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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31 1999.
/_/ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______.
Commission File Number 0-7349
eNote.com Inc.
(Name of small business issuer in its charter)
Delaware 59-345315
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
185 Allen Brook Lane, Williston, Vermont 05495
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (802) 288-9000
Securities registered under Section 12(b) of the Exchange Act:
TITLE OF CLASSES NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ---------------- -----------------------------------------
Common Stock, par value $.01 per share. Not applicable.
Securities registered under Section 12(g) of the Exchange Act: None.
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. / /
The issuer's revenues for its most recent fiscal year were $0.
As of March 31, 2000, the Issuer had 10,049,481 shares of Common Stock,
$.01 par value, outstanding. On that date, the aggregate market value of the
Common Stock held by non-affiliates of the Issuer was $17,512,543 (based on the
average of the reported high and low sales prices on the OTC Bulletin
Board-Registered Trademark- on such date).
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure Format (check one):
Yes / / No /X/
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PART I
Our results can materially differ from those forecasted or expressed in the
forward-looking statements contained in this Report. This Report contains
forward-looking statements that are not historical facts, but rather are based
on our current expectations, estimates and projections about eNote's industry
and our beliefs and assumptions. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions are
intended to identify forward-looking statements. These statements are not
guarantees of future performance and are subject to some risks, uncertainties
and other factors, many of which are beyond our control, are difficult to
predict and could cause actual results to differ materially from those expressed
or forecasted in the forward-looking statements. We caution you not to place
undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this Report. We are not obligated to
update these statements or publicly release the result of any revisions to them
to reflect events or circumstances after the date of this Report or to reflect
the occurrence of unanticipated events.
ITEM 1. DESCRIPTION OF BUSINESS.
CORPORATE BACKGROUND INFORMATION.
We are a Delaware corporation that was formerly known as Webcor
Electronics, Inc ("Webcor"). Webcor conducted an initial public offering in May
1982 pursuant to a Form S-1 Registration Statement under the Securities Act of
1933 (the "Securities Act"). In connection with an application to list its
Common Stock on the NASDAQ system, Webcor also registered its Common Stock
pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange
Act"). As a result of a 1989 bankruptcy proceeding, Webcor became an inactive
shell that had no assets, liabilities or business activities. Webcor remained
inactive until March 11, 1997, when its stockholders approved a plan of
reorganization proposed by Capston Network Company of Clearwater, Florida
("Capston"). This plan of reorganization authorized Capston to seek a suitable
business combination opportunity for Webcor, authorized a series of changes in
Webcor's corporate structure, and granted stock to Capston and others for
services rendered and to be rendered in connection with the implementation of
the plan of reorganization. Capston and its President Sally A. Fonner began
actively seeking a business combination opportunity for Webcor in the spring of
1997. After investigating a number of opportunities, Capston negotiated an
agreement with the stockholders of Navis Technologies, Ltd. ("Navis") in March
of 1999. In connection with this transaction, the stockholders of Navis agreed
to contribute all of their Navis stock to Webcor in exchange for 8,000,000
shares of Common Stock, which included 400,000 shares issued in connection with
the conversion of $400,000 of convertible debentures at a rate of one share per
dollar of principal converted (the "Navis Transaction"). At the same time,
Capston negotiated an agreement with Friedlander International Limited
("Friedlander") where Friedlander agreed to contribute $5,000,000 in cash to
eNote in exchange for 5,000,000 shares of Convertible Preferred Stock and
2,000,000 Common Stock Purchase Warrants (the "Friedlander Transaction"). The
Navis Transaction closed on April 5, 1999, and the Friedlander Transaction
closed on April 6, 1999.
The Navis Transaction. Webcor acquired Navis in a business combination
transaction that was structured as a reverse takeover, or "RTO." In connection
with the Navis Transaction, the stockholders of Navis exchanged their Navis
stock for newly issued stock of Webcor. Before the Navis Transaction, Webcor had
no assets, liabilities or business operations. No relationship existed between
Webcor and Navis prior to the Navis Transaction and no funds of Webcor were
spent to acquire the stock of Navis.
Until March 31, 1999, Webcor had 3,476,370 shares of common stock ("Old
Common") issued and outstanding. In preparation for the Navis Transaction,
Webcor changed its name to eNote.com Inc. It also effected a "reverse split"
where the Old Common was consolidated in the ratio of one post-consolidation
share ("Common Stock") for every six and three-quarters (6-3/4) shares of Old
Common, provided, that no stockholder's ownership was reduced to fewer than 100
shares of Common Stock if that stockholder owned at least 100 shares of Old
Common on March 31, 1999. In connection with the Navis Transaction, Webcor
agreed to acquire all of the issued and outstanding shares of Navis in exchange
for 8,000,000 shares of
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Common Stock, which included 400,000 shares issued in connection with the
conversion of $400,000 of convertible debentures at a rate of one share per
dollar of principal converted. In addition, Webcor agreed to issue 1,460,000
shares of Common Stock to certain consultants and advisors, including 540,000
shares of Common Stock that were issued to persons designated by Capston,
270,000 shares of Common Stock that were issued to legal counsel for the parties
and 650,000 shares of Common Stock that were issued to certain financial
consultants as finders fees.
The Friedlander Transaction. On April 6, 1999, we sold 5,000,000 shares of
Convertible Preferred Stock ("Preferred Stock") and 2,000,000 Common Stock
Purchase Warrants ("Warrants") to Friedlander for $5,000,000 in cash. The
Preferred Stock has a liquidation preference of $1 per share, or $5,000,000 in
the aggregate, and is convertible into Common Stock on a share-for-share basis.
The Warrants are exercisable for five years from the date of issuance at a price
of $1 per share, and are subject to voluntary redemption by us at a redemption
premium of $1 per Warrant over the spread between the exercise price of the
Warrant and the market price of the Common Stock on the redemption date. Under
the Friedlander agreements, the holders of Preferred Stock and Warrants are
protected against dilution resulting from certain post-closing stock issuances
and are entitled to certain demand and piggy-back registration rights.
New Management Team. In connection with the closing of the Navis
Transaction, Sally A. Fonner appointed persons designated by Navis to serve as
our executive officers. The executive officers, and the positions held by such
persons as of December 31, 1999, are set forth below.
<TABLE>
<CAPTION>
Name Age Positions
<S> <C> <C>
John R. Varsames 48 President, Chief Executive Officer
Michael T. Grennan 45 Treasurer, Secretary, Chief Financial Officer
Daniel Peterson 41 Vice President of Business Development
</TABLE>
Under the terms of the Friedlander and Navis transactions, Friedlander and
the former stockholders of Navis replaced the current board of directors with
their own nominees (the "New Directors"). The New Directors include Messrs.,
Varsames and Grennan and five other independent non-employee directors.
BUSINESS OVERVIEW.
After extensive demographic and market studies, it was determined that
there was a demand for a product to provide email and limited internet services
to those groups and individuals that are currently not served or are under
served by computers and the Internet. Therefore, we intend to finish the
development, begin commercialization of and develop ancillary products to a
proprietary system originally developed by Navis, that we call the TVemail-TM-
System. The TVemail-TM- System is designed to function as a low cost Internet
alternative for customers who want access to e-mail and other online services,
but want to avoid the cost and complexity of a personal computer ("PC") or
network computer ("NC") based system. The TVemail-TM- System will be generally
easier to use and generally less expensive than any available alternative,
including PCs, NCs and Web TV-TM-. We believe this low cost combination of
television viewed e-mail and limited online services will appeal to a large
segment of the potential market and help transform advertising, electronic
commerce and information delivery for the consumer mass market.
MARKET CONDITIONS AND THE TVemail-TM- CONCEPT.
The Internet has experienced rapid growth over the last few years. Despite
this growth, according to CyberAtlas.com as of February 2000, approximately 56%
of U.S. households had no access to e-mail and other online services. While
there seems to be almost universal agreement that e-mail and online services are
desirable, a large segment of the population does not intend to "get wired" in
the foreseeable future. The principal reasons cited for a lack of e-mail and
access to online services include:
- - The cost, complexity and size of PC and NC equipment;
- - The time and effort required to learn about information equipment and
services;
- - The time and effort required to use PC and NC equipment;
- - The inability to access desired content without time consuming log-on
and navigation procedures;
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- - The high monthly cost of online information services; and
- - "Information Overload" resulting from too many choices.
The TVemail-TM- System has been designed to overcome all of these
objections. We have designed a compact in-home information terminal that uses
the customer's television set as a monitor and connects directly to the
customer's telephone line for access to our servers. The terminal uses a
wireless keyboard as an input device and can either be placed on top of the
television set or discretely tucked away. While PCs, NCs and other information
appliances generally require the customer to boot-up, log-on and navigate, our
TVemail-TM- System automatically downloads and stores the customer's e-mail and
other content every few hours. A blinking "message received" indicator notifies
the customer when e-mail or other new content has been received and reviewing
the new material is as simple as turning on the television set and selecting a
color-coded icon from our graphical user interface ("GUI").
The TVemail-TM- System does not provide complete Internet access and we do
not intend to compete for customers who already have complex information
retrieval systems. Instead, we intend to provide basic e-mail and a limited
array of online services, such as news, sports, weather reports and online
shopping, to the 56% of U.S. households that do not have or desire full Internet
access. Due to the simplicity of the TVemail-TM- System, we expect to be able to
provide monthly TVemail-TM- service for an approximately $9.95 per month.
Depending on different distribution alternatives that we have yet to finalize,
there may be an additional cost to the consumer associated with purchasing the
TVemail terminal and wireless keyboard.
Since the TVemail-TM- System is simple, inexpensive, automatic and
instantly accessible, we believe it will have significant mass market appeal.
Nevertheless, our business is subject to considerable risk and uncertainty and
there is no assurance that we will succeed in our efforts to finish the
development and effectively market our TVemail-TM- System.
HISTORY OF NAVIS AND THE TVemail-TM- TECHNOLOGY.
Navis was founded in 1996 for the purpose of developing and commercializing
communication appliances, electronic point of sale devices and infrared
subsystems for NCs (Network Computer) and other "thin client" data retrieval and
storage systems. As a subcontractor to Acorn, the team developed for Oracle,
IBM, Apple, Netscape, and Sun Microsystems the original reference design for the
NC concept. The NC concept was designed as an alternative to the PC and the
companies formed the NC Consortium to develop and commercialize the technology.
In an NC environment, memory and processing intensive computer tasks are
performed on a remote computer and the user relies on a small and relatively
unsophisticated data entry and retrieval device that is connected to the main
computer. In 1996, Navis was selected by the NC consortium to develop the
infrared communications ("IR") protocol and input devices to be used by the NC
Consortium members. Working in conjunction with SolutioNet, Navis developed a
series of peripherals that rely on SolutioNet's Two Way Infrared Protocol,
("TWIRP") technology. These peripherals were adopted by the NC licencees and
were implemented in the first generation of NC products.
Navis' involvement in the NC Consortium gave it extensive experience in
developing, manufacturing, and marketing specialized information appliances. The
experience also convinced Navis' management that a substantial market exists for
simple, low cost information appliances that will give users easy access to
e-mail and a limited variety of online services.
THE TVemail-TM- SYSTEM.
The TVemail-TM- System has been designed to give users easy access to
e-mail, information gathering, and online shopping services in a format that is
far less expensive and complex than Internet access technologies that operate on
PC or NC platforms. We believe the principal competitive advantages of the
TVemail-TM- System include:
- - Low Cost -- The TVemail-TM- System's monthly online service fees is
expected to cost less than $120 per year. Depending on the distribution
channel, there may be a purchase price for the
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TVemail System hardware. We believe these costs compare quite favorably
with the costs associated with alternative products currently on the
market.
- - Simplicity of Operation -- While PCs, NCs and other information appliances
generally require the customer to boot-up, log-on and navigate, our
TVemail-TM- System automatically downloads and stores the customer's e-mail
and other content every few hours. As a result, checking messages on the
TVemail-TM-System is as simple as turning on the television set and
selecting a color-coded icon from our graphical user interface, also known
as GUI.
- - Customized Content -- The TVemail-TM- System gives users the ability to
select the particular online services they want without receiving content
or advertising that they don't want. We intend to continually upgrade our
content options to meet the particular requirements of our customers and
expect that expanded service options will also give rise to new revenue
opportunities.
- - Speed -- Since the TVemail-TM- System automatically downloads and stores
the customer's e-mail and other content periodically, retrieval of stored
information is virtually instantaneous. In addition, if a customer wants to
manually check messages or update their other content, total retrieval time
is generally very short, consisting merely of the time required to dial up,
log-on to a local server and download or upload, as applicable, the
information.
- - Efficiency -- The TVemail-TM- System makes very efficient use of server,
telephone and modem resources because the information is collected on the
server and/or the in-home terminal and automatically transferred at
pre-determined intervals. Since the user is not online while composing or
reading messages, the connect time for each session is minimal, and a large
number of clients can be accommodated on a single server.
TECHNICAL OVERVIEW.
The TVemail-TM- System is comprised of two principal elements: an in-home
terminal, including an IR receiver, IR keyboard and accessories (the "Client
Hardware"), and our proprietary back-end server systems (the "Server Systems").
Initial design, engineering and "proof of concept" phases on both the Client
Hardware and the Server Systems were completed as of December 31, 1999. Fully
operational versions of the Client Hardware and the Server Systems were deployed
on a preliminary test basis during the fourth quarter of 1999. These preliminary
trials substantiated our technology and the engineering and design of the Client
Hardware and the Server Systems. During the first and second quarter of the
calendar year 2000, we will conduct a more extensive full-scale pilot program to
evaluate the TVemail-TM- System. Based on participant feedback during the pilot
program, we will make additional modifications to the Client Hardware and Server
Systems.
CLIENT HARDWARE.
Our current version of Client Hardware offers the following features:
- - A blinking LED indicator prompts the user to check messages;
- - A color-coded GUI to guide the user through e-mail and other content
functions;
- - On demand send and receive e-mail functions;
- - Up to 5 password protected user mailboxes per subscriber;
- - Storage capacity for up to 250 e-mail messages;
- - Customized address books for each user;
- - Simple text input for e-mail;
- - Customizable content with news, sports and weather reports; and
- - Targeted banner and direct e-mail advertising;
Due to the inherent flexibility of the Client Hardware and Server System
many of the features mentioned above can be implemented or enhanced after
initial installation. The TVemail-TM- Client
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Hardware has been designed to satisfy the user's requirements while maintaining
an efficient telephone and server usage profile that maximizes the return on the
service provider's investment. Since the user cannot be online while creating an
e-mail message or fax, the modem is utilized only during prearranged dial-ups,
or when the user initiates a manual connection. The Client Hardware can be
configured to poll the server to send and receive e-mail and other content
between four and twelve times per day depending on user preferences. Individual
units can be configured to dial during different time windows so the call load
can be distributed throughout the day and concentrated during non-peak usage
times. This allows us to secure low cost Point of Presence ("POP") access from
multiple Internet Service Providers ("ISPs").
SERVER SYSTEM.
Our proprietary Server System has been designed to be modular, flexible,
and compatible with most relational database products. These features will
facilitate reporting, scheduling and batch processing, and permit us to send
targeted advertising, mass mailings, and surveys to our customers based on their
particular location or other demographic information. Additional services such
as custom news, stock quotes, games, online banking, and other content will use
separate servers to ensure the integrity of the TVemail-TM- System and prevent
system crashes in the event that a particular feature goes offline. In addition,
we expect our Server System to incorporates the following technical features
upon the roll-out of the TVemail-TM- System:
- - C, C+ and Visual Basic programming;
- - Online maintenance of subscriber information for log-in synchronization,
billing, account management and advertising management;
- - Easy interface with other servers for optional content including games,
news services, and stock quotes;
- - Automatic conversion of certain Internet communications protocols to
TVemail-TM- format; and
- - Debit and credit card billing capabilities for account management and
online transactions.
BUSINESS STRATEGY.
Our business objective is to transform advertising, commerce and
information delivery for the consumer mass market through the TVemail-TM- System
which combines the convenience of television with e-mail and limited online
services. The principal elements of our business strategy include:
PROVIDE EASY TO USE AND COST-EFFECTIVE E-MAIL AND ONLINE SERVICE ACCESS. We
offer customers easy to use and cost-effective e-mail and online service access
that is designed to the specific demands of customers who have no prior
experience with e-mail or the Internet. Our TVemail-TM- System is designed to
function as a low cost Internet alternative for customers who want access to
e-mail and other online services, but want to avoid the cost and complexity of a
PC or NC based system. We intend to capitalize on our expertise in thin client
server platforms to develop new products and services based on our TVemail-TM-
platform that meet the specific requirements of individual consumers and private
communications networks. These products will offer higher performance and more
advanced functionality while continuing to offer a simple and cost effective
solution for our customers.
PROVIDE COMPELLING VALUE FOR END-USERS. While many companies focus on
providing content to people who have enough technical knowledge and appropriate
equipment to access and use the Internet, are focused on bringing the
convenience and utility of e-mail and other online services to the 56% of U.S.
households that do not have PCs or Internet access. We designed the TVemail-TM-
System to provide a simple, compact and cost effective alternative to PCs, NCs,
WebTV and other full scale Internet access products. To use the TVemail-TM-
System, consumers need only their existing television, a phone line and the
TVemail-TM- Client Hardware.
PROVIDE COMPELLING VALUE FOR ADVERTISERS AND E-COMMERCE MERCHANTS. Due to
the nature of the TVemail-TM- System and our ability to sort our customers on
the basis of location or other demographic information, advertisers, online
merchants and other providers of online services will be able to carefully
target their promotions and surveys.
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DEVELOP AND EXPAND MULTIPLE DISTRIBUTION CHANNELS. We intend to distribute
our products through direct advertising, retail merchants and resellers. To
quickly reach a broad, worldwide audience, we will seek to establish a worldwide
network of retailer merchants, wholesale distributors and resellers. We intend
to develop multiple distribution channels directed at the specific needs of
individual consumers and private networks.
AGGRESSIVELY PENETRATE GLOBAL MARKETS. We believe that the market for the
TVemail-TM- System is global in scope and we will seek to rapidly deploy our
Server Systems in the United States, Australia, New Zealand, Europe and other
industrialized countries that have a telecommunications infrastructure. In order
to facilitate the marketing, distribution and market penetration of the
TVemail-TM- System internationally it is likely that we will enter into
strategic relationships with local entities to create partially owned foreign
operating subsidiaries. We will then provide technological services to the
foreign operating subsidiaries to create and service localized versions of the
TVemail-TM- System which will be bought, marketed and distributed by each
foreign operating subsidiary in its respective country or territory. Foreign
markets currently are, and we anticipate them to remain, a significant strategic
focus for us. Due to the simplicity and low cost of the TVemail-TM- System, we
believe TVemail-TM- will be a viable option for Internet access in less
developed countries. It is likely that our foreign subsidiaries will be able to
provide local content directories and user interfaces in multiple languages for
the TVemail-TM- System as we enter each country or region.
CREATE BRAND IDENTITY. We intend to create an identity for our TVemail-TM-
System under the brand name "TVemail". We believe that the creation of a brand
identity is important to our strategy to become the preferred provider of e-mail
and online information services to households that do not presently have access
to PC or NC based information retrieval systems. By creating consumer awareness
of the TVemail-TM- System, we believe it will drive penetration in its potential
markets and increase the pace at which consumers, online service providers and
e-commerce merchants recognize the service benefits of the TVemail-TM- System.
Another possible market that we could pursue in the future might include
captive commercial systems, where the collection, archiving and distribution of
internally and externally generated information is important. Examples of the
potential commercial applications for private networks based on the TVemail-TM-
technology include:
- - Hospitals and other health care facilities that need to collect, archive
and distribute patient information;
- - Nursing homes and other extended care facilities that need to communicate
with physicians, staff and residents;
- - Hotels, resorts and other accommodations that need to effectively
communicate with guests;
- - Colleges and universities that need to communicate effectively with
resident students;
- - Community organizations that need to effectively communicate with members;
and
- - Other organizations where televisions are common and the collection and
distribution of data is important.
Currently, we are not actively pursuing these markets.
PRODUCT TESTING.
