<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 For the Period Ended March 31, 1998.
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Transition Period From
________________to_______________.
Commission file number 333-25937
DIDAX INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 54-1831588
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4501 Daly Dr., Suite 103
Chantilly, VA 20151
(Address of Principal Executive Offices)
(703-968-4808)
(Issuer's Telephone Number, Including Area Code)
Not applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes [X] No [ ]
Applicable Only to Corporate Issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date:
Common Stock, $ .01 Par Value: 3,651,630 shares outstanding as of March 31, 1998
Transitional Small Business Disclosure Format (check 0ne):
Yes [ ] No [X]
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INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets--March 31, 1998 3
Statements of Operations--Three Months Ended March 31, 1997 and
1998, and May 12, 1993 to March 31, 1998 Cumulative from
Inception 4
Statements of Cash Flows--Three Months Ended March 31, 1997 and
1998, and May 12, 1993 to March 31, 1998 Cumulative from
Inception 5
Notes to Financial Statements--March 31, 1998 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
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DIDAX INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,802,845
Accounts receivable including unbilled of $38,573 71,577
Prepaid expenses 10,492
Deferred costs 2,250
------------
Total current assets 4,887,164
PROPERTY AND EQUIPMENT, net 224,524
OTHER ASSETS:
Notes receivable from officers 93,000
------------
Total other assets 93,000
------------
$ 5,204,688
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 82,230
Accounts payable 184,533
Accrued liabilities 190,124
Deferred revenue 6,460
------------
Total current liabilities 463,347
OTHER LIABILITIES:
Accounts payable 33,421
COMMITMENTS AND CONTINGENCIES --
COMMON STOCK SUBJECT TO POSSIBLE RECISSION
$.01 par value, 21,250 shares issued and outstanding 85,000
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 20,000,000 shares
authorized; 3,651,630 shares issued and
outstanding at March 31, 1998 36,516
Common stock warrants 666,722
Additional paid-in capital 12,447,652
Deficit accumulated during development stage (8,527,970)
------------
Total stockholders' equity 4,622,920
------------
$ 5,204,688
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
DIDAX INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Cumulative
For the Three Months from Inception
Ended March 31, (May 12, 1993)
------------------------------- to March
1997 1998 31, 1998
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES:
Consulting services $ 67,837 $ 45,881 $ 446,994
Internet access 23,438 2,072 111,983
Retail sales 3,342 26,120 101,584
Advertising sales -- 15,730 32,606
----------- ----------- -----------
Total operating revenues 94,617 89,803 693,167
OPERATING EXPENSES:
Cost of goods and services 45,485 39,401 506,506
Product development 122,038 78,900 1,429,050
CCN operations 116,743 157,622 915,327
Sales and marketing 92,528 249,626 2,322,605
General and administrative 192,648 372,354 2,292,823
----------- ----------- -----------
Total operating expenses 569,442 897,903 7,466,311
----------- ----------- -----------
LOSS FROM OPERATIONS (474,825) (808,100) (6,773,144)
OTHER INCOME (EXPENSES):
Interest income 9,289 58,132 164,042
Gain on exchange of assets -- -- 3,091
Miscellaneous income 113 -- 1,399
Interest expense (44,708) (1,752) (1,923,358)
----------- ----------- -----------
Total other income (expenses) (35,306) 56,380 (1,754,826)
----------- ----------- -----------
NET LOSS $ (510,131) $ (751,720) $(8,527,970)
=========== =========== ===========
Net loss per common share (basic) $ (0.76) $ (0.24)
=========== ===========
Weighted average number of common
shares outstanding 674,997 3,169,953
=========== ===========
Net loss per common share (diluted) $ (0.76) $ (0.24)
=========== ===========
Weighted average number of common shares and
common share equivalents outstanding 674,997 3,169,953
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
DIDAX INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Cumulative
For the Three Months from Inception
Ended March 31, (May 12, 1993)
--------------------------------- to March
1997 1998 31, 1998
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (510,131) $ (751,720) $ (8,527,970)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 29,809 24,917 331,603
Amortization of debt discount charged
to interest expense 27,797 -- 127,660
Common stock issued in lieu of cash for
professional services -- -- 36,062
Common stock donated -- -- 200,000
Common stock issued in lieu of cash for
interest on repayment of long term debt -- -- 1,700,000
Changes in assets and liabilities affecting operations:
Accounts receivable (42,920) 20,649 (71,577)
Advances due from officer -- -- (93,000)
Prepaid expenses 10,800 6,623 (10,492)
Accounts payable (182,915) 145,389 217,954
Accrued liabilities 52,652 34,135 190,124
Deferred revenue (1,526) (9,558) 6,460
------------ ------------ ------------
Net cash used by operating activities: (616,434) (529,565) (5,893,176)
------------ ------------ ------------
CASH FLOWS FOR INVESTING ACTIVITIES:
Purchases of property and equipment (3,140) (108,041) (410,305)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from short-term debt 1,564,241 -- 1,564,241
Proceeds from long-term debt 37,230 -- 82,230
Proceeds from short-term debt, officer and director -- -- 873,000
Proceeds from advances due to officer and director -- -- 242,000
Repayment of short-term debt -- -- (1,700,000)
Repayment of advances due to officer and director (212,000) -- (242,000)
Repayment of short-term debt, officer and director -- -- (873,000)
Net proceeds from issuance of common stock -- (2,125) 11,172,159
Deferred costs (4,677) (1,205) (12,304)
------------ ------------ ------------
Net cash provided (used) by financing activities 1,384,794 (3,330) 11,106,326
------------ ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 765,220 (640,936) 4,802,845
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 51,126 5,443,781 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 816,346 $ 4,802,845 $ 4,802,845
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Interest paid $ 2,238 $ -- $ 83,038
============ ============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common Stock totaling $2,000 was issued in 1995 in settlement of a loan
from an officer.
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
A. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Certain items in the accompanying 1997 financial statements have been
reclassified to conform with the 1998 presentation. Operating results for the
three month period ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1998. For further
information, refer to the financial statements and footnotes thereto included in
DIDAX INC.'s 1997 Form 10-KSB.
B. THE COMPANY AND ACQUISITION
Prior to April 11, 1997, the accompanying financial statements include the
accounts of Didax On-Line, L.C. ("DIDAX ON-LINE"), a Virginia limited liability
company incorporated in Virginia on January 12, 1995, and Didax, Inc. an
S-Corporation ("DIDAX, Inc.") incorporated on May 12, 1993 in Virginia. The
assets and liabilities of DIDAX ON-LINE were previously held by DIDAX, Inc. The
net assets of DIDAX, Inc. were contributed to DIDAX ON-LINE in exchange for
366,193 membership units in DIDAX ON-LINE on January 12, 1995. The members of
DIDAX ON-LINE and the stockholders of DIDAX, Inc. voted to merge into DIDAX
INC., a Delaware corporation ("DIDAX" or "the Company") which was effective on
April 11, 1997. Under the terms of this merger, the Company, among other
things, issued a total of 1,160,376 shares of its Common Stock, representing
100% of its outstanding Common Stock subsequent to the Merger. All references
to number of shares, per share amounts, stock option data, and market prices of
Common Stock for the quarter ended March 31, 1997, were restated to reflect the
merger. The Company's business includes the development of computer
communications and information services specifically designed to meet the needs
of Christian users of the Internet and World Wide Web.
On February 18, 1998, DIDAX purchased all of the outstanding shares of
gofishnet.com, inc. for 130,292 shares of the Company's common stock.
gofishnet.com, inc. ("gofishnet"), an Internet retailer of Christian music and
videos, operates as a wholly owned subsidiary of the Company. The Company
accounted for the merger as a pooling of interests based on the guidelines
described in Accounting Principles Board No. 16, "Business Combinations".
Accordingly, the financial statements presented for the three months ended March
31, 1998 and 1997, respectively are presented on a consolidated basis. For the
three months ended March 31, 1997, gofishnet earned revenues of $1,881 and
incurred a net loss of $39,553.
The Company intends to increase expenditures in connection with marketing and
product development activities. The Company anticipates that losses will
continue until such time as the Company is able to build an effective marketing
and sales organization, and achieve market acceptance of its products and
services.
C. SHORT-TERM DEBT
In the first quarter of 1997, gofishnet borrowed $37,230 at an interest rate of
7% from a former principal. gofishnet borrowed an additional $45,000 at an
interest rate of 10% from the same source during the third and fourth quarters
of 1997. The Company recognized $1,752 and $382 interest expense for the three
months ended March 31, 1998 and 1997, respectively in connection with these
notes. Both notes were due and repaid in full on April 1, 1998.
D. RELATED PARTY TRANSACTIONS
To enhance process and achieve product efficiencies, the Company hired Corporate
Resource Development, Inc. ("CRD") in February 1998, for consulting services
commencing in March 1998 on a month to month basis,
<PAGE> 7
cancelable within 30 days of notice from the firm in the month following such
notice. Max Carey, a member of DIDAX's board of directors, is CRD's Vice
Chairman.
E. NET LOSS PER COMMON SHARE
The following is a reconciliation of the basic and diluted earnings per share
("EPS") calculations for the periods presented:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------
1997 1998
---- ----
<S> <C> <C>
Net loss (numerator) $ (510,131) $ (751,720)
Weighted average shares (denominator) 674,997 3,169,953
Basic net loss per share $ (0.76) $ (0.24)
========== ==========
Dilutive shares (denominator) 674,997 3,169,953
Diluted net loss per share $ (0.76) $ (0.24)
========== ==========
</TABLE>
As required by Securities and Exchange Commission (SEC) Staff Accounting
Bulletin No. 98, the above calculation of EPS is based on Statement of Financial
Accounting Standards No. 128 "Earnings Per Share," for both quarters ended March
31, 1998 and 1997. Thus, 55,414 and 50,962 stock options and purchase warrants
granted at below market prices outstanding in the quarters ended March 31, 1998
and 1997, respectively, are not included in the calculation of diluted EPS as
their inclusion would be antidilutive. Therefore, EPS for the period ending
March 31, 1997 is restated to reflect the aforementioned SEC pronouncement and
the merger with gofishnet.
F. CHANGE IN SENIOR MANAGEMENT
Pursuant to an Employment Agreement between William M. Parker and the Company
dated March 23, 1998, Mr. Parker has been appointed as the Company's Chief
Executive Officer ("CEO") and President, effective April 14, 1998, replacing Dr.
Robert C. Varney, who has agreed to continue to serve on the Company's Board of
Directors as Vice Chairman. Mr. Parker will also serve as a member of the
Company's Board of Directors.
In March 1998, the Company entered into revised employment agreements with Dane
B. West, William H. Bowers, and Gary A. Struzik, which supersede the employment
agreements dated June 1997. The changes consisted of reducing severance pay from
eighteen to six months, identification of performance thresholds for salary
increases, a change in the vesting schedule of performance based stock options
to match that of CEO and President, William M. Parker, and to duly execute
noncompetition and proprietary information agreements. In addition, pursuant to
termination, the named executives are now only eligible for severance pay
benefits as noted above, without regard to reason, whereas the prior employment
agreements stipulated various actions depending on the circumstances surrounding
termination.
G. COMMITMENTS AND CONTINGENCIES
SECURITIES
In 1996, the Company became aware that certain prior private placements may be
deemed not to have been properly exempted from registration under federal and/or
state law. This may give rise to the opportunity for certain stockholders and
members to exercise recission rights, if any, related to their investment in the
Company. The Company believes there may be valid legal defenses to any and/or
all such recission actions, if initiated. The potential of inadvertent exemption
violations was communicated to the investors concerned in August of 1996 and in
writing in December 1996. As of March 20, 1998, all but 21,250 shares of common
stock subject to recission are beyond the statue of limitations under Section 13
of the Securities Act of 1933 and Section 10b-5 of the Securities Exchange Act
of 1934 along with the Securities Law of State jurisdictions, which the Company
uses as a reasonable
<PAGE> 8
basis for establishing the potential exposure. In December 1998, these remaining
21,250 shares of common stock subject to recission will be beyond the statute of
limitations. Thus, common stock at par and paid in capital will increase at that
time by $213 and $84,787, respectively.
H. SUBSEQUENT EVENTS
STOCK OPTION PLAN
In April 1998, the Board of Directors resolved to amend the 1997 Stock Option
Plan. The substance of this change was to amend the actual administration of the
plan by making all options subject to the approval of the Board of Directors,
and in the case of a merger or a similar reorganization that the Company does
not survive, to cause only non vested stock options to be subject to termination
should the surviving entity not assume the obligation of all granted options.
