<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _____________ to _____________
Commission file number: 0-21275
ENTER TECH CORP.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 84-1349553
------ ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
430 East 6th Street, Loveland, Colorado 80537
---------------------------------------------
(Address of principal executive offices)
970-669-4918 *
--------------
(Issuer's telephone number)
* This is a new number
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 12, 2000, the issuer had
12,783,000 shares of common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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ENTER TECH CORP.
Form 10-QSB
For the Quarter Ended March 31, 2000
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I-FINANCIAL INFORMATION.............................................................................1
Item 1. Financial Statements.........................................................................1
Review Report of Independent Certified Public Accountant........................................1
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999......................................................................2
Consolidated Statements of Operations, Three Months Ended
March 31, 2000 and March 31, 1999......................................................3
Consolidated Statements of Cash Flows, Three Months Ended
March 31, 2000 and March 31, 1999......................................................4
Notes to Consolidated Financial Statements......................................................5
Item 2. Plan of Operation............................................................................8
PART II-OTHER INFORMATION...............................................................................14
Item 1. Legal Proceedings...........................................................................14
Item 2. Changes in Securities.......................................................................14
Item 5. Other Information...........................................................................15
Item 6. Exhibits and Reports on Form 8-K............................................................16
</TABLE>
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors
Enter Tech Corporation
Loveland, Colorado
We have reviewed the accompanying balance sheet of Enter Tech Corp. as of March
31, 2000, and the related statements of operations and cash flows for the three
months then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Enter Tech Corp.
A review of interim financial statements consists principally of inquiries of
Company personnel responsible for financial matters and analytical procedures
applied to financial data. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
As discussed in the notes to the financial statements, certain conditions
indicate that the Company may be unable to continue as a going concern. The
accompanying financial statements do not include any adjustments to the
financial statements that might be necessary should the Company be unable to
continue as a going concern.
/s/ SCHUMACHER & ASSOCIATES, INC.
Schumacher & Associates, Inc.
Certified Public Accountants
2525 Fifteenth Street, Suite 3H
Denver, Colorado 80211
May 10, 2000
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ENTER TECH CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
<S> <C> <C>
Current Assets
Cash $ 42,011 $ 14
----------- -------------
Total Current Assets 42,011 14
Receivable, Wave Power 23,515 --
Equipment, net of accumulated
depreciation of $1,229 6,963 7,373
----------- -------------
Total Assets $ 72,489 $ 7,387
=========== =============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable $ 52,171 $ 35,512
Stock compensation payable 23,700 1,103,574
Customer deposits 60,000 60,000
Related party payables 357,794 322,009
Notes payable, other 115,806 15,806
----------- -------------
Total Current Liabilities 609,471 1,536,901
----------- -------------
Stockholders' (Deficit):
Preferred Stock, $.0001 par value,
5,000,000 shares authorized
none issued and outstanding -- --
Common Stock, $.0001 par value,
100,000,000 shares authorized
7,783,000 shares issued and
outstanding 778 385
Additional paid-in capital 1,470,099 381,618
Accumulated deficit (2,007,859) (1,911,517)
----------- -------------
Total Stockholders' (Deficit) (536,982) (1,529,514)
----------- -------------
Total Liabilities and
Stockholders' (Deficit) $ 72,489 $ 7,387
=========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ENTER TECH CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
<S> <C> <C>
Revenues $ -- $ --
------------ ------------
Operating Expenses:
Depreciation 410 --
Supplies -- 496
Professional fees 77,162 39,200
Rent 4,500 2,700
Stock issued for services 9,000 --
Travel 2,572 2,255
Telephone 863 2,009
Other 1,835 2,103
------------ ------------
Total Operating Expenses 96,342 48,763
------------ ------------
Net Loss $ (96,342) $ (48,763)
============ ============
Per Share $ (.01) $ (.01)
============ ============
Weighted Average Number
of Shares Outstanding 7,783,000 3,650,000
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ENTER TECH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
<S> <C> <C>
Cash Flows Operating Activities:
Net (loss) $ (96,342) $ (48,763)
Adjustment to reconcile net
(loss) to net cash provided
by operating activities:
Depreciation 410 --
Stock for services 9,000 --
Increase in receivable,
Wave Power (23,515) --
Increase in accounts payable
and accrued expenses 16,659 1,575
------------ ------------
Net Cash (Used in) Operating
Activities (93,788) (47,188)
------------ ------------
Cash Flows from Investing
Activities -- --
------------ ------------
Cash Flows from Financing
Activities:
Common stock issued and
additional paid-in capital -- --
Increase in notes payable 100,000 --
Increase in payable, related
parties 35,785 47,188
------------ ------------
135,785 47,188
------------ ------------
Increase in Cash 41,997 --
------------ ------------
Cash, Beginning of Period 14 --
============ ============
Cash, End of Period $ 42,011 $ --
============ ============
Interest Paid $ -- $ --
============ ============
Income Taxes Paid $ -- $ --
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ENTER TECH CORP.
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
March 31, 2000
(1) Condensed Financial Statements
The financial statements included herein have been prepared by Enter Tech Corp.
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as allowed by such
rules and regulations, and Enter Tech Corp. believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these financial statements be read in conjunction with the December 31, 1999
audited financial statements and the accompanying notes thereto.
While management believes the procedures followed in preparing these financial
statements are reasonable, the accuracy of the amounts are in some respect's
dependent upon the facts that will exist, and procedures that will be
accomplished by Enter Tech Corp. later in the year.
The management of Enter Tech Corp. believes that the accompanying unaudited
condensed financial statements contain all adjustments (including normal
recurring adjustments) necessary to present fairly the operations and cash flows
for the periods presented.
(2) Business Combination
On January 7, 2000, the Company entered into an agreement with Shopping Mall
Online, Inc. and an individual whereby the Company acquired 80% of the
outstanding common stock of Shopping Mall Online. The consideration for the
acquisition was 2,400,000 shares of the Company's common stock. The agreement
also provides that if for any reason the Company's common stock is not trading
above a $1.00 bid price at the time the Rule 144 restrictive legend on the stock
certificate for the 2,400,000 shares of the Company's common stock is removed,
the Company will issue additional shares of its common stock to the individual.
The value of the additional shares to be issued will be equal to the difference
between $2.4 million and the value of the 2,400,000 shares of common stock
issued under the agreement based on the then existing bid price. The business
combination has been accounted for as a purchase. No goodwill has been recorded
in the transaction because the former owner of Shopping Mall Online, Inc. now
owns 31% of the Company. The 2,400,000 shares of common stock have been recorded
at predecessor cost of Shopping Mall Online, Inc. All costs related to
development of Shopping Mall Online, Inc. have been expensed.
The agreement also provides the voting rights with respect to the common stock
of Shopping Mall Online will remain with the individual until the restrictive
legend on the 2,400,000 shares of the Company's common stock is removed. If for
any reason the Company is declared insolvent or files for bankruptcy protection
after the date of the agreement until the restrictive legend on the Company's
common stock is removed, Shopping Mall Online will have the right to rescind the
agreement. Shopping Mall Online has the right under the agreement to appoint one
person nominated by the individual to the board of directors of the
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ENTER TECH CORP.
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
March 31, 2000
(2) Business Combination, Continued
Company. Prior to the foregoing transaction, Shopping Mall Online was owned
solely by this individual. This individual is also the principal owner of
Integrity Capital, Inc. Integrity Capital provides investor relations services
for the Company.
(3) Marketing and Administration of Sales Agreement
The Company has entered into an agreement with a previous director of the
Company for the marketing and administration of sales through certain identified
locations and the division of profits after the director has recovered related
costs. The Company currently has orders for the purchase of thirty kiosk
software vending units at $50,000 per unit from a previous director. The Company
received $60,000 of deposits related to these orders. The Company is uncertain
whether it will be able to deliver the units and it is not determinable at this
time whether a refund will be required. A contingency exists with respect to
this matter, the ultimate resolution of which cannot presently be determined.
(4) Stock Purchase and Subscription Agreement
On March 15, 2000, the Company signed a Stock Purchase and Subscription
Agreement whereby the Reserve Foundation Trust ("trust") will purchase 6,000,000
restricted shares of the Company's common stock for $10,000,000 through a
private placement, providing that all terms to the purchase agreement are
fulfilled. According to the terms of the Stock Purchase and Subscription
Agreement, the full transfer of funds would take place on May 1, 2000, provided
that the Company must file its annual Form 10-K or 10-KSB for the year ending
December 31, 1999, and complete the acquisition of WavePower, Inc. by May 1,
2000. Demand registration rights after January 2001 and piggyback registration
rights are to be granted to the trust if the transaction closes. Upon signing
the Stock Purchase and Subscription Agreement, the trust provided the Company
with $50,000 in interim financing, which was subsequently increased to $100,000
at March 31, 2000. The debt is to be repaid from the final funding of the
private placement.
(5) Litigation
During February, 2000 the Company commenced litigation against a former officer
of the Company alleging failure of the former officer to meet certain
performance standards. The Company is seeking cancellation of the agreement to
issue 750,000 shares of Company common stock and the payment of $500 per month
compensation to the former officer and the return of 500,000 shares of stock
previously issued. (See Note 6) A contingency exists with respect to this
matter, the ultimate resolution of which cannot presently be determined.
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ENTER TECH CORP.
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
March 31, 2000
(6) Basis of Presentation - Going Concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained operating losses
since its inception and has a net capital deficiency. Management is attempting
to raise additional capital.
In view of these matters, realization of certain of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financial requirements, raise additional capital, and the success of its future
operations.
Management is in the process of attempting to raise additional capital and
reduce operating expenses. Management believes that its ability to raise
additional capital and reduce operating expenses provide an opportunity for the
Company to continue as a going concern.
(7) Subsequent Events
The Company completed the acquisition of WavePower, Inc. on April 19, 2000. The
Company issued certificates for the 5,000,000 shares of restricted common stock
as described in the Plan of Reorganization and Acquisition of WavePower, Inc.
The shares of restricted common stock that were issued to WavePower, Inc.
increased the Company's outstanding shares of common stock to 12,783,000.
On April 10, 2000, the board of directors of the Company agreed to establish two
voting trusts in which the Company would place 5,000,000 shares of the Company's
preferred stock. The first trust will contain 3,000,000 preferred shares being
held in reserve for the acquisition of WavePower, Inc. as outlined in the
definitive agreement. The second trust will contain 2,000,000 preferred shares
of Company stock that will be used for the benefit and distribution to the
officers, directors and significant consultants to the Company with the option
of a distribution of up to 1,000,000 of these preferred shares for additional
compensation as they may, from time to time, come available to the Company. The
president of the Company will retain sole voting rights for both trusts.
On May 4, 2000, the Reserve Foundation Trust indicated that they would go
forward with the dispersal of funds as described in the Stock Purchase and
Subscription Agreement. The Company has issued certificates for the 6,000,000
shares of restricted common stock in preparation for delivery once the funding
is completed. The shares of restricted common stock issued to the Trust and to
WavePower, Inc. bring the Company's issued common stock to 18,783,000. The
interim financing the trust provided the Company in the amount of $250,000 is to
be repaid in full as per the terms of the Stock Purchase and Subscription
agreement on or before May 22, 2000.
Litigation against the Company has been threatened during May, 2000 by a
corporation which alleges that the Company has not fulfilled an agreement to
issue 1,000,000 shares of the Company's common stock in consideration of the
waiver of any rights by the corporation or affiliated entities to acquire
WavePower, Inc., which the Company acquired on April 19, 2000. The Company is of
the view that the conditions precedent to the issuance of such stock were not
fulfilled and that the agreement was repudiated. The Company intends to contest
any claims. Due to the preliminary stage of the matter, the ultimate resolution
of this contingency cannot presently be determined.
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ITEM 2. PLAN OF OPERATION.
The following discussion of our plan of operation should be read
together with the financial statements and the related notes in Item 1 of Part I
above. As discussed in the notes to the financial statements, there are
circumstances which indicate that Enter Tech may be unable to continue as a
going concern. We cannot assure you that our plans in that regard will be
successful and that we will be able to continue as a going concern.
OVERVIEW
Enter Tech is a development stage company formed in July 1996 and we
have not yet generated revenues from our planned principle operations. Since
Enter Tech's acquisition in June 1998 of Links Ltd., also a development stage
company, we have focused on attempting to develop a prototype kiosk, or vending
machine, through which Links had previously planned to market computer software,
music and possibly digital video products stored on disks or computer hard
drives. Enter Tech has not yet been successful in developing on its own a
commercially feasible prototype of the proposed kiosk and we have continued to
evaluate the alternative of acquiring a company which has already developed a
similar kiosk concept. We have also recently focused on a strategy of acquiring
other companies with proprietary technology or strategic relationships which
would complement the kiosk concept, including e-commerce companies which could
ultimately lead to the kiosk products being available through internet access.
RECENT SIGNIFICANT EVENTS
Shopping Mall Online Acquisition
On January 7, 2000, Enter Tech acquired 80% of the outstanding common
stock of Shopping Mall Online, Inc., a development stage company, in exchange
for the issuance of 2,400,000 restricted shares of Enter Tech common stock.
