As Filed with the Securities and Exchange Commission on July 9, 1999
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2, REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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Docuport, Inc.
(Name of small business issuer in its charter)
Delaware 3577 22-3649272
(Primary
(State or other jurisdiction of Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
1155 Rene Levesque West - Suite 3500
P.O. Box 60
Montreal, PQ, H3B 3T6, Canada
(514) 878-0098
(Address and telephone number of
principal executive offices and place of business)
Raja S. Tuli, Chairman of the Board of Directors
Docuport, Inc.
1155 Rene Levesque West - Suite 3500
P.O. Box 60
Montreal, PQ, H3B 3T6, Canada
(514) 878-0098
(514) 866-3630
(Name, address and telephone
number of agent for service)
Copies to:
Frederick M. Mintz, Esq.
Mintz & Fraade, P.C.
488 Madison Avenue
New York, New York 10022
Telephone No.: (212) 486-2500
Facsimile No.: (212) 486-0701
---------------
Approximate date of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. |X|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| ______________________.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<PAGE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed
Title of securities Amount to be Proposed Maximum Amount of
to registered (1) Maximum Aggregate registration fee
be registered Offering Price Offering Price
Per Share
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<S> <C> <C> <C> <C>
Common Stock,
par value $0.001 1,233,333 $2.00 $2,466,666 $685.73
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
This prospectus relates to 1,233,333 shares of our common stock owned by
the persons named in this prospectus under the caption "Selling Stockholders."
The shares were acquired by the selling stockholders in various transactions,
all of which were exempt from registration under the Securities Act of 1933, as
amended. The shares registered by this prospectus may be offered from time to
time by the selling stockholders through ordinary brokerage transactions in the
over-the-counter market, in negotiated transactions or through other commonly
used methods to trade publicly available stock, at market prices prevailing at
the time of sale or negotiated prices. The shares of our common stock may be
sold directly or through brokers or dealers.
We will receive no part of the proceeds of any sales of our common stock
as a result of this registration. We will bear all the costs and expenses
associated with the preparation and filing of this registration statement.
<PAGE>
SUBJECT TO COMPLETION, DATED July 9, 1999
PROSPECTUS
1,233,333 Shares
DOCUPORT, INC
Common Stock
This is the first registration of our securities. The common stock
available for sale as a result of this prospectus will be sold by currently
existing stockholders. We will not receive any money from the sale of our common
stock as a result of this registration.
------------------------
We have not yet begun operations and are still in the development stage.
These are speculative securities which pose a high degree of risk to investors.
An investor should read the Risk Factors section of this Prospectus, located on
page 4 before deciding whether to invest in these securities.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is __, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Summary...........................................................1
Summary Financial Information............................................... 3
Risk Factors.................................................................4
Use of Proceeds.............................................................11
Capitalization..............................................................11
Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................................11
Financial Condition and Results of Operations...............................13
Business....................................................................16
Dividend Policy.............................................................22
Employees...................................................................22
Management..................................................................23
Executive Compensation......................................................25
Certain Relationships and Transactions......................................26
Principal Stockholders......................................................28
Plan of Distribution........................................................29
Description of the Securities...............................................33
Shares Eligible for Future Sale.............................................35
Legal Matters...............................................................36
Experts.....................................................................37
Available Information.......................................................37
Index to Financial Statements............................................F - 1
<PAGE>
SUMMARY
The following summary highlights certain information from this prospectus
and may not contain all the information you may find important to your decision
to invest in our securities. To understand this prospectus fully, you should
read the entire prospectus carefully, including the financial information
following this prospectus.
For simplicity, we use the terms "we" and "our" to refer both to the
corporation originally founded as Docuport, Inc. under the laws of Ontario,
Canada and which became our wholly owned subsidiary following our March, 1999
private offering and the entity that was incorporated in the State of Delaware
on March 24, 1999 and whose common stock is the subject of this prospectus. At
times we will refer to Docuport Canada and Docuport Delaware for purposes of
distinguishing the two entities.
Our Business
We were incorporated in the State of Delaware in March, 1999. We are the
parent corporation of Docuport, Inc, a corporation incorporated under the laws
of Ontario, Canada in February, 1992 under the name Slimfax, Inc. The Canadian
corporation was founded by our Chairman of the Board of Directors, Mr. Raja S.
Tuli. We have developed and intend to market and sell a patented, portable
multifunctional office machine called the Slimfax. The Slimfax's dimensions are
12.5" x 3" x 1.24"; and it is a combination: (1) full page fax machine, (2) full
page scanner, (3) full page printer, (4) full page copier and (5) fax/data
modem. Full page means 8.5" x any length. The Slimfax weighs approximately 2.1
lbs. It utilizes a power supply consisting of either a DC connector which
conveniently plugs into any electrical outlet; a rechargeable Nickel Metal
Hydride battery or an AC adapter to plug into the cigarette lighter of a car or
boat. We are unaware of any other product currently on the market which
possesses these multifunctional capabilities in this size and weight.
Management believes that the Slimfax has an advantage over its present and
future competitors because of the pricing, distribution and support strategies
which Management intends to utilize. Management has no knowledge that any other
company presently makes a portable product such as the Slimfax that incorporates
a fax machine, copier, scanner, data modem and printer in one unit. Furthermore,
the intended price of the Slimfax would make it affordable to a wide segment of
the population. We intend to have a strategic marketing and promotion campaign
which shall focus upon educating distributors and potential users about the
technology and the Slimfax benefits.
Although at the present time we have not finalized any distribution
arrangements, it is our intention that the Slimfax will be sold through the
following distribution channels : (i) Direct Marketing; (ii)
Dealers/Distributors; (iii) Retail; (iv) Original Equipment Manufacturers who
will use their own name on the Slimfax; (v) System Integrators, which package
several products together offering a full service integrated product; (vi) Value
Added Resellers, who upgrade and repackage products for marketing; and (vii) the
Internet to market directly to users of the product.
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We intend to improve the Slimfax by developing and producing features such
as color, speed and higher resolution. We are also developing a Portable
Pen-Size Scanner which will be 8.5" in length with an outside diameter of 1/4"
and weighing 2.5 ounces, making the Portable Pen-Size Scanner easy to use and
permitting convenience of remote use. We anticipate completing development of a
prototype within two months and starting production of the Portable Pen-Size
Scanner within the next six months.
Our products are designed for relative ease of use and portability. It is
not necessary for a user of our products to have a detailed understanding of
computer technology. Our products are specifically designed to benefit users by
allowing individuals to engage in mobile use of their computers while
maintaining contact with their clients and office from remote locations.
On August 12, 1998, we entered into a non-binding letter of intent with
Pentax Technologies to market the Slimfax by entering into a private label
agreement, pursuant to which Pentax would sell the Slimfax under its own label,
as a Pentax product. There can be no assurance that this transaction will
proceed.
On April, 15, 1999 we entered into a Marketing and Sales Agreement with
Solutions Plus, Inc. (See "Certain Relationships and Transactions") This
agreement provides that Solutions Plus, Inc. will be responsible for our sales
and marketing operations on a non-exclusive basis. Its responsibilities include
the marketing and sale of the Slimfax, as well as maintenance of our books,
records and financial accounts. We are still in the planning stages of our
development and have not begun sales of the Slimfax. Part of our agreement with
Solutions Plus, Inc. is to plan a marketing and sales strategy for the
introduction of the Slimfax into the retail sales market.
Our executive offices are located at 1155 Rene Levesque West, Suite 3500,
P.O.Box 60, Montreal, PQ, H3B 3T6, Canada. The telephone number in Canada is
(514) 878-0098 and the facsimile number is (514) 866-3630. Our United States
offices are located at 81 Two Bridges Road, Fairfield, New Jersey 07005. The
telephone number in New Jersey is (973) 882-3177 and the facsimile number is
(973) 882-5340.
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SUMMARY FINANCIAL INFORMATION
Since the Delaware corporation was formed on March 24, 1999 and we did not
commence operations through the Delaware corporation until after March 31, 1999
the following data has been derived from the financial statements of our
Canadian subsidiary and should be read in conjunction with those statements,
which are included in this prospectus and expressed in U.S. dollars.
AUDITED
<TABLE>
<CAPTION>
From Inception 12 Months Ending December 31,
February 1, 1992
through December 31, 1998 1998 1997
<S> <C> <C> <C>
Statement of Operations Data:
Net Revenue .................................... $0 $0 $0
Interest Income ................................ $11,152 $113 $6,124
Total Expenses ................................. $683,334 $156,592 $329,446
Net Loss ....................................... $(672,182) $(156,479) $(323,322)
Balance Sheet Data:
Working Capital ................................ $(621,438) $(500,610)
Total Assets ................................... $153,523 $173,243
Total Liabilities .............................. $767,894 $663,588
Stockholders' Equity (Deficiency)(1) ........... $(614,371) $(490,345)
</TABLE>
UNAUDITED
<TABLE>
<CAPTION>
From Inception 3 Months Ending March 31,
February 1, 1992
through March 31, 1998 1998 1997
<S> <C> <C> <C>
Statement of Operations Data:
Net Revenue .................................... $0 $0 $0
Interest Income ................................ $11,152 $0 $0
Total Expenses ................................. $757,231 $73,897 $23,311
Net Loss ....................................... $(746,079) $(73,897) $(23,221)
Actual Proforma(2) Actual
Balance Sheet Data:
Working Capital ................................ $(705,649) $84,351 $(533,075)
Total Assets ................................... $60,144 $850,144 $166,981
Total Liabilities .............................. $759,003 $759,003 $690,353
Stockholders' Equity (Deficiency)(1) ........... $(698,859) $91,141 $(523,372)
</TABLE>
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(1) Amounts indicated do not include shares of our common stock underlying each
common stock purchase warrant held by investors in the 1996 private offering.
(2) Amounts indicated include (A) 700,000 shares of our common stock issued
pursuant to a private offering commenced in March, 1999 by Docuport Delaware,
which closed in April, 1999; and (B) 435,000 shares of our common stock issued
pursuant to a private offering in April, 1999 by Docuport Delaware. In view of
the fact that Docuport Delaware was incorporated on March 24, 1999 there were no
financial results to the United States entity until after March 31, 1999 and
accordingly, only the proforma presentation reflects the Docuport Delaware's
initial raise of capital in April, 1999.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should read these risks described below before making any investment decisions,
however, the following risk factors are not intended to be an exhaustive list of
the general or specific risks relating to the purchase of our common stock and
additional risk factors are described throughout this registration statement. If
any of the following risks actually occur, our business, financial condition and
operations will be materially affected.
We do not have an operating history to evaluate our future performance
We have not yet begun operations. As a result, you will not be able to
predict our future financial condition based upon our past performance.
Computer technology is subject to rapid change and advancement
Because we are entering a highly competitive market you should be aware of
the difficulties we will likely encounter. Portable peripheral technology has
been in existence since the early 1990's. The computer technology market is
subject to significant change and advancement which results in short product
life cycles and rapid price declines. The development of new and better
technologies, may render our products obsolete or have a material adverse effect
upon our business. Our future prospects are highly dependent upon our ability to
increase our products functions and to develop new products which address new
technologies and receive market acceptance. We believe that our products and
technology are sufficiently advanced so as to insulate us from technical
obsolescence for a number of years. There are numerous manufacturers of portable
peripheral technology which have substantially greater financial and technical
resources and production and marketing capabilities than we do. These
competitors may be able to bring new, better and cheaper products to the market
more quickly than we can.
The failure to be year 2000 compliant by either third parties or us may
materially affect our operations
The issue known commonly as "Y2K" refers to the inability of many
computers and
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<PAGE>
computer software to recognize the changing of the millennium to the year 2000.
Thus, date sensitive computers and related software which have not been properly
programmed will recognize the change in years of December 31, 1999 to January 1,
2000 as January 1, 1900. We are reviewing our current systems and believe that
our technology is year 2000 compliant. However, there can be no assurance that
all of our internal systems, devices and applications will be 2000 compliant.
We place a high degree of reliance upon computer systems of third parties,
such as customers, trade suppliers and computer hardware and commercial software
suppliers. Although we are assessing the readiness of these third parties and
preparing contingency plans if they are not 2000 compliant, there can be no
assurance that the failure of these third parties to modify their systems prior
to December 31, 1999, would not have an adverse effect upon our business.
In addition, we believe that our products should work effectively with
other technology which may not be 2000 compliant. However, there can be no
assurance with respect to the effect the failure to be year 2000 compliant will
have upon our products or that our products will not be affected by the year
2000 problem.
We Will Need Additional Financing to Continue to Develop Our Products
We will need additional financing to meet our capital requirements. We
currently have no arrangements to obtain additional financing and we will be
dependent upon sources such as: (i) future earnings, and (ii) the availability
of funds from private sources such as, loans and additional private placements.
In view of our lack of an operating history, our ability to obtain additional
funds is limited. Additional financing may only be, if at all, upon terms which
may not be commercially advantageous. If adequate funds are not available from
operations or additional sources of financing, our business will be materially
adversely affected.
We will be competing with numerous larger and more financially established
companies
The market for our products is highly competitive and is characterized by
pressures to reduce prices, incorporate new features and accelerate the release
of new product versions. There are numerous companies which offer products in
the portable peripheral market which compete directly or indirectly with our
products. These competitors have substantially greater financial and technical
resources and production and marketing capabilities than we do. Competitors with
superior resources may be able to bring newer, better and cheaper products to
market more quickly than we are capable of doing. We will be competing with:
o Multi-function and single use portable product manufacturers such as
Toshiba, Hewlett Packard and Xerox; and
o Local businesses which provide the same services which can be
performed by the SlimFax, such as copy centers and computer rental
service providers.
We believe the early timing of the Slimfax in the portable peripheral
market, the United States patent which we own and the patents we are applying
for, should give us a competitive edge in
5
<PAGE>
the portable peripheral market. It should take several years of research and
development efforts before competitors can design and develop a comparable
product. However, there can be no assurance that our competitors will not
succeed in developing and marketing comparable products at a future date which
could prove to be equally or more effective than those we develop or acquire or
which could render our products obsolete or non-competitive. A variety of other
potential actions by our competitors, including increased promotion and
accelerated introduction of new of enhanced products, could have a material
adverse impact upon the results of our operations. There can be no assurance
that we will be able to successfully compete with such promotions in the future.
We expect to incur significant losses for the foreseeable future
We expect to incur significant losses on both a quarterly and an annual
basis for the foreseeable future. There can be no assurance that we will ever
achieve profitability. Our revenues and operating results may also fluctuate.
We have not declared any dividends on our common stock
To date, we have not paid dividends on our common stock and at the present
time, we intend to retain earnings, if any, for our development and expansion.
There can be no assurance that we will have sufficient earnings to pay any
dividends on our common stock. In addition, even if we have sufficient earnings,
we are not obligated to declare dividends on our common stock. Future
declarations of any cash or stock dividends will be in our board's sole and
absolute discretion and will depend on our earnings, capital requirements,
financial position, general economic conditions and other pertinent factors. It
is also possible that the terms of any future debt financing may restrict the
payment of dividends.
We may be subject to the SEC's "penny stock" rules if our common stock is below
$5.00 per share
If, after our stock begins to trade, the trading price of our common stock
is below $5.00 per share, trading in our securities would be subject to the
requirements of the SEC's rules with respect to securities trading below $5.00,
which are referred to as "penny stocks". These rules require the delivery prior
to any transaction of a disclosure schedule explaining the penny stock market
and all associated risks and impose various sales practice requirements on
broker-dealers who sell "penny stocks" to persons other than established
customers and accredited investors, which are generally defined as institutions
or an investor individually or with their spouse, who has a net worth exceeding
$1,000,000 or annual income, individually exceeding $200,000 or, with their
spouse, exceeding $300,000. For these types of transactions the broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to the sale.
In addition, broker-dealers must disclose commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities they offer. The additional burdens imposed upon broker-dealers by
such requirements may discourage broker-dealers from effecting transactions in
our common stock which could severely limit its market price and liquidity.
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We may not be able to protect our proprietary rights
We rely, and intend to rely upon the patent which has been granted to us
and the patent applications we have filed and intend to file with the United
States Patent and Trademark Office to protect our rights to the technology we
have developed. Our exclusive right to develop and use this technology is
essential to our introduction into the technology market. However, there can be
no assurance that we will be able to protect and enforce these rights against
companies which attempt to copy our technology or improve upon our designs.
Our success depends upon the continued employment of our executives and certain
key employees
We intend to substantially depend upon the continued services of our
President and Chief Executive Officer, Mr. Norman Docteroff, for management,
sales and marketing of the Slimfax. In addition, we substantially depend upon
our founder, Chairman of the Board of Directors, Mr. Raja S. Tuli, for advances
in our technology and development of new products. The loss of the services of
Mr. Docteroff or Mr. Tuli would have a material adverse affect upon our business
and our prospects. We have not entered into employment agreements with any of
our key personnel, other than with Mr. Docteroff. We do not maintain "key man"
life insurance on the life of any of our employees. To the extent that the
services of key personnel become unavailable, we will be required to retain
other qualified persons and there can be no assurance that we will be able to
employ qualified persons upon acceptable terms.
In addition, our success is dependent upon our ability to attract and
retain highly qualified personnel. Competition for such personnel is intense and
there can be no assurance that we will be able to attract and retain the
personnel necessary for the development and operation of our business. The loss
of the services of any such personnel may have a material adverse effect upon
our financial condition and our existing or planned operations.
Government regulations of technology could affect production and sale of our
product
Our operations are subject to regulations applicable to our products and
business operations such as:
o import and export regulations;
o minimum product safety regulations; and
o federal and state tax regulations.
We intend to fully comply with applicable regulations, there can be no
assurance of our ability to do so. If we are unable to comply with such
regulations, such noncompliance may have an adverse effect upon our operations.
We may not engage in future product development
7
<PAGE>
Our plans to engage in future development of the Slimfax and other
products are based upon factors such as:
o our profitability from the sale of the Slimfax;
o our ability to raise additional financing other than from
operations; and
o the recruitment of sufficient personnel for sales, marketing and
technology development for future products;
There can be no assurance that we will engage in future product development or
that such new product development will be successful.
You may not have a significant impact upon controlling our affairs
Mr. Raja S. Tuli and members of his immediate family (Raja S. Tuli and
members of his immediate family are hereinafter collectively referred to as the
"Tuli family shareholders") own approximately 58% of our issued and outstanding
common stock. The Tuli family stockholders have agreed that for a period of five
years commencing April 1, 1999, our board will consist of five board members and
that two of our directors will be outside directors, who are directors whom we
do not employ. We have only one outside director as of the date of this
prospectus. Our President and Chief Executive Officer, Norman Docteroff is also
a director. We anticipate that a second outside director will soon be elected by
our shareholders other than the Tuli family stockholders. This agreement also
provides that for this five year period the Tuli family stockholders will not
have the right to participate in a vote to elect the outside directors. The
outside directors will, therefore be elected by a majority of our other
stockholders. This agreement will remain in effect for five years unless an
underwriter of a future registration of our securities requests that this be
changed. Whether or not to comply with the underwriter's request will be in the
sole and absolute discretion of the Tuli family stockholders. Even though our
outside directors will be elected by stockholders other than the Tuli family
stockholders, the Tuli family stockholders will control our management and
affairs. After the five year period, based upon their present ownership
percentage of our issued and outstanding common stock, the Tuli family
stockholders, will have the power to elect all of our directors.
The market for our securities is unsure and may be volatile
There is no current market for our securities and there can be no
assurance that a market will exist in the future. In addition, if a trading
market does develop, there can be no assurance that our common stock can be
resold either at or near its original offering prices. We intend to arrange to
list our common stock on the NASD Bulletin Board. However, there can be no
assurance that we will qualify for such listing.
We engage in transactions in foreign currency which are subject to fluctuations
in the exchange rate
We conduct a substantial number of transactions in foreign currency,
primarily the Canadian
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<PAGE>
dollar and, to a lesser extent, the Indian rupee. Fluctuations in the exchange
rates between the United States dollar and the Canadian dollar or Indian rupee,
could have an adverse affect upon our operating results in the future. We may
seek to limit our exposure to the risk of currency fluctuations by engaging in
foreign currency transactions which could expose us to substantial risk of loss.
Our management has limited experience in managing international transactions and
have not yet formulated a strategy to protect us against currency fluctuations.
There can be no assurance that fluctuations in foreign currency exchange rates
will not have a significant adverse impact upon our future operating results.
The source of the factual data in this registration statement was provided by
Mr. Raja S. Tuli, our founder, Chairman of the Board of Directors
The information which is set forth in this registration statement was
obtained, in large part, from Mr. Raja S. Tuli, our founder, Chairman of the
Board of Directors and one of our directors. 300,000 shares of our common stock
owned by Mr. Raja S. Tuli will be registered as a result of this registration,
and he will benefit substantially from this registration of our securities. This
information necessarily incorporates significant assumptions as well as factual
matters and is believed by Mr. Tuli to be accurate.
Conflicts may exist with certain of our officers and directors
There are several conflicts associated with our officers and directors.
These conflicts include, engaging in other businesses similar or dissimilar to
ours, allocating their time and services between us and the other entities with
which they are involved.
Since 1993, one of our directors, Mr. Raja S. Tuli, President, has served
as the President, Chief Executive Officer and Director of the Widecom Group,
Inc. Widecom designs and manufactures "wide format office equipment" which
transmits, receives, prints, copies and archives wide format documents. Mr. Tuli
is required to spend a majority of his time for Widecom. Mr. Raja S. Tuli does
not intend to spend more than ten (10%) percent of his total working time
working for us.
Mr. Norman Docteroff is our President, Chief Executive Officer. His wife,
Corina Docteroff, is the owner of Solutions Plus, Inc., the company with which
we have entered into an agreement to market and sell the Slimfax. Mr. Docteroff
has entered into an employment agreement with Solutions Plus, Inc. which
provides for Mr. Docteroff to receive a salary and commissions for sales. Our
employment agreement with Mr. Docteroff's permits him to engage in other
activities. However, he is required to devote a minimum of 30 hours of work per
week to us.
The law firm of Mintz & Fraade, P.C. has been retained as our legal
counsel. Counsel owns 15,000 shares of our common stock which it purchased in
our private offering of March, 1999, at a purchase price of $.10 per share.
Our right to issue preferred stock may facilitate management entrenchment
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Our board has the right to issue up to 2,000,000 shares of preferred stock
and to determine the rights, price, preferences, privileges, and restrictions
including voting rights of these shares without the approval of our
stockholders. Any issuance of preferred shares could be used by our current
management to delay, defer or prevent a change in management, which may not be
in the best interests of holders of our common stock. We have no present plans
to issue any shares of preferred stock.
We are dependent upon manufacturers and establishing relationships with third
parties, which could result in our inability to manufacture and market our
products.
Although we will initially manufacture the Slimfax and other products we
may develop, we do not intend to conduct manufacturing operations on a
continuing basis and will be dependent upon independent third parties to
manufacture and ship our products. We expect to continue to be dependent upon
such manufacturers for the foreseeable future. These manufacturers will be
responsible for timely and cost-effective manufacturing which may affect our
ability to cost-effectively compete with other similar products. Therefore, we
are dependent upon the continued viability and financial stability of these
manufacturers. In addition, these third party manufacturers are expected to
produce our products to certain specifications supplied by us, however, there
can be no assurance that these instructions will be followed by the
manufacturers. The failure to produce a product in accordance with our specific
instructions and at a certain minimum level of quality could have a material
adverse impact upon the results of our operations.
We have entered into one and intend to enter into additional agreements
with third parties to sell our products on the retail market and we expect a
substantial amount of our revenues will be derived from the sale of our products
through these third parties. We are, therefore, dependent upon the continued
viability and financial stability of these resellers. We are also dependent upon
the resellers who generally offer products of several different companies,
including, in some cases, products which will be competitive with our products.
There can be no assurance that the resellers will purchase our products or
provide such products with adequate levels of support. The entire loss of, or a
significant reduction in sales volume to any of these resellers would have a
material adverse effect upon our results of operations.
Some of our statements refer to the future, which may prove to be inaccurate
Certain statements in this prospectus discuss future expectations and
plans which are considered forward-looking statements as defined by section
27(a) of the Securities Act of 1933, section 21(e) of the Securities Exchange
Act of 1934, and as the term has been defined in the Private Securities
Litigation Reform Act of 1995. Sentences which incorporate words such as
"believes," "intends," "expects," "predicts," "may," "will," "should,"
"contemplates," "anticipates," or similar statements are based on our beliefs
and expectations using the most current information available to us. However,
these statements involve risks and uncertainties and are subject to change at
any time which can cause actual results to differ materially from the results
discussed in such statements.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of our common
stock by selling stockholders. We have agreed to pay the professional fees and
expenses related to this registration statement, which we estimate to be
approximately $50,000.
CAPITALIZATION
In view of the fact that Docuport Delaware was formed on March 24, 1999
and we did not commence operations through the Delaware corporation until after
March 31, 1999, the following table sets forth, as of March 31, 1999, on an
unaudited basis, the capitalization for our Canadian subsidiary (expressed in
U.S. dollars). It does not reflect the sale of 700,000 shares of common stock at
$0.10 per share pursuant to an offering commenced in March, 1999 which closed in
April, 1999 or the sale of 435,000 shares at $2.00 per share of common stock in
April, 1999.
March 31, 1999
--------------
Liabilities:
Current Liabilities $759,003
Stockholders' Deficiency:
Common Stock, $.001 par value $73
Total Stockholders' Deficiency(1) $(698,859)
Total Liabilities and Stockholders' Equity $60,144
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are in a developmental stage and have not generated any revenues as of
the date of this prospectus. All of our activities, since our inception, have
been devoted to the development of the Slimfax and preparation for its
introduction into the marketplace and the raising of operating capital through
the solicitation of funds in private offerings.
