<PAGE> 1
As filed with the Securities and Exchange Commission on April 12, 2000
Registration No. 333-
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ENVIRONMAX.COM, INC.
(Name of issuer in its charter)
---------------
UTAH 5045 87-064520
(State of incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
4190 S. HIGHLAND DRIVE, SUITE 210
SALT LAKE CITY, UTAH 84124
(801) 424-0200
(Address and telephone number of registrant's principal executive offices
and principal place of business)
---------------
ROBERT F. CRAIG
CHIEF EXECUTIVE OFFICER
4190 S. HIGHLAND DRIVE, SUITE 210
SALT LAKE CITY, UTAH 84124
(801) 424-0200
(Name, Address and telephone number of agent for service)
---------------
COPIES TO:
J. GORDON HANSEN, ESQ.
RICHARD D. CLAYTON, ESQ.
SCOTT R. CARPENTER, ESQ.
PARSONS BEHLE & LATIMER
201 SOUTH MAIN STREET, SUITE 1800
SALT LAKE CITY, UTAH 84111
(801) 532-1234
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================
PROPOSED PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT
TITLE OF EACH CLASS MAXIMUM AMOUNT OFFERING PRICE AGGREGATE OF
OF SECURITIES TO BE TO BE PER SHARE (1) OFFERING PRICE REGISTRATION
REGISTERED REGISTERED FEE
=================================================================================================
<S> <C> <C> <C> <C>
Common Shares, with par 7,000,000 $ 21 $147,000,000 $38,808
value of $.001 per share. shares
=================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH A DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
[INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.]
SUBJECT TO COMPLETION, DATED APRIL 12, 2000
PROSPECTUS
ENVIRONMAX.COM, INC.
A MINIMUM OF 3,000,000 SHARES AND A MAXIMUM OF 7,000,000 SHARES
ISSUABLE TO THE GENERAL PUBLIC
This is the initial registered public offering of EnvironMax.com, Inc.,
and we are offering a minimum of 3,000,000 shares and a maximum of 7,000,000
shares to the general public. All of the common shares offered hereby are being
sold by EnvironMax.com, Inc. Prior to this offering there has been no public
market for our securities. We will apply to list the common shares for quotation
on the American Stock Exchange under the symbol "ENVX."
THE COMMON SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS," BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
<TABLE>
<CAPTION>
===============================================================================================
Minimum Offering Maximum Offering
-----------------------------------------------------------------------------------------------
Per Share Total Per Share Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Public Offering Price $17.00 $51,000,000 $17.00 $119,000,000
-----------------------------------------------------------------------------------------------
Offering Expenses $ .17 $500,000 $.07 $500,000
===============================================================================================
Net Proceeds $16.83 $50,500,000 $16.93 $118,500,000
===============================================================================================
</TABLE>
The date of this prospectus is , 2000.
<PAGE> 3
[INSIDE FRONT COVER]
[Graphics depicting the Company's products.]
WE INTEND TO DISTRIBUTE TO SHAREHOLDERS ANNUAL REPORTS CONTAINING
AUDITED FINANCIAL STATEMENTS EXAMINED BY AN INDEPENDENT PUBLIC ACCOUNTING FIRM
AND QUARTERLY REPORTS FOR THE FIRST THREE QUARTERS OF EACH CALENDAR YEAR
CONTAINING UNAUDITED FINANCIAL INFORMATION.
<PAGE> 4
As used in this prospectus, the terms "we," "our," "us,"
"EnvironMax.com," and "the Company" refer to EnvironMax.com, Inc. We have filed
trademark and tradename applications for the "EnvironMax.com," and "EnvironMax"
names and logos. All other trademarks or tradenames referred to in this
prospectus are the property of their respective owners.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY................................................................. 1
RISK FACTORS....................................................................... 6
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.................................. 17
USE OF PROCEEDS.................................................................... 18
DIVIDEND POLICY.................................................................... 18
CAPITALIZATION..................................................................... 18
DILUTION........................................................................... 19
SELECTED FINANCIAL DATA............................................................ 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................................................. 22
RESULTS OF OPERATIONS.............................................................. 24
BUSINESS........................................................................... 27
LEGAL PROCEEDINGS.................................................................. 35
MANAGEMENT EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES......................... 35
CERTAIN TRANSACTIONS............................................................... 40
PRINCIPAL SHAREHOLDERS............................................................. 40
COMPANY'S PLAN OF DISTRIBUTION..................................................... 42
DESCRIPTION OF SECURITIES.......................................................... 46
SHARES ELIGIBLE FOR FUTURE SALE.................................................... 47
STOCK TRANSFER AND LISTING......................................................... 48
LEGAL MATTERS...................................................................... 48
EXPERTS............................................................................ 48
WHERE YOU CAN FIND ADDITIONAL INFORMATION.......................................... 49
INDEX TO FINANCIAL STATEMENTS...................................................... F-1
</TABLE>
(i)
<PAGE> 5
(This page intentionally left blank.)
<PAGE> 6
PROSPECTUS SUMMARY
You should read this summary information with the entire prospectus and
the more detailed information in this prospectus, including the risk factors
regarding our company and the common stock being sold in this offering, the
financial statements and notes to those statements appearing elsewhere in this
prospectus.
OUR BUSINESS
We provide commercial and governmental enterprises with environmental
monitoring and management solutions. Through our parent corporation, Enmax, we
have pioneered hazardous material management by supporting, maintaining and
upgrading the Hazardous Material Management System, or HMMS, a system used by
governmental agencies, such as the Department of Defense, to monitor and track
hazardous material and waste. We are using this knowledge and expertise to
design, develop, and market the EnvironMax system. Designed to replace HMMS and
meet commercial requirements as well, the EnvironMax system uses a combination
of computer software, hardware, label printers, bar code scanning devices, and
business processes to manage and monitor the procurement, use and disposal of
hazardous material and waste.
The EnvironMax system manages hazardous materials in a manner similar to
that used by pharmacies in their management of prescription drugs. The
EnvironMax system monitors hazardous materials from their purchase through all
stages of dispersal, use and handling by employing serialized bar coded labels
and scanning devices. Information is then input and maintained in our database
via web-based software which can function both as a stand alone solution, or as
an integrated part of an enterprise resource planning system, or ERP. It is from
this database that compliance and accounting reports can be generated.
In addition to our EnvironMax system, we intend to develop other systems
to assist in environmental compliance management. These plans include systems
that will manage, track, and monitor air emissions and water discharges.
Together with our parent Enmax we currently provide environmental
management solutions to numerous Department of Defense Depots including
Warner-Robins Air Logistics Center, Tobyhanna Army Depot, and the Marine Corps
Logistics Base, Albany. We plan to convert these enterprises from HMMS to the
EnvironMax system within the next six months. We also plan to market and sell to
other enterprises throughout the United States and the world.
1
<PAGE> 7
MARKET OPPORTUNITY
There are thousands of commercial entities and governmental sites within
the United States that are subjected to Environmental Protection Agency
reporting criteria. This necessitates an effective solution for tracking the
acquisition, production, handling, storage and disposal of environmentally
hazardous materials and waste. In 1994, U.S. governmental agencies spent
approximately $35 billion on environmental compliance efforts and commercial
enterprises spent approximately $ 65 billion as reported by the Congressional
Research Service Report of 1997. Although these services are primarily provided
internally, there are a few large and medium sized corporations offering such
services.
The Internet has accelerated the introduction of processes for managing
information and providing services. It also has changed the way software
applications are developed and deployed. In addition, the Internet has
accelerated the trend towards distributed software applications. We intend to
take advantage of this opportunity by enabling EnvironMax to be web-based, Linux
and Windows NT operable, and distributed via the Internet.
EnvironMax can operate separately or as an integrated part of an
enterprise wide software solution. With the recent proliferation of companies
adopting company-wide enterprise software systems, we plan to participate in
this movement by providing a comprehensive suite of totally interoperable tools
and solutions for the management of hazardous materials and waste, air emissions
and water discharges.
OUR STRATEGY
Our goal is to become the leading provider of environmental management,
tracking and monitoring solutions for commercial and governmental enterprises
throughout the world. Key elements of our strategy to achieve this goal include:
- educating current and potential governmental users of HMMS about the
advantages of the EnvironMax system and securing contracts with those users;
- increasing awareness of our EnvironMax system among domestic and
international commercial enterprises and securing contracts with those entities;
- continuing our research and development efforts and developing
applications in the areas of air and water pollution prevention;
- forming alliances with business to business internet portals,
application service providers, or ASP's, and environmental waste management
consultants;
- integrating our products with major company-wide enterprise resource
planning, or ERP, systems currently in use and being developed.
2
<PAGE> 8
CORPORATE INFORMATION
Our corporate parent began maintaining the HMMS system on September 1,
1998. Enmax Corporation maintained and managed the HMMS system hazardous
materials and waste management tracking system. Enmax used its experience and
knowledge to begin development of the new EnvironMax system, which was designed
to take advantage of the Internet as a means for the deployment of a complete
hazardous material and waste tracking system. In order to take advantage of the
increased opportunities presented by the Internet, EnvironMax.com, Inc. was
incorporated in February 2000 to operate as a separate legal entity. We are
engaged in the development and marketing of the EnvironMax system, as well as
other related products. Our principal executive offices are located at 4190 S.
Highland Drive, Suite 210, Salt Lake City, Utah 84124 and our telephone number
is (801) 424-0200. Our Internet address is www.environmax.com. Information
contained in our web-sites is not part of this prospectus.
THE OFFERING
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
Common Shares offered by EnvironMax.com, Inc............ 3,000,000 shares 7,000,000 shares
Common Shares to be outstanding after this offering..... 17,076,918 shares 21,116,918 shares
Use of proceeds ........................................ To provide for product development,
marketing/sales, infrastructure,
operations and hiring of personnel.
American Exchange Market Symbol......................... ENVX
</TABLE>
The outstanding share information is based on our shares outstanding as
of April 1, 2000. This information excludes 987,100 common shares issuable upon
the exercise of stock options outstanding as of April 1, 2000 with an exercise
price of $10 per share.
3
<PAGE> 9
SUMMARY FINANCIAL DATA
The following table summarizes financial data for our business. The
summary of selected financial data set forth below should be read in conjunction
with our financial statements and the related notes included elsewhere in this
prospectus and in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
prospectus.
For purposes of presenting our financial statements, we have segregated
or "carved-out" the operations related to the EnvironMax product from the
historical financial statements of Enmax Corporation. Accordingly, our financial
statements in this prospectus and the selected financial data present our
financial condition and results of operations as if EnvironMax.com, Inc. had
existed as a separate legal entity for all periods presented. The carved-out
historical results presented are not necessarily indicative of what would have
actually occurred had EnvironMax.com, Inc. existed as a separate legal entity
and any historical results are not necessarily indicative of results that may be
expected for any future period.
The selected statements of operations data for the period September 1,
1998 (date operations commenced) to December 31, 1998 and for the year ended
December 31, 1999 and the selected balance sheet data as of December 31, 1999
are derived from, and are qualified by reference to, the audited financial
statements and related notes appearing elsewhere in this prospectus.
4
<PAGE> 10
SUMMARY FINANCIAL DATA
ENVIRONMAX (AN OPERATING COMPONENT OF ENMAX CORPORATION)
<TABLE>
<CAPTION>
PERIOD SEPTEMBER 1, 1998
(DATE OPERATIONS COMMENCED) YEAR ENDED
TO DECEMBER 31, 1998 (1) DECEMBER 31, 1999
------------------------- -----------------
<S> <C> <C>
STATEMENTS OF INCOME DATA:
Total revenues ........................ $ 745,980 $2,432,192
Cost of revenues ...................... 452,195 1,525,630
---------- ----------
Gross profit .......................... 293,785 906,562
Operating costs and expenses:
Selling, general and administrative 259,650 808,002
Research and development .......... - 75,417
Interest expense ...................... 856 4,671
---------- ----------
Net income ............................ 33,279 18,472
Pro forma income tax provision (2) .... 13,312 7,389
---------- ----------
Pro forma net income .................. $ 19,967 $ 11,083
========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------------------
BALANCE SHEET DATA: ACTUAL PRO FORMA(3) PRO FORMA AS ADJUSTED(4)
----------- ----------- ------------------------
<S> <C> <C> <C>
Cash and cash equivalents ......................... $ 439 $ 101,978 $50,601,978
Total assets ...................................... 511,521 161,910 50,661,910
Long-term obligations, including current portion .. 37,120 37,120 37,120
Net investment / shareholders' equity (5) ........ 355,596 124,791 50,624,791
</TABLE>
(1) Represents the carved-out portion of the predecessor operations related to
the EnvironMax product included within Enmax. Financial information prior to
September 1, 1998 is not presented as there were no EnvironMax operations prior
to this date. All other operations of Enmax were not related to the EnvironMax
operations and were excluded from the carved-out financial information.
(2) Pro forma income tax provision represents the estimated tax provision based
on a 40% effective tax rate that we believe would have been incurred had Enmax
not been an S corporation for income tax purposes. There are no S corporation
distributions as neither the EnvironMax operations nor Enmax were converted to a
C corporation.
(3) Pro forma amounts reflect the (i) initial capitalization of 100,000 common
shares of EnvironMax.com, Inc. as of February 1, 2000, (ii) the issuance of
97,840 common shares to employees at $0.01 per share on March 7, 2000, (iii) the
sale of 10,000 common shares to an outside investor at $10 per share on March
15, 2000, (iv) the contribution of certain net assets from Enmax Corporation for
13,700,000 common shares on March 15, 2000 and (v) the elimination of the net
investment and net assets of EnvironMax that are not being contributed to
EnvironMax.com, Inc.
(4) Pro forma as adjusted amounts reflect (i) the sale of the 3,000,000 common
shares in this offering at an assumed initial public offering price of $17 per
share, after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, and (ii) the issuance of 169,078
common shares issued for consulting services related to the initial public
offering.
(5) Net investment as of December 31, 1999 is shown in lieu of shareholders'
equity as there is no direct ownership in the carved-out financial statements of
EnvironMax. See audited financial statements appearing elsewhere herein.
5
<PAGE> 11
RISK FACTORS
An investment in our shares involves a high degree of risk. You should
consider carefully the following information about these risks, together with
our financial statements and related notes and the other information contained
in this prospectus, before you decide to invest in our shares. If any of the
following risks actually occur, our business, financial condition or results of
operations would likely suffer. In this case, the market price of our common
shares could decline, and you may lose all or part of the money you paid to buy
our common shares.
OUR OPERATING HISTORY IS LIMITED, SO IT WILL BE DIFFICULT FOR YOU TO EVALUATE AN
INVESTMENT IN OUR COMPANY.
We have only a limited relevant operating history for you to evaluate an
investment in our company. Our parent corporation, Enmax Corporation, formed
EnvironMax.com, Inc. in early 2000 with a substantially revised business plan
from that used by Enmax that will focus on our EnvironMax system. As a new
company in a competitive and rapidly evolving industry, we face risks and
uncertainties relating to our ability to successfully implement our strategy.
You must consider the risks, expenses and uncertainties that a company like
ours, operating with an unproven business model, faces in a new and rapidly
evolving market such as the market for environmental management, tracking, and
monitoring technology. If we cannot address these risks and uncertainties or are
unable to execute our strategy, we may not be successful, which would
significantly reduce the value of your investment.
WE ARE DEPENDENT UPON ANTICIPATED REVENUE FROM YET TO BE ACQUIRED CONTRACTS WITH
GOVERNMENT AND COMMERCIAL CLIENTS.
Our anticipated revenue includes revenues from yet to be acquired
contracts. If we are unable to secure these contracts, our revenues would be
lower than anticipated. Because a high percentage of our expenses will be
relatively fixed in the short term, if revenue levels fall below expectations,
the Company's operating results are likely to be materially adversely affected.
THE FAILURE OF OUR OPERATING RESULTS TO MEET THE EXPECTATIONS OF PUBLIC MARKET
ANALYSTS AND INVESTORS MAY NEGATIVELY IMPACT THE VALUE OF OUR SHARES.
It is possible that in some future periods our results of operations may
be below the expectations of public market analysts and investors. This could
cause our stock price to decline. In addition, we plan to increase significantly
our operating expenses to expand our sales and marketing, administration,
consulting and training, maintenance and technical support and research and
development groups. If revenues fall below our expectations for any period and
we are unable to quickly reduce our spending in response, our operating results
could be lower than expected and our stock price may fall.
6
<PAGE> 12
WE ARE DEPENDENT UPON THE SUCCESSFUL PERFORMANCE OF OUR ENVIRONMAX SYSTEM AND
UPON MAKING MODIFICATIONS THAT ARE NECESSARY TO KEEP UP WITH RAPID TECHNOLOGICAL
CHANGE.
Our EnvironMax system has not yet been tested. It is possible that the
EnvironMax system will fail to satisfactorily meet the needs of potential
commercial and governmental enterprises. Although we hope to prevent such a
scenario through rigorous beta-testing, client input and trouble-shooting, there
can be no assurance that we will be able to adequately address all of the
hazardous material management concerns which may arise. In addition, the market
for hazardous material and waste management software is characterized by rapid
technological advancements, changes in customer requirements, frequent new
product introductions and enhancements and changing industry standards. The life
cycles of our products are difficult to estimate and our current market position
could be undermined by rapid technological changes and the introduction of new
products and enhancements by new or existing competitors. We currently have a
number of new product development efforts underway, including air, water and
soil modules along with global positioning system tracking to complement the
suite of products already offered.
The Company's product development efforts are expected to require
substantial investment by the Company. There can be no assurance that the
Company will have sufficient resources to make the necessary investment or that
it will not experience difficulties that could delay or prevent the successful
development, introduction or marketing of new products or enhancements.
OUR FAILURE OR INABILITY TO PROTECT OUR INTELLECTUAL PROPERTY COULD
SIGNIFICANTLY HARM OUR COMPETITIVE POSITION, AND WE COULD ALSO INCUR SUBSTANTIAL
COSTS TO DEFEND CLAIMS THAT WE HAVE VIOLATED THE PROPRIETARY RIGHTS OF OTHERS.
Protecting our intellectual property is an important factor in
maintaining our competitive position in the environmental tracking and
management industry. If we do not or are unable to adequately protect our
intellectual property, our sales and profitability could be adversely affected.
We currently rely upon confidentiality agreements and trade secrets to protect
our intellectual property. This generally does not afford the same degree of
protection as does copyright, trademark or patent law. Therefore, we plan to
seek copyright and trademark registrations as well as apply for several U.S. and
international patents for various aspects of our proprietary technology.
However, we cannot assure you that these protections will be granted. If we are
unable to obtain proper copyright, trademark, and patent protection we might be
unable to protect our proprietary rights. Even if we are successful in obtaining
copyright, trademark, and patent protection, we cannot be certain that our means
of protecting our proprietary rights in the United States or abroad will be
adequate and competitors may independently develop similar or better
technologies. Our failure to protect our proprietary rights would have a
material adverse effect upon our ability to successfully compete in this market.
7
<PAGE> 13
Despite our efforts to protect our proprietary rights and technologies,
unauthorized parties may attempt to copy aspects of our products or to obtain
and use trade secrets or other information or technology that we regard as
proprietary. Legal proceedings to enforce our intellectual property rights could
be burdensome, time consuming and expensive, and there may be a high degree of
uncertainty as to the outcome. Such legal proceedings may also divert
management's attention from growing our business. In addition, the laws of some
foreign countries do not protect our proprietary rights as fully as do the laws
of the United States. If we do not, or are unable to enforce and protect our
intellectual property, our business may suffer substantial harm.
WE MAY NOT BE ABLE TO MEET ENVIRONMENTAL STANDARDS SET BY VARIOUS STATES OR
FOREIGN COUNTRIES
Although our system has been designed to assist commercial and
governmental enterprises in meeting the standards set by the Environmental
Protection Agency and the 14 states in which Enmax is now doing business, we
have not verified the compliance of EnvironMax with the remaining 36 states or
any foreign country. Failure of our product to facilitate compliance with the
environmental requirements of a state or a foreign country may inhibit our
business in that state or country and negatively affect our ability to obtain
new customers, expand our business and generate projected revenues.
OUR CONTRACTUAL LIMITATIONS ON LIABILITY AND DISCLAIMERS MAY NOT SUFFICIENTLY
PROTECT US AGAINST POSSIBLE CLAIMS
Our clients may be subject to liability for environmental damage.
Although our contracts will contain language designed to limit and disclaim
liability for violations by our customers of environmental regulations, this
language may not shield us from liability. If we are made a party to a suit for
violations of environmental regulations by a customer, such a suit could be
costly to defend and could have a negative impact upon our name and brand. This
would have a materially adverse effect upon our ability to generate revenues as
projected.
WE MUST ACHIEVE RAPID MARKET PENETRATION OF OUR PRODUCT IN ORDER TO COMPETE
SUCCESSFULLY.
Because the hazardous material, waste and other environmental management
markets are new and emerging, companies that are early in providing products and
solutions for these markets will have an advantage in building awareness and
consumer loyalty. Therefore, in order for us to successfully market our products
on a wide-scale basis, we must achieve rapid market penetration. For example, if
we are unable to demonstrate the viability of our products through rapid growth:
- we will be unable to achieve economies of scale;
- we will be less able to negotiate favorable terms with customers and
other partners; and
8
<PAGE> 14
- customers will be less likely to devote resources to purchasing and
implementing our products if they are not seen as an industry standard. We may
lack the economic and managerial resources necessary to promote this growth.
Also, the fact that we rely almost entirely on the success of a principal
product affects our ability to penetrate diversified markets. In addition, while
we believe our process of web-enabled software results in superior products, it
requires time and resources that may delay new product releases and upgrades.
These delays could affect our ability to take advantage of market opportunities
on a timely basis.
OUR BRAND MAY NOT ACHIEVE THE BROAD RECOGNITION NECESSARY TO SUCCEED.
We believe that broad recognition and a favorable audience perception of
the EnvironMax brand will be essential to our success. If our brand does not
achieve broad recognition as the leading provider of hazardous material and
waste management solutions for governmental agencies and commercial businesses,
our success will be limited. We intend to build brand recognition through
substantial advertising and public relations efforts. We expect to significantly
increase our expenses relating to the building of our brand awareness in future
periods as we build the EnvironMax brand and awareness of our products and
services, but may lack the resources necessary to accomplish these initiatives.
Even if the resources are available, we cannot be certain that our brand
enhancement strategy will deliver the brand recognition and favorable perception
that we seek. If our strategy is unsuccessful, these expenses may never be
recovered and we may be unable to increase revenues. Even if we achieve greater
brand recognition, competitors with greater resources or a more recognizable
brand could reduce our market share of the emerging hazardous material and waste
management market.
OUR STRATEGY TO PROVIDE SOLUTIONS FOR HAZARDOUS MATERIAL AND WASTE MANAGEMENT
AND TRACKING DEPENDS UPON OUR ABILITY TO SUCCESSFULLY INTRODUCE PRODUCTS
TAILORED FOR THAT BUSINESS.
For our strategy of providing hazardous material and waste management
and tracking solutions for customers to be successful, we must provide products
that meet the needs of those customers and their business. We are developing our
web-enabled product, EnvironMax for this purpose. This new product, which is our
primary environmental material and waste management product, may not be adopted
by potential customers for any number of reasons, including lack of customer
awareness of our company and our product, malfunction of the products and
failure to meet needs of hazardous material and waste producers. If our products
are not successful, we will fail to execute our strategy.
THE ENVIRONMENTAL HAZARDOUS MATERIAL AND WASTE MANAGEMENT INDUSTRY IS INTENSELY
COMPETITIVE AND WE MAY BE UNABLE TO COMPETE EFFECTIVELY WITH PROVIDERS OF
SOLUTIONS FOR PRODUCERS OF HAZARDOUS MATERIALS
We face direct competition in the area of software for hazardous waste
management from TRW, Inc., Science Application International Corporation, Radian
International, LLC and
9
<PAGE> 15
numerous other waste management software companies. Many of these competitors
are large, well-established companies with significantly greater financial
resources, more extensive marketing and distribution capabilities, larger
development staffs and more widely recognized brands and products. We also
compete for service revenue with a number of companies that provide technical
support and other professional services to users of various hazardous material
management systems, including some original equipment manufacturers with which
we have agreements. Many of these companies have larger and more experienced
service organizations than we do.
OUR SUCCESS DEPENDS ON OUR ABILITY TO SUCCESSFULLY MANAGE GROWTH.
In order to execute our business plan, we must grow significantly. We
have 38 employees and we anticipate that the number of our employees will
increase in the foreseeable future. Our planned growth entails risk. If we do
not expand our operations in an efficient manner, our expenses could grow
disproportionately to revenues or our revenues could decline or grow more slowly
than expected, either of which could negatively affect the value of your
investment. Our current and anticipated future growth, combined with the
requirements we will face as a public company, will place a significant strain
on our management, systems and resources. Our key personnel have limited
experience managing this type of growth. We also need to improve our financial
and managerial controls and reporting systems and procedures and to continue to
expand and maintain close coordination among our technical, accounting, finance
and sales and marketing organizations. If we do not succeed in these efforts,
our revenues and the value of your investment will fall.
IF WE DO NOT SUCCESSFULLY IMPLEMENT OUR INTERNATIONAL EXPANSION, OUR BUSINESS
MAY NOT GROW AS ANTICIPATED AND SUBSTANTIAL RESOURCES MAY BE DRAINED.
A key component of our growth strategy is to establish our presence in
foreign markets. It will be costly to establish international facilities and
operations, promote our brand internationally, and develop localized products
and support. Revenue from international activities may not offset the expense of
establishing and maintaining these foreign operations. In addition, we may not
be successful in marketing and distributing our products because we have little
experience in these markets. Some of the factors that may impact our ability to
initiate and maintain successful operations in foreign markets include:
- - hiring and successful supervision of employees in foreign jurisdictions;
- - language, technical and cultural differences;
- - varying laws, including intellectual property protection and enforcement
laws;
- - differences in reliability of telecommunications infrastructure and
Internet access;
- - export controls that may prevent us from shipping our products into and
from some markets;
10
<PAGE> 16
- - restrictions against repatriation of earnings from our foreign operations;
- - unexpected changes in trading policies, regulatory requirements and
exchange rates; and
- - general political and economic trends.
If we are unable to profitably operate in foreign markets, our business
may not grow as anticipated, substantial resources could be drained and our
stock price could suffer.
WE MAY SUFFER FROM THE RESULTS OF SOFTWARE ERRORS OR DEFECTS.
Software programs frequently contain errors or defects, especially when
first introduced or when new versions are released. We could lose revenue as a
result of errors or defects in our software products. We cannot assure you that
errors will not be found in new products or releases. While we test our products
prior to release, the fact that some of the components of our software products
used are developed by independent parties over whom we exercise no supervision
or control makes it particularly difficult to identify and remedy operational
errors or defects. Any errors could result in loss of revenue, or delay in
market introduction or acceptance, diversion of development resources, downtime
for customers, damage to our reputation and increased service costs.
DUE TO COMPETITIVE LABOR MARKETS, WE MAY NOT BE ABLE TO RECRUIT AND RETAIN
SUFFICIENT QUALIFIED PROFESSIONALS NECESSARY FOR OUR GROWTH.
In order to grow as we anticipate, we must hire significant numbers of
professionals to develop and market our products and provide technical support,
education and training and other services to our customers. Competition for
qualified professionals in the software industry is intense, and we may be
unable to recruit and retain sufficient professionals to manage our anticipated
growth.
OUR MANAGEMENT TEAM LACKS EXPERIENCE IN SOME AREAS, IS NOT COMPLETE, AND HAS
SEVERAL NEW MEMBERS.
Our business is highly dependent on our ability to acquire necessary
members of our management team and on our management team's ability to work
together effectively. Several members of our management lack significant
experience with an "internet" company or a public company. This may hinder our
ability to compete in this competitive arena. Some members of our management
have not previously worked together as a team and have had only limited
experience managing a rapidly growing company on either a public or private
basis. If we fail to find qualified individuals to serve in management
positions, or if our management team fails to work together effectively, this
could offset efficient decision-making, product development, sales and marketing
efforts and the management of our financial and other resources, which would
negatively impact our operating results.
11
<PAGE> 17
LOSS OF ANY OF OUR KEY MANAGEMENT PERSONNEL COULD NEGATIVELY IMPACT OUR
BUSINESS.
The loss or departure of any of our officers or key employees could harm
our ability to implement our business plan and could lower our revenues. Our
future success depends to a significant extent on the continued service and
coordination of our management team, particularly Robert F. Craig, our Chief
Executive Officer. Mr. Craig is the only member of our management team for whom
we maintain key person insurance.
