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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 2, 2000
COMMISSION FILE NUMBER 0-23243
POPMAIL.COM, INC.
(Exact name of registrant as specified in its chapter)
MINNESOTA 41-1487885
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(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
1331 CORPORATE DRIVE, SUITE 350
IRVING, TEXAS 75038
(972) 550-5500
(Address, including zip code, and telephone number
of registrant's principal executive offices)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Shares of common stock (par value $.01 per share)
Common Stock Purchase Warrants
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
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The Company's revenues for the fiscal year ended January 2, 2000 totaled
$12,273,198.
As of March 27, 2000, the aggregate market value of the registrant's common
stock, $.01 par value, held by non-affiliates of the registrant, computed by
reference to the average high and low prices on such date as reported by the
NASDAQ SmallCap Market was $90,409,000. As of March 27, 2000, there were
outstanding 34,422,928 shares of the registrant's common stock.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement to be filed within 120
days after the end of the fiscal year covered by this report are incorporated by
reference into Items 9, 10, 11 and 12 of Part III hereof.
FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in the following pages, constitute
"forward-looking statements" within the meaning of the Securities Act of 1933,
as amended and the Securities Exchange Act of 1934, as amended. Forward-looking
statements involve a number of risks and uncertainties, and, in addition to the
risk and other factors discussed in this Form 10-KSB, other factors that could
cause actual results to differ materially are the following: the economic
conditions in the new markets into which the Company expands and possible
uncertainties in the customer base in these areas; competitive pressures from
other restaurant companies and providers of email-based services; ability to
raise additional capital required to support the Company's operations and enable
the Company to pursue its business plan; government regulation of the Internet;
business conditions, such as inflation or a recession, and growth in the general
economy; changes in monetary and fiscal policies, other laws and regulations;
and other risks identified from time to time in the Company's SEC reports,
registration statements and public announcements.
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TABLE OF
CONTENTS
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Page
PART I ----
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ITEM 1. Description of Business................................................................. 1
Risk Factors............................................................................ 8
ITEM 2. Description of Property................................................................. 21
ITEM 3. Legal Proceedings....................................................................... 23
ITEM 4. Submission of Matters to a Vote of Security Holders..................................... 23
PART II
ITEM 5. Market for Common Equity and Related Shareholder
Matters................................................................................. 24
ITEM 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................... 25
ITEM 7. Financial Statements.................................................................... F-1
ITEM 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................................................ 35
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act....................................... 36
ITEM 10. Executive Compensation.................................................................. 36
ITEM 11. Security Ownership of Certain Beneficial Owners and
Management.............................................................................. 36
ITEM 12. Certain Relationships and Related Transactions.......................................... 36
PART IV
ITEM 13. Exhibits and Reports on Form 8-K........................................................ 36
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
PopMail.com, inc. ("PopMail") currently consists of two divisions, the
restaurant division and the Internet division. The restaurant division develops,
owns and operates restaurants with multiple themed dining rooms designed to
appeal to the upscale casual dining market. PopMail has Cafe Odyssey restaurants
at the Mall of America in Bloomington, Minnesota which opened in June 1998, and
in the Denver Pavilions, which opened in March 1999.
Our Internet division consists of two companies, PopMail Network, Inc.,
("Network") based in Dallas, TX, a provider of permission and affinity based
email services to broadcast stations, professional sports teams and other
clients in the media and entertainment industries and the recently formed
IZ.com, Inc. ("IZ"), based in Bellevue, WA. The name "IZ was borrowed from
IZ.com Incorporated, a Delaware corporation acquired by PopMail in February
2000. IZ only recently commenced its operations.
The Company commenced operations as Hotel Mexico, Inc. ("HMI"), which
was incorporated in Ohio in January 1994. In 1996, the Company opened the
Kenwood Restaurant under the trade name Hotel Discovery, and in August 1997, HMI
was reorganized as Hotel Discovery, Inc., a Minnesota corporation. During
February 1998, the Company changed the name of its restaurant concept from Hotel
Discovery to Cafe Odyssey and changed the name of the Company to Cafe Odyssey,
Inc.
Pursuant to a merger effective September 1, 1999, the Company acquired
popmail.com, inc., a Delaware corporation engaged in the business of providing
Internet email services. Following the merger, the Company changed its corporate
name from Cafe Odyssey, Inc. to PopMail.com, inc.
On December 3, 1999, ROI Acquisition Corporation, a Texas corporation
and wholly owned subsidiary of PopMail, acquired, effective as of November 30,
1999, substantially all of the assets and assumed substantially all of the
liabilities of ROI Interactive, LLC ("ROI"), a Texas limited liability company.
ROI provides exclusive email service and permission-based, opt-in marketing
services to television stations and major league sports franchises.
Effective February 9, 2000, PopMail acquired IZ.com, Incorporated
("IZ.com"), a Delaware corporation. IZ.com (to be renamed "PopMail Media, Inc.")
is attempting to integrate the use of multiple media - television, the Internet
and email - to reach 18 to 25 year olds and derive commerce. PopMail Media is
attempting to build a brand and marketing strategy that will allow it to
dominate its target market. As a result of the PopMail Media acquisition, the
Company is changing its strategic focus to apply its multimedia expertise to the
email-based marketing business operated by PopMail. The Company is currently
modifying its website and television programming efforts in a directed effort to
complement PopMail's business strategy.
As noted in the Risk Factors section of this Form 10-KSB, the Company
has incurred substantial operating losses to date and, as of January 2, 2000,
has a deficiency in working capital of approximately $8.7 million. There can be
no assurance of the Company's capacity to achieve and sustain profitable
operations, and without additional financing (of which there can be no
assurance), the Company may not have sufficient funds to support its operations,
retire its indebtedness in the ordinary course of business and pursue its
business plan.
As also noted in the Risk Factors section of this Form 10-KSB, the
factors discussed in the preceding paragraph (among other factors) give rise to
a risk that the Company's common stock will be delisted from the Nasdaq SmallCap
Market, leading to a loss of liquidity and a decrease in the market price of the
Company's stock.
DESCRIPTION OF POPMAIL NETWORK, INC.
Network provides email services that allow its Clients to provide: 1)
outbound distribution email messages to registrants of the services and network
and 2) web based affinity email accounts to visitors of our Client's sites i.e.,
[email protected]. Network has over 500 Clients in the broadcast,
professional sports teams, media and entertainment industries. Network considers
its Clients to be "Affiliates," and the subscribers to ENEWSNOTIFIER(TM) and
PopMail(TM) to be "Members" because of their affinity towards, and willingness
to receive, information from one or more Affiliates. Together, these combined
services create a permission and affinity based email marketing network. The
distribution through this network, called "e-channels", is customized for each
Member, allowing them to select exactly the content they choose from their
favorite broadcast, entertainment and sports companies. "Clients" are defined as
entities that either pay Network for services or while not paying for a service,
have agreed through contract to provide Network either some right, limited or
complete, to communicate with Member(s). As a result, some Network Clients both
pay Network money and allow access to Members while other Network Clients may
only allow Network access to Members. Network has historically provided
customized email services and distribution to meet the marketing
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needs of individual businesses forming a one-to-one relationships with their
customers in the broadcast, media, sports and entertainment industries.
Network plans to bring more interested consumers ("Members") to its
Client's products by extending their brand, marketing efforts and content beyond
its own database and to other databases within our network of Clients.
Management believes the primary value of Network is the expanding base of
Members who have chosen to receive services from a Network Client and who
"opt-in" to services, content and products from other Network Clients.
Market
Rapidly Growing Market: Email is currently the number one application
on the Internet according to Forrester Research. Forrester estimates that email
will become a $4.8 Billion dollar industry by 2004, of which Network hopes to
capture a small share.
Growing Demand and Use for Email; The benefits of using email are: low
cost and higher response rates compared to traditional advertising and direct
mail, global reach, tracking of users interests, ease of use, and near real time
delivery.
Unique Position Within a Growing Market; Much commercial email is
unsolicited and is generic - not targeted to the recipient's needs or interests.
The majority of this commercial email is the electronic equivalent of junk mail.
Users receive these unsolicited emails from retail and category "opt-in" lists
or from lists compiled as they visit various web sites. This approach is
increasingly ineffective and disliked by recipients. In fact, growing resentment
towards unsolicited commercial email may lead to privacy regulation in the
United States.
The opposite of unsolicited email is "permission and affinity-based"
marketing which has been "opted-in" by recipients. In other words, recipients
have replied positively to a request by a company that they will willingly
accept email content from a specified source. The next level of the permission
basis is affinity, in which recipients have willingly allied with a group or
organization of their choice and have sought information from that group, brand,
icon or trusted agent.
Services
At the present time, Network offers two proprietary e-mail services which are
described below:
- ENEWSNOTIFIER(TM) (ENN) - a permission marketing email service, which
allows Clients to collect preference and demographic information from their
customers and create a Member database. These organizations can then use this
database to send out targeted, personalized and customized messages for
marketing purposes. Network provides the Client with a username and password to
access the administration area for sending out their own emails. Clients link
the services from their site. When a user visits the client's site, they click
on the icon which links them to our servers. They then sign up and select the
topics of interest to them on the Client's custom service. Network presently
offers the ENEWSNOTIFIER service through ROI.
- PopMail(TM) is an affinity email service that allows Clients to
offer free Web based email boxes on their home pages. Members sign up for a
personal email address that contains their affinity group's name (such as
[email protected]). Clients benefit from the affinity with their
customers and higher traffic on their Web site when registrants visit the
Client's site to send and receive their email. Clients can also sell
advertising.
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The Member visits the Client's site and clicks on the sign up box on
the frame that resides on the Client's site. Each page is customized with the
client's look and feel. Each time the Member wants to check their email they
visit the client's site and enter their username and password in the boxes on
the frame.
At present, Network targets four vertical markets for its email services:
broadcast, media, sports and entertainment. Companies in these vertical markets
typically have customers with a stronger affinity for their product or service -
such as a favorite sports team, radio station, personality, or publication.
Using Network's email services allows Clients to cut through the clutter and
inefficiencies of traditional marketing, and more effectively and efficiently
promote and brand their content, products or services to their viewers,
listeners, fans and customers on the topics and items already of interest to
them. Benefits and examples of these programs in action include:
- Television Stations - increase ratings by using ENN to notify
Members, via email, about news stories of interest to them scheduled for
broadcast on their station.
- Radio Stations - advertise their brand and drive traffic to their
sites by using PopMail(TM).
- Sports Teams - provide advanced information to Members, sell tickets
and merchandise, and sponsor promotions using ENN.
One of Network's goals is to leverage the relationships between the
Company's Clients and their customers and to strengthen the PopMail Network.
Revenues
Network currently generates revenue through the following means:
- Annual license fees
- Monthly hosting fees
- Set up fees
Although very little revenue has been generated to date by advertisements
and no revenue has been produced from e-commerce up-selling to Members, and
there can be no assurance that this will change, Network intends to introduce
these revenue generators to its business model within the near future.
Competition
There are many companies which compete directly or indirectly with
PopMail. Those in customer relationship management and outbound email production
include public companies such as Critical Path (CPTH), Digital Impact (DIGI)
Mail.com(MAIL), Message Media, Inc. (MESG), Kana Communications, Inc., (KANA)
24/7 Media Inc. (TFSM) and Exactis (XACT). There are a host of large and smaller
privately held companies. IZ's competitors include InfoBeat, Lifeminders
(LFMN), YesMail (YESM) and Netcreations(NTCR).
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At present, there are few affinity based email companies combining
affinity content with branded email and permission based email-marketing
services specifically towards the vertical markets we are currently in.
Strategy
Network plans to employ the following growth strategies:
- Continue to solidify its presence in its current targeted vertical
markets. At present, Network has signed agreements with more than
500 Clients. Many of these Clients have not fully utilized the
capability of the Network services by introducing advertising or
e-commere for up-selling and, as such, Network is also focusing on
the education of its Clients and Members to increase usage and,
ultimately, Members.
- Grow its existing member databases.
- Assist Clients in the development of affinity rich content for
distribution through the network to permission based Members.
- Resell IZ content through its network.
- Seek out and acquire companies that can enhance our goals, member
growth and content development.
- Form strategic relationships with other businesses that may
provide compatible and collaborative Internet services for the
Company's Broadcast, Media, Sports and Entertainment Clients.
- Select and move aggressively into other vertical markets where
Network's products and services can be effective branding and
marketing tools.
- Generate revenue from each contact between the Company and each
Client.
Network is currently looking at building e-commerce functionality into
its product offerings; this may be done internally or Network may select a
strategic partner in order to build its member base more rapidly. The Company
will also regularly introduce enhanced versions of its services and product
offerings.
In addition, Network has begun to penetrate the international market
and has begun to develop and deploy bilingual versions of Network's services.
Intellectual Property
The Company relies on tradename and trademark protection for its
proprietary names and logos. PopMail has not registered or sought to register
any patents. The Company seeks to protect its know-how and trade secrets
primarily through confidentiality and licence agreements.
Description of IZ.com, Inc.
IZ, based in Bellevue, WA, was recently incorporated as a wholly owned
Delaware subsidiary of PopMail. IZ produces web content for ZD Net under
contract at the direction of award winning journalist, Jesse Berst. The
newsletter called the "Berst Alert" is part of the web based information site
called Jesse Berst's Anchor Desk. See: http://www.zdnet.com/anchordesk. The
content provided through the Berst Alert is in the form of an affinity email
newsletter currently received by approximately 1.6 millions registrants each
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day. IZ is paid a fee to produce the Berst Alert under a one-year non-cancelable
agreement expiring in February 2001.
IZ plans to create and establish email content newsletters through
trusted agents (icons or personalities) with high affinity appeal within the
current Network vertical markets: broadcast, media, sports and entertainment. IZ
will resell content through Network to its network of affiliated Clients and
will establish additional content vertical markets. However, there can be no
assurance that IZ will produce any new newsletters.
DESCRIPTION OF RESTAURANT DIVISION
General
PopMail's restaurant division develops, owns and operates restaurants
with multiple themed dining rooms designed to appeal to the upscale casual
dining market. PopMail owns and operates two full service "Cafe Odyssey"
restaurants, one in the Mall of America, located in Bloomington, Minnesota, a
suburb of Minneapolis (the "Mall of America Restaurant"). The Mall of America
Restaurant opened on June 8, 1998, and the second, which opened on March 15,
1999, at the Denver Pavilions, located in the downtown district of Denver,
Colorado (the "Denver Pavilions Restaurant").
PopMail has no current plans to expand the restaurant division through
additional owned restaurants. The Company may ultimately license more Cafe
Odyssey restaurants or enter into other arrangements for additional restaurants
which do not require the Company to invest substantial amounts of capital.
In 1996 the Company opened a restaurant in Cincinnati, Ohio (the
"Kenwood Restaurant") under the trade name Hotel Discovery. PopMail closed the
Kenwood Restaurant in September 1999. In November 1999 the Company entered into
an agreement to sell the assets relating to the Kenwood Restaurant, subject to
certain contingencies concerning transfer of the liquor license and certain
other matters, which contingencies have not yet been fully resolved. In
connection with the pending sale, PopMail assigned the lease for the restaurant
property to the proposed buyer, who has been making the required lease payments
since November 1999. PopMail remains primarily obligated under the lease.
Concept
PopMail's restaurants are positioned in the upscale casual segment and
differentiate themselves from the competition by offering its guests an
enveloping experience that combines award winning food with sophisticated,
non-intrusive entertainment. While there are restaurants that have a strong food
base and others that focus on entertainment, PopMail feels that the
"experiential dining" combination it offers is unique to the industry.
Based on the concepts of travel, discovery and adventure, each
restaurant provides guests with a dining experience in multiple themed
environments that capture the romance, passion and nature of exotic locations
throughout the world utilizing state-of-the-art technology in sound, video,
lighting, scenery and decor. The Mall of America and Denver Pavilions
Restaurants contain three dining rooms that replicate the environments of the
lost City of Atlantis, the ancient Incan ruins of Machu Picchu in the Andes and
the sweeping plains of the Serengeti desert in Tanzania, Africa.
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The menu at each restaurant offers a broad range of cuisine from around
the world, including "cultural fusion" menu items such as Barcelona Spring Rolls
and Asian Tacos. Features include American, Asian, Jamaican, West Indian,
Mexican and European tastes and textures. Menu items are freshly made, using
only the highest quality fresh meats, produce, spices and other ingredients. The
menu mirrors the exploratory journey and adventure society themes of the
restaurants.
Each restaurant also has a retail area located at the entrance which
includes a collection of adult and children's casual clothing, including
T-shirts, sweatshirts, shirts and caps, and a limited amount of other logo
merchandise.
Restaurant Operations
PopMail strives to maintain quality operations through extensive
training of its employees and careful supervision of personnel. PopMail has
developed a detailed operations manual containing specifications relating to
food and beverage preparation, maintenance of premises and employee conduct.
Each restaurant is expected to have a director of operations with a staff of
five to seven managers and a staff accountant. Each director of operations
reports directly to PopMail's President of Restaurant Operations.
PopMail requires all kitchen and front-of-the-house managers to
complete an intensive six-week training program which includes two weeks of food
preparation training in the kitchen, as well as complete cross-training on all
other phases of the restaurant's operations. PopMail's restaurant management is
then tested on PopMail's philosophy, management strategy, policies, procedures
and operating standards. In addition, each prospective guest service employee
actually tastes, and is tested on, every food and beverage item on the menu.
Daily shift meetings are held prior to lunch and dinner to re-educate the
service staff on all menu items, to communicate daily specials, to respond to
feedback from comment cards and to reinforce service standards.
Competition
The food service industry is intensely competitive with respect to food
quality, concept, location, service and price. In addition, there are many
well-established food service competitors with substantially greater financial
and other resources than PopMail and with substantially longer operating
histories. PopMail believes that it competes with other full-service dine-in
restaurants, take-out food service companies, fast-food restaurants,
delicatessens, cafeteria-style buffets and prepared food stores, as well as with
supermarkets and convenience stores. Competitors include national, regional and
local restaurants, purveyors of carry out food and convenience dining
establishments.
Competition in the food service business is often affected by changes
in consumer tastes, national, regional, and local economic and real estate
conditions, demographic trends, traffic patterns, the cost and availability of
labor, purchasing power, availability of product, and local competitive factors.
PopMail attempts to manage or adapt to these factors, but it should be
recognized that some or all of these factors could cause PopMail to be adversely
affected. Management is of the opinion that quality food which is pleasingly
presented is an absolute requirement within the upscale casual segment of the
industry. Cafe Odyssey restaurants have won nine major food awards in three
cities, reflecting PopMail's commitment to food excellence.
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Government Regulations
PopMail is subject to federal, state and local laws affecting the
operation of its restaurants, including zoning, health, sanitation and safety
regulation and alcoholic beverage licensing requirements. Each restaurant is
operated in accordance with standardized procedures designed to assure
compliance with all applicable codes and regulations. The suspension of a food
service or liquor license would cause an interruption of operations at the
affected restaurant. PopMail believes that it is in compliance with all
licensing and other regulations.
PopMail is subject to "dram shop" statutes in the State of Minnesota
which generally provide a person injured by an intoxicated person the right to
recover damages from the establishment or establishments that served alcoholic
beverages to the intoxicated person. PopMail has obtained insurance against such
potential liability.
PopMail is also subject to the Fair Labor Standards Act, which governs
minimum wages, overtime and working conditions. A significant portion of
PopMail's restaurant employees are paid at rates relating to either the federal
or state minimum wage. Accordingly, an increase in the minimum wage would
directly increase each restaurant's labor cost.
Obtaining alcoholic beverage licenses from various jurisdictions will
require disclosure of certain detailed information about directors, officers and
greater than 10 percent shareholders of PopMail's equity securities, and will
necessitate that such persons be approved by the appropriate liquor licensing
authority.
EMPLOYEES
As of January 2, 2000, PopMail employed 271 persons, including 41 in
the Internet email services division and 230 persons in the Company's restaurant
operations. Approximately 85 of the Company's employees work part-time. None of
PopMail's employees is represented by a collective bargaining organization and
the Company has never experienced a work stoppage, strike or labor dispute. The
Company believes its relations with its employees are satisfactory.
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RISK FACTORS
The following discussion should be read in connection with the
Company's consolidated financial statements and related notes included
elsewhere in this report.
WE HAVE INCURRED LOSSES TO DATE AND IF OUR REVENUES DO NOT IMPROVE, WE
WILL NEED ADDITIONAL FINANCING IN ORDER TO CONTINUE OPERATIONS AND PURSUE OUR
BUSINESS PLAN.
PopMail incurred net losses of approximately $24.2 million during 1999,
$6.7 million in 1998 and $4.0 million in 1997 and had a working capital deficit
of approximately $8.7 million as of January 2, 2000. Our ability to continue our
present operations and successfully implement our expansion plans is contingent
upon our ability to increase our revenues and ultimately attain and sustain
profitable operations. Even though financing activity subsequent to January 2,
2000 has improved our working capital position (see Note N to the financial
statements) without additional financing, the cash generated from our current
operations will not be adequate to fund operations and service our indebtedness
during 2000. There can be no assurance that additional financing will be
available on terms acceptable to the Company or on any terms whatsoever. In the
event that we are unable to fund our operations and our business plan, or if we
fail to achieve or sustain profitable operations, the market price of our stock
will suffer.
OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ SMALLCAP MARKET,
WHICH DELISTING COULD HINDER YOUR ABILITY TO OBTAIN ACCURATE QUOTATIONS AS TO
THE PRICE OF OUR COMMON STOCK, OR DISPOSE OF OUR COMMON STOCK IN THE SECONDARY
MARKET.
Although our common stock is currently listed on the Nasdaq SmallCap
Market, we cannot guarantee that an active public market for our common stock
will continue to exist. We have responded to numerous inquiries from of Nasdaq
expressing concern over various matters, including but not limited to a "going
concern" qualification expressed by our former independent auditors as of
January 3, 1999. Accordingly, our securities may be delisted from the Nasdaq
SmallCap Market or be required to reapply for listing meeting the Nasdaq initial
listing requirements, which are generally more stringent than the requirements
currently governing the Company's listing. Additional factors giving rise to
such delisting could include, but are not be limited to: (1) a reduction of our
net tangible assets to below $2,000,000, (2) a reduction to one active market
maker, (3) a reduction in the market value of the public float in our securities
to less than $1,000,000, (4) a reduction of the trading price of our Common
Stock to less than $1.00 per share or (5) the discretion of the Nasdaq SmallCap
Market.
In the event our securities are delisted from the Nasdaq SmallCap
Market, trading, if any, in our common stock would thereafter be conducted in
the over-the-counter markets in the so-called "pink sheets" or the National
Association of Securities Dealer's "Electronic Bulletin Board." Consequently,
the liquidity of our common stock would likely be impaired, not only in the
number of shares which could be bought and sold, but also through delays in the
timing of the transactions, reduction in the coverage of our securities by
security analysts and the news media, and lower prices for our securities than
might otherwise prevail. In addition, our common stock would become subject to
certain rules of the Securities and Exchange Commission relating to "penny
stocks." These rules require broker-dealers to make special suitability
determinations for purchasers other than established customers and certain
institutional investors and to receive the purchasers' prior
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written consent for a purchase transaction prior to sale. Consequently, these
"penny stock rules" may adversely affect the ability of broker-dealers to sell
our common stock and may adversely affect your ability to sell shares of our
common stock in the secondary market.
WE ARE DEPENDENT ON THE ONGOING SERVICES OF CERTAIN OF OUR EXECUTIVES,
THE LOSS OF WHICH COULD HAVE A DETRIMENTAL EFFECT ON OUR PROFITABILITY AND THE
MARKET PRICE OF OUR STOCK.
Our plan of business development and our day-to-day operations rely
heavily on the experience of Stephen D. King, our Chief Executive Officer,
Ronald K. Fuller, our President, Jesse Berst, the CEO of our IZ business,
Thomas W. Orr, our Chief Financial Officer and Gary Schneider, the CEO of our
PopMail Network division. The loss of any of them could adversely affect the
success of our operations and strategic plans and, consequently, have a
detrimental effect on the market price of our stock.
WE MAY BE UNABLE TO HIRE QUALIFIED EMPLOYEES TO HELP IMPLEMENT AND
MANAGE OUR EXPANSION PLANS, WHICH INABILITY COULD BE DETRIMENTAL TO THE VALUE OF
YOUR INVESTMENT.
Our success will depend in large part upon our ability to supplement
our existing management team. We will need to hire additional corporate level
and management employees to help implement and operate our plans for expansion
of our Internet and restaurant divisions. The demand for individuals with
management skills is high and many other businesses, most of which have greater
name recognition and resources than the Company, compete for their services.
Any inability or delay in obtaining additional key employees could have a
material adverse effect on our expansion plans and, consequently, the market
value of our stock.
DUE TO OUR LIMITED OPERATING HISTORY, YOU MAY FIND IT DIFFICULT TO
ASSESS OUR ABILITY TO OPERATE PROFITABLY.
We have only been operating our Mall of America restaurant since June
1998, and our Denver restaurant since March 1999. In addition, Old Popmail was
founded in December 1997, and ROI commenced operations in June 1998. Finally,
IZ.com Incorporated was incorporated in February 1999. Consequently, we face the
added risks, expenses and difficulties related to developing and operating a new
business enterprise. Given our lack of significant operating history, investors
may have difficulty assessing the many factors which will determine our ability
to generate future profits.
ONE INDIVIDUAL CONTROLS A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK AND
MAY INFLUENCE OUR AFFAIRS.
Following our merger with popmail.com, inc. on September 1, 1999, James
L. Anderson was elected to our Board of Directors and served as its Chairman
until his resignation on January 24, 2000. Effective February 1, 2000, Mr.
Anderson resigned from our Board. Based upon a Schedule 13D filed with the
Securities and Exchange Commission on September 13, 1999, as of March 27, 2000,
Mr. Anderson indirectly or directly controlled approximately 31.6 percent of our
outstanding common stock. Accordingly, he may have the ability to determine the
election of members of the Board of Directors and determine the approval of
corporate transactions and other matters requiring shareholder approval. Unless
and until Mr. Anderson substantially decreases his percentage beneficial
ownership in our common stock, he will continue to have significant influence
over our affairs.
DUE TO THE LARGE NUMBER OF OUTSTANDING OPTIONS AND WARRANTS, OUR
SHAREHOLDERS FACE A RISK OF SUBSTANTIAL FUTURE DILUTION AND DOWNWARD PRESSURE
ON THE TRADING PRICE OF OUR COMMON STOCK.
We have a total of 29,483,118 shares of our common stock reserved for
issuance pursuant to our stock options plans, outstanding preferred stock and
common purchase warrants. Most of these shares have either registered for
resale or are subject to agreements providing for their registration for resale
under certain circumstances. Accordingly, our existing shareholders face a
substantial risk of dilution and the trading price of our common stock may
decrease as these convertible securities are exercised or converted into shares
of common stock and subsequently offered for sale through the Nasdaq SmallCap
Market.
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WE RELY HEAVILY ON OUR INTELLECTUAL PROPERTY RIGHTS AND OTHER
PROPRIETARY INFORMATION; FAILURE TO PROTECT AND MAINTAIN THESE RIGHTS AND
INFORMATION COULD PREVENT US FROM COMPETING EFFECTIVELY.
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we seek to protect
through a combination of trade secret and trademark law, as well as
confidentiality or license agreements with our employees, consultants, and
corporate and strategic partners. If we are unable to prevent the unauthorized
use of our proprietary information or if our competitors are able to develop
similar technologies independently, the competitive benefits of our
technologies, intellectual property rights and proprietary information will be
diminished.
WE MAY NOT PAY DIVIDENDS ON OUR COMMON STOCK, IN WHICH EVENT YOUR ONLY
RETURN ON INVESTMENT, IF ANY, WILL OCCUR ON THE SALE OF OUR STOCK.
To date, we have not paid any cash dividends on our common stock, and
we do not intend to do so in the foreseeable future. Rather, we intend to use
any future earnings to fund our operations and the growth of our business.
Accordingly, the only return on an investment in our common stock will occur
upon its sale.
PURSUANT TO ITS AUTHORITY TO DESIGNATE AND ISSUE SHARES OF OUR STOCK AS
IT DEEMS APPROPRIATE, OUR BOARD OF DIRECTORS MAY ASSIGN RIGHTS AND PRIVILEGES TO
CURRENTLY UNDESIGNATED SHARES WHICH COULD ADVERSELY AFFECT YOUR RIGHTS AS A
COMMON SHAREHOLDER.
Our authorized capital consists of 100,000,000 shares of capital stock.
Our Board of Directors, without any action by the shareholders, may designate
and issue shares in such classes or series (including classes or series of
preferred stock) as it deems appropriate and establish the rights, preferences
and privileges of such shares, including dividends, liquidation and voting
rights. As of March 27, 2000, we have 34,422,928 shares of common stock,
275,000 shares of Series E Convertible Preferred Stock and 287,408 shares of
Series F Convertible Preferred Stock outstanding. As of such date, a further
31,055,117 shares of common stock have been reserved as follows:
- a maximum of 750,000 shares of common stock reserved for issuance
upon exercise of the Series E Preferred Shares, 275,000 shares of
which are currently outstanding;
- a maximum of 7,375,000 shares of common stock reserved for
issuance upon conversion of Series F Convertible Preferred Stock;
- 3,348,895 shares of common stock issuable upon exercise of options
granted under the IZ.com Incorporated stock option plan assumed by
the Company;
- 2,600,000 shares issuable upon the exercise of the Class A
Warrants issued as part of our initial public offering and the
partial exercise of the underwriter's over-allotment;
- 15,100,889 shares issuable upon the exercise of outstanding
warrants;
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- 1,250,000 shares reserved for issuance under our 1997 Stock Option
and Compensation Plan, of which options reverting to 1,590,333
shares are currently outstanding (including 340,333 shares which
remain subject to shareholder approval);
- 250,000 shares for issuance under our 1998 Director Stock Option
Plan, of which options relating to 290,000 shares are currently
outstanding, of which 40,000 remain subject to shareholder
approval; and
The rights of holders of preferred stock and other classes of common stock
that may be issued could be superior to the rights granted to holders of the
Units issued in our initial public offering. Our Board's ability to designate
and issue such undesignated shares could impede or deter an unsolicited tender
offer or takeover proposal. Further, the issuance of additional shares having
preferential rights could adversely affect the voting power and other rights of
holders of common stock.
MINNESOTA LAW MAY INHIBIT OR DISCOURAGE TAKEOVERS, WHICH COULD REDUCE THE
MARKET VALUE OF OUR STOCK.
As a corporation organized under Minnesota law, we are subject to
certain Minnesota statutes which regulate business combinations and restrict the
voting rights of certain persons acquiring shares of its stock. By impeding a
merger, consolidation, takeover or other business combination involving the
Company or discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company, these regulations could
adversely affect the market value of our stock.
THE LIMITATIONS ON DIRECTOR LIABILITY CONTAINED IN OUR ARTICLES OF
INCORPORATION AND BYLAWS MAY DISCOURAGE SUITS AGAINST DIRECTORS FOR BREACH OF
FIDUCIARY DUTY.
As permitted by Minnesota law, our Amended and Restated Articles of
Incorporation provide that members of our Board of Directors are not personally
liable to you or the Company for monetary damages resulting from a breach of
their fiduciary duties. These limitations on director liability may discourage
shareholders from suing directors for breach of fiduciary duty and may reduce
the likelihood of derivative litigation brought against a director by
shareholders on the Company's behalf. Furthermore, our Bylaws provide for
mandatory indemnification of directors and officers to the fullest extent
permitted by Minnesota law. All of these provisions limit the extent to which
the threat of legal action against our directors for any breach of their
fiduciary duties will prevent such breach from occurring in the first instance.
PURSUING AND COMPLETING POTENTIAL ACQUISITIONS COULD DIVERT MANAGEMENT
ATTENTION AND FINANCIAL RESOURCES AND MAY NOT PRODUCE THE DESIRED BUSINESS
RESULTS.
We do not have specific personnel dedicated solely to pursuing and
completing acquisitions. As a result, if we pursue any acquisition, our
management, in addition to fulfilling their operational responsibilities, could
spend significant time, management resources and financial resources to pursue
and complete the acquisition and integrate the acquired business with our
existing business.
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To finance any acquisition, we may use capital stock or cash or a combination
of both. Alternatively, we may borrow money from a bank or other lender. If we
use capital stock, our shareholders may experience dilution. If we use cash or
debt financing, our financial liquidity would be reduced. In addition,
acquisitions may result in nonrecurring charges or the amortization of
significant goodwill that could adversely affect our ability to achieve and
maintain profitability.
Despite the investment of these management and financial resources and
completion of due diligence with respect to these efforts, an acquisition may
fail to produce the expected revenues, earnings or business and an acquired
service or technology may not perform as expected for a variety of reasons,
including:
- Difficulties in the assimilation of the operations, technologies,
products and personnel of the acquired company,
- Risks of entering markets in which we have no or limited prior
experience,
- Expenses of any undisclosed or potential legal liabilities of the
acquired company,
- The applicability of rules and regulations that might restrict our
ability to operate, and
- The potential loss of key employees of the acquired company.
If we make acquisitions in the future and the acquired businesses fail
to perform as expected, our business operating results and financial condition
may be materially adversely affected.
FAILURE TO MANAGE OUR GROWTH MAY ADVERSELY AFFECT OUR BUSINESS
We have grown rapidly and expect to continue to grow rapidly both by
hiring new employees and serving new business and markets. Our growth has
placed, and will continue to place, a significant strain on our management and
our operating and financial systems.
Our personnel, systems, procedures and controls may be inadequate to
support our future operations. In order to accommodate the increased size of our
operations, we will need to hire, train and retain the appropriate personnel to
manage our operations. We will also need to improve our financial and management
controls, reporting systems and operating systems, all of which will require
significant ongoing investments of the efforts of key personnel.
IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND
INVESTORS, THE MARKET PRICE OF OUR COMMON STOCK MAY FALL SIGNIFICANTLY.
The market price of publicly traded securities generally reflects, to a
large degree, the expectations of industry analysts and significant investors
with respect to the short and long-term operating results of the issuers. When
issuers fail to meet such expectations, the market price of their publicly
traded securities usually decreases, sometimes significantly, and may not
recover. There can be no assurance that We will be able to satisfy the
expectations of market analysts and investors to avoid a precipitous drop in the
market price of our common stock.
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OUR ABILITY, OR INABILITY, TO RESPOND TO VARIOUS COMPETITIVE FACTORS
AFFECTING THE RESTAURANT INDUSTRY MAY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.
The restaurant industry is highly competitive and is affected by
changes in consumer preferences, as well as by national, regional and local
economic conditions, and demographic trends. Discretionary spending priorities,
traffic patterns, tourist travel, weather conditions, employee availability and
the type, number and location of competing restaurants, among other factors,
will also directly affect the performance of our restaurants. Changes in any of
these factors in the markets where we currently operate our restaurants could
adversely affect the results of our operations. Furthermore, the restaurant
industry in general is highly competitive based on the type, quality and
selection of the food offered, price, service, location and other factors and,
as a result, has a high failure rate. The themed restaurant industry is
relatively young, is particularly dependent on tourism and has seen the
emergence of a number of new competitors. We compete with numerous
well-established competitors, including national, regional and local restaurant
chains, many of which have greater financial, marketing, personnel and other
resources and longer operating histories than us. As a result, we may be unable
to respond to the various competitive factors affecting the restaurant industry.
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INTERNET DIVISION
WE ARE ENTERING INTO A NEW BUSINESS VENTURE IN AN EVOLVING INDUSTRY
IN WHICH WE HAVE NO EXPERIENCE AND WHICH HAS AN UNPROVEN REVENUE MODEL.
The email business adds a significantly different business to our
business operations. Some members of our present management have little or
no experience with the business of providing email services. The
Internet industry is rapidly evolving, extremely competitive, and the market
place for internet-related shares has been very volatile. Furthermore, the
email business has no proven revenue model. Consequently, there can be no
assurance that sufficient revenues will be generated to support our current
operations and other capital requirements.
IN LIGHT OF RECENT CONSOLIDATION IN THE RADIO INDUSTRY, THE LOSS OF ANY
SIGNIFICANT AFFILIATE CONTRACTS WOULD NEGATIVELY IMPACT POPMAIL'S OPERATIONS.
The last few years have brought substantial concentration of power
among a few players in the radio industry. Consequently, significant portions of
the industry are controlled by a relatively few organizations. We already have
affiliation contracts in place with 2 of the 5 largest organizations and are in
negotiations with the remaining players. In light of such consolidation,
however, the loss of any of these significant affiliation contracts or our
inability to enter into contracts with other radio industry entities would
negatively impact our operations.
OUR EMAIL BASED PRODUCTS ARE DEPENDENT UPON THE INTERNET.
The success of our services and products will depend in large part upon
the continued development and expansion of the Internet. The Internet has
experienced, and is expected to continue to experience, significant and
geometric growth in the number of users and the amount of traffic. There can be
no assurance that the Internet infrastructure will continue to be able to
support the demands placed on it by this continued growth. In addition, the
Internet could lose its viability due to delays in the development or adoption
of new standards and protocols (for example, the next-generation Internet
Protocol) to handle increased levels of Internet activity, or due to increased
governmental regulation. There can be no assurance that the infrastructure or
complementary services necessary to make the Internet a viable commercial
marketplace will be developed, or, if developed, that the Internet will become a
viable commercial marketplace for services and products
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such as those we offer. If the necessary infrastructure or complementary
services or facilities are not developed, or if the Internet does not become a
viable commercial marketplace, our business, results of operations, and
financial condition will be materially adversely affected.
OUR FUTURE SUCCESS WILL DEPEND ON INCREASED ACCEPTANCE OF THE INTERNET
AS A MEDIUM OF COMMERCE.
The market for Internet email and other services is relatively new and
evolving rapidly. Our future success will depend, in part, upon our ability to
provide services that are accepted by our existing and future members as an
integral part of their business model. The level of demand for Internet email
and other services will depend upon a number of factors, including the
following:
- - - the growth in consumer access to, and acceptance of, new interactive
technologies such as the Internet;
- - - the adoption of Internet-based business models; and
- - - the development of technologies that facilitate two-way communication between
companies and target audiences.
Significant issues concerning the commercial use of Internet
technologies, including security, reliability, cost, ease of use and quality of
service, remain unresolved and may inhibit the growth of services that use these
technologies. Our future success will depend, in part, on our ability to meet
these challenges, which must be met in a timely and cost-effective manner. We
cannot be sure that we will succeed in effectively meeting these challenges, and
our failure to do so could materially and adversely affect our business.
Industry analysts and others have made many predictions concerning the
growth of the Internet as a business medium. Many of these historical
predictions have overstated the growth of the Internet. These predictions should
not be relied upon as conclusive. The market for our Internet email services may
not develop, our services may not be adopted and individual personal computer
users in business or at home may not use the Internet or other interactive media
for commerce and communication. If the market for Internet email and other
services fails to develop, or develops more slowly than expected, or if our
services do not achieve market acceptance, our business would be materially and
adversely affected.
INTERNET STOCKS ARE SUBJECT TO MARKET VOLATILITY.
The stock market in general, and the market prices for Internet-related
companies in particular, have experienced extreme volatility that often has been
unrelated to the operating performance of such companies. These fluctuations may
adversely affect our stock price.
If Internet usage does not continue to grow or its infrastructure
fails, our business will suffer. If the Internet does not gain increased
acceptance for business-to-consumer electronic commerce, our business will not
grow or become profitable. We cannot be certain that the infrastructure or
complementary services necessary to maintain the Internet as a useful and easy
means of transferring documents and data will continue to develop. The Internet
infrastructure may not support the demands that growth may place on it and the
performance and reliability of the Internet may decline.
INCREASED COMPETITION RESULTING FROM AN INCREASE IN THE NUMBER OF FREE
EMAIL PROVIDERS THAT TARGET THE RADIO INDUSTRY MAY HAVE AN ADVERSE EFFECT ON
POPMAIL'S FUTURE BUSINESS OPERATIONS.
Currently there are hundreds of free email providers, but our
management believes that it is currently the only email provider that
targets the radio industry. To the extent we are successful within the radio
industry, we anticipate others will attempt to compete in the radio segment.
Increased competition due to a greater number of free email providers targeting
the radio industry may have an adverse affect on our future business operations.
WE MAY FACE INCREASING COMPETITION FOR RADIO STATION CUSTOMERS AND
INTERNET ADVERTISERS.
As a provider of free email, we compete with numerous other email
providers, many of which have more capital than us. The principal competitors in
the private-label email service business are: CommTouch, WhoWhere, MailChek,
iName, and OnMedia. Of these providers, to the knowledge of our management, only
MailChek and OnMedia have any radio station customers. The Company views its
greatest competitive threat to its ability to establish relationships with radio
stations as the potential availability of software that may duplicate many of
the features in the PopMail email system. In addition, we face increasing
competition for Internet advertisers.
THERE IS A RISK THAT GOVERNMENT REGULATION OF THE INTERNET COULD BECOME
MORE EXTENSIVE.
There are currently few laws or regulations directly applicable to
access to or commerce on the Internet. However, due to the increasing popularity
and use of the Internet, it is possible that a number of laws and regulations
may be adopted with respect to the Internet, covering issues such as user
privacy, pricing, characteristics, and quality of products and service. The
Telecommunications Reform Act of 1996 imposes criminal penalties on anyone who
distributes obscene, indecent, or patently offensive communications on the
Internet. Other nations, including Germany, have taken
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actions to restrict the free flow of material deemed to be objectionable on the
Internet. The adoption of any additional laws or regulations may decrease the
growth of the Internet, which could in turn decrease the demand for our services
and products, and increase our cost of doing business or otherwise have an
adverse effect on our business, results of operations and financial condition.
Moreover, the applicability to the Internet of existing laws in various
jurisdictions governing issues such as property ownership, libel, and personal
privacy is uncertain and will take years to resolve. Any such new legislation or
regulation could have a material adverse effect on our business, results of
operations, and financial condition.
WE MAY NOT BE ABLE TO GENERATE SUFFICIENT REVENUE IF THE ACCEPTANCE OF
ONLINE ADVERTISING, WHICH IS NEW AND UNPREDICTABLE, DOES NOT DEVELOP AND EXPAND
AS WE ANTICIPATE.
We have to derive a substantial portion of our revenue from online
advertising and direct marketing, including both email and Web-based programs.
If these services do not continue to achieve market acceptance, we may not
generate sufficient revenue to support our continued operations. The Internet
has not existed long enough as an advertising medium to demonstrate its
effectiveness relative to traditional advertising. Advertisers and advertising
agencies that have historically relied on traditional advertising may be
reluctant or slow to adopt online advertising. Many potential advertisers have
limited or no experience using email or the Web as an advertising medium. They
may have allocated only a limited portion of their advertising budgets to online
advertising, or may find online advertising to be less effective for promoting
their products and services than traditional advertising media. If the market
for online advertising fails to develop or develops more slowly than we expect,
we may not sustain revenue growth or achieve or sustain profitability.
The market for email advertising in general is vulnerable to the
negative public perception associated with unsolicited email, known as "spam."
Public perception, press reports or governmental action related to spam could
reduce the overall demand for email advertising in general, which could reduce
our revenue and prevent us from achieving or sustaining profitability.
IF WE DO NOT MAINTAIN AND EXPAND OUR MEMBER BASE WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY FOR ADVERTISERS.
Our revenue has been derived primarily from advertisers seeking
targeted member groups in order to increase their return on advertising
investments. If we are unable to maintain and expand our member base,
advertisers could find our audience less attractive and effective for promoting
their products and services and we could experience difficulty retaining our
existing advertisers and attracting additional advertisers. To date, we have
relied on referral-based marketing activities to attract a portion of our
members and will continue to do so for the foreseeable future. This type of
marketing is largely outside of our control and there can be no assurance that
it will generate rates of growth in our member base comparable to what we have
experienced to date.
We would also be unable to grow our member base if a significant number
of our current members stopped using our service. Members may discontinue using
our service if they object to having their online activities tracked or they do
not find our content useful. In addition, our service allows our members to
easily unsubscribe at any time by clicking through a link appearing at the
bottom of our email messages and selecting the particular categories from which
they want to unsubscribe.
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OUR BUSINESS DEPENDS ON OUR ABILITY TO DEVELOP AND MAINTAIN RELEVANT
AND APPEALING CONTENT IN OUR EMAIL MESSAGES; IF WE ARE NOT ABLE TO CONTINUE TO
DELIVER SUCH CONTENT WE MAY BE NOT ABLE TO MAINTAIN AND EXPAND OUR MEMBER BASE,
WHICH COULD NEGATIVELY AFFECT OUR ABILITY TO RETAIN AND ATTRACT THE ADVERTISERS
WE NEED TO SUSTAIN REVENUE GROWTH.
We have relied on our editorial staff to identify and develop
substantially all of our content utilizing content derived from other parties.