The following discussion should be read in conjunction with the financial
statements and the notes to those statements which appear elsewhere in this
prospectus. The following discussion contains forward looking statements which
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors
- ----------
(1) Amounts indicated do not include shares of our common stock underlying
each common stock purchase warrant held by investors in the 1996 private
offering.
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which could cause or contribute to such differences include, but are not limited
to, those discussed below and elsewhere in this prospectus.
OVERVIEW
We are a development stage company, principally involved in the planning,
design and development of our two products, the "Slimfax" and "Pen-Sized
Scanner". We are currently developing our Slimfax and Pen-Sized Scanner products
and anticipate beginning the initial start-up activities for manufacturing,
marketing and sale for these products within the next twelve months.
Our business focuses on creating portable computer peripherals for the
highly-mobile professional. We believe that our initial product, the Slimfax is
the smallest multifunctional scanner, printer, copier and fax machine available
in the market; and, as a result, ideally positioned as a portable tool for
mobile executives. The second product, a Pen-Sized Scanner, could be useful to
anyone who desires a portable memory device, which permits scanning and storage
of information, until downloaded or transmitted into a personal computer.
Although we have not begun commercially manufacturing our products and we
have not derived any revenue to date, we have manufactured small quantities for
beta site testing. We expect to have the Slimfax in production, and generating
revenue by the last quarter of this year. We will shortly begin to recruit
management level employees as well as salesmen. The extent of our hiring will
depend upon whether we manufacture the Slimfax or subcontract its manufacture to
third parties.
GOVERNMENT SPONSORED PROGRAMS
To date, a portion of our financing has been derived from research and
development grants and reimbursements from the Canadian government. Government
sponsored programs are designed to encourage and support the development and
exploitation of new technologies by providing partial reimbursement to Canadian
businesses for expenses incurred in connection with research and development
activities.
Companies seeking reimbursement must submit applications verifying the
amounts and nature of research and development expenditures incurred for audit
by the Canadian government. Although the Canadian government has reimbursed us
for substantially all amounts requested in each of our filings, it is not
uncommon for the government to significantly reduce the amount claimed for
reimbursement.
We anticipate that financing derived from research and development grants
and reimbursements will account for a decreasing portion of our liquid capital
reserves.
IMPACT OF CURRENCY EXCHANGE RATES
We have conducted a substantial number of transactions in foreign
currency, primarily the Canadian dollar and, to a lesser extent, the Indian
rupee. Fluctuations in the exchange rates between the United States dollar and
the Canadian dollar or Indian rupee, could have an adverse effect upon our
operating results in the future. We may seek to limit our exposure to the risk
of currency
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fluctuations by engaging in foreign currency transactions which could expose us
to substantial risk of loss. Our management has limited experience in managing
international transactions and have not yet formulated a strategy to protect us
against currency fluctuations. There can be no assurance that fluctuations in
foreign currency exchange rates will not have a significant impact upon our
future operating results.
RESULTS OF OPERATIONS
The following table sets forth the percentage of net loss represented by
certain line items in the statement of operations:
1998 1997
Expenses
Salaries & Subcontractors 19% 43%
Materials 11% 21%
Foreign exchange loss 21% 10%
Financing Fees 2% 16%
Interest on long term debt 37% 19%
R & D tax credits (9%) (29%)
Grants & Interest (0%) (2%)
Net loss for the year 100% 100%
YEAR ENDING DECEMBER 31, 1998 COMPARED TO YEAR ENDING DECEMBER 31, 1997
Operating Expenses: Operating expenses consist primarily of salaries of research
and development engineers, subcontractors in the prototyping and development
process, material purchases, interest on long term debt and financing fees.
Operating expenses net of R&D tax credits, grants and interest, decreased from
$423,343 for the year ending December 31, 1997 to $170,074 for the year ending
December 31, 1998. The decrease in operating expenses was because we reached the
final stages of development for our Slim Fax product. As overall operating
expenses decreased in 1998, the interest on the long-term debt (from the 1996
private offering) decreased by 6% from $61,373 in 1997 to $57,570 in 1998, but
resulted in 37% of the net loss for the year ending December 31, 1998 compared
to 19% for the year ending December 31, 1997. Financing fees for 1998 were 2%
while they were 16% of the net loss of 1997, as no new financing was done in
1998. Salaries and subcontractors accounted for 19% of the net loss for 1998,
compared to 43% for 1997, which was a 79% decrease from $140,558 in 1997 to
$29,552 in 1998.
Government Grants and Reimbursements: Referred to as research and development
tax credits, these grants are available as reimbursements to us, until the stage
when we reach profitability and have
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taxes payable to the Canadian government. At the stage when we have taxes
payable, these grants are applied to the taxes. The R&D tax credits are
available to us as a percentage of research and development expenses, and are
not available for expenses related to currency exchange losses, financing fees,
or other expenses outside of Canada. The R&D tax credits reduced in 1998 by 86%
to $13,482 from $93,897 for the year ending December 31, 1997.
INTERIM ENDING MARCH 31, 1999 COMPARED TO INTERIM ENDING MARCH 31, 1998
Operating Expenses: Operating expenses consist primarily of salaries of research
and development engineers, subcontractors in the prototyping and development
process, material purchases, interest on long term debt and financing fees.
Operating expenses net of R&D tax credits, grants and interest, increased from
$33,559 for the year ending March 31, 1998 to $83,599 for the year ending March
31, 1999. The increase in operating expenses was because we reached the final
stages of development for our SlimFax product. As overall operating expenses
increased in 1999, the interest on the long-term debt (from the 1996 private
offering) increased by 2% from $14,376 in 1998 to $14,656 in 1999, but resulted
in 80% of the net loss for the quarter ending March 31, 1999 compared to 38% for
the quarter ending March 31, 1998. Salaries and subcontractors accounted for 52%
of the net loss for 1999, compared to 51% for 1998, which was a 68% increase
from $11,282 in 1998 to $35,254 in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have satisfied our working capital requirements
principally through the issuance of debt and equity securities and government
sponsored research and development grants and reimbursement. As of March 31,
1999 we had working capital of negative $705,649, as compared to negative
$621,438 on December 31, 1998 and negative $500,610 on December 31, 1997.
In July 1996 we conducted a private offering pursuant to Rule 504 of the
Securities Act of 1933, as amended. The offering raised $575,000 which we used
as working capital and to assist research and development of our products. Each
investor in the 1996 private offering purchased a unit (or a fractional unit)
valued at $50,000. Each unit consisted of the following: (a) a $50,000
promissory note bearing 10% interest per year and maturing upon the earlier of
two years from issuance or the effective date of an initial public offering; (b)
10,000 shares of common stock; and (c) 10,000 common stock purchase warrants.
Upon a resolution of our Board of Directors, passed on March 24, 1999, all
shares of common stock and warrants in the Canadian subsidiary were exchanged
for shares in the Delaware parent (the "Exchange"). The ratio of the Exchange
was three (3) shares or warrants in the parent for every two (2) shares or
warrants in the Canadian subsidiary.
In February, 1999 we offered an extension agreement to the investors of
the 1996 offering which extended the due date of the Promissory Notes which were
part of the 1996 private offering. Sixteen of the 18 investors agreed to the
extension. As compensation to the investors who agreed to the extension, we: (A)
issued additional warrants equal to the number of the warrants held (as adjusted
upon the Exchange) with an exercise price of $0.10 per share and (B) the
exercise price for the warrants originally issued in connection with the 1996
private offering was reduced from $1.67 (as adjusted) to $0.10. The extension
agreement extended the due date for the Promissory Notes
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until the earlier to occur of either (a) August 1, 2000; or (b) the raising an
aggregate of $5,000,000 in financing.
In March, 1999 we commenced a second private offering, which closeed in
April, 1999 raising $70,000. The offering consisted of shares of its common
stock, at a purchase price of $0.10 per share. These shares are restricted and
cannot be transferred until the earlier to occur of one year after purchase or
registration of the shares with the SEC.
In April, 1999 we completed a private offering, raising $870,000. The
offering consisted of shares of our common stock, at a purchase price of $2.00
per share.
We believe, based upon our currently proposed plans and assumptions
relating to our operations (including, assumptions with respect to the progress
of research and development and the costs associated with production, marketing
and sale of out products), that our current cash position and projected cash
from operations will be sufficient to satisfy our contemplated cash requirements
for the next six to nine months following the filing of this registration. How
quickly we will need additional financing will depend upon how we determine it
is in our best interest to manufacture and market the Slimfax. If we proceed
with production ourselves, we will need additional financing sooner than if we
contract manufacture of the Slimfax to third parties. Such a determination will
also affect the number of employees we anticipate hiring in the next 12 months.
If we do not manufacture the Slimfax ourselves, we anticipate the need for an
additional 30-40 employees, including salesmen, management, engineers and other
skilled employees within the next 12 months. If we manufacture the Slimfax
ourselves, we will require additional employees, the number of which is
uncertain and will be dependant upon the extent of our manufacturing activities.
If our plans change, or our assumptions change or prove to be incorrect, or if
projected cash flow proves to be insufficient to fund operations (due to
unanticipated expenses, delays, or other problems), we could be required to seek
additional financing sooner than anticipated. We have no current arrangements to
obtain, or sources of, additional financing and it is not anticipated that
existing stockholders will provide any portion of our future financing
requirements. There can be no assurance that additional financing will be
available to us, when needed, on commercially reasonable terms, or at all.
Under SFAS No. 133, "Accounting for Derivatives Instruments and Hedging
Activities" a company is required to record derivatives on the balance sheet as
assets or liabilities, measured at fair market value. Gains or losses resulting
from changes in the values of those derivatives are accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. The key
criterion for hedge accounting is that the hedging relationship must be highly
effective in achieving offsetting changes in fair value or cash flows. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. Management
believes that the adoption of SFAS No. 133 will have no material effect on its
financial statements.
SOP 98-5, "Reporting on the Costs of Start-Up Activities," requires that
the costs of start-up activities, including organization costs, be expensed as
incurred. This statement is effective for fiscal years beginning after June 15,
1999. Management believes that the adoption of SOP 98-5 will have no material
effect on its financial statements.
The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable years. We are a
development stage company which
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relies heavily upon computer technologies to operate our business. We believe,
that due to the widespread nature of potential Year 2000 issues, any contingency
planning process is an ongoing one which will require further modifications as
we obtains additional information regarding (1) the Company's internal systems
and (2) the status of third party Year 2000 readiness. Contingency planning for
possible Year 2000 disruptions will continue to be defined, improved and
implemented. The following discussion of the implications of the Year 2000
problem for us contains numerous forward-looking statements based upon
inherently uncertain information.
We place a high degree of reliance on our computer systems and those of
third parties, such as customers, product suppliers and computer hardware and
commercial software suppliers. We believe that our products, computer systems
and software are fully year 2000 compliant. However, it is possible that certain
of our computer systems or product suppliers or our customers many not accept
input of, store, manipulate and output dates in the year 2000 or thereafter
without error or interruption. We are investigating our current suppliers'
progress in identifying and addressing problems which their computer systems
will face in correctly processing date information as the year 2000 approaches.
Although we are assessing the readiness of these third parties and preparing
contingency plans, there can be no assurance that the failure of these third
parties to modify their systems in advance of December 31, 1999, would not have
a material adverse effect upon us.
If problems are discovered with our current suppliers which cannot be
remedied we intend to seek alternative suppliers who are fully year 2000
compliant. We may, however, be required to make significant expenditures to
address or remedy any year 2000 problems of our vendors which are not identified
in advance, or to satisfy liabilities to which we may become subject as a result
of such problems. An interruption of the our ability to conduct business due to
a Year 2000 readiness problem could have a material adverse effect upon us.
DESCRIPTION OF BUSINESS
Our Canadian subsidiary was incorporated under the laws of Canada in
February, 1992, under the name SlimFax, Inc. In 1996 the Canadian company
changed its name to Docuport, Inc. The Canadian corporation was founded by its
current President and Chief Financial Officer, Mr. Raja S. Tuli. Mr. Raja S.
Tuli is also our Chairman of the Board of Directors. When Docuport Delaware was
incorporated on March 24, 1999 the Board of Directors agreed to transfer
5,567,500 shares of common stock together with the equivalent rights to purchase
common stock pursuant to warrants owned, to the shareholders of our Canadian
subsidiary in exchange for 3,711,667 common shares and any warrants held of the
Canadian subsidiary. This constituted all the issued and outstanding shares of
the Canadian company.
Proposed Business
We intend to become a leading developer of portable computer peripheral
equipment. Following five years of research and development, we have developed
and intend to market a patented, "portable" multi functional office machine
called the Slimfax, which we believe is the first product of its kind. The
Slimfax is a combination:
(1) full page fax machine;
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(2) full page scanner;
(3) full page printer,
(4) full page copier; and
(5) fax/data modem,
with dimensions of 12.5" x 3" x 1.24". Full page means 8.5 inches x any length.
The Slimfax weighs approximately 2.1 lbs. It utilizes a power supply consisting
of either a DC connector which conveniently plugs into any electrical outlet; a
rechargeable Nickel Metal Hydride battery and an AC adapter to plug into the
cigarette lighter of a car or boat. We know of no other product currently on the
market which possesses these multifunctional capabilities in this size and
weight.
After five years of research and development, a compact, portable design
was created, for which a United States patent was granted. This patent is based
upon a single roller concept placing a scan head which reads the information fed
into the Slimfax on one side of the roller and print head on the other side of
the roller. A second patent has been refiled after being inadvertently deemed
abandoned by the United States Patent and Trademark Office and the company has
re-submitted such patent. This second patent protects our technology, based upon
support arms allowing documents fed through the Slimfax to pass through the
mechanism unobstructed, which is critical in such a compact design. Three
additional patents are pending for new designs for the Slimfax and related
technologies.
The research and development expenditures for our fiscal years ending
December 31, 1997 and 1998 were $209,800 and $46,440 respectively.
The Slimfax can be used to create a portable office through its ability to
be used with both conventional telephone land lines or in conjunction with
cellular phones, allowing the Slimfax to be used in any location where a
telephone connection can be established.
Product Features
The features of the Slimfax are as follows:
Direct Thermal. The Slimfax incorporates a direct thermal printing technology.
We believe that the direct thermal method provides excellent print quality,
removing the need to carry ribbons and cartridges used in larger printers and
allowing for a very compact and portable design.
Facsimile Machine (Fax). Portable Fax Machines began entering the market in 1993
and 1994. The Slimfax is a full featured, full size (8.5 inches x any length)
fax machine which we believe is the smallest fax machine currently available on
the market. The Slimfax is capable of printing at a speed of 9600 bps (bits per
second) on 8.5 inch sheets or rolled paper and has three modes of resolution
(standard, fine and super fine). If the Slimfax is connected to a telephone line
or cellular phone it can transmit and receive hard copy facsimiles. We believe
that because of Slimfax's patented single roller design, the Slimfax is smaller,
more portable and less expensive than those of the competition. The competitor's
models include Mitsubishi F- 15, Ricoh's "World's smallest fax machine" and NEC
i300. The NEC i300 can only be used with NEC cellular telephones and is very
costly. Sending a
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fax with the Slimfax is done in the same manner as using a stand-alone fax
machine, by inputting the media or file and pressing the corresponding buttons
on the keypad. Limited distribution and high retail costs have prevented the
anticipated growth of portable fax machines. We believe that the current
products in this market will not challenge the Slimfax due to the size, price
and weight of the Slimfax.
Printer. The Slimfax can print full size documents. It can print letters,
spreadsheets, and drawings at a resolution of up to 200 x 400 dpi (dots per
inch) and at a speed of up to two pages-per-minute. Since the Slimfax uses
direct-thermal technology, it removes the necessity of cartridges and ribbons.
There are two general categories in the portable printer market: (A) portable
printers, which are used as either a desktop or a portable printer and (B)
compact portable printers, which are used by mobile business people and
professionals. Portable printers usually weigh between two to seven pounds and
we believe that the only two manufacturers of compact portable printers weighing
less than two (2) pounds are Pentax Technologies and Citizen-America; however,
these are only single function products and, therefore, we believe they are not
directly competitive.
The method used by printers currently include ink jet, bubble jet, thermal
fusion, thermal ribbon and direct thermal technology. Both the ink jet and the
bubble jet require ink cartridges for printing. We believe that the direct
thermal method, which is utilized by the Slimfax as well as certain of its
competitors, permits a compact design and provides excellent print qualities
without requiring the user of the Slimfax to maintain a supply of ribbons or
cartridges.
Scanner. Portable scanners are relatively new to the marketplace. The Slimfax is
a full size, high resolution contact scanner with a resolution of 200 x 400 dpi,
capable of scanning up to two pages-per-minute. Using the Slimfax to scan media
into a computer for recall and printing at the user's convenience removes the
need to carry documents and paperwork. The first company to enter the portable
scanner market was Logitech, with the ScanMan. However, since the ScanMan can't
scan a full page at one time, we believe that the ScanMan will not be
competitive with the Slimfax.
Copier. The Slimfax has a single roller design which allows full size documents
to be scanned and printed simultaneously. This enables the Slimfax to act as a
copier, with an optical resolution of 200 x 400 dpi and print resolution of 200
x 400 dpi. Copies can be made at a speed of two pages-per-minute. At the present
time there are no portable copiers on the market. Xerox attempted to introduce a
portable copier but we believe that this product did not gain acceptance in the
market place. We believe that, since our competitors copiers, while small, are
not easily transportable and certainly not of such size which would merit being
called portable, they will not be competitive with the Slimfax.
Fax Card and Modem for Laptops and Notebooks. The Slimfax can act not only as a
hard copy fax machine, but also utilizes a fax card enabling the user to fax
documents directly from a word processor. Laptops and notebook computers have
facsimile transmission capabilities as part of their software packages, however,
we believe that owners of laptops and notebook computers who only have need for
facsimile transmissions will most likely not purchase the multi-function
Slimfax. The prices of fax cards have generally decreased, even though the cost
of fax cards for notebook computers is still high due to the miniaturization
required. We believe that, because of the high costs, these products are not
competitive with the Slimfax for end users who desire multiple functions in
conjunction with their computer.
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Power Supply. The Slimfax's power is supplied by one of three means:
(i) a DC connector which conveniently plugs into any electrical outlet;
(ii) a rechargeable Nickel Metal Hydride battery; or
(iii) an AC adapter which plugs into the cigarette lighter of a car or
boat.
Customer Base.
We believe that potential customers of the Slimfax will be end users, who
are individuals purchasing the Slimfax for personal use and companies which will
purchase the Slimfax for distribution to employees who travel as a necessary
element of their employment.
End users will be: (A) professionals who travel for business purposes; (B)
individuals who own laptop, notebook, or subnotebook computers; (C) anyone who
owns or plans to purchase a portable peripherals for mobile computing; (D)
anyone who requires hard copy facsimile transmissions from remote locations; (E)
anyone requiring a transportable scanner and (F) anyone needing more space at
their desk.
We believe that our major customers will be (A) Distributors; (B)
Licensees; (C) System Integrators and (D) Value Added Resellers who will market
and sell to end users, such as computer and technology retail stores.
Product Strategy
We intend to create unique packaging for the Slimfax in order to create
quick market awareness and product recognition. This will be part of
multi-faceted marketing campaign designed to introduce the Slimfax to the retail
market. We believe the easy to use design of the Slimfax will be a critical
factor in creating quick market acceptance. An example of the Slimfax's user
friendly design is the use of thermal technology which eliminates the need for
toners and cartridges. We believe that thermal technology is as good or better
than ink jet or laser technology, both which require the use of either toners or
cartridges. We believe the Slimfax will have a competitive advantage based upon
its multiple functions, its size/portability and high quality at an affordable
price. We believe that the Slimfax is very practical and efficient, which is a
necessity in today's mobile product environment.
Pricing Strategy.
We believe that the Slimfax is the first product of its kind to be
introduced to the portable computer market. Therefore, pricing of the Slimfax
will not be influenced by the retail market for multi-function products, but
upon the retail market for portable single use products of equal size and target
customer base. We intend to compete with the price of other similar products
which are currently in the market which are not portable. Our initial retail
pricing of the Slimfax will be approximately $299.00 with an anticipated
reduction to $200.00 one year after the commencement of sales to the public.
Distribution Strategies.
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Although we are reviewing the advantages of distribution by a large
company with the experience and contacts necessary to handle the introduction of
the Slimfax to the market, we have not entered into any agreements as of the
date of this registration statement.
Retail channels of products similar to the Slimfax include: (i) Mail
order/catalog, superstore/computer/office equipment dealers, traditional
computer store and warehouse/club for multifunctional products; (ii) mail
order/catalog, superstore/office/computer specialty store, traditional computer
store, mass merchants and retail stores for personal sheet-federal scanners and
(iii) mail order/catalog, superstores/computer office stores, specialty store,
traditional computer store, mass merchants and retail stores for portable
printers. Peripheral Magazine performed an end user study which identified the
mail/order catalog and both computer and office equipment superstores as the two
prime sales channels for products similar to the Slimfax.
We intend to sell the Slimfax through the following distribution channels:
Direct Marketing. We intend to mail directly to companies which fit a
certain criteria information with respect to Slimfax, followed by telephone and
local demonstrations. Our main purpose for direct sales will be to expeditiously
start the first year sales so there is revenue being generated even if takes the
first year or so to develop the distribution network. We intend to shift the
primary focus towards training dealers on how to sell. We believes that it is
important to constantly have a small internal direct sales force because it will
keep us in touch with end users and gives us better control in directing our
retail dealer base.
Dealers/Distributors. We intend to target distributors which already carry
scanners, copiers, facsimiles, printers, and multifunctional devices. Examples
of the some of the most common distributors for competitive products, include
Ingram Micro, Miresel, TechData and Globelle. We believe that by targeting such
respected names, it will facilitate distribution resulting in early retail
shelf-space.
Retail. We intend to focus on retail channels targeting knowledgeable,
well educated, middle to high income, technically knowledgeable professionals
who travel frequently and need to remain in contact with both clients and their
base offices. We believe that these individuals already own or use portable
computers and will have a use for multi-purpose peripheral equipment such as the
Slimfax.
OEM Channels. We believe that, in the long term, this distribution channel
will be extremely important to us. We desire to sell rights to the Slimfax to
established companies with immediate market recognition which can private label,
i.e., put their own name on the Slimfax. The companies to be targeted will be
manufacturers of computer equipment such as Hewlett Packard, Visoneer,
Pentax-Technologies. We have entered into a non-binding letter of intent with
Pentax Technologies for the purpose of distributing the Slimfax in this manner.
Pentax Technologies intends to privately label the Slimfax pursuant to this
letter of intent.
System Integrators. There are many companies across North America which
sell mobile office solutions. They usually package a special design brief case
which includes a notebook computer, portable printer, and, on occasion, a
sheetfed or hand fed scanner and cellular phone. These are then sold as packages
in volume to governments, real estate companies, insurance companies, and other
business which involve significant travel as a complete mobile office solution.
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We believe that companies will have a great interest in the Slimfax since it
will offer them greater mobility, a small product size, and more features
without an increase in cost.
Value Added Reseller's. These companies are responsible for marketing and
selling the package which System Integrators design for end users. We intend to
utilize value added resellers in our second year of operations. We intend to
launch the Slimfax with extensive publicity in several major cities together
with large volume mailings to certain target publications. We intend to place
descriptive articles announcing the introduction of the Slimfax in a large
number of newspapers and trade magazines in the hopes of alleviating the high
cost of private advertising.
Internet - World Wide Web. Since the Internet has a rapidly increasing
number of users, we intend to design and maintain a webpage for use as a
marketing tool in an attempt to capitalize on the rapidly growing information
highway.
Future Products
We intend to improve the features of the Slimfax by developing and
producing new features such as infrared data association, color printing,
increased printing, copying, scanning, faxing speed and increased resolution. We
believe that these features are essential to maintain what we believe is the
Slimfax's position ahead of present and future competitors.
Additionally, we are in the process of developing a portable pen-size
scanner. The Pen-Size Scanner is 8.5 inches in length with an outside diameter
of a 1/4" and weighs 2.5 ounces, which enables individuals to keep the unit in
their possession at all times. The Pen-Size Scanner has a color contact-sensor.
It utilizes a power supply of a rechargeable lithium battery which, when fully
charged, is capable of 100 scans. The Pen-Size Scanner has a memory of up to 100
image or text files. Scanning is performed by holding the unit in ones' hand,
across the entire 8.5 inch width of a page and manually pulling the scanner down
the entire length of the page over the image to be scanned which results in an
8.5 x 11 image. In view of the Pen-Sized Scanner's portability, it is ideal for
remote locations.
The Pen-Size Scanner allows the user to save the scanned document, which
can then be downloaded to any computer for viewing or merging into word
processing programs, spreadsheets or graphics design applications such as MS
Word, Excel, Photoshop and Coral Draw.
We intend to complete development of the Pen-Sized Scanner and to
manufacture a prototype within the next 60 days. Within six months following the
initial production, we intend to begin production and beta testing of the
Pen-Sized Scanner.
We are also researching and in the process of developing a Second
Generation Slimfax. Unlike current industry standards which incorporate a
parallel scan-head design for use in personal-sheetfed scanning products, the
Second Generation Slimfax will utilize a traversing scan head and print head.
This traversing scan head and print head will result in the Second Generation
Slimfax being smaller than the Slimfax we initially intend to introduce into the
market. Moreover, we contemplate that the Second Generation Slimfax will be
produced at a lower cost than the Slimfax. We have applied for a U.S. patent to
protect our proprietary rights to this technology. This new
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product will be marketed as a single unit or in a modular format for single
functions such as a fax, printer or scanner.
We will initially manufacture the Slimfax ourselves. However, when demand
for the Slimfax increases, we intend to enter into agreements to have the
Slimfax manufactured abroad. Once these contracts are entered into, we will no
longer manufacture the Slimfax.
Dividend Policy
To date, we have not paid dividends on our common stock and at the present
time, we intend to retain earnings, if any, for our development and expansion.
