
as to the type of consideration to accept, the Board shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company (Section 315(b) of the California General Corporation Law).
8. Options.
-------
(a) Term of Option. The term of each Incentive Stock Option shall be
---------------
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Incentive Stock Option Agreement. The term of each Option that
is not an Incentive Stock Option shall be ten (10) years and one (1) day from
the date of grant thereof or such shorter term as may be provided in the Stock
Option Agreement. However, in the case of an Option granted to an Optionee who,
at the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power
-5-
<PAGE>
of all classes of stock of the Company or any Parent or Subsidiary, (i) if the
Option is an Incentive Stock Option, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter time as may be provided in
the Stock Option Agreement, or (ii) if the Option is a Nonstatutory Stock
Option, the term of the Option shall be five (5) years and one (1) day from the
date of grant thereof or such other term as may be provided in the Stock Option
Agreement.
(b) Exercise of Option.
------------------
(i) Procedure for Exercise: Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan. In no event shall an Option be exercised at a rate of less than 20% per
year over five years from the date of the grant of the Option.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 7 of the Plan. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. In the
event that the exercise of an Option is treated in part as the exercise of an
Incentive Stock Option and in part as the exercise of a Nonstatutory Stock
Option pursuant to Section 5 (b), the Company shall issue a separate stock
certificate evidencing the Shares treated as acquired upon exercise of an
Incentive Stock Option and a separate stock certificate evidencing the Shares
treated as acquired upon exercise of a Nonstatutory Stock Option and shall
identify each such certificate accordingly in its stock transfer records. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be avail-able, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(ii) Termination of Status as an Employee, Consultant or
---------------------------------------------------
Director. In the event of termination of an Optionee's Continuous Status as an
- --------
Employee, Consultant or Director (as the case may be), such Optionee may, but
only within thirty (30) days (or such other period of time not exceeding three
(3) months in the case of an Incentive Stock Option or six (6) months in the
case of a Nonstatutory Stock Option, as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement, exercise the Option to the extent that such Employee,
Consultant or Director
-6-
<PAGE>
was entitled to exercise it at the date of such termination. To the extent that
such Employee, Consultant or Director was not entitled to exercise the Option at
the date of such termination, or if such Employee, Consultant or Director does
not exercise such Option (which such Employee, Consultant or Director was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(iii) Disability of Optionee. Notwithstanding the provisions of
----------------------
Section 8(b) (ii) above, in the event of termination of an Optionee's Continuous
Status as an Employee, Consultant or Director as a result of such Employee's or
Consultant's disability, such Employee, Consultant or Director may, but only
within six (6) months (or such other period of time not exceeding twelve (12)
months as is deter-mined by the Board, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) from the
date of such termination (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent such Employee, Consultant or Director was entitled to
exercise it at the date of such termination. To the extent that such Employee,
Consultant or Director was not entitled to exercise the Option at the date of
termination, or if such Employee, Consultant or Director does not exercise such
Option (which such Employee, Consultant or Director was entitled to exercise)
within the time specified herein, the Option shall terminate.
(iv) Death of Optionee. In the event of the death of an
-----------------
Optionee:
(A) during the term of the Option who is at the time of his
or her death an Employee, Consultant or Director of the Company and who shall
have been in Continuous Status as an Employee, Consultant or Director since the
date of grant of the Option, the Option may be exercised, at any time within six
(6) months (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), by Optionees estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that would have accrued had the
Optionee continued living and remained in Continuous Status as an Employee,
Consultant or Director six (6) months (or such other period of time as is
determined by the Board at the time of grant of the Option) after the date of
death; or
(B) within thirty (30) days (or such other period of time
not exceeding three (3) months as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the termination of Continuous Status as an Employee,
Consultant or Director, the Option may be exercised, at any time within six (6)
months (or such other period of time as is determined by the Board at the time
of grant of the Option) following the date of death (but in no event later than
the date of expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
9. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. After the Board of Directors determines that
------------------
it will offer an Employee, Consultant or Director a Stock Purchase Right, it
shall deliver to the offeree a stock purchase agreement or stock bonus
agreement, as the case may be, setting forth the terms, conditions
-7-
<PAGE>
and restrictions relating to the offer, including the number of Shares which
such person shall be entitled to purchase, and the time within which such person
must accept such offer, which shall in no event exceed six (6) months from the
date upon which the Board of Directors or its Committee made the determination
to grant the Stock Purchase Right. The offer shall be accepted by execution of a
stock purchase agreement or stock bonus agreement in the form determined by the
Board of Directors.
(b) Issuance of Shares. Forthwith after payment therefor, the Shares
------------------
purchased shall be duly issued; provided, however, that the Board may require
that the Purchaser make adequate provision for any Federal and State withholding
obligations of the Company as a condition to the Purchaser purchasing such
Shares.
(c) Repurchase Option. Unless the Board determines otherwise, the
-----------------
stock purchase agreement or stock bonus agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the Purchaser's employment with the Company for any reason (including death or
disability). If the Board so determines, the purchase price for shares
repurchased may be paid by cancellation of any indebtedness of the Purchaser to
the Company. The repurchase option shall lapse at such rate as the Board may
determine.
(d) Other Provisions. The stock purchase agreement or stock bonus
----------------
agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Board of Directors.
10. Non-Transferability of Options and Stock Purchase Rights. The
--------------------------------------------------------
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Optionee or Purchaser, only by the Optionee or Purchaser.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, or repurchase of Shares from a Purchaser upon termination of
employment, as well as the price per share of Common Stock covered by each such
outstanding Option or Stock Purchase Right, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock of the Company or the payment of a stock
dividend with respect to the Common Stock or any other increase or decrease in
the numbed of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
-8-
<PAGE>
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, if the Optionee is a Director, Officer or Consultant, the
Optionee shall fully vest in and have the right to exercise the Option or Stock
Purchase Right as to all of the Optioned Stock, including Shares as to which it
would not otherwise be vested or exercisable. If an Option or Stock Purchase
Right becomes fully vested and exercisable in lieu of assumption or substitution
in the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option or Stock Purchase Right
shall be fully vested and exercisable for a period of fifteen (15) days from the
date of such notice, and the Option or Stock Purchase Right shall terminate upon
the expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
12. Time of Granting Options. The date of grant of an Option or Stock
------------------------
Purchase Right shall, for all purposes, be the date on which the Board makes the
determination granting such Option or Stock Purchase Right. Notice of the
determination shall be given to each Employee, Consultant or Director to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, the revisions or amendments shall require approval of the
shareholders of the Company as required to satisfy
-9-
<PAGE>
Sections 162(m) and 422 of the Code (or any successor Rule or statute or other
applicable law, Rule or regulation, including the requirements of any exchange
or quotation system on which the Commons Stock is listed or quoted).
(b) Shareholder Approval. If any amendment requiring shareholder
--------------------
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such shareholder approval shall be solicited as described
in Section 17 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted and such Options or Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee or Purchaser (as the case may be)
and the Board, which agreement must be in writing and signed by the Optionee or
Purchaser (as the case may be) and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option or Stock Purchase Rights unless the
exercise of such Option or Stock Purchase Rights and the issuance and delivery
of such Shares pursuant thereto shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Rights,
the Company may require the person exercising such Option or Stock Purchase
Rights to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Option, Stock Purchase and Stock Bonus Agreements. Options shall be
-------------------------------------------------
evidenced by written option agreements in such form as the Board shall approve.
Upon the exercise of Stock Purchase Rights, the Purchaser shall sign a stock
purchase agreement or stock bonus agreement in such form as the Board shall
approve.
-10-
<PAGE>
17. Shareholder Approval.
--------------------
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted. If such shareholder approval is obtained at a duly held
shareholders' meeting, it must be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company, or if such
shareholder approval is obtained by written consent, it may be obtained by the
written consent of the holders of a majority of the outstanding shares of the
Company's capital stock entitled to vote.
(b) If and in the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 17(b) hereof, then the Company shall, at or prior to
the first annual meeting of shareholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company user Section
12 of the Exchange Act or (2) the granting of an Option hereunder to an officer
or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information which would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment were
then being solicited) by the rules and regulations in effect under Section 14(a)
of the Exchange Act at the time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subSection (i) hereof not later than the date on which such information is first
sent or given to shareholders.
-11-
<PAGE>
EXHIBIT 10.14
Mr. Michael D. Fox March 22, 1999
Direct of Sales Eastern Region [LOGO] Cincinnati Bell
SoloPoint, Inc. Telephone
130B Knowles Drive 201 E. Fourth St.
Los Gatos, CA 95032 P.O. Box 2301
Cincinnati, Ohio 45201-2301
Dear Mike:
This letter confirms Cincinnati Bell Telephone Company's commitment to purchase
and accept a minimum of 10,000 S-310-CVM Voice Mail and Caller ID Manager units
at a price of $39.00/unit before March 31, 2000, Payment terms are net 30 days.
Cincinnati Bell agrees to treat pricing and terms of this purchase as
proprietary information coveted by the non-disclosure agreement in effect
between SoloPoint and Cincinnati Bell.
Cincinnati Bell or its designated agent will issue Purchase Orders for the
scheduled quantities at least four weeks in advance of our required Delivery
Date. We will attach a copy of this letter to each Purchase Order, specifically
referencing that Purchase Order. Cincinnati Bell reserves the right to refuse
acceptance of any units that do not perform to their stated specifications.
Cincinnati Bell understands that upon acceptance of products by Cincinnati Bell
or its designated agent, such products can only be returned to SoloPoint in
accordance with SoloPoint's current S-310-CVM warranty policy.
Cincinnati Bell would like the 10,000 units delivered to Cincinnati Bell, and/or
its designated agent freight pre-paid, according to the following schedule:
<TABLE>
<CAPTION>
Delivery Date Quantity Delivery Location
- --------------------------------------------------- ------------------ --------------------------------------
<S> <C> <C>
On or before March 31, 1999 2,000 Innotrac (P.O. Issued 3/19)
On or before March 31, 1999 1,000 Cincinnati Bell (P.O. Issued 3/15)
On or before April 23, 1999 2,500 Innotrac (P.O. Issued 3/19)
On or before September 30, 1999 2,500 Innotrac/Cincinnati Bell
------
1999 Sub-total 8,000
On or before March 31, 1999 2,000 Innotrac/Cincinnati Bell
------
Total Units 10,000
</TABLE>
Cincinnati Bell may adjust the above delivery schedule by providing SoloPoint a
minimum of 30 days written notice prior to the adjusted delivery date, However,
if for any reason other than the S-310-CVM failing to perform to SoloPoint's
stated specifications, Cincinnati Bell or its designated agent accepts delivery
of fewer than 10,000 units delivered to Cincinnati Bell or its agent by March
31, 2000, Cincinnati Bell will make immediate payment to SoloPoint of an
additional $20.72 for each S-310-CVM delivered to and accepted by Cincinnati
Bell or its designated agent, per standard pricing for 5-10,000 units quoted at
$59.72 per unit.
Cincinnati Bell or its designated agent will provide first-tier customer support
for the first 30 days post-sale. SoloPoint will provide after 30 days post-sale
support and second-tier support during SoloPoint's normal business hours for
customer inquiries referred to SoloPoint by Cincinnati Bell or its designated
agent.
We look forward to ongoing business with SoloPoint. Please contact John Rhoads
at 513-397-0985 with any questions.
<PAGE>
EXHIBIT 10.15
SOLOPOINT, INC.
COMMON STOCK SUBSCRIPTION AGREEMENT
August 10, 1999
This Common Stock Subscription Agreement (the "Agreement") is entered into
as of this 10th day of August, 1999, among SoloPoint, Inc., a California
corporation (the "Company") and the undersigned purchasers (each a "Purchaser"
and together the "Purchasers").
SECTION 1
SALE OF COMMON STOCK
1.1 Sale of Common Stock. Subject to the terms and conditions hereof, the
--------------------
Company will issue and sell to the Purchasers, and the Purchasers will purchase
from the Company, shares of Common Stock of the Company (the "Common Stock")
with an aggregate value of $3,150,000, at a price per share equal to the then
Current Market Price on the date (the "Escrow Opening Date") that the Company
places certificates representing the shares of Common Stock issued and sold to
the Purchasers hereunder in escrow with Chase Manhattan Bank and Trust Company,
National Association (the "Escrow Agent"), it being understood by the parties
that the Company shall not be required to issue shares of Common Stock to any
Purchaser if such issuance would result in the concentration of ownership of
more than 50% of the issued and outstanding Common Stock of the Company in any
one shareholder or group of affiliated shareholders. The certificates
representing the shares of Common Stock to be purchased hereunder shall be
issued to the Purchasers as of the Escrow Opening Date. The number of shares of
Common Stock to be purchased and the purchase price to be paid by Purchasers is
outlined on Exhibit A, which is incorporated herein by this reference.
1.2 The cash consideration (the "Escrowed Funds") to be paid by the
Purchasers to the Company for Common Stock shall be placed in escrow with the
Escrow Agent by wire transfer of immediately available funds to an interest
bearing account to be designated by the Escrow Agent on the Escrow Opening Date.
If any Purchaser intends to pay for shares of Common Stock by means of
conversion of any loan made to the Company, such Purchaser must deliver to the
Escrow Agent on the Escrow Opening Date, the instrument representing such loan,
together with instructions to the Escrow Agent stating that such instrument
shall be released to the party that is recipient of the Ecrowed Funds on the
Escrow Release Date (as defined herein). For the purpose of any computation
pursuant to this Section 1: (i) the "Current Market Price" at any date of one
share of Common Stock of the Company, shall be deemed to be the average of the
closing prices for shares of Common Stock on the preceding ten (10) business
days as furnished by the National Quotation Bureau, Incorporated (or an
equivalent recognized source of quotations), as determined by the Company's
independent accountants, Ernst & Young, and (ii) "Escrowed Funds" shall not
include any portion of the consideration for the shares of Common Stock to be
paid by any Purchaser by means of the conversion of any convertible loan made by
such Purchaser or any of its affiliates to the Company prior to the Escrow
Opening Date.