Because our members' preferences are constantly evolving, our editorial staff
may be unable to accurately and effectively identify and develop content that is
relevant and appealing to our members. As a result, we may have difficulty
maintaining and expanding our member base, which could negatively affect our
ability to retain and attract advertisers. If we are unable to retain and
attract advertisers our revenue will decrease. Additionally, we license a small
percentage of our content from third parties. The loss, or increase in cost, of
our licensed content may impair our ability to assimilate and maintain
consistent, appealing content in our email messages or maintain and improve the
services we offer to consumers. We intend to continue to strategically license a
portion of our content for our emails from third parties, including content that
is integrated with internally developed content. These third-party content
licenses may be unavailable to us on commercially reasonable terms, and we may
be unable to integrate third-party content successfully. The inability to obtain
any of these licenses could result in delays in product development or services
until equivalent content can be identified, licensed and integrated. Any delays
in product development or services could negatively affect our ability to
maintain and expand our member base.
IF WE DO NOT RESPOND TO OUR COMPETITION EFFECTIVELY, WE MAY LOSE
CURRENT ADVERTISERS AND FAIL TO ATTRACT NEW ADVERTISERS, REDUCING OUR REVENUES
AND HARMING OUR FINANCIAL RESULTS.
We face intense competition from both traditional and online
advertising and direct marketing businesses. If we do not respond to this
competition effectively, we may not be able to retain current advertisers or
attract new advertisers, which would reduce our revenue and harm our financial
results. Currently, several companies offer competitive email direct marketing
services, such as coolsavings.com, MyPoints.com, NetCreations, YesMail.com,
Digital Impact and Exactis. We also expect to face competition from online
content providers, list aggregators as well as established online portals and
community Web sites that engage in direct marketing programs. Additionally, we
may face competition from traditional advertising agencies and direct marketing
companies that may seek to offer online products or services.
WE DEPEND HEAVILY ON OUR NETWORK INFRASTRUCTURE AND IF THIS FAILS IT
COULD RESULT IN UNANTICIPATED EXPENSES AND PREVENT OUR MEMBERS FROM EFFECTIVELY
UTILIZING OUR SERVICES, WHICH COULD NEGATIVELY IMPACT OUR ABILITY TO ATTRACT AND
RETAIN MEMBERS AND ADVERTISERS.
Our ability to successfully create and deliver our email messages
depends in large part on the capacity, reliability and security of our
networking hardware, software and telecommunications infrastructure. Failures
within our network infrastructure could result in unanticipated expenses to
address such failures and could prevent our members from effectively utilizing
our services, which could prevent us from retaining and attracting members and
advertisers. The hardware
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infrastructure on which our system operates is located at PSINet in Reston,
Virginia. We do not currently have fully redundant systems or a formal disaster
recovery plan. Our system is susceptible to natural and man-made disasters,
including earthquakes, fires, floods, power loss and vandalism. Further,
telecommunications failures, computer viruses, electronic break-ins or other
similar disruptive problems could adversely affect the operation of our systems.
Our insurance policies may not adequately compensate us for any losses that may
occur due to any damages or interruptions in our systems. Accordingly, we could
be required to make capital expenditures in the event of unanticipated damage.
In addition, our members depend on Internet service providers, or ISPs, for
access to our Web site. Due to the rapid growth of the Internet, ISPs and Web
sites have experienced significant system failures and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
These problems could harm our business by preventing our members from
effectively utilizing our services.
OUR FUTURE SUCCESS WILL DEPEND ON INCREASED ACCEPTANCE OF THE INTERNET
AS A MEDIUM OF COMMERCE.
The market for Internet email and other services is relatively new and
evolving rapidly. Our future success will depend, in part, upon our ability to
provide services that are accepted by our existing and future members as an
integral part of their business model. The level of demand for Internet email
and other services will depend upon a number of factors, including the
following:
- - - the growth in consumer access to, and acceptance of, new interactive
technologies such as the Internet;
- - - the adoption of Internet-based business models; and
- - - the development of technologies that facilitate two-way communication
between companies and target audiences.
Significant issues concerning the commercial use of Internet
technologies, including security, reliability, cost, ease of use and quality of
service, remain unresolved and may inhibit the growth of services that use these
technologies. Our future success will depend, in part, on our ability to meet
these challenges, which must be met in a timely and cost-effective manner. We
cannot be sure that we will succeed in effectively meeting these challenges, and
our failure to do so could materially and adversely affect our business.
Industry analysts and others have made many predictions concerning the
growth of the Internet as a business medium. Many of these historical
predictions have overstated the growth of the Internet. These predictions should
not be relied upon as conclusive. The market for our Internet email services may
not develop, our services may not be adopted and individual personal computer
users in business or at home may not use the Internet or other interactive media
for commerce and communication. If the market for Internet email and other
services fails to develop, or develops more slowly than expected, or if our
services do not achieve market acceptance, our business would be materially and
adversely affected.
WE MAY INCUR LIABILITY FOR THE INVASION OF PRIVACY
The Federal Trade Commission has investigated businesses that have used
personally identifiable information without permission or in violation of a
stated privacy policy. PopMail has established and communicated to its members a
privacy policy. In the event that the
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Company conveys personally identifiable information to its corporate customers
without permission or in violation of its stated privacy policy, we may incur
liability for the unlawful invasion of privacy.
RESTAURANT DIVISION
OUR ABILITY, OR INABILITY, TO RESPOND TO VARIOUS COMPETITIVE FACTORS
AFFECTING THE RESTAURANT INDUSTRY MAY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.
The restaurant industry is highly competitive and is affected by
changes in consumer preferences, as well as by national, regional and local
economic conditions, and demographic trends. Discretionary spending priorities,
traffic patterns, tourist travel, weather conditions, employee availability and
the type, number and location of competing restaurants, among other factors,
will also directly affect the performance of our restaurants. Changes in any of
these factors in the markets where we currently operate our restaurants could
adversely affect the results of our operations. Furthermore, the restaurant
industry in general is highly competitive based on the type, quality and
selection of the food offered, price, service, location and other factors and,
as a result, has a high failure rate. The themed restaurant industry is
relatively young, is particularly dependent on tourism and has seen the
emergence of a number of new competitors. We compete with numerous
well-established competitors, including national, regional and local restaurant
chains, many of which have greater financial, marketing, personnel and other
resources and longer operating histories than us. As a result, we may be unable
to respond to the various competitive factors affecting the restaurant industry.
WE HAVE ENTERED INTO NON-CANCELABLE LEASES UNDER WHICH WE ARE OBLIGATED
TO MAKE PAYMENTS FOR TERMS OF 12 TO 15 YEARS.
We have entered into long-term leases relating to the Kenwood, Mall of
America and Denver restaurants. These leases are non-cancelable by us (except in
limited circumstances) and range in term from 12 to 15 years. Although we have
closed the Kenwood restaurant and assigned the related lease to an unrelated
third party who is currently making the required lease payments, We remain the
primary obligor under the lease. If we decide to close any of our existing
restaurants, we may nonetheless be committed to perform our obligations under
the applicable lease, which would include, among other things, payment of the
applicable base rent for the balance of the respective lease term. Such
continued obligations increase our chances of closing a restaurant without
receiving an adequate return on our investment.
AMONG OTHER ECONOMIC FACTORS OVER WHICH WE HAVE NO CONTROL, THE SUCCESS
OF OUR RESTAURANTS WILL DEPEND ON CONSUMER PREFERENCES AND THE PREVAILING LEVEL
OF DISCRETIONARY CONSUMER SPENDING.
The success of our restaurant division depends to a significant degree
on a number of economic conditions over which we have no control, including:
- discretionary consumer spending;
- the overall success of the malls, entertainment centers and other
venues where Cafe Odyssey restaurants are or will be located;
- economic conditions affecting disposable consumer income; and
- the continued popularity of themed restaurants in general and the Cafe
Odyssey concept in particular.
Furthermore, most themed restaurants are especially susceptible to shifts in
consumer preferences because they open at or near capacity and frequently
respond to such shifts by experiencing a decline in revenue growth or of actual
revenues. An adverse change in any or all of these conditions would have a
negative effect on our operations and the market value of our common stock.
OUR RESTAURANT DIVISION IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION
WHICH COULD HAVE A NEGATIVE EFFECT ON OUR BUSINESS.
The restaurant industry, and to a lesser extent, the retail
merchandising industry, are subject to numerous federal, state, and local
government regulations, including those relating to:
- the preparation and sale of food
- building and zoning requirements
- environmental protections
- minimum wage requirements
- overtime
- working and safety conditions
- the sale of alcoholic beverages
- sanitation
- relationships with employees
- unemployment
- workers compensation
- citizenship requirements
Any change in the current status of such regulations, including an
increase in employee benefits costs, workers' compensation insurance rates, or
other costs associated with employees, could substantially increase our
compliance and labor costs. Because we pay many of our restaurant-level
personnel rates based on either the federal or the state minimum wage, increases
in the minimum wage would lead to increased labor costs. In addition, our
operating results would be adversely affected in the event we fail to maintain
our food and liquor licenses. Furthermore, restaurant operating costs are
affected by increases in unemployment tax rates, sales taxes and similar costs
over which we have no control.
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ITEM 2. DESCRIPTION OF PROPERTY.
THE MALL OF AMERICA RESTAURANT
Location
The Mall of America Restaurant consists of approximately 17,800 square
feet located on the third floor of the Mall of America in Bloomington,
Minnesota, a suburb of Minneapolis. This site is leased pursuant to a lease
agreement dated August 4, 1997.
The Mall of America opened in August 1992 with 266 tenants and now
holds approximately 520 stores, merchandise carts and attractions, including
four large anchor tenants (Macy's, Bloomingdale's, Sears and Nordstrom). The
mall encompasses 4.2 million square feet on four enclosed floors, of which 2.5
million square feet are leasable, and employs 11,000 to 13,000 people, depending
on the season. More than 93% of the leasable space is under contract, up from
71% five years ago. The mall draws an estimated 40 million visitors per year.
Tourists account for 35% to 37% of annual mall traffic, but increases up to 50%
in the summer months.
Description of Lease
The term of the lease is for 12 years, commencing on June 1, 1998. The
lease does not provide for renewal terms.
The lease provides for the payment of either a minimum annual rent or a
percentage rent based on gross sales. The minimum annual rent is $25 per square
foot, or $405,375 per year based on approximately 16,215 square feet of leased
area. The percentage rent is the amount by which 6% of gross sales exceeds
minimum rent. The terms of payment do not change over the course of the lease
term. The lease also provided for a waiver of the minimum annual rent only, for
the first year of the lease. In addition to the fixed minimum rent and
percentage rent, the Company is required to pay its proportionate share of
common area maintenance costs; taxes, insurance, maintenance and operating
costs.
THE DENVER PAVILIONS RESTAURANT
Location
The Denver Pavilions Restaurant consists of approximately 18,000 square
feet located on the third floor of the Denver Pavilions in Denver, Colorado.
This site is leased pursuant to a lease agreement dated May 12, 1998 and
includes office space utilized for the Company's restaurant division.
21
<PAGE> 24
Description Of Lease
The term of the lease is for 15 years, commencing on February 27, 1999.
The lease also provides for three renewal terms.
The lease provides for the payment of either a minimum annual rent or a
percentage rent based on gross sales. The minimum annual rent increases
throughout the term of the lease from $450,000 per year in years one through
five to $568,800 in years 11 through 15. The percentage rent is the amount by
which 5% of gross sales exceeds minimum rent. The lease also provides for a
tenant allowance. In addition to the fixed minimum rent and percentage rent, the
Company is required to pay its proportionate share of common area maintenance
costs: taxes, insurance, maintenance and operating costs.
THE KENWOOD RESTAURANT
Location
The Kenwood Restaurant opened in December 1996 under the name Hotel
Discovery and was closed by the Company in August 1999. In November 1999, the
Company assigned the related lease (described below) in connection with the
pending sale of restaurant assets to a third party, who subsequently reopened
the restaurant under another name and continues to operate the same. The
property is approximately 17,000 square feet in size on three levels and is
located at the northeast corner of Sycamore Plaza at Kenwood Shopping Center in
Cincinnati, Ohio. Although the third party has paid all payments due under the
lease since November 1999, PopMail remains primarily obligated under the lease.
Description of Lease
The initial term of the lease is 15 years with an option for two
additional five-year periods. The lease provides for the payment of both a
monthly fixed minimum rent and a percentage rent based on gross sales in excess
of an escalating base amount. The monthly fixed minimum rent is $12,833 for the
first five years of the initial lease term, $14,117 for the sixth through tenth
years of the initial lease term, $15,400 for the eleventh through fifteenth
years of the initial lease term.
In addition to the fixed minimum rent, the lease provides for the
payment of a percentage rent equal to 4% of the gross sales from the restaurant
in excess of the following annual gross sales amounts; $3,850,000 for the first
five years of the initial lease term, $4,235,000 for the sixth through tenth
years of the initial lease term, $4,620,000 for the eleventh through fifteenth
years of the initial lease term. No percentage rent was paid in 1998 or 1999. In
addition to the fixed minimum rent and percentage rent, the Company is required
to pay its proportionate share of common area maintenance costs; taxes,
insurance, maintenance and operating costs.
IRVING TEXAS OFFICE FACILITIES
PopMail's Internet email services division subleases approximately
8,500 square feet of office space in Irving, Texas. PopMail's sublease commenced
on September 1, 1998 and expires on December 31, 2001. Rentals of $11,412.00 per
month ($136,444 annually) are required under the sublease, in addition to
nominal charges for common area maintenance.
22
<PAGE> 25
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in legal actions in the ordinary course of its
business. Although the outcomes of any such legal actions cannot be predicted,
in the opinion of management there is no legal proceeding pending against or
involving the Company for which the outcome is likely to have a material adverse
effect upon the business, operating results and financial condition of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matters to a vote of security holders
during the last quarter of the fiscal year covered by this report.
23
<PAGE> 26
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
PRICE RANGE OF COMMON STOCK
Since November 3, 1997, the common stock of the Company has been traded
in the over-the counter market and quoted on the Nasdaq SmallCap Market.
Initially, the Company's common stock was quoted under the symbol "HOTD". On May
21, 1998, the Company changed its corporate name from Hotel Discovery, Inc. to
Cafe Odyssey, Inc. In conjunction with this change, effective May 24, 1998, the
Company's symbol for its common stock was changed to "CODY." Effective September
1, 1999, the Company acquired popmail.com, inc. and changed its name to
PopMail.com, inc. In connection with the change in the Company's name, the
Company's symbol for its common stock was changed to "POPM."
As described more fully in the Risk Factors section of this Form
10-KSB, there is a substantial risk that PopMail's common stock will be delisted
from the Nasdaq SmallCap Market. In the event that such risk materializes,
trading, if any, in our common stock would thereafter be conducted in the
over-the-counter markets in the so-called "pink sheets" or the National
Association of Securities Dealer's "Electronic Bulletin Board." Consequently,
the liquidity of our common stock would likely be impaired and the market price
of our shares may decrease significantly.
The following table sets forth the high and low bid prices of the
Company's common stock for the periods indicated. The Nasdaq bid quotations
represent inter-dealer prices, without retail mark-ups, mark-downs or
commissions, and may not necessarily represent actual transactions:
<TABLE>
<CAPTION>
HIGH LOW
FISCAL YEAR ENDED JANUARY 3, 1999:
<S> <C> <C>
First Quarter............................ $3.75 $1.88
Second Quarter........................... 5.38 2.25
Third Quarter............................ 3.63 1.00
Fourth Quarter........................... 1.13 .50
FISCAL YEAR ENDED JANUARY 2, 2000:
First Quarter............................ 1.03 .56
Second Quarter........................... 3.56 .50
Third Quarter............................ 4.88 1.94
Fourth Quarter........................... 4.09 1.44
</TABLE>
As of March 27, 2000, there were approximately 270 shareholders of
record of the Company's common stock, and approximately 6,000 other beneficial
owners whose shares are held in street name.
The Company has never declared or paid any cash dividends or
distributions on its capital stock. The Company does not intend to pay any cash
dividends on its common stock in the foreseeable future, as the current policy
of the Company's Board of Directors is to retain all earnings, if any, to
support operations and finance expansion. Future declaration and payment of
dividends, if any, will be determined in light of then current conditions,
including the Company's earnings, operations, capital requirements, financial
condition, restrictions in financing arrangements and other factors deemed
relevant by the Board of Directors.
RECENT SALES OF UNREGISTERED SECURITIES
The following table lists recent sales of unregistered securities by the
Company:
<TABLE>
<CAPTION>
TITLE AND CASH OR
DESCRIPTION OF AMOUNT OF CONSIDERATION
DATE SECURITIES SECURITIES ISSUED TO RECEIVED
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/22/99 Warrant to purchase Warrants to purchase Stephen D. King In connection with
Common Stock shares of Common Jerry Ruyan certain guaranties
Stock(1) Greg Mosher of a loan
Andrew Green
- - ----------------------------------------------------------------------------------------------------------------------
2/23/99 Warrant to purchase Warrant to purchase Frank W. Terrizzi In consideration
Common Stock 50,000 shares of for a loan
Common Stock
- - ----------------------------------------------------------------------------------------------------------------------
3/3/99 Warrant to purchase Warrants to purchase Stephen D. King In consideration
Common Stock an aggregate of Michael Berg of a guaranty of a
500,000 shares of Jack Feltl loan and pledge of
Common Stock, at an Cayne Mills certain collateral
exercise price of Timothy Maudlin
$0.75
- - ----------------------------------------------------------------------------------------------------------------------
3/18/99 Warrant to purchase Warrant to purchase Stephen D. King In consideration
Common Stock 150,000 shares of of a guaranty of a
Common Stock, at an loan and pledge of
exercise price of certain collateral
$1.00
- - ----------------------------------------------------------------------------------------------------------------------
3/18/99 Warrant to purchase Warrant to purchase Cunningham Group In consideration
Common Stock 150,000 shares of Construction Services of certain
Common Stock, at an financial
exercise price of concessions
$0.75
- - ----------------------------------------------------------------------------------------------------------------------
4/20/99 Warrants to purchase Warrants to purchase J. Jeffrey Brausch & Financial Advisory
an aggregate of an aggregate of Company Services
330,000 shares of 330,000 shares of CTC, Inc.
common stock at an Common Stock, at an
exercise price of $0.75 exercise price of
$0.75
</TABLE>
- - -------------------
(1) The Guaranty provides for an initial Warrant to purchase 200,000
shares of Common Stock, at an exercise price of $0.75, to be issued to each of
the Guarantors. Additionally, penalty Warrants are to be provided for each month
after the due date that the loan and guaranties are still outstanding. To date,
Warrants to purchase 940,000 shares of Common Stock have been issued.
24
<PAGE> 27
<TABLE>
<CAPTION>
TITLE AND CASH OR
DESCRIPTION OF AMOUNT OF CONSIDERATION
DATE SECURITIES SECURITIES ISSUED TO RECEIVED
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4/28/99 Warrants to purchase Warrants to purchase Gulfstream Financial Financial
an aggregate of an aggregate of Partners Advisory Services;
1,000,000 shares of 1,000,000 shares of
common stock(2) common stock
- - ----------------------------------------------------------------------------------------------------------------------
6/10/99 Common Stock 120,000 Shares Internet Community Concepts Acquisition of
1.5% of the
outstanding shares
of Internet
Community Concepts
- - ----------------------------------------------------------------------------------------------------------------------
8/19/99 Private Placement of Up to 750,000 Units Certain Accredited Offering still in
Units consisting of at a price of $2.00 Investors process
one share of Series E per Unit 175,000
Convertible Preferred units have sold
Stock and one Warrant through Jan. 2, 2000
to purchase one share
of Common Stock
- - ----------------------------------------------------------------------------------------------------------------------
9/29/99 Common Stock 75,000 shares NC Capital Markets, Inc. Engagement Fee of
$80,000 for
Investment Banking
services
- - ----------------------------------------------------------------------------------------------------------------------
10/12/99 Warrant to purchase Warrant to purchase Metropolitan Financial
600,000 shares of Capital Advisory
Common stock Partners, Services
Inc.
Warrant to purchase Warrant to purchase Michael Bird In connection with
15,000 shares of 15,000 of Common loan
common stock at an
- - ----------------------------------------------------------------------------------------------------------------------
11/3/99 Warrants to purchase Warrants to Gulfstraw
an aggregate of purchase an Financial
1,850,000 shares aggregate of Partners
of Common Stock 1,850,000 and Blake
shares of Capital Partners
Common Stock
- - ----------------------------------------------------------------------------------------------------------------------
10/13/99 Common Stock 66,187 shares Cunningham Group Construction
Construction Services, LLC Services
- - ----------------------------------------------------------------------------------------------------------------------
11/10/99 Common Stock 288,000 shares Frank Terrizzi As an additional incentive,
to excercise immediately,
an additional Warrant to
purchase 500,000 shares at
$2.00 was issued.
Additionally, in consideration
of further financial services,
Warrants to purchase 1,000,000
shares of common stock at an
exercise price of $1.50 were
issued and Warrant to purchase
350,000 shares of common stock
at an exercise price of $1.625 was
issued.
Conversion $200,000
debt and other financing
services
</TABLE>
- - -------------------
(2) Terms originally called for warrants to purchase 1,000,000 shares
of common stock, one-fourth of which vested once the stock price reached $2.00
per shares for 10 consecutive days at an exercise price of $1.00 per share,
one-fourth vested once the stock price reached $4.00 per shares for 10
consecutive days at an exercise price of $2.00 per share, one-fourth vested once
the stock price reached $6.00 per shares for 10 consecutive days at an exercise
price of $3.00 per share, one-fourth vested once the stock price reached $8.00
per shares for 10 consecutive days at an exercise price of $4.00 per share.
Warrants to purchase 500,000 shares of common stock were amended to reduce the
exercise price to $2.00 in exchange for the investor agreeing to immediately
exercise the warrants. As an additional incentive, an additional Warrant to
purchase 500,000 shares at $2.00. Additionally, in consideration of further
financial services, Warrants to purchase 1,000,000 shares of common stock at an
exercise price of $1.50 were issued and Warrant to purchase 350,000 shares of
common stock at an exercise price of $1.625 was issued.
<PAGE> 28
<TABLE>
<CAPTION>
TITLE AND CASH OR
DESCRIPTION OF AMOUNT OF CONSIDERATION
DATE SECURITIES SECURITIES ISSUED TO RECEIVED
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11/24/99 (4) Common Stock 900,000 shares LegacyMaker, Inc. In exchange for
cancellation of
Previously issued
Warrant
======================================================================================================================
11/24/99 Private Placement of $2,000,000 4% Certain accredited $1,393,000
Convertible Debentures Convertible investors
Denbentures and
Warrants to purchase
150,000 shares of
Common Stock at an
exercise price of
$1.625
--------------------------------------------------------------------------
Warrant to purchase J.P. Carey Securities, Inc. Commissions
125,000 shares of
Common Stock at an
exercise price of
$1.625
======================================================================================================================
12/1/99 Private Placement of 2,450,000 shares members of ROI, LLC 450,000
Common Stock in
Connection with ROI
Acquisition
- - ----------------------------------------------------------------------------------------------------------------------
12/1/99 Private Placement of Warrant to purchase The Hillstreet Fund, L.P. In consideration
Warrants 200,000 shares of for a loan
common stock at an
exercise price of
$1.34
- - ----------------------------------------------------------------------------------------------------------------------
12/6/99 Private Placement of Warrant to purchase Hal Taylor In consideration
Warrants 80,000 shares of for a loan
common stock at an
exercise price of
$1.25
</TABLE>
(4) Agreement to exchange entered into as of this date. Acted issuance occured
subsequent to January 2, 2000.
<PAGE> 29
<TABLE>
<CAPTION>
TITLE AND CASH OR
DESCRIPTION OF AMOUNT OF CONSIDERATION
DATE SECURITIES SECURITIES ISSUED TO RECEIVED
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/10/99 Private Placement of Warrant to purchase eBankerUSA.com, Inc. In consideration
Warrants 89,375 shares of for financing
Common Stock at an services
exercise price of
$2.00
- - ----------------------------------------------------------------------------------------------------------------------
12/10/99 Private Placement of Warrant to purchase American Frontier As finder's fee
Warrants 19,500 shares of Financial Corporation for financing
Common Stock at an services (see
exercise price of eBanker)
$1.25
======================================================================================================================
12/14/99 Private Placement 628,800 shares of Certain accredited Cash in the amount and
Common Stock Warrant investors of $500,000
to purchase 100,000 Consulting Services
shares common stock
at an excercise price
of $1.00
--------------------------------------------------------------------------
--------------------------------------------------------------------------
======================================================================================================================
</TABLE>
All of the above-referenced warrants expire five years after the date of
issuance. In all of the above cases, there was no underwriter involved. The
Company relied upon Rule 506 of Regulation D and or Section 4(2) of the
Securities Act of 1933, as amended.
<PAGE> 30
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in connection with the
Company's consolidated financial statements and related notes included elsewhere
in this report.
Overview
PopMail.com, inc. ("the Company" or "PopMail") consists of two
divisions, the Internet email services division and the restaurant division.
Management's primary focus is to develop the Internet email division by
exploring additional revenue sources and complementary services through mergers,
acquisitions and joint ventures. The Company is exploring other business
acquisitions for the Internet Division. However, no assurance can be given that
other mergers or acquisitions will be completed or desired results achieved.
25
<PAGE> 31
Future revenue and profits, if any, will depend upon various factors,
including the rapidly changing e-commerce community of the Internet, the market
acceptance of the Company's current restaurant concept, the quality of
restaurant operations, and general economic conditions. The Company's present
source of revenue is limited to its existing restaurants and minor fee income
from its Internet e-mail services division. There can be no assurances the
Company will successfully implement its expansion plans, of the Internet email
services or restaurant division, in which case it will continue to be dependent
on the revenues from the existing restaurants. The Company also faces all of the
risks, expenses and difficulties frequently encountered in connection with the
expansion and development of a new and expanding business. With the addition of
the Internet email services division, the Company will be hiring senior
management to operate that division. As noted in the Risk Factors section of
this Form 10-KSB, the Company has incurred substantial operating losses to date
and, as of January 2, 2000, has a deficiency in working capital of approximately
$8.7 million. There can be no assurance of the Company's capacity to achieve and
sustain profitable operations, and without additional financing (of which there
can be no assurance), the Company may not have sufficient funds to support its
operations, retire its indebtedness in the ordinary course of business and
pursue its business plan.
The Company has adopted a 52-53-week year ending on the Sunday nearest
December 31 of each year. All references herein to "1999" represent a 52-week
fiscal year ended January 2, 2000 and "1998" represents a 53-week fiscal year
ended January 3, 1999.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JANUARY 2, 2000 AND JANUARY 3,
1999
Net Sales
Net sales for the restaurant division increased by $5,233,563 or 75.5%
to $12,166,454 for 1999 from $6,932,891 for 1998. Sales at the Mall of America
Restaurant increased by $1,705,481 or 39.8% to $5,988,165 for 1999 from
$4,282,684 for 1998. The Mall of America Restaurant was open for the full
fifty-two weeks in 1999 vs. 30 weeks in 1998. Sales at Denver Pavilions were
$5,008,674 for the 42 weeks of operations in 1999. The Kenwood Restaurant had
sales in 1999 of $1,169,615 before it closed on August 29, 1999. The Kenwood
Restaurant had sales of $2,650,207 in 1998. The Company is currently finalizing
the sale of this restaurant.
Net sales for the email service division was $106,744 resulting from
the ROI acquisition completed on December 3, 1999.
Costs and Expenses
The restaurants food, beverage and retail costs were $3,144,513 (25.8%
of net sales) for 1999 as compared to $1,897,492 (27.4% of net sales) for 1998,
which remain within the normal operating percentage of net sales. This reduction
in the percentage change from the prior year indicates stabilization in overall
cost of goods sold.
Restaurants operating expenses were $8,404,324 (69.1% of net sales) for
1999 as compared to $5,038,105 (72.7% of net sales) for 1998. The increase in
restaurant operating expenses is due primarily to the opening of the Denver
Pavilions Restaurant.
The 74.4% increase in depreciation expense in 1999 is primarily
attributable to the new Denver Pavilions Restaurant.
26
<PAGE> 32
Goodwill amortization expense for 1999 was $3,933,411. This represents
the excess of the purchase price and related costs over the fair value of the
net assets of business acquired. The Company amortizes goodwill on a
straight-line basis over a three-year period. Remaining goodwill amortization at
January 2, 2000 is as follows: $13,277,280 for 2000, $13,277,280 for 2001 and
$9,722,786 for 2002.
The restaurant division had pre-opening expenses of $939,179 in 1999
as compared to $732,851 in 1998. Of these expenses, $871,220 were for the Denver
Pavilions Restaurant and $67,959 related to the start-up site located in Irvine,
California. The Company has decided not to open a restaurant at this site.
The Company's executive and administrative office located in
Bloomington, Minnesota, had general, administrative and development expenses of
$5,002,557 for 1999 as compared to $3,081,213 for 1998. This increase reflects
the results of the acquisitions of Old Popmail and ROI. The email service
division's executive and administrative office located in Dallas, Texas, had
general, administrative and development expenses of $1,536,589 for 1999. These
expenses represent administrative and development expenses of Old Popmail and
ROI since Acquisition. The Company has to address the numerous executive and
administrative staffing requirements from its mergers and acquisitions,
shareholder relationships, and development costs associated with Internet email
software creation. The Company will be seeking additional senior management
personnel as well as support staff, which will also have an associated impact on
future earnings. The Company expects to continue to incur operating losses
during 2000.
The Company's other income and expense consist of interest income,
interest expense, warrant repricing, debt guarantee cost and financial advisory
services. Interest expense for 1999 was $2,357,245 as compared to $130,625 for
1998. This increase of $2,226,620 relates to the financing fees generated in
raising debt throughout the year and additional borrowings during the year.
Interest income for 1999 was $49,323 as compared to $180,999 for 1998
reflecting lower levels of cash of 1999. The Company recorded a warrant
repricing expense of $4,539,311 relating to the Series B Preferred Stock issued
in the Popmail Merger. The Company recorded costs associated with the guarantees
provided for debt financing for 1999 of $1,607,833. The Company also recorded
costs associated with services provided by third party financial advisors for
1999 of $1,489,040. These costs were paid with both the issuances of new common
stock and warrants.
Liquidity and Capital Resources
The Company had a working capital deficit of $8,696,477 at January 2,
2000, compared to a deficit of $3,870,058 on January 3, 1999. Cash and cash
equivalents were $1,136,137 at January 2, 2000 representing an increase of
$1,029,890 from the cash and cash equivalents of $106,247 at January 3, 1999.
During 1999, the Company's principal capital requirements were
27
<PAGE> 33
the construction of the Denver Pavilions Restaurant and the acquisition of
furniture, fixtures and equipment of approximately $4.2 million, net of landlord
contributions, and the acquisition and merger with popmail.com, inc., of
approximately $5.1 million. The Company used approximately $5,900,000 in cash
for operations and $6,600,000 for investing activities during 1999. The Company
generated approximately $13,500,000 in cash from financing activities in 1999.
The Company's primary sources of working capital in 1999 were proceeds
from the sale of common and preferred stock, and the issuances of warrants and
debt. Financing activity in 1999 and early 2000 are described in the
Consolidated Financial Statements and Related Notes.
28
<PAGE> 34
The Company has no current plans to expand the restaurant division
directly. It may do so through licensing or other arrangements where the Company
does not invest directly into the business.
The Company intends to fund operations and the expansions of the
Internet email services division through additional equity and debt
transactions. Management believes it has resources sufficient to meet the
Company's working capital needs for the next twelve months from its cash on
hand, proceeds available from the exercise of stock options and warrants, and
additional equity and debt financing.
34
<PAGE> 35
ITEM 7. FINANCIAL STATEMENTS
POPMAIL.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants -
Grant Thornton LLP.................................................... F-1
Report of Independent Public Accountants -
Arthur Andersen LLP................................................... F-2
Financial Statements
Consolidated Balance Sheets........................................... F-3
Consolidated Statements of Operations................................. F-5
Consolidated Statements Shareholders' Equity.......................... F-6
Consolidated Statements of Cash Flows................................. F-8
Notes to Consolidated Financial Statements... ........................ F-11
<PAGE> 36
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
PopMail.com, inc.
We have audited the accompanying consolidated balance sheet of
PopMail.com, inc. and subsidiaries (the Company, formerly Cafe Odyssey, Inc.) as
of January 2, 2000 and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
PopMail.com, inc. and subsidiaries as of January 2, 2000 and the results of
their consolidated operations and their consolidated cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
March 24, 2000
F-1
<PAGE> 37
To PopMail.com, inc. (formerly Cafe Odyssey, Inc.):
We have audited the accompanying balance sheet of PopMail.com, inc.
(formerly Cafe Odyssey, Inc.) as of January 3, 1999 and the related statements
of operations, shareholders' equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts an disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of PopMail.com, inc.
(formerly Cafe Odyssey, Inc.) as of January 3, 1999 and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has suffered recurring
losses from operations and has a net working capital deficit that raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
/s/ ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
February 19, 1999
F-2
<PAGE> 38
POPMAIL.COM, INC.
(FORMERLY CAFE ODYSSEY, INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 2, January 3,
ASSETS 2000 1999
----------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,136,137 $ 106,247
Accounts receivable 275,655 -
Inventories 111,807 161,463
Other current assets 483,496 452,243
------------ ------------
Total current assets 2,007,095 719,953
Property and equipment, at cost
Leasehold improvements 12,711,082 6,435,925
Equipment and fixtures 5,526,412 4,014,095
Construction in progress - 2,823,920
------------ ------------
18,237,494 13,273,940
Less accumulated depreciation and amortization 3,370,692 1,574,392
------------ ------------
14,866,802 11,699,548
Goodwill, net of accumulated amortization
of $3,933,411 36,277,346 -
Other assets, net 344,121 520,487
------------ ------------
$ 53,495,364 $ 12,939,988
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 39
POPMAIL.COM, INC.
(FORMERLY CAFE ODYSSEY, INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND
SHAREHOLDERS' EQUITY January 2, January 3,
2000 1999
------------ ------------
<S> <C> <C>
Current liabilities
Notes payable $ 6,037,518 $ 2,000,000
Convertible promissory notes payable 1,460,417 150,000
Current maturities of long-term obligations 193,833 199,007
Accounts payable 1,604,952 1,452,648
Due to affiliates 120,000 100,000
Accrued compensation 529,336 539,027
Other accrued expenses 757,516 149,329
------------ ------------
Total current liabilities 10,703,572 4,590,011
Deferred rent credits 3,650,512 1,755,852
Long-term obligations, less current maturities 1,883,688 755,878
------------ ------------
Total liabilities 16,237,772 7,101,741
Commitments and contingencies - -
Shareholders' equity
Common stock, $.01 par value, 100,000,000 shares
authorized; 24,695,872 and 8,000,089 shares
issued and outstanding 246,958 80,001
Series C 8% convertible preferred stock, par value $.01;
$1,000 stated value; authorized 2,000 shares; 605 shares
issued and outstanding at January 2, 2000 693,000 -
Series D 8% convertible preferred stock, par value $.01;
$1,000 stated value; authorized 2,200 shares; 2,200 shares
issued and outstanding at January 2, 2000 2,288,000 -
Series E convertible preferred stock, par value $.01; $2.00
stated value; authorized 750,000 shares; 175,000 shares
issued and outstanding at January 2, 2000 350,000 -
Additional paid-in capital 74,901,160 20,281,140
Less common stock subscribed and note receivable
from affiliate (2,850,000) (400,000)
Accumulated deficit (38,371,526) (14,122,894)
------------ ------------
37,257,592 5,838,247
------------ ------------
$ 53,495,364 $ 12,939,988
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 40
POPMAIL.COM, INC.
(FORMERLY CAFE ODYSSEY, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended
----------------------------------
January 2, January 3,
2000 1999
------------ ------------
Revenues
<S> <C> <C>
Restaurant sales, net $ 12,166,454 $ 6,932,891
E-mail services 106,744 -
------------ ------------
12,273,198 6,932,891
Costs and expenses
Restaurant food, beverage and retail costs 3,144,513 1,897,492
Restaurant operating expenses 8,404,324 5,038,105
Restaurant depreciation 1,639,279 940,186
Amortization of goodwill 3,933,411 -
Pre-opening expenses 939,179 732,851
Loss on impairment of restaurant related assets - 2,000,000
General, administrative and development expenses 5,002,557 3,081,213
------------ ------------
23,063,263 13,689,847
------------ ------------
Loss from operations (10,790,065) (6,756,956)
Other income (expense)
Interest expense (2,357,245) (130,625)
Interest income 49,323 180,999
Warrant repricing (4,539,311) -
Debt guarantee costs (1,607,833) -
Financial advisory services (1,489,040) -
------------ ------------
(9,944,106) 50,374
------------ ------------
Net loss (20,734,171) (6,706,582)
Preferred stock dividends and accretion (3,514,461) -
------------ ------------
Loss attributable to common shareholders $(24,248,632) $ (6,706,582)
============ ============
Basic and diluted net loss per share:
Net loss $ (2.05) $ (0.84)
============ ============
Loss attributable to common shareholders $ (2.40) $ (0.84)
============ ============
Basic and diluted weighted average outstanding shares 10,108,451 8,000,131
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 41
POPMAIL.COM, INC.
(FORMERLY CAFE ODYSSEY, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common
stock
Additional subscribed
Common stock Preferred stock paid-in and note Accumulated
--------------------- ---------------------
Shares Amount Shares Amount capital receivable deficit Total
--------- -------- ------- ---------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1997 8,000,189 $ 80,002 -- $ -- $ 20,152,949 $ (400,000) $ (7,416,312) $ 12,416,639
Issuance of warrants to
guarantors -- -- -- -- 128,490 -- -- 128,490
Cancellation of share
grant (100) (1) -- -- (299) -- -- (300)
Net loss -- -- -- -- -- -- (6,706,582) (6,706,582)
--------- -------- ------- ---------- ------------ ----------- ------------ ------------
Balance at January 3, 1999 8,000,089 80,001 -- -- 20,281,140 (400,000) (14,122,894) 5,838,247
Issuance of common stock
in lieu of compensation 280,013 2,800 -- -- 194,908 -- -- 197,708
Issuance of common stock
for services 351,942 3,519 -- -- 626,339 -- -- 629,858
Warrants issued for
services -- -- -- -- 1,301,500 -- -- 1,301,500
Issuance of common stock 180,000 1,800 -- -- 198,200 -- -- 200,000
Common stock issued for
conversion of
promissory notes
payable and payment of
interest 197,147 1,971 -- -- 402,787 -- -- 404,758
Stock option conversions 118,999 1,190 -- -- 88,059 -- -- 89,249
Exercise of warrants 2,250,000 22,500 -- -- 2,915,000 -- -- 2,937,500
Sale of Class A
convertible preferred
stock -- -- 2,000 2,000,000 -- -- -- 2,000,000
Issuance of Class B
convertible preferred
stock in PopMail
acquisition -- -- 2,024 21,589,755 -- -- -- 21,589,755
Warrants issued in
PopMail acquisition -- -- -- -- 4,318,956 -- -- 4,318,956
Warrants issued to
PopMail guarantor in
PopMail acquisition -- -- -- -- 2,700,000 -- -- 2,700,000
Sale of Class C
convertible preferred
stock -- -- 2,000 2,000,000 -- -- -- 2,000,000
Sale of Class D
convertible preferred
stock -- -- 2,200 2,200,000 -- -- -- 2,200,000
Sale of Class E
convertible preferred
stock -- -- 175,000 350,000 -- -- -- 350,000
Note receivable issued
to affiliate for
purchase of common
stock -- -- -- -- -- (2,450,000) -- (2,450,000)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 42
POPMAIL.COM, INC.
(FORMERLY CAFE ODYSSEY, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - CONTINUED
<TABLE>
<CAPTION>
Common
stock
Common stock Preferred stock Additional subscribed
-------------------- --------------------- paid-in and note Accumulated
Shares Amount Shares Amount capital receivable deficit Total
--------- -------- ------- ---------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series A, C and D
private placement costs -- $ -- -- $ -- $ (722,323) $ -- $ -- $ (722,323)
Issuance of common stock
in the ROI acquisition 2,750,000 27,500 -- -- 6,254,961 -- -- 6,282,461
Old PopMail stock
subscribed -- -- -- -- -- (2,000) -- (2,000)
Cash received on common
stock subscribed -- -- -- -- -- 2,000 -- 2,000
Conversion of Class A
preferred 1,015,999 10,160 (2,000) (2,000,000) 1,989,840 -- -- --
Conversion of Class B
preferred 8,633,900 86,339 (2,024) (21,589,755) 21,503,416 -- -- --
Conversion of Class C
preferred 917,783 9,178 (1,395) (1,395,000) 1,385,822 -- -- --
Record non-cash
preferred stock deemed -- -- -- (3,338,461) 3,338,461 -- -- --
dividend
Record preferred stock
deemed dividend -- -- -- 3,338,461 -- -- (3,338,461) --
Dividends paid or
accrued on preferred -- -- -- 176,000 -- -- (176,000) --
stock
Warrants issued to
guarantors of notes
payable -- -- -- -- 1,232,833 -- -- 1,232,833
Repricing of warrants
related to the PopMail -- -- -- -- 4,539,311 -- -- 4,539,311
acquisition
Warrants issued for
private placement
costs in connection
with Series A, C and D -- -- -- -- 469,500 -- -- 469,500
issuances
Warrants issued in
connection with notes
payable -- -- -- -- 1,882,450 -- -- 1,882,450
Net loss -- -- -- -- -- -- (20,734,171) (20,734,171)
---------- -------- ------- ------------ ------------ ------------ ------------ ------------
Balance at January 2, 2000 24,695,872 $246,958 177,805 $ 3,331,000 $ 74,901,160 $ (2,850,000) $(38,371,526) $ 37,257,592
========== ======== ======== ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 43
POPMAIL.COM, INC.
(FORMERLY CAFE ODYSSEY, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended
----------------------------------
January 2, January 3,
2000 1999
------------ -----------
<S> <C> <C>
Operating activities:
Net loss $(20,734,171) $(6,706,582)
Adjustments to reconcile net loss to cash
flows from operating activities:
Restaurant depreciation and amortization 1,796,304 940,186
Loss on disposal of property and equipment 57,030 -
Loss on impairment of restaurant related assets - 2,000,000
Amortization of goodwill 3,933,411 -
Amortization of deferred rent (67,840) 134,352
Amortization of warrant discount 972,333 59,302
Common stock issued in lieu of compensation 197,708 -
Common stock issued for services and interest 684,616 -
Warrants issued for services 1,301,500 -
Warrants issued to guarantors 1,232,833 -
Repricing of warrants issued in the PopMail acquisition 4,539,311 -
Other 567,177 -
Changes in operating assets and liabilities, net of effect of business
acquisitions:
Accounts receivable 335,982 -
Inventories 49,656 (119,697)
Other current assets (6,810) (202,200)
Other assets 220,278 (336,087)
Accounts payable (375,149) 783,268
Accrued expenses (619,327) 205,909
------------ -----------
Net cash used in operating activities (5,915,158) (3,241,549)
Investing activities:
Purchases of property and equipment, net (4,125,807) (9,369,574)
Issuance of note receivable to affiliate (2,450,000) -
------------ -----------
Net cash used in investing activities (6,575,807) (9,369,574)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 44
POPMAIL.COM, INC.
(FORMERLY CAFE ODYSSEY, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Years ended
----------------------------------
January 2, January 3,
2000 1999
----------- ------------
Financing activities:
<S> <C> <C>
Proceeds from issuance of stock $ 200,000 $ -
Proceeds from issuance of preferred stock 5,730,000 -
Proceeds from short term notes payable 5,020,884 -
Payments on short-term notes payable (5,940,271) (200,000)
Proceeds from convertible notes payable 2,300,000 -
Payments on convertible notes payable (100,000) -
Proceeds from long-term debt 1,500,000 3,002,976
Payments on long-term debt (199,007) (1,028,980)
Tenant allowance collected 1,962,500 1,621,500
Advances from shareholder/officers 240,000 100,000
Repayment of advances from shareholders/officers (220,000) -
Proceeds from exercise of options and warrants 3,026,749 -
Payments on cancellation of stock - (300)
----------- ------------
Net cash provided by financing activities 13,520,855 3,495,196
----------- ------------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 1,029,890 (9,115,927)
Cash and cash equivalents, beginning of year 106,247 9,222,174
----------- ------------
Cash and cash equivalents, end of year $ 1,136,137 $ 106,247
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 703,491 $ 130,625
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 45
POPMAIL.COM, INC.
(FORMERLY CAFE ODYSSEY, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Years ended
----------------------------------
January 2, January 3,
2000 1999
------------ ----------
<S> <C> <C>
Non-cash financing and investing activities:
Conversion of preferred stock into common stock $ 3,395,000 $ -
Conversion of debt and interest into common stock 404,758 -
Preferred stock issued for placement costs 820,000 -
Common stock issued for compensation 197,708 -
Common stock issued for services 629,858 -
Warrants issued for services 1,301,500 -
Warrants issued to guarantors of notes payable 1,232,833 -
Warrants issued for private placement costs in
connection with Series A, C and D issuances 469,500 -
Warrants issued in connection with notes payable 1,882,450 -
Repricing warrants related to the PopMail acquisition 4,539,311 -
Acquisitions:
Common stock issued 27,872,216 -
Warrants issued 7,018,956 -
Fair value of assets acquired (1,583,952) -
Liabilities assumed 6,903,537 -
------------ ----------
Purchase price in excess of fair value of
assets acquired $ 40,210,757 $ -
============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 46
POPMAIL.COM, INC.