Under the acquisition agreement, if Enter Tech's common stock is not publicly
trading at a bid price above $1 per share when the stock transfer restrictions
are removed for the initial 2,400,000 shares pursuant to Rule 144 under the
Securities Act of 1933, Enter Tech must issue additional shares of its common
stock. The number of additional shares that may be issued are to be based on a
value of those shares equal to the difference between $2,400,000 and the value
of the original 2,400,000 shares of common stock at the time the stock transfer
restrictions are removed. If at any time while the stock transfer restrictions
under Rule 144 are in effect for the shares Enter Tech is declared insolvent or
files for bankruptcy protection, Shopping Mall Online has the right to rescind
the acquisition agreement.
Shopping Mall Online intends to provide web-hosting services and
provide exposure to businesses for both consumer and business-to-business
e-commerce activity. Shopping Mall Online also plans to act as an aggregate site
for advertising, promotional and co-branding activities in connection with the
placement of interactive kiosks in venues that support heavy traffic and
exposure. We anticipate these venues will include
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regional shopping centers, community retail centers, airports, and other large
retail outlets. We anticipate Shopping Mall Online will generate revenues from
hosting, banner advertisements and a percentage of sales from customers.
WavePower Acquisition
On April 19, 2000, Enter Tech acquired 80% of the outstanding shares of
common stock of WavePower, Inc., a development stage company, in exchange for
the issuance of 5,000,000 restricted shares of Enter Tech common stock. In
addition, Enter Tech agreed to reserve 3,000,000 shares of its 5,000,000
authorized shares of preferred stock for issuance as further payment for the
acquisition to the former sole shareholder of WavePower in the event that
certain performance objectives related to future gross income and net pre-tax
profit of WavePower are met. The additional 3,000,000 shares of preferred stock
would be issued through exercise of an option to purchase the preferred stock,
contingent on meeting the performance objectives, and would be convertible into
shares of Enter Tech common stock at the rate of 2 shares of common stock for
each share of preferred stock. The agreement also contemplates that the
remaining 2,000,000 authorized shares of Enter Tech preferred stock may be
issued to the existing members of Enter Tech management and a significant
consultant.
WavePower plans to become an application service provider and is in the
process of developing a network which moves traditional computer applications
out of the conventional personal computer and onto a central network. WavePower
intends that users will then be able to freely access all of the power,
applications and connectivity of a series of networked computers from their own
individual terminal.
Agreement for $10 Million Equity Financing
On March 15, 2000, Enter Tech entered into a stock purchase and
subscription agreement with the Reserve Foundation Trust under which the trust
is to purchase 6,000,000 restricted shares of Enter Tech common stock in
exchange for cash of $10 million. When the agreement was signed, the trust
provided Enter Tech with $50,000 in interim debt financing. That amount was
subsequently increased to a total of $250,000. On May 4, 2000, the trust
indicated that all conditions to the stock purchase had been satisfied and that
it would go forward with providing the $10 million in funds to Enter Tech. These
funds had not yet been received by Enter Tech as of May 15, 2000. Although Enter
Tech has issued stock certificates for the 6,000,000 shares of common stock to
be purchased by the trust, these stock certificates are being held for delivery
until the trust funds the stock purchase amount of $10 million. Enter Tech
currently believes that the $10 million equity funding will occur on or about
May 22, 2000, at which time the interim debt financing is to be repaid. However,
we cannot assure you that the financing will be completed.
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DESCRIPTION OF OUR CURRENT PLAN OF OPERATION
Our current plan of operation for the next 12 months primarily involves
the development of our kiosk technology, pursuit of Shopping Mall Online's
web-hosting and interactive kiosk placement in shopping malls and other retail
outlets, and continued development of WavePower's application service provider
network. We plan to devote substantial time and resources to integrating these
various business models.
In addition, we intend to pursue potential acquisitions or other
strategic alliances with suitable kiosk concept or e-commerce companies. We have
not established a specific level of revenues, earnings or assets below which we
would not consider a potential target company for an acquisition or alliance.
Moreover, we may identify an attractive target company which may currently be
generating losses but which we believe has a promising business plan. Although
we plan to proceed with what we believe is an appropriate level of due diligence
in implementing this strategy, we cannot assure you that any acquisition or
alliance will be successful or that we will achieve the expected benefits from
the transaction.
For us to continue to attempt to develop our plan of a kiosk through
which to market computer software, music and possibly digital video products, we
will need to construct a new prototype kiosk and have that prototype tested
before we are able to begin marketing and production of these kiosks. We have in
the past used software and hardware developed by third parties to construct
prototypes of kiosks and we anticipate any future prototypes will also be
developed by third parties. We anticipate that we will develop a prototype kiosk
and begin construction of units during the next 12 to 18 months. However, we
cannot assure you that we will ever be able to develop a commercially successful
kiosk.
We are currently involved in negotiations with several major mall
developers and retailers who have expressed an interest in the branding and
marketing strategies of Shopping Mall Online and the deployment of the kiosk
technology and concept. One such group has expressed interest in a beta-test of
the kiosk in combination with Shopping Mall Online in a currently undetermined
number of malls in the U.S. and Canada. However, we cannot assure you that any
such partnerships or relationships with mall developers or retailers will be
established.
We plan to identify any number of merger candidates that may be brought
to our attention through our present associations. We plan to evaluate the
candidates using broad criteria. We expect that negotiations with a target
company will focus on the percentage of our common stock, as computed following
a merger or acquisition, that the target company's stockholders would receive
for their share holdings in the target company. Depending upon, among other
things, the target company's assets and liabilities, our stockholders will in
all likelihood experience dilution in their interest in us following any merger
or acquisition.
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LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, Enter Tech had $42,011 in cash, including cash
supplied from the interim debt financing by Reserve Foundation Trust discussed
above, and current liabilities of $609,471. This represented a working capital
deficit of $(567,460).
As of March 31, 2000, Enter Tech had no material commitments for
capital expenditures and no plans to pay dividends to its shareholders.
If completed, the Reserve Foundation Trust private placement financing
is expected to provide Enter Tech with funds to continue the process of
developing the prototype kiosk machine concept within the next 12 months.
However, Enter Tech will be required to completely reconstruct an entirely new
prototype of the kiosk based upon its concept of the kiosk. Some engineering
work has been done to design plans for the components and software to be used in
the kiosks, but it is likely that a portion or all of the engineering done to
date will need to be completely updated or redone.
Enter Tech is also continuing to evaluate the option of acquiring a
"kiosk company" which has already developed some or all of the concepts
conceived by Enter Tech. As this development or acquisition strategy proceeds,
Enter Tech is anticipating the possibility of licensing this technology in
foreign countries. We cannot assure you that any commercially favorable
relationships with prospective licensees will be established. If the kiosk
concept can be developed, additional employees will be needed based upon the
development schedule of the kiosk. If a "kiosk company" is acquired Enter Tech
will be required to evaluate the need of any current or potential employees of
the "kiosk company."
If the kiosk concept is developed by Enter Tech as conceived, Enter
Tech currently plans to have the product manufactured on a contract basis with a
third party manufacturer. Therefore, Enter Tech does not plan to acquire
significant additional plant and equipment for the purpose of manufacturing the
kiosk. No assurances can be made as to if the kiosk concept will ever be fully
developed or if a "kiosk company" can be acquired. There is no assurance that
the kiosks will function as planned if Enter Tech is able to develop the kiosks,
or acquire a "kiosk company", or be manufactured at a unit cost commercially
favorable to Enter Tech. We cannot assure you that Enter Tech will be able to
generate any revenues from sales or that any sales will be made of kiosks or
from kiosk vending operations.
Provided the private placement funding is completed, it is anticipated
that the funds should also be able to finance the operations of Shopping Mall
Online, Inc. for the next 12 months. Shopping Mall Online is anticipated to
provide web hosting services and e-commerce activity. It is expected that
Shopping Mall Online is to combine their branding and marketing strategies with
the kiosk concept and potentially market to major mall developers and retailers.
It is anticipated that Shopping Mall Online will require additional employees to
develop the systems and has committed to hire two full time people, one as
President and the other as Director of Operations. Additional employees
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will be required as Managers of Business Development, Technology and Systems
Administration and Sales. Additional operational personnel will be required
within each department. Enter Tech currently has 11 employees, and plans to hire
an additional 4 employees by June 30, 2000 and an additional 10 employees by
December 31, 2000.
Approximately 2,600 square feet of office space is expected to be
needed this year as is significant server computers and communication backbone
to host the web sites and provide adequate access to the online mall. It is
anticipated that Shopping Mall Online will license an established e-commerce
application software package from a reputable third party, but this does not
preclude the possibility that modifications and independent research or
development could be needed. There is no assurance that Shopping Mall Online
will become a viable business or generate any revenues from the activities it
plans to undertake. Online shopping is crowded with many vendors and there is
nothing to prevent any other person or company from pursuing this potential line
of business. It is possible that the WavePower acquisition could provide a
compatible synergy to the efforts of Shopping Mall Online, Inc. and any kiosk
development by Enter Tech or "kiosk company" Enter Tech may contemplate
acquiring due to the technology developed by WavePower.
WavePower's technology could enhance the kiosk operational design. The
acquisition of Wave Power may enhance the effectiveness of Shopping Mall
Online's commerce activity and vice versa. Additional employees will be required
to continue the development process of WavePower, most of whom are expected to
be technical professionals.
Enter Tech anticipates that with the private placement funds, we will
be able to finance WavePower to continue operations and develop the
infrastructure needed to generate revenue, however it is the intention of Enter
Tech to aggressively identify other sources of capital for development of Enter
Tech and all of its subsidiaries as is necessary for continued operation and to
generate revenues.
We are currently evaluating the projected capital needs for the
development of the kiosk and for the operation of Shopping Mall Online and
WavePower. Although we believe that the recent $10 million equity financing, if
it is completed, will be sufficient for our cash requirements for the next 12
months, we cannot assure you that we will not need additional funds to fully and
successfully implement our strategy.
CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements that involve risks
and uncertainties. All statements included in this report, other than statements
of historical facts, that address activities, events or developments that we
expect, believe or anticipate will or may occur in the future, are
forward-looking statements. These forward-looking statements include statements
about:
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o The future anticipated direction of the high technology and
e-commerce industries,
o The pending $10 million equity financing from the Reserve Foundation
Trust,
o Planned acquisitions of operating companies,
o Plans for development, expansion and integration of companies which
have been acquired,
o Planned capital and operating expenditures,
o Future funding sources,
o Anticipated revenues and sales growth, and
o Overall business strategies.
These forward-looking statements are subject to a number of
assumptions, risks and uncertainties, including such factors as:
o Technological developments and consumer preferences in the high
technology and e-commerce industries,
o The risk that the pending $10 million equity financing from the
Reserve Foundation Trust may not be completed,
o Expected benefits from development, expansion and integration of
acquired companies,
o Competition in the markets for our planned businesses,
o The availability of adequate financing,
o Dependence on existing management, and
o Changes in laws or regulations affecting our plan of operation.
We caution you that our forward-looking statements are not guarantees
of future performance and that actual results or developments may differ
materially from those expressed or implied by the forward-looking statements.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Except as set forth herein the Company is not a party to any material
pending legal proceedings; nor are any such proceedings involving the Company
contemplated by a governmental authority to the knowledge of the Company.
On February 24, 2000, the Company initiated a civil action by it
against Jerry Stiles, a/k/a Gerald C. Stiles, a former officer of and consultant
to the Company, in the District Court of Douglas County, Colorado. The Company
requests that: 1) the Court rescinds the contract; and 2) awards the Company
damages to be determined at trial. On April 4, 2000, Mr. Stiles filed an
answer/counterclaim against the Company that claimed: 1) breach of contract on
the Company's part; 2) unpaid compensation; 3) damages for unpaid compensation;
4) damages under the Colorado Securities Act; and 5) fraudulent
misrepresentation and non-disclosure to be proven at trial.
ITEM 2. CHANGES IN SECURITIES.
RECENT SALES OF UNREGISTERED SECURITIES
For the period January 1, 2000 through May 11, 2000, Enter Tech issued
the following securities without registration under the Securities Act of 1933.
1. On January 7, 2000, Enter Tech issued 2,400,000 shares of common
stock to Robert J. Pratt to acquire Shopping Mall Online, Inc. These shares were
issued in reliance on the exemption from registration provided by Section 4(2)
of the Securities Act of 1933.
2. On March 20, 2000, Enter Tech issued 10,000 shares of common stock
to Mark A. Thomas, as compensation for Mr. Thomas acting as an Enter Tech
director. These shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933.
3. On April 19, 2000, Enter Tech issued 5,000,000 shares of common
stock and an option to purchase 3,000,000 shares of preferred stock to Vernon
Kendrick in exchange for 80% of the outstanding shares of common stock of
WavePower, Inc. These shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933.
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<PAGE> 17
The facts relied on to make the exemption from registration provided by
Section 4(2) of the Securities Act of 1933 available for the sales of securities
discussed in paragraphs 1 through 3 above were:
o the limited number of purchasers,
o the sophistication or accreditation of the purchasers,
o their access to material information about Enter Tech,
o the information furnished to them by Enter Tech,
o the absence of any general solicitation or advertising, and
o restrictions on transfer of the securities issued to them as
indicated by a legend on the certificates representing such
securities.