DEVELOPMENT OF AIR AND WATER SYSTEMS
In addition to the management and tracking of hazardous materials, we
plan to develop and introduce products designed for the management and tracking
of water discharge and air emissions. We have very little experience in these
fields. This lack of experience could result in a failure to adequately compete
in these fields which could negatively effect our strategic plan and operating
results as a whole.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING NECESSARY TO EXECUTE OUR
BUSINESS STRATEGY.
We may need to raise additional funds to support more rapid expansion,
respond to competitive pressures, acquire complementary businesses or
technologies or respond to other unanticipated events. We cannot assure you that
additional funding will be available to us in amounts or on terms acceptable to
us. If sufficient funds are not available or are not available on acceptable
terms, our ability to fund our expansion, take advantage of acquisition
opportunities, develop or enhance our services or products, or otherwise respond
to competitive pressures would be significantly limited.
IF WE FAIL TO MANAGE TECHNOLOGICAL CHANGE EFFECTIVELY, DEMAND FOR OUR PRODUCTS
AND SERVICES WILL SUFFER.
The market for hazardous waste management solutions is in an early stage
of development and is characterized by rapidly changing technology, evolving
industry standards, frequent new service and product introductions and changes
in customer demands. Our future success will depend to a substantial degree on
our ability to continue to offer products and services that incorporate leading
technology and respond to technological advances and emerging industry standards
and practices on a timely and cost-effective basis. You should be aware that:
- our technology or systems may become obsolete upon the introduction of
alternative technologies;
- the technological life cycles of our products have been historically
short and are difficult to accurately estimate;
- we may not have sufficient resources to develop or acquire new
technologies or to introduce new services capable of competing with future
technologies or service offerings; and
12
<PAGE> 18
- the price of the products and services we provide may decline as
rapidly as, or more rapidly than, the cost of any competitive alternatives.
We may not be able to respond effectively to the technological
requirements of the changing market for hazardous waste management solutions. To
the extent we determine that new technologies and equipment are required to
remain competitive, the development, acquisition and implementation of those
technologies and equipment are likely to continue to require significant capital
investment by us. We may not have sufficient capital for this purpose in the
future, and even if it is available, investments in new technologies may not be
profitable or may not result in commercially viable technological processes. If
we do not develop and introduce new products and services and achieve market
acceptance in a timely manner, demand for our products and services will drop
and our business will suffer.
CHANGES IN ENVIRONMENTAL RULES AND REGULATIONS COULD ADVERSELY AFFECT OUR
ABILITY TO PROVIDE AN ADEQUATE HAZARDOUS MATERIAL MANAGEMENT SOLUTION
Our product provides hazardous material and waste management and
tracking solutions to those producing and handling hazardous material and waste
which enables those enterprises to comply with the rules and regulations
promulgated by the Environmental Protection Agency and other U.S. Government
Agencies. Changes in these regulations could have a material adverse effect upon
us. The success of our current and future products depends upon our ability to
adapt to changes in the environmental rules and regulations.
THERE ARE RISKS RELATED TO GOVERNMENT CONTRACTS
We believe that the success and development of our business will
continue in the next few years to be impacted by our ability to participate in
government contract programs. Accordingly, our financial performance may be
directly affected by changes in government contracting policies. Among the
factors that could materially adversely affect our government contracting
business are budgetary constraints and the adoption of new laws or regulations.
Most government contracts are subject to modification or termination in the
event of changes in funding, and our contractual costs and revenues are subject
to adjustments as a result of audits by government auditors. In addition, all
government contracts require compliance with various contract provisions and
procurement regulations and in certain cases, accounting requirements.
Violations of these regulations could result in the termination of a contract,
imposition of fines, and suspension or debarment from competing for or receiving
awards of additional government contracts. Our exclusion from federal
procurements, the termination of any of our significant government contracts or
the imposition of such penalties could materially and adversely affect our
success.
13
<PAGE> 19
THE CONTINUED STATUS OF ENMAX AS A SMALL DISADVANTAGED BUSINESS IN THE
PROCUREMENT OF CERTAIN GOVERNMENT CONTRACTS MAY BE IMPORTANT
Since 1995 our parent company, Enmax, has participated in the section
8(a) "Small Disadvantaged Business Program" administered by the U.S. Government
Small Business Administration. The 8(a) Program affords eligible firms with
advantages in competing for government contracts. EnvironMax.com, through Enmax,
has been awarded an "HMMS Sustainment" contract with the Department of Defense
pursuant to Enmax's participation in the 8(a) Small Disadvantage Business
Program, which is expected to generate approximately $1.5 million of revenue to
us.
We plan to continue to work with Enmax through government approved
"teaming arrangements" to continue to service these contracts and in the
procurement of future contracts. The Small Business Administration has been
advised of the formation of EnvironMax.com, Inc., and the plans of Enmax to use
the EnvironMax system and EnvironMax.com, Inc. employees and resources. If the
SBA denies the continued status of Enmax as a Small Disadvantaged Business and
we are not able to make sales pursuant to these contracts, there could be an
adverse effect on our anticipated revenue from these contracts.
THE GROWTH OF OUR BUSINESS WILL BE DIMINISHED IF WEB-BASED SOFTWARE IS NOT
ACCEPTED AS A MEDIUM FOR COMMERCE AND BUSINESS NETWORKING APPLICATIONS.
EnvironMax is a web-based software application which runs on LINUX based
and Windows NT capable operating systems through which our customers and
potential customers can execute the functions of our software over the Internet.
If the Internet is not accepted as a medium for networking applications, demand
for our products and services will be diminished. A number of factors may
inhibit Internet usage, including:
- inadequate network infrastructure;
- lack of knowledge and training on Internet use and benefits;
- consumer concerns for Internet privacy and security;
- lack of availability of cost-effective, high-speed service;
- changes in government regulation relating to the Internet; and
- Internet taxation.
If Internet usage grows, the infrastructure may not continue to support
the demands placed on it by that growth and its performance and reliability may
decline. Web sites have experienced interruptions as a result of delays or
outages throughout the Internet infrastructure. If
14
<PAGE> 20
these interruptions continue business may no longer see the Internet as an
effective forum on which to conduct business and Internet usage may decline.
A DISRUPTION OR MALFUNCTION THAT DISABLES OUR COMPUTER SYSTEMS COULD HARM OUR
ABILITY TO PERFORM OUR SERVICES AND NEGATIVELY AFFECT OUR BRAND.
The continuing and uninterrupted performance of our computer systems is
critical to our success. Our customers who access our services through the
Internet may become dissatisfied by any systems disruption or failure that
interrupts our ability to provide our services and content to them. Substantial
or repeated system disruptions or failures would reduce our ability to provide
adequate customer service and undermine our reputation in the business
community. We intend to house our communications hardware and database servers
in various locations throughout the U.S. This creates exposure for us to various
natural disasters as well as other events including, power loss,
telecommunications failures, break-ins and similar events which could negatively
affect the operation of our systems.
Computer viruses, electronic break-ins, computer hackers or other
similar disruptive problems could also harm our systems. Any of these
occurrences and any resulting dissatisfaction among our customers and members of
the business community could negatively affect the EnvironMax brand and image.
Our insurance policies may not adequately compensate us for any losses that may
occur due to any failures or interruptions in our systems. We do not presently
have a formal disaster recovery plan.
A SINGLE SHAREHOLDER WILL BE ABLE TO EXERT SIGNIFICANT CONTROL OVER
ENVIRONMAX.COM, INC.
After this offering, Robert F. Craig will have indirect ownership of
approximately 60 percent of our outstanding common shares. As a result, Mr.
Craig will be able to determine the outcome of actions that require shareholder
approval. For example, Mr. Craig could elect all of our directors, delay or
prevent a transaction in which shareholders might receive a premium over the
prevailing market price for their shares and control changes in management.
FUTURE SALES OF OUR COMMON SHARES AFTER THIS OFFERING MAY NEGATIVELY AFFECT OUR
STOCK PRICE.
The market price of our common shares could decline as a result of sales
of a large number of our common shares in the market following the offering, or
the perception that such sales could occur. Following this offering, we will
have a large number of common shares outstanding and available for resale
beginning at various points in time in the future. These sales also might make
it more difficult for us to sell equity securities in the future at a time and
at a price that we deem appropriate. In addition to the shares being registered
under this registration statement, an additional 13,810,000 shares are subject
to Rule 144 of the Securities and Exchange act of 1933. Under Rule 144, these
shares will not be available for sale on the open market until one year
following the effective date of this registration statement unless an additional
registration statement becomes effective subsequent to the effective date of
this registration statement.
15
<PAGE> 21
Additionally, 100,540 shares of stock, in the form of stock options or employee
held stock will be available for sale 90 days subsequent to the effective date
of this registration statement under rule 701 of the act.
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON SHARES AND THEIR MARKET PRICE MAY
EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS. SUCH VOLATILITY COULD RESULT
IN CLAIMS AGAINST US.
Prior to this offering, investors could not buy or sell our common
shares in the public markets. An active public market for our common shares may
not develop or be sustained after the offering. The market price of our common
shares may decline below the initial public offering price after this offering.
We will unilaterally set the minimum bid price in the initial public offering
for the shares. This initial price may not be indicative of prices that will
prevail in the trading market. Fluctuations in market price and volume are
particularly common among securities of Internet-related and other technology
companies. The market price of our common shares may fluctuate significantly in
response to the following factors:
- variations in quarterly operating results;
- changes in market valuations of Internet-related and other technology
companies;
- our competitors' announcements of significant contracts, acquisitions,
strategic partnerships, joint ventures or capital commitments;
- failure to complete significant advertising and merchandise sales;
- additions or departures of key personnel;
- future sales of common shares; and
- changes in financial estimates by securities analysts.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
outstanding securities. Although recent changes in securities law impose limits
upon such suits, we may be the target of litigation which could result in
substantial costs and divert management's attention and resources.
THIS OFFERING IS SELF UNDERWRITTEN AND OUR PLAN OF DISTRIBUTION DIFFERS FROM
TRADITIONAL PLANS
We plan to use a "Dutch Auction" as the primary method of distributing
our shares. We will solicit offers to purchase from prospective investors
through the internet as well as by traditional means. The auction is open for
purposes of receiving offers to purchase following the posting of the final
prospectus on the website of MainStreet IPO, which is located at
www.MainStreetIPO.com. This method of distribution has not been done previously,
and there
16
<PAGE> 22
is a risk that we will not sell the desired amount of securities or receive the
desired price for those securities. If this were to occur, we would likely
postpone or cancel the offering which could materially affect any future
attempts to sell our shares in a public offering.
THE DISTRIBUTION OF OUR SHARES THROUGH A DUTCH AUCTION, WITHOUT AN UNDERWRITER,
COULD RESULT IN A POOR AFTER MARKET FOR OUR SHARES
Because we are not using a traditional underwriter for this offering,
there may be a greater risk that our common shares will not receive adequate
support from securities firms in the after market, through market-making and
other activities. If this should occur, the market price for our common shares
may decline.
WE MAY SPEND THE NET PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT
AGREE.
The net proceeds of this offering are not allocated for specific uses.
Our management will have broad discretion to spend the net proceeds of this
offering in ways with which investors may not agree. The failure of our
management to apply these funds effectively could result in unfavorable returns,
which could cause the price of our common shares to decline.
YOU WILL INCUR SUBSTANTIAL AND IMMEDIATE DILUTION.
You will incur substantial and immediate dilution in the proforma net
tangible book value of $14.04 per share, assuming an initial public offering
price of $17.00 per share. Net tangible book value per share represents the
amount of total tangible assets less total liabilities, divided by the number of
common shares then outstanding. To the extent that currently outstanding options
are exercised or converted, there will be further dilution in your shares. See
"Dilution."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. In some cases, you can identify forward-looking
statements by terms such as "may," "might," "could," "will," "should," "expect,"
"plan," "intend," "forecast," "anticipate," "believe," "estimate," "predict,"
"foreseeable," "potential," "continue" or the negative of these terms or other
comparable terminology. The forward-looking statements contained in this
prospectus involve known and unknown risks, uncertainties, and other factors
that may cause our or our industry's actual results, level of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these
statements. These factors include, among others, those listed under "Risk
Factors" and elsewhere in this prospectus. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. You should not place undue reliance on these forward-looking
statements.
17
<PAGE> 23
USE OF PROCEEDS
We estimate that we will receive net proceeds of $50,500,000 from the
sale of the 3 million common shares offered if the minimum amount of shares in
this offering are sold to $118,500,000 for the sale of the 7 million common
shares offered as the maximum amount of shares in this offering; in both
instances assuming an initial public offering price of $17.00 per share, and
after deducting estimated offering expenses. We intend to use the net proceeds
of this offering for general corporate purposes, including sales and marketing
activities, product development and support, operations, infrastructure and
hiring of additional personnel. We have not determined the amount of net
proceeds to be used specifically for each of the foregoing purposes.
The cost, timing and amount of funds we need cannot be precisely
determined at this time and will be based on numerous factors. Accordingly, our
management will have broad discretion to spend flexibly in applying the net
proceeds of this offering. Pending their use, we intend to invest the net
proceeds of this offering in interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock
and do not anticipate paying any cash dividends in the foreseeable future. We
currently intend to retain any future earnings for the expansion and operation
of our business.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- - On an actual basis for the predecessor operators of EnvironMax
- - On a pro forma basis to reflect (i) the initial capitalization of 100,000
common shares of EnvironMax.com, Inc. as of February 1, 2000, (ii) the
issuance of 97,840 common shares to employees at $0.01 per share on March
7, 2000, (iii) the sale of 10,000 common shares to an outside investor at
$10 per share on March 15, 2000, (iv) the contribution of certain net
assets from Enmax Corporation for 13,700,000 common shares on March 15,
2000 and (v) the elimination of the net investment and net assets of
EnvironMax that are not being contributed to EnvironMax.com, Inc.
- - On a pro forma as adjusted basis to reflect (i) the pro forma adjustment
(ii) the sale of 3,000,000 shares of common stock by us in this offering at
an assumed actual public offering price of $17.00 per share, after
deducting estimated underwriting discounts and commissions and offering
expenses payable by us, and (iii) the issuance of 169,078 common shares for
consulting services related to the initial public offering.
18
<PAGE> 24
<TABLE>
<CAPTION>
As of December 31, 1999
---------------------------------------------------------
Pro forma
Pro forma as adjusted
Actual (unaudited) (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Capital lease obligations, current portion $ 7,720 $ 7,720 $ 7,720
Capital lease obligations,
long term portion 29,400 29,400 29,400
Shareholders' Equity:
Net investment 355,596
Preferred shares, 20,000,000
shares authorized,
$0.001 par value, none
outstanding
Common shares, 100,000,000
shares authorized,
$0.001 par value,
13,907,840 shares
outstanding (pro forma),
17,076,918 shares
outstanding (pro forma
as adjusted), 13,908 17,077
Additional paid-in capital 110,883 50,607,714
Retained earnings
----------- ----------- -----------
Total shareholders' equity 355,596 124,791 50,624,791
----------- ----------- -----------
Total capitalization $ 392,716 $ 161,911 $50,661,911
=========== =========== ===========
</TABLE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $125,000, or $0.01 per outstanding common share. Pro forma net
tangible book value per share is determined by dividing the amount of our pro
forma tangible assets less total liabilities by the pro forma number of common
shares outstanding at that date. Dilution in pro forma net tangible book value
per share represents the difference between the amount per share paid by
purchasers of common shares in this offering and the adjusted pro forma net
tangible book value per share of common shares immediately after the completion
of this offering.
After giving effect to the issuance and sale of the common shares
offered by us at an assumed initial public offering price of $17.00 per share
and after deducting the estimated offering expenses payable by us, and the
application of the estimated net proceeds from this offering, our adjusted pro
forma net tangible book value as of December 31, 1999 would have been $50.6
million or $2.96 per share. This represents an immediate increase in pro forma
net tangible book value to our existing shareholders of $2.95 per share and an
immediate dilution to
19
<PAGE> 25
purchasers in this offering of $14.04 per share. If the initial public offering
price is higher or lower, the dilution to purchasers in this offering will be
greater or less, respectively.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share $17.00
Pro forma net tangible book value per share
at December 31, 1999, $ 0.01
Increase in pro forma net tangible book value per share
attributable to this offering 2.95
------
Pro forma as adjusted net tangible book value per share
after this offering $2.96
------
Dilution per share to new investors $14.04
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the differences between the number of common shares purchased from us, the
aggregate effective cash consideration paid to us and the average price per
share paid by existing shareholders, new investors purchasing common shares in
this offering and common shares issued for consulting services related to this
offering. The calculation below is based on an assumed initial public offering
price of $17 per share, before deducting estimated offering expenses payable by
us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
---------------------------- ---------------------------- Average Price
Number Percent Amount Percent Per Share
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing shareholders 13,907,840 81.4% $ 101,978 .2% $ 0.01
New investors 3,000,000 17.6% 51,000,000 99.8% 17.00
Consulting shares 169,078 1.0% -- -- --
----------- ----------- ----------- ----------- -----------
Total 17,076,918 100% $51,101,978 100 %
=========== =========== =========== ===========
</TABLE>
This discussion and table assumes no exercise of any stock options
outstanding as of December 31, 1999. As of April 1, 2000, there were options
outstanding to purchase a total of 987,100 common shares with a weighted average
exercise price of $10.00 per share. To the extent that any of these options are
exercised, there will be further dilution to new investors. Please see
"Capitalization."
SELECTED FINANCIAL DATA
The tables that follow present portions of our financial statements and
are not complete. You should read the selected financial data set forth below in
conjunction with our financial statements and the related notes included
elsewhere in this prospectus and in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere in this prospectus. The selected statements of income data for the
period September 1, 1998 (date operations commenced) to December 31, 1998 and
for the year ended December 31, 1999 and the selected balance sheet data as of
December 31, 1999 are derived from, and are qualified by reference to, the
audited financial statements and related notes appearing elsewhere in this
prospectus.
20
<PAGE> 26
We began operations effective September 1, 1998 as a component of Enmax
Corporation ("Enmax"). Enmax is a certified small disadvantaged and
minority-owned 8(a) business, providing information technology solutions to the
government and commercial enterprises as well as prime contracts and
subcontractors who provide high-tech systems and services to the government.
Effective September 1, 1998 (date operations commenced), Enmax was awarded a
$1.7 million contract from a United States government agency to provide
maintenance and technical support on a hazardous material management system
("HMMS") software program utilized by various government sites. The operations
relating to the HMMS contract represented a separate operating component of
EnvironMax. In 1999, EnvironMax obtained two additional contracts totaling $1.5
million to provide additional HMMS support services to the various government
locations utilizing the HMMS software.
SUMMARY FINANCIAL DATA
ENVIRONMAX (AN OPERATING COMPONENT OF ENMAX CORPORATION)
<TABLE>
<CAPTION>
PERIOD SEPTEMBER 1, 1998
(DATE OPERATIONS COMMENCED) YEAR ENDED
TO DECEMBER 31, 1998(1) DECEMBER 31, 1999
------------------------- -----------------
<S> <C> <C>
STATEMENTS OF INCOME DATA:
Total revenues ........................ $ 745,980 $2,432,192
Cost of revenues ...................... 452,195 1,525,630
---------- ----------
Gross profit .......................... 293,785 906,562
Operating costs and expenses:
Selling, general and administrative.. 259,650 808,002
Research and development ............ - 75,417
Interest expense ...................... 856 4,671
---------- ----------
Net income ............................ 33,279 18,472
Pro forma income tax provision(2) ..... 13,312 7,389
---------- ----------
Pro forma net income .................. $ 19,967 $ 11,083
========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------------------------------
BALANCE SHEET DATA: ACTUAL PRO FORMA(3) PRO FORMA AS ADJUSTED(4)
----------- ----------- ------------------------
<S> <C> <C> <C>
Cash and cash equivalents ......................... $ 439 $ 101,978 $50,601,978
Total assets ...................................... 511,521 161,910 50,661,910
Long-term obligations, including current portion .. 37,120 37,120 37,120
Net investment / shareholders' equity(5) .......... 355,596 124,791 50,624,791
</TABLE>
(1) Represents the carved-out portion of the predecessor operations related to
the EnvironMax product included within Enmax. Financial information prior to
September 1, 1998 is not presented as there were no EnvironMax operations prior
to this date. All other operations of Enmax were not related to the EnvironMax
operations and were excluded from the carved-out financial information.
(2) Pro forma income tax provision represents the estimated tax provision based
on a 40% effective tax rate that we believe would have been incurred had Enmax
not been an S corporation for income tax purposes. There are no S corporation
distributions as neither the EnvironMax operations nor Enmax were converted to a
C corporation.
(3) Pro forma amounts reflect the (i) initial capitalization of 100,000 common
shares of EnvironMax.com, Inc. as of February 1, 2000, (ii) the issuance of
97,840 common shares to employees at $0.01 per share on March 7, 2000, (iii) the
sale of 10,000 common shares to an outside investor at $10 per share on March
15, 2000, (iv) the contribution of certain net assets from Enmax Corporation for
13,700,000 common shares on March 15, 2000 and (v) the elimination of the net
investment and net assets of EnvironMax that are not being contributed to
EnvironMax.com, Inc.
(4) Pro forma as adjusted amounts reflect (i) the sale of the 3,000,000 common
shares in this offering at an assumed initial public offering price of $17 per
share, after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, and (ii) the issuance of 169,078
common shares issued for consulting services related to the initial public
offering.
(5) Net investment as of December 31, 1999 is shown in lieu of shareholders'
equity as there is no direct ownership in the carved-out financial statements of
EnvironMax. See audited financial statements appearing elsewhere herein.
21
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
Financial Statements and Notes thereto, included elsewhere in this prospectus.
This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
those set forth under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
We develop and market environmental management, monitoring and tracking
solutions designed to assist commercial and governmental enterprises comply with
environmental regulations. Our initial product, EnvironMax, uses a combination
of computer software, label printers, bar code scanning devices and business
processes to manage and track hazardous materials from purchase through issue
and use, up through disposal. The EnvironMax system reduces purchase and
disposal expenditures, decreases personnel exposure, and helps eliminate such
environmental abuses as improper disposal.
Central to the EnvironMax system is the EnvironMax software. This
software is web-enabled which facilitates distribution and operation as well as
provides connectivity for the flow of information to and from databases. We
believe that web-enabled technologies are the optimal solution for hazardous
material and waste management software and that our EnvironMax product, with its
web-enabled application, provides a universal solution for environmental control
and reporting problems encountered by enterprises worldwide. In addition, the
EnvironMax software can function both as a stand-alone solution, or as an
integrated part of an enterprise wide ERP software package.
HISTORICAL BACKGROUND
Enmax, our corporate parent, and its personnel developed, maintained,
serviced, and supported the Hazardous Material Management System (HMMS) for the
Department of Defense. Enmax obtained 8(a) status as a Small Disadvantaged
Business, which has facilitated its ability to compete in the bidding for
government contracts with the Department of Defense. Over the past few years,
Enmax has continued to develop and improve upon the HMMS software. We have used
this background and experience to develop the EnvironMax system. We believe it
to be superior to the HMMS system in areas such as ease of use, cost efficiency
and technological advancement. In February 2000, EnvironMax.com, Inc. was
incorporated by Enmax, following which, Enmax transferred capital, technologies,
contracts and personnel to us. The transferred technology has been further
developed into the current EnvironMax product. For purposes of presenting our
financial statements, we have segregated the operations related to the
EnvironMax product from the historical financial statements of Enmax
Corporation. Accordingly, our consolidated financial statements in this
prospectus and the following discussion present our
22
<PAGE> 28
financial condition and results of operations as if EnvironMax.com, Inc. had
existed as a separate legal entity for all periods presented.
Historically, Enmax derived a substantial part of its revenues from the
support and maintenance of the HMMS products under government contracts. We
expect that for the foreseeable future the overwhelming majority of our revenues
will be derived from the EnvironMax system, and its associated training,
customer support, and consulting services.
We market our systems primarily in North America but plan to expand into
the international marketplace. We have had no revenues to date from customers
outside the United States.
We began to incur research and development costs in 1999 and have
invested heavily in the expansion of our sales, marketing and professional
services organizations to support our long-term growth strategy. As a result of
research and development investments, we anticipate that our operating expenses
will increase substantially for the foreseeable future as we increase the number
of people and programs in sales and marketing, product development and
professional services. Accordingly, we expect to incur net losses in the first
year of operation.
Revenues for EnvironMax have been comprised of maintenance and technical
support of the HMMS software.
Cost of revenues primarily consist of our costs for maintaining and
providing technical support for the HMMS software and is largely labor costs.
Research and development expenses consist of payroll and related costs
for software engineers, technical writers, quality assurance and research and
development management personnel and the costs of materials used by these
employees in the development of new or enhanced product offerings. Also included
in research and development are the costs associated with supporting
consultants.
General and administrative expenses are composed of professional fees,
salaries and related costs for accounting, administrative, finance, human
resources, information systems and legal personnel as well as costs associated
with implementing and expanding our internal information and management
reporting systems.
We plan to significantly increase our expenditures for sales and
marketing, research and development and general and administrative expenses in
fiscal 2000.
23
<PAGE> 29
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as
the percentage of total revenues for the periods indicated attributable to what
would be the EnvironMax product:
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain carved
out financial data as a percentage of revenues:
<TABLE>
<CAPTION>
Period September 1, 1998
(Date Operations Commenced) Year ended
to December 31, 1998 December 31, 1999
----------------- -----------------
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of revenues 60.6 62.7
----- -----
Gross Profit 39.4 37.3
Selling, general and
administrative expenses 34.8 33.2
Research and development 0.0 3.1
----- -----
Operating income 4.6 1.0
Interest expense 0.1 0.2
----- -----
Income before income tax 4.5 0.8
expense
Pro forma income tax expense
1.8 0.3
----- -----
Pro forma net income 2.7% 0.5%
===== =====
</TABLE>
For the purposes of presenting our financial statements, we have
segregated or "carved-out" the operations relating to the HMMS and EnvironMax
products from the historical financial statements of Enmax. Accordingly, the
results of operations, and related analyses are presented as if EnvironMax.com,
Inc. has existed as a separate legal entity for all the information presented.
The carved out historical information results are not necessarily indicative of
what would have actually occurred had EnvironMax.com, Inc. existed as a separate
legal entity and any historical results are not necessarily indicative of the
results that may come from future operations.
PERIOD SEPTEMBER 1, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31, 1998 AND
YEAR ENDED DECEMBER 31, 1999
Revenues - Our revenues were $746,000 for the period September 1, 1998
to December 31, 1998 and $2.4 million for the year ended December 31, 1999. From
the date we started operations, we have generated revenues from our maintenance
contracts with the United States government. The increase in revenues for the
year ended December 31, 1999 as compared to the period September 1, 1998 to
December 1998 was due to the significant government contract only
24
<PAGE> 30
being in place for four months in 1998 compared to a full year in 1999, as well
as an increase in the number of government contract awards received in 1999.
Cost of Revenues - Our cost of revenues was $452,000 for the period
September 1, 1998 to December 31, 1998 and $1.5 million for the year ended
December 31, 1999, representing a $1.1 million or 237% increase. As a percentage
of revenues, cost of revenues was 60.6% in 1998 and 62.7% in 1999. The increase
in the cost of revenues percentage from 1998 to 1999 primarily resulted from an
increase in labor rates incurred under the contracts.
Selling, General and Administrative - Selling, general and
administrative expenses were $260,000 for the period September 1, 1998 to
December 31, 1998 and $808,000 for the year ended December 31, 1999,
representing an increase of $548,000, or 211.2%, from 1998 to 1999. Selling,
general, and administrative expenses represented 34.8% of our total revenues in
1998 and 33.2% of our total revenues in 1999. The increase in amounts expended
from 1998 to 1999 was due to the increased revenues and increased depreciation
expense in 1999 due to purchases of furniture and equipment. The decrease in
selling, general, and administrative expenses as a percentage of revenues from
1998 to 1999 was a result of a higher revenue base without a corresponding
dollar-for-dollar increase in certain fixed costs.
Research and Development - Research and development expenses were
$75,000 in 1999 and represent the costs incurred in the development of the
EnvironMax system and its web-based business-to-business application.
Interest Expense - Interest expense consists of interest expense on
capital lease obligations. The leases were executed in late 1998 resulting in
lower interest expense as compared to 1999.
Pro Forma Income Taxes - Pro forma income taxes are based on a 40%
effective tax rate that we believe would have been incurred had Enmax not been
an S corporation.
Liquidity and Capital Resources - Since our establishment, we have
funded our operations primarily through revenues generated from our contracts
with the United States government. As of December 31, 1999, we had working
capital of $321,000. Net cash used in operating activities was $341,000 in 1998
and net cash provided by operations was $74,000 in 1999. Cash used in operating
activities was primarily attributed to the increase in trade receivables of
$436,000 in 1998 and the cash provided by operations in 1999 was primarily
attributable to net income of $18,000 coupled with changes in working capital.