There can be no assurance that we will have enough earnings to pay any dividends
on our common stock. Even if we have sufficient earnings, we are not obligated
to declare dividends on our common stock. Our board has sole and absolute
discretion whether to declare any cash or stock dividends. This decision will be
based upon the following:
o earnings;
o capital requirements;
o our financial position;
o general economic conditions; and
o other factors the board may consider.
It is also possible that the terms of any future debt financing may
restrict the payment of dividends.
Employees
We currently employ six full time employees consisting of four engineers,
one technician and one computer scientist. In addition, Mr. Norman Docteroff has
signed an employment agreement with us which requires him to work a minimum of
30 hours per week for us. Mr. Raja S. Tuli has orally agreed to spend 10%
percent of his time working for us.
Offices
Our executive offices are currently located at 1155 Rene Levesque West,
Suite 3500, P.O.Box 60, Montreal, PQ, H3B 3T6, Canada. The offices are provided
by Technologie Novimage, a research and development company, of which Raja S.
Tuli, who is our founder, Chairman of the Board of Directors, owns 10% of the
issued and outstanding common stock. We are not charged for use of this office
space. We are currently examining a proposal for additional office space at 1000
St-Antoine Street, Suite 700, Montreal, Canada for use as an assembly and
manufacturing site and for additional office space for a term of one year. The
premises is comprised of 2,490 square feet for a minimum lease price of $9,960
per year.
In addition we utilize 2000 square feet of office space provided by
Solutions Plus, Inc., at no cost pursuant to our Marketing and Sales Agreement,
for our United States operations. These offices are located at 81 Two Bridges
Road, Fairfield, New Jersey, 07004. If the space provided by
22
<PAGE>
Solutions Plus, Inc., at this location is insufficient for our needs, as
determined by our board and Solutions Plus, Inc., we will enter into a lease for
office space which meets our requirements.
MANAGEMENT
Executive Officers and Directors
The following table sets forth the names and ages of the members of our
board, our executive officers and the positions they each hold.
Name Age Position
- ---- --- --------
Norman Docteroff 65 President and
Chief Executive Officer
Raja S. Tuli 33 Chairman of the Board
of Directors
Madan G. Singh 53 Director
Lakhbir Tuli 61 Director
Melvin Yablon 69 Director
Mr. Norman Docteroff has been our President and Chief Executive Officer
since April 15, 1999, pursuant to a three year employment agreement. In 1994,
Mr. Docteroff founded and is currently President and a Director of Solutions
Plus, Inc., which is wholly owned by his wife Corina Docteroff. Solutions Plus,
Inc. specializes in assisting small companies to market and sell their products.
From 1989 to 1994, Mr. Docteroff was employed under a five year management
contract by Gemini Industries, Inc., a business he and an associate started in
1968. Gemini Industries, Inc., manufactured various audio and video accessories.
In 1986, Mr. Docteroff and his associate sold 75% of the business. The remaining
25% was sold in 1989. From 1962 to 1968, Mr. Docteroff was the national sales
manager of Manhattan Industries, a major consumer products company. From 1957 to
1961, Mr. Docteroff owned and operated hardware departments in chain department
stores, which were sold to Modells Department Stores. Mr. Docteroff is a
director of several private companies and of Xceed Corp., a public company
engaged in providing companies with marketing, sales and interactive and network
services. These services focus on the expanding use of the Internet as a retail
sales medium. Xceed trades on the Nasdaq National Market System.
Raja S. Tuli, our founder, had been our President, Chief Executive Officer
from the inception of our Canadian subsidiary until April 5, 1999. Since our
hiring of a new President and Chief Executive Officer in April 1999, Mr. Tuli
has been serving as our Chairman of the Board of Directors. From 1990 to the
present, Mr. Tuli has been President, Chief Executive Officer and a Director of
WideCom Group, Inc. From 1990 to 1993, Mr. Tuli was also Treasurer of WideCom
Group, Inc. From 1987 to 1990 Mr. Tuli was President of CACE Ltd. a family-owned
23
<PAGE>
architectural/construction business. Mr. Tuli received a Bachelor of Science
degree in Computer Engineering in 1988 from the University of Alberta.
Madan G. Singh, an uncle of Raja S. Tuli, has been one of our directors
since the inception of our Canadian subsidiary. He received doctorate degrees
from Cambridge University (England), Toulouse (France) and the University of
Waterloo (Canada). Dr. Singh has a B.S. from Exeter University, and a M.S. from
Manchester University. Dr. Singh has been the Chairman of the Computer
Department and Chairman of Control Engineering at the University of Manchester
Institute of Science and Technology in Manchester, England since 1979. He was
head of the Post Graduate Department of the University of Manchester from 1981 -
1983 and from 1985 to 1987. In February 1994, he was made a "Chavalier dans
l'ordre des Palmes Academiques" (a French academic honor) by a decree signed by
the Prime Minister of France. Dr. Singh edited the ten volume "Encyclopedia of
Systems and Control", coordinated the publication of eight Concise Encyclopedias
(each on a different matter), authored or co-authorized eight books and over 170
scientific articles and edited or co-edited ten additional books.
Lakhbir Tuli, father of Raja and Suneet Tuli (brother of Raja S. Tuli and
one of our principal shareholders), has been one of our directors since the
inception of our Canadian subsidiary From 1993 to the present, Mr. Tuli has been
president of Widecom Fax and Plotters, Inc. From 1990 to the present, Mr. Tuli
has been a consultant to WideCom Group, Inc. Mr. Tuli received a M.S.C. science
degree in Civil Engineering from Punjab University in 1961.
Melvin Yablon has been one of our directors since July __, 1999. From 1990
until 1998, Mr. Yablon was the president and sole shareholder of North America
Intercon, Ltd., a company engaged in importing goods for sale. From 1977 to the
present, Mr. Yablon has been the president and sole shareholder of First
Adjusters, Inc., an insurance adjusting firm.
All of the our directors will serve until the next annual stockholders'
meeting when their successors will be elected and qualify. Officers are elected
at the meeting of the Board following the annual stockholders' meeting. None of
the current officers or directors are required or expected to devote all of
their time to our business.
Mr. Raja S. Tuli and members of his immediate family (Raja S. Tuli and
members of his immediate family are hereinafter collectively referred to as the
"Tuli family shareholders") own approximately 58% of our issued and outstanding
common stock. The Tuli family stockholders have agreed that for a period of five
years commencing April 1, 1999, our board will consist of five board members and
that two of our directors will be outside directors, who are directors whom we
do not employ. We have only one outside director as of the date of this
prospectus. We anticipate that a second outside director will soon be elected by
our shareholders other than the Tuli family stockholders. This agreement also
provides that for this five year period the Tuli family stockholders will not
have the right to participate in a vote to elect the outside directors. The
outside directors will, therefore be elected by a majority of our other
stockholders. This agreement will remain in effect for five years unless an
underwriter of a future registration of our securities requests that this be
changed. Whether or not to comply with the underwriter's request will be in the
sole and absolute discretion of the Tuli family stockholders. Even though our
outside directors will be elected by stockholders other than the Tuli family
stockholders, the Tuli family stockholders will control our management and
affairs. After the five year period, based upon their present ownership
percentage
24
<PAGE>
of our issued and outstanding common stock, the Tuli family stockholders, will
have the power to elect all of our directors.
We will pay each of our outside directors $1,000 for each board meeting
they attend. Each outside director is also entitled to reimbursement for
reasonable expenses incurred with respect to attending each meeting.
Executive Compensation
We have entered into a three year employment agreement with Norman
Docteroff, who is our President and Chief Executive Officer. The agreement
provides a salary in the form of options to purchase an aggregate 250,000 shares
of our common stock at an exercise price of $2.00. Each month, a pro rata share
of the options will vest; Mr. Docteroff will earn the right to purchase 6,945
options each month. On May 1, 1999, we made the first $10,000 monthly payment to
Solutions Plus, Inc. pursuant to the Marketing and Sales Agreement dated the 5th
day of April, 1999 and are obligated to make 34 additional monthly payments.
These payments will last for the duration of the three year agreement. Solutions
Plus, Inc. is owned by Corina Docteroff, wife of Mr. Docteroff, who is the
president and a director of Solutions Plus, Inc.
We can terminate the employment of Mr. Docteroff upon death or extended
disability or for cause as defined in the employment agreement. In addition, we
may terminate his employment agreement for any reason upon 30 days' notice. If
we terminate without cause, the remaining options which have not vested will
immediately vest.
Raja S. Tuli receives an annual salary of CN$24,000 (Canadian Dollars) in
payments of CN$2,000 per month. We do not have a written agreement with Mr. Tuli
for his employment.
Stock Option Plan
We intend to implement a stock option plan in the near future. The purpose
of the plan will be to provide our directors, officers, key employees and
consultants with additional incentives by increasing their ownership interests.
The stock option plan, which we anticipate will incorporate both qualified and
non-qualified options, will contain terms which shall be approved by the board
and submitted to the shareholders for approval.
Indemnification of Directors and Officers
Our certificate of incorporation contains the following provision with
respect to indemnification of our directors and officers:
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of Section
102(b)(7) of the General Corporation Law of the State of Delaware, as the same
may be amended or supplemented.
This provision does not eliminate or limit the liability of a director for
violating the following:
25
<PAGE>
o duty of loyalty (which includes a director's obligation to refrain
from self dealing with us improperly competing with us or usurping our
opportunities);
o failing to act in good faith;
o engaging in intentional misconduct or knowingly violating a law;
or
o participating in the payment of a dividend or a stock repurchase
or redemption for himself.
This provision does not affect any director's liability under federal
securities laws or the availability of equitable remedies such as an injunction
or rescission for breach of fiduciary duty.
We intend to purchase directors liability insurance for our officers and
directors. However, there can be no assurance that such insurance will be
available to us at commercially reasonable terms, or at all.
Certain Relationships and Transactions
In December, 1998, we entered into a three year management and consulting
agreement with Rexon Limited, a Swiss based company. The agreement provides that
Rexon will provide us with various management, marketing, business planning an
acquisition strategies. As compensation, Rexon received 23.3% of the then issued
and outstanding shares of the common stock of the Canadian corporation. Upon the
exchange of the Canadian Corporation's shares for ours, Rexon became the
beneficial owner of approximately 1,195,000 shares of our common stock.
Subsequently, Rexon transferred 295,000 shares to Diversified Investors for
services rendered to Rexon and 616,000 shares to other third parties. In
addition, we have agreed to pay Rexon $5,000 per month for a period of two years
after we become a publicly traded company. We have not yet begun to pay Rexon
its fees.
In April, 1999, we entered into three year non-exclusive Marketing and
Sales Agreement with Solutions Plus, Inc., which is wholly owned by Corina
Docteroff, the wife of Norman Docteroff, who, in addition to being our President
and Chief Executive Officer, is the President and a Director of Solutions Plus,
Inc. Mr. Docteroff has signed an employment agreement which requires him to work
a minimum of 30 hours per week for us. Solutions Plus, Inc. specializes in
marketing, sales and networking. The agreement requires Solutions Plus, Inc. to
market, sell and provide support services with respect to the Slimfax. In
addition, Solutions Plus, Inc. will provide the following services:
o manage our financial records including the billing of customers, payment
of expenses such as insurance policies, leases, bills and other related
administrative matters;
o maintain our employment records;
o maintain account and company records in accordance with generally
accepted accounting standards; and
o maintain an operating account for us for the deposit of funds generated
by product sales and for payment of our operating expenses.
26
<PAGE>
As part of our marketing agreement, Solutions Plus, Inc. is providing us with
space in their offices for our United States based employees such as our
accounting, sales and marketing staff. In exchange, we agreed to pay Solutions
Plus, Inc. $10,000 per month starting May 1, 1999 and continuing for the
duration of the agreement. Solutions Plus, Inc. will receive 10% of gross sales
which Solutions Plus, Inc. generates of our product, less returns. In addition,
Solutions Plus, Inc. will receive 5% of all gross sales of our product to
companies which sell the Slimfax under their own private label, less returns. We
can terminate the Marketing and Sales agreement if Solutions Plus, Inc. fails to
sell 25,000 Slimfax machines within the first twelve months after the Slimfax
becomes commercially available and an additional 125,000 Slimfax machines during
the second 12 month period after the Slimfax becomes commercially available.
27
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of common stock owned and the
percentage of our outstanding shares of common stock as of July 9, 1999 for the
following:
o all persons who own more than 5 percent of our outstanding common stock;
o each officer and director;
o officers and directors as a group.
- --------------------------------------------------------------------------------
AMOUNT OF
NAME BENEFICIAL PERCENTAGE
OWNERSHIP
- --------------------------------------------------------------------------------
Raja S. Tuli
c/o Docuport, Inc.
1155 Rene Levesque West 1,750,000 29.15%
Suite 3500
Montreal, PQ, H3B 3T6, Canada
- --------------------------------------------------------------------------------
Suneet Tuli(1)
c/o Docuport, Inc.
1155 Rene Levesque West 875,000 14.57%
Suite 3500
Montreal, PQ, H3B 3T6, Canada
- --------------------------------------------------------------------------------
Lakhbir Tuli
1290 Whiteoaks Avenue
Mississauga, Ontario 875,000 14.57%
L5J 3C1
Canada
- --------------------------------------------------------------------------------
Norman Docteroff
81 Two Bridges Road 27,780(2) .46%
Fairfield, New Jersey 07005
- --------------------------------------------------------------------------------
Melvin Yablon
220 East 57th Street, Apt. 2C 37,500(3) .62%
New York, NY 10022
- --------------------------------------------------------------------------------
Diversified Investors Capital
Services of North America, Inc. 704,000 11.73%
850 Third Avenue
New York, N.Y. 10022
- --------------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
Madan Singh 0 0.0%
c/o Docuport, Inc.
1155 Rene Levesque West
Suite 3500
Montreal, PQ, H3B 3T6, Canada
- --------------------------------------------------------------------------------
All Officers and Directors
as a group (6 people) 3,565,280 59.40%
- --------------------------------------------------------------------------------
- ----------
(1) Suneet Tuli is the brother of Raja S. Tuli, who is our Chairman of the Board
of Directors and the son of Lakhbir Tuli, one of our directors.
(2) Includes options to purchase shares of our common stock which were issued to
Mr. Docteroff as compensation in connection with his employment agreement to
serve as our Chief Executive Officer and a director.
(3) Amounts indicated do not include 7,500 shares of our common stock underlying
the common stock purchase warrants held by Mr. Yablon which he purchased in the
1996 private offering. Those warrants will not be exercisable until the earlier
to occur of either August 1, 2000 or the closing of a financing of $5,000,000.
We believe that each of the persons and entities listed above have the
sole voting power with respect to the shares of common stock beneficially owned
by each of them.
We have entered into an agreement with the following: Mr. Tuli and certain
members of his family who own our common stock, Rexon Limited and Diversified
Investors Capital Services of North America, Inc. with respect to their
ownership of our common stock and our registration of their shares. In exchange
for registering certain of their shares which are the subject of this
registration statement, Mr. Tuli and the members of his family who own shares of
our common stock may sell 300,000 shares at the rate of 100,000 shares per
quarter and Rexon Limited and Diversified Investors may each sell 75,000 shares
at the rate of 25,000 shares per quarter. The first quarter commences 90 days
following this registration statement becoming effective.
Plan of Distribution
Prior to this registration, no public market for our securities existed. A
total of up to 1,233,333 shares may be sold pursuant to this prospectus by
certain of our stockholders. Except as we have described above, the stockholders
selling our stock have never held any position or office with us or had any
other material relationship with us. We will not receive any of the proceeds
from the sale of our common stock by selling stockholders.
The selling stockholders may, from time to time sell all or a portion of
their registered shares in negotiated transactions or on any exchange in which
we may list or trade our common stock, at prices then prevailing or related to
the then current market price. The shares will not be sold in an underwritten
public offering, but may be sold either directly or through brokers or dealers.
Brokers
29
<PAGE>
or dealers may receive commissions or discounts from selling stockholders (or if
any such broker-dealer acts as agent for the purchaser of such shares, from the
purchaser) in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares Owned Shares Owned Percentage of
Selling Prior to Following Shares following
Stockholder Registration Shares Registered Registration(1) Registration
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Raja S. Tuli, 1,750,000 300,000 1,450,000 24.15%
Chairman of the
Board of Directors
- -------------------------------------------------------------------------------------------------------------------
Norman Docteroff 250,000(2) 83,333 166,667 2.77%
- -------------------------------------------------------------------------------------------------------------------
Aarnel Funding 25,000 25,000 0
Corp. Pension Plan
- -------------------------------------------------------------------------------------------------------------------
Artas Corporation 40,000 40,000 0
- -------------------------------------------------------------------------------------------------------------------
Baker, David 6,000 1,000 5,000
- -------------------------------------------------------------------------------------------------------------------
Barotz, Norman 2,500 1,500 1,000
- -------------------------------------------------------------------------------------------------------------------
Berg, Jake 20,000 20,000 0
- -------------------------------------------------------------------------------------------------------------------
Bowen, Ellen, & 1,000 1,000 0
Doug
- -------------------------------------------------------------------------------------------------------------------
Brown, Gary 5,000 2,000 3,000
- -------------------------------------------------------------------------------------------------------------------
Bushong, Heather 9,750 3,000 6,750
- -------------------------------------------------------------------------------------------------------------------
Calderola, Nancy 3,000 2,000 1,000
- -------------------------------------------------------------------------------------------------------------------
Castellano, Anthony 20,000 12,500 7,500
- -------------------------------------------------------------------------------------------------------------------
Chianese, Lawrence 1,000 1,000 0
- -------------------------------------------------------------------------------------------------------------------
Corsalini, Marie 4,500 2,000 2,500
- -------------------------------------------------------------------------------------------------------------------
DiModica, Joseph 10,000 10,000 0
- -------------------------------------------------------------------------------------------------------------------
Diversified Investors 701,000 409,000 292,000 4.86%
Capital Services of
North America, Inc.
- -------------------------------------------------------------------------------------------------------------------
Evans, Debra 42,500 15,000 27,500
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Fam Gindi 5,000 5,000 0
- -------------------------------------------------------------------------------------------------------------------
Finesod, Ben 5,000 2,000 3,000
- -------------------------------------------------------------------------------------------------------------------
Forgione, Diane & 2,500 2,500 0
Peter
- -------------------------------------------------------------------------------------------------------------------
Hayhurst, Sandra &
Walter 2,000 2,000 0
- -------------------------------------------------------------------------------------------------------------------
Hazoury, Anandy 25,000 10,000 15,000
- -------------------------------------------------------------------------------------------------------------------
Hersch, Andrew 37,500 12,500 25,000
- -------------------------------------------------------------------------------------------------------------------
Kaplan, Hilan Trust, 500 500 0
Lovey Kaplan
Trustee
- -------------------------------------------------------------------------------------------------------------------
Kessler, Robert 32,500 10,000 22,500
- -------------------------------------------------------------------------------------------------------------------
Kramer & Kramer 3,000 1,000 2,000
- -------------------------------------------------------------------------------------------------------------------
Leeman, Ira S 20,000 20,000 0
- -------------------------------------------------------------------------------------------------------------------
Lerner, Arthur H 5,000 5,000 0
- -------------------------------------------------------------------------------------------------------------------
London, Joyce 2,000 1,500 500
- -------------------------------------------------------------------------------------------------------------------
Ludeau, Cedric 5,000 5,000 0
- -------------------------------------------------------------------------------------------------------------------
Mancuso, Anthony R. 5,000 5,000 0
- -------------------------------------------------------------------------------------------------------------------
Mastey, Henri 4,000 2,000 2,000
- -------------------------------------------------------------------------------------------------------------------
Mastey, Jean Yves 4,000 2,000 2,000
- -------------------------------------------------------------------------------------------------------------------
Matrangolo, Stephen 7,500 7,500 0
- -------------------------------------------------------------------------------------------------------------------
McKean, Andrew 2,500 2,500 0
- -------------------------------------------------------------------------------------------------------------------
Mellis, Lee 3,000 1,000 2,000
- -------------------------------------------------------------------------------------------------------------------
Merchant Ent. Ltd. 2,000 2,000 2,000
- -------------------------------------------------------------------------------------------------------------------
Miller, Michael 20,000 20,000 0
- -------------------------------------------------------------------------------------------------------------------
Mintz & Fraade, 15,000 15,000 0
P.C
- -------------------------------------------------------------------------------------------------------------------
MMH Investments, 37,500 12,500 25,000
Inc.
- -------------------------------------------------------------------------------------------------------------------
Pedrignani, Paolo 10,000 5,000 5,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Peterson, Brent 1,000 1,000 0
- -------------------------------------------------------------------------------------------------------------------
Regency 5,750 1,000 4,750
Resources,Inc
- -------------------------------------------------------------------------------------------------------------------
Rowe, Sandra 1,000 1,000 0
- -------------------------------------------------------------------------------------------------------------------
Schuster,Jerome 50,000 15,000 35,000
- -------------------------------------------------------------------------------------------------------------------
Shapiro, Jane 1,000 1,000 0
- -------------------------------------------------------------------------------------------------------------------
Spellane, Tom 2,000 2,000 0
- -------------------------------------------------------------------------------------------------------------------
Steiner, Jeffery 5,000 2,000 3,000
- -------------------------------------------------------------------------------------------------------------------
Stepniewski, Jackie 7,000 2,000 5,000
- -------------------------------------------------------------------------------------------------------------------
Stone, Gladys 2,000 2,000 0
- -------------------------------------------------------------------------------------------------------------------
Stone, Lawrence 34,500 34,500 0
- -------------------------------------------------------------------------------------------------------------------
Telesnick, Alan 9.500 2,000 7,500
- -------------------------------------------------------------------------------------------------------------------
Tigrak, Omer 3,000 1,000 2,000
- -------------------------------------------------------------------------------------------------------------------
Tobias, Barbara 4,000 2,000 2,000
- -------------------------------------------------------------------------------------------------------------------
Toboroff, Leonard 10,000 5,000 5,000
- -------------------------------------------------------------------------------------------------------------------
Toth, Francis 5,000 2,000 3,000
- -------------------------------------------------------------------------------------------------------------------
Tristan, Lucia 2,000 1,000 1,000
- -------------------------------------------------------------------------------------------------------------------
Vecchio 65,000 65,000 0
Consultants, Inc.
- -------------------------------------------------------------------------------------------------------------------
Weissman, Jody 8,7500 2,000 6,750
- -------------------------------------------------------------------------------------------------------------------
Wells, John 15,000 5,000 10,000
- -------------------------------------------------------------------------------------------------------------------
Wunderlin, Rosalind 1,000 1,000 0
- -------------------------------------------------------------------------------------------------------------------
Yablon, Melvin 37,500 15,000 22,500
- -------------------------------------------------------------------------------------------------------------------
Zion Morally 1,000 1,000 0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes all shares registered pursuant to this prospectus are sold by
the selling shareholders.
(2) Represents shares available to be purchased pursuant to options issued
to Mr. Docteroff as compensation pursuant to his employment agreement to serve
as our Chief Executive Officer and a director, which provide for the vesting of
options to purchase 6,945 shares of common stock per month.
32
<PAGE>
DESCRIPTION OF THE SECURITIES
General
The following description summarizes our authorized and currently
outstanding securities. We are authorized to issue 12,000,000 shares of common
stock, par value $.001 per share and a maximum of 2,000,000 shares of preferred
stock, $.01 per share. There are 6,002,500 shares of common stock issued and
outstanding as of the date of this prospectus. No shares of preferred stock have
been issued.
Common Stock
Each holder of shares of our common stock, issued and outstanding, is
entitled to one vote per share held and has the sole right and power to vote
upon all matters upon which a vote of stockholders is taken. Neither our
certificate of incorporation nor our by laws permit our stockholders to vote
their shares cumulatively. Upon liquidation, dissolution, or winding up of our
business, the owners of common stock are entitled to receive our net assets in
proportion to the respective number of shares held by them, following payment to
our preferred stockholders. The holders of Common Stock do not have any
preemptive right to subscribe for or purchase any Shares of any class of stock.
All of our outstanding shares of common stock are fully paid and non-assessable
and not subject to further call or redemption.
To date, we have never paid dividends on any of our common stock and we
intend to reinvest earnings, if any, for the development and expansion of our
business. We do not guarantee that we will have enough earnings to pay any
dividends on our common stock. Even if we have sufficient earnings, we are not
required to declare dividends on our common stock. Whether we should declare
cash or stock dividends will be in the sole and absolute discretion of our board
and will depend on our earnings, capital requirements, financial position,
general economic conditions and other relevant factors. It is also possible that
the terms of any future debt financing may restrict declaration of dividends.
Preferred Stock
We are authorized by our certificate of incorporation to issue preferred
stock, in one or more series which may contain rights, privileges and
limitations, including:
o conversion privileges o dividends
o redemption rights o liquidation privileges.
Except as specifically provided by the Delaware General Corporation Law
relating to the voting by all classes of stock, holders of preferred stock will
have no voting rights unless specifically granted by our board. We have not
issued any of our preferred stock, as of the date of this prospectus and
currently have no plans to do so.
If any shares of preferred stock are issued, a certificate of designation,
setting forth the series of such preferred stock and the rights, privileges and
limitations of the holders of the preferred stock will be filed with the
Secretary of State of the State of Delaware. This may have the effect the of
33
<PAGE>
delaying, deferring or preventing a change in control of our management without
further action by other stockholders and may adversely affect the rights of the
holders of our common stock.
Warrants
In July 1996 we conducted a private offering pursuant to Rule 504 of the
Securities Act of 1933, as amended. The offering raised $575,000 which we used
as working capital and to assist research and development of our products. Each
investor in the 1996 private offering purchased a unit (or a fractional unit)
valued at $50,000. Each unit consisted of the following: (a) a $50,000
promissory note bearing 10% interest per year and maturing upon the earlier of
two years from issuance or the effective date of an initial public offering; (b)
10,000 shares of common stock, which were exchanged for 15,000 shares of our
common stock upon the exchange of common stock (the "Exchange") in our Canadian
subsidiary for our common stock; and (c) 10,000 common stock purchase warrants,
which were exchanged for 15,000 common stock purchase warrants upon the exchange
of common stock in our Canadian subsidiary for our common stock.