RELATED PARTY TRANSACTIONS
The Company has tendered notice to terminate the aforementioned consulting
agreement with CRD, effective May 31, 1998.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
BACKGROUND
DIDAX INC. ("the Company") is the creator and builder of the Christian Community
Network(TM) (CCN) (www.christcom.net), an interactive website which provides
information and resources that the Company believes generally appeals to the
Christian community. The information and resources are developed and made
available both by the Company and by Christian and secular retailers,
publishers, charities and ministries. To date, the Company has derived most of
its revenues from providing Consulting Services, defined as Internet development
and hosting, to Christian organizations, such as Promise Keepers, a nonprofit
Christian ministry (PK Net, www.promisekeepers.org); Christianity Today, Inc., a
publisher of Christian periodicals (www.christianity.net); and World Vision, an
international Christian relief agency (www.worldvision.org). The Company's
website services and development clients also include Mercy Medical Airlift,
Christian Management Association, Worship Media Resources, the Salvation Army,
Evangelical Council for Financial Accountability (ECFA), Young Life and
Presbyterian Church in America.
In the fourth quarter of 1997, the Company used the opportunity afforded by its
initial public offering (IPO) to begin transitioning from being a client-based
web services provider to being a consumer-based developer of Internet
communities. It is the Company's opinion that Internet commerce will
increasingly flow towards communities that are able to aggregate large numbers
of individual consumers with similar interests and characteristics. The
Christian market is a prime example of this type of community, and demographic
studies of online Christians indicate their desirability to the advertisers and
online retail businesses that currently generate the majority of Internet
revenues. The Company generally believes that there is a relationship between
the size of a given online community and its ability to generate advertising and
retail revenues and is focused on substantially increasing the size of its
current membership base and visitor traffic. At present, the Company is
positioned to generate the majority of its revenues through: the sale of
advertising and sponsorship opportunities on CCN; direct retail sales and
royalties/fees from the sale of Christian interest products manufactured or
developed by others (primarily books, CDs, and other articles generally
appealing to the Christian marketplace); membership and/or purchase-driven fees
from online promotional partners (currently ranging from retailers to affinity
buying clubs); and to a much lesser extent, the continuing provision of Internet
services to Christian and nonprofit organizational clients.
The effectiveness of its transition to being a community builder is evidenced by
the relatively stable level of revenues earned by the Company in the first
quarter of 1998 as compared to the same period in 1997, despite a shift in the
composition of revenue. Thus the decline in web consulting services revenues was
largely offset by the Company's new revenue streams (advertising, affinity
memberships, and retail sales). Additionally, the Company's progress in
developing the CCN community is evidenced by the growth in membership, site
visits, and advertising impressions as well as substantive recognition from
external sources such as USA Today and several Website rating services,
including The Mining Company (www.theminingco.com) and Best of the Christian Web
(www.botcw.org). Membership on CCN is free and simply requires filling out an
online registration form with one's name, e-mail address, and limited
demographic data. A visit is the number of times a sequence of pages has been
viewed in succession by a single user without leaving the CCN site. An
advertising (ad) impression is the display of one of several types of ads on a
given page seen during the course of a visit. At March 31, 1998, the company had
26,469 members as compared to 3,829 members at March 31, 1997, an annual growth
rate of 591%. Visits increased 340% from a monthly average of 32,000 visits per
month in the quarter ended March 31,1997 to an average of 141,000 visits per
month in the quarter ended March 31, 1998. During the same period, ad
impressions grew 1,076% from a monthly average of 128,000 to a monthly average
of 1,506,000. To the extent visits continue to increase on the CCN site and the
Company continues to place advertisements on CCN for which it receives a fee,
advertising revenues from CCN should increase. The opportunity for the Company
to begin generating significant advertising and retail revenues is predicated
upon increasing the membership and site visits to CCN. Until critical mass is
achieved in pursuing this consumer oriented business model, work effort shifted
from client services activities may have an adverse effect on overall revenue.
In the first quarter of 1998, the Company completed the purchase of
gofishnet.com, inc. ("gofishnet"), released several new products, and enhanced
several of its existing products. The combination of these community building
<PAGE> 10
activities has been instrumental in realizing this increased traffic pattern.
Gofishnet, an Internet retailer of Christian music and videos, was acquired on
February 18, 1998. The acquisition was accounted for as a pooling of interests
and gofishnet operates as a wholly owned subsidiary of DIDAX INC. Through the
expansion of its services, the marketing of those services, and its presence on
CCN, gofishnet experienced a retail sales (music and videos) revenue growth of
1,025% from $1,881 for the first quarter of 1997 to $21,153 for the first
quarter of 1998. Additional new offerings to CCN members and visitors included
direct access to Net.Market (an Internet based discount buying club),
Auto-by-Tel (an automobile buying service), and The Flower Club (an online
flower retailer). The Company receives purchase royalties and/or referral fees
from these businesses that complement similar arrangements already in place with
Amazon.com (an online book and music retailer) and Promise Keepers (a nonprofit
ministry selling a range of books, music and clothing items). The Company also
began offering free Web-based e-mail to CCN members through a revenue sharing
agreement with WhoWhere? The agreement provides CCN with a percentage of the
advertising revenue sold by WhoWhere? on the e-mail service and also allows CCN
to remarket the service - called CCNmail - to third party organizations whose
membership can benefit from the service and whose usage generates additional
revenue sharing opportunities for CCN and the third party organization. The
Company invested significant resources to improve site content via the
Brotherhood(TM) Channel (provides information and interaction opportunities for
Christian men), CCN Forums (an interactive medium for the continuing discussion
of topics of interest to CCN members), and the launch of CCN Events, the most
comprehensive local Christian events database on the Internet. To support the
growing interest in these services, the Company invested in technology
infrastructure - primarily server speed and capacity - to enable more visitors
to get involved. Indications of favorable market acceptance include: the "1997
Christian Web Site of the Year" award given to CCN by Best of the Christian Web,
an Internet watchdog and advisory service for the online Christian community; a
"Hot Site" award by USA Today; the "#1 Christian Music Website" award given to
CCN Events by The Mining Company in recognition of its expansive local concert
and events information; and the "#2 Christian Music Website" award given to
gofishnet.com by The Mining Company in recognition of its broad content, unique
features, and product selection. The Company plans to continue enhancing CCN for
years to come in order to become the preferred online resource for Christians in
search of information, interaction and involvement opportunities that help them
apply a Christian world view across the breadth of their life and interests.
The Company has an extremely limited operating history upon which an evaluation
of the Company and its business can be based. The Company's business must be
considered in light of the risks, expenses and problems frequently encountered
by companies in their early stage of development, particularly companies in new
and rapidly evolving markets, such as the Internet. The market for the Company's
services and products has only very recently begun to develop, is rapidly
evolving and is characterized by an increasing number of market entrants who
have introduced or developed services and products for use on the Internet. As a
result, the Company's mix of services and products may undergo substantial
changes as the Company reacts to competitive and other developments in the
overall Internet market. The Company has achieved only limited revenues to date,
has incurred net losses since inception and expects to continue to operate at a
loss until sufficient revenues are generated to cover expenses. As of March 31,
1998, the Company had an accumulated deficit of approximately $8,528,000.
As a result of the Company's extremely limited operating history, the Company
has no meaningful historical financial data upon which to base future operating
expenses. Accordingly, the Company's expense levels are based in part on
possible future revenues, of which there can be no assurance. A shortfall in
revenues would have an immediate adverse impact on the Company's business,
results of operations and financial condition. The Company has just recently
begun to generate revenue from the commercial sale of advertising space on CCN
and very limited sales of products via CCN. The Company plans to significantly
increase its sales and marketing efforts, and fund greater levels of product
development. The Company expects to experience significant fluctuations in
future quarterly operating results and believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as any indication of future performance.
<PAGE> 11
RESULTS OF OPERATIONS
THE QUARTER ENDED MARCH 31, 1998 AND 1997
NET LOSS
For the quarter ended March 31, 1998, the Company incurred a net loss of
$751,720 as compared to a net loss of $510,131 for the same period ended March
31, 1997. This increased loss of $241,589 (47%) was due primarily to an increase
in Company expenditures, the details of which follow. The loss increase
consisted of a $333,276 increase in the Loss from Operations for the quarter
ended March 31, 1998 ($808,100) as compared to the quarter ended March 31, 1997
($474,825), offset by a $91,686 increase in Other Income. Other Income increased
as a result of a $48,843 increase in interest income and a $42,956 decrease in
interest expense.
REVENUES
In the quarters ended March 31, 1998 and 1997, the Company earned $89,803 and
$94,617 of revenue, respectively. Of the revenue recognized during the quarter
ended March 31, 1998, $45,881 was generated from Consulting Services, $2,072
from Internet Access, $26,120 from Retail Sales, and $15,730 from Advertising.
This compares to $67,837 of Consulting Service revenue, $23,438 of Internet
Access revenue, $3,342 of Retail Sales revenue and $0 of Advertising revenue for
the comparable period in 1997. Internet access revenue decreased by $21,366
(91%) because DIDAX recorded a one-time adjustment in the first quarter of 1997.
This adjustment was to reflect a change in DIDAX's agreement with IBM as to the
method of measuring Internet access revenues. Additionally, the Company
discontinued actively marketing Internet access in the end of 1996. The $21,956
(32%) decrease in Consulting Service revenue is due to DIDAX's transition from
being a web consulting services provider to being a community builder, as
previously described, which is indicative of the 682% increase in retail sales
and the posting of advertising revenue unrealized in the first quarter of 1997.
With continued growth in site traffic, service enhancements, and marketing
resources dedicated to retail and advertising revenue opportunities, the Company
hopes to achieve continued progress in these revenue streams.
COST OF REVENUES
Cost of Goods and Services, consisting primarily (62%) of costs related to
development, maintenance and support of customer websites, was $39,401 and
$45,485 for the quarters ended March 31, 1998 and 1997, respectively. The result
of this was a gross margin improvement to 56% from 52% for the quarters ended
March 31, 1998 and 1997, respectively. However, taking the one time favorable
revenue adjustment in the first quarter of 1997 into account, operationally this
increase is really from 41% instead of 52% gross margin. This trend establishes
the very reason the Company is quickly, yet carefully, continuing to transition
to higher leverage retail and advertising revenue streams. To the extent that
the Company is able to continue to grow these high margin revenues, cost of
sales should continue to decrease as a percentage of revenue. However, there can
be no guarantee that this will occur due to the volatile nature of the Internet
industry.
PRODUCT DEVELOPMENT AND CCN OPERATIONS
Product Development expenses decreased by $43,138 (35%) primarily because of a
decrease in salary expenses. There was one less employee in the department in
the first quarter of 1998 as compared to the same period in 1997. CCN Operations
expenses, consisting primarily of costs related to the Company's maintenance and
enhancements for CCN, increased to $157,622 for the quarter ended March 31,
1998, as compared to $116,743 for the same period in 1997. The cost of CCN
Operations increased by 35% because a smaller portion of salary expense was
charged to cost of sales due to the decrease in web consulting revenues. In
addition, there was an across the board wage increase in September 1997.
<PAGE> 12
SALES AND MARKETING
Seeking to improve market recognition of CCN and to thus increase the Company's
retail and advertising sales, the Company invested $157,098 (170%) more in the
first quarter of 1998 as compared to the same period in 1997. This amounts to a
total expense of $249,626 and $92,528 for the quarters ended March 31, 1998 and
1997, respectively. This increased investment consisted of increases in
staffing, wages, and promotional expense. DIDAX's promotional efforts include
magazine and Internet advertisements and the use of promotional giveaway
materials to expand market awareness. The Company believes that it will continue
to incur substantial technical and marketing expenses as it seeks to expand the
market for CCN.
GENERAL AND ADMINISTRATIVE
The Company increased its general & administrative (G&A) costs by 93% or
$179,706 in the first quarter of 1998 versus the same quarter in 1997 mostly in
response to the requirements of being a publicly held firm. In addition, the
acquisition of gofishnet made up $32,739 of this increase in cost. In order to
address the Company's requirement to improve the operational processes necessary
to under gird CCN growth, the Company invested over $40,000 in management
consulting services. Lastly, salary expenses increased in the first quarter of
1998 as salary abatements due to funding constraints were discontinued at the
end of 1997.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased 526% to $58,132 from $9,289 for the quarters ended
March 31, 1998 and 1997, respectively. This $48,843 increase is due to the
investment of the proceeds from the Company's IPO.