Cash provided by financing activities in 1998 was $341,000 and was a result of
working capital funding by Enmax to fund the EnvironMax operations. Cash used in
financing activities in 1999 was $74,000 and was a result of capital
expenditures of $29,000 and positive working capital generated in 1999 that was
absorbed into Enmax's centralized cash management system.
Our purchase of capital property and equipment under capital leases
totaled $44,000 in 1998, and our purchase of capital property and equipment
totaled $29,000 in 1999. We anticipate that we will experience an increase in
our capital expenditures and lease commitments consistent with our anticipated
growth in operations, infrastructure, and personnel.
25
<PAGE> 31
We currently lease two facilities related to our primary operations that
are both classified as operating leases. Our Layton, Utah lease is $4,017 per
month and expires in October 2001. Our Clearfield, Utah lease is $1,209 per
month and expires in June 2000.
We have not undertaken any other financing activities.
As of April 4, we believe that our current cash on hand together with
the proceeds from this offering will be sufficient to meet our capital
expenditures and working capital requirements for at least one year. However, in
the case that we need to raise additional funds to support more rapid expansion,
respond to competitive pressures, acquire complementary businesses or
technologies, or respond to unanticipated requirements, we cannot assure you
that additional funding will be available to us in amounts or on terms
acceptable to us. If sufficient funds are not available or are not available on
acceptable terms, our ability to fund our expansion, take advantage of
acquisition opportunities, develop or enhance our services or products, or
otherwise respond to competitive pressures would be significantly limited.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Boards, or FASB, issued
Statement of Financial Accounting Standard, or SFAS, No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and its components. The only component of
comprehensive income to us is net income.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which established accounting and reporting
standards for derivative instrument and hedging activities. Generally, it
requires that an entity recognize all derivatives as either an asset or
liability and measure those instruments at fair value, as well as identify the
conditions for which a derivative may be specifically designed as a hedge. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000. We do not
currently engage or plan to engage in any derivative or hedging activities. The
adoption of SFAS No. 133 is not expected to have an material impact on our
operating results.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Our products and services are primarily developed in the United States.
We currently do not have an international marketing presence, but anticipate
expansion into the international market in the near future. As a result, our
financial results could be affected by changes in foreign currency exchange
rates or weak economic conditions in foreign markets. Because all of our
revenues are currently denominated in U.S. dollars, a strengthening of the
dollar could make our EnvironMax products less competitive in foreign markets.
26
<PAGE> 32
BUSINESS
OVERVIEW
We design, develop and market environmental management, monitoring and
tracking solutions. Our recent efforts have concentrated on the development,
deployment and management of the EnvironMax system. Our EnvironMax system is a
software and hardware system which promotes compliance with governmental
regulations by providing cradle-to-grave tracking and management of hazardous
material. The software component of our EnvironMax product is designed to be
web-enabled, stand-alone or enterprise-wide ERP solution.
In addition to our EnvironMax system, we expect to develop other
environmental tracking, reporting, monitoring and management solutions. These
include systems that will manage, track, and monitor air emissions and water
discharge.
INDUSTRY BACKGROUND
Hazardous Waste Management -- Based upon state environmental services
records, we believe there are tens of thousands of commercial and governmental
entities in the United States alone with mandated EPA reporting criteria. We
believe this represents only 10% of the potential worldwide market place. The
Department of Defense alone has several thousand sites with hazardous waste
problems. Other Federal agencies have similar problems. In addition, many
foreign countries and companies wishing to do business with the United States
and with companies within the U.S. must comply with stringent environmental
compliance regulations. Based on information provided in the 1997 Congressional
Research Service Report, we estimate the international market for management,
abatement, and tracking tools is approximately $2 Trillion per year.
The Internet -- The Internet has emerged as the fastest growing global
communications medium, enabling millions to connect to a world-wide network to
conduct business and share information electronically. The Internet has also
enabled and accelerated a trend towards distributed software applications. With
a distributed application, instead of installing and running software on an
individual desktop, end users can access the application from remote locations
using the Internet. The Internet makes the physical location of a software
application or service irrelevant to the end user. Rather than individually
installing programs on a number of PCs, businesses can use the Internet to allow
end users to access a single server maintaining the software. As a result of
this trend, application service providers, or ASPs, have emerged. An ASP is a
service provider that centrally hosts services and software applications and
leases them to companies. These companies can access these applications for a
fee through the Internet, rather than buying and installing the programs, thus
reducing the costs associated with hosting the software locally. Nonetheless,
operating under previous computing models, many companies have already invested
tremendous amounts of capital in their existing legacy computer systems and
applications. Therefore, new software applications must be developed to allow
seamless integration between existing legacy systems and applications being
offered by ASPs over the Internet.
27
<PAGE> 33
THE ENVIRONMAX SYSTEM SOLUTION
We provide effective, efficient and complete solutions for environmental
management and tracking in order to assure compliance with environmental rules
and regulations. The EnvironMax system facilitates such compliance and reduces
expenditures by tracking and reporting the procurement, use, and disposal of
hazardous materials and waste.
Business Focus -- With its HMMS system, our parent corporation Enmax
pioneered hazardous waste management solutions by supporting, maintaining and
upgrading a system that manages and tracks hazardous material and waste. This
product has been, and currently is, in use at several major Department of
Defense depots. The EnvironMax system will replace the HMMS program,
incorporating a programming language that enables it to be superior to the HMMS.
Furthermore, the EnvironMax software uses web-enabling technologies that can
gather, track, manage, and distribute information on a global basis.
Effective Distribution Channel -- We plan to provide products and
services to commercial and governmental enterprises that manage hazardous
material and waste, air emissions and water discharge. Our software will be
distributed directly to the users via the Internet, which will enable us to
customize the software and products specifically to the needs of the user. The
user will use our web-enabled software to access databases that we host.
Periodic reports will be generated either locally or from our facilities. Little
or no training would be involved that is not included on the distributed
software itself. The distribution of our software will require that we maintain
several servers throughout the country, and eventually throughout the world.
This will be expensive and may present obstacles that could affect our ability
to distribute the software. We will distribute the EnvironMax hardware, such as
the bar code scanners and label printers, directly to our customers.
Comprehensive Product Offerings -- We believe that our EnvironMax
technology is the de facto standard for hazardous material and waste management
and tracking solutions. EnvironMax should serve as a foundation upon which we
will build multiple products that perform different tasks. Each product has
specific components that can be modified to meet specific customer requirements.
Our business experience will enable us to provide scaleable business
enhancements to the EnvironMax suite of products.
Complementary Value-added Services -- In order for our customers to
implement our product offerings, we will provide a wide range of valuable
complementary services. We believe that our service offerings will provide
significant benefits for hazardous material and waste management. These service
offerings include:
- Technical Support
Our technical support will provide assistance during installation
and operation of the EnvironMax software;
28
<PAGE> 34
- Consulting and Custom Development
Our consultants have extensive technological and environmental
compliance specific business knowledge, which allows us to assist
our customers in implementing EnvironMax solutions;
- Hardware Optimization and Certification
Our consultants can optimize the EnvironMax software for a
specific hardware platform and provide a rigorous testing and
certification process; and
- Documentation
We will provide consistent and up-to-date documentation on the
EnvironMax system.
OUR STRATEGY
Our goal is to become the leading provider of environmental tracking and
monitoring solutions for commercial and governmental enterprises throughout the
world. Key elements of our strategy to achieve our goal include:
Providing the EnvironMax system to users and producers of hazardous
material and wastes--We seek to design a focused hazardous material management
and tracking system that simplifies and facilitates the effective management,
tracking and reporting of hazardous material from procurement through disposal
and provide this solution to users and producers of hazardous material and
wastes.
We plan to continue servicing governmental contracts entered into with
the Department of Defense and expand to other government departments that have
hazardous materials management and tracking requirements.
We also plan to market the EnvironMax product to commercial enterprises
that have a need for an effective management and tracking tool for hazardous
materials. We believe that we will be able to effectively do this by leveraging
our experience and by offering a web-enabled software and enterprise solution
that features comprehensive tracking and reporting functions for all stages of
hazardous material and waste management.
Remaining Committed to Research and Development--We are committed to
continuing our research and development efforts to enhance our products to be
efficient and effective platforms for delivering hazardous material and waste
management and tracking solutions. Our primary focus will be to continue to
improve upon and implement the first fully web-enabled hazardous materials
management, tracking, and reporting system, a fully integrated web-enabled
database management system and a web-enabled project management system.
29
<PAGE> 35
Expanding our Product Line--We plan to continue our marketing and
development efforts by expanding into other areas of environmental management.
In addition to the EnvironMax product, we plan to develop and market integrated
environmental monitoring, tracking and reporting solutions for water discharge
and air emissions.
Expanding Our International Presence--We plan to take advantage of what
we believe will be high international demand for EnvironMax solutions. We plan
to penetrate the international market by recruiting partners to help distribute
our brand and products. Local partners will also enable us to customize our
products to meet local language and regulatory requirements. As our
international penetration continues, we plan to expand our support resources to
meet time zone and language requirements.
PRODUCTS
The EnvironMax system is a tool specifically designed to meet the
complex needs of hazardous waste management and tracking. The EnvironMax system
utilizes Oracle-based, web-enabled software, dedicated databases, portable bar
code scanners, serialized label printers, and business processes to efficiently
manage and monitor hazardous materials. The EnvironMax system has been
specifically designed to enable compliance with the rules and regulations
promulgated by the Environmental Protection Agency. Similar to the approach used
by pharmacies in their management of prescription drugs, our EnvironMax product
monitors and tracks hazardous material and waste through all stages of use, such
as:
Pre-Acquisition--Through the EnvironMax system, hazardous material
requests are sent to those responsible for authorizing the procurement.
Such requests can be automatically sent to multiple workgroups. For
example, requests for authorization may be directed towards fire,
environmental, and safety personnel. Once the material is authorized the
order can be placed.
Storage--Upon arrival, material is entered into the system as new
inventory and transferred to a hazardous material distribution supply
center where it can be assigned a location, shelf, or bin. The
EnvironMax system associates the hazardous material with that location.
Disbursement--As the materials are received and broken down into
job-specific quantities, each container is assigned a unique serial
number and bar code that is linked with its original parent container.
As the materials are distributed, they are weighed and scanned against
the employee's number so that the material location can be tracked as
well as the amount used. The EnvironMax software ensures that the
employee using the material has the proper training and equipment and
that the material is being used in an approved location.
Reuse and Waste--When an employee has completed a job, remaining
materials are again weighed, scanned, and placed back into inventory or
are disposed of. Material that becomes waste is tied to a waste
container. The label on each waste container specifies its waste,
profile which correlates with its disposal instructions.
30
<PAGE> 36
Central to the EnvironMax system is the EnvironMax software. The
EnvironMax software effectively tracks the hazardous materials and waste. It is
web-enabled, which allows it to effectively operate with an array of networks
and operating systems. This also allows us to offer efficient and direct
distribution over the Internet. Through the Internet we are also able to offer
online customer support and instant updates of our products.
The EnvironMax software is Linux based, Windows NT compatible and
web-enabled. It has been designed to be interoperable with multiple platforms to
enable our customers to make efficient use of their existing systems in
collaboration with the EnvironMax software. Many businesses have replaced or are
replacing their older legacy software systems with new integrated enterprise
systems. The EnvironMax software has been designed to be completely integrated
as an ERP solution that will be compatible with most industrial IT systems
currently in use.
In addition to the current EnvironMax system, we intend to expand the
EnvironMax technology into other areas requiring environmental waste monitoring
and tracking systems. We are developing pollution prevention products to assist
in regulatory compliance by managing, tracking, and monitoring air emissions and
water discharge.
SERVICES
In connection with our EnvironMax system we provide consulting and
support services that facilitate the ease and use of our products. We employ
both permanently deployed "Tiger Teams" as well as Help Desk support to assist
our customers at their locations as well as on the phone or via the web. We
employ proprietary tools and processes in supporting our customers on a
nation-wide basis and are preparing to expand to a global support mission.
Help Desk - Direct, dial-in 1-800 type support is available twenty-four
hours a day, seven days a week. Our trouble desk positions are staffed with
trained and proficient technicians, who are backed by the developers responsible
for the products in use.
Tiger Teams - Presently, three support teams or "Tiger Teams" are
deployed geographically across the US, with the intent of providing short notice
response to technical issues that cannot be resolved on the phone. Additionally,
each of our operational locations receives periodic visits from qualified
technicians who can help to resolve any lingering issues, and quantify customer
concerns for the developers.
Embedded Help Files - This support is coupled with help files included
in the products themselves. We utilize user-friendly help files, including over
200 embedded instructional videos in EnvironMax. These systems have been and
will continue to be as forward thinking in the area of self help as technology
and instructional theory will allow. This three-tier support structure has been
in place for several years and provides an effective vehicle for insuring
immediate response to customer concerns and issues and will be implemented
worldwide.
31
<PAGE> 37
GENERATION OF REVENUE
We anticipate generating revenue from contracts with commercial and
governmental enterprises for the use of our EnvironMax system. Our initial
revenue will be obtained through the continued servicing of the HMMS system
under our contracts with the Department of Defense. Upon implementation of the
EnvironMax system, revenues will be generated primarily through the sales of our
EnvironMax system to commercial and governmental enterprises. Each customers
will obtain a limited license to use the EnvironMax software and hardware for a
specific fee. Customization may require additional compensation. In addition,
each customer will pay a separate maintenance and support fee.
CUSTOMERS
EnvironMax customers include a number of major Department of Defense
installations and depots such as:
- Warner-Robins Air Logistics Center, Macon, GA;
- Tobyhanna Army Depot, Allentown, PA;
- Cherry Point Naval Aviation Depot, Cherry Point, NC; and
- Marine Corps Logistic Base, Albany, GA.
In addition to the Department of Defense sites, the NASA Dryden Flight
Research Center at Edwards Air Force Base is also a user. Currently, the
EnvironMax product is contracted through the Federal Systems Integration and
Management (FEDSIM) organization under the U.S. Government General Services
Administration (GSA). EnvironMax.com is in the process of conducting discussions
to add a number of new sites under the U.S. Naval Supply command. We also
anticipate the addition of a number of new U.S. Navy facilities.
STRATEGIC TECHNOLOGY ALLIANCES
We are working to establish partnering agreements with several of the
leading providers of Enterprise Resource Planning (ERP) systems such as Oracle,
SAP and Peoplesoft. We are also working to establish alliances with leading
technical consulting firms such as AEEC, Andersen Consulting and Radian
International, LLC. We anticipate that such technical alliances will produce
benefits to all parties. We also are exploring teaming relationships with
network specialists Cisco Systems, Exodus as well as other Application Services
Providers. The objectives are to provide high quality integrated products
characterized by reliable operations at competitive pricing structures.
SALES, MARKETING AND DISTRIBUTION
Our marketing strategy is to capitalize on the increasing emphasis
placed on pollution prevention, which is driven by federal and local government
regulatory and enforcement agencies, non-government organizations such as
Greenpeace and the Sierra Club, and the general public. Companies that comply
with regulations can avoid costly fines, liability for personal
32
<PAGE> 38
injury and environmental remediation cleanup. In recent years, many companies
have become pro-active in their pollution prevention efforts.
EnvironMax.com plans to target its commercial marketing efforts towards
those companies who are on the EPA's lists of principal environmental
regulations violators as well as violator lists collected by environmental
organizations. Based on lists provided by some state environmental agencies, we
estimate that there are in excess of 100,000 companies throughout the United
States that could benefit from the implementation of EnvironMax.
Marketing plans include a campaign to establish brand name recognition.
We intend to accomplish this through multi-media advertising, trade-shows and
other traditional means.
In addition, we intend to obtain customers through the use of our
strategic alliances, particularly with environmental consultants, enterprise
software systems providers, and Application Service Providers. We also plan to
use, sponsor and conduct cyberseminars.
COMPETITION
The market for hazardous waste management solutions is evolving rapidly
and is intensely competitive, characterized by frequently changing technology
and changing standards. We expect competition to increase both from existing
competitors and new market entrants. We face direct competition in the area of
hazardous material management software. We also face competition from more
traditional non-software solutions to waste management.
In the commercial marketplace there are several providers of solutions.
Companies currently offering hazardous material management solutions for
commercial enterprises include TRW, Inc., Science Application International
Corporation, Radian International, LLC and many others. Many of these
competitors are large, well-established companies with significantly greater
financial resources, more extensive marketing and distribution capabilities,
larger development staffs and more widely recognized brands and products. We
believe that our systems surpass existing technology. However, we expect
competition to increase both from existing competitors and new market entrants.
SOFTWARE ENGINEERING AND DEVELOPMENT
We have invested and will continue to invest in the development of
innovative new product features and technologies in response to the evolving
market for hazardous waste management software solutions and input from key
customers. We seek to deliver consistently strong EnvironMax products targeted
at specific usage as opposed to the more traditional one-size-fits-all hazardous
material management. One of our key strategies has been to offer a scaleable
approach, so that our products can be used by organizations of all sizes. This
is accomplished through web-enabled software, which enables multiple users
throughout the world to connect to our databases.
33
<PAGE> 39
INTELLECTUAL PROPERTY
Our ability to protect our software, business processes and other
proprietary technology is important to our success. To accomplish this, we rely
primarily on trade secrets. We require that our employees and consultants sign
confidentiality and nondisclosure agreements. We generally regulate access to
and distribution of our documentation and other proprietary information. The
web-enabling technologies used to develop the EnvironMax product have been
obtained under a license from Enmax, which allows us to use specific
web-enabling technologies in the design of our EnvironMax product.
We also plan to seek trademark and copyright registration as well as
apply for U.S. and foreign patents. Despite our efforts to protect our
proprietary technology through trade secrets and possible patent, trademark,
tradename, and copyright applications and/or registrations, unauthorized third
parties may attempt to infringe or misappropriate our rights. We cannot be
certain that we will be able to prevent the infringement of our intellectual
property or its unauthorized use in the future. The laws of some foreign
countries do not protect our proprietary rights to the same extent as do the
laws of the United States.
We do not believe that our products infringe on the rights of third
parties. However, our products are comprised of many distinct software
components, some of which are developed by independent parties, and therefore
third parties may assert infringement claims against us which may result in
costly litigation or require us to obtain a license to third-party intellectual
rights. There can be no assurance that such licenses will be available on
reasonable terms or at all, which could have a negative effect on our business,
operating results and financial condition.
EMPLOYEES
As of April 1, 2000, we had a total of 38 employees. Of the total
employees, (14) were in software engineering, (2) in sales and marketing, (6) in
customer service and technical support, (5) in operations, (4) in finance and
administration and (7) assigned to development. Our employees are not
represented by any labor union and are not subject to a collective bargaining
agreement, and we have never experienced a work stoppage. We believe our
relations with our employees are good.
We have entered into a group benefit agreement with Workforce Solutions
Inc. (WSI). While this has proven to be an advantageous resource, as we grow, it
may become more economical for us to internalize our benefit packages and
employee management. Until that time, we intend to use WSI as our group benefit
provider.
FACILITIES
Our business headquarters are located in Salt Lake City, Utah. At this
location, our parent corporation, Enmax, has delivered IT services throughout
the mountain west and across the United States. We currently have a lease with
Associated Western Universities, Inc. for approximately 8591 square feet of
office space currently housing our Salt Lake City office. The current rent is
$6,369 per month. This 2 year lease expires in November 2000.
34
<PAGE> 40
A majority of our operational activities take place in Layton, Utah. In
October 1998 we entered into a lease with PEKA Properties for 5,124 square feet.
The term of this lease is three years and will expire in October 2001. The rent
under this lease is $4,107 per month. A substantial portion of the equipment
used at this site is also leased on a month by month basis.
We also have an office space lease in Clearfield, Utah for approximately
1100 square feet of office space for a monthly cost of $1,209.40, expiring in
June 2000.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table presents information regarding our executive
officers, directors and key employees as of March 1, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------- ---- -----------------------------------------
<S> <C> <C>
Robert F. Craig 52 Chief Executive Officer, Director
Fred Nichols 51 President and General Manager, Director
Dean Hutchings 38 Chief Financial Officer
George D. Torian, Jr. 50 Vice President, Sales and Marketing
Ron DeMass 32 Vice President, Systems
Judi Bergslien 48 Vice President, Support
Genowefa Z. Craig 48 Director
Charles M. Meredith 69 Director
Lynn B. Barney 52 Director
</TABLE>
Robert F. Craig, Chief Executive Officer, Chairman -- Mr. Craig serves
as our Chief Executive Officer and as Chairman of our Board of Directors. Mr.
Craig also has served as Chairman of the Board, President and Chief Executive
Officer of ENMAX Corporation since its incorporation in 1994. He formed ENMAX
initially in 1989, five years prior to its incorporation. From 1970 to 1984 Mr.
Craig held various responsible positions with IBM, initially in engineering and
then in marketing and sales. In 1999, the U.S. Small Business Administration
named Mr. Craig as the 8(a) Contractor of the Year. He earned his Master of
Business Administration degree in 1970 from Western Michigan University.
Fred Nichols, President, General Manager and Director -- Mr. Nichols
serves as our President and General Manager. Prior to joining EnvironMax.com,
Inc. Mr. Nichols served as Vice President of Operations & Marketing for Enmax
Corporation from February 1998 to February 2000. Prior to that date, Mr. Nichols
was with NCI Information Systems, Inc from 1992 until 1998, as the Field Office
Director, Director of Operations, and Program Manager.
35
<PAGE> 41
Prior to NCI, Mr. Nichols served in the U.S. Army from 1971 until 1992, in which
much of his experience involved the Program Management and/or Project Management
for telecommunications and software engineering projects. Mr. Nichols has an MS
in Systems Management from the University of Southern California, a BS in
Business Management from Southwest Missouri State University, and has completed
many additional courses in Program Management, Telecommunications
Systems/Management, and Software Development.
Dean Hutchings, Chief Financial Officer - Mr. Hutchings joined us in
March 2000 as our Chief Financial Officer. Mr. Hutchings has most recently been
with Novell as Marketing Controller from 1998 to March 2000. Prior to that, Mr.
Hutchings was the Chief Financial Officer for Ion Laser Technology, Inc. from
1993 until 1998, a Senior Accountant for Deloitte and Touche LLP from 1988 until
1993, and an Accounting Systems Consultant for PCS Business Solutions from 1986
to 1988. Mr. Hutchings has a BA in Business Administration from California State
University, Fullerton and is a CPA.
George D. Torian, Jr., Vice President, Marketing and Sales - Prior to
joining us, Mr. Torian has worked for IBM since 1973. His position at IBM
include: Sales Representative, Sales School Manager, Account Manager, Senior
Regional Marketing Representative, and Channel Account Manager. Most recently,
Mr. Torian served as a Strategic Alliance Manager responsible for developing and
implementing IBM's worldwide strategy for leveraging strategic alliances to
create marketing opportunities and grow IBM's Global Service revenue. Mr. Torian
earned a B.S. in Business Administration from Morgan State University in 1973.
Ron DeMass, Vice President, Systems - Mr. DeMass serves as our Vice
President of Systems. Most recently Mr. DeMass has served as Director and
Program Manager for the Hazardous Material Management System project for Enmax
Corporation from September 1998 to February 2000. Prior to that, Mr. DeMass was
a Systems Analyst Principle for NCI Information Systems, Inc. (April 1991 -
August 1998), a Programmer/Analyst for West Coast Information Systems, Inc.
(June 1989 - March 1991), and a Programmer for Alta Health Strategies (July 1988
- - June 1989). Mr. DeMass has a BS in Computer Science from Westminster College
of Salt Lake City, and an AAS in Computer Information Systems from Salt Lake
Community College.
Judi Bergslien, Vice President, Support - Ms. Bergslien has been our
Vice President of Support since our inception in February 2000. Prior to this
Ms. Bergslien served as Director of Contracts for Enmax Corporation since August
1998. Prior to that, Ms. Bergslien was with NCI Information Systems, Inc. as the
Acting Director/Utah Regional Office (February 1998 - September 1998), Principal
Systems Analyst (July 1995 - September 1998), and a Senior Systems Analyst
(January 1991 - July 1995). Ms. Bergslien has a BS in General Management and
Accounting from Purdue University.
Genowefa Z. Craig, Director - Ms. Craig has been the Office
Administrator and is Secretary/Treasurer to the Board for Enmax Corporation
since April 1994. Prior to that, Ms. Craig was the Office Manager for CC&Q
Holdings, Inc. from March 1991 until April 1994. Ms.
36
<PAGE> 42
Craig has an AA in Business Administration from Tallahassee Community College.
Genowefa Craig is the spouse of Mr. Robert F. Craig.
Charles M. Meredith, Director - Mr. Meredith has been the Executive
Vice President of Enmax Corporation since 1995 where he directs all areas of the
Enmax corporate business activities, including performance activities for all
existing contracts and business development. Prior to that, Mr. Meredith was
President of The Meredith Group from 1982 until 1995. Mr. Meredith has a BS in
Electrical Engineering from the University of Southern California.
Lynn B. Barney, Director - Mr. Barney has been the principal of Siena
Investments since January 2000. Prior to that, Mr. Barney was a Director of
Strategic Planning for Alta Technology Corporation from 1998 to 1999. Prior to
that Mr. Barney was Director and CEO with Ion Laser Technology, Inc. from 1987
until 1998. He also was the Founder, President and CEO of Cottonwood Security
Bank from 1978 until 1987. Mr. Barney has a BA in Management from the University
of Utah and an MBA from the University of Utah.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We do not currently have a compensation committee, however our bylaws do
empower the board of directors to create one or more committees and appoint
members of the board of directors to serve on them. Our Chairman and Chief
Executive Officer participated in board deliberations regarding the compensation
of all executive officers including himself.
COMPOSITION OF THE BOARD
We currently have five directors. Directors are elected by the
shareholders at each annual meeting of shareholders to serve until the next
annual meeting or until a director's earlier death, resignation, or removal.
There are currently no voting agreements by and among our directors.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for their services as
directors, although members are reimbursed for expenses in connection with
attendance at board and compensation meetings. Some Directors, who also are
employees have received stock options under the 2000 Equity Incentive Plan.
EMPLOYMENT AGREEMENTS
We currently have entered into employment agreements with Dean Hutchings
and George D. Torian. Under the terms of his agreement, in exchange for a base
salary of $115,000 per year and options to acquire 30,000 of our common shares,
Mr. Hutchings is serving in the capacity of Chief Financial Officer and shall
work exclusively for EnvironMax.com, Inc. for a period of two years. Mr. Torian,
who will join us on May 1, 2000, is to serve as our Vice President of Marketing
for a two year term in consideration of his receiving a base yearly salary of
$125,000
37
<PAGE> 43
and options to purchase 50,000 of our common shares. Both Mr. Hutchings
and Mr. Torian have entered into covenants not to compete for a period of one
year following the termination of employment. Other than the contracts with Mr.
Hutchings and Mr. Torian, we have not entered into employment agreements with
any of our executive officers.
EXECUTIVE COMPENSATION
The following table presents annualized compensation information for the
calendar year 2000, paid or accrued by our Chief Executive Officer and each of
our other executive officers whose salary and bonus for calendar year 2000 will
be more than $100,000. Because EnvironMax was not incorporated until early 2000,
none of such officers has worked for more than a few months.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------------------------
LONG TERM COMPENSATION
ANNUALIZED AWARDS PAYOUTS
COMPENSATION
(A) (B) (C) (D) (E) (F) (G) (H) (I)
NAME AND PRINCIPAL POSITION RESTRICTED SECURITIES
OTHER STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
YEAR ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ROBERT F. CRAIG,
CHIEF EXECUTIVE OFFICER 2000 250,000 210,500
FRED NICHOLS, PRESIDENT
GENERAL MANAGER 2000 95,000 50,000
DEAN HUTCHINGS
CHIEF FINANCIAL OFFICER 2000 115,000 30,000
RON DEMASS
VICE PRESIDENT, SYSTEMS 2000 95,000 50,000
</TABLE>
OPTION GRANTS IN LAST YEAR
The following table presents the grants of stock options under our 2000
Equity Incentive Plan during fiscal 2000 to each of our executive officers named
in the Summary Compensation Table.
All option grants under the 2000 Equity Incentive Plan are either
"incentive stock options" (as defined in the Internal Revenue Code) or
nonqualified stock options. Options generally expire on the earlier of the 10
year anniversary of the grant or upon the termination of the optionee's
employment. The exercise price of each option that has been granted is equal to
the fair market value of the optioned securities on the date of grant, as
required by the incentive stock option rules. Nonqualified stock options may be
granted for less than fair market value, but not less than 85% of the stock's
fair market value on the date of the grant.