(FORMERLY CAFE ODYSSEY, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - NATURE OF THE BUSINESS
PopMail.com, inc. ("the Company" or "PopMail"), formerly Cafe Odyssey, Inc.,
consists of two divisions, the restaurant division and the e-mail services
division. During 1999, in conjunction with the acquisition of Popmail.com,
Inc. the Company changed its name from Cafe Odyssey, Inc. to PopMail.com,
inc.
The restaurant division develops, owns and operates upscale casual
restaurants with multiple themed dining rooms. The Company has "Cafe Odyssey"
restaurants at the Mall of America in Bloomington, Minnesota, which opened in
June 1998 and at the Denver Pavilions, in Denver, Colorado, which opened in
March 1999. The Company closed its Cincinnati, Ohio location in September
1999 and is currently finalizing the sale of this restaurant.
The e-mail services division provides permission marketing and affinity-based
e-mail communications concentrating primarily on the needs of businesses in
the broadcast, media, sports and entertainment industries located throughout
the United States.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Fiscal Year
The Company has adopted a 52-53 week year ending on the Sunday nearest
December 31 of each year. All references herein to "1999" represents a
52-week fiscal year ended January 2, 2000 and "1998" represents a 53-week
fiscal year ended January 3, 1999.
Cash and Cash Equivalents
The Company includes as cash and cash equivalents, cash on hand, bank
deposits and all liquid money market investments with original maturities of
three months or less when purchased, which are recorded at the lower of cost
or market.
Inventories
Inventories consist primarily of restaurant food and beverages and retail
supplies and are stated at the lower of cost or market as determined by the
first-in first-out method.
F-11
<PAGE> 47
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Pre-Opening Costs
The direct and incremental costs associated with opening a new restaurant,
which consist of hiring and training the initial workforce, mock service and
other direct costs, are charged to operations when incurred.
Property and Equipment
Property and equipment acquired are recorded at cost. Leasehold improvements
are capitalized, while repair and maintenance expenses are charged to
operations as incurred. Leasehold improvements are amortized using the
straight-line method over the shorter of the estimated useful life or the
lease term for financial reporting purposes and accelerated methods for tax
purposes. Furniture and equipment are depreciated on a straight-line method
over their estimated useful lives of 3 to 15 years.
Goodwill
Goodwill represents the excess of the purchase price and related costs over
the fair value of the net assets of businesses acquired and is amortized on a
straight-line basis over three years.
Fair Values of Financial Instruments
Due to their short-term nature, the carrying value of the Company's current
financial assets and liabilities approximates their fair values. The fair
value of the Company's borrowings, if recalculated based on current interest
rates, would not significantly differ from the recorded amounts.
Deferred Rent Credits
The restaurant operating leases provide for certain tenant inducements,
including up-front cash payments to help cover the costs of construction, and
scheduled increases in base rentals over their terms. Rent expense is
recognized on a straight-line basis, and deferred rent credits have been
established for the differences between the amounts recognized and rent paid.
Income Taxes
The Company accounts for income taxes using the liability method to recognize
deferred income tax assets and liabilities. Deferred income taxes are
provided for differences between the financial reporting and tax bases of the
Company's assets and liabilities at currently enacted tax rates.
Advertising
The Company expenses advertising costs as incurred. Advertising expense was
approximately $977,000 and $761,000 during 1999 and 1998.
F-12
<PAGE> 48
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Stock-Based Compensation
The Company utilizes the intrinsic value method for stock-based compensation.
Under this method, compensation expense is recognized for the amount, if any,
by which the market price of the common stock on the date of grant exceeds
the exercise price of an option. Pro-forma information related to the fair
value method of accounting is contained in note H.
Net Loss Per Common Share
Basic and diluted net loss per common share is computed by dividing the net
loss by the weighted average number of common shares outstanding during the
year. The impact of common stock equivalents has been excluded from the
computation of weighted average common shares outstanding, as the net effect
would be antidilutive.
Use of Estimates
Preparing financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the 1998 financial statements to
conform to the 1999 presentation. These reclassifications had no effect on
net loss or shareholders' equity as previously reported.
NOTE C - BUSINESS COMBINATIONS
On August 29, 1999, the Company completed its merger with Popmail.com, Inc.,
which was accounted for as a purchase. The results of PopMail's operations
have been included with the Company's operations from the date of the merger.
Consideration for the merger included the issuance of 2,024 shares of Series
B Convertible preferred stock, convertible into 8,633,900 shares of the
Company's common shares valued at $21,589,755; the issuance of 4,407,098
five-year warrants to purchase common at an exercise price of $3.00 per share
valued at $4,318,956; the assumption of approximately $5,019,000 of notes
payable, which required the issuance of 900,000 five-year warrants to the
holder of those notes valued at $2,700,000; and $890,000 in closing costs.
The total consideration exceeded the fair value of the net liabilities
acquired by approximately $33,800,000, which has been recorded as goodwill
and is being amortized on a straight-line basis over three years.
On December 3, 1999, the Company completed the acquisition of ROI Interactive
LLC (ROI). This acquisition was accounted for as a purchase with the results
of operations included with the Company's operations from the date of
acquisition. Total consideration included the issuance of 2,750,000 shares of
the Company's common shares valued at $6,282,461 and $150,000 in closing
F-13
<PAGE> 49
NOTE C - BUSINESS COMBINATIONS - Continued
costs. The total consideration exceeded the fair value of the net liabilities
acquired by approximately $6,400,000, which has been recorded as goodwill and
is being amortized on a straight-line basis over three years.
The following unaudited consolidated pro forma information assumes the above
business combinations occurred at the beginning of the respective periods
presented. However, the 1998 pro forma information does not include ROI, as
it did not begin operations until 1999.
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1999 1998
------------ -----------
<S> <C> <C>
Net revenues $13,303,000 $ 6,982,126
Net loss attributable to common shareholders (35,539,000) (20,413,468)
Net loss per share attributable to common shareholders $(1.73) $(1.23)
Weighted average shares outstanding 20,540,500 16,634,031
</TABLE>
The unaudited pro forma information is not necessarily indicative of the
combined results that would have occurred had the merger and acquisition
occurred on those dates, nor is it indicative of the results that may occur
in the future.
NOTE D - IMPAIRMENT OF RESTAURANT RELATED ASSETS
In 1998, the Company recorded a non-cash write-down of its Cincinnati, Ohio
restaurant assets of $2,000,000. This impairment was determined by Company's
management based on the operating performance of the restaurant combined with
the difference between the carrying amount of the assets and the undiscounted
cash flows estimated to be generated. The write-down was calculated in
accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of", based primarily on operating
projections, future discounted cash flows and other relevant market factors.
F-14
<PAGE> 50
NOTE E - NOTES PAYABLE
<TABLE>
<CAPTION>
Notes payable consists of the following:
January 2, January 3,
2000 1999
---------- ---------
<S> <C> <C>
Short-term revolving line of credit (a) $3,000,000 $2,000,000
Short-term revolving loan (b) 825,000 -
Short-term promissory notes, net of discounts of
$192,177 (c) 2,082,823 -
Other 129,695 -
---------- -----------
$6,037,518 $ 2,000,000
========= ==========
</TABLE>
(a) In September 1998, the Company entered into a $3,000,000 revolving line of
credit with a financial institution collateralized by a leasehold mortgage,
security agreement and assignment of rents and income of the Cincinnati
restaurant. In addition, two directors and an ex-director of the Company entered
into a joint and several limited guaranty of the first $1,000,000 of the
Company's borrowings under this credit facility. In consideration of these
guarantees, the Company issued 40,000 five-year warrants to each of these
individuals at an exercise price of $0.75 per share in November 1998. Guarantees
for the other $2,000,000 were obtained later in November 1998 from two of the
aforementioned directors and an additional third party whereby two of the
directors each severally guaranteed $500,000 and the other third party
guaranteed $1,000,000, of such borrowings. All three guarantors pledged certain
collateral to the financial institution in connection with the later guarantees.
In exchange for such guarantees and pledges of collateral, the Company issued
200,000 five-year warrants each to two of the directors in November 1998, and
400,000 five-year warrants to the other third party in January 1999, all at an
exercise price of $0.75 per share. This revolving line of credit facility is due
on demand, or, if no demand is made, in July 2000. This credit facility provides
for monthly payments of interest accrued on the outstanding unpaid principal
balance at a rate equal to the prime rate, or 8.5% as of January 2, 2000 and
7.75% as of January 3, 1999. Each of the guarantee agreements contain provisions
which require the issuance of additional warrants and payment of cash penalties
if the borrowings were not paid in full by September 30, 1999. As of January 2,
2000, the Company accrued $375,000 for the cash penalties and is obligated for
and has recorded 600,000 five-year warrants at an exercise price of $0.75 per
share.
(b) In March 1999, the Company entered into a $825,000 revolving loan facility
with a financial institution collateralized by substantially all of the
Company's assets. In addition, the loan is guaranteed by five individuals. In
consideration of these guarantees, the Company issued 500,000 five-year warrants
in March 1999 (ranging from 25,000 to 250,000 warrants) to these individuals at
an exercise price of $0.75 per share. All guarantors pledged certain collateral
to the financial institution in connection with these guarantees. This revolving
line of credit facility is due on demand, or, if no demand is made, in March
2000. This credit facility provides for monthly payments of interest accrued on
the outstanding unpaid principal balance at a rate equal to the prime rate, or
8.5% as of January 2, 2000.
(c) In connection with the PopMail merger, the company assumed a note payable
for $5,019,387, of which $4,469,387 was repaid shortly after the merger. The
remaining $550,000 is payable in monthly payments with interest at the prime
rate (8.5% at January 2, 2000). The principal is due on demand, or, if no demand
is made, in full amount in January 2000. The loan is uncollateralized.
F-15
<PAGE> 51
NOTE E - NOTES PAYABLE - Continued
In December 1999, the Company entered into a note payable for $200,000.
The note is payable in monthly payments for interest at 15%. The
principal is due on demand, or, if no demand is made, in full amount in
March 2000. In connection with the loan the Company issued 80,000
five-year warrants with an exercise price of $1.25 to the lender. The
fair value of these warrants has been recorded as a discount and is
being amortized over the life of the note.
In December 1999, the Company entered into a note payable for $325,000.
The note is payable in monthly payments for interest at 15%. The
principal is due on demand, or, if no demand is made, in full amount in
March 2000. In connection with the loan the Company issued 89,375
five-year warrants with an exercise price of $2.00 to the lender. The
fair value of these warrants has been recorded as a discount and is
being amortized over the life of the note. In addition, the Company
issued 19,500 five-year warrants at an exercise price of $2.00 per share
to a third party as a finders fee on this note.
Also in December 1999, the Company entered into a note payable for
$1,200,000. At the inception of the loan, the Company prepaid the
interest of 13% ($91,000) for the life of the note until the loan
matures in July, 2000. In connection with the loan the Company issued
200,000 five-year warrants with an exercise price of $1.34 to the
lender. The fair value of these warrants has been recorded as a discount
and is being amortized over the life of the note.
NOTE F - LONG-TERM OBLIGATIONS
Long-term obligations consists of the following:
<TABLE>
<CAPTION>
January 2, January 3,
2000 1999
---------- ----------
<S> <C> <C>
Senior promissory notes, bearing interest at 15.94%, due in monthly $ 755,878 $ 954,885
installments of principal and interest, through July 2002,
collaterized by equipment 1,321,643 -
4% senior convertible note payable, net of discount of --------- ----------
$678,357 (a) 2,077,521 954,885
Less current maturities 193,833 199,007
--------- ----------
$1,883,688 $ 755,878
========= ==========
Aggregate future maturities of long-term obligations are as follows:
2000 $ 193,833
2001 1,548,722
2002 334,966
--------
$2,077,521
==========
</TABLE>
F-16
<PAGE> 52
NOTE F - LONG-TERM OBLIGATIONS - Continued
(a) In November 1999, the Company executed a senior convertible note for
$2,000,000 which matures in November 2001 and bears interest at 4%. The
note and any unpaid interest is convertible into the Company's common
stock at the trading price at the day of the conversion. In connection
with this note, the Company issued 275,000 five-year warrants with an
exercise price of $1.625 to the lenders and a placement agent. The fair
value of these warrants has been recorded as a discount and is being
amortized over the life of the note.
NOTE G - CONVERTIBLE PROMISSORY NOTES PAYABLE
Convertible promissory notes payable consists of the following:
<TABLE>
<CAPTION>
January 2, January 3,
2000 1999
----------- ----------
<S> <C> <C>
Senior convertible note payable, net of discount of $539,583 (a) $1,460,417 $ -
Other (b) - 150,000
----------- -----------
$ 1,460,417 $ 150,000
=========== ===========
</TABLE>
(a) In August 1999, the Company executed a senior convertible note for
$2,000,000 which matures in August 2000, and bears interest at prime
plus 2% (effective interest rate of 10.5% as of January 2, 2000). The
note and any unpaid interest is convertible into the Company's common
stock at a conversion price of $2.50. In connection with this note, the
Company issued 500,000 five-year warrants with an exercise price of
$2.50 to the lender. The fair value of these warrants has been recorded
as a discount and is being amortized over the life of the note.
(b) Consisted of three 8.01% convertible promissory notes which matured in
July 1999. The notes were converted into 89,147 shares of the Company's
common stock.
In May 1999, the Company executed one other convertible promissory note
of $300,000 which matured in 1999; $100,000 was repaid and the
additional $200,000 was converted into 108,000 shares of the Company's
common stock.
NOTE H - SHAREHOLDERS' EQUITY
Convertible Preferred Stock
Series A - In May 1999, the Company issued 2,000 shares of Series A 8%
convertible preferred stock with a stated value of $1,000 per share in a
private placement transaction. In addition, the Company issued warrants for
the purchase of 300,000 shares of the Company's common stock at $3.00 per
share to the investor. The preferred stock was convertible into the Company's
common stock at a price equal to 65% of the market value at the time of
conversion. During 1999, all Series A shares were converted into 1,015,999
shares of common stock. In November 1999, the warrants issued with the Series
A shares were re-priced to $1.00 per warrant.
In connection with the issuance of the Series A shares, the Company
recognized a non-cash deemed dividend of approximately $1,077,000 which was
recorded as a discount to preferred stock
F-17
<PAGE> 53
NOTE H - SHAREHOLDERS' EQUITY - Continued
with a corresponding credit to additional paid-in capital. The discount was
recognized at the date of issue of the Series A shares, the same date at
which the shares were eligible for conversion. The accretion of the discount
is reflected in the statement of operations as an adjustment to net loss, but
has no effect on total shareholders' equity. The Company also accrued
approximately $21,000 in preferred stock dividends in 1999 related to the
Series A shares.
Series B - In June 1999, the Company issued 2,024 shares of Series B
convertible preferred stock in connection with the PopMail merger (see note
C). The Series B shares were convertible into 8,633,900 shares of common
stock and warrants to purchase 4,407,098 shares of common stock at $3.00 per
share. All Series B shares issued in this transaction were converted in 1999.
In November 1999, the warrants issued in connection with the Series B
conversion were re-priced from $3.00 to $0.75 per share. In connection with
this re-pricing, the Company recognized an expense of approximately
$4,500,000.
Series C - In July 1999, the Company issued 2,000 shares of Series C 8%
convertible preferred stock with a stated value of $1,000 per share in a
private placement. In addition, the Company issued warrants for the purchase
of 300,000 shares of common stock at $3.00 per share to the investor. The
Series C shares are convertible into the Company's common stock at a price
equal to 65% of the market value at the time of conversion. During 1999,
1,395 shares of Series C were converted into 917,783 shares of common stock.
In November 1999, warrants for 200,000 shares issued with the Series C shares
were re-priced to $1.00 per warrant.
In connection with the issuance of the Series C shares, the Company
recognized a non-cash deemed dividend and discount accretion of approximately
$1,077,000 similar to that of the Series A shares. The Company also accrued
approximately $67,000 in preferred stock dividends in 1999 related to the
Series C shares.
Series D - In August 1999, the Company issued 2,200 shares of Series D 8%
convertible preferred stock with a stated value of $1,000 per share in a
private placement. In addition, the Company issued warrants for the purchase
of 300,000 shares of common stock at $3.00 per share to the investor. The
Series D shares are convertible into the Company's common stock at a price
equal to 65% of conversion. No Series D shares were converted during 1999.
In connection with the issuance of the Series D shares, the Company
recognized a non-cash deemed dividend and discount accretion of approximately
$1,185,000 similar to that of the Series A and Series C shares. The Company
also accrued approximately $88,000 in preferred stock dividends in 1999
related to the Series D shares.
Series E - Beginning in October 1999, the Company issued 175,000 shares of
Series E convertible preferred stock with a stated value of $2.00 per share
in a private placement. For each Series E share issued, a warrant was also
issued for the purchase of a share of common stock at $3.00 per share. Each
Series E share is convertible into one share of common stock. Series E shares
are not entitled to dividends.
All of the convertible preferred stock series contain certain liquidation
preference provisions including accrued and unpaid dividends and defined
payment amounts per share. In connection
F-18
<PAGE> 54
NOTE H - SHAREHOLDERS' EQUITY - Continued
with the Series A, C, and D shares, warrants for 450,000 shares of common
stock at $3.00 per share were issued to a financial advisor.
Warrants
A summary of the Company's warrant activity is as follows:
<TABLE>
<CAPTION>
Weighted average
Shares exercise price
--------- ----------------
<S> <C> <C>
Outstanding at December 28, 1997 2,964,955 $5.22
Granted 520,000 0.75
Canceled (199,205) 6.50
--------- -----
Outstanding at January 3, 1999 3,285,750 5.58
Granted 15,120,973 1.38
Exercised (2,250,000) 1.31
----------- -----
Outstanding at January 2, 2000 16,156,723 $2.24
========== =====
Outstanding warrants at January 2, 2000 are as follows:
Exercise price
-----------------------------------------
Weighted Number
Range average of shares
------------- ----------- ----------
<S> <C> <C>
$0.00 - $1.00 $0.69 8,407,098
1.25 - 2.50 1.78 3,388,875
3.00 - 6.50 5.58 4,360,750
----------
$2.24 16,156,723
==== ==========
</TABLE>
Stock Options
The Company maintains two stock option plans (the "Plans"), the 1997 Stock
Option and Compensation Plan, which has 1,250,000 common shares reserved for
issuance and the 1998 Director Option Plan, which has 250,000 common shares
reserved for issuance. At January 2, 2000, the Plans have issued 429,333
options subject to approval of additional authorized shares by the
shareholders. The Plans are administered by a stock option committee of the
Board of Directors, which has the discretion to determine the number of
shares granted, the price of the option, the term of the option and the time
period over which the option may be exercised. Stock options granted under
these plans generally have an exercise price equal to the fair value of the
stock on the date of grant, have a ten year term and vest ratably over three
years.
F-19
<PAGE> 55
NOTE H - SHAREHOLDERS' EQUITY - Continued
A summary of the Company's option activity is as follows:
<TABLE>
<CAPTION>
Weighted average
Shares exercise price
--------- ----------------
<S> <C> <C>
Outstanding at December 28, 1997 707,666 $3.11
Granted/repriced 846,166 1.16
Forfeited/repriced (734,666) 3.10
--------- ----
Outstanding at January 3, 1999 819,166 1.11
Granted 1,482,500 1.56
Exercised (118,999) 0.75
Forfeited/canceled (253,334) 0.75
--------- ----
Outstanding at January 2, 2000 1,929,333 $1.37
========= ====
</TABLE>
Outstanding and exercisable options at January 2, 2000 are as follows:
<TABLE>
<CAPTION>
OPTIONS OPTIONS EXERCISABLE
OUTSTANDING
Exercise price
------------------------- Weighted average
Weighted Number remaining Weighted Number
Range average of shares contractual life average of shares
------------- -------- --------- ---------------- -------- ---------
<S> <C> <C> <C> <C> <C>
$0.75 - $1.00 $0.85 914,333 8.32 years $0.87 774,330
1.78 - 3.00 1.84 1,015,000 9.76 years 2.06 130,000
--------- -------
$1.37 1,929,333 $1.04 904,330
==== ========= ==== =======
</TABLE>
On December 10, 1998, the board of directors approved a repricing of all
outstanding stock options held by the Company's employees and directors. The
new exercise price of $0.75 was greater than the fair market value of the
Company's stock on that date. A total of 660,666 options priced at $3.00 to
$4.50 were exchanged for options priced at $0.75. The new options vest in
three equal installments on the first, second and third anniversaries of the
new date of grant. In September, in connection with the PopMail merger,
874,333 outstanding options became fully vested in accordance with the change
in control provisions of the Plans.
F-20
<PAGE> 56
NOTE H - SHAREHOLDERS' EQUITY - Continued
Pro forma information regarding the fair value of stock options is as
follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Net loss
As reported $(20,734,121) $(6,706,582)
Pro forma (21,173,798) (6,891,308)
Basic and diluted EPS
As reported (2.05) (0.84)
Pro forma (1.97) (0.86)
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1999 and 1998: risk-free interest rates of
6.41% and 6.01%; no expected dividend yield, expected lives of 3 and 7 years;
and expected volatility of 150% and 80%.
Warrants and options granted for services were valued at the fair value of
the warrant or option granted or the value of the services provided,
whichever is more easily determinable.
NOTE I - INCOME TAXES
As of January 2, 2000 and January 3, 1999, the Company's deferred taxes
consisted primarily of net operating loss carryforwards, pre-opening costs
not currently deductible and accelerated methods of depreciation. The Company
has recorded a full valuation allowance against the net deferred tax asset
due to the uncertainty of realizing the related benefits.
As of January 2, 2000, the Company had net operating loss carryforwards of
approximately $40 million, which, if not used, will expire through 2019.
NOTE J - COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company has entered into operating leases for its existing restaurants
which have an initial lease term of ten to fifteen years with an option for
renewal. These leases contain provisions for contingent rentals based on a
percentage of gross revenues, as defined, and provisions for payments of real
estate taxes, insurance and common area costs. In addition, certain of these
leases provide for tenant inducements and rent abatement. Total rent expense,
including common area costs, real estate taxes and percentage rent, was
$1,385,139 and $604,146 for 1999 and 1998, respectively.
The Company also leases office space at the Corporate headquarters in
Minneapolis and in Dallas. The total expense for these facilities in was
$151,801 and $104,035 for 1999 and 1998, respectively.
F-21
<PAGE> 57
NOTE J - COMMITMENTS AND CONTINGENCIES - Continued
Future minimum rental payments are as follows as of January 2, 2000:
<TABLE>
<S> <C>
2000 $ 1,339,809
2001 1,258,904
2002 1,066,795
2003 1,038,347
2004 1,084,432
Thereafter 8,471,589
----------
$14,259,876
==========
</TABLE>
Litigation
The Company is involved in various legal actions rising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
financial position or the results of its operations.
NOTE K - RELATED PARTY TRANSACTIONS
During 1998, the Company entered into a revolving note payable with
significant shareholder, director and executive officer to the Company to
fund its working capital as necessary. The maximum amount of this note was
$100,000, which was outstanding at January 3, 1999. This note was paid in
full in 1999.
During 1999, the Company entered into four $60,000, 18% notes payable with
two shareholders and officers of the Company with principal plus interest
payable at maturity. In addition to the stated interest, an amount of 3% of
the principal is due at maturity. Two of the notes matured in 1999 and were
paid in full. The two remaining notes are due in January 2000.
In December 1999, the Company entered into a promissory note receivable of
$2,450,000 with a partnership controlled by a significant shareholder,
director and executive officer of the Company. The principal plus interest of
5.74% is due to the Company in December 2002. The Partnership has pledged
1,225,000 shares of the Company's common stock as security for the note.
Proceeds of this note were used to purchase shares of the Company's stock
issued in connection with the ROI acquisition (see note C). Accordingly, this
note has been classified as a reduction of shareholders' equity in the
accompanying financial statements.
Krienik Advertising, Inc., an Ohio corporation whose President, Chief
Executive Officer and 100% shareholder is a director of the Company, provided
marketing and advertising services to the Company. Fees paid for these
services, including payments for subcontracted media, printing, production
and research services, were approximately $677,000 and $741,000 during 1999
and 1998, respectively.
F-22
<PAGE> 58
NOTE L - BUSINESS SEGMENTS
The Company operates in two reportable segments, restaurant operations and
e-mail marketing services. The e-mail marketing services segment began in
1999 with the PopMail merger. The Company's general, administrative and
development expenses are included in the restaurant operations segment with
the exception of those expenses directly attributable to the e-mail division.
Information relating to these segments for 1999 are as follows:
<TABLE>
<CAPTION>
Restaurant e-mail
operations marketing Total
---------- --------- -----
<S> <C> <C> <C>
Net revenues $12,166,454 $ 106,744 $ 12,273,198
Operating loss (5,426,808) (5,363,257) (10,790,065)
Total assets 14,531,247 41,414,117 55,945,364
Equipment depreciation and amortization 1,639,279 157,025 1,796,304
Capital expenditures, net of acquisition 4,027,388 98,419 4,125,807
</TABLE>
NOTE M - FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of 1999, the Company recorded several adjustments
and transactions that affect, in part, previous quarters including the
following approximate amounts:
<TABLE>
<S> <C>
Expenses related to stock warrants and stock options for
services, re-pricings, and financial guarantees $ 8,000,000
Adjustments to equipment and depreciation 950,000
Accruals for financing fees, preferred stock dividends,
and financial advisory services 1,200,000
----------
Increase to net loss attributable to common shareholders $10,150,000
==========
</TABLE>
Had the above adjustments been recorded in the appropriate periods, net loss
attributable to common shareholders would have increased by approximately
$970,000 in each of the first two quarters and approximately $550,000 in the
third quarter of the year ended January 2, 2000.
NOTE N - SUBSEQUENT EVENTS (UNAUDITED)
PRIVATE PLACEMENTS
In January 2000, the Company executed a private placement memorandum
authorizing the issuance of 2,350,000 units valued at $1.00 per unit. Each
unit consists of one share of the Company's common stock and one five-year
warrant to purchase one share of the Company's common stock with an exercise
price of $2.00. As of March 24, 2000, the Company has issued all 2,350,000
units related to this placement.
F-23
<PAGE> 59
NOTE N - SUBSEQUENT EVENTS (UNAUDITED) - Continued
Also in January 2000, the Company executed a private placement memorandum
authorizing the issuance of 2,666,667 units valued at $2.25 per unit. Each
unit consists of one share of the Company's common stock and one five-year
warrant to purchase one share of the Company's common stock with an exercise
price of $3.00. As of March 24, 2000, the Company has issued all 2,666,667
units related to this placement.
The proceeds of these private placements were used to repay the due to
affiliates and all but $1,000,000 of the Company's $6,037,518 notes payable
that were outstanding at January 2, 2000, as well as to fund the continuing
operating needs of the Company.
MERGER WITH IZ.COM INCORPORATED
On February 9, 2000, the Company completed a merger with IZ.com Incorporated
("IZ.com"), a development stage online convergent media company. The merger
will be accounted for under the purchase method of accounting. The former
shareholders of IZ.com were issued 287,408 shares of newly created Series F
Convertible preferred stock, with an additional 130,508 shares issuable upon
the exercise of IZ.com options assumed by PopMail. Both the Series F and
option shares are convertible into common at a rate of 12.977 shares. This
conversion ratio will increase to a rate of 25.66 shares, upon approval of
the merger by the shareholders of PopMail. Assuming conversion of all
potentially issuable shares at the higher conversion rate, they would convert
into approximately 10,725,000 shares of the Company's common stock valued at
approximately $47,825,000, using a share price based upon the average closing
price of the five business days prior to the closing of the transaction. With
estimated closing costs of $250,000, the total consideration plus the fair
value of the net liabilities assumed will result in approximately $49,000,000
of goodwill, which will be amortized on a straight-line basis over three
years.
During the period from February 9, 1999 (inception) through December 31,
1999, IZ.com incurred net losses of approximately $5,000,000, representing
start-up expenses.
WARRANTS
In March 2000, the Company took several actions to induce warrant holders to
exercise warrants previously issued. Holders of 750,000 warrants at $2.00
per share were issued 250,000 additional 5-year warrants with an exercise
price of $5.00 per share. Additionally, the Company re-priced 850,000
previously issued $3.00 per share warrants to $2.00 per share.
Computer Hardware Addition
In February 2000, the Company purchased computer hardware and the related
infrastructure for its e-mail services division for approximately $1,800,000.
F-24
<PAGE> 60
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On September 30, 1999, Arthur Andersen LLP and the Company agreed to
the resignation of Arthur Andersen LLP as independent public accountants of
Registrant.
The reports of Arthur Andersen LLP on the financial statements of the
Company for the past two years, the most recent of which is the fiscal year
ended January 3, 1999, contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to audit scope or accounting principles.
However, reference is made to said reports which includes an explanatory
paragraph that describes the uncertainty over the Company's ability to continue
as a going concern described in Note 1 of the financial statements.
The Registrant's Board of Directors participated in and approve the
decision to change independent accountants.
In connection with its audits for the two most recent periods and
through September 30, 1999, there were no disagreements with Arthur Andersen LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Arthur Andersen LLP would have cause them to make
reference thereto in their report on the financial statements for such years.
During the two most recent fiscal years and through September 30, 1999,
there were no reportable events (as defined in Regulation S-B Item
304(a)(1)(iv)).
Arthur Andersen LLP has furnished the Company with a letter addressed
to the SEC stating that it agrees with the above statements. A copy of the
letter is included in an exhibit to the Company's Current Report on Form 8-K
filed with the SEC on October 1, 1999.
The Company engaged Grant Thornton LLP as its new independent
accountants as of September 30, 1999. During the two most recent periods and
through September 30, 1999, the Company has not consulted with Grant Thronton
LLP on items which (1) were or should have been subject to SAS 50 or (2)
concerned the subject matter of a disagreement or reportable event with the
former auditor (as described in Regulation S-B Item 304(a)(2)).
35
<PAGE> 61
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Information in response to this Item is incorporated herein by
reference to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after the end of the fiscal year covered by this
Form 10-KSB.
ITEM 10. EXECUTIVE COMPENSATION
Information in response to this Item is incorporated herein by
reference to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after the end of the fiscal year covered by this
Form 10-KSB.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this Item is incorporated herein by
reference to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after the end of the fiscal year covered by this
Form 10-KSB.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this Item is incorporated herein by
reference to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after the end of the fiscal year covered by this
Form 10-KSB.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
2.1 Agreement and Plan of Merger dated as of June 1, 1999 among Cafe
Odyssey, Inc, Stephen D. King, PopMail.com, inc., all of the Holders of
Common Stock of Popmail.com, inc. and Cafe Odyssey Acquisition
Subsidiary, Inc. (incorporated herein by reference to Exhibit 2.0 of
the Registrant's Current Report on Form 8-K dated June 22, 1999 and
filed on June 25, 1999).
2.2 Agreement and Plan of Reorganization among ROI InterActive, LLC, Cafe
Odyssey, Inc. and ROI Acquisition Corporation (incorporated herein by
reference to Exhibit 2.0 to the Company's Current Report on Form 8-K
dated December 17, 1999.)
2.3 First Amendment to Agreement and Plan of Reorganization, dated November
12, 1999 by and among Parent, Sub, the Company, and the Members.
(incorporated herein by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K dated December 17, 1999.)
2.4 Agreement and Plan of Reorganization dated as of January 21, 2000 among
PopMail.com, inc., IZ.com Incorporated, IZ Acquisition Corporation, and
Virtual Group LLC.
36
<PAGE> 62
(incorporated herein by reference to Exhibit 2.1 of the Company's
Current Report on Form 8-K dated February 9, 2000 and filed on February
24, 2000)
3.1(A) Articles of Incorporation, as amended (incorporated herein by reference
to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended April 4, 1999).
3.1(B) Certificate of Designation of Series B Convertible Preferred Stock
(incorporated herein by reference to Exhibit 3.1(b) to the Registrant's
report on Form 8-K dated June 22, 1999 and filed on June 25, 1999).
3.1(C) Certificate of Designation of Series C 8% Convertible Preferred Stock
(incorporated herein by reference to Exhibit 3.1(c) to the Registrant's
report on Form 8-K dated July 13, 1999 and filed on July 23, 1999)
3.1(D) Certificate of Designation of Series D 8% Convertible Preferred Stock
(incorporated hereby by reference to Exhibit 3.1(d) to the Registrant's
Form 8-K dated September 1, 1999 and filed on September 16, 1999)
3.1(E) Articles of Amendment of Articles of Incorporation filed on September
3, 1999 (incorporated hereby by reference to Exhibit 3.1(d) to the
Registrant's Form 8-K dated September 1, 1999 and filed on September
16, 1999)
3.1(F) Certificate of Designation of Series F Convertible Preferred Stock
(incorporated herein by reference to Exhibit 3.1 of the Company's
Current Report on Form 8-K dated February 9, 2000 filed on February 24,
2000)
3.1(G) Certificate of Designation of Series E Convertible Preferred Stock
3.2 By-laws (incorporated herein by reference to Exhibit 3.2 to the 1997 SB
-2).
4.1 Form of Warrant Agreement (incorporated herein by reference to
Exhibit 4 to the 1997 SB-2)
4.2 Form of Warrant (the series of Warrants initially covers 4,407,098
shares of common stock; subject to adjustment) (incorporated herein by
reference to Exhibit 4.0 to the Registrant's Current Report on Form 8-K
dated June 22, 1999)
4.3 Schedule identifying material details of warrants issued by the Company
substantially identical to the warrant filed as Exhibit 4.2.
4.4 Common Stock Purchase Warrant issued to J. Jeffrey Brausch & Company
4.5 Warrant to Purchase Shares of Common Stock issued to J. Jeffrey Brausch
& Company
4.6 Schedule identifying material details of warrants issued by the Company
substantially identical to the warrant filed as Exhibit 4.5.
4.7 Form of Common Stock Purchase Warrant (IPO Series)
37
<PAGE> 63
4.8 Schedule identifying material details of warrants issued by the Company
substantially identical to the warrant filed as Exhibit 4.7.
4.9 Warrant to Purchase Shares of Common Stock of the Company
4.10 Schedule identifying material details of warrants issued by the Company
substantially identical to the warrant filed as Exhibit 4.9.
4.11 Form of Warrant to Purchase Shares of Common Stock of the Company (GW-
1)
4.12 Form of Warrant to Purchase Shares of Common Stock of the Company (GW-
2)
4.13 Form of Warrant to Purchase Shares of Common Stock of the Company (MB-
1)
4.14 Form of Warrant to Purchase Shares of Common Stock of the Company (GFP
Series)
4.15 Schedule identifying material details of warrants issued by the Company
substantially identical to the warrant filed as Exhibit 4.14.
4.16 Warrant to Purchase Shares of Common Stock issued to Hillstreet Fund,
L.P.
4.17 Warrant to Purchase Shares of Common Stock issued to Andrew Baum
4.18 Schedule identifying material details of warrants issued by the Company
substantially identical to the warrant filed as Exhibit 4.17.
4.19 Warrant to Purchase Shares of Common Stock Issued to Metropolitan
Capital Partners, Inc. (MCP-1)
4.20 Warrant to Purchase Shares of Common Stock Issued to Metropolitan
Capital Partners, Inc. (MCP-2)
4.21 Warrant to Purchase Shares of Common Stock Issued to Wayne L. Teidge
(WT-1)
4.22 Warrant to Purchase Shares of Common Stock Issued to Metropolitan
Capital Partners, Inc. (HT-1)
4.23 Warrant to Purchase Shares of Common Stock Issued to eBanker USA.com,
Inc. (EB-1)
4.24 Warrant to Purchase Shares of Common Stock Issued to eBanker USA.com,
Inc. (EB-2)
10.1 Indenture of Lease dated November 9, 1994 between Phillip E. Stephens,
Trustee and Kenwood Restaurant, Inc; First Amendment to Lease dated May
3, 1995 by and between Phillip E. Stephens, Trustee and Kenwood
Restaurant, Zinc.; by Second Amendment to Lease dated , 1996
between Phillip E. Stephens, Trustee and Kenwood Restaurant Limited
Partnership; Second Amendment to Agreement dated October 18, 1996
between Phillip E. Stephens, Trustee and Kenwood Restaurant Limited
Partnership; and Addendum to Second Amendment to Lease dated October
18, 1996 between Phillip E.
38
<PAGE> 64
Stephen, Trustee and Kenwood Restaurant Limited Partnership (Kenwood
Restaurant) (incorporated herein by reference to Exhibit 10.1 to the
1997 SB-2).
10.2 Lease dated August 4, 1997 between Mall of America Company and Hotel
Mexico, Inc. (Mall of America Restaurant) (incorporated herein by
reference to Exhibit 10.2 to the 1997 SB-2).
10.3 1997 Stock Option and Compensation Plan (incorporated herein by
reference to Exhibit 10.4 to the 1997 SB-2).
10.4 Employment Agreement between the Company and Ronald K. Fuller dated
March 17, 1997 (incorporated herein by reference to Exhibit 10.5 to the
1997 SB-2).
10.5 Amendment to 1997 Stock Option and Compensation Plan (incorporated
herein by reference to Exhibit 10.6 to the 1997 SB-2).
10.6 Second Amendment to 1997 Stock Option and Compensation Plan
(incorporated herein by reference to Exhibit 10.7 to the 1997 SB-2).
10.7 Third Amendment dated February 25, 1998 to the Company's 1997 Stock
Option and Compensation Plan (incorporated herein by reference to
Exhibit 10.1 to the Registrant's Quarterly Report in Form 10-QSB for
the quarter ended June 28, 1998 (the "2-Q98 10-QSB").
10.8 1998 Director Stock Option Plan (incorporated herein by reference to
Exhibit 10.2 to the 2Q98 10-QSB).
10.9 Shopping Center Lease dated May 12, 1998 between Denver Pavilions, L.P.
and the Company (incorporated herein by reference to Exhibit 10 to the
Company's current Report on Form 8-K filed on May 27, 1998).
10.10 Open-End Leasehold Mortgage, Security Agreement and Assignment of
Rents, Income and Proceeds made as of September 23, 1998 by the Company
to The Provident Bank ("Provident")(incorporated herein by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 27, 1998 (the "3Q98 10-QSB")).
10.11 Revolving Promissory Note Mortgage Loan dated September 23, 1998
between the Company and Provident (incorporated herein by reference to
Exhibit 10.2 to the 3Q98 10-QSB).
10.12 Security Agreement dated as of September 23, 1998 between the Company
and Provident (incorporated herein by reference to Exhibit 10.3 to the
3Q98 10-QSB).
10.13 Agreement Among Guarantors dated November 16, 1998 among Stephen D.
King, Jerry L. Ruyan, Greg C. Mosher and the Company (incorporated
herein by reference to Exhibit 10.18 to the Company's Annual Report on
Form 10-KSB for the fiscal year needed 1/4/99 (the "1998 10-KSB)).
39
<PAGE> 65
10.14 Agreement Among Guarantors dated January 22, 1999 among Stephen D.
King, Jerry L. Ruyan, Greg C. Mosher and the Company (incorporated
hereby reference to Exhibit 10.19 to the 1998 10-KSB.)
10.15 Warrant No. PL-1 dated November 16, 1998 to purchase 40,000 shares of
common stock of the Company issued to Stephen D. King (incorporated
hereby reference to Exhibit 10.19 to the 1998 10-KSB.)
10.16 Schedule identifying material details of other warrants issued by the
Company substantially identical to the warrant filed as Exhibit 10.15.
10.17 Indemnification and Contribution Agreement dated March 3, 1999 among
Michael A. Bird, John E. Feltl, Stephen D. King, Timothy I. Maudlin,
Wayne W. Mills and the Company (incorporated hereby reference to
Exhibit 10.19 to the 1998 10-KSB.)
10.18 Promissory Note dated March 10, 1999 of the Company to BankWindsor
(incorporated hereby reference to Exhibit 10.19 to the 1998 10-KSB.)
10.19 Warrant No. BWL-1 dated March 3, 1999 to purchase 25,000 shares of
common stock of the Company issued to Michael A. Bird (incorporated
hereby reference to Exhibit 10.19 to the 1998 10-KSB.)
10.20 Schedule identifying material details of other warrants issued by the
Company substantially identical to the warrant filed as Exhibit 10.24
(incorporated hereby reference to Exhibit 10.19 to the 1998 10-KSB.)
10.21 Warrant No. PL2-1 dated March 18, 1999 to purchase 150,000 shares of
common stock of the Company issued to Stephen D. King (incorporated
herein by reference to Exhibit 10.26 to the Amendment to the 1998
10-KSB).
10.22 Common Stock Purchase Warrant to purchase 300,000 shares of Cafe
Odyssey, Inc. dated as of May 14, 1999, issued to The Shaar Fund Ltd.
(Incorporated hereby by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended April 4, 1999)
10.23 Schedule identifying material details of additional warrants issued by
the Company substantially identical to the warrant filed as Exhibit
10.22.
10.24 Securities Purchase Agreement, dated as of May 14, 1999, between Cafe
Odyssey, Inc., and The Shaar Fund Ltd. (Incorporated hereby by
reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended April 4, 1999)
10.25 Registration Rights Agreement, dated May 14, 1999, between Cafe
Odyssey, Inc., and The Shaar Fund Ltd. (Incorporated hereby by
reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended April 4, 1999)
10.26 Indemnification Agreement between Cafe Odyssey, Inc. LegacyMaker, Inc.
(Incorporated hereby by reference to Exhibit 10.1 to the Registrant's
Form 8-K dated June 22, 1999 and filed on June 25, 1999)
40
<PAGE> 66
10.27 Escrow Agreement by and among popmail.com, inc., James L. Anderson, as
Attorney-in-Fact for certain Shareholders, Cafe Odyssey, Inc., Cafe
Odyssey Acquisition Subsidiary, Inc. and Thompson & Knight, a
professional corporation. (Incorporated hereby by reference to Exhibit
10.2 to the Registrant's Form 8-K dated June 22, 1999 and filed on June
25, 1999)
10.28 Agreement by and between Cafe Odyssey, Inc. and James L. Anderson
(Incorporated hereby by reference to Exhibit 10.3 to the Registrant's
Form 8-K dated June 22, 1999 and filed on June 25, 1999)
10.29 Indemnification Agreement between popmail.com, Inc. and Stephen D. King
(Incorporated hereby by reference to Exhibit 10.4 to the Registrant's
Form 8-K dated June 22, 1999 and filed on June 25, 1999)
10.30 Employment Agreement by and between Cafe Odyssey, Inc. and Stephen D.
King (Incorporated hereby by reference to Exhibit 10.5 to the
Registrant's Form 8-K dated June 22, 1999 and filed on June 25, 1999)
10.31 Form of Warrant issued in connection with the Series C 8% Convertible
Preferred Stock (Incorporated hereby by reference to Exhibit 10.1 to
the Registrant's Form 8-K dated July 13, 1999 and filed on July 23,
1999)
10.32 Schedule identifying material details of additional warrants issued by
the Company substantially identical to the warrant filed as Exhibit
10.31.
10.33 Securities Purchase Agreement, dated July 13, 1999 between the Company
and The Shaar Fund Ltd. (Incorporated hereby by reference to Exhibit
10.2 to the Registrant's Form 8-K dated July 13, 1999 and filed on July
23, 1999)
10.34 Registration Rights Agreement, dated July 13, 1999 between the Company
and The Shaar Fund Ltd. (Incorporated hereby by reference to Exhibit
10.3 to the Registrant's Form 8-K dated July 13, 1999 and filed on July
23, 1999)
10.35 Amended and Restated Employment Agreement dated October 5, 1999 by and
between Cafe Odyssey, Inc., a Minnesota corporation (the "Company"),
and Thomas W. Orr (the "Executive"). (Incorporated herein by reference
to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-QSB for
Quarter ended October 4, 1999.)
10.36 Securities Purchase Agreement, dated July 13, 1999 between the
Registrant and The Shaar Fund Ltd. (Incorporated herein by reference to
Exhibit 10.1 to the Registrant's Form 8-K dated September 1, 1999 and
filed on September 16, 1999)
10.37 Form of Warrant issued in connection with the Series D 8% Convertible
Preferred Stock (Incorporated hereby by reference to Exhibit 10.2 to
the Registrant's Form 8-K dated September 1, 1999 and filed on
September 16, 1999)
10.38 Schedule identifying material details of additional warrants issued by
the Company substantially identical to the warrant filed as Exhibit
10.37.