As noted above, our Client Hardware and Server Systems were tested on a
preliminary basis in the third and fourth quarters of 1999. These preliminary
trials substantiated our technology and the engineering and design of the Client
Hardware and Server Systems. During the first and second quarter of 2000, we
will conduct more extensive pilot testing to enhance the TVemail-TM- System and
evaluate the TVemail-TM- System's graphical user interface, product design and
functions. We anticipate making revisions to the TVemail-TM- System up to the
initial release date based upon the results of this pilot testing. It is
anticipated that we will have approximately 400 fully operational units in use
during the pilot tests.
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PRODUCT ROLLOUT AND MARKETING.
We believe that we will be able to rollout the TVemail-TM- System to
consumers in the latter part of the second quarter of calendar year 2000.
Initially, for the first stages of the rollout, we anticipate our marketing and
distribution efforts to be focused primarily on direct television marketing such
as infomercials or shopping networks and limited retail distribution.
We currently anticipate providing online service for a flat fee of $9.95
per month, exclusive of the cost of the TVemail-TM- terminal and wireless
keyboard. Our proposed service will include unlimited e-mail access, daily news,
weather, sports, and access to certain e-commerce services. We believe the
principal factor that distinguishes the TVemail-TM- System from traditional
Internet service providers is our ability to send and deliver the user's mail
automatically without direct user involvement.
After the initial product launch, we plan on aggressively pursuing
relationships with online service providers such as banks and utilities for
co-marketing and/or distribution opportunities. Our goal is to get as many
consumers using our service and paying our monthly service fee as possible. We
plan on using traditional advertising mediums such as print, radio, and
infomercials to heighten brand and product awareness on a regional and national
scale. We also plan on mounting an online marketing effort for the TVemail-TM-
System via banner ads, direct e-mails, and online promotions. Targets for the
online effort include people who don't have a PC at home or people whose friends
and family are avid PC users. Points of purchase will include a 1-800 number,
the TVemail-TM- web site, infomercials, and retail distribution locations.
RESEARCH AND DEVELOPMENT.
Since 1996, we have been actively involved in the design, development and
testing of components, embedded software and server systems necessary for the
effective deployment of the TVemail-TM- System. Substantially all of our Client
Hardware and Server Systems are in the final Beta prototype stage. Because of
the high levels of technical expertise required for the development of our
products, we have established a close working relationship with the NC
Consortium and a number of strategic alliances described elsewhere herein.
Substantially all of our activities to date have been financed by capital
contributions from the founder of Navis, subordinated third-party debt that was
converted into equity in connection with the Navis Transaction, and the
Friedlander Transaction. During the first and second quarter of 2000, we
anticipate raising additional capital through offshore equity and debt
placements with foreign investors. It is likely that any additional capital
raised by us will be used to pay operating costs and fund future R&D. It is
expected that we will be required to pay all future R&D costs from our own
resources and any additional funding received to complete the development and
commercialization of our existing and proposed products. Features being explored
for inclusion in our second and third-generation TVemail-TM- devices include:
- - MSR and smart card capability, for online purchases and bill paying
- - Voice mail capability
- - Digital camera support
- - Flash ROM for full portability
- - Modular upgrade for full web browsing
- - Universal control with input devices
- - Voice recognition
- - Spyglass or comparable thin client web browser for unrestricted browsing
The Company had no product development expenditures during 1998. During
1999, the Company spent approximately $600,000 on product development. It is
anticipated that during calendar year 2000 the Company will continue to expend
significant additional capital on product development.
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ACQUISITIONS.
Pursuant to a Stock Purchase Agreement (the "SolutioNet Agreement") entered
into on August 6, 1999 between James D. Richards, III, Martine Richards, the
Company and SolutioNet, Ltd. ("SolutioNet"), we purchased 55% of the outstanding
common stock of SolutioNet (the "Purchased SolutioNet Stock") for $250,000.
Certain employees of SolutioNet are entitled to receive options to purchase
non-voting common stock equivalent to an aggregate of up to approximately 10% of
SolutioNet's common stock at an exercise price of $.01 per share. Such series of
non-voting common stock is not currently authorized by SolutioNet's Certificate
of Incorporation. Mr. Richards is an employee of the Company. SolutioNet's
assets include certain proprietary technology related to IR devices that we use
in the TVemail-TM- System. The SolutioNet Agreement provides that the Company
may require the Richardses to re-purchase the Purchased SolutioNet Stock for
$250,000, upon the occurrence of certain events. The SolutioNet Agreement
further provides that, for a period of two years, the Richardses shall have the
right and option to re-purchase the Purchased SolutioNet Stock from the Company
for $250,000 if exercised during the first year or for an amount determined by
independent appraisal of the value of the Purchased SolutioNet Stock if
exercised during the second year, if: (i) Mr. Richards' employment with us is
terminated for any reason; (ii) any of the terms of Mr. Richards' employment
with us are changed in any way detrimental to the Richardses; (iii) we become
insolvent, are dissolved or liquidated, take any action related to its
dissolution or winding up or enter proceedings under any law relating to
bankruptcy, insolvency, reorganization or relief from debts; (iv) our market
value declines to less than $15 million; or (v) Mr. Richards' level of equity
ownership in the Company is diluted by more than thirty percent (30%).
In connection with the SolutioNet Agreement, SolutioNet entered into a
Consulting Agreement with Mr. Richards, whereby Mr. Richards is to provide
consulting services to SolutioNet for a period of two years commencing on August
6, 1999, in exchange for $2,083 per month payable only to the extent that
SolutioNet has available funds. Furthermore, in connection with the SolutioNet
Agreement, the Richardses, the Company and SolutioNet entered into a
Shareholders' Agreement (the "SolutioNet Shareholders' Agreement"), pursuant to
which the Richardses and the Company agreed to take certain actions (i) to fix
the number of directors that constitute the entire Board of Directors of
SolutioNet at three, and (ii) to elect as members of the Board of Directors of
SolutioNet one designee of Mr. Richards, one designee of the Company and one
director mutually acceptable to the Richardses and the Company. The SolutioNet
Shareholders' Agreement also contains certain negative covenants with respect to
changing SolutioNet's business, Certificate of Incorporation or Bylaws, entering
into certain types of transactions and terminating the SolutioNet Consulting
Agreement, among other things.
Pursuant to an Asset Purchase Agreement (the "WebATM Agreement"), dated
August 13, 1999, between WebATM.com, Inc., a newly-formed wholly-owned
subsidiary of the Company ("WebATM.com"), and Gary Cronin, an employee of the
Company, WebATM.com agreed to purchase certain assets consisting of a website
with programmed web pages, text and graphics, the "WEBATM.COM" domain name and
common law rights in the tradename "WebATM" (collectively, the "WebATM Assets"),
for $100,000. The WebATM Assets represent incomplete technology relating to a
publicly accessible user interface for certain on-line financial services. In
connection with the WebATM Agreement, Mr. Cronin agreed not to engage in certain
activities deemed competitive with those of WebATM.com.
GOVERNMENT REGULATION.
We could become subject to burdensome government regulation which affects
our ability to offer our service or which affects demand for our service. We are
subject to varying degrees of federal, state, local and foreign regulation as
well as laws enacted by the U.S. Congress and other governments. The Federal
Communications Commission (the "FCC") has established regulations that among
things set licensure, installation and equipment standards for communications
systems. A number of these regulations apply to the TVemail-TM- System and
compliance with existing and future regulations may increase our cost of
providing the TVemail-TM- service, or otherwise damage the competitive position
of the TVemail-TM- service. We are currently in the process of obtaining all
required FCC approvals for the TVemail-TM- System. As of December 31, 1999, we
had not received any formal approvals and the failure to obtain any required
approvals could delay or prevent the rollout of the TVemail System.
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It is also anticipated that due to the increasing popularity and use of the
Internet, it will be subject to increased attention and regulation. These laws
and regulations may regulate issues such as user privacy, defamation, network
access, pricing, taxation, content, quality of products and services and
intellectual property ownership and infringement. These laws and regulations
could expose us to liability, materially increase our cost of providing our
service, and decrease the growth and acceptance of the Internet in general and
access to the Internet over cable systems.
We anticipate that the costs and effects of compliance with federal, state
and local environmental laws will not be material.
SERVICE MARKS, PATENTS AND PROPRIETARY TECHNOLOGY.
We have filed federal trademark applications to register the trademarks
"TVemail," "eNote.com," "PCemail," "WebATM," "Browserless Internet,"
"BuyMail," "TVewriter," "EZ Color," "eNote International.com," "Get
Connected.. Simply," "Simply Communicate," "TVemail.. The Answering Machine
for the Internet" and "eNote International" in the United States. These
applications are currently pending. Our mark AIRMOUSE is registered in the
United States. The mark TWIRP is registered in the United States and owned by
SolutioNet, Ltd, our partially-owned subsidiary. We also have registered a
series of domain names with Internic, Inc. and Network Solutions, Inc. We
currently own patents, which cover some of our technology, IR technology and
protocols. We license certain software to be incorporated into the our
products and certain development tools for internal use in product design. We
believe that an inability to effectively protect its intellectual property
could have a material adverse effect on our financial condition and results
of operations. See "Management's Discussion and Analysis or Plan of
Operation-Certain Trends and Uncertainties-The Company Depends on its
Intellectual Property, Which May Be Difficult and Costly to Protect." and
"Management's Discussion and Analysis or Plan of Operation-Certain Trends and
Uncertainties-Technology Licensed From Third Parties."
COMPETITION.
The competitive market for e-mail, online service access and Internet
appliances may limit demand or pricing for the TVemail-TM- System. We expect to
experience intense competition from established online service providers such as
America Online, Inc., Prodigy Communications Corporation and Microsoft
Corporation's WebTV as well as the suppliers of Internet appliances such as Sony
and Netpliance. Many companies provide e-mail and online service access and
other services, which provide functionality superior to those included in the
TVemail-TM- System. As a result of this competition, demand for the TVemail-TM-
System may suffer, we may be restricted in the service rates we can charge for
the TVemail-TM- System and our business, financial condition and results of
operations may be adversely affected. Many of our competitors have significantly
greater financial, technical, marketing, distribution, customer support and
other resources than we do. Furthermore, many of our competitors have
significantly greater experience, better name recognition, more compelling
content and easier access to consumers, advertisers and online service providers
than we do.
EMPLOYEES.
As of December 31, 1999, we had 45 full-time employees (including our
executive officers) and one part-time employee. We also engage several
consultants who are employed on a full-time basis by others. We are not subject
to any collective bargaining agreements and we consider our relations with
employees to be good.
ITEM 2. DESCRIPTION OF PROPERTY.
We currently lease 14,548 square feet of office and light manufacturing
space in Williston, Vermont from AirMouse House Ltd. Partnership, a Vermont
limited partnership of which John R. Varsames, our President and Chief Executive
Officer, is the General Partner. The Williston lease expires on May 31, 2004 and
provides for annual payments of $100,000, with annual adjustments for certain
changes in the consumer price index. The Williston lease provides us with the
option to extend the lease for another five-year term. We also lease
approximately 750 square feet of office space in New York City. The New York
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lease expires on September 30, 2000 and provides for monthly rent payments of
$2,156. Our current properties are inadequate to support the Company's continued
growth and expansion and it is likely that the Company will have to seek
additional, non-contiguous property to supplement our current office space. The
Company believes that it can acquire or lease additional properties as
additional need arises, although there can be no assurance that any such
additional space will be obtained by the Company on acceptable terms, or at all.
ITEM 3. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION.
Since April 5, 1999, the Company's Common Stock has been trading on the OTC
Bulletin Board-Registered Trademark- (the "OTCBB") under the trading symbol
ENOT. Prior to March 31, 1999, the Common Stock had been thinly and sporadically
traded for years under the trading symbol WBET. The following table sets forth
the high ask and low bid quotations for the Company's Common Stock during each
quarter within the last two fiscal years. The following quotations were provided
by the National Quotation Bureau, LLC, and do not represent actual transactions;
these quotations do not reflect dealer markups, markdowns or commissions. All
prices have been adjusted for the 1 for 12 reverse stock split followed
immediately by the stock distribution of ((12/6.75)-1) shares of Common Stock
for each 1 share of Common Stock outstanding, both effected by the Company as of
April 2, 1999 (collectively, the "Reverse Stock Split").
<TABLE>
<CAPTION>
Low Bid High Ask
<S> <C> <C>
Year ended December 31, 1998
First quarter $0.135 $ 1.35
Second quarter $0.135 $ 1.485
Third quarter $0.135 $ 1.013
Fourth quarter $0.105 $ 0.844
Year ended December 31, 1999
First quarter $0.106 $ 1.62
Second quarter $2.25 $10.125
Third quarter $3.688 $ 7.125
Fourth quarter $2.938 $ 4.125
</TABLE>
The High Ask Price in 1998 was $1.485 verses 1999 where it was $10.125. The Low
Bid Price in 1998 was $.105 verses 1999 where it was $.105.
HOLDERS.
At December 31, 1999, the Company's Common Stock was held by 1,020 holders
of record.
DIVIDENDS.
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We have not paid, and currently have no intention to pay, any cash dividends
on our Common Stock. Any decision to declare dividends in the future will be
made by our Board of Directors and will depend upon the Company's future
earnings, capital requirements, financial condition and other factors deemed
relevant by our Board of Directors.
RECENT SALES OF UNREGISTERED SECURITIES.
On July 14, 1998 and September 9, 1998, Navis sold $200,000 and $250,000
principal amount of 1 Year, 18% Convertible Debentures ("18% Debentures") to Dr.
Peter Stern and Dr. Peter Swift, respectively, for face value. On January 8,
1999 Navis sold a $50,000 convertible promissory note (the "Note") due and
payable (together with a $10,000 financing fee) immediately upon the receipt by
Navis of any funds from certain enumerated financing transactions, but in any
event no later than July 8, 1999, for face value to Robert Jones. On March 23,
1999, Navis sold a $100,000 principal amount 1 Year 12% Convertible Debenture
(the "Old 12% Debenture") to Friedlander Capital Management, Inc. for face
value. Each of the 18% Debentures, Note and 12% Debentures was sold in a
transaction exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended. The 18% Debentures, Note and Old 12% Debentures were
each convertible, upon an equity offering prior to such instrument's maturity,
into equity securities of Navis or any corporation ultimately formed by Navis or
any of Navis' owners for the purpose of manufacturing and distributing the
TVemail-TM- technology, at a conversion price equal to the offering price of
such equity securities. As of April 6, 1999, the Company repaid Dr. Stern's 18%
Debenture and the other 18% Debenture, Note and Old 12% Debentures were
converted into shares of Common Stock at $1.00 per share.
Between April 7, 1998 and March 23, 1999, Navis issued 15 separate 12%
Promissory Notes (the "Varsames Notes") to John R. Varsames in an aggregate
principal amount of approximately $228,984. The Varsames Notes were issued in
transactions exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended. The Varsames Notes are payable on demand, and on March
29, 1999, April 9, 1999 and June 9, 1999, Navis repaid an aggregate of
approximately $211,903 principal amount of Varsames Notes and approximately
$17,081 accrued interest thereon.
On April 6, 1999, we sold 5,000,000 shares of convertible preferred stock
(the "Preferred Stock") and 2,000,000 common stock purchase warrants (the
"Warrants") to Friedlander International Limited for $5,000,000 in cash. The
Preferred Stock is convertible into Common Stock on a share-for-share basis. The
Warrants are exercisable for five years from the date of issuance at a price of
$1 per share, and are subject to voluntary redemption by the Company at a
redemption premium of $1 per Warrant over the spread between the exercise price
of the Warrant and the market price of the Company's Common Stock on the
redemption date. The Preferred Stock and the Warrants were issued in a
transaction exempt from registration pursuant to Regulation D promulgated under
the Securities Act of 1933, as amended.
On May 3, 1999, we sold $30,000 and $50,000 principal amount of 1 Year, 12%
Convertible Debentures to Mr. Lance Murdoc and Mr Robert Francis Corvino,
respectively, for face value. These debentures are convertible into our Common
Stock at a rate of one share for every $3 of principal converted. These
debentures where issued in a transaction exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD-LOOKING STATEMENTS
When used in this Report, press releases and elsewhere by eNote.com
Inc. (the "Company") and its management from time to time, the words "believes,"
"anticipates," "intends" and "expects" and similar expressions are intended to
identify forward-looking statements that involve a number of risks and
uncertainties. Additionally, statements contained in this discussion that are
not historical are forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act,
including statements regarding expectations, beliefs, intentions or strategies
regarding the future. The Company intends that all forward-looking statements be
subject to the
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safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect the Company's views as of the date they
are made with respect to future events and financial performance, but are
subject to many risks and uncertainties, which could cause the actual results of
the Company to differ materially from any future results expressed or implied by
such forward-looking statements. Factors that could cause actual results to
differ materially or adversely include, without limitation, any inability or
delay in the development or manufacture of the Company's TVemail-TM- System,
including the in-home TVemail-TM- terminals (the "Client Hardware"), the
Company's proprietary back-end server systems (the "Server Systems") and the
graphical user interface ("GUI"), as well as the other risks described under the
caption "Management's Discussion and Analysis or Plan of Operation--Certain
Trends and Uncertainties. The Company does not undertake to update
forward-looking statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
As a result of its bankruptcy, as of March 31, 1999, Webcor had no assets,
liabilities, or ongoing operations and had not engaged in any business
activities since February 1990. Webcor had no operations during the fiscal year
ended March 31, 1999 and no assets or liabilities as of March 31, 1999.
In the fourth quarter of 1998, Navis ceased its pre-existing operations and
revenue generating activities so that as of 1999 Navis was exclusively dedicated
to the development of the TVemail-TM- System. As a result, after the Navis
Transaction, we had no revenue generating operations and throughout 1999 the
Company was solely engaged in the development and commercialization of the
TVemail-TM- System, including the Client Hardware and the Server Systems.
Our financial condition and results from operations were dramatically
different between 1998 and 1999. 1998 reflected the old operations of Navis,
which included revenue from operations and significantly less operating
expenses. 1999 reflects the new operations of the Company, including the
termination of Navis' prior business operations and an exclusive dedication to
the TVemail-TM- System. As a result, we believe that our results from operations
for 1998 are not comparable to the results from operations for 1999 and the
Company's anticipated financial condition and results from operations going
forward.
Of the $1,906,000 of General and Administrative Expenses reflected on our
results from operations for the year ended December 31, 1999, approximately
$630,000 was attributable to salaries and stock based compensation and
approximately $400,000 was attributable to legal and professional fees due in
larger part to the non-recurring transactions occurring during the first and
second quarter of 1999, including the Navis Transaction. The remainder is
attributable to other general and administrative expenses.
To initially fund development activities for the TVemail-TM- System and
provide initial working capital, the Company raised $5 million as of April 6,
1999 from the Friedlander Transaction. The Company used this capital to continue
its development of the Client Hardware, to install Server Systems to run the
TVemail-TM- network, to complete the GUI, to perform marketing studies, to
produce the preliminary test Client Hardware units, to identify and develop
potential strategic relationships and distribution opportunities and to fund
legal and other administrative expenses related to the Navis Transaction and the
Friedlander Transaction.
The Company currently plans to commence full-scale commercial deployment of
the TVemail-TM- System in the United States near the end of the second quarter
of 2000. This schedule is subject to many risks and uncertainties, including
those set forth below under the caption "Certain Trends and Uncertainties," and
the Company's progress towards commercial deployment of the TVemail-TM- system
may be made at a significantly slower rate, through different avenues, or not at
all.
During the year ending December 31, 2000, the Company expects its research
and development efforts to be focused on the final development and production of
the TVemail-TM- device and further research and development for subsequent
versions of the TVemail-TM- System and other ancillary products. The Company
expects to spend a significant amount of capital on research and development in
fiscal 2000, however, there can be no assurance that unanticipated technical
obstacles, lack of funds, changes in strategy or other factors will not cause
actual research and development expenses to differ materially from the Company's
expectations.
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During the year ended December 31, 1999, we significantly increased our
number of employees to 45 full time employees and 1 part time employee. We
anticipate hiring a significant number of additional employees during 2000 which
is likely to significantly increase our operating expenses. However, there can
be no assurance that lack of qualified applicants, changes in strategy or lack
of funds will prevent us from hiring additional employees.
During the year ended December 31, 1999 we did not generate any revenue
from operations. We do not anticipate generating any revenue until the
TVemail-TM- System is successfully launched in the United States or
internationally through a joint venture or a partially owned subsidiary. On
March 24, 2000, we entered into a Joint Venture Agreement with Seafont Pty.