Page 1
<PAGE>
1.3 Issuance of Warrants.
--------------------
(a) The Company agrees to issue to Purchasers, pro rata based on the
number of shares of Common Stock subscribed for by each Purchaser hereunder,
warrants (individually the "Warrant" and collectively the "Warrants")
exercisable for the purchase of an aggregate 1,300,000 shares of Common Stock
at a price per share of $3.00. The Warrants shall be issued to Purchasers as of
the date (the "Escrow Release Date") that the Escrowed Funds are released to the
Company. The Warrants shall be fully transferable, and shall be exercisable by
means of a cashless exercise at any time during the 18-month period commencing
on the Escrow Release Date; provided that any transferee of Warrants that is not
an affiliate of InveStar Capital, Inc. shall not be entitled to cashless
exercise of the Warrants. The terms of the Warrants are set forth more fully in
the form of Warrant annexed hereto as Exhibit B. For purposes of this Agreement
an "affiliate" of a person or an entity shall mean any natural person or entity
that directly or indirectly, through one or more intermendiaries, controls or is
controlled by or is under common control with such person or entity, any entity
in which such person or entity directly or indirectly, through one or more
intermediaries, is a general partner, principal, managing member, beneficiary or
otherwise a direct or indirect owner of a controlling interest or with which
such person or entity may merge or consolidate.
(b) The common stock issuable upon exercise of the Warrants (the
"Warrant Shares") shall be entitled to the benefits of the registration rights
granted by the Company pursuant to that certain Registration Rights Agreement
(the "Registration Rights Agreement"), dated of even date herewith, by and among
the Company and the Purchasers, a copy of which is annexed hereto as Exhibit E.
(c) The Company and the Purchasers, having adverse interests and as a
result of arm's length bargaining, agree that (i) the Purchasers have not
rendered and have not agreed to render any services to the Company in connection
with the issuance of the Warrants; (ii) the Warrants are not being issued as
compensation; and (iii) the fair market value of each Warrant as of the date of
issuance for income tax and other purposes shall be deemed to be $0.01 per
Warrant Share.
1.4 Release of Escrow. The certificates representing the shares of Common
-----------------
Stock being purchased hereunder and the Escrowed Funds shall be released by the
Escrow Agent to the Purchasers and the Company, respectively, upon receipt by
the Company of notice from the Nasdaq Stock Market ("Nasdaq") that the panel
presiding at the Company's August 12, 1999 Nasdaq delisting hearing has not
ordered the delisting of the Company. In the event that the delisting of the
Company is ordered by such panel, the Escrow Agent shall return the certificates
to the Company's Secretary and the Escrowed Funds to the Purchasers. The terms
and conditions of the release of Escrow are set forth more fully in the form of
Escrow Agreement annexed hereto as Exhibit C.
1.5 Legend. The certificate or certificates for the Common Stock shall be
------
subject to a legend restricting transfer under the Securities Act of 1933, as
amended (the "Securities Act") and referring to restrictions on transfer herein,
such legend to be substantially as follows:
Page 2
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (A) AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, OR (B) AN OPINION OF COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR (C) FULL COMPLIANCE WITH THE PROVISIONS OF RULE 144 UNDER THE
ACT."
1.6 Removal of Legends. Any legend endorsed on a certificate pursuant to
------------------
Section 1.5 hereof shall be removed (a) if the shares of the Common Stock
represented by such certificate shall have been effectively registered under the
Securities Act or otherwise lawfully sold in a public transaction, (b) if such
shares may be transferred in compliance with Rule 144(k) promulgated under the
Securities Act, or (c) if the holder of such shares shall have provided the
Company with an opinion of counsel, in form and substance acceptable to the
Company, stating that a public sale, transfer or assignment of such shares may
be made without registration.
Page 3
<PAGE>
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers that:
2.1 Organization. The Company is a corporation duly organized and validly
------------
existing under the laws of the State of California and is in good standing under
such laws. The Company has requisite corporate power and authority to own,
lease and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company is qualified
to do business as a foreign corporation in each jurisdiction in which the
ownership of its property or the nature of its business requires such
qualification, except where failure to so qualify would not have a materially
adverse effect on the Company.
2.2 Authorization. The Company has all corporate right, power and
-------------
authority to enter into this Agreement, the Registration Rights Agreement and
the Escrow Agreement and to consummate the transactions contemplated hereby and
thereby. All corporate action on the part of the Company, its directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the Escrow
Agreement by the Company, and the authorization, sale, issuance and delivery of
the Common Stock and the performance of the Company's obligations hereunder and
under the Registration Rights Agreement and the Escrow Agreement has been taken.
This Agreement, the Registration Rights Agreement and the Escrow Agreement have
been duly executed and delivered by the Company and constitute legal, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy as they may apply to Section 1.6 of the Registration Rights
Agreement. Upon issuance and delivery pursuant to this Agreement, all of the
Common Stock being sold to the Purchasers hereunder and all of the Common Stock
issuable upon exercise of the Warrants will be duly and validly issued, fully
paid and nonassessable and free and clear of any liens and encumbrances. There
are no statutory, contractual or other preemptive rights or rights of first
refusal with respect to the issuance and sale of such Common Stock.
2.3 Validity of Securities. The Company's securities, when issued, sold
----------------------
and delivered by the Company in accordance with the terms of this Agreement,
will be duly and validly issued, fully-paid and nonassessable. The issuance,
sale and delivery of such securities are not subject to preemptive or any
similar rights of the shareholders of the Company or any liens or encumbrances
arising through the Company. Based in part upon the representations of the
Purchasers in this Agreement, the offer, sale and issuance of the Company's
securities hereunder will be made in compliance with all applicable federal and
state securities laws.
2.4 No Conflict. The execution and delivery of this Agreement, the
-----------
Registration Rights Agreement and the Escrow Agreement do not, and the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination,
Page 4
<PAGE>
cancellation or acceleration of any obligation or to a loss of a material
benefit, under, any provision of the Amended and Restated Articles of
Incorporation or Bylaws of the Company or any mortgage, indenture, lease or
other agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company, its properties or assets, which conflict, violation, default or right
would have a material adverse effect on the business, properties, prospects or
financial condition of the Company.
2.5 Accuracy of Reports; Financial Statements. All reports required to be
-----------------------------------------
filed with the Securities and Exchange Commission (the "SEC") by the Company
from the date of the Company's initial public offering through the date of this
Agreement under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), copies of which have been made available to each Purchaser (the "SEC
Documents"), have been duly and timely filed, were in substantial compliance
with the requirements of their respective forms when filed, were complete and
correct in all material respects as of the dates at which the information was
furnished, and contained (as of such dates) no untrue statement of a material
fact nor omitted to state a material fact necessary in order to make the
statements made therein in light of the circumstances in which made not
misleading. The Company's financial statements included in the SEC Documents
(the "Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of the Company and any
subsidiaries at the dates thereof and the consolidated results of operations and
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring adjustments).
2.6 Changes. Since May 14, 1999 (the date on which the Company's Quarterly
-------
Report on Form 10-QSB for the fiscal quarter ended March 31, 1999 was filed with
the SEC), there has not been (a) any incurrence by the Company of any material
liability, absolute or contingent, or (b) except for the potential delisting of
the Company by the Nasdaq which will be adjudicated at a hearing before a Nasdaq
panel scheduled for August 12, 1999, any event or condition of any character
that has materially and adversely affected or might materially and adversely
affect the business, properties, prospects or financial condition of the Company
(as such business is presently conducted and as it is proposed to be conducted).
There is no material liability or contingency of the Company that is not
disclosed in the SEC Documents.
2.7 Governmental Consents, Etc. No consent, approval or authorization of
--------------------------
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, the Registration Rights Agreement or the Escrow
Agreement, or the consummation of any other transaction contemplated hereby and
thereby, except such filings as may be required to be made with the SEC, the
National Association of Securities Dealers, Inc. ("NASD") and with governmental
authorities for purposes of effecting compliance with the securities and Blue
Sky laws in the states in which Common Stock is offered and/or sold, which
compliance will be effected in accordance with such laws.
Page 5
<PAGE>
2.8 Litigation. Except as disclosed in the SEC Documents and Schedule 2.8
----------
hereto, there is no pending or, to the best of the Company's knowledge,
threatened lawsuit, administrative proceeding, arbitration, labor dispute or
governmental investigation ("Litigation") to which the Company is a party or by
which any material portion of its assets, taken as a whole, may be bound, nor is
the Company aware of any basis therefor, which Litigation, if adversely
determined, would have a material adverse effect on the business, properties,
prospects or financial condition of the Company.
2.9 Intellectual Property. To its knowledge, and except as disclosed in
---------------------
the SEC Documents, the Company owns or possesses sufficient legal rights to all
patents, trademarks, service marks, tradenames, copyrights, trade secrets,
licenses, information and proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted, without infringement
of any rights of a third party. Except as disclosed in the SEC Documents, the
Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, tradenames, copyrights, trade secrets or
other proprietary rights or processes of any other person or entity, which
violation would have a material adverse effect on the business, properties,
prospects or financial condition of the Company. Except as disclosed in the SEC
Documents, the Company has not granted (nor has the Company licensed from a
third party) any material rights to or licenses to its patents, trademarks,
service marks, tradenames, copyrights, trade secrets or other proprietary rights
or processes.
2.10 Registration Rights. Except as contemplated herein and in the
-------------------
Registration Rights Agreement, the Company has not granted or agreed to grant
any rights to register its securities under the Securities Act, including piggy-
back rights, to any person or entity.
2.11 No Material Default. The Company is not in violation of or default
-------------------
under any provision of (a) its Certificate of Incorporation or Bylaws or (b) any
mortgage, indenture, lease or other agreement or instrument, permit, concession,
franchise or license to which it is a party or by which it is bound or (c) any
federal or state judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company, except with respect to clauses (b) and (c)
above, such violations or defaults as would not have a material adverse effect
on the business, properties, prospects or financial condition of the Company.
The Company is not in default with respect to any material debt or liability.
2.12 Disclosure. No representation or warranty of the Company contained in
----------
this Agreement or the exhibits attached to this Agreement (when read together
and taken as a whole), contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein in light of the circumstances under which they were made not
misleading.
2.14 Rights of Common Stock. The Common Stock shall have the rights,
----------------------
preferences, privileges and restrictions provided in the Company's Amended and
Restated Certificate of Incorporation.
Page 6
<PAGE>
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as follows:
3.1 Investment. Purchaser is acquiring the Common Stock for investment for
----------
its own account, not as a nominee or agent and not with a view to or for resale
in connection with any distribution thereof. Purchaser understands that the
Common Stock purchased by such Purchaser from the Company pursuant to this
Agreement has not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of such Purchaser's
investment intent and the accuracy of such Purchaser's representations as
expressed herein.
3.2 Accredited Investor. Each Purchaser is an "accredited investor" as
-------------------
defined by Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act"). The SEC documents have been made available to each Purchaser,
and each Purchaser has received all the information it has requested regarding
the Company. Each Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the Common Stock. Each purchaser has completed the information
requested by the Investor Suitability Questionnaire attached as Exhibit D to
this Agreement (the "Questionnaire").
3.3 Authority. This Agreement, the Registration Rights Agreement and the
---------
Escrow Agreement have been duly executed and delivered by each Purchaser and
constitute legal, valid and binding obligations of the Purchasers, enforceable
in accordance with their respective terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies and to limitations of public policy as they may apply to
Section 1.6 of the Registration Rights Agreement. The execution and delivery of
this Agreement, the Registration Rights Agreement and the Escrow Agreement do
not, and the consummation of the transactions contemplated hereby and thereby
will not, conflict with or result in any violation of any obligation under any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Purchasers.
3.4 Government Consents, Etc. No consent, approval or authorization of or
------------------------
designation, declaration or filing with any governmental authority on the part
of the Purchasers is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Common Stock,
or the consummation of any other transaction contemplated hereby.
3.5 Investigation. Each Purchaser has had a reasonable opportunity to
-------------
discuss the Company's business, management and financial affairs with the
Company's management.
Page 7
<PAGE>
SECTION 4
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
The obligations of each Purchaser to the Company under this Agreement are
subject to the fulfillment, on or before the Escrow Opening Date, of each of the
following conditions, unless otherwise waived:
4.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 2 shall be true and correct in all
material respects on the Escrow Opening Date with the same effect as though such
representations and warranties had been made on and as of the Escrow Opening
Date.
4.2 Covenants. All covenants, agreements and conditions contained in this
---------
Agreement to be performed by the Company on or prior to the Escrow Opening Date
shall have been performed or complied with in all material respects.
4.3 No Order Pending. There shall not then be in effect any order
----------------
enjoining or restraining the transactions contemplated by this Agreement.
4.4 No Law Prohibiting or Restricting Sale. There shall not be in effect
--------------------------------------
any law, rule or regulation prohibiting or restricting such sale, or requiring
any consent or approval of any person which shall not have been obtained to
issue the Common Stock (except as otherwise referenced in this Agreement).
4.5 Additional Agreements. On or before the Escrow Opening Date, the
---------------------
Company and the Escrow Agent shall have executed and delivered a counterpart of
the Escrow Agreement attached as Exhibit C and the Company shall have executed
and delivered a counterpart of the Registration Rights Agreement attached as
Exhibit E.
4.6 Investor Suitability Questionnaire. On or before the Escrow Opening,
----------------------------------
each Purchaser shall have executed and delivered the Investor Suitability
Questionnaire attached as Exhibit E.
4.7 Current Market Price. The Current Market Price for one share of
--------------------
Company Common Stock, determined as of the Escrow Opening Date, shall not exceed
of $1.50.