ITEM 5. OTHER INFORMATION.
Enter Tech is providing the following information in lieu of filing a
separate current report on Form 8-K for information required by Items 2 and 7
thereunder.
On April 19, 2000, Enter Tech acquired 80% of the outstanding shares of
common stock of WavePower, Inc., a development stage company, in exchange for
the issuance to Vernon C. Kendrick of 5,000,000 restricted shares of Enter Tech
common stock. In addition, Enter Tech agreed to reserve 3,000,000 shares of its
5,000,000 authorized shares of preferred stock for issuance as further payment
for the acquisition to the former sole shareholder of WavePower in the event
that certain performance objectives related to future gross income and net
pre-tax profit of WavePower are met. The additional 3,000,000 shares of
preferred stock would be issued through exercise of an option to purchase the
preferred stock, contingent on meeting the performance objectives, and would be
convertible into shares of Enter Tech common stock at the rate of 2 shares of
common stock for each share of preferred stock. The agreement also contemplates
that the remaining 2,000,000 authorized shares of Enter Tech preferred stock may
be issued to the existing members of Enter Tech management and a significant
consultant.
The financial statements of WavePower and pro forma financial
information giving effect to the acquisition of WavePower called for by Item 7
of the Form 8-K are not included in this report. Enter Tech plans to file those
financial statements and pro
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<PAGE> 18
forma financial information by an amendment to this report within 60 days after
the date that the original report on Form 8-K was due.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following Exhibits are furnished as part of this
report:
Exhibit 2.1 Reorganization Agreement dated April 19, 2000 among Enter Tech
Corporation, WavePower, Inc. and Vernon C. Kendrick.*
Exhibit 10.1 Employment Agreement among Vernon C. Kendrick, Enter Tech
Corporation and WavePower, Inc.*
Exhibit 27.1 Financial Data Schedule.*
* Filed herewith.
(a) Reports on Form 8-K.
We filed one current report on Form 8-K during the quarter ended March
31, 2000. We filed a Form 8-K reporting under Item 2 the acquisition of Shopping
Mall Online, Inc. on January 7, 2000. The financial statements related to our
acquisition of Shopping Mall Online were filed with our amended current report
on Form 8-K/A on March 29, 2000, which also reported under item 5 the signing of
a conditional subscription agreement for the private placement of 6,000,000
shares of common stock for $10,000,000.
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<PAGE> 19
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 15, 2000 ENTER TECH CORP.
By: /s/ SAM LINDSEY
----------------------------
Sam Lindsey, President and
Chief Financial Officer
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<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ -----------
<S> <C>
2.1 Reorganization Agreement dated April 19, 2000 among Enter Tech
Corporation, WavePower, Inc. and Vernon C. Kendrick.*
10.1 Employment Agreement among Vernon C. Kendrick, Enter Tech
Corporation and WavePower, Inc.*
27.1 Financial Data Schedule.*
</TABLE>
* Filed herewith.
<PAGE> 1
EXHIBIT 2.1
REORGANIZATION AGREEMENT
THIS REORGANIZATION AGREEMENT (the "Agreement") is made and entered
into by and among ENTER TECH CORPORATION, a publicly held Nevada corporation
(the "Corporation"); WAVEPOWER, INC, a Florida corporation (the "Subsidiary");
and VERNON C. KENDRICK, an individual ("Kendrick") (hereinafter referred to as
the "Subscribers"); and, the Corporation, the Subsidiary and the Subscribers
being collectively referred to as the "Parties" and each being sometimes
hereinafter generically referred to as a "Party").
PREAMBLE:
WHEREAS, the Subscribers own 5,000,000 shares of the Subsidiary's
common voting stock and no shares of the Subsidiary's preferred stock, such
securities being all of the authorized issued and outstanding shares of the
Subsidiary's capital stock (there being no other securities; the "Subsidiary
Stock"), a corporation engaged in the business more particularly described in
Exhibit 0.2 annexed hereto and made a part hereof; and
WHEREAS, the Subscribers desire to acquire 5,000,000 shares of the
Corporation's voting Common Stock, par value $0.001 per share (the "Stock"), in
consideration for their conveyance of shares of the Subsidiary Stock which will
constitute 80% of the Subsidiary's authorized, issued and outstanding
securities; provided that the transaction qualifies as a tax-free reorganization
under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended:
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the Parties, intending to be legally bound, hereby agree as follows:
WITNESSETH:
ARTICLE ONE
EXCHANGE PROVISIONS
1.1 EXCHANGE
(a) Subject to the hereinafter described conditions and Performance
Criteria, the Corporation hereby agrees to exchange shares of its
voting Common Stock, $0.001 par value, in an amount equal to 5,000,000
shares, with the Subscribers for 4,000,000 voting shares of the
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<PAGE> 2
Subsidiary Stock currently authorized, issued and outstanding
(consisting of 5,000,000 shares of voting Common Stock and no shares of
Preferred Stock of the Subsidiary) which, upon transfer, will
constitute 80% of the Subsidiary's reserved or issued and outstanding
securities.
(b) Concurrently with the execution of this Agreement and delivery of the
Subsidiary Stock to the Corporation, the Corporation shall cause its
transfer agent to issue the requisite number of shares of Stock to the
Subscribers, allocated to each Subscriber as follows:
Vernon C. Kendrick 5,000,000 shares
(c) Performance Criteria: Nothing herein shall be construed to prevent the
Corporation from issuing the Subscribers additional shares or options
to purchase additional shares in connection with the Subsidiary having
obtained specified sums of gross income and net pre-tax profit under
the management of the Subscriber, which formula shall be agreed upon
and set forth in a formal employment agreement with the Subscriber.
1.2 EXEMPTION FROM REGISTRATION
(a) Each Subscriber hereby represents, warrants, covenants and acknowledges
that:
(1) (a) The Stock is being issued without registration under
the provisions of Section 5 of the Securities Act of
1933, as amended (the "Act") or of the applicable
securities regulations of the State of Nevada (the
"Nevada Securities Act") pursuant to exemptions
provided pursuant to Section 4(2) of the Act and
comparable provisions of the Nevada Securities Act;
(b) The Subscribers have represented and warranted that
any filings required in conjunction with the
transactions contemplated in this Agreement required
under the laws of the State of Nevada will be
promptly made.
(2) All of the Stock will bear legends restricting its transfer,
sale, conveyance or hypothecation unless such Stock is either
registered under the provisions of Section 5 of the Act and
under the Nevada Securities Act, or an opinion of legal
counsel, in form and substance satisfactory to legal counsel
to the Corporation is provided by the Subscribers to the
effect that such registration is not required as a result of
applicable exemptions therefrom;
(3) The Corporation's transfer agent shall be instructed not to
transfer any of the Stock unless the Corporation advises it
that such transfer is in compliance with all applicable laws
and has been approved by the Corporation;
(4) The Subscribers are acquiring the Stock for their own account,
for investment purposes only, and not with a view to further
sale or distribution; and
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<PAGE> 3
(5) Each Subscriber or his or her advisors have examined the
Corporation's latest reports to the Securities and Exchange
Commission on Forms 10-KSB, 10-QSB and 8-K (collectively and
generically hereinafter referred to as "34 Act Reports"), have
been provided with access to all of the Corporation's books
and records and have questioned the Corporation's officers and
directors as to such matters involving the Corporation as the
Subscribers deemed appropriate.
(b) The Corporation hereby represents, warrants, covenants and acknowledges
that:
(1) The Stock is being transferred without registration under the
provisions of Section 5 of the Act or under the Nevada
Securities Act pursuant to the exemptions provided by Section
4(2) of the Act and comparable provisions of the Nevada
Securities Act;
(2) All of the Stock will bear legends restricting its transfer,
sale, conveyance or hypothecation within the jurisdictional
boundaries of the United States, unless such Stock is either
registered under the provisions of Section 5 of the Act and
under applicable state securities laws, or an opinion of legal
counsel is provided by the Corporation certifying that such
registration is not required as a result of applicable
exemptions therefrom;
(3) The Corporation shall not transfer any of the Subsidiary Stock
except in compliance with all applicable laws; and
(4) The Corporation is acquiring the Subsidiary Stock for its own
account, for investment purposes only and not with a view to
further sale or distribution.
1.3 LIABILITIES.
(a) Any liabilities in any manner encumbering or affecting the Subsidiary
or its assets are disclosed on Exhibit 1.3 annexed hereto and made a
part hereof (the "Disclosed Subsidiary Liabilities").
(b) The Subscribers hereby covenant and agree to indemnify and hold the
Corporation harmless from any liabilities of the Subsidiary or
affecting the Subsidiary's assets other than the Disclosed Subsidiary
Liabilities ("Undisclosed Subsidiary Liabilities") and the Corporation
may, in addition to all other legal or equitable remedies that may be
available, offset from any funds, securities or other things of value
due to the Subscribers or the Subscribers' affiliates (as that term is
most liberally defined for federal securities law purposes), such sums
as may be required to make the Corporation whole as a result of the
assertion of any Undisclosed Subsidiary Liability against the
Subsidiary or its assets.
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<PAGE> 4
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
2.1 THE CORPORATION.
The Corporation hereby represents and warrants to each Subscriber, as a
material inducement to his, her or its entry into this Agreement, that, except
as disclosed in Exhibit 2.1 (the "Corporation's Warranty Exceptions") or in the
Corporation's 34 Act Reports filed prior to the date of this Agreement, the
following representations and warranties are, to the best of the Corporation's
knowledge, materially accurate:
(a) The Corporation owns or leases the assets described in the
Corporation's 34 Act Reports subject to such changes in inventory and
supplies as were required in the ordinary course of business;
(b) The Corporation has 100,000,000 shares of Common Stock $0.001 par
value, authorized, of which a total of 7,780,000 shares are currently
outstanding or reserved, there being no other outstanding securities of
any class or of any kind or character of the Corporation (except for
certain Preferred Stock described hereinafter), there being no
outstanding subscriptions, options, warrants or other agreements or
commitments obligating the Corporation to issue or sell any additional
shares of the Corporation's Stock or any options or rights with respect
thereto, or any securities convertible into any shares of Stock of any
class, except with reference to rights granted to the Corporation's
officers and certain officers of subsidiaries under employment
agreements for bonus awards based upon performance at year end. In
addition to the foregoing the Corporation shall have issued to its
existing management group as of the date of closing an additional
2,000,000 shares of Preferred Stock $0.001 par value, carrying voting
rights of 5 votes for each share of Preferred Stock and conversion
rights equal to 2 shares of Common Stock for each share of Preferred
Stock. To the extent all of such 2,000,000 shares of preferred stock
shall not have been issued by the Closing Date, notwithstanding
anything to the contrary herein or in any other agreements between the
Corporation and Subsidiary or Subscriber, the Corporation may issue the
balance of such 2,000,000 shares of preferred stock to its management.
An additional 3,000,000 shares of such Preferred Stock shall be subject
to options in favor of Vern Kendrick as described in his employment
agreement. Further, nothing herein shall preclude the Corporation from
issuing additional Common Stock or Options pursuant to a qualified
Employee Stock Option Plan, profit sharing plan or other bonus
arrangement as the parties may subsequently determine.
(c) The Corporation is not a party to any written or oral agreement which
grants an option or right of first refusal or other arrangement to
acquire any of its securities or to any agreement that affects the
voting rights of any of its securities, nor has the Corporation made
any commitment of any kind relating to the issuance of shares of any of
the Corporation's securities, whether by subscription, right of
conversion, option or
4
<PAGE> 5
otherwise; except that an employment agreement may be entered into with
the Subscriber which provides for issuance of stock and/or options
and/or warrants to the Subscriber.
(d) The Corporation is not a party to any agreement or understanding for
the sale or exchange of inventory or services for consideration other
than cash or at a discount in excess of normal discount for quantity or
cash payment;
(e) There are presently no contingent liabilities, factual circumstances,
threatened or pending litigation, contractually assumed obligations or
unasserted possible claims which might result in a material adverse
change in the future financial condition or operations of the
Corporation;
(f) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not require the consent, authority
or approval of any other person or entity except such as have been
obtained;
(g) Except as otherwise disclosed herein no transactions have been entered
into either by or on behalf of the Corporation, other than in the
ordinary course of business nor have any acts been performed (including
within the definition of the term performed the failure to perform any
required acts) which would adversely affect the goodwill of the
Corporation;
(h) The entering into of this Agreement and the performance thereof has
been duly and validly authorized by all required corporate action;
(i) (1) The certified, consolidated financial statements of the
Corporation and its subsidiaries, including consolidated
statements of operations, stockholders investment and cash
flows and consolidated balance sheets for its last two fiscal
years, and unaudited consolidated financial statements for the
period from the last consolidated certified financial
statement until the end of the Corporation's fiscal quarter
closest to the date of this Agreement, all prepared in
accordance with generally accepted accounting principles,
consistently applied, are included in the Corporation's 34 Act
Reports (the "Corporation's Financial Statements").