Ltd., an Australian corporation, to create and jointly own an Australian
corporation (the "Australian Subsidiary") to market and distribute a TVemail-TM-
System in Australia and New Zealand. The Company has committed to contributing
capital up to $250,000 to the Australian Subsidiary in consideration for the
Company's fifty percent ownership interest. We plan on pursuing additional
international opportunities and strategic relationships to bring localized
versions of the TVemail-TM- System to market throughout the world's
industrialized countries. We may invest additional capital in other partially or
wholly owned foreign operating entities. These plans are subject to many risks
and uncertainties, including those set forth below under the caption Certain
Trends and Uncertainties and the Company's successful launch in the United
States or internationally may be delayed or not occur at all.
The Company plans to purchase approximately $500,000 in computer equipment,
lab equipment and development tools in 2000. These capital outlays could be
substantially greater, if the Company decides to handle certain functions, such
as manufacturing, marketing or customer service in-house as opposed to
contracting them out.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our business through the issuance of debt and equity. We
raised $5,000,000 through the Friedlander Transaction which has primarily funded
our operations to date. On March 13, 2000, we raised an additional $500,000
through the issuance of a one year ten percent subordinated convertible
debenture in an offshore transaction to an Seafont, Pty. Ltd., an Australian
corporation. This debenture is convertible into shares of Common Stock at an
initial conversion rate equal to one share for each $7 of principal converted.
Also, during the first and start of the second quarter of 2000, we have
raised approximately $5,000,000 through the sale of approximately 825,000
shares of the Company's Common Stock and approximately 413,000 Common Stock
Purchase Warrants with an exercise price of $.01 per share in offshore
transactions to various European entities. The Company anticipates that it
will need to raise significant capital during 2000 to carry out its plan
through additional issuances of debt and equity. However, there can be no
assurance that the Company will raise any additional capital.
The Company believes that its current capital resources are sufficient to
complete the development and finalization of the TVemail-TM- System and launch
the TVemail-TM- System in the United States on a limited basis, which the
Company expects to occur during the second quarter of 2000. However, in order
for the Company to begin ongoing mass production of the Client Hardware or to
initiate sales and marketing efforts relating to the TVemail-TM- service, the
Company will have to raise substantial additional funding through public or
private debt or equity financing. There can be no assurance that the Company
will be able to raise such funds, and, if it cannot, its business may be
materially and adversely affected.
While the Company currently plans to begin its sales of its TVemail-TM-
device and its internet service in the second quarter of 2000, there can be no
assurance that difficulties in research and development, network development,
manufacturing or financing, or other factors will not delay the launch date or
prevent such launch altogether.
CERTAIN TRENDS AND UNCERTAINTIES
In addition to the other information contained in this Report on Form
10-KSB, the following factors should be considered carefully.
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RISKS RELATING TO THE COMPANY'S NEED FOR ADDITIONAL
FINANCIAL RESOURCES
NEED FOR ADDITIONAL FUNDS
We believe our existing capital is sufficient to finalize the development
of the Client Hardware, to complete installation of the Server Systems to run
the TVemail-TM- network, to complete the GUI, to complete pilot testing and
initially launch the TVemail-TM- System in the United States. We expect to
complete such endeavors by the second quarter of 2000. However, in order for us
to begin continued mass production of the Client Hardware or to initiate
widespread sales and marketing efforts relating to the TVemail-TM- service, we
anticipate that we will have to raise substantial additional funds. We currently
intend to seek additional funding through public or private financings, which
may include debt or equity financings. Adequate funds for these purposes,
whether obtained through financial markets or collaborative or other
arrangements with corporate partners or from other sources, may not be available
when needed or on terms acceptable to the Company. Insufficient funds may
require us to: delay, scale back or eliminate some or all of our research and
product development programs; license to third parties our technology to
commercialize products or technologies that the Company would otherwise seek to
develop itself; to sell ourselves to a third party; to cease operations; or to
declare bankruptcy.
If we raise additional funds through the issuance of debt securities, the
holders of the debt securities will have a claim to the Company's assets that
will be prior to any claim of the stockholders. Interest on any debt securities
could increase our costs and negatively impact our operating results. If we
raise additional funds through the issuance of preferred stock, the terms of
such preferred stock may provide that the holders of such preferred stock are
entitled to receive dividends and/or distributions upon liquidation prior to the
holders of Common Stock. Furthermore, any such preferred stock may have class
voting rights, conversion features and/or antidilution protections of which the
Common Stock does not have the benefit. If we raise additional funds through the
issuance of Common Stock or securities convertible into or exchangeable for
Common Stock, the percentage ownership of the Company's then-existing
stockholders will decrease. In addition, any such convertible or exchangeable
securities may have rights, preferences and privileges more favorable to the
holders than those of the Common Stock.
SUBORDINATION OF COMMON STOCK TO PREFERRED STOCK; RISK OF DILUTION;
ANTI-DILUTION ADJUSTMENTS.
In the event of the liquidation, dissolution or winding up of the Company,
the Common Stock is expressly subordinate to the $5 million preference of the 5
million outstanding shares of Preferred Stock. The conversion rate of the
Preferred Stock is subject to adjustment, among other things, upon issuances of
Common Stock or securities convertible into Common Stock or rights to purchase
Common Stock that have not been expressly approved in writing by a majority in
interest of the holders of Preferred Stock or their elected representatives. As
of December 31, 1999, each share of Preferred Stock was convertible into 1 share
of Common Stock.
NEED FOR AND DEPENDENCE ON QUALIFIED PERSONNEL.
Our success is highly dependent on the hiring and retention of key
personnel and technical staff. The loss of key personnel or the failure to
recruit necessary additional personnel or both could impede the achievement of
development objectives. There is intense competition for qualified personnel in
the areas of the Company's activities, and there can be no assurance that the we
will be able to attract and retain the qualified personnel necessary for the
development of our business. Many of our competitors have significantly greater
financial and other resources than we do and may be able to offer more lucrative
compensation packages which include stock options and other stock-based
compensation and higher-profile employment opportunities.
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RISKS RELATING TO THE COMPANY'S OPERATIONS AND TECHNOLOGIES
LIMITED OPERATING HISTORY; RECENT SHIFT IN BUSINESS STRATEGY.
Immediately prior to the acquisition of Navis on April 5, 1999, the Company
had no business operations. Navis itself was founded in June 1996 and until the
fourth quarter of 1998 supplied infrared protocol and advanced input devices to
NC manufacturers and provided contract engineering and consulting services.
However, Navis' revenues from operations never exceeded $703,000 in any given
year. During 1998, Navis shifted its business emphasis to focus entirely on the
development of the TVemail-TM- service. We have yet to launch the TVemail-TM-
service commercially or to receive any revenue from such service. As a result,
we have only a limited operating history and there is little historical
information on which to evaluate our business and prospects. Our revenue, if
any, for the foreseeable future is almost entirely dependent on successfully
bringing the TVemail-TM- service to market and on the number of customers, if
any, who subscribe to the TVemail-TM- service after the launch of the service.
There can be no assurance that we will be successful in implementing any of our
business strategies.
Once the basic TVemail-TM- service is marketed, if ever, we intend to
expand our operations by developing and marketing new or complementary services
or systems. However, there can be no assurance that we will be able to do so
effectively. Although we believe that, in the future, we will be able to use the
TVemail-TM- service as a platform to provide e-mail related and other services,
there can be no assurances that we will be able to do so.
THE COMPANY DEPENDS ON ITS INTELLECTUAL PROPERTY, WHICH MAY BE DIFFICULT AND
COSTLY TO PROTECT.
Our intellectual property includes proprietary and confidential information
that is not currently subject to patent, trademark or similar protection. The
Company has filed federal trademark applications to register the trademarks
"TVemail," "eNote.com," "PCemail," "WebATM," "Browserless Internet," "BuyMail,"
"TVewriter," "EZ Color," "eNote International.com," "Get Connected.. Simply,"
"Simply Communicate," and "TVemail.. The Answering Machine for the Internet,"
however, the Company may not be able to secure significant protection for these
trademarks. If our competitors or others adopt product or service names similar
to the names listed above that we anticipate using, it may impede our ability to
build brand identity and customer loyalty. We rely primarily on secrecy to
protect technology, especially where patent protection is not believed to be
appropriate or obtainable. No assurance can be given that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the our trade secrets, or that the we can
effectively protect its rights to its unpatented trade secrets.
The validity, enforceability and scope of protection of certain proprietary
rights in Internet-related businesses are uncertain and still evolving. If
unauthorized third parties are able to copy our service or our business model or
to use our confidential information to develop competing services, we could lose
customers and our business could be negatively impacted. We may not be able to
effectively police unauthorized use of our technology because such policing is
difficult and expensive. In particular, the global nature of the Internet makes
it difficult to control the ultimate destination or security of software or
other data transmitted. Furthermore, the laws of other countries may not
adequately protect our intellectual property.
Our business activities and the TVemail-TM- service may infringe upon the
proprietary rights of others. In addition, other parties may assert infringement
claims against the Company. Any such claims and any resulting litigation could
subject us to significant liability for damages and could also result in
invalidation of our proprietary rights. We could be required to enter into
costly and burdensome royalty and licensing agreements. These agreements may not
be available on acceptable terms, or may not be available at all. We may also
need to file lawsuits to defend the validity of our intellectual property rights
and trade secrets, or to determine the validity and scope of the proprietary
rights of others. Litigation is expensive and time-consuming and could divert
management's attention away from our business.
TECHNOLOGY LICENSED FROM THIRD PARTIES.
We have entered into agreements with, and have licensed certain technology
from, third parties. The Company has relied on scientific, technical, commercial
and other data supplied and disclosed by others in entering into these
agreements and will rely on such data in support of development of certain
products.
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Furthermore, we believe that we will license additional technologies from third
parties in the future. Although we have no reason to believe that this
information contains errors of omission or fact, there can be no assurance that
there are no errors of omission or fact that would materially affect the
commercial viability of these products.
RAPID TECHNOLOGICAL CHANGE, CUSTOMER DEMANDS AND INTENSE COMPETITION.
The e-mail service market is characterized by rapidly changing technology,
customer demands and intense competition. If we cannot keep pace with these
changes, our TVemail-TM- service could become uncompetitive and its business
could suffer. If we are not successful in developing and marketing enhancements
to the TVemail-TM- service or new services that respond to technological change
or customer demands, our business may be materially and adversely effected.
The competitive market for e-mail and online service access may limit
demand or pricing for the TVemail-TM-system. We expect to experience intense
competition from established online service providers such as America Online,
Inc., Prodigy Communications Corporation and Microsoft Corporation's WebTV-TM-
as well as competition from Internet appliance manufactures such as Sony and
Netpliance. Many companies provide e-mail and online service access and other
services, which provide functionality superior to those included in the
TVemail-TM- system. As a result of this competition, demand for the TVemail-TM-
system may suffer, we may be restricted in the service rates we can charge for
the TVemail-TM- system and our business, financial condition and results of
operations may be adversely affected. Many of our competitors have significantly
greater financial, technical, marketing, distribution, customer support and
other resources than we does. Furthermore, many of our competitors have
significantly greater experience, better name recognition, more compelling
content and easier access to consumers, advertisers and online service providers
than do.
MANAGEMENT OF GROWTH.
Our ability to implement our business plan successfully in a new and
rapidly-evolving market will require effective planning and growth management.
If we cannot manage our anticipated growth effectively, our business and
financial results may suffer. We plan on expanding our existing operations
substantially. Although we anticipate out sourcing manufacturing and procurement
and limited components of marketing and technical services, we may be forced to
expand our manufacturing, sales and marketing and technical support. We expect
that we will need to manage and broaden multiple relationships with customers,
on line providers and other third parties. We also expect that we will need to
expand our financial systems, procedures and controls and will need to augment,
train and manage our workforce, particularly our information technology staff.
As a result, our management and operating systems may be strained by any growth
and the Company may be unable to timely complete necessary improvements to its
operating systems, procedures and controls to support future operations.
CAPACITY CONSTRAINTS MAY IMPEDE REVENUE GROWTH AND PROFITABILITY.
We believe that satisfactory performance, reliability and availability of
our TVemail-TM- appliances and Server Systems infrastructure will be critical to
the Company's reputation and ability to attract customers and maintain adequate
customer service levels. Any significant or prolonged capacity constraints could
delay or prevent customers from sending or gaining access to their documents or
other data or services. Such constraints could decrease our ability to acquire
and retain customers and prevent us from achieving the necessary growth in
revenue to achieve profitability. If the amount of traffic increases
substantially and we experience capacity constraints, we may need to spend
significant amounts to expand and upgrade our technology and network
infrastructure. Furthermore, we may be unable to predict the rate or timing of
any increases in the use of its services in order to respond in a timely manner.
SYSTEMS FAILURES AND BUSINESS INTERRUPTIONS WHICH WOULD HARM OUR BUSINESS.
Our success will depend in part on the efficient and reliable operation of
TVemail-TM- service sufficient to accommodate a large number of subscribers. We
intend to locate our Server Systems at multiple sites with redundant functions
in order to reduce the risks of system failure, however, the Server Systems are
vulnerable to damage from fire, power loss, telecommunications failures,
break-ins and other events, which could lead to: interruptions or delays in our
service; loss of data; or the inability to accept, transmit and
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confirm customer documents and data. Our business may be materially adversely
effected if its service is interrupted. Although we intend to implement network
security measures, our systems may be vulnerable to computer viruses, electronic
break-ins, attempts by third parties deliberately to exceed the capacity of the
systems and similar disruptions, any of which could have a material adverse
effect on our business.
RISKS RELATING TO THE INTERNET AND ONLINE COMMERCE
PRIVACY CONCERNS MAY DISCOURAGE CUSTOMERS FROM USING THE COMPANY'S SERVICES.
Concerns over the security of online transactions and the privacy of users
may inhibit the growth of the Internet as a means of delivering documents and
data. We may need to incur significant expenses and use significant resources to
protect against the threat of security breaches or to alleviate problems caused
by such breaches. We plan to rely on encryption and authentication technology to
provide secure transmission of confidential information. If our security
measures do not prevent security breaches, we could suffer operating losses,
damage to its reputation, litigation and possible liability. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments may result in a compromise or breach of our encryption and
authentication technology and could enable an outside party to steal proprietary
information or interrupt its operations.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD
HARM OUR BUSINESS.
Changes in the regulatory environment could negatively impact our ability
to generate revenues and increase our expenses. The Internet is largely
unregulated and the laws governing the Internet remain unsettled, even in areas
where there has been some legislative action. It may take years to determine
whether and how existing laws such as those governing intellectual property,
privacy and taxation apply to the Internet. In addition, because of increasing
popularity and use of the internet, any number of laws and regulations may be
adopted with respect to the internet or other online services covering issues
such as: user privacy; security; pricing; content; copyrights; distribution;
taxation; and characteristics and quality of services. Such regulations could
impose additional costs or interdicts on our activities, which could have a
material adverse effect.
IF THE INTERNET INFRASTRUCTURE FAILS, OUR BUSINESS MAY SUFFER.
We cannot be certain that the infrastructure or complementary services
necessary to maintain the Internet as a useful, convenient or secure means of
transferring documents and data will continue to develop. The Internet
infrastructure may not support the demands that growth may place on it, and the
performance and reliability of the Internet may decline, which could have a
material adverse effect on our business.
THE COMPANY DEPENDS ON THIRD-PARTY PROVIDERS OF INTERNET AND TELECOMMUNICATIONS
SERVICE.
Our operations depend on third parties for Internet access and
telecommunications. Frequent or prolonged interruptions of these services could
result in significant losses of revenues. These types of occurrences could also
cause users to perceive our products as not functioning properly and therefore
encourage them to use other methods to deliver and receive information. We have
limited control over these third parties and there can be no assurance that we
will be able to maintain relationships with them on acceptable commercial terms.
Nor can there be any assurance that the quality of services that they provide
will remain at the levels needed to enable us to conduct our business
effectively. Each of these third parties has likely experienced outages in the
past, and could experience outages, delays and other difficulties due to system
failures unrelated to the Company's systems.
COSTS OF TRANSMITTING DOCUMENTS AND DATA COULD INCREASE.
The cost of transmitting documents and data over the Internet could
increase, and the Company may not be able to increase its prices to cover such
rising costs. Several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet and on-line service providers in
a manner similar to long distance telephone carriers and to impose access fees
on such providers. Also, foreign laws and state tax laws and regulations
relating to the provision of services over the Internet are still
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developing. If individual states impose taxes on services provided over the
Internet, our cost of providing TVemail-TM- and other services may increase.
ITEM 7. FINANCIAL STATEMENTS.
See Index to Consolidated Financial Statements on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On September 22, 1999, we engaged Deloitte & Touche LLP, New York, New
York, as independent auditors, to audit our financial statements for the year
ended December 31, 1999 and, consequently, ended the engagement of Want & Ender,
CPA, P.C., New York, New York. Such actions were approved by our Board of
Directors as of November 11, 1999. Want & Ender neither resigned nor declined to
stand for re-election. None of Want & Ender's reports on the financial
statements of the Company for either of the two years ended December 31, 1998
and December 31, 1997 contained an adverse opinion or disclaimer of opinion, or
was modified as to uncertainty, audit scope, or accounting principles. We had no
disagreements with Want & Ender on any matter of accounting principles or
practices, financial statements disclosure, or auditing scope or procedure which
could have caused them to make reference to the subject matter of such
disagreement in connection with their report.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
John R. Varsames 49 Director President and Chief Executive Officer
Michael T. Grennan 46 Director, Secretary, Treasurer and Chief
Financial Officer
Leopold Abraham II 72 Director
Stanley M. Blau 62 Director
James Bowman 48 Director
Charles W. Quatt 53 Director
Victor Reichenstein 75 Director
Daniel J. Peterson 41 Vice President of Business Development
</TABLE>
Charles W. Quatt is the brother-in-law of John R. Varsames.
The following information is furnished for each of the directors and
executive officers of the Company:
JOHN R. VARSAMES has served as the President and Chief Executive Officer of
the Company since April 1999 and became a director of the Company in November
1999. His term as a director expires at the Annual Meeting of Stockholders in
2002. In June 1996, Mr. Varsames founded and became the Chief Executive Officer
of Navis Technologies, Inc. From 1994 to 1996 Mr. Varsames served initially as a
consultant and then Vice President for AirMouse Remote Controls and its
AirMarket Interactive System. From 1984 to 1994 he was the President and Chief
Executive Officer of Northshore Companies, a construction, development and real
estate investment firm.
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<PAGE>
MICHAEL T. GRENNAN is a Certified Public Accountant and has served as the
Secretary, Treasurer and Chief Financial Officer of the Company since April 1999
and became a director of the Company in November 1999. His term as a Director of
the Company expires at the Annual Meeting of Stockholders in 2001. Prior to
joining the Company, Mr. Grennan worked for seven years as a self-employed
business and financial consultant. Previously, Mr. Grennan worked for 14 years
in public accounting, first on the audit staff of Coopers & Lybrand, and then as
a staff member, manager and partner of the accounting firm of Urbach, Kahn, and
Werlin, PC.
LEOPOLD ABRAHAM II became a director of the Company in November 1999 and
his term expires at the Annual Meeting of Stockholders in 2002. Mr. Abraham
served as Chairman and Chief Executive Officer of Associated Merchandising
Corporation, a retail merchandising and sourcing organization, from 1977 until
his retirement in 1993. Since retiring from Associated Merchandising, Mr.
Abraham was a director of Liz Claiborne, Inc. from 1993 to 1998. He currently
serves on the boards of directors of: R.G. Barry Corp., a manufacturer of
comfort footwear (since 1993); Signet Group, plc, an operator of retail jewelry
stores in the United States and the United Kingdom (since 1994); Galey & Lord,
Inc., a manufacturer of textile products (since 1993); and the Smith Barney
Funds Board (since 1994).
STANLEY M. BLAU became a director of the Company in November 1999 and his
term expires at the Annual Meeting of Stockholders in 2001. Mr. Blau is
currently retired and has not been employed since 1996. Mr. Blau served on the
board of directors of Executone Information Systems, Inc., a developer and
distributor of voice and data communication systems, from 1988 until 1999, and
served as the Vice Chairman of the board of directors from 1988 until 1996.
Since 1998, Mr. Blau has been a partner in PS Capital LLC, a firm investing in
high technology startup companies in the Internet, e-commerce and
telecommunications fields.