In February, 1999 we offered an extension agreement to the investors of
the 1996 offering which extended the due date of the Promissory Notes which were
part of the 1996 private offering. Sixteen of the 18 investors agreed to the
extension. As compensation to the investors who agreed to the extension, we: (A)
issued additional warrants equal to the number of the warrants held (as adjusted
upon the Exchange) with an exercise price of $0.10 per share and (B) the
exercise price for the warrants originally issued in connection with the 1996
private offering was reduced from $1.67 (as adjusted) to $0.10. The extension
agreement extended the due date for the Promissory Notes until the earlier to
occur of either (a) August 1, 2000; or (b) the raising an aggregate of
$5,000,000 in financing.
Warrant holders may exercise their rights by surrendering the warrant
certificate to us, with the fully completed and executed subscription form,
together with payment of the exercise price. Commencing upon the date of the
purchase, the warrants may be exercised at any time in whole or part at the
applicable exercise price until the warrants expire. We will not issue
fractional shares when the warrants are exercised.
The exercise price and the number of shares of common stock purchased upon
the exercise of the warrants are subject to adjustment if certain events were
occur such as stock dividends, stock splits, combinations or reclassifications
of the common stock. Additionally, an adjustment would be made in the case of a
reclassification or exchange of common stock, or if we were to consolidation or
merge, in order to enable warrant holders to acquire the kind and number of
shares of stock or other securities or property receivable in such event by a
holder of the number of shares of common stock that might have been purchased
upon the exercise of the warrant.
Previous Private Offerings
In July, 1996, we conducted a private offering, pursuant to Rule 504 of
Regulation D of the Securities Act of 1933, as amended, in which it raised
$575,000. Each investor in the 1996 offering purchased units consisting of the
following securities: (i) a $50,000 non-negotiable promissory note at 10%
interest, due at the earlier of either two years after the closing of the
private placement or an initial public offering, (ii) 10,000 shares of our
common stock, and (iii) a warrant to purchase 10,000
34
<PAGE>
shares of our common stock at a purchase price of $2.50 per share one year
following an initial public offering and expiring five years following the
initial public offering, however, no provisions have been made if we do not
conduct an initial public offering. In February 1999, investors in the 1996
private placement were offered an extension agreement which extended the due
date of the promissory note in exchange for additional warrants equal to 1.5
times the number of original warrants to adjust for the exchange of shares of
common stock in our Canadian subsidiary for shares of our common stock on a
three for two basis, at a purchase price of $.10 per share. In addition, the
original purchase price of the warrants was reduced from $1.67 (as adjusted) to
$0.10. Sixteen of the eighteen investors in the 1996 private placement agreed to
this extension, executing extension agreements.
In March, 1999 Docuport Delaware commenced a private offering of shares,
pursuant to Rule 504 of Regulation D of the Securities Act of 1933, as amended,
of its common stock, which closed in April selling 700,000 shares at a purchase
price of $.10 per share. The shares purchased in the March, 1999 offering are
restricted and are not freely transferrable until the earlier of either one year
following purchase of the shares or registration of the shares with the SEC.
On March 24, 1999, our board and the board of our Canadian subsidiary,
authorized the exchange of all of the issued and outstanding shares and warrants
of the Canadian corporation into our shares or warrants to purchase our shares
on a 3 for 2 basis. Thus, for every 100 shares of the Canadian corporation's
common stock, a stockholder received 150 shares of our common stock. The
Canadian subsidiary continues in existence as our subsidiary.
In April, 1999 Docuport Delaware concluded a private offering, pursuant to
Rule 504 of Regulation D of the Securities Act of 1933, as amended, of shares of
our common stock, selling 435,000 shares at a purchase price of $2.00 per share.
Shares Eligible for Future Sale
We currently have outstanding 6,002,500 shares of common stock. Of these
shares 1,150,000 (excluding shares underlying options granted to Norman
Docteroff as compensation in connection with his employment agreement to serve
as our Chief Executive Officer and a director) will be registered pursuant to
this registration statement and will be freely transferable without restriction
or further registration under the Securities Act. In addition, we have issued an
aggregate of 607,500 shares in private offerings pursuant to Rule 504 of the
Securities Act of 1933, as amended. These shares, while not registered with the
SEC are freely transferable by their respective owners.
All of the remaining 4,245,000 shares of our outstanding common stock
outstanding are "restricted securities," as that term is defined in Rule 144
promulgated under the Securities Act, and may only be sold pursuant to an
effective registration statement under the Securities Act, or in compliance with
the exemption provisions of Rule 144 or pursuant to another exemption under the
Securities Act.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year is entitled to sell,
35
<PAGE>
within any three-month period, a number of shares that does not exceed the
greater of 1% of the then outstanding shares of the issuer's common stock or the
average weekly trading volume during the four calendar weeks preceding such
sale, provided that certain public information about the issuer as required by
Rule 144 is then available and the seller complies with certain other
requirements. Affiliates may sell unrestricted securities in compliance with
Rule 144, other than the holding period requirement. A person who is not an
affiliate, has not been affiliate within two months prior to sale, and has
beneficially owned the restricted securities for at least two years, is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above.
Prior to this registration, there has been no public trading market for
the common stock and we cannot predict the effect, if any, that public sales of
shares of common stock or the availability of shares for sale will have on the
market prices of the common stock and warrants. Nevertheless, the possibility
that a substantial amount of common stock or warrants may be sold in the public
market may adversely effect prevailing market prices and could impair our
ability to raise capital through the sale of its equity securities.
Determination of Offering Price
Prior to this registration of our common stock, there has been no public
market for any of our securities and there can be no assurance that a market
will develop. In recent private offerings of our securities, we have sold our
common stock at prices of $.10 and $2.00. The price of our common stock, when
sold by our stockholders will be determined by broker-dealers and market makers
in negotiated transactions, or trades over the open market where we intend to
list our common stock. Among factors which may be considered by broker-dealers,
market makers and investors to determine the price for our securities in the
public market are:
o estimates of our business potential;
o prevailing market conditions in the U.S. economy and the market in which
we intend to compete;
o an evaluation of other companies comparable to us and their ability to
effectively compete with our product.
Transfer Agent
The transfer agent for our common stock is Liberty Transfer Company, 191
New York Avenue, Huntington, New York 11243.
INTEREST OF NAMED EXPERTS AND COUNSEL
Legal Matters
The legality of our common stock has been passed upon on our behalf by
Mintz & Fraade, P.C., New York, New York. Mintz & Fraade, P.C. beneficially owns
15,000 shares of our common stock.
Experts
36
<PAGE>
The financial statements included in this prospectus and in the
Registration Statement have been audited by BDO Dunwoody, independent chartered
accountants, to the extent and for the periods set forth in their report
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such reports given upon the authority of said firm as experts
in accounting and auditing.
LEGAL PROCEEDINGS
We do not know of any litigation pending, threatened or contemplated, or
unsatisfied judgments, against us, or of any proceeding to which we are a party.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act (together with all amendments
and exhibits) for the securities registered by this registration statement. This
Prospectus, filed as a part of the registration statement, does not contain all
of the information set forth in, or annexed as exhibits to, the registration
statement, certain parts of which are omitted in accordance with the rules and
regulations of the commission. For further information about us, please refer to
the registration statement, including its exhibits and schedules, which may be
inspected without charge at the principal office of the commission, 450 Fifth
Street, NW, Washington, D.C. 20549, or at other regional offices of the
commission. Copies of such material may be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, NW, Washington, D.C.
20549, at prescribed rates. Such material may also be accessed electronically at
the SEC's home page on the Internet at http://www.sec.gov.
37
<PAGE>
- --------------------------------------------------------------------------------
Docuport, Inc.
1,233,333 Shares
--------------
PROSPECTUS
--------------
We have not authorized anyone to give any information or to make any
representations other than those contained in this Prospectus. No other
information should be relied upon. The information contained in this prospectus
is current only to the date of this prospectus. This Prospectus does not offer
to sell any securities in any jurisdiction where to do so would be unlawful.
----------
Until , 1999 (25 days after the date of this prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligations of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
______ , 1999
================================================================================
38
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report .............................................. F-2
Audited Balance Sheets as of December 31, 1998 ............................ F-3
Statements of Operations, for the Period of Inception
Through the Fiscal Year Ended December 31, 1998 ........................... F-4
Statements of Stockholders' Deficiency, for the Period of
Inception Through Fiscal Years Ended December 31, 1997 and
December 31, 1998 ......................................................... F-5
Statements of Cash Flows, for the Period of Inception
Through Fiscal Years Ended December 31, 1997 and
December 31, 1998.......................................................... F-6
Notes to Financial Statements ............................................. F-7
Balance Sheets as of March 31, 1999 (unaudited) ........................... F-12
Statements of Operation, for the Period of Inception Through
Three months ended March 31, 1999 and March 31, 1998 (unaudited)........... F-13
Statements of Shareholders' Deficiency for the Period of
Inception Through Three months ended March 31, 1999 and
March 31, 1998 (unaudited) ................................................ F-14
Statements of Cash Flows, for the Period of Inception
Through Three Months ended March 31, 1999 and
March 31, 1998 (Unaudited) ................................................ F-15
Notes to Unaudited Financial Statements.................................... F-16
F-1
<PAGE>
================================================================================
Auditors' Report
- --------------------------------------------------------------------------------
To the Directors of
DOCUPORT INC.
We have audited the balance sheets of Docuport Inc. (a development stage
company) as at December 31, 1998 and December 31, 1997 and the statements of
operations, shareholders' deficiency and cash flows for the period from February
1st, 1992, date of inception, through December 31, 1998 and for the years ended
December 31, 1998 and December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1998 and 1997
and the results of its operations and the changes in its cash flow for the
period from February 1st, 1992, date of inception, through December 31, 1998 and
for the years ended December 31, 1998 and December 31, 1997 in accordance with
generally accepted accounting principles in the United States.
/s/ BDO Dunwoody LLP
Chartered Accountants
Montreal, Quebec
February 12, 1999
F-2
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Balance Sheets
(Expressed in United States dollars)
December 31 1998 1997
- --------------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents $ 117,899 $ 10,822
Miscellaneous receivable 3,142 2,954
Income tax credits receivable 25,415 145,748
Advance to employee (Note 1) -- 3,454
-------------------------
146,456 162,978
Capital assets (Note 2) 7,067 10,265
-------------------------
$ 153,523 $ 173,243
================================================================================
Liabilities and Shareholders' Deficiency
Current
Accounts payable and accrued liabilities $ 167,605 $ 85,134
Due to related parties (Note 3) 25,289 3,454
Current portion of long term debt (Note 4) 575,000 575,000
-------------------------
767,894 663,588
-------------------------
Shareholders' deficiency
Share capital (Note 5) 73 73
Deficit accumulated during the development stage (672,182) (515,703)
Cumulative translation adjustment 57,738 25,285
-------------------------
(614,371) (490,345)
-------------------------
$ 153,523 $ 173,243
================================================================================
See accompanying summary of significant accounting policies
and notes to these financial statements.
F-3
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Statements of Operations
(Expressed in United States dollars)
<TABLE>
<CAPTION>
February 1, 1992 to Year ended Year ended
December 31, December 31, December 31,
1998 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Amortization $ 6,907 $ 2,948 $ 2,767
Foreign exchange loss 64,163 32,142 32,021
Materials 107,896 17,482 68,423
Office 36,044 8,284 19,742
Professional fees 19,290 10,146 5,555
Rent 8,802 2,451 2,626
Research and development tax credits (166,509) (13,482) (93,897)
Salaries and employees benefits 155,262 29,552 90,721
Subcontractors 126,221 -- 64,837
Taxes and licences 1,406 535 871
Travel 27,835 4,415 19,922
-----------------------------------------------
Operating loss before undernoted (387,317) (94,473) (213,588)
-----------------------------------------------
Other income and expenses
Interest income 11,152 113 6,124
Financing fees (155,336) (3,640) (53,155)
Interest and bank charges (2,613) (909) (1,330)
Interest on long term debt (138,068) (57,570) (61,373)
-----------------------------------------------
(284,865) (62,006) (109,734)
-----------------------------------------------
Net loss $ (672,182) $ (156,479) $ (323,322)
==============================================================================================
Loss per common share, basic and diluted $ (0.22) $ (0.05) $ (0.11)
==============================================================================================
Weighted average number of shares
outstanding 3,015,000 3,015,000 3,015,000
==============================================================================================
</TABLE>
See accompanying summary of significant accounting policies
and notes to these financial statements.
F-4
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Statements of Shareholders' Deficiency
(Expressed in United States dollars)
For the period from February 1, 1992, date of inception, through December 31,
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other
Comprehen- Comprehen-
Common sive sive
Shares Loss Deficit Loss Total
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, February 1, 1992 $ -- $ -- $ -- $ --
2,900,000 Common shares
issued in 1992 for
$ 0.0000251 per share 73 -- -- 73
115,000 common shares
issued in 1996 for nil
consideration -- -- -- --
Comprehensive loss
Net loss for the period -- -- (192,381) $(192,381) (192,381)
Other comprehensive income
Foreign currency
translation adjustments -- 909 -- 909 909
---------
Comprehensive loss -- -- -- $(191,472)
---------------------------------- ========= ---------
Balance, December 31, 1997 73 909 (192,381) (191,399)
Comprehensive loss
Net loss for the year -- -- (323,322) $(323,322) (323,322)
Other comprehensive income
Foreign currency
translation adjustments -- 24,376 -- 24,376 24,376
---------
Comprehensive loss -- -- -- $(298,946)
---------------------------------- ========= ---------
Balance, December 31, 1997 73 25,285 (515,703) (490,345)
Comprehensive loss
Net loss for the year -- -- (156,479) $(156,479) (156,479)
Other comprehensive income
Foreign currency
translation adjustments -- 32,453 -- 32,453 32,453
--------- ---------
Comprehensive loss -- -- -- $(124,026)
---------------------------------- =========
Balance, December 31, 1998 $ 73 $ 57,738 $(672,182) $(614,371)
========================================================================= =========
</TABLE>
See accompanying summary of significant accounting policies
and notes to these financial statements.
F-5
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Statements of Cash Flows
(Expressed in United States dollars)
<TABLE>
<CAPTION>
February 1, 1992 to Year ended Year ended
December 31, December 31, December 31,
1998 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used in)
Operating activities
Net loss $(672,182) $(156,479) $(323,322)
Add (deduct) items not requiring a cash outlay
Amortization 6,907 2,948 2,767
Foreign exchange loss 64,163 32,142 32,021
Net changes in assets
and liabilities related to operations
Accounts receivable (3,142) (188) (913)
Income tax credits receivable (25,415) 120,333 (86,650)
Accounts payable and accrued liabilities 167,605 82,471 60,368
Other assets 250 250 --
-----------------------------------------
(461,814) 81,477 (315,729)
-----------------------------------------
Investing activities
Purchase of capital assets (14,224) -- (7,554)
Advances to employee -- 3,454 (3,454)
-----------------------------------------
(14,224) 3,454 (11,008)
-----------------------------------------
Financing activities
Due to related parties 25,289 21,835 (194)
Long term debt issued 575,000 -- --
Shares issued 73 -- --
-----------------------------------------
600,362 21,835 (194)
-----------------------------------------
Effect of exchange rate changes on cash (6,425) 311 (4,892)
-----------------------------------------
Net increase (decrease) in cash during the period 117,899 107,077 (331,823)
Cash and equivalents, beginning of period -- 10,822 342,645
-----------------------------------------
Cash and equivalents, end of period $ 117,899 $ 117,899 $ 10,822
================================================================================================
</TABLE>
Note: See Note 8 for supplementary information
See accompanying summary of significant accounting policies
and notes to these financial statements.
F-6
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Summary of Significant Accounting Policies
(Expressed in United States dollars)
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Nature of Business Docuport Inc. (the "Company") was
incorporated under the laws of Ontario in
February 1992 and was inactive until January
1, 1996, the inception date. The Company is
developing and intends to market a patented
portable multifunctional office machine
called the Slimfax. The Company's future
operations is dependent upon successful
marketing and sales of its product and
obtaining the necessary financing to complete
the development.
Basis of Financial Statements The accompanying consolidated financial
statements are stated in United States
dollars, "the reporting currency". The
transactions of the Company have been
recorded during the year in Canadian dollars,
"the functional currency". The translation of
Canadian dollars into United States dollars
amounts have been made at the year end
exchange rates for balance sheet items and
the average exchange rate for the year for
revenues, expenses, gains and losses.
Translation adjustments to reporting currency
are included in equity.
These financial statements have been prepared
by management in accordance with generally
accepted accounting principles in the United
States.
Accounting Estimates The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities
and disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
revenues and expenses during the reporting
period. Actual results could differ from
those estimated.
Capital Assets Management reviews long-lived assets for
impairment whenever events or changes in
circumstances indicate that the carrying
amount of an asset may not be recoverable,
and, if deemed impaired, measurement and
recording of an impairment loss is based on
the fair value of the asset.
Capital assets are recorded at cost less
accumulated amortization. Amortization is
provided annually at rates calculated to
amortize the assets over their estimated
useful lives as follows:
Furniture and fixtures - 20% declining
balance
Computer equipment - 30% declining
balance
Cash and Equivalents Cash and cash equivalents include all highly
liquid investments purchased with original
maturities of three months or less.
F-7
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Summary of Significant Accounting Policies (continued)
(Expressed in United States dollars)
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Recently Issued Accounting SFAS No 133, "Accounting for Derivatives
Standards Instruments and Hedging Activities" requires
companies to record derivatives on the
balance sheet as assets or liabilities,
measured at fair market value. Gains or
losses resulting from changes in the values
of those derivatives are accounted for
depending on the use of the derivative and
whether it qualifies for hedge accounting.
The key criterion for hedge accounting is
that the hedging relationship must be highly
effective in achieving offsetting changes in
fair value or cash flows. SFAS No. 133 is
effective for fiscal years beginning after
June 15, 1999. Management believes that the
adoption of SFAS No. 133 will have no
material effect on its financial statements.
SOP 98-5, "Reporting on the Costs of Start-Up
Activities," requires that the costs of
start-up activities, including organization
costs, be expensed as incurred. This
Statement is effective for financial
statements issued for fiscal years beginning
after December 15, 1998. Management believes
that the adoption of SOP 98-5 will have no
material effect on its financial statements.
Research and Research and development costs are charged
Development Costs against income in the year of expenditure.
Income Taxes The Company accounts for income taxes under
the asset and liability method as required by
SFAS No. 109, Accounting for Income Taxes.
Under the asset and liability method,
deferred income taxes are recognized for the
tax consequences of temporary differences by
applying enacted tax rates applicable to
future years to differences between the
financial statements carrying amounts and the
tax bases of existing assets and liabilities.
When tax credits are available, they are
recognized as reductions of current year's
tax expense.
Fair Value of The carrying amounts of financial instruments
Financial of the Company, Instruments including cash
and cash equivalents, accounts receivable,
and accounts payable approximate fair value
because of their short maturity. The fair
value of advances to and from related parties
and long term debt cannot be readily
determined.
Earnings (loss) per share Earnings (loss) per common share is based on
the weighted average number of common shares
outstanding during the period. The effect of
common shares contingently issuable pursuant
to outstanding warrants has not been
considered since they are anti-dilutive.
F-8
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Notes to Financial Statements
(Expressed in United States dollars)
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
1. Advance to Employee
The advance is non-interest bearing and without specific terms of
repayment.
- --------------------------------------------------------------------------------
2. Capital Assets
1998 1997
---------------------------------------------
Accumulated Net Book Net Book
Cost Amortization Value Value
Furniture and fixtures $ 1,176 $ 351 $ 825 $ 820
Computer equipment 12,081 5,839 6,242 9,445
---------------------------------------------
$13,257 $ 6,190 $ 7,067 $10,265
=============================================
- --------------------------------------------------------------------------------
3. Due to Related Parties and Related Party Transactions
The amounts due to related parties are non-interest bearing with no
specific terms of repayment.
From February 1, 1992 to December 31, 1998 the Company subcontracted
software and other consulting projects totalling $111,557 with various
companies controlled by shareholders.
During 1997 the Company subcontracted software consulting projects
totalling $64,837 with various companies controlled by shareholders.
During 1998 the Company incurred rent charges from a related company
totalling $2,451 (1997 - $2,626).
These transactions were in the normal course of business and were measured
at the exchange amount, which is the amount of consideration established
and agreed to by the related companies.
- --------------------------------------------------------------------------------
4. Long Term Debt
1998 1997
------------------
10% subordinated promissory notes, due August 28, 1998 $575,000 $575,000
==================
The Company is currently in default as the notes were due August 28, 1998.
The Company is presently negotiating an extention with the noteholders and
the debt has been reflected as current.
- --------------------------------------------------------------------------------
F-9
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Notes to Financial Statements
(Expressed in United States dollars)
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
5. Share Capital
(a) Authorized
Unlimited amount of common shares of no par value
(b) Issued and outstanding
1998 1997
----------------
3,015,000 Common shares $ 73 $ 73
================
(c) Warrants
In connection with the subordinated promissory notes (see Note 4),
the Company has issued to the noteholders 115,000 warrants to
purchase common shares at an exercise price of $2.50. The warrants
expire August 28, 2002.
- --------------------------------------------------------------------------------
6. Income Taxes
(a) The reconciliation of income taxes calculated at the effective tax
rate of 18.87% to the total tax provision is as follows:
1998 1997
-----------------------
Income taxes (recovery) at statutory
rates $(29,528) $(61,011)
Adjustment to valuation adjustment 29,528 61,011
-----------------------
$ -- --
=======================
(b) Deferred Tax Assets
Deferred tax assets have been recorded at current rates as follows:
Balance of pool of Scientific Research &
Development available to reduce taxable
income for future years $ -- $ 41,000
Tax losses available to reduce taxable
income of future years 116,000 59,000
-----------------------
116,000 100,000
Less: Deferred tax asset valuation
allowance 116,000 100,000
-----------------------
Net tax asset $ -- $ --
=======================
The Company has net operation loss carryforwards to reduce taxable
income of approximately $614,000 which expire during the years 2003
through 2005.
F-10
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Notes to Financial Statements
(Expressed in United States dollars)
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
7. Commitment
The Company is committed under a management and consulting agreement for a
three year period ending December 2001 for compensation consisting of
700,000 shares which will be transferred from the present shareholders. In
addition, the Company is committed to the consultant for a fee of $5,000
per month for a two year period after such time the Company becomes
publicly traded.
- --------------------------------------------------------------------------------
8. Supplemental Disclosure of Cash Flow Information
Cash paid during the year:
1998 1997
-----------------------
Interest $ 58,479 $ 62,703
=======================
There are no non-monetary transactions during the years.