(2) The Corporation's Financial Statements, as contained in its 34
Act Reports, fairly present the Corporation's financial
condition as of their respective dates and its results of
operations for their respective periods in accordance with
generally accepted accounting principles, consistently
applied;
(j) (1) Except as and to the extent reflected or reserved against in
the consolidated balance sheet of the Corporation and its
subsidiaries (the "Corporation's Interim Balance Sheet), as of
Dec. 31, 1999 the Corporation and its subsidiaries had no
liabilities or legal obligations of a nature required to be
reflected on a corporate balance sheet prepared in accordance
with generally accepted accounting principles or disclosed in
the notes thereto, whether absolute, accrued, contingent, or
otherwise and whether due or to become due (including, without
limitation,
5
<PAGE> 6
liabilities for taxes and interest, penalties, and other
charges payable with respect thereto in respect of or measured
by the income of the Corporation through such date, or arising
out of any transaction entered into prior thereto).
(2) There is no material reasonable basis for the assertion
against the Corporation or any of its subsidiaries of any
liability or obligation which is not fully reflected or
reserved against in the Corporation's various securities
filings or in the Corporation's Interim Balance Sheet or
disclosed in the notes thereto, except liabilities or
obligations incurred since Dec. 31, 1999 in the ordinary
course of Corporation business.
(k) Since the date of the Corporation's Financial Statements no events have
occurred nor have any facts been discovered which could have a material
adverse effect on the financial status, results of operations or
prospects of the Corporation;
(1) On the Closing Date of this Agreement, the Corporation's net
liabilities, excluding liabilities as a result of the
transaction contemplated hereby, shall not exceed those
disclosed in its annual financial report for the twelve month
period ended Dec. 31, 1999, by more than $25,000, and since
that date and such filing, there has not been any materially
adverse change in the financial condition, operations or
prospects of the Corporation;
(m) The Corporation and its subsidiaries do not have any liabilities which
constitute a lien or charge on their securities or assets;
(n) The Corporation and each of its subsidiaries has good, valid and
marketable title to all of its assets, subject to no mortgage, pledge,
lien, encumbrance, security interest or charge, except as disclosed in
the Corporation's Financial Statements, and can and will retain free
and clear title thereto after Closing on this transaction, free and
clear of any liens whatsoever;
(o) There are no claims, actions, suits, proceedings or investigations
pending or threatened against the Corporation or any of its
subsidiaries except as disclosed in the Corporation's securities
filings and the Corporation does not know of any basis for any such
claim, action, suit, proceeding or investigation;
(p) During the past 12 months neither the Corporation nor any of its
subsidiaries have disposed of any assets or contractual rights which
disposition, in the opinion of the Corporation's management, has had or
will in the future have a materially adverse impact on the business of
the Corporation and its subsidiaries taken as a whole;
(q) (1) The Corporation has filed with the appropriate governmental
agencies all tax returns and tax reports required to be filed;
all federal, state and local income, profits, franchise,
sales, use, occupation, property or other taxes due have been
fully paid, and, the Corporation is not a party to any action
or proceeding by any
6
<PAGE> 7
governmental authority for assessment or collection of taxes,
nor has any claim for assessments been asserted against the
Corporation or its assets, nor is the Corporation aware of any
facts or circumstances which could give rise to the assertion
of any viable, material claim; and
(2) All taxes that the Corporation is or was required to withhold
or collect have been duly withheld or collected and to the
extent required have been paid to the proper governmental
authority or person;
(r) The Corporation and each of its current, material operating
subsidiaries is, as of the date of this Agreement, a validly existing
corporation, organized pursuant to the laws of the their respective
jurisdictions of incorporation and qualified to do business in each
state where required to do so, with all legal and corporate authority
and power to conduct its business and to own its properties and
possesses all necessary permits and licenses required in connection
with the conduct of its business;
(s) The conduct of the Corporation's business is in material compliance
with applicable federal, state and local governmental statutes, rules,
regulations, ordinances and decrees;
(t) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance with the terms of this
Agreement will not conflict with or result in a breach in any of the
terms or provisions of, or constitute a default under, the certificate
of incorporation or bylaws of the Corporation; any indenture, contract,
other material agreement or instrument to which the Corporation or any
of its subsidiaries or their respective assets are bound; or, violate
any applicable regulation, judgment, order or decree of any
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Corporation, its securities, assets or
properties;
(u) This Agreement constitutes a binding obligation of the Corporation,
enforceable against it in accordance with the terms hereof, and has
been authorized by all required corporate action;
(v) (1) The Corporation has not experienced any material difficulties
with the management or recruiting of employees for its
business, nor does the Corporation have any reason to believe
that any such difficulties will arise in the future.
(2) None of the employees of the Corporation or its subsidiaries
are represented by labor unions, nor does the Corporation have
any reason to believe that any of its employees desire to be
represented by labor unions; and
(3) The Corporation has no reason to believe that any of its
employees have any potential claims against the Corporation,
its subsidiaries or their successors in interest based on
violations of equal employment laws, occupational health and
safety standards or any other legally protected rights;
7
<PAGE> 8
(w) (1) The Corporation has not generated any hazardous wastes or
engaged in activities which could be interpreted as potential
violations of laws, statutes, regulations ordinances or
judicial decrees in any manner regulating the generation or
disposal of hazardous waste.
(2) There are no on-site or off-site locations where the
Corporation or any of its subsidiaries has stored, disposed or
arranged for the disposal of chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or petroleum
products; there are no underground storage tanks located on
property owned or leased by the Corporation or any of its
subsidiaries; and, no polychlorinated hiphenyle are used or
stored at any property owned or leased by the Corporation or
any subsidiary;
(x) (1) The Corporation currently has in full force and effect
insurance policies of the kind and in coverage amounts
adequate to meet its current insurance requirements; and
(2) There are no impediments to obtaining hazard and liability
insurance covering all of the Corporation's assets and
operations, at commercially reasonable insurance rates, nor
does the Corporation have any basis for believing that such
insurance, at such rates, will not be obtainable by the
Corporation in the future;
(y) All of the information reflected in the foregoing representations and
warranties is complete and accurate, and does not omit any information
required to make the information provided non-misleading, accurate and
meaningful, in light of the nature of this transaction; and
(z) There is no material fact, development or threatened development that
materially adversely affects, or is likely to materially adversely
affect the business of the Corporation, which the Corporation has not
publicly disclosed or privately disclosed, either expressly or by
reasonable implication, to the Subscribers.
2.2 THE SUBSIDIARY.
The Subsidiary and each of the Subscribers, jointly and severally,
hereby represent and warrant to the Corporation, as a material inducement to the
Corporation's entry into this Agreement, that, except as specified on Exhibit
2.2 annexed hereto and made a part hereof (the "Subsidiary's Warranty
exceptions"), the following representations and warranties are, to the best of
their knowledge, materially accurate:
(a) (1) Exhibits 2.2(a) Subsidiary's Property Inventory (Real and
Personal), 2.2(a-1) Subsidiary Technology and Intellectual
Property, 2.2(a-2) Functional Specifications and 2.2(a-3)
Patents and Copyrights contain a complete and accurate list of
all real and all personal property owned by the Subsidiary,
8
<PAGE> 9
tangible, intangible and inchoate (the term Subsidiary in the
context of this Article being deemed to include all
subsidiaries of the Subsidiary and sibling corporation's of
the Subsidiary, the assets and operations of which are to be
included among the subjects of this Agreement), and the
principal terms of all patents, trademarks, copyrights, trade
names, domain names, service marks, other intellectual
property, franchises and licenses held by the Subsidiary for
use in manufacture and sale of computer related products,
including identification of the licensor, the formulae for
royalty or other payments thereunder, the expiration dates,
and other terms of any extensions or renewals permitted
thereunder. Except as disclosed on Exhibit 2.2 the Subsidiary
has good and defensible title to all of its material
properties and assets, including without limitation those
reflected in the Subsidiary's financial statements and those
used or located on property controlled by Subsidiary in its
business (except assets leased or sold in the ordinary course
of business), subject to no mortgage, pledge, lien, charge,
security interest, encumbrance or material restriction
(2) The operations of any affiliated entities which comprise the
total business of which the Subsidiary has been a part since
its inception have been consolidated as to ownership and
control under the Subsidiary, in a manner resulting in the
control and ownership thereof by the Subsidiary, and, as a
consequence of the transactions contemplated by this
Agreement, all such assets and operations shall become the
indirect property (through ownership of the Subsidiary's
capital stock) of the Corporation.
The Subsidiary owns or possesses legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets, and
other proprietary rights and processes necessary to complete its
business plan (together, the "Intellectual Property") without any known
infringement of the rights of others. There are no outstanding options,
licenses or agreements of any kind with respect to the Intellectual
Property of any other person or entity other than (i) such licenses or
agreements arising from the purchase of "off the shelf" or standard
products and (ii) licenses with customers for their use of Intellectual
Property entered into in the ordinary course of Subsidiary's business.
No employee of Subsidiary is obligated under any contract (including
licenses, covenants or commitments of any nature) other agreement, or
subject to any judgment, decree or order of any court or administrative
body, that would interfere with his duties to the Subsidiary or that
would conflict with the Subsidiary's business. The Subsidiary has taken
all reasonable and customary actions to protect and maintain the
confidentiality and secrecy of all Intellectual Property.
(b) (1) The Subsidiary has 20,000,000 shares of voting Common Stock,
$0.001 par value, authorized, 5,000,000 shares of which are
currently issued, and 5,000,000 shares of Preferred Stock,
$0.001 par value, no shares of which currently issued and
outstanding there being no other authorized or outstanding
securities of any class or of any kind or character of the
Subsidiary.
9
<PAGE> 10
(2) There are no outstanding subscriptions, options, warrants or
other agreements or commitments obligating the Subsidiary or
any Subscriber to issue or sell any additional shares of
Subsidiary Stock or any options or rights with respect
thereto, or any securities convertible into any shares of
Subsidiary Stock of any class;
(c) Upon conveyance of the Subsidiary Stock by the Subscribers, the
Corporation will become the owner of 80% of the Subsidiary's
authorized, issued and outstanding equity securities;
(d) As of the, Closing Date on this Agreement, the Subsidiary will not be a
party to any written or oral agreement which grants any option or right
of first refusal or other arrangement to acquire any of its securities
or to any agreement that will affect the voting rights of any of its
securities, nor have the Subscriber or the Subsidiary made any
commitment of any kind relating to the issuance of shares of any of the
Subsidiary's equity securities, whether by subscription, right of
conversion, option or otherwise;
(e) The Subsidiary is not a party to any agreement or understanding for the
sale or exchange of inventory or services for consideration other than
cash or at a discount in excess of normal discounts for quantity or
cash payment;
(f) There are presently no contingent liabilities, factual circumstances,
threatened or pending litigation, contractually assumed obligations or
unasserted possible claims known to the Subsidiary which might result
in a material adverse change in the future financial condition or
operations of the Subsidiary;
(g) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not require the consent, authority
or approval of any other person or entity, except such as have been
obtained;
(h) No transactions have been entered into either by or on behalf of the
Subsidiary, other than in the ordinary course of business nor have any
acts been performed (including within the definition of the term
performed the failure to perform any required acts) which would
materially adversely affect the goodwill of the Subsidiary;
(i) The entering into of this Agreement and the performance required
hereunder has been duly and validly authorized by all required
corporate action;
(j) (1) Annexed hereto and made a part hereof as composite Exhibit
2.2(j) are: (a) an unaudited balance sheet of the Subsidiary
as of November 30, 1999, with the related statement of
operations and accumulated deficit and unaudited statements of
cash flows for the from inception to November 30, 1999 (such
balance sheets, statements of operations and other statements
are referred to herein as the "Subsidiary's Financial
Statements").
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<PAGE> 11
(2) The Subsidiary's Financial Statements fairly present the
financial condition of the Subsidiary as of the dates thereof,
and the results of operations of the Subsidiary for the
periods indicated, in each case in accordance with generally
accepted accounting principles applied on a consistent basis;
(3) Except as and to the extent reflected or reserved against in
the Subsidiary's Balance Sheet, the Subsidiary had no
liabilities or legal obligations of a nature required to be
reflected on a corporate balance sheet prepared in accordance
with generally accepted accounting principles or disclosed in
the notes thereto, whether absolute, accrued, contingent, or
otherwise and whether due or to become due (including, without
limitation, liabilities for taxes and interest, penalties, and
other charges payable with respect thereto (a) in respect of
or measured by the income of the Subsidiary through such date,
or (b) arising out of any transaction entered into prior
thereto).
(4) There is no basis for the assertion against the Subsidiary of
any liability or obligation which is not fully reflected or
reserved against in the Subsidiary's Interim Balance Sheet or
disclosed in the notes thereto, except liabilities or
obligations incurred since November 30, 1999 in the ordinary
course of the Subsidiary's business consistent with its past
practice.
(k) Except as reflected in the Subsidiary's Financial Statements, since
Nov. 30, 1999 the Subsidiary has not suffered any material adverse
change in its financial condition, assets, liabilities or business; or
suffered any material casualty loss (whether or not insured);
(1) On the Closing Date of this Agreement, the Subsidiary's aggregate
liabilities, whether accrued or inchoate, shall not exceed $25,000
(including liabilities owed to the Subscribers) and such liabilities
shall not require any payments, other than as specifically disclosed in
Exhibit 1.3, and the Subsidiary's unaudited Financial Statement shall
reflect paid-in capital of not less than $25,000.