JAMES BOWMAN became a director of the Company in November 1999 and his
term expires at the Annual Meeting of Stockholders in 2000. Since 1982,
Mr. Bowman has been a Senior Partner at Forbes Consulting, a market research and
consulting company.
CHARLES W. QUATT became a director of the Company in March 2000 and his
term expires at the Annual Meeting of Stockholders in 2001. Mr. Quatt is
currently the founder and President of Quatt Associates, Inc., a management
consulting firm. Prior to founding Quatt Associates, from 1987 to 1996,
Mr. Quatt was a manager and consultant with the Hay Group. Mr. Quatt currently
serves as a director of the Hay Group.
VICTOR REICHENSTEIN became a director of the Company in November 1999 and
his term expires at the Annual Meeting of Stockholders in 2000. Mr. Reichenstein
was the President and a director of the Company (when it was formerly known as
Webcor Electronics, Inc.) from 1971 until the Company filed for bankruptcy in
1989. Since 1989, Mr. Reichenstein has been a private investor at Vicel Inc., an
investment firm. From 1993 to 1995, he served as a director of Safeskin
Corporation, a company engaged in the manufacture of disposable gloves.
DANIEL J. PETERSON became Vice President of Business Development on
September 1, 1999. During 1998, Mr. Peterson was the Vice President and General
Manager of the Equipe Division - East Coast at PRI Automation. From 1996 through
1998, Mr. Petereson was the Vice President of Sales & Marketing of the OEM
Systems Division with PRI Automation. From 1995 through 1996, Mr. Peterson was a
Site Operations Manager with Applied Materials. Prior to joining Applied
Materials, Mr. Peterson was the Director of Marketing and Sales of the Automated
Systems Group at Schlumberger Technologies.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
For the year ended December 31, 1999, the following persons who were directors,
officers, or beneficial owners of more than 10% of the Common Stock during such
year, failed to file on a timely basis reports required by Section 16(a) of the
Exchange Act during such year or any prior fiscal year. Sally Fonner, who is no
longer a Director of the Company, did not timely file a Form 3 when she was
elected a Director on March 23, 1999, but filed a Form 3 on May 7, 1999
reporting her status as a Director as well as the securities that she
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<PAGE>
beneficially owned as of the filing date. Daniel J. Peterson was appointed as an
executive officer on December 6, 1999, but has yet to file the required Form 3.
Charles W. Quatt became a Director on March 17, 2000, but has yet to file the
required Form 3. The following Directors each failed to file the required Form 4
in connection with stock option grants made pursuant to the 1999 Non-Employee
Directors' Stock Option Plan on December 6, 1999: Leopold Abraham II, Stanley M.
Blau, James Bowman, Charles W. Quatt and Victor Reichenstein. The Company has
notified each officer and director of any failure to file and the Company
anticipates that each such officer and director will file all required forms
during the second quarter of 2000.
ITEM 10. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued for
services rendered in 1999 by the Chief Executive Officer and the other two
executive officers of the Company (the "Named Executive Officers"). Prior to
April 1999, the Company did not have any operations and Sally A. Fonner served
as the sole executive officer until her resignation on April 5, 1999. Ms. Fonner
received no compensation other than the following which was paid to Capston
Network Company in connection with a plan of reorganization approved by the
Company's stockholders (i) 181,389 shares of the Company's Common Stock and (ii)
$150,000 in cash. Ms. Fonner is an affiliate of Capston Network Company.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------------------------- ------------------
Name and Other Annual Shares Under
Principal Position Year Salary ($) Bonus ($) Compensation ($) Option Awards
- ---------------------------- ---------- ------------- -------------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
John R. Varsames President 1999 114,944 ------ ------ n/a
and Chief Executive 1998 127,076 ------ ------
Officer(1) 1997 72,950 ------ ------
Michael T. Grennan 1999 93,877 ------ ------ n/a
Secretary, Treasurer and
Chief Financial Officer(2)
Daniel J. Peterson Vice 1999 32,791 ------ ------ n/a
President of Business
Development(3)
</TABLE>
(1) John R. Varsames was appointed President and Chief Executive Officer of the
Company on April 5, 1999. The salary reflected for 1999 is the actual
amount paid to Mr. Varsames for his service from the time he was appointed
through December 31, 1999. The Compensation reflected for years 1998 and
1997 was the compensation received by Mr. Varsames in his capacity as the
President and Chief Executive Officer of Navis Technologies, Inc.
(2) Michael T. Grennan was appointed Secretary, Treasurer and Chief Financial
Officer on April 5, 1999. The salary reflected for 1999 is the actual
amount paid to Mr. Grennan for his service from the time he was appointed
through December 31, 1999.
(3) Daniel J. Peterson was appointed Vice President of Business Development on
September 1, 1999. The salary reflected for 1999 is the actual amount paid
to Mr. Peterson for his service from the time he was appointed through
December 31, 1999.
None of the named executive officers held or were issued options to
acquire shares of the Company's Common Stock during the year ending December 31,
1999.
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<PAGE>
DIRECTOR COMPENSATION
Each director of the Company who is not an employee of the Company is
reimbursed for reasonable out-of-pocket expenses incurred in attending meetings.
In addition, provided the 1999 Non-Employee Directors' Stock Option Plan (the
"1999 Director Plan") is approved by the stockholders, non-employee directors
are entitled to certain option grants. Under the 1999 Director Plan each
non-employee director receives (i) upon first being elected to the board an
option for 20,000 shares which vests over one year and (ii) annually, at the
time of the annual meeting, an option for 5,000 shares which vests over one
year. Pursuant to the 1999 Director Plan, options vest upon any
change-in-control of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock and Preferred Stock as of April 26, 2000
by (a) each director of the Company, (b) each of the executive officers named in
the Summary Compensation Table above, (c) all directors and executive officers
as a group and (d) each person known to the Company to own beneficially 5% or
more of its Common Stock. Except as otherwise indicated, each such person has
sole investment and voting power with respect to the shares shown as being
beneficially owned by such person, based on information provided to the Company.
<TABLE>
<CAPTION>
Number of Shares of Percent of
Number of Shares of Percent of Preferred Stock Outstanding
Common Stock Outstanding Beneficially Preferred
Name Beneficially Owned Common Stock Owned Stock
---- ------------------ ------------ ----- -----
<S> <C> <C> <C> <C>
John R. Varsames 7,100,000(1)(2) 64.27% ---- 0%
Michael T. Grennan 250,000(3) 2.26% ---- 0%
Leopold Abraham II 11,000(4) * ---- 0%
Stanley M. Blau 10,000(4) * ---- 0%
James Bowman 10,000(4) * ---- 0%
Charles W. Quatt 4,000 * ---- 0%
Victor Reichenstein 130,000(4) 1.18% ---- 0%
Executive Officers and
Directors as a Group
(8 persons) 7,515,000 67.78% ---- 0%
Burton G. Friedlander 7,424,100(5)(6)(7) 41.14% 5,000,000 100%
</TABLE>
- -----------------
* less than 1%
(1) Mr. Varsames shares beneficial ownership of 7,080,000 shares of Common
Stock with his wife, Heidi A. Varsames. Mr. Varsames holds sole voting
power of these 7,080,000 shares pursuant to a proxy from his wife.
(2) Includes 20,000 shares of Common Stock held of record by the adult children
of Mr. and Mrs. Varsames, Kristen Varsames and Lori A. Varsames. Mr.
Varsames holds sole voting power over these 20,000 shares pursuant to
proxies from Kristen Varsames and Lori A. Varsames.
(3) Mr. Grennan's reported holdings do not include 2,000 shares that are held
by his father, as to which he disclaims beneficial ownership.
(4) Includes 10,000 shares which may be acquired within sixty days after April
26, 2000 by exercise of stock options by non-employee directors pursuant to
grants made under 1999 Non-Employee Directors' Stock Option Plan provided
that such plan is approved by the Company's stockholders.
(5) Includes 5,000,000 shares of Common Stock issuable upon conversion of
5,000,000 shares of Preferred Stock and 2,000,000 shares of Common Stock
issuable upon exercise of immediately exercisable warrants.
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<PAGE>
(6) Mr. Friedlander exercises voting and investment control over shares of
Common Stock and Preferred Stock held by Friedlander International Limited
("FIL") and Friedlander Limited Partnership ("FLP") through their
investment manager, Freidlander Capital Management Corp. ("FCMC") of which
Mr. Friedlander is the sole Stockholder.
(7) Information as to Mr. Friedlander, FIL, FLP and FCMC is based on a
Statement on Schedule 13D filed by Mr. Friedlander and FCMC with the
Commission on July 15, 1999 and a Form 4 for June 1999 provided by Mr.
Friedlander and FCMC, and the Company assumes no responsibility for such
information.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On April 5, 1999, the Company acquired Navis in a transaction whereby
the stockholders of Navis exchanged all of their Navis stock for 8,000,000
shares of newly issued Common Stock (or approximately 80% of the Company's then
outstanding Common Stock), and Navis became a wholly-owned subsidiary of the
Company. Pursuant to the Navis transaction, Mr. Varsames became the beneficial
owner of approximately 71% of the Company's then outstanding Common Stock, was
appointed President and Chief Executive Officer of the Company, and acquired the
contractual right to designate individuals for appointment to the Board. Mr.
Varsames shares beneficial ownership of 7,080,000 shares of Common Stock with
his wife, Heidi A. Varsames. Prior to the Navis Transaction, Mr. Varsames was
not a director, officer or stockholder of, or otherwise related to, the Company.
On April 6, 1999, the Company entered into the Friedlander Transaction,
pursuant to which Friedlander purchased Preferred Stock and Warrants convertible
into and exercisable for, respectively, approximately 41% of the then
outstanding Common Stock and was granted the contractual right to designate two
individuals for appointment to the Board. Prior to the Friedlander Transaction,
neither Friedlander nor Mr. Friedlander was a director, officer or stockholder
of, or otherwise related to, the Company. Mr. Friedlander designated Mr. Blau
and Mr. Abraham as Directors, each of whom was appointed in November 1999.
In connection with the Navis Transaction and Friedlander Transaction,
the Company agreed to issue 1,460,000 shares of Common Stock to certain
consultants and advisors, including 540,000 shares of Common Stock that were
issued to persons designated by Capston, 270,000 shares of Common Stock that
were issued to legal counsel for the parties and 650,000 shares of Common Stock
that were issued to certain financial consultants as finders' fees. Ms. Fonner
was so designated by Capston to receive 180,600 of such 540,000 shares of Common
Stock. George W. Schiele received 600,000 of the 650,000 shares of Common Stock
issued as finders' fees. Mr. Schiele transferred 250,000 of the 600,000 shares
to Mr. Friedlander. Mr. Friedlander was recruited by Mr. Schiele to perform
services for the Company and thereby became entitled to 250,000 shares based on
a Statement on Schedule 13G filed on July 1, 1999 by Mr. Schiele. In addition to
the above mentioned stock compensation, upon the closing of the Navis
Transaction, Navis paid $250,000 (the "Cash Compensation") in cash to Capston,
$100,000 of which Capston, in turn, paid to Mr. Schiele and another individual
($50,000 each) who acted as finders in connection with the Navis Transaction,
and the remaining $150,000 was retained by Capston. An oral agreement (the "Cash
Condition Agreement") between Capston and Navis provided that Capston's $150,000
portion of the Cash Compensation is subject to repayment in the event that the
Common Stock fails to trade at or above $5.00 per share on a national securities
exchange or in the National Association of Securities Dealers' SmallCap Market
for at least 45 consecutive trading days within the six months immediately
following the closing of the Navis Transaction. The Cash Condition Agreement was
later modified to provide that the relevant time period for such trading would
be the four months immediately following the filing of the Report on Form 10-KSB
for the fiscal year ending March 31, 1999, rather than the six months
immediately following the Navis Transaction.
Between April 7, 1998 and March 23, 1999, Navis issued 15 separate 12%
Promissory Notes (the "Varsames Notes") to Mr. Varsames in an aggregate
principal amount of approximately $223,647. The Varsames Notes are payable on
demand, and on March 29, 1999, April 9, 1999 and June 9, 1999, Navis repaid an
aggregate of approximately $250,147 principal amount of Varsames Notes and
approximately $17,081 accrued interest thereon. Navis is a wholly-owned
subsidiary of the Company.
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<PAGE>
Ms. Fonner and Capston agreed to reimburse the Company $150,000 (the
"Reimbursement") for legal fees incurred by the Company. The Reimbursement has
yet to be received by the Company.
The Company leases approximately 14,500 square feet of office and light
manufacturing space in Williston, Vermont from Airmouse House Ltd. Partnership.
This lease expires in 2004 and calls for rent of approximately $8,333 per month
in 1999, with amounts generally increasing annually thereafter to reflect cost
of living related increases. Mr. Varsames is a general partner of Airmouse House
Ltd. Partnership. The terms of the lease were determined by arms-length
negotiation between the parties.
The Company has retained Forbes Consulting Group, Inc. ("Forbes") to
perform certain consumer market research and consulting services. The Company
estimates the projected total cost of such services to be approximately $90,000
to $100,000. It has made payments aggregating approximately $118,447 to Forbes
through the first quarter of 2000. Mr. Bowman is a senior partner of Forbes.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
EXHIBIT TABLE
EXHIBIT NO. DESCRIPTION
----------- -----------
3(a) Amended and Restated Certificate of Incorporation ***
3(b) Amended By-laws ***
4.1 Certificate of Powers, Designations,
Preferences and Rights of the Convertible
Preferred Stock, par value $.01 per
share, of the Company.*
4.2 Common Stock Purchase Warrant dated April 6, 1999
between the Company and Friedlander International
Limited. *
4.3 1-Year 18 Percent Convertible Debenture due May 3, 2000
of Navis in principal amount of $200,000. ***
4.4 1-Year 18 Percent Convertible Debenture due May 3, 2000
of Navis in principal amount of $250,000. ***
4.5 $50,000 Convertible promissory note of Navis, issued
January 8, 1999. ***
4.6 1-Year 12 Percent Convertible Debenture due March 23,
2000 of Navis in principal amount of $100,000. ***
4.7 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated April 7, 1998 in principal amount of
$50,000, payable on demand. ***
4.8 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated April 28, 1998 in principal amount
of $18,000, payable on demand. ***
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<PAGE>
4.9 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated May 4, 1998 in principal amount of
$7,500, payable on demand. ***
4.10 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated May 14, 1998 in principal amount of
$28,000, payable on demand. ***
4.11 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated May 28, 1998 in principal amount of
$5,200, payable on demand. ***
4.12 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated June 11, 1998 in principal amount of
$10,000, payable on demand. ***
4.13 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated June 25, 1998 in principal amount of
$500, payable on demand. ***
4.14 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated January 27, 1999 in principal amount
of $6,000, payable on demand. ***
4.15 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated January 31, 1999 in principal amount
of $56,948, payable on demand. ***
4.16 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated February 2, 1999 in principal amount
of $5,000, payable on demand. ***
4.17 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated February 5, 1999 in principal amount
of $5,000, payable on demand. ***
4.18 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated February 23, 1999 in principal amount
of $5,000, payable on demand. ***
4.19 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated March 4, 1999 in principal amount of
$20,000, payable on demand. ***
4.20 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated March 5, 1999 in principal amount of
$1,000, payable on demand. ***
4.21 12% Promissory Note of Navis Technologies, Ltd. to John
R. Varsames, dated March 23, 1999 in principal amount of
$5,500, payable on demand.***
4.22 12% Convertible Debenture to Lance Murdock due May 3, 2000
in principal amount of $30,000.
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<PAGE>
4.23 12% Convertible Debenture to Robert Francis Corvino due May 3,
2000 in principal amount of $50,000.
4.24 10% Subordinated Convertible Debenture to Seafont Pty.
Ltd., due March 13, 2001 in principal amount of $500,000.
4.25 Form of Common Stock Purchase Warrant for March/April 2000
European Stock Placement.
10.1 Reorganization Agreement, dated April 5, 1999, between and
among the Company, Navis Technologies Limited, and the
stockholders of Navis Technologies Limited. *
10.2 Purchase and Sale Agreement, dated April 6, 1999, between
the Company and Friedlander International Limited. *
10.3 Plan of Reorganization and Proposed Operations. **
10.4 Lease Agreement by and between Airmouse House, Ltd.
Partnership, and the Company with respect to certain
premises in Williston, Vermont.***
10.5 Sublease Agreement, dated June 15, 1999, between the
Company and NYBOR Corporation with respect to a portion of
the Company's leased premises in Williston Vermont. ***
10.6 Agreement of Lease between 866 U.N. Plaza Associates LLC
and the Company with respect to a portion of the 3rd Floor
at 866 U.N. Plaza, New York, New York. ***
10.7 Stock Purchase Agreement by and among James D. Richards,
III and Martine Richards, the Company and SolutioNet, Ltd.,
dated August 6, 1999 ***
10.8 Consulting Agreement dated as of August 6, 1999 between
SolutioNet, Ltd. and James D. Richards, III. ***
10.9 Shareholders' Agreement, dated as of August 6, 1999, by and
among James D. Richards, III and Martine Richards, the
Company and SolutioNet, Ltd. ***
10.10 Asset Purchase Agreement dated as of August 13, 1999, by
and between WebATM.com, Inc. and Gary Cronin***
10.11 Letter Agreement dated as of August 26, 1999, among Capston
Network Company and the Company***
10.12 1997 Incentive Stock Plan. ***
10.13 Agreement dated December 30, 1999 between Navinet and the
Company.
10.15 Note (Debenture) Purchase Agreement dated March 13, 2000 by
and between Seafont Pty. Ltd. and the Company.
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10.16 Form of Common Stock Purchase Agreement for March/April
2000 European Stock Placement.
10.17 2000 Stock Incentive Plan.
10.18 Joint Venture Agreement dated as of March 24, 2000 between
Seafont Pty. Ltd and the Company.
10.19 Service and Private Label Agreement dated as of March 20, 2000
between the Company and CoolEmail.com, Inc.
10.20 Memorandum of Understanding dated as of March 24, 2000
between the Company and Cesky Telecom a.s.
16.1 Letter on change in certifying accountant.(II)
20.1 The Company's Current Report on Form 8-K filed April 5,
1999. ***
20.2 The Company's Current Report on Form 8-K filed April 20,
1999***
20.3 The Company's Proxy Statement filed April 27, 1998.***
20.4 The Company's Proxy Statement filed January 1, 1997.***
21.1 A list of Subsidiaries of the Company.
23.1 Consent of Want and Ender CPA, P.C., Independent
Auditors.***
24.1 Power of Attorney by Directors in favor of John R. Varsames.
27 Financial Data Schedule.
- ----------------
* Previously filed with, and incorporated by reference to, the Company's
Current Report on Form 8-K filed April 20, 1999.
** Incorporated by reference to the Company's Proxy Statement filed April 27,
1998, which was attached to the Company's Form 10-KSB filed September 22,
1999.
*** Previously filed with, and incorporated by reference to, the Company's Form
10-KSB filed September 22, 1999.
II Previously filed with, and incorporated by reference to, the Company's
Current Report on Form 8-K filed November 12, 1999.
(b) REPORTS ON FORM 8-K.
The Company filed a Current Report on Form 8-K on November 12, 1999.
PAGE 27
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
eNOTE.COM INC.
Date: April 14, 2000 By: /s/ JOHN R. VARSAMES
--------------------------------------
John R. Varsames
President and Chief Executive Officer
In accordance with the Exchange Act this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date: April 14, 2000 By: /s/ JOHN R. VARSAMES
--------------------------------------
John R. Varsames
President and Chief Executive Officer,
Director (Principal Executive Officer)
Date: April 14, 2000 By: /s/ MICHAEL T. GRENNAN
--------------------------------------
Michael T. Grennan
Treasurer, Secretary and Chief Financial
Officer, Director
(Principal Financial Officer and Principal
Accounting Officer)
Date: April 14, 2000 *
------------------------------------------
Lee Abraham, Director
Date: April 14, 2000 *
------------------------------------------
Stanley M. Blau, Director
Date: April 14, 2000 *
------------------------------------------
James Bowman, Ph.D., Director
Date: April 14, 2000 *
------------------------------------------
Charles Quatt, Ph.D., Director
Date: April 14, 2000 *
------------------------------------------
Victor Reichenstein, Director
*By: /s/ JOHN R. VARSAMES
------------------------------------------
John R. Varsames, Attorney-in-fact
PAGE 28
<PAGE>
ENOTE.COM INC.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORTS:
Report of Deloitte & Touche LLP F-2
Report of Kelleher & Company F-3
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998:
Balance Sheets F-4
Statements of Operations F-5
Statements of Stockholders' Equity (Deficit) F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8 through F-16
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
eNote.Com Inc.