Page 8
<PAGE>
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement are subject to the
fulfillment on or prior to the Escrow Opening Date of each of the following
conditions, unless otherwise waived:
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Purchaser(s) in Section 3 hereof shall be true and
correct in all material respects on and as of the Escrow Opening Date with the
same effect as though such representations and warranties had been made on and
as of the Escrow Opening Date.
5.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed by the Purchasers on or prior to the Escrow
Opening Date shall have been performed or complied with in all material
respects.
5.3 No Order Pending. There shall not then be in effect any order
----------------
enjoining or restraining the transactions contemplated by this Agreement.
5.4 No Law Prohibiting or Restricting Such Sale. There shall not be in
-------------------------------------------
effect any law, rule or regulation prohibiting or restricting such sale, or
requiring any consent or approval of any person which shall not have been
obtained to issue the Common Stock (except as otherwise provided in this
Agreement).
5.5 Escrowed Funds. The Escrowed Funds shall have been placed in escrow in
--------------
the account designated by the Escrow Agent, and the instrument(s) representing
any convertible loan(s) to be converted into Common Stock as part of the
consideration to be paid by a Purchaser for the Common Stock subscribed for
hereunder shall been delivered to the Escrow Agent at the time and in the manner
proscribed in Section 1.2 hereof.
5.6 Additional Agreements. On or before the Escrow Opening Date, each
---------------------
Investor and the Escrow Agent shall have executed and delivered a counterpart of
the Escrow Agreement attached as Exhibit C and each Investor shall have executed
and delivered a counterpart of the Registration Rights Agreement attached as
Exhibit E.
SECTION 6
COVENANTS OF THE COMPANY
6.1 Registration of Common Stock. Subject to the terms and conditions set
----------------------------
forth herein and in the Registration Rights Agreement, the Company will use
reasonable best efforts to file with the Securities Exchange Commission, within
180 days following the Escrow Release Date, a registration statement sufficient
to register the shares of Company Common Stock purchased by the Purchasers
hereunder, as well as the shares of Company Common Stock issuable upon exercise
of the Warrants.
Page 9
<PAGE>
6.2 Board of Directors. Effective as of the Escrow Release Date, and so
------------------
long as InveStar Capital, Inc. ("InveStar") and its affiliates hold at least
500,000 shares of Company Common Stock, SoloPoint will nominate InveStar's
designee for one seat on the Company's Board of Directors. Such designee, once
elected to the Board, shall be appointed as a member of the Company's
Compensation Committee. In addition, InveStar and its affiliates shall be
entitled to designate an observer of the Board of Directors, which person shall
have the right to be present at all meetings of the Board of Directors and to
inspect materials presented to the Board of Directors; provided that such person
shall agree in writing (i) to be bound by the same fiduciary duties as those
imposed upon the Company's directors in respect to the receipt of confidential
information and to use reasonable care to protect the Company's confidential
information, and (ii) not to disclose the Company's confidential information to
any person or entity. The Company reserves the right to withhold any
information and to exclude InveStar's non-director representative from any
meeting or portion thereof if the Board of Directors reasonably believes that
access to such information or attendance at such meeting would: (i) involve a
conflict of interest regarding a material issue for the Company, (ii) be
necessary in order to meet or protect any fiduciary obligations of the Board of
Directors or (iii) adversely effect attorney-client privilege between the
Company and its counsel.
6.3 Issuance of Preferred Stock. For so long as InveStar and its
---------------------------
affiliates own at least 100,000 shares of Common Stock, the Company will not to
issue any shares of Preferred Stock without the prior written consent of
InveStar or one of its affiliates. In addition, the Company hereby agrees that
InveStar and its affiliates shall be entitled to purchase its pro rata portion
(based on its percentage ownership of the Company's issued and outstanding
securities) of any issuance of Company Preferred Stock.
6.4 Issuance of Warrants. As of the Escrow Release Date, the Company will
--------------------
issue the Warrants to the Purchasers subject to the terms and conditions set
forth herein and in the form of Warrant annexed hereto as Exhibit B.
SECTION 7
MISCELLANEOUS
7.1 Governing Law. This Agreement and all acts and transactions pursuant
-------------
to this Agreement and the rights and obligations of the parties to this
Agreement shall be governed, construed and interpreted in accordance with the
laws of the State of California, without giving effect to principles of
conflicts of law.
7.2 Survival. Unless otherwise set forth in this Agreement, the
--------
warranties, representations and covenants of the Company and the Purchasers
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Escrow Opening.
7.3 Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the parties to this Agreement and their respective
successors and assigns.
Page 10
<PAGE>
7.4 Entire Agreement; Amendment. This Agreement, the Registration Rights
---------------------------
Agreement, the Escrow Agreement and the other documents delivered pursuant to
this Agreement constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede all prior agreements and understandings among the parties relating to
the subject matter hereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against which enforcement of any such amendment, waiver,
discharge or termination is sought.
7.5 Notices and Dates. Unless otherwise provided in this Agreement, any
-----------------
notice required or permitted by this Agreement shall be in writing and shall be
deemed sufficient upon delivery, when delivered personally or by overnight
courier and addressed to the party to be notified at such party's address as set
forth on the signature page to this Agreement or as subsequently modified by
written notice. If any date provided for in this Agreement falls on a Saturday,
Sunday or legal holiday, such date shall be deemed extended to the next business
day.
7.6 Brokers.
-------
(a) Except as disclosed to the Purchasers, the Company has not engaged,
consented to or authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Company
agrees to indemnify and hold harmless the Purchasers from and against all fees,
commissions or other payments owing to any party acting on behalf of the Company
hereunder.
(b) No Purchaser has engaged, consented to or authorized any broker,
finder or intermediary to act on its behalf, directly or indirectly, as a
broker, finder or intermediary in connection with the transactions contemplated
by this Agreement. Each Purchaser hereby agrees to indemnify and hold harmless
the Company from and against all fees, commissions or other payments owing to
any party acting on behalf of such Purchaser hereunder.
7.7 Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
7.8 Costs and Expenses. Irrespective of whether the Escrow Opening is
------------------
effected, the Company shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement.
7.9 No Third Party Rights. Nothing in this Agreement shall create or be
---------------------
deemed to create any rights in any person or entity not a party to this
Agreement.
7.10 Captions and Headings. The captions and headings used herein are for
---------------------
convenience and ease of reference only and are not intended to be a part of or
to affect the meaning or interpretation of this Agreement.
Page 11
<PAGE>
7.11 Counterparts. This Agreement may be executed in counterparts, and each
------------
such counterpart shall be deemed an original for all purposes.
IN WITNESS WHEREOF, the parties to this Agreement have executed or caused
their respective authorized officers to execute this Agreement as of the first
date written above.
"COMPANY":
SoloPoint, Inc. Address
130 B Knowles Drive
Los Gatos, California 95032
By: ____________________________ Facsimile: (408) 364-1724
Arthur G. Chang
President and Chief Executive Officer
PURCHASER(S):
By: ____________________________ Address: _______________________
(Signature) _______________________
____________________________
(Print Name)
Page 12
<PAGE>
EXHIBIT A
TERMS OF PURCHASE
<TABLE>
<CAPTION>
Name Number of Shares Purchase Price
- ----- ----------------- --------------
<S> <C> <C>
InveStar Burgeon Venture Capital, Inc. 512,316 $1.0844
InveStar Dayspring Venture Capital,
Inc. 768,474 $1.0844
InveStar Excelsus Venture Capital
(Int'l), Inc. LDC 768,474 $1.0844
Forefront Venture Partners, L.P. 256,158 $1.0844
Hui-Chuan Liu 276,650 $1.0844
The Bass Trust 92,217 $1.0844
Carsten 1978 Trust, as Amended,
UTD 7-12-78 46,108 $1.0844
Murali & Mythill Narayanan 13,832 $1.0844
Jai Bhagat 13,832 $1.0844
Edward M. Esber, Jr. 18,443 $1.0844
Storm Ventures Fund I, LLC 110,660 $1.0844
Tae Hea & Rosemarie Nahm 27,665 $1.0844
</TABLE>
EXHIBITS
<PAGE>
EXHIBIT B
WARRANT
EXHIBITS
<PAGE>
Exhibit B
---------
Warrant No. W-.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION OF SUCH
SECURITIES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION,
OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF ARTICLE III OF THIS
WARRANT.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
AS HEREIN DESCRIBED
Dated August 10, 1999
This certifies that for value received________________________________ or
registered assigns, is entitled, subject to the terms set forth herein, to
purchase from SoloPoint, Inc., a California corporation (the "Company"), up to
-------
_______ fully paid and non-assessable shares of the Company's Common Stock, at
the price of $3.00 per share. The initial purchase price of $3.00 per share,
and the number of shares purchasable hereunder, are subject to adjustment in
certain events, all as more fully set forth under Article IV herein.
ARTICLE I
DEFINITIONS
-----------
"Affiliate" means any natural person or entity that directly, or through
---------
one or more intermendiaries, controls or is controlled by or is under common
control with InveStar Capital, Inc. ("InveStar"), any entity in which InveStar
directly or indirectly through one or more intermediaries, is a general partner,
principal, managing member, beneficiary or otherwise a direct or indirect owner
of a controlling interest or with which InveStar may merge or consolidate.
"Articles of Incorporation" means the Articles of Incorporation of the
-------------------------
Company.
"Closing Date" means August __, 1999.
------------
"Commission" means the Securities and Exchange Commission, or any other
----------
federal agency then administering the Exchange Act or the Securities Act, as
defined herein.
<PAGE>
"Common Stock" means the Company's Common Stock, any stock into which such
------------
stock shall have been changed or any stock resulting from any reclassification
of such stock, and any other capital stock of the Company of any class or series
now or hereafter authorized having the right to share in distributions either of
earnings or assets of the Company without limit as to amount or percentage.
"Company" means SoloPoint, Inc., a California corporation, and any
-------
successor corporation.
"Exercise Period" means the period commencing on the Closing Date and
----------------
terminating February __, 2001, unless sooner terminated as provided in Section
2.4 hereof.
"Exercise Price" means the price per share of Common Stock set forth in the
--------------
Preamble to this Warrant, as such price may be adjusted pursuant to Article IV
hereof.
"Fair Market Value" means
-----------------
(i) If shares of Common Stock are being sold pursuant to a
public offering under an effective registration statement under the Securities
Act which has been declared effective by the Commission and Fair Market Value is
being determined as of the closing of the public offering, the "price to public"
specified for such shares in the final prospectus for such public offering;
(ii) If shares of Common Stock are then listed or admitted
to trading on any national securities exchange or traded on any national market
system and Fair Market Value is not being determined as of the date described in
clause (i) of this definition, the average of the daily closing prices for the
ten (10) trading days before such date, excluding any trades which are not bona
fide, arm's length transactions. The closing price for each day shall be the
last sale price on such date or, if no such sale takes place on such date, the
average of the closing bid and asked prices on such date, in each case as
officially reported on the principal national securities exchange or national
market system on which such shares are then listed, admitted to trading or
traded;
(iii) If no shares of Common Stock are then listed or
admitted to trading on any national securities exchange or traded on any
national market system or being offered to the public pursuant to a registration
described in clause (i) of this definition, the average of the reported closing
bid and asked prices thereof on such date in the over-the-counter market as
shown by the National Association of Securities Dealers automated quotation
system or, if such shares are not then quoted in such system, as published by
the National Quotation Bureau, Incorporated or any similar successor
organization, and in either case as reported by any member firm of the New York
Stock Exchange selected by the Holder;
(iv) If no shares of Common Stock are then listed or
admitted to trading on any national exchange or traded on any national market
system, if no closing bid and asked prices thereof are then so quoted or
published in the over-the-counter market and if no such shares are being offered
to the public pursuant to a registration described in clause (i) of this
definition, the fair value of a share of Common Stock shall be as determined in
good faith by the Board of Directors of the Company.
"Holder" means the person in whose name this Warrant is registered on the
------
books of the
<PAGE>
Company maintained for such purpose.
"Person" means and includes natural persons, corporations, limited
------
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, limited liability companies, trusts, banks, trust
companies, land trusts, business trusts, government entities and authorities and
other organizations, whether or not legal entities.
"Principal Executive Office" means the Company's office at 130-B Knowles
--------------------------
Avenue, Los Gatos, California 95032, or such other office as designated in
writing to the Holder by the Company.
"Register," "Registered" and "Registration" refer to a registration
-------- ---------- ------------
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Rule 144" means Rule 144 as promulgated by the Commission under the
--------
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that the Commission may promulgate.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Shareholder" means a holder of one or more Warrant Shares or shares of
-----------
Common Stock acquired upon conversion of Warrant Shares.
"Warrant" means the warrant dated as of Closing Date issued to Holder and
-------
all warrants issued upon the partial exercise, transfer or division of or in
substitution for any Warrant.
"Warrant Shares" means the shares of Common Stock issuable upon the
--------------
exercise of this Warrant provided that if under the terms hereof there shall be
a change such that the securities purchasable hereunder shall be issued by an
entity other than the Company or there shall be a change in the type or class of
securities purchasable hereunder, then the term shall mean the securities
issuable upon the exercise of the rights granted hereunder.