(m) None of the properties or assets used in the business of the Subsidiary
are subject to any mortgage, pledge, lien, security interest,
conditional sale agreement, encumbrance, or charge of any kind, except
as disclosed in Exhibit 1.3;
(n) (1) There are no claims, actions, suits, proceedings or
investigations pending or threatened by or against the
Subsidiary and the Subsidiary does not know of any basis for
any such claim, action, suit, proceeding, or investigation;
(2) The Subsidiary is not subject to any liabilities or potential
liabilities that will subject the Corporation, or its
affiliates, stockholders, officers, directors, agents or
advisors to any claims or liabilities predicated or emanating
from product liability, torts or violations of law
attributable to the Subsidiary or for which the Subsidiary
assumed responsibility or which can in any manner be imputed
to the Subsidiary or its assets;
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(o) The Subsidiary has no liabilities involving expenses attributable
directly, indirectly or incidentally to any litigation;
(p) Except as otherwise disclosed in the Subsidiary's Financial Statements
the Subsidiary has good, valid, and marketable title to all its
properties, licenses, and assets, real, personal and mixed, tangible
and intangible;
(q) (1) Since its inception the Subsidiary has not disposed of any
assets or contractual rights which disposition has had or will
in the future have a materially adverse effect on the business
of the Subsidiary and no such disposition will be made by the
Subsidiary outside the ordinary course of business during the
interim between execution of this Agreement and the Closing,
unless this Agreement shall have been terminated, without the
prior written consent of the Corporation;
(2) Neither the Subsidiary nor its subsidiaries, if any, have,
during the six months proceeding the date of this Agreement,
distributed any unusual amounts of income to their
stockholders, agents, employees or any related parties.
(r) The Subsidiary has filed with the appropriate governmental agencies all
tax returns and tax reports required to be filed; all United States,
state and local income, profits, franchise, sales, use, occupation,
property or other taxes due have been fully paid, except as listed on
Exhibit 1.3; and, the Subsidiary is not a party to any action or
proceeding by any governmental authority for assessment or collection
of taxes, nor has any claim for assessments been asserted against the
Subsidiary or its assets;
(s) The Subsidiary is, as of the date of this Agreement, a validly existing
corporation, organized pursuant to the laws of the State of Florida
(and its subsidiaries and sibling corporations are validly organized
and in good standing under their laws of their corporate domiciles),
with all legal and corporate authority and power to conduct its
business and to own its properties and possesses all necessary permits
and licenses required in connection with the conduct of its business;
(t) The conduct of the Subsidiary's business is in material compliance with
all applicable federal, state and local governmental statutes, rules,
regulations, ordinances and decrees;
(u) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance with the terms of this
Agreement will not conflict with or result in a breach in any of the
terms or provisions of, or constitute a default under, the Articles of
Incorporation or By-Laws of the Subsidiary; any indenture, other
material agreement or instrument to which the Subsidiary or its
stockholders are a party or by which the Subsidiary or its assets are
bound; or, any applicable regulation, judgment, order or decree of any
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Subsidiary, its securities or its properties;
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(v) This Agreement constitutes the valid and binding agreement of the
Subsidiary and is enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law, no such
proceeding being anticipated or under consideration);
(w) (1) The Subsidiary has not experienced any material difficulties
with the management or recruiting of employees for its
business, nor does the Subsidiary have any reason to believe
that any such difficulties will arise in the future.
(2) Employees of the Subsidiary are not represented by labor
unions; and
(3) The Subsidiary has no reason to believe that any of its
employees have any potential claims against the Subsidiary or
its successors in interest based on violations of equal
employment laws, occupational health and safety standards or
any other legally protected rights;
(x) (1) The Subsidiary has no reason to believe that it has generated
any hazardous wastes or engaged in activities which violate or
could be interpreted as violating any laws, statutes,
regulations ordinances or judicial decrees in any manner
regulating the generation or disposal of hazardous waste.
(2) There are no on-site or off-site locations where the
Subsidiary has stored, disposed or arranged for the disposal
of chemicals, pollutants, contaminants, wastes, toxic
substances, petroleum or petroleum products; there are no
underground storage tanks located on property owned or leased
by the Subsidiary; and, no polychlorinated hiphenyle are used
or stored at any property owned or leased by the Subsidiary;
(y) All of the information reflected in the foregoing representations and
warranties is complete and accurate, and does not omit any information
required to make the information provided non-misleading, accurate and
meaningful, in light of the nature of this transaction.
There is no material fact, development or threatened development that
materially adversely affects, or is likely to materially adversely
affect the business of the Subsidiary, which the Subscriber has not
disclosed, either expressly or by reasonable implication, to the
Corporation.
(z) Exhibit 2.2 (aa) contains a list and description of material contracts
to which the Subsidiary is a party, whether written or oral. The
Subsidiary has not breached, or committed any default under, any
material contract to which it is a party. To the best of the knowledge
of the Subsidiary and the Subscriber, no other person has violated or
breached or committed any default under any material contract.
Furthermore, to the best of the Subsidiary and Subscriber's knowledge,
no event has occurred and no circumstance or condition exists that
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(with or without notice or lapse of time) will, or could be reasonably
expected to (a) result in a violation or breach of any of the
provisions of any such material contract (b) give any person the right
to declare a default or exercise any remedy under any material contract
(c) give any person the right to accelerate the maturity or performance
of any material contract or (d) give any person the right to cancel,
terminate or modify any such material contract. Subsidiary has not
waived any of its material rights under any material contract.
(aa) Exhibit 2.2 (bb) contains a list of each Employee, whether full or part
time and whether currently being paid or not, of Subsidiary, such
employees' beginning date, salary, position, description of material
duties, credentials, including educational background and experience, a
description of fringe benefits applicable to such employee, a copy of
written employment agreements and a description of any verbal
employment agreements. Subsidiary and Subscriber are not aware of any
verbal employment agreements. Subsidiary and Subscriber are not aware
of any circumstances or conditions which could lead to the loss of any
such employees. Such Exhibit also sets forth each salary, bonus,
deferred compensation, incentive compensation, medial termination pay
and/or other plan, program or agreement (collectively, the "Plan")
sponsored, maintained or contributed to or required to be contributed
to by Subsidiary for the benefit of any employee. Subsidiary is in
compliance in all medical respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as
amended. Such Exhibit also contains a separate list, identified as
such, of employees Subsidiary anticipates hiring and their anticipated
start date and terms of employment. No employee or prospective employee
has been promised any compensation, raises, stock, options, fringe
benefits or other remuneration except as provided on Exhibit 2.2 (bb).
(bb) Subsidiary has in place procedures to insure that on a regular basis
software code and other Intellectual Property prepared by its employees
is available to and usable by the Subsidiary and is in accessible form
(i.e. such information is not contained in encrypted files, stored
offsite or otherwise under the control of any employee without access
thereto by the Subsidiary). All such procedures are described in detail
in Exhibit 2.2(cc). The Subsidiary has the legal right to all software
and other Intellectual Property produced by the employees in
connections with, relating to or arising out of any project or matter
of the Subsidiary. Each employee is bound to uphold the confidentiality
of any Intellectual Property of the Subsidiary and, is legally
prohibited from utilizing any of such Intellectual Property for any
other employer, person, firm, entity, venture or endeavor of any kind
or nature whatsoever.
(cc) Subsidiary is the lessee of a lease for its business premises, the
material terms and conditions of which (description and location of
premises, square footage rent, expense payments, term, options to renew
and to lease additional space, rent escalation factors and other
important matters) are set forth on Exhibit 2.2 (dd). A true copy of
such lease, and any amendments thereto, has been delivered to the
Company. Such lease is in full force and effect, there have been no
uncured defaults thereunder and there are no events which, upon lapse
of time or the giving of notice, would constitute a default by either
party to such lease.
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2.3 THE SUBSCRIBERS.
Each Subscriber hereby represents and warrants to the Corporation, as a
material inducement to the Corporation's entry into this Agreement, that, except
as specified on Exhibit 2.3 annexed hereto and made a part hereof (the
"Subscribers' Warranty exceptions"), the following representations and
warranties are, to the best of the Subscribers' knowledge, materially accurate;
(a) Each Subscriber will, on the Closing Date, own the Subsidiary stock,
registered in his her or its name and subject to no liens, pledges or
encumbrances, and will convey good title thereto to the Corporation,
there being no outstanding subscriptions, options, warrants or other
agreements or commitments obligating the Subscriber to sell any of his
shares of the Subsidiary's Stock or any options or rights with respect
thereto;
(c) All of the information reflected in the foregoing representations and
warranties and, the representations and warranties made by the
Subsidiary, are complete and accurate, and do not omit any information
required to make the information provided non-misleading, accurate and
meaningful, in light of the nature of this transaction;
(d) (1) Annexed hereto and made a part hereof as composite Exhibit
2.3(c) are completed officers and directors questionnaires
pertaining to each Subscriber and company questionnaires
pertaining to the Subsidiary, which each Subscriber has either
completed or reviewed, on forms provided by the Corporation's
legal counsel (collectively hereinafter referred to as the
Questionnaires"); and
(2) The Questionnaires have been completed and answered in an
accurate and complete fashion, and do not fail to disclose any
information necessary to render the information provided, not
misleading.
(d) Annexed hereto and made a part hereof as Exhibit 2.3(d) is a complete,
accurate and not misleading, narrative disclosure document providing
the information called for by Securities and Exchange Commission
Regulation SB with reference to the Subsidiary, its operations and
background.
ARTICLE THREE
CONDITIONS
3.1 CONDITION SUBSEQUENT
(a) The obligations of the Parties are subject to the condition subsequent
that the Subsidiary's Financial Statements comply or can within the 90
day period following the Closing on this Agreement be made to comply
with the requirements of Regulation S-B promulgated under the
Securities Exchange Act of 1934.
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(b) In the event that the Securities and Exchange Commission advises the
Corporation that the financial statements of the Subsidiary (excluding
pro forma financial statements) filed with the Form 8-K of the
Corporation relating to the acquisition of the Subsidiary, or an
amendment thereto, fail to comply in a material respect with generally
accepted accounting principals or the requirements of Regulation S-B
and the Securities and Exchange Commission is unwilling to waive such
deficiencies, the Corporation and the Subsidiary will use their best
efforts to correct the subject financial statements in such manner as
will satisfy the Securities and Exchange Commission's objections
thereto or cause the Securities and Exchange Commission to withdraw its
objections; provided that, if such corrections are not affected or such
objections withdrawn within three months after any deficiencies are
raised by the Securities and Exchange Commission, the Corporation may
elect to rescind this Agreement, ab initio, unless the Parties can, at
such time, agree on a restructuring of this transaction in a manner
meeting the applicable reporting requirements imposed by applicable
United States and state securities law requirements.
3.2 CONDITIONS TO THE CORPORATION'S OBLIGATIONS
The obligations of the Corporation under this Agreement are subject to
the Subsidiary's (the term Subsidiary in the context of this Article being
deemed to include all subsidiaries of the Subsidiary and sibling corporations of
the Subsidiary, the assets and operations of which are to be included among the
subjects of this Agreement) and Subscribers' satisfaction, or the written waiver
by the Corporation, of the following conditions prior to Closing (the
"Conditions Precedent"):
(a) That all covenants, agreements, actions, proceedings, instruments and
documents required to be carried out or delivered by a Subscriber or
the Subsidiary pursuant to this Agreement shall have been performed,
complied with or delivered to the Corporation in accordance with the
terms thereof.
(b) That the warranties and representations made by the Subscribers and the
Subsidiary in this Agreement shall be true and correct in all material
respects on and as of the date of Closing and shall be deemed to be
made on and as of such date.
(c) That there are no material violations of any laws, statutes,
ordinances, orders, regulations or requirements of any governmental
authority affecting the Subsidiary or its assets, nor will there be any
at the time of Closing.
(d) There is no action, suit or proceeding pending or threatened against or
affecting the Subsidiary or its assets in any court or before or by any
federal, provincial, state, county or municipal department, commission,
board, bureau, agency or other governmental instrumentality which would
affect the Subscriber's or the Subsidiary's ability to perform
hereunder or which could affect the business of the Subsidiary in a
materially adverse manner.
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(e) That the Subsidiary is in material compliance with all applicable
federal, state or local statutes, regulations, rules or ordinances
applicable to the it, its securities or assets and that the
transactions contemplated hereby will not result in any violations
thereof.
(f) That the issuance of the Stock and the transfer of the Subsidiary Stock
complies with the requirements for exemption from registration under
the statutes, regulations and rules applicable thereto and of
comparable provisions of the laws of the Corporation's and the
Subscriber's state of domicile.
(g) That all licenses, patents and intellectual property rights heretofore
held or owned by the Subsidiary continue to be in good standing and not
subject to legal or other challenges, and that after Closing on this
Agreement, they will continue to remain in full force, effect and
validity, and that the Subsidiary shall have had properly assigned to
it all patents, copyrights, trademarks, trade secrets, processes,
concepts, plans, working drawings and other intellectual property
rights of any nature developed by Vern C. Kendrick in connection with
the business of Subsidiary.