Williston, Vermont
We have audited the accompanying consolidated balance sheet of eNote.Com Inc.
(the "Company") as of December 31, 1999 and the related consolidated statements
of operations, stockholders' equity (deficit), and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
within 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 audit provides a
reasonable basis for our opinion.
In our opinion, such 1999 consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1999, and the results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted within the
United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 10, 2000 (April 20 as to Note 13)
F-2
<PAGE>
KELLEHER & COMPANY
To the Board of Directors and Stockholders
Navis Technologies, Ltd.
We have audited the accompanying balance sheet of Navis Technologies, Ltd. as
of December 31, 1998, and the related statements of income, accumulated
deficit, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Navis Technologies, Ltd. as
of December 31, 1998, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/
- ----------------------
Kelleher & Company
December 21, 1999
CERTIFIED PUBLIC ACCOUNTANTS
-------------------------------------------------------------
137 South Street, Boston, MA 02111 - (617) 451-9720
F-3
<PAGE>
eNOTE.COM INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 324,392 $ --
Accounts receivable -- 18,159
Inventories 814,773 2,770
Prepaid expenses and other current assets 36,206 --
----------- -----------
Total current assets 1,175,371 20,929
PROPERTY AND EQUIPMENT - Net 615,541 33,762
INTANGIBLES - Net 375,914 --
SECURITY DEPOSITS 124,242 --
TOTAL ASSETS $ 2,291,068 $ 54,691
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 660,937 $ 220,166
Notes payable-stockholder 7,045 196,947
Convertible debentures 80,000 450,000
Other current liabilities 50,000 --
----------- -----------
Total current liabilities 797,982 867,113
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, $1.00 par value, 5,000,000
shares authorized, issued and outstanding in 1999; none in 1998 5,000,000 --
Common stock, $0.01 par value, 25,000,000 shares authorized;
10,049,491 and 7,600,000 issued and outstanding,
in 1999 and 1998, respectively 100,495 76,000
Common stock warrants 740,000 --
Due from related party (150,000) --
Unearned compensation (109,263) --
Additional paid-in capital 537,358 (75,800)
Accumulated deficit (4,625,504) (812,622)
----------- -----------
Total stockholders' equity (deficit) 1,493,086 (812,422)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 2,291,068 $ 54,691
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
eNOTE.COM INC
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
NET REVENUE $ -- $ 237,213
----------- -----------
OPERATING EXPENSES:
Sales and marketing 463,430 412,360
Research and development 598,042 --
General and administrative (including
$128,390 of stock-based compensation in 1999) 1,906,018 656,787
Depreciation and amortization 114,224 4,062
----------- -----------
Total operating expenses 3,081,714 1,073,209
----------- -----------
LOSS FROM OPERATIONS (3,081,714) (835,996)
INTEREST AND OTHER INCOME - Net 81,413 --
INTEREST EXPENSE (32,999) (53,711)
----------- -----------
NET LOSS (3,033,300) (889,707)
PREFERRED STOCK DIVIDEND (740,000) --
----------- -----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(3,773,300) $ (889,707)
=========== ===========
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.40) $ (0.12)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 9,409,902 7,600,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
eNOTE.COM INC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONVERTIBLE COMMON
PREFERRED STOCK COMMON STOCK STOCK WARRANTS
--------------- ------------ --------------
SHARES TOTAL SHARES TOTAL SHARES TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 -- $ -- 7,600,000 $ 76,000 -- $ --
Net loss -- -- -- -- -- --
--------- ----------- ----------- ----------- ---------- -----------
BALANCE, DECEMBER 31, 1998 -- -- 7,600,000 76,000 -- --
Issuance of shares to Webcor's stockholders -- -- 589,491 5,895 -- --
Conversion of debentures -- -- 400,000 4,000 -- --
Issuance of convertible preferred stock for cash 5,000,000 4,260,000 -- -- -- --
Costs related to Navis acquisition -- -- -- -- -- --
Issuance of common stock warrants -- -- -- -- 740,000 740,000
Issuance of shares in connection with Navis -- -- -- -- -- --
Acquisition and issuance of preferred stock -- -- 1,460,000 14,600 -- --
Costs relating to services received in
connection with Navis Acquisition and
issuance of preferred shares -- -- -- -- -- --
Deemed dividend preferred stock -- 740,000 -- -- -- --
Due from related party -- -- -- -- -- --
Unearned stock compensation -- -- -- -- -- --
Amortization of unearned stock compensation -- -- -- -- -- --
Net loss -- -- -- -- -- --
--------- ----------- ----------- ----------- ---------- -----------
BALANCE, DECEMBER 31, 1999 5,000,000 $ 5,000,000 10,049,491 $ 100,495 740,000 $ 740,000
========= =========== =========== =========== ========== ===========
<CAPTION>
RETAINED
DUE FROM ADDITIONAL EARNINGS
RELATED UNEARNED PAID-IN (ACCUMULATED
PARTY COMPENSATION CAPITAL DEFICIT) TOTAL
----- ------------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 $ -- $ -- $ (75,800) $ 77,085 $ 77,285
Net loss -- -- -- (889,707) (889,707)
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 -- -- (75,800) (812,622) (812,422)
Issuance of shares to Webcor's stockholders -- -- (5,895) -- --
Conversion of debentures -- -- 396,000 -- 400,000
Issuance of convertible preferred stock for cash -- -- -- -- 4,260,000
Costs related to Navis acquisition -- -- (39,582) -- (39,582)
Issuance of common stock warrants -- -- -- -- 740,000
Issuance of shares in connection with Navis -- -- -- -- --
Acquisition and issuance of preferred stock -- -- 1,445,600 -- 1,460,000
Costs relating to services received in
connection with Navis Acquisition and
issuance of preferred shares -- -- (1,460,000) -- (1,460,000)
Deemed dividend preferred stock -- -- -- (740,000) --
Due from related party (150,000) -- -- -- (150,000)
Unearned stock compensation -- (237,653) 237,653 -- --
Amortization of unearned stock compensation -- 128,390 -- -- 128,390
Net loss -- -- -- (3,033,300) (3,033,300)
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 $ (150,000) $ (109,263)$ 537,358 $(4,625,504) $ 1,493,086
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
eNOTE.COM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,033,300) $ (889,707)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 114,224 4,062
Stock-based compensation 128,390 --
Share of SolutioNet loss 4,128 --
Changes in assets and liabilities:
Decrease in accounts receivable 18,159 13,907
Increase in inventory (812,003) --
Increase in prepaid expenses and other current assets (36,206) --
Increase in accounts payable and accrued expenses 440,771 204,312
Increase in security deposits (124,242) --
----------- -----------
Net cash used in operating activities (3,300,079) (667,426)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (658,394) (28,917)
Investment in SolutioNet (250,000) --
Purchases of intangibles (67,651) --
Purchase of website (50,000) --
----------- -----------
Net cash used in investing activities (1,026,045) (28,917)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible debentures 180,000 646,947
Repayment of convertible debentures (150,000) --
Repayment of convertible note payable- stockholder (189,902) --
Loan to related party (150,000) --
Proceeds from issuance of convertible preferred stock and warrants 5,000,000 --
Costs related to Navis acquisition (39,582) --
----------- -----------
Net cash provided by financing activities 4,650,516 646,947
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
AND CASH EQUIVALENTS 324,392 (49,396)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR -- 49,396
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 324,392 $ --
=========== ===========
SUPPLEMENTAL NONCASH TRANSACTIONS
AMOUNT PAID FOR INTEREST $ 77,606 $ --
=========== ===========
NONCASH EXCHANGES:
Conversion of debentures into common shares $ 400,000 $ --
=========== ===========
Loan issued in connection with Web ATM acquisition $ 50,000 $ --
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
eNOTE.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
eNote.Com Inc. (the "Company") (formerly Webcor Electronics, Inc.), is a
successor of Navis Technologies, Inc. ( "Navis"). The Company was
organized in 1971 under the laws of Delaware and was a public shell. On
April 5, 1999, the Company acquired all of the outstanding shares of
common stock of Navis ("Navis Acquisition") by issuing 7.6 million of its
shares of common stock. Simultaneously, the Company changed its name from
Webcor Electronics, Inc. to eNote.Com Inc. Navis was incorporated on
August 13, 1996 under the laws of the State of Delaware.
In connection with the Navis Acquisition, the Company issued an additional
1,460,000 shares of common stock representing 540,000 shares to
individuals designated by Capston Network Company ("Capston"), a
stockholder of the Company, 270,000 shares to legal counsel and 650,000
shares to certain financial consultants as finders' fees.
Concurrent with the Navis Acquisition, the Company sold 5 million shares
of convertible preferred stock, par value $.01 per share (the "Preferred
Stock"), and warrants to purchase 2 million shares of common stock to
Friedlander International Limited ("Friedlander") for $5 million in cash
(the "Friedlander Transaction"). The Preferred Stock has a liquidation
preference of $1 per share, or $5 million in the aggregate, and is
convertible into common stock on a one-for-one share basis. The warrants
have an exercise price of $1 per share. The warrants were valued at $0.37
per share using the Black Scholes valuation model. Because the Preferred
Stock is convertible immediately and the warrants vested immediately, a
dividend of $740,000 has been recognized. Since the Navis Acquisition and
the Friedlander Transaction were substantially interrelated, the costs
incurred in connection with these transactions have been accounted for as
a reduction of additional paid-in capital.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its subsidiary. All significant
intercompany balances and transactions have been eliminated in
consolidation.
REVERSE MERGER METHOD OF ACCOUNTING - Following the Navis Acquisition,
management of Navis became management of the Company. The former
stockholders of Navis owned approximately 80% of the outstanding shares of
common stock of the Company immediately following the Navis Acquisition.
In accordance with generally accepted accounting principles, the Navis
Acquisition was accounted for as a reverse merger. As a result, Navis is
considered to be the acquiring entity and the Company the acquired entity
for accounting purposes, even though the Company is the acquirer for legal
purposes. The historical financial information of Navis became the
historical financial information of the Company and historical
stockholders' equity and earnings per share prior to the merger have been
retroactively restated for the equivalent number of shares received in the
merger. The financial statements subsequent to the Navis Acquisition
include: (1) the balance sheet with the net assets of Navis at historical
costs; (2) the results of operations of Navis for 1998 and through the
date of the Navis Acquisition and the results of operations of the Company
after the acquisition date.
F-8
<PAGE>
CHANGE IN YEAR-END - The Company has changed its year-end from March 31 to
December 31 to conform to Navis's year-end.
CASH EQUIVALENTS - For the purposes of statements of cash flows, the
Company considers all short term, highly liquid investments with an
original maturity of three months or less to be cash equivalents.
INVENTORY - Inventories are stated at the lower of cost, determined on a
first-in, first-out basis, or market.
REVENUE RECOGNITION - The Company is in the development stage of its
product TVEmail. The Company expects to launch its product late during
second quarter 2000. The Company had no revenue in 1999. In 1998, the
Company recognized revenue as it was earned on contracts. Prior to the
Navis Acquisition, Navis was engaged in the sale of electronic devices
from its inception until its development of the TVEmail product. As a
result, the Company is not considered to be a development stage
enterprise.
The Company expects to derive its revenue principally from monthly service
fees and from the sale of TVEmail units.
RESEARCH AND DEVELOPMENT COSTS - Computer software costs of TVEmail
developed for the internal use of the Company are capitalized during the
period that the software is being developed. Any costs incurred in the
preliminary stages of development and in the operating stages of the
software are immediately expensed to research and development.
Amortization of the capitalized software costs will begin when the
software is ready for its intended use and will be amortize over the
expected life of the software. During 1999 the TVEmail software was in the
testing stage and accordingly the Company had not begun the amortization
of the capitalized software costs.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments,
including cash equivalents, accounts receivable, accounts payable,
debentures and notes payable are carried at cost, which approximates their
fair value because of the short-term maturity of these instruments.
Statement of Financial Accounting Standards ("SFAS") No. 133, accounting
for derivative instruments and hedging activities, was newly issued in
June 1998 with an effective date for fiscal years beginning after June 15,
2000. SFAS No. 133 requires that all derivative financial instruments be
recognized in the financial statements and measured at fair value
regardless of the purpose or intent for holding them. The Company has not
adopted SFAS 133 but does not believe that there will be a material effect
on the financial statements.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is recorded on the straight-line method over the estimated
useful lives of the related assets. The Company depreciates furniture and
equipment over five years. Leasehold improvements are capitalized and
amortized on the straight-line basis over the shorter of their useful life
or the term of the lease. Maintenance and repairs are expensed as
incurred. When property or equipment is retired or otherwise disposed of,
related costs and accumulated depreciation are removed from the accounts
and any resulting gain or loss is included in operations.
The Company reviews assets for impairment whenever events or changes in
circumstances indicate the carrying value of the asset may not be
recoverable. A determination of impairment, if any, is made based on
estimates of undiscounted future cash flows. For the years ended December
31, 1998 and 1999, there have been no asset impairments.
F-9
<PAGE>
INTANGIBLES - Intangible assets are amortized using the straight-line
method and consists of the following:
<TABLE>
<CAPTION>
TYPE OF INTANGIBLE AMORTIZATION
PERIOD
<S> <C>
Goodwill 3 years
Patents and trademarks 5 years
Covenant not to compete 3 years
Domain names 5 years
Acquired websites 2 years
</TABLE>
As required by SFAS No. 121, accounting for the impairment of long-lived
assets to be disposed of, management reviews long-lived assets and the
related intangible assets for impairment whenever events or changes in
circumstances indicate the carrying amount of the assets may not be
recoverable. Recoverability of these assets is determined by comparing the
forecasted undiscounted net cash flows of the operation to which the
assets relate, to the carrying amount including associated intangible
assets of the operation. If the operation is determined to be unable to
recover the carrying amount of its assets, then intangible assets are
written down first, followed by the other long-lived assets of the
operation, to fair value. Fair value is determined based on undiscounted
cash flows or appraised values, depending upon the nature of the assets.
USE OF ESTIMATES - The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from these estimates.
STOCK-BASED COMPENSATION - Stock-based compensation is recognized using
the intrinsic value method prescribed in Accounting Principles Board
("APB") Opinion No. 25, accounting for stock issued to employees, and
related interpretations. Accordingly, compensation expense for stock
options is measured as the excess, if any, of the fair value of the
Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock and is amortized over the vesting period. The
Company has adopted the disclosure provisions of SFAS No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION, which requires the Company to disclose the
pro forma effects on earnings and earnings per share as if SFAS No. 123
had been adopted.
COMPREHENSIVE INCOME - The Company has adopted the provisions of SFAS No.
130, reporting comprehensive income. SFAS No. 130 establishes standards
for reporting and presentation of comprehensive income and its components
in the financial statements. Comprehensive income includes all changes in
equity during a period except those resulting from investments by and
distributions to owners. To date, no elements of comprehensive income
exist other than net loss.
SEGMENTS - The Company has adopted the provisions of SFAS No. 131,
disclosures about segments of an enterprise and related information. SFAS
No. 131 establishes standards for companies to report information about
operating segments in annual financial statements. It also establishes
standards for related disclosures about products and services, geographic
areas and major customers. The Company's 1998 revenue was generated from
one segment operated in the United States of America. The Company did not
have revenue in 1999, therefore no disclosure is made. The Company has
determined that it did not have any separately reportable business
segments for the year ended December 31, 1999.
F-10
<PAGE>
3. STOCK OPTIONS AND EMPLOYEE BENEFIT PLAN
On April 9, 1997, the Company established a Stock Option Plan (the "1997
Plan"). The 1997 Plan provides for the grant to employees of the Company
of incentive stock options to purchase shares of the Company's common
stock. The 1997 Plan also provides for the grant to certain employees,
officers, directors and consultants of the Company of non-qualified
options to purchase shares of the Company's common stock. The 1997 Plan is
administered by a committee appointed by the Board of Directors which
determines the terms of the options granted, including the exercise price,
the number of shares subject to option, and the option vesting period.
Stock options generally have a maximum term of three years and vest in
equal annual increments over a three-year period beginning one year from
the date of grant. The total number of shares available for grants can not
exceed 1% of the total number of shares outstanding on the date of the
grant with certain limited exceptions. Stock-options outstanding at
December 31,1999 have exercise prices between $0.88 and $3.88 and a
weighted average contractual life of 1.25 years.
The following table summarizes stock option plan activity:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
<S> <C> <C>
Outstanding at January 1, 1998 -- $--
Granted -- --
Canceled -- --
Exercised -- --
------ -----
Outstanding at December 31, 1998 --
Granted 95,226 1.18
Canceled -- --
Exercised -- --
------ -----
Outstanding at December 31, 1999 95,226 $1.18
====== =====
</TABLE>
A total of 16,000 options with an exercise price ranging from of $1.13 to
$1.69 per share are exercisable as of December 31, 1999.
The Company recorded $237,653 of unearned stock-based compensation during
the year ended December 31, 1999 as a result of granting stock options
with exercise prices below the estimated fair value of the Company's
common stock at the date of grant. Unearned stock-based compensation has
been presented as a component of stockholders' equity and is being as a
charged to general and administrative expense over the vesting period of
the applicable options, which was $128,390 for the year ended December 31,
1999.
Pro forma information assuming the Company had accounted for its employee
stock options granted under the fair value method prescribed by SFAS No.
123 is presented below. The per share weighted-average fair value of stock
options granted through December 31, 1999 was $2.12 on the date of grant
using the Black Scholes option pricing model (30% volatility). The fair
value of options was estimated using a risk-free interest rate of 5%, a
dividend yield of 0%, and a weighted average expected life of five years.
F-11
<PAGE>
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net loss:
As reported $ (3,773,300) $ (889,707)
Pro forma $ (3,807,187) $ (889,707)
Basic loss per share
As reported $ (0.40) $ (0.12)
Pro forma $ (0.40) $ (0.12)
</TABLE>
EMPLOYEE BENEFIT PLANS - On July 19, 1999 the Board of Directors approved
the Company's 401k plan ("401k Plan"). The 401k Plan was established for
the purpose of providing retirement benefits to eligible employees and to
enable employees to supplement their retirement by election to have the
Company contribute amounts to the 401k Plan in lieu of payments to such
employee in cash. The 401k Plan is intended to satisfy the provisions of
section 401(k) of the Internal Revenue Code of 1986, as amended. During
1999, there were no contributions made by the Company.
4. NET LOSS PER COMMON SHARE
The Company computes net loss per common share in accordance with SFAS No.
128, earnings per share. Under SFAS No. 128, the Company is required to
present basic and diluted earnings per share, if applicable. Basic
earnings per share is calculated based on weighted average number of
shares outstanding during the period. Diluted earnings per share
calculation includes the weighted average number of shares outstanding and
gives effect to potentially dilutive common shares such as options,
warrants and convertible debt and preferred stock outstanding.
Net loss per common share for the years ended December 31, 1999 and 1998
is based on the weighted average number of shares of common stock
outstanding during the periods. Potentially dilutive securities include
options, warrants and convertible preferred stock; however, such
securities have not been included in the calculations of net loss per
common share as their effect would be antidilutive. Therefore, there is no
difference between the basic and diluted net loss per common share for any
of the periods presented.
5. INVESTMENTS
On October 18,1999, the Company acquired 55% of the outstanding shares of
SolutioNet, Inc. ("SolutioNet"). The Company neither holds majority seats
on SolutioNet's Board of Directors nor control over its operations.
Accordingly, the Company has accounted for its investment in SolutioNet
under the equity method of accounting. The Company's excess purchase price
over its share of SolutioNet's net assets as of the acquisition date was
$245,875, which is recorded as goodwill and is being amortized over three
years on a straight-line basis. The amount amortized in 1999 was $17,738.
At December 31, 1999, as a result of the Company's share in SolutioNet's
1999 losses, the investment has been fully written off.