ARTICLE II
EXERCISE
--------
II.1 Exercise Right; Manner of Exercise. The purchase rights represented
----------------------------------
by this Warrant may be exercised by the Holder, in whole or in part, at any time
and from time to time during the Exercise Period upon (i) surrender of this
Warrant, together with an executed Notice of Exercise, substantially in the form
of Exhibit "A" attached hereto, at the Principal Executive Office, and (ii)
-----------
payment to the Company of the aggregate Exercise Price for the number of Warrant
Shares specified in the Notice of Exercise (such aggregate Exercise Price the
"Total Exercise Price"). The Total Exercise Price shall be paid by check;
- ---------------------
provided, however, that if the Warrant Shares are acquired in conjunction with a
- -----------------
Registration of such Warrant Shares, then Holder may arrange for the aggregate
Exercise Price for such Warrant Shares to be paid to the Company from the
proceeds of the sale of
-3-
<PAGE>
such Warrant Shares pursuant to such Registration. The Person or Person(s) in
whose name(s) any certificate(s) representing the Warrant Shares issuable upon
exercise of this Warrant shall be deemed to become the holder(s) of, and shall
be treated for all purposes as the record holder(s) of, such Warrant Shares, and
such Warrant Shares shall be deemed to have been issued, immediately prior to
the close of business on the date on which this Warrant and Notice of Exercise
are presented and payment made for such Warrant Shares, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be actually delivered to such
Person or Person(s). Certificates for the Warrant Shares so purchased shall be
delivered to the Holder within a reasonable time, not exceeding fifteen (15)
days after this Warrant is exercised. If this Warrant is exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation, deliver a
new Warrant evidencing the rights of the Holder to purchase the balance of the
Warrant Shares which Holder is entitled to purchase hereunder. The issuance of
Warrant Shares upon exercise of this Warrant shall be made without charge to the
Holder for any issuance tax with respect thereto or any other cost incurred by
the Company in connection with the exercise of this Warrant and the related
issuance of Warrant Shares.
II.2 Conversion of Warrant.
---------------------
(a) Right to Convert. In addition to, and without limiting, the
----------------
other rights of the Holder hereunder, the Holder shall have the right (the
"Conversion Right") to convert this Warrant or any part hereof into Warrant
- ------------------
Shares at any time and from time to time during the term hereof. Upon exercise
of the Conversion Right, the Company shall deliver to the Holder, without
payment by the Holder of any Exercise Price or any cash or other consideration,
that number of Warrant Shares computed using the following formula:
X = Y(A - B)
--------
A
Where: X = The number of Warrant Shares to be issued to the Holder
Y = The number of Warrant Shares purchasable pursuant to this
Warrant
A = The Fair Market Value of one Warrant Share as of the
Conversion Date
B = The Exercise Price
(b) Method of Exercise. The Conversion Right may be exercised by
------------------
an eligible Holder by the surrender of this Warrant at the Principal Executive
Office, together with a written statement (the "Conversion Statement"),
----------------------
specifying that the Holder intends to exercise the Conversion Right and
indicating the number of Warrant Shares to be acquired upon exercise of the
Conversion Right. Such conversion shall be effective upon the Company's receipt
of this Warrant, together with the Conversion Statement, or on such later date
as is specified in the Conversion Statement (the "Conversion Date") and, at the
---------------
Holder's election, may be made contingent upon the closing of the consummation
of the sale of Common Stock pursuant to a Registration. Certificates for the
Warrant Shares so acquired shall be delivered to the Holder within a reasonable
time, not exceeding fifteen (15) days after the Conversion Date. If applicable,
the Company shall, upon surrender of this Warrant for cancellation, deliver a
new Warrant evidencing the rights of the Holder to purchase the balance of the
Warrant Shares which Holder is entitled to purchase hereunder.
II.3 Fractional Shares. The Company shall not issue fractional shares of
-----------------
Common Stock
-4-
<PAGE>
or scrip representing fractional shares of Common Stock upon any exercise or
conversion of this Warrant. As to any fractional share of Common Stock which the
Holder would otherwise be entitled to purchase from the Company upon such
exercise or conversion, the Company shall purchase from the Holder such
fractional share at a price equal to an amount calculated by multiplying such
fractional share (calculated to the nearest 1/100th of a share) by the Fair
Market Value of a share of Common Stock on the date of the Notice of Exercise or
the Conversion Date, as applicable, as determined in good faith by the Company's
Board of Directors. Payment of such amount shall be made in cash or by check
payable to the order of the Holder at the time of delivery of any certificate or
certificates arising upon such exercise or conversion.
ARTICLE III
REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT
------------------------------------------------
III.1 Maintenance of Registration Book. The Company shall keep at the
--------------------------------
Principal Executive Office a register in which, subject to such reasonable
regulations as it may prescribe, it shall provide for the registration, transfer
and exchange of this Warrant. The Company and any Company agent may treat the
Person in whose name this Warrant is registered as the owner of this Warrant for
all purposes whatsoever and neither the Company nor any Company agent shall be
affected by any notice to the contrary.
III.2 Restrictions on Transfers.
-------------------------
(a) Compliance with Securities Act: Representations of Holder.
---------------------------------------------------------
The Holder, by acceptance hereof, represents and warrants to the Company that:
(i) This Warrant and the Common Stock to be issued upon
exercise hereof Stock are being acquired for investment, solely for the Holder's
own account, not as a nominee or agent for any other Person, and not with a view
to the resale or distribution of any part thereof;
(ii) The Holder believes it has received all the
information it considers necessary or appropriate for deciding whether to
acquire the Warrant. The Holder further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Warrant;
(iii) The Holder understands that the Warrant has not
been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of its representations as expressed herein; and
(iv) The Holder understands that the Warrant and the
Warrant Shares are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, the Holder represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the
-5-
<PAGE>
resale limitations imposed thereby and by the Act;
The Holder agrees that the Holder will not offer, sell or otherwise
dispose of this Warrant or any such shares of Common Stock except under
circumstances which will not result in a violation of the Securities Act. Upon
exercise of this Warrant, the Holder shall confirm in writing, by executing the
form attached as Exhibit "B" hereto, that the shares of Common Stock purchased
-----------
thereby are being acquired for investment solely for the Holder's own account
and not as a nominee for any other Person, and not with a view toward
distribution or resale.
(b) Certificate Legends. This Warrant and all shares of Common
-------------------
Stock issued upon exercise of this Warrant (unless Registered under the
Securities Act) shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legends required by applicable state
securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION
OF SUCH SECURITIES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATING THERETO, (ii) AN OPINION OF COUNSEL
FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION, OR (iv) OTHERWISE COMPLYING
WITH THE PROVISIONS OF ARTICLE III OF THE WARRANT UNDER WHICH THIS
SECURITY WAS ISSUED.
(c) Disposition of Warrant or Shares. With respect to any offer,
--------------------------------
sale or other disposition of this Warrant or any shares of Common Stock issued
upon exercise of this Warrant, the Holder or the Shareholder, as the case may
be, agrees to give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of the Holder's or
Shareholder's counsel, if reasonably requested by the Company, to the effect
that such offer, sale or other disposition may be effected without Registration
under the Securities Act or qualification under any applicable state securities
laws of this Warrant or such shares, as the case may be, and indicating whether
or not under the Securities Act certificates for this Warrant or such shares, as
the case may be, to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to insure
compliance with the Securities Act. Promptly upon receiving such written notice
and reasonably satisfactory opinion, if so requested, the Company, as promptly
as practicable, shall notify the Holder or the Shareholder, as the case may be,
that it may sell or otherwise dispose of this Warrant or such shares, as the
case may be, all in accordance with the terms of the notice delivered to the
Company. Each certificate representing this Warrant or the shares thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as to
the applicable restrictions on transferability in order to insure compliance
with the Securities Act, unless in the aforesaid reasonably satisfactory opinion
of counsel for the Holder or the Shareholder, as the case may be, such legend is
not necessary in order to insure compliance with the Securities Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
(d) Warrant Transfer Procedure. Transfer of this Warrant to a
--------------------------
third party,
-6-
<PAGE>
following compliance with the preceding subsections of this Section
3.2, shall be effected by execution of the Assignment Form attached hereto as
Exhibit "C", and surrender for registration of transfer of this Warrant at the
- ------- ---
Principal Executive Office, together with funds sufficient to pay any applicable
transfer tax. Upon receipt of the duly executed Assignment Form and the
necessary transfer tax funds, if any, the Company, at its expense, shall execute
and deliver, in the name of the designated transferee or transferees, one or
more new Warrants representing the right to purchase a like aggregate number of
shares of Common Stock. Any transferee of this Warrant that is not an Affiliate
shall not be eligible for the cashless exercise of this Warrant provided for in
Section 2 hereof.
(e) Termination of Restrictions. The restrictions imposed under
---------------------------
this Section 3.2 upon the transferability of the Warrant and the shares of
Common Stock acquired upon the exercise of this Warrant shall cease when (i) a
registration statement covering such securities becomes effective under the
Securities Act, (ii) the Company is presented with an opinion of counsel
reasonably satisfactory to the Company that such restrictions are no longer
required in order to insure compliance with the Securities Act or with a
Commission "no-action" letter stating that future transfers of such securities
by the transferor or the contemplated transferee would be exempt from
registration under the Securities Act, or (iii) such securities may be
transferred in accordance with Rule 144(k). When such restrictions terminate,
the Company shall, or shall instruct its transfer agent to, promptly, and
without expense to the Holder or the Shareholder, as the case may be, issue new
securities in the name of the Holder and/or the Shareholder, as the case may be,
not bearing the legends required under subsection (b) of this Section 3.2. In
addition, new securities shall be issued without such legends if such legends
may be properly removed under the terms of Rule 144(k).
III.3 Replacement. Upon receipt of evidence reasonably satisfactory to
-----------
the Company of the loss, theft, destruction or mutilation of this Warrant and
(i) in the case of any such loss theft or destruction, upon delivery of
indemnity reasonably satisfactory to the Company in form and amount, or (ii) in
the case of any such mutilation, upon surrender of such Warrant for cancellation
at the Principal Executive Office, the Company, at its expense, shall execute
and deliver, in lieu thereof, a new Warrant.
ARTICLE IV
ANTIDILUTION PROVISIONS
-----------------------
IV.1 Reorganization, Reclassification or Recapitalization of the Company.
-------------------------------------------------------------------
In case of (1) a capital reorganization, reclassification or recapitalization of
the Company's capital stock (other than in the cases referred to in Section 4.3
hereof), (2) the Company's consolidation or merger with or into another
corporation in which the Company is not the surviving entity, or a reverse
triangular merger in which the Company is the surviving entity but the shares of
the Company's capital stock outstanding immediately prior to the merger are
converted, by virtue of the merger, into other property, whether in the form of
securities, cash or otherwise, or (3) the sale or transfer of the Company's
property as an entirety or substantially as an entirety, then, as part of such
reorganization, reorganization, recapitalization, merger, consolidation, sale or
transfer, lawful provision shall be made so that there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof (in lieu of
or in addition to the number of shares of Common Stock theretofore deliverable,
as appropriate), and without payment of any additional consideration, the number
of shares of stock or other securities or property to which the holder of the
number of shares of Common Stock which
-7-
<PAGE>
would otherwise have been deliverable upon the exercise of this Warrant or any
portion thereof at the time of such reorganization, reclassification,
recapitalization, consolidation, merger, sale or transfer would have been
entitled to receive in such reorganization, reclassification, recapitalization,
consolidation, merger, sale or transfer. This Section 4.1 shall apply to
successive reorganizations, reclassifications, recapitalizations,
consolidations, mergers, sales and transfers and to the stock or securities of
any other corporation that are at the time receivable upon the exercise of this
Warrant. If the per-share consideration payable to the Holder for shares of
Common Stock in connection with any transaction described in this Section 4.1 is
in a form other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's Board of
Directors.
IV.2 Splits and Combinations. If the Company at any time subdivides any
-----------------------
of its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely if the outstanding shares of Common
Stock are combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased. Upon
any adjustment of the Exercise Price under this Section 4.2, the number of
shares of Common Stock issuable upon exercise of this Warrant shall equal the
number of shares determined by dividing (i) the aggregate Exercise Price payable
for the purchase of all shares issuable upon exercise of this Warrant
immediately prior to such adjustment by (ii) the Exercise Price per share in
effect immediately after such adjustment.
IV.3 Reclassification. If the Company changes any of the securities as to
----------------
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted.
IV.4 Dividends and Distribution. If the Company declares a dividend or
--------------------------
other distribution on the Common Stock or if a dividend or other distribution on
the Common Stock occurs pursuant to the Articles of Incorporation (other than a
cash dividend or distribution), then, as part of such dividend or distribution,
lawful provision shall be made so that there shall thereafter be deliverable
upon the exercise of this Warrant or any portion thereof, in addition to the
number of shares of Common Stock receivable thereupon and without payment of any
additional consideration, the amount of the dividend or other distribution to
which the holder of the number of shares of Common Stock obtained upon exercise
hereof would have been entitled to receive had the exercise occurred as of the
record date for such dividend or distribution.
IV.5 Liquidation; Dissolution. If the Company shall dissolve, liquidate
------------------------
or wind up its affairs, the Holder shall have the right, but not the obligation,
to exercise this Warrant effective as of the date of such dissolution,
liquidation or winding up. If any such dissolution, liquidation or winding up
results in any distribution to the Holder in excess of the aggregate Exercise
Price for the shares of Common Stock for which this Warrant is exercised, then
the Holder may, at its option, exercise this Warrant without making payment of
such aggregate Exercise Price and, in such case, the Company shall, upon
distribution to the Holder, consider such aggregate Exercise Price to have been
paid in full, and in making such settlement to the Holder, shall deduct an
amount equal to such
-8-
<PAGE>
aggregate Exercise Price from the amount payable to the Holder.
IV.6 Other Dilutive Events. If any event occurs as to which the other
---------------------
provisions of this Article IV are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof,
then, in each such case, the Company shall appoint a firm of independent public
accountants of recognized national standing (which may be the Company's regular
auditors) which shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Article
IV, necessary to preserve, without dilution, the purchase rights represented by
this Warrant. Upon receipt of such opinion, the Company shall promptly mail a
copy thereof to the Holder and shall make the adjustments described therein.
IV.7 Certificates and Notices.