(h) That the operations of any affiliated entities which comprise the total
business of which the Subsidiary has been a part since its inception
have been consolidated as to ownership and control under the
Subsidiary, in a manner resulting in the control and ownership thereof
by the Subsidiary, and, that as a consequence of the transactions
contemplated by this Agreement, all such assets and operations shall
become the indirect property (through ownership of the Subsidiary's
capital stock) of the Corporation.
(i) That the Subsidiary and Subscriber shall have furnished to the
Corporation such books, records, minutes, documentation, information,
and data as the Corporation may have requested in order to complete its
due diligence investigation prior to closing and shall have permitted
the Corporation and its agents to inspect the business of the
Subsidiary and investigate its Intellectual Property.
3.3 CONDITIONS TO THE SUBSCRIBERS' OBLIGATIONS
The obligations of the Subscribers under this Agreement are subject to
the Subscriber's satisfaction, or the written waiver thereof by the Subscribers,
of the following conditions prior to Closing (the 'Subscribers' Conditions
Precedent"):
(a) That all covenants, agreements, actions, proceedings, instruments and
documents required to be carried out or delivered by the Corporation
pursuant to this Agreement shall have been performed, complied with or
delivered to the Subscriber in accordance with the terms thereof.
(b) That the warranties and representations made by the Corporation in this
Agreement shall be true and correct in all material respects on and as
of the date of Closing and shall be deemed to be made on and as of such
date.
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(c) That the issuance of the Stock and the transfer of the Subsidiary Stock
complies with the requirements for exemption from registration under
the statutes, regulations and rules applicable thereto, including,
without limitation, the provisions of Sections 4(l), 4(2) or 4(6) of
the Securities Act of 1933, as amended, of Regulation D promulgated
thereunder, and of comparable provisions of the laws of the
Corporation's and the Subscriber's state of domicile.
(d) That the Corporation shall have furnished to Subscriber such books,
records, minutes and other documents as it may reasonably request and
require to complete its due diligence investigation prior to closing.
(e) That the Corporation and the holders of 5,315,000 shares currently
owned and controlled by the current officers, directors, affiliates and
founders of the Corporation shall have entered into and executed a
Shareholder's Agreement with Subscriber providing (i) for continuity of
business operations; (ii) for the expansion of the current board of
directors to seven members, an additional two members of which shall be
appointed by Subscriber for three years, and (iii) that an affirmative
vote of 66 2/3% of all directors shall be required to dilute or reverse
the existing capital structure without equivalent consideration;
acquire subsidiaries in a manner which is unfairly dilutive to any
Corporation shareholders; or otherwise take action which materially
changes the existing corporate capital structure without equivalent
consideration or fundamental mission; all for a period of three years
from closing. A similar shareholders agreement shall have been entered
into with Subscriber re: the Subsidiary on the same terms.
Notwithstanding the foregoing, however, any supermajority provisions
contained in such shareholders agreements shall apply only during those
periods of time when Subsidiary's business performance and pre-tax
profits shall equal or better the performance schedule and standards
set forth in Exhibit 3.3(e).
ARTICLE FOUR
CLOSING
4.1 CLOSING DATE.
The effective date of the Closing on this transaction shall be April
19, 2000. Closing will be held by telephone conference arranged by the
Corporation at a mutually agreeable time but may be adjourned and reconvened at
a physical location, if required, at the request of either Party. If closing at
a physical location is required, it shall take place at the Corporation's
offices in Delray Beach, Florida, during normal business hours, at a mutually
convenient time within ten business days following the adjourned teleconference
closing session.
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4.2 ITEMS DELIVERED AT CLOSING BY THE SUBSIDIARY AND THE SUBSCRIBER.
Prior to the Closing, the Subscribers will deliver the following items
to the Corporation, which shall be held in escrow until completion of the
Closing
(a) Certificates for all of the Subsidiary Stock, duly endorsed or with
stock power attached with appropriate signature guarantees, in form and
substance adequate to permit immediate transfer thereof to the
Corporation;
(b) A certification from an officer of the Subsidiary to the effect that
after consulting with counsel to the Subsidiary or other legal counsel
acceptable to the Corporation, he or they reasonably believe that:
(1) The issuance of the Stock to the Subscribers will not require
any actions in the Subscriber's state of domicile, other than
such actions as have been taken no later than the fifth day
prior to Closing, in order to comply with such state's laws,
regulations and rules governing private placements, and that
such issuance will not violate any such laws, regulations or
rules; and
(2) The transfer of the Subsidiary Stock as contemplated by this
Agreement meets the requirements of the exemption from
registration requirements provided by Sections 4(l), 4(2) or
4(6) of the Securities Act of 1933, as amended.
(c) A certification from the Subsidiary's chief financial officer
indicating that, after a review of the Subsidiary's books and records
from the date of the Subsidiary's latest financial statements annexed
hereto until the fifth day prior to Closing, such review did not give
such officer cause to believe that any materially detrimental matters
have occurred, or that there have been any materially detrimental
changes in the financial condition of the Subsidiary, other than as
disclosed in this Agreement.
(d) An investment letter, in the form annexed hereto as Exhibit 4.2(d).
(e) An opinion letter, from Subsidiary's counsel, to the effect that no
person or entity has any prior legal right to acquire any portion of
the Subsidiary's assets, business or shares of stock pursuant to or
arising out of a certain Reorganization Agreement among Novus
Environmental, Inc., a Delaware Corporation, WavePower, Inc., a Florida
corporation and Vernon C. Kendrick dated on or about January 20, 2000.
4.3 ITEMS DELIVERED AT CLOSING BY THE CORPORATION.
Prior to the Closing, the Corporation will deliver the following to the
Subscriber, which shall be held in escrow until completion of the Closing:
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(a) Certificates for the Stock, in denominations of 25,000 shares or
greater.
(b) An opinion from the Corporation's legal counsel that the issuance of
the Stock as contemplated by this Agreement will meet the requirements
of the exemption from registration requirements provided by Section 4.2
of the Securities Act of 1933, as amended.
(c) A certification from the Corporation's chief financial officer
indicating that, after a review of the Corporation's books and records
from the date of the Corporation's latest financial statements annexed
hereto until the fifth day prior to Closing, such review did not give
such officer cause to believe that any materially detrimental matters
have occurred, or that there have been any materially detrimental
changes in the financial condition of the Corporation, other than as
disclosed in this Agreement.
4.4 CLOSING COSTS.
Except as expressly provided in this Agreement, each Party shall pay
their own Closing costs. This extends to all attorney's fees incurred prior to
closing, however all post closing attorneys fees shall be paid by the
Corporation insofar as any such fees have been incurred on the business of the
Corporation or the Subsidiary, however not on behalf of the Subscriber.
ARTICLE FIVE
BROKER
5.1 THE SUBSCRIBER.
The Subscribers and the Subsidiary represent and warrant to the
Corporation that it will not be subject to and will indemnify and hold it
harmless against any claims of brokers, "finders", or other intermediaries for
commissions or other compensation in connection with this Agreement and the
consummation of the transactions contemplated hereby.
5.2 THE CORPORATION.
The Corporation hereby represents and warrants that it has dealt with
no brokers, "finders", or other intermediaries in conjunction with his
contemplated purchase of the Subsidiary.
ARTICLE SIX
COVENANTS
6.1 MAINTENANCE OF SUBSIDIARY:
Except as approved by the Corporation's Chief Executive Officer:
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(b) The Subsidiary shall not sell or transfer any of the its material
assets, real, personal, tangible or intangible, other than in the
ordinary course of business, without the Corporation's explicit prior
written consent.
(c) The Subsidiary will keep all of its material assets in good standing,
order and repair and shall cause any and all necessary remedies and
repairs thereto to be made on or before the Closing.
(d) The Subsidiary shall preserve all of its contractual rights in good
standing.
(e) The operations of any affiliated entities which comprise the total
business of which the Subsidiary has been a part since its inception
will be consolidated as to ownership and control under the Subsidiary,
in a manner resulting in the control and ownership thereof by the
Subsidiary, and, as a consequence of the transactions contemplated by
this Agreement, all such assets and operations shall become the
indirect property (through ownership of the Subsidiary's capital stock)
of the Corporation.
6.2 COOPERATION.
The Corporation and the Subsidiary and their agents shall have
reasonable access to the premises and assets of the other for the purpose of
familiarizing themselves with the operations of each other's business. The
Subsidiary and the Corporation agree to cooperate with each other and to render
a reasonable amount of assistance in the orderly integration of the business of
the Subsidiary into the Corporation's operations and the familiarization of the
Parties therewith.
6.3 POST CLOSING LEGAL ACTIVITIES
(a) The Corporation's general counsel will prepare and file all required
reports of the transactions contemplated by this Agreement with the
Securities and Exchange Commission, such reports to include a detailed
report of special event on Form 8-K, any required proxy materials, and
such other matters as, in the opinion of management, may be required.
(b) The Parties hereby covenant and agree to fully cooperate with the
Corporation's general counsel in the timely preparation and filing of
all such materials and reports, which are due on or before the tenth
day following Closing.
6.4 EMPLOYMENT OF SUBSCRIBERS
(a) The Subscribers hereby covenant and agree that Vernon C. Kendrick shall
remain in the employ of the Subsidiary, as its chief executive officer
and President, and that he shall remain as Chairman of the Board of
Directors of the Subsidiary for a period of at least 36 months
following Closing on this Agreement, and that he shall use his best
efforts and
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diligence to assure the success of the Subsidiary's business, and that
he shall serve in an official capacity with the Corporation if so
requested and appropriately compensated.
(b) The Parties hereby acknowledge that Vernon C. Kendrick, who serves as
an executive officer of the Subsidiary shall be paid annual
compensation for their services to the Corporation and its
subsidiaries, including the Subsidiary, in a sum to be agreed upon for
his services to both the Corporation and the Subsidiary.
(c) The Parties hereby agree that Vernon C. Kendrick shall execute an
Employment Agreement in form and substance as set forth in Exhibit
6.4(c) attached hereto.
6.5 SECONDARY OFFERING
The Corporation hereby covenants and agrees to use its best efforts to
effect a secondary offering of its securities of at least $5,000,000 within 180
days following the Closing on this Agreement, and to loan a portion of the
proceeds to the Subsidiary on a subordinated, long term basis.
6.6 PRIVATE PLACEMENT
Upon closing of this Agreement the Subscriber and the Corporation agree
to utilize their respective resources on a "best efforts" basis to assist the
Corporation to obtain an additional paid in capital of at least $2,000,000, for
a share price to be established by mutual agreement. To the extent funds raised
by the Corporation pursuant to a secondary offering of its securities exceeds $5
million, the Corporation's obligations under this paragraph shall be deemed
satisfied.
ARTICLE SEVEN
MISCELLANEOUS
7.1 AMENDMENT.
No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is evinced by a written instrument,
subscribed by the Party against which such modification, waiver, amendment,
discharge or change is sought.
7.2 NOTICE.
All notices, demands or other communications given hereunder shall be
in writing and shall be deemed to have been duly given on the first business day
after mailing by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
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To the Corporation:
Enter Tech Corporation
Attention: Sam Lindsey, President
430 E. 6th Street
Loveland, CO. 80537
To the Subsidiary:
WavePower, Inc.
Attention: Vernon C Kendrick, President
75 N.E. 6th Ave. Delray Beach, Fl. 33483
or such other address or to such other person as any Party shall designate to
the other for such purpose in the manner hereinafter set forth. Copies of any
notice shall also be sent to Jay C. Salyer, Jr. Esq., General Counsel to the
Subsidiary, by facsimile to (954) 792-1007.
7.3 ENTIRE AGREEMENT.
This instrument, together with the instruments referred to herein,
contain all of the understandings and agreements of the Parties with respect to
the subject matter discussed herein. All prior agreements whether written or
oral are merged herein and shall be of no force or effect.
7.4 SURVIVAL.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and Closing hereon and shall
be effective regardless of any investigation that may have been made or may be
made by or on behalf of any Party.
7.5 SEVERABILITY.
If any provision or any portion of any provision of this Agreement,
other than one of the conditions precedent or subsequent, or the application of
such provision or any portion thereof to any person or circumstance shall be
held invalid or unenforceable, the remaining portions of such provision and the
remaining provisions of this Agreement or the application of such provision or
portion of such provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby.
7.6 GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the
State of Colorado and any legal proceedings pertaining directly or indirectly to
the rights or obligations of the Parties hereunder shall, to the extent legally
permitted, be held in a Court of competent
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jurisdiction in the Larimer County, City of Loveland, State of Colorado, and
shall be subject to the mediation procedures of such Court.
7.7 INDEMNIFICATION.
Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including legal or
other expenses incidental thereto), contingent, current, or inchoate to which
they or any one of them may become subject as a direct, indirect or incidental
consequence of any action by the indemnifying Party or as a consequence of the
failure of the indemnifying Party to act, whether pursuant to requirements of
this Agreement or otherwise. Such indemnification shall include, but shall not
be limited to, loss, damage or expense, including reasonable attorneys fees
relating to or arising out of the failure or inaccuracy of any representation,
warranty or covenant made by such party pursuant to such agreement. In the event
it becomes necessary to enforce this indemnity through an attorney, with or
without litigation, the successful Party shall be entitled to recover from the
indemnifying Party, all costs incurred including reasonable attorneys' fees
throughout any negotiations, trials or appeals, whether or not any suit is
instituted.