41
<PAGE> 67
10.39 Registration Rights Agreement, dated July 13, 1999 between the
Registrant and The Shaar Fund Ltd. (Incorporated hereby by reference to
Exhibit 10.3 to the Registrant's Form 8-K dated September 1, 1999 and
filed on September 16, 1999)
10.40 Loan Agreement by and between the Registrant and Fairview Partners
dated as of August 24, 1999. (Incorporated hereby by reference to
Exhibit 10.4 to the Registrant's Form 8-K dated September 1, 1999 and
filed on September 16, 1999)
10.41 Form of Senior Convertible Note dated August 24, 1999. (Incorporated
hereby by reference to Exhibit 10.5 to the Registrant's Form 8-K dated
September 1, 1999 and filed on September 16, 1999)
10.42 Form of Warrant to Purchase Common Stock of the Registrant issued to
Fairview Partners. (Incorporated hereby by reference to Exhibit 10.6 to
the Registrant's Form 8-K dated September 1, 1999 and filed on
September 16, 1999)
10.43 Support Agreement dated as of August 24, 1999 among Stephen D. King,
the Registrant and Fairview Partners. (Incorporated hereby by reference
to Exhibit 10.7 to the Registrant's Form 8-K dated September 1, 1999
and filed on September 16, 1999)
10.44 First Deed of Trust, Security Agreement and Fixture Financing Statement
dated as of August 24, 1999, between the Registrant and the Public
Trustee of Denver County, Colorado. (Incorporated hereby by reference
to Exhibit 10.8 to the Registrant's Form 8-K dated September 1, 1999
and filed on September 16, 1999)
10.45 Agreement Between Landlord and Lender dated as of August 24, 1999 by
Denver Pavilions, L.P. and the Registrant. (Incorporated hereby by
reference to Exhibit 10.9 to the Registrant's Form 8-K dated September
1, 1999 and filed on September 16, 1999)
10.46 Escrow Agreement dated August 25, 1999, by and between Fairview
Partners, the Registrant and Johnson Trust Company. (Incorporated
hereby by reference to Exhibit 10.10 to the Registrant's Form 8-K dated
September 1, 1999 and filed on September 16, 1999)
10.47 Registration Rights Agreement, dated January 21, 2000 between the
Registrant and the stockholders of IZ.com, Incorporated. (incorporated
herein by reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K dated filed on February 24, 2000)
10.48 Pledge Agreement dated December 3, 1999 between King Family Partners
and the Company.
10.49 First Amendment to Pledge Agreement dated December 3, 1999 dated March
28, 2000 between King Family Partners and the Company.
10.50 Amended and Restated Promissory Note in the amount of $2,450,000 dated
December 3, 1999 of King Family Partners to the Company.
10.51 Promissory Note in the amount of the $245,000 dated March 30, 2000 of
King Family Partners to the Company.
42
<PAGE> 68
10.52 Employment Agreement entered into as of February 9, 2000, by and
between Jesse Berst and the Company.
10.53 Amendment to Employment Agreement dated July 27, 1999 by and between
the Company and Ronald K. Fuller.
21 Subsidiaries
23.1 Consent of Grant Thornton, LLP
23.2 Consent of Arthur Andersen LLP
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
On November 15, 1999, the Company filed an amendment to a report on Form 8-K/A
relating to its acquisition of Popmail.com, Inc.
On December 17, 1999, the Company filed a report on Form 8-K relating to its
acquisition of ROI Interactive, LLC.
43
<PAGE> 69
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
POPMAIL.COM, INC.
("Registrant")
Dated: , 2000 By: /s/ Stephen D. King
---------------- ----------------------------------------
Stephen D. King
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on , 2000 by the following persons on
behalf of the Registrant, in the capacities indicated.
SIGNATURE TITLE
- - --------- -----
/s/ Stephen D. King Chief Executive Officer and Director
- - ----------------------------------
Stephen D. King (Principal Executive Officer)
/s/ Thomas W. Orr Chief Financial Officer and Director
- - ----------------------------------
Thomas W. Orr (Principal Financial and Accounting
Officer)
/s/ Ronald K. Fuller President and Director
- - ----------------------------------
Ronald K. Fuller
/s/ Michael L. Krienik Director
- - ----------------------------------
Michael L. Krienik
/s/ Frank Wood Director
- - ----------------------------------
Frank Wood
44
<PAGE> 70
/s/ Gary Schneider President of Corporate Development and
- - ---------------------------------- Director
Gary Schneider
/s/ Jesse Berst Chief Operating Officer and Director
- - ----------------------------------
Jesse Berst
45
<PAGE> 1
EXHIBIT 3.1 (g)
POPMAIL.COM, INC.
CERTIFICATE OF DESIGNATION OF
SERIES E CONVERTIBLE PREFERRED STOCK
Pursuant to Section 401(3)(b) of the Business Corporation Act of the
State of Minnesota, PopMail.com, inc., formerly known as Cafe Odyssey, Inc. (the
"Company"), a corporation organized and existing under the Business Corporation
Act of the State of Minnesota, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of
the Company by the Articles of Incorporation of the Company, and in accordance
with the provisions of Section 401(3)(a) of the Business Corporation Act of the
State of Minnesota, the Board of Directors of the Company as of September 22,
1999, adopted the following resolution creating a series of preferred stock
designated as Series E Convertible Preferred Stock:
RESOLVED: That pursuant to the authority vested in the Board of
Directors of the Company in accordance with the provisions of its Articles of
Incorporation, as amended, a series of preferred stock, $.01 par value, to be
titled the "Series E Convertible Preferred Stock" (the "Preferred Shares") of
the Company is hereby created and designated. The number of shares of Preferred
Shares shall be 750,000 shares. The voting powers, preferences and relative,
participating, optional and other special rights of the Preferred Shares, and
the qualifications, limitations and restrictions thereof, are as follows:
1. Designation. The series of preferred stock established hereby shall be
designated the "Series E Convertible Preferred Stock" (and shall be referred to
herein as the "Preferred Shares") and the authorized number of Preferred Shares
shall be 750,000, subject to adjustment as hereinafter provided.
2. Voting Rights. Holders of Preferred Shares shall have no vote on any
matters submitted to the holders of Common Stock. Without the affirmative vote
of the holders (acting together as a class) of at least a majority of Preferred
Shares at the time outstanding given in person or by proxy at any annual or
special meeting, or, if permitted by law, in writing without a meeting, the
Company shall not alter, change or amend the preferences or rights of the
Preferred Shares.
3. Dividends. There are no rights to dividends.
4. Liquidation Right and Preference. In the event of the liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of Preferred Shares shall be entitled to receive in cash, out of the
assets of the Company, an amount equal to Two Dollars ($2.00) per share for each
outstanding Preferred Share (herein, "Liquidation Value"), before any payments
shall be made or any assets distributed to the holders of Common Stock or any
other class of shares of the Company ranking junior to Preferred Shares. If,
upon any liquidation, dissolution or winding up of the Company, the assets of
the Company are insufficient to pay the Liquidation Value, the holders of such
Preferred Shares shall share pro rata in any such distribution in proportion to
the full amounts to which they would otherwise be respectively entitled.
Following such payment to the holders of Preferred Shares upon such liquidation,
dissolution or a winding up of the Company, the holders of Common Stock and
Preferred Shares shall then share ratably in all the assets of the Company
thereafter remaining. For purposes of this joint distribution of assets to the
holders of Common Stock and the holders of Preferred Shares, each holder of
Preferred Shares should be regarded as owning that number of Common Stock into
which such Preferred Shares would then be convertible.
<PAGE> 2
5. Conversion Rights.
a. Conversion. The Company and holder of the Preferred Shares shall
be entitled to convert any or all of such Preferred Shares into shares of Common
Stock. The number of shares of Common Stock issuable upon such conversion shall
be determined as follows: (1) divide $2.00 by the lesser of (i) $2.00, or (ii)
seventy (70) percent of the average closing market price of the Company's Common
Stock during the ten (10) trading days immediately preceding the Filing Date (as
defined in Section 6 herein); and multiplying the quotient determined in (1) by
the number of Preferred Shares being converted.
b. Conversion Mechanics -- Holder. In order to exercise the
conversion privilege, a holder of Preferred Shares shall (1) notify the Company
in writing of such holder's intent to convert a specified portion of such shares
(the "Conversion Notice" and the date of such notice which shall be the same or
later than the date notice is given, the "Conversion Notice Date") and (2)
provide, on or prior to the Conversion Notice Date, to the Company at its
principal office the certificate evidencing the Preferred Shares being
converted, duly endorsed to the Company and accompanied by written notice to the
Company that the holder elects to convert a specified portion or all of such
Shares. Preferred Shares converted at the option of the Holder shall be deemed
to have been converted on the day of receipt by the Company of the certificate
representing such shares for conversion in accordance with the foregoing
provisions (the "Conversion Date"), and at such time the rights of the holder of
such Preferred Shares other than the right to receive shares of Common Stock
upon conversion of the Preferred Shares pursuant to the terms hereof, as such
holder, shall cease and such holder shall be treated for all purposes as the
record holder of Common Stock issuable upon conversion. As promptly as
practicable on or after the Conversion Date, the Company shall issue and mail or
deliver to such holder a certificate or certificates for the number of Common
Stock issuable upon conversion, computed to the nearest full shares, and a
certificate or certificates for the balance of Preferred Shares surrendered, if
any, not so converted into Common Stock.
c. Conversion Mechanics -- Company. At its election, the Company may
automatically convert the Preferred Shares. Notice of the conversion to the
holder shall be given by mailing via first-class mail a notice of the Company's
intent to convert a specified portion of such shares (the "Conversion Notice")
not less than ten (10) business days prior to the effectiveness of such
conversion. As promptly as practicable on or after such conversion by the
Company, the Company shall issue and mail or deliver to such holder a
certificate or certificates for the number of Common Stock issuable upon
conversion, computed to the nearest full shares, and a certificate or
certificates for the balance of Preferred Shares surrendered, if any, not so
converted into Common Stock.
6. Registration Rights. After May 1, 2000 (the "Filing Date"), the
Company shall, on a one-time basis, prepare and file a registration statement
under the 1933 Act covering the resale of the shares of Common Stock issued or
issuable upon conversion of the Preferred Shares. The Company shall bear all
expenses and fees incurred in connection with the preparation, filing, and
amendment of such registration statement, except that each holder of Preferred
Shares shall pay all fees, disbursements and expenses of any counsel or expert
retained by such holder and all underwriting discounts and commissions, filing
fees and any transfer or other taxes relating to the Shares included in the
Registration Statement. Each holder of preferred shares shall cooperate with the
Company in the preparation and filing of any Registration Statement, and in the
furnishing of information concerning the holder for inclusion therein, or in any
efforts by the Company to establish that the proposed sale is exempt under the
Securities Act of 1933 as to any proposed distribution.
2
<PAGE> 3
7. Other Terms of Series E Convertible Preferred Shares.
a. Consolidation, Merger, Exchange, etc. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another company, or the sale of all
or substantially all of its assets to another company, shall be effected in such
a way that holders of Common Stock shall be entitled to receive stock,
securities, cash or other assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision shall be made
whereby the holders of Preferred Shares shall thereafter have the right to
receive, in lieu of Common Stock of the Company, such shares of stock,
securities, cash or other assets as would have been issued or payable with
respect to or in exchange for such number of shares of Common Stock receivable
upon a conversion of such Preferred Shares had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any such
case appropriate provisions shall be made with respect to the rights and
interests of the holders of the Preferred Shares to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities, cash or other assets thereafter
receivable upon the conversion of such Preferred Shares. The Company shall not
effect any such reorganization, reclassification, consolidation, merger or sale,
unless prior to the consummation thereof the surviving company (if other than
the Company), the company resulting from such consolidation or the company
purchasing such assets shall assume by written instrument executed and mailed to
the registered holders of the Preferred Shares at the last address of such
holders appearing on the Books of the Company, the obligation to deliver to such
holders such shares of stock, securities, cash or other assets as, in according
to the foregoing provisions, such holders may be entitled to receive.
b. Stock Split, Stock Dividend, Recapitalization, etc. If the
Company, at any time while any Preferred Shares are outstanding, (a) shall pay a
stock dividend or otherwise make a distribution or distributions payable in
shares of its capital stock (whether payable in shares of its Common Stock or of
capital stock of any class), (b) subdivide outstanding shares of Common Stock
into a larger number of shares, (c) combine outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of shares of
Common Stock any shares of capital stock of the Company, the Conversion Price in
effect immediately prior thereto shall be adjusted so that the holder of any
Preferred Shares thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock which such holder would have owned
or have been entitled to receive after the happening of any of the events
described above had such Preferred Shares been converted immediately prior to
the happening of such event or the record date therefor, whichever is earlier.
Any adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of shareholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
c. Notice of Certain Events. If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any
rights; or
3
<PAGE> 4
(iv) the approval of any shareholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company (other than a subdivision or
combination of the outstanding shares of Common Stock), any
consolidation or merger to which the Company is a party, any
sale or transfer of all of substantially all of the assets of
the Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding-up of the affairs of the
Company;
then the Company shall mail to the holders of Preferred Shares, at least 10
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding-up is expected to become effective, and (z) the date as of which it
is expected that holders of Common Stock shall be entitled to exchange such
shares of Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Certificate to be
duly executed in its corporate name on this day of , 1999.
POPMAIL.COM, INC.
By: /s/ Thomas W. Orr
---------------------------
Thomas W. Orr
Chief Financial Officer
4
<PAGE> 1
Exhibit 4.3
SCHEDULE OF WARRANTS ISSUED IN POPMAIL TRANSACTION
<TABLE>
<CAPTION>
NUMBER OF
DATE OF WARRANT SHARES OF
ISSUANCE NAME OF WARRANT RECIPIENT NO. COMMON STOCK
<S> <C> <C> <C>
6/22/99 Jeff Crabtree PM-1 44,065
6/22/99 Bruce Campbell PM-2 88,148
6/22/99 Keleigh Ahman PM-3 22,040
6/22/99 Randy Isbell PM-4 22,040
The Marcos A. and Sonya Nance Rodriguez PM-5 3,155,464
6/22/99 Children's Trust No. 2
6/22/99 James A. Gammon PM-6 52,885
6/22/99 The Sonya Nance Trust PM-7 22,040
6/22/99 Toni Bryan PM-8 88,148
6/22/99 James Anderson PM-9 215,948
6/22/99 Travis Reese PM-10 348,160
6/22/99 Paul Martin PM-11 348,160
</TABLE>
<PAGE> 1
EXHIBIT 4.4
HOTEL MEXICO, INC.
COMMON STOCK PURCHASE WARRANT
Hotel Mexico, Inc., an Ohio corporation (the "COMPANY"), hereby agrees
that, for value received, J. JEFFREY BRAUSCH & COMPANY, or its assigns, is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time after July 30, 1998, and before 5:00 p.m.,
Minneapolis, Minnesota time, on July 30, 2002, Fifteen Thousand Seven Hundred
Fifty (15,750) shares of the no par value Common Stock of the Company (the
"COMMON STOCK"), at an exercise price of $3.75 per share, subject to adjustment
as provided herein.
1. EXERCISE OF WARRANT. The purchase rights granted by this Warrant
shall be exercised (in minimum quantities of 100 shares) by the holder
surrendering this Warrant with the form of exercise attached hereto duly
executed by such holder, to the Company at its principal office, accompanied by
payment, in cash or by cashier's check payable to the order of the Company, of
the purchase price payable in respect of the Common Stock being purchased. If
less than all of the Common Stock purchasable hereunder is purchased, the
Company will, upon such exercise, execute and deliver to the holder hereof a new
Warrant (dated the date hereof) evidencing the number of shares of Common Stock
not so purchased. As soon as practicable after the exercise of this Warrant and
payment of the purchase price, the Company will cause to be issued in the name
of and delivered to the holder hereof, or as such holder may direct, a
certificate or certificates representing the shares purchased upon such
exercise. The Company may require that such certificate or certificates contain
on the face thereof a legend substantially as follows:
"The transfer of the shares represented by this certificate is
restricted pursuant to the terms of a Common Stock Purchase Warrant
dated July 30, 1997, issued by Hotel Mexico, Inc., a copy of which is
available for inspection at the offices of Hotel Mexico, Inc. Transfer
may not be made except in accordance with the terms of the Common Stock
Purchase Warrant. In addition, no sale, offer to sell or transfer of
the shares represented by this certificate shall be made unless a
registration statement under the Federal Securities Act of 1933, as
amended (the "ACT"), with respect to such shares is then in effect or
an exemption from the registration requirements of the Act is then in
fact applicable to such shares."
2. NEGOTIABILITY AND TRANSFER. This Warrant is issued upon the
following terms, to which each holder hereof consents and agrees:
(a) Until this Warrant is duly transferred on the books
of the Company, the Company may treat the registered
holder of this Warrant as absolute owner hereof for
all purposes without being affected by any notice to
the contrary.
<PAGE> 2
(b) Each successive holder of this Warrant, or of any
portion of the rights represented thereby, shall be
bound by the terms and conditions set forth herein.
3. ANTIDILUTION ADJUSTMENTS. If the Company shall at any time hereafter
subdivide or combine its outstanding shares of Common Stock, or declare a
dividend payable in Common Stock, the exercise price in effect immediately prior
to the subdivision, combination or record date for such dividend payable in
Common Stock shall forthwith be proportionately increased, in the case of
combination, or proportionately decreased, in the case of subdivision or
declaration of a dividend payable in Common Stock, and each share of Common
Stock purchasable upon exercise of this Warrant, immediately preceding such
event, shall be changed to the number determined by dividing the then current
exercise price by the exercise price as adjusted after such subdivision,
combination or dividend payable in Common Stock.
No fractional shares of Common Stock are to be issued upon the exercise
of the Warrant, but the Company shall pay a cash adjustment in respect of any
fraction of a share which would otherwise be issuable in an amount equal to the
same fraction of the market price per share of Common Stock on the day of
exercise as determined in good faith by the Company.
In case of any capital reorganization or any reclassification of the
shares of Common Stock of the Company, or in the case of any consolidation with
or merger of the Company into or with another corporation, or the sale of all or
substantially all of its assets to another corporation, which is effected in
such a manner that the holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a part of such reorganization, reclassification, consolidation, merger
or sale, as the case may be, lawful provision shall be made so that the holder
of the Warrant shall have the right thereafter to receive, upon the exercise
hereof, the kind and amount of shares of stock or other securities or property
which the holder would have been entitled to receive if, immediately prior to
such reorganization, reclassification, consolidation, merger or sale, the holder
had held the number of shares of Common Stock which were then purchasable upon
the exercise of the Warrant. In any such case, appropriate adjustment (as
determined in good faith by the Board of Directors of the Company) shall be made
in the application of the provisions set forth herein with respect to the rights
and interest thereafter of the holder of the Warrant, to the end that the
provisions set forth herein (including provisions with respect to adjustments of
the exercise price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable
upon the exercise of the Warrant.
When any adjustment is required to be made in the exercise price,
initial or adjusted, the Company shall forthwith determine the new exercise
price, and
(a) prepare and retain on file a statement describing in
reasonable detail the method used in arriving at the new
exercise price; and
<PAGE> 3
(b) cause a copy of such statement to be mailed to the holder of
the Warrant as of a date within ten (10) days after the date
when the circumstances giving rise to the adjustment occurred.
4. TRANSFERABILITY; REGISTRATION RIGHTS. Prior to making any
disposition of the Warrant or of any Common Stock purchased upon exercise of the
Warrant, the holder will give written notice to the Company describing briefly
the manner of any such proposed disposition. The holder will not make any such
disposition until (i) the Company has notified him that, in the opinion of its
counsel, registration under the Act is not required with respect to such
disposition, or (ii) a registration statement covering the proposed distribution
has been filed by the Company and has become effective. The holder then will
make any disposition only pursuant to the conditions of such opinion or
registration. The Company agrees that, upon receipt of written notice from the
holder hereof with respect to such proposed distribution, it will use its best
efforts, in consultation with the holder's counsel, to ascertain as promptly as
possible whether or not registration is required, and will advise the holder
promptly with respect thereto, and the holder will cooperate in providing the
Company with information necessary to make such determination.
If, at any time one (1) year after the date hereof and prior to the
expiration of seven (7) years from the date hereof, the Company shall propose to
file any registration statement under the Securities Act of 1933, as amended,
covering a public offering of the Company's Common Stock and permitting the
inclusion of shares of selling shareholders, it will notify the holder hereof at
least thirty (30) days prior to each such filing and will include in the
registration statement (to the extent permitted by applicable regulation) the
Common Stock purchased by the holder or purchasable by the holder upon the
exercise of the Warrant to the extent requested by the holder hereof.
Notwithstanding the foregoing, the number of shares of the holders of the
Warrants proposed to be registered thereby shall be reduced pro rata with any
other selling shareholder (other than the Company) upon the request of the
managing underwriter of such offering. If the registration statement or offering
statement filed pursuant to such forty-five (45) day notice has not become
effective within six months following the date such notice is given to the
holder hereof, the Company must again notify such holder in the manner provided
above.
At any time one (1) year after the date hereof and prior to the
expiration of four (4) years from the date hereof, and provided that a
registration statement on Form S-3 (or its equivalent) is then available to the
Company, and on a one-time basis only, if the holders of 51% or more of the
warrants and the shares acquired upon exercise of the Warrants request the
registration of the shares on Form S-3 (or its equivalent), the Company shall
promptly thereafter use its best efforts to effect the registration under the
Securities Act of 1933, as amended, of all such shares which such holders
request in writing to be so registered, and in a manner corresponding to the
methods of distribution described in such holders' request.
All expenses of any such registrations referred to in this Section 4,
except the fees of counsel to such holders and underwriting commissions or
discounts shall be borne by the Company.
<PAGE> 4
The Company will mail to each record holder, at the last known post
office address, written notice of any exercise of the rights granted under this
Section 4, by certified or registered mail, return receipt requested, and each
holder shall have thirty (30) days from the date of deposit of such notice in
the U.S. Mail to notify the Company in writing whether such holder wishes to
join in such exercise.
The Company will furnish the holder hereof with a reasonable number of
copies of any prospectus included in such filings and will amend or supplement
the same as required during the period of required use thereof. The Company will
maintain the effectiveness of any registration statement or the offering
statement filed by the Company, whether or not at the request of the holder
hereof, for at least six (6) months following the effective date thereof.
In the case of the filing of any registration statement, and to the
extent permissible under the Act and controlling precedent thereunder, the
Company and the holder hereof shall provide cross indemnification agreements to
each other in customary scope covering the accuracy and completeness of the
information furnished by each.
The holder of the Warrant agrees to cooperate with the Company in the
preparation and filing of any such registration statement or offering statement,
and in the furnishing of information concerning the holder for inclusion
therein, or in any efforts by the Company to establish that the proposed sale is
exempt under the Act as to any proposed distribution.
5. CASHLESS EXERCISE OPTION.
(a) Provided the Company's Common Stock shall then be traded
on an exchange or quoted by NASDAQ or otherwise traded as
described in 5(d) hereof, the holder of this Warrant shall
have the right to require the Company to convert this
Warrant (the "CONVERSION RIGHT"), at any time from July
30, 1998 and prior to its expiration, into shares of
Common Stock as provided for in this Section 5. Upon
exercise of the Conversion Right, the Company shall
deliver to the holder (without payment by the holder of
any exercise price) that number of shares of Common Stock
equal to the quotient obtained by dividing (x) the value
of the Warrant at the time the Conversion Right is
exercised (determined by subtracting the aggregate
exercise price for the Warrant Shares in effect
immediately prior to the exercise of the Conversion Right
from the aggregate Fair Market Value (as determined below)
for the Warrant Shares immediately prior to the exercise
of the Conversion Right) by (y) the Fair Market Value of
one share of Common Stock immediately prior to the
exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the holder,
at any time or from time to time, prior to its
expiration, on any business day, by delivering a
written notice (the "CONVERSION NOTICE") to the
Company at the offices of
<PAGE> 5
the Company exercising the Conversion Right and
specifying (i) the total number of shares of Stock
the Warrantholder will purchase pursuant to such
conversion, and (ii) a place, and a date not less
than five (5) nor more than twenty (20) business days
from the date of the Conversion Notice for the
closing of such purchase.
(c) At any closing under Section 5(b) hereof, (i) the
holder will surrender the Warrant, (ii) the Company
will deliver to the holder a certificate or
certificates for the number of shares of Common Stock
issuable upon such conversion, together with cash, in
lieu of any fraction of a share, and (iii) the
Company will deliver to the holder a new Warrant
representing the number of shares, if any, with
respect to which the Warrant shall not have been
exercised.
(d) "FAIR MARKET VALUE" of a share of Common Stock as of
a particular date (the "DETERMINATION DATE") shall
mean:
(i) If the Company's Common Stock is traded on
an exchange or is quoted on the National
Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National
Market System, or the Small Cap Market, then
the average closing or last sale prices,
respectively, reported for the ten (10)
business days immediately preceding the
Determination Date.
(ii) If the Company's Common Stock is not traded
on an exchange or on the NASDAQ National
Market System, or the Small Cap Market, but
is traded in the over-the-counter market,
then the average of the closing bid and
asked prices reported for the ten (10)
business days immediately preceding the
Determination Date.
6. NOTICES. The Company shall mail to the registered holder of the
Warrant, at his last known post office address appearing on the books of the
Company, not less than fifteen (l5) days prior to the date on which (a) a record
will be taken for the purpose of determining the holders of Common Stock
entitled to dividends (other than cash dividends) or subscription rights, or (b)
a record will be taken (or in lieu thereof, the transfer books will be closed)
for the purpose of determining the holders of Common Stock entitled to notice of
and to vote at a meeting of stockholders at which any capital reorganization,
reclassification of shares of Common Stock, consolidation, merger, dissolution,
liquidation, winding up or sale of substantially all of the Company's assets
shall be considered and acted upon.
7. RESERVATION OF COMMON STOCK. A number of shares of Common Stock
sufficient to provide for the exercise of the Warrant upon the basis herein set
forth shall at all times be reserved for the exercise thereof.
<PAGE> 6
8. MISCELLANEOUS. Whenever reference is made herein to the issue or
sale of shares of Common Stock, the term "COMMON STOCK" shall include any stock
of any class of the Company other than preferred stock with a fixed limit on
dividends and a fixed amount payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company.
The Company will not, by amendment of its Articles of Incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act or deed, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by the Company, but will, at all times in good faith,
assist, insofar as it is able, in the carrying out of all provisions hereof and
in the taking of all other action which may be necessary in order to protect the
rights of the holder hereof against dilution.
Upon written request of the holder of this Warrant, the Company will
promptly provide such holder with a then current written list of the names and
addresses of all holders of warrants originally issued under the terms of, and
concurrent with, this Warrant.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. References to the "holder of" include the
immediate holder of shares purchased on the exercise of this Warrant, and the
word "holder" shall include the plural thereof. This Common Stock Purchase
Warrant shall be interpreted under the laws of the State of Minnesota.
All shares of Common Stock or other securities issued upon the exercise
of the Warrant shall be validly issued, fully paid and non-assessable, and the
Company will pay all taxes in respect of the issuer thereof.
Notwithstanding anything contained herein to the contrary, the holder
of this Warrant shall not be deemed a stockholder (including, no right to vote
on any matters coming before the shareholders) of the Company for any purpose
whatsoever until and unless this Warrant is duly exercised.
IN WITNESS WHEREOF, this Warrant has been duly executed by Hotel
Mexico, Inc., this 30th day of July, 1997.
HOTEL MEXICO, INC.
By /s/ Stephen D. King
---------------------------
Title: Chief Executive Officer
<PAGE> 7
WARRANT EXERCISE FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of Hotel
Mexico, Inc. to which such Warrant relates and herewith makes payment of
$ therefor in cash or by certified check, and requests that such
shares be issued and be delivered to, , the address for
which is set forth below the signature of the undersigned.
Dated:
--------------------------
- - ------------------------------ -----------------------------------------
(Taxpayer's I.D. Number) (Signature)
-----------------------------------------
-----------------------------------------
(Address)
--------------------------------
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase shares of
Common Stock of Hotel Mexico, Inc. to which the within Warrant relates and
appoints , attorney, to transfer said right on the books of
Hotel Mexico, Inc. with full power of substitution in the premises.
Dated:
--------------------------
------------------------------------
(Signature)
------------------------------------
------------------------------------
(Address)
<PAGE> 8
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant pursuant to Section 5)
The undersigned hereby irrevocably elects a cashless exercise of the
right of purchase represented by the within Common Stock Purchase Warrant for,
and to purchase thereunder, shares of Common Stock, as
provided for in Section 5 therein.
If said number of shares shall not be all the shares purchasable under
the within Common Stock Purchase Warrant, a new Warrant is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher number of shares.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional shares to:
NAME
-------------------------------------------------------------
(Please Print Name)
ADDRESS
-------------------------------------------------------------
-------------------------------------------------------------
SOCIAL SECURITY NO.
--------------------------------------------------------
SIGNATURE
---------------------------------------------------------------------
NOTE: The above signature should correspond exactly
with the name on the first page of this Common Stock
Purchase Warrant or with the name of the assignee
appearing in the assignment form on the preceding
page.
<PAGE> 1
EXHIBIT 4.5
The Warrant and the securities issuable upon exercise of this Warrant (the
"Securities") have not been registered under the Securities Act of 1933 (the
"Securities Act") or under any state securities or Blue Sky laws ("Blue Sky
Laws"). No transfer, sale, assignment, pledge, hypothecation or other
disposition of this Warrant or the Securities or any interest therein may be
made except (a) pursuant to an effective registration statement under the
Securities Act and any applicable Blue Sky Laws or (b) if the Company has been
furnished with both an opinion of counsel for the holder, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that no
registration is required because of the availability of an exemption from
registration under the Securities Act and applicable Blue Sky Laws, and
assurances that the transfer, sale, assignment, pledge, hypothecation or other
disposition will be made only in compliance with the conditions of any such
registration or exemption.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF CAFE ODYSSEY, INC.
WARRANT NO. JJB-1 Bloomington, Minnesota
April 20, 1999
This certifies that, for value received, J. JEFFREY BRAUSCH & COMPANY,
or its successors or assigns ("Holder") is entitled to purchase from Cafe
Odyssey, Inc. (the "Company") Three Hundred Thousand (300,000) fully paid and
nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par
value (the "Common Stock"), at any time and from time to time from the date
hereof until April 20, 2004, at an exercise price of $0.75 per share (the
"Exercise Price"), subject to adjustment as herein provided.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant. The rights represented by this Warrant may be
exercised by the Holder, in whole or in part (but not as to a fractional share
of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which each Holder consents and agrees:
<PAGE> 2
a. Until this Warrant is transferred on the books of the
Company, the Company will treat the Holder of this Warrant registered
as such on the books of the Company as the absolute owner hereof for
all purposes without being affected by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in
compliance with all applicable state and federal securities laws,
regulations and orders, and with all other applicable laws, regulations
and orders.
c. The Warrant may not be transferred, and the Shares
underlying this Warrant may not be transferred, without the Holder
obtaining an opinion of counsel satisfactory in form and substance to
the Company's counsel stating that the proposed transaction will not
result in a prohibited transaction under the Securities Act of 1933, as
amended ("Securities Act"), and applicable Blue Sky laws. By accepting
this Warrant, the Holder agrees to act in accordance with any
conditions reasonably imposed on such transfer by such opinion of
counsel.
d. Neither this issuance of this Warrant nor the issuance of
the Shares underlying this Warrant have been registered under the
Securities Act.
3. Certain Covenants of the Company. The Company covenants and
agrees that all Shares which may be issued upon the exercise of the rights
represented by this Warrant, upon issuance and full payment for the Shares so
purchased, will be duly authorized and issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue hereof, except
those that may be created by or imposed upon the Holder or its property, and
without limiting the generality of the foregoing, the Company covenants and
agrees that it will from time to time take all such actions as may be requisite
to assure that the par value per share of the Common Stock is at all times equal
to or less than the effective purchase price per share of the Common Stock
issuable pursuant to this Warrant. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved free of
preemptive or other rights for the exclusive purpose of issue upon exercise of
the purchase rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Exercise Price and Number of Shares. The
Exercise Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock
Split or Stock Combination. In the event that (i) any dividends on any
class of stock of the Company payable in Common Stock or securities
convertible into or exercisable for Common Stock ("Common Stock
Equivalents") shall be paid by the Company, (ii) the Company shall
subdivide its then outstanding shares of Common Stock into a greater
number of shares, or (iii) the Company shall combine its outstanding
shares of Common Stock, by reclassification or otherwise, then, in any
such event, the Exercise Price in effect immediately prior to such
event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full
cent) determined by dividing (a) the number of shares of Common Stock
outstanding immediately prior to such event, multiplied by the then
existing Exercise Price, by (b) the total number of shares of Common
Stock outstanding immediately after such event, and the resulting
quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price
2
<PAGE> 3
shall be made if the amount of such adjustment shall be less than $.05
per share, but in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which,
together with any adjustment or adjustments so carried forward, shall
amount to not less than $.05 per share.
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this
Section, the Holder shall thereafter (until another such adjustment) be
entitled to purchase at the adjusted Exercise Price the number of
shares, calculated to the nearest full share, obtained by multiplying
the number of shares specified in such Warrant (as adjusted as a result
of all adjustments in the Exercise Price in effect prior to such
adjustment) by the Exercise Price in effect prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
c. Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of
Common Stock purchasable upon the exercise of the Warrant, then, and in
each such case, the Company within thirty (30) days thereafter shall
give written notice thereof, by first class mail, postage prepaid,
addressed to each Holder as shown on the books of the Company, which
notice shall state the adjusted Exercise Price and the increased or
decreased number of shares purchasable upon the exercise of the
Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If
at any time while any Warrant is outstanding there should be any
capital reorganization of the capital stock of the Company (other than
the issuance of any shares of Common Stock in subdivision of
outstanding shares of Common Stock by reclassification or otherwise and
other than a combination of shares provided for in Section 4(a)
hereof), or any consolidation or merger of the Company with another
corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other
corporation, which is effected in such a manner that the holders of
Common Stock shall be entitled to receive cash, stock, securities, or
assets with respect to or in exchange for Common Stock, then, as a part
of such transaction, lawful provision shall be made so that each Holder
shall have the right thereafter to receive, upon the exercise hereof,
the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of
the Company has been sold, conveyed, leased or otherwise transferred,
as the case may be, which the Holder would have been entitled to
receive upon such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other
transfer, if such Warrant had been exercised immediately prior to such
capital reorganization, reclassification of capital stock,
consolidation, merger, sale, conveyance, lease or other transfer. In
any such case, appropriate adjustments (as determined by the Board of
Directors of the Company) shall be made in the application of the
provisions set forth in this Warrant (including the adjustment of the
Exercise Price and the number of Shares issuable upon the exercise of
the Warrants) to the end that the provisions set forth herein shall
thereafter be applicable, as near as reasonably may be, in relation to
any shares or other property thereafter deliverable upon the exercise
of the Warrants as if the Warrants had been exercised immediately prior
to such capital reorganization, reclassification of capital stock, such
consolidation, merger, sale, conveyance, lease or other transfer and
the Warrant Holders had carried out the terms of
3
<PAGE> 4
the exchange as provided for by such capital reorganization,
consolidation or merger. The Company shall not effect any such capital
reorganization, consolidation, merger or transfer unless, upon or prior
to the consummation thereof, the successor corporation or the
corporation to which the property of the Company has been sold,
conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to each Holder such shares of
stock, securities, cash or property as in accordance with the foregoing
provisions such Holder shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the Holder
as such to any voting rights or other rights as a stockholder of the Company.
6. Registration Rights. If at any time on or after October 1, 1999, the
Company shall propose to file any registration statement (other than any
registration on Form S-4, S-8 or any other similarly inappropriate form, or any
successor forms thereto) under the 1933 Act covering a public offering of the
Company's Common Stock, it will notify the Holder hereof at least thirty (30)
days prior to each such filing and will use its best efforts to include in the
Registration Statement (to the extent permitted by applicable regulation), the
Common Stock purchased or purchasable by the Holder upon the exercise of the
Warrant to the extent requested by the Holder hereof within twenty (20) days
after receipt of notice of such filing (which request shall specify the interest
in this Warrant or the Warrant Shares intended to be sold or disposed of by such
Holder and describe the nature of any proposed sale or other disposition
thereof); provided, however, that if a greater number of Warrants and Warrant
Shares is offered for participation in the proposed offering than in the
reasonable opinion of the managing underwriter of the proposed offering can be
accommodated without adversely affecting the proposed offering, then the amount
of Warrant and Warrant Shares proposed to be offered by such Holders for
registration, as well as the number of securities of any other selling
shareholders participating in the registration, shall be proportionately reduced
to a number deemed satisfactory by the managing underwriter. The Company shall
bear all expenses and fees incurred in connection with the preparation, filing,
and amendment of the Registration Statement with the Commission, except that the
Holder shall pay all fees, disbursements and expenses of any counsel or expert
retained by the Holder and all underwriting discounts and commissions, filing
fees and any transfer or other taxes relating to the Shares included in the
Registration Statement. The Holder of this Warrant agrees to cooperate with the
Company in the preparation and filing of any Registration Statement, and in the
furnishing of information concerning the Holder for inclusion therein, or in any
efforts by the Company to establish that the proposed sale is exempt under the
1933 Act as to any proposed distribution.
7. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
8. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holders.
9. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to Cafe Odyssey, Inc.,
4801 West
4
<PAGE> 5
81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the
Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, Cafe Odyssey, Inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
CAFE ODYSSEY, INC.
/s/ Stephen D. King
-------------------------------
Stephen D. King
Chairman of the Board
5
<PAGE> 6
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________________ of the shares of Common Stock of Cafe
Odyssey, Inc. (the "Shares") to which such Warrant relates and herewith makes
payment of $_____________ therefor in cash, certified check or bank draft and
requests that a certificate evidencing the Shares be delivered to,
_______________________________, the address for whom is set forth below the
signature of the undersigned:
Dated: ____________________
_________________________________________
(Signature)
_________________________________________
_________________________________________
(Address)
X X X
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto _____________________________________ the right to purchase
shares of Common Stock of Cafe Odyssey, Inc. to which the within Warrant relates
and appoints ____________________ attorney, to transfer said right on the books
of _________________ with full power of substitution in the premises.
Dated: ____________________
_________________________________________
(Signature)
_________________________________________
_________________________________________
(Address)
6
<PAGE> 1
EXHIBIT 4.6
<TABLE>
<CAPTION>
Date of Name of Warrant Number of Shares Expiration
Issuance Warrant Recipient No. of Common Stock Date
<S> <C> <C> <C> <C>
4/20/99 CTC, Inc. CTC-1 30,000 4/20/2004
</TABLE>
<PAGE> 1
EXHIBIT 4.7
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAW. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF, AND NO TRANSFER OF THE
SECURITIES WILL BE MADE BY THE COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF
SUCH REGISTRATION OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
CAFE ODYSSEY, INC.
COMMON STOCK PURCHASE WARRANT
Warrant No. IPO-
Cafe Odyssey, Inc., a Minnesota corporation (the "Company"), hereby
agrees that, for value received, , or his or her assigns, is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time after November 3, 1998, and before 4:30 p.m.,
Minneapolis, Minnesota time, on November 3, 2002,
( ) shares of the $.01 par value Common Stock of the Company, at an
exercise price of $6.50 per Share, subject to adjustment as provided herein.
1. EXERCISE OF WARRANT. The purchase rights granted by this Warrant
shall be exercised (in minimum quantities of 100 shares) by the holder
surrendering this Warrant with the form of exercise attached hereto duly
executed by such holder, to the Company at its principal office, accompanied by
payment, in cash or by cashier's check payable to the order of the Company, of
the purchase price payable in respect of the Shares being purchased. If less
than all of the Shares purchasable hereunder is purchased, the Company will,
upon such exercise, execute and deliver to the holder hereof a new Warrant
(dated the date hereof) evidencing the number of Shares not so purchased. As
soon as practicable after the exercise of this Warrant and payment of the
purchase price, the Company will cause to be issued in the name of and delivered
to the holder hereof, or as such holder may direct, a certificate or
certificates representing the Shares purchased upon such exercise. The Company
may require that such certificate or certificates contain on the face thereof a
legend substantially as follows:
"The transfer of the shares represented by this certificate is
restricted pursuant to the terms of a Common Stock Purchase Warrant
dated November 7, 1997, issued by Cafe Odyssey, Inc., a copy of which
is available for inspection at the offices of Cafe Odyssey, Inc.
Transfer may not be made except in accordance with the terms of the
Common Stock Purchase Warrant. In addition, no sale, offer to sell or
transfer of the shares represented by this certificate shall be made
unless a Registration Statement under the Securities Act of 1933, as
amended (the "Act"), with respect to such shares is then in effect or
an exemption from the registration requirements of the Act is then in
fact applicable to such shares."
2. NEGOTIABILITY AND TRANSFER. This Warrant is issued upon the
following terms, to which each holder hereof consents and agrees:
(a) Except where directed by a court of competent
jurisdiction pursuant to the dissolution or
liquidation of a corporate holder hereof for the
period ending one year from November 3, 1997, title
to this Warrant may not be sold, transferred,
assigned or hypothecated, except that within such
one-year period title to this Warrant may
<PAGE> 2
be transferred only to R. J. Steichen & Company (the
"Underwriter"), or to a person who is both an officer
and shareholder, or both an officer and employee, of
the Underwriter, or to a successor (or both an
officer and shareholder, or both an officer and
employee) in interest to the business of the
Underwriter, by endorsement (by the holder hereof
executing the form of assignment attached hereto) and
delivery in the same manner as in the case of a
negotiable instrument transferable by endorsement and
delivery subject to the requirements of Section 4
hereof.
(b) Until this Warrant is duly transferred on the books
of the Company, the Company may treat the registered
holder of this Warrant as absolute owner hereof for
all purposes without being affected by any notice to
the contrary.
(c) Each successive holder of this Warrant, or of any
portion of the rights represented thereby, shall be
bound by the terms and conditions set forth herein.
3. ANTIDILUTION ADJUSTMENTS. If the Company shall at any time hereafter
subdivide or combine its outstanding shares of Common Stock, or declare a
dividend payable in Common Stock, the exercise price in effect immediately prior
to the subdivision, combination or record date for such dividend payable in
Common Stock shall forthwith be proportionately increased, in the case of
combination, or proportionately decreased, in the case of subdivision or
declaration of a dividend payable in Common Stock, and the number of Shares
purchasable upon exercise of this Warrant, immediately preceding such event,
shall be changed to the number determined by dividing the then current exercise
price by the exercise price as adjusted after such subdivision, combination or
dividend payable in Common Stock and against the number of Shares purchasable
upon the exercise of this Warrant immediately preceding such event, so as to
achieve an exercise price and number of Shares purchasable after such event
proportional to such exercise price and number of Shares purchasable immediately
preceding such event. No adjustment in exercise price shall be required unless
such adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which are not
required to be so made shall be carried forward and taken into account in any
subsequent adjustment. All calculations hereunder shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
No fractional Shares are to be issued upon the exercise of the Warrant,
but the Company shall pay a cash adjustment in respect of any fraction of a
Share which would otherwise be issuable in an amount equal to the same fraction
of the market price per share of Common stock on the day of exercise as
determined in good faith by the Company.
In case of any capital reorganization or any reclassification of the
Common Stock of the Company, or in the case of any consolidation with or merger
of the Company into or with another corporation, or the sale of all or
substantially all of its assets to another corporation, which is effected in
such a manner that the holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a part of such reorganization, reclassification, consolidation, merger
or sale, as the case may be, lawful provision shall be made so that the holder
of the Warrant shall have the right thereafter to receive, upon the exercise
hereof, the kind and amount of shares of stock or other securities or property
which the holder would have been entitled to receive if, immediately prior to
such reorganization, reclassification consolidation, merger or sale, the holder
had held the number of Shares which were then purchasable upon the exercise of
the Warrant. In any such case, appropriate adjustment (as determined in good
faith by the Board of Directors of the Company) shall be made in the application
of the provisions set forth herein with respect to the rights and interest
thereafter of the holder of the Warrant, to the end that the
2
<PAGE> 3
provisions set forth herein (including provisions with respect to adjustments of
the exercise price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable
upon the exercise of the Warrant.
When any adjustment is required to be made in the exercise price,
initial or adjusted, the Company shall forthwith determine the new exercise
price, and
(a) prepare and retain on file a statement describing in
reasonable detail the method used in arriving at the
new exercise price; and
(b) cause a copy of such statement to be mailed to the
holder of the Warrant as of a date within ten (10)
days after the date when the circumstances giving
rise to the adjustment occurred.
4. REGISTRATION RIGHTS. Prior to making any disposition of the Warrant
or of any Shares purchased upon exercise of the Warrant, the holder will give
written notice to the Company describing briefly the manner of any such proposed
disposition. The holder will not make any such disposition until (i) the Company
has notified him or her that, in the opinion of its counsel, registration under
the Act is not required with respect to such disposition, or (ii) a Registration
Statement covering the proposed distribution has been filed by the Company and
has become effective. The Company agrees that, upon receipt of written notice
from the holder hereof with respect to such proposed distribution, it will use
its best efforts, in consultation with the holder's counsel, to ascertain as
promptly as possible whether or not registration is required, and will advise
the holder promptly with respect thereto, and the holder will cooperate in
providing the Company with information necessary to make such determination.