- --------------------------------------------------------------------------------
F-11
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Balance Sheets
(Expressed in United States dollars)
As at March 31 1999 1998
- --------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Assets
Current
Cash and cash equivalents $ 28,267 $ 2,163
Miscellaneous receivable 3,146 2,981
Income tax credits receivable 21,941 148,612
Advance to employee -- 3,522
-------------------------
53,354 157,278
Capital assets 6,790 9,703
-------------------------
$ 60,144 $ 166,981
================================================================================
Liabilities and Shareholders' Deficiency
Current
Accounts payable and accrued liabilities $ 158,890 $ 104,148
Due to related parties 25,113 11,205
Current portion of long term debt 575,000 575,000
-------------------------
759,003 690,353
-------------------------
Shareholders' deficiency
Share capital 73 73
Deficit accumulated during the development stage (746,079) (538,924)
Cumulative translation adjustment 47,147 15,479
-------------------------
(698,859) (523,372)
-------------------------
$ 60,144 $ 166,981
================================================================================
F-12
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Statements of Operations
(Expressed in United States dollars)
<TABLE>
<CAPTION>
February 1, 1992 to 3 months ended 3 months ended
March 31, March 31, March 31,
1999 1999 1998
- ---------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Expenses
Amortization $ 7,274 $ 367 $ 580
Foreign exchange loss (gain) 54,461 (9,702) (10,248)
Materials 127,445 19,549 --
Office 44,765 8,721 3,708
Professional fees 21,606 2,316 2,797
Rent 8,802 -- 636
Research and development tax credits (166,509) -- --
Salaries and employees benefits 190,516 35,254 11,282
Subcontractors 126,221 -- --
Taxes and licences 1,423 17 --
Travel 30,554 2,719 --
-----------------------------------------------
Operating loss before undernoted (446,558) (59,241) (8,755)
-----------------------------------------------
Other income and expenses
Interest income 11,152 -- --
Financing fees (155,336) -- --
Interest and bank charges (2,613) -- (90)
Interest on long term debt (152,724) (14,656) (14,376)
-----------------------------------------------
(299,521) (14,656) (14,466)
-----------------------------------------------
Net loss $ (746,079) $ (73,897) $ (23,221)
=============================================================================================
Less per common share, basic and diluted $ (0.25) $ (0.02) $ (0.01)
=============================================================================================
Weighted average number of shares
outstanding 3,015,000 3,015,000 3,015,000
=============================================================================================
</TABLE>
F-13
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Statements of Shareholders' Deficiency
(Expressed in United States dollars)
For the periods from February 1, 1992, date of inception, to March 31, 1999 and
for the three months ended March 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other
Comprehen- Comprehen-
Common sive sive
Shares loss Deficit loss Total
--------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Balance, February 1, 1992 $ -- $ -- $ -- $ --
2,900,000 Common shares
issued in 1992 for
$ 0.0000251 per share 73 -- -- 73
115,000 common shares
issued in 1996 for nil
consideration -- -- -- --
Comprehensive loss
Net loss from inception to
March 31, 1999 -- -- (746,079) $ (746,079) (746,079)
Other comprehensive income
Foreign currency
translation adjustments -- 47,147 -- 47,147 47,147
----------
Comprehensive loss -- -- -- $(698,932)
----------------------------------- ========== ----------
Balance, March 31, 1999 $ 73 $ 47,147 $ (746,079) $ (698,859)
======================================================================= ==========
Balance, January 1, 1999 $ 73 $ 57,738 $ (672,182) $ -- $ (614,371)
Comprehensive loss
Net loss for the period -- -- (73,897) $ (73,897) (73,897)
Other comprehensive income
Foreign currency
translation adjustments -- (10,591) -- (10,591) (10,591)
----------
Comprehensive loss -- -- -- $ (84,488) --
----------------------------------- ==========
Balance, March 31, 1999 $ 73 $ 47,147 $ (746,079) $ (698,859)
======================================================================= ==========
Balance, January 1, 1998 $ 73 $ 25,285 $ (515,703) $ (490,345)
Comprehensive loss
Net loss for the period -- -- (23,221) $ (23,221) (23,221)
Other comprehensive income
Foreign currency
translation adjustments -- (9,806) -- (9,806) (9,806)
---------- ----------
Comprehensive loss -- -- -- $ (33,027)
----------------------------------- ==========
Balance, March 31, 1998 $ 73 $ 15,479 $ (538,924) $ (523,372)
======================================================================= ==========
</TABLE>
F-14
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Statements of Cash Flows
(Expressed in United States dollars)
<TABLE>
<CAPTION>
February 1, 1992 to 3 months ended 3 months ended
March 31, March 31, March 31,
1999 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Unaudited) (Unaudited) (Unaudited)
Cash provided by (used in)
Operating activities
Net loss $(746,079) $ (73,897) $ (23,221)
Add (deduct) items not requiring a cash outlay
Amortization 7,274 367 580
Foreign exchange loss (gain) 54,461 (9,702) (10,248)
Net changes in assets
and liabilities related to operations
Accounts receivable (3,146) (4) (27)
Income tax credits receivable (21,941) 3,474 (2,864)
Accounts payable and accrued liabilities 158,890 (8,715) 19,014
Decrease in other assets 250 250 --
-----------------------------------------
(550,291) (88,227) (16,766)
-----------------------------------------
Investing activities
Purchase of capital assets (14,314) (90) (18)
Advances to employee -- -- (68)
-----------------------------------------
(14,314) (90) (86)
-----------------------------------------
Financing activities
Due to related parties 25,113 (176) 7,751
Long term debt issued 575,000 -- --
Shares issued 73 -- --
-----------------------------------------
600,186 (176) 7,751
-----------------------------------------
Effect of exchange rate changes on cash (7,314) (1,139) 442
-----------------------------------------
Net increase (decrease) in cash
and equivalents during the period 28,267 (89,632) (8,659)
Cash and equivalents, beginning of period -- 117,899 10,822
-----------------------------------------
Cash and equivalents, end of period $ 28,267 $ 28,267 $ 2,163
===============================================================================================
</TABLE>
F-15
<PAGE>
================================================================================
DOCUPORT INC.
(a development stage company)
Notes to Unaudited Financial Statements
March 31, 1999 and 1998
- --------------------------------------------------------------------------------
1. Basis of presentation
The financial statements as of March 31, 1999 and 1998 and for the periods
from February 1st, 1992, date of inception, to March 31, 1999 and for the
three-month periods ended March 31, 1999 and March 31, 1998, include, in
the opinion of management, all normal recurring adjustments necessary to
present fairly the financial position, results of operations and cash
flows at March 31, 1999 and for all periods presented.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto incorporated by reference in the company's financial
statements for the year ending December 31, 1998. The results of
operations for the three-month periods ended March 31, 1999 and 1998 are
not necessarily indicative of the operating results to be expected for the
full year.
- --------------------------------------------------------------------------------
2. Subsequent Events
In February, 1999 the Company offered an extension agreement to the
investors of the 1996 private offering which extended the due date of the
promissory notes. The agreement extended the due date of the promissory
notes to the earlier to occur of either (a) August 1, 2000; or (b) the
raising of an aggregate of $5,000,000 in financing. Sixteen of the
eighteen investors agreed to the extension and those who agreed were
granted additional warrants equal to the number of warrants held with an
exercise price of $0.10 per share and the exercise price of their original
warrants was reduced to $0.10 per share from $2.50.
On March 24, 1999 a new corporate entity was incorporated in the state of
Delaware and all the common shares and warrants of the Company were
exchanged for shares of the new entity at a ratio of three (3) shares or
warrants for every two (2) shares or warrants held.
In March 1999 the new corporate entity commenced a private offering
consisting of 700,000 shares at a purchase price of $0.10 per share. The
offering was completed in April 1999.
In April 1999 the new corporate entity completed another private offering
consisting of 435,000 shares at a purchase price of $2.00 per share.
F-16
<PAGE>
PART II
Item 24. Indemnification of Directors and Officers.
Article EIGHTH of the Registrant's Certificate of Incorporation, contains
the following provision with respect to the indemnification of directors of the
Company:
"EIGHTH: The personal liability of the directors of the Corporation
is hereby eliminated to the fullest extent permitted by the provisions of
Section 102(b)(7) of the General Corporation Law of the State of Delaware, as
the same may be amended or supplemented."
Sections 1, 2, 3 and 4 of Article 8 of the Registrant's By-laws contain
the following provisions with respect to the indemnification of directors,
officers and authorized representatives:
"Section 1. Indemnification of Directors and Officers in Third Party
Proceedings. The Corporation shall indemnify any director or officer of the
Corporation who was or is an "authorized representative" of the Corporation
(which shall mean for the purposes of this Article a director or officer of the
Corporation, or a person serving at the request of the Corporation as a
director, officer, partner or trustee of another corporation, partnership, joint
venture, trust or other enterprise) and who was or is a "party" (which shall
include for purposes of this Article the giving of testimony or similar
involvement) or is threatened to be made a party to any "third party proceeding
" (which shall mean for purposes of this Article any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Corporation) by
reason of the fact that such person was or is an authorized representative of
the Corporation, against expenses (which shall include for purposes of this
Article attorney's fees and disbursements), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such third party proceeding if such person acted in good faith
and in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the Corporation and, with respect to a criminal third party
proceeding (which shall include for purposes of this Article any investigation
which could or does lead to a criminal third party proceeding) had not
reasonable cause to believe such conduct was unlawful. The termination of any
third party proceeding by judgment, order, settlement, indictment, conviction or
upon a plea of no contest or its equivalent, shall not, of itself, create a
presumption that the authorized representative did not act in good faith and in
a manner which such person reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal third party
proceeding, had reasonable cause to believe that such conduct was unlawful.
Section 2. Indemnification of Directors and Officers in Corporate
Proceedings. The Corporation shall indemnify any director or officer of the
Corporation who was or is an authorized representative of the Corporation and
who was or is a party or is threatened to be made a party to any "corporate
proceeding" (which shall mean for purposes of this Article any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor or any investigative proceeding by or on behalf
of the Corporation) by reason of the fact that such person was or is an
authorized representative of the Corporation, against expenses (including
attorneys' fees and disbursements) actually and reasonably incurred by such
person in connection with the defense or settlement of such corporate proceeding
if such person acted in good faith and in
II-1
<PAGE>
a manner such person reasonably believed to be in, or not opposed to, the best
interests of the Corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of such
person's duty to the Corporation unless and only to the extent that the court in
which such corporate proceeding was pending shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such authorized representative is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 3. Indemnification of Authorized Representatives. To the
extent that an authorized representative of the Corporation who neither was nor
is a director or officer of the Corporation has been successful on the merits or
otherwise in defense of any third party or corporate proceeding or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses actually and reasonably incurred by such person in connection
therewith. Such an authorized representative may, at the discretion of the
Corporation, be indemnified by the Corporation in any other circumstances to any
extent if the Corporation would be required by Section 1 or 2 of this Article
VIII to indemnify such person in such circumstances to such extent as if such
person were or had been a director or officer of the Corporation.
Section 4. General Terms. Any indemnification under Section 1 and
Section 2 of this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he had met the applicable standard of conduct set forth in
Section 1 and Section 2 of this Article VIII. Such determination shall be made
(i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in written
opinion, or (iii) by the stockholders.
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in these By-laws.
Section 145 of the Delaware General Corporation Law also contains
provisions entitling directors and officers of the Company to indemnification
from judgments, fines, amounts paid in settlement and reasonable expenses,
including attorneys' fees, as the result of an action or proceeding in which
they may be involved by reason of being or having been a director or officer of
the Company (or, at the request of the Company,, a director or officer of
another corporation or other enterprise); provided the officers or directors
acted in good faith. The Company also may obtain an insurance policy which will
cover officers and directors for any liability arising out of their actions in
such capacity.
The foregoing do not and will not eliminate or limit the liability of a
director for violating his duty of loyalty (which includes the obligation of a
director of the Company to refrain from self-dealing with respect to the
Company, improperly competing with the Company or usurping
II-2
<PAGE>
Company opportunities), failing to act in good faith, engaging in intentional
misconduct or knowingly violating a law or participating in the payment of a
dividend or a stock repurchase or redemption for himself. The foregoing also do
not and will not affect any director's liability under federal securities laws
or the availability of equitable remedies such as an injunction or rescission
for breach of fiduciary duty.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth an itemized list of all expenses to be
borne by the Registrant in connection with the issuance and distribution of the
securities being registered hereby other than underwriting discounts and
commissions and non-accountable expenses.
SEC Registration Fee........................................... $ 685.73
Printing and Engraving......................................... 1000.00*
Legal Fees and Expenses........................................ 35,000.00*
Accounting Fees and Expenses................................... 12,000.00*
Transfer Agent Fees............................................ 800.00*
Miscellaneous Expenses......................................... 514.27*
TOTAL.................................................... 50,000.00
- ----------
* Estimated.
Item 26. Sales of Unregistered Securities.
Effective April, 1999, the Registrant sold and issued an aggregate of
700,000 shares of Common Stock to a total of seventeen individuals for the
aggregate consideration of $70,000 ($.10 per share). The issuance of all of such
shares of Common Stock did not require registration under the Securities Act in
that all of such shares of Common Stock were issued pursuant to an exemption
from the registration requirements of the Securities Act afforded by Section
3(b) and Rule 504 thereof.
Effective April, 1999, the Registrant sold and issued an aggregate 435,000
shares of its Common Stock to a total of 32 individuals for the aggregate
consideration of $870,000 ($2.00 per share). All of such shares of Common stock
were issued pursuant to an exemption from the registration requirements of the
Securities Act afforded by Section 3(6) and Rule 504 thereof.
Item 27. Exhibits.
Number Description
- ------ -----------
3.1 Articles of Incorporation of Registrant.
3.2 By-Laws of Registrant.
4.1 Specimen Common Stock Certificate.
II-3
<PAGE>
5.1+ Opinion of Mintz & Fraade, P.C.
10.1 Employment Agreement of Norman Docteroff
10.2 Marketing and Sales Agreement with Solutions Plus, Inc.
10.3 Management and Consulting Agreement with Rexon Ltd.
21.1 Subsidiary of Registrant
23.1+ Consent of Mintz & Fraade, P.C. (Included in 5.1)
23.2 Consent of BDO Dunwoody
24.1 Power of Attorney (set forth on the signature page of this Registration
Statement).
27.1 Financial Data Schedule
- ----------
+ To be filed by amendment.
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to any of the provisions
described under Item 24 above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will governed by the final
adjudication of such issue.
The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(a) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) reflect in this prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement; and,
notwithstanding the forgoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in the
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
II-4
<PAGE>
(c) Include any additional or changed material information with
respect to the plan of distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering; and
The Registrant hereby further undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this Registration Statement as
of the time the Commission declared it effective; and
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration
Statement, and that offering of such securities at that time as the
initial bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, we
certify that we have reasonable grounds to believe that we meet all of the
requirements of filing on Form SB-2 and authorize this registration statement to
be signed on our behalf by the undersigned, in New York, State of New York,
on July 9, 1999.
DOCUPORT, INC.
By: /s/ Raja S. Tuli
-----------------------------------
Raja S. Tuli, Chairman of the Board
By: /s/ Norman Docteroff
-----------------------------------
Norman Docteroff, President
POWER OF ATTORNEY
We, the undersigned officers and directors of Docuport, Inc., hereby
severally constitute and appoint Norman Docteroff and Raja S. Tuli, and each of
them (with full power to each of them to act alone), our true and lawful
attorneys-in-fact and agents, with full power of substitution, for us and in our
stead, in any and all capacities, to sign any and all amendments (including
pre-effective and post-effective amendments) to this Registration Statement and
all documents in connection thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting to said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
necessary or advisable to be done in and about the premises, as full to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all the said attorneys-in-fact and agents, or any of them, or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Name Title Date
---- ----- ----
President, Chief Executive
/s/ Norman Docteroff Officer and Director July 2, 1999
- ------------------------------
Norman Docteroff
/s/ Raja S. Tuli Director July 9, 1999
- ------------------------------
Raja S. Tuli
/s/ Madan G. Tuli Director July 9, 1999
- ------------------------------
Madan G. Tuli
/s/ Lakhbir Tuli Director July 9, 1999
- ------------------------------
Lakhbir Tuli
State of Delaware
PAGE 1
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "DOCUPORT, INC.", FILED IN THIS OFFICE ON THE TWENTY-FOURTH DAY
OF MARCH, A.D. 1999, AT 4 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
[SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9659538
DATE: 03-30-99
<PAGE>
Certificate of Incorporation
of
Docuport, Inc.
Under Section 102 of the General Corporation Law
of the State of Delaware
------------------------------------------------
The undersigned, a natural person of at least eighteen (18) years of age,
for the purpose of forming a corporation under the General Corporation Law of
the State of Delaware, certifies that:
FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is
Docuport, Inc.
SECOND: The purpose or purposes for which the Corporation is formed are as
follows:
To design, develop, market and maintain portable peripheral technology,
and provide technical and consultant services with respect to portable
peripheral technology and other related fields.
To engage in research and development, purchase, sale, import, export,
license, distribution, design, manufacture, assembly, maintenance or rental of
any product, machine, apparatus, appliance, merchandise, and property of every
kind and description, ideas, systems, procedures, and services of any nature,
including, without limiting the generality of the foregoing, all types of
products, which possess an internal intelligence for recognizing and correlating
any type of data or information to be processed, pattern interpretation,
recognition and memory systems and equipment; all types of products which relate
to computers, electronic systems, telecommunications, equipment and components
and electrical, mechanical and electromechanical apparatus and equipment of
every kind and description and electronic, telecommunication and communication
related device and equipment.
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:00 PM 03/24/1999
991115712 - 3020891
<PAGE>
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware, provided
that it is not formed to engage in any act or activity requiring the consent or
approval of any state official, department, board, agency or other body without
such consent or approval first being obtained.
To enter into any lawful arrangements for sharing profits, union of
interest, reciprocal concession, or cooperations with any corporation,
association, partnership, syndicate, entity, person, or governmental, municipal,
or public authority, domestic or foreign, in the carrying on of any business
which the Corporation is authorized to carry on or any business or transaction
deemed necessary, convenient, or incidental to the carrying out of any of the
purposes of the Corporation.
To apply for, register, obtain, purchase, lease, take licenses in respect
of, or otherwise acquire, and to hold, own, use, ope rate, develop, enjoy, grant
licenses and immunities in respect of, manufacture under and to introduce, sell,
assign, mortgage, pledge or otherwise dispose of, and in any manner deal with
and contract with reference to:
A. inventions, devices, formulas, processes and any improvements
and modifications thereof;
B. letters patent, patent rights, patented processes, copyrights,
designs, and similar rights, trade- marks, trade symbols and
other indications of origin and ownership granted by or
recognized under the laws of the United States of America or
of any state or subdivision thereof, or of any foreign country
or subdivision thereof, and all rights connected therewith or
appertaining thereunto; and
C. franchises, licenses, grants and concessions.
To enter into, make and perform contracts of every kind and description
which may be necessary or convenient for the business of the Corporation, with
any person, firm, association, corpora tion, municipality, county, state, body
politic, or government, or colony, any dependency, or political or
administrative division thereof.
2
<PAGE>
To enter into and carry out partnerships (both general partnerships and
limited partnerships) and other forms of joint arrangements with other persons,
firms or corporations, so far as and to the extent that the same may be done and
performed by a corporation organized under the General Corporation Law of the
State of Delaware.
To carry on business at any place within the jurisdiction of the United
States and in any and all foreign countries and to purchase any property at any
such place or places.
To acquire and take over as a going concern, and thereafter to carry on
the business of any person, firm or corporation engaged in any business which
the Corporation is authorized to carry on and, in connection therewith, to
acquire the good will and all or any of the assets and to assume or otherwise
provide for all or any of the liabilities of any such business.
To borrow money for its corporate purposes and to make, accept, endorse,
execute and issue promissory notes, bills of exchange, bonds, debentures, or
other obligations from time to time, for the purchase of property, or for any
purpose in connec tion with the business of the Corporation, and, if deemed
proper, to secure the payment of any such obligations, mortgages, pledge, deed
of trust or otherwise.
To carry on any other similar business in connection with the foregoing,
and to have and exercise all of the powers conferred by the laws of the State of
Delaware upon corporations formed under the General Corporation Law of the State
of Delaware, and to do any or all of the things hereinbefore set forth to the
same extent as natural persons might or could do so.
To such extent as a corporation organized under the General Corporation
Law of the State of Delaware may now or hereafter lawfully do, to perform or do
each and everything necessary, suit able, convenient, or proper for, or in
connection with, or inci dental to, the accomplishment of any one or more of the
purposes or the exercise of any one or more of the powers herein described, or
designed directly or indirectly to promote the interests of the Corporation or
to enhance the value of its properties; and in general, to do any and all things
and exercise any and all powers, rights and privileges for which a corporation
now or hereafter may
3
<PAGE>
be organized under the General Corporation Law of the State of Delaware, or
under any act amendatory thereof, supplemental thereto, or substituted
therefore, including, but not limited to, all of the powers enumerated in
Sections 121-123 of the Delaware State General Corporation Law or any other
statute of the State of Delaware.
THIRD: The registered office of the Corporation is to be located in Kent
County, in the State of Delaware.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is fourteen million (14,000,000) shares, of which twelve
million (12,000,000) shares shall be Common Stock, par value of $.001 per share
and two million (2,000,000) shares shall be Preferred Stock, par value of $.01
per share.
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors of the Corporation is hereby expressly authorized to
provide, by resolution or resolutions duly adopted by it prior to issuance, for
the creation of each such series and to fix the designations and the powers,
preferences, rights, qualifications, limitations and restrictions relating to
the shares of each such series. The authority of the Board of Directors with
respect to each series of Preferred Stock shall include, but not be limited to,
determining the following:
(A) the designation of such series, the number of shares to
constitute such series and the stated value thereof, if different from the par
value thereof;
(B) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law and, if so, the terms of such
voting rights, which may be general or limited;
(C) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative and, if so, from what dates, the conditions and
dates upon which such dividends shall be payable, and the preferences or
relation which such dividends shall bear to the dividends payable on any shares
of stock of any other class or any other series of preferred stock;
(D) whether the shares of such series shall be subject
4
<PAGE>
to redemption by the corporation and, if so, the times, prices and other
conditions of such redemption;
(E) the amount or amounts payable upon shares of such series in the
voluntary or involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the corporation;
(F) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and manner
in which any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such series for retirement or other corporate
purposes and the terms and provisions relating to the operation thereof;
(G) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series of
preferred stock or any other securities and, if so, the price or prices or the
rate or rates of conversion or exchange and the method, if any, of adjusting the
same, and any other terms and conditions of conversion or exchange;
(H) the limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of dividends or the
making of other distributions on, and upon the purchase, redemption or other
acquisition by the corporation of, the common stock or shares of stock of any
other class or any other series of preferred stock;
(I) the conditions or restrictions, if any, upon the creation of
indebtedness of the corporation or upon the issue of any additional stock,
including additional shares of such series or of any other series of preferred
stock or of any other class; and
(J) any other powers, preferences and other special rights,
relative, participating, optional or otherwise, and any qualifications,
limitations and restrictions thereon.
The powers, preferences and relative, participating, optional and other
special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereon, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall
5
<PAGE>
be identical in all respects with all other shares of such series, except that
shares of any one series issued at different times may differ as to the dates
from which dividends thereof shall be cumulative.
No holder of shares of the Corporation of any class whether now or
hereafter authorized shall have any preemptive right to subscribe for, purchase
or receive any shares of the Corporation of any class, whether now or hereafter
authorized, or any options or warrants to purchase any such shares, or any
securities convertible into or exchanged for any such shares, which may at any
time be issued, sold or offered for sale by the Corporation.
FIFTH: The registered office in the State of Delaware is to be located at
9 East Lockerman Street, Dover, Delaware 19901, and the registered agent in
charge thereof is Colby Attorneys Services Co., Inc.
SIXTH: The duration of the Corporation is to be perpetual.
SEVENTH: Except as may otherwise be specifically provided in this
Certificate of Incorporation, no provision hereof is intended to be construed as
limiting, prohibiting, denying, or abrogating any of the general or specific
powers or rights conferred under the General Corporation Law of the State of
Delaware upon corporations of the State of Delaware, upon the Corporation, its
shareholders, bondholders and security holders, and upon its directors, officers
and other corporate personnel, including, without limitation, the power of the
Corporation to furnish indemnification to any person or persons in the
capacities defined and prescribed by the General Corporation Law of the State of
Delaware and the defined and pres cribed rights of a person or persons to
indemnification as the same are conferred by the General Corporation Law of the
State of Delaware.
EIGHTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the provisions of Section
102(b)(7) of the General Corporation Law of the State of Delaware, as the same
may be amended or supplemented.
NINTH: The name and address of the incorporator are as
6
<PAGE>
follows: Alan P. Fraade, Esq. c/o Mintz & Fraade, P.C. 488 Madison Avenue, New
York, New York 10022.
IN WITNESS WHEREOF, this Certificate has been subscribed this 23 day of
March, 1999 by the undersigned who affirms that the statements made herein are
true under the penalties of perjury.
/s/ Alan P. Fraade, Esq.
-------------------------------
Alan P. Fraade, Esq.
c/o Mintz & Fraade, P.C.
488 Madison Avenue
New York, New York 10022
7
BY LAWS
OF
DOCUPORT, INC.
(A DELAWARE CORPORATION)
I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
II
MEETING OF STOCKHOLDERS
Section 1. Place of Meeting. Meetings of the stockholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Delaware, as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special Meetings of the stockholders may be
called by the Board of Directors, the Chairman of the Board, the President, or
by the holders of shares entitled to cast not less that 25% of the votes at the
meeting. Upon request in writing to the Chairman of the Board, the President,
any Vice President or the Secretary by any person (other than the board)
entitled to call a special meeting of the stockholders, the officer forthwith
shall cause notice to be given to the stockholders entitled to vote that a
meeting will be held at a time requested by the person or persons calling the
meeting, not less that 15 nor more than 60 days after the receipt of the
request. If the notice is not given within 20 days after receipt of the request,
the persons entitled to call the meeting may give the notice.
<PAGE>
Section 4. Notice of Meetings. Written notice of the place, date, and time
of all meetings of the stockholders shall be given, not less than ten (10) nor
more than sixty (60) days before the date on which the meeting is to be held, to
each stockholder entitled to vote at such meeting, except as otherwise provided
herein or as required from time to time by the Delaware General Corporation Law
or the Certificate of Incorporation.
Section 5. Quorum; Adjournment. At any meeting of the stockholders, the
holders of a majority of all of the shares of the stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law or the Certificate of Incorporation. Where a separate
vote by a class, classes or series is required, a majority of the outstanding
shares of such class, classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter, unless or except to the extent that the presence of a
larger number may be required by law or the Certificate of Incorporation. If a
quorum shall fail to attend any meeting, the chairman of the meeting or the
holders of a majority of the shares of stock entitled to vote who are present,
in person or by proxy, may adjourn the meeting to another place, date or time
without notice other than announcement at the meeting, until a quorum shall be
present or represented.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 6. Organization. At every meeting of the shareholders, the
chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, one of the following persons
present in the order stated shall act as chairman of the meeting: the vice
chairman of the board, if there be one, the president, the vice presidents in
their order of rank or seniority, a chairman designated by the board of
directors or a chairman chosen by the stockholders in the manner provided in
Section 5 of this Article II. The secretary, or in his absence, an assistant
secretary, or in the absence of the secretary and the assistant secretaries, a
person appointed by the chairman of the meeting, shall act as secretary.
<PAGE>
Section 7. Proxies and Voting. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting.
Each stockholder shall have one vote for every share of stock entitled to
vote which is registered in his name on the record date for the meeting, except
as otherwise provided herein or required by law or the Certificate of
Incorporation.
All voting, including on the election of directors but excepting where
otherwise provided herein or required by law or the Certificate of
Incorporation, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or such stockholder's proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the Board of Directors.
All elections of directors shall be determined by a plurality of the votes
cast, and except as otherwise required by law or the Certificate of
Incorporation, all other matters shall be determined by a majority of the votes
cast.
Section 8. Stock List. A complete list of stockholders entitled to vote at
any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in such stockholder's name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which places
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any stockholder who
is present. This list shall presumptively determine the identity of the
stockholder entitled to vote at the meeting and the number of shares held by
each of them.
Section 9. Inspectors of Election. In advance of any meeting of
stockholders, the Board of Directors may appoint inspectors of election, who
need not be stockholders, to act at such meeting or any adjournment thereof. If
inspectors of election are not so appointed, the person presiding at any such
meeting may, and on the request of any stockholder entitled to vote at the
meeting and before voting begins shall, appoint inspectors of election. The
number of inspectors shall be either one or three, as determined,
<PAGE>
in the case of inspectors appointed upon demand of a stockholder, by the
stockholders in the manner provided in Section 5 of this Article II, and
otherwise by the Board of Directors or person presiding at the meeting, as the
case may be. If any person who is appointed fails to appear or act, the vacancy
may be filled by appointment made by the Board of Directors in advance of the
meeting, or at the meeting by the person presiding at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take an oath
faithfully to execute the duties of inspector at such meeting.