To date we have not granted any stock options other than those issued
under the 2000 Equity Incentive Plan in which we granted to our employees
incentive stock options to purchase a total of 987,100 common shares. Potential
realizable values are computed by:
38
<PAGE> 44
- Multiplying the number of common shares subject to a given option by
the exercise price per share,
- Assuming that the aggregate option exercise price derived from that
calculation compounds at the annual 5% or 10% rates shown in the table for the
entire 10 year term of the option, and
- Subtracting from that result the aggregate option exercise price. The
5% and 10% assumed annual rates of stock price appreciation are required by the
rules of the Securities and Exchange Commission and do not represent our
estimate or projection of future common stock prices.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------
Percent of
Number of Total Potential Realizable Value At
Securities Options Exercise Assumed Annual Rates of Stock
Underlying Granted to Price Per Price Appreciation for Option
Options Employees in Share Expiration Term
Granted Fiscal Year ($/share) Date ------------------------------------------
Name 0% 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert F. Craig (1)410,500 41.6% 10.00 20-Mar-10 0 $2,581,612 $ 6,542,313
Fred Nichols 50,000 5.1% 10.00 21-Mar-10 0 314,447 796,871
Dean Hutchings 30,000 3.0% 10.00 22-Mar-10 0 188,668 478,123
Ron DeMass (2) 80,000 8.1% 10.00 24-Mar-10 0 503,116 1,274,994
</TABLE>
(1) Includes 200,000 shares granted to his spouse beneficially owned by Mr.
Craig.
(2) Includes 30,000 shares granted to his spouse and beneficially owned by
Mr. DeMass.
The following table presents the number of shares of common stock
subject to vested and unvested stock options held at April 1, 2000 by each of
our executive officers named in the Summary Compensation Table. Also, presented
are values of "in-the-money" options, which represent the positive difference
between the exercise price of each outstanding stock option and the assumed
initial public offering price of $17.00 per share.
<TABLE>
<CAPTION>
Number of Shares
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
April 1, 2000 at April 1, 2000
------------------------- --------------------------
Name Vested Unvested Vested Unvested
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert F. Craig 0 410,500 0 $2,873,500
Fred Nichols 0 50,000 0 350,000
Dean Hutchings 0 30,000 0 210,000
Ron DeMass 0 80,000 0 560,000
</TABLE>
(1) Includes 200,000 shares granted to his spouse beneficially owned by Mr.
Craig.
(2) Includes 30,000 shares granted to his spouse and beneficially owned by
Mr. DeMass.
39
<PAGE> 45
2000 EQUITY INCENTIVE PLAN
The 2000 Equity Incentive Plan was adopted by the board of directors on
March 15, 2000. The plan became effective upon its adoption by the board.
2,210,000 common shares were authorized for issuance under the 2000 Equity
Incentive Plan. Under the 2000 Equity Incentive Plan eligible individuals in our
employ or service (including officers, non-employee board members and
consultants) could be granted options to purchase common shares. The 2000 Equity
Incentive Plan is administered by our board of directors. The exercise price for
the options may be paid in cash or in common shares valued at fair market value
on the exercise date. Each option assumed by any successor corporation will be
adjusted to apply to the number and class of securities which would have been
issuable to the option holder had the option been exercised immediately prior to
the merger or asset sale. Following such merger or asset sale, appropriate
adjustments will also be made to the number and class of securities available
for issuance under the 2000 Equity Incentive Plan and the exercise price payable
per share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same. The board may amend or modify
the 2000 Equity Incentive Plan at any time, subject to any required shareholder
approval. The 2000 Equity Incentive Plan will terminate no later than March 1,
2010.
CERTAIN TRANSACTIONS
RELATIONSHIP WITH ENMAX CORPORATION
EnvironMax.com, is an affiliate corporation of Enmax Corporation. In
February 2000, EnvironMax.com, Inc. was incorporated and in March 2000 Enmax
transferred technologies constituting the EnvironMax system to EnvironMax.com.
We will continue to rely upon Enmax for the securing of certain government
contracts and performing those contracts in "teaming arrangements" with Enmax.
Robert F. Craig owns 100 percent of the outstanding shares of Enmax and
currently possesses 13,841,050 shares or 99.5 percent of EnvironMax.com, Inc..
In addition to the transfer of technology to EnvironMax.com, Enmax transferred
key personnel, management, equipment, inventory, contracts and intangibles. See
Note 5 of Notes to Financial Statements.
PRINCIPAL SHAREHOLDERS
The following table presents information as to the beneficial ownership
of our common shares as of April 1, 2000 by
- Each shareholder known by us to be the beneficial owner of more than 5%
of our common shares;
- Each of our directors;
- Each executive officer listed in our summary compensation table; and
40
<PAGE> 46
- All directors and executive officers as a group.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Unless indicated below, to our knowledge, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable. Common shares subject to options that are currently
exercisable or exercisable within 60 days of April 1, 2000 are deemed to be
outstanding and to be beneficially owned by the person holding the options for
the purpose of computing the percentage ownership of that person but are not
treated as outstanding for the purpose of computing the percentage ownership of
any other person.
SECURITY OWNERSHIP OF BENEFICIAL OWNERS
<TABLE>
<CAPTION>
NAME & ADDRESS(3) OF AMOUNT AND NATURE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------ -------------------- ----------------------- ----------------
<S> <C> <C> <C>
Common Shares Robert F. Craig 13,841,050 (1) 99.5%
Common Shares Fred Nichols 5,000 0.0%
Common Shares Dean Hutchings 1,500 0.0%
Common Shares Ron DeMass 8,000 (2) 0.1%
</TABLE>
(1) Includes beneficial ownership of 13,800,000 shares owned by Enmax
Corporation and 20,000 shares owned by Genowefa Z. Craig.
(2) Includes 3,000 shares beneficially owned by Judi Bergslien.
(3) The address for EnvironMax.com, Inc. is 4190 South Highland Drive, #210,
Salt Lake City, Utah 84124.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------- ------------------------------- ----------------------- ---------------
<S> <C> <C> <C>
Common Shares Genowefa Z. Craig 13,841,050 (1) 99.5%
Common Shares Charles M. Meredith 5,000 0.0%
Common Shares Lynn B. Barney -0- 0.0%
</TABLE>
(1) Includes beneficial ownership of 13,821,050 shares owned by Robert F.
Craig.
41
<PAGE> 47
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
The Company's Articles of Incorporation limit the personal liability of
directors and officers for monetary damages to the maximum extent permitted by
Utah law. Under Utah law, such limitations include monetary damages for any
action taken or failed to be taken as an officer or director except for (i)
amounts representing a financial benefit to which the person is not entitled,
(ii) liability for intentional infliction of harm on the corporation, or its
shareholders, (iii) unlawful distributions, or (iv) an intentional violation of
criminal law. The Articles of Incorporation also provide that the Company will
indemnify its directors and officers against any damages arising from their
actions as agents of the Company, and that the Company may similarly indemnify
its other employees and agents. The Company is also empowered under its Articles
of Incorporation to enter into indemnification agreements with its directors and
officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification by the
Company would be required or permitted. The Company is not aware of any
threatened litigation or proceeding which would result in a claim for such
indemnification.
COMPANY'S PLAN OF DISTRIBUTION
We propose to offer directly to the general public a minimum of
3,000,000 common shares and a maximum of 7,000,000 common shares at the public
offering price set forth on the cover page of this prospectus, as this price is
determined by the process described immediately below.
The public offering price set forth on the cover page of this prospectus
will be based on the results of a dutch auction process which will proceed as
follows:
- After the effectiveness of the registration statement relating to
this offering, prospective investors will be entitled to bid or
offer to purchase through the internet. The auction is open for
purposes of receiving offers to purchase following the posting of
the final prospectus on the web site of MAINSTREETIPO, which is
located at www.MainStreetIPO.com. This website is managed by Todd
& Company, Inc., a broker-dealer registered with the Commission
and a member of the NASD. Todd & Company, Inc. and
MainStreetIPO.com have entered into a management agreement which
essentially provides Todd & Company, Inc. with full control of the
website. The offers to purchase on the bids will specify the
number of shares the potential investor proposes to purchase and
the price the investor is willing to pay for the shares. After an
offer to purchase has been confirmed by our escrow agent, American
Stock Transfer and Trust Company, it may be modified or withdrawn
at any time until the auction is closed. Similarly, new bids may
be placed at any time prior to the close of the auction. The
principal factor in establishing the initial price the public pays
us for the shares will be the price per share, or
42
<PAGE> 48
"clearing price," resulting from the auction that equals the
lowest price set forth in valid firm bids at which all of the
shares in an amount we elect to sell between the 3 million share
minimum offering to the 7 million share maximum offering may be
sold to potential investors. The clearing price may be equal to or
greater than the public offering price set by us, but it will not
be lower. The clearing price will determine the allocation of
shares to successful bidders. All bids which are below the
clearing price will be rejected even if they are higher than the
public offering price. If sufficient bids are not received or the
clearing price is not equal to or greater than the public offering
price for the 3 million share minimum, we will either cancel the
offering or file a post-effective amendment and conduct a new
auction.
- A simplified example of the auction process is as follows: Company
X offers to sell 1,000,000 shares in its public offering through
the dutch auction process, and sets the public offering price at
$20. Company X receives offers to purchase, all of which are kept
confidential until the auction process ends, as set forth in the
following table.
<TABLE>
<CAPTION>
Number of Shares Requested Allocated to
by Bidders Bid Price Clearing Price Successful Bidders
- ------------------------------ ----------------- --------------------------- --------------------
<S> <C> <C> <C>
200,000 $36 $24 100%
150,000 $30 $24 100%
350,000 $28 $24 100%
400,000 $24 $24 75%
700,000 $20 0%
</TABLE>
The offers in the above table include offers to purchase 700,000 shares
at $28 to $36, leaving 300,000 of the 1,000,000 shares offered still available.
400,000 shares are requested at $24. The 300,000 available shares will be
allocated among the 400,000 shares bid for at $24. Thus, $24 is the "clearing"
price, and everyone who bid $24 will be able to purchase 75% of the number of
shares for which they bid. All of the 1,000,000 shares sold to the public in the
offering will be sold by Company X at $24 per share. All bids at $20, which was
the public offering price, would be rejected.
We are offering a minimum of 3 million shares, and a maximum of 7
million of our common shares by this auction process. Throughout the bidding
process, we examine the number of offers to purchase and the amounts per share
of the offers. We will then select the number of shares from our minimum
offering of 3 million shares to our maximum offering of 7 million shares to be
included in this offering. The following table illustrates a hypothetical bid
process for our offering.
43
<PAGE> 49
<TABLE>
<CAPTION>
Number of Shares Requested Aggregate Number of Shares at
By Bidders Bid Price Bid Price and Greater
- --------------------------- --------- ------------------------------
<S> <C> <C>
100,000 $24 100,000
100,000 $23 200,000
150,000 $22 350,000
400,000 $21 750,000
750,000 $20 1,500,000
1,500,000 $19 3,000,000
2,000,000 $18 5,000,000
2,500,000 $17 8,500,000
</TABLE>
Using the above hypothetical, we could fix the number of shares offered
to the public at 3 million shares with a resulting clearing price at $19 per
share for all 3 million shares sold in the offering, at between 3 million and 5
million shares with a resulting clearing price at $18 for all such shares, or at
over 5 million shares with a resulting clearing price of $17 per share. We will
select the number of shares between the 3 million share minimum and the 7
million share maximum, and thus the resulting clearing price for all the shares
in this offering, based on our desire to raise adequate funds to support our
plans and also maximizing shareholder value in light of the actual offers to
purchase. We do not know how many offers to purchase will be submitted, or what
the prices will be for any offers to purchase. The above hypothetical table is
included merely to explain our auction process.
The auction may remain open for up to 90 days after the effective date
of this prospectus, or we may elect to close the auction at any time prior to
the 90-day maximum period.
For a bid to be accepted by us as a valid offer to purchase shares, it
must be accompanied by adequate funds in the form of check, cash or wire
transfer, payable to American Stock Transfer and Trust Company as escrow agent,
to purchase the shares at the price contained in the offer to purchase. The
bids, documents evidencing the offers to purchase, and the funds accompanying
the bids will be held in escrow by our planned transfer agent, American Stock
Transfer and Trust Company or such other transfer agent as we may decide to use.
Our transfer agent will hold all funds in escrow until closing of the offering,
at which time it will close the escrow and distribute the appropriate number of
common shares to successful bidders and distribute to us the offering proceeds.
Any excess funds sent with successful offers to purchase, and all funds sent
with unsuccessful offers to purchase, will be returned to those persons or
entities that had excess or unsuccessful bids. Todd & Company, Inc. is not
responsible to, nor will it, hold funds, establish escrow accounts, or
distribute monies or securities.
We will close the auction on a date within 90 days following the date of
this prospectus, based on the rate at which we receive purchase orders for our
shares, and the number of shares and price range contained in those purchase
order. The offered shares will be sold by us to investors who have submitted
offers to purchase at or in excess of the clearing price, and these investors
will be notified by e-mail, telephone, voice mail, facsimile or mail as soon as
practicable following the close of the auction that their offers to purchase
have been accepted. The number of shares sold to an investor submitting an offer
to purchase precisely at the clearing price may be subject to a pro rata
reduction. Once the auction is closed, an independent auditor whom we have
retained will verify and certify that the auction results are accurate and
comply with the mathematical algorithm of the dutch auction process.
44
<PAGE> 50
Immediately following the effective date of our registration statement,
our prospectus will be posted on the web site of MAINSTREETIPO.com, Inc., which
is located at www.MainStreetIPO.com. MAINSTREETIPO.com, Inc. has contracted with
Todd & Company, Inc., to manage the website in connection with our public
offering. MainStreetIPO.com was established to provide companies with a web site
to offer their capital stock to the public through an electronic auction. We
have licensed space on their web site for up to 90 days to conduct our offering.
MAINSTREETIPO.com states its purpose to be enable "any individual to bid on any
IPO of his or her choice. The site enables any corporation the ability to
perform its own self underwritten (Direct IPO) using a Dutch Auction of its
registered shares." We have been informed that we are the first company to
conduct an offering using MAINSTREETIPO.com's websites therefore, we are not
able to determine its ability to realize its stated purpose or if this format of
conducting a direct initial public offering will be successful.
Todd & Company, Inc. may be deemed an underwriter as that term is
defined under the Securities Act of 1933. However, Todd & Company, Inc. is not
acting in the typical underwriter's capacity. Todd & Company, Inc. has not
evaluated or made any independent inquiries of our Company nor established in
negotiations with us the public offering price or the structure of this
offering, which was based solely on our determination. Todd & Company, Inc. is
not making any investment recommendation or soliciting investments. Offers and
sales are accomplished by us through our prospectus. Todd & Company, Inc. is not
passing upon the suitability of our securities for prospective investors. All
offers and sales will be made by us through the web site and the dutch auction
process, and Todd & Company, Inc. will not be monitoring sales. Todd & Company,
Inc. will receive a fixed fee for its services, and in addition in consideration
for use of the website related to the offering will receive common shares equal
to 1 percent of the total common shares outstanding immediately after the
offering. MAINSTREETIPO.com is currently in discussions with the Division of
Market Regulation regarding its role and that of Todd & Company, Inc. in
connection with this offering.
Price and volume volatility in the market for our common shares may
result from the somewhat unique nature of the proposed plan of distribution.
Price and volume volatility in the market for our common shares after the
completion of this offering may adversely affect the market price of our common
shares.
Prior to the offering, there has been no public market for our common
shares. The initial public offering price for the common shares will be
determined by the process described above and does not necessarily bear any
direct relationship to our assets, current earnings or book value or to any
other established criteria of value, although these factors were considered in
establishing the initial public offering price range. Other factors considered
in determining the initial public offering price range include:
- market conditions;
- the industry in which we operate;
- an assessment of our management;
- our initial operating results;
- our business potential; and
- other factors deemed relevant.
45
<PAGE> 51
If securities broker-dealers seek to participate in our distribution by
soliciting purchase orders which the broker-dealers place for our shares, and
those orders result in them receiving shares in our auction, we may allow those
broker-dealers a discount within NASD guidelines. We have not sought any
securities broker-dealers to solicit purchase orders for our shares in this
auction process, we cannot assure whether or not we will choose to seek
participating broker-dealers, and we have made no decision regarding the amount
of any discount or if any discounts will be provided.
DESCRIPTION OF SECURITIES
We are authorized to issue 100,000,000 common shares, par value of
$0.001 per share, of which 13,907,840 shares are currently issued and
outstanding, and held of record by 63 shareholders. There are options to
purchase 987,100 of our common shares currently held by our employees. There
currently is no public market for our common shares. We are offering a minimum
of 3 million and a maximum of 7 million of our common shares to the general
public in this offering. Following this offering, the market price of our common
shares could decline as a result of the perception that a large number of our
common shares could be offered for sale in the market.
COMMON SHARES
Each common shareholder is entitled to one vote for each common share
held on all matters submitted to a vote of shareholders. Cumulative voting for
the election of directors is not provided for in our articles of incorporation,
which means that the holders of a majority of the shares voted can elect all of
the directors then standing for election.
Upon our liquidation, dissolution, or winding up, the assets legally
available for distribution to our shareholders, after payment of claims of
creditors, are distributable ratably among the holders of our common shares and
any participating preferred shares outstanding at that time after payment of
liquidation preferences, if any, on any outstanding preferred shares. Each
outstanding common share is, and all common shares to be outstanding upon
completion of this offering will be, fully paid and non-assessable.
Dividends may be paid on the outstanding common shares, if and when
declared by the board of directors, out of legally available funds.
Holders of our common shares are not entitled to preemptive rights, and
our common shares are not subject to conversion or redemption.
PREFERRED SHARES
The board of directors is authorized, without further shareholder
approval, to issue from time to time up to an aggregate of 20,000,000 preferred
shares in one or more series and to fix or alter the designations, preferences,
rights and any qualifications, limitations or restrictions of the shares of each
series thereof, including the dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, including sinking fund provisions,
redemption price or prices,
46
<PAGE> 52
liquidation preferences and the number of shares constituting any series or
designation of series. We have no present plans to issue any preferred shares.
SHARES ELIGIBLE FOR FUTURE SALE
RULE 144
IN GENERAL, UNDER RULE 144 AS CURRENTLY IN EFFECT, BEGINNING 90 DAYS
AFTER THE DATE OF THIS PROSPECTUS, A PERSON WHO HAS BENEFICIALLY OWNED COMMON
SHARES FOR AT LEAST ONE YEAR WOULD BE ENTITLED TO SELL WITHIN ANY THREE MONTH
PERIOD A NUMBER OF SHARES THAT DOES NOT EXCEED THE GREATER OF: 1% OF THE COMMON
SHARES THEN OUTSTANDING, WHICH WILL EQUAL BETWEEN 169,000 AND 209,000 SHARES
IMMEDIATELY AFTER THIS OFFERING; OR THE AVERAGE WEEKLY TRADING VOLUME OF THE
COMMON SHARES ON THE NASDAQ NATIONAL MARKET OR ANY OTHER NATIONAL MARKET ON
WHICH THE SHARES ARE TRADED DURING THE FOUR CALENDAR WEEKS PRECEDING THE FILING
OF A NOTICE ON FORM 144 FOR THE SALE. SALES UNDER RULE 144 ARE ALSO SUBJECT TO
MANNER OF SALE PROVISIONS AND NOTICE REQUIREMENTS AND TO THE AVAILABILITY OF
CURRENT PUBLIC INFORMATION ABOUT US.
RULE 144(k)
UNDER RULE 144(K), A PERSON WHO HAS NOT BEEN AN AFFILIATE, AS THAT TERM
IS DEFINED IN RULE 144, AT ANYTIME DURING THE 90 DAYS PRECEDING A SALE, AND WHO
HAS BENEFICIALLY OWNED THE SHARES PROPOSED TO BE SOLD FOR AT LEAST TWO YEARS, IS
ENTITLED TO SELL THOSE SHARES WITHOUT COMPLYING WITH THE MANNER OF SALE, PUBLIC
INFORMATION, VOLUME LIMITATION OR NOTICE PROVISIONS OF RULE 144. THEREFORE,
UNLESS OTHERWISE RESTRICTED, SHARES THAT HAVE BEEN HELD BY A NON-AFFILIATE FOR
AT LEAST TWO YEARS MAY BE SOLD IN THE OPEN MARKET IMMEDIATELY AFTER THE LOCK UP
AGREEMENTS EXPIRE.
RULE 701
Any employee, officer or director of, or consultant to, us who purchases
his shares under a written compensatory plan or contract may be entitled to sell
his shares in reliance on Rule 701. Rule 701 permits affiliates to sell their
Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that non-affiliates may sell
these shares in reliance on Rule 144 without having to comply with the holding
period, public information, volume limitation or notice provisions of Rule 144.
All holders of Rule 701 shares are required to wait until 90 days after the date
of this prospectus before selling those shares. However, all shares issued under
Rule 701 are subject to lock-up agreements and will only become eligible for
sale when the 180-day lock-up agreements expire.
47
<PAGE> 53
There are 13,810,000 shares subject to Section 144 of the Securities and
Exchange act of 1933. These shares will not be available for sale on the open
market until one year following the effective date of this registration
statement unless an additional registration statement becomes effective
subsequent to the effective date of this registration statement. Additionally,
100,540 shares of stock, in the form of stock options or employee held stock
will be available for sale 90 days subsequent to the effective date of this
registration statement under rule 701 of the act..
STOCK OPTIONS
We may file a Form S-8 registration statement under the Securities Act
on or immediately after the date of this prospectus to register all common
shares covered by outstanding options or reserved for future issuance under the
2000 Equity Incentive Plan. Such registration statement will automatically
become effective upon filing. Accordingly, shares covered by that registration
statement will thereupon be eligible for sale in the public markets, unless such
options are subject to vesting restrictions or the contractual restrictions
described above.
STOCK TRANSFER AND LISTING
STOCK TRANSFER AGENT
The planned stock transfer agent for our common shares is American Stock
Transfer & Trust Company.
SHAREHOLDER REPORTS
We furnish our shareholders with annual reports containing audited
financial statements and may furnish our shareholders with quarterly or
semi-annual reports containing unaudited financial information.
LISTING
We have applied for quotation on the American Stock Exchange under the
symbol "ENVX".
LEGAL MATTERS
The validity of the common shares offered hereby will be passed upon for
us by Parsons Behle & Latimer, a Professional Law Corporation, Salt Lake City,
Utah.
EXPERTS
The financial statements of EnvironMax.com, Inc. included in this
prospectus as of February 1, 2000 and EnvironMax (an operating component of
Enmax Corporation) included in this prospectus as of December 31, 1998 and 1999
and for the period September 1, 1998 (date
48
<PAGE> 54
operations commenced) to December 31, 1998 and for the year ended December 31,
1999, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
EnvironMax.com, Inc. has filed with the Securities and Exchange
Commission a registration statement on Form S-1, including exhibits, schedules
and amendments filed with the registration statement, under the Securities Act
with respect to the common stock to be sold in this offering. This prospectus
does not contain all of the information set forth in this registration
statement. For further information about EnvironMax.com, Inc. and the common
shares to be sold in the offering, please refer to this registration statement.
For additional information, please refer to the exhibits that have been filed
with our registration statement on Form S-1. You may read and copy all or any
portion of the registration statement or any other information EnvironMax.com,
Inc. files at the Securities and Exchange Commission's public reference room at
450 Fifth Street, N.W., Washington, D.C., 20549. You can request copies of these
documents upon payment of a duplicating fee, by writing to the Securities and
Exchange Commission. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information about the public reference rooms.
EnvironMax.com, Inc.'s Securities and Exchange Commission filings, including the
registration statement, will also be available to you on the Securities and
Exchange Commission's web site (http://www.sec.gov). We intend to furnish our
shareholders with annual reports containing audited financial statements by an
independent public accounting firm and quarterly reports containing unaudited
financial information for the first three quarters of each year.
49
<PAGE> 55
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ENVIRONMAX (AN OPERATING COMPONENT OF ENMAX CORPORATION):
Independent Auditors' Report........................................................ F-2
Balance Sheets as of December 31, 1998 and 1999..................................... F-3
Statements of Income for the period September 1, 1998 (date operations
commenced) to December 31, 1998 and for the year ended December 31, 1999............ F-4
Statements of Cash Flows for the period September 1, 1998 (date operations
commenced) to December 31, 1998 and for the year ended December 31, 1999............ F-5
Notes to Financial Statements....................................................... F-6
ENVIRONMAX.COM, INC. (A WHOLLY OWNED SUBSIDIARY OF ENMAX CORPORATION):
Independent Auditors' Report....................................................... F-11
Balance Sheet as of February 1, 2000............................................... F-12
Notes to Balance Sheet............................................................. F-13
</TABLE>
F-1
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of Enmax Corporation:
We have audited the accompanying balance sheets of EnvironMax, an
operating component of Enmax Corporation, (the "Company"), as of December 31,
1998 and 1999 and the related statements of income and cash flows for the period
September 1, 1998 (date operations commenced) to December 31, 1998 and for the
year ended December 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1998
and 1999, and the results of its operations and its cash flows for the period
September 1, 1998 (date operations commenced) to December 31, 1998 and for the
year ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
- -----------------------------------
Salt Lake City, Utah
March 1, 2000
F-2
<PAGE> 57
ENVIRONMAX
(AN OPERATING COMPONENT OF ENMAX CORPORATION)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 300 $ 439
Receivables - trade 436,401 446,793
--------- ---------
Total current assets 436,701 447,232
--------- ---------
FURNITURE AND EQUIPMENT, at cost:
Furniture and equipment 43,989 73,358
Less accumulated depreciation and amortization (3,142) (13,426)
--------- ---------
Furniture and equipment - net 40,847 59,932
--------- ---------
OTHER ASSETS 4,357 4,357
--------- ---------
TOTAL ASSETS $ 481,905 $ 511,521
========= =========
LIABILITIES AND NET INVESTMENT
CURRENT LIABILITIES:
Trade accounts payable $ 70 $ 15,689
Accrued payroll 46,415 60,177
Accrued liabilities 16,818 42,939
Capital lease obligations, current portion 6,869 7,720
--------- ---------
Total current liabilities 70,172 126,525
CAPITAL LEASE OBLIGATIONS, long-term portion 37,120 29,400
--------- ---------
Total liabilities 107,292 155,925
COMMITMENTS AND CONTINGENCIES (Notes 1, 2, 3, and 5)
NET INVESTMENT IN ENVIRONMAX 374,613 355,596
--------- ---------
TOTAL LIABILITIES AND NET INVESTMENT $ 481,905 $ 511,521
========= =========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 58
ENVIRONMAX
(AN OPERATING COMPONENT OF ENMAX CORPORATION)
STATEMENTS OF INCOME
FOR THE PERIOD SEPTEMBER 1, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31,
1998 AND FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
REVENUES $ 745,980 $2,432,192
COST OF REVENUES 452,195 1,525,630
---------- ----------
GROSS PROFIT 293,785 906,562
---------- ----------
EXPENSES:
Selling, general, and administrative 259,650 808,002
Research and development 75,417
---------- ----------
Total expenses 259,650 883,419
---------- ----------
OPERATING INCOME 34,135 23,143
INTEREST EXPENSE 856 4,671
---------- ----------
NET INCOME $ 33,279 $ 18,472
========== ==========
PRO FORMA NET INCOME DATA (UNAUDITED):
Net income as reported $ 33,279 $ 18,472
Pro forma income tax provision 13,312 7,389
---------- ----------
PRO FORMA NET INCOME $ 19,967 $ 11,083
========== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 59
ENVIRONMAX
(AN OPERATING COMPONENT OF ENMAX CORPORATION)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 1, 1998 (DATE OPERATIONS COMMENCED) TO
DECEMBER 31, 1998 AND FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 33,279 $ 18,472
Reconcilation to net cash provided by (used in)
operating activities:
Depreciation and amortization 3,142 10,284
Changes in operating assets and liabilities:
Receivables - trade (436,401) (10,392)
Other assets (4,357) -
Trade accounts payable 70 15,619
Accrued payroll 46,415 13,762
Accrued liabilities
16,818 26,121
--------- ---------
Net cash provided by (used in) operating activities (341,034) 73,866
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Purchases of furniture and equipment (29,369)
Payments on capital lease obligations (6,869)
Increase (decrease) in net investment in Environmax 341,334 (37,489)
--------- ---------
Net cash provided by (used in) financing activities 341,334 (73,727)
--------- ---------
INCREASE IN CASH 300 139
CASH, beginning of the year - 300
--------- ---------
CASH, end of the year $ 300 $ 439
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 856 $ 4,671
========= =========
SUPPLEMENTAL NONCASH FINANCING AND INVESTING ACTIVITIES:
Furniture and equipment purchased under capital leases $ 43,989 -
========= =========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 60
ENVIRONMAX
(AN OPERATING COMPONENT OF ENMAX CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD SEPTEMBER 1, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31,
1998 AND FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF COMPANY - Enmax Corporation ("Enmax") is a certified
small disadvantaged and minority-owned 8(a) business, providing
information technology solutions to the government as well as prime
contracts and subcontractors who provide high-tech systems and services
to the government. Effective September 1, 1998 (date operations
commenced), Enmax was awarded a $1.7 million contract from a United
States government agency to provide maintenance and technical support on
a hazardous material management system ("HMMS") software program
utilized by various government sites. The operations relating to the
HMMS contract represent a separate operating component of Enmax, such
operations are hereinafter referred to as EnvironMax ("EnvironMax" or
the "Company"). In 1999, the Company obtained two additional contracts
totaling $1.5 million to provide additional HMMS support services to the
various government locations utilizing the HMMS software. All revenues
in the accompanying financial statements represent services provided
under these HMMS contracts.