If, at any time prior to the expiration of seven (7) years from
November 3, 1997, the Company shall propose to file any Registration Statement
(other than any registration on Forms S-4, S-8 or any other similarly
inappropriate form or Registration Statement with respect to an initial public
offering in which there are no selling shareholders) under the Securities Act of
1933, as amended, covering a public offering of the Company's Units or shares,
it will notify the holder hereof at least thirty (30) days prior to each such
filing and will include in the Registration Statement (to the extent permitted
by applicable regulation), the shares purchased by the holder or purchasable by
the holder upon the exercise of the Warrant to the extent requested by the
holder hereof. Notwithstanding the foregoing, the number of shares of the
holders of the Warrants proposed to be registered thereby shall be reduced pro
rata with any other selling shareholder (other than the Company) upon the
reasonable request of the managing underwriter of such offering. If the
Registration Statement or Offering Statement filed pursuant to such thirty (30)
day notice has not become effective within six months following the date such
notice is given to the holder hereof, the Company must again notify such holder
in the manner provided above.
At any time prior to the expiration of five (5) years from November 3,
1997, and provided that a registration statement on Form S-3 (or its equivalent)
is then available to the Company, and on a one-time basis only, if the holders
of 50% or more of the Warrants and/or the Shares acquired upon exercise of the
Warrants request the registration of the Shares on Form S-3 (or its equivalent),
the Company shall promptly thereafter use its best efforts to effect the
registration under the Act of all such shares which such holders request in
writing to be so registered, and in a manner corresponding to the methods of
distribution described in such holders' request.
3
<PAGE> 4
All expenses of any such registrations referred to in this Section 4,
except the fees of counsel to such holders and underwriting commissions or
discounts, filing fees, and any transfer or other taxes applicable to such
shares, shall be borne by the Company.
Upon effectiveness of a Registration Statement which includes Common
Stock purchased or purchasable upon the exercise of this Warrant in accordance
with a valid demand under this Section 4, the rights under this Warrant of all
holders to make another such demand shall terminate. Each purchaser or
transferee of a portion of this Warrant is responsible to determine whether his
or her demand rights under this paragraph have been terminated by such an
exercise. Any Warrants issued upon transfers subsequent to such an exercise
shall have all of the demand registration provisions under this Section 4
deleted.
The Company will mail to each record holder, at the last known post
office address, written notice of any exercise of the rights granted under this
Section 4, by certified or registered mail, return receipt requested, and each
holder shall have twenty (20) days from the date of deposit of such notice in
the U.S. mail to notify the Company in writing whether such holder wishes to
join in such exercise.
The Company will furnish the holder hereof with a reasonable number of
copies of any prospectus included in such filings and will amend or supplement
the same as required during the period of required use thereof. The Company will
maintain, at its expense, the effectiveness of any Registration Statement or the
Offering Statement filed by the Company, whether or not at the request of the
holder hereof, for at least six (6) months following the effective date thereof.
In the case of the filing of any Registration Statement, and to the
extent permissible under the Act and controlling precedent thereunder, the
Company and the holder hereof shall provide cross indemnification agreements to
each other in customary scope covering the accuracy and completeness of the
information furnished by each.
The holder of the Warrant agrees to cooperate with the Company in the
preparation and filing of any such Registration Statement or Offering Statement
and in the furnishing of information concerning the holder for inclusion
therein, or in any efforts by the Company to establish that the proposed sale is
exempt under the Act as to any proposed distribution.
5. RIGHT TO CONVERT.
(a) The holder of this Warrant shall have the right to
require the Company to convert this Warrant (the
"Conversion Right"), at any time after November 3,
1998 and prior to its expiration, into Common Stock
as provided for in this Section 5. Upon exercise of
the Conversion Right, the Company shall deliver to
the holder (without payment by the holder of any
exercise price) that number of shares of Common Stock
equal to the quotient obtained by dividing (x) the
value of the Warrant at the time the Conversion Right
is exercised (determined by subtracting the exercise
price for one Warrant Share in effect immediately
prior to the exercise of the Conversion Right from
the Fair Market Value (as determined below) for one
Warrant Share immediately prior to the exercise of
the Conversion Right) by (y) the Fair Market Value of
one share of Common Stock immediately prior to the
exercise of the Conversion Right.
4
<PAGE> 5
(b) The Conversion Right may be exercised by the holder,
at any time or from time to time, prior to its
expiration, on any business day, by delivering a
written notice (the "Conversion Notice") to the
Company at the offices of the Company exercising the
Conversion Right and specifying (i) the total number
of shares of Common Stock the Warrantholder will
purchase pursuant to such conversion, and (ii) a
place, and a date not less than five (5) nor more
than twenty (20) business days from the date of the
Conversion Notice, for the closing of such purchase.
(c) At any closing under Section 5(b) hereof, (i) the
holder will surrender the Warrant, (ii) the Company
will deliver to the holder a certificate or
certificates for the number of shares of Common Stock
issuable upon such conversion, together with cash, in
lieu of any fraction of a share, and (iii) the
Company will deliver to the holder a new Warrant
representing the number of shares, if any, with
respect to which the Warrant shall not have been
converted.
(d) "Fair Market Value" of a share of Common Stock as of
a particular date (the "Determination Date") shall
mean:
(i) If the Company's Common Stock is traded on
an exchange or is quoted on The Nasdaq
National Market or The Nasdaq SmallCap
Market, then the average closing or last
sale prices, respectively, reported for the
ten (10) business days immediately preceding
the Determination Date.
(ii) If the Company's Common Stock is not traded
on an exchange or on The Nasdaq National
Market or The Nasdaq SmallCap Market, but is
traded in the over-the-counter market, then
the average of the closing bid and asked
prices reported for the ten (10) business
days immediately preceding the Determination
Date.
(iii) If the Company's Common Stock is not
publicly traded and there has been a bona
fide sale for cash on an arm's-length basis
within 45 days prior to the Determination
Date of such Common Stock by the Company
privately to one or more investors
unaffiliated with the Company (a "Qualifying
Sale"), then the most recent such sales
price; and
(iv) If the Company's Common Stock is not
publicly traded and there has been no
Qualifying Sale, then the appraised fair
market value of such stock, as determined by
mutual agreement of the Company and the
holder of the Warrant; or if the parties
cannot agree to such valuation, then each of
the Company and the holder shall select an
arbitrator and such arbitrators shall select
a third, and such three arbitrators shall
determine (in accordance with the Commercial
Arbitration Rules of the American
Arbitration Association, such expenses to be
borne equally by the parties) the fair
market value (without any discount for lack
of marketability or minority interest) of a
share of Common Stock of the Company.
6. NOTICES. The Company shall mail to the registered holder of the
Warrant, at his or her last known post office address appearing on the books of
the Company, not less than fifteen (15) days prior to
5
<PAGE> 6
the date on which (a) a record will be taken for the purpose of determining the
holders of Common Stock entitled to dividends (other than cash dividends) or
subscription rights, or (b) a record will be taken (or in lieu thereof, the
transfer books will be closed) for the purpose of determining the holders of
common stock entitled to notice of and to vote at a meeting of shareholders at
which any capital reorganization, reclassification of common stock,
consolidation, merger, dissolution, liquidation, winding up or sale of
substantially all of the Company's assets shall be considered and acted upon.
7. RESERVATION OF COMMON STOCK. A number of shares of Common Stock
sufficient to provide for the exercise of the Warrant and the shares of Common
Stock included therein upon the basis herein set forth shall at all times be
reserved for the exercise thereof.
8. MISCELLANEOUS. Whenever reference is made herein to the issue or
sale of shares of Common Stock, the terms "Common Stock" or "Shares" shall
include any stock of any class of the Company other than preferred stock that
has a fixed limit on dividends and a fixed amount payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
The Company will not, by amendment of its Articles of Incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act or deed, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by the Company, but will, at all times in good faith,
assist, insofar as it is able, in the carrying out of all provisions hereof and
in the taking of all other action which may be necessary in order to protect the
rights of the holder hereof against dilution.
Upon written request of the holder of this Warrant, the Company will
promptly provide such holder with a then current written list of the names of
all holders of warrants originally issued under the terms of, and concurrent
with, this Warrant.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. References to the "holder of" include the
immediate holder of shares purchased on the exercise of this Warrant, and the
word "holder" shall include the plural thereof. This Common Stock Purchase
Warrant shall be interpreted under the laws of the State of Minnesota.
All Shares or other securities issued upon the exercise of the Warrant
shall be validly issued, fully paid and non-assessable, and the Company will pay
all taxes in respect of the issue thereof.
Notwithstanding anything contained herein to the contrary, the holder
of this Warrant shall not be deemed a stockholder of the Company for any purpose
whatsoever until and unless this Warrant is duly exercised.
IN WITNESS WHEREOF, this Warrant has been duly executed by Cafe
Odyssey, Inc., this 16th day of June, 1999.
CAFE ODYSSEY, INC.
By
---------------------------------
Its
---------------------------------
6
<PAGE> 7
WARRANT EXERCISE FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, shares of Common Stock of Cafe Odyssey, Inc. to
which such Warrant relates and herewith makes payment of $ therefor in
cash or by certified check, and requests that such shares be issued and be
delivered to, , the address for which is set forth below
the signature of the undersigned.
Dated:
----------------
- - --------------------------- ------------------------------
(Taxpayer's I.D. Number) (Signature)
------------------------------
------------------------------
(Address)
X X X
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase shares of Common
Stock of Cafe Odyssey, Inc. to which the within Warrant relates and appoints
, attorney, to transfer said right on the books of Cafe Odyssey,
Inc. with full power of substitution in the premises.
Dated:
-------------------
------------------------------
(Signature)
------------------------------
------------------------------
(Address)
7
<PAGE> 8
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant pursuant to Section 5)
The undersigned hereby irrevocably elects a cashless exercise of the
right of purchase represented by the within Common Stock Purchase Warrant for,
and to purchase thereunder, shares of Common Stock, as provided for in Section 5
therein.
If said number of shares shall not be all the shares purchasable under
the within Common Stock Purchase Warrant, a new Warrant is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher number of shares.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional shares to:
Name
-----------------------------
(Please Print Name)
Address
-----------------------------
-----------------------------
Social Security No.
------------------------
Signature
-----------------------------
NOTE: The above signature should correspond exactly with the name
on the first page of this Common Stock Purchase Warrant or with
the name of the assignee appearing in the assignment form on the
preceding page.
8
<PAGE> 1
EXHIBIT 4.8
SCHEDULE OF WARRANTS IN IPO SERIES
<TABLE>
<CAPTION>
NUMBER OF
DATE OF WARRANT SHARES OF
ISSUANCE NAME OF WARRANT RECIPIENT NO. COMMON STOCK
- - -------- ------------------------- ------- ------------
<S> <C> <C> <C>
6/16/99 Dennis Hanish IPO-2 1,725
6/16/99 John Ryden IPO-3 1,725
6/16/99 Duane Anderson IPO-4 300
6/16/99 Victor Greenstein IPO-5 725
6/16/99 Bruce LeDuc IPO-6 3,714
6/16/99 Constance Berman IPO-7 742
6/16/99 Bernard Weber IPO-8 742
6/16/99 Miles Braufman IPO-9 371
6/16/99 Joseph Buska IPO-10 6,584
6/16/99 Wayne W. Mills IPO-11 28,533
6/16/99 Douglas Pritchard IPO-12 620
6/16/99 Dennis Nielsen IPO-13 3,600
6/16/99 Ernest Andberg IPO-14 2,000
6/16/99 Mark Bystrom IPO-15 2,000
6/16/99 John Nielsen IPO-16 1,400
6/16/99 Patrick M. Sidders IPO-17 1,900
6/16/99 David Dalvey IPO-18 7,500
6/16/99 Thomas Jamison IPO-19 7,500
6/16/99 David Lantz IPO-20 7,500
6/16/99 Vicki Lynn Anderson IPO-21 600
6/16/99 John E. Feltl IPO-22 170,219
</TABLE>
<PAGE> 1
EXHIBIT 4.9
The Warrant and the securities issuable upon exercise of this Warrant (the
"Securities") have not been registered under the Securities Act of 1933 (the
"Securities Act") or under any state securities or Blue Sky laws ("Blue Sky
Laws"). No transfer, sale, assignment, pledge, hypothecation or other
disposition of this Warrant or the Securities or any interest therein may be
made except (a) pursuant to an effective registration statement under the
Securities Act and any applicable Blue Sky Laws or (b) if the Company has been
furnished with both an opinion of counsel for the holder, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that no
registration is required because of the availability of an exemption from
registration under the Securities Act and applicable Blue Sky Laws, and
assurances that the transfer, sale, assignment, pledge, hypothecation or other
disposition will be made only in compliance with the conditions of any such
registration or exemption.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. Bloomington, Minnesota
---- , 1999
----------------
This certifies that, for value received, , or his
----------------
successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc.
(the "Company") ( ) fully paid and nonassessable shares
---------------- ---------
(the "Shares") of the Company's Common Stock, $.01 par value (the "Common
Stock"), at any time and from time to time from the date hereof until
, 2004, at an exercise price of $0.75 per share (the "Exercise
- - ------------ ---
Price"), subject to adjustment as herein provided.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant.
a. Exercise for Cash. The rights represented by this Warrant
may be exercised by the Holder, in whole or in part (but not as to a
fractional share of Common Stock), by the surrender of this Warrant
(properly endorsed, if required, at the Company's principal office in
Bloomington, Minnesota, or such other office or agency of the Company
as the Company may designate by notice in writing to the Holder at the
address of such Holder appearing on the books of the Company at any
time within the period above named), and upon payment to it by
certified check, bank draft or cash of the purchase price for such
Shares. The Company agrees that the Shares so purchased shall have and
are deemed to be issued to the Holder as the record owner of such
Shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such Shares as
aforesaid. Certificates for the Shares of Common Stock so purchased
shall be delivered to the Holder within a reasonable time, not
exceeding ten (10) days, after the rights represented by this Warrant
shall have been so exercised, and, unless this Warrant has expired, a
new Warrant representing the number of Shares, if any, with respect to
which this Warrant shall not then have been exercised shall also be
delivered to the Holder within such time. The Company may require that
any such new Warrant or any certificate for Shares purchased upon the
exercise hereof bear a legend substantially similar to that which is
contained on the face of this Warrant.
2
<PAGE> 2
b. Cashless Exercise. Upon receipt of a notice of cashless
exercise, the Company shall deliver to the Holder (without payment by
the Holder of any exercise price) that number of Shares that is equal
to the quotient obtained by dividing (x) the value of the Warrant on
the date that the Warrant shall have been surrendered (determined by
subtracting the aggregate exercise price for the Shares in effect on
the Exercise Date from the aggregate Fair Market Value (hereinafter
defined) for the Shares by (y) the Fair Market Value of one share of
Common Stock. A notice of "cashless exercise" shall state the number of
Shares as to which the Warrant is being exercised. "Fair Market Value"
for purposes of this Section (b) shall mean the average of the Common
Stock closing prices reported by the principal exchange on which the
Common Stock is traded, or the last sale prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotation
System ("Nasdaq") National Market or SmallCap Market, as the case may
be, for the ten (10) business days immediately preceding the Exercise
Date or, in the event no public market shall exist for the Common Stock
at the time of such cashless exercise, Fair Market Value shall mean the
fair market value of the Common Stock as the same shall be determined
in the good faith discretion of the Board of Directors, after full
consideration of all factors then deemed relevant by such Board in
establishing such value, including by way of illustration and not
limitation, the per share purchase price of Common Stock or per
security convertible into one share of Common Stock of the most recent
sale of shares of Common Stock or securities convertible into Common
Stock by the Company after the date hereof all as evidenced by the vote
of a majority of the directors then in office.
2. Transferability of This Warrant. This Warrant is issued upon the
following terms, to which each Holder consents and agrees:
a. Until this Warrant is transferred on the books of the
Company, the Company will treat the Holder of this Warrant registered
as such on the books of the Company as the absolute owner hereof for
all purposes without being affected by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in
compliance with all applicable state and federal securities laws,
regulations and orders, and with all other applicable laws, regulations
and orders.
c. The Warrant may not be transferred, and the Shares
underlying this Warrant may not be transferred, without the Holder
obtaining an opinion of counsel satisfactory in form and substance to
the Company's counsel stating that the proposed transaction will not
result in a prohibited transaction under the Securities Act of 1933, as
amended ("Securities Act"), and applicable Blue Sky laws. By accepting
this Warrant, the Holder agrees to act in accordance with any
conditions reasonably imposed on such transfer by such opinion of
counsel.
d. Neither this issuance of this Warrant nor the issuance of
the Shares underlying this Warrant have been registered under the
Securities Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be created by or imposed upon the Holder or its property, and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such actions as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less
3
<PAGE> 3
than the effective purchase price per share of the Common Stock issuable
pursuant to this Warrant. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved free of preemptive or
other rights for the exclusive purpose of issue upon exercise of the purchase
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock
Split or Stock Combination. In the event that (i) any dividends on any
class of stock of the Company payable in Common Stock or securities
convertible into or exercisable for Common Stock ("Common Stock
Equivalents") shall be paid by the Company, (ii) the Company shall
subdivide its then outstanding shares of Common Stock into a greater
number of shares, or (iii) the Company shall combine its outstanding
shares of Common Stock, by reclassification or otherwise, then, in any
such event, the Exercise Price in effect immediately prior to such
event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full
cent) determined by dividing (a) the number of shares of Common Stock
outstanding immediately prior to such event, multiplied by the then
existing Exercise Price, by (b) the total number of shares of Common
Stock outstanding immediately after such event, and the resulting
quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price shall be made if the amount of such adjustment
shall be less than $.05 per share, but in such case any adjustment that
would otherwise be required then to be made shall be carried forward
and shall be made at the time and together with the next subsequent
adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to not less than $.05 per share.
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this
Section, the Holder shall thereafter (until another such adjustment) be
entitled to purchase at the adjusted Exercise Price the number of
shares, calculated to the nearest full share, obtained by multiplying
the number of shares specified in such Warrant (as adjusted as a result
of all adjustments in the Exercise Price in effect prior to such
adjustment) by the Exercise Price in effect prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
c. Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of
Common Stock purchasable upon the exercise of the Warrant, then, and in
each such case, the Company within thirty (30) days thereafter shall
give written notice thereof, by first class mail, postage prepaid,
addressed to each Holder as shown on the books of the Company, which
notice shall state the adjusted Exercise Price and the increased or
decreased number of shares purchasable upon the exercise of the
Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If
at any time while any Warrant is outstanding there should be any
capital reorganization of the capital stock of the Company (other than
the issuance of any shares of Common Stock in subdivision of
outstanding
4
<PAGE> 4
shares of Common Stock by reclassification or otherwise and other than
a combination of shares provided for in Section 4(a) hereof), or any
consolidation or merger of the Company with another corporation, or any
sale, conveyance, lease or other transfer by the Company of all or
substantially all of its property to any other corporation, which is
effected in such a manner that the holders of Common Stock shall be
entitled to receive cash, stock, securities, or assets with respect to
or in exchange for Common Stock, then, as a part of such transaction,
lawful provision shall be made so that each Holder shall have the right
thereafter to receive, upon the exercise hereof, the number of shares
of stock or other securities or property of the Company, or of the
successor corporation resulting from such consolidation or merger, or
of the corporation to which the property of the Company has been sold,
conveyed, leased or otherwise transferred, as the case may be, which
the Holder would have been entitled to receive upon such capital
reorganization, reclassification of capital stock, consolidation,
merger, sale, conveyance, lease or other transfer, if such Warrant had
been exercised immediately prior to such capital reorganization,
reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer. In any such case, appropriate
adjustments (as determined by the Board of Directors of the Company)
shall be made in the application of the provisions set forth in this
Warrant (including the adjustment of the Exercise Price and the number
of Shares issuable upon the exercise of the Warrants) to the end that
the provisions set forth herein shall thereafter be applicable, as near
as reasonably may be, in relation to any shares or other property
thereafter deliverable upon the exercise of the Warrants as if the
Warrants had been exercised immediately prior to such capital
reorganization, reclassification of capital stock, such consolidation,
merger, sale, conveyance, lease or other transfer and the Warrant
Holders had carried out the terms of the exchange as provided for by
such capital reorganization, consolidation or merger. The Company shall
not effect any such capital reorganization, consolidation, merger or
transfer unless, upon or prior to the consummation thereof, the
successor corporation or the corporation to which the property of the
Company has been sold, conveyed, leased or otherwise transferred shall
assume by written instrument the obligation to deliver to each Holder
such shares of stock, securities, cash or property as in accordance
with the foregoing provisions such Holder shall be entitled to
purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the Holder
as such to any voting rights or other rights as a stockholder of the Company.
6. Registration Rights. If at any time after April 1, 2000, and prior
to the fifth anniversary of the date hereof, the Company shall propose to file
any registration statement (other than any registration on Form S-4, S-8 or any
other similarly inappropriate form, or any successor forms thereto) under the
1933 Act covering a public offering of the Company's Common Stock (a
"Registration Statement"), it will notify the Holder hereof at least thirty (30)
days prior to each such filing and will use its best efforts to include in the
Registration Statement (to the extent permitted by applicable regulation), the
Common Stock purchased or purchasable by the Holder upon the exercise of the
Warrant to the extent requested by the Holder hereof within twenty (20) days
after receipt of notice of such filing (which request shall specify the interest
in this Warrant or the Warrant Shares intended to be sold or disposed of by such
Holder and describe the nature of any proposed sale or other disposition
thereof); provided, however, that if a greater number of Warrants and Warrant
Shares is offered for participation in the proposed offering than in the
reasonable opinion of the managing underwriter of the proposed offering can be
accommodated without adversely affecting the proposed offering, then the amount
of Warrant and Warrant Shares proposed to be offered by such Holders for
registration, as well as the
5
<PAGE> 5
number of securities of any other selling shareholders participating in the
registration, shall be proportionately reduced to a number deemed satisfactory
by the managing underwriter. The Company shall keep the Registration Statement
effective and current until the earlier to occur of (i) the date all the Shares
are sold, (ii) the date all of the Shares may be sold under Rule 144(k) under
the Securities Act or (iii) the expiration date of this Warrant. The Company
shall bear all expenses and fees incurred in connection with the preparation,
filing, and amendment of the Registration Statement with the Commission, except
that the Holder shall pay all fees, disbursements and expenses of any counsel or
expert retained by the Holder and all underwriting discounts and commissions,
filing fees and any transfer or other taxes relating to the Shares included in
the Registration Statement. The Holder of this Warrant agrees to cooperate with
the Company in the preparation and filing of any Registration Statement, and in
the furnishing of information concerning the Holder for inclusion therein, or in
any efforts by the Company to establish that the proposed sale is exempt under
the 1933 Act as to any proposed distribution.
7. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
8. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holders.
9. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By: /s/ Thomas W. Orr
-----------------------------------
Its: Chief Financial Officer
-----------------------------------
6
<PAGE> 6
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder,_____________________ of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $_____________ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
, the address for whom is set forth below the
_______________________________
signature of the undersigned:
Dated:
-----------------------
------------------------------------
(Signature)
------------------------------------
------------------------------------
(Address)
X X X
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto ______________ the right to purchase __________ shares of Common
Stock of PopMail.com, inc. to which the within Warrant relates and appoints
_____________ attorney to transfer said right on the books of PopMail.com, inc.
with full power of substitution in the premises.
Dated:
-------------------------
------------------------------------
(Signature)
------------------------------------
------------------------------------
(Address)
7
<PAGE> 1
EXHIBIT 4.10
Material Details of the Warrants
Substantially Identical to the
Warrant Filed as Exhibit 4.9
<TABLE>
<CAPTION>
Date of Name of Warrant No. of Shares of Exercise Price
--------------
Issuance Warrant Recipient No. Common Stock Expiration Date
-------- ----------------- --- ------------ ---------------
<S> <C> <C> <C> <C> <C>
9/30/99 Jerry L. Ruyan PL-10 30,000 $0.75 9/30/2004
10/31/99 Jerry L. Ruyan PL-11 30,000 $0.75 10/31/2004
11/30/99 Stephen D. King PL-12 30,000 $0.75 11/30/2004
11/30/99 Jerry L. Ruyan PL-13 30,000 $0.75 11/30/2004
12/31/99 Stephen D. King PL-14 30,000 $0.75 12/31/2004
12/31/99 Jerry L. Ruyan PL-15 30,000 $0.75 12/31/2004
1/31/2000 Stephen D. King PL-16 30,000 $0.75 1/31/2005
1/31/2000 Jerry L. Ruyan PL-17 30,000 $0.75 1/31/2005
2/29/2000 Stephen D. King PL-18 30,000 $0.75 2/29/2005
2/29/2000 Jerry L. Ruyan PL-19 30,000 $0.75 2/29/2005
</TABLE>
<PAGE> 1
Exhibit 4.11
The Warrant and the securities issuable upon exercise of this Warrant (the
"Securities") have not been registered under the Securities Act of 1933 (the
"Securities Act") or under any state securities or Blue Sky laws ("Blue Sky
Laws"). No transfer, sale, assignment, pledge, hypothecation or other
disposition of this Warrant or the Securities or any interest therein may be
made except (a) pursuant to an effective registration statement under the
Securities Act and any applicable Blue Sky Laws or (b) if the Company has been
furnished with both an opinion of counsel for the holder, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that no
registration is required because of the availability of an exemption from
registration under the Securities Act and applicable Blue Sky Laws, and
assurances that the transfer, sale, assignment, pledge, hypothecation or other
disposition will be made only in compliance with the conditions of any such
registration or exemption.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. GW-1 Bloomington, Minnesota
, 1999
This certifies that, for value received, GABRIEL WISDOM, or his
successors or assigns (the "Holder") is entitled to purchase from PopMail.com,
inc. (the "Company") One Hundred Thirty Thousand (130,000) fully paid and
nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par
value (the "Common Stock") at an exercise price of $1.80 per share (the
"Exercise Price"), subject to adjustment as herein provided. This Warrant may be
exercised by Holder at any time after the date hereof; provided that, Holder
shall in no event have the right to exercise this Warrant or any portion thereof
later than the third (3rd) anniversary of the date hereof.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant. The rights represented by this Warrant may be
exercised by the Holder, in whole or in part (but not as to a fractional share
of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which Holder consents and agrees:
<PAGE> 2
a. Until this Warrant is transferred on the books of the Company, the
Company will treat the Holder of this Warrant registered as such on the
books of the Company as the absolute owner hereof for all purposes without
being affected by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and the Shares
underlying this Warrant shall not be transferable, except in compliance with
all applicable state and federal securities laws, regulations and orders,
and with all other applicable laws, regulations and orders.
c. The Warrant may not be transferred, and the Shares underlying this
Warrant may not be transferred, without the Holder obtaining an opinion of
counsel satisfactory in form and substance to the Company's counsel stating
that the proposed transaction will not result in a prohibited transaction
under the Securities Act of 1933, as amended ("Securities Act"), and
applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to
act in accordance with any conditions reasonably imposed on such transfer by
such opinion of counsel.
d. Neither this issuance of this Warrant nor the issuance of the
Shares underlying this Warrant have been registered under the Securities
Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be created by or imposed upon the Holder or its property, and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such actions as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the effective purchase price per share of the Common Stock issuable
pursuant to this Warrant. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved free of preemptive or
other rights for the exclusive purpose of issue upon exercise of the purchase
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock Split
or Stock Combination. In the event that (i) any dividends on any class
of stock of the Company payable in Common Stock or securities
convertible into or exercisable for Common Stock ("Common Stock
Equivalents") shall be paid by the Company, (ii) the Company shall
subdivide its then outstanding shares of Common Stock into a greater
number of shares, or (iii) the Company shall combine its outstanding
shares of Common Stock, by reclassification or otherwise, then, in any
such event, the Exercise Price in effect immediately prior to such
event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full
cent) determined by dividing (a) the number of shares of Common Stock
outstanding immediately prior to such event, multiplied by the then
existing Exercise Price, by (b) the total number of shares of Common
Stock outstanding immediately after such event, and the resulting
quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price shall be made if the amount of such adjustment
shall be less than $.05 per share, but in such case any adjustment that
would otherwise be required then to
<PAGE> 3
be made shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to not less
than $.05 per share.
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this
Section, the Holder shall thereafter (until another such adjustment) be
entitled to purchase at the adjusted Exercise Price the number of
shares, calculated to the nearest full share, obtained by multiplying
the number of shares specified in such Warrant (as adjusted as a result
of all adjustments in the Exercise Price in effect prior to such
adjustment) by the Exercise Price in effect prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
c. Notice as to Adjustment. Upon any adjustment of the Exercise
Price and any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrant, then, and in each
such case, the Company within thirty (30) days thereafter shall give
written notice thereof, by first class mail, postage prepaid, addressed
to each Holder as shown on the books of the Company, which notice shall
state the adjusted Exercise Price and the increased or decreased number
of shares purchasable upon the exercise of the Warrants, and shall set
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If at
any time while this Warrant is outstanding there should be any capital
reorganization of the capital stock of the Company (other than the
issuance of any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise and other than
a combination of shares provided for in Section 4(a) hereof), or any
consolidation or merger of the Company with another corporation, or any
sale, conveyance, lease or other transfer by the Company of all or
substantially all of its property to any other corporation, which is
effected in such a manner that the holders of Common Stock shall be
entitled to receive cash, stock, securities, or assets with respect to
or in exchange for Common Stock, then, as a part of such transaction,
lawful provision shall be made so that Holder shall have the right
thereafter to receive, upon the exercise hereof, the number of shares
of stock or other securities or property of the Company, or of the
successor corporation resulting from such consolidation or merger, or
of the corporation to which the property of the Company has been sold,
conveyed, leased or otherwise transferred, as the case may be, which
the Holder would have been entitled to receive upon such capital
reorganization, reclassification of capital stock, consolidation,
merger, sale, conveyance, lease or other transfer, if this Warrant had
been exercised immediately prior to such capital reorganization,
reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer. In any such case, appropriate
adjustments (as determined by the Board of Directors of the Company)
shall be made in the application of the provisions set forth in this
Warrant (including the adjustment of the Exercise Price and the number
of Shares issuable upon the exercise of the Warrant) to the end that
the provisions set forth herein shall thereafter be applicable, as near
as reasonably may be, in relation to any shares or other property
thereafter deliverable upon the exercise of the Warrant as if the
Warrant had been exercised immediately prior to such capital
reorganization, reclassification of capital stock, such consolidation,
merger, sale,
<PAGE> 4
conveyance, lease or other transfer and the Holder had carried out the
terms of the exchange as provided for by such capital reorganization,
consolidation or merger. The Company shall not effect any such capital
reorganization, consolidation, merger or transfer unless, upon or prior
to the consummation thereof, the successor corporation or the
corporation to which the property of the Company has been sold,
conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to the Holder such shares of
stock, securities, cash or property as in accordance with the foregoing
provisions such Holder shall be entitled to purchase.
5. Redemption of Warrants
a. Redemption Price. This Warrant may be redeemed at the
option of the Company, at any time after the date hereof following a
period of 20 consecutive trading days where the per share average
closing bid price of the Common Stock exceeds $40.00, on notice as set
forth in Section 5(b), and at a redemption price equal to $.01 per
Share outstanding at the time of redemption. For purposes of this
Section, the closing bid price of the Common Stock shall be determined
by the closing bid price as reported by Nasdaq so long as the Common
Stock is quoted on Nasdaq and, if the Common Stock is listed on a
national securities exchange, shall be determined by the last reported
sale price on the primary exchange on which the Common Stock is traded.
b. Notice of Redemption. In the case of the redemption of this
Warrant, the Company shall give notice of such redemption to the holder
of this Warrant as hereinafter provided in this Section 5(b). Notice of
redemption to the holder of thisWarrant shall be given by mailing by
first-class mail a notice of such redemption not less than 30 days
prior to the date fixed for redemption. Any notice which is given in
the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the holder receives the notice. Such notice
shall specify the date fixed for redemption, the place of redemption
and the redemption price of $.01 at which this Warrant is to be
redeemed, and shall state that payment of the redemption price of this
Warrant will be made on surrender of the Warrant at such place of
redemption, and that if not exercised by the close of business on the
date fixed for redemption, the exercise rights of this Warrant shall
expire unless extended by the Company. Such notice shall also state the
current Exercise Price and the date on which the right to exercise this
Warrant will expire unless extended by the Company.
c. Payment of Warrants on Redemption; Deposit of Redemption
Price. If notice of redemption shall have been given as provided in
Section 5(b), the redemption price of $.01 per outstanding Share shall,
unless this Warrant is theretofore exercised pursuant to the terms
hereof, become due and payable on the date and at the place stated in
such notice. On and after such date of redemption, the exercise rights
of this Warrant shall expire. On presentation and surrender of this
Warrant at such place of payment in such notice specified, this Warrant
shall be paid and redeemed at the redemption price of $.01 per
outstanding Share.
<PAGE> 5
6. No Rights as Stockholders. This Warrant shall not entitle the
Holder as such to any voting rights or other rights as a stockholder of the
Company.
7. Registration Rights.
a. Piggyback Registration Rights. If the Company, after the
date hereof and prior to the third (3rd) anniversary of the date
hereof, shall file a registration statement with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as
amended, for the purpose of registering shares of Common Stock for sale
to the public, the Company shall give to the Holder at least twenty
(20) days advance written notice of its intention to file such
registration statement and Holder shall have the right to have included
in such registration statement such number of the Shares as it shall
designate to the Company within ten (10) days after the date of such
notice, provided that the number of Shares to be included in such
registration statement, when added to all the other shares to be
included therein, does not exceed the number of shares which the
Company and its underwriters, if any, reasonably fix for inclusion. The
Holder shall furnish the Company with such information as may be
required in connection with such registration statement and will
cooperate to cause such registration to become effective at the
earliest practicable time. If the shares to which such registration
relates are to be sold in an underwritten offering, the Holder, as a
condition to the inclusion of the shares in the registration statement,
shall agree that its Shares will be sold only as a part of such
underwritten offering and at the price and upon the terms fixed by the
Company and its underwriters, subject to the right of the Holder to
withdraw the Shares therefrom.
b. Demand Registration Rights. On a one-time basis only,during
the term of this Warrant, upon request by the Holder or Holders of a
majority in interest of this Warrant, and of any Shares, the Company
will promptly take all necessary steps to register or qualify, under
the 1933 Act and the securities laws of such states as the holders may
reasonably request, such number of Shares issued and to be issued upon
conversion of the Warrants requested by such holders in their request
to the Company. The Company shall keep effective and maintain any
registration, qualification, notification, or approval specified in
this section for such period as may be reasonably necessary for such
Holder or Holders of this Warrant and/or such Shares to dispose thereof
and from time to time shall amend or supplement the prospectus used in
connection therewith to the extent necessary in order to comply with
applicable law.
8. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
9. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holder.
<PAGE> 6
10. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By
--------------------------------------
Its
-------------------------------------
<PAGE> 7
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
, the address for whom is set forth below the
signature of the undersigned:
Dated:
-----------------------
-----------------------------------
(Signature)
-----------------------------------
-----------------------------------
(Address)
* * *
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase
shares of Common Stock of PopMail.com, inc. to which the within Warrant relates
and appoints attorney, to transfer said right on the books
of with full power of substitution in the premises.
Dated:
-----------------------
-----------------------------------
(Signature)
-----------------------------------
-----------------------------------
(Address)
<PAGE> 1
Exhibit 4.12
The Warrant and the securities issuable upon exercise of this Warrant (the
"Securities") have not been registered under the Securities Act of 1933 (the
"Securities Act") or under any state securities or Blue Sky laws ("Blue Sky
Laws"). No transfer, sale, assignment, pledge, hypothecation or other
disposition of this Warrant or the Securities or any interest therein may be
made except (a) pursuant to an effective registration statement under the
Securities Act and any applicable Blue Sky Laws or (b) if the Company has been
furnished with both an opinion of counsel for the holder, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that no
registration is required because of the availability of an exemption from
registration under the Securities Act and applicable Blue Sky Laws, and
assurances that the transfer, sale, assignment, pledge, hypothecation or other
disposition will be made only in compliance with the conditions of any such
registration or exemption.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. GW-2 Bloomington, Minnesota
September 28, 1999
This certifies that, for value received, GABRIEL WISDOM, or his
successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc.
(the "Company") Seventy Thousand (70,000) fully paid and nonassessable shares
(the "Shares") of the Company's Common Stock, $.01 par value (the "Common
Stock") at an exercise price of $3.00 per share (the "Exercise Price"), subject
to adjustment as herein provided. This Warrant may be exercised by Holder at any
time after the two (2) year anniversary of the date hereof; provided that,
Holder may exercise this Warrant prior to such two (2) year anniversary with the
prior written consent of the Company or upon a Change of Control (as hereinafter
defined). Holder shall in no event have the right to exercise this Warrant or
any portion thereof later than the fifth (5th) anniversary of the date hereof,
at which time this Warrant shall expire. For the purposes of this Warrant,
"Change of Control" shall mean the sale in one or more private transactions of
fifty percent (50%) or more of the outstanding shares of the Company's Common
Stock.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant. The rights represented by this Warrant
may be exercised by the Holder, in whole or in part (but not as to a fractional
share of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
1
<PAGE> 2
2. Transferability of this Warrant. This Warrant is issued upon
the following terms, to which Holder consents and agrees:
a. Until this Warrant is transferred on the books of the
Company, the Company will treat the Holder of this Warrant registered
as such on the books of the Company as the absolute owner hereof for
all purposes without being affected by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and
the Shares underlying this Warrant shall not be transferable, except in
compliance with all applicable state and federal securities laws,
regulations and orders, and with all other applicable laws, regulations
and orders.
c. The Warrant may not be transferred, and the Shares
underlying this Warrant may not be transferred, without the Holder
obtaining an opinion of counsel satisfactory in form and substance to
the Company's counsel stating that the proposed transaction will not
result in a prohibited transaction under the Securities Act of 1933, as
amended ("Securities Act"), and applicable Blue Sky laws. By accepting
this Warrant, the Holder agrees to act in accordance with any
conditions reasonably imposed on such transfer by such opinion of
counsel.
d. Neither this issuance of this Warrant nor the issuance
of the Shares underlying this Warrant have been registered under the
Securities Act.
3. Certain Covenants of the Company. The Company covenants and
agrees that all Shares which may be issued upon the exercise of the rights
represented by this Warrant, upon issuance and full payment for the Shares so
purchased, will be duly authorized and issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue hereof, except
those that may be created by or imposed upon the Holder or its property, and
without limiting the generality of the foregoing, the Company covenants and
agrees that it will from time to time take all such actions as may be requisite
to assure that the par value per share of the Common Stock is at all times equal
to or less than the effective purchase price per share of the Common Stock
issuable pursuant to this Warrant. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved free of
preemptive or other rights for the exclusive purpose of issue upon exercise of
the purchase rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Exercise Price and Number of Shares. The
Exercise Price and number of Shares are subject to the following
adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock
Split or Stock Combination. In the event that (i) any dividends on any
class of stock of the Company payable in Common Stock or securities
convertible into or exercisable for Common Stock ("Common Stock
Equivalents") shall be paid by the Company, (ii) the Company shall
subdivide its then outstanding shares of Common Stock into a greater
number of shares, or (iii) the Company shall combine its outstanding
shares of Common Stock, by reclassification or otherwise, then, in any
such event, the Exercise Price in effect immediately prior to such
event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full
cent) determined by dividing (a) the number of shares of Common Stock
outstanding immediately prior to such event, multiplied by the then
existing
<PAGE> 3
Exercise Price, by (b) the total number of shares of Common Stock
outstanding immediately after such event, and the resulting quotient
shall be the adjusted Exercise Price per share. No adjustment of the
Exercise Price shall be made if the amount of such adjustment shall be
less than $.05 per share, but in such case any adjustment that would
otherwise be required then to be made shall be carried forward and
shall be made at the time and together with the next subsequent
adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to not less than $.05 per share.
b. Adjustment of Number of Shares Purchasable on Exercise
of Warrants. Upon each adjustment of the Exercise Price pursuant to
this Section, the Holder shall thereafter (until another such
adjustment) be entitled to purchase at the adjusted Exercise Price the
number of shares, calculated to the nearest full share, obtained by
multiplying the number of shares specified in such Warrant (as adjusted
as a result of all adjustments in the Exercise Price in effect prior to
such adjustment) by the Exercise Price in effect prior to such
adjustment and dividing the product so obtained by the adjusted
Exercise Price.
c. Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of
Common Stock purchasable upon the exercise of the Warrant, then, and in
each such case, the Company within thirty (30) days thereafter shall
give written notice thereof, by first class mail, postage prepaid,
addressed to each Holder as shown on the books of the Company, which
notice shall state the adjusted Exercise Price and the increased or
decreased number of shares purchasable upon the exercise of the
Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc.
If at any time while this Warrant is outstanding there should be any
capital reorganization of the capital stock of the Company (other than
the issuance of any shares of Common Stock in subdivision of
outstanding shares of Common Stock by reclassification or otherwise and
other than a combination of shares provided for in Section 4(a)
hereof), or any consolidation or merger of the Company with another
corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other
corporation, which is effected in such a manner that the holders of
Common Stock shall be entitled to receive cash, stock, securities, or
assets with respect to or in exchange for Common Stock, then, as a part
of such transaction, lawful provision shall be made so that Holder
shall have the right thereafter to receive, upon the exercise hereof,
the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of
the Company has been sold, conveyed, leased or otherwise transferred,
as the case may be, which the Holder would have been entitled to
receive upon such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other
transfer, if the Warrant had been exercised immediately prior to such
capital reorganization, reclassification of capital stock,
consolidation, merger, sale, conveyance, lease or other transfer. In
any such case, appropriate adjustments (as determined by the Board of
Directors of the Company) shall be made in the application of the
provisions set forth in this Warrant (including the adjustment of the
Exercise Price and the number of Shares issuable upon the exercise of
the Warrant) to
<PAGE> 4
the end that the provisions set forth herein shall thereafter be
applicable, as near as reasonably may be, in relation to any shares or
other property thereafter deliverable upon the exercise of the Warrant
as if the Warrant had been exercised immediately prior to such capital
reorganization, reclassification of capital stock, such consolidation,
merger, sale, conveyance, lease or other transfer and the Holder had
carried out the terms of the exchange as provided for by such capital
reorganization, consolidation or merger. The Company shall not effect
any such capital reorganization, consolidation, merger or transfer
unless, upon or prior to the consummation thereof, the successor
corporation or the corporation to which the property of the Company has
been sold, conveyed, leased or otherwise transferred shall assume by
written instrument the obligation to deliver to the Holder such shares
of stock, securities, cash or property as in accordance with the
foregoing provisions such Holder shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the
Holder as such to any voting rights or other rights as a stockholder of the
Company.
6. Registration Rights.
a. Piggyback Registration Rights. If the Company, at any
time after eighteen months from the issuance of this Warrant, shall
propose to file any registration statement (other than any registration
on Form S-4, S-8 or any other similarly inappropriate form, or any
successor forms thereto) under the 1933 Act covering a public offering
of the Company's Common Stock, it will notify the Holder hereof at
least thirty (30) days prior to each such filing and will use its best
efforts to include in the Registration Statement (to the extent
permitted by applicable regulation), the Common Stock purchased or
purchasable by the Holder upon the exercise of the Warrant to the
extent requested by the Holder hereof within twenty (20) days after
receipt of notice of such filing (which request shall specify the
interest in this Warrant or the Warrant Shares intended to be sold or
disposed of by such Holder and describe the nature of any proposed sale
or other disposition thereof); provided, however, that if a greater
number of Warrants and Warrant Shares is offered for participation in
the proposed offering than in the reasonable opinion of the managing
underwriter of the proposed offering can be accommodated without
adversely affecting the proposed offering, then the amount of Warrant
and Warrant Shares proposed to be offered by such Holders for
registration, as well as the number of securities of any other selling
shareholders participating in the registration, shall be
proportionately reduced to a number deemed satisfactory by the managing
underwriter. The Company shall bear all expenses and fees incurred in
connection with the preparation, filing, and amendment of the
Registration Statement with the Commission, except that the Holder
shall pay all fees, disbursements and expenses of any counsel or expert
retained by the Holder and all underwriting discounts and commissions,
filing fees and any transfer or other taxes relating to the Shares
included in the Registration Statement. The Holder of this Warrant
agrees to cooperate with the Company in the preparation and filing of
any Registration Statement, and in the furnishing of information
concerning the Holder for inclusion therein, or in any efforts by the
Company to establish that the proposed sale is exempt under the 1933
Act as to any proposed distribution.
<PAGE> 5
b. Demand Registration Rights. On a one-time basis only,
during the three year period commencing two years after the date of
this Warrant, upon request by the Holder and of any Shares, the Company
will promptly take all necessary steps to register or qualify, under
the 1933 Act and the securities laws of such states as the holders may
reasonably request, such number of Shares issued and to be issued upon
conversion of the Warrants requested by such holders in their request
to the Company. The Company shall keep effective and maintain any
registration, qualification, notification, or approval specified in
this section for such period as may be reasonably necessary for the
Holder of the Warrant and/or the Shares to dispose thereof and from
time to time shall amend or supplement the prospectus used in
connection therewith to the extent necessary in order to comply with
applicable law.
7. Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Minnesota.
8. Amendments and Waivers. The provisions of this Warrant may
not be amended, modified or supplemented, and waiver or consents to departures
from the provisions hereof may not be given, unless the Company agrees in
writing and has obtained the written consent of the Holder.