------------------------
(a) Adjustment Certificate. Upon any adjustment of the Exercise Price
----------------------
and/or the number of shares of Common Stock purchasable upon exercise of this
Warrant, a certificate, signed by (i) the Company's President and Chief
Financial Officer, or (ii) any independent firm of certified public accountants
of recognized national standing the Company selects at its own expense, setting
forth in reasonable detail the events requiring the adjustment and the method by
which such adjustment was calculated, shall be mailed to the Holder and shall
specify the adjusted Exercise Price and the number of shares of Common Stock
purchasable upon exercise of the Warrant after giving effect to the adjustment.
(b) Extraordinary Corporate Events. If the Company, after the date
------------------------------
hereof, proposes to effect (i) any transaction described in Sections 4.1 or 4.3
hereof, (ii) a liquidation, dissolution or winding up of the Company described
in Section 4.5 hereof, or (iii) any payment of a dividend or distribution with
respect to Common Stock, then, in each such case, the Company shall mail to the
Holder a notice describing such proposed action and specifying the date on which
the Company's books shall close, or a record shall be taken, for determining the
holders of Common Stock, entitled to participate in such action, or the date on
which such reorganization, reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution or winding up shall take place or commence,
as the case may be, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to receive securities and/or other
property deliverable upon such action, if any such date is to be fixed. Such
notice shall be mailed to the Holder at least fifteen (15) days prior to the
record date for such action in the case of any action described in clause (i) or
clause (iii) above, and in the case of any action described in clause (ii)
above, at least fifteen (15) days prior to the date on which the action
described is to take place and at least fifteen (15) days prior to the record
date for determining holders of Common Stock entitled to receive securities
and/or other property in connection with such action.
IV.8 No Impairment. The Company shall not, by amendment of the Articles
-------------
of Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but shall
at all times in good faith assist in the carrying out of all the provisions of
this Article IV and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
-9-
<PAGE>
IV.9 Application. Except as otherwise provide herein, all sections of
-----------
this Article IV are intended to operate independently of one another. If an
event occurs that requires the application of more than one section, all
applicable sections shall be given independent effect.
ARTICLE V
COVENANTS OF COMPANY
--------------------
V.1 Covenants. The Company covenants that:
---------
(a) Share Limits. The Company will not take any action which would
------------
result in any adjustment of the Exercise Price if the total number of shares of
Common Stock issuable after such action upon exercise of this Warrant, together
with all shares of Common Stock then outstanding and all shares of Common Stock
issuable upon exercise of options or warrants to acquire such shares and upon
conversion of instruments which are convertible into such shares, would exceed
the total number of shares of Common Stock then authorized under the Articles of
Incorporation;
(b) Authorized Shares. The Company will at all times have authorized,
-----------------
and reserved for the purpose of issue or transfer upon exercise of the rights
evidenced by this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant; and
(c) Fully Paid Shares. The Company will take all actions necessary or
-----------------
appropriate to validly and legally issue fully paid and non-assessable shares of
Common Stock upon exercise of this Warrant. All such shares will be free from
all taxes, liens and charges with respect to the issuance thereof, other than
any stock transfer taxes in respect to any transfer occurring contemporaneously
with such issuance.
ARTICLE VI
MISCELLANEOUS
-------------
VI.1 Holder Not a Shareholder. Prior to the exercise of this Warrant as
------------------------
hereinbefore provided, the Holder shall not be entitled to any of the rights of
a shareholder of the Company including, without limitation, the right as a
shareholder (i) to vote on or consent to any proposed action of the Company or
(ii) except as provided herein, to receive (a) dividends or any other
distributions made to shareholders, (b) notice of or attend any meetings of
shareholders of the Company, or (c) notice of any other proceedings of the
Company.
VI.2 Nonwaiver. No course of dealing or any delay or failure to exercise
---------
any right hereunder shall operate as a waiver of such right. No single or
partial waiver of any provision of this Warrant or of any breach or default
hereunder or of any right or remedy shall operate as a waiver of any other
provision, breach, default right or remedy or of the same provision, breach,
default, right or remedy on a future occasion.
-10-
<PAGE>
VI.3 Notices. Any notice, demand or delivery to be made pursuant to this
-------
Warrant will be sufficiently given or made if sent by first class mail, postage
prepaid, addressed to (a) the Holder and the Shareholders at their last known
addresses appearing on the books of the Company maintained for such purpose or
(b) the Company at its Principal Executive Office. The Holder, the Shareholders
and the Company may each designate a different address by notice to the other
pursuant to this Section 6.3. A notice shall be deemed effective upon the
earlier of (i) receipt or (ii) the third day after mailing in accordance with
the terms of this Section 6.3.
VI.4 Successors and Assigns. This Warrant shall be binding upon, the
----------------------
Company and any Person succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company with respect to the shares of Common Stock issuable
upon exercise of this Warrant shall survive the exercise, expiration or
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the Holder, each Shareholder and their
respective successors and assigns.
VI.5 Modification; Severability.
--------------------------
(a) If, in any action before any court or agency legally empowered
to enforce any term, any term is found to be unenforceable, then such term shall
be deemed modified to the extent necessary to make it enforceable by such court
or agency.
(b) If any term is not curable as set forth in subsection (a)
above, the unenforceability of such term shall not affect the other provisions
of this Warrant but this Warrant shall be construed as if such unenforceable
term had never been contained herein.
VI.6 Integration. This Warrant replaces all prior and contemporaneous
-----------
agreements and supersedes all prior and contemporaneous negotiations between the
parties with respect to the transactions contemplated herein and constitutes the
entire agreement of the parties with respect to the transactions contemplated
herein.
VI.7 Amendment. This Warrant may not be modified or amended except by
---------
written agreement of the Company, the Holder and the Shareholder(s), if any.
VI.8 Headings. The headings of the Articles and Sections of this Warrant
--------
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
VI.9 Governing Law. This Warrant shall be governed by, and construed in
-------------
accordance with, the laws of the State of California applicable to contracts
entered into and to be performed wholly within California by California
residents.
-11-
<PAGE>
IN WITNESS WHEREOF, each of the Company and the Holder have caused this
Warrant to be executed by its duly authorized representative as of the date
first written above.
THE COMPANY:
SOLOPOINT, INC.
By:
------------------------------------
Arthur G. Chang
President and Chief Executive Officer
THE HOLDER:
----------------------------------------
(Signature)
----------------------------------------
(Print Name)
Address:
-------------------------------
-------------------------------
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<PAGE>
SCHEDULE OF EXHIBITS
--------------------
EXHIBIT "A" - Notice of Exercise (Section 2.1)
EXHIBIT "B" - Investment Representation Certificate (Section 3.2(a))
EXHIBIT "C" - Assignment Form (Section 3.2(d))
<PAGE>
EXHIBIT "A"
-----------
NOTICE OF EXERCISE FORM
-----------------------
(To be executed only upon partial or full exercise of the within Warrant)
The undersigned registered Holder of the within Warrant hereby irrevocably
exercises the within Warrant for and purchases ______ shares of Common Stock of
SoloPoint, Inc. and herewith makes payment therefor in the amount of
$__________, all at the price and on the terms and conditions specified in the
within Warrant and requests that a certificate (or certificates in denominations
of shares) for the shares of Common Stock of SoloPoint, Inc. hereby purchased be
issued in the name of and delivered to the undersigned. and, if such shares of
Common Stock shall not include all the shares of Common Stock issuable as
provided in the within Warrant, that a new Warrant of like tenor for the number
of shares of Common Stock of SoloPoint, Inc. not being purchased hereunder be
issued in the name of and delivered to the undersigned.
Dated: __________, _____
Signature Guaranteed
----------------------------------------
----------------------------------------
By:
-------------------------------------
(Signature of Registered Holder)
Title:
----------------------------------
NOTICE: The signature to this Notice of Exercise must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
The signature to this Notice of Exercise must be guaranteed by a
commercial bank or trust company in the United States or a member firm
of the New York Stock Exchange.
<PAGE>
EXHIBIT "B"
-----------
INVESTMENT REPRESENTATION CERTIFICATE
-------------------------------------
Purchaser: ___________________________
Company: SoloPoint, Inc.
Security: Common Stock
Amount: ___________________________
Date: August ___, 1999
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act");
(b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefor, which exemption depends upon, among other things, the bona fide nature
of the Purchaser's investment intent as expressed herein. In this connection,
the Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future;
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, the Purchaser
understands that the Company is under no obligation to register the Securities
other than as set forth in that certain Common Stock Subscription Agreement,
dated of even date herewith, by and between the Company and the Purchaser. In
addition, the Purchaser understands that the certificate evidencing the
Securities will be imprinted with the legend referred to in the Warrant under
which the Securities are being purchased;
(d) The Purchaser is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than two (2) years after the party has
purchased and paid for the securities to be sold; (iii) the sale
<PAGE>
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three-month period not exceeding the specified limitations stated therein;
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market upon which to make such a sale then exists,
the Company may not be satisfying the current public information requirements of
Rule 144, and that, in such event, the Purchaser may be precluded from selling
the Securities under Rule 144 even if the two-year minimum holding period had
been satisfied; and
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Date: ____________, _______
PURCHASER:
-------------------------
(Signature)
-------------------------
(Print Name)
- 2 -
<PAGE>
EXHIBIT "C"
-----------
ASSIGNMENT FORM
---------------
(To be executed only upon the assignment of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the within Warrant
hereby sells, assigns and transfers unto ______________________________, whose
address is _________________________________________ all of the rights of the
undersigned under, with respect to shares of Common Stock of SoloPoint, Inc.
and, if such shares of Common Stock shall not include all the shares of Common
Stock issuable as provided in the within Warrant, that a new Warrant of like
tenor for the number of shares of Common Stock of SoloPoint, Inc. not being
transferred hereunder be issued in the name of and delivered to the undersigned,
and does hereby irrevocably constitute and appoint ____________________ attorney
to register such transfer on the books of SoloPoint, Inc. maintained for the
purpose, with full power of substitution in the premises.
Dated: __________, ________
Signature Guaranteed
---------------------------------------
---------------------------------------
By:
-----------------------------------
(Signature of Registered Holder)
Title:
---------------------------------
NOTICE: The signature to this Agreement must correspond with the name upon the
face of the within Warrant in every particular, without alteration or
enlargement or any change whatever.
The signature to this Notice of Assignment must be guaranteed by a
commercial bank or trust company in the United States or a member firm
of the New York Stock Exchange.
<PAGE>
EXHIBIT C
ESCROW AGREEMENT
EXHIBITS
<PAGE>
ESCROW AGREEMENT
Escrow Agreement dated as of August 10, 1999 by and among SoloPoint, Inc.
a California corporation ("SoloPoint"), each of the persons listed on Exhibit D
---------
annexed hereto (each an "Investor" and collectively, the "Investors") and Chase
Manhattan Bank and Trust Company, National Association (the "Escrow Agent").
WITNESSETH
WHEREAS, pursuant to a certain Common Stock Subscription Agreement (the
"Subscription Agreement"), dated of even date herewith, by and between SoloPoint
and the Investors (i) SoloPoint is required to deposit in escrow, to be held by
the Escrow Agent subject to the terms and conditions set forth herein, certain
stock certificates representing the shares of SoloPoint Common Stock being
issued and sold to the Investors, and (ii) the Investors are required to deposit
in escrow, to be held by the Escrow Agent subject to the terms and conditions
set forth herein, certain funds and debt instruments, in each case pending the
outcome of SoloPoint's Nasdaq Stock Market ("Nasdaq") delisting hearing (the
"Hearing") scheduled for August 12, 1999.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Escrow Agent. SoloPoint, on the one hand, and the
---------------------------
Investors, on the other hand, do hereby appoint and designate the Escrow Agent
as escrow agent for the purposes set forth herein, and the Escrow Agent does
hereby accept such appointment under the terms and conditions set forth herein.
2. Establishment of Escrow Fund. Simultaneously with the execution of
----------------------------
this Escrow Agreement, (a) the Investors are depositing with the Escrow Agent
(i) cash in the amount of $2,900,000.00 (less the amount of any nominal
transfer and transaction fees and the amount of accrued and unpaid interest on
the debt interests referred to in clause (b)), and (ii) debt instruments in the
aggregate principal amount of $250,000 together with instructions to the Escrow
Agent that such debt instruments be delivered to the party that is the recipient
of the Escrow Fund upon disposition thereof, and (b) SoloPoint is depositing
with the Escrow Agent stock certificates representing an aggregate 2,904,829
shares of its Common Stock, which certificates have been issued to the Investors
in the denominations set forth in Exhibit D. The Escrow Agent shall hold,
---------
subject to the terms and conditions hereof, such cash, debt instruments and
stock certificates and shall make such investments and reinvestments of the
escrowed cash as may be permitted pursuant to Section 2 hereof (which, together
with the income from such investments, are hereinafter referred to as the
"Escrow Fund").
<PAGE>
3. Investment of Escrow Fund. During the term of this Escrow Agreement,
-------------------------
the Escrow Fund shall be invested and reinvested by the Escrow Agent, in the
qualified investment indicated below (check one):
[ ] One or more portfolios offered by Vista Fund Distributors, Inc., for
which affiliates of Chase Manhattan Bank and Trust Company, N.A.
provide investment advisory and other services for a fee as
described in the prospectus for such fund which has been provided to
SoloPoint and the Investors;
[ ] Time or Demand deposit;
[ ] Such other investments as the parties may mutually agree upon.
The Escrow Agent shall have the right to liquidate any investments held in
order to provide funds necessary to make required payments under this Escrow
Agreement. The Escrow Agent in its capacity as escrow agent hereunder shall not
have any liability for any loss sustained as a result of any investment prior to
its maturity of for the failure of the parties to give the Escrow Agent
instructions to invest or reinvest the Escrow Fund or any earnings thereon.