The accompanying financial statements as of December 31, 1998 and
1999 and for the period September 1, 1998 to December 31, 1998 and for
the year ended December 31, 1999 represent the "carve-out" of the
EnvironMax operations (all of which relate to the HMMS software) from
the historical financial statements of Enmax. In this context, no direct
ownership relationship existed in the component comprising EnvironMax.
Accordingly, a net investment in EnvironMax is shown in lieu of
stockholders' equity in the accompanying financial statements for the
periods presented. The statements of income exclude the other operations
of Enmax that represent different operations than those of EnvironMax.
Revenues and cost of revenues relating to HMMS services were tracked
separately within Enmax. Allocations of general and administrative
expenses have been made primarily based on personnel, revenue, space,
direct costs of related activities, or estimates of time spent to
provide services. These allocations include amounts for facilities,
marketing, general management, professional services, information
management, and other miscellaneous services. Management believes that
the foregoing allocations were made on a reasonable basis; however, they
are not necessarily indicative of the costs that would have been
incurred on a stand-alone basis or what may be expected for any future
period. Enmax's accounting systems were not designed to track cash
receipts and payments and liabilities on a component-specific basis.
Accordingly, all cash related transactions are included as part of the
net investment in EnvironMax.
F-6
<PAGE> 61
In 1999, management of the Company dedicated research and
development resources to the development of a web-based hazardous
material management and tracking system software utilizing their
understanding and knowledge of the HMMS software. The new software is a
web-based, business-to-business internet application service provider
(ASP) software that has the functionality of the existing HMMS software
that is accessible through the internet. Effective February 1, 2000,
EnvironMax.com, Inc. was incorporated as a wholly owned subsidiary of
Enmax (see Note 5) to further develop and market the new web-based
software product to government and commercial entities with
environmental compliance and reporting requirements.
BASIS OF PRESENTATION - As discussed above, the accompanying
financial statements present, on a historical cost basis, the assets,
liabilities, revenues, and expenses related to EnvironMax, an operating
component of Enmax.
USE OF ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that effect the reported amounts of 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.
FURNITURE AND EQUIPMENT - Furniture and equipment are recorded at
cost. Depreciation is provided on the straight-line method over the
estimated useful lives of the related assets (3 to 10 years). Equipment
leased under capital leases is amortized over the lesser of its useful
life or the lease term.
OTHER ASSETS - Other assets consist of a deposit made on a capital
lease entered into by the Company.
REVENUE RECOGNITION - Maintenance and technical support revenues
under the HMMS contracts are recognized as the services are performed
based on hours incurred.
RESEARCH AND DEVELOPMENT - Research and development costs are
expensed as incurred.
INCOME TAXES - Enmax is not subject to income tax as it is an S
corporation and taxes are paid by the respective stockholder.
Accordingly, no provision for federal and state income taxes is recorded
in the accompanying financial statements. The pro forma income tax
provision is based on a 40% effective tax rate that the Company believes
would have been incurred had Enmax not been an S corporation for income
tax purposes. The effective rate is comprised of a 34 percent federal
statutory rate plus an effective state tax rate net of federal benefit
of six percent. If the Company converted to a C corporation as of
December 31, 1999, it would not have recorded any significant deferred
tax assets or liabilities.
F-7
<PAGE> 62
EARNINGS PER SHARE - Earnings per share have been omitted from the
accompanying statements of income as there is no direct ownership
relationship in the EnvironMax component and such information is not
meaningful.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS - The Company has not
capitalized any software development costs to date in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed." Capitalization of software development costs begins upon the
establishment of technological feasibility of the product. After
technological feasibility is established, material software development
costs are capitalized. The capitalized cost is then amortized on a
straight-line basis over the estimated product life, or on the ratio of
current revenues to total projected product revenues, whichever is
greater.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates the
carrying value of long-term assets based upon current and anticipated
undiscounted cash flows, and recognizes an impairment when such
estimated cash flows will be less than the carrying value of the asset.
Measurement of the amount of impairment, if any, is based upon the
difference between carrying value and fair value.
RISKS AND CONCENTRATION - During the period September 1, 1998 to
December 31, 1998 and the year ended December 31, 1999, the Company's
revenues were derived from United States government contracts. At
December 31, 1999, the Company has one significant contract outstanding
with the United States government for approximately $2,205,000 in fees
which expires in May 2000. Remaining amounts under the contract at
December 31, 1999 are approximately $935,000. The Company is financially
dependent on the significant government contract and there can be no
assurance that a new HMMS maintenance contract will be extended to the
Company by the government upon its expiration. Receivables due at
December 31, 1998 and 1999 of $436,401 and $446,793, respectively, are
due from the United States government.
Financial instruments that potentially subject the Company to a
concentration of credit risk, consist principally of trade accounts
receivable due from the United States government. Historically, the
Company has not experienced significant losses related to such
receivables.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Financial instruments held or
used by the Company include accounts receivable, accounts payable, and
capital lease obligations. The fair values of these instruments, which
could change if market conditions change, are based on management's
estimates. Management believes that the carrying value of these
instruments approximates their fair values.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS - In June 1998, the
Financial Accounting Standards Board, ("FASB"), issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative
instruments and hedging activities. Generally, it
F-8
<PAGE> 63
requires that an entity recognize all derivatives as either an asset or
liability and measure those instruments at fair value, as well as
identify the conditions for which a derivative may be specifically
designed as a hedge. SFAS No. 133, as amended, is effective for fiscal
years beginning after June 15, 2000. The Company does not currently
engage or plan to engage in any derivative or hedging activities. The
adoption of SFAS No. 133 is not expected to have a material impact on
the Company's financial statements.
2. LINE OF CREDIT
Enmax has a $2 million revolving line of credit (increased to $5
million subsequent to year end) with a bank to fund working capital
needs, which also includes the working capital needs of the EnvironMax
component. Because the Enmax accounting system does not track cash
receipts and payments on a component operations-specific basis, no debt
or related interest expense was allocated to the EnvironMax operations.
3. LEASES
The Company leases certain furniture and equipment under capital
leases. It also leases its office facilities under long-term operating
leases. Rent expense under long-term operating leases for the period
September 1, 1998 to December 31, 1998 and for the year ended December
31, 1999 was approximately $22,000 and $52,000, respectively. The gross
book value of furniture and equipment under capital leases totaled
approximately $44,000 as of December 31, 1998 and 1999.
Future minimum lease payments under these lease agreements are as
follows as of December 31, 1999:
<TABLE>
<CAPTION>
CAPITAL OPERATING
-------- ---------
<S> <C> <C>
Year ending December 31:
2000 $ 11,676 $ 53,199
2001 11,676 41,271
2002 11,676 2,058
2003 11,676 1,200
-------- --------
Total 46,704 $ 97,728
========
Less amount representing interest (9,584)
Less current portion (7,720)
--------
Capital leases obligations, long-term portion $ 29,400
========
</TABLE>
4. NET INVESTMENT IN ENVIRONMAX
Enmax funds the working capital requirements of the Company based
upon a centralized cash management system. The net investment in
EnvironMax includes accumulated equity as well as any working capital
funding requirements to/from Enmax.
F-9
<PAGE> 64
The net investment in EnvironMax is comprised of the following for
the period September 1, 1998 to December 31, 1998 and for the year ended
December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
BALANCE, SEPTEMBER 1, 1998 None
Net income $ 33,279
Other capital transactions 341,334
---------
BALANCE, DECEMBER 31, 1998 374,613
Net income 18,472
Other capital transactions (37,489)
---------
BALANCE, DECEMBER 31, 1999 $ 355,596
=========
</TABLE>
5. SUBSEQUENT EVENT
On February 1, 2000, EnvironMax.com, as a successor to EnvironMax,
was incorporated as a wholly owned subsidiary of Enmax. Effective March
1, 2000, all employees of the Company which provided services on the
government HMMS contracts and research on the new web-based HMMS
software were transferred to EnvironMax.com. As the United States
government contracts are not assignable, EnvironMax.com will continue to
team with Enmax to provide services under these contracts. Enmax will
pay EnvironMax.com an established rate, under an agreed-upon fee
schedule, for services performed on the existing HMMS contracts. Certain
net assets relating to the Company were also transferred to
EnvironMax.com at historical cost.
******
F-10
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of EnvironMax.com, Inc.:
We have audited the accompanying balance sheet of EnvironMax.com, Inc.
(the "Company") (a wholly owned subsidiary of Enmax Corporation) as of February
1, 2000 (date of incorporation). This financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of the Company as of February 1, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
- -----------------------------------
Salt Lake City, Utah
April 4, 2000
F-11
<PAGE> 66
ENVIRONMAX.COM, INC.
(A WHOLLY OWNED SUBSIDIARY OF ENMAX CORPORATION)
BALANCE SHEET
FEBRUARY 1, 2000 (DATE OF INCORPORATION)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
CASH $1,000
------
TOTAL ASSETS $1,000
======
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDER'S EQUITY
COMMON STOCK - $0.001 par value; 100,000,000 shares authorized;
100,000 shares issued and outstanding $100
PREFERRED STOCK - $0.001 par value; 20,000,000 shares authorized;
no shares issued and outstanding --
ADDITIONAL PAID-IN CAPITAL 900
------
TOTAL STOCKHOLDER'S EQUITY $1,000
======
</TABLE>
See notes to balance sheet.
F-12
<PAGE> 67
ENVIRONMAX.COM, INC.
(A WHOLLY OWNED SUBSIDIARY OF ENMAX CORPORATION)
NOTES TO BALANCE SHEET
AS OF FEBRUARY 1, 2000 (DATE OF INCORPORATION)
- --------------------------------------------------------------------------------
1. BACKGROUND AND COMPANY DESCRIPTION
BACKGROUND - Enmax Corporation ("Enmax") is a certified small disadvantaged and
minority-owned 8(a) business, providing information technology solutions to the
government as well as prime contracts and subcontractors who provide high-tech
systems and services to the government. Effective September 1, 1998 (date
operations commenced), Enmax was awarded a $1.7 million contract from a United
States government agency to provide maintenance and technical support on a
hazardous material management system ("HMMS") software program utilized by
various government sites. The operations relating to the HMMS contract represent
a separate operating component of Enmax. In 1999, the Company obtained two
additional contracts totaling $1.5 million to provide additional HMMS support
services to the various government locations utilizing the HMMS software.
In 1999, Enmax dedicated research and development resources to the development
of a web-based hazardous material management and tracking system software
utilizing their understanding and knowledge of the HMMS software. The new
software is a web-based, business-to-business internet application service
provider (IASP) software that has the functionality of the existing HMMS
software that is accessible through the internet. Effective February 1, 2000,
EnvironMax.com, Inc. ("EnvironMax.com"), a wholly owned subsidiary of Enmax, was
incorporated as a C corporation in the State of Utah to further develop and
market the new web-based software product.
DESCRIPTION OF COMPANY - The accompanying balance sheet includes the accounts of
EnvironMax.com (the "Company"), a wholly owned subsidiary of Enmax.
EnvironMax.com is a developer and distributor of web-based, business-to-business
information technology services and products to government and commercial
enterprises that have environmental compliance and reporting requirements. The
Company also manages certain hazardous material management system (HMMS)
software program contracts of the United States government on behalf of Enmax
under a teaming agreement. The Company was initially funded on February 1, 2000.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS - The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
F-13
<PAGE> 68
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
3. SUBSEQUENT EVENTS
Effective March 1, 2000, all employees of Enmax, which provided services on the
government HMMS contracts and research on the new web-based HMMS software, were
transferred to the Company. As the contracts are not assignable, the Company
will continue to team with Enmax to provide services under these contracts.
Enmax will pay the Company an established rate, under an agreed-upon fee
schedule, for services performed on the existing HMMS contracts.
On March 7, 2000, the Company issued 97,840 shares of its common stock to
certain employees for $0.01 per share. Between 70% and 100% of the shares
granted to employees are subject to repurchase by the Company should any
employee terminate or not execute employee and other ancillary agreements. The
Company's rights of repurchase expire on the earlier of one year from the date
of grant or the date of a public offering of the Company's securities. The
difference between the fair value of the stock at the grant date and the
exercise price of the options subject to repurchase will be recognized as
compensation expense in the Company's statements of operations over the period
that the repurchase rights expire. The difference between the fair value of the
stock at the grant date and the exercise price of the options vested upon grant
was immediately expensed in the Company's statements of operations. Fair value
at the grant date was deemed to be $10 per share based on actual cash
transactions with unrelated parties.
On March 15, 2000, certain net assets consisting of property and equipment,
software and licenses related to the predecessor operations of the Company were
also transferred to the Company at historical cost for 13,700,000 shares of the
Company's common stock. In addition, on March 15, 2000 the Company issued to an
unrelated third party 10,000 shares of common stock for cash at $10.00 per
share.
On March 15, 2000, the EnvironMax.com, Inc. 2000 Incentive Plan ("Plan") was
adopted by the Company's board of directors. The Plan has authorized the grant
of options up to 2,210,000 shares to selected officers, directors, or employees
of the Company and selected non-employee agents, advisors, and independent
contractors. The Plan allows for the grant of incentive and nonqualified stock
options, common stock, stock appreciation rights, and cash bonuses. The Company
granted 889,100 options to employees of the Company on March 20, 2000 with an
exercise price of $10.00 per share. An additional 98,000 options were granted to
employees of the Company from March 21, 2000 through April 1, 2000 at $10.00 per
share.
******
F-14
<PAGE> 69
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
the Common Shares being registered. All the amounts shown are estimates except
for the registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission
Registration Fee $ 29,400
NASD Filing Fee 7,000
National Market Listing Fee 5,000
Printing and Engraving and Expenses 5,000
Legal Fees and Expenses 125,000
Accounting Fees and Expenses 50,000
Transfer Agent and Registrar Fees and
Expenses 35,000
Web Site Licensing Fee 100,000
Web Site Promotional Fees 140,000
Miscellaneous 3,600
--------
Total $500,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation limit the personal liability of
directors and officers for monetary damages to the maximum extent permitted by
Utah law. Under Utah law, such limitations include monetary damages for any
action taken or failed to be taken as an officer or director except for (i)
amounts representing a financial benefit to which the person is not entitled,
(ii) liability for intentional infliction of harm on the Corporation or its
shareholders, (iii) unlawful distributions, or (iv) an intentional violation of
criminal law. The Articles of Incorporation also provide that the Company will
indemnify its directors and officers against any damages arising from their
actions as agents of the Company, and that the Company may similarly indemnify
its other employees and agents. The Company is also empowered under its Articles
of Incorporation to enter into indemnification agreements with its directors and
officers.
The Company's Bylaws provide that, to the full extent permitted by the
Company's Articles of Incorporation and the Utah Revised Business Corporation
Act, the Company will indemnify (and advance expenses to) the Company's
officers, directors and employees in connection with any action, suit or
proceeding (civil or criminal) to which those persons are
II-1
<PAGE> 70
made party by reason of their being a director, officer or employee). Any such
indemnification will be in addition to the advancement of expenses.
The terms of the Company's Equity Incentive Plan provide that, to the
fullest extent permitted by the Company's Articles of Incorporation and Bylaws
and by Utah law, no member of the committee which administers the plan will be
liable for any action or omission taken with respect to the plan or any options
issued thereunder. The Plan also provides that no member of the Board of
Directors will be liable for any action or determination made in good faith with
respect to the Plan or any option granted thereunder.
There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification is
being sought, nor is the Company aware of any pending or threatened litigation
that may result in claims for indemnification by any director, officer, employee
or other agent.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(i) On February 1, 2000, we issued to EnMax Corporation 100,000 common
shares in exchange for $1,000.
(ii) On March 7, 2000, we issued to employees of EnvironMax.com, Inc.
and EnMax Corporation 97,840 common shares of common stock in exchange for
$978.40.
(iii) On March 15, 2000, we issued to EnMax Corporation 13,700,000
common shares in exchange for property and intellectual property rights.
(iv) On March 15, 1999, we issued and sold 10,000 common shares to Rand
& Jones at a purchase price of $10.00 per share.
(v) From March 20, 2000 through April 1, 2000, we granted options to
purchase an aggregate of 987,100 common shares under our 2000 Equity Incentive
Plan with a weighted average exercise price of $10.00.
No underwriters were involved in the foregoing sales of securities.
Except as noted such sales were deemed to be exempt under the Securities Act in
reliance upon Section 4(2) thereof relative to sales by an issuer not involving
any public offering, or, in the case of options to purchase common stock, Rule
701 under the Securities Act. All of the foregoing securities are deemed
restricted securities for purposes of the Securities Act.
II-2
<PAGE> 71
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
3.1 (i) Articles of Incorporation of EnvironMax.com, Inc.
(ii) By-laws of EnvironMax.com, Inc.
4.1 Shareholders Equity Incentive Plan, dated
5.1* Opinion regarding legality of the offering
10.1* USAF Cooperative Research and Development Agreement Between Logistics
Information Division and EnvironMax.com, Inc.
10.2+ Assignment Agreement
10.3+ License Agreement
10.4 Bill of Sale
10.5 Teaming Agreement
10.6* Website Services Agreement entered into by and between EnvironMax.com,
Inc. and Todd & Company, Inc.
23.1 Independent auditors' consent
23.2 Consent of counsel
27 Financial data schedule
* To be filed by amendment
+ Application has been made to the Commission to seek confidential treatment
of certain provisions. Omitted material for which confidential treatment
has been requested will be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 72
(3) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Salt Lake City, State
of Utah on the 12th day of April, 2000.
ENVIRONMAX.COM, INC.
By: /s/ Robert F. Craig
------------------------------------
Robert F. Craig
Chairman and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert F. Craig and Dean E. Hutchings,
and each of them, his attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for him in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully as to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
/s/ Robert F. Craig Chairman and Chief Executive April 12, 2000
- --------------------------------------- Officer
Robert F. Craig
/s/ Fred Nichols President and Director April 12, 2000
- ---------------------------------------
Fred Nichols
/s/ Dean Hutchings Chief Financial Officer April 12, 2000
- ---------------------------------------
Dean Hutchings
/s/ Charles M. Meredith Director April 12, 2000
- ---------------------------------------
Charles M. Meredith
/s/ Lynn B. Barney Director April 12, 2000
- ---------------------------------------
Lynn B. Barney
</TABLE>
II-5
<PAGE> 74
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
3.1 (i) Articles of Incorporation of EnvironMax.com, Inc.
(ii) By-laws of EnvironMax.com, Inc.
4.1 Shareholders Equity Incentive Plan, dated March 15, 2000
5.1* Opinion regarding legality of the offering
10.1* USAF Cooperative Research and Development Agreement Between Logistics
Information Division and EnvironMax.com, Inc.
10.2+ Assignment Agreement
10.3+ License Agreement
10.4 Bill of Sale
10.5 Teaming Agreement
10.6* Website Services Agreement entered into by and between EnvironMax.com,
Inc. and Todd & Company, Inc.
23.1 Independent auditors' consent
23.2 Consent of counsel
27 Financial data schedule
</TABLE>
* To be filed by amendment
+ Application has been made to the Commission to seek confidential treatment
of certain provisions. Omitted material for which confidential treatment
has been requested will be filed by amendment.
<PAGE> 1
EXHIBIT 3.1(i)
ARTICLES OF INCORPORATION OF ENVIRONMAX.COM, INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ENVIRONMAX.COM, INC.
The undersigned natural person of the age of 18 years or older, acting
as incorporator of a corporation under the Utah Revised Business
Corporation Act as codified at ss. 16-10a-101, et. seq. (as it may be
amended from time to time, the "act"), adopts the following Articles of
Incorporation for such corporation:
ARTICLE I.
NAME
The name of this corporation is EnvironMax.com, Inc.
ARTICLE II.
PURPOSE
The corporation is organized to engage in any lawful act or activity
for which business corporations may be organized under the Act.
ARTICLE III.
AUTHORIZED SHARES
The total number of shares the Corporation is authorized to issue is
120,000,000, which shall be divided into two classes as follows: 20,000,000
Preferred Shares, par value $.001 per share, and 100,000,000 Common Shares, par
value $.001 per share.
The preferences, limitations and relative rights of each class of
shares (to the extent established hereby), and the express grant of authority to
the board of directors to amend these Articles of Incorporation to divide the
Preferred Stock into series or classes, to establish and modify the preferences,
limitations and relative rights of the shares of Preferred Stock, and to
otherwise make changes affecting the capitalization of the Corporation, subject
to the limitations and procedures set forth in section 16-10a-602 of the Act,
are as follows:
A. Common Shares.
1. Each outstanding Common Share shall be entitled to one vote
on each matter to be voted on by the shareholders of the Corporation.
2. Subject to any rights that may be conferred upon any
Preferred Shares, upon dissolution of the Corporation the holders of Common
Shares then outstanding shall be entitled to receive the net assets of the
Corporation. Such net assets shall be divided among and paid to the holders of
Common Shares, on a pro-rata basis, according to the number of Common Shares
held by each of them.
3. Subject to any rights that may be conferred upon any
Preferred Shares, dividends may be paid on the outstanding Common Shares if, as
and when declared by the board of directors, out of funds legally available
therefor.
4. All rights accruing to the outstanding shares of the
Corporation not expressly provided for to the contrary herein or in the
Corporation's bylaws or in any amendment hereto or thereto shall be vested in
the Common Shares.
B. Preferred Shares. Pursuant to the authority granted to the
board of directors by section 16-10a-1002(1)(e) of the Act, the board of
directors, without shareholder action, may amend the Corporation's Articles of
Incorporation, to the extent and in the manner permitted by Section 16-10a-602
of the Act.
ARTICLE IV.
REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the corporation
is 201 South Main Street, Salt Lake City, Utah 84111. The name of the
corporation's initial registered agent at that address is Scott R.
Carpenter.
ARTICLE V.
INITIAL BOARD OF DIRECTORS
<PAGE> 2
The number of directors on the Corporation's board shall be set by the
Corporation's bylaws. The Corporation's initial board of directors shall consist
of five individuals, whose names and addresses are as follows:
<TABLE>
<S> <C>
Robert F. Craig 4190 South Highland Drive, Suite 210
Salt Lake City, UT 84124
Genowefa Z. Craig 4190 South Highland Drive, Suite 210
Salt Lake City, UT 84124
Charles M. Meredith 4190 South Highland Drive, Suite 210
Salt Lake City, UT 84124
Fred E. Nichols 4190 South Highland Drive, Suite 210
Salt Lake City, UT 84124
Lynn B. Barney 3663 East Brighton Point Drive
Salt Lake City, UT 84121
</TABLE>
ARTICLE VI.
LIMITATION OF LIABILITY OF DIRECTORS
To the fullest extent permitted by the Act or any other applicable law
as now in effect or as may hereafter be amended, a director of this
Corporation shall not be personally liable to the Corporation or its
shareholders for monetary damages for any action taken or any failure
to take any action as a director. No amendment to or repeal of this
Article VI shall apply to or have any effect on the liability or
alleged liability of any director of this Corporation for or with
respect to any action or failure to act by such director occurring
prior to such amendment or repeal.
ARTICLE VII.
INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The Corporation shall to the fullest extent permitted by the Act, as
the same may be amended and supplemented, indemnify all directors,
officers, employees, and agents of the Corporation whom it shall have
the power to indemnify hereunder from and against any and all the
expenses, liabilities, and other matters referred to herein or covered
hereby. The Corporation shall have the right to advance expenses to its
directors, officers, employees and agents to the full extent permitted
by the Act, as the same may be amended or supplemented. Such right to
indemnification or advancement of expenses shall continue as to a
person who has ceased to be a director, officer, employee or agent of
the Corporation and shall inure to the benefit of the heirs, executors
and administrators of such persons. The indemnification and advancement
of expenses provided herein shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement may be
entitled under bylaw, agreement, vote of shareholders, vote of
disinterested directors or otherwise. The Corporation shall have the
right to purchase and maintain insurance on behalf of its directors,
officers, employees or agents to the full extent permitted by the Act,
as the same may be amended or supplemented.
ARTICLE VIII.
BYLAWS
The board of directors is authorized to alter or amend the bylaws of
the corporation, except the board of directors may not amend any bylaw
adopted by the shareholders if the shareholders resolution expressly
gives the exclusive right of amendment to the shareholders.
ARTICLE IX.
INCORPORATOR
The name and address of the incorporator is:
Scott R. Carpenter 201 South Main Street, Suite 1800
Salt Lake City, Utah 84111
DATED this ______ day of March, 2000.
------------------
Scott R. Carpenter
ACKNOWLEDGEMENT OF REGISTERED AGENT
The undersigned hereby accepts and acknowledges appointment as initial
registered agent of the corporation named above.
------------------
Scott R. Carpenter
<PAGE> 1
EXHIBIT 3.1(ii)
BYLAWS OF ENVIRONMAX.COM, INC.
BYLAWS OF
ENVIRONMAX.COM, INC.
ARTICLE X. OFFICES
A. Business Office. The principal office of the corporation shall be
located at any place either within or outside the State of Utah as designated in
the company's most recent annual report on file with the Utah Division of
Corporations. The corporation may have such other offices, either within or
without the State of Utah as the board of directors may designate or as the
business of the corporation may require from time to time.
B. Registered Office. The registered office of the corporation shall be
located within the State of Utah and may be, but need not be, identical with the
principal office. The address of the registered office may be changed from time
to time.
ARTICLE XI. SHAREHOLDERS
A. Annual Shareholder Meeting. The annual meeting of the shareholders
shall be held at such time and on such day as shall be fixed by the board of
directors for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday in the State of Utah, such meeting shall be
held on the next succeeding business day.
B. Special Shareholder Meetings. Special meetings of the shareholders,
for any purpose or purposes described in the meeting notice, may be called by
the chief executive officer, or by the board of directors, and shall be called
by the chief executive officer at the request of the holders of not less than
one-fourth of all outstanding votes entitled to be cast on any issue at the
meeting.
C. Place of Shareholder Meeting. The board of directors may designate
any place, either within or without the State of Utah, as the place of meeting
for any annual or any special meeting of the shareholders, unless by written
consent (which may be in the form of waivers of notice or otherwise) all
shareholders entitled to vote at the meeting designate a different place, either
within or without the State of Utah, as the place for the holding of such
meeting. If no designation is made by either the directors or unanimous action
of the voting shareholders, the place of meeting shall be the principal office
of the corporation in the State of Utah.
D. Notice of Shareholder Meeting. Written notice stating the date,
time, and place of any annual or special shareholder meeting shall be delivered
not less than 10 nor more than 70 days before the date of the meeting, either
personally or by mail, by or at the direction of the chief executive officer,
the board of directors, or other persons calling the meeting, to each
shareholder of record entitled to vote at such meeting and to any other
shareholder entitled by the Utah Revised Business Corporation Act , Utah Code
Ann. ss. 16-10a-101 et seq. (the "Act") or the articles of incorporation to
receive notice of the meeting. Notice shall be deemed to be effective at the
earlier of: (1) when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid; (2) on the date shown on the return
receipt if sent by registered or certified mail, return receipt requested, and
the receipt is signed by or on behalf of the addressee; (3) when received; or
(4) 3 days after deposit in the United States mail, if mailed postpaid and
correctly addressed to an address other than that shown in the corporation's
current record of shareholders.
If any shareholder meeting is adjourned to a different date, time, or
place, notice need not be given of the new date, time, and place, if the new
date, time, and place is announced at the meeting before adjournment. But if the
adjournment is for more than 30 days or if a new record date for the adjourned
meeting is or must be fixed, then notice must be given pursuant to the
requirements of the previous paragraph, to those persons who are shareholders as
of the new record date.