F-12
<PAGE>
Summarized financial information for SolutioNet as of and for the year
ended December 31, 1999:
<TABLE>
<S> <C>
Total assets $ 42,983
=========
Total liabilities $ 35,513
Total stockholders' equity 7,470
Total liabilities and stockholders' equity $ 42,983
=========
Net revenue $ 234,212
Operating expenses 243,262
Net loss $ (9,050)
=========
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment, net at December 31, 1999 and 1998 consists of the
following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Computer equipment and software $209,921 $ --
Research equipment 119,915 --
Office equipment 262,543 55,170
Leasehold improvement 121,185 --
713,564 55,170
Less accumulated depreciation and
amortization 98,023 21,408
-------- --------
Property and equipment, net $615,541 $ 33,762
======== ========
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1999 and 1998 were $76,615 and $4,062, respectively.
F-13
<PAGE>
7. INTANGIBLE ASSETS
As of December 31, 1999 and 1998, intangible assets, net of accumulated
amortization, consists of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Goodwill $245,875 $--
Patents and trademarks 81,148 --
Domain names 16,500 --
Covenants not to compete 20,000 --
Website 50,000 --
-------- ----
413,523 --
Less accumulated amortization 37,609 --
-------- ----
$375,914 $--
======== ====
</TABLE>
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 1999 and 1998
consists of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Accounts payable $475,246 $107,150
Accrued payroll and benefits 78,957 113,016
Due to stockholder 99,436 --
7,300 --
-------- --------
Acounts payable and accrued expenses $660,937 $220,166
======== ========
</TABLE>
9. CONVERTIBLE DEBENTURES
On July 15, 1998 and September 9, 1998, Navis issued 18% Convertible
Debentures ("1998 Convertible Debentures") of $200,000 and $250,000,
respectively, maturing after one year. The 1998 Convertible Debentures
were convertible into shares of common stock at $1 per share. Prior to the
Navis Acquisition, the $400,000 of the 1998 Convertible Debentures were
converted into 400,000 shares of common stock and the balance of $50,000
was repaid. On March 23, 1999 and May 3, 1999, Navis issued 12%
Convertible Debentures ("1999 Convertible Debentures) for $100,000 and
$80,000, respectively, maturing after one year. The 1999 Convertible
Debentures were convertible to shares of common stock at $3 per share. The
1999 Convertible Debentures issued on March 23, 1999 of $100,000 were
repaid in 1999.
10. RELATED PARTY LOANS
Notes payable to a stockholder are unsecured and short-term in nature. The
Company repaid $189,902 of such notes during 1999.
A loan was made to Capston representing legal fees paid by the Company on
its behalf. The loan is due on January 30, 2000.
F-14
<PAGE>
11. INCOME TAXES
In connection with the Company's acquisition of Navis, Navis's status as
an S-Corporation was terminated, and Navis became subject to federal and
state income taxes. No deferred tax benefit has been provided due to the
uncertainty of future earnings.
The significant components of deferred tax assets at December 31, 1999 are
as follows:
<TABLE>
<S> <C>
Federal tax loss carryforward $ 952,000
State tax loss carryforward 112,000
-----------
1,064,000
Valuation allowance (1,064,000)
-----------
Deferred tax asset, net $ --
===========
</TABLE>
12. LEASING ARRANGEMENTS
The Company leases certain land, buildings and equipment. These leases are
classified as operating leases that expire at various intervals between
2000 and 2004. Certain of these leases contain renewal options and have
escalation clauses tied to changes in the Consumer Price Index. Under the
terms of the leases, the Company is generally responsible for the payment
of property taxes, insurance and maintenance costs related to the leased
property.
On May 31, 1999, the Company entered into a five-year lease on its current
corporate offices with a partnership in which the major stockholder of the
Company is a general partner.
The following is a schedule by year of minimum future rental expense (net
of sublease income) on noncancellable operating leases as of December 31,
1999:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
2000 $122,788
2001 100,000
2002 100,000
2003 100,000
2004 50,000
--------
Total minimum future rentals $472,788
========
</TABLE>
13. SUBSEQUENT EVENTS
The accompanying consolidated financial statements for the year ended
December 31, 1999 have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. As shown in the consolidated financial
statements, during the years ended December 31, 1999 and 1998, the Company
incurred net losses of $3,033,300 and $889,707, respectively, depleting
its initial capitalization. For the year ended December 31, 1999, the
Company incurred operating expenses of $3,081,714 while earning no
revenue.
F-15
<PAGE>
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a
timely basis, to obtain additional financing or capital investments as may
be required, and ultimately to attain successful operations. In this
regard, as of April 20, 2000, the Company completed a private placement of
$500,000 of one year 10% Subordinated Convertible Debentures. The
debentures are convertible into shares of common stock of the Company at
the rate of $7.00 per share and may be redeemed by the Company. The
proceeds will be used for general corporate purposes and funding ongoing
product development.
In addition, the Company has completed a private placement of its common
stock to unrelated investors. The terms of the placement require the
Company to sell an aggregate of approximately 825,000 shares of its common
stock at $6.00 per share, with attached warrants which will allow for the
purchase of 412,500 additional shares at an exercise price of $0.01 per
share. The warrants are immediately exercisable. As of April 20, 2000, the
Company has received approximately $3,953,000 for the purchase of 658,332
shares and the exercise of warrants to purchase an additional 329,166
shares. The proceeds will be used for general corporate purposes and
funding ongoing product development.
The Company also entered into a joint venture agreement with an investor
to create an Australian corporation to distribute, market and sell a
localized version of TVEmail in Australia and New Zealand. The Company
will have a 50% equity interest, but will hold a majority representing
voting control. The terms of the agreement require a $250,000 investment
by each party.
******
F-16
<PAGE>
Exhibit 4.22
No.________ $ 30,000.00
NAVIS TECHNOLOGIES, LTD.
ONE LAWSON LANE
BURLINGTON, VT 05401
MAY 3, 1999
1-YEAR 12 PERCENT CONVERTIBLE DEBENTURE
DUE MAY 3, 2000
Navis Technologies, Ltd., a Delaware corporation, (the
"Corporation"), for value received, promises to pay to Lance Mudock or
assigns, the sum of $30,000.00 on May 3, 2000 (the "due date"), together
with interest accrued thereon at the rate of 12 percent per annum,
computed from May 3, 1999 (the "issue date"). Payment of principal and
interest shall be made in lawful money of the United States of America
and shall be mailed to the owner or owners hereof at the address
appearing below, unless the conversion option is exercised as set forth
below in Paragraph 2.
This Debenture is one of a duly authorized issue of the
Corporation's debentures issued in varying denominations, all of like
tenor and maturity, except variations necessary to express the number,
principal amount and payee of each debenture.
1. EQUAL RANK. All debentures of this issue rank equally and
ratably without priority over one another.
2. CONVERSION. The holder or holders of this Debenture may
prior to the maturity hereof (except that, if the Corporation has
called this Debenture for redemption, the right to convert shall
terminate at the close of business on the second business day prior to
the date fixed as the date for such redemption), convert the principal
amount hereof into common stock of eNote.com Inc., a Delaware
corporation and the sole shareholder of the Corporation, upon
registration of such stock by eNote.com Inc. The Conversion shall be at
the rate of three dollars ($3.00) per share of common stock. To convert
this Debenture, the holder or holders hereof must surrender the same at
the office of the Corporation, together with a written instrument of
transfer in a form satisfactory to the Corporation, properly completed
and executed and with a written notice of conversion.
3. FRACTIONAL SHARES. In lieu of issuing any fraction of a
share upon the conversion of this Debenture, the Corporation shall pay
to the holder hereof for any fraction of a share otherwise issuable
upon the conversion, cash equal to the same fraction of the then
current per unit market price of the equity.
4. REDEMPTION. The Corporation may at any time prepay in whole
or in part, the principal amount, plus accrued interest to the date of
prepayment, of all outstanding debentures of this issue.
<PAGE>
5. DEFAULT. If any of the following events occur ("Event of
Default"), the entire unpaid principal amount of, and accrued or unpaid
interest on, this debenture shall immediately be due and payable, and
the Corporation shall pay all costs of collection, including, but not
limited to, reasonable attorneys' fees and expenses incurred by the
owner(s) or its assigns on account of such collection, whether or not
suit is brought:
a. The Corporation fails to pay the principal of this
Debenture at its maturity;
b. The Corporation commence any voluntary proceeding
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, dissolution, or liquidation law or
statute, of any jurisdiction, whether now or subsequently in effect; or
the Corporation is adjudicated a bankrupt by a court or competent
jurisdiction; or the Corporation petitions or applies for, acquiesces
in, or consents to, the appointment of any receiver or trustee of the
Corporation for all of its property or assets; or the Corporation makes
an assignment for the benefit of all its creditors; or the Corporation
admits in writing its inability to pay its debts as they mature; or
c. There is commenced against the Corporation any
proceeding relating to the Corporation under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
receivership, dissolution, or liquidation law or statute, of any
jurisdiction, whether now or subsequently in effect, and the proceeding
remains undismissed for a period of 60 days or the Corporation by any
act indicates its consent, approval of, or acquiescence in, the
proceeding; or a receiver or trustee in appointed for the Corporation
or for all or substantially all of its property or assets, and the
receivership or trusteeship remains undischarged for a period of 60
days; or a warrant of attachment, execution or similar process is
issued against any substantial part of the property or assets of the
Corporation, and the warrant or similar process is not dismissed or
bonded within 60 days after the levy.
5. REGISTERED OWNER. The Corporation shall treat the person or
persons whose name or names appear on this Debenture as the absolute
owner or owners hereof for the purpose of receiving payment of, or on
account of, the principal and interest due on this Debenture and for
all other purposes, unless and until written notice satisfactory to the
Corporation is provided by the registered owner of assignment hereof.
6. ASSIGNMENT. The owner(s) hereof may assign its rights
hereunder to any person or entity. No assignment of rights or
obligations shall be effective until delivery of written notice of such
assignment is made by the assigning party to the other party hereto.
7. RELEASE OF SHAREHOLDERS, OFFICERS AND DIRECTORS. This
Debenture is the obligation of the Corporation only, and no recourse
shall be had for the payment of any principal or interest hereon
against any shareholder, officer or director of the Corporation, either
directly or through the Corporation, by virtue of any statute for the
enforcement of any assessment or otherwise. The holder or holders of
this Debenture, by the acceptance hereof, and as part of the
consideration for this Debenture, release all claims and waive all
liabilities against the foregoing persons in connection with this
Debenture.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has assigned this Debenture
this 3rd day of May, 1999.
Navis Technologies, Ltd.
/s/ JOHN R. VARSAMES
-----------------------------
John R. Varsames, President
REGISTERED OWNER:
Lance Murdock
----------------------------
----------------------------
----------------------------
3
<PAGE>
Exhibit 4.23
No.________ $ 50,000.00
NAVIS TECHNOLOGIES, LTD.
ONE LAWSON LANE
BURLINGTON, VT 05401
MAY 3, 1999
1-YEAR 12 PERCENT CONVERTIBLE DEBENTURE
DUE MAY 3, 2000
Navis Technologies, Ltd., a Delaware corporation, (the
"corporation"), for value received, promises to pay to Robert Francis
Corvino or assigns, the sum of $50,000.00 on May 3, 2000 (the "due
date"), together with interest accrued thereon at the rate of 12
percent per annum, computed from May 3, 1999 (the "issue date").
Payment of principal and interest shall be made in lawful money of the
United States of America and shall be mailed to the owner or owners
hereof at the address appearing below, unless the conversion option is
exercised as set forth below in Paragraph 2.
This Debenture is one of a duly authorized issue of the
Corporation's debentures issued in varying denominations, all of like
tenor and maturity, except variations necessary to express the number,
principal amount and payee of each debenture.
1. EQUAL RANK. All debentures of this issue rank equally and
ratably without priority over one another.
2. CONVERSION. The holder or holders of this Debenture may
prior to the maturity hereof (except that, if the Corporation has
called this Debenture for redemption, the right to convert shall
terminate at the close of business on the second business day prior to
the date fixed as the date for such redemption), convert the principal
amount hereof into common stock of eNote.com Inc., a Delaware
corporation and the sole shareholder of the Corporation, upon
registration of such stock by eNote.com Inc. The Conversion shall be at
the rate of three dollars ($3.00) per share of common stock. To convert
this Debenture, the holder or holders hereof must surrender the same at
the office of the Corporation, together with a written instrument of
transfer in a form satisfactory to the Corporation, properly completed
and executed and with a written notice of conversion.
3. FRACTIONAL SHARES. In lieu of issuing any fraction of a
share upon the conversion of this Debenture, the Corporation shall pay
to the holder hereof for any fraction of a share otherwise issuable
upon the conversion, cash equal to the same fraction of the then
current per unit market price of the equity.
4. REDEMPTION. The Corporation may at any time prepay in whole
or in part, the principal amount, plus accrued interest to the date of
prepayment, of all outstanding debentures of this issue.
<PAGE>
5. DEFAULT. If any of the following events occur ("Event of
Default"), the entire unpaid principal amount of, and accrued or unpaid
interest on, this debenture shall immediately be due and payable, and
the Corporation shall pay all costs of collection, including, but not
limited to, reasonable attorneys' fees and expenses incurred by the
owner(s) or its assigns on account of such collection, whether or not
suit is brought:
a. The Corporation fails to pay the principal of
this Debenture at its maturity;
b. The Corporation commence any voluntary proceeding
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, dissolution, or liquidation law or
statute, of any jurisdiction, whether now or subsequently in effect; or
the Corporation is adjudicated a bankrupt by a court of competent
jurisdiction; or the Corporation petitions or applies for, acquiesces
in, or consents to, the appointment of any receiver or trustee of the
Corporation for all of its property or assets; or the Corporation makes
an assignment for the benefit of all its creditors; or the Corporation
admits in writing its inability to pay its debts as they mature; or
c. There is commenced against the Corporation any
proceeding relating to the Corporation under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
receivership, dissolution, or liquidation law or statute, of any
jurisdiction, whether now or subsequently in effect, and the proceeding
remains undismissed for a period of 60 days or the Corporation by any
act indicates its consent, approval of, or acquiescence in, the
proceeding; or a receiver or trustee in appointed for the Corporation
or for all or substantially all of us property or assets, and the
receivership or trusteeship remains undischarged for a period of 60
days; or a warrant of attachment, execution or similar process is
issued against any substantial part of the property or assets of the
Corporation, and the warrant or similar process is not dismissed or
bonded within 60 days after the levy.
5. REGISTERED OWNER. The Corporation shall treat the person or
persons whose name or names appear on this Debenture as the absolute
owner or owners hereof for the purpose of receiving payment of, or on
account of, the principal and interest due on this Debenture and for
all other purposes, unless and until written notice satisfactory to the
Corporation is provided by the registered owner of assignment hereof.
6. ASSIGNMENT. The owner(s) hereof may assign its rights
hereunder to any person or entity. No assignment of rights or
obligations shall be effective until delivery of written notice of such
assignment is made by the assigning party to the other party hereto.
7. RELEASE OF SHAREHOLDERS, OFFICERS AND DIRECTORS. This
Debenture is the obligation of the Corporation only, and no recourse
shall be had for the payment of any principal or interest hereon against
any shareholder, officer or director of the Corporation, either directly
or through the Corporation, by virtue of any statute for the enforcement
of any assessment or otherwise. The holder or holders of this Debenture,
by the acceptance hereof, and as part of the consideration for this
Debenture, release all claims and waive all liabilities against the
foregoing persons in connection with this Debenture.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has assigned this Debenture this 3rd day of
May, 1999
Navis Technologies, Ltd
/s/ JOHN R. VARSAMES
--------------------------
John R. Varsames, President
REGISTERED OWNER:
Robert Francis Corvino
333 South Elm Street
Hindsdale, IL 60521
(630) 654-1697
3
<PAGE>
Exhibit 4.24
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN RELIANCE ON REGULATION S
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE ACT OR ANY STATE
SECURITIES LAW, AND THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
REGULATION S, REGISTRATION UNDER THE ACT OR AN EXEMPTION THEREFROM UNDER SAID
ACT AND UNDER ALL APPLICABLE STATE SECURITIES LAWS. FURTHERMORE, ALL HEDGING
TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
A-1 $500,000.00
ENOTE.COM INC
185 ALLEN BROOK LANE
WILLISTON, VERMONT 05495
MARCH 13, 2000
1-YEAR 10 PERCENT SUBORDINATED CONVERTIBLE DEBENTURE
DUE MARCH 13, 2001
eNote.com Inc., a Delaware corporation, (the "Corporation"), for value
received, promises to pay to Seafont Group Holdings Pty. Ltd., an Australian
corporation (the "Holder"), the sum of Five Hundred Thousand U.S. Dollars
($500,000) on March 13, 2001 (the "due date"), together with interest accrued
thereon at the rate of 10 percent per annum, computed from March 13, 2000 (the
"issue date"). Payment of principal and interest shall be made in lawful money
of the United States of America and shall be wire transferred to the owner
hereof at the address appearing below, unless the conversion option is exercised
as set forth below in Section 1. This Debenture is a duly authorized issue of
the Corporation.
This Note is issued pursuant to a Note Purchase Agreement dated March
13, 2000 (the "Purchase Agreement") by and between the Corporation and the
Holder.
1. CONVERSION. The holder of this Debenture may at time prior to the
maturity hereof (except that, if the Corporation has called this Debenture for
redemption, the right to convert shall terminate at the close of business on the
second business day prior to the day fixed as the date for such redemption),
convert the principal amount hereof into shares of the Corporation's Common
Stock. The Conversion ratio shall be $7 of debenture principal per share of
Common Stock. To convert this Debenture, the holder hereof must surrender the
same at the office of the Corporation, together with a written instrument of
transfer in a form satisfactory to the Corporation, properly completed and
executed and with a written notice of conversion. All rights of the holder of
this Debenture shall, to the extent of the principal and interest thereof
converted, cease as of the date of such conversion.
<PAGE>
2. FRACTIONAL SHARES. In lieu of issuing any fraction of a share upon
the conversion of this Debenture, the Corporation shall pay to the holder hereof
for any fraction of a share otherwise issuable upon the conversion, cash equal
to the same fraction of $7 per unit.
3. REDEMPTION. The Corporation may at any time prepay in whole or in
part, without penalty, the principal amount, plus accrued interest to
the date of prepayment, of all outstanding debentures of this issue.