4. Disposition and Termination.
---------------------------
(a) If the Hearing shall not result in a decision by the Nasdaq to
immediatedelist SoloPoint, and SoloPoint shall provide the Escrow Agent with
written proof to that effect, then the Escrow Agent shall immediately deliver
(i) the Escrow Fund and the debt instruments to the Company, and (ii) the
escrowed stock certificates to the Investors at their addresses listed in
Exhibit D. Upon such delivery by the Escrow Agent, this Escrow Agreement shall
- ---------
terminate, subject to the provisions of Paragraph 5(f) hereunder, which
paragraph shall survive such termination.
(b) If, however, the Hearing shall result in a decision by the Nasdaq to
immediately delist SoloPoint, and the Investors or SoloPoint shall provide the
Escrow Agent with written proof to that effect, then the Escrow Agent shall
immediately deliver (i) the Escrow Fund to the Investors in the dollar amounts
set forth next to their respective names in Exhibit D, (ii) the debt instruments
---------
to InveStar Capital, Inc., and (iii) the escrowed stock certificates to the
Company. Upon such delivery by the Escrow Agent, this Escrow Agreement shall
terminate, subject to the provisions of Paragraph 5(f) hereunder, which
paragraph shall survive such termination.
(c) If no decision with respect to the continued listing of SoloPoint on
Nasdaq shall have been made by Septemebr 15, 1999, then the Escrow Agent shall
be required, without further notice and without the need for further
instructions from any party, to dispose of the Escrow Fund and other property
held by it in escrow in the manner provided in clause (b) of this Section 4.
-2-
<PAGE>
5. Miscellaneous.
-------------
(a) The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein.
(b) The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction or request furnished
to it hereunder and believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall be under no
duty to inquire into or investigate the validity, accuracy or content of any
such document. The Escrow Agent shall have no duty to solicit any payments that
may be due it hereunder.
(c) The Escrow Agent shall not be liable for any action taken or omitted
by it in good faith unless a court of competent jurisdiction determines that the
Escrow Agent's willful misconduct was the primary cause of any loss to SoloPoint
or any Investor. The Escrow Agent may consult with counsel of its own choice and
shall have full and complete authorization and protection for any action taken
or omitted by it hereunder in good faith and in accordance with the opinion of
such counsel.
(d) The Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving notice in writing of such resignation specifying
a date when such resignation shall take effect. The Escrow Agent shall have the
right to withhold an amount equal to the amount due and owing to the Escrow
Agent, plus any costs and expenses the Escrow Agent shall reasonably believe may
be incurred by the Escrow Agent in connection with the termination of the Escrow
Agreement.
(e) SoloPoint hereby agrees to (i) pay the Escrow Agent upon execution
of this Agreement its fee as set forth on Exhibit A hereto, for the services to
---------
be rendered hereunder, and (ii) pay or reimburse the Escrow Agent upon request
for all expenses, disbursement, and advances, including reasonable attorney's
fees, incurred or made by it in connection with the preparation, execution,
performance, delivery modification and termination of this agreement.
(f) SoloPoint, on the one hand, and the Investors, on the other hand,
hereby agree to jointly and severally indemnify the Escrow Agent for, and hold
it harmless against any loss, liability or expense arising out of or in
connection with this Agreement and carrying out its duties hereunder, including
the costs and expenses of defending itself against any claim of liability,
except in those cases where the Escrow Agent has been guilty of gross negligence
or willful misconduct. Anything in this agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action.
(g) Each party hereto, except the Escrow Agent, shall provide the Escrow
Agent with their Tax Identification Number (TIN) as assigned by the Internal
Revenue Service. All interest or other income earned under the Escrow Agreement
shall be allocated and paid as provided
-3-
<PAGE>
herein and reported by the recipient to the Internal Revenue Service as having
been so allocated and paid.
(h) The duties and responsibilities of the Escrow Agent hereunder shall
be determined solely by the express provisions of this Escrow Agreement, and no
other or further duties or responsibilities shall be implied. The Escrow Agent
shall not have any liability under, nor duty to inquire into the terms and
provisions of any agreement or instructions, other than outlined on the
Agreement.
(i) All notices and communications hereunder shall be in writing and
shall be deemed to be duly given if sent by first class mail to the address as
follows:
If to the Escrow Agent, to:
Chase Manhattan Bank and Trust Company, National Association
101 California Street, Suite #2725
San Francisco, CA 94111
Attention: James Nagy, AVP
Phone: (415) 954-9507
Fax: (415) 693-8850
If to SoloPoint, to:
SoloPoint, Inc.
130B Knowles Drive
Los Gatos, California 95032
Attention: Arthur G. Chang
Phone: (408) 364-8850
Fax: (408) 364-1724
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Martin J. Waters, Esq.
Phone: (650) 320-4808
Fax: (650) 493-6811
If to the Investors, to:
InveStar Capital, Inc.
12th Floor, 333 Keelung Road, Section 1, Room 1201, Taipei, Taiwan ROC
-4-
<PAGE>
With a copy to:
VentureStar, Inc.
1737 North First Street, Suite 650
San Jose, California 95112
Attention: Dorothy Wu
Phone: (408) 573-1066
Fax: (408) 573-1060
Hui-Chuan Liu
8th Floor, 9, Lane 311, Alley 43, Section 2
Hoping East Road
Taipei, Taiwan R.O.C.
Phone: 886-2-2701-2937
With a copy to:
Mr. Joe Liu
1466 Stareel Lane
San Jose, California 95131
Phone: 510-498-1189
Fax: 510 440 8488
-5-
<PAGE>
The Bass Trust
PO Box 1499
3788 Ahonui Place
Hanalei, Hawaii 96714
Attention: Charlie Bass
Carsten 1978 Trust, as Amended, UTD 7-12-78
Jack C. Carsten TTEE
P.O. Box 704
Los Altos, California 94023
Attention: Jack Carsten
Murali & Mythill Narayanan
3908 Hobson Gate Court
Naperville, IL 60540
Attention: Murali Narayanan
Jai Bhagat
106 Adderbury Court
Ridgeland, MS 39157
Attention: Jai Bhagat
Edward M. Esber, Jr.
13430 Country Way
Los Altos Hills, CA 94022
Attention: Edward M. Esber, Jr.
Storm Ventures Fund I, LLC
2800 Sand Hill Road
Menlo Park, CA 94025-7055
Tae Hea & Rosemarie Nahm
235 E. Edith
Los Altos, CA 94022-3036
or at such other address as any of the above may have furnished to the
other parties in writing by registered mail, return receipt requested and any
such notice or communication given in the manner specified in this Paragraph
5(i) shall be deemed to have been given on the date received by the Escrow
Agent. In the event that the Escrow Agent, in its sole discretion, shall
determine that an emergency exists, the Escrow Agent may use such other means of
communications as the Escrow Agent deems advisable.
-6-
<PAGE>
(j) In the event funds transfer instructions are given (other than in
writing at the time of execution of the Agreement), whether in writing, by
telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the person or persons designated on
Exhibit B hereto, and the Escrow Agent may rely upon the confirmations of anyone
- ---------
purporting to be the person or persons so designated. The persons and telephone
numbers for callbacks may be changed only in writing actually received and
acknowledged by the Escrow Agent. The parties to this Agreement acknowledge
that such security procedure is commercially reasonable.
(k) It is understood that the Escrow Agent and the beneficiary's bank
in any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto to identify
(i) the beneficiary, (ii) the beneficiary's bank, or (iii) an order it executes
using any such identifying number, even where its use may result in a person
other than the beneficiary being paid, or the transfer of funds to a bank other
than the beneficiary's bank, or an intermediary bank designated.
(l) The provisions of this Escrow Agreement may be waived, altered,
amended or supplemented, in whole or in part, only in writing signed by all of
the parties hereto.
(m) Neither this Escrow Agreement nor any right or interest hereunder
may be assigned in whole or in part by any party without the prior consent of
the other parties.
(n) This Escrow Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(o) The Escrow Agent shall not incur any liability for following the
instructions herein contained or expressly provided for, or written instructions
given by the parties hereto.
(p) In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions, claims or demands from
any party hereto which, in its opinion, conflict with any of the provisions of
this Agreement, it shall be entitled to refrain from taking any action and its
sole obligation shall be to keep safely all property held in escrow until it
shall be directed otherwise in writing by all of the other parties hereto or by
a final order or judgment of a court of competent jurisdiction.
(q) This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to its
principles of conflicts of laws and any action brought hereunder shall be
brought in the courts of the State of California. Each party hereto irrevocably
waives any objection on the grounds of venue, forum non-convenience or any
similar grounds and irrevocably consents to service or process by mail or in any
other manner permitted by applicable law and consents to the jurisdiction of
said courts.
-7-
<PAGE>
(r) Any company into which the Escrow Agent may be merged or converted
or with which it may be consolidated or any company resulting from any merger,
conversion or consolidation to which it shall be a party or any company to which
the Escrow Agent may sell or transfer all or substantially all of its
escrow/custody business, provided such company shall be eligible to serve as
Escrow Agent hereunder, shall be the successor hereunder to the Escrow Agent
without the execution or filing of any paper or any further act.
(s) Each of SoloPoint and the Investors shall present an Authorized
Officer's Certificate with specimen signatures to the Escrow Agent upon the
execution hereof (Exhibit C attached).
---------
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
on the date and year first above written.
SoloPoint, Inc.
By:_________________
Name:
Chase Manhattan Bank and Trust Company, National
Association
By:____________________________________
Investors:
---------
_______________________________________
(Signature)
______________________________
(Printed Name)
-9-
<PAGE>
Exhibit A
Fees
----
ESCROW AGENT FEE: $3,000.00
- -----------------
Per annum or any part thereof without proration for partial years.
Includes review and negotiation of Escrow Agent Agreement; establishment of
records, procedures and controls, and normal Escrow Agent duties. Payable upon
establishment of Agreement.
LEGAL FEE: (if applicable): AT COST
- ----------
INVESTMENTS (if applicable):
- -----------
Chase makes available many attractive mutual fund alternatives with
competitive performance records, including funds rated "AAA" by Standard &
Poor's and Moody's. Of particular interest to trust customers are several funds
offered by prospectus only through the Vista Family of Mutual Funds. Chase
receives compensation from the fund manager of these mutual funds in connection
with such investments. Additional information in relation to such compensation
is available upon request.
<TABLE>
<CAPTION>
Cash Escrow-Interest paid on average monthly balance
One month LIBOR less 50 basis points NO CHARGE
<S> <C>
ACTIVITY FEES:
- -------------------------------------------------------------------
Wire Transfers, each $25.00
Checks, each $10.00
Claims processing, each $25.00
Tax Reporting, per form $10.00
</TABLE>
Direct out-of-pocket expenses (legal expenses, travel, and other
professional services) will be charged at the actual cost thereof. Indirect
expenses such as stationery items, checks, envelopes, etc., and disbursements
such as postage and telephone will be charged at 6% of annual administration
fees.
<PAGE>
Additional Terms
- ----------------
. Our proposed fees are based upon our review and acceptance of the appropriate
documentation and standard credit approval by Global Trust Services Credit.
. An incumbency certificate setting forth names, titles and specimen signatures
must be furnished to us with respect to each person signing or giving us
instructions on behalf of each corporate party to the Agreement.
. "Out-of-pocket expenses" includes, but is not limited to legal expense, CUSIP
charges, postage, stationery, travel and delivery expenses. If the Escrow
agent is required to assume duties or responsibilities not included in this
schedule, additional reasonable fees will be assessed based upon the nature
of the service and the responsibility involved.
. Any legal counsel fees incurred will be charged at cost.
. A Funds Transfer Agreement in substantially the same form as previously
provided must be executed. Alternatively, language from this Agreement may be
incorporated in the Governing documents.
THIS FEE PROPOSAL IS CONFIDENTIAL AND MAY NOT BE REVEALED TO
ANY PARTY
OUTSIDE THE WORKING GROUP IN THE TRANSACTION.
-2-
<PAGE>
Exhibit B
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Funds Transfer Instructions
-----------------------------------------------------------
If to SoloPoint:
Name: Telephone Number:
- ---- ----------------
1. Arthur G. Chang (408) 364-0262
2. Ronald J. Tchorzewski (408) 341-8402
3. ______________________ _______________________________
If to Investors:
Name: Telephone Number:
- ---- ----------------
1. ______________________ _______________________________
2. ______________________ _______________________________
3. ______________________ _______________________________
Telephone callbacks shall be made to each of SoloPoint and the Investors if
joint instructions are required pursuant to the Agreement.
-3-
<PAGE>
Exhibit C
SoloPoint, Inc.
Date: August __, 1999
Authorized Company Representatives
-----------------------------------
<TABLE>
<CAPTION>
Printed Name Title Signature
- ----------------------------- ------------------------------ ------------------------------------------
<S> <C> <C>
Arthur G. Chang President & CEO
- ----------------------------- ------------------------------ ------------------------------------------
Ronald J. Tchorzewski Chief Financial Officer
- ----------------------------- ------------------------------ ------------------------------------------
- ----------------------------- ------------------------------ ------------------------------------------
- ----------------------------- ------------------------------ ------------------------------------------
- ----------------------------- ------------------------------ ------------------------------------------
</TABLE>
The above designation of an "Authorized Company Representative" on behalf
of the Company may be amended or rescinded at any time hereafter by a
replacement Certificate.
<TABLE>
<CAPTION>
<S> <C>
Dated: ____________________________
By ____________________________
Name: ____________________________
Title: ____________________________
</TABLE>
<PAGE>
Investors (as a group)
Date: August __, 1999
Authorized Company Representatives
----------------------------------
<TABLE>
<CAPTION>
Printed Name Title Signature
- ----------------------------- ------------------------------ ------------------------------------------
<S> <C> <C>
- ----------------------------- ------------------------------ ------------------------------------------
- ----------------------------- ------------------------------ ------------------------------------------
- ----------------------------- ------------------------------ ------------------------------------------
- ----------------------------- ------------------------------ ------------------------------------------
- ----------------------------- ------------------------------ ------------------------------------------
</TABLE>
The above designation of an "Authorized Company Representative" on behalf
of the Company may be amended or rescinded at any time hereafter by a
replacement Certificate.