If inspectors of election are appointed as aforesaid, they shall determine
from the lists referred to in Section 8 of this Article II the number of shares
outstanding, the shares represented at the meeting, the existence of a quorum,
and the voting power of shares represented at the meeting, determine the
authenticity, validity and effect of proxies, receive votes or ballots, hear and
determine all challenges and questions in any way arising in connection with the
right to vote or the number of votes which may be cast, count and tabulate all
votes or ballots, determine the results, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders entitled to vote
thereat. If there be three inspectors of election, the decision, act or
certificate of both shall be effective in all respects as the decision, act or
certificate of both.
Unless waived by vote of the stockholders conducted in the manner which is
provided in Section 5 of this Article II, the inspectors shall make a report in
writing of any challenge or question or matter which is determined by them, and
execute a sworn certificate of any facts found by them.
Section 10. Actions by Stockholders. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in this State,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery to a Corporation's registered office shall be by certified or
registered mail, return receipt requested. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
<PAGE>
III
BOARD OF DIRECTORS
Section 1. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation or by these By-laws directed
or required to be exercised or done by the stockholders. The use of the phrase
"Whole Board" herein refers to the total number of directors which the
corporation would have if there were no vacancies.
Section 2. Number and Term in Office. A director need not be a stockholder
a citizen of the United States or a resident of the State of Delaware. The
authorized number of directors constituting the Board of Directors shall consist
of one person. Thereafter, the number of directors constituting the Whole Board
shall be at least one. Subject to the foregoing limitation and except for the
first Board of Directors, such number may be fixed from time to time by action
of the stockholders or of the directors, or, if the number is not fixed, the
number shall be one. The number of directors may be increased or decreased by
action of stockholders or of the directors. Except as provided in Section 3 of
this Article III, directors shall be elected by the holders of record of a
plurality of the votes cast at Annual Meetings of Stockholders, and each
director so elected shall hold office until the next Annual Meeting and until
his or her successor is duly elected and qualified, or until his or her earlier
resignation or removal. Any director may resign at any time upon written notice
to the Corporation.
Section 3. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director or by the stockholders entitled to vote at any Annual or
Special Meeting held in accordance with Article II, and the directors so chosen
shall hold office until the next Annual or Special Meeting duly called for that
purpose and until their successors are duly elected and qualified, or until
their earlier resignation or removal.
Section 4. Nominations of Directors; Election. Nominations for the
election of directors may be made by the Board of Directors or a committee
appointed by the Board of Directors, or by any stockholder entitled to vote
generally in the election of directors who complies with the procedures set
forth in this Section 4. Directors shall be at least 21 years of age. Directors
need not be stockholders. At each meeting of stockholders for the election of
directors at which a quorum is present, the persons receiving a
<PAGE>
plurality of the votes cast shall be elected directors. All nominations by
stockholders shall be made pursuant to timely notice in proper written form to
the Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 30 days nor more than 60 days prior to the meeting;
provided, however, that in the event that less than 40 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. To be in
proper written form, such stockholder's notice shall set forth in writing (i) as
to each person whom the stockholder proposes to nominate for election or
re-election as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, including, without limitation, such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected; and (ii) as to the stockholder giving the
notice (x) the name and address, as they appear on the Corporation's books, of
such stockholder and (y) the class and number of shares of the Corporation which
are beneficially owned by such stockholder.
Section 5. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. The first meeting of each newly-elected Board of Directors shall be
held immediately following the Annual Meeting of Stockholders and no notice of
such meeting shall be necessary to be given the newly-elected directors in order
legally to constitute the meeting, provided a quorum shall be present. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman of the
Board, the President or at least one of the directors then in office. Notice
thereof stating the place, date and hour of the meetings shall be given to each
director by mail, telephone or telegram not less than seventy-two (72) hours
before the date of the meeting. Meetings may be held at any time without notice
if all the directors are present or if all those not present waive such notice
in accordance with Section 2 of Article VI of these By-laws.
Section 6. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-laws, at all meetings of the
Board of Directors, a majority of the directors then in office shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any
<PAGE>
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 7. Action of Board Without a Meeting. Unless otherwise provided by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors of any committee
thereof may be taken without a meeting if all members of the Board of Directors
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 8. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the president or the secretary. Such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 9. Organization. At every meeting of the Board of Directors, the
Chairman of the Board, if there be one, or, in the case of a vacancy in the
office or absence of the Chairman of the Board, one of the following officers
present in the order stated shall act as Chairman of the meeting: the president,
the vice presidents in their order of rank and seniority, or a chairman chosen
by a majority of the directors present. The secretary, or, in his absence, an
assistant secretary, or in the absence of the secretary and the assistant
secretaries, any person appointed by the Chairman of the meeting shall act as
secretary.
Section 10. Committees. The Board of Directors may, by resolution passed
by a majority of the directors then in office, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, whom may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member of
a committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such absent
or disqualified member. Any committee, to the extent allowed by law and provided
in the Bylaws or resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Each
committee shall keep regular minutes and reports to the Board of Directors when
required.
<PAGE>
Section 11. Compensation. Unless otherwise restricted by the Certificate
of Incorporation or these By-laws, the Board of Directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 12. Removal. Unless otherwise restricted by the Certificate of
Incorporation or these By-laws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of shares
entitled to vote at an election of directors.
IV
OFFICERS
Section 1. General. The officers of the Corporation shall be appointed by
the Board of Directors and shall consist of a Chairman of the Board or a
President, or both, one or more Vice Presidents, a Treasurer and a Secretary.
The Board of Directors may also choose one or more assistant secretaries and
assistant treasurers, and such other officers and agents as the Board of
Directors, in its sole and absolute discretion shall deem necessary or
appropriate as designated by the Board of Directors from time to time. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-laws provide otherwise.
Section 2. Election; Term of Office. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall elect a Chairman of
the Board or a President, or both, one or more Vice Presidents, a Secretary and
a Treasurer, and may also elect at that meeting or any other meeting, such other
officers and agents as it shall deem necessary or appropriate. Each officer of
the Corporation shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors together with the powers
and duties which are customarily exercised by such officer; and each officer of
the Corporation shall hold office until such officer's successor is elected and
qualified or until such officer's earlier resignation or removal. Any officer
may resign at any time upon written notice to the Corporation. The Board of
Directors may at any time, with or without cause, by the affirmative vote of a
majority of directors then in office, remove an officer.
<PAGE>
Section 3. Chairman of the Board. The Chairman of the Board, if there be
such an officer, shall be the chief executive officer of the Corporation. The
Chairman of the Board shall preside at all meetings of the stockholders and the
Board of Directors and shall have such other duties and powers as may be
prescribed by the Board of Directors from time to time.
Section 4. President. The President shall be the chief operating officer
of the Corporation, shall have general and active management of the business of
the Corporation, having general control of the business and affairs of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall have and exercise such
further powers and duties as may be specifically delegated to or vested in the
President from time to time by these By-laws or the Board of Directors. In the
absence of the Chairman of the Board or in the event of his inability or refusal
to act, or if the Board has not designated a Chairman, the President shall
perform the duties of the Chairman of the Board, and when so acting, shall have
all the powers and be subject to all of the restrictions upon the Chairman of
the Board.
Section 5. Vice President. In the absence of the President or in the event
of his inability or refusal to act, the Vice President (or in the event that
there be more than one vice president, the vice presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The vice presidents shall perform such other
duties and have such other powers as the Board of Directors or the President may
from time to time prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given notice of meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or the President. If the
Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
if there be no Assistant Secretary, then either the Board of Directors or the
President may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary or
any Assistant Secretary, if there be one, shall have authority to affix same to
any instrument requiring it and when so affixed, it may be attested to by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general
<PAGE>
authority to any other officer to affix the seal of the Corporation and to
attest to the affixing by his or her signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.
Section 7. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep complete and accurate accounts of
all receipts and disbursements of the Corporation, and shall deposit all monies
and other valuable effects of the Corporation in its name and to its credit in
such banks and other depositories as may be designated from time to time by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation,
taking proper vouchers and receipts for such disbursements, and shall render to
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation. The Treasurer shall, when and if
required by the Board of Directors, give and file with the Corporation a bond,
in such form and amount and with such surety or sureties as shall be
satisfactory to the Board of Directors, for the faithful performance of his or
her duties as Treasurer. The Treasurer shall have such other powers and perform
such other duties as the Board of Directors or the President shall from time to
time prescribe.
Section 8. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
Section 9. Resignations. Any officer may resign at any time by giving
written notice to the Corporation; provided, however, that notice to the Board
of Directors, the Chairman of the Board, the President or the Secretary shall be
deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 10. Removal. Any officer or agent may be removed, either with or
without cause, at any time, by the Board of Directors at any meeting called for
that purpose; provided, however, that the President may remove any agent
appointed by him.
Section 11. Vacancies. Any vacancy among the officers, whether caused by
death, resignation, removal or any other cause, shall be filled in the manner
which is prescribed for election or appointment to such office.
<PAGE>
V
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board or the President or a Vice President and (ii)
by the Treasurer or Secretary of the Corporation, certifying the number of
shares owned by such holder in the Corporation.
Section 2. Signatures. Any or all the signatures on the certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by such person's attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be canceled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less
<PAGE>
than ten (10) days before the date of such meeting, nor more than sixty (60)
days prior to any other action. A determination of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners.. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
Section 7. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the Chairman of the Board, the President, any Vice
President or the Secretary and any such officer may, in the name of and on
behalf of the Corporation take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and powers incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
VI
NOTICES
Section 1. Notice. Whenever, under the provisions of the laws of this
state or the Certificate of Incorporation or these Bylaws, any notice, request,
demand or other communication is required to be or may be given or made to any
officer, director, or registered stockholder, it shall not be construed to mean
that such notice, request, demand or other communication must be given or made
in person, but the same may be given or made by mail, telegraph, cablegram,
telex, or telecopier to such officer, director or registered stockholder. Any
such notice, request, demand or other communication shall be considered to have
been properly given or made, in the case of mail, telegraph or cable, when
deposited in the mail or delivered to the appropriate office for telegraph or
cable transmission, and in other cases when transmitted by the party giving or
making the same, directed to the officer or director at his address as it
appears on the records of the Corporation or to a registered stockholder at his
address as it
<PAGE>
appears on the record of stockholders, or, if the stockholder shall have filed
with the Secretary of the Corporation a written request that notices to him be
mailed to some other address, then directed to the stockholder at such other
address. Notice to directors may also be given in accordance with Section 5 of
Article III hereof.
Whenever, under the provisions of the laws of this state or the
Certificate of Incorporation or these By-laws, any notice, request, demand or
other communication is required to be or may be given or made to the
Corporation, it shall also not be construed to mean that such notice, request,
demand or other communication must be given or made in person, but the same may
be given or made to the Corporation by mail, telegraph, cablegram, telex, or
telecopier. Any such notice, request, demand or other communication shall be
considered to have been properly given or made, in the case of mail, telegram or
cable, when deposited in the mail or delivered to the appropriate office for
telegraph or cable transmission.
Section 2. Waivers of Notice. Whenever any written notice is required to
be given under the provisions of the Certificate of Incorporation, these By-laws
or a statute, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice of such meeting.
Attendance of a person, either in person or by proxy, at any
meeting, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice of such meeting.
VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting or by any
Committee of the Board of Directors having such authority at any meeting
thereof, and may be paid in cash, in property, in shares of the capital stock,
or in any combination thereof. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
deems proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for
<PAGE>
any proper purpose, and the Board of Directors may modify or abolish any such
reserve.
Section 2. Disbursements. All notes, checks, drafts and orders for the
payment of money issued by the Corporation shall be signed in the name of the
Corporation by such officers or such other persons as the Board of Directors may
from time to time designate.
Section 3. Corporation Seal. The corporate seal, if the Corporation shall
have a corporate seal, shall have inscribed thereon the name of the Corporation,
the year of its organization and the words "Corporate Seal, Delaware". The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
VIII
INDEMNIFICATION
Section 1. Indemnification of Directors and Officers in Third Party
Proceedings. The Corporation shall indemnify any director or officer of the
Corporation who was or is an "authorized representative" of the Corporation
(which shall mean for the purposes of this Article a director or officer of the
Corporation, or a person serving at the request of the Corporation as a
director, officer, partner or trustee of another corporation, partnership, joint
venture, trust or other enterprise) and who was or is a "party" (which shall
include for purposes of this Article the giving of testimony or similar
involvement) or is threatened to be made a party to any "third party proceeding
" (which shall mean for purposes of this Article any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Corporation) by
reason of the fact that such person was or is an authorized representative of
the Corporation, against expenses (which shall include for purposes of this
Article attorney's fees and disbursements), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such third party proceeding if such person acted in good faith
and in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the Corporation and, with respect to a criminal third party
proceeding (which shall include for purposes of this Article any investigation
which could or does lead to a criminal third party proceeding) had not
reasonable cause to believe such conduct was unlawful. The termination of any
third party proceeding by judgment, order, settlement, indictment, conviction or
upon a plea of no contest or its equivalent, shall not, of itself, create a
presumption that the authorized representative did not act in good faith and in
a manner which such person reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any
<PAGE>
criminal third party proceeding, had reasonable cause to believe that such
conduct was unlawful.
Section 2. Indemnification of Directors and Officers in Corporate
Proceedings. The Corporation shall indemnify any director or officer of the
Corporation who was or is an authorized representative of the Corporation and
who was or is a party or is threatened to be made a party to any "corporate
proceeding" (which shall mean for purposes of this Article any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor or any investigative proceeding by or on behalf
of the Corporation) by reason of the fact that such person was or is an
authorized representative of the Corporation, against expenses (including
attorneys' fees and disbursements) actually and reasonably incurred by such
person in connection with the defense or settlement of such corporate proceeding
if such person acted in good faith and in a manner such person reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of such person's duty to the
Corporation unless and only to the extent that the court in which such corporate
proceeding was pending shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
authorized representative is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper.
Section 3. Indemnification of Authorized Representatives. To the extent
that an authorized representative of the Corporation who neither was nor is a
director or officer of the Corporation has been successful on the merits or
otherwise in defense of any third party or corporate proceeding or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses actually and reasonably incurred by such person in connection
therewith. Such an authorized representative may, at the discretion of the
Corporation, be indemnified by the Corporation in any other circumstances to any
extent if the Corporation would be required by Section 1 or 2 of this Article
VIII to indemnify such person in such circumstances to such extent as if such
person were or had been a director or officer of the Corporation.
Section 4. General Terms. Any indemnification under Section 1 and Section
2 of this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he had met the applicable standard of conduct set forth in
Section 1 and Section 2 of this Article VIII. Such determination shall be made
(i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit
<PAGE>
or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in written opinion, or (iii) by the stockholders.
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in these By-laws.
Section 5. Amendment. Any amendment to Article VIII shall not apply to any
liability of a director, officer, employee or agent arising out of a transaction
or omission occurring prior to the adoption of such amendment, but any such
liability based on a transaction or omission occurring prior to the adoption of
such amendment shall be governed by Article VIII of these By-laws, as in effect
at the time of such transaction or omission.
Section 6. Insurance and Trust Fund. In furtherance and not in limitation
of the powers conferred by statute:
(1) the Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of law; and
(2) the Corporation may create a trust fund, grant a security interest
and/or use other means (including, without limitation, letters of credit, surety
bonds and/or other similar arrangements), as well as enter into contracts
providing indemnification to the fullest extent permitted by law and including
as part thereof provisions with respect to any or all of the foregoing, to
ensure the payment of such amount as may become necessary to effect
indemnification as provided therein, or elsewhere.
Section 7. Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, including the right to be paid by
the Corporation the expenses incurred in defending any proceeding in advance of
its final disposition, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Section or otherwise with respect to
the indemnification and advancement of expenses of directors and officers of the
Corporation.
<PAGE>
IX
AMENDMENTS
Except as otherwise specifically stated within an Article to be altered,
amended or repealed, these By-laws may be altered, amended or repealed and new
By-laws may be adopted at any meeting of the Board of Directors or of the
stockholders, provided notice of the proposed change was given in the notice of
the meeting.
[GRAPHIC OMITTED]
NUMBER SHARES
0
See Reverse for
Certain Definitions
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
DOCUPORT, INC.
TOTAL AUTHORIZED ISSUE
12,000,000 SHARES PAR VALUE $.001 EACH
COMMON STOCK
SPECIMEN
This is to Certify that _______________________________________ is the owner of
_______________________________________________________________ fully paid and
non-assessable shares of the above Corporation transferable only on the books
of the Corporation by the holder hereof in person or by duly authorized Attorney
upon surrender of this Cerificate properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized
officers.
Dated
_____________________________ _____________________________
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - ______ Custodian _______
Cust Minor
under Uniform Gifts to Minors Act ___________
(State)
For value received ___ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_____________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _________________________________________________ Attorney to transfer
the said Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated ______________ 19___
In presence of
_______________________________
_______________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
EMPLOYMENT AGREEMENT
BETWEEN
DOCUPORT, INC.
AND
NORMAN DOCTEROFF
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the 5th day of April, 1999 (the "Effective Date"), by and between DOCUPORT,
INC., a Canadian corporation (the "Company" or the "Employer"), having an
address at Suite 3500, 1155 Rene-Levesque W., P.O. Box 60, Montreal, Province of
Quebec, Canada; and NORMAN DOCTEROFF ("Employee"), having an address at 31 Twin
Bridges Road, Fairfield, New Jersey 07005.
RECITALS
A. Employee has substantial experience and expertise in operating and
managing one or more business enterprises including but not limited to
management and supervision of sales, marketing, finances and manufacturing
operations of business enterprises.
B. The Company is a corporation engaged in the development of peripheral
equipment for computers including but not limited to portable fax machines,
scanners and copiers.
C. The Company desires to employ Employee to manage the business of the
Company.
NOW, THEREFORE, in consideration of the above recitals, the terms and
conditions hereinafter set forth, and for their mutual reliance, the parties
hereto agree as follows:
1. Establishment of Relationship.
The Company hereby employs Employee as President and Chief Operating
Officer of the Company, and Employee hereby accepts and agrees to such
employment in accordance with all of the terms and conditions of this Agreement.
During the term of this Agreement, Employee shall manage and supervise the
business of the Company, subject to the direction of the Board of Directors,
including but not limited to review and control of accounting, marketing and
sales, and perform such other services as may be delegated to Employee by the
Board of Directors of the Company, as shall be consistent with the position in
which Employee is employed hereunder. Employee hereby agrees to devote his best
endeavors and skill, for the interest, benefit and best advantage of Company and
shall devote a substantial portion of his work time consisting of a minimum of
thirty (30) hours per week to the business of the Company. Employee may accept,
as his sole and exclusive property, payments received by Employee for other
services rendered by Employee outside the scope of Employee's employment by the
Company so long as the provision of such services do not interfere with the
provision of services to be provided by Employee on behalf of Company pursuant
to or as contemplated by this Agreement.
2. Representations and Warranties of Employee.
The Company has entered into this Agreement in reliance on the
Employee's representation and warranties. Employee hereby represents and
warrants to the Company that he has
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<PAGE>
the power and authority to enter into this Agreement and that the Employee's
execution of this Agreement does not violate, conflict with or cause and event
of default pursuant to any other Agreement or obligation of which Employee may
be a party or which he may be bound.
3. Duties and Covenants of Employee.
3.1 The duties of Employee pursuant to this Agreement shall be those
customarily performed by the President and Chief Operating Officer, including
the duties to:
(a) Establish marketing and sales plans, and establish
realistic sales goals on a monthly, quarterly and annual basis;
(b) Have complete day to day responsibility for the operations
of the Company, including contract negotiations, supervision of sales and
marketing and accounting and participation in financial public relations
including, but not limited to road shows;
(c) Sign all checks on behalf of the Company for any and all
expenses incurred in the course of the Company's business up to $20,000, with
checks in excess of $20,000 requiring a second signatory designated, from time
to time by the Company's Board of Directors;
(d) Prepare, in connection with the services to be provided by
Employee under this Agreement, all reports and correspondence necessary or
appropriate in the circumstances, it being understood by the parties that all
such records, reports, and correspondence shall be the property of the Company;
(e) Prepare a budget for the operations of the Company which
shall be submitted to the Board of Directors in or before June 1, 1999 for the
balance of 1999 and on or before November 1, of each year commencing November 1,
1999 for the succeeding calendar year, which budget shall be subject to approval
by the Board of Directors and shall be followed by the Employee, except as may
be otherwise approved by the Board of Directors.
(f) Promote, as and to the extent permitted by law and
applicable ethical standards, the business of the Company; and
(g) Perform such other duties as the Board of Directors of the
Company shall from time to time, reasonably direct; provided such duties are
consistent with the position of President and Chief Operating Officer of the
Company.
Notwithstanding the foregoing duties of the Employee, the Employee shall
not have the power and authority to bind the Company or enter into agreements or
commitments on behalf of the Company without the prior approval of the Board of
Directors of the Company
3.2 In the performance of Employee's duties set forth in this Section 3,
Employee
2
<PAGE>
covenants that Employee shall notify the Company within five (5) business days
after the occurrence of any of the following; (i) the accusation of Employee of
a felony or any other crime involving moral turpitude or immoral conduct; (ii)
Employee's incapacity or disability or any condition affecting Employee which
adversely effects Employee's ability to provide his services as required under
this Agreement;
4. Office Space, Personnel and Administrative Support.
The Company shall furnish, at its expense, to Employee, the
following: (a) adequate office space as may be reasonable necessary for the
performance of Employee's duties hereunder, (b) equipment and furniture for use
by Employee in performing his duties, and (c) such support personnel, if any, as
may be necessary to enable Employee to perform his duties.
5. Compensation; Benefits.
In consideration for Employee agreeing to work for the Company,
Employee shall be entitled to receive and shall receive warrants to purchase,
exercisable at Two ($2.00) Dollars per share, Two Hundred Fifty Thousand
(250,000) shares of Stock in the Company. Said warrants shall be earned and
delivered to Employee in equal monthly installments of 6,945 warrants per month,
on the last day of each month; provided however if Employee is terminated, other
than for cause, the then remaining warrants shall be deemed to be vested and
immediately delivered to Employee. In the event Employee is terminated "With
Cause" (as hereinafter defined), or if the Employee terminates his employment,
the balance of the undelivered warrants shall terminate and be of no further
force and effect. All warrants must be exercised within three (3) years of the
date they are issued.
6. Term.
The term of this Agreement shall commence on April 15, 1999, and
shall continue in full force and effect thereafter for an initial term of three
(3) years. Thereafter, this Agreement shall be automatically extended for
successive one (1) year terms unless terminated by either party at any time, by
giving the other party ninety (90) days prior written notice of such
termination. There shall be no additional warrants or other consideration given
to Employee if this Agreement is extended.
7. Termination.
7.1 This Agreement may be terminated immediately by the Company by
notice to Employee upon the occurrence of any of the following events
(hereinafter defined as "With Cause");
(a) Upon Employee's death or permanent disability (the term
"permanent disability" shall be defined as the failure of the Employee to
perform his duties and responsibilities for a total of sixty-five (65) days
(excluding Saturdays, Sundays and holidays upon which banks are
3
<PAGE>
closed in the State of New Jersey) during any twelve (12) consecutive months
during the term of this Agreement, or the determination by an independent
physician that Employee is permanently disabled): or
(b) Employee's conviction of a felony or of any other crime
involving moral turpitude.
(c) Employee's willful malfeasance or gross negligence;
(d) Employee's fraud, misappropriation or embezzlement;
(e) Employee's failure to perform such duties which are
reasonably assigned to him by the Board of Directors of the Company, provided
such duties are customary and appropriate for his position as President and
Chief Operating Officer of the Company; or
(f) Employee's default, violation of, or failure to perform
any material provision of this Agreement;
provided however, that with respect to items (e) and (f) above, termination
shall be subject to receipt of written notice by the Employee from the Company
specifying the failure or default and the Employee failing to cure such failure
or default within five (5) days after such notice. Except with respect to the
five (5) days notice to terminate the Employee with respect to items (e) and (f)
pursuant to the preceding sentence, the Employer may terminate this Agreement
and the Employee's employment With Cause upon notice to the Employee, which
notice shall state the cause for termination and the date of termination which,
at the Company's election, may be effective immediately. Such termination of the
Employee's employment shall not constitute a breach of this Agreement by the
Company and the Employer's sole obligation to the Employee shall be to pay the
Employee the amount of any compensation then due to the Employee through the
date of termination.
7.2 The Company, may terminate Employee for any reason other than as
set forth in Section 7.1, upon thirty (30) days notice, provided that all
warrants to purchase the stock of the Company set forth in Section 5 shall be
immediately vested in Employee and delivered to Employee.
7.3 Termination of this Agreement shall not release or discharge
either party from any obligation, debt or liability which shall have previously
accrued and remain to be performed on or after the date of termination.
8. Rights and Obligations upon Termination; Access to Books and Records.
Upon termination of Employment, Employee shall remove all of
Employee's work items and materials from the Company's office and turn over to
Company all materials belonging to Company. All customer records shall remain
the exclusive property of Company.