7.8 LITIGATION.
(a) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees up to and including all
negotiations, trials and appeals, whether or not litigation is
initiated.
(b) In the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the
dispute shall, at the request of any Party, be exclusively resolved
through the following procedures:
(1) First, the issue shall be submitted to mediation before a
mediation service in Denver, Colorado to be selected by lot from
four alternatives to be provided two by each Party. The mediation
efforts shall be concluded within ten business days after their
initiation unless the Parties unanimously agree to an extended
mediation period;
(2) In the event that mediation does not lead to a resolution of the
dispute then at the request of any Party, the Parties shall
submit the dispute to binding arbitration before an arbitration
service located in Denver, Colorado to be selected by lot, from
four alternatives to be provided; and
(3) Expenses of mediation shall be borne by the Subsidiary, if
successful. Expenses of mediation, if unsuccessful and of
arbitration shall be borne by the Party or Parties against whom
the arbitration decision is rendered. If the terms of the
arbitral award do not establish a prevailing Party, then the
expenses of unsuccessful mediation and arbitration shall be borne
equally by the Parties.
24
<PAGE> 25
7.9 BENEFIT OF AGREEMENT.
The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representatives, estate, heirs and legatees.
7.10 CAPTIONS.
The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
7.11 NUMBER AND GENDER.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
7.12 FURTHER ASSURANCES.
The Parties agree to do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged or delivered and to perform all such acts and
deliver all such deeds, assignments, transfers, conveyances, powers of attorney,
assurances, stock certificates and other documents, as may, from time to time
hereafter, be required herein to effect the intent and purpose of this
Agreement.
7.13 STATUS.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, employer-employee relationship, lessor-lessee
relationship, or principal-agent relationship; rather, the relationships
established hereby are those of purchaser and seller.
7.14 COUNTERPARTS.
This Agreement may be executed in any number of counterparts. All
executed counterparts shall constitute one Agreement notwithstanding that all
signatories are not signatories to the original or the same counterpart.
Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for aesthetic
purposes, prepare a fully executed original version of this Agreement, which
shall be the document filed with the Securities and Exchange Commission.
7.15 LICENSE.
This Agreement is the property of Jay C. Salyer, Jr., Esq. for use
hereof by the Parties is authorized hereby solely for purposes of this
transaction and, the use of this form of agreement or of any derivation thereof
without Jay C. Salyer, Jr. Esq.'s prior written permission is prohibited.
25
<PAGE> 26
7.16 EXHIBIT INDEX.
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
0.2 Business Description
1.3 Disclosed Subsidiary Liabilities
2.1 Corporation's Warranty Exceptions
2.2 Subsidiary's Warranty Exceptions
2.2(a) Subsidiary Property Inventory (Real and Personal)
2.2(a-1) Subsidiary Technology and Intellectual Property
2.2(a-2) Functional Specifications
2.2(a-3) Patents and Copyrights
2.2(j) Subsidiary's Financial Statements
2.2(aa) Subsidiary's Contracts
2.2(bb) Subsidiary's Employee Matters
2.2(cc) Subsidiary's Software Security Procedures
2.2(dd) Subsidiary's Lease Terms
2.3 Subscriber's Warranty Exceptions
2.3(c) Questionnaires
2.3(d) Regulation SB Narrative Disclosure
3.3(e) Subscriber's Performance Standards
4.2 Subscriber's Deliveries at Closing
4.2(d) Investment Letter (Subsidiary)
6.4(c) Employment Agreement
</TABLE>
26
<PAGE> 27
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed effective as of the 19th day of April, 2000.
SIGNED, SEALED AND DELIVERED
IN OUR PRESENCE:
ENTER TECH CORPORATION
- -----------------------------------
By: /s/ SAM LINDSEY
- ----------------------------------- ----------------------------------
Sam Lindsey, President
(CORPORATE SEAL)
Attest:
------------------------------
Secretary
WAVEPOWER, INC.
- -----------------------------------
By: /s/ VERNON C. KENDRICK
- ----------------------------------- ----------------------------------
Vernon C. Kendrick, President
(CORPORATE SEAL)
Attest:
------------------------------
Secretary
SUBSCRIBERS
/s/ VERNON C. KENDRICK
- -----------------------------------
- ----------------------------------- ----------------------------------
Vernon C. Kendrick, Subscriber
27
<PAGE> 28
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
0.2 Business Description
1.3 Disclosed Subsidiary Liabilities
2.1 Corporation's Warranty Exceptions
2.2 Subsidiary's Warranty Exceptions
2.2(a) Subsidiary Property Inventory (Real and Personal)
2.2(a-1) Subsidiary Technology and Intellectual Property
2.2(a-2) Functional Specifications
2.2(a-3) Patents and Copyrights
2.2(j) Subsidiary's Financial Statements
2.2(aa) Subsidiary's Contracts
2.2(bb) Subsidiary's Employee Matters
2.2(cc) Subsidiary's Software Security Procedures
2.2(dd) Subsidiary's Lease Terms
2.3 Subscriber's Warranty Exceptions
2.3(c) Questionnaires
2.3(d) Regulation SB Narrative Disclosure
3.3(e) Subscriber's Performance Standards
4.2 Subscriber's Deliveries at Closing
4.2(d) Investment Letter (Subsidiary)
6.4(c) Employment Agreement
</TABLE>
28
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
among VERNON C. KENDRICK, an individual residing in the State of Florida (the
"President"); ENTER TECH CORPORATION, a publicly held Nevada corporation (the
"Company"); and, WAVEPOWER, INC. a Florida corporation (the "Consolidated
Subsidiary", the Consolidated Subsidiary, the President and the Company being
collectively referred to as the "Parties" and generically as a "Party").
PREAMBLE:
WHEREAS, the Company, as the Consolidated Subsidiary's 80% stockholder,
and the Consolidated Subsidiary's Board of Directors are of the opinion that in
conjunction with effectuation of the Consolidated Subsidiary's future plans, the
Consolidated Subsidiary must obtain the services of a qualified chief operating
officer; and
WHEREAS, the President has a broad administrative and financial
background, and has, prior to the acquisition of the Consolidated Subsidiary by
the Company, served as the president of the Consolidated Subsidiary and is
thoroughly knowledgeable with all aspects of its operations; and
WHEREAS, the President is agreeable to serving as the President and
chief operating officer, on the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
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WITNESSETH:
ARTICLE ONE
TERM, RENEWALS, EARLIER TERMINATION
1.1 TERM.
This Agreement shall be for an initial term of three years, commencing
on the 30th day of April, 2000. Notwithstanding the foregoing but subject to
continuation of the President's rights to compensation under Article Three
hereof, this Agreement is subject to termination by the Chairman of the
Company's Board of Directors (the "Chairman") at any time at least 66.6% of the
Board of Directors of the Company carry a vote of no confidence in the
President.
1.2 RENEWALS.
This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing not to
renew this Agreement provides the other Party with written notice of its
election not to renew ("Termination Election Notice") on or before 90 days prior
to termination of the then current term.
1.3 EARLIER TERMINATION.
The Consolidated Subsidiary shall have the right to terminate this
Agreement prior to the expiration of its Term, or of any renewals thereof,
subject to the provisions of Section 1.4:
(a) For Cause: The Consolidated Subsidiary may terminate the President's
employment under this Agreement at any time for cause. Such termination
shall be evidenced by written notice thereof to the President, which
notice shall specify the cause for termination. For purposes hereof,
the term "cause" shall mean the inability, refusal or failure of the
President to perform his duties under this Agreement for a period in
excess of 90 days, the refusal of the President to follow the
directions of the Company's Chairman; dishonesty, theft, or conviction
of a crime.
(b) Discontinuance of Business: In the event that the Consolidated
Subsidiary discontinues operating its business, this Agreement shall
terminate as of the last day of the month on which the Consolidated
Subsidiary ceases operation with the same force and effect as if such
last day of the month were originally set as the termination date
hereof.
(c) Death: This Agreement shall terminate immediately on the death of the
President.
1.4 FINAL SETTLEMENT.
Upon termination of this Agreement and payment to the President of all
amounts due him hereunder, the President or his representative shall execute and
deliver to the Consolidated Subsidiary on a form prepared by the Consolidated
Subsidiary a receipt for such sums and a release of all claims, except such
claims as may have been submitted pursuant to the terms of this Agreement and
which remain unpaid, and, shall forthwith tender to the Consolidated Subsidiary
all records, manuals and written procedures, as may be desired by the
Consolidated Subsidiary for the continued conduct of its business.
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ARTICLE TWO
SCOPE OF EMPLOYMENT
2.1 RETENTION
The Consolidated Subsidiary hereby hires the President and the
President hereby accepts such employment, in accordance with the terms,
provisions and conditions of this Agreement.
2.2 GENERAL DESCRIPTION OF DUTIES.
The President shall perform the duties generally associated with the
position of chief executive officer of the Consolidated Subsidiary and such
other duties as are, from time to time, delegated to him by the Company's
Chairman. In amplification of the foregoing, the President shall be responsible
for the following matters:
(a) Assisting the Company's vice president with compliance by the Company
with its reporting and disclosure obligations pertaining to the
Consolidated Subsidiary and its officers and directors to the
Securities and Exchange Commission and to state and provincial
securities regulatory authorities;
(b) Compliance by the Consolidated Subsidiary and its subsidiaries with all
of their tax reporting obligations;
(c) Compliance by the Consolidated Subsidiary and its subsidiaries with all
of their obligations under the laws of the provinces, states and
countries in which they are incorporated or doing business;
(d) Analysis of financial data concerning the Consolidated Subsidiary's
performance, as well as financial data concerning potential
Consolidated Subsidiary acquisitions;
(e) Preparation and implementation of strategic plans for the Consolidated
Subsidiary, subject to parameters established by the Company's chief
executive officer; and
(f) Supervision of the Consolidated Subsidiary's operations and personnel
and integration of the Consolidated Subsidiary's legal, accounting and
administrative affairs with those of the Company in a manner reducing
duplication related costs and expenses.
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<PAGE> 4
2.3 STATUS.
Throughout the term of this Agreement, the President shall serve as the
Consolidated Subsidiary's president and chief executive officer. In the event
that he is not elected to such position, then, at the option of the President,
this Agreement will be deemed terminated, effective as of the earliest time that
it can be reasonably determined that such election will not take place.
2.4 EXCLUSIVITY.
The President shall, unless specifically otherwise authorized by the
Company's Chairman, on a case by case basis, devote his business time
exclusively to the affairs of the Consolidated Subsidiary.
ARTICLE THREE
COMPENSATION
3.1 COMPENSATION.
As consideration for the President's future services to the
Consolidated Subsidiary and for his entry into this Agreement, the Consolidated
Subsidiary hereby grants the President the following compensation:
(a) Options to purchase 3,000,000 shares of the Company's Series A
preferred stock at an exercise price of par value per share, each share
of which shall carry five votes per share and which shall be
convertible to one share of common stock per share of preferred stock,
subject to standard anti-dilutive provisions, and exercisable as
follows:
(1) 1,000,000 shares may be exercised during the 12th through 13th
months following the date of this Agreement;
(2) 1,000,000 shares may be exercised during the 24th through 25th
months following the date of this Agreement; and
(3) 1,000,000 shares may be exercised during the 35th through 36th
months following the date of this Agreement.
The above described options shall vest only in proportion to the
relative success achieved by the Executive in meeting the objectives of
the Business Plan he has proposed to and which has been approved by the
Company, as follows: If the Executive achieves 100% or more of the
profit projections contained in the Business Plan, the options
otherwise vesting during such period of time fully vest. However if the
Executive achieves less than
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<PAGE> 5
100% of the profit projections in the Business Plan but greater than
75% thereof in any particular time period, then 50% of the options
which would otherwise be exercisable during such period may be
exercised and the balance thereof would lapse. If the Executive
achieves greater than or equal to 50% of said profit projections but
less than 75% then only 25% of said options shall vest and the balance
would lapse. If the Executive achieves less than 50% of said profit
projections then none of the options for that profit period shall
vest. Notwithstanding the foregoing, the Executive shall be entitled
to 100% of the above options regardless of any success ratio in the
event the Company fails to timely and adequately provide capital
funding to the Subsidiary.
(b) An annual bonus payable in shares of the Company's common stock,
determined by dividing 3 % of the Consolidated Subsidiary's pre-tax
profits for the subject calendar year by the average bid price for the
Company's common stock at during the last five trading days prior to
the end of the last day of each year and the initial five days of the
new year, provided, however, that this Agreement shall have been in
effect for at least one half of the subject year.
(c) An annual cash bonus equal to 3% of the Consolidated Subsidiary's
pre-tax profits for the subject calendar year, provided, however, that
this Agreement shall have been in effect for at least one half of the
subject year.
(d) A salary of $104,000 per year, payable in arrears in accordance with
the Company's payroll procedures, but subject to review on an annual
basis, with the expectation of the Parties that it will be increased as
increased profits and cash flow from operations permit but never
decreased below $104,000 per year. Notwithstanding the foregoing, such
salary shall be $5,000 per month prior to June 1, 2000.