E. Waiver of Notice. A shareholder may waive any notice required by the
Act, the articles of incorporation, or these bylaws, by a writing signed by the
shareholder entitled to the notice, which is delivered to the corporation
(either before or after the date and time stated in the notice) for inclusion in
the minutes or filing with the corporate records.
A shareholder's attendance at a meeting:
1. waives objection to lack of notice or defective notice of
the meeting, unless the shareholder at the beginning of the meeting objects to
<PAGE> 2
holding the meeting or transacting business at the meeting because of lack of
notice or effective notice; and
2. waives objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented.
F. Fixing of Record Date. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive payment of any distribution,
or in order to make a determination of shareholders for any other proper
purpose, the board of directors may fix in advance a date as the record date.
Such record date shall not be more than 70 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If no record date is so fixed by the board for the determination of shareholders
entitled to notice of, or to vote at a meeting of shareholders, the record date
for determination of such shareholders shall be at the close of business on the
day the first notice is delivered to shareholders. If no record date is fixed by
the board for the determination of shareholders entitled to receive a
distribution, the record date shall be the date the board authorizes the
distribution. With respect to actions taken in writing without a meeting, the
record date shall be the date the first shareholder signs the consent.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof unless the board of directors fixes a new
record date which it must do if the meeting is adjourned to a date more than 120
days after the date fixed for the original meeting.
G. Shareholder List. After fixing a record date for a shareholders'
meeting, the corporation shall prepare a list of the names of its shareholders
entitled to be given notice of the meeting. The shareholder list must be
available for inspection by any shareholder, beginning on the earlier of 10 days
before the meeting for which the list was prepared or two business days after
notice of the meeting is given for which the list was prepared and continuing
through the meeting, and any adjournment thereof. The list shall be available at
the corporation's principal office or at a place identified in the meeting
notice in the city where the meeting is to be held.
H. Shareholder Quorum and Voting Requirements.
1. Quorum. Except as otherwise required by the Act or the
articles of incorporation, a majority of the outstanding shares of the
corporation entitled to vote on each matter submitted to a vote at a meeting of
shareholders, represented by person or by proxy, shall constitute a quorum. If a
quorum exists, action on a matter, other than the election of directors, is
approved if the votes cast favoring the action exceed the votes cast opposing
the action, unless the articles of incorporation or the Act require a greater
number of affirmative votes.
2. Voting of Shares. Unless otherwise provided in the articles
of incorporation or these bylaws, each outstanding share, regardless of class,
is entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
I. Quorum and Voting Requirements of Voting Groups. If the articles of
incorporation or the Act provide for voting by a single voting group on a
matter, action on that matter is taken when voted upon by that voting group.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to that
matter. Unless the articles of incorporation or the Act provide otherwise, a
majority of the votes entitled to be cast on the matter by the voting group
constitutes a quorum of that voting group for action on that matter.
If the articles of incorporation or the Act provide for voting by two
or more voting groups on a matter, action on that matter is taken only when
voted upon by each of those voting groups counted separately. Action may be
taken by one voting group on a matter even though no action is taken by another
voting group entitled to vote on the matter.
If a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless the
articles of incorporation or the Act require a greater number of affirmative
votes.
J. Greater Quorum or Voting Requirements. The articles of incorporation
may provide for a greater quorum or voting requirement for shareholders, or
voting groups of shareholders, than is provided for by these bylaws. An
amendment to the articles of incorporation that adds, changes, or deletes a
greater quorum or voting requirement for shareholders must meet the same quorum
requirement and be adopted by the same vote and voting groups required to take
action under the quorum and voting requirement then in effect or proposed to be
adopted, whichever is greater.
<PAGE> 3
K. Proxies. At all meetings of shareholders, a shareholder may vote in
person or by proxy which is executed in writing by the shareholder or which is
executed by his duly authorized attorney-in-fact. Such proxy shall be filed with
the secretary of the corporation or other person authorized to tabulate votes
before or at the time of the meeting. No proxy shall be valid after 11 months
from the date of its execution unless otherwise provided in the proxy. All
proxies are revocable unless they meet specific requirements of irrevocability
set forth in the Act. The death or incapacity of a voter does not invalidate a
proxy unless the corporation is put on notice. A transferee for value who
receives shares subject to an irrevocable proxy, can revoke the proxy if he had
no notice of the proxy.
L. Corporation's Acceptance of Votes.
1. Name Corresponds. If the name signed on a vote, consent,
waiver, proxy appointment, or proxy appointment revocation corresponds to the
name of a shareholder, the corporation, if acting in good faith, is entitled to
accept the vote, consent, waiver, proxy appointment, or proxy appointment
revocation and give it effect as the act of the shareholder.
2. Name Does Not Correspond. If the name signed on a vote,
consent, waiver, proxy appointment, or proxy appointment revocation does not
correspond to the name of a shareholder, the corporation, if acting in good
faith, is nevertheless entitled to accept the vote, consent, waiver, proxy
appointment, or proxy appointment revocation and give it effect as the act of
the shareholder if:
a. the shareholder is an entity as defined in the Act
and the name signed purports to be that of an officer or agent of the entity;
b. the name signed purports to be that of an
administrator, executor, guardian, or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver, proxy
appointment, or proxy appointment revocation;
c. the name signed purports to be that of a receiver
or trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver, proxy appointment, or proxy appointment
revocation; or
d. the name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's authority to
sign for the shareholder has been presented with respect to the vote, consent,
waiver, proxy appointment, or proxy appointment revocation; or
e. two or more persons are the shareholder as
co-tenants or fiduciaries and the name signed purports to be the name of at
least one of the co-owners and the person signing appears to be acting on behalf
of all co-tenants or fiduciaries.
3. Shares Registered In More Than One Name. If shares are
registered in the names of two or more persons, whether fiduciaries, members of
a partnership, co-tenants, husband and wife as community property, voting
trustees, persons entitled to vote under a shareholder voting agreement or
otherwise, or if two or more persons (including proxy holders) have the same
fiduciary relationship respecting the same shares, unless the secretary of the
corporation or other officer or agent entitled to tabulate votes is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:
a. If only one votes, such act binds all;
b. If more than one votes, the act of the majority so
voting bind all;
c. If more than one votes, but the vote is evenly
split on any particular matter, each faction may vote the securities in question
proportionately.
If the instrument so filed or the registration of the shares shows that any
tenancy is held in unequal interests, a majority or even split for the purpose
of this section shall be a majority or even split in interest.
4. Rejection of vote. The corporation is entitled to reject a
vote, consent, waiver, proxy appointment, or proxy appointment revocation if the
secretary or other officer or agent authorized to tabulate votes, acting in good
faith, has reasonable basis for doubt about the validity of the signature on it
or about the signatory's authority to sign for the shareholder.
5. Liability. The corporation and its officer or agent who
accepts or rejects a vote, consent, waiver, proxy appointment or proxy
appointment revocation in good faith and in accordance with the standards of
this section are not liable in damages to the shareholder for the consequences
of the acceptance or rejection.
6. Valid Action. Corporate action based on the acceptance or
rejection of a vote, consent, waiver, proxy appointment or proxy appointment
revocation under this section is valid unless a court of competent jurisdiction
<PAGE> 4
determines otherwise.
M. Action by Shareholders Without a Meeting.
1. Written Consent. Any action required or permitted to be
taken at a meeting of the shareholders may be taken without a meeting and
without prior notice if one or more consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shareholders entitled to vote with
respect to the subject matter thereof were present and voted. Action taken under
this section has the same effect as action taken at a duly called and convened
meeting of shareholders and may be described as such in any document.
2. Post-Consent Notice. Unless the written consents of all
shareholders entitled to vote have been obtained, notice of any shareholder
approval without a meeting shall be given at least ten days before the
consummation of the action authorized by such approval to (a) those shareholders
entitled to vote who did not consent in writing, and (b) those shareholders not
entitled to vote. Any such notice must be accompanied by the same material that
is required under the Act to be sent in a notice of meeting at which the
proposed action would have been submitted to the shareholders for action.
3. Effective Date and Revocation of Consents. No action taken
pursuant to this section shall be effective unless all written consents
necessary to support the action are received by the corporation within a
sixty-day period and not revoked. Such action is effective as of the date the
last written consent is received necessary to effect the action, unless all of
the written consents specify an earlier or later date as the effective date of
the action. Any shareholder giving a written consent pursuant to this section
may revoke the consent by a signed writing describing the action and stating
that the consent is revoked, provided that such writing is received by the
corporation prior to the effective date of the action.
4. Unanimous Consent for Election of Directors.
Notwithstanding subsection (1), directors may not be elected by written consent
unless such consent is unanimous by all shares entitled to vote for the election
of directors.
N. Voting for Directors. Unless otherwise provided in the articles of
incorporation, every shareholder entitled to vote for the election of directors
has the right to cast, in person or by proxy, all of the votes to which the
shareholder's shares are entitled for as many persons as there are directors to
be elected and for whom election such shareholder has the right to vote.
Directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present.
ARTICLE XII. BOARD OF DIRECTORS
A. General Powers. All corporate powers shall be exercised by or under
the authority, and the business and affairs of the corporation shall be managed
under the direction, of the board of directors.
B. Number, Tenure, and Qualification of Directors. The authorized
number of directors shall be a number within a range of from 1 to 10, inclusive,
as determined by the board of directors; provided, however, that the number of
directors shall be a minimum of three unless and for as long as the corporation
has fewer than three shareholders, in which case the number of directors may be
equal to or greater than the number of shareholders. After any shares of this
company are issued, the number of directors outside of the range specified above
cannot be changed except by a duly adopted amendment to the articles of
incorporation or by an amendment to this bylaw duly approved by the majority of
the outstanding shares entitled to vote. Each director shall hold office until
the next annual meeting of shareholders or until the director's earlier death,
resignation, or removal. However, if his term expires, he shall continue to
serve until his successor shall have been elected and qualified, or until there
is a decrease in the number of directors. Directors do not need to be residents
of Utah or shareholders of the company.
C. Regular Meetings of the Board of Directors. A regular meeting of the
board of directors shall be held without other notice than this bylaw
immediately after, and at the same place as, the annual meeting of shareholders,
for the purpose of appointing officers and transacting such other business as
may come before the meeting. The board of directors may provide, by resolution,
the time and place for the holding of additional regular meetings without other
notice than such resolution.
D. Special Meetings of the Board of Directors. Special meetings of the
board of directors may be called by or at the request of the chief executive
officer or any director. The person authorized to call special meetings of the
board of directors may fix any place as the place for holding any special
meeting of the board of directors.
E. Notice of, and Waiver of Notice for, Special Director Meetings.
Unless the articles of incorporation provide for a longer or shorter period,
notice of the date, time, and place of any special director meeting shall be
given at least forty-eight (48) hours previously thereto either orally or in
writing. Any director may waive notice of any meeting. Except as provided in the
next sentence, the waiver must be in writing and signed by the director entitled
to the notice. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business and at the
<PAGE> 5
beginning of the meeting (or promptly upon his arrival) objects to holding the
meeting or transacting business at the meeting, and does not thereafter vote for
or assent to action taken at the meeting. Unless required by the articles of
incorporation, neither the business to be transacted at, nor the purpose of, any
special meeting of the board of directors need be specified in the notice or
waiver of notice of such meeting.
F. Director Quorum and Voting.
1. Quorum. A majority of the number of directors prescribed by
resolution shall constitute a quorum for the transaction of business at any
meeting of the board of directors, unless the articles require a greater number.
2. Voting. The act of the majority of the directors present at
a meeting at which a quorum is present when the vote is taken shall be the act
of the board of directors unless the articles of incorporation require a greater
percentage.
Unless the articles of incorporation provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
A director who is present at a meeting of the board of directors or a
committee of the board of directors when corporate action is taken is deemed to
have assented to the action taken unless: (a) the director objects at the
beginning of the meeting (or promptly upon his arrival) to holding or
transacting business at the meeting and does not thereafter vote for or assent
to any action taken at the meeting; and (b) the director contemporaneously
requests his dissent or abstention as to any specific action be entered in the
minutes of the meeting; or (c) the director causes written notice of his dissent
or abstention as to any specific action to be received by the presiding officer
of the meeting before its adjournment or to the corporation immediately after
adjournment of the meeting. The right of dissent or abstention is not available
to a director who votes in favor of the action taken.
G. Director Action Without a Meeting. Any action required or permitted
to be taken by the board of directors at a meeting may be taken without a
meeting if all the directors consent to such action in writing. Action taken by
consent is effective when the last director signs the consent, unless, prior to
such time, any director has revoked a consent by a signed writing received by
the corporation, or unless the consent specifies a different effective date. A
signed consent has the effect of a meeting vote and may be described as such in
any document.
H. Resignation of Directors. A director may resign at any time by
giving a written notice of resignation to the corporation. Such resignation is
effective when the notice is received by the corporation, unless the notice
specifies a later effective date.
I. Removal of Directors. The shareholders may remove one or more
directors at a meeting called for that purpose if notice has been given that a
purpose of the meeting is such removal. The removal may be with or without cause
unless the articles of incorporation provide that directors may only be removed
with cause. If a director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove him. A
director may be removed only if the number of votes cast to remove him exceeds
the number of votes cast not to remove him.
J. Board of Director Vacancies. Unless the articles of incorporation
provide otherwise, if a vacancy occurs on the board of directors, including a
vacancy resulting from an increase in the number of directors, the shareholders
may fill the vacancy. During such time that the shareholders fail or are unable
to fill such vacancies then and until the shareholders act:
1. the board of directors may fill the vacancy; or
2. if the board of directors remaining in office constitute
fewer than a quorum of the board, they may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
If the vacant office was held by a director elected by a voting group of
shareholders:
a. if there are one or more directors elected by the
same voting group, only such directors are entitled to vote to fill the vacancy
if it is filled by the directors; and
b. only the holders of shares of that voting group
are entitled to vote to fill the vacancy if it is filled by the shareholders.
A vacancy that will occur at a specific later date (by reason of a resignation
effective at a later date) may be filled before the vacancy occurs but the new
director may not take office until the vacancy occurs.
K. Director Compensation. By resolution of the board of directors, each
director may be paid his expenses, if any of attendance at each meeting of the
board of directors and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the board of directors or both. No such
payment shall preclude any director from serving the corporation in any other
<PAGE> 6
capacity and receiving compensation therefor.
L. Director Committees.
1. Creation of Committees. Unless the articles of
incorporation provide otherwise, the board of directors may create one or more
committees and appoint members of the board of directors to serve on them. Each
committee must have one or more members, who shall serve at the pleasure of the
board of directors.
2. Selection of Members. The creation of a committee and
appointment of members to it must be approved by the greater of (a) a majority
of all the directors in office when the action is taken or (b) the number of
directors required by the articles of incorporation to take such action.
3. Required Procedures. Those sections of this Article III
which govern meetings, actions without meetings, notice and waiver of notice,
quorum and voting requirements of the board of directors, apply to committees
and their members.
4. Authority. Unless limited by the articles of incorporation,
each committee may exercise those aspects of the authority of the board of
directors which the board of directors confers upon such committee in the
resolution creating the committee. Provided, however, a committee may not:
a. authorize distributions;
b. approve or propose to shareholders action that the
Act requires be approved by shareholders;
c. fill vacancies on the board of directors or on any
of its committees;
d. amend the articles of incorporation pursuant to
the authority of directors to do so;
e. adopt, amend, or repeal bylaws;
f. approve a plan of merger not requiring shareholder
approval;
g. authorize or approve reacquisition of shares,
except according to a formula or method prescribed by the board of directors; or
h. authorize or approve the issuance or sale or
contract for sale of shares or determine the designation and relative rights,
preferences, and limitations of a class or series of shares, except that the
board of directors may authorize a committee (or an officer) to do so within
limits specifically prescribed by the board of directors.
ARTICLE XIII. OFFICERS
A. Number of Officers. The officers of the corporation shall be a
president, and a secretary, each of whom shall be appointed by the board of
directors. Such other officers and assistant officers as may be deemed
necessary, including any vice-presidents, may also be appointed by the board of
directors. If specifically authorized by the board of directors, an officer may
appoint one or more officers or assistant officers. The same individual may
simultaneously hold more than one office in the corporation.
B. Appointment and Term of Office. The officers of the corporation
shall be appointed by the board of directors for a term as determined by the
board of directors. If no term is specified, they shall hold office until the
first meeting of the directors held after the next annual meeting of
shareholders. If the appointment of officers shall not be made at such meeting,
such appointment shall be made as soon thereafter as is convenient. Each officer
shall hold office until his successor shall have been duly appointed and shall
have qualified until his death, or until he shall resign or is removed.
The designation of a specified term does not grant to the officer any
contract rights, and the board may remove the officer at any time prior to the
termination of such term.
C. Removal of Officers. Any officer or agent may be removed by the
board of directors at any time, with or without cause. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Appointment of an officer or agent shall not of itself create contract rights.
D. Resignation of Officers. Any officer may resign at any time, subject
to any rights or obligations under any existing contracts between the officers
and the corporation, by giving notice to the chief executive officer or board of
directors. An officer's resignation shall take effect at the time specified
therein, and the acceptance of such resignation shall not be necessary to make
it effective.
E. President. Unless the board of directors has designated the chairman
of the board or another individual as chief executive officer, the president
shall be the chief executive officer of the corporation and, subject to the
control of the board of directors, shall in general supervise and control all of
the business and affairs of the corporation. Unless there is a chairman of the
board, the president shall, when present, preside at all meetings of the
shareholders and of the board of directors. The president may sign, with the
<PAGE> 7
secretary or any other proper officer of the corporation thereunto authorized by
the board of directors, certificates for shares of the corporation and deeds,
mortgages, bonds, contracts, or other instruments which the board of directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the board of directors from time to time.
F. Vice-Presidents. If appointed, in the absence of the president or in
the event of his death, inability or refusal to act, the vice-president (or in
the event there be more than one vice-president, the vice-presidents in the
order designate at the time of their election, or in the absence of any
designation, then in the order of their appointment) shall perform the duties of
the president, and when so acting, shall have all the powers of, and be subject
to, all the restrictions upon the president.
G. Secretary. The secretary shall: (1) keep the minutes of the
proceedings of the shareholders, the board of directors, and any committees of
the board in one or more books provided for that purpose; (2) see that all
notices are duly given in accordance with the provisions of these bylaws or as
required by law; (3) be custodian of the corporate records; (4) when requested
or required, authenticate any records of the corporation; (5) keep a register of
the post office address of each shareholder which shall be furnished to the
secretary by such shareholder; (6) sign with the chief executive officer, or a
vice-president, certificates for shares of the corporation, the issuance of
which shall have been authorized by resolution of the board of directors; (7)
have general charge of the stock transfer books of the corporation; and (8) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned by the chief executive officer or by
the board of directors. Assistant secretaries, if any, shall have the same
duties and powers, subject to the supervision of the secretary.
H. Treasurer. If appointed, the treasurer shall: (1) have charge and
custody of and be responsible for all funds and securities of the corporation;
(2) receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies, or other depositories as shall be
selected by the board of directors; and (3) in general perform all of the duties
incident to the office of treasurer and such other duties as from time to time
may be assigned by the chief executive officer or by the board of directors. If
required by the board of directors, the treasurer shall give a bond for the
faithful discharge of his or her duties in such sum and with such surety or
sureties as the board of directors shall determine. Assistant treasurers, if
any, shall have the same powers and duties, subject to the supervision of the
treasurer.
I. Salaries. The salaries of the officers shall be fixed from time to
time by the board of directors.
ARTICLE XIV. INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS, AND EMPLOYEES
A. Indemnification of Directors. The corporation shall indemnify and
advance expenses to the directors of the corporation to the fullest extent
permitted by applicable law. Without limiting the generality of the foregoing,
the corporation shall indemnify the directors of the corporation in all cases in
which a corporation may indemnify a director under section 16-10a-902 of the
Act. The corporation shall consider and act as expeditiously as possible upon
any and all requests by a director for indemnification or advancement of
expenses.
B. Indemnification of Officers, Agents and Employees Who Are Not
Directors. The board of directors may indemnify and advance expenses to any
officer, employee or agent of the corporation who is not a director of the
corporation to any extent consistent with public policy, as determined by the
general or specific actions of the board of directors.
C. Insurance. By action of the board of directors, notwithstanding any
interest of the directors in such action, the corporation may purchase and
maintain liability insurance on behalf of a person who is or was a director,
officer, employee, fiduciary or agent of the corporation, against any liability
asserted against or incurred by such person in that capacity or arising from
such person's status as a director, officer, employee, fiduciary or agent,
whether or not the corporation would have the power to indemnify such person
under the applicable provisions of the Act.
ARTICLE XV. CAPITAL STOCK
A. Issuance of Shares. The issuance or sale by the corporation of any
shares of its authorized capital stock of any class, including treasury shares,
shall be made only upon authorization by the board of directors. The board of
directors may authorize the issuance of shares for consideration consisting of
any tangible or intangible property or benefit to the corporation, including
cash, promissory notes, services performed, contracts or arrangements for
services to be performed, or other securities of the corporation. Shares shall
be issued for such consideration expressed in dollars as shall be fixed from
time to time by the board of directors.
B. Certificates for Shares.
<PAGE> 8
1. Content. Certificates representing shares of the
corporation shall at minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of the State of Utah; the name
of the person to whom issued; and the number and class of shares and the
designation of the series, if any, the certificate represents; and be in such
form as determined by the board of directors. Such certificates shall be signed
(either manually or by facsimile) by the chief executive officer or a
vice-president and by the secretary or an assistant secretary and may be sealed
with a corporate seal or a facsimile thereof. Each certificate for shares shall
be consecutively numbered or otherwise identified.
2. Legend as to Class or Series. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences, and limitations
applicable to each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of the board of
directors to determine variations for future series) must be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish the
shareholder this information on request in writing and without charge.
3. Shareholder List. The name and address of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of the corporation.
4. Transferring Shares. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed, or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the corporation as the board of directors may prescribe.
C. Shares Without Certificates.
1. Issuing Shares Without Certificates. Unless the articles of
incorporation provide otherwise, the board of directors may authorize the issue
of some or all the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already represented by
certificates until they are surrendered to the corporation.
2. Information Statement Required. Within a reasonable time
after the issue or transfer of shares without certificates, the corporation
shall send the shareholder a written statement containing, at a minimum, the
information required by the Act.
D. Registration of the Transfer of Shares. Registration of the transfer
of shares of the corporation shall be made only on the stock transfer books of
the corporation. In order to register a transfer, the record owner shall
surrender the shares to the corporation for cancellation, properly endorsed by
the appropriate person or persons with reasonable assurances that the
endorsements are genuine and effective. Unless the corporation has established a
procedure by which a beneficial owner of shares held by a nominee is to be
recognized by the corporation as the owner, the person in whose name shares
stand in the books of the corporation shall be deemed by the corporation to be
the owner thereof for all purposes.
E. Restrictions on Transfer or Registration of Shares. The board of
directors or shareholders may impose restrictions on the transfer or
registration of transfer of shares (including any security convertible into, or
carrying a right to subscribe for or acquire shares). A restriction does not
affect shares issued before the restriction was adopted unless the holders of
the shares are parties to the restriction agreement or voted in favor of or
otherwise consented to the restriction.
A restriction on the transfer or registration of transfer of shares may
be authorized:
1. to maintain the corporation's status when it is dependent
on the number or identity of its shareholders;
2. to preserve entitlements, benefits or exemptions under
federal, or local laws; and
3. for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares
may:
a. obligate the shareholder first to offer the
corporation or other persons (separately, consecutively, or simultaneously) an
opportunity to acquire the restricted shares;
b. obligate the corporation or other persons
(separately, consecutively, or simultaneously) to acquire the restricted shares;
c. require as a condition to such transfer or
registration, that any one or more persons, including the holders of any of its
shares, approve the transfer or registration if the requirement is not
manifestly unreasonable; or
d. prohibit the transfer or the registration of
<PAGE> 9
transfer of the restricted shares to designated persons or classes of persons,
if the prohibition is not manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this section and its existence is noted
conspicuously on the front or back of the certificate or is contained in the
information statement required by this Article VI with regard to shares issued
without certificates. Unless so noted, a restriction is not enforceable against
a person without knowledge of the restriction.
F. Corporation's Acquisition of Shares. The corporation may acquire its
own shares and the shares so acquired constitute authorized but unissued shares.
If the articles of incorporation prohibit the reissue of acquired
shares, the number of authorized shares is reduced by the number of shares
acquired, effective upon amendment of the articles of incorporation, which
amendment may be adopted by the shareholders or the board of directors without
shareholder action. The articles of amendment must be delivered to the Secretary
of State and must set forth:
1. the name of the corporation;
2. the reduction in the number of authorized shares, itemized
by class and series.
3. the total number of authorized shares, itemized by class
and series, remaining after reduction of the shares; and
4. a statement that the amendment was adopted by the board of
directors without shareholder action and that shareholder action was not
required.
ARTICLE XVI. DISTRIBUTIONS
A. Distributions to Shareholders. The board of directors may authorize,
and the corporation may make, distributions to the shareholders of the
corporation subject to any restrictions in the corporation's articles of
incorporation and in the Act.
B. Unclaimed Distributions. If the corporation has mailed three
successive distributions to a shareholder at the shareholders' address as shown
on the corporation's current record of shareholders and the distributions have
been returned as undeliverable, no further attempt to deliver distributions to
the shareholder need be made until another address for the shareholder is made
known to the corporation, at which time all distributions accumulated by reason
of this section, except as otherwise provided by law, be mailed to the
shareholder at such other address.
ARTICLE XVII. MISCELLANEOUS
A. Inspection of Records by Shareholders and Directors. A shareholder
or director of a corporation is entitled to inspect and copy, during regular
business hours at the corporation's principal office, any of the records of the
corporation required to be maintained by the corporation under the Act. If such
person gives the corporation written notice of the demand at least 5 business
days before the date in which such a person wishes to inspect and copy. The
scope of such inspection right shall be not allowed under the Act.
B. Corporate Seal. The board of directors may provide a corporate seal
which may be circular in form and have inscribed thereon any designation
including the name of the corporation, the state of incorporation, and the words
"Corporate Seal."
C. Control Shares. The provisions of the Control Shares Acquisitions
Act, as set forth in section 61-6-1, et. seq. of the Utah Code Annotated, shall
not apply to control share acquisitions of shares of the corporation.
D. Amendments. The corporation's board of directors or shareholders may
amend or repeal the corporation's bylaws at any time unless:
1. the articles of incorporation or the Act reserve this power
exclusively to the shareholders in whole or part; or
2. the shareholders in adopting, amending, or repealing a
particular bylaw provide expressly that the board of directors may not amend or
repeal that bylaw; or
3. the bylaw either establishes, amends, or deletes, a greater
shareholder quorum or voting requirement.
Any amendment which changes the voting or quorum requirement for the
board must meet the same quorum requirement and be adopted by the same vote and
voting groups required to take action under the quorum and voting requirements
then in effect or proposed to be adopted, whichever are greater.
E. Fiscal Year. The fiscal year of the corporation shall be established
by the board of directors.
---------------------------------
, Secretary
----------------------
Adopted this 6th day of March, 2000.
<PAGE> 1
EXHIBIT 4.1
SHAREHOLDERS EQUITY INCENTIVE PLAN
EnvironMax.com, Inc.
2000 EQUITY INCENTIVE PLAN
(As Adopted and Effective March 15, 2000)
1. INTRODUCTION.
The Plan was adopted by the Board on and effective as of March 15, 2000.
The purpose of the Plan is to promote the long-term success of the
Company and the creation of stockholder value by (a) encouraging
Employees, Outside Directors and Consultants to focus on critical
long-range objectives, (b) encouraging the attraction and retention of
Employees, Outside Directors and Consultants with exceptional
qualifications and (c) linking Employees, Outside Directors and
Consultants directly to stockholder interests through increased stock
ownership. The Plan seeks to achieve this purpose by providing for
Awards in the form of Restricted Shares, Stock Units, Options (which may
constitute incentive stock options or nonstatutory stock options) or
stock appreciation rights. The Plan shall be governed by, and construed
in accordance with, the laws of the State of Utah (except their
choice-of-law provisions).
2. ADMINISTRATION.
2.1 COMMITTEE COMPOSITION.
The Plan shall be administered by the Committee. The Committee shall
consist exclusively of two or more directors of the Company, who shall
be appointed by the Board. In addition, the composition of the Committee
shall satisfy: (a) such requirements as the Securities and Exchange
Commission may establish for administrators acting under plans intended
to qualify for exemption under Rule 16b-3 (or its successor) under the
Exchange Act; and (b) such requirements as the Internal Revenue Service
may establish for outside directors acting under plans intended to
qualify for exemption under section 162(m)(4)(C) of the Code.