<TABLE>
<CAPTION>
<S> <C>
Dated: _______________________________
By ______________________________
Name: ______________________________
Title: ______________________________
</TABLE>
-2-
<PAGE>
Exhibit D
Schedule of Investors
<TABLE>
<CAPTION>
Name and Address Shares Purchased Purchase Price
- ------------------------------------------------------ ---------------- --------------
<S> <C> <C>
InveStar Burgeon Venture Capital, Inc. 512,316 $1.0844
12F, 333 Keelung Road, Section 1
Room 1201
Taipei, Taiwan R.O.C.
InveStar Dayspring Venture Capital, Inc. 768,474 $1.0844
12F, 333 Keelung Road, Section 1
Room 1201
Taipei, Taiwan R.O.C.
InveStar Excelsus Venture Capital (Int'l), Inc. LDC 768,474 $1.0844
12F, 333 Keelung Road, Section 1
Room 1201
Taipei, Taiwan R.O.C.
Forefront Venture Partners L.P. 256,158 $1.0844
1737 N. First Street, Suite 650
San Jose, CA 95112
Hui-Chuan Liu 276,650 $1.0844
8th Floor, 9, Lane 311, Alley 43, Section 2
Hoping East Road
Taipei, Taiwan R.O.C.
The Bass Trust 92,217 $1.0844
PO Box 1499
3788 Ahonui Place
Hanalei, Hawaii 96714
</TABLE>
-3-
<PAGE>
Exhibit D
(Continued)
Schedule of Investors
<TABLE>
<CAPTION>
Name and Address Shares Purchased Purchase Price
- ---------------------------------------------- ---------------- --------------
<S> <C> <C>
Carsten 1978 Trust, as Amended, UTD 7-12-78 46,108 $1.0844
Jack C. Carsten TTEE
P.O. Box 704
Los Altos, California 94023
Attention: Jack Carsten
Murali & Mythill Narayanan 13,832 $1.0844
3908 Hobson Gate Court
Naperville, IL 60540
Jai Bhagat 13,832 $1.0844
106 Adderbury Court
Ridgeland, MS 39157
Edward M. Esber, Jr. 18,443 $1.0844
13430 Country Way
Los Altos Hills, CA 94022
Storm Ventures Fund I, LLC 110,660 $1.0844
2800 Sand Hill Road
Menlo Park, CA 94025-7055
Tae Hea & Rosemarie Nahm 27,665 $1.0844
235 E. Edith
Los Altos, CA 94022-3036
</TABLE>
-4-
<PAGE>
EXHIBIT D
SOLOPOINT, INC.
INVESTOR SUITABILITY QUESTIONNAIRE
______________________
(ALL INFORMATION FURNISHED IN COMPLETING THIS
QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY)
SoloPoint, Inc. (the "Company") will use the responses to this
questionnaire to qualify prospective investors for purposes of federal and state
securities laws.
Please complete, sign, date and return one copy of this questionnaire
-------- ---- ---- ------
as soon as possible to Martin J. Waters at Wilson, Sonsini, Goodrich & Rosati,
650 Page Mill Road, Palo Alto, CA 94304-1050.
If the answer to any question below is "none" or "not applicable",
please so indicate.
Your answers will be kept confidential at all times. However, by
signing this questionnaire, you agree that the Company may present this
questionnaire to such parties as it deems appropriate to establish the
availability of exemptions from registration under state and federal security
laws.
I. INDIVIDUAL INVESTORS
--------------------
1. PERSONAL
--------
Name
------------------------------------------------------------------------
(Exact name as it should appear on stock certificate)
Residence Address
-----------------------------------------------------------
Home Telephone
--------------------------------------------------------------
Date of Birth
---------------------------------------------------------------
Social Security Number
------------------------------------------------------
2. BUSINESS
--------
Occupation
------------------------------------------------------------------
Number of Years
-------------------------------------------------------------
EXHIBITS
<PAGE>
Present Employer
------------------------------------------------------------
Position/Title
--------------------------------------------------------------
Business Address
------------------------------------------------------------
Business Telephone
----------------------------------------------------------
3. RESIDENCE INFORMATION
---------------------
(a) Set forth in the space provided below the state(s) in which you have
maintained your principal residence during the past three years and the
dates during which you resided in each state.
_____________________________________________________________________
_____________________________________________________________________
(b) Are you registered to vote in, or do you have a driver's license issued
by, or do you maintain a residence in any other state? If yes, in which
state(s)?
_____________________________________________________________________
4. INCOME
------
(a) Do you reasonably expect either your own income from all sources
------
during the current year to exceed $200,000 or the joint income of you
--
and your spouse (if married) from all sources during the current year
to exceed $300,000?
Yes _____ No _____ If not, please specify
amount ______________
(b) What percentage of your income as shown above is anticipated to be
derived from sources other than salary?
_____________________________________________________________________
(c) Was either your yearly income from all sources during each of the last
------
two years in excess of $200,000 or was the joint income of you and
--
your spouse (if married) from all sources during each of such years in
excess of $300,000?
Yes _____ No _____
If no, please specify amount for:
Last Year:___________
Year Before Last:___________
EXHIBITS
<PAGE>
5. NET WORTH
---------
Will your net worth as of the date you purchase the securities offered,
together with the net worth of your spouse, be in excess of $1,000,000?
Yes _____ No _____ If not, please specify
amount _______________
6. EDUCATION
---------
Please describe your educational background and degrees obtained, if any.
___________________________________________________________________________
___________________________________________________________________________
7. AFFILIATION
-----------
If you have any pre-existing personal or business relationship with the
Company or any of its officers, directors or controlling persons, please
describe the nature and duration of such relationship.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
8. BUSINESS AND FINANCIAL EXPERIENCE
---------------------------------
(a) Please describe in reasonable detail the nature and extent of your
business, financial and investment experience which you believe gives
you the capacity to evaluate the merits and risks of the proposed
investment and the capacity to protect your interests.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
EXHIBITS
<PAGE>
(b) Are you purchasing the securities offered for your own account and for
investment purposes only?
Yes _____ No _____
If no, please state for whom you are investing and/or the reason for
investing.
______________________________________________________________________
______________________________________________________________________
9. FINANCIAL ADVISORS
------------------
In evaluating this investment, will you use the services of any of the
following advisors? (If so, please identify, providing address and
telephone number.)
Accountant: ________________________________
________________________________
________________________________
Attorney: ________________________________
________________________________
________________________________
Other: ________________________________
________________________________
________________________________
PLEASE TURN TO PAGE 8 AND SIGN AND DATE THIS QUESTIONNAIRE
EXHIBITS
<PAGE>
II. NON-INDIVIDUAL INVESTORS
------------------------
(Please answer Part II only if the purchase is proposed to be undertaken by a
corporation, partnership or other entity.)
IF INVESTMENT WILL BE MADE BY MORE THAN ONE AFFILIATED ENTITY, PLEASE COMPLETE A
COPY OF THIS QUESTIONNAIRE FOR EACH ENTITY.
----
1. IDENTIFICATION
--------------
Name ________________________________________________________
(Exact name as it will appear on stock certificate)
Address of Principal
Place of Business _________________________________________
Jurisdiction of Formation
or Incorporation __________________________________________
Contact Person ______________________________________________
Telephone Number (____)
Type of Entity
(corporation, partner-
ship, trust, etc.) _________________________________________
Was entity formed for the purpose of this investment?
Yes _____ No _____
If the answer is yes, all shareholders, partners or other equity owners
must answer Part I of this Questionnaire. If the above answer is no,
please continue completing this form.
2. PROPOSED INVESTMENT
-------------------
Please indicate the amount of your proposed investment: $____________
Please state the investing entity's net worth at the time the securities
will be purchased: $_______________
3. BUSINESS
--------
Please check the appropriate box to indicate which of the following
accurately describes the nature of the business conducted by the investing
entity:
EXHIBITS
<PAGE>
[ ] a corporation, organization described in Section 501(c)(3) of the
Internal Revenue Code, a Massachusetts or similar business trust or a
partnership, in each case, not formed for the purpose of this
investment, with total assets in excess of $5,000,000;
[ ] private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940 [a U.S. venture
capital fund which invests primarily through private placements in
non-publicly traded securities and makes available (either directly or
through co-investors) to the portfolio companies significant guidance
concerning management, operations or business objectives];
[ ] a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958;
[ ] an investment company registered under the Investment Company Act
of 1940 or a business development company as defined in Section
2(a)(48) of that Act;
[ ] a bank as defined in Section 3(a)(2) or a savings and loan
association or other institution defined in Section 3(a)(5)(A) of the
Securities Act of 1933 acting in either an individual or fiduciary
capacity;
[ ] an insurance company as defined in Section 2(13) of the
Securities Act of 1933;
[ ] an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 whose investment
decision is made by a fiduciary which is either a bank, savings and
loan association, insurance company, or registered investment advisor,
or whose total assets exceed $5,000,000, or, if a self-directed plan,
--
a plan whose investment decisions are made solely by persons who are
accredited investors;
[ ] an entity not located in the U.S. and whose equity owners are
neither U.S. citizens nor U.S. residents;
[ ] a trust with total assets in excess of $5,000,000 whose purchase
is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of the Securities Act of 1933.
[ ] Other. Describe: ______________________________________
________________________________________________________
________________________________________________________
4. INVESTMENT EXPERIENCE
---------------------
Please provide information detailing the business, financial and
investment experience of the entity and investment manager of such entity.
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
EXHIBITS
<PAGE>
III. SIGNATURE
---------
The above information is true and correct in all material respects and
the undersigned recognizes that the Company and its counsel are relying on the
truth and accuracy of such information in reliance on the exemption contained in
Subsection 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder. The undersigned agrees to notify the Company promptly
of any changes in the foregoing information which may occur prior to the
investment.
Executed at ___________________, on _________________, 19__.
_______________________________
(Signature)
________________________________
(Title if for Entity)
EXHIBITS
<PAGE>
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
EXHIBITS
<PAGE>
SOLOPOINT, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of the 10th
day of August, 1999, by and among SoloPoint, Inc., a California corporation (the
"Company") and each of the undersigned investors (each an "Investor" and
together the "Investors").
R E C I T A L S
---------------
A. Effective as of the same date as this Agreement, the Company and the
Investors have entered into a Common Stock Subscription Agreement (the
"Subscription Agreement") pursuant to which the Company has agreed to sell to
the Investors and the Investors have agreed to purchase from the Company shares
of the Company's common stock (all terms not otherwise defined herein shall have
the meanings ascribed in the Subscription Agreement).
B. A condition to the Investors' obligations under the Subscription
Agreement is that the Company and the Investors enter into this Agreement in
order to provide the Investors with certain rights to register the Common Stock
acquired by the Investors pursuant to the Subscription Agreement. The Company
desires to induce the Investors to purchase the Common Stock pursuant to the
Subscription Agreement by agreeing to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
AGREEMENT
1. Registration Rights. The Company and the Investors covenant and agree
-------------------
as follows:
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means (i) the shares of the
Company's common stock issued or sold in connection with the Subscription
Agreement (such shares of common stock are collectively referred to herein as
the "Shares" or "Stock"), (ii) the shares of the Company's common stock issuable
upon the conversion of any of the Warrants (such shares of the Company's common
stock are collectively referred to herein as the "Warrant Shares"), and (iii)
any other shares of the Company's common stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, the Stock; provided, that the foregoing definition shall exclude
in all cases any Registrable Securities sold by a person
Page 1
<PAGE>
in a transaction in which his or her rights under this Agreement are not
assigned. Notwithstanding the foregoing, shares of common stock shall only be
treated as Registrable Securities if and so long as they have not been (x) sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (y) sold in a transaction exempt from the
registration and prospectus delivery requirements under Section 4(1) of the
Securities Act so that all transfer restrictions, and restrictive legends with
respect thereto, if any, are removed upon the consummation of such sale;
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock then outstanding
which are Registrable Securities, plus the number of shares of common stock
issuable pursuant to then exercisable or convertible securities which are
Registrable Securities;
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with this
Agreement;
(e) The term "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor form under the Securities Act; and
(f) The term "SEC" means the Securities and Exchange Commission.
1.2 Registration. The Company will use reasonable best efforts to
------------
effect a registration to permit the sale of the Registrable Securities as
described below, and pursuant thereto the Company will:
(a) prepare and file within the six month period commencing the date
hereof, and use reasonable efforts to have declared effective by the SEC within
25 days after the date of filing, a registration statement on Form S-3 relating
to resale of all of the shares of the Registrable Securities and use reasonable
efforts to cause such registration statement to remain continuously effective
for a period which will terminate when all Registrable Securities covered by
such registration statement, as amended from time to time, have been sold or
when the Registrable Securities may be sold under Rule 144(k) under the
Securities Act;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the registration statement as may be necessary to keep such
registration statement effective for the period specified in Section 1.2(a) and
to comply with the provisions of the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act") with respect to the distribution of
all Registrable Securities;
(c) notify each Investor promptly and confirm such notice in writing
(i) when the registration statement or any post-effective amendment has become
effective, (ii) of any request by the SEC for amendments or supplements to the
registration statement or for additional information, (iii) of the issuance by
the SEC of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose, and (iv) of the
receipt by the Company of any notification with respect to the suspension of the
Page 2
<PAGE>
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose;
(d) use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible moment;
(e) furnish to each Investor, without charge, at least one copy of the
registration statement and any post-effective amendment thereto, including
financial statements and schedules, and upon an Investor's request, all
documents incorporated therein by reference and all exhibits thereto (including
those incorporated by reference);
(f) deliver to each Investor, without charge, as many copies of the
investor information materials and any amendment or supplement thereto as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities;
(g) cause all Registrable Securities covered by the registration
statement to be listed on each securities exchange or market on which similar
securities issued by the Company are then listed, and if the securities are not
so listed to use its reasonable best efforts promptly to cause all such
securities to be listed on either the New York Stock Exchange, the American
Stock Exchange or the Nasdaq Stock Market;
(h) use reasonable efforts to qualify or register the Registrable
Securities for sale under (or obtain exemptions from the application of) the
Blue Sky laws of such jurisdictions as are applicable. The Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any such jurisdiction where it is not presently qualified
or where it would be subject to general service of process or taxation as a
foreign corporation in any jurisdiction where it is not now so subject;
(i) otherwise use reasonable efforts to comply with all applicable
rules and regulations of the SEC under the Securities Act and the Exchange Act
and take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder; and
(j) expenses incurred in connection with a registration requested
pursuant to this Section 1.2 shall be borne by the Company, including all
registration, filing, qualification, printers' and accounting fees but excluding
any underwriters' discounts or commissions and any fees and disbursements of any
counsel for the selling Holders (such fees or discounts, if any, to be borne pro
rata by the Holders participating in the registration).