4
<PAGE>
9. Confidential Information and Restrictive Covenants.
A. Confidential Information; Non-Disclosure.
(i) As used in this Agreement, "Confidential Information"
means information which is presented to the Employee by the Company or
developed, conceived or created by the Company, or disclosed to the Employee or
known by or conceived or created by the Employee during the term of the
Employee's employment by the Company, with respect to the Company, its business
or any of its products, processes, and other services relating thereto relating
to the past, present or future business of the Company or any plans therefore,
or relating to the past, present or future business of a third party or plans
therefore which are disclosed to the Employee. Confidential Information
includes, but is not limited to, all documentation, hardware and software
relating thereto, and information and data in written, graphic and/or machine
readable form, products, processes and services, whether or not patentable,
trademarkable or copyrightable or otherwise protectable, including, but not
limited to, information with respect to discoveries; know-how; ideas; computer
programs, source codes and object codes; designs; algorithms; processes and
structures; product information; marketing information; price lists; cost
information; product contents and formulae; manufacturing and production
techniques and methods; research and development information; lists of clients
and vendors and other information relating thereto; financial data and
information; business plans and processes; documentation with respect to any of
the foregoing; and any other information of the Company that the Company informs
the Employee or the Employee should know, by virtue of his position or the
circumstances in which the Employee learned such other information, is to be
kept confidential including, but not limited to, any information acquired by the
Employee from any sources prior to the commencement of the Employee's employment
by the Company. Confidential Information also includes similar information
obtained by the Company in confidence from its vendors, licensors, licensees,
customers and/or clients. Confidential Information may or may not be labeled as
confidential.
(ii) Except as required in the performance of the Employee's
duties as an employee, the Employee will not, during or after his employment,
directly or indirectly, use any Confidential Information or disseminate or
disclose any Confidential Information to any person, firm, corporation,
association or other entity. The Employee shall take all reasonable measures to
protect Confidential Information from any accidental, unauthorized or premature
use, disclosure or destruction. The foregoing prohibition shall not apply to any
Confidential Information which: (a) was generally available to the public prior
to such disclosure; (b) becomes publicly available through no act or omission of
the Employee, (c) is disclosed as reasonably required in a proceeding to enforce
the Employee's rights under this Agreement or (d) is disclosed as required by
court order or applicable law.
(iii) Upon termination of the Employee's employment with the
Company for any reason or at any time upon request of the Company, the Employee
agrees to deliver to the Company all materials of any nature which are in the
Employee's possession or control and which are or contain Confidential
Information, Work Product or Work Products (hereinafter defined), or
5
<PAGE>
which are otherwise the property of the Company or any vendor, licensor,
licensee, customer or client of the Company, including, but not limited to
writings, designs, documents, records, data, memoranda, tapes and disks
containing software, computer source code listings, routines, file layouts,
record layouts, system design information, models, manuals, documentation and
notes.
(iv) All ideas, inventions, discoveries or improvements,
whether patentable or not, conceived by the Employee (alone or with others)
during the term of the Employee's employment by the Company ("Work Products")
shall be the exclusive property of and assigned to the Company or as the Company
may direct without compensation to the Employee. Any records with respect to the
foregoing shall be the sole and exclusive property of the Company and the
Employee shall surrender possession of such records to the Company upon any
suspension or termination of his employment with the Company. Any Work Product
shall be deemed incorporated in the definition of Confidential Information for
all purposes hereunder.
(v) The Employee will not assert any rights with respect to
the Company, its business, or any of its products, processes and other services
relating thereto, Work Product or any Confidential Information as having been
acquired or known by the Employee prior to the commencement of the Employee's
employment with the Company.
B. Work Products.
(i) The Employee represents and warrants to the Company that
all work that the Employee performs, for or on behalf of the Company and its
clients, and all work product that the Employee produces, including, but not
limited to, software, documentation, memoranda, ideas, designs, inventions,
processes, algorithms, etc. (also " Work Product") will not knowingly infringe
upon or violate any patent, copyright, trade secret or other property right of
any of the Employee's former employers or of any other third party. Further, the
Employee will not disclose to the Company or use in any of the Employee's Work
Product any confidential or proprietary information belonging to others, unless
both the owner thereof and the Company have consented to such disclosure and
usage.
(ii) The Employee will promptly disclose to the Company all
Work Products developed by the Employee within the scope of his employment with
the Employer or which relate directly to, or involve the use of, any
Confidential Information including, but not limited to, all software, concepts,
ideas and designs, and all documentation, manuals, letters, pamphlets, drafts,
memoranda and other documents, writings or tangible things of any kind.
(iii) The Employee acknowledges and agrees that all
copyrightable Work Products prepared by the Employee within the scope of the
Employee's employment with the Company are "works made for hire" and,
consequently, that the Company owns all copyrights thereto.
(iv) The Employee hereby assigns, transfers and conveys to the
Company,
6
<PAGE>
without additional consideration, all of her other rights, title and interest
(including, but not limited to, all patent, copyright and trade secret rights)
in and to all Work Products prepared by the Employee, whether patentable or not,
made or conceived, in whole or in part, by the Employee within the scope of the
Employee's employment by the Company, or that relate directly to, or involve the
use of, Confidential Information.
(v) The Employee will, without additional compensation,
execute all assignments, oaths, declarations and other documents requested by
the Company to effect and further evidence the foregoing assignment, transfer
and conveyance, and agree to provide all reasonable assistance to the Company
(at the Company's expense) to provide all information, documentation and
assistance to the Company in perfecting, enforcing, defending or protecting any
or all of the Company's rights in all Work Product.
C. Restrictive Covenants.
(i) The Employee agrees that he shall not use the name
"Docuport" or any variation thereof or any variation thereof, except in the
course of his employment by the Company.
(ii) From the date hereof and for a period of one (1) year
following the end of the Term (notwithstanding the earlier termination of this
Agreement), the Employee will not, anywhere within North America, directly or
indirectly, own, manage, join, control, be employed by, or participate in the
ownership (other than the ownership of less than one (1%) percent of the issued
and outstanding shares of any publicly-held corporation), operation or control
of, or be connected in any manner with, any corporation or other entity engaged
in any activity of the type and character of the business then conducted by the
Company or which the Company plans to conduct at the time of termination of this
Agreement, whether for his own account or as an employee of any other person,
firm or corporation.
(iii) During the Term of the Employee's employment by the
Company, and for a period of one (1) year following the termination of his
employment (whenever, however and by whomever caused) Employee will not (a)
induce or attempt to induce any customer or client of the Company to reduce such
customers or client's business with the Company; (b) solicit or attempt to
induce any of the Company's employees to leave the employment of the Company;
(c) induce or attempt to induce any of the Company's suppliers or vendors to
reduce the business which they do with the Company; or (d) take any other action
prejudicial to the Employer or its business affairs or interests.
(iv) The restrictions which are contained in this Paragraph
"9" of this Agreement shall apply to all locations within North America. The
Employee hereby acknowledges and agrees that the Company has plans to carry on
substantial business throughout North America.
7
<PAGE>
D. Reasonableness of Restrictions
Employee agrees that the duration, scope and geographic area
for which the provisions set forth in this Agreement are to be effective are
reasonable. If any court of competent jurisdiction determines that any provision
of this Agreement is invalid or unenforceable by reason of such provision
extending the covenants and agreements contained herein for too great a period
of time or over too great a geographical area, or by reason of its being too
extensive in any other respect, such agreement or covenant shall be interpreted
to extend only over the maximum period of time and geographical area, and to the
maximum extent in all other respects, as to which it is valid and enforceable,
all as determined by such court in such action. Any determination that any
provision of this Agreement is invalid or unenforceable, in whole or in part,
shall have no effect on the validity or enforceability of any remaining
provision of this Agreement.
E. Time Periods Not Limited
Any period of time set forth in this Agreement shall not be
construed to permit the Employee to engage in any of the prohibited acts set
forth in this Agreement after such period if such acts would otherwise be
prohibited by any applicable statute or legal precedent.
F. Equitable Relief.
Employee acknowledges that the services to be rendered by the
Employee hereunder are of a special character which gives them a peculiar value,
the loss of which cannot be reasonably or adequately compensated in damages in
an action at law. Furthermore, a breach by the Employee of any of the provisions
contained in this Paragraph "9" of this Agreement, will cause the Company
irreparable injury and harm. The Employee expressly agrees that, notwithstanding
anything which is contained in this Agreement to the contrary, the Company shall
be entitled to injunctive or other equitable relief to prevent the Employee's
breach or anticipated breach of the provisions contained in this Paragraph "9"
of this Agreement. Resort to such equitable relief, however, shall not be
construed to be a waiver of any other rights or remedies which the Company may
have for damages or otherwise.
10. Assignment.
Employee shall not assign any rights or delegate any duties under
this Agreement without the prior written consent of Company. Any unauthorized
attempted assignment shall be null and void and of no force or effect.
11. Notices.
Any and all notices, requests, payments, demands and other
communications, required or permitted hereunder shall be given to the respective
parties in writing, by registered or certified mail, postage prepaid, return
receipt requested, addressed to the Company or the Employee,
8
<PAGE>
as the case may be, as follows:
To Company: Docuport, Inc.
Suite 3500
1155 Rene-Levesque W.
Montreal, Quebec
Canada
Attn: Mr. Raja Tuli
Copy to: Mintz & Fraade, P.C.
488 Madison Avenue
New York, New York 10022
Att: Frederick M. Mintz
To Employee: Mr. Norman Docteroff
81 Two Bridges Road
Fairfield, New Jersey 07005
or at such other address(es) and to such other persons(s) as either party may
from time to time designate by notice given as herein provided. Notices shall be
deemed effective seventy-two (72) hours after deposit in the United States mail
if sent by certified or registered mail.
12. Severability.
If any term, provision, covenant or condition of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remaining provisions shall remain in full force and effect and shall in no
way be affected, impaired or invalidated. In event that a provision of this
Agreement is rendered invalid or unenforceable as provided in this Paragraph 12
and its removal has the effect of materially altering (i) the obligations of
Company in such manner as , in the sole judgment of Company, will cause the
Company to act in violation of its Operating Agreement or Certificate of
Formation, or (ii) the obligations of either Company or Employee in such manner
as in the reasonable judgment of the affected party, will cause serious
financial hardship to such party, the party so affected shall have the right to
terminate this Agreement upon thirty (30) days prior written notice to the other
party. In the event of termination pursuant to this Section 12, the provisions
of Paragraph 7 shall govern such termination.
13. Amendment.
No modification, amendment or addition to this Agreement, nor waiver
of any of its provisions, shall be valid or enforceable unless in writing and
signed by both parties.
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<PAGE>
14. Entire Agreement.
This Agreement and the documents referred to herein contain all of
the terms and conditions agreed upon by the parties with respect to the subject
matter hereof. No other understanding, oral or otherwise, regarding the subject
matter of this Agreement, shall be deemed to exist or to bind either party
15. Binding Effect.
This Agreement shall be binding on the parties, their distributees,
legal representatives, successors and permitted assignees.
16. Choice of Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
17. Interpretation.
No provision of this Agreement is to be interpreted for or against
either party because that party's legal representative drafted such provision.
18. Headings.
The headings which are used in this Agreement are for convenience
only and shall not affect in any manner the meaning or interpretation of this
Agreement.
19. Waiver of Breach.
No waiver of any of the provisions of this Agreement shall be deemed
to be or shall constitute a waiver of any other provision hereof, regardless of
whether similar, nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
20. Duplicate Originals.
This Agreement may be executed in any number of counterpart copies,
all of which constitute one and the same Agreement and each of which shall
constitute an original, and shall become effective upon execution and delivery
to Company and the Employee.
21. Legal Representation.
Employee acknowledges that Employee has been advised by the Company
to seek his own separate counsel in connection with the negotiation and
execution of this Agreement.
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Employee further acknowledged that prior to the execution of this Agreement,
Employee has apprised himself of sufficient relevant information, through
counsel or through other sources of Employee's selection, in order that Employee
can intelligently exercise his own judgment in deciding whether to execute, and
negotiating the contents of, this Agreement.
22. Assistance in Litigation.
During the term of this Agreement, Employee shall be available to
Company, at no additional cost to the Company, to testify as an expert witness,
or otherwise, in the event of litigation brought against Company based upon a
claim of negligence or any other cause of action regarding Employee, except if
Employee is a named adverse party.
23. Governing Law; Disputes. This Agreement shall in all respects be
construed, governed, applied and enforced in accordance with the internal laws
of the State of New Jersey without giving effect to the principles of conflict
of laws and be deemed to be an agreement made under the laws of and entered into
in the State of New Jersey. Except as otherwise provided in Article "9" of this
Agreement, the parties agree that they shall be deemed to have agreed to binding
arbitration in New York, New York, with respect to the entire subject matter of
any and all disputes relating to or arising under this Agreement including, but
not limited to, the specific matters or disputes as to which arbitration has
been expressly provided for by other provisions of this Agreement. Any such
arbitration shall be by a panel of three arbitrators and pursuant to the rules
then obtaining of the American Arbitration Association in New York, New York.
The parties may agree in writing to conduct any arbitration in another location
or forum by their mutual consent. In all arbitrations, judgment upon the
arbitration award may be entered in any court having jurisdiction. The parties
specifically designate the Courts in the County of New York, State of New York
as properly having jurisdiction for any proceeding to confirm and enter judgment
upon any such arbitration award. The parties hereby consent to and submit to
personal jurisdiction over each of them by the Courts of the State of New York
in any action or proceeding, waive personal service of any and all process and
specifically consent that in any such action or proceeding, any service of
process may be effectuated upon any of them by certified mail, return receipt
requested, in accordance with Paragraph "11" of this Agreement. The parties
agree, further, that the prevailing party in any such arbitration as determined
by the arbitrators shall be entitled to such costs and attorney's fees, if any,
in connection with such arbitration as may be awarded by the arbitrators;
provided, however, that if a proceeding is commenced to confirm and enter a
judgment thereon by the Courts of the State of New York and such application is
denied, no such costs or attorneys fees shall be paid. In connection with the
arbitrators' determination for the purpose of which party, if any, is the
prevailing party, they shall take into account all of the facts and
circumstances including, without limitation, the relief sought, and by whom, and
the relief, if any, awarded, and to whom. In addition, and notwithstanding the
foregoing sentence, a party shall not be deemed to be the prevailing party
unless the amount of the arbitration award is greater than fifteen (15%) percent
of the amount offered in writing by the other party. For example, if the party
initiating the arbitration ("A") seeks an award of $100,000 plus costs and
expenses, the other party ("B") has offered A $50,000 prior to the commencement
of the arbitration proceeding, and the arbitration panel awards
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any amount less than $57,500 to A, the panel should determine that B has
"prevailed".
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.
DOCUPORT, INC.
("Company")
By: /s/ Raja Tuli
------------------------------
, Title
/s/ Norman Docteroff
---------------------------------
NORMAN DOCTEROFF, Employee
12
MARKETING AND SALES CONTRACT
BETWEEN
SOLUTIONS PLUS, INC.
AND
DOCUPORT, INC.
<PAGE>
MARKETING AND SALES
CONTRACT
================================================================================
AGREEMENT made as of the 5th day of April, 1999, by and between
SOLUTIONS PLUS, INC.., a business corporation organized under the laws of the
State of New Jersey, with offices at 81 Two Bridges Road, Fairfield, New Jersey
07005 (hereinafter "Service Corporation"); and DOCUPORT, INC. a Canadian
corporation, having offices at 1155 Rene-Levesque W., Montreal, Province of
Quebec, Canada (hereinafter "Docuport").
W I T N E S S E T H;
WHEREAS, Docuport is engaged in the development of peripheral
equipment for computers including but not limited to portable fax machines,
scanner and copiers;
WHEREAS, Docuport desires to contract with Service Corporation for
Service Corporation to market and sell Docuport products on a non-exclusive
basis; and
WHEREAS, Service Corporation, understanding and accepting the terms
set forth herein, desires to perform such marketing and sales services for
Docuport.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties do hereby covenant and agree as follows:
1. Services
(a) Docuport hereby retains Service Corporation and Service
Corporation hereby agrees to perform on a non-exclusive basis, on the terms and
conditions herein contained, the following duties:
(i) To market and sell to business enterprises and electronic
retailers Docuport products and to provide any and all necessary and reasonable
support services in order to market and sell Docuport products including
advertising and sales training programs.
(ii) At no additional charge to Docuport, Service Corporation
shall allow Docuport to utilize the space currently leased by Service
Corporation at 81 Two Bridges Road, Fairfield (the "Two Bridges Space") for
Docuport's United States offices, including Docuport's accounting, sales and
marketing staff. If in the opinion of Service Corporation's chief operating
officer and the Board of Directors of Docuport, the Two Bridges space is
inadequate for Docuport's needs, Docuport shall enter into a lease for such
space as Service Corporation and Docuport deem reasonably necessary to satisfy
Docuport's business requirements.
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<PAGE>
(iii) Assist in the preparation of all advertising materials
including the development of trade brochures and print, TV and Radio
advertisement, to the extent deemed advisable by both Docuport and Service
Corporation; it being understood that no monies shall be expended for
advertising without the prior written approval of Docuport.
(b) Service Corporation agrees to use reasonable care in the
selection of the personnel and the rendering of services provided to Docuport
pursuant to Subsection 1(a) hereof, and covenants that the personnel and
services so provided shall be proficient in the skills for which they are
employed. In the event that the performance of any such personnel or the quality
of any services or supplies provided by Service Corporation pursuant to
Subsection 1(a) hereof shall be unsatisfactory to the Docuport, Docuport shall
notify Service Corporation of its complaint and the same shall be remedied
immediately by Service Corporation.
2. Administrative and Management Duties.
(a) Docuport further retains Service Corporation, and Service
Corporation agrees to perform, upon the terms and conditions herein contained,
the following duties:
(i) To manage and administer Docuport's financial records
including the billing of all customers of Docuport and the preparation of all
checks required to pay all expenses of Docuport. Notwithstanding the foregoing,
only officers and directors of Docuport are authorized to sign said checks. On
or before the fifteenth day of each month, Service Corporation shall furnish
Docuport with a statement accounting for all financial transactions for the
preceding month. All collections shall be deposited in the bank account
maintained by and for Docuport (as set forth below).
(ii) To establish and maintain complete and orderly files
containing correspondence, rent records, employment records, insurance policies,
leases, receipts, bills, vouchers, and all other documents and papers pertaining
to the operating and management of Docuport, all of which shall be and remain
the property of Docuport and shall be available to Docuport and its
representative at any time.
(iii) To establish and maintain in accordance with generally
accepted accounting principles, consistently applied, accurate, and complete
books of account with proper entries of all receipts, income, and disbursements,
pertaining to the operation of Docuport, which books of account shall be and
remain the property of Docuport and shall be available to Docuport and its
representatives for inspection at any time.
(b) Contemporaneously with the execution of this Agreement, Docuport will
establish an operating account in which all monies received by Docuport from
sales generated within the United States of Docuport products will de deposit
and from which all sales, marketing and other expenses shall be paid. Docuport
shall initially place Two Hundred Fifty Thousand ($250,000) Dollars in such
account and shall add funds when and if reasonably needed.
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<PAGE>
3. Service Fee. In consideration for its services to the Docuport pursuant
to this Agreement, Service Corporation shall be entitled to the following
compensation:
(a) Ten Thousand ($10,000) Dollars per month payable on the first
day of each month commencing May 1, 1999; the first payment shall be for the
period of April 15, 1999 through May 14, 1999 and subsequent payments shall be
for each comparable period;
(b) Ten (10%) percent of the gross sales of the Company generated by
Service Corporation less returns (except as noted in 3(c)). Said monies shall be
paid on the fifteenth of the month for sales occurring during the previous
month. Adjustments for returns shall be made in the month the returns are
received by Docuport. For purposes of this Agreement, gross sales shall only
include monies actually received by the Company.
(c) Five (5%) percent of all gross sales generated by Service
Corporation to Original Equipment Manufacturers less returns. Said monies shall
be paid on the fifteenth of the month of sales occurring during the previous
month. Adjustments for returns shall be made in the month the returns are
received by Docuport. For purposes of this Agreement, gross sales shall only
include monies actually received by the Company.
(d) All prices for Docuports products which are sold by Service
Corporation shall be determined by Docuport, in its sole and absolute
discretion.
Nothwithstanding, the provisions of Subparagraphs "(b)" and "(c)" of this
Paragraph "3" of this Agreement, if the gross sales of the Company generated by
Service Corporation equal Twenty-Five Million ($25,000,000) Dollars or more
during any period of twelve (12) consecutive calendar months (the "Period"),
then Docuport shall have the option, in its sole and absolute discretion, to
reduce the percentage commissions paid to Service Corporation pursuant to
Subparagraphs "(b)" and "(c)" of this Paragraph "3" of this Agreement to three
(3%) percent for the balance of the term of this Agreement. This option may be
exercised by Docuport by giving written notice to Service Corporation pursuant
to Paragraph "11" of this Agreement within thirty (30) days after the end of the
Period. If Docuport exercises the foregoing option, then Service Corporation
shall not be obligated to pay any sales and marketing costs pursuant to
Subparagraph "4.1" of Paragraph "4" of this Agreement.
4. Expenses
4.1 Service Corporation shall pay all sales and marketing costs including
but not limited to commissions to its sales personnel and others, travel
expenses, entertainment expenses and sales training expenses.
4.2 Docuport shall pay for all of the following expenses which it agrees
to: sales samples, collateral sales material, development costs, advertising
costs, trade shows, as well as all administrative expenses including rental
expense, secretarial, telephone, book-keeping personnel,
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<PAGE>
payroll taxes of administrative staff and insurance costs.
5. Financial Reports. Service Corporation shall prepare and furnish to
Docuport the following financial reports.
(a) Within fifteen (15) days after the end of each month, a detailed
statement of all cash receipts and disbursements received and made during the
preceding month in connection with the performance of its duties hereunder,
together with a list of all accounts payable and receivable as of the last day
of each month and a projection of the net cash flow (or deficit) anticipated by
Service Corporation for the three-month period following the end of said month.
(b) Within thirty (30) days after the end of each calendar quarter,
a statement of income and expenses showing the results of operations for said
quarter and cumulatively for the period from the beginning of the calendar year
through the end of said quarter, which statement shall be prepared on a accrual
basis.
(c) Within forty-five (45) days after the end of each calendar year,
a statement of income and expense showing the results of operations for said
year, which statement shall be prepared on a accrual basis.
6. Fidelity Insurance. Service Corporation shall maintain adequate
fidelity insurance on those of its employees handing funds or assets of the
Docuport naming Docuport as the named insured and shall carry workmen's
compensation insurance for all sales personnel.
7. Indemnity. Service Corporation shall indemnity and hold Docuport
harmless from and against all claims, damages, and costs arising out of or in
connection with the performance of Service Corporation's duties hereunder,
except for acts of Docuport taken outside of the scope of Service Corporation's
duties hereunder and acts of willful misconduct or gross negligence of the
Docuport. Service Corporation shall endeavor to procure from its insurers
waivers or subrogation with respect to claims against Docuport under policies in
which Docuport is not a named insured, and shall promptly notify Docuport in the
event that any such waiver is obtainable only upon payment of an additional
premium. Docuport shall have the right at its option to pay such additional
premium.
8. Term of Agreement.
(a) This Agreement shall commence on April 15, 1999 and shall
continue in force and effect for a period of three (3) years subject to
termination pursuant to paragraph "(c)" of this Article "8" of this Agreement.
In addition, this Agreement shall automatically renew itself at the end of the
third year on an annual basis for each and every subsequent one-year period
unless terminated by either party on not less than thirty (30) days written
notice prior to the end of the original term or any renewal term thereof.
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<PAGE>
(b) On the effective date of termination, Service Corporation shall
turn over to Docuport all books and records relating to the Docuport (copies of
which may be made and retained by Service Corporation at Service Corporation's
cost and expense) and all funds of Docuport then remaining in Service
Corporation's possession, together with such authorizations and letters of
direction addressed to suppliers, employees, banks, and other parties, as
Docuport may reasonably require; and Service Corporation shall cooperate in the
transfer of management and administrative responsibilities to Docuport or its
designee. A final accounting of unpaid fees (if any) due to Service Corporation
hereunder shall be made within fifteen (15) days after the effective date of
termination.
(c) The Company shall have the right to terminate this Agreement if
Service Corporation shall fail to sell 25,000 of the Company's patented,
"portable" multifunctional office machines called the SlimFax (the "SlimFax")
during the first twelve (12) months of this Agreement and an additional 125,000
of the Company's SlimFax during the second twelve (12) months of this Agreement.
(d) Upon termination of this Agreement, Service Corporation shall be
entitled to only such compensation which it was entitled to prior to the date of
termination.
9. Assignment. This Agreement is personal to Service Corporation. Service
Corporation agree that it shall not assign this Agreement or subcontract the
performance of its duties hereunder without Docuport's prior written consent.
Any assignment or subcontracting without such consent shall be void.
10. Confidential Information and Restrictive Covenants.
(a) Confidential Information; Non-Disclosure.
(i) As used in this Agreement, "Confidential Information"
means information which is presented to Service Corporation by Docuport or
developed, conceived or created by Docuport, or disclosed to Service Corporation
or known by or conceived or created by Service Corporation during the term of
Service Corporation's employment by Docuport, with respect to Docuport, its
business or any of its products, processes, and other services relating thereto
relating to the past, present or future business of Docuport or any plans
therefore, or relating to the past, present or future business of a third party
or plans therefore which are disclosed to Service Corporation. Confidential
Information includes, but is not limited to, all documentation, hardware and
software relating thereto, and information and data in written, graphic and/or
machine readable form, products, processes and services, whether or not
patentable, trademarkable or copyrightable or otherwise protectable, including,
but not limited to, information with respect to discoveries; know-how; ideas;
computer programs, source codes and object codes; designs; algorithms; processes
and structures; product information; marketing information; price lists; cost
information; product contents and formulae; manufacturing and production
techniques and methods; research and development information; lists of clients
and vendors and other information relating thereto;
5
<PAGE>
financial data and information; business plans and processes; documentation with
respect to any of the foregoing; and any other information of Docuport that
Docuport informs Service Corporation or Service Corporation should know, by
virtue of its position or the circumstances in which Service Corporation learned
such other information, is to be kept confidential including, but not limited
to, any information acquired by Service Corporation from any sources prior to
the commencement of Service Corporation's employment by Docuport. Confidential
Information also includes similar information obtained by Docuport in confidence
from its vendors, licensors, licensees, customers and/or clients. Confidential
Information may or may not be labeled as confidential.