9. Notices. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to the
Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at
his or her address set forth on the records of the Company; or if sent to the
Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com,
inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other
address as the Company or the Holder shall notify the other as provided in this
Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By
--------------------------------------
Its
-------------------------------------
<PAGE> 6
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
, the address for whom is set forth below the
signature of the undersigned:
Dated:
----------------------------
-----------------------------------
(Signature)
-----------------------------------
-----------------------------------
(Address)
* * *
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase
shares of Common Stock of PopMail.com, inc. to which the within Warrant relates
and appoints attorney, to transfer said right on the books
of with full power of substitution in the premises.
Dated:
-----------------------
----------------------------------------
(Signature)
----------------------------------------
----------------------------------------
(Address)
<PAGE> 1
EXHIBIT 4.13
THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY
LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO
REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND
ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH
REGISTRATION OR EXEMPTION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. MB-1 Bloomington, Minnesota
October 12, 1999
This certifies that, for value received, MICHAEL BIRD, or his
successors or assigns (AHolder@) is entitled to purchase from PopMail.com, inc.
(the "Company") Fifteen Thousand (15,000) fully paid and nonassessable shares
(the "Shares") of the Company's Common Stock, $.01 par value (the "Common
Stock") at any time and from time to time from the date hereof until October 12,
2004, at an exercise price of $2.00 per share (the "Exercise price"), subject to
adjustment as herein provided.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant. The rights represented by this Warrant may be
exercised by the Holder, in whole or in part (but not as to a fractional share
of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which each Holder consents and agrees:
a. Until this Warrant is transferred on the books of the
Company, the Company will treat the Holder of this Warrant registered as such on
the books of the Company as the absolute owner hereof for all purposes without
being affected by any notice to the contrary.
<PAGE> 2
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in compliance
with all applicable state and federal securities laws, regulations and orders,
and with all other applicable laws, regulations and orders.
c. Prior to making any disposition of this Warrant or of any
of the Shares underlying this Warrant, the Holder will give written notice to
the Company describing the manner of any such proposed disposition. The Warrant
may not be transferred, and the Shares may not be transferred, without the
Holder obtaining an opinion of counsel satisfactory in form and substance to the
Company's counsel stating that the proposed transaction will not result in a
prohibited transaction under the Securities Act of 1933, as amended ("Securities
Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder
agrees to act in accordance with any conditions reasonably imposed on such
transfer by such opinion of counsel.
d. Neither this issuance of this Warrant nor the issuance of
the Shares underlying this Warrant have been registered under the Securities
Act.
3. Certain Covenants of the Company. The Company covenants and
agrees that all Shares which may be issued upon the exercise of the rights
represented by this Warrant, upon issuance and full payment for the Shares so
purchased, will be duly authorized and issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue hereof, except
those that may be created by or imposed upon the Holder or its property, and
without limiting the generality of the foregoing, the Company covenants and
agrees that it will from time to time take all such actions as may be requisite
to assure that the par value per share of the Common Stock is at all times equal
to or less than the effective purchase price per share of the Common Stock
issuable pursuant to this Warrant. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved free of
preemptive or other rights for the exclusive purpose of issue upon exercise of
the purchase rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock
Split or Stock Combination. In the event that (i) any dividends on any class of
stock of the Company payable in Common Stock or securities convertible into or
exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the
Company, (ii) the Company shall subdivide its then outstanding shares of Common
Stock into a greater number of shares, or (iii) the Company shall combine its
outstanding shares of Common Stock, by reclassification or otherwise, then, in
any such event, the Exercise Price in effect immediately prior to such event
shall (until adjusted again pursuant hereto) be adjusted immediately after such
event to a price (calculated to the nearest full cent) determined by dividing
(a) the number of shares of Common Stock outstanding immediately prior to such
event, multiplied by the then existing Exercise Price, by (b) the total number
of shares of Common Stock outstanding immediately after such event, and the
resulting quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price shall be made if the amount of such adjustment shall be
less than $.05 per share, but in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall
2
<PAGE> 3
amount to not less than $.05 per share.
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this Section,
the Holder shall thereafter (until another such adjustment) be entitled to
purchase at the adjusted Exercise Price the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares specified in
such Warrant (as adjusted as a result of all adjustments in the Exercise Price
in effect prior to such adjustment) by the Exercise Price in effect prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
c. Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrant, then, and in each such case,
the Company within thirty (30) days thereafter shall give written notice
thereof, by first class mail, postage prepaid, addressed to each Holder as shown
on the books of the Company, which notice shall state the adjusted Exercise
Price and the increased or decreased number of shares purchasable upon the
exercise of the Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If
at any time while any Warrant is outstanding there should be any capital
reorganization of the capital stock of the Company (other than the issuance of
any shares of Common Stock in subdivision of outstanding shares of Common Stock
by reclassification or otherwise and other than a combination of shares provided
for in Section 4(a) hereof), or any consolidation or merger of the Company with
another corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other corporation,
which is effected in such a manner that the holders of Common Stock shall be
entitled to receive cash, stock, securities, or assets with respect to or in
exchange for Common Stock, then, as a part of such transaction, lawful provision
shall be made so that each Holder shall have the right thereafter to receive,
upon the exercise hereof, the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of the
Company has been sold, conveyed, leased or otherwise transferred, as the case
may be, which the Holder would have been entitled to receive upon such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer, if such Warrant had been exercised
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other transfer. In any
such case, appropriate adjustments (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions set forth in
this Warrant (including the adjustment of the Exercise Price and the number of
Shares issuable upon the exercise of the Warrants) to the end that the
provisions set forth herein shall thereafter be applicable, as near as
reasonably may be, in relation to any shares or other property thereafter
deliverable upon the exercise of the Warrants as if the Warrants had been
exercised immediately prior to such capital reorganization, reclassification of
capital stock, such consolidation, merger, sale, conveyance, lease or other
transfer and the Warrant Holders had carried out the terms of the exchange as
provided for by such capital reorganization, consolidation or merger. The
Company shall not effect any such capital reorganization, consolidation, merger
or transfer unless, upon or prior to the consummation thereof, the successor
corporation or the corporation to which the property of the Company has been
sold, conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to each Holder such shares of stock,
securities, cash or property as in accordance with the foregoing provisions such
Holder shall be entitled to purchase.
3
<PAGE> 4
5. No Rights as Stockholders. This Warrant shall not entitle the Holder
as such to any voting rights or other rights as a stockholder of the Company.
6. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
7. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holders.
8. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By:
------------------------------
Its:
--------------------------
4
<PAGE> 5
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
, the address for whom is set forth below the
signature of the undersigned:
Dated:
--------------------------
------------------------------------
[Signature]
------------------------------------
[Printed]
------------------------------------
------------------------------------
[Address]
* * *
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase
shares of Common Stock of PopMail.com, inc. to which the within Warrant relates
and appoints attorney, to transfer said right on the books
of with full power of substitution in the premises.
Dated:
--------------------------
------------------------------------
[Signature]
------------------------------------
[Printed]
------------------------------------
------------------------------------
[Address]
5
<PAGE> 1
EXHIBIT 4.14
THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY
LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO
REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND
ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH
REGISTRATION OR EXEMPTION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. GFP-14 Bloomington, Minnesota
December 2, 1999
This certifies that, for value received, GULFSTREAM FINANCIAL PARTNERS,
or its successors or assigns ("Holder") is entitled to purchase from
PopMail.com, inc. (the "Company") Five Hundred Thousand (500,000) fully paid and
nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par
value (the "Common Stock"), at any time and from time to time from the date
hereof until December 2, 2004 (the "Warrant Exercise Period"), at an exercise
price of $1.50 per share (the "Exercise Price"), subject to adjustment as herein
provided.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant. The rights represented by this Warrant may be
exercised by the Holder, in whole or in part (but not as to a fractional share
of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which each Holder consents and agrees:
a. Until this Warrant is transferred on the books of the Company,
the Company will treat the Holder of this Warrant registered
as such on the books of the Company as the absolute owner hereof for
all purposes without being affected by any notice to the contrary.
<PAGE> 2
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in
compliance with all applicable state and federal securities laws,
regulations and orders, and with all other applicable laws, regulations
and orders.
c. Prior to making any disposition of this Warrant or of any
of the Shares underlying this Warrant, the Holder will give written
notice to the Company describing the manner of any such proposed
disposition. The Warrant may not be transferred, and the Shares may not
be transferred, without the Holder obtaining an opinion of counsel
satisfactory in form and substance to the Company's counsel stating
that the proposed transaction will not result in a prohibited
transaction under the Securities Act, and applicable Blue Sky laws. By
accepting this Warrant, the Holder agrees to act in accordance with any
conditions reasonably imposed on such transfer by such opinion of
counsel.
d. Neither this issuance of this Warrant nor the issuance of
the Shares underlying this Warrant have been registered under the
Securities Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be created by or imposed upon the Holder or its property, and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such actions as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the effective purchase price per share of the Common Stock issuable
pursuant to this Warrant. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved free of preemptive or
other rights for the exclusive purpose of issue upon exercise of the purchase
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock Split or
Stock Combination. In the event that (i) any dividends on any class of stock of
the Company payable in Common Stock or securities convertible into or
exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the
Company, (ii) the Company shall subdivide its then outstanding shares of Common
Stock into a greater number of shares, or (iii) the Company shall combine its
outstanding shares of Common Stock, by reclassification or otherwise, then, in
any such event, the Exercise Price in effect immediately prior to such event
shall (until adjusted again pursuant hereto) be adjusted immediately after such
event to a price (calculated to the nearest full cent) determined by dividing
(a) the number of shares of Common Stock outstanding immediately prior to such
event, multiplied by the then existing Exercise Price, by (b) the total number
of shares of Common Stock outstanding immediately after such event, and the
resulting quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price shall be made if the amount of such adjustment shall be
less than $.05 per share, but in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to not less than $.05
per share.
2
<PAGE> 3
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this Section,
the Holder shall thereafter (until another such adjustment) be entitled to
purchase at the adjusted Exercise Price the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares specified in
such Warrant (as adjusted as a result of all adjustments in the Exercise Price
in effect prior to such adjustment) by the Exercise Price in effect prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
c. Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrant, then, and in each such case,
the Company within thirty (30) days thereafter shall give written notice
thereof, by first class mail, postage prepaid, addressed to each Holder as shown
on the books of the Company, which notice shall state the adjusted Exercise
Price and the increased or decreased number of shares purchasable upon the
exercise of the Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If
at any time while any Warrant is outstanding there should be any capital
reorganization of the capital stock of the Company (other than the issuance of
any shares of Common Stock in subdivision of outstanding shares of Common Stock
by reclassification or otherwise and other than a combination of shares provided
for in Section 4(a) hereof), or any consolidation or merger of the Company with
another corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other corporation,
which is effected in such a manner that the holders of Common Stock shall be
entitled to receive cash, stock, securities, or assets with respect to or in
exchange for Common Stock, then, as a part of such transaction, lawful provision
shall be made so that each Holder shall have the right thereafter to receive,
upon the exercise hereof, the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of the
Company has been sold, conveyed, leased or otherwise transferred, as the case
may be, which the Holder would have been entitled to receive upon such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer, if such Warrant had been exercised
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other transfer. In any
such case, appropriate adjustments (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions set forth in
this Warrant (including the adjustment of the Exercise Price and the number of
Shares issuable upon the exercise of the Warrants) to the end that the
provisions set forth herein shall thereafter be applicable, as near as
reasonably may be, in relation to any shares or other property thereafter
deliverable upon the exercise of the Warrants as if the Warrants had been
exercised immediately prior to such capital reorganization, reclassification of
capital stock, such consolidation, merger, sale, conveyance, lease or other
transfer and the Warrant Holders had carried out the terms of the exchange as
provided for by such capital reorganization, consolidation or merger. The
Company shall not effect any such capital reorganization, consolidation, merger
or transfer unless, upon or prior to the consummation thereof, the successor
corporation or the corporation to which the property of the Company has been
sold, conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to each Holder such shares of stock,
securities, cash or property as in accordance with the foregoing provisions such
Holder shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the
Holder as such to any voting rights or other rights as a stockholder of the
Company.
3
<PAGE> 4
6. Registration Rights. If at any time during the Warrant Exercise
Period, the Company shall propose to file any registration statement (other than
any registration on Form S-4, S-8 or any other similarly inappropriate form, or
any successor forms thereto) (the "Registration Statement") under the 1933 Act
covering a public offering of the Company's Common Stock, it will notify the
Holder hereof at least thirty (30) days prior to each such filing and will use
its best efforts to include in the Registration Statement (to the extent
permitted by applicable regulation), the Common Stock purchased or purchasable
by the Holder upon the exercise of the Warrant to the extent requested by the
Holder hereof within twenty (20) days after receipt of notice of such filing
(which request shall specify the interest in this Warrant or the Shares intended
to be sold or disposed of by such Holder and describe the nature of any proposed
sale or other disposition thereof); provided, however, that if a greater number
of Common Stock is offered for participation in the proposed offering than in
the reasonable opinion of the managing underwriter of the proposed offering can
be accommodated without adversely affecting the proposed offering, then the
amount of Shares proposed to be offered by such Holders for registration, as
well as the number of securities of any other selling shareholders participating
in the registration, shall be proportionately reduced to a number deemed
satisfactory by the managing underwriter. The Company shall bear all expenses
and fees incurred in connection with the preparation, filing, and amendment of
the Registration Statement with the Commission, except that the Holder shall pay
all fees, disbursements and expenses of any counsel or expert retained by the
Holder and all underwriting discounts and commissions, filing fees and any
transfer or other taxes relating to the Shares included in the Registration
Statement. The Holder of this Warrant agrees to cooperate with the Company in
the preparation and filing of any Registration Statement, and in the furnishing
of information concerning the Holder for inclusion therein, or in any efforts by
the Company to establish that the proposed sale is exempt under the 1933 Act as
to any proposed distribution.
7. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
8. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holders.
9. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By:___________________________________
Its: ________________________________
4
<PAGE> 5
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________________ of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $_____________ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
_______________________________, the address for whom is set forth below the
signature of the undersigned:
Dated: ____________________
_______________________________________
(Signature)
_______________________________________
_______________________________________
(Address)
~ ~ ~
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto _____________________________________ the right to purchase
shares of Common Stock of PopMail.com, inc. to which the within Warrant relates
and appoints ____________________ attorney, to transfer said right on the books
of _________________ with full power of substitution in the premises.
Dated: ____________________
_______________________________________
(Signature)
_______________________________________
_______________________________________
(Address)
5
<PAGE> 1
EXHIBIT 4.15
SCHEDULE OF WARRANTS ISSUED (GFP SERIES)
<TABLE>
<CAPTION>
NUMBER OF
DATE OF WARRANT SHARES OF EXERCISE
ISSUANCE NAME OF WARRANT RECIPIENT NO. COMMON STOCK PRICE
- - -------- ------------------------- ------- ------------ --------
<S> <C> <C> <C> <C>
11/3/99 Gulfstream Financial Partners GFP-13 250,000 $ 2.00
2401 PGA Boulevard, Suite 190
Palm Beach Gardens, FL 33410
11/3/99 Blake Capital Partners, LLC GFP-14 250,000 $ 2.00
12/2/99 Gulfstream Financial Partners GFP-14(2) 500,000 $ 1.50
12/1/99 Henry Fong, Jr. GFP-15a 50,000 $ 1.625
12/1/99 Lauren Fong GFP-15b 50,000 $ 1.625
12/1/99 Benjamin Private School GFP-15c 50,000 $ 1.625
Fed I.D.: 59-1536502
12/1/99 Barry Hollander GFP-15d 50,000 $ 1.625
12/1/99 Gulfstream Financial Partners, LLC GFP-15e 150,000 $ 1.625
12/2/99 Blake Capital Partners BCP-1 500,000 $ 1.50
</TABLE>
<PAGE> 1
EXHIBIT 4.16
The Warrant and the securities issuable upon exercise of this Warrant (the
"Securities") have not been registered under the Securities Act of 1933 (the
"Securities Act") or under any state securities or Blue Sky laws ("B1ue Sky
Laws"). No transfer, sale, assignment, pledge, hypothecation or other
disposition of this Warrant or the Securities or any interest therein may be
made except (a) pursuant to an effective registration statement under the
Securities Act and any applicable Blue Sky Laws or (b) if the Company has been
furnished with both an opinion of counsel for the holder, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that no
registration is required because of the availability of an exemption from
registration under the Securities Act and applicable Blue, Sky Laws, and
assurances that the transfer, sale, assignment, pledge, hypothecation or other
disposition will be made only in compliance with the conditions of any such
registration or exemption.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
POPMAIL.COM, INC.
Warrant No. December 1, 1999 Bloomington, Minnesota
This certifies that, for value received, THE, HILLSTREET FUND, L.P., or its
successors or assigns ("Holder") is entitled to purchase from Popmail.com, Inc.,
a Minnesota corporation, (tile "Company") Two Hundred Thousand ($200,000) fully
paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01
par value (the "Common Stock"), at any time after the date hereof and prior to
December 1, 2004 (the "Warrant Exercise Period"), at an exercise price of $1.34
per share (tile "Exercise Price"), subject to adjustment as herein provided.
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise of Warrant. The rights represented by this Warrant may be
exercised by the Holder, in whole or in part (but not as to a fractional share
of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall leave been surrendered and
payment for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require
<PAGE> 2
that any such new Warrant or any certificate for Shares purchased upon the
exercise hereof bear a legend substantially similar to that which is contained
on the face of this Warrant.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which each Holder, consents and agrees:
(a) Until this Warrant is transferred on the books of the
Company, the Company will treat the Holder of this Warrant registered as such on
the books of the Company as the absolute owner hereof for all purposes without
being affected by any notice to the contrary.
(b) This Warrant may not be exercised and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in compliance
with all applicable state and federal securities laws, regulations and orders,
and with all other applicable laws, regulations and orders.
(c) The Warrant may not be transferred, and the Shares may not
be transferred, without the Holder obtaining an opinion of counsel satisfactory
in form and substance to the Company's counsel stating that the proposed
transaction will not result in a prohibited transaction under the Securities Act
of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By
accepting this Warrant, the Holder agrees to act in accordance with any
conditions reasonably imposed on such transfer by such opinion of counsel.
(d) Neither this issuance of this Warrant nor the issuance of
the Shares underlying this Warrant have been registered under the Securities
Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be created by or imposed upon the Holder or its property, and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such actions as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the effective purchase price per share of the Common Stock issuable
pursuant to this Warrant. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved free of preemptive or
other rights for the exclusive purpose of issue upon exercise of the purchase
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
(a) Adjustment of Exercise Price for Stock Dividend, Stock
Split or Stock Combination. In the event that (i) any dividends on any class of
stock of the Company payable in Common Stock or securities convertible into or
exercisable for Common Stock ("Common Stock
<PAGE> 3
Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its
then outstanding shares of Common Stock into a greater number of shares, or
(iii) the Company shall combine its outstanding shares of Common Stock, by
reclassification or otherwise, then, in any such event, the Exercise Price in
effect immediately prior to such event shall (until adjusted again pursuant
hereto) be adjusted immediately after such event to a price (calculated to the
nearest full cent) determined by dividing (a) the number of shares of Common
Stock outstanding immediately prior to such event, multiplied by the then
existing Exercise Price, by (b) the total number of shares of Common Stock
outstanding immediately after such event, and the resulting quotient shall be
the adjusted Exercise Price per share. No adjustment of the Exercise Price shall
be made if the amount of such adjustment shall be less than $.05 per share, but
in such case any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to not less than $.05 per share.
(b) Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this Section,
the Holder shall thereafter (until another such adjustment) be entitled to
purchase at the adjusted Exercise Price the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares specified in
such Warrant (as adjusted as a result of all adjustments in the Exercise Price
in effect prior to such adjustment) by the Exercise Price in effect prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
(c) Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrant, then, and in each such case,
the Company within thirty (30) days there after shall give written notice
thereof, by first class mail, postage prepaid, addressed to each Holder as shown
on the books of the Company, which notice shall state the adjusted Exercise
Price and the increased or decreased number of shares purchasable upon the
exercise of the Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(d) Effect of Reorganization, Reclassification, Merger, etc.
If at any time while any Warrant is outstanding there should be any capital
reorganization of the capital stock of the Company (other than the issuance of
any shares of Common Stock in subdivision of outstanding shares of Common Stock
by reclassification or otherwise and other than a combination of shares provided
for in Section 4(a) hereof), or any consolidation or merger of the Company with
another corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other corporation,
which is effected in such a manner that the holders of Common Stock be entitled
to receive cash, stock, securities, or assets with respect to or in exchange for
Common Stock, then, as a part of such transaction, lawful provision shall be
made so that each Holder shall have the right thereafter to receive, upon the
exercise hereof, the number of shares of stock or other securities or property
of the Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of the
Company has been sold, conveyed, leased or otherwise transferred, as the case
may be, which the Holder would have been entitled to receive upon such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer, if such Warrant had been exercised
<PAGE> 4
immediately prior to such capital reorganization reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other transfer. In any
such case, appropriate adjustments (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions set forth in
this Warrant (including the adjustment of the Exercise Price and the number of
Shares issuable upon the exercise of the Warrants) to the end that the
provisions set forth herein shall herein shall thereafter be applicable, as near
as reasonably may be, in relation to any shares or other property thereafter
deliverable upon the exercise of the Warrants as if the Warrants had been
exercised immediately prior to such capital reorganization, reclassification of
capital stock, such consolidate on, merger, sale, conveyance, lease or other
transfer and the Warrant Holders had carried out the terms of the exchange as
provided for by such capital reorganization, consolidation or merger. The
Company shall not effect any such capital reorganization, consolidation merger
or transfer unless, upon or prior to the consummation thereof, the successor
corporation or the corporation to which the property of the Company has been
sold, conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to each Holder such shares of stock,
securities, cash oi- property as in accordance with the foregoing provisions
such Holder shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the Holder
as such to any voting rights or other rights as a stockholder of the Company.
6. Registration Rights.
(a) Piggyback Registration Rights. Provided that the Shares
are not then included in a Current registration statement of the Company, if the
Company, at any time before the fifth anniversary of the issuance of this
Warrant, shall file a registration statement with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended, for the purpose
of registering shares of Common stock for sale to the public, the Company shall
give to the Holder at least twenty (20) days advance written notice of its
intention to file such registration statement and Holder shall have the right to
have included in such registration statement such number of the Shares as it
shall designate to the Company within ten (10) days after the date of such
notice, provided that the number of Shares to be included in such registration
statement, when added to all the other shares to be included therein, does not
exceed the number of shares which the Company and its underwriters, if any,
reasonably fix for inclusion. If the number of Shares to be included in such
registration statement is less than the total number of Shares which the Holder
has requested to be included, then the Holder and other holders of shares of
Common Stock or other securities of the Company entitled to include shares of
Common Stock in such registration shall participate in the underwriting pro rata
based upon the total number of shares of Common Stock requested to be registered
by all of such holders. The Holder shall furnish the Company with such
information as may be required in connection with such registration statement
and will cooperate to cause such registration to become effective at the
earliest practicable time. If the shares to which such registration relates are
to be sold in an underwritten offering, the Holder, as a condition to the
inclusion of the shares in the registration statement, shall agree that its
Shares will be sold only as a part of such underwritten offering at the price
and upon the terms fixed by the Company and its underwriters, subject to the
right of the Holder to withdraw the Shares therefrom.
<PAGE> 5
(b) Demand Registration Rights. On a one-time basis only, during the
three year period commencing two years after the date of this Warrant, upon
request by the Holder or Holders of a majority in interest of this Warrant, and
any Shares, the Company will promptly take all necessary steps to register or
qualify, under the 1933 Act and the securities laws of such states as the holder
may reasonably request, such number of Shares issued and to be issued upon
conversion of the Warrants and shares of common stock of the Company owned at
such time by such holders pursuant to the conversion of that certain $2,000.000
Senior Convertible Note issued as of the date of this Warrant requested by such
holders in their request to the Company. The Company shall keep effective and
maintain any registration, qualification, notification, or approval specified in
this section for such period as may be reasonably necessary for such Holder or
Holders of this Warrant and/or such Shares to dispose thereof and from time to
time shall amend or supplement the prospectus used in connection therewith to
the extent necessary in order to comply with applicable law.
7. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
8. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the (Company agrees in writing and
has obtained the written consent of the Holders.
9. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at its
address set forth on the records of the Company; or if sent to the Company shall
be mailed, delivered, or telefaxed and confirmed to PopMail.com, Inc., 4801
West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as
the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, Popmail.com, Inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
Popmail.com, Inc.
/s/ Stephen D. King
Stephen D. King
Chairman of the Board
<PAGE> 6
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of
Popmail.com, Inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $ therefor in cash, certified check or bank draft and
requests that a certificate evidencing the Shares be delivered to
, the address for whom is set forth below the
signature of the undersigned:
Dated:
--------------------------------------
(Signature)
--------------------------------------
--------------------------------------
(Address)
<PAGE> 7
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase shares
of Common Stock of Popmail.com, Inc. to which the within Warrant relates and
appoints attorneys, to transfer said right on the books
of with full power of substitution in the premises.
Dated:
-------------------------
--------------------------------------
(Signature)
--------------------------------------
--------------------------------------
(Address)
<PAGE> 1
EXHIBIT 4.17
THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY
LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO
REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND
ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH
REGISTRATION OR EXEMPTION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. AB-1 Bloomington, Minnesota
December 1, 1999
This certifies that, for value received, ANDREW BAUM, or his successors
or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the
"Company") Forty Thousand (40,000) fully paid and nonassessable shares (the
"Shares") of the Company's Common Stock, $.01 par value (the "Common Stock") at
any time and from time to time from the date hereof until December 1, 2004, at
an exercise price of $2.00 per share (the "Exercise price"), subject to
adjustment as herein provided.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant.
a. Exercise for Cash. The rights represented by this Warrant
may be exercised by the Holder, in whole or in part (but not as to a fractional
share of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
b. Cashless Exercise. Upon receipt of a notice of cashless
exercise, the Company shall deliver to the Holder (without payment by the Holder
of any exercise price) that number of Shares that is equal to the quotient
obtained by dividing (x) the value of the Warrant on
<PAGE> 2
(hereinafter defined) for the Shares by (y) the Fair Market Value of one share
of Common Stock. A notice of "cashless exercise" shall state the number of
Shares as to which the Warrant is being exercised. "Fair Market Value" for
purposes of this Section (b) shall mean the average of the Common Stock closing
prices reported by the principal exchange on which the Common Stock is traded,
or the last sale prices as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") National Market or SmallCap
Market, as the case may be, for the ten (10) business days immediately preceding
the Exercise Date or, in the event no public market shall exist for the Common
Stock at the time of such cashless exercise, Fair Market Value shall mean the
fair market value of the Common Stock as the same shall be determined in the
good faith discretion of the Board of Directors, after full consideration of all
factors then deemed relevant by such Board in establishing such value, including
by way of illustration and not limitation, the per share purchase price of
Common Stock or per security convertible into one share of Common Stock of the
most recent sale of shares of Common Stock or securities convertible into Common
Stock by the Company after the date hereof all as evidenced by the vote of a
majority of the directors then in office.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which each Holder consents and agrees:
a. Until this Warrant is transferred on the books of the
Company, the Company will treat the Holder of this Warrant registered as such on
the books of the Company as the absolute owner hereof for all purposes without
being affected by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in compliance
with all applicable state and federal securities laws, regulations and orders,
and with all other applicable laws, regulations and orders.
c. Prior to making any disposition of this Warrant or of any
of the Shares underlying this Warrant, the Holder will give written notice to
the Company describing the manner of any such proposed disposition. The Warrant
may not be transferred, and the Shares may not be transferred, without the
Holder obtaining an opinion of counsel satisfactory in form and substance to the
Company's counsel stating that the proposed transaction will not result in a
prohibited transaction under the Securities Act of 1933, as amended ("Securities
Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder
agrees to act in accordance with any conditions reasonably imposed on such
transfer by such opinion of counsel.
d. Neither this issuance of this Warrant nor the issuance
of the Shares underlying this Warrant have been registered under the Securities
Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be created by or imposed upon the Holder or its property, and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such actions as may be requisite to assure
that the par value per share of the Common Stock is at all
2
<PAGE> 3
times equal to or less than the effective purchase price per share of the Common
Stock issuable pursuant to this Warrant. The Company further covenants and
agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved free of preemptive or other rights for the exclusive purpose of issue
upon exercise of the purchase rights evidenced by this Warrant, a sufficient
number of shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock
Split or Stock Combination. In the event that (i) any dividends on any class of
stock of the Company payable in Common Stock or securities convertible into or
exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the
Company, (ii) the Company shall subdivide its then outstanding shares of Common
Stock into a greater number of shares, or (iii) the Company shall combine its
outstanding shares of Common Stock, by reclassification or otherwise, then, in
any such event, the Exercise Price in effect immediately prior to such event
shall (until adjusted again pursuant hereto) be adjusted immediately after such
event to a price (calculated to the nearest full cent) determined by dividing
(a) the number of shares of Common Stock outstanding immediately prior to such
event, multiplied by the then existing Exercise Price, by (b) the total number
of shares of Common Stock outstanding immediately after such event, and the
resulting quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price shall be made if the amount of such adjustment shall be
less than $.05 per share, but in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to not less than $.05
per share.
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this Section,
the Holder shall thereafter (until another such adjustment) be entitled to
purchase at the adjusted Exercise Price the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares specified in
such Warrant (as adjusted as a result of all adjustments in the Exercise Price
in effect prior to such adjustment) by the Exercise Price in effect prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
c. Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrant, then, and in each such case,
the Company within thirty (30) days thereafter shall give written notice
thereof, by first class mail, postage prepaid, addressed to each Holder as shown
on the books of the Company, which notice shall state the adjusted Exercise
Price and the increased or decreased number of shares purchasable upon the
exercise of the Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If
at any time while any Warrant is outstanding there should be any capital
reorganization of the capital stock of the Company (other than the issuance of
any shares of Common Stock in subdivision of outstanding shares of Common Stock
by reclassification or otherwise and other than a combination of shares provided
for in Section 4(a) hereof), or any consolidation or merger of the Company with
another corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all
3
<PAGE> 4
of its property to any other corporation, which is effected in such a manner
that the holders of Common Stock shall be entitled to receive cash, stock,
securities, or assets with respect to or in exchange for Common Stock, then, as
a part of such transaction, lawful provision shall be made so that each Holder
shall have the right thereafter to receive, upon the exercise hereof, the number
of shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such consolidation or merger, or of the
corporation to which the property of the Company has been sold, conveyed, leased
or otherwise transferred, as the case may be, which the Holder would have been
entitled to receive upon such capital reorganization, reclassification of
capital stock, consolidation, merger, sale, conveyance, lease or other transfer,
if such Warrant had been exercised immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer. In any such case, appropriate adjustments
(as determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant (including the
adjustment of the Exercise Price and the number of Shares issuable upon the
exercise of the Warrants) to the end that the provisions set forth herein shall
thereafter be applicable, as near as reasonably may be, in relation to any
shares or other property thereafter deliverable upon the exercise of the
Warrants as if the Warrants had been exercised immediately prior to such capital
reorganization, reclassification of capital stock, such consolidation, merger,
sale, conveyance, lease or other transfer and the Warrant Holders had carried
out the terms of the exchange as provided for by such capital reorganization,
consolidation or merger. The Company shall not effect any such capital
reorganization, consolidation, merger or transfer unless, upon or prior to the
consummation thereof, the successor corporation or the corporation to which the
property of the Company has been sold, conveyed, leased or otherwise transferred
shall assume by written instrument the obligation to deliver to each Holder such
shares of stock, securities, cash or property as in accordance with the
foregoing provisions such Holder shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the Holder
as such to any voting rights or other rights as a stockholder of the Company.
6. Piggyback Registration Rights. If at any time prior to December 1,
2004, the Company shall propose to file any registration statement (other than
any registration on Form S-4, S-8 or any other similarly inappropriate form, or
any successor forms thereto) (the "Registration Statement") under the 1933 Act
covering a public offering of the Company's Common Stock, it will notify the
Holder hereof at least thirty (30) days prior to each such filing and will use
its best efforts to include in the Registration Statement (to the extent
permitted by applicable regulation), the Common Stock purchased or purchasable
by the Holder upon the exercise of the Warrant to the extent requested by the
Holder hereof within twenty (20) days after receipt of notice of such filing
(which request shall specify the interest in this Warrant or the Shares intended
to be sold or disposed of by such Holder and describe the nature of any proposed
sale or other disposition thereof); provided, however, that if a greater number
of Shares is offered for participation in the proposed offering than in the
reasonable opinion of the managing underwriter of the proposed offering can be
accommodated without adversely affecting the proposed offering, then the amount
of Shares proposed to be offered by such Holders for registration, as well as
the number of securities of any other selling shareholders participating in the
registration, shall be proportionately reduced to a number deemed satisfactory
by the managing underwriter. The Company shall bear all expenses and fees
incurred in connection with the preparation, filing, and amendment of the
Registration Statement with the Commission, except that the Holder shall pay all
fees, disbursements and expenses of any counsel or expert retained by the Holder
and all underwriting discounts and commissions, filing fees and any transfer or
other taxes relating to the Shares included in the Registration Statement. The
4
<PAGE> 5
Holder of this Warrant agrees to cooperate with the Company in the preparation
and filing of any Registration Statement, and in the furnishing of information
concerning the Holder for inclusion therein, or in any efforts by the Company to
establish that the proposed sale is exempt under the 1933 Act as to any proposed
distribution.
7. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
8. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holders.
9. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By:
--------------------------------
Its:
----------------------------
5
<PAGE> 6
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
, the address for whom is set forth below the
signature of the undersigned:
Dated:
-------------------------
------------------------------------
[Signature]
------------------------------------
[Printed]
------------------------------------
------------------------------------
[Address]
* * *
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase
shares of Common Stock of PopMail.com, inc. to which the within Warrant relates
and appoints attorney, to transfer said right on the books
of with full power of substitution in the premises.
Dated:
-------------------------
------------------------------------
[Signature]
------------------------------------
[Printed]
------------------------------------
------------------------------------
[Address]
6
<PAGE> 1
EXHIBIT 4.18
Schedule identifying material details of warrants issued by the Company
substantially identical to the warrant filed as Exhibit 4.17.
<TABLE>
<CAPTION>
NUMBER OF
DATE OF WARRANT SHARES OF
ISSUANCE NAME OF WARRANT RECIPIENT NO. COMMON STOCK
- - -------- ------------------------- ------- ------------
<S> <C> <C> <C>
12/1/99 Metropolitan Capital Partners, Inc. AB-2 10,000
12/1/99 Ramel Shorte AB-3 10,000
</TABLE>
<PAGE> 1
EXHIBIT 4.19
THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY
LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO
REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND
ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH
REGISTRATION OR EXEMPTION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. MCP-1 Bloomington, Minnesota
October 12, 1999
This certifies that, for value received, METROPOLITAN CAPITAL PARTNERS,
INC., or its successors or assigns ("Holder") is entitled to purchase from
PopMail.com, inc. (the "Company") Six Hundred Thousand (600,000) fully paid and
nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par
value (the "Common Stock"), at any time during the period (the "Warrant Exercise
Period") and at the exercise prices (the "Exercise Prices") set forth in Section
1, subject to adjustment as herein provided.
This Warrant is being issued in connection with that certain Financial
Public Relations Agreement (the "Agreement") between the Company and
Metropolitan Capital Partners, Inc. dated October 12, 1999, and is subject to
the following provisions, terms and conditions:
1. Vesting of Warrant Shares. Holder's rights to purchase the Shares
under this Warrant are exercisable only to the extent that all, or any portion
thereof, has vested in the Holder. The Warrant shall vest in five lots, as
provided below, until fully vested:
(a) Lot 1. Warrants to purchase 100,000 Shares at an Exercise
Price of $2.00 per Share shall vest when the closing price per share of the
Company's Common Stock is at or above $2.00 for ten (10) consecutive trading
days.
(b) Lot 2. Warrants to purchase 100,000 Shares at an Exercise
Price of $4.00 per Share shall vest when the closing price per share of the
Company's Common Stock is at or above $4.00 for ten (10) consecutive trading
days.
(c) Lot 3. Warrants to purchase 100,000 Shares at an Exercise
Price of $5.00 per Share shall vest when the closing price per share of the
Company's Common Stock is at or above $5.00 for ten (10) consecutive trading
days.
(d) Lot 4. Warrants to purchase 100,000 Shares at an Exercise
Price of $6.00 per Share shall vest when the closing price per share of the
Company's Common Stock is at or above $6.00 for ten (10) consecutive trading
days.
(e) Lot 5. Warrants to purchase 200,000 Shares at an Exercise
Price of $8.00 per Share shall vest when the closing price per share of the
Company's Common Stock is at or above $8.00 for ten (10) consecutive trading
days.
<PAGE> 2
Notwithstanding anything to the contrary contained herein, if (i) the
lots described in subsections (a), (b) and (c), above, have not vested by July
31, 2000, and (ii) the lots described in subsections (d) and (e), above, have
not vested by December 31, 2000, then all rights with respect to such lots shall
lapse. To the extent vested, this Warrant may be exercised, in part or in full,
at any time prior to October 12, 2004.
2. Exercise of Warrant.
a. Exercise for Cash. The rights represented by this Warrant
may be exercised by the Holder, in whole or in part (but not as to a fractional
share of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
b. Cashless Exercise. Upon receipt of a notice of cashless
exercise, the Company shall deliver to the Holder (without payment by the Holder
of any exercise price) that number of Shares that is equal to the quotient
obtained by dividing (x) the value of the Warrant on the date that the Warrant
shall have been surrendered (determined by subtracting the aggregate exercise
price for the Shares in effect on the Exercise Date from the aggregate Fair
Market Value (hereinafter defined) for the Shares by (y) the Fair Market Value
of one share of Common Stock. A notice of "cashless exercise" shall state the
number of Shares as to which the Warrant is being exercised. " Fair Market
Value" for purposes of this Section (b) shall mean the average of the Common
Stock closing prices reported by the principal exchange on which the Common
Stock is traded, or the last sale prices as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") National
Market or SmallCap Market, as the case may be, for the ten (10) business days
immediately preceding the Exercise Date or, in the event no public market shall
exist for the Common Stock at the time of such cashless exercise, Fair Market
Value shall mean the fair market value of the Common Stock as the same shall be
determined in the good faith discretion of the Board of Directors, after full
consideration of all factors then deemed relevant by such Board in establishing
such value, including by way of illustration and not limitation, the per share
purchase price of Common Stock or per security convertible into one share of
Common Stock of the most recent sale of shares of Common Stock or securities
convertible into Common Stock by the Company after the date hereof all as
evidenced by the vote of a majority of the directors then in office.
2. Transferability of this Warrant. This Warrant is issued upon
the following terms, to
2
<PAGE> 3
which each Holder consents and agrees:
a. Until this Warrant is transferred on the books of the Company, the
Company will treat the Holder of this Warrant registered as such on the books of
the Company as the absolute owner hereof for all purposes without being affected
by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and the Shares
underlying this Warrant shall not be transferable, except in compliance with all
applicable state and federal securities laws, regulations and orders, and with
all other applicable laws, regulations and orders.
c. Prior to making any disposition of this Warrant or of any of the
Shares underlying this Warrant, the Holder will give written notice to the
Company describing the manner of any such proposed disposition. The Warrant may
not be transferred, and the Shares may not be transferred, without the Holder
obtaining an opinion of counsel satisfactory in form and substance to the
Company's counsel stating that the proposed transaction will not result in a
prohibited transaction under the Securities Act of 1933, as amended ("Securities
Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder
agrees to act in accordance with any conditions reasonably imposed on such
transfer by such opinion of counsel.
d. Neither this issuance of this Warrant nor the issuance of the Shares
underlying this Warrant have been registered under the Securities Act.
3. Certain Covenants of the Company. The Company covenants and agrees that all
Shares which may be issued upon the exercise of the rights represented by this
Warrant, upon issuance and full payment for the Shares so purchased, will be
duly authorized and issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue hereof, except those that may
be created by or imposed upon the Holder or its property, and without limiting
the generality of the foregoing, the Company covenants and agrees that it will
from time to time take all such actions as may be requisite to assure that the
par value per share of the Common Stock is at all times equal to or less than
the effective purchase price per share of the Common Stock issuable pursuant to
this Warrant. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved free of preemptive or
other rights for the exclusive purpose of issue upon exercise of the purchase
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and
number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock
Combination. In the event that (i) any dividends on any class of stock of the
Company payable in Common Stock or securities convertible into or exercisable
for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii)
the Company shall subdivide its then outstanding shares of Common Stock into a
greater number of shares, or (iii) the Company shall combine its outstanding
shares of Common Stock, by reclassification or otherwise, then, in any such
event, the Exercise Price in effect immediately prior to such event shall
(until adjusted again pursuant hereto) be adjusted immediately after such event
to a price (calculated to the nearest full cent) determined by dividing (a) the
number of shares of Common Stock outstanding immediately prior to such event,
3
<PAGE> 4
multiplied by the then existing Exercise Price, by (b) the total number of
shares of Common Stock outstanding immediately after such event, and the
resulting quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price shall be made if the amount of such adjustment shall be
less than $.05 per share, but in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to not less than $.05
per share.
b. Adjustment of Number of Shares Purchasable on Exercise of Warrants.
Upon each adjustment of the Exercise Price pursuant to this Section,
the Holder shall thereafter (until another such adjustment) be entitled to
purchase at the adjusted Exercise Price the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares specified in
such Warrant (as adjusted as a result of all adjustments in the Exercise Price
in effect prior to such adjustment) by the Exercise Price in effect prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and
any increase or decrease in the number of shares of Common Stock purchasable
upon the exercise of the Warrant, then, and in each such case, the Company
within thirty (30) days thereafter shall give written notice thereof, by first
class mail, postage prepaid, addressed to each Holder as shown on the books of
the Company, which notice shall state the adjusted Exercise Price and the
increased or decreased number of shares purchasable upon the exercise of the
Warrants, and shall set forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If at any
time while any Warrant is outstanding there should be any capital reorganization
of the capital stock of the Company (other than the issuance of any shares of
Common Stock in subdivision of outstanding shares of Common Stock by
reclassification or otherwise and other than a combination of shares provided
for in Section 4(a) hereof), or any consolidation or merger of the Company with
another corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other corporation,
which is effected in such a manner that the holders of Common Stock shall be
entitled to receive cash, stock, securities, or assets with respect to or in
exchange for Common Stock, then, as a part of such transaction, lawful provision
shall be made so that each Holder shall have the right thereafter to receive,
upon the exercise hereof, the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of the
Company has been sold, conveyed, leased or otherwise transferred, as the case
may be, which the Holder would have been entitled to receive upon such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer, if such Warrant had been exercised
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other transfer. In any
such case, appropriate adjustments (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions set forth in
this Warrant (including the adjustment of the Exercise Price and the number of
Shares issuable upon the exercise of the Warrants) to the end that the
provisions set forth herein shall thereafter be applicable, as near as
reasonably may be, in relation to any shares or other property thereafter
deliverable upon the exercise of the Warrants as if the Warrants had been
exercised immediately prior to such capital reorganization, reclassification of
capital stock, such consolidation, merger, sale, conveyance, lease or other
transfer and the Warrant Holders had carried out the terms of the exchange as
provided for by such capital reorganization, consolidation or merger.
4
<PAGE> 5
The Company shall not effect any such capital reorganization, consolidation,
merger or transfer unless, upon or prior to the consummation thereof, the
successor corporation or the corporation to which the property of the Company
has been sold, conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to each Holder such shares of stock,
securities, cash or property as in accordance with the foregoing provisions such
Holder shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the
Holder as such to any voting rights or other rights as a stockholder of the
Company.
6. Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Minnesota.
7. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holders.
8. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By:_____________________________________
Its:__________________________________
5
<PAGE> 6
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________________ of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $_____________ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
_____________________________, the address for whom is set forth below the
signature of the undersigned:
Dated: ____________________
____________________________________
[Signature]
____________________________________
[Printed]
____________________________________
____________________________________
[Address]
~ ~ ~
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto _____________________________________ the right to purchase
shares of Common Stock of PopMail.com, inc. to which the within Warrant relates
and appoints ____________________ attorney, to transfer said right on the books
of _________________ with full power of substitution in the premises.