Interest expense was $1,752 and $44,708 for the quarters ended March 31, 1998
and 1997, respectively. The decrease in interest expense is due to the repayment
in October 1997 of $623,000 of interest bearing notes issued in 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the quarters ended March 31, 1998 and 1997, net cash used in operating
activities was $529,565 and $616,434, respectively. Net cash used in investment
activities was $108,041 and $3,140 in the quarters ended March 31, 1998 and
1997, respectively as the Company began to purchase the technology tools
necessary to support the traffic growth on CCN.
Net cash (used) provided by financing activities was $(3,330) and $1,384,794 for
the quarters ended March 31, 1998 and 1997, respectively. In the first quarter
of 1997, the Company issued $1,700,000 of short term debt and $37,230 of long
term debt. Offering costs for the $1,700,000 short term debt were $135,759,
netting $1,564,241 of proceeds, $212,000 of which was used to repay director
advances made in 1996. Liquidation of the $1,700,000 short term debt occurred in
October 1997.
The Company currently anticipates that its $4,423,817 working capital balance at
March 31, 1998, consisting primarily of remaining proceeds from the Company's
initial public offering after the debt liquidation and liquidation of accrued
offering costs, will be sufficient to meet the Company's anticipated working
capital, lease commitments, and capital expenditure requirements for the next
eighteen months. However, the Company anticipates that it may seek to raise
additional funds in order to pursue acquisitions, or in the event that the
Company's estimates of operating losses and capital requirements change or prove
inaccurate or in order that the Company may respond to increased demand or to
take advantage of other unanticipated opportunities. There can be no assurance
that additional financing will be available to the Company or that such
financing will be available on acceptable terms.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
As a result of the Company's extremely limited operating history and the rapid
technological change experienced in the Internet industry generally, the Company
has no meaningful historical financial data upon which to base future
<PAGE> 13
operating expenses. Accordingly, the Company's expense levels are based in part
on its expectations as to future revenues, of which there can be no assurance.
There can be no assurance that the Company will be able to accurately predict
the levels of future revenues, if any, and the failure to do so would have a
materially adverse effect on the Company's business, results of operations and
financial condition.
The Company generated most of its revenue in the first quarters of 1998
and 1997 from web development consulting services. While generating $67,837 in
revenue from consulting services in the first quarter of 1997, the Company was
resource limited in its ability to expand its core business of developing CCN to
a point of generating highly leveragable advertising and retail revenues from
its members and visitors which amounted, in this early stage, to $41,850 in the
first quarter of 1998. Now that the Company has the resources to be fully
focused on the development of CCN, the Company is offering consulting services
to a lesser extent, concentrating on the high leverage opportunities that
escalating growth in consumer interest in CCN are expected to provide. This
transition is expected to cause significant fluctuations in near term future
quarterly operating results.
The Company expects to experience significant fluctuations in future
quarterly operating results that may be caused by other factors as well. Causes
of such significant fluctuations may include, among other factors, demand for
the Company's services, the number, timing and significance of new service
announcements by the Company and its competitors, the ability of the Company to
develop, market and introduce new and enhanced versions of its services on a
timely basis, the level of product and price competition, changes in operating
expenses, changes in service mix, changes in the Company's sales incentive
strategy, and general economic factors.
The Company's operating expense levels are based, in significant part,
on the Company's expectations of future revenue on a quarterly basis. If actual
revenue levels on a quarterly basis are below management's expectations, both
gross margins and results of operations are likely to be adversely affected
because a relatively small amount of the Company's costs and expenses varies
with its revenue in the short term.
FORWARD LOOKING STATEMENTS
Certain information in this quarterly report on Form 10-QSB may contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact are forward-looking statements for purposes of these provisions,
including any projections of earnings, revenues or other financial items, any
statements of the plans and objectives of management for future operations, any
statements concerning proposed new products or services, any statements
regarding future economic conditions or performance, and any statement of
assumptions underlying any of the foregoing. In some cases, forward-looking
statements can be identified by the use of terminology such as "may," "expects,"
"believes," "plans," "anticipates," "estimates," "potential," or "continue," or
the negative thereof or other comparable terminology. Although the Company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements.
<PAGE> 14
ITEM 6. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
4.5A Form of Stock Option Agreement as amended April 6, 1998
10.3A 1997 Stock Option Plan as amended April 6, 1998
10.19A Employment Agreement between the Registrant and Dane West dated
as of March 23, 1998
10.20A Employment Agreement between the Registrant and William Bowers
dated as of March 23, 1998
10.21A Employment Agreement between the Registrant and Gary Struzik
dated as of March 23, 1998
10.36 Form of Noncompetition and Proprietary Information Agreement
between the Registrant and Messrs. Bowers, West, Parker, and
Struzik dated as of March 23, 1998
11 Computation of Earnings Per Share
27.1 Financial Data Schedule - Restatement of the Quarter Ended
March 31, 1997
27.2 Financial Data Schedule - For the Quarter Ended March 31, 1998
(b) Reports on Form 8-K
The Company filed no Reports on Form 8-K during the three months ended March 31,
1998.
<PAGE> 15
SIGNATURES
In accordance with the requirements of Securities Act of 1934, DIDAX
INC., the registrant, has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIDAX INC.
May 15, 1998 By: /s/ William M. Parker
---------------------
William M. Parker
Chief Executive Officer and President
May 15, 1998 By: /s/ Gary A. Struzik
-------------------
Gary A. Struzik, Chief Financial Officer and
Secretary, Chief Accounting Officer
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
4.5A Form of Stock Option Agreement as amended April 6, 1998 1-2
10.3A 1997 Stock Option Plan as amended April 6, 1998 1-8
10.19A Employment Agreement between the Registrant and Dane West dated as of 1-4
March 23, 1998
10.20A Employment Agreement between the Registrant and William Bowers dated 1-4
as of March 23, 1998
10.21A Employment Agreement between the Registrant and Gary Struzik dated as 1-4
of March 23, 1998
10.36 Form of Noncompetition and Proprietary Information Agreement between 1-3
the Registrant and Messrs. Bowers, West, Parker, and Struzik dated as of
March 23, 1998
11 Computation of Earnings Per Share 1-2
27.1 Financial Data Schedule - Restatement of the Quarter Ended March 31, 1997 1
27.2 Financial Data Schedule - For the Quarter Ended March 31, 1998 1
</TABLE>
<PAGE> 1
Exhibit 4.5A
DIDAX INC.
STOCK OPTION AGREEMENT
For value received, and subject to all the provisions hereof and to all of the
terms and conditions of the 1997 Stock Option Plan ("The Plan"), as amended
April 6, 1998, incorporated by this reference herein, DIDAX INC., a Delaware
corporation (the "Company"), hereby grants to the Optionee named below (the
"Optionee") a Non-Qualified Stock Option ("option") to purchase shares of its
Common Stock, par value $.01 per share (the "Common Stock"), at the option price
set forth as follows:
Optionee ________________________
Number of shares of Common Stock
as to which the option is granted ________________________
Option Price per Share of Common Stock ________________________
Date of option grant ________________________
Expiration of option ________________________
Date of Exercise:
Number of shares of Common Stock and dates exercisable under the option as
determined by the Compensation Committee or the Board of Directors are as
follows:
__________shares commencing________________________
1. Relationship to Plan: This option is granted pursuant to the Company's 1997
Stock Option Plan effective April 11, 1997, as amended April 6, 1998, and is in
all respects subject to the terms, conditions and definitions of the Plan
(including, but not limited to, provisions concerning exercise, restrictions on
options, termination, nontransferability and adjustment of the number of shares
subject to this option and the exercise price thereof). The Optionee hereby
accepts this option subject to all the terms and provisions of the Plan. The
Optionee further agrees that all decisions under and interpretations of the Plan
by the Board of Directors (the "Board") or the Compensation Committee (the
"Committee") established under the Plan shall be final, binding and conclusive
upon the Optionee and his or her heirs.
2. Time of Exercise. This option may be exercised on or after the Date of
Exercise from time to time in full or in part and shall remain exercisable
(subject to the provisions of the Plan) until the earlier of (i) the date as of
which the Optionee has exercised the option as to all shares subject hereto, or
(ii) the expiration of 10 years following the Option Date.
3. Methods of Exercise. This option shall be exercisable, in whole or in part,
by a written notice to the Company that specifies the date of grant of the
option being exercised, and the number of shares to be purchased. The notice
shall be accompanied by payment of the full amount of the option price by either
(i) cash or check payable to the Company, or (ii) by the delivery to the Company
of shares of the Company's stock having a value equal to the exercise price and
having been owned by the optionee for a minimum of six months. Upon receipt of
such payment, the Company will thereafter deliver or cause to be delivered to
the Optionee (or if any other individual or individuals are exercising this
option, to such individual or individuals) at the office of the Company, a
certificate or certificates for the number of shares with respect to which this
option is being exercised, registered in the name or names of the individual or
individuals exercising the option; provided, however, that if any law or
regulation or order of the Securities and Exchange Commission or other body
having jurisdiction in the premises shall require the Company or Optionee (or
other individual or individuals exercising this option) to take any action in
connection with the shares being purchased, the delivery of the certificate or
certificates for such shares shall be delayed until such action has been taken.
<PAGE> 2
4. Purchase For Investment. This option is granted on the condition that the
purchase of shares of Common Stock hereunder shall be for the account of the
Optionee (or other individual or individuals exercising this option) for
investment purposes and not with a view to the resale or distribution thereof,
except that such condition shall be inoperative if the offering and sale of
shares subject to the option is registered under the Securities Act of 1933, as
amended, or if in the opinion of counsel for the Company such shares may be
resold without registration. At the time of any exercise of the option, the
Optionee (or other individual or individuals exercising this option) will
execute such further agreements as the Company may require to implement the
foregoing condition and to acknowledge the Optionee's (or such other
individual's) familiarity with restrictions on the resale of the shares under
applicable securities laws.
5. Nontransferability of Option. Except as provided in Section 9(g) of the Plan,
options shall not be transferable by the Optionee otherwise than by will or the
laws of descent or distribution, and options shall be exercisable during the
Optionee's lifetime only by him or her.
6. Termination. Except as provided in the Plan, this option shall terminate and
may no longer be exercised if the Optionee ceases for any reason to be an
employee of the Company.
7. Governing Law and Interpretation. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. It shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives.
8. Miscellaneous. The Optionee shall have no rights as a stockholder with
respect to the shares subject to this option until the exercise of the option
and the issuance of a stock certificate for the shares with respect to which the
option shall have been exercised. Nothing herein contained shall impose any
obligation on the Company or the Optionee with respect to the Optionee's
employment by the Company. Nothing herein contained shall impose any obligation
upon the Optionee to exercise the option.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by its duly authorized representative and Optionee has accepted the
terms described herein and executes this Agreement in duplicate.
DIDAX INC.
By _____________________
Title __________________
OPTIONEE
________________________
Signature
________________________
Social Security Number
________________________________________________
Optionee Address
<PAGE> 1
Exhibit 10.3A
DIDAX INC.
1997 STOCK PLAN
As Amended April 6, 1998
1.PURPOSE. The purpose of this Plan is to advance the interests of DIDAX, INC.
(the "Company") by providing an opportunity to its selected key employees (as
defined in Paragraph 2(b)) and consultants (as defined in Paragraph 2(a)) to
purchase shares (the "Shares") of the Common Stock, par value $.01 per share
(the "Common Stock"), of the Company. By encouraging stock ownership, the
Company seeks to attract, retain and motivate key employees, consultants and
ministry partners. It is intended that this purpose will be effected by the
granting of (i) incentive stock options ("Incentive Options") as described in
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"); (ii)
nonqualified stock options ("Nonqualified Options," and, together with the
incentive options, the "Options") as provided herein; and (iii) rights to
purchase shares of Common Stock ("Restricted Stock") of the Company pursuant to
restricted stock agreements and subscription agreements as provided herein
("Purchase Rights" and collectively with the options, the "Stock Incentives").
2.DEFINITIONS.
(a) The term "consultants" means those persons, other than employees of
the Company, who provide services to the Company, including nonemployee
directors of the Company, and who are determined by the Compensation
Committee to be eligible for Stock Incentives under this Plan.
(b) The term "key employees" means those executive, administrative,
operational, engineering or managerial employees who are determined by the
Compensation Committee to be eligible for Stock Incentives under this
Plan.
(c) The term "ministry partners" means those organizations or individuals,
other than employees and consultants, whose relationship with DIDAX is
critical to meeting the Company's business objectives and who are
determined by the Compensation Committee to be eligible for stock
incentives under this plan.