1.3 Restrictions; Procedure For Sales Pursuant To A Registration
------------------------------------------------------------
Statement.
- ---------
(a) Each Holder agrees to the following restrictions on and procedures
for sales made pursuant to a registration statement:
(i) Notice to Company. If any Holder proposes to sell any Shares or
Warrant Shares, the Holder shall notify the Company of its intent to do so by
telephoning and
Page 3
<PAGE>
speaking directly with Ronald J. Tchorzewski or the then current Chief Financial
Officer of the Company at (408) 364-8850, and following up by immediately
sending a written Notice of Sale. The Notice of Sale to the Company shall
conclusively be deemed to establish an agreement by such Holder to comply with
the registration provisions herein described, and the Notice of Sale shall be
deemed to constitute a representation that any information previously supplied
by such Holder is accurate as of the date of such Notice of Sale.
(ii) Delay of Sale. The Company may refuse to permit the Holder to
resell any Shares or Warrant Shares for a specified period of time; provided,
however, that (a) in order to exercise this right, the Company must deliver a
certificate in writing to the Holder to the effect that the registration
statement in its then current form contains an untrue statement of material fact
or omits to state a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading, (b) in no event shall such delay exceed twenty (20) days, (c) in no
event shall this right of delay be exercised on more than two (2) occasions in
any twelve (12) month period, and (d) during any suspension as contemplated by
this Section 1.4 (a)(ii), the Company will not allow any of its officers or
directors to buy or sell any of the Company's securities.
(b) Representations of Holders. Each Holder hereby represents to and
--------------------------
covenants with the Company that, during the period in which a registration
statement effected pursuant to Section 1.2 remains effective, such Holder will:
(i) not engage in any stabilization activity in connection
with any of the Company's securities;
(ii) cause to be furnished to any purchaser of the Shares or
Warrant Shares and to the broker-dealer, if any, through whom Shares may be
offered, a copy of the investor information materials provided by the Company;
and
(iii) not bid for or purchase any securities of the Company or
any rights to acquire the Company's securities, or attempt to induce any person
to purchase any of the Company's securities or any rights to acquire the
Company's securities other than as permitted under the Exchange Act.
(c) Information for Use in Registration Statement. Each Holder
---------------------------------------------
represents and warrants to the Company that such Holder has completed the
information requested by the Selling Holder's Questionnaire attached as Exhibit
A to this Agreement (the "Questionnaire"), and further represents and warrants
to the Company that all information provided by such Holder in the Questionnaire
is true, accurate and complete. Each Holder understands that the written
information in the Questionnaire and all written representations made in this
Agreement are being provided to the Company specifically for use in, or in
connection with, the registration statement, and has executed this Agreement
with such knowledge.
1.4 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable
Page 4
<PAGE>
Securities of any selling Holder that such Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of such Holder's Registrable Securities.
1.5 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any dispute that might arise with respect to the interpretation or
implementation of this Section 1.
1.6 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law; and the
Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 1.6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
Page 5
<PAGE>
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.6(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 1.6(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
1.6(b) exceed the net proceeds from the offering received by such Holder, except
in the case of willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.6 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.6, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.6, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.6.
(d) If the indemnification provided for in this Section 1.6 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations;
provided that, in no event shall any contribution by a Holder under this
Subsection 1.6(d) exceed the net proceeds from the offering received by such
Holder, except in the case of willful fraud by such Holder. The relative fault
of the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
Page 6
<PAGE>
(e) The obligations of the Company and Holders under this Section 1.6
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1.
1.7 Reports Under Securities Exchange Act Of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, so long as the Company remains subject to
the periodic reporting requirements under Sections 13 or 15(d) of the Exchange
Act;
(b) take such action, including the voluntary registration of its
common stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of the Exchange Act and the
rules and regulations promulgated thereunder, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without registration or
pursuant to such form.
2. MISCELLANEOUS.
2.1 Successors and Assigns. Except as otherwise provided in this
----------------------
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
(including transferees of any of the Shares and/or Warrant Shares). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of laws.
Page 7
<PAGE>
2.3 Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided herein, any notice required or
-------
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier and addressed
to the party to be notified at such party's address as set forth on the
signature page hereto or as subsequently modified by written notice. In the
event that any date provided for in this Agreement falls on a Saturday, Sunday
or legal holiday, such date shall be deemed extended to the next business day.
Notwithstanding the foregoing, any notice delivered pursuant to Section 1.4
hereto must be made by personal delivery or confirmed facsimile transmission.
2.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
2.8 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
2.9 Entire Agreement. This Agreement, and the documents referred to in
----------------
this Agreement (with the exception of the registration statement) constitute the
entire agreement between the parties hereto pertaining to the subject matter
hereof, and any and all other written or oral agreements existing between the
parties hereto are expressly canceled.
Page 8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.
<TABLE>
<CAPTION>
"COMPANY"
<S> <C>
SOLOPOINT, INC. Address:
130-B Knowles Drive
Los Gatos, California 95032
By: ____________________________ Facsimile: (408) 364-1724
Arthur G. Chang
President and Chief Executive Officer
INVESTORS:
By: ____________________________ Address: ________________________
(Signature)
________________________
____________________________
(Print Name)
</TABLE>
Page 9
<PAGE>
EXHIBIT A
SOLOPOINT, INC.
SELLING STOCKHOLDER'S QUESTIONNAIRE
In connection with the SoloPoint, Inc. (the "Company") Registration
Statement (File No. _______________) registering certain shares of the Company's
common stock, the undersigned represents and warrants that the information set
forth below is true, accurate and complete:
1. As of the date hereof, the undersigned beneficially owns ______ shares
of the Company's common stock.
2. Except as described below, the undersigned has not had a material
relationship with the Company or any of its predecessors or affiliates within
the last three years.
The term "material relationship" has not been defined by the Securities and
Exchange Commission (the "SEC"). However, the SEC has indicated that it will
probably construe as a "material relationship" any relationship which tends to
prevent arms length bargaining in dealings with a company, whether arising from
a close business connection or family relationship, a relationship of control or
otherwise. It seems prudent, therefore, to consider that the undersigned would
have such a relationship, for example, with any organization of which the
undersigned is an officer, director, trustee or partner or in which the
undersigned owns, directly or indirectly, ten percent (10%) or more of the
outstanding voting stock, or in which the undersigned has some other substantial
interest, and with any person or organization with whom the undersigned has, or
with whom any relative or spouse (or any other person or organization as to
which the undersigned has any of the foregoing other relationships) has, a
contractual relationship.
If applicable, please describe the material relationship with the Company:
Dated: ___________________ By:______________________________________
(Signature)
Name:____________________________________
(Print Name)
Title:___________________________________
(if applicable)
Page 10
<PAGE>
SCHEDULE 2.8
Litigation
----------
A former vendor, The CatchPole Corporation, has sued the Company in
Massachusetts for the collection of certain fees for consulting services
allegedly rendered to the Company. The Company believes that it was overcharged
for such services and has offered to pay a reduced amount. The Settlement
negotiations are underway. Management estimates that the Company's total
exposure with respect to the matter is less than $10,000.00.
A former customer, Hello Direct, Inc., filed suit against the Company
in California for the collection of an amount due for return of product to the
Company. The Company and Hello Direct, Inc. have agreed in principal on the
terms of the settlement. The Company will issue a refund to Hello Direct in the
amount of $16,533.63 upon completion of the financing currently underway in
exchange for Hello Direct's dismissal of its claim and general release of the
Company.
EXHIBITS
<PAGE>
EXHIBIT 10.16
Wednesday, December 8, 1999
Thomas Muise
18910 Ansley Place
Saratoga, CA 95070
Dear Thomas,
On behalf of SoloPoint, I am pleased to offer you the position of Chief
Financial Officer, reporting directly to myself, the CEO of SoloPoint, Inc. Your
anticipated start date is no later than Monday, January 10, 2000.
Your salary will be $125,000 annually. As part of the executive management team,
you will be eligible for company performance based bonuses.
You will also receive a stock option to purchase 70,000 shares of SoloPoint
common stock. Your stock option will be issued in accordance with the terms set
forth in SoloPoint's 1993 Incentive Stock Option Plan. The price of the optioned
shares will be the fair market value of SoloPoint common stock on the date of
the grant of the stock option, either at the next meeting of the Board of
Directors or by written consent of the Board of Directors, as determined by the
Board. Twenty-five percent of the optioned shares will vest one year after your
start date, and the balance will vest monthly over the next three years at 1/48%
per month.
Per our agreement, should you be terminated other than for Cause (as defined
below) within 60 days before or after the effective date of a Change of Control
Transaction (as defined below), one half (1/2) of your unvested shares will
be immediately vested upon such termination. A "Change of Control Transaction"
shall mean a merger or reorganization of the Company with or into another
corporation, entity or person or the sale of all of or substantially all of the
Company's assets to another corporation, entity or person, if immediately after
such transaction less than 51% of the capital stock or equity interests in the
surviving entity are owned by persons who owned in the aggregate at least 51% of
the capital stock of the Company immediately prior to such transaction. The
term "Cause" shall mean any one or more of the following occurrences; (i) the
repeated failure to follow the reasonable directions of the Board of Directors
of the Company, (ii) engaging in willful misconduct which is demonstrably and
materially injurious to the Company's business or reputation, (iii) committing a
felony or an act of fraud against the Company, (iv) the misappropriation of
material property belonging to the Company; or (v) breaching in any material
respect the terms of any confidentiality or proprietary information agreement
between Purchaser and the Company, and a majority vote by the Board of Directors
of the Company authorizing a for Cause termination after the occurrence of (i),
(ii), (iii), (iv) or (v) as set forth above.
<PAGE>
Your position is classified as professional, and therefore is "exempt" under
state law. Since this is a startup company, we expect that our employees will be
working substantially more than 40 hours per week. You agree that you will not
have any outside employment or consulting activities without SoloPoint's written
permission.
SoloPoint has instituted a medical plan under TriNet Employment Group,
which offers several different health plans to chose from. The company pays
100% for the employee medical and dental coverage, 75% for the dependents
medical coverage and does not cover the dependents dental. You will be
eligible for coverage on your start date.
In addition, you will be entitled to receive SoloPoint's employee benefits,
which currently include ten days of paid vacation and five days sick leave
per year. These benefits accrue in equal increments over the course of the year.
A maximum of ten vacation days may be accrued and carried over to the next year.
This offer of employment is open until Friday, December 10, 1999.
This offer is contingent upon: (i) your providing SoloPoint with the legally
required proof of your identity and authorization to work in the United States,
and (ii) your completing, signing and returning to us, by fax followed by
receipt of original, both this offer letter and the SoloPoint Employment,
Confidential Information, and Invention Assignment Agreement (ECIIAA), which
contains additional terms applicable to your employment.
Your employment with SoloPoint is not for any specified period of time,
and can be terminated by you or by us at any time, for any reason, with or
without cause. Please note that this provision is a condition of your
employment with SoloPoint.
This letter agreement and the enclosed ECIIAA set forth the complete
agreement and understanding between you and SoloPoint concerning your
employment, and supersede any prior or contemporaneous representations or
understandings with respect to your employment. Any additions to or
modifications of these agreements must be in writing and signed by the CEO
and President of SoloPoint.
I am excited about this opportunity and look forward to working with you.
Sincerely yours,
Arthur G. Chang
CEO, SoloPoint, Inc.
By: Start Date:
------------------------------- ----------------------
Thomas Muise
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-20703 and No. 333-32945), pertaining to the 1993 Incentive
Stock Plan of SoloPoint.com, Inc., of our report dated February 15, 2000, with
respect to the financial statements of SoloPoint.com, Inc., included in the
Annual Report (Form 10-KSB) for the year ended December 31, 1999.
/s/ Ernst & Young LLP
Palo Alto, California
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-KSB
FOR THE FISCAL YEAR ENDED 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
*Identify the financial statement(s) to be referenced in the legend:
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,086,262
<SECURITIES> 0
<RECEIVABLES> 236,810
<ALLOWANCES> 174,173
<INVENTORY> 245,742
<CURRENT-ASSETS> 2,466,923
<PP&E> 573,552
<DEPRECIATION> 542,326
<TOTAL-ASSETS> 2,536,146
<CURRENT-LIABILITIES> 777,810
<BONDS> 0
0
0
<COMMON> 19,009,574
<OTHER-SE> (17,251,238)
<TOTAL-LIABILITY-AND-EQUITY> 2,536,146
<SALES> 1,621,622
<TOTAL-REVENUES> 1,621,622
<CGS> 1,810,153
<TOTAL-COSTS> 2,314,586
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,318
<INCOME-PRETAX> (2,479,236)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,479,236)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,479,236)
<EPS-BASIC> (0.85)
<EPS-DILUTED> (0.85)
</TABLE>