Dated: ____________________
____________________________________
[Signature]
____________________________________
[Printed]
____________________________________
____________________________________
[Address]
6
<PAGE> 1
EXHIBIT 4.20
THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY
LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO
REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND
ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH
REGISTRATION OR EXEMPTION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. MCP-2 Bloomington, Minnesota
December 1, 1999
This certifies that, for value received, METROPOLITAN CAPITAL PARTNERS,
INC., or its successors or assigns ("Holder") is entitled to purchase from
PopMail.com, inc. (the "Company") One Hundred Fifty Thousand (150,000) fully
paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01
par value (the "Common Stock") at any time and from time to time from the date
hereof until December 1, 2004, at an exercise price of $1.00 per share (the
"Exercise Price"), subject to adjustment as herein provided.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant.
a. Exercise for Cash. The rights represented by this Warrant
may be exercised by the Holder, in whole or in part (but not as to a fractional
share of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
b. Cashless Exercise. Upon receipt of a notice of cashless
exercise, the Company shall deliver to the Holder (without payment by the Holder
of any exercise price) that number of Shares that is equal to the quotient
obtained by dividing (x) the value of the Warrant on the date that the Warrant
shall have been surrendered (determined by subtracting the aggregate exercise
price for the Shares in effect on the Exercise Date from the aggregate Fair
Market Value (hereinafter defined) for the Shares by (y) the Fair Market Value
of one share of Common Stock. A
<PAGE> 2
notice of "cashless exercise" shall state the number of Shares as to which the
Warrant is being exercised. "Fair Market Value" for purposes of this Section (b)
shall mean the average of the Common Stock closing prices reported by the
principal exchange on which the Common Stock is traded, or the last sale prices
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("Nasdaq") National Market or SmallCap Market, as the case may
be, for the ten (10) business days immediately preceding the Exercise Date or,
in the event no public market shall exist for the Common Stock at the time of
such cashless exercise, Fair Market Value shall mean the fair market value of
the Common Stock as the same shall be determined in the good faith discretion of
the Board of Directors, after full consideration of all factors then deemed
relevant by such Board in establishing such value, including by way of
illustration and not limitation, the per share purchase price of Common Stock or
per security convertible into one share of Common Stock of the most recent sale
of shares of Common Stock or securities convertible into Common Stock by the
Company after the date hereof all as evidenced by the vote of a majority of the
directors then in office.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which each Holder consents and agrees:
a. Until this Warrant is transferred on the books of the
Company, the Company will treat the Holder of this Warrant registered as such on
the books of the Company as the absolute owner hereof for all purposes without
being affected by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in compliance
with all applicable state and federal securities laws, regulations and orders,
and with all other applicable laws, regulations and orders.
c. Prior to making any disposition of this Warrant or of any of
the Shares underlying this Warrant, the Holder will give written notice to the
Company describing the manner of any such proposed disposition. The Warrant may
not be transferred, and the Shares may not be transferred, without the Holder
obtaining an opinion of counsel satisfactory in form and substance to the
Company's counsel stating that the proposed transaction will not result in a
prohibited transaction under the Securities Act of 1933, as amended ("Securities
Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder
agrees to act in accordance with any conditions reasonably imposed on such
transfer by such opinion of counsel.
d. Neither this issuance of this Warrant nor the issuance of the
Shares underlying this Warrant have been registered under the Securities Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be created by or imposed upon the Holder or its property, and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such actions as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the effective purchase price per share of the Common Stock issuable
pursuant to this Warrant. The Company further covenants and agrees that during
the period within
2
<PAGE> 3
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized and reserved free of preemptive or other rights for
the exclusive purpose of issue upon exercise of the purchase rights evidenced by
this Warrant, a sufficient number of shares of its Common Stock to provide for
the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock Split
or Stock Combination. In the event that (i) any dividends on any class of stock
of the Company payable in Common Stock or securities convertible into or
exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the
Company, (ii) the Company shall subdivide its then outstanding shares of Common
Stock into a greater number of shares, or (iii) the Company shall combine its
outstanding shares of Common Stock, by reclassification or otherwise, then, in
any such event, the Exercise Price in effect immediately prior to such event
shall (until adjusted again pursuant hereto) be adjusted immediately after such
event to a price (calculated to the nearest full cent) determined by dividing
(a) the number of shares of Common Stock outstanding immediately prior to such
event, multiplied by the then existing Exercise Price, by (b) the total number
of shares of Common Stock outstanding immediately after such event, and the
resulting quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price shall be made if the amount of such adjustment shall be
less than $.05 per share, but in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to not less than $.05
per share.
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this Section,
the Holder shall thereafter (until another such adjustment) be entitled to
purchase at the adjusted Exercise Price the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares specified in
such Warrant (as adjusted as a result of all adjustments in the Exercise Price
in effect prior to such adjustment) by the Exercise Price in effect prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
c. Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrant, then, and in each such case,
the Company within thirty (30) days thereafter shall give written notice
thereof, by first class mail, postage prepaid, addressed to each Holder as shown
on the books of the Company, which notice shall state the adjusted Exercise
Price and the increased or decreased number of shares purchasable upon the
exercise of the Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If
at any time while any Warrant is outstanding there should be any capital
reorganization of the capital stock of the Company (other than the issuance of
any shares of Common Stock in subdivision of outstanding shares of Common Stock
by reclassification or otherwise and other than a combination of shares provided
for in Section 4(a) hereof), or any consolidation or merger of the Company with
another corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other corporation,
which is effected in such a manner that the holders of Common Stock shall be
entitled to receive cash, stock, securities, or assets with respect to or in
3
<PAGE> 4
exchange for Common Stock, then, as a part of such transaction, lawful provision
shall be made so that each Holder shall have the right thereafter to receive,
upon the exercise hereof, the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of the
Company has been sold, conveyed, leased or otherwise transferred, as the case
may be, which the Holder would have been entitled to receive upon such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer, if such Warrant had been exercised
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other transfer. In any
such case, appropriate adjustments (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions set forth in
this Warrant (including the adjustment of the Exercise Price and the number of
Shares issuable upon the exercise of the Warrants) to the end that the
provisions set forth herein shall thereafter be applicable, as near as
reasonably may be, in relation to any shares or other property thereafter
deliverable upon the exercise of the Warrants as if the Warrants had been
exercised immediately prior to such capital reorganization, reclassification of
capital stock, such consolidation, merger, sale, conveyance, lease or other
transfer and the Warrant Holders had carried out the terms of the exchange as
provided for by such capital reorganization, consolidation or merger. The
Company shall not effect any such capital reorganization, consolidation, merger
or transfer unless, upon or prior to the consummation thereof, the successor
corporation or the corporation to which the property of the Company has been
sold, conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to each Holder such shares of stock,
securities, cash or property as in accordance with the foregoing provisions such
Holder shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the
Holder as such to any voting rights or other rights as a stockholder of the
Company.
6. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
7. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holders.
8. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By:
--------------------------------
Its:
-------------------------------
4
<PAGE> 5
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
, the address for whom is set forth below the
signature of the undersigned:
Dated:
---------------------------
-----------------------------------
[Signature]
-----------------------------------
[Printed]
-----------------------------------
-----------------------------------
[Address]
* * *
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase shares of Common
Stock of PopMail.com, inc. to which the within Warrant relates and appoints
attorney, to transfer said right on the books of
with full power of substitution in the premises.
Dated:
---------------------
-----------------------------------
[Signature]
-----------------------------------
[Printed]
-----------------------------------
-----------------------------------
[Address]
5
<PAGE> 1
EXHIBIT 4.21
THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY
LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO
REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND
ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH
REGISTRATION OR EXEMPTION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. WT-1 Bloomington, Minnesota
December 1, 1999
This certifies that, for value received, WAYNE L. TEIDGE, or his
successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc.
(the "Company") Twenty Thousand (20,000) fully paid and nonassessable shares
(the "Shares") of the Company's Common Stock, $.01 par value (the "Common
Stock"), at any time and from time to time from the date hereof until December
1, 2004 (the "Warrant Exercise Period"), at an exercise price of $1.625 per
share (the "Exercise Price"), subject to adjustment as herein provided.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant. The rights represented by this Warrant may be
exercised by the Holder, in whole or in part (but not as to a fractional share
of Common Stock), by the surrender of this Warrant (properly endorsed, if
required, at the Company's principal office in Bloomington, Minnesota, or such
other office or agency of the Company as the Company may designate by notice in
writing to the Holder at the address of such Holder appearing on the books of
the Company at any time within the period above named), and upon payment to it
by certified check, bank draft or cash of the purchase price for such Shares.
The Company agrees that the Shares so purchased shall have and are deemed to be
issued to the Holder as the record owner of such Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Shares as aforesaid. Certificates for the Shares of Common
Stock so purchased shall be delivered to the Holder within a reasonable time,
not exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder within
such time. The Company may require that any such new Warrant or any certificate
for Shares purchased upon the exercise hereof bear a legend substantially
similar to that which is contained on the face of this Warrant.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which each Holder consents and agrees:
a. Until this Warrant is transferred on the books of the
Company, the Company will treat the Holder of this Warrant registered
as such on the books of the Company as the absolute owner hereof for
all purposes without being affected by any notice to the contrary.
<PAGE> 2
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in
compliance with all applicable state and federal securities laws,
regulations and orders, and with all other applicable laws, regulations
and orders.
c. Prior to making any disposition of this Warrant or of any
of the Shares underlying this Warrant, the Holder will give written
notice to the Company describing the manner of any such proposed
disposition. The Warrant may not be transferred, and the Shares may not
be transferred, without the Holder obtaining an opinion of counsel
satisfactory in form and substance to the Company's counsel stating
that the proposed transaction will not result in a prohibited
transaction under the Securities Act, and applicable Blue Sky laws. By
accepting this Warrant, the Holder agrees to act in accordance with any
conditions reasonably imposed on such transfer by such opinion of
counsel.
d. Neither this issuance of this Warrant nor the issuance of
the Shares underlying this Warrant have been registered under the
Securities Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be created by or imposed upon the Holder or its property, and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such actions as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the effective purchase price per share of the Common Stock issuable
pursuant to this Warrant. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved free of preemptive or
other rights for the exclusive purpose of issue upon exercise of the purchase
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock
Split or Stock Combination. In the event that (i) any dividends on any class of
stock of the Company payable in Common Stock or securities convertible into or
exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the
Company, (ii) the Company shall subdivide its then outstanding shares of Common
Stock into a greater number of shares, or (iii) the Company shall combine its
outstanding shares of Common Stock, by reclassification or otherwise, then, in
any such event, the Exercise Price in effect immediately prior to such event
shall (until adjusted again pursuant hereto) be adjusted immediately after such
event to a price (calculated to the nearest full cent) determined by dividing
(a) the number of shares of Common Stock outstanding immediately prior to such
event, multiplied by the then existing Exercise Price, by (b) the total number
of shares of Common Stock outstanding immediately after such event, and the
resulting quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price shall be made if the amount of such adjustment shall be
less than $.05 per share, but in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to not less than $.05
per share.
2
<PAGE> 3
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this Section,
the Holder shall thereafter (until another such adjustment) be entitled to
purchase at the adjusted Exercise Price the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares specified in
such Warrant (as adjusted as a result of all adjustments in the Exercise Price
in effect prior to such adjustment) by the Exercise Price in effect prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
c. Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrant, then, and in each such case,
the Company within thirty (30) days thereafter shall give written notice
thereof, by first class mail, postage prepaid, addressed to each Holder as shown
on the books of the Company, which notice shall state the adjusted Exercise
Price and the increased or decreased number of shares purchasable upon the
exercise of the Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If
at any time while any Warrant is outstanding there should be any capital
reorganization of the capital stock of the Company (other than the issuance of
any shares of Common Stock in subdivision of outstanding shares of Common Stock
by reclassification or otherwise and other than a combination of shares provided
for in Section 4(a) hereof), or any consolidation or merger of the Company with
another corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other corporation,
which is effected in such a manner that the holders of Common Stock shall be
entitled to receive cash, stock, securities, or assets with respect to or in
exchange for Common Stock, then, as a part of such transaction, lawful provision
shall be made so that each Holder shall have the right thereafter to receive,
upon the exercise hereof, the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of the
Company has been sold, conveyed, leased or otherwise transferred, as the case
may be, which the Holder would have been entitled to receive upon such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer, if such Warrant had been exercised
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other transfer. In any
such case, appropriate adjustments (as determined by the Board of Directors of
the Company) shall be made in the application of the provisions set forth in
this Warrant (including the adjustment of the Exercise Price and the number of
Shares issuable upon the exercise of the Warrants) to the end that the
provisions set forth herein shall thereafter be applicable, as near as
reasonably may be, in relation to any shares or other property thereafter
deliverable upon the exercise of the Warrants as if the Warrants had been
exercised immediately prior to such capital reorganization, reclassification of
capital stock, such consolidation, merger, sale, conveyance, lease or other
transfer and the Warrant Holders had carried out the terms of the exchange as
provided for by such capital reorganization, consolidation or merger. The
Company shall not effect any such capital reorganization, consolidation, merger
or transfer unless, upon or prior to the consummation thereof, the successor
corporation or the corporation to which the property of the Company has been
sold, conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to each Holder such shares of stock,
securities, cash or property as in accordance with the foregoing provisions such
Holder shall be entitled to purchase.
5. No Rights as Stockholders. This Warrant shall not entitle the
Holder as such to any voting rights or other rights as a stockholder of the
Company.
3
<PAGE> 4
6. Registration Rights. If at any time during the Warrant Exercise
Period, the Company shall propose to file any registration statement (other than
any registration on Form S-4, S-8 or any other similarly inappropriate form, or
any successor forms thereto) (the "Registration Statement") under the 1933 Act
covering a public offering of the Company's Common Stock, it will notify the
Holder hereof at least thirty (30) days prior to each such filing and will use
its best efforts to include in the Registration Statement (to the extent
permitted by applicable regulation), the Common Stock purchased or purchasable
by the Holder upon the exercise of the Warrant to the extent requested by the
Holder hereof within twenty (20) days after receipt of notice of such filing
(which request shall specify the interest in this Warrant or the Shares intended
to be sold or disposed of by such Holder and describe the nature of any proposed
sale or other disposition thereof); provided, however, that if a greater number
of Common Stock is offered for participation in the proposed offering than in
the reasonable opinion of the managing underwriter of the proposed offering can
be accommodated without adversely affecting the proposed offering, then the
amount of Shares proposed to be offered by such Holders for registration, as
well as the number of securities of any other selling shareholders participating
in the registration, shall be proportionately reduced to a number deemed
satisfactory by the managing underwriter. The Company shall bear all expenses
and fees incurred in connection with the preparation, filing, and amendment of
the Registration Statement with the Commission, except that the Holder shall pay
all fees, disbursements and expenses of any counsel or expert retained by the
Holder and all underwriting discounts and commissions, filing fees and any
transfer or other taxes relating to the Shares included in the Registration
Statement. The Holder of this Warrant agrees to cooperate with the Company in
the preparation and filing of any Registration Statement, and in the furnishing
of information concerning the Holder for inclusion therein, or in any efforts by
the Company to establish that the proposed sale is exempt under the 1933 Act as
to any proposed distribution.
7. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
8. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holders.
9. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By: s/ Thomas W. Orr
Its: CFO
4
<PAGE> 5
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
, the address for whom is set forth below the
signature of the undersigned:
Dated:
-----------------------
-----------------------------------
(Signature)
-----------------------------------
-----------------------------------
(Address)
* * *
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the right to purchase
shares of Common Stock of PopMail.com, inc. to which the within Warrant relates
and appoints attorney, to transfer said right on the books
of with full power of substitution in the premises.
Dated:
-----------------------
-----------------------------------
(Signature)
-----------------------------------
-----------------------------------
(Address)
5
<PAGE> 1
EXHIBIT 4.22
THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY
LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO
REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND
ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH
REGISTRATION OR EXEMPTION.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF POPMAIL.COM, INC.
WARRANT NO. HT-1 Minneapolis, Minnesota
December 6, 1999
This certifies that, for value received, HAL TAYLOR, or his successors
or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the
"Company") Eighty Thousand (80,000) fully paid and nonassessable shares (the
"Shares") of the Company's Common Stock, $.01 par value (the "Common Stock") at
an exercise price of $1.25 per share (the "Exercise Price"), subject to
adjustment as herein provided. This Warrant may be exercised by Holder at any
time, provided that Holder shall in no event have the right to exercise this
Warrant or any portion thereof later than the fifth (5th) anniversary of the
date hereof, at which time this Warrant shall expire.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise of Warrants. The Exercise Price may be paid in cash or by
check to the order of the Company, or any combination of cash or check, subject
to adjustment as provided in Section 4 hereof. Upon surrender of the Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter defined) for the
Shares purchased, at the Company's executive offices currently located at Suite
112, 4801 West 81st Street Bloomington, MN 55437, the registered Holder shall be
entitled to receive a certificate or certificates for the Shares so purchased.
The purchase rights represented by each Warrant Certificate are exercisable at
the option of the Holder hereof, in whole or in part (but not as to fractional
shares of the Common Stock). In the case of the purchase of less than all the
Shares purchasable under any Warrant Certificate, the Company shall cancel said
Warrant Certificate upon the surrender thereof and shall execute and deliver a
new Warrant Certificate of like tenor for the balance of the Shares purchasable
thereunder.
2. Transferability of this Warrant. This Warrant is issued upon the
following terms, to which Holder consents and agrees:
a. Until this Warrant is transferred on the books of the
Company, the Company will treat the Holder of this Warrant registered
as such on the books of the Company as the absolute owner hereof for
all purposes without being affected by any notice to the contrary.
b. This Warrant may not be exercised, and this Warrant and the
Shares underlying this Warrant shall not be transferable, except in
compliance with all applicable state and federal securities laws,
regulations and orders, and with all other applicable laws, regulations
and orders.
1
<PAGE> 2
c. The Warrant may not be transferred, and the Shares
underlying this Warrant may not be transferred, without the Holder
obtaining an opinion of counsel satisfactory in form and substance to
the Company's counsel stating that the proposed transaction will not
result in a prohibited transaction under the Securities Act of 1933, as
amended ("Securities Act"), and applicable Blue Sky laws. By accepting
this Warrant, the Holder agrees to act in accordance with any
conditions reasonably imposed on such transfer by such opinion of
counsel.
d. Neither this issuance of this Warrant nor the issuance of
the Shares underlying this Warrant have been registered under the
Securities Act.
3. Certain Covenants of the Company. The Company covenants and agrees
that all Shares which may be issued upon the exercise of the rights represented
by this Warrant, upon issuance and full payment for the Shares so purchased,
will be duly authorized and issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue hereof, except those that
may be created by or imposed upon the Holder or its property, and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such actions as may be requisite to assure
that the par value per share of the Common Stock is at all times equal to or
less than the effective purchase price per share of the Common Stock issuable
pursuant to this Warrant. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved free of preemptive or
other rights for the exclusive purpose of issue upon exercise of the purchase
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The Exercise
Price and number of Shares are subject to the following adjustments:
a. Adjustment of Exercise Price for Stock Dividend, Stock
Split or Stock Combination. In the event that (i) any dividends on any
class of stock of the Company payable in Common Stock or securities
convertible into or exercisable for Common Stock ("Common Stock
Equivalents") shall be paid by the Company, (ii) the Company shall
subdivide its then outstanding shares of Common Stock into a greater
number of shares, or (iii) the Company shall combine its outstanding
shares of Common Stock, by reclassification or otherwise, then, in any
such event, the Exercise Price in effect immediately prior to such
event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full
cent) determined by dividing (a) the number of shares of Common Stock
outstanding immediately prior to such event, multiplied by the then
existing Exercise Price, by (b) the total number of shares of Common
Stock outstanding immediately after such event, and the resulting
quotient shall be the adjusted Exercise Price per share. No adjustment
of the Exercise Price shall be made if the amount of such adjustment
shall be less than $.05 per share, but in such case any adjustment that
would otherwise be required then to be made shall be carried forward
and shall be made at the time and together with the next subsequent
adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to not less than $.05 per share.
b. Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to this
Section, the Holder shall thereafter
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<PAGE> 3
(until another such adjustment) be entitled to purchase at the adjusted
Exercise Price the number of shares, calculated to the nearest full
share, obtained by multiplying the number of shares specified in such
Warrant (as adjusted as a result of all adjustments in the Exercise
Price in effect prior to such adjustment) by the Exercise Price in
effect prior to such adjustment and dividing the product so obtained by
the adjusted Exercise Price.
c. Notice as to Adjustment. Upon any adjustment of the
Exercise Price and any increase or decrease in the number of shares of
Common Stock purchasable upon the exercise of the Warrant, then, and in
each such case, the Company within thirty (30) days thereafter shall
give written notice thereof, by first class mail, postage prepaid,
addressed to each Holder as shown on the books of the Company, which
notice shall state the adjusted Exercise Price and the increased or
decreased number of shares purchasable upon the exercise of the
Warrants, and shall set forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
d. Effect of Reorganization, Reclassification, Merger, etc. If
at any time while this Warrant is outstanding there should be any
capital reorganization of the capital stock of the Company (other than
the issuance of any shares of Common Stock in subdivision of
outstanding shares of Common Stock by reclassification or otherwise and
other than a combination of shares provided for in Section 4(a)
hereof), or any consolidation or merger of the Company with another
corporation, or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other
corporation, which is effected in such a manner that the holders of
Common Stock shall be entitled to receive cash, stock, securities, or
assets with respect to or in exchange for Common Stock, then, as a part
of such transaction, lawful provision shall be made so that Holder
shall have the right thereafter to receive, upon the exercise hereof,
the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of
the Company has been sold, conveyed, leased or otherwise transferred,
as the case may be, which the Holder would have been entitled to
receive upon such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other
transfer, if this Warrant had been exercised immediately prior to such
capital reorganization, reclassification of capital stock,
consolidation, merger, sale, conveyance, lease or other transfer. In
any such case, appropriate adjustments (as determined by the Board of
Directors of the Company) shall be made in the application of the
provisions set forth in this Warrant (including the adjustment of the
Exercise Price and the number of Shares issuable upon the exercise of
the Warrant) to the end that the provisions set forth herein shall
thereafter be applicable, as near as reasonably may be, in relation to
any shares or other property thereafter deliverable upon the exercise
of the Warrant as if the Warrant had been exercised immediately prior
to such capital reorganization, reclassification of capital stock, such
consolidation, merger, sale, conveyance, lease or other transfer and
the Holder had carried out the terms of the exchange as provided for by
such capital reorganization, consolidation or merger. The Company shall
not effect any such capital reorganization, consolidation, merger or
transfer unless, upon or prior to the consummation thereof, the
successor corporation or the corporation to which the property of the
Company has been sold, conveyed, leased or otherwise transferred shall
assume by written instrument the obligation to deliver to the Holder
such shares of stock, securities, cash or property as in accordance
with the foregoing provisions such Holder shall be entitled to
purchase.
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5. No Rights as Stockholders. This Warrant shall not entitle the Holder
as such to any voting rights or other rights as a stockholder of the Company.
6. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Minnesota.
7. Amendments and Waivers. The provisions of this Warrant may not be
amended, modified or supplemented, and waiver or consents to departures from the
provisions hereof may not be given, unless the Company agrees in writing and has
obtained the written consent of the Holder.
8. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the Holder
shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or
her address set forth on the records of the Company; or if sent to the Company
shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc.,
4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address
as the Company or the Holder shall notify the other as provided in this Section.
IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be
signed by its duly authorized officer in the date set forth above.
POPMAIL.COM, INC.
By Thomas W. Orr
Its CFO
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SUBSCRIPTION FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________________ of the shares of Common Stock of
PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith
makes payment of $_____________ therefor in cash, certified check or bank draft
and requests that a certificate evidencing the Shares be delivered to,
_______________________________, the address for whom is set forth below the
signature of the undersigned:
Dated: ____________________
___________________________________________
(Signature)
___________________________________________
___________________________________________
(Address)
~ ~ ~
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto _____________________________________ the right to purchase
shares of Common Stock of PopMail.com, inc. to which the within Warrant relates
and appoints ____________________ attorney, to transfer said right on the books
of _________________ with full power of substitution in the premises.
Dated: ____________________
___________________________________________
(Signature)
___________________________________________
___________________________________________
(Address)
<PAGE> 1
EXHIBIT 4.23
VOID AFTER 3:30 P.M., MOUNTAIN TIME, ON THE EXPIRATION DATE
WARRANT TO PURCHASE COMMON SHARES
POPMAIL.COM, INC.
Warrant No. EB-1
This is to Certify That, FOR VALUE RECEIVED, eBANKER USA.COM, INC.,
1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203 ("Holder"), is entitled
to purchase, subject to the provisions of this Warrant, from POPMAIL.COM, INC.
("Company"), a Minnesota corporation, at any time until 3:30 P.M., Mountain
Time, on December 10, 2004 ("Expiration Date"), 121,875 Common Shares of the
Company. Notwithstanding the foregoing, the Holder shall be required to exercise
this Warrant during the thirty (30) days after the last trading day that the
closing bid price of a Common Share exceeds $6.00 (as adjusted in the same
manner that adjustments in the Exercise Price are made as provided herein) for
twenty (20) consecutive trading days. If not exercised during such thirty (30)
day period, the Expiration Date shall be the thirtieth day. The purchase price
per Common Share shall initially be $2.00. The number of Common Shares to be
received upon the exercise of this Warrant and the price to be paid for a Common
Share may be adjusted from time to time as hereinafter set forth. The purchase
price of a Common Share in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price." This Warrant is or
may be one of a series of warrants identical in form issued by the Company to
purchase Common Shares of the Company and the term "Warrants" as used herein
means all such Warrants (including this Warrant). The Common Shares, as adjusted
from time to time, underlying the Warrants are hereinafter sometimes referred to
as "Warrant Shares" and include all Common Shares that have been issued upon the
exercise of the Warrants and all unissued Common Shares underlying the Warrants.
This Warrant is being issued in connection with that certain Loan
Agreement between the Company and eBanker USA.Com, Inc. dated December 10, 1999
(the "Loan Agreement").
(A) VESTING OF WARRANT SHARES. Holder's rights to purchase the Warrant
Shares hereunder are exercisable only to the extent that all, or any portion
thereof, have vested in the Holder. The Warrant Shares shall vest on the vesting
dates set forth below until the Warrant is fully vested, as set forth in the
following schedule:
(1) Warrants to purchase up to 89,375 Common Shares shall vest
on the date hereof; and
(2) Warrants to purchase up to 32,500 Common Shares shall vest
upon the Company's election, pursuant to the Loan Agreement, to extend
the date on which the outstanding principal balance of the Company's
loan from eBanker USA.Com, Inc. is due.
<PAGE> 2
Notwithstanding anything to the contrary contained herein, in the event
that the Company does not elect to extend the date on which its loan from
eBanker USA.Com, Inc. is due, that portion of the Warrant described in Paragraph
(a)(2) shall lapse.
(B) EXERCISE OF WARRANT. To the extent vested, this Warrant may be
exercised in whole or in part at any time or from time to time until the
Expiration Date or if the Expiration Date is a day on which banking institutions
are authorized by law to close, then on the next succeeding day which shall not
be such a day, by presentation and surrender hereof to the Company or at the
office of its stock transfer agent, if any, with the Purchase Form annexed
hereto duly executed and accompanied by payment of the Exercise Price for the
number of Common Shares specified in such Form, together with all federal and
state taxes applicable upon such exercise. The Company agrees not to merge,
reorganize or take any action that would terminate this Warrant unless
provisions are made as part of such merger, reorganization or other action which
would provide the holders of this Warrant with an equivalent of this Warrant as
specified in Section (i) hereof. The Company agrees to provide notice to the
Holder that any tender offer is being made for the Company's Common Shares no
later than three business days after the day the Company becomes aware that any
tender offer is being made for outstanding Common Shares of the Company. If this
Warrant should be exercised in part only, the Company shall, upon surrender of
this Warrant for cancellation, execute and deliver a new Warrant evidencing the
right of the Holder to purchase the balance of the Common Shares purchasable
hereunder. Upon receipt by the Company of this Warrant at the office of the
Company or at the office of the Company's stock transfer agent, in proper form
for exercise and accompanied by the Purchase Form and the Exercise Price, the
Holder shall be deemed to be the holder of record of the Common Shares issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Common Shares shall
not then be actually delivered to the Holder.
(C) RESERVATION OF SHARES. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of Common Shares as shall be required for issuance or
delivery upon exercise of this Warrant.
(D) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a Common Share called for upon any exercise hereof,
the Company shall, upon receipt by the Company or the Company's stock transfer
agent of the Exercise Price on such fractional share, pay to the Holder an
amount in cash equal to such fraction multiplied by the current value of such
fractional share, determined as follows:
(1) If the Common Shares are listed on a national securities
exchange or a foreign exchange, are admitted to unlisted trading
privileges on such an exchange, or are listed for trading on a trading
system of the National Association of Securities Dealers, Inc. ("NASD")
such as The Nasdaq SmallCap Market ("SCM") or the Nasdaq National
Market ("NNM") or the OTC Bulletin Board, then the current value shall
be the last reported sale price of the Common Shares on such an
exchange or system on the last business day prior to the date of
exercise of this Warrant or if no such sale is made on such day, the
average of the
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<PAGE> 3
closing bid prices for the Common Shares for such day on such exchange
or such system shall be used; or
(2) If the Common Shares are not so listed on such exchange or
system or admitted to unlisted trading privileges, the current value
shall be the average of the last reported bid prices reported by the
National Quotation Bureau, Inc. on the last business day prior to the
date of the exercise of this Warrant; or
(3) If the Common Shares are not so listed or admitted to
unlisted trading privileges and if bid prices are not so reported, the
current value shall be an amount, not less than book value, determined
in such reasonable manner as may be prescribed by the board of
directors of the Company.
(E) EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations entitling the
Holder thereof to purchase (under the same terms and conditions as provided by
this Warrant) in the aggregate the same number of Common Shares purchasable
hereunder. This Warrant may not be sold, transferred, assigned, or hypothecated
except in compliance with federal and state securities laws. Any transfer or
assignment shall be made by surrender of this Warrant to the Company or at the
office of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and with funds sufficient to pay any transfer tax;
whereupon the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other Warrants which carry the same rights upon presentation hereof at the
office of the Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any warrants issued in substitution for or
replacement of this Warrant, or into which this Warrant may be divided or
exchanged. Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Subject to such right
of indemnification, any such new Warrant executed and delivered shall constitute
an additional contractual obligation on the part of the Company, whether or not
this Warrant so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.
(F) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(G) ADJUSTMENT PROVISIONS.
(1) Adjustments of the Exercise Price.
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(A) If the Company subdivides its outstanding Common
Shares into a greater number of Common Shares, the Exercise
Price in effect immediately prior to such subdivision shall be
proportionately reduced. Conversely, if the Company combines
its outstanding Common Shares into a lesser number of Common
Shares, the Exercise Price in effect immediately prior to such
combination shall be proportionally increased. In case of a
subdivision or combination, the adjustment of the Exercise
Price shall be made as of the effective date of the applicable
event. A distribution on Common Shares, including a
distribution of Convertible Securities, to shareholders of the
Company on a pro rata basis shall be considered a subdivision
of Common Shares for the purposes of this subsection (1)(A) of
this Section, except that the adjustment will be made as of
the record date for such distribution and any such
distribution of Convertible Securities shall be deemed to be a
distribution of the Common Shares underlying such Convertible
Securities.
(B) If the Company shall at any time distribute or
cause to be distributed to its shareholders, on a pro rata
basis, cash, assets, or securities of any entity other than
the Company, then the Exercise Price in effect immediately
prior to such distribution shall automatically be reduced by
an amount determined by dividing (x) the amount (if cash) or
the value (if assets or securities) of the holders' of
Warrants (as such term is defined in the first paragraph
hereof) pro rata share of such distribution determined
assuming that all holders of Warrants had exercised their
Warrants on the day prior to such distribution, by (y) the
number of Common Shares issuable upon the exercise of Warrants
(as such term is defined in the first paragraph hereof) by the
holders thereof on the day prior to such distribution.
(C) If the Company defaults in making any payment
required pursuant to a promissory note dated December 10,
1999, in the amount of $325,000 from the Company to eBanker
USA.Com, Inc., the Exercise Price shall be reduced to $0.01.
(3) No Adjustment for Small Amounts. Anything in this Section
(f) to the contrary notwithstanding, the Company shall not be required
to give effect to any adjustment in the Exercise Price unless and until
the net effect of one or more adjustments, determined as above
provided, shall have required a change of the Exercise Price by at
least one cent, but when the cumulative net effect of more than one
adjustment so determined shall be to change the actual Exercise Price
by at least one cent, such change in the Exercise Price shall thereupon
be given effect.
(4) Number of Shares Adjusted. Upon any adjustment of the
Exercise Price pursuant to subsection (1)(A) or (B) of this Section,
the Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the
number of Common Shares, calculated to the nearest full share, obtained
by multiplying the number of Common Shares initially issuable upon
exercise of this Warrant by the Exercise
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<PAGE> 5
Price specified in the first paragraph hereof and dividing the product
so obtained by the new Exercise Price.
(5) Definitions.
(A) Whenever reference is made in this Section (f) to
the distribution of Common Shares, the term "Common Shares"
shall mean the Common Shares of the Company authorized as of
the date hereof and any other class of stock ranking on a
parity with such Common Shares. However, subject to the
provisions of Section (i) hereof, Common Shares issuable upon
exercise hereof shall include only Common Shares of the class
designated as Common Shares of the Company as of the date
hereof.
(B) Whenever reference is made in this Section (f) to
the distribution of Convertible Securities, the term
"Convertible Securities" shall mean options or warrants or
rights for the purchase of Common Shares of the Company or for
the purchase of any stock or other securities convertible into
or exchangeable for Common Shares of the Company.
(6) Determination of Date of Issue. In case the Company shall
take a record of the holders of Common Shares for the purpose of
entitling them to receive a dividend or other distribution payable in
Common Shares or in Convertible Securities, then such record date shall
be deemed to be the date of the issue of the Common Shares deemed to
have been issued upon the declaration of such dividend or the making of
such other distribution, as the case may be.
(7) Treasury Shares. For the purpose of this Section (f),
Common Shares at any relevant time owned or held by, or for the account
of, the Company shall not be deemed outstanding.
(H) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (f) hereof, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office, and with its stock transfer and warrant agent, if any, an
officer's certificate showing the adjusted Exercise Price determined as herein
provided and setting forth in reasonable detail the facts requiring such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the Holder.
(I) NOTICES TO HOLDERS. So long as this Warrant shall be outstanding
and unexercised (i) if the Company shall pay any dividend or make any
distribution upon the Common Shares or (ii) if the Company shall offer to the
holders of Common Shares for subscription or purchase by them any shares of
stock of any class or any other rights or (iii) if any capital reorganization of
the Company, reclassification of the capital stock of the Company, consolidation
or merger of the Company with or into another corporation, sale, lease or
transfer of all or substantially all of the property and assets of the Company
to another corporation, or voluntary or involuntary dissolution,
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<PAGE> 6
liquidation or winding up of the Company shall be effected, then, in any such
case, the Company shall cause to be delivered to the Holder, at least 10 days
prior to the date specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed action and stating the date on
which (x) a record is to be taken for the purpose of such dividend, distribution
or rights, or (y) such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of Common Shares of
record shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up.
(J) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding Common
Shares of the Company (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of an issuance of
Common Shares by way of dividend or other distribution or of a subdivision or
combination), or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding Common
Shares of the class issuable upon exercise of this Warrant) or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company shall cause effective
provision to be made so that the Holder shall have the right thereafter, by
exercising this Warrant, to purchase the kind and amount of shares of stock and
other securities and property which the Holder would have received upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance had this Warrant been exercised prior to the consummation of
such transaction. Any such provision shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. The foregoing provisions of this Section (i) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of Common Shares and to successive consolidations, mergers, sales or
conveyances. In the event the Company spins off a subsidiary by distributing to
the shareholders of the Company as a dividend or otherwise the stock of the
subsidiary, the Company shall reserve for the life of this Warrant, shares of
the subsidiary to be delivered to the Holders of the Warrants upon exercise to
the same extent as if they were owners of record of the Warrant Shares on the
record date for distribution of the shares of the subsidiary.
(K) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) By no later than March 10, 2000, the Company will file and
have declared effective a registration statement under the Securities
Act of 1933, as amended (the "Act"), registering the Warrant Shares for
resale. If for any reason such registration statement is not declared
effective on or before March 10, 2000, the Exercise Price shall be
reduced to $1.50. If such registration statement is not declared
effective on or after March 11, 2000 and on or before April 9, 2000,
the Exercise Price shall be reduced to $1.25 commencing April 10, 2000.
The Exercise Price shall be reduced an additional $0.25 for each thirty
(30) day period or portion thereof commencing May 10, 2000, that such
registration statement is not declared effective; provided that, the
Exercise Price shall not be reduced to below $0.25.
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<PAGE> 7
Upon any reduction in the Exercise Price pursuant to this Section
(j)(1), the number of Warrant Shares the Holder of this Warrant shall
be entitled to purchase shall be increased to such number as is
determined by dividing $178,500 by the reduced Exercise Price. Nothing
contained herein shall relieve the Company of the requirement to file
and have declared effective such registration statement by March 10,
2000, or relieve the Company for liability for any damages that the
Holder may incur as a result of the failure of the Company to comply
with such requirement.
(2) In connection with such registration statement, the
Company shall:
(A) Supply to each selling Holder a copy of the
registration statement and a reasonable number of copies of
the preliminary, final and other prospectus in conformity with
requirements of the Act and the Rules and Regulations
promulgated thereunder and such other documents as the Holders
shall reasonably request.
(B) Bear the complete cost and expense (other than
any selling commissions relating to the sale of the Warrant
Shares, which shall be paid by the sellers thereof) of such
registration statement.
(C) Keep effective such registration statement until
the first of the following events occur: (i) 12 months have
elapsed after the effective date of such registration
statement or (ii) all of the registered Warrant Shares issued
by the Company either before or after the effective date of
such registration statement have been publicly sold under such
registration statement.
(D) Use its best efforts to register or qualify the
Warrant Shares for sale in those states requested by the
person selling the Warrant Shares; provided that, the Company
shall not be required to register or qualify Warrant Shares
for sale in any state in which the sale of the Warrant Shares
by the person selling the Warrant Shares would be exempt from
having to be registered or qualified in such state. The
determination of whether or not such an exemption exists shall
be made by counsel for the Company and such determination
shall be provided in writing to the person desiring to sell
Warrant Shares in a state.
(E) Indemnify and hold harmless each such Holder and
each underwriter, within the meaning of the Act, who may
purchase from or sell for any such Holder, any Warrant Shares,
from and against any and all losses, claims, damages, and
liabilities (including but not limited to, any and all
expenses whatsoever reasonably incurred in investigating,
preparing, defending or settling any claim) arising from (i)
any untrue or alleged untrue statement of a material fact
contained in any registration statement furnished pursuant to
clause (A) of this subsection, or any prospectus included
therein or (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading
(unless such untrue statement or omission or such alleged
untrue statement or omission was based upon information
furnished or required to be
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<PAGE> 8
furnished in writing to the Company by such Holder or
underwriter expressly for use therein), which indemnification
shall include each person, if any, who controls any such
Holder or underwriter within the meaning of the Act; provided,
however, that the Company shall not be so obligated to
indemnify any such Holder or underwriter or controlling person
unless such Holder and underwriter shall at the same time
indemnify the Company, its directors, each officer signing any
registration statement or any amendment to any registration
statement and each person, if any, who controls the Company
within the meaning of the Act, from and against any and all
losses, claims, damages and liabilities (including, but not
limited to, any and all expenses whatsoever reasonably
incurred in investigating, preparing, defending or settling
any claim) arising from (i) any untrue or alleged untrue
statement of a material fact contained in any registration
statement or prospectus furnished pursuant to Clause (A) of
this subsection, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but
the indemnity of such Holder, underwriter or controlling
person shall be limited to liability based upon information
furnished, or required to be furnished, in writing to the
Company by such Holder or underwriter or controlling person
expressly for use therein. The Company shall not be liable for
amounts paid in settlement of any such litigation if such
settlement was effected without the consent of the Company.
The indemnity agreement of the Company herein shall not inure
to the benefit of any such underwriter (or to the benefit of
any person who controls such underwriter) on account of any
losses, claims, damages, liabilities (or actions or
proceedings in respect thereof) arising from the sale of any
of such Warrant Shares by such underwriter to a person if such
underwriter failed to send or give a copy of the prospectus
furnished pursuant to Clause (A) of this subsection, as the
same may then be supplemented or amended (if such supplement
or amendment shall have been furnished to the Holders pursuant
to said Clause (A)), to such person with or prior to the
written confirmation of the sale involved.
(3) Each Holder shall supply such information as the Company
may reasonably require from such Holder, or any underwriter for such
Holders, for inclusion in such registration statement or posteffective
amendment.
(4) The Company's agreements with respect to the Warrant
Shares in this Section will continue in effect regardless of the
exercise or surrender of this Warrant.
(5) Any notices or certificates by the Company to the Holder
and by the Holder to the Company shall be deemed delivered if in
writing and delivered personally or sent by certified mail, return
receipt requested, to the Holder, addressed to the Holder at the
Holder's address as set forth on the Warrant or stockholder register of
the Company, or, if the Holder has designated, by notice in writing to
the Company, any other address, to such other address, and, if to the
Company, addressed to it at 4801 West 81st Street, Suite 112,
Bloomington, Minnesota 55437. The Company may change its address by
written notice to the Holder.
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(L) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. The Company may
cause the following legend, or one similar thereto, to be set forth on the
Warrants and on each certificate representing Warrant Shares or any other
security issued or issuable upon exercise of this Warrant not theretofore
distributed to the public or sold to underwriters for distribution to the public
pursuant to Section (j) hereof; unless legal counsel for the Company is of the
opinion as to any such certificate that such legend, or one similar thereto, is
unnecessary:
"The securities represented by this certificate may not be offered for
sale, sold or otherwise transferred except pursuant to an effective
registration statement made under the Securities Act of 1933 (the
"Act") and under any applicable state securities law, or pursuant to an
exemption from registration under the Act and under any applicable
state securities law, the availability of which is to be established to
the satisfaction of the Company."
(M) EXCHANGE PROVISIONS.
(1) For purposes of this Section (l), this Warrant shall be
deemed to represent the same number of Warrants as there are Warrant
Shares underlying this Warrant. For example, if there are 10,000
Warrant Shares underlying this Warrant, then for purposes of this
Section (l) the Holder shall be deemed to hold 10,000 Warrants.
(2) For purposes of this Section (l), the following terms
shall have the following meanings:
(A) "Current Market Value of a Warrant Share" shall
be the current value of a Warrant Share as determined under
Section (c)(1) or (2) hereof except that the time of the
determination thereunder shall be the last business day prior
to the day the Company receives a notice from the Holder under
this Section (l).
(B) "Warrant Value" shall mean the Current Market
Value of a Warrant Share minus or less the Exercise Price
payable under this Warrant as of the close of business on the
last business day prior to the day the Company receives a
notice from the Holder under this Section (l).
(3) The Holder shall have the right to exchange, in a cashless
transaction, all or part of the Holder's Warrants for Common Shares
issued by the Company at anytime prior to the Expiration Date of such
Warrants by providing written notice ("Notice") to the Company.
(4) Within 10 days after receipt of such Notice by the
Company, the Company shall issue the number of Common Shares of the
Company to the Holder which is determined by dividing the Warrant Value
of the Warrants being exchanged by the Current Market Value of a
Warrant Share as of the date the Notice is received by the Company.
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<PAGE> 10
(5) The Holder shall surrender the Warrant which the Holder is
exchanging for Common Shares upon receipt thereof. If the entire
Warrant is being exchanged by the Holder for Common Shares, the Company
shall cancel the entire Warrant. If less than the entire Warrant is
being exchanged for Common Shares, the Company shall issue a new
Warrant to the Holder representing the portion of this Warrant which
was not exchanged for Common Shares.
(N) APPLICABLE LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the state of Colorado.
Dated: December 10, 1999
POPMAIL.COM, INC.
By:
--------------------------------------
Thomas W. Orr, Chief Financial Officer
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PURCHASE FORM
Dated:
-----------------------------------
The undersigned hereby irrevocably elects to exercise the Warrant to
the extent of purchasing shares of Common Shares and hereby makes
payment of $ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SHARES
Name:
---------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
------------------------------------------------------------------------
Signature:
----------------------------------------------------------------------
ASSIGNMENT FORM
Dated:
-----------------------------------
FOR VALUE RECEIVED,
-------------------------------------------------------------
hereby sells, assigns and transfers unto
----------------------------------------
Name:
---------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
------------------------------------------------------------------------
the right to purchase Common Shares represented by this Warrant to the extent of
Common Shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint, attorney, to transfer the same on the books of the
Company with full power of substitution in the premises.
Signature:
-----------------------------------------
<PAGE> 1
EXHIBIT 4.24
VOID AFTER 3:30 P.M., MOUNTAIN TIME, ON THE EXPIRATION DATE
WARRANT TO PURCHASE COMMON SHARES
POPMAIL.COM, INC.