(d) The term "optionee" means an individual to whom an option is granted
under this Plan.
(e) The term "grantee" means an individual to whom a purchase right is
granted under this Plan.
3. EFFECTIVE DATE. This Plan became effective April 11, 1997, as so adopted by
the Board of Directors of the Company.
4. STOCK SUBJECT TO THE PLAN. The Shares that may be purchased (through the
exercise of options or the purchase of Restricted Stock) under this Plan shall
not exceed in the aggregate 2,057,937 Shares. If any Stock Incentives granted
under the Plan shall terminate, expire or be cancelled as to any Shares, new
Stock Incentives may thereafter be granted covering such Shares. In addition,
any Shares purchased under this Plan subsequently repurchased by the Company
pursuant to the terms hereof may again be granted under the Plan. The Shares
issued upon exercise of Stock Incentives under this Plan may, in whole or in
part, be either authorized but unissued Shares or issued Shares reacquired by
the Company. Notwithstanding any other provisions of this Plan, the aggregate
number of Shares subject to outstanding options granted under the Plan, plus the
aggregate number of shares issued upon the exercise of all options granted under
the Plan, shall never be permitted to exceed the number of Shares specified in
the first sentence of section 4, except in accordance with subsection 8(a)
below.
Stock subject to the plan consists of options granted in prior years, which were
approved by the Board in the absence of a formal stock plan. They are now
therefore subject to this plan and are subject also to shareholder vote. They
consist of the following:
<PAGE> 2
(a) 34,000 Shares to Founders @$1.50 per share, granted in 1993.
(b) 38,500 Shares to consultants and employees, @$1.66 per share, granted
in 1994.
(c) 246,203 Shares granted to CEO, consultants, a director and employees
all @$2.00 per share, granted in 1995.
(d) 163,859 Shares to employees, including executives and a director,
granted @$3.00 and $4.00 per share in 1996.
(e) 25,000 Shares to a ministry partner @$4.00 per share granted in 1996.
(f) 77,875 Shares to subscribers in debt with warrants offering @$4.00 per
share. The offering closed October 30, 1996. Warrants continue to accrue as long
as the debt remains outstanding. Any amount granted above this amount is covered
by this plan.
(g) 712,500 Shares of an Incentive Option to the CFO and the directors at
9/27/96, the date of the Board Resolution reserving these shares. They are
issuable @$5.00 per share upon attaining various performance thresholds.
5. ADMINISTRATION. The Plan shall be administered by the Board of Directors of
the Company (the "Board"), or by a committee appointed by the Board which shall
not have less than two (2) members (in either case, the "Compensation
Committee"). No single participant may receive options to purchase more than the
total number of shares authorized for issuance under the 1997 Plan. The
Compensation Committee is tasked with the responsibility of administering the
1997 Plan grants as approved by the Board of Directors and the Compensation
Committee may delegate administrative duties to such employees of the Company as
it deems proper. The Board of Directors, or the Compensation Committee may grant
nonqualified stock options or incentive stock options with Board approval, to
purchase shares of Common Stock; provided that, if the Compensation Committee
does not consist entirely of non-employee directors, then grants of Options to
officers, directors, and 10% shareholders must be approved by the Board of
Directors as a whole. As such, the Board of Directors has authority:
(a) to determine to which of the eligible individuals, and the time or
times at which, options to purchase Common Stock of the Company shall be
granted;
(b) to determine the number of shares of Common Stock to be subject to
options granted to each eligible individual;
(c) to determine the price to be paid for the shares of Common Stock upon
the exercise of each option;
(d) to determine the term and the exercise schedule of each option;
(e) to determine the terms and conditions of each stock option agreement
(which need not be identical) entered into between the Company and any
eligible individual to whom the Board of Directors has granted an option;
(f) to interpret the Plan; and
(g) to make all determinations deemed necessary or advisable for the
administration of the Plan.
The Compensation Committee, if any, shall be appointed by and shall serve at the
pleasure of the Board of Directors of the Company. No member of the Compensation
Committee shall be liable for any action or determination made with respect to
the Plan.
<PAGE> 3
6. ELIGIBLE EMPLOYEES, CONSULTANTS AND MINISTRY PARTNERS. Incentive Options may
be granted to such key employees of the Company, including members of the Board
of Directors who are also employees of the Company, as are selected by the
Compensation Committee and approved by the Board of Directors. Nonqualified
Options and Purchase Rights may be granted to such key employees, consultants
and ministry partners, including members of the Board of Directors, as are
selected by the Compensation Committee and approved by the Board of Directors.
The term "employee" includes an officer or director who is an employee of the
Company or a parent or subsidiary of it, as well as a nonofficer, nondirector
employee of the Company or a parent or subsidiary or it.
7. DURATION OF THE PLAN. This Plan shall terminate ten (10) years from the
effective date of this Plan, unless terminated earlier pursuant to Paragraph 13
hereof, and no Stock Incentives may be granted after such termination.
8. RESTRICTIONS ON INCENTIVE OPTIONS. Incentive Options (but not Nonqualified
Options) granted under this Plan shall be subject to the following restrictions:
(a) Limitation on Number of Shares. The aggregate fair market value,
determined as of the date the Incentive Option is granted, of the Shares
with respect to which Incentive Options are exercisable for the first time
by an employee during any calendar year shall not exceed $100,000. If an
employee is eligible to participate in any other incentive stock option
plans of the Company which are also intended to comply with the provisions
of Section 422A of the Code, the applicable annual limitation shall apply
to the aggregate number of Shares for which Incentive Options may be
granted under all such plans. An Incentive Option may be granted which
exceeds the $100,000 limitation, as long as under then applicable law the
portion of such option which is exercisable for shares in excess of the
$100,000 limitation shall be treated as a nonqualified option. No
Incentive Options may be exercised until and unless the Plan is approved
by the shareholders within one year of the date hereof, such approval to
be expressed in any legal way under Delaware law.
(b) 10% Stockholder. If any employee to whom an Incentive Option is
granted pursuant to the provisions of the Plan is on the date of grant the
owner of stock (as determined under Section 425(d) of the Code) possessing
more than 10% of the total combined voting power of all classes of stock
of the Company (or of any parent or subsidiary of the Company), then the
following special provisions shall be applicable to the Incentive Option
granted to such individual:
(i) The option price per Share subject to such Incentive Option
shall not be less than 110% of the fair market value of one Share on
the date of grant; and
(ii) The Incentive Option shall not have a term in excess of five
(5) years from the date of grant.
In determining stock ownership, an Optionee shall be considered as
owning the voting capital stock owned, directly or indirectly, by or
for his brother and sisters, spouse, ancestors, and lineal
descendants. Voting capital stock owned, directly or indirectly, by
or for a corporation, partnership, estate or trust shall be
considered as being owned proportionately by or for its shareholders,
partners, or beneficiaries, as applicable. Common Stock with respect
to which any such Optionee holds an option shall not be counted.
Additionally, outstanding capital stock shall include all capital
stock actually issued and outstanding immediately after the grant of
the option to the optionee. Outstanding capital stock shall not
include capital stock authorized for issue under outstanding options
held by the Optionee or by any other person.
9. TERMS AND CONDITIONS OF OPTIONS. Incentive and Nonqualified Options granted
under this Plan shall be evidenced by stock option agreements in such form and
not inconsistent with the Plan as the Compensation Committee may recommend and
the Board of Directors shall approve from time to time, which agreements shall
evidence the following terms and conditions:
<PAGE> 4
(a) Price.
(i) Incentive Options. Subject to the condition of subparagraph
(b)(i) of Paragraph 8, if applicable, with respect to each Incentive
Option, the purchase price per Share payable upon the exercise of
each Incentive Option granted hereunder shall be recommended by the
Compensation Committee and approved by the Board of Directors and
shall be not less than 100% of the fair market value of one Share on
the day the option is granted.
(ii) Nonqualified Options. With respect to each Nonqualified Option,
the purchase price per Share payable upon the exercise of each
Nonqualified Option granted hereunder shall be recommended by the
Compensation Committee and approved by the Board of Directors at the
time the Nonqualified Option is granted, but shall not be less than
40% of fair market value at the time of grant.
(b) Number of Shares. Each option agreement shall specify the number of Shares
to which it pertains.
(c) Exercise. Subject to the conditions of subparagraphs (a) and (b) (ii) of
Paragraph 8, if applicable, each option shall be exercisable for the full amount
or for any part thereof and at such intervals or in such installments as the
Compensation Committee recommends and the Board of Directors may determine at
the time it grants such option; provided, however, that no option shall be
exercisable with respect to any Shares later than ten (10) years after the date
of the grant of such option.
(d) Notice of Exercise and Payment. An option shall be exercisable only by
delivery of a written notice to the Compensation Committee or the Board of
Directors, any member of the Compensation Committee or the Board of Directors,
the Company's Treasurer, or any other officer of the Company designated by the
Compensation Committee and approved by the Board of Directors to accept such
notices on its behalf, specifying the number of Shares for which it is
exercised. If such Shares are not at the time effectively registered under the
Securities Act of 1933, as amended, the Optionee shall include with such notice
a letter, in form and substance satisfactory to the Company confirming that such
Shares are being purchased for the optionee's own account for investment and not
with a view to the resale or distribution thereof. Payment shall be made in full
at the time of delivery to the optionee of a certificate or certificates
covering the number of Shares for which the option was exercised. Payment shall
be made (i) by cash or check, (ii) if permitted by the Compensation Committee
and approved by the Board of Directors, by delivery and assignment to the
Company of shares of the Company's stock having a fair market value (as
determined by the Compensation Committee) equal to the exercise price, (iii) if
permitted by the Compensation Committee and approved the Board of Directors, by
a promissory note, or (iv) by a combination of (i), (ii), and (iii). The value
of the shares of the Company's stock for such purpose shall be its fair market
value as of the date the option is exercised, as determined in accordance with
procedures to be established by the Compensation Committee and approved by the
Board of Directors.
(e) Withholding Taxes; Delivery of Shares. The Company's obligation to deliver
Shares upon exercise of a Nonqualified Option, in whole or in part, shall be
subject to the Optionee's satisfaction of all applicable federal, state, and
local income and employment tax withholding obligations. The Optionee may
satisfy the obligation, in whole or in part, by electing to have the Company
withhold Shares having a value equal to the amount required to be withheld. The
value of Shares to be withheld shall be based on the fair market value of the
Shares on the date the amount of tax to be withheld is to be determined. If
Common Stock acquired by exercise of an incentive stock option granted pursuant
to this Plan is disposed of within two (2) years from the date of grant of the
option or within one (1) year after the transfer of the Common Stock to the
optionee, the holder of the Common Stock immediately prior to the disposition
shall promptly
<PAGE> 5
notify the Company in writing of the date and terms of the disposition and
shall provide such other information regarding the disposition as the
Company may reasonably require.
(f) Nontransferability. No option shall be transferable by the Optionee
otherwise than by will or the laws of descent or distribution, and each
option shall be exercisable during his lifetime only by him (except as
otherwise provided for in subparagraph (g) below).
(g) Termination of Options. Each option shall terminate and may no longer
be exercised if the Optionee ceases for any reason to be an employee of,
or consultant to, or ministry partner with the Company, except that:
(i) if the Optionee's performance of services shall have terminated
for any reason other than cause, resignation or other voluntary
action before his eligibility to retire, disability (as defined
below) or death, he may at any time within a period of thirty (30)
days after such termination of the performance of services exercise
his option to the extent that the option was exercisable by him on
the date of termination of his performance of services;
(ii) if the Optionee's performance of services shall have been
terminated because of disability within the meaning of Section
22(e)(3) of the Internal Revenue Code, the Optionee may, at any time
within a period of one (1) year after the termination of performance
of services, exercise his option to the extent that the option was
exercisable by him on the date of termination of his employment or
performance of services; and
(iii) if the Optionee dies at a time when the option was exercisable
by him, then his estate, personal representative or beneficiary to
whom it has been transferred may, at any time within a period of one
(1) year following his death if the Optionee's performance of
services shall have been terminated by his death, or for the period
following the termination of his performance of services during
which the option would have remained exercisable under clauses (i)
or (ii) above if the Optionee's performance of services shall have
been terminated prior to his death, exercise the option to the
extent the Optionee might have exercised it at the time of his
death; provided, however, that no option may be exercised to any
extent by anyone after the date of expiration of the option.
(iv) The Board of Directors determines to extend the option exercise
date for the nonqualified portion of the plan on a case by case
basis.