4. SUBORDINATION.
a. The Corporation, for itself, its successors and
assigns, covenants and agrees, and each holder of
this Note by his acceptance thereof likewise
covenants and agrees, that the payment of the
principal of and interest on each and all of this
Note shall be subordinate and subject, to the extent
and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all Senior
Indebtedness.
b. Upon any distribution of assets of the Corporation
upon any dissolution, winding up, liquidation, or
reorganization of the Corporation, whether in
bankruptcy, insolvency, or receivership proceedings
or upon an assignment for the benefit of creditors of
any other dissolution, winding up, liquidation, or
reorganization of the Corporation:
(i) All Senior Indebtedness shall first be paid
in full, or provision made for such payment
in full of the principal thereof, and
premium, if any, and interest thereon,
before any payment is made on account of the
principal of, or interest on, the Notes;
(ii) Any payment or distribution of assets of the
Corporation of any kind or character,
whether in cash, property, or securities
(other than stock of the Corporation as
reorganized or readjusted or securities of
the Corporation or any other corporation
provided for by a plan of reorganization or
readjustment the payment of which is
subordinate, at least to the extent provided
in this Section with respect to the Notes,
to the payment of all Senior Indebtedness at
the time outstanding and to any securities
issued in respect thereof under any such
plan of reorganization or readjustment), to
which the holder of this Note would be
entitled except for the provisions of this
Section shall be paid by the liquidating
trustee or agent or other person making such
payment of distribution, whether a trustee
in bankruptcy, receiver, or liquidating
trustee or other trustee or agent, directly
to the holders of Senior Indebtedness or
their representative or representatives or
the trustee or trustees under any indenture
under which any instruments evidencing any
of such Senior Indebtedness may have been
issued, ratably according to the aggregate
amounts remaining unpaid on account of the
principal of, and premium, if any, and
interest on, the Senior Indebtedness held or
represented by each, to the extent necessary
to make payment in full of all Senior
Indebtedness remaining unpaid, after giving
effect to any concurrent payment or
distribution, or provision therefor, to the
holders of such Senior Indebtedness; and
2
<PAGE>
(iii) In the event that, notwithstanding the
foregoing, any payment or distribution of
assets of the Corporation of any kind or
character, whether in cash, property, or
securities (other than stock of the
Corporation as reorganized or readjusted or
securities of the Corporation or any other
corporation provided for by a plan of
reorganization or readjustment the payment
of which is subordinate, at least to the
extent provided in this Section with respect
to the Note, to the payment of all Senior
Indebtedness at the time outstanding and to
any securities issued in respect thereof
under any such plan of reorganization or
readjustment), shall be received by the
holder of this Note before all Senior
Indebtedness is paid in full, or provision
made for its payment, such payment or
distribution shall be paid over to the
holders of Senior Indebtedness remaining
unpaid or unprovided for or their
representative or representatives or to the
trustee or trustees under any indenture
under which any instruments evidencing any
of such Senior Indebtedness may have been
issued, as provided in the foregoing
subparagraph (2), for application to the
payment of such Senior Indebtedness until
all such Senior Indebtedness shall have been
paid in full after giving effect to any
concurrent payment or distribution, or
provision therefor, to the holders of such
Senior Indebtedness.
c. Subject to the payment in full of all Senior
Indebtedness, the holder of this Note shall be
subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of
cash, property, or securities of the Corporation
applicable to the Senior Indebtedness until the
principal of and interest on this Note shall be paid
in full, and no such payments or distributions in
respect of this Note of cash, property, or securities
distributable to the Senior Indebtedness under the
provisions here shall, as between the Corporation,
its creditors other than the holders of Senior
Indebtedness, and the holder of this Notes, be deemed
to be a payment by the Corporation to or on account
of this Note. It is understood that the provisions of
this Section are and are intended solely for the
purpose of defining the relative rights of the holder
of this Note, on the one hand, and the holders of the
Senior Indebtedness on the other hand. Nothing
contained in this Section is intended to or shall
impair, as between the Corporation, its creditors
other than the holders of Senior Indebtedness, and
the holder of this Note, the absolute and
unconditional obligation of the Corporation to pay
the holder of this Note the principal of and interest
on this Note as and when the same shall become due
and payable in accordance with their terms, or is
intended to or shall affect the relative rights of
the holder of this Note and creditors of the
Corporation other than the holders of the Senior
Indebtedness; nor shall anything herein or therein
prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law upon
default under this Note, subject to the rights, if
any, under this Section of the holders of Senior
Indebtedness in respect of cash, property or
securities of the Corporation received upon the
exercise of any such remedy.
d. Upon any distribution of assets of the Corporation
referred to in this Section, the holder of this Note
shall be entitled to rely upon a certificate of the
liquidating trustee or agent or other person making
any distribution to such holder for the
3
<PAGE>
purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the
Senior Indebtedness and other indebtedness of the
Corporation, the amount thereof or payable thereon,
and all other facts pertinent thereto or to this
Section.
e. If there shall have occurred a default in the payment
of the principal of (or premium, if any) or interest
on any Senior Indebtedness, then, unless and until
such default shall have been cured or waived, no
payment of principal or interest shall be made by the
Corporation on this Note, and no holder of this Note
shall be entitled to receive any such payment.
Nothing contained in this Section shall, however (1)
affect the obligation of Corporation to make or
prevent the Corporation from making, at any time,
except during the pendency of any dissolution,
winding up, liquidation, or reorganization
proceedings or except as provided in the first
sentence of this subsection, payments of principal of
or interest on this Note, or (2) prevent the
application by any paying agent of any moneys
deposited with it by the Corporation to the payment
of or on account of the principal of, or interest on,
this Note, if, at the time of such deposit, the
paying agent did not have written notice of any event
prohibiting the making of such payment or deposit by
the Corporation; or (3) be construed as preventing
the occurrence of any Event of Default hereunder.
f. No right of any present or future holder of any
Senior Indebtedness of the Corporation to enforce
subordination as herein provided shall at any time or
in any way be prejudiced or impaired by any act or
failure to act on the part of the Corporation or by
any act or failure to act, in good faith, by any such
holder, or by an noncompliance by the Corporation
with the terms, provisions, and covenants of this
Note, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
g. Any renewal or extension of the time of payment of
any Senior Indebtedness or the exercise by the
holders of Senior Indebtedness of any of their rights
under the Senior Indebtedness, including without
limitation the waiver of default thereunder or the
release of any security therefor, may be made or done
all without notice to or assent from the holder of
this Note. No compromise, alteration, amendment,
modification, extension, renewal, or other change of,
or waiver, consent, or other action in respect of,
any liability or obligation under or respect of, or
of any of the terms, covenants, or conditions or any
indenture or other instrument under which any Senior
Indebtedness is outstanding or of such Senior
Indebtedness, and no release of property securing any
Senior Indebtedness, whether or not such release is
in accordance with the provisions of any applicable
document, shall in any way alter or affect any of the
provisions of this Section.
h. "Senior Indebtedness" for purposes of this Section
shall mean all indebtedness (principal and interest)
now existing or hereafter incurred of the Corporation
for money borrowed from banks or other financial
institutions: (i) which is secured by the assets of
the Corporation; and (ii) is not by its express terms
subordinate and junior to or on parity with this
Note.
5. DEFAULT. If any of the following events occur ("Event of Default"),
the entire unpaid
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principal amount of, and accrued and unpaid interest on, this Debenture shall
immediately be due and payable, and the Corporation shall pay all costs of
collection including, but not limited to, reasonable attorneys' fees and
expenses incurred by the owner(s) or its assigns on account of such collection,
whether or not suit is brought:
a. The Corporation fails to pay the principal of this
Debenture at its maturity;
b. The Corporation commences any voluntary proceeding
under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, receivership,
dissolution, or liquidation law or statute, of any
jurisdiction, whether now or subsequently in effect;
or the Corporation is adjudicated as bankrupt by a
court of competent jurisdiction; or the Corporation
petitions or applies for, acquiesces in, or consents
to, the appointment of any receiver or trustee of the
Corporation or for all or substantially all of its
property or assets; or the Corporation makes an
assignment for the benefit of its creditors; or the
Corporation admits in writing its inability to pay
its debts as they mature; or
c. There is commenced against the Corporation any
proceeding relating to the Corporation under any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, dissolution, or
liquidation law or statute, of any jurisdiction,
whether now or subsequently in effect, and the
proceeding remains undismissed for a period of 60
days or the Corporation by any act indicates its
consent to, approval of, or acquiescence in the
proceeding; or a receiver or trustee is appointed for
the Corporation or for all or substantially all of
its property or assets, and the receivership or
trusteeship remains undischarged for a period of 60
days; or a warrant of attachment, execution or
similar process is issued against any substantial
part of the property or assets of the Corporation,
and the warrant or similar process is not dismissed
or bonded within 60 days after the levy.
6. REGISTERED OWNER. The Corporation shall treat the person or persons
whose name or names appear on this Debenture as the absolute owner or owners
hereof for the purpose of receiving payment of, or on account of, the principal
and interest due on this Debenture and for all other purposes, unless and until
written notice satisfactory to the Corporation is provided by the registered
owner of assignment hereof.
7. ASSIGNMENT. The Corporation may assign its rights hereunder to any
person or entity. No assignment of rights or obligations shall be effective
until delivery of written notice of such assignment is made by the assigning
party to the other party hereto.
8. RESTRICTIONS ON TRANSFER. This Note and any shares of the
Corporation's Common Stock received upon conversion of this Note may not be
transferred other than as provided in the Purchase Agreement.
9. RELEASE OF SHAREHOLDERS, OFFICERS AND DIRECTORS. This Debenture is
the obligation of the Corporation only, and no recourse shall be had for the
payment of any principal or interest hereon against any shareholder, officer or
director of the Corporation, either directly or through the Corporation, by
virtue of any statute for the enforcement of any assessment or otherwise. The
holder or holders of this
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Debenture, by the acceptance hereof, and as part of the consideration for this
Debenture, release all claims and waive all liabilities against the foregoing
persons in connection with this Debenture.
10. GOVERNING LAW. This Debenture and all terms and conditions herein
shall be governed by and construed and in accordance with the laws of the State
of Vermont excluding the state's conflict of law provisions.
IN WITNESS WHEREOF, THE CORPORATION HAS SIGNED THIS DEBENTURE THIS 13TH
DAY OF MARCH, 2000.
ENOTE.COM INC.
BY: /s/ JOHN R. VARSAMES
-----------------------------------
JOHN R. VARSAMES, PRESIDENT AND CEO
REGISTERED OWNER:
SEAFONT GROUP HOLDINGS PTY. LTD.
BY: /s/ ANDREW KELLEY
------------------------------------
ANDREW KELLEY, CEO
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Exhibit 4.25
THIS WARRANT, AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT, HAVE BEEN ISSUED IN RELIANCE ON REGULATION S OF THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAW, AND THEY MAY NOT BE
SOLD OR TRANSFERRED EXCEPT PURSUANT TO REGULATION S, REGISTRATION UNDER THE ACT
OR AN EXEMPTION THEREFROM UNDER SAID ACT AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS. FURTHERMORE, ALL HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
ENOTE.COM, INC.
VOID AFTER , 2005
---------------------
Warrant No.___ ____________, 2000
THIS CERTIFIES that, for value received, ___________________________,
or its registered assigns, is entitled, subject to the terms of Section 1
hereof, to subscribe for and purchase from eNote.com, Inc., a Delaware
corporation (hereinafter called the "Company"), at the price of $.01 per share
(such price, as from time to time to be adjusted as hereinafter provided, being
hereinafter called the "Warrant Price"), at any time on or prior to
______________, 2005 up to _____________________ (______) fully paid,
nonassessable shares of Common Stock, par value $.01 per share, of the Company
("Common Stock"), subject, however, to the provisions and upon the terms and
conditions hereinafter set forth.
Section 1. EXERCISE OF WARRANT. This Warrant may be exercised by the
holder hereof, in whole or in part (but not as to a fractional share of Common
Stock), by the completion of the subscription form attached hereto and by the
surrender of this Warrant (properly endorsed) at the office of the Company in
Williston, Vermont (or at such other agency or office of the Company in the
United States as it may designate by notice in writing to the holder hereof at
the address of the holder hereof appearing on the books of the Company), and by
payment to the Company of the Warrant Price, in cash or by certified or official
bank check, for each share being purchased. In the event of any exercise of the
rights represented by this Warrant, a certificate or certificates for the shares
of Common Stock so purchased, registered in the name of the holder hereof, shall
be delivered to the holder hereof within a reasonable time, not exceeding
fifteen (15) business days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired or been exercised
in full, a new Warrant representing the number of shares (except a remaining
fractional share), if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof within such time.
With respect to any such exercise, the holder hereof shall for all purposes be
deemed to have become the holder of record of the number of shares of Common
Stock evidenced by such certificate or certificates from the date on which this
Warrant was surrendered and payment of the Warrant Price was made irrespective
of the
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date of delivery of such certificate, except that, if the date of such surrender
and payment is a date on which the stock transfer books of the Company are
closed, such person shall be deemed to have become the holder of such shares at
the close of business on the next succeeding date on which the stock transfer
books are open. No fractional shares shall be issued upon exercise of this
Warrant. If any fractional interest in a share of Common Stock would, except for
the provisions of this Section 1, be delivered upon any such exercise, the
Company, in lieu of delivering the fractional share thereof, shall pay to the
holder hereof an amount in cash equal to the current market price of such
fractional interest as determined in good faith by the Board of Directors of the
Company.
Section 2. ADJUSTMENT OF NUMBER OF SHARES.
(a) RECLASSIFICATION, CONSOLIDATION OR MERGER. In the event of any
reclassification or change of outstanding securities of the Common Stock, or in
the event of any consolidation or merger of the Company with or into another
corporation or entity, other than a consolidation or merger with another
corporation or entity in which the Company is the continuing corporation and
which does not result in any reclassification, conversion or change of
outstanding Common Stock, or in the event of any sale of all or substantially
all of the assets of the Company, the Company, or such successor or purchasing
corporation or entity, as the case may be, shall execute a new warrant
certificate (the "New Warrant Certificate"), providing that the Holder of this
Warrant shall have the right to exercise such new warrants and procure upon such
exercise, in lieu of each share of Common Stock issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, conversion, change,
consolidation or merger by a holder of one share of Common Stock.
(b) SUBDIVISIONS, COMBINATIONS AND STOCK DIVIDENDS. If at any time
while this Warrant is outstanding and unexpired the Company shall subdivide or
combine its Common Stock, or shall pay a dividend with respect to Common Stock
payable in, or make any other distribution with respect to its Common Stock
consisting of, shares of Common Stock, then the number of Warrant Shares for
which this Warrant is exercisable shall be adjusted, from and after the date of
determination of stockholders entitled to receive such dividend or distribution,
to that number determined by multiplying the number of Warrant Shares for which
this Warrant is exercisable immediately prior to such date of determination by a
fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately after such dividend or distribution and
(ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution.
(c) NOTICE OF ADJUSTMENT. Upon any adjustment of the Warrant Price,
then and in each such case the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the Warrant holder at the
address of such holder as shown on the books of the Company, which notice shall
state the Warrant Price resulting from such adjustment, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
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(d) STOCK TO BE RESERVED. The Company will at all times reserve and
keep available out of its authorized Common Stock or its treasury shares, solely
for the purpose of issuance upon the exercise of this Warrant as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the exercise of this Warrant.
(e) DEFINITION OF COMMON STOCK. As used herein the term "Common Stock"
shall mean and include the 25,000,000 shares of Common Stock, par value $.01 per
share, as authorized on the date of this and any additional Common Stock, par
value $.01 hereinafter authorized.
Section 3. NOTICES OF RECORD DATES. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any right to sell shares of stock of any class or any
other right; or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other corporation or entity; or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
then and in each such event the Company will give notice to the holder of this
Warrant specifying: (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right and stating the amount and
character of such dividend, distribution or right; and (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock will be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 10 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to (x) the effectiveness of a
registration statement under the Securities Act of 1933 and applicable state
securities laws, or (y) a favorable vote of stockholders, if either is required.
Section 4. NO STOCKHOLDER RIGHTS OR LIABILITIES.
(a) Except as set forth in paragraph 5(b), this Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere
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enumeration herein of the rights or privileges of the holder hereof shall give
rise to any liability of such holder for the Warrant Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
(b) At any time while this Warrant is outstanding, the Company shall,
prior to making any distribution of its property or assets to the holders of its
Common Stock as a dividend in liquidation or partial liquidation or by way of
return of capital or any dividend payable out of funds legally available for
dividends under the laws of the State of Delaware, give to the holder of this
Warrant, not less than 20 days prior written notice of any such distribution. If
such holder shall exercise this Warrant on or prior to the date of such
distribution set forth in such notice, such holder shall be entitled to receive,
upon such exercise: (i) the number of shares of Common Stock receivable pursuant
to such exercise; and (ii) without payment of any additional consideration, a
sum equal to the amount of such property or assets as would have been payable to
the holder hereof as an owner of the shares described in clause (i) of this
paragraph 5(b) had the holder hereof been the holder of record of such shares on
the record date for such distribution; and an appropriate provision with respect
to such payment to such holder as described in this paragraph 5(b) shall be made
a part of any such distribution.
Section 6. COMPLIANCE WITH SECURITIES ACT.
The Holder of this Warrant Certificate, by acceptance hereof, agrees
that the Warrant and the shares of Common Stock to be issued upon exercise
hereof are being acquired for investment and that it will not offer, sell or
otherwise dispose of the Warrants or any shares of Common Stock to be issued
upon exercise hereof except: (a) in accordance with the provisions of Regulation
S, promulgated under the Securities Act of 1933, as amended (the "Act"); (b)
upon Registration under the Act; or (c) pursuant to an exemption to registration
under said Act and all applicable state securities laws. Upon the exercise of
the Warrant, the Holder hereof shall (i) confirm in writing that the shares of
Common Stock so purchased are being acquired by an entity or individual who is
not a "U.S. Person" as defined in Rule 902(k) of Regulation S under the Act or
(ii) deliver a written opinion of counsel to the effect that the Warrant and the
shares of Common Stock to be issued upon exercise thereof have been registered
under the Act or are exempt from registration thereunder. This Warrant
Certificate and all shares of Common Stock issued upon the exercise of the
Warrant (unless registered under the Act) shall be stamped or imprinted with a
legend substantially in the following form:
THIS WARRANT, AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT, HAVE BEEN ISSUED IN RELIANCE ON REGULATION S OF THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAW, AND THEY MAY NOT BE
SOLD OR TRANSFERRED EXCEPT PURSUANT TO REGULATION S, REGISTRATION UNDER THE ACT
OR AN EXEMPTION THEREFROM UNDER SAID ACT AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS. FURTHERMORE, ALL HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES MAY NOT BE
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CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
Section 7. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its discretion reasonably impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
Section 8. NOTICES. Any notice to be given to either party under this
Warrant Certificate shall be in writing and shall be deemed to have been given
to the Company or the Holder hereof, as the case may be, when delivered in hand
or when sent by first class mail, postage prepaid, addressed, if to the Company,
at its principal office and, if to the Holder hereof, at its address as set
forth in the Company's books and records or at such other address as the Holder
hereof may have provided to the Company in writing.
Section 9. GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of Vermont, without giving
effect to such jurisdiction's principles of conflict of laws.
Section 10 EXCLUSIVE JURISDICTION. With respect to actions and
proceedings to enforce the provisions of, arising from, or relating to this
Warrant or the Warrant, the holder, by acceptance of this Warrant, consents to
personal jurisdiction in the state or federal courts of the State of Vermont and
irrevocably agrees that all such actions and proceedings shall be litigated
exclusively in such courts. Further, each of the parties hereto waives any
objection that it may have to the conduct of any action or proceeding in any
such court based on improper venue or FORUM NON CONVENIENS. Each of the parties
hereto waives personal service of any and all process upon it and agrees that
valid service of process may be made by mail or courier service directed to it
at the address set forth herein and that service so made shall be deemed to be
completed upon the earlier of actual receipt or ten (10) days after the same
shall have been posted.
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IN WITNESS WHEREOF, the duly authorized agent of eNote.com, Inc. has
executed this Warrant as of the ___th day of ________, 2000.
ENOTE.COM, INC.
By:_____________________________
John R. Varsames, President & CEO
[Corporate Seal]
Attest:
________________________________
Secretary
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SUBSCRIPTION FORM TO BE EXECUTED
UPON EXERCISE OF THE WARRANT
Date:
To: eNote.com, Inc.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase [__________] shares of
Common Stock covered by such Warrant, and herewith tenders $[____________] in
full payment of the purchase price for such shares as provided in the within
Warrant.
The undersigned either (i) hereby certifies that it is not a U.S.
Person as that term is defined in Rule 902(k) of the Securities Act of 1933, as
amended (the "Act") or (ii) is delivering herewith an opinion of counsel, which
is attached hereto, to the effect that the Warrant and the Common Stock issuable
upon exercise of the Warrant have been registered under the Act or are exempt
from registration thereunder.
Name of Holder:
By: _____________________________
Address_____________________________
_____________________________
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Exhibit 10.13
MASTER AGREEMENT
This Master Agreement (together with the Schedules attached hereto, as modified
and supplemented from time to time, the "Agreement") is made and entered into as
of the date last written below by and between NaviNet, Inc., a Delaware
corporation ("NaviNet"), and eNote.com Inc. (the "Customer"). Each of NaviNet
and Customer is a "Party" and collectively are the "Parties" to this Agreement.
WHEREAS, NaviNet is in the business of providing certain data services described
in Section 1.2 below; and
WHEREAS, Customer desires to receive such data services from NaviNet and NaviNet
desires to provide such data services to Customer;
NOW, THEREFORE, in consideration of the premises contained herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereby agree as follows:
1 DEFINITIONS
1.1 UNDEFINED TERMS. Terms not otherwise defined herein shall be defined and
construed in accordance with the Communications Act of 1934, as amended, and
otherwise as such terms are commonly used in the telecommunications industry.
1.2 DATA SERVICES. The services provided by NaviNet under Schedule B, including
the obligation to (i) aggregate all incoming calls from End Users (as defined
herein), (ii) convert data traffic to Transmission Control Protocol/Internet
Protocol ("TCP/IP") format and (iii) route data traffic between the End User and
Customer or Internet.
1.3 IN-SERVICE DATE. The date on which NaviNet gives notice to Customer that
Data Services are available to Customer, or the date on which any of Customer's
End Users receive Data Services.