Warrant No. EB-2
This is to Certify That, FOR VALUE RECEIVED, AMERICAN FRONTEER
FINANCIAL CORPORATION, 1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203
("Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from POPMAIL.COM, INC. ("Company"), a Minnesota corporation, at any time until
3:30 P.M., Mountain Time, on December 10, 2004 ("Expiration Date"), 19,500
Common Shares of the Company. Notwithstanding the foregoing, the Holder shall be
required to exercise this Warrant during the thirty (30) days after the last
trading day that the closing bid price of a Common Share exceeds $6.00 (as
adjusted in the same manner that adjustments in the Exercise Price are made as
provided herein) for twenty (20) consecutive trading days. If not exercised
during such thirty (30) day period, the Expiration Date shall be the thirtieth
day. The purchase price per Common Share shall initially be $2.00. The number of
Common Shares to be received upon the exercise of this Warrant and the price to
be paid for a Common Share may be adjusted from time to time as hereinafter set
forth. The purchase price of a Common Share in effect at any time and as
adjusted from time to time is hereinafter sometimes referred to as the "Exercise
Price." This Warrant is or may be one of a series of warrants identical in form
issued by the Company to purchase Common Shares of the Company and the term
"Warrants" as used herein means all such Warrants (including this Warrant). The
Common Shares, as adjusted from time to time, underlying the Warrants are
hereinafter sometimes referred to as "Warrant Shares" and include all Common
Shares that have been issued upon the exercise of the Warrants and all unissued
Common Shares underlying the Warrants.
(A) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in
part at any time or from time to time until the Expiration Date or if the
Expiration Date is a day on which banking institutions are authorized by law to
close, then on the next succeeding day which shall not be such a day, by
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Common Shares
specified in such Form, together with all federal and state taxes applicable
upon such exercise. The Company agrees not to merge, reorganize or take any
action that would terminate this Warrant unless provisions are made as part of
such merger, reorganization or other action which would provide the holders of
this Warrant with an equivalent of this Warrant as specified in Section (i)
hereof. The Company agrees to provide notice to the Holder that any tender offer
is being made for the Company's Common Shares no later than three business days
after the day the Company becomes aware that any tender offer is being made for
outstanding Common Shares of the Company. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the Common Shares purchasable hereunder. Upon receipt by the
Company of this Warrant at the office of the Company or at the office of the
Company's stock transfer agent, in proper form for exercise and accompanied by
the
<PAGE> 2
Purchase Form and the Exercise Price, the Holder shall be deemed to be the
holder of record of the Common Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Common Shares shall not then be
actually delivered to the Holder.
(B) RESERVATION OF SHARES. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of Common Shares as shall be required for issuance or
delivery upon exercise of this Warrant.
(C) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a Common Share called for upon any exercise hereof,
the Company shall, upon receipt by the Company or the Company's stock transfer
agent of the Exercise Price on such fractional share, pay to the Holder an
amount in cash equal to such fraction multiplied by the current value of such
fractional share, determined as follows:
(1) If the Common Shares are listed on a national securities
exchange or a foreign exchange, are admitted to unlisted trading
privileges on such an exchange, or are listed for trading on a trading
system of the National Association of Securities Dealers, Inc. ("NASD")
such as The Nasdaq SmallCap Market ("SCM") or the Nasdaq National
Market ("NNM") or the OTC Bulletin Board, then the current value shall
be the last reported sale price of the Common Shares on such an
exchange or system on the last business day prior to the date of
exercise of this Warrant or if no such sale is made on such day, the
average of the closing bid prices for the Common Shares for such day on
such exchange or such system shall be used; or
(2) If the Common Shares are not so listed on such exchange or
system or admitted to unlisted trading privileges, the current value
shall be the average of the last reported bid prices reported by the
National Quotation Bureau, Inc. on the last business day prior to the
date of the exercise of this Warrant; or
(3) If the Common Shares are not so listed or admitted to
unlisted trading privileges and if bid prices are not so reported, the
current value shall be an amount, not less than book value, determined
in such reasonable manner as may be prescribed by the board of
directors of the Company.
(D) EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations entitling the
Holder thereof to purchase (under the same terms and conditions as provided by
this Warrant) in the aggregate the same number of Common Shares purchasable
hereunder. This Warrant may not be sold, transferred, assigned, or hypothecated
except in compliance with federal and state securities laws. Any transfer or
assignment shall be made by surrender of this Warrant to the Company or at the
office of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and with funds sufficient to pay any transfer tax;
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<PAGE> 3
whereupon the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other Warrants which carry the same rights upon presentation hereof at the
office of the Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any warrants issued in substitution for or
replacement of this Warrant, or into which this Warrant may be divided or
exchanged. Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Subject to such right
of indemnification, any such new Warrant executed and delivered shall constitute
an additional contractual obligation on the part of the Company, whether or not
this Warrant so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.
(E) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(F) ADJUSTMENT PROVISIONS.
(1) Adjustments of the Exercise Price.
(A) If the Company subdivides its outstanding Common
Shares into a greater number of Common Shares, the Exercise
Price in effect immediately prior to such subdivision shall be
proportionately reduced. Conversely, if the Company combines
its outstanding Common Shares into a lesser number of Common
Shares, the Exercise Price in effect immediately prior to such
combination shall be proportionally increased. In case of a
subdivision or combination, the adjustment of the Exercise
Price shall be made as of the effective date of the applicable
event. A distribution on Common Shares, including a
distribution of Convertible Securities, to shareholders of the
Company on a pro rata basis shall be considered a subdivision
of Common Shares for the purposes of this subsection (1)(A) of
this Section, except that the adjustment will be made as of
the record date for such distribution and any such
distribution of Convertible Securities shall be deemed to be a
distribution of the Common Shares underlying such Convertible
Securities.
(B) If the Company shall at any time distribute or
cause to be distributed to its shareholders, on a pro rata
basis, cash, assets, or securities of any entity other than
the Company, then the Exercise Price in effect immediately
prior to such distribution shall automatically be reduced by
an amount determined by dividing (x) the amount (if cash) or
the value (if assets or securities) of the holders' of
Warrants (as such term is defined in the first paragraph
hereof) pro rata share of such distribution determined
assuming that all holders of Warrants had exercised their
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<PAGE> 4
Warrants on the day prior to such distribution, by (y) the
number of Common Shares issuable upon the exercise of Warrants
(as such term is defined in the first paragraph hereof) by the
holders thereof on the day prior to such distribution.
(C) If the Company defaults in making any payment
required pursuant to a promissory note dated December 10,
1999, in the amount of $325,000 from the Company to eBanker
USA.com, Inc., the Exercise Price shall be reduced to $0.01.
(3) No Adjustment for Small Amounts. Anything in this Section
(f) to the contrary notwithstanding, the Company shall not be required
to give effect to any adjustment in the Exercise Price unless and until
the net effect of one or more adjustments, determined as above
provided, shall have required a change of the Exercise Price by at
least one cent, but when the cumulative net effect of more than one
adjustment so determined shall be to change the actual Exercise Price
by at least one cent, such change in the Exercise Price shall thereupon
be given effect.
(4) Number of Shares Adjusted. Upon any adjustment of the
Exercise Price pursuant to subsection (1)(A) or (B) of this Section,
the Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the
number of Common Shares, calculated to the nearest full share, obtained
by multiplying the number of Common Shares initially issuable upon
exercise of this Warrant by the Exercise Price specified in the first
paragraph hereof and dividing the product so obtained by the new
Exercise Price.
(5) Definitions.
(A) Whenever reference is made in this Section (f) to
the distribution of Common Shares, the term "Common Shares"
shall mean the Common Shares of the Company authorized as of
the date hereof and any other class of stock ranking on a
parity with such Common Shares. However, subject to the
provisions of Section (i) hereof, Common Shares issuable upon
exercise hereof shall include only Common Shares of the class
designated as Common Shares of the Company as of the date
hereof.
(B) Whenever reference is made in this Section (f) to
the distribution of Convertible Securities, the term
"Convertible Securities" shall mean options or warrants or
rights for the purchase of Common Shares of the Company or for
the purchase of any stock or other securities convertible into
or exchangeable for Common Shares of the Company.
(6) Determination of Date of Issue. In case the Company shall
take a record of the holders of Common Shares for the purpose of
entitling them to receive a dividend or other distribution payable in
Common Shares or in Convertible Securities, then such record date shall
be deemed to be the date of the issue of the Common Shares deemed to
have been
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<PAGE> 5
issued upon the declaration of such dividend or the making of such
other distribution, as the case may be.
(7) Treasury Shares. For the purpose of this Section
(f), Common Shares at any relevant time owned or held by, or for the
account of, the Company shall not be deemed outstanding.
(G) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (f) hereof, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office, and with its stock transfer and warrant agent, if any, an
officer's certificate showing the adjusted Exercise Price determined as herein
provided and setting forth in reasonable detail the facts requiring such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the Holder.
(H) NOTICES TO HOLDERS. So long as this Warrant shall be outstanding
and unexercised (i) if the Company shall pay any dividend or make any
distribution upon the Common Shares or (ii) if the Company shall offer to the
holders of Common Shares for subscription or purchase by them any shares of
stock of any class or any other rights or (iii) if any capital reorganization of
the Company, reclassification of the capital stock of the Company, consolidation
or merger of the Company with or into another corporation, sale, lease or
transfer of all or substantially all of the property and assets of the Company
to another corporation, or voluntary or involuntary dissolution, liquidation or
winding up of the Company shall be effected, then, in any such case, the Company
shall cause to be delivered to the Holder, at least 10 days prior to the date
specified in (x) or (y) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which (x) a record is
to be taken for the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Shares of record shall be
entitled to exchange their Common Shares for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(I) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding Common
Shares of the Company (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of an issuance of
Common Shares by way of dividend or other distribution or of a subdivision or
combination), or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding Common
Shares of the class issuable upon exercise of this Warrant) or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company shall cause effective
provision to be made so that the Holder shall have the right thereafter, by
exercising this Warrant, to purchase the kind and amount of shares of stock and
other securities and property which the Holder would have received upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or
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<PAGE> 6
conveyance had this Warrant been exercised prior to the consummation of
such transaction. Any such provision shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. The foregoing provisions of this Section (i) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of Common Shares and to successive consolidations, mergers, sales or
conveyances. In the event the Company spins off a subsidiary by distributing to
the shareholders of the Company as a dividend or otherwise the stock of the
subsidiary, the Company shall reserve for the life of this Warrant, shares of
the subsidiary to be delivered to the Holders of the Warrants upon exercise to
the same extent as if they were owners of record of the Warrant Shares on the
record date for distribution of the shares of the subsidiary.
(J) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) By no later than March 10, 2000, the Company will file and
have declared effective a registration statement under the Securities
Act of 1933, as amended (the "Act"), registering the Warrant Shares for
resale. If for any reason such registration statement is not declared
effective on or before March 10, 2000, the Exercise Price shall be
reduced to $1.50. If such registration statement is not declared
effective on or after March 11, 2000 and on or before April 9, 2000,
the Exercise Price shall be reduced to $1.25 commencing April 10, 2000.
The Exercise Price shall be reduced an additional $0.25 for each thirty
(30) day period or portion thereof commencing May 10, 2000, that such
registration statement is not declared effective; provided that, the
Exercise Price shall not be reduced to below $0.25. Upon any reduction
in the Exercise Price pursuant to this Section (j)(1), the number of
Warrant Shares the Holder of this Warrant shall be entitled to purchase
shall be increased to such number as is determined by dividing $39,000
by the reduced Exercise Price. Nothing contained herein shall relieve
the Company of the requirement to file and have declared effective such
registration statement by March 10, 2000, or relieve the Company for
liability for any damages that the Holder may incur as a result of the
failure of the Company to comply with such requirement.
(2) In connection with such registration statement, the
Company shall:
(A) Supply to each selling Holder a copy of the
registration statement and a reasonable number of copies of
the preliminary, final and other prospectus in conformity with
requirements of the Act and the Rules and Regulations
promulgated thereunder and such other documents as the Holders
shall reasonably request.
(B) Bear the complete cost and expense (other than
any selling commissions relating to the sale of the Warrant
Shares, which shall be paid by the sellers thereof) of such
registration statement.
(C) Keep effective such registration statement until
the first of the following events occur: (i) 12 months have
elapsed after the effective date of such registration
statement or (ii) all of the registered Warrant Shares issued
by the
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Company either before or after the effective date of such
registration statement have been publicly sold under such
registration statement.
(D) Use its best efforts to register or qualify the
Warrant Shares for sale in those states requested by the
person selling the Warrant Shares; provided that, the Company
shall not be required to register or qualify Warrant Shares
for sale in any state in which the sale of the Warrant Shares
by the person selling the Warrant Shares would be exempt from
having to be registered or qualified in such state. The
determination of whether or not such an exemption exists shall
be made by counsel for the Company and such determination
shall be provided in writing to the person desiring to sell
Warrant Shares in a state.
(E) Indemnify and hold harmless each such Holder and
each underwriter, within the meaning of the Act, who may
purchase from or sell for any such Holder, any Warrant Shares,
from and against any and all losses, claims, damages, and
liabilities (including but not limited to, any and all
expenses whatsoever reasonably incurred in investigating,
preparing, defending or settling any claim) arising from (i)
any untrue or alleged untrue statement of a material fact
contained in any registration statement furnished pursuant to
clause (A) of this subsection, or any prospectus included
therein or (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading
(unless such untrue statement or omission or such alleged
untrue statement or omission was based upon information
furnished or required to be furnished in writing to the
Company by such Holder or underwriter expressly for use
therein), which indemnification shall include each person, if
any, who controls any such Holder or underwriter within the
meaning of the Act; provided, however, that the Company shall
not be so obligated to indemnify any such Holder or
underwriter or controlling person unless such Holder and
underwriter shall at the same time indemnify the Company, its
directors, each officer signing any registration statement or
any amendment to any registration statement and each person,
if any, who controls the Company within the meaning of the
Act, from and against any and all losses, claims, damages and
liabilities (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating,
preparing, defending or settling any claim) arising from (i)
any untrue or alleged untrue statement of a material fact
contained in any registration statement or prospectus
furnished pursuant to Clause (A) of this subsection, or (ii)
any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, but the indemnity of such
Holder, underwriter or controlling person shall be limited to
liability based upon information furnished, or required to be
furnished, in writing to the Company by such Holder or
underwriter or controlling person expressly for use therein.
The Company shall not be liable for amounts paid in settlement
of any such litigation if such settlement was effected without
the consent of the Company. The indemnity agreement of the
Company herein shall not inure to the benefit of any such
underwriter (or to the benefit of any person who controls such
underwriter) on account of any losses, claims, damages,
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liabilities (or actions or proceedings in respect thereof)
arising from the sale of any of such Warrant Shares by such
underwriter to a person if such underwriter failed to send or
give a copy of the prospectus furnished pursuant to Clause (A)
of this subsection, as the same may then be supplemented or
amended (if such supplement or amendment shall have been
furnished to the Holders pursuant to said Clause (A)), to such
person with or prior to the written confirmation of the sale
involved.
(3) Each Holder shall supply such information as the Company
may reasonably require from such Holder, or any underwriter for such
Holders, for inclusion in such registration statement or posteffective
amendment.
(4) The Company's agreements with respect to the Warrant
Shares in this Section will continue in effect regardless of the
exercise or surrender of this Warrant.
(5) Any notices or certificates by the Company to the Holder
and by the Holder to the Company shall be deemed delivered if in
writing and delivered personally or sent by certified mail, return
receipt requested, to the Holder, addressed to the Holder at the
Holder's address as set forth on the Warrant or stockholder register of
the Company, or, if the Holder has designated, by notice in writing to
the Company, any other address, to such other address, and, if to the
Company, addressed to it at 4801 West 81st Street, Suite 112,
Bloomington, Minnesota 55437. The Company may change its address by
written notice to the Holder.
(K) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. The Company may
cause the following legend, or one similar thereto, to be set forth on the
Warrants and on each certificate representing Warrant Shares or any other
security issued or issuable upon exercise of this Warrant not theretofore
distributed to the public or sold to underwriters for distribution to the public
pursuant to Section (j) hereof; unless legal counsel for the Company is of the
opinion as to any such certificate that such legend, or one similar thereto, is
unnecessary:
"The securities represented by this certificate may not be offered for
sale, sold or otherwise transferred except pursuant to an effective
registration statement made under the Securities Act of 1933 (the
"Act") and under any applicable state securities law, or pursuant to an
exemption from registration under the Act and under any applicable
state securities law, the availability of which is to be established to
the satisfaction of the Company."
(L) EXCHANGE PROVISIONS.
(1) For purposes of this Section (l), this Warrant shall be
deemed to represent the same number of Warrants as there are Warrant
Shares underlying this Warrant. For example, if there are 10,000
Warrant Shares underlying this Warrant, then for purposes of this
Section (l) the Holder shall be deemed to hold 10,000 Warrants.
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(2) For purposes of this Section (l), the following terms
shall have the following meanings:
(A) "Current Market Value of a Warrant Share" shall
be the current value of a Warrant Share as determined under
Section (c)(1) or (2) hereof except that the time of the
determination thereunder shall be the last business day prior
to the day the Company receives a notice from the Holder under
this Section (l).
(B) "Warrant Value" shall mean the Current Market
Value of a Warrant Share minus or less the Exercise Price
payable under this Warrant as of the close of business on the
last business day prior to the day the Company receives a
notice from the Holder under this Section (l).
(3) The Holder shall have the right to exchange, in a cashless
transaction, all or part of the Holder's Warrants for Common Shares
issued by the Company at anytime prior to the Expiration Date of such
Warrants by providing written notice ("Notice") to the Company.
(4) Within 10 days after receipt of such Notice by the
Company, the Company shall issue the number of Common Shares of the
Company to the Holder which is determined by dividing the Warrant Value
of the Warrants being exchanged by the Current Market Value of a
Warrant Share as of the date the Notice is received by the Company.
(5) The Holder shall surrender the Warrant which the Holder is
exchanging for Common Shares upon receipt thereof. If the entire
Warrant is being exchanged by the Holder for Common Shares, the Company
shall cancel the entire Warrant. If less than the entire Warrant is
being exchanged for Common Shares, the Company shall issue a new
Warrant to the Holder representing the portion of this Warrant which
was not exchanged for Common Shares.
(M) APPLICABLE LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the state of Colorado.
Dated: December 10, 1999
POPMAIL.COM, INC.
By:
--------------------------------------
Thomas W. Orr, Chief Financial Officer
9
<PAGE> 10
PURCHASE FORM
Dated:
------------------------------
The undersigned hereby irrevocably elects to exercise the Warrant to
the extent of purchasing shares of Common Shares and hereby makes
payment of $ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SHARES
Name:
--------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
-----------------------------------------------------------------------
Signature:
---------------------------------------------------------------------
ASSIGNMENT FORM
Dated:
------------------------------
FOR VALUE RECEIVED,
------------------------------------------------------------
hereby sells, assigns and transfers unto
--------------------------------------
Name:
-------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
----------------------------------------------------------------------
the right to purchase Common Shares represented by this Warrant to the extent of
Common Shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint, attorney, to transfer the same on the books of the
Company with full power of substitution in the premises.
Signature:
--------------------------------------------
<PAGE> 1
TYPE: EX-10.16
EXHIBIT 10.16
<TABLE>
<CAPTION>
Date of Name of Warrant Number of Shares Expiration
Issuance Warrant Recipient No. of Common Stock Date
<S> <C> <C> <C> <C>
11/16/98 Jerry L. Ruyan PL-2 40,000 11/16/2003
11/05/98 Greg C. Mosher PL-3 40,000 11/05/2003
11/16/98 Stephen D. King PL-4 200,000 11/16/2003
11/16/98 Jerry L. Ruyan PL-5 200,000 11/16/2003
1/22/99 Andrew Green PL-6 200,000 1/22/2004
1/22/99 Andrew Green PL-7 200,000 1/22/2004
2/23/99 Frank W. Terrizzi PL-8 50,000 2/23/2004
2/14/00 Greg C. Mosher PL-9 40,000 11/5/2003
3/18/99 Stephen D. King PL2-1 150,000 3/18/2004
3/18/99 Jeffrey P. Stebbins PL2-3 150,000 3/18/2004
</TABLE>
<PAGE> 1
EXHIBIT 10.23
Schedule of Additional Warrants Issued in Connection with Series A 8%
Convertible Preferred Stock
<TABLE>
<CAPTION>
Date of Name of Warrant Number of Shares Expiration
Issuance Warrant Recipient No. of Common Stock Date
<S> <C> <C> <C> <C>
5/14/99 Progressive Group A-2 150,000 5/14/2004
</TABLE>
<PAGE> 1
EXHIBIT 10.32
Schedule of additional Warrants
Issued in Connection with Series C 8% Convertible Preferred Stock
<TABLE>
<CAPTION>
No. of Shares
Date of Name of Warrant Warrant of Common Exercise Expiration
Issuance Recipient No. Stock Price Date
- - -------- --------------- ------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C>
7/13/99 Progressive Group C-2 150,000 $3.00 7/13/2004
11/12/99 The Shaar Fund, Ltd. C-1b 100,000 $3.00 7/13/2004
11/12/99 The Shaar Fund, Ltd. C-3 200,000 $2.00 7/13/2004
</TABLE>
<PAGE> 1
EXHIBIT 10.38
Schedule of additional Warrants
Issued in Connection with Series D 8% Convertible Preferred Stock
<TABLE>
<CAPTION>
Date of Name of Warrant Number of Shares Expiration
Issuance Warrant Recipient No. of Common Stock Date
- - -------- ----------------- ------- ---------------- ----------
<S> <C> <C> <C> <C>
8/31/99 Progressive Group D-2 150,000 8/31/2004
</TABLE>
<PAGE> 1
EXHIBIT 10.48
PLEDGE AGREEMENT
This PLEDGE AGREEMENT made this 3rd day of December, 1999, between KING
FAMILY PARTNERS, an Ohio limited partnership ("Pledgor"), and POPMAIL.COM, INC.,
a Minnesota corporation (the "Company"), as secured party.
W I T N E S S E T H:
WHEREAS, Pledgor has executed and delivered that promissory note of
even date herewith payable to the Company in the principal amount of $2,450,000
(the "Note");
WHEREAS, Pledgor owns 125,000 shares of the common stock, $.01 par
value, of the Company (the "Shares");
WHEREAS, Pledgor has agreed to grant the Company a security interest in
the Shares to secure the payment of all indebtedness owed by Pledgor to the
Company pursuant to the Note;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises set forth herein, and in consideration of other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Pledgor hereby grants to the Company a security interest in all of
Pledgor's right, title and interest in and to the Shares, together with all
distributions, additions, substitutions or replacements for any of the foregoing
property and together with proceeds of any and all of the foregoing property,
each whether now owned or hereafter acquired (the "Collateral"), as security for
the payment and performance of each and every debt, liability and obligation of
Pledgor pursuant to the Note (the "Secured Obligations").
2. Pledgor has good and marketable title to and will at all times keep
the Collateral free of all liens and encumbrances, except for the security
interest created hereby, and has full power and authority to execute this Pledge
Agreement, to perform Pledgor's obligations hereunder and to subject the
Collateral to the security interest created hereby. Pledgor has made no other
assignment, transfer, conveyance, pledge or grant of a security interest in the
Collateral. Pledgor shall not, without the prior written consent of the Company,
which will not be unreasonably withheld or delayed, sell, convey, assign,
pledge, grant a security interest in or otherwise transfer or encumber all or
any part of the Collateral. All costs of keeping the Collateral free of any
liens, encumbrances and security interests prohibited by this Pledge Agreement
and removing the same, if they should arise, shall be borne and paid by Pledgor.
3. Pledgor will upon receipt deliver to the Company as additional
Collateral hereunder all securities distributed on account of the Shares such as
stock, dividends and securities resulting from stock splits, reorganizations and
recapitalizations.
4. Pledgor will duly endorse, in blank, each and every instrument
constituting the Shares by signing on said instrument or by signing a separate
assignment or other documents of transfer, if required by the Company, and will
at any time or times hereafter perform such other acts as the Company may
request to establish, maintain, perfect and enforce the Company's security
interest in the Collateral and rights under this Agreement.
<PAGE> 2
5. Pledgor shall execute and shall pay all costs of filing this Pledge
Agreement and any financing or termination statement, or application for lien,
with respect to the Collateral, and Pledgor hereby appoints the Company as
attorney-in-fact for Pledgor to do whatever the Company may deem necessary to
perfect or continue perfected the security interest of the Company in the
Collateral.
6. Loss or damage to the Collateral shall not release Pledgor from his
obligations hereunder.
7. The Company's duty of care with respect to Collateral in its
possession shall be deemed fulfilled if the Company exercises reasonable care in
physically safekeeping such Collateral or, in the case of Collateral in the
custody or possession of a bailee or other third party, exercises reasonable
care in the selection of the bailee or other third party, and the Company need
not otherwise preserve, protect, insure or care for any Collateral. The Company
shall have no liability or responsibility to any third party for any action
taken or omitted with respect to the Collateral on the direction of any third
party.
8. The Company, in the name of Pledgor or otherwise, after the
occurrence of an Event of Default, shall have the authority but shall not be
obligated to (a) demand, collect, receive and receipt for, compromise, compound,
settle, prosecute and discontinue any suits or proceedings in respect of any and
all of the Collateral; (b) take any action which the Company deems necessary or
desirable in order to realize on the Collateral, including, without limitation,
the power to perform any contract, to endorse in the name of Pledgor any checks,
drafts, notes or other documents which are Collateral or are received in payment
or on account of the Collateral; (c) to transfer any of the Collateral into its
name or that of its nominee, and to notify the obligor on or issuer of any
Collateral to the Company of any amounts due or distributable thereon; (d) to
apply any proceeds of any Collateral against any item or items of the Secured
Obligations as the Company, in its sole discretion, may determine, whether the
same shall be due or not due; (e) at its option, without demand or notice,
declare all or any part of the Secured Obligations immediately due and payable;
and (f) exercise, in addition to the foregoing rights and remedies and any other
rights and remedies granted under any other agreement or applicable law, all
rights and remedies of a secured party under the Uniform Commercial Code or any
other applicable law, including the right to receive all dividends or
distributions with respect to, and to exercise all voting and other rights as a
holder of, the Securities, and the right to offer and sell the Collateral
privately or publicly. Until the occurrence of an Event of Default, Pledgor
shall be entitled to receive all distributions and to exercise all voting rights
with respect to the Securities. At the Company's request, Pledgor shall
cooperate with the Company and do all things necessary to enable the Company to
sell any and all of the Collateral in compliance with all applicable securities
and other laws and regulations.
9. As used herein, the term "Event of Default" shall have the meaning
assigned to such term in the Note.
10. Pledgor agrees to pay all of the Company's costs, including
reasonable attorneys' fees, in the collection of any of the Secured Obligations
and the enforcement of the Company's rights. If any notification of intended
disposition of any of the Collateral is required by law, such notification shall
be deemed reasonably and properly given if mailed at least 10 days before such
disposition addressed to Pledgor at the following address:
8260 North Creek Drive, Cincinnati, Ohio 45236.
11. No delay or failure by the Company in the exercise of any right or
remedy shall constitute a waiver thereof, and no single or partial exercise by
the Company of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.
2
<PAGE> 3
12. This Agreement shall take effect when signed by Pledgor and
delivered to the Company, and Pledgor waives notice of the Company's acceptance
hereof.
13. Pledgor shall be responsible for and shall indemnify and hold the
Company harmless from the payment of all state and federal taxes payable as a
result of any sale of any or all of the Collateral.
14. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one agreement.
15. The rights, options, powers and remedies granted in this Agreement
and the other Loan Documents shall extend to the Company and to its heirs,
representatives, successors and assigns and shall be binding upon Pledgor and
his heirs, representatives, successors and assigns; provided, however, that
notwithstanding the foregoing, Pledgor shall not be entitled to assign any of
his rights or obligations under this Agreement or the Note without the prior
written consent of the Company.
16. This Agreement shall be governed by the laws of the State of
Minnesota and, unless the context otherwise requires, all terms used herein
which are defined in Articles 1 and 9 of the Uniform Commercial Code, as in
effect in such state, shall have the meanings therein stated. If any provision
or application of this Agreement is held unlawful or unenforceable in any
respect, such illegality or unenforceability shall not affect any other
provisions or applications which can be given effect and this Agreement shall be
construed as if the unlawful or unenforceable application had never been
contained herein or prescribed hereby. All representations and warranties
contained in this Agreement shall survive the execution, delivery and
performance of this Agreement in the creation and payment of the Secured
Obligations.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
PLEDGOR: KING FAMILY PARTNERS, an Ohio limited partnership
By: s/ Stephen D. King
---------------------------------------------
Its General Partner
Stephen D. King, President
THE COMPANY:
POPMAIL.COM, INC., a Minnesota corporation
By: s/ Thomas W. Orr
---------------------------------------------
Thomas W. Orr
Chief Financial Officer
3
<PAGE> 1
EXHIBIT 10.49
FIRST AMENDMENT TO PLEDGE AGREEMENT DATED DECEMBER 3, 1999
This FIRST AMENDMENT TO PLEDGE AGREEMENT DATED DECEMBER 3, 1999, is
made this 28th day of March, 2000, between KING FAMILY PARTNERS, an Ohio limited
partnership ("Pledgor"), and POPMAIL.COM, INC., a Minnesota corporation (the
"Company"), as secured party.
W I T N E S S E T H:
WHEREAS, Pledgor has executed and delivered that certain promissory
note dated December 3, 1999, payable to the Company in the principal amount of
$2,450,000 (the "December 1999 Note");
WHEREAS, Pledgor owns 1,250,000 shares of the common stock, $.01 par
value, of the Company (the "Shares"), which were pledged to the Company as
security for Pledgor's obligations under the December 1999 Note pursuant to a
Pledge Agreement dated as of December 3, 1999 (the "Pledge Agreement");
WHEREAS, Pledgor has executed another promissory note dated March 28,
2000, payable to the Company in the amount of $245,000 (the "March 2000 Note");
WHEREAS, Pledgor has agreed to modify the terms of the Pledge Agreement
so that the Pledge Agreement, as amended, will secure all amounts due and owing
under the March 2000 Note, in addition to all amounts due and owing under the
December 1999 Note.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises set forth herein, and in consideration of other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. The term "Shares" as used in the Pledge Agreement shall be deemed to
include the 122,500 shares of common stock, par value $.01 per share, of the
Company acquired by Pledgor on or about March 30, 2000.
2. The term "Secured Obligations" as used in the Pledge Agreement
shall, in addition to all of Pledgor's obligation's to the Company arising out
of the December 1999 Note, also be deemed to include all of Pledgor's
obligations for the payment and performance of each and every debt, liability
and obligation pursuant to the March 2000 Note.
3. Except as expressly amended hereby, all other terms and conditions
of the Pledge Agreement shall remain in full force and effect.
[SIGNATURE PAGE TO FOLLOW]
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
PLEDGOR: KING FAMILY PARTNERS, an Ohio limited partnership
By: SDK Investments, Inc., its General Partner
By: /s/ Stephen D. King
---------------------------------------------
Stephen D. King, President
THE COMPANY:
POPMAIL.COM, INC., a Minnesota corporation
By: /s/ Thomas W. Orr
---------------------------------------------
Thomas W. Orr
Chief Financial Officer
2
<PAGE> 1
EXHIBIT 10.50
AMENDED AND RESTATED
PROMISSORY NOTE
Bloomington, Minnesota
$2,450,000.00 December 3, 1999
FOR VALUE RECEIVED, KING FAMILY PARTNERS, an Ohio limited partnership
(the "Maker"), hereby unconditionally promises to pay to POPMAIL.COM, INC., a
Minnesota corporation, or its successors and assigns (the "Payee"), at
Bloomington, Minnesota or at such other place or places as may be designated by
Payee from time to time, the sum of Two Million Four Hundred Fifty Thousand
Dollars ($2,450,000.00) (the "Principal Sum").
The Principal Sum, plus interest thereon from the date hereof at the
rate of 5.74 percent per annum, shall be due and payable by Maker to Payee on
December 3, 2002 (the "Maturity Date") in any coin or currency of the United
States of America which, at the time of payment, is legal tender for the payment
of public and private debts.
All payments on account of this Note, when paid, shall be applied first
to the payment of all interest then due on the unpaid balance of this Note and
the balance, if any, shall be applied to reduction of the unpaid balance of the
Principal Sum. This Note may be prepaid in full or in part at any time without
premium.
Maker agrees to immediately pay to Holder hereof, upon demand, all
losses, costs and expenses (including attorneys' fees) incurred by Holder for
collection and enforcement of this Note in the event of default or otherwise.
Maker waives presentment, protest and demand, notice of protest, notice
of dishonor and non-payment of this Note, and expressly agrees that this Note,
or any payment hereunder, may be extended from time to time without in any way
affecting the liability of Maker.
The terms, conditions and provisions of this Note shall be construed
and enforced according to the laws of the State of Minnesota.
Notwithstanding any of the provisions of this Note, Payee shall look
solely to the Collateral (as defined in that certain Pledge Agreement between
Maker and PopMail.com, inc. dated December 3, 1999) for the satisfaction of the
obligations of this Note or any obligation in any other instrument securing
payment hereof and shall not seek a personal judgment against Maker except to
the extent the laws of the State of Minnesota make a judgment against Maker
necessary in order to enforce the terms of such instruments. In no event shall
the Payee seek to enforce or collect a deficiency judgment with respect to this
Note against Maker.
1
<PAGE> 2
This Note supersedes all provisions of any and all previous promissory
notes delivered by Maker on December 3, 1999, in favor of Payee in the principal
amount of $2,450,000.00.
IN WITNESS WHEREOF, the duly authorized officer of Maker has caused
this Note to be executed on the date first above written.
King Family Partners,
an Ohio limited partnership
By: SDK Investments, Inc., its
General Partner
By: /s/ Stephen D. King
----------------------------------
Stephen D. King
President
Acknowledged and accepted by
POPMAIL.COM, INC., this 29th
day of March, 2000:
By: s/ Thomas W. Orr
---------------------------------
Name: Thomas W. Orr
Title: CFO
2
<PAGE> 1
EXHIBIT 10.51
PROMISSORY NOTE
Bloomington, Minnesota
$245,000.00 March 30, 2000
FOR VALUE RECEIVED, KING FAMILY PARTNERS, an Ohio limited partnership
(the "Maker"), hereby unconditionally promises to pay to POPMAIL.COM, INC., a
Minnesota corporation, or its successors and assigns (the "Payee"), at
Bloomington, Minnesota or at such other place or places as may be designated by
Payee from time to time, the sum of Two Hundred Forty-Five Thousand Dollars
($245,000.00) (the "Principal Sum").
The Principal Sum, plus interest thereon from the date hereof at the
rate of 5.74 percent per annum, shall be due and payable by Maker to Payee on
March 30, 2003 (the "Maturity Date") in any coin or currency of the United
States of America which, at the time of payment, is legal tender for the payment
of public and private debts.
All payments on account of this Note, when paid, shall be applied first
to the payment of all interest then due on the unpaid balance of this Note and
the balance, if any, shall be applied to reduction of the unpaid balance of the
Principal Sum. This Note may be prepaid in full or in part at any time without
premium.
Maker agrees to immediately pay to Holder hereof, upon demand, all
losses, costs and expenses (including attorneys' fees) incurred by Holder for
collection and enforcement of this Note in the event of default or otherwise.
Maker waives presentment, protest and demand, notice of protest, notice
of dishonor and non-payment of this Note, and expressly agrees that this Note,
or any payment hereunder, may be extended from time to time without in any way
affecting the liability of Maker.
The terms, conditions and provisions of this Note shall be construed
and enforced according to the laws of the State of Minnesota.
Notwithstanding any of the provisions of this Note, Payee shall look
solely to the Collateral (as defined in that certain Pledge Agreement between
Maker and PopMail.com, inc. dated December 3, 1999, and amended as of even date
herewith) for the satisfaction of the obligations of this Note or any obligation
in any other instrument securing payment hereof and shall not seek a personal
judgment against Maker except to the extent the laws of the State of Minnesota
make a judgment against Maker necessary in order to enforce the terms of such
instruments. In no event shall the Payee seek to enforce or collect a deficiency
judgment with respect to this Note against Maker.
<PAGE> 2
IN WITNESS WHEREOF, the duly authorized officer of Maker has caused
this Note to be executed on the date first above written.
King Family Partners,
an Ohio limited partnership
By: SDK Investments, Inc., its General Partner
By: s/ Stephen D. King
------------------------------------------
Stephen D. King
President
<PAGE> 1
EXHIBIT 10.52
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as
of February 9th, 2000, by and between Jesse Berst (the "Employee") and
Popmail.com, Inc. (the "Company").
RECITALS
A. IZ.com Incorporated, a Delaware corporation ("IZ.com"), the Company
and certain other parties are entering into an Agreement and Plan of
Reorganization dated as of February 9, 2000, which provides for the merger (the
"Merger") of a newly formed, wholly-owned subsidiary of the Company with and
into IZ-com.
B. The Company desires to retain the services of the Employee and the
Employee desires to be employed by the Company from and after the Merger, on the
terms and subject to the conditions set forth in this Agreement.
AGREEMENT
In consideration of the mutual covenants herein contained, the
continuing employment of the Employee by the Company, and other good and
Valuable consideration, the receipt and sufficiency of which arc hereby
acknowledged, the parties agree as follows:
1. Duties and Scope of Employment. The Company shall employ the
Employee in the position of Chief Operating Officer, with such duties,
responsibilities and compensation as in effect as of the Effective Date. Only
the Board of Directors of the Company in consultation with the Chief Executive
Officer (the "Board") shall have the tight to revise such responsibilities from
time to time as the Board may deem necessary or appropriate.
2. At-Will Employment; Severance. The Company and the Employee
acknowledge that the Employee's employment is and shall continue to be at-will,
as defined under applicable law. If the Employee's employment terminates for any
reason, Employee shall not be entitled to any payments, benefits, damages,
awards or compensation other than as follows: If the Employee's employment is
terminated by the Company without cause within two years after commencement of
his employment with the Company, the Employee will be entitled to a one-time
severance payment equal to six months of the Employee's base salary as of the
termination date. The Employee's stock option agreement(s) will also provide
that in such an event, all shares will vest which would otherwise have vested
through the date of termination and during the following six months as if the
options had vested on a monthly basis beginning on the Employee's employment
commencement date. The foregoing benefits are contingent on the Employee
entering into a severance agreement in such form as the Company reasonably
requests, which will include a waiver of any additional claims against the
Company. For purposes of the foregoing, "cause" means one or more of the
following: (i) material breach of any confidentiality, invention assignment or
other agreement with the Company which breach is not cured within ten (10) days
of receipt of written notice from the Company; (ii) negligence in the
performance of duties or nonperformance or misperformance of such duties that in
the good faith judgment of
<PAGE> 2
the Company adversely affects the operations or reputation of the Company; (iii)
refusal to abide by or comply with the good faith directives of the Board of
Directors or the Company's standard policies and procedures, which actions
continue for a period of at least ten (10) days after written notice from the
Company; (iv) any willful dishonesty, fraud, or misappropriation of funds with
respect to the business or affairs of the Company; (v) conviction by, or entry
of a plea of guilty or nolo contendre in, a court of competent and final
jurisdiction for any crime which constitutes a felony in the jurisdiction
involved; or (vi) abuse of alcohol or drugs (legal or illegal) that, in the
Company's judgment, materially impairs your ability to perform your duties.
3. Compensation and Benefits.
(a) Base Compensation. The Company shall pay the Employee as
compensation for the Employee's services an annual base salary of $250,000. Such
salary shall be subject to applicable tax withholding and shall be paid
periodically in accordance with normal Company payroll practices. Such salary
shall be subject to review on an annual basis, but shall not be subject to
reduction during the term of Employee's employment.
(b) Performance Bonus. The Employee shall be eligible for an
annual performance bonus, to be determined by the Company, in accordance with
the Company's customary practices for officer compensation.
(c) Benefits. The Employee shall be eligible to participate in
the employee benefit plans which are available or which become available to
other employees of the Company, with the adoption or maintenance of such plans
to be in the discretion of the Company, subject in each case to the generally
applicable terms and conditions of the plan or program in question and to the
determination of any committee administering such plan or program.
(d) Termination of Employment. In the event the Employee's
employment with the Company terminates (i) the Company shall pay the Employee
any unpaid base salary due for periods prior to the date of termination of
employment ("Termination Date"); (ii) the Company shall pay the Employee all of
the Employee's accrued and unused vacation through the Termination Date; and
(iii) following submission of proper expense reports by the Employee, the
Company shall reimburse the Employee for all expenses reasonably and necessarily
incurred by the Employee in connection with the business of the Company prior to
termination. These payments shall be made promptly upon termination and within
the period of time mandated by applicable law. In addition, in the event the
Employee's employment with the Company terminates, the Employee shall be
entitled to any benefits due to him under the agreements, plans and practices
referred to in Sections 2 and 3(c) hereof.
4. No Impediment to Agreement. The Employee hereby represents to the
Company that the Employee is not, as of the date hereof, and will not be during
the Employee's employment with the Company, employed under contract, oral or
written, by any other person, firm or entity in a manner that conflicts in any
material respect with the Employee's ability to
2
<PAGE> 3
perform his duties under this Agreement, and is not and will not be bound by the
provisions of any restrictive covenant or confidentiality agreement which would
constitute an impediment to, or restriction upon, the Employee's ability to
enter this Agreement and perform the duties of Employee's employment.
5. Successors; Personal Services. The services and duties to be
performed by the Employee hereunder are personal and may not be assigned or
delegated. This Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns, and the Employee, the Employee's heirs and
representatives.
6. Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to Employee at the home address, which Employee most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its CEO.
7. Miscellaneous Provisions.
(a) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(b) Entire Agreement. This Agreement and the other agreements,
plans and practices referred to herein shall supersede and replace all prior
agreements or understandings relating to the subject matter hereof, and no
agreement, representations or understandings (whether oral or written or whether
express or implied) which are not expressly set forth or referred to in this
Agreement have been made or entered into by either party with respect to the
relevant matter hereof.
(c) Choice of Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the internal substantive
laws of the State of Delaware without reference to any choice of law rules.
(d) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
3
<PAGE> 4
(e) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's proct ss, and any action in violation of this subsection shall be
void.
(f) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of all applicable income, health
insurance and employment taxes.
(g) Assignment by Company. The Company may assign its rights
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the Company. In
the case of any such assignment, the term "Company" when used in a section of
this Agreement shall mean the corporation that actually employs the Employee.
(h) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
(i) Effective Date. This Agreement shall become effective on
the date (the "Effective Date") on which the Merger is consummated.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
COMPANY: POPMAIL.COM, INC.
By /s/ Stephen King
-----------------------------
Title C.E.O.
---------------------------
Employee: /s/ Jesse Berst
--------------------------------
Jesse Berst
4
<PAGE> 1
EXHIBIT 10.53
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement is made as of July 27, 1999 by
and between CAFE ODYSSEY, INC., a Minnesota corporation (the "Company"), and
RONALD K. FULLER (the "Executive").
WHEREAS, the Company and Executive are parties to an Employment
Agreement dated as of March 17, 1997 (the "Employment Agreement"); and
WHEREAS, the Company and Executive desire to amend the Employment
Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereto agree to amend the Employment Agreement as
follows:
1. Executive's Base Salary shall be $250,000 as of September 1, 1999.
Executive shall be paid a monthly bonus of $4,167 on each of July 30
and August 30. Executive shall be paid $12,500 on June 30, reflecting
the accrual of such monthly bonus from April 1, 1999.
2. Section 3.1 of the Employment Agreement shall be amended to read in its
entirety as follows:
3.1 Termination of Employment. Executive's employment under
this Agreement may be terminated by the Company or Executive at any
time for any reason; provided, however, that if Executive's employment
is terminated by the Company during the term of this Agreement for a
reason other than for Cause, or if Executive terminates his employment
for "Good Reason" (as defined in Section 3.2(b) below), he shall
continue to receive his Base Salary, Base Bonus, Incentive Bonus (the
annual amount of which shall equal the sum of the Incentive Bonus
payments made to Executive for the four quarters preceding termination)
and the benefits listed in Sections 2.2 and 2.4 above for a period of
two (2) years from the date of termination. The termination shall be
effective as of the date specified by the party initiating the
termination in a written notice delivered to the other party, which
date shall not be earlier than the date such notice is delivered to the
other party. This Agreement shall terminate in its entirety immediately
upon the death of Executive. Except as expressly provided to the
contrary in this section or applicable law, Executive's rights to pay
and benefits shall cease on the date his employment under this
Agreement terminates.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date set forth above.
CAFE ODYSSEY, INC.
By s/ Stephen D. King s/ Ronald K. Fuller
--------------------- ----------------------
Chairman of the Board RONALD K. FULLER
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
popmail.com (Delaware), inc., a Delaware corporation
PopMail Network, Inc., a Texas corporation
IZ.com, a Delaware corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 24, 2000, accompanying the
consolidated financial statements included in the Annual Report of PopMail.com,
inc. (formerly Cafe Odyssey, Inc.) on Form 10-KSB for the year ended January 2,
2000. We hereby consent to the incorporation by reference of said report in the
Registration Statements of PopMail.com, inc. on Forms S-3 (File No. 333-80241,
File No. 333-85243, File No. 333-88199, File No. 333-93317, File No. 333-96109,
and File No. 333-32232) and on Forms S-8 (File No. 333-62729 and File No.
333-62747).
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
April 3, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accounts, we hereby consent to the incorporation of our
report dated February 19, 1999 included in this Form 10-KSB, into the Company's
previously filed Registration Statement File Nos. 333-80241, 333-85243,
333-88199, 333-93317, 333-96109, 333-62729 and 333-62747.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
April 3, 2000
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