(ii) Except as required in the performance of Service
Corporation's duties, Service Corporation will not, during or after its
employment, directly or indirectly, use any Confidential Information or
disseminate or disclose any Confidential Information to any person, firm,
corporation, association or other entity. Service Corporation shall take all
reasonable measures to protect Confidential Information from any accidental,
unauthorized or premature use, disclosure or destruction. The foregoing
prohibition shall not apply to any Confidential Information which: (a) was
generally available to the public prior to such disclosure; (b) becomes publicly
available through no act or omission of Service Corporation, (c) is disclosed as
reasonably required in a proceeding to enforce Service Corporation's rights
under this Agreement or (d) is disclosed as required by court order or
applicable law.
(iii) Upon termination of Service Corporation's employment
with Docuport for any reason or at any time upon request of Docuport, Service
Corporation agrees to deliver to Docuport all materials of any nature which are
in Service Corporation's possession or control and which are or contain
Confidential Information, Work Product or Work Products (hereinafter defined),
or which are otherwise the property of Docuport or any vendor, licensor,
licensee, customer or client of Docuport, including, but not limited to
writings, designs, documents, records, data, memoranda, tapes and disks
containing software, computer source code listings, routines, file layouts,
record layouts, system design information, models, manuals, documentation and
notes.
(iv) All ideas, inventions, discoveries or improvements,
whether patentable or not, conceived by Service Corporation (alone or with
others) during the term of Service Corporation's employment by Docuport ("Work
Products") shall be the exclusive property of and assigned to Docuport or as
Docuport may direct without compensation to Service Corporation. Any records
with respect to the foregoing shall be the sole and exclusive property of
Docuport and Service Corporation shall surrender possession of such records to
Docuport upon any suspension or termination of its employment with Docuport. Any
Work Product shall be deemed incorporated in the definition of Confidential
Information for all purposes hereunder.
(v) Service Corporation will not assert any rights with
respect to Docuport, its business, or any of its products, processes and other
services relating thereto, Work Product or any Confidential Information as
having been acquired or known by Service Corporation prior to the commencement
of Service Corporation's employment with Docuport.
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<PAGE>
(b) Work Products.
(i) Service Corporation represents and warrants to Docuport
that all work that Service Corporation performs, for or on behalf of Docuport
and its clients, and all work product that Service Corporation produces,
including, but not limited to, software, documentation, memoranda, ideas,
designs, inventions, processes, algorithms, etc. (also " Work Product") will not
knowingly infringe upon or violate any patent, copyright, trade secret or other
property right of any of Service Corporation or of any other third party.
Further, Service Corporation will not disclose to Docuport or use in any of
Service Corporation's Work Product any confidential or proprietary information
belonging to others, unless both the owner thereof and Docuport have consented
to such disclosure and usage.
(ii) Service Corporation will promptly disclose to Docuport
all Work Products developed by Service Corporation within the scope of its
employment with the Employer or which relate directly to, or involve the use of,
any Confidential Information including, but not limited to, all software,
concepts, ideas and designs, and all documentation, manuals, letters, pamphlets,
drafts, memoranda and other documents, writings or tangible things of any kind.
(iii) Service Corporation acknowledges and agrees that all
copyrightable Work Products prepared by Service Corporation within the scope of
Service Corporation's employment with Docuport are "works made for hire" and,
consequently, that the Company owns all copyrights thereto.
(iv) Service Corporation hereby assigns, transfers and conveys
to the Company, without additional consideration, all of its other rights, title
and interest (including, but not limited to, all patent, copyright and trade
secret rights) in and to all Work Products prepared by Service Corporation,
whether patentable or not, made or conceived, in whole or in part, by Service
Corporation within the scope of Service Corporation's employment by the Company,
or that relate directly to, or involve the use of, Confidential Information.
(v) Service Corporation will, without additional compensation,
execute all assignments, oaths, declarations and other documents requested by
Docuport to effect and further evidence the foregoing assignment, transfer and
conveyance, and agree to provide all reasonable assistance to Docuport (at
Docuport's expense) to provide all information, documentation and assistance to
Docuport in perfecting, enforcing, defending or protecting any or all of
Docuport's rights in all Work Product.
(c) Restrictive Covenants.
(i) Service Corporation agrees that it shall not use the name
"Docuport" or any variation thereof or any variation thereof, except in the
course of its employment by Docuport.
(ii) From the date hereof and for a period of one (1) year
following the end of the
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<PAGE>
Term (notwithstanding the earlier termination of this Agreement), Service
Corporation will not, anywhere within North America, directly or indirectly,
own, manage, join, control, be employed by, or participate in the ownership
(other than the ownership of less than one (1%) percent of the issued and
outstanding shares of any publicly-held corporation), operation or control of,
or be connected in any manner with, any corporation or other entity engaged in
any activity of the type and character of the business then conducted by
Docuport or which Docuport plans to conduct at the time of termination of this
Agreement, whether for its own account or as an employee of any other person,
firm or corporation.
(iii) During the Term of Service Corporation's employment by
Docuport, and for a period of one (1) year following the termination of its
employment (whenever, however and by whomever caused) Service Corporation will
not (a) induce or attempt to induce any customer or client of Docuport to reduce
such customers or client's business with Docuport; (b) solicit or attempt to
induce any of Docuport's employees to leave the employment of Docuport; (c)
induce or attempt to induce any of Docuport's suppliers or vendors to reduce the
business which they do with Docuport; or (d) take any other action prejudicial
to the Employer or its business affairs or interests.
(iv) The restrictions which are contained in this Paragraph
"9" of this Agreement shall apply to all locations within North America. Service
Corporation hereby acknowledges and agrees that Docuport has plans to carry on
substantial business throughout North America.
(d) Reasonableness of Restrictions
Service Corporation agrees that the duration, scope and
geographic area for which the provisions set forth in this Agreement are to be
effective are reasonable. If any court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable by reason of such
provision extending the covenants and agreements contained herein for too great
a period of time or over too great a geographical area, or by reason of its
being too extensive in any other respect, such agreement or covenant shall be
interpreted to extend only over the maximum period of time and geographical
area, and to the maximum extent in all other respects, as to which it is valid
and enforceable, all as determined by such court in such action. Any
determination that any provision of this Agreement is invalid or unenforceable,
in whole or in part, shall have no effect on the validity or enforceability of
any remaining provision of this Agreement.
(e) Time Periods Not Limited
Any period of time set forth in this Agreement shall not be
construed to permit Service Corporation to engage in any of the prohibited acts
set forth in this Agreement after such period if such acts would otherwise be
prohibited by any applicable statute or legal precedent.
(f) Equitable Relief.
Service Corporation acknowledges that the services to be
rendered by Service
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<PAGE>
Corporation hereunder are of a special character which gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. Furthermore, a breach by Service Corporation of any
of the provisions contained in this Paragraph "10" of this Agreement, will cause
Docuport irreparable injury and harm. Service Corporation expressly agrees that,
notwithstanding anything which is contained in this Agreement to the contrary,
Docuport shall be entitled to injunctive or other equitable relief to prevent
Service Corporation's breach or anticipated breach of the provisions contained
in this Paragraph "10" of this Agreement. Resort to such equitable relief,
however, shall not be construed to be a waiver of any other rights or remedies
which Docuport may have for damages or otherwise.
11. Notices. All notices required to be given by wither party to the other
hereunder shall be in writing and shall be delivered or sent by registered mail,
return receipt requested and postage prepaid, to the parties at the address set
forth above with a copy of any notices to Docuport to be sent to Mintz & Fraade,
P.C., 488 Madison Avenue, New York, New York 10022, Attn. Frederick M. Mintz.
Either party may at any time change its address by sending written notice to the
other party in the manner hereinabove prescribed.
12. Miscellaneous.
(a) This Agreement contains the entire Agreement between the parties
hereto, and any agreement hereafter made shall be ineffective to modify or
terminate this Agreement or constitute a waiver of any of the provisions hereof
unless such agreement is in writing and signed by the party against whom
enforcement of the modification, termination, or waiver is sought.
(b) The captions to the paragraphs in this Agreement are included
for convenience of reference only and are not intended to and shall be deemed to
modify or explain any of the terms of this Agreement.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey.
(d) This Agreement shall in all respects be construed, governed,
applied and enforced in accordance with the internal laws of the State of New
Jersey without giving effect to the principles of conflict of laws and be deemed
to be an agreement made under the laws of and entered into in the State of New
Jersey. Except as otherwise provided in Article "10" of this Agreement, the
parties agree that they shall be deemed to have agreed to binding arbitration in
New York, New York, with respect to the entire subject matter of any and all
disputes relating to or arising under this Agreement including, but not limited
to, the specific matters or disputes as to which arbitration has been expressly
provided for by other provisions of this Agreement. Any such arbitration shall
be by a panel of three arbitrators and pursuant to the rules then obtaining of
the American Arbitration Association in New York, New York. The parties may
agree in writing to conduct any arbitration in another location or forum by
their mutual consent. In all arbitrations, judgment upon the arbitration award
may be entered in any court having jurisdiction. The parties specifically
designate the Courts in the County of New York, State of New York as properly
having jurisdiction for any
9
<PAGE>
proceeding to confirm and enter judgment upon any such arbitration award. The
parties hereby consent to and submit to personal jurisdiction over each of them
by the Courts of the State of New York in any action or proceeding, waive
personal service of any and all process and specifically consent that in any
such action or proceeding, any service of process may be effectuated upon any of
them by certified mail, return receipt requested, in accordance with Paragraph
"11" of this Agreement. The parties agree, further, that the prevailing party in
any such arbitration as determined by the arbitrators shall be entitled to such
costs and attorney's fees, if any, in connection with such arbitration as may be
awarded by the arbitrators; provided, however, that if a proceeding is commenced
to confirm and enter a judgment thereon by the Courts of the State of New York
and such application is denied, no such costs or attorneys fees shall be paid.
In connection with the arbitrators' determination for the purpose of which
party, if any, is the prevailing party, they shall take into account all of the
facts and circumstances including, without limitation, the relief sought, and by
whom, and the relief, if any, awarded, and to whom. In addition, and
notwithstanding the foregoing sentence, a party shall not be deemed to be the
prevailing party unless the amount of the arbitration award is greater than
fifteen (15%) percent of the amount offered in writing by the other party. For
example, if the party initiating the arbitration ("A") seeks an award of
$100,000 plus costs and expenses, the other party ("B") has offered A $50,000
prior to the commencement of the arbitration proceeding, and the arbitration
panel awards any amount less than $57,500 to A, the panel should determine that
B has "prevailed".
IN WITNESS WHEREOF, this instrument has been duly executed as of the
day and year above written.
DOCUPORT, INC.
By: /s/ Raja Tuli
--------------------------------
SOLUTIONS PLUS, INC.
By: /s/ Norman Docteroff
--------------------------------
10
MANAGEMENT AND CONSULTING AGREEMENT
This consulting Agreement is made effective this 12th day of December 1998 by an
between Rexon Limited, ("Consultant") a corporation with offices located at P.O.
Box 2321, 1211-Geneva 1, Switzerland and Docuport, Inc. a corporation with
principal offices at 1155 Rene Levesque West-Suite 3500, P.O. Box 60, Montreal,
PQ H2B3T6 ("Client") with respect to the following:
PREMISES
WHEREAS, Consultant has rendered and continues to render valuable services to
Client in connection with various management, marketing, business planning and
acquisition strategies and
WHEREAS, Client desires to retain Consultant to continue to aid Client in such
areas.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and agreement
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which is expressly acknowledged, Client and Consultant are as
follows:
1. Engagement of Consultant
Client hereby retains Consultant to continue to assist Client in the
following areas:
A. Review, analyze and assist the company in the preparation of a
definitive business plan describing the Company's business,
financial condition and future business potential
B. Introducing Client to potential customers "(Customers"), advising
Client in connection with sales proposals to Customers and assisting
the Client in negotiating sales transactions with Customers;
<PAGE>
C. Meeting with management and assisting management in developing an
implementing marketing campaigns regarding the Client's products;
D. Analyze and provide advice to management in connection with
potential acquisition candidates including review of the financial,
business and operating history of such candidates;
E. Introducing Client to banks, lenders and other financing sources.
F. Advising the Client in connection with management, marketing and
financing strategy;
G. Advising the Client with respect to the structuring and funding of
receivable and payables as well as the funding of capital
expenditures;
H. Introducing Client to potential business acquisitions and merger
candidates ("Merger Candidates");
I. Inspect the assets and analyze the operations of Merger Candidates;
and
J. Provide advise in structuring business acquisitions and assisting
Client in negotiations for the acquisition of Merger Candidates.
All the foregoing services collectively are referred to herein as the
"Consulting Services".
2. Compensation.
Client desires for the Consultant to perform the Consulting Services
on behalf of the Client as of the date of this Agreement. The Consultant
acknowledges that the Client currently lacks the financial resources necessary
to adequately compensate the Consultant for the Consulting Services.
Accordingly, the Consultant has agreed to perform the Consulting Services on
behalf of the Client and accept deferred compensation from the Client and the
immediate issuance to the
2
<PAGE>
Consultant of shares of stock equal to 23.3% of the currently outstanding common
shares of Docuport (approximately 700,000 shares). Such shares shall be issued
to Consultant from the present from present shareholders. At such time as
Docuport becomes a publicly traded company under "504", Rexon or its assigns
shall receive a consulting fee of $5,000 per month for a period of twenty-four
months for such services.
3. Terms of Agreement, Extensions and Renewals
The term of this Agreement shall commence on the date hereof and
shall expire thirty-six (36) months from the compensation date (the "Initial
Consulting Period"). Thereafter, this Agreement can be extended on a
month-to-month basis (the "Extension Period") by mutual agreement of the parties
executed in writing specifying the compensation for the Extension Period. Such
notice shall be in writing and shall be delivered at least (10) days prior to
the end of the Initial Consulting Period or any subsequent extension period. In
the event of termination pursuant to this paragraph, neither party shall have
any further rights or obligations hereunder after the effective date of such
termination except that the obligation of Client to make payments as provided
for in this Agreement and to reimburse costs and expenses shall continue until
paid in full by Client.
4. Nondisclosure of Confidential Information
In consideration for the Client entering into this Agreement,
Consultant agrees that the following items used in the Clients business are
secret, confidential, unique and valuable, were developed by Client at great
cost and over a long period of time and disclosure of any of the items to anyone
other than Client's officers, agents, or authorized employees, will cause Client
irreparable injury.
A. Non-public financial information, accounting information, plans of
operations, possible mergers or acquisitions.
3
<PAGE>
B. Customer lists, call lists and other confidential customer data;
C. Memoranda, notes, records concerning the technical processes
conducted by Client;
D. Sketches, plans, drawings and other confidential research and
development data or;
E. Marketing and Manufacturing processes and the composition of
Client's products.
5. Due Diligence
Client shall supply and deliver to Consultant all information
relating to its business as may be reasonably requested by Consultant and enable
Consultant to make such investigation of Client and its business prospects.
6. Best Efforts Basis
Consultant agrees that he will, at all times, faithfully and to the
best of his experience, ability and talents, perform all the duties that may be
required of and from Consultant pursuant to the terms of this Agreement.
Consultant does not guarantee that his efforts will have any impact on Client's
business or that any subsequent financial improvement will result of
Consultant's efforts. Client understands and acknowledges that the success or
failure of Consultant's efforts will be predicated on Client's assets and
operating results.
7. Client's Right to Approve Transactions
Client expressly retains the right to approve, in its sole
discretion, each and every transaction introduced by Consultant that involves
Client as a party to any agreement. Consultant and Client mutually agree that
Consultant is not authorized to enter into agreements on behalf of Client. It is
mutually understood and agreed that Client is not obligated to accept or close
on sales proposals, marketing proposals, financial transactions, any promotional
proposal, acquisition or merger transactions submitted by Consultant.
4
<PAGE>
8. Place of Services
The Consulting Services contemplated to be performed by Consultant
will be performed at locations selected by Consultant. It is understood and
expected that Consultant will make contacts with persons and entities within
and/or outside the U.S. deemed appropriate by Consultant.
9. Cost and Expenses
Consultant shall be responsible for all out-of-pocket expenses,
travel expenses, third party expenses, filing fees, copy and mailing expenses
that Consultant may incur in performing Consulting Services under this
Agreement, unless specifically authorized by Client.
10. Non-Exclusive Services
Client acknowledges that Consultant is currently providing services
of the same or similar nature to other parties and Client agrees that Consultant
is not prevented or barred from rendering services of the same nature or a
similar nature to any other individual or entity. Consultant understands and
agrees that Client shall not be prevented or barred from retaining other persons
or entities to provide services of the same or similar nature as those provided
by Consultant. Consultant will advise Client of its position with respect to any
activity, employment, business arrangement or potential conflict of interest
which may be relevant to this Agreement.
11. All Prior Agreements Terminated
This Agreement constitutes the entire understanding of the parties
with respect to the engagement of Consultant and all prior agreements and
understandings with respect thereto are hereby terminated and shall be of no
force or effect.
12. Representations and Warranties of Client
Client hereby represents and warrants to Consultant that:
5
<PAGE>
A. Corporate Existence - Client is a corporation duly organized and
validly existing, with corporate power to own property and carry on
its business as it is now being conducted.
B. No Conflict - This Agreement has been duly executed by Client and
the execution and performance of this Agreement will not violate or
result in a breach of, or constitute a default in, any agreement,
instrument, judgment, decree or order to which Client is a party or
to which Client is subject, nor will such execution and performance
constitute a violation or conflict of any fiduciary duty to which
Client is subject.
C. Validity of Shares - The shares issued to Consultant pursuant to
paragraph 2 of this Agreement, are and will be duly authorized,
validity issued, fully paid and non-assessable, free and clear of
all liens and encumbrances.
D. Authority - Client has the full legal right, power, authority and
approval required to enter into, execute and deliver all the shares
described in paragraph 2 of this Agreement and to fully perform all
of its obligations hereunder.
13. Representations and Warranties of Consultant
Consultant hereby represents and warrants to Client that:
A. Information - No representation or warranty contained herein, nor a
statement in any document, certificate or schedule furnished or to
be furnished pursuant to the Agreement by Consultant, or in
connection with the transaction contemplated hereby, contains or
contained any untrue statement of material fact.
B. Reliance Upon Representations - The information provided pursuant to
this Agreement may be relied upon by Client as true and correct as
of the date of delivery of any shares received
6
<PAGE>
by Consultant through the execution of options hereunder. Further,
Consultant represents as follows:
(a) by reason of Consultant's knowledge and experience of
financial and business matters in general and investments in
particular Consultant is capable of evaluating the merits and
risks of this transaction and in bearing the economic risks of
an investment in the warrants and shares and the Client in
general and fully understands the speculative nature of such
securities and the possibility of such loss; the Consultant
understands that the warrants and the shares will be fully
restricted securities and that they have not been registered
with the Securities and Exchange Commission or any state
securities bureau. Accordingly, the shares and warrants will
contain appropriate restricted stock legends; and
(b) Consultant has had the opportunity to ask questions and
receive answers concerning the terms and conditions of the
shares to be issued hereby and reserved for issuance pursuant
hereto and to obtain any additional information which Client
possess or can acquire without reasonable effort or expense
that is necessary to verify the accuracy of information
furnished; and
(c) Subsequent Events - Consultant will notify Client if
subsequent to the date hereof either party incurs obligations
which could compromise its efforts and obligations under this
Agreement.
7
<PAGE>
14. Consultant is Not an Agent or Employee
Consultant's obligations under this Agreement consist solely of the
Consulting Services described herein. In no event shall Consultant be considered
to act as the employee or agent of Client or otherwise represent or bind Client.
For the purposes of this Agreement, Consultant is an independent contractor. All
final decisions with respect to acts of Client or its affiliates, whether or not
made pursuant to or in reliance on information or advice furnished by Consultant
hereunder, shall be those of Client or such affiliates and Consultant shall
under no circumstance be liable for any expense incurred or loss suffered by
Client as a consequence of such action or decisions.
15. Miscellaneous
A. Authority - The execution and performance of this Agreement have
been authorized by all requisite corporate action. This Agreement
constitutes a valid and binding obligation of the parties hereto.
B. Amendment - This Agreement may be amended or modified at any time in
any manner only by an instrument in writing executed by the parties
hereto.
C. Waiver - All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and
remedies provided by law. No delay or failure on the part of either
party in the exercise of any right or remedy arising from a breach
of this Agreement shall operate as a waiver of any subsequent right
or remedy arising from a subsequent breach of this Agreement. The
consent of any party where required hereunder to any act of
occurrence shall not be deemed to be a consent to any other act of
occurrence. Upon delivery of such instruction to
8
<PAGE>
Client, the Client shall irrevocably be bound to make such payments
directly to third parties so designed.
D. Assignment
(1) Neither this Agreement nor any right created by it shall be
assignable by either party without the prior written consent
of the other.
(2) Nothing in this Agreement, expressed or implied, is intended
to confer upon any person or parties designated below, other
than the parties and their successors, any rights or remedies
under this Agreement.
(3) Notwithstanding the foregoing, the Client agrees to deliver
any compensation payable to the Consultant hereunder to third
parties designated by the Consultant upon Consultant's
delivery to Client of written instructions to make such
payments directly to third parties.
E. Notices - Any notice or other communication required or permitted by
this Agreement must be in writing and shall be deemed to be properly
given when delivered in person to an officer of the other party,
when deposited in the United States miails for transmittal by
certified or registered mail, postabe prepaid, or when deposited
with a public telegraph company for transmittal or when sent by
facsimile transmission, charges prepaid provided that the
communications is addressed:
9
<PAGE>
(1) In the case of Client to:
Docuport Inc.
1155 Rene Levesque West-Suite 3500
P.O. Box 60
Montreal, P.Q. H3B3T6
(2) In the case of Consultant to:
Rexon Limited
P.O. Box 2321
1211-Geneva 1
Switzerland
(3) With a copy to:
Diversified Investors Capital Services of North America, Inc.
850 Third Avenue - 10th Floor
New York, NY 10022
or to such other person or addressee as may be designated by the parties to
receive notice.
F. Headings and Captions - The headings of paragraph are included
solely for convenience. If a conflict exists between any heading and
the text of this Agreement, the text shall control.
G. Intentionally Deleted
H. Effect of Partial Invalidity - In the event that any one or more of
the provisions contained in this Agreement shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, but this Agreement shall be
constructed
10
<PAGE>
as if it never contained any such invalid, illegal or unenforceable
provisions.
I. Attorney's Fees - If any action at law or in equity, including an
action for declaratory relief, is brought to enforce or interpret
the provisions of this Agreement, the prevailing party shall be
entitled to recover actual attorney's fee from the other party. The
attorney's fees may be ordered by the court in the trial of any
action described in this paragraph or may be enforced in a separate
action brought for determining attorney's fees.
J. Time is of the Essence - Time is of the essence of this Agreement
and of each and every provision hereof.
K. Mutual Cooperation - The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement and shall execute
such other and further documents and take such other and further
actions as may be necessary or convenient to effect the transactions
described herein.
L. Further Actions - At any time and from time-to-time, each party
agrees, at its or their expense, to take actions and to execute and
deliver documents as may be reasonably necessary to effectuate the
purpose of this Agreement.
M. Indemnification - Client and Consultant agree to indemnify, defend
and hold each other harmless from and against all demands, claims,
actions, losses, damages, liabilities, costs and expenses, including
without limitation, interest, penalties and attorneys' fees and
expenses asserted against or imposed or incurred by either party by
reason of a resulting from a breach of any
11
<PAGE>
representation, warrant, covenant condition or agreement of the
other party to this Agreement.
N. No Third Party Beneficiary - Nothing in this Agreement, expressed or
implied, is intended to confer upon any person, other than the
parties hereto and their successors, any rights or remedies under or
by reason of this Agreement unless this Agreement specifically
states such intent.
0. Facsimile Counterparts - If a party signs this Agreement and
transmits an electronic facsimile of the signature page to the other
party, the party who receives the transmission may rely upon the
electronic facsimile as a signed original of this Agreement.
P. Governing Law - The parties agree that in the event of any dispute
under this Agreement, the laws of the State of New York will
control, and any actions brought under this Agreement shall be
brought in an appropriate court in the State of New York. This is
agreed to without regard to any conflict of law issues that might
otherwise arise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
herein above written.
REXON LIMITED
By: /s/ Nicole Didi
-----------------------------
DOCUPORT, INC.
By: /s/ Raja Tuli
-----------------------------
12
SUBSIDIARIES
1. Docuport, Inc. a corporation incorporated under the laws of Ontario, Canada
in February, 1992 under the name Slimfax, Inc.
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
Docuport, Inc.
1155 Rene-Levesque Blvd. West
Suite 3500
Montreal, Quebec
H3B 3T6
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated February 12, 1999, relating to the
financial statements of Docuport, Inc., which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO DUNWOODY LLP
Chartered Accountants
Montreal, Quebec
July 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the annual
statements and is qualified in its entirety by reference to such financial
statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 14,151
<SECURITIES> 103,748
<RECEIVABLES> 28,557
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 146,456
<PP&E> 13,257
<DEPRECIATION> 6,190
<TOTAL-ASSETS> 153,523
<CURRENT-LIABILITIES> 767,894
<BONDS> 0
0
0
<COMMON> 73
<OTHER-SE> (614,444)
<TOTAL-LIABILITY-AND-EQUITY> 153,523
<SALES> 0
<TOTAL-REVENUES> 113
<CGS> 0
<TOTAL-COSTS> 94,473
<OTHER-EXPENSES> 62,119
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,479
<INCOME-PRETAX> (156,479)
<INCOME-TAX> 0
<INCOME-CONTINUING> (156,479)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (156,479)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