2.2 COMMITTEE RESPONSIBILITIES.
The Committee shall (a) select the Employees, Outside Directors and
Consultants who are to receive Awards under the Plan, (b) determine the
type, number, vesting requirements and other features and conditions of
such Awards, (c) interpret the Plan and (d) make all other decisions
relating to the operation of the Plan. The Committee may adopt such
rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on
all persons.
2.3 COMMITTEE FOR NON-OFFICER GRANTS.
The Board may also appoint a secondary committee of the Board, which
shall be composed of one or more directors of the Company who need not
satisfy the requirements of Section 2.1. Such secondary committee may
administer the Plan with respect to Employees and Consultants who are
not considered officers or directors of the Company under section 16 of
the Exchange Act, may grant Awards under the Plan to such Employees and
Consultants and may determine all features and conditions of such
Awards. Within the limitations of this Section 2.3, any reference in the
Plan to the Committee shall include such secondary committee.
3. SHARES AVAILABLE FOR GRANTS.
3.1 BASIC LIMITATION.
Common Shares issued pursuant to the Plan may be authorized but unissued
shares or treasury shares. The aggregate number of Options, SARs, Stock
Units and Restricted Shares awarded under the Plan shall not exceed (a)
2,210,000 plus (b) the additional Common Shares described in Sections
3.2, 3.3, and 3.4. The limitations of this Section 3.1 and Section 3.2
shall be subject to adjustment pursuant to Section 11.
3.2 ANNUAL INCREASE IN SHARES.
As of January 1 of each year, commencing with the year 2001, the
aggregate number of Options, SARs, Stock Units and Restricted Shares
that may be awarded under the Plan shall automatically increase by a
number equal to the lesser of (a) 5% of the total number of Common
Shares then outstanding or (b) 250,000.
3.3 ADDITIONAL SHARES.
<PAGE> 2
If Restricted Shares or Common Shares issued upon the exercise of
Options are forfeited, then such Common Shares shall again become
available for Awards under the Plan. If Stock Units, Options or SARs are
forfeited or terminate for any other reason before being exercised, then
the corresponding Common Shares shall again become available for Awards
under the Plan. If Stock Units are settled, then only the number of
Common Shares (if any) actually issued in settlement of such Stock Units
shall reduce the number available under Section 3.1 and the balance
shall again become available for Awards under the Plan. If SARs are
exercised, then only the number of Common Shares (if any) actually
issued in settlement of such SARs shall reduce the number available
under Section 3.1 and the balance shall again become available for
Awards under the Plan. The foregoing notwithstanding, the aggregate
number of Common Shares that may be issued under the Plan upon the
exercise of ISOs shall not be increased when Restricted Shares or other
Common Shares are forfeited.
3.4 UNISSUED SHARES UNDER PRIOR PLAN.
Any Common Shares available for issuance under the terms of the
Company's prior stock option plans, if any (the "Prior Plan") may, in
the Committee's discretion, be made available for Awards under the Plan
(except for Awards that are ISOs), provided that the number of Common
Shares available under the Prior Plan is correspondingly reduced.
3.5 DIVIDEND EQUIVALENTS.
Any dividend equivalents paid or credited under the Plan shall not be
applied against the number of Restricted Shares, Stock Units, Options or
SARs available for Awards, whether or not such dividend equivalents are
converted into Stock Units.
4. ELIGIBILITY.
4.1 INCENTIVE STOCK OPTIONS.
Only Employees who are common-law employees of the Company, a Parent or
a Subsidiary shall be eligible for the grant of ISOs. In addition, an
Employee who owns more than 10% of the total combined voting power of
all classes of outstanding stock of the Company or any of its Parents or
Subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in section 422(c)(5) of the Code are satisfied.
Unless otherwise provided in the Stock Option Agreement, the first
$100,000 worth of optioned shares that are part of an option grant and
can first be exercised in a given year shall be considered ISOs, and the
remainder shall be considered NSOs.
4.2 OTHER GRANTS.
Only Employees, Outside Directors and Consultants shall be eligible for
the grant of Restricted Shares, Stock Units, NSOs or SARs.
5. OPTIONS.
5.1 STOCK OPTION AGREEMENT.
Each grant of an Option under the Plan shall be evidenced by a Stock
Option Agreement between the Optionee and the Company. Such Option shall
be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The Stock Option
Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the
Plan need not be identical. Options may be granted in consideration of a
reduction in the Optionee's other compensation. A Stock Option Agreement
may provide that a new Option will be granted automatically to the
Optionee when he or she exercises a prior Option and pays the Exercise
Price in the form described in Section 6.2.
5.2 NUMBER OF SHARES.
Each Stock Option Agreement shall specify the number of Common Shares
subject to the Option and shall provide for the adjustment of such
number in accordance with Section 11. Options granted to any Optionee in
a single fiscal year of the Company shall not cover more than 250,000
Common Shares, except that Options granted to a new Employee in the
fiscal year of the Company in which his or her service as an Employee
first commences shall not cover more than 750,000 Common Shares. The
limitations set forth in the preceding sentence shall be subject to
adjustment in accordance with Section 11.
5.3 EXERCISE PRICE.
Each Stock Option Agreement shall specify the Exercise Price; provided
that the Exercise Price under an ISO shall in no event be less than 100%
of the Fair Market Value of a Common Share on the date of grant and the
Exercise Price under an NSO shall in no event be less than 85% of the
Fair Market Value of a Common Share on the date of grant. In the case of
an NSO, a Stock Option Agreement may specify an Exercise Price that
varies in accordance with a predetermined formula while the NSO is
outstanding
<PAGE> 3
5.4 EXERCISABILITY AND TERM.
Each Stock Option Agreement shall specify the date or event when all or
any installment of the Option is to become exercisable. The Stock Option
Agreement shall also specify the term of the Option; provided that the
term of an ISO shall in no event exceed 10 years from the date of grant.
A Stock Option Agreement may provide for accelerated exercisability in
the event of the Optionee's death, disability or retirement or other
events and may provide for expiration prior to the end of its term in
the event of the termination of the Optionee's service. A Stock Option
Agreement may provide for early exercise upon the condition that the
Common Shares issued upon exercise be made subject to a Restricted Stock
Agreement with vesting and other restrictions. Options may be awarded in
combination with SARs, and such an Award may provide that the Options
will not be exercisable unless the related SARs are forfeited.
5.5 MODIFICATION OR ASSUMPTION OF OPTIONS.
Within the limitations of the Plan, the Committee may modify, extend or
assume outstanding options or may accept the cancellation of outstanding
options (whether granted by the Company or by another issuer) in return
for the grant of new options for the same or a different number of
shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an Option shall, without the consent
of the Optionee, alter or impair his or her rights or obligations under
such Option.
5.6 BUYOUT PROVISIONS.
The Committee may at any time (a) offer to buy out for a payment in cash
or cash equivalents an Option previously granted or (b) authorize an
Optionee to elect to cash out an Option previously granted, in either
case at such time and based upon such terms and conditions as the
Committee shall establish.
6. PAYMENT FOR OPTION SHARES.
6.1 GENERAL RULE.
The entire Exercise Price of Common Shares issued upon exercise of
Options shall be payable in cash or cash equivalents at the time when
such Common Shares are purchased, except as follows: (a) in the case of
an ISO granted under the Plan, payment shall be made only pursuant to
the express provisions of the applicable Stock Option Agreement, but the
Stock Option Agreement may specify that payment may be made in any
form(s) described in this Section 6; or (b) in the case of an NSO, the
Committee may at any time accept payment in any form(s) described in
this Section 6.
6.2 SURRENDER OF STOCK.
To the extent that this Section 6.2 is applicable, all or any part of
the Exercise Price may be paid by surrendering, or attesting to the
ownership of, Common Shares that are already owned by the Optionee. Such
Common Shares shall be valued at their Fair Market Value on the date
when the new Common Shares are purchased under the Plan. Unless
otherwise permitted by the Committee, the Optionee shall not surrender,
or attest to the ownership of, Common Shares in payment of the Exercise
Price if such action would cause the Company to recognize compensation
expense (or additional compensation expense) with respect to the Option
for financial reporting purposes
6.3 EXERCISE/SALE.
To the extent that this Section 6.3 is applicable, all or any part of
the Exercise Price and any withholding taxes may be paid by delivering
(on a form prescribed by the Company) an irrevocable direction to a
securities broker approved by the Company to sell all or part of the
Common Shares being purchased under the Plan and to deliver all or part
of the sales proceeds to the Company.
6.4 EXERCISE/PLEDGE.
To the extent that this Section 6.4 is applicable, all or any part of
the Exercise Price and any withholding taxes may be paid by delivering
(on a form prescribed by the Company) an irrevocable direction to pledge
all or part of the Common Shares being purchased under the Plan to a
securities broker or lender approved by the Company, as security for a
loan, and to deliver all or part of the loan proceeds to the Company
6.5 PROMISSORY NOTE.
To the extent that this Section 6.5 is applicable, all or any part of
the Exercise Price and any withholding taxes may be paid by delivering
(on a form prescribed by the Company) a full-recourse promissory note.
However, the par value of the Common Shares being purchased under the
Plan, if newly issued, shall be paid in cash or cash equivalents.
6.6 OTHER FORMS OF PAYMENT.
<PAGE> 4
To the extent that this Section 6.6 is applicable, all or any part of
the Exercise Price and any withholding taxes may be paid in any other
form that is consistent with applicable laws, regulations and rules.
7. AUTOMATIC OPTION GRANTS TO OUTSIDE DIRECTORS.
7.1 INITIAL GRANTS.
Each Outside Director who first becomes a member of the Board after the
Effective Date shall receive a one-time grant of an NSO covering 5,000
Common Shares (subject to adjustment under Section 11). Such NSO shall
be granted on the date when such Outside Director first joins the Board.
Such NSO shares shall become exercisable as follows: 25% of such NSO
shares shall become exercisable upon the completion of 12 months of
service from the date of grant and 1/48 of the total number of such NSO
shares shall become exercisable upon the completion of each of the next
36 months of service. An Outside Director who previously was an Employee
shall not receive a grant under this Section 7.1.
7.2 ANNUAL GRANTS.
Upon the conclusion of each regular annual meeting of the Company's
stockholders held in the year 2000 or thereafter, each Outside Director
who will continue serving as a member of the Board thereafter shall
receive an NSO covering 2,000 Common Shares (subject to adjustment under
Section 11), except that such NSO shall not be granted in the calendar
year in which the same Outside Director received the NSO described in
Section 7.1. NSOs granted under this Section 7.2 shall become
exercisable in full on the first anniversary of the date of grant. An
Outside Director who previously was an Employee shall be eligible to
receive grants under this Section 7.2.
7.3 ACCELERATED EXERCISABILITY.
All NSOs granted to an Outside Director under this Section 7 shall also
become exercisable in full in the event of: (a) the termination of such
Outside Director's service because of death, total and permanent
disability or retirement at or after age 65; or (b) a Change in Control
with respect to the Company, except as provided in the next following
sentence. If the Company and the other party to the transaction
constituting a Change in Control agree that such transaction is to be
treated as a "pooling of interests" for financial reporting purposes,
and if such transaction in fact is so treated, then the acceleration of
exercisability shall not occur to the extent that the Company's
independent accountants and such other party's independent accountants
separately determine in good faith that such acceleration would preclude
the use of "pooling of interests" accounting.
7.4 EXERCISE PRICE.
The Exercise Price under all NSOs granted to an Outside Director under
this Section 7 shall be equal to 100% of the Fair Market Value of a
Common Share on the date of grant, payable in one of the forms described
in Sections 6.1, 6.2, 6.3 and 6.4.
7.5 TERM.
All NSOs granted to an Outside Director under this Section 7 shall
terminate on the earliest of (a) the 10th anniversary of the date of
grant or (b) the date 12 months after the termination of such Outside
Director's service for any reason.
7.6 AFFILIATES OF OUTSIDE DIRECTORS.
The Committee may provide that the NSOs that otherwise would be granted
to an Outside Director under this Section 7 shall instead be granted to
an affiliate of such Outside Director. Such affiliate shall then be
deemed to be an Outside Director for purposes of the Plan, provided that
the service-related vesting and termination provisions pertaining to the
NSOs shall be applied with regard to the service of the Outside
Director.
8. STOCK APPRECIATION RIGHTS.
8.1 SAR AGREEMENT.
Each grant of an SAR under the Plan shall be evidenced by an SAR
Agreement between the Optionee and the Company. Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of
the various SAR Agreements entered into under the Plan need not be
identical. SARs may be granted in consideration of a reduction in the
Optionee's other compensation.
8.2 NUMBER OF SHARES.
Each SAR Agreement shall specify the number of Common Shares to which
the SAR pertains and shall provide for the adjustment of such number in
accordance with Section 11. SARs granted to any Optionee in a single
fiscal year shall in no event pertain to more than 250,000 Common
Shares, except that SARs granted to a new Employee in the fiscal year of
the Company in which his or her service as an Employee first
<PAGE> 5
commences shall not pertain to more than 750,000 Common Shares. The
limitations set forth in the preceding sentence shall be subject to
adjustment in accordance with Section 11.
8.3 EXERCISE PRICE.
Each SAR Agreement shall specify the Exercise Price. An SAR Agreement
may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.
8.4 EXERCISABILITY AND TERM.
Each SAR Agreement shall specify the date when all or any installment of
the SAR is to become exercisable. The SAR Agreement shall also specify
the term of the SAR. An SAR Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or
retirement or other events and may provide for expiration prior to the
end of its term in the event of the termination of the Optionee's
service. SARs may be awarded in combination with Options, and such an
Award may provide that the SARs will not be exercisable unless the
related Options are forfeited. An SAR may be included in an ISO only at
the time of grant but may be included in an NSO at the time of grant or
thereafter. An SAR granted under the Plan may provide that it will be
exercisable only in the event of a Change in Control.
8.5 EXERCISE OF SARS.
Upon exercise of an SAR, the Optionee (or any person having the right to
exercise the SAR after his or her death) shall receive from the Company
(a) Common Shares, (b) cash or (c) a combination of Common Shares and
cash, as the Committee shall determine. The amount of cash and/or the
Fair Market Value of Common Shares received upon exercise of SARs shall,
in the aggregate, be equal to the amount by which the Fair Market Value
(on the date of surrender) of the Common Shares subject to the SARs
exceeds the Exercise Price. If, on the date when an SAR expires, the
Exercise Price under such SAR is less than the Fair Market Value on such
date but any portion of such SAR has not been exercised or surrendered,
then such SAR shall automatically be deemed to be exercised as of such
date with respect to such portion.
8.6 MODIFICATION OR ASSUMPTION OF SARS.
Within the limitations of the Plan, the Committee may modify, extend or
assume outstanding SARs or may accept the cancellation of outstanding
SARs (whether granted by the Company or by another issuer) in return for
the grant of new SARs for the same or a different number of shares and
at the same or a different exercise price. The foregoing
notwithstanding, no modification of an SAR shall, without the consent of
the Optionee, alter or impair his or her rights or obligations under
such SAR.
9. RESTRICTED SHARES.
9.1 RESTRICTED STOCK AGREEMENT.
Each grant of Restricted Shares under the Plan shall be evidenced by a
Restricted Stock Agreement between the recipient and the Company. Such
Restricted Shares shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the
Plan. The provisions of the various Restricted Stock Agreements entered
into under the Plan need not be identical.
9.2 PAYMENT FOR AWARDS.
Subject to the following sentence, Restricted Shares may be sold or
awarded under the Plan for such consideration as the Committee may
determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, future services and past services. To
the extent that an Award consists of newly issued Restricted Shares, the
consideration shall consist exclusively of cash, cash equivalents or
past services rendered to the Company (or a Parent or Subsidiary) or,
for the amount in excess of the par value of such newly issued
Restricted Shares, full-recourse promissory notes, as the Committee may
determine.
9.3 VESTING CONDITIONS.
Each Award of Restricted Shares may or may not be subject to vesting.
Vesting shall occur, in full or in installments, upon satisfaction of
the conditions specified in the Restricted Stock Agreement. A Restricted
Stock Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events.
9.4 VOTING AND DIVIDEND RIGHTS.
The holders of Restricted Shares awarded under the Plan shall have the
same voting, dividend and other rights as the Company's other
stockholders. A Restricted Stock Agreement, however, may require that
the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with
<PAGE> 6
respect to which the dividends were paid.
10. STOCK UNITS.
10.1 STOCK UNIT AGREEMENT.
Each grant of Stock Units under the Plan shall be evidenced by a Stock
Unit Agreement between the recipient and the Company. Such Stock Units
shall be subject to all applicable terms of the Plan and may be subject
to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the
Plan need not be identical. Stock Units may be granted in consideration
of a reduction in the recipient's other compensation.
10.2 PAYMENT FOR AWARDS.
To the extent that an Award is granted in the form of Stock Units, no
cash consideration shall be required of the Award recipients.
10.3 VESTING CONDITIONS.
Each Award of Stock Units may or may not be subject to vesting. Vesting
shall occur, in full or in installments, upon satisfaction of the
conditions specified in the Stock Unit Agreement. A Stock Unit Agreement
may provide for accelerated vesting in the event of the Participant's
death, disability or retirement or other events.
10.4 VOTING AND DIVIDEND RIGHTS.
The holders of Stock Units shall have no voting rights. Prior to
settlement or forfeiture, any Stock Unit awarded under the Plan may, at
the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Common Share while the
Stock Unit is outstanding. Dividend equivalents may be converted into
additional Stock Units. Settlement of dividend equivalents may be made
in the form of cash, in the form of Common Shares, or in a combination
of both. Prior to distribution, any dividend equivalents which are not
paid shall be subject to the same conditions and restrictions as the
Stock Units to which they attach.
10.5 FORM AND TIME OF SETTLEMENT OF STOCK UNITS.
Settlement of vested Stock Units may be made in the form of (a) cash,
(b) Common Shares or (c) any combination of both, as determined by the
Committee. The actual number of Stock Units eligible for settlement may
be larger or smaller than the number included in the original Award,
based on predetermined performance factors. Methods of converting Stock
Units into cash may include (without limitation) a method based on the
average Fair Market Value of Common Shares over a series of trading
days. Vested Stock Units may be settled in a lump sum or in
installments. The distribution may occur or commence when all vesting
conditions applicable to the Stock Units have been satisfied or have
lapsed, or it may be deferred to any later date. The amount of a
deferred distribution may be increased by an interest factor or by
dividend equivalents. Until an Award of Stock Units is settled, the
number of such Stock Units shall be subject to adjustment pursuant to
Section 11.
10.6 DEATH OF RECIPIENT.
Any Stock Units Award that becomes payable after the recipient's death
shall be distributed to the recipient's beneficiary or beneficiaries.
Each recipient of a Stock Units Award under the Plan shall designate one
or more beneficiaries for this purpose by filing the prescribed form
with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award
recipient's death. If no beneficiary was designated or if no designated
beneficiary survives the Award recipient, then any Stock Units Award
that becomes payable after the recipient's death shall be distributed to
the recipient's estate.
10.7 CREDITORS' RIGHTS.
A holder of Stock Units shall have no rights other than those of a
general creditor of the Company. Stock Units represent an unfunded and
unsecured obligation of the Company, subject to the terms and conditions
of the applicable Stock Unit Agreement.
11. PROTECTION AGAINST DILUTION.
11.1 ADJUSTMENTS.
In the event of a subdivision of the outstanding Common Shares, a
declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that
has a material effect on the price of Common Shares, a combination or
consolidation of the outstanding Common Shares (by reclassification,
reverse split or otherwise) into a lesser number of Common Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee
shall make appropriate adjustments in one or more of: (a) The number of
Options, SARs, Restricted Shares and Stock Units available for future
<PAGE> 7
Awards under Section 3; (b) the limitations set forth in Sections 5.2
and 8.2; (c) the number of NSOs to be granted to Outside Directors under
Section 7; (d) the number of Common Shares covered by each outstanding
Option and SAR; (e) the Exercise Price under each outstanding Option and
SAR; or (f) the number of Stock Units included in any prior Award which
has not yet been settled. Except as provided in this Section 11, a
Participant shall have no rights by reason of any issue by the Company
of stock of any class or securities convertible into stock of any class,
any subdivision or consolidation of shares of stock of any class, the
payment of any stock dividend or any other increase or decrease in the
number of shares of stock of any class.
11.2 DISSOLUTION OR LIQUIDATION.
To the extent not previously exercised or settled, Options, SARs and
Stock Units shall terminate immediately prior to the dissolution or
liquidation of the Company.
11.3 REORGANIZATIONS.
In the event that the Company is a party to a merger or other
reorganization, outstanding Awards shall be subject to the agreement of
merger or reorganization. Such agreement shall provide for (a) the
continuation of the outstanding Awards by the Company, if the Company is
a surviving corporation, (b) the assumption of the outstanding Awards by
the surviving corporation or its parent or subsidiary, (c) the
substitution by the surviving corporation or its parent or subsidiary of
its own awards for the outstanding Awards, (d) full exercisability
and/or vesting and accelerated expiration of the outstanding Awards or
(e) settlement of the full value of the outstanding Awards in cash or
cash equivalents followed by cancellation of such Awards.
12. CHANGE IN CONTROL.
Unless the applicable agreement evidencing the Award provides otherwise,
in the event of any Change in Control, the vesting and exercisability of
each outstanding Award shall automatically accelerate so that each such
Award shall, immediately prior to the effective date of the Change in
Control, become fully exercisable for all of the Common Shares at the
time subject to such Award and may be exercised for any or all of those
shares as fully-vested Common Shares. Notwithstanding the foregoing,
acceleration of vesting and exercisability shall not occur upon a Change
in Control only to the following extent and under the following
circumstances:
(a) If the Company and the other party to the transaction
constituting a Change in Control agree that such
transaction is to be treated as a "pooling of interests"
for financial reporting purposes, and if such
transaction in fact is so treated, then the acceleration
of vesting and exercisability shall not occur to the
extent that the Company's independent accountants and
such other party's independent accountants separately
determine in good faith that such acceleration would
preclude the use of "pooling of interests" accounting;
(b) The Committee makes a reasonable, good faith
determination that the Award will remain outstanding, or
will be assumed by the surviving corporation (or parent
or subsidiary thereof), or will be substituted with an
award with substantially the same terms by the surviving
corporation (or parent or subsidiary thereof); and
(c) The Committee may, in its discretion, provide in the
Stock Option Agreement that, to the extent that
acceleration of vesting and exercisability does not
occur upon the event of any Change in Control because of
the application of Sections 12(a) or (b), in the event
that a recipient of an Award experiences an Involuntary
Termination within twelve (12) months following such
Change in Control, the vesting and exercisability of
each outstanding Award held by such recipient shall
automatically accelerate, as if the recipient of the
Award provided another six (6) months of service
following such Involuntary Termination. Absent a
specific reference in the Stock Option Agreement and/or
the associated Notice of Option, the acceleration
provided in this Section 12(c) shall not be applicable.
13. DEFERRAL OF AWARDS.
The Committee (in its sole discretion) may permit or require a
Participant to: (a) have cash that otherwise would be paid to such
Participant as a result of the exercise of an SAR or the settlement of
Stock Units credited to a deferred compensation account established for
such Participant by the Committee as an entry on the Company's books;
(b) have Common Shares that otherwise would be delivered to such
<PAGE> 8
Participant as a result of the exercise of an Option or SAR converted
into an equal number of Stock Units; or (c) have Common Shares that
otherwise would be delivered to such Participant as a result of the
exercise of an Option or SAR or the settlement of Stock Units converted
into amounts credited to a deferred compensation account established for
such Participant by the Committee as an entry on the Company's books.
Such amounts shall be determined by reference to the Fair Market Value
of such Common Shares as of the date when they otherwise would have been
delivered to such Participant. A deferred compensation account
established under this Section 13 may be credited with interest or other
forms of investment return, as determined by the Committee. A
Participant for whom such an account is established shall have no rights
other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and
shall be subject to the terms and conditions of the applicable agreement
between such Participant and the Company. If the deferral or conversion
of Awards is permitted or required, the Committee (in its sole
discretion) may establish rules, procedures and forms pertaining to such
Awards, including (without limitation) the settlement of deferred
compensation accounts established under this Section 13.
14. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such
Common Shares shall be treated for all purposes under the Plan like
Common Shares issued in settlement of Stock Units and shall, when
issued, reduce the number of Common Shares available under Section 3.
15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
15.1 EFFECTIVE DATE.
No provision of this Section 15 shall be effective unless and until the
Board has determined to implement such provision.
15.2 ELECTIONS TO RECEIVE NSOS, RESTRICTED SHARES OR STOCK UNITS.
An Outside Director may elect to receive his or her annual retainer
payments and/or meeting fees from the Company in the form of cash, NSOs,
Restricted Shares or Stock Units, or a combination thereof, as
determined by the Board. Such NSOs, Restricted Shares and Stock Units
shall be issued under the Plan. An election under this Section 15 shall
be filed with the Company on the prescribed form.
15.3 NUMBER AND TERMS OF NSOS, RESTRICTED SHARES OR STOCK UNITS.
The number of NSOs, Restricted Shares or Stock Units to be granted to
Outside Directors in lieu of annual retainers and meeting fees that
would otherwise be paid in cash shall be calculated in a manner
determined by the Board. The terms of such NSOs, Restricted Shares or
Stock Units shall also be determined by the Board.
16. LIMITATION ON RIGHTS.
16.1 RETENTION RIGHTS.
Neither the Plan nor any Award granted under the Plan shall be deemed to
give any individual a right to remain an Employee, Outside Director or
Consultant. The Company and its Parents, Subsidiaries and Affiliates
reserve the right to terminate the service of any Employee, Outside
Director or Consultant at any time, with or without cause, subject to
applicable laws, the Company's certificate of incorporation and by-laws
and a written employment agreement (if any).
16.2 STOCKHOLDERS' RIGHTS.
A Participant shall have no dividend rights, voting rights or other
rights as a stockholder with respect to any Common Shares covered by his
or her Award prior to the time when a stock certificate for such Common
Shares is issued or, if applicable, the time when he or she becomes
entitled to receive such Common Shares by filing any required notice of
exercise and paying any required Exercise Price. No adjustment shall be
made for cash dividends or other rights for which the record date is
prior to such time, except as expressly provided in the Plan.
16.3 REGULATORY REQUIREMENTS.
Any other provision of the Plan notwithstanding, the obligation of the
Company to issue Common Shares under the Plan shall be subject to all
applicable laws, rules and regulations and such approval by any
regulatory body as may be required. The Company reserves the right to
restrict, in whole or in part, the delivery of Common Shares pursuant to
any Award prior to the satisfaction of all legal requirements relating
to the issuance of such Common Shares, to their registration,
qualification or listing or to an exemption from registration,
qualification or listing.
16.4 COMPANY RIGHT OF FIRST REFUSAL.
<PAGE> 9
Any Award granted under the Plan may, in the Committee's discretion,
include a condition that the Common Shares issued pursuant to the Award
be subject to a right of first refusal in favor of the Company in the
event of any subsequently proposed transfer of such shares.
17. WITHHOLDING TAXES.
17.1 GENERAL.
To the extent required by applicable federal, state, local or foreign
law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall
not be required to issue any Common Shares or make any cash payment
under the Plan until such obligations are satisfied.
17.2 SHARE WITHHOLDING.
The Committee may permit a Participant to satisfy all or part of his or
her withholding or income tax obligations by having the Company withhold
all or a portion of any Common Shares that otherwise would be issued to
him or her or by surrendering all or a portion of any Common Shares that
he or she previously acquired. Such Common Shares shall be valued at
their Fair Market Value on the date when they are withheld or
surrendered.
18. FUTURE OF THE PLAN.
18.1 TERM OF THE PLAN.
The Plan, as set forth herein, shall become effective on the Effective
Date. The Plan shall remain in effect until it is terminated under
Section 18.2, except that no ISOs shall be granted on or after the 10th
anniversary of the later of (a) the date when the Board adopted the Plan
or (b) the date when the Board adopted the most recent increase in the
number of Common Shares available under Section 3 which was approved by
the Company's stockholders.
18.2 AMENDMENT OR TERMINATION.
The Board may, at any time and for any reason, amend or terminate the
Plan. An amendment of the Plan shall be subject to the approval of the
Company's stockholders only to the extent required by applicable laws,
regulations or rules. No Awards shall be granted under the Plan after
the termination thereof. The termination of the Plan, or any amendment
thereof, shall not affect any Award previously granted under the Plan.