(h) Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to any Shares covered by his option until the
date of issuance of a stock certificate to him for such Shares.
(i) Repurchase of Shares by the Company. Any Shares purchased by an
Optionee upon exercise of an option may in the discretion of the
Compensation Committee and approved by the Board of Directors be
subject to repurchase by the Company if and to the extent
specifically set forth in the agreement pursuant to which the Shares
were purchased.
10. TERMS AND CONDITIONS OF PURCHASE RIGHTS. Purchase Rights granted under this
Plan shall be evidenced by restricted stock agreements and subscription
agreements in such form and not inconsistent with the Plan as the Compensation
Committee recommends and the Board of Directors shall approves from time to
time, which agreements shall include the following terms and conditions:
(a) Price. The purchase price of each Share purchased by key employees or
consultants pursuant to a Purchase Right hereunder shall be the price
determined by the Compensation Committee and approved by the Board of
Directors at the time such Purchase Right is granted.
(b) Number of Shares. Each restricted stock agreement and subscription
agreement shall specify the number of Shares to which it pertains.
<PAGE> 6
(c) Investment Intent and Payment. If the Shares purchased are not at the
time effectively registered under the Securities Act of 1933, as amended,
the restricted stock agreement and subscription agreement shall provide
that the grantee is purchasing such Shares for the grantee's own account
for investment and not with a view to the resale or distribution thereof.
Payment shall be made in full at the time of delivery to the Company by
the grantee of an executed restricted stock agreement and subscription
agreement covering the number of Shares for which the Purchase Right was
granted. An officer or agent of the Company shall be entitled to retain in
escrow for the benefit of the grantee stock certificates representing
Shares which are subject to a repurchase option of the Company, as
described in subparagraph (f) below. Payment for Shares shall be made (i)
by cash or check, (ii) if permitted by the Compensation Committee and
approved by the Board of Directors, by delivery and assignment to the
Company of shares of the Company's stock having a fair market value (as
determined by the Compensation Committee) equal to the purchase price,
(iii) if permitted by the Compensation Committee and approved by the Board
of Directors, by a promissory note, or (iv) by a combination of (i), (ii),
and (iii). The value of the shares of the Company's stock for such purpose
shall be its fair market value as of the date of the restricted stock
agreement, as determined in accordance with procedures to be established
by the Compensation Committee and approved by the Board of Directors.
(d) Withholding Taxes. The Company's obligation to deliver Shares to the
grantee shall be subject to the grantee's satisfaction of all applicable
federal, state, and local income and employment tax withholding
obligations. The grantee may satisfy such withholding obligations, in
whole or in part, by electing to have the Company withhold Shares having a
value equal to the amount required to be withheld. The value of the Shares
to be withheld shall be based on the fair market value of such Shares as
of the date the amount of tax is to be determined.
(e) Nontransferability. Any Shares purchased by a grantee pursuant to a
purchase right hereunder may, in the discretion of the Compensation
Committee and approved by the Board of Directors, be subject to transfer
restrictions if and to the extent specifically set forth in the restricted
stock agreement governing such purchase.
(f) Repurchase of Shares by the Company. Any Shares purchased by a grantee
pursuant to a Purchase Right hereunder may, in the discretion of the
Compensation Committee and approval of the Board of Directors, be subject
to repurchase by the Company if and to the extent set forth in the
restricted stock agreement governing such purchase.
(g) Rights as Stockholder. Except for the limitations on transferability
and the Company's repurchase rights set forth above, the grantee of a
Purchase Right shall, upon purchase of Shares, possess all rights as a
holder of Common Stock of the Company.
11. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATIONS.
Appropriate adjustment shall be made in the maximum number of Shares of Common
Stock subject to the Plan and in the number, kind and price of Shares covered by
any Stock Incentive granted hereunder to give effect to any stock dividends or
other distributions, stock splits, stock combinations, recapitalizations and
other similar changes in the capital structure of the Company after the
effective date of the Plan.
12. MERGER; SALE OF ASSETS; DISSOLUTION. In the event of a change of the Common
Stock resulting from a merger or similar reorganization as to which the Company
is the surviving corporation, the number and kind of shares which thereafter may
be subject to Stock Incentives granted under this Plan and the number, kind and
price of Shares then subject to Stock Incentives shall be appropriately adjusted
in such manner as the Compensation Committee recommends and the Board of
Directors may deem equitable to prevent substantial dilution or enlargement of
the rights available or granted hereunder. Except as otherwise determined by the
Board of Directors of the Company, a merger or a similar reorganization that the
Company does not survive, or a sale of all or substantially all of the
<PAGE> 7
assets of the Company, shall cause every nonvested Incentive Option and
Nonqualified Option outstanding hereunder to terminate, to the extent not then
exercised, unless any surviving entity agrees to assume the obligations
hereunder.
13. NO RIGHTS. Except as hereinabove expressly provided in Sections 10 and 11,
no optionee shall have any rights by reason of any subdivision or consolidation
of shares of the capital stock of any class or the payment of any stock dividend
or any other increase or decrease in the number of shares of any class or by
reason of any dissolution, liquidation, merger or consolidation or spin-off of
assets or stock of another corporation, and any issue by the Company of shares
of stock of any class or of securities convertible into shares of stock of any
class shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to any option granted
hereunder. The grant of an option pursuant to this Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
consolidate or to dissolve, liquidate, sell, or transfer all or any part of its
business or assets.
14. COMPLIANCE WITH APPLICABLE LAWS. Notwithstanding any other provision of the
Plan, the Company shall have no liability to issue any shares under the Plan
unless such issuance would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity. Prior to the issuance
of any shares under the Plan, the Company may require a written statement that
the recipient is acquiring the shares for investment and not for the purpose or
with the intention of distributing the shares.
15. DEATH OF A PARTICIPANT. In the event of the death of an Optionee, any
options which the Optionee was entitled to exercise on the date immediately
preceding his death shall be exercisable by the person or persons to whom those
rights pass by will or by the laws of descent and distribution. Any such
exercise shall be by written notice thereof filed with the Secretary of the
Company at the Company's corporate headquarters prior to the option's expiration
date, and any person exercising such an option shall be treated as an Optionee
for purposes of the provisions of this Plan.
16. EMPLOYMENT AND SHAREHOLDER STATUS. The Plan does not constitute a contract
of employment, and selection as an Optionee will not give any employee the right
to be retained in the employ of the Company. The grant of an option under the
Plan shall not confer upon the holder thereof any right as a shareholder of the
Company. As of the date on which an Optionee exercises an option, the Optionee
shall have all rights of a stockholder of record with respect to the number of
shares of Common Stock as to which the option is exercised, irrespective of
whether certificates to evidence the shares of stock have been issued on such
date. If the redistribution of shares is restricted pursuant to Paragraph 13,
certificates representing such shares may bear a legend referred to such
restrictions.
17. TERMINATION OR AMENDMENT OF PLAN. The Board of Directors may at any time
terminate this Plan or make such changes in or additions to the Plan as it deems
advisable without further action on the part of the stockholders of the Company,
provided that no such termination or amendment shall adversely affect or impair
any then outstanding Stock Incentive without the consent of the person holding
such Stock Incentive.
18. TERMINATION. The Plan shall terminate automatically on April 11, 2007, and
may be terminated at any earlier date by the Board. No option shall be granted
hereunder after the termination of the Plan, but such termination shall not
affect the validity of any option then outstanding.
19. TIME OF GRANTING OPTIONS. The date of grant of an option hereunder shall,
for all purposes, be the date on which the Board of Directors makes the
determination granting such option.
20. RESERVATION OF SHARES. The Company, during the terms of this Plan, will at
all times reserve and keep available such number of shares of its Common Stock
as shall be sufficient to satisfy the requirements of the Plan.
<PAGE> 8
21. EFFECTIVE DATE. This Plan was adopted by the Board of Directors, pursuant to
shareholder approval in accordance with the requirements of the Internal Revenue
Code and the Delaware General Corporation Law of the Company on April 9, 1997,
and shall be effective on said date, provided the Plan is approved within twelve
(12) months of said date. Options may be granted, but may not be exercised,
prior to the date of such shareholder approval.
22. CORPORATION FINANCIAL INFORMATION. The Company shall provide all optionees
on an annual basis with a balance sheet and income statement for the then ending
fiscal year.
<PAGE> 1
Exhibit 10.19A
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of March 23, 1998, by
and between Dane B. West of Purcellville, Virginia ("Employee") and DIDAX INC.,
a Delaware business corporation with its principal place of business at 4501
Daly Drive, Suite 103, Chantilly, VA 20151 ("DIDAX"), each a "party" and
collectively the "parties." In consideration of the employment and continuing
employment of Employee by DIDAX, DIDAX and Employee hereby agree as follows:
1. Employment, Complete Agreement, and Modification. DIDAX agrees to employ
Employee and Employee agrees to be employed by DIDAX on the terms and conditions
set forth herein. This Agreement supersedes all previous representations, either
written or oral, between the parties, relating to employment, services,
compensation, and/or benefits, including but not limited to the document titled
"Employment Agreement (President)" made June 10, 1997. No provision of this
Agreement may be modified except by a writing signed by both parties.
2. Position. Subject to the Bylaws of DIDAX and to the direction of the Board
of Directors of DIDAX (the "Board"), Employee shall serve as a senior executive
in DIDAX to be specified by the Chief Executive Officer ("CEO") of DIDAX within
ninety (90) days of the date of execution of this Agreement, performing such
duties and carrying out such responsibilities as are assigned by the CEO, and in
such additional management position(s) as the CEO may designate. As a bona fide
occupational qualification for this position, Employee will subscribe to the
Statement of Faith as stated in Article XIII, Section 2 of the Bylaws of DIDAX.
The Board shall either vote, or recommend to the shareholders of DIDAX, as
appropriate, that during the Term of this Agreement, Employee be nominated for
election as a director.
3. Compensation. During the Term of this Agreement, DIDAX shall pay to Employee
for all his services a base salary in periodic installments in accordance with
DIDAX's usual practice for its similarly situated employees, at an annual rate
of $90,000, to be increased to $100,000 if DIDAX's net quarterly revenues exceed
$200,000, and to $120,000 if DIDAX's net quarterly revenues exceed $400,000.
4. Incentive Compensation. In addition to the compensation provided in Section
3, Employee shall be entitled to receive payments under DIDAX's incentive
compensation and/or bonus program(s) (as in effect from time to time), if any,
in such amounts as are determined by the Board to be appropriate. Any incentive
compensation which is not deductible, in the opinion of DIDAX's counsel, under
Section 162(m) of the Internal Revenue Code shall be deferred and paid, without
interest, in the first year or years when and to the extent such payment may be
deducted.
5. Stock Options. In accordance with the provisions of DIDAX's 1997 Incentive
Stock Option Plan (the "Plan") and the specific authorization of the Board,
DIDAX hereby grants to Employee, subject to all of the terms and conditions of
the Plan and this Agreement, options to acquire shares of DIDAX's outstanding
common stock ("Option Stock") in the amount and per the vesting schedule as
indicated in Attachment A. In the event of termination of this Agreement,
Employee has the right to retain only those options that have vested prior to
the effective date of such termination, until their natural expiration. All
unvested options, warrants, and similar rights shall remain the property of
DIDAX.
6. Benefits. During the Term of this Agreement:
6.1 Employee shall be entitled to four (4) weeks of paid vacation time per
year, to be taken at times mutually acceptable to Employee and DIDAX.
6.2 DIDAX shall provide paid accident and health insurance for Employee and
his family comparable to that DIDAX provides for other DIDAX employees and
their families.
Page 1 of 3
<PAGE> 2
6.3 DIDAX shall obtain at its expense (subject to Employee's insurability)
an insurance policy on the life of Employee, adjusted at policy anniversary
date, subject to the last sentence of this Section 6.3, in the minimum face
amount of Employee's current annual base salary. Employee shall have the
exclusive right to designate the beneficiaries of such policy and change
such beneficiaries from time to time. Such policy and the proceeds and cash
value thereof shall be the sole property of Employee and DIDAX shall not
retain any benefit therein.
6.4 Employee shall be entitled to sick leave benefits in accordance with the
customary policies of DIDAX for its executive officers, but in no event less
than one (1) week per year. In the event of Employee's Disability, DIDAX
shall provide disability insurance that shall provide for the payment of
Employee's annualized salary at the time of the Disability, for a period of
not less than one (1) year from the date of Disability. For purposes of this
Agreement, "Disability" shall mean a written determination by a physician
mutually agreeable to DIDAX and Employee (or, in the event of Employee's
total physical or mental disability, Employee's legal representative) that
Employee is physically or mentally unable to perform his duties under this
Agreement and that such disability has continued for ninety (90) days and
can reasonably be expected to continue for a period of six (6) consecutive
months or for shorter periods aggregating one hundred and eighty (180) days
in any twelve-(12)-month period.