3.2 EXEMPTION FROM REGISTRATION
(a) The President hereby represents, warrants, covenants and acknowledges
that:
(1) The stock being issued as compensation under Section 3. 1 (a)
of this Agreement (the "Stock") will be issued without
registration under the provisions of Section 5 of the
Securities Act of 1933, as amended (the "Act") or the
securities regulatory laws and regulations of the State of
Nevada (the "Nevada Securities Act") pursuant to exemptions
provided pursuant to Section 4(2) of the Act and comparable
provisions of the Nevada Securities Act;
(2) The President shall be responsible, at the Consolidated
Subsidiary's expense, for preparing and filing any reports
concerning this transaction with the Florida Securities
Commission, and payment of any required filing fee;
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(3) All of the Stock will bear legends restricting its transfer,
sale, conveyance or hypothecation unless such Stock is either
registered under the provisions of Section 5 of the Act and
under the Nevada Securities Act, or an opinion of legal
counsel, in form and substance satisfactory to legal counsel
to the Company is provided by the President to the effect that
such registration is not required as a result of applicable
exemptions therefrom;
(4) The Company's transfer agent shall be instructed not to
transfer any of the Stock unless the Company advises it that
such transfer is in compliance with all applicable laws;
(5) The President is acquiring the Stock for his own account, for
investment purposes only, and not with a view to further sale
or distribution; and
(6) The President or his advisors have examined the Company's
latest reports to the Securities and Exchange Commission on
Forms 10-KSB, IO-QSB and 8-K (collectively and generically
hereinafter referred to as "34 Act Reports"), have been
provided with access to all of the Company's books and records
and have questioned the Company's officers and directors as to
such matters involving the Company as the President deemed
appropriate.
(b) Notwithstanding the provisions of Section 3.2(a), the shares reserved
for exercise of the options described in Section 3.1(b) shall, to the
extent legally allowable based on the Company's ability to meet
applicable legal requirements, be listed with any stock exchange or
securities market on which the Company's common stock is admitted to
trading.
3.3 BENEFITS
The President shall be entitled to a benefit package equal to the most
favorable benefit package provided by the Company or its subsidiaries to any of
its employees, officers, directors, consultants or agents, other than the
Company's Chairman.
3.4 INDEMNIFICATION
The Consolidated Subsidiary will defend, indemnify and hold the
President harmless from liabilities, suits, judgments, fines, penalties or
disabilities, including expenses associated directly, therewith (e.g. legal
fees, court costs, investigative costs, witness fees, etc.) resulting from any
reasonable actions in good faith on behalf of the Consolidated Subsidiary, to
the fullest extent legally permitted, and in conjunction therewith, shall assure
that all required expenditures are made by the Consolidated Subsidiary in a
manner making it unnecessary for the President to incur any out of pocket
expenses; provided, however, that the President permits the Consolidated
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<PAGE> 7
Subsidiary to select and super-vise all personnel involved in such defense and
that the President waive any conflicts of interest that such personnel may have
as a result of also representing the Consolidated Subsidiary or other
Consolidated Subsidiary personnel and agrees to hold them harmless from any
matters involving such representation, except such as involve fraud or bad
faith.
ARTICLE FOUR
SPECIAL COVENANTS
4.1 CONFIDENTIALITY.
The President acknowledges that, in and as a result of his employment
hereunder, he will be developing for the Consolidated Subsidiary, making use of,
acquiring and/or adding to, confidential information of special and unique
nature and value relating to such matters as the Consolidated Subsidiary's trade
secrets, systems, procedures, manuals, confidential reports and lists of clients
and lenders; consequently, as material inducement to the entry into this
Agreement by the Consolidated Subsidiary, the President hereby covenants and
agrees that he shall not, at anytime during or following the terms of his
employment hereunder, directly or indirectly, personally use, divulge or
disclose, for any purpose whatsoever, any of such confidential information which
has been obtained by or disclosed to him as a result of his employment by the
Consolidated Subsidiary, or the Consolidated Subsidiary's affiliates. In the
event of a breach or threatened breach by the President of any of the provisions
of this Section 4. 1, the Consolidated Subsidiary, in addition to and not in
limitation of any other rights, remedies or damages available to the
Consolidated Subsidiary, whether at law or in equity, shall be entitled to a
permanent injunction in order to prevent or to restrain any such breach by the
President, or by the President's partners, agents, representatives, servants,
employers, employees, affiliates and/or any and all persons directly or
indirectly acting for or with him.
4.2 SPECIAL REMEDIES.
In view of the irreparable harm and damage which would undoubtedly
occur to the Consolidated Subsidiary as a result of a breach by the President of
the covenants or agreements contained in this Article Four, and in view of the
lack of an adequate remedy at law to protect the Consolidated Subsidiary's
interests, the President hereby covenants and agrees that the Consolidated
Subsidiary shall have the following additional rights and remedies in the event
of a breach hereof:
(a) The President hereby consents to the issuance of a permanent injunction
enjoining him from any violations of the covenants set forth in Section
4.1 hereof; and
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(b) Because it is impossible to ascertain or estimate the entire or exact
cost, damage or injury which the Consolidated Subsidiary may sustain
prior to the effective enforcement of such injunction, the President
hereby covenants and agrees to pay over to the Consolidated Subsidiary,
in the event he violates the covenants and agreements contained in
Section 4.2 hereof, the greater of:
(i) Any payment or compensation of any kind received by him
because of such violation before the issuance of such
injunction, or
(ii) The sum of One Hundred Thousand ($100,000.00) Dollars per
violation, which sum shall be liquidated damages, and not a
penalty, for the injuries suffered by the Consolidated
Subsidiary as a result of such violation, the Parties hereto
agreeing that such liquidated damages are not intended as the
exclusive remedy available to the Consolidated Subsidiary for
any breach of the covenants and agreements contained in this
Article Four, prior to the issuance of such injunction, the
Parties recognizing that the only adequate remedy to protect
the Consolidated Subsidiary from the injury caused by such
breaches would be injunctive relief.
4.3 CUMULATIVE REMEDIES.
The President hereby irrevocably agrees that the remedies described in
Section 4.3 hereof shall be in addition to, and not in limitation of, any of the
rights or remedies to which the Consolidated Subsidiary is or may be entitled
to, whether at law or in equity, under or pursuant to this Agreement.
4.4 ACKNOWLEDGMENT OF REASONABLENESS.
The President hereby represents, warrants and acknowledges that he has
carefully read and considered the provisions of this Article Four and, having
done so, agrees that the restrictions set forth herein are fair and reasonable
and are reasonably required for the protection of the interests of the
Consolidated Subsidiary, its officers, directors and other employees;
consequently, in the event that any of the above-described restrictions shall be
held unenforceable by any court of competent jurisdiction, the President hereby
covenants, agrees and directs such court to substitute a reasonable judicially
enforceable limitation in place of any limitation deemed unenforceable and, the
President hereby covenants and agrees that if so modified, the covenants
contained in this Article Four shall be as fully enforceable as if they had been
set forth herein directly by the Parties. In determining the nature of this
limitation, the President hereby acknowledges, covenants and agrees that it is
the intent of the Parties that a court adjudicating a dispute arising hereunder
recognize that the Parties desire that this covenant not to compete be imposed
and maintained to the greatest extent possible.
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4.5 UNAUTHORIZED ACTS.
The President hereby covenants and agrees that he will not do any act
or incur any obligation on behalf of the Consolidated Subsidiary of any kind
whatsoever, except as authorized by the Company.
4.6 NON-COMPETITION
The Executive agrees that he shall not compete directly or indirectly
with the Company for a period of three years following termination of his
employment. For this purpose competition shall include developing or exploiting
any technology which competes directly or indirectly with technology developed
by or under active development by the Subsidiary during the Executive's tenure
at the Subsidiary.
4.7 TECHNOLOGY OWNERSHIP
The Executive hereby transfers, sets over and assigns unto the
Subsidiary the technology and intellectual property previously developed by him
and more fully described in the Reorganization Agreement between the Subsidiary,
Vernon C. Kendrick and the Corporation. The Executive further agrees that all
technology and intellectual property developed or acquired by him during the
term of his employment with the Subsidiary shall be owned by the Subsidiary
without further consideration, and he will execute and deliver such instruments
and documents without further consideration as may be necessary to convey title
to such technology to the Corporation.
4.8 QUALIFICATION.
The provisions of this Article Four shall not apply in the event that
the reorganization agreement pursuant to which the Corporation acquired the
Consolidated Subsidiary is rescinded, except as to confidential information
pertaining to the Corporation and its other subsidiaries.
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ARTICLE.FIVE
MISCELLANEOUS
5.1 NOTICES.
All notices, demands or other communications hereunder shall be in
writing, and unless otherwise provided, shall be deemed to have been duly given
on the first business day after mailing by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
TO THE PRESIDENT:
Vernon C .Kendrick
75 N. E. 6th Avenue
Delray Beach, Fl. 33483
TO THE CONSOLIDATED SUBSIDIARY:
Vernon C. Kendrick, President
WAVEPOWER, INC.
75 N. E. 6th Avenue
Delray Beach, Fl. 33483
Copy to:
Sam Lindsey, President
ENTER TECH CORPORATION
430 E. 6th Street
Loveland, CO. 80537
TO THE COMPANY
Sam Lindsey, President
ENTER TECH CORPORATION
430 E. 6th Street
Loveland, CO. 80537
or to such other address or to such other person as any party shall designate to
the other for such purpose in the manner hereinafter set forth. The Parties
acknowledge that Jay C. Salyer, Jr., Esq., who serves as legal counsel to Vernon
C. Kendrick, has acted as scribner for the Parties in this transaction and that
because of the inherent conflict of interests involved, it has advised the
Company to retain independent counsel to review this Agreement on its behalf.
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5.2 AMENDMENT.
NO modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by the Party
against which the enforcement of said modification, waiver, amendment, discharge
or change is sought.
5.3 MERGER.
This instrument contains all of the understandings and agreements of
the Parties with respect to the subject matter discussed herein. All prior
agreements whether written or oral, are merged herein and shall be of no force
or effect.
5.4 SURVIVAL.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 SEVERABILITY.
If any provision or any portion of any provision of this Agreement, or
the application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 GOVERNING LAW AND VENUE.
This Agreement shall be construed in accordance with the laws of the
State of Florida and any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in a forum selected by the Company within the State of Florida
5.7 LITIGATION.
In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the prevailing Party
shall be entitled to recover its costs and expenses, including reasonable
attorneys' fees up to and including all negotiations, trials and appeals,
whether or not litigation is initiated.
================================================================================
PLEASE INITIAL: CORPORATION:______ PRESIDENT:______
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<PAGE> 12
5.8 BENEFIT OF AGREEMENT.
This Agreement may not be assigned by either Party without the prior
written consent of the other. Subject to the restrictions on transferability and
assignment contained herein, the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the Parties, their successors, assigns,
personal representative, estate, heirs and legatees.
5.9 CAPTIONS.
The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
5.1 0 NUMBER AND GENDER.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.11 FURTHER ASSURANCES.
The Parties hereby agree to do, execute, acknowledge and deliver or
cause to be done, executed or acknowledged or delivered and to perform all such
acts and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 STATUS.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee.
5.13 COUNTERPARTS.
This Agreement may be executed in any number of counterparts. All
executed counterparts shall constitute one Agreement notwithstanding that all
signatories are not signatories to the original or the same counterpart.
================================================================================
PLEASE INITIAL: CORPORATION:______ PRESIDENT:______
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<PAGE> 13
5.14 LICENSE.
This Agreement is the property of Jay C. Salyer, Jr., Esq. The use
hereof by the Parties is authorized hereby solely for purposes of this
transaction and, the use of this form of agreement or of any derivation thereof
without Jay C. Salyer, Jr., Esq.'s prior written permission is prohibited.
* * *
================================================================================
PLEASE INITIAL: CORPORATION:______ PRESIDENT:______
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CO_DOCS_A #62620 V1 WORD97
<PAGE> 14
IN WITNESS WHEREOF, the Parties have executed this Agreement, effective
as of the ________ day of April, 2000.
Signed, Sealed & Delivered
In Our Presence
ENTER TECH CORPORATION
- --------------------------------
- --------------------------------
By: /S/ SAM LINDSEY
-------------------------
Sam Lindsey, President
(CORPORATE SEAL) Attest:
---------------------
Secretary
WAVEPOWER, INC.
- --------------------------------
- --------------------------------
By: /S/ VERNON C. KENDRICK
-------------------------
Vernon C. Kendrick, President
(CORPORATE SEAL) Attest:
---------------------
Secretary
PRESIDENT
- --------------------------------
________________________________ /S/ VERNON C. KENDRICK
----------------------------
Vernon C. Kendrick
================================================================================
PLEASE INITIAL: CORPORATION:______ PRESIDENT:______
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CO_DOCS_A #62620 V1 WORD97
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF OPERATIONS FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM
10-QSB FOR THE YEAR TO DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,011
<PP&E> 8,192
<DEPRECIATION> (1,229)
<TOTAL-ASSETS> 72,489
<CURRENT-LIABILITIES> 609,471
<BONDS> 0
0
0
<COMMON> 778
<OTHER-SE> (537,760)
<TOTAL-LIABILITY-AND-EQUITY> 72,489
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 96,342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (96,342)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