19. LIMITATION ON PAYMENTS.
19.1 SCOPE OF LIMITATION.
This Section 19 shall apply to an Award only if: (a) the independent
auditors most recently selected by the Board (the "Auditors") determine
that the after-tax value of such Award to the Participant, taking into
account the effect of all federal, state and local income taxes,
employment taxes and excise taxes applicable to the Participant
(including the excise tax under section 4999 of the Code), will be
greater after the application of this Section 19 than it was before the
application of this Section 19; or (b) the Committee, at the time of
making an Award under the Plan or at any time thereafter, specifies in
writing that such Award shall be subject to this Section 19 (regardless
of the after-tax value of such Award to the Participant). If this
Section 19 applies to an Award, it shall supersede any contrary
provision of the Plan or of any Award granted under the Plan except to
the extent that an Award specifically refers to, and overrides, this
Section 19.
19.2 BASIC RULE.
In the event that the Auditors determine that any payment or transfer by
the Company under the Plan to or for the benefit of a Participant (a
"Payment") would be nondeductible by the Company for federal income tax
purposes because of the provisions concerning "excess parachute
payments" in section 280G of the Code, then the aggregate present value
of all Payments shall be reduced (but not below zero) to the Reduced
Amount. For purposes of this Section 19, the "Reduced Amount" shall be
the amount, expressed as a present value, which maximizes the aggregate
present value of the Payments without causing any Payment to be
nondeductible by the Company because of section 280G of the Code.
19.3 REDUCTION OF PAYMENTS.
If the Auditors determine that any Payment would be nondeductible by the
Company because of section 280G of the Code, then the Company shall
promptly give the Participant notice to that effect and a copy of the
detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how
much of the Payments shall be eliminated or reduced (as long as after
such election the aggregate present value of the Payments equals the
Reduced Amount) and shall advise the Company in writing of his or her
election within 10 days of receipt of notice. If no such election is
made by the Participant within such 10-day period, then the Company
<PAGE> 10
may elect which and how much of the Payments shall be eliminated or
reduced (as long as after such election the aggregate present value of
the Payments equals the Reduced Amount) and shall notify the Participant
promptly of such election. For purposes of this Section 19, present
value shall be determined in accordance with section 280G(d)(4) of the
Code. All determinations made by the Auditors under this Section 19
shall be binding upon the Company and the Participant and shall be made
within 60 days of the date when a Payment becomes payable or
transferable. As promptly as practicable following such determination
and the elections hereunder, the Company shall pay or transfer to or for
the benefit of the Participant such amounts as are then due to him or
her under the Plan and shall promptly pay or transfer to or for the
benefit of the Participant in the future such amounts as become due to
him or her under the Plan.
19.4 OVERPAYMENTS AND UNDERPAYMENTS.
As a result of uncertainty in the application of section 280G of the
Code at the time of an initial determination by the Auditors hereunder,
it is possible that Payments will have been made by the Company which
should not have been made (an "Overpayment") or that additional Payments
which will not have been made by the Company could have been made (an
"Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the
Company or the Participant which the Auditors believe has a high
probability of success, determine that an Overpayment has been made,
such Overpayment shall be treated for all purposes as a loan to the
Participant which he or she shall repay to the Company, together with
interest at the applicable federal rate provided in section 7872(f)(2)
of the Code; provided, however, that no amount shall be payable by the
Participant to the Company if and to the extent that such payment would
not reduce the amount which is subject to taxation under section 4999 of
the Code. In the event that the Auditors determine that an Underpayment
has occurred, such Underpayment shall promptly be paid or transferred by
the Company to or for the benefit of the Participant, together with
interest at the applicable federal rate provided in section 7872(f)(2)
of the Code.
19.5 RELATED CORPORATIONS.
For purposes of this Section 19, the term "Company" shall include
affiliated corporations to the extent determined by the Auditors in
accordance with section 280G(d)(5) of the Code.
20. DEFINITIONS.
20.1 "AFFILIATE" means any entity other than a Subsidiary, if the
Company and/or one or more Subsidiaries own not less than 50% of
such entity.
20.2 "AWARD" means any award of an Option, an SAR, a Restricted Share
or a Stock Unit under the Plan.
20.3 "BOARD" means the Company's Board of Directors, as constituted
from time to time.
20.4 "CAUSE" means the commission of any act of fraud, embezzlement
or dishonesty by the recipient of the Award, any unauthorized
use or disclosure by such person of confidential information or
trade secrets of the Company (or any Parent or Subsidiary), or
any other intentional misconduct by such person adversely
affecting the business or affairs of the Company (or any Parent
or Subsidiary) in a material manner.
20.5 "CHANGE IN CONTROL" means: (a) the consummation of a merger or
consolidation of the Company with or into another entity or any
other corporate reorganization, if persons who were not
stockholders of the Company immediately prior to such merger,
consolidation or other reorganization own immediately after such
merger, consolidation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (i) the
continuing or surviving entity and (ii) any direct or indirect
parent corporation of such continuing or surviving entity; (b)
the sale, transfer or other disposition of all or substantially
all of the Company's assets; (c) a change in the composition of
the Board, as a result of which fewer than 50% of the incumbent
directors are directors who either (i) had been directors of the
Company on the date 24 months prior to the date of the event
that may constitute a Change in Control (the "original
directors") or (ii) were elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of
the aggregate of the original directors who were still in office
at the time of the election or nomination and the directors
whose election or nomination was previously so approved; or (d)
any transaction as a result of which any person is the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing at least 50% of the total voting power represented
by the Company's then outstanding voting securities. For
purposes of this Paragraph (d), the term "person" shall have the
same meaning as when used in sections 13(d) and 14(d) of the
Exchange Act but shall exclude (i) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or of a Parent or Subsidiary and (ii) a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the
<PAGE> 11
same proportions as their ownership of the common stock of the
Company. A transaction shall not constitute a Change in Control
if its sole purpose is to change the state of the Company's
incorporation or to create a holding company that will be owned
in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
20.6 "CODE" means the Internal Revenue Code of 1986, as amended.
20.7 "COMMITTEE" means a committee of the Board, as described in
Section 2.
20.8 "COMMON SHARE" means one share of the common stock of the
Company.
20.9 "COMPANY" means ENVIRONMAX.COM, INC., a Utah corporation.
20.10 "CONSULTANT" means a consultant or adviser who provides bona
fide services to the Company, a Parent, a Subsidiary or an
Affiliate as an independent contractor. Service as a Consultant
shall be considered employment for all purposes of the Plan,
except as provided in Section 4.1.
20.11 "EFFECTIVE DATE" means the date of the Plan's adoption by the
Board.
20.12 "EMPLOYEE" means a common-law employee of the Company, a Parent,
a Subsidiary or an Affiliate.
20.13 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
20.14 "EXERCISEPRICE," in the case of an Option, means the amount for
which one Common Share may be purchased upon exercise of such
Option, as specified in the applicable Stock Option Agreement.
"Exercise Price," in the case of an SAR, means an amount, as
specified in the applicable SAR Agreement, which is subtracted
from the Fair Market Value of one Common Share in determining
the amount payable upon exercise of such SAR.
20.15 "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee in good faith on such basis as it
deems appropriate. Whenever possible, the determination of Fair
Market Value by the Committee shall be based on the prices
reported in The Wall Street Journal. Such determination shall be
conclusive and binding on all persons.
20.16 "INVOLUNTARY TERMINATION" means the termination of the service
of the recipient of the Award which occurs by reason of: (1)
such recipient's involuntary dismissal or discharge by the
Company for reasons other than Cause, or (2) such recipient's
voluntary resignation following (A) a change in his or her
position with the Company which materially reduces his or her
level of responsibility, (B) a reduction in his or her level of
base salary or (C) a relocation of such recipient's place of
employment by more than 35 miles, provided and only if such
change, reduction or relocation is effected by the Company
without the recipient's consent.
20.17 "ISO" means an incentive stock option described in section
422(b) of the Code.
20.18 "NSO" means a stock option not described in sections 422 or 423
of the Code.
20.19 "OPTION" means an ISO or NSO granted under the Plan and
entitling the holder to purchase Common Shares.
20.20 "OPTIONEE" means an individual or estate who holds an Option or
SAR.
20.21 "OUTSIDE DIRECTOR" shall mean a member of the Board who is not
an Employee. Service as an Outside Director shall be considered
employment for all purposes of the Plan, except as provided in
Section 4.1.
20.22 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each
of the corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A
corporation that attains the status of a Parent on a date after
the adoption of the Plan shall be considered a Parent commencing
as of such date.
20.23 "PARTICIPANT" means an individual or estate who holds an Award.
20.24 "PLAN" means this ENVIRONMAX.COM, INC. 2000 Equity Incentive
Plan, as amended from time to time.
20.25 "RESTRICTED SHARE" means a Common Share awarded under the Plan.
20.26 "RESTRICTED STOCK AGREEMENT" means the agreement between the
Company and the recipient of a Restricted Share which contains
the terms, conditions and restrictions pertaining to such
Restricted Share.
20.27 "SAR" means a stock appreciation right granted under the Plan.
20.28 "SAR AGREEMENT" means the agreement between the Company and an
<PAGE> 12
Optionee which contains the terms, conditions and restrictions
pertaining to his or her SAR.
20.29 "STOCK OPTION AGREEMENT" means the agreement between the Company
and an Optionee that contains the terms, conditions and
restrictions pertaining to his or her Option.
20.30 "STOCK UNIT" means a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.
20.31 "STOCK UNIT AGREEMENT" means the agreement between the Company
and the recipient of a Stock Unit which contains the terms,
conditions and restrictions pertaining to such Stock Unit.
20.32 "SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company, if
each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the
status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
<PAGE> 1
EXHIBIT 10.4
BILL OF SALE
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, ENMAX CORPORATION, a Utah corporation
("Transferor"), hereby sells, transfers, assigns, conveys and delivers to
ENVIRONMAX.COM, INC., a Utah corporation("Transferee"), all right, title and
interest in and to certain personal property used by Transferor in connection
with its business including, but not limited to, such tangible personal
property, machinery, equipment, tools and furniture, mobile equipment, computer
equipment, inventory, leases, contracts, and books and records as listed on the
attached Exhibit A.
This document and the covenants and agreements herein
contained shall be binding upon Transferor and its successors and assigns.
This Bill of Sale does not supersede or waive any contractual
remedies between Transferor and Transferee. Such remedies are in addition to and
are not merged into this instrument.
IN WITNESS WHEREOF, Transferor has caused this Bill of Sale to
be executed on its behalf effective as of the 15th day of March, 2000.
ENMAX CORPORATION
BY
---------------------------------
ITS
---------------------------------
<PAGE> 1
EXHIBIT 10.5
TEAMING AGREEMENT
This Teaming Agreement (hereinafter "Agreement") is made and entered
into as of the date last signed by and between ENMAX Corporation, a
Utah Corporation, (hereinafter called "ENMAX") and ENVIRONMAX.COM,
Inc., a Utah corporation (hereinafter referred to as "ENVIRONMAX"). All
of the above aforementioned are hereinafter referred to as "the
Parties."
RECITALS
WHEREAS, the Government has issued, or intends to issue Requests for
Proposals and/or other forms of business opportunities for procurement
of various products and/or services, (hereinafter "Business
Opportunities"); and
WHEREAS, the Government intends to procure some of the Business
Opportunities under 8(a) program; (hereinafter "the Program"); and
WHEREAS, ENMAX is a qualified 8(a) concern; and
WHEREAS, the parties intend to submit proposals in response to certain
Business Opportunities with one of the Parties assuming the role of
prime contractor; and
WHEREAS, the other Party is desirous of participating as a
subcontractor under the selected Business Opportunities; and
WHEREAS, the respective capabilities of the Parties hereto complement
one another, and it appears to be in the best interest of both Parties
hereto to work jointly in the bidding, sale, and delivery of the
supplies and services being acquired under the Program (FAR Subpart
9.6, "Contract Team Arrangements"); and
WHEREAS, the Parties wish to form a teaming arrangement and to define
their respective rights, duties, and obligations thereunder;
NOW, THEREFORE, and in consideration of the mutually binding covenants
and conditions set forth herein, the Parties hereto mutually agree as
follows:
XVIII. Objective and Duration
18.1 The objective and sole intent of this Teaming Agreement shall be
to cooperate in marketing for specific Business Opportunities and/or preparing,
submitting proposals and negotiating, in attempts to obtain awards for the
contract resulting from the Business Opportunities identified in Addendum A .
18.2 One of the Parties is to be identified as the Prospective Prime
Contractor for each Business Opportunity listed on Addendum A. The other Party
will be the Prospective Subcontractor in accordance with the provisions of this
Agreement.
18.3 The Parties intend that each addition of a project to the table in
Addendum A shall be interpreted as a separate, independent agreement comprising
all of the provisions contained in this Agreement.
18.4 It is expressly understood that in the event of contract award to
the Prospective Prime Contractor under an identified Business Opportunity, the
Parties may enter into negotiations for a subcontract to perform the work scope
contemplated by the Parties as subsequently amended in the prime contract
negotiation.
18.5 Except for those obligations regarding proprietary data, which
shall survive this Agreement, for each of the Business Opportunities identified
in Addendum A, this Agreement shall remain in effect until any one of the
following occurs:
(a) Award of a contract for the Business Opportunity
identified in Addendum A to a prime contractor is prohibited by congress or a
government entity with authority to terminate said program.
(b) Cancellation of the program by the Government.
(c) Mutual agreement of the Parties to terminate this
Agreement with a minimum of ninety (90) days written notice by either Party.
(d) Award of the contract for the identified Business
Opportunity to the Prospective Prime Contractor and execution and approval of a
corresponding subcontract with the Prospective Subcontractor under the terms of
this Agreement, effective for the entire term of the contract including all
option periods and extensions as may be exercised by the Government.
(e) The indictment, suspension or debarment by the Government
of either Party.
<PAGE> 2
(f) Modification of the Solicitation by the Government
changing the 8(a) program status of the Business Opportunity.
(g) Failure of the Prospective Prime Contractor to maintain
its status as an 8(a) firm with the required qualifications necessary to be an
eligible bidder.
(h) Official notice by the Government (or the Government's
contractor if the Business Opportunity is for a subcontract) that the
Prospective Subcontractor will not be approved as a subcontractor.
18.6 Notwithstanding the provisions of paragraph 1.5(f) above, the
Parties may mutually agree in writing to continue this Agreement in effect
whether the Business Opportunity's 8(a) status is changed.
18.7 Notwithstanding the provisions of paragraph 1.5(g) above, the
Parties may mutually agree in writing to reverse the roles as Prospective Prime
Contractor and Prospective Subcontractor to continue this Agreement in effect if
the original Prospective Prime Contractor failed to maintain its 8(a)
qualifications.
XIX. Proposal Preparation
19.1 The Prospective Prime Contractor shall have the primary
responsibility for the preparation of all technical and non-technical aspects of
the proposal including but not limited to:
(a) Marketing and promotional efforts;
(b) Proposal content, assembly and production;
(c) Liaison with Government customer personnel; and
(d) Oral discussions and negotiations, if held.
19.2 The Prospective Subcontractor agrees to use its best efforts in
supporting the Prospective Prime Contractor during the proposal preparation and
negotiation activities of the Business Opportunity. Each Party shall contribute
to the preparation of the proposal to the extent necessary to assure the
inclusion of a thorough and accurate description of its responsibilities in the
proposal. Each Party shall provide all required past performance information,
technical proposal material, management information, schedule information, fully
burdened cost data, pricing data and all representations and certifications
applicable to the Business Opportunity. Each Party further agrees to furnish
such additional information, assistance support, and cooperation as may be
reasonably required in pursuit of the award of the prime contract during the
pre-award period. The Prospective Subcontractor shall at all times be entitled
to receive, upon reasonable request, documentation and information concerning
oral discussions and negotiations between the Prospective Prime Contractor and
the procuring agency. Nonetheless, in the preparation and submission of the
proposal for the Business Opportunity, each Party will bear its own costs.
19.3 The Prospective Prime Contractor will prepare data required for
any proposals and integrate the data with that of the Prospective Subcontractor.
The Prospective Subcontractor shall be identified in the proposal as the
subcontractor to provide the following services:
(a) Management Assistance
(b) Providing software and programs
(c) Training
(d) Assistance in contract negotiations
(e) Technical Support
(f) Local area personnel, area personnel recruitment
(g) Proposal preparation assistance
19.4 The Prospective Prime Contractor agrees that it will provide
adequate notice to the Prospective Subcontractor of the work to be performed by
the Prospective Subcontractor as defined, with such terms and conditions as may
be required to reflect the prime contract and to include such other terms as may
be mutually agreed upon by the Parties. The Parties agree and acknowledge that
the extent of task support required by the Prospective Prime Contractor may vary
as a result of its prime contract negotiations with the procuring agency,
therefore, it is anticipated that the work scope assigned by the Prospective
Prime Contractor will be increased or decreased as appropriate in response to
the variances, if any, to the overall effort as proposed. In any event if
applicable under an 8(a) Business Opportunity, the Prospective Prime
Contractor's portion of the overall Program shall not be less than 51% of the
total cost of the contract performance incurred for personnel (FAR 52.219-14
Limitations on Subcontracting). The subcontract price shall be as negotiated
between the Parties after conduct of such costs and/or price analysis as may be
required by Federal Acquisition Regulation (FAR), the Defense FAR Supplement
(DFARS), or any subordinate agency supplemental regulations if applicable.
19.5 If, during the technical or business negotiations prior to
finalization of the prime contract arrangements related to the Business
<PAGE> 3
Opportunity, it becomes apparent to the Parties that the Prospective Prime
Contractor must modify or reduce the scope referred to in the proposal, then the
Prospective Prime Contractor and the Prospective Subcontractor will negotiate
the revised requirements to adjust to their respective work scope and the value
of the prime contract and subcontract. The Prospective Prime Contractor will in
no way modify the proposal during the discussions or negotiations as to either
increase the risk of performance to, or decrease potential cost or fee recovery
by the Prospective Subcontractor unless the Prospective Subcontractor
specifically approves such modification.
19.6 Except as may be otherwise agreed upon in writing, for Business
Opportunities that are issued for products or services, neither Party shall
participate with third parties with regard to duplicate, parallel proposal
activities covering the Business Opportunities identified in Addendum A. It is
agreed that the Prospective Subcontractor will not compete independently as
prime contractor, participate with other companies, make proposals or agreements
in support of the efforts of other firms or teams competing on the Business
Opportunities, nor engage in related efforts other than as a prospective prime
or subcontractor hereunder with the Prospective Prime Contractor. However, if
either Party is disqualified for any reason by the procuring agency or office
responsible for a Business Opportunity or should either Party elect not to
participate in the Business Opportunity or fails to commit the necessary
resources and effort to reasonably demonstrate to the other Party that the Party
wants to win the contract award, the other Party may upon ten (10) days notice
pursue the activity necessary to give the other Party the opportunity to win the
work required by the Business Opportunities, including participating with other
firms. The Party receiving notice under this paragraph shall have an additional
five days to correct the reason for which the notice was sent.
XX. Formation of a Performance Entity
20.1 Should the Prospective Prime Contractor be awarded the prime
contract as a result of this Agreement, the Parties agree to enter into good
faith negotiations intending to culminate in a subcontract to be awarded to the
Prospective Subcontractor for its area of interest identified in the proposal,
subject to the necessary government approvals, required flow down clauses and
negotiation of mutually acceptable price, delivery, and terms and conditions.
The Prospective Prime Contractor will designate an employee as the Executive
Project Manager responsible for contract performance. All tasks for which the
Prospective Subcontractor is responsible shall be performed by the Prospective
Subcontractor at the direction, and under the supervision, of the Prospective
Prime Contractor. Except as may be otherwise agreed in writing by the Parties,
each of the Parties shall bear its own expenses for its own performance of the
proposal work, subcontract, and related work.
XXI. General Provisions
21.1 During the term of this Agreement, the Prospective Prime
Contractor and the Prospective Subcontractor, to the extent of their right to do
so, shall exchange such data as is reasonably required for each to perform its
obligations hereunder. The Prospective Prime Contractor and the Prospective
Subcontractor each agree to comply with the provisions of the following
"Disclosure Agreement" (i.e., all paragraphs subordinate to this paragraph 4.1)
with regard to the administration of proprietary data.
21.1.1 Information and data which the disclosing Party
considers to be either propriety or competition sensitive and so indicates by an
appropriate identification shall be called "Proprietary Information" and shall
be subject to the following provisions.
21.1.2 In consideration for the disclosure of Proprietary
Information, the Parties agree that each shall use its reasonable best efforts
to keep in confidence and not disclose to any person or entity outside of the
respective organizations, or to any unauthorized person within their
organizations, for a period of ten (10) years from the day of receipt thereof,
any of the other Party's Proprietary Information. Reasonable best efforts are
defined to be the same degree of care that the Party receiving Proprietary
Information uses to protect its own Proprietary Information of a similar nature.
Neither Party shall be liable for use or disclosure of any such Proprietary
Information if the same (i) is in the public domain at the time it was
disclosed, or thereafter enters the public domain without breach of this
Agreement; (ii) can be shown by prior documents or other competent evidence to
be known to the Party receiving it at the time of disclosure; (iii) is used or
disclosed by accident, inadvertence, or mistake despite the exercise of said
reasonable best efforts; (iv) is used or disclosed with the prior written
approval of the other Party; (v) is independently developed by the receiving
Party; (vi) becomes known to the receiving Party without similar restrictions
from a source having a legal right to disclose such information and who owes no
obligations of confidence with respect to the owning Party; (vii) was not
reduced to writing and identified in writing as Proprietary Information subject
to this Agreement; (viii) is disclosed by the owning Party to a third party
without restrictions similar to those in this Agreement; or (ix) is used or
disclosed after a period of ten (10) years from date of receipt.
21.1.3 Neither Party shall be liable in damages for any
inadvertent disclosure where the customary degree of care as previously defined
has been exercised; provided that upon discovery of such inadvertent disclosure,
it shall have endeavored to prevent any further inadvertent disclosure.
21.1.4 If Proprietary Information is disclosed orally or
visually, such oral or visual information shall be reduced to writing promptly
by the disclosing Party and every page of such writing containing Proprietary
<PAGE> 4
Information shall be clearly identified as described hereinabove. Said writing
shall be delivered to the receiving Party within thirty (30) days after
disclosure thereto of said Proprietary Information.
21.1.5 Should the Party receiving Proprietary Information be
faced with legal action or a requirement under Government regulations to
disclose Proprietary Information received hereunder, the receiving Party shall
forthwith notify the Party furnishing Proprietary Information, and upon the
request of the latter, shall cooperate with the Party furnishing Proprietary
Information in contesting such a disclosure. Except in connection with failure
to discharge responsibilities set forth in the preceding sentence, neither Party
shall be liable in damages for any disclosures pursuant to judicial action or
Government regulations.
21.1.6 The Parties agree that the Party receiving Proprietary
Information under the Agreement shall not authorize directly or indirectly
further disclosure to any sources for use in any country in contravention of the
export laws, or other laws or regulations, of the United States.
21.1.7 No license under any patents, or to use (except
pursuant to this Agreement) the technology being transmitted, is granted or
conveyed by one Party's disclosing Proprietary Information or other information
to the other Party hereunder nor shall such a disclosure constitute any
representation, warranty, assurances, guaranty, or inducement by the disclosing
Party to the other Party with respect to infringement of patent or other rights
of others.
21.1.8 This Agreement shall apply in lieu of and not
withstanding the proprietary or restrictive legends or statements associated
with any particular Proprietary Information furnished hereunder.
21.1.9 Each Party represents that, to the best of its
knowledge, it has the right to disclose, transmit, or otherwise dispose of the
Proprietary Information that it discloses or transmits under this Agreement.
21.1.10 Proprietary Information furnished hereunder shall
remain the property of the furnishing Party and shall be returned to it or
destroyed promptly at is request together with all copies made thereof by the
receiving Party hereunder, and any other media which incorporated the
Proprietary Information in any respect.
21.2 Inventions made in connection with performance under this
Agreement shall remain the property of the originating Party. In the event of
joint inventions, the Parties shall establish their respective rights and shall
be entitled to participate equally in any said joint invention. In this regard,
it is recognized and agreed that the Parties may be required to and shall grant
license or other rights to the Government to inventions, data, and information
under such standard provisions which may be contained in the Government prime
contract contemplated by this agreement, provided, however, such license or
other rights shall not exceed those required by said Contract.
21.3 All communications relating to this Agreement shall be directed
only to the specific person designated to represent the Prospective Prime
Contractor and the Prospective Subcontractor on this agreement. These
appointments shall be kept current during the period of the Agreement.
All notices to ENMAX shall be addressed to:
ENMAX Corporation
4190 South Highland Drive
Suite 210
Salt Lake City, Utah 84124
Phone (801) 424-0200 Fax (801) 424-0300
Attention: Robert F. Craig, President, & CEO
All notices to THE ENVIRONMAX GROUP, shall be addressed to:
ENVIRONMAX.COM, Inc.
4190 South Highland Drive
Suite 210
Salt Lake City, Utah 84124
Phone (801) 424-0200 Fax (801) 424-0300
Attention: Robert F. Craig, President, & CEO
21.4 No publicity or advertising shall be released by either ENMAX or
ENVIRONMAX in connection with this Agreement or any proposal contemplated hereby
without the prior written approval of the other. Neither Party, however, shall
be precluded from revealing the content of this Agreement to the Government. In
the event of any contract award contemplated by this Agreement, neither Party
shall make any release for publication in media intended for public circulation
without the other Party's prior approval thereof.
21.5 The Prospective Prime Contractor shall conduct all communications
with the customer and with other organizations, as required, to perform its role
as prime contractor. All work products will be delivered to the designated
customer entity by the Prospective Prime Contractor or at the Prospective Prime
Contractor's direction.
21.6 This Agreement shall not constitute, create, give effort to, or
otherwise recognize a joint venture pooling arrangement, partnership or formal
business organization of any kind. Neither Party may assign or transfer its
interest herein without the prior written consent of the other. Each Party will
<PAGE> 5
earn its own profits or bear its own losses of its contract or subcontract
performance.
21.7 This Agreement applies only to cooperative efforts of the Parties
in connection with the Business Opportunities identified in Addendum A. This
Agreement does not prevent or encumber either Party from pursuing other business
opportunities. Nothing contained herein shall restrict either Party from
quoting, offering to sell, or selling to others, any items or services which it
regularly offers for sale, which are not unique to this Agreement and which may
be included in the prime proposal. Further, it is not the intent of this
Agreement to restrict the Government's right to full competition.
21.8 The validity, construction, scope, and performance of this
Agreement shall be governed by the laws of the state of Utah. The invalidity or
unenforceability of any part of this Agreement for any reason whatsoever shall
not affect the validity or enforceability of the remainder.
21.9 This Agreement contains the entire agreement of the Parties
superseding any previous understanding, commitments or agreements, oral or
written with respect to the subject matter thereof, except the Disclosure
Agreement set forth herein.
XXII. Execution and Effectivity
22.1 IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the day and year last signed and it is effective as of the date last signed.
ENVIRONMAX.COM, INC. ENMAX Corporation
By: By:
--------------------------------- ---------------------------------
Charles M. Meredith
Executive Vice President
Date: Date:
------------------------------- -------------------------------
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of EnvironMax.com, Inc. on
Form S-1 of our reports dated March 1, 2000, and April 4, 2000, appearing in
the Prospectus, which is part of this Registration Statement, and we also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
- -----------------------------------
Salt Lake City, Utah
April 7, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF COUNSEL
Consent of Counsel
The undersigned hereby consents to the reference to the firm of Parsons
Behle & Latimer under the caption "Legal Matters" in the Registration Statement
on Form S-1 of Environmax.com, Inc.
/s/ Parsons Behle & Latimer
------------------------------------
Parsons Behle & Latimer
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US
<S> <C> <C>
<PERIOD-TYPE> YEAR 4-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 SEP-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<EXCHANGE-RATE> 1 1
<CASH> 439 300
<SECURITIES> 0 0
<RECEIVABLES> 446,793 436,401
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 447,232 437,701
<PP&E> 73,358 43,989
<DEPRECIATION> 13,426 3,142
<TOTAL-ASSETS> 511,521 481,905
<CURRENT-LIABILITIES> 126,525 70,172
<BONDS> 29,400 37,120
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 355,596 374,613
<TOTAL-LIABILITY-AND-EQUITY> 511,521 481,905
<SALES> 2,432,192 745,980
<TOTAL-REVENUES> 2,432,192 745,980
<CGS> 1,525,630 452,195
<TOTAL-COSTS> 1,525,630 452,195
<OTHER-EXPENSES> 883,419 259,650
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,671 856
<INCOME-PRETAX> 18,472 33,279
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 18,472 33,279
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