6.5 In addition to the vacation provided pursuant to Section 6.1 hereof,
Employee shall be entitled to not less than ten (10) paid holidays (other
than weekends) per year, generally on such days consistent with DIDAX's
employment policies.
6.6 Employee shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by him (in accordance with the policies and
procedures established by DIDAX or the Board for similarly situated
employees of DIDAX) in performing services hereunder.
6.7 Employee shall be eligible to participate in benefits not inconsistent
or duplicative of those set forth in this Section 6 as DIDAX shall establish
or maintain for its employees or executives generally. Employee shall be
solely responsible for any applicable income taxes relating to benefits
provided under this Section 6.
7. Term and Termination. The Term of this Agreement shall begin on the date of
execution stated above and shall continue until this Agreement is terminated by
either party as provided herein. Either party may terminate this Agreement and
Employee's employment hereunder at any time, with or without cause, upon thirty
(30) days prior written notice of termination to the other party.
8. Severance. Upon termination of his employment by DIDAX, and execution of a
termination agreement, Employee shall continue to receive as severance his
current base salary and such benefits as are provided under Sections 6.2 and 6.3
for an additional six (6) months. 9. Protective Covenant. During the period of
his employment by DIDAX, Employee shall: (9.1)to the best of his ability, devote
his full professional and business time and best efforts to the performance of
his duties for DIDAX and its subsidiaries and affiliates; and (9.2)not acquire,
assume, or participate in, directly or indirectly, any position, investment,
action or interest adverse or antagonistic to DIDAX, its business or prospects,
financial or otherwise.
9. Protective Covenant. During the period of his employment by DIDAX, Employee
shall: (9.1) to the best of his ability, devote his full professional and
business time and best efforts to the performance of his duties for DIDAX and
its subsidiaries and affiliates; and (9.2) not acquire, assume, or participate
in, directly or indirectly, any position, investment, action or interest
adverse or antagonistic to DIDAX, its business or prospects, financial or
otherwise.
10. Conciliation. The parties agree that any claim or dispute arising from or
related to this Agreement shall be settled by biblically based mediation and, if
necessary, legally binding arbitration in accordance with the Rules of Procedure
for Christian Conciliation of the Institute for Christian Conciliation, 1537
Avenue D, Suite 352, Billings, MT 59102. Judgment upon an arbitration decision
may be entered in any court otherwise having
Page 2 of 3
<PAGE> 3
jurisdiction. These methods shall be the sole remedy for any controversy or
claim arising out of this Agreement and the parties expressly waive their
respective right to file a lawsuit in any civil court against one another for
such disputes, except to enforce an arbitration decision. The parties agree that
any claim or dispute hereunder shall expire if not brought within one (1) year
of arising. Any claim or dispute arising from or related to the Noncompetition
and Proprietary Information Agreement between DIDAX and Employee, or any
subsequent noncompetition, nonsolicitation, confidentiality, and/or proprietary
information agreement or covenant between DIDAX and Employee, shall not be
subject to this Section 10.
11. Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Virginia without regard to principles
of conflict of laws.
12. Severability. Should any provision or clause of this Agreement be held to be
void, invalid, or unenforceable, the remaining provisions of this Agreement
shall not be affected and shall continue in effect and the invalid provision
shall be deemed modified to the least degree necessary to remedy such
invalidity.
13. Assignment. This Agreement and the rights and obligations of the parties
shall bind and inure to the benefit of each of the parties hereto and shall also
bind and inure to the benefit of any successor or successors of DIDAX, but,
except as to any such successor of DIDAX, neither this Agreement nor any rights
or benefits hereunder may be assigned by either party without the prior written
consent of the other party.
14. Notice. Any notice required or permitted to be given hereunder shall be
effective when received and shall be sufficient if in writing and if personally
delivered or send by prepaid express delivery service, to the party to receive
such notice at its address set forth at the beginning of this Agreement or at
such other address as a party may be notice specify to the other.
15. No Conflicting Obligations. Each party represents and warrants that it is
under no obligation or restriction, nor will it assume any such obligation or
restriction, that does or would in any way violate, interfere, or conflict with
the performance to be rendered under this Agreement.
16. Agreement Read, Understood, and Fair. Employee has carefully read and
considered all provisions of this Agreement and agrees that all of the
restrictions set forth are fair and reasonable and are reasonably required for
the protection of the Interests of DIDAX.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE DULY EXECUTED THIS AGREEMENT AS OF
THE DATE FIRST WRITTEN ABOVE.
DANE B. WEST DIDAX INC.
/s/ Dane B. West /s/ James G. Buick
- --------------------------- --------------------------
Dane B. West James G. Buick
("Employee") Chairman of the Board
- ---------------------------
Spouse
Page 3 of 3
<PAGE> 4
ATTACHMENT "A"
Dane West
<TABLE>
<CAPTION>
Exercise Expiration
Shares Price Vesting Date
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
30,000 $1.50 Fully Vested 06/30/03
5,191 $4.00 Fully Vested 12/31/06
2,420 $5.00 Fully Vested 03/31/07
2,420 $5.00 Fully Vested 06/30/07
75,579 $5.00 $1M ANNUAL REV. OR STOCK = OR greater than $7.50 FOR 2 Cons. MOS. 03/23/08
25,193 $5.00 $4M ANNUAL REV. AND PROFIT FOR 2 Consecutive QRTRS. 03/23/08
OR STOCK = OR greater than $10.00
25,193 $5.00 $10M ANNUAL REV. AND EPS greater than $0.25 03/23/08
10,077 $5.00 EPS = OR greater than $0.05 03/23/08
15,116 $5.00 EPS = OR greater than $0.10 03/23/08
20,154 $5.00 EPS = OR greater than $0.15 03/23/08
</TABLE>
<PAGE> 1
Exhibit 10.20A
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of March 23, 1998, by
and between William Bowers of Chantilly, Virginia ("Employee") and DIDAX INC., a
Delaware business corporation with its principal place of business at 4501 Daly
Drive, Suite 103, Chantilly, VA 20151 ("DIDAX"), each a "party" and collectively
the "parties." In consideration of the employment and continuing employment of
Employee by DIDAX, DIDAX and Employee hereby agree as follows:
1. Employment, Complete Agreement, and Modification. DIDAX agrees to employ
Employee and Employee agrees to be employed by DIDAX on the terms and conditions
set forth herein. This Agreement supersedes all previous representations, either
written or oral, between the parties relating to employment, services,
compensation, and/or benefits, including but not limited to the document titled
"Employment Agreement" made June 10, 1997. No provision of this Agreement may be
modified except by a writing signed by both parties.
2. Position. Subject to the Bylaws of DIDAX and to the direction of the Board
of Directors of DIDAX (the "Board"), Employee shall serve as directed by the
Chief Executive Officer ("CEO") of DIDAX, performing such duties and carrying
out such responsibilities as are assigned by the CEO, and in such additional
management position(s) as the CEO may designate, currently including continuing
to serve as Chief Technology Officer of DIDAX. As a bona fide occupational
qualification for this position, Employee will subscribe to the Statement of
Faith as stated in Article XIII, Section 2 of the Bylaws of DIDAX. The Board
shall either vote, or recommend to the shareholders of DIDAX, as appropriate,
that during the Term of this Agreement, Employee be nominated for election as a
director.
3. Compensation. During the Term of this Agreement, DIDAX shall pay to Employee
for all his services a base salary in periodic installments in accordance with
DIDAX's usual practice for its similarly situated employees, at an annual rate
of $90,000, to be increased to $100,000 if DIDAX's net quarterly revenues exceed
$200,000, and to $120,000 if DIDAX's net quarterly revenues exceed $400,000.
4. Incentive Compensation. In addition to the compensation provided in Section
3, Employee shall be entitled to receive payments under DIDAX's incentive
compensation and/or bonus program(s) (as in effect from time to time), if any,
in such amounts as are determined by the Board to be appropriate. Any incentive
compensation which is not deductible, in the opinion of DIDAX's counsel, under
Section 162(m) of the Internal Revenue Code shall be deferred and paid, without
interest, in the first year or years when and to the extent such payment may be
deducted.
5. Stock Options. In accordance with the provisions of DIDAX's 1997 Incentive
Stock Option Plan (the "Plan") and the specific authorization of the Board,
DIDAX hereby grants to Employee, subject to all of the terms and conditions of
the Plan and this Agreement, options to acquire shares of DIDAX's outstanding
common stock ("Option Stock") in the amount and per the vesting schedule as
indicated in Attachment A. In the event of termination of this Agreement,
Employee has the right to retain only those options that have vested prior to
the effective date of such termination, until their natural expiration. All
unvested options, warrants, and similar rights shall remain the property of
DIDAX.
6. Benefits. During the Term of this Agreement:
6.1 Employee shall be entitled to four (4) weeks of paid vacation time per
year, to be taken at times mutually acceptable to Employee and DIDAX.
6.2 DIDAX shall provide paid accident and health insurance for Employee and
his family comparable to that DIDAX provides for other DIDAX employees and
their families.
Page 1 of 3
<PAGE> 2
6.3 DIDAX shall obtain at its expense (subject to Employee's insurability)
an insurance policy on the life of Employee, adjusted at policy anniversary
date, subject to the last sentence of this Section 6.3, in the minimum face
amount of Employee's current annual base salary. Employee shall have the
exclusive right to designate the beneficiaries of such policy and change
such beneficiaries from time to time. Such policy and the proceeds and cash
value thereof shall be the sole property of Employee and DIDAX shall not
retain any benefit therein.
6.4 Employee shall be entitled to sick leave benefits in accordance with the
customary policies of DIDAX for its executive officers, but in no event less
than one (1) week per year. In the event of Employee's Disability, DIDAX
shall provide disability insurance that shall provide for the payment of
Employee's annualized salary at the time of the Disability, for a period of
not less than one (1) year from the date of Disability. For purposes of this
Agreement, "Disability" shall mean a written determination by a physician
mutually agreeable to DIDAX and Employee (or, in the event of Employee's
total physical or mental disability, Employee's legal representative) that
Employee is physically or mentally unable to perform his duties under this
Agreement and that such disability has continued for ninety (90) days and
can reasonably be expected to continue for a period of six (6) consecutive
months or for shorter periods aggregating one hundred and eighty (180) days
in any twelve-(12)-month period.
6.5 In addition to the vacation provided pursuant to Section 6.1 hereof,
Employee shall be entitled to not less than ten (10) paid holidays (other
than weekends) per year, generally on such days consistent with DIDAX's
employment policies.
6.6 Employee shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by him (in accordance with the policies and
procedures established by DIDAX or the Board for similarly situated
employees of DIDAX) in performing services hereunder.
6.7 Employee shall be eligible to participate in benefits not inconsistent
or duplicative of those set forth in this Section 6 as DIDAX shall establish
or maintain for its employees or executives generally. Employee shall be
solely responsible for any applicable income taxes relating to benefits
provided under this Section 6.
7. Term and Termination. The Term of this Agreement shall begin on the date of
execution stated above and shall continue until this Agreement is terminated by
either party as provided herein. Either party may terminate this Agreement and
Employee's employment hereunder at any time, with or without cause, upon thirty
(30) days prior written notice of termination to the other party.
8. Severance. Upon termination of his employment by DIDAX, and execution of a
termination agreement, Employee shall continue to receive as severance his
current base salary and such benefits as are provided under Sections 6.2 and 6.3
for an additional six (6) months.
9. Protective Covenant. During the period of his employment by DIDAX, Employee
shall: (9.1)to the best of his ability, devote his full professional and
business time and best efforts to the performance of his duties for DIDAX and
its subsidiaries and affiliates; and (9.2)not acquire, assume, or participate
in, directly or indirectly, any position, investment, action or interest adverse
or antagonistic to DIDAX, its business or prospects, financial or otherwise.
10. Conciliation. The parties agree that any claim or dispute arising from or
related to this Agreement shall be settled by biblically based mediation and, if
necessary, legally binding arbitration in accordance with the Rules of Procedure
for Christian Conciliation of the Institute for Christian Conciliation, 1537
Avenue D, Suite 352, Billings, MT 59102. Judgment upon an arbitration decision
may be entered in any court otherwise having jurisdiction. These methods shall
be the sole remedy for any controversy or claim arising out of this Agreement
and the parties expressly waive their respective right to file a lawsuit in any
civil court against one
Page 2 of 3
<PAGE> 3
another for such disputes, except to enforce an arbitration decision. The
parties agree that any claim or dispute hereunder shall expire if not brought
within one (1) year of arising. Any claim or dispute arising from or related to
the Noncompetition and Proprietary Information Agreement between DIDAX and
Employee, or any subsequent noncompetition, nonsolicitation, confidentiality,
and/or proprietary information agreement or covenant between DIDAX and Employee,
shall not be subject to this Section 10.
11. Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Virginia without regard to principles
of conflict of laws.
12. Severability. Should any provision or clause of this Agreement be held to be
void, invalid, or unenforceable, the remaining provisions of this Agreement
shall not be affected and shall continue in effect and the invalid provision
shall be deemed modified to the least degree necessary to remedy such
invalidity.
13. Assignment. This Agreement and the rights and obligations of the parties
shall bind and inure to the benefit of each of the parties hereto and shall also
bind and inure to the benefit of any successor or successors of DIDAX, but,
except as to any such successor of DIDAX, neither this Agreement nor any rights
or benefits hereunder may be assigned by either party without the prior written
consent of the other party.
14. Notice. Any notice required or permitted to be given hereunder shall be
effective when received and shall be sufficient if in writing and if personally
delivered or send by prepaid express delivery service, to the party to receive
such notice at its address set forth at the beginning of this Agreement or at
such other address as a party may be notice specify to the other.
15. No Conflicting Obligations. Each party represents and warrants that it is
under no obligation or restriction, nor will it assume any such obligation or
restriction, that does or would in any way violate, interfere, or conflict with
the performance to be rendered under this Agreement.
16. Agreement Read, Understood, and Fair. Employee has carefully read and
considered all provisions of this Agreement and agrees that all of the
restrictions set forth are fair and reasonable and are reasonably required for
the protection of the Interests of DIDAX.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE DULY EXECUTED THIS AGREEMENT AS OF
THE DATE FIRST WRITTEN ABOVE.
WILLIAM BOWERS DIDAX INC.
/s/ William Bowers /s/ James G. Buick
- ------------------------ -----------------------
William Bowers James G. Buick
("Employee") Chairman of the Board
- ------------------------
Spouse
Page 3 of 3
<PAGE> 4
ATTACHMENT "A"
William Bowers
<TABLE>
<CAPTION>
Exercise Expiration
Shares Price Vesting Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4,000 $1.50 Fully Vested 06/30/03
10,385 $4.00 Fully Vested 12/31/06
2,420 $5.00 Fully Vested 03/31/07
2,420 $5.00 Fully Vested 06/30/07
72,491 $5.00 $1M ANNUAL REV. OR STOCK = OR greater than $7.50 FOR 2 Cons. MOS. 03/23/08
24,164 $5.00 $4M ANNUAL REV. AND PROFIT FOR 2 Consecutive QRTRS. 03/23/08
OR STOCK = OR greater than $10.00
24,164 $5.00 $10M ANNUAL REV. AND EPS greater than $0.25 03/23/08
9,665 $5.00 EPS = OR greater than $0.05 03/23/08
14,498 $5.00 EPS = OR greater than $0.10 03/23/08
19,331 $5.00 EPS = OR greater than $0.15 03/23/08
</TABLE>
<PAGE> 1
Exhibit 10.21A
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of March 23, 1998, by
and between Gary Struzik of Sterling, Virginia ("Employee") and DIDAX INC., a
Delaware business corporation with its principal place of business at 4501 Daly
Drive, Suite 103, Chantilly, VA 20151 ("DIDAX" , each a "party" and collectively
the "parties." In consideration of the employment and continuing employment of
Employee by DIDAX, DIDAX and Employee hereby agree as follows:
1. Employment, Complete Agreement, and Modification. DIDAX agrees to employ
Employee and Employee agrees to be employed by DIDAX on the terms and conditions
set forth herein. This Agreement supersedes all previous representations, either
written or oral, between the parties relating to employment, services,
compensation, and/or benefits, including but not limited to the document titled
"Employment Agreement" made June 10, 1997. No provision of this Agreement may be
modified except by a writing signed by both parties.
2. Position. Subject to the Bylaws of DIDAX and to the direction of the Board
of Directors of DIDAX (the "Board"), Employee shall serve as directed by the
Chief Executive Officer ("CEO") of DIDAX, performing such duties and carrying
out such responsibilities as are assigned by the CEO, and in such additional
management position(s) as the CEO may designate, currently including continuing
to serve as Chief Financial Officer of DIDAX. As a bona fide occupational
qualification for this position, Employee will subscribe to the Statement of
Faith as stated in Article XIII, Section 2 of the Bylaws of DIDAX.
3. Compensation. During the Term of this Agreement, DIDAX shall pay to Employee
for all his services a base salary in periodic installments in accordance with
DIDAX's usual practice for its similarly situated employees, at an annual rate
of $90,000, to be increased to $100,000 if DIDAX's net quarterly revenues exceed
$200,000, and to $110,000 if DIDAX's net quarterly revenues exceed $400,000.
4. Incentive Compensation. In addition to the compensation provided in Section
3, Employee shall be entitled to receive payments under DIDAX's incentive
compensation and/or bonus program(s) (as in effect from time to time), if any,
in such amounts as are determined by the Board to be appropriate. Any incentive
compensation which is not deductible, in the opinion of DIDAX's counsel, under
Section 162(m) of the Internal Revenue Code shall be deferred and paid, without
interest, in the first year or years when and to the extent such payment may be
deducted.
5. Stock Options. In accordance with the provisions of DIDAX's 1997 Incentive
Stock Option Plan (the "Plan") and the specific authorization of the Board,
DIDAX hereby grants to Employee, subject to all of the terms and conditions of
the Plan and this Agreement, options to acquire shares of DIDAX's outstanding
common stock ("Option Stock") in the amount and per the vesting schedule as
indicated in Attachment A. In the event of termination of this Agreement,
Employee has the right to retain only those options that have vested prior to
the effective date of such termination, until their natural expiration. All
unvested options, warrants, and similar rights shall remain the property of
DIDAX.
6. Benefits. During the Term of this Agreement:
6.1. Employee shall be entitled to four (4) weeks of paid vacation time per
year, to be taken at times mutually acceptable to Employee and DIDAX.
6.2. DIDAX shall provide paid accident and health insurance for Employee and
his family comparable to that DIDAX provides for other DIDAX employees and
their families.
Page 1 of 3
<PAGE> 2
6.3. DIDAX shall obtain at its expense (subject to Employee's insurability)
an insurance policy on the life of Employee, adjusted at policy anniversary
date, subject to the last sentence of this Section 6.3, in the minimum face
amount of Employee's current annual base salary. Employee shall have the
exclusive right to designate the beneficiaries of such policy and change
such beneficiaries from time to time. Such policy and the proceeds and cash
value thereof shall be the sole property of Employee and DIDAX shall not
retain any benefit therein.
6.4. Employee shall be entitled to sick leave benefits in accordance with
the customary policies of DIDAX for its executive officers, but in no event
less than one (1) week per year. In the event of Employee's Disability,
DIDAX shall provide disability insurance that shall provide for the payment
of Employee's annualized salary at the time of the Disability, for a period
of not less than one (1) year from the date of Disability. For purposes of
this Agreement, "Disability" shall mean a written determination by a
physician mutually agreeable to DIDAX and Employee (or, in the event of
Employee's total physical or mental disability, Employee's legal
representative) that Employee is physically or mentally unable to perform
his duties under this Agreement and that such disability has continued for
ninety (90) days and can reasonably be expected to continue for a period of
six (6) consecutive months or for shorter periods aggregating one hundred
and eighty (180) days in any twelve-(12)-month period.
6.5. In addition to the vacation provided pursuant to Section 6.1 hereof,
Employee shall be entitled to not less than ten (10) paid holidays (other
than weekends) per year, generally on such days consistent with DIDAX's
employment policies.
6.6. Employee shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by him (in accordance with the policies and
procedures established by DIDAX or the Board for similarly situated
employees of DIDAX) in performing services hereunder.
6.7. Employee shall be eligible to participate in benefits not inconsistent
or duplicative of those set forth in this Section 6 as DIDAX shall establish
or maintain for its employees or executives generally. Employee shall be
solely responsible for any applicable income taxes relating to benefits
provided under this Section 6.
7. Term and Termination. The Term of this Agreement shall begin on the date of
execution stated above and shall continue until this Agreement is terminated by
either party as provided herein. Either party may terminate this Agreement and
Employee's employment hereunder at any time, with or without cause, upon thirty
(30) days prior written notice of termination to the other party.
8. Severance. Upon termination of his employment by DIDAX, and execution of a
termination agreement, Employee shall continue to receive as severance his
current base salary and such benefits as are provided under Sections 6.2 and 6.3
for an additional six (6) months.
9. Protective Covenant. During the period of his employment by DIDAX, Employee
shall: (9.1) to the best of his ability, devote his full professional and
business time and best efforts to the performance of his duties for DIDAX and
its subsidiaries and affiliates; and (9.2) not acquire, assume, or participate
in, directly or indirectly, any position, investment, action or interest adverse
or antagonistic to DIDAX, its business or prospects, financial or otherwise.
10. Conciliation. The parties agree that any claim or dispute arising from or
related to this Agreement shall be settled by biblically based mediation and, if
necessary, legally binding arbitration in accordance with the Rules of Procedure
for Christian Conciliation of the Institute for Christian Conciliation, 1537
Avenue D, Suite 352, Billings, MT 59102. Judgment upon an arbitration decision
may be entered in any court otherwise having jurisdiction. These methods shall
be the sole remedy for any controversy or claim arising out of this Agreement
and the parties expressly waive their respective right to file a lawsuit in any
civil court against one
Page 2 of 3
<PAGE> 3
another for such disputes, except to enforce an arbitration decision. The
parties agree that any claim or dispute hereunder shall expire if not brought
within one (1) year of arising. Any claim or dispute arising from or related to
the Noncompetition and Proprietary Information Agreement between DIDAX and
Employee, or any subsequent noncompetition, nonsolicitation, confidentiality,
and/or proprietary information agreement or covenant between DIDAX and Employee,
shall not be subject to this Section 10.
11. Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Virginia without regard to principles
of conflict of laws.
12. Severability. Should any provision or clause of this Agreement be held to be
void, invalid, or unenforceable, the remaining provisions of this Agreement
shall not be affected and shall continue in effect and the invalid provision
shall be deemed modified to the least degree necessary to remedy such
invalidity.
13. Assignment. This Agreement and the rights and obligations of the parties
shall bind and inure to the benefit of each of the parties hereto and shall also
bind and inure to the benefit of any successor or successors of DIDAX, but,
except as to any such successor of DIDAX, neither this Agreement nor any rights
or benefits hereunder may be assigned by either party without the prior written
consent of the other party.
14. Notice. Any notice required or permitted to be given hereunder shall be
effective when received and shall be sufficient if in writing and if personally
delivered or send by prepaid express delivery service, to the party to receive
such notice at its address set forth at the beginning of this Agreement or at
such other address as a party may be notice specify to the other.
15. No Conflicting Obligations. Each party represents and warrants that it is
under no obligation or restriction, nor will it assume any such obligation or
restriction, that does or would in any way violate, interfere, or conflict with
the performance to be rendered under this Agreement.
16. Agreement Read, Understood, and Fair. Employee has carefully read and
considered all provisions of this Agreement and agrees that all of the
restrictions set forth are fair and reasonable and are reasonably required for
the protection of the Interests of DIDAX.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE DULY EXECUTED THIS AGREEMENT AS OF
THE DATE FIRST WRITTEN ABOVE.
GARY STRUZIK DIDAX INC.
/s/ Gary Struzik /s/ James G. Buick
- ------------------------ -----------------------
Gary Struzik James G. Buick
("Employee") Chairman of the Board
- ------------------------
Spouse
Page 3 of 3
<PAGE> 4
ATTACHMENT "A"
Gary Struzik
<TABLE>
<CAPTION>
Exercise Expiration
Shares Price Vesting Date
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
30,000 $3.00 One Third at end of 1996, 1997, 1998 03/31/06
6,331 $4.00 Fully Vested 12/31/06
1,405 $5.00 Fully Vested 03/31/07
1,290 $5.00 Fully Vested 06/30/07
31,434 $5.00 $1M ANNUAL REV. OR STOCK = OR greater than $7.50 FOR 2 Cons. MOS. 03/23/08
10,478 $5.00 $4M ANNUAL REV. AND PROFIT FOR 2 Consecutive QRTRS. 03/23/08
OR STOCK = OR greater than $10.00
10,478 $5.00 $10M ANNUAL REV. AND EPS greater than $0.25 03/23/08
4,191 $5.00 EPS = OR greater than $0.05 03/23/08
6,287 $5.00 EPS = OR greater than $0.10 03/23/08
8,382 $5.00 EPS = OR greater than $0.15 03/23/08
</TABLE>
<PAGE> 1
Exhibit 10.36
NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENT
THIS NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENT ("Noncompetition
Agreement") is entered into as of March ___, 1998, by and between
__________________________________, who resides at _____________________________
____________________ ("Employee") and DIDAX INC., a Delaware business
corporation with its principal place of business at 4501 Daly Drive, Suite 103,
Chantilly, VA 20151 ("DIDAX"), each a "party" and collectively the "parties."
This Noncompetition Agreement is entered into in connection with the Employment
Agreement executed by these same parties concurrently herewith. In consideration
for and as an essential condition of the employment and continuing employment of
Employee by DIDAX, Employee and DIDAX hereby agree as follows:
1. Noncompetition Covenant. Except with the prior written consent of the Board
of Directors of DIDAX (the "Board"), for a period of twelve (12) months after he
ceases to be employed by DIDAX (the "Termination Date"), Employee shall not,
alone, or as a member, employee or agent of any partnership, or as an officer,
agent, employee, director, stockholder, or investor of any other corporation,
directly or indirectly: (1.1) own, manage, operate, join, control or participate
in the ownership, management, operation, or control of, (1.2) become employed
by, consult or advise, or (1.3) be connected in any manner with any business or
activity which is competitive with the business of, or attempts to solicit
business or customers from, DIDAX as conducted on the Termination Date.
2. Information Disclosed Remains Property of DIDAX. All ideas, concepts,
information, and written material disclosed by DIDAX to Employee, or acquired
from a customer or prospective customer of DIDAX, are and shall remain, during
employment with DIDAX and subsequent to the Termination Date, the sole and
exclusive property and proprietary information of DIDAX or such customers, and
are disclosed in confidence by DIDAX or permitted to be acquired from such
customers in reliance on Employee's agreement to maintain them in confidence and
not to use or disclose them to any other person except in furtherance of DIDAX's
business.
3. Confidential Information. Employee agrees to hold as DIDAX's property all
trade secrets, processes, proprietary information, know-how, memoranda, books,
papers, letters, customer lists, processes, computer software, records,
financial information, policy and procedure manuals, training and recruiting
procedures, and other data, and all copies thereof and therefrom, in any way
relating to DIDAX's business and affairs, whether made by him or otherwise
coming into his possession ("Confidential Information") and on termination of
his employment, or demand of DIDAX at any time, to deliver to DIDAX all tangible
copies of Confidential Information. Employee recognizes and acknowledges that
DIDAX's Confidential Information are valuable, special, and unique assets of
DIDAX's business, access to and knowledge of which are essential to the
performance of the Employee's duties under the Employment Agreement with DIDAX.
Employee will not, during or after the term of his employment by DIDAX, in whole
or in part, disclose such Confidential Information to any person or entity for
any reason or purpose whatsoever, nor shall Employee make use of any such
Confidential Information for his own purposes or for the benefit of any person
or entity (except DIDAX) under any circumstances during or after the term of his
employment, provided that after the term of his employment these restrictions
shall not apply to such Confidential Information that are then in the public
domain (provided that Employee was not directly responsible for such
Confidential Information entering the public domain without DIDAX's consent).
Employee shall have no obligation hereunder to keep confidential any
Confidential Information if and to the extent disclosure thereof is specifically
required by law; provided, however, that in the event disclosure is required by
applicable law, Employee shall provide DIDAX with prompt notice of such
requirement, prior to making any disclosure, so that DIDAX may seek an
appropriate protective order. Employee shall use his best efforts to cause all
persons or entities to whom any Confidential Information shall be disclosed by
him hereunder to observe the terms and conditions set forth herein as through
each such person or entity were bound hereby. Employee further agrees that
during the term of his employment
Page of 2
<PAGE> 2
with DIDAX, he will not use or disclose to other employees of DIDAX confidential
information belonging to his former employers.
4. Ownership of Intellectual Property. Any and all inventions, discoveries,
improvements, processes, apparatus, methods, designs, records, files, drawings,
documents, equipment, or other scientific, literary or artistic creations
(collectively "Creations") that Employee has invented, discovered, conceived,
originated, or made, or may invent, discover, conceive, originate, or make, by
himself or in conjunction with any other person or entity, during the period of
his employment by DIDAX in any way, directly or indirectly, connected with
DIDAX's business shall be the sole and exclusive property of DIDAX. Employee
agrees that all copyrightable works created by Employee or under DIDAX's
direction in connection with DIDAX's business are "works made for hire" and
shall be the sole and complete property of DIDAX, and that any and all
copyrights to such works belong to DIDAX. To the extent such works are not
deemed to be "works made for hire," Employee hereby assigns all proprietary
rights, including copyright, in these works to DIDAX without further
compensation. Employee agrees to disclose to DIDAX every patent application,
notice of copyright, or other action taken by Employee or any assignee or
affiliate to protect intellectual property during the twelve (12) months
following termination of Employee's employment with DIDAX, for whatever reason,
so that DIDAX may determine whether to assert a claim under this section or any
other provisions of this Noncompetition Agreement or the related Employment
Agreement.
5. Severability; No Waiver. Should any provision or clause of this
Noncompetition Agreement be held to be void, invalid, or unenforceable, the
remaining provisions of this Noncompetition Agreement shall not be affected and
shall continue in effect and the invalid provision shall be deemed modified to
the least degree necessary to remedy such invalidity. If any tribunal of
competent jurisdiction construes any provision or clause of this Noncompetition
Agreement, or any portion thereof, to be illegal, void, or unenforceable because
of the duration of such provision or the area or matter covered thereby, such
tribunal shall reduce the duration, area, or matter of such provision, and, in
its reduced form, such provision shall then be enforceable and shall be
enforced. The failure of either party to partially or fully exercise any right
or the waiver by either party of any breach, shall not prevent a subsequent
exercise of such right or be deemed a waiver of any subsequent breach of the
same or any other term of this Noncompetition Agreement.
6. Assignment. This Noncompetition Agreement and the rights and obligations of
the parties shall bind and inure to the benefit of each of the parties hereto
and shall also bind and inure to the benefit of any successor or successors of
DIDAX, but, except as to any such successor of DIDAX, neither this
Noncompetition Agreement nor any rights or benefits hereunder may be assigned by
either party without the prior written consent of the other party.
7. Notice. Any notice required or permitted to be given hereunder shall be
effective when received and shall be sufficient if in writing and if personally
delivered or sent by prepaid express delivery service, to the party to receive
such notice at its address set forth at the beginning of this Noncompetition
Agreement or at such other address as a party may be notice specify to the
other.
8. No Conflicting Obligations. Each party represents and warrants that it is
under no obligation or restriction, nor will it assume any such obligation or
restriction, that does or would in any way violate, interfere, or conflict with
the performance to be rendered under this Noncompetition Agreement.
9. Agreement Read, Understood, and Fair. Employee has carefully read and
considered all provisions of this Noncompetition Agreement and agrees that all
of the restrictions set forth are fair and reasonable and are reasonably
required for the protection of the Interests of DIDAX.
Page of 2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have duly executed this Noncompetition
Agreement as of the date first written above.
DIDAX INC.
- ------------------------ -----------------------
Mr. James G. Buick
("Employee") Chairman of the Board
Page of 2
<PAGE> 1
Exhibit 11
DIDAX INC.
COMPUTATION OF EARNINGS PER SHARE
03/31/97
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: QUARTER ENDED MARCH 31, 1997
Common Exercise Assumed Assumed Net Shares
Shares Price Proceeds IPO Price Treas. Stk. Added
------ ----- -------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding - beginning of period 1,160,376
gofishnet stock:
122,055
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 50,962
Shares Excluded due to antidilutive effect per FAS128
Basis for weighted average share calculation
Weighted average share outstanding
Net loss
Net loss per share
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: QUARTER ENDED MARCH 31, 1997 04/01/97
Shares subject Total Grant/Purch. Days
to Recission Shares Date Outstanding
------------ ------ ---- -----------
<S> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding - beginning of period 607,434 552,942 01/01/97 90
gofishnet stock:
0 122,055 01/01/97 90
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 0 50,962 01/01/97 90
Shares Excluded due to antidilutive effect per FAS128
Basis for weighted average share calculation
Weighted average share outstanding
Net loss
Net loss per share
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: Diluted Basic
Weighted Weighted
Shares Shares
------ ------
<S> <C> <C>
Common Stock
Assumed issued and outstanding - beginning of period 49,764,780 49,764,780
gofishnet stock:
10,984,950 10,984,950
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 4,586,580 0
----------- -----------
65,336,310 60,749,730
Shares Excluded due to antidilutive effect per FAS128 (4,586,580) 0
----------- -----------
Basis for weighted average share calculation 60,749,730 60,749,730
90 90
----------- -----------
Weighted average share outstanding 674,997 674,997
Net loss (510,130) (510,130)
----------- -----------
Net loss per share (0.76) (0.76)
</TABLE>
<PAGE> 2
DIDAX INC.
COMPUTATION OF EARNINGS PER SHARE
03/31/98
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: QUARTER ENDED MARCH 31, 1998
Common Exercise Assumed Assumed Net Shares
Shares Price Proceeds IPO Price Treas. Stk. Added
------ ----- -------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding - beginning of period 3,542,588
Rescission reduced on 3/20/98 by 553,184 shares 3,542,588
Stock sold during the year:
gofishnet stock:
126,055
127,055
130,292
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 55,414
Shares Excluded due to antidilutive effect per FAS128
Basis for weighted average share calculation
Weighted average share outstanding
Net loss
Net loss per share
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: QUARTER ENDED MARCH 31, 1997 04/01/98
Shares subject Total Grant/Purch. Days
to Recission Shares Date Outstanding
------------ ------ ---- -----------
<S> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding - beginning of period 574,434 2,968,154 01/01/98 78
Rescission reduced on 3/20/98 by 553,184 shares 21,250 3,521,338 03/20/98 12
----
90
Stock sold during the year:
gofishnet stock:
0 126,055 01/01/98 31
0 127,055 02/01/98 22
0 130,292 02/23/98 37
----
90
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 0 55,414 01/01/98 90
Shares Excluded due to antidilutive effect per FAS128
Basis for weighted average share calculation
Weighted average share outstanding
Net loss
Net loss per share
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: Diluted Basic
Weighted Weighted
Shares Shares
------ ------
<S> <C> <C>
Common Stock
Assumed issued and outstanding - beginning of period 231,516,012 231,516,012
Rescission reduced on 3/20/98 by 553,184 shares 42,256,056 42,256,056
------------ ------------
273,772,068 273,772,068
Stock sold during the year:
gofishnet stock:
3,907,710 3,907,710
2,795,213 2,795,213
4,820,804 4,820,804
------------ ------------
11,523,727 11,523,727
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 4,987,260 0
------------ ------------
290,283,055 285,295,795
Shares Excluded due to antidilutive effect per FAS128 (4,987,260) 0
------------ ------------
Basis for weighted average share calculation 285,295,795 285,295,795
90 90
------------ ------------
Weighted average share outstanding 3,169,953 3,169,953
Net loss (751,720) (751,720)
------------ ------------
Net loss per share (0.24) (0.24)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 94,617
<CGS> 45,485
<TOTAL-COSTS> 523,957
<LOSS-PROVISION> 0
<OTHER-EXPENSES> 0
<INTEREST-EXPENSE> 44,708
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (510,131)
<EPS-PRIMARY> (.76)
<EPS-DILUTED> (.70)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 4,802,845
<SECURITIES> 0
<RECEIVABLES> 71,577
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,887,164
<PP&E> 397,806
<DEPRECIATION> 173,282
<TOTAL-ASSETS> 5,204,688
<CURRENT-LIABILITIES> 463,347
<BONDS> 0
0
0
<COMMON> 12,569,168
<OTHER-SE> 666,722
<TOTAL-LIABILITY-AND-EQUITY> 5,204,688
<SALES> 0
<TOTAL-REVENUES> 89,803
<CGS> 39,401
<TOTAL-COSTS> 858,502
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,752
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (751,720)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.23)
</TABLE>