1.4 END USERS. Each subscriber of the Customer who receive Data Services and
whose data traffic is routed though a NaviPOP.
1.5 NAVIPOP. NaviNet point of presence.
2 UNDERTAKING
2.1 OBLIGATIONS OF NAVINET. The obligations of NaviNet under this Agreement are
set forth in the GeoDial Service Description which may be revised from time to
time (a copy of which is attached hereto at Schedule A).
<PAGE>
MASTER AGREEMENT
2.2 OBLIGATIONS OF CUSTOMER.
(a) EQUIPMENT. Prior to the In-Service Date, Customer shall install such
equipment as specified in Schedule B, in accordance with the technical
specifications set forth therein.
(b) COMPENSATION. Customer shall pay all sums arising under this Agreement in
accordance with the requirements set forth herein.
(c) ACCEPTABLE USE POLICY. Customer shall require End Users to adhere to an
Acceptable Use Policy, as defined in Section 14.1, as a condition of receiving
service. NaviNet's Acceptable Use Policy is at: http://www.navinet.net/aup.php3.
(d) SERVICE ORDERS. Prior to receiving service from NaviNet, Customer must
submit NaviNet's Service Order Form (a copy of which is attached hereto at
Schedule C) describing the initial coverage and capacity required by Customer.
The Service Order Form is subject to the terms and conditions contained herein.
(e) REALMS AND PHONE NUMBERS. Customer is required to use realms and will share
dial-in phone numbers with other Customers.
3 TERM
The Agreement shall be effective as of the date last written below. The "Initial
Term" of the Agreement shall be for two (2) years from the In-Service Date.
Thereafter, the Agreement will automatically renew for additional one-year
terms, unless either Party notifies the other in writing of its intention not to
renew the Agreement at least ninety (90) days prior to the expiration of the
Initial Term or the then current one-year term, whichever is applicable. The
Initial Term plus any one-year extension(s) thereof shall equal the "Term of the
Agreement".
4 CERTAIN FEES
4.1 MONTHLY UNIT FEES. Each month, subject to the conditions set forth herein,
Customer shall pay NaviNet a "Unit Fee." Such fee shall be calculated by
multiplying the total number of Units counted by the NaviNet authentication
server in each month (such number, the "Unit Count" or "UC") multiplied by the
dollar amount set forth in applicable tier in Schedule E (such dollar amount in
each tier, a "Unit Fee"). For the first six months following the In-Service
Date, the applicable Unit Fee shall be the Fee for an UC of greater than or
equal to 25,000 and less than or equal to 125,000.
(a) MINIMUM UC. For the month beginning July 2000 (fill in the date of the first
day of the seventh full month following the In-Service Date), and through the
remainder of the Term Customer shall pay NaviNet for a minimum UC of 25,000,
even if the UC falls below such number (as relevant, such UC, "Minimum UC"). By
committing to a Minimum UC, Customer shall obtain the Data Services for a Unit
Fee each month equal to (i) the Minimum UC for the month multiplied by the tier
in Schedule E applicable to the Minimum UC, (ii) plus the Fee Per Unit
calculated under Section 4.1 for each TIC in excess of the Minimum EUC.
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MASTER AGREEMENT
(b) COMMITMENT NOTICE. At any time during the term, Customer may give NaviNet
notice (the "Commitment Notice") of its intent to increase the Minimum UC in
order to qualify for a lower Fee Per Unit. During the calendar month in which
NaviNet receives the Commitment Notice and for the two subsequent months
thereafter (the "Ramp-Up Period"), if the actual UC for the month is below the
Minimum UC provided in the Commitment Notice, Customer shall pay a Unit Fee for
that month equal to the actual UC for the month multiplied by the tier in
Schedule B applicable to the Minimum UC. Thereafter, the Unit Pee shall be
calculated under Section 4.1(a). If during any month of the Ramp-Up Period, the
actual UC equals or exceeds the Minimum UC provided in the Commitment Notice,
the Unit Fee for such month shall be calculated under Section 4.1(a) beginning
with the month in which the actual UC equals or exceeds the Minimum UC.
4.2 SETUP FEE. Customer shall pay NaviNet a "Setup Fee." Such fee shall equal $0
(N/A)per New End User per month. To determine the number of New End Users,
NaviNet shall calculate the difference between the current month's total number
of End Users and the previous highest level of total number of End Users during
any month of the Term. NaviNet shall issue invoices monthly, as described in
Section 5.1 below, to Customer for such Setup Fees.
4.3 REALM FEES. The first two realms are supported at no charge. The fee for
each additional realm shall be $500.00. The fee for changing a realm shall be
$500.00.
4.4 LATE FEES. All charges arising under this Agreement that remain unpaid by
the due date specified in Section 5.1 are subject to interest thereon from the
due date at the maximum rate permitted by law up to 1.5% per month, calculated
PRO RATA for each day after the due date until the date of payment.
4.5 FEE ADJUSTMENT. During the Term of this Agreement, NaviNet shall not
increase fees set forth herein, unless laws, regulations or governmental rulings
result in a substantial increase in the cost to NaviNet of providing Services,
in which case such increase shall be limited to the amounts necessary to cover
those costs. During the Term of this Agreement, NaviNet shall provide at least
sixty (60) days advance written notice to Customer of such fee increase.
4.6 REINSTATEMENT FEE. In the event the Agreement is terminated pursuant to
Section 9.1(a) for a failure of Customer to pay sums owed to NaviNet when due
and Customer desires to reinstate NaviNet Data Services, (a) Customer shall pay,
in full, all outstanding balances owed to NaviNet; (b) Customer shall pay a
Reinstatement Fee of $1,000; and (c) "the previous highest level of total number
of End Users during any month of the Term" as described in Section 4.2 set at
zero. Customer shall be eligible for reinstatement of receipt of Data Services
from NaviNet only once.
4.7 SERVICE LEVEL AGREEMENT FEES. NaviNet's Service Level Agreement Fees are set
forth in the Service Level Agreement at Schedule D, attached hereto.
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MASTER AGREEMENT
4.8 TERMINATION FEE. In the event the Agreement is terminated due to an Event of
Default on the part of the Customer, Customer shall pay the Termination Fees set
forth in Section 9.3, below.
5 PAYMENT AND BILLING
5.1 PAYMENT DATE. Unless otherwise agreed to in writing by the Parties, Customer
shall pay sums owing under this Agreement by check within thirty (30) days of
the date of written invoice from NaviNet. If Customer fails to pay an invoice
within 30 days, Customer shall be deemed to be in default under the terms of
this Agreement and shall be deemed to have waived any credits to which it may
have been entitled under this Agreement.
(a) INVOICE PERIOD. NaviNet will send Customer a monthly invoice reflecting the
charges incurred during the prior Month at each NaviPOP. For the purposes of
this Agreement, a "Month" shall mean the period beginning at 12:00:00 a.m.,
Local Time, on the first day of each calendar month and ending at 11:59:59 p.m.,
Local Time, on the last day of each calendar month. "Local Time" refers to the
time in each time zone where a given NaviPOP is located. Any calls that begin in
one Month and conclude in the following Month shall be invoiced to the later
Month. Failure by NaviNet to send a monthly invoice shall not constitute a
default or waiver by NaviNet of any of its rights under this Agreement.
5.2 BILLING DISPUTES. If Customer in good faith disputes an invoice rendered by
NaviNet, Customer may withhold payment of the disputed amount, provided (a)
Customer gives written notice of the disputed charge within fifteen (15) days of
the date of written invoice from NaviNet and (b) pays any undisputed charges in
accordance with Section 5.1 of this Agreement. The Parties shall cooperate with
each other to resolve any billing dispute expeditiously. If the Parties are
unable to resolve a billing dispute within thirty (30) days from the date the
disputed amount is due, either Party may then invoke the arbitration provisions
of Section 12 at which time late fees shall begin to accrue, to be payable only
in the event that the billing dispute is decided in favor of NaviNet. The Party
prevailing in any such arbitration shall be entitled to reimbursement for
reasonable expenses (as determined by the arbitrator), including reasonable
legal fees, incurred in connection with such arbitration proceedings.
6 VOLUME AND CAPACITY REQUIREMENTS
The terms and conditions of expansion or reduction of Customer's End User
volumes are set forth in the GeoDial Service Description, attached hereto at
Schedule A.
7 CONFIDENTIAL AND PROPRIETARY INFORMATION
The Terms and Conditions of the Non-Disclosure Agreement entered into between
the parties prior to the execution of this Agreement shall remain in effect
throughout the term of this Agreement and for three years after the termination
of this Agreement.
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MASTER AGREEMENT
8 EVENTS OF DEFAULT
The following shall constitute an "Event of Default" under this Agreement:
8.1 Customer may be deemed to be in default of its obligations under this
Agreement if: Customer fails to perform or fulfill any of its obligations under
this Agreement, including (a) failure to pay amounts due and owing in accordance
with Section 5, above; (b) failure to abide by the decision of the arbitrator in
accordance with Section 12, and such failure is not remedied within thirty (30)
days after written notice thereof from NaviNet; provided however, that NaviNet
may in its sole discretion extend such thirty (30) day period. Any such
extension must be in writing. Notwithstanding the above, amounts found to be due
and payable to NaviNet by the arbitrator shall be payable within five (5) days
of the arbitrator's decision. Failure to pay amounts when so due shall
constitute an Event of Default.
8.2 NaviNet shall be deemed in default of its obligations under this Agreement
if: (a) if the number of consecutive months, NaviNet is below the industry
average in two or more of the following categories (signified by Inverse
Internet Benchmark assigned letter grade): 24-Hour Call Failure Rate, Modem
Connect Speed, Average Time to Login, and Average Web Throughput, multiplied by
the average number of such categories below the average during the period equals
or exceeds twelve, or (b) NaviNet fails to perform or fulfill any of its
material obligations or breaches any of its representations or warranties under
this Agreement, including failure to abide by the decision of the arbitrator in
accordance with Section 13, and such failure is not remedied within thirty (30)
days after written notice thereof from ISP; provided however, that ISP may in
its sole discretion extend such thirty (30) day period. Any such extension must
be in writing.
9 TERMINATION
9.1 This Agreement may be terminated prior to the expiration of the Term:
(a) by either Party in the Event of Default by the other Party;
(b) by either Party in the event of any event set forth in Section 10.1 which
remains in effect for more than thirty (30) days;
(c) by either Party if any law, regulation or governmental ruling, or
interpretation or implementation thereof by a competent court or regulatory
authority, prevents that Party from receiving a material benefit of this
Agreement.
(d) by Customer within 90 days from the In-Service Date, if Customer has
technical, service, and/or any other performance problems defined at the time by
Customer, caused by the use of NaviNet or its network which adversely affects
Customers ability to adequately meet its business needs.
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MASTER AGREEMENT
9.2 Any termination shall be effective upon written notice by the terminating
Party to the non-terminating Party in accordance with Section 15.9.
9.3 Upon termination of this Agreement, Customer shall remain liable to NaviNet
for (i) all payables outstanding, (ii) any uninvoiced Unit Fees and (iii) in the
event that this Agreement is terminated as a result of Customer's default, for
fifty percent (50%) of the Unit Fee for the Minimum UC for the remainder of the
Term.
10 LIMITATION OF LIABILITY
10.1 FORCE MAJEURE. Neither NaviNet nor Customer shall be liable in any respect
for any failure of performance hereunder, if such is due to Acts of God, fire,
explosion, vandalism, cable cut, storm or other similar occurrence, any law,
order, regulation, direction, action or request of the United States government
or of any other government or of any civil or military authority, national
emergencies, insurrections, riots, wars, strikes, lockouts or work stoppages or
other labor difficulties, supplier failures (including failure of performance of
any carrier), shortages, breaches or delays, or preemption of existing service
in compliance with a final rule or regulation of the Federal Communications
Commission or a court of competent jurisdiction.
10.2 DISCLAIMER OF WARRANTIES. Except as expressly set forth in this Agreement,
NaviNet makes no warranties, representations or agreements, written or oral,
express or implied, either in fact or by operation of law, including warranties
of merchantability and fitness for a particular purpose.
(a) LIMITATION OF LIABILITY. Neither NaviNet nor Customer shall be liable to the
other Party nor any other person, firm or entity for any incidental, indirect,
special, consequential, punitive or reliance damages of any nature whatsoever
regardless of the foreseeability thereof (including, but not limited to, any
claim from any client customer, third party or patron for loss of services, lost
profits or lost revenues) arising under or in connection with this Agreement, or
the performance hereunder, arising from any breach, or partial breach, or
potential breach of the provisions of this Agreement, or arising out of any act
or omission by either NaviNet or Customer, their respective agents, employees or
affiliates whether based on breach of contract, breach of warranty, negligence
or any other theory of liability. Customer's sole and exclusive remedy for any
breach of this Agreement shall be as set forth in the GeoDial Service
Description.
11 INDEMNIFICATION
11.1 Customer shall indemnify, hold harmless, and defend NaviNet, its
directors, officers, agents, employees and/or representatives from and against
any and all claims, demands, causes of action, losses, expenses or liabilities,
including reasonable attorney's fees, on account of injury or death of any
person or loss of or damage to any and all property arising, directly or
indirectly, out of the acts or omissions of Customer, any subcontractor,
director, officer, agent, employee and/or representative of each of them, in the
performance of any obligations arising under this Agreement, except to the
extent such cause of action, loss, expense or liability is caused solely by the
gross negligence or willful misconduct of NaviNet.
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MASTER AGREEMENT
11.2 NaviNet shall indemnify, hold harmless, and defend Customer, its directors,
officers, agents, employees and/or representatives from and against any and all
claims, demands, causes of action, losses, expenses or liabilities, including
reasonable attorney's fees, on account of injury or death of any person or loss
of or damage to any and all property arising, directly or indirectly, out of the
acts or omissions of NaviNet, any subcontractor, director, officer, agent,
employee and/or representative of each of them, in the performance of any
obligations arising under this Agreement, except to the extent such cause of
action, loss, expense or liability is caused solely by the gross negligence or
willful misconduct of Customer.
12 DISPUTE RESOLUTION
12.1 Any dispute arising out of or relating to this Agreement shall be settled
by arbitration by an arbitrator chosen by NaviNet and approved by Customer and
in accordance with the rules of the American Arbitration Association. The
decision of the arbitrator shall be final and binding. Judgment upon the award
rendered by the arbitrator may be entered by any court with jurisdiction. All
such arbitration shall be conducted at a location mutually agreed to by the
pates. Pending resolution of the dispute, the Parties agree to continue to
perform all obligations arising under this Agreement.
13 SERVICE MARKS
13.1 NaviNet grants Customer a non-exclusive, non-transferable license to use
the "NaviNet" name until January 31, 2000, by which date NaviNet has agreed to
change its name. From and after January 31, 2000, NaviNet grants Customer a
non-exclusive, non-transferable license to use its new name as well as any
applicable service marks. Customer grants NaviNet a non-exclusive,
non-transferable license to use the "eNote.com" name as well as applicable
service marks, which will be furnished upon request. Such license is intended
solely for the purpose of advertising and marketing Customer's alliance with
NaviNet without exposing either Party to claims for service mark or trademark
infringement. Each Party shall retain exclusive ownership of all service marks
and trade marks associated with its business, Either Party may at any time
revoke such license granted hereby to the other Party.
13.2 Each Party agrees to obtain the oral or written approval of the other Party
prior to: (i) the publication, dissemination or transmission of any promotional
material containing the name or service marks of the other Party and (ii) the
use of the name or service marks of the other Party in conjunction with any
other names or service marks.
14 ACCEPTABLE USE POLICY
14.1 Customer shall maintain a written policy which is consistent with and
includes all of the material terms of the policy as set forth at:
http://www.navinet.net/aup.php3, including without limitation, a prohibition
against unlawful use of its network and requirement of cooperation with law
enforcement officials in the pursuit of illegal uses of its network (such
policy, "Acceptable Use Policy"). Customer shall deliver in writing such
Acceptable Use Policy to NaviNet within thirty (30) days following the execution
of this Agreement and shall deliver in writing to NaviNet all material changes
made to such Acceptable Use Policy within thirty (30) days of such
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MASTER AGREEMENT
changes. Customer shall require all End Users to adhere to such Acceptable Use
Policy as a condition of receiving Customer service. Failure of an End User to
comply with such Acceptable Use Policy shall be grounds for termination of End
User's contract with Customer at the request of NaviNet. Notwithstanding
anything herein to the contrary, NaviNet may block any data traffic to or from
End Users, which appear to violate such Acceptable Use Policy.
15 MISCELLANEOUS
15.1 NUMBER PORTABILITY. Notwithstanding the availability of number portability
in a particular jurisdiction, the Parties agree that any line numbers assigned
to Customer in connection with service provided under this Agreement are
provided solely for the use of NaviNet services. Upon termination of this
Agreement, Customer shall be prohibited from using any line numbers assigned to
it by NaviNet.
15.2 ENTIRE AGREEMENT; MODIFICATIONS IN WRITING. This Agreement constitutes the
entire Agreement between Customer and NaviNet and supersedes all prior
agreements and undertakings, whether written or oral, concerning the subject
matter of this Agreement. No amendments or modifications to the printed terms
and provisions of this Agreement will be valid or binding unless such amendments
or modifications are agreed to in writing and signed by both Parties.
15.3 ASSIGNABILITY. Neither Party may assign this Agreement or any right or
obligation hereunder without the prior written consent of the other Party, which
consent shall not be unreasonably withheld; provided, however, that NaviNet may
assign this Agreement to any entity controlled by or under common control with
NaviNet without seeking Customer's consent and Customer's consent shall not be
required in connection with the sale or other transfer of all or substantially
all of the assets of or equity interests in NaviNet.
15.4 WAIVER. The failure of either Party to give notice of default or to enforce
or insist upon compliance with any of the terms or conditions of this Agreement
shall not be construed as a waiver thereof or of any other term or condition of
this Agreement.
15.5 CHOICE OF LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the choice
of law rules thereof.
15.6 RELATIONSHIP BETWEEN THE PARTIES. Except as expressly stated herein,
neither NaviNet nor Customer is an agent, employer, partner, contractor or joint
venturer of the other.
15.7 SEVERABILITY. In the event any portion of this Agreement is found to be
invalid or nullified, it shall not affect the validity of any other provision of
this Agreement.
15.8 SURVIVABILITY. The terms and provisions contained in this Agreement that by
their sense and context are intended to survive the performance or termination
thereof by the Parties hereto shall so survive the completion of performance or
termination of this Agreement, including without limitation provisions for
indemnification and the making of any and all payments due hereunder.
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MASTER AGREEMENT
15.9 NOTICES. Notices to be given to any Party under this Agreement shall not
be effective unless in writing and hand-delivered or mailed by registered or
certified mail to said Party at its address as set forth below, or to such other
address as has been designated by the other Party in accordance with this
Section 15.9.
If to NaviNet:
NaviNet, Inc.
600 Federal Street
Andover, MA 01810
Attention: T.C. Browne
If to CUSTOMER:
eNote.com Inc.
185 Allen Brook Lane
Williston, VT 05495
Attention:
Notices shall be effective on the date delivered, if by hand, or if by mail on
the third business day after the date mailed.
15.10 HEADINGS. Descriptive headings in this Agreement are for convenience only
and shall not affect the construction of this Agreement.
15.11 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same document.
15.12 YEAR 2000 COMPLIANCE. The "Year 2000 Problem" refers to the potential
inability of some computer software to appropriately treat date-related
information or functions involving dates of January 1, 2000 and thereafter. The
Parties make the following representations and warranties, to the exclusion of
all other representations and warranties made in this Agreement, with respect to
the Year 2000 Problem:
(a) NaviNet represents that is has made and will continue to make commercially
reasonable efforts to ensure that the computer systems it uses or intends to use
in providing the NaviNet Data Services will not be materially impaired by the
Year 2000 Problem, provided, however, that Customer acknowledges and agrees that
NaviNet is an integrator of systems and services provided by other entities, and
NaviNet can neither modify the products and services of such entities nor
guarantee that they will function without adverse effect from the Year 2000
Problem. NaviNet will periodically inform Customer of the steps NaviNet is
taking to ensure against ad-verse effects on the NaviNet Data Services cause by
the Year 2000 Problem. Breach of the foregoing representations and obligations
shall constitute an Event of Default under Section 8 of this Agreement, and
Customer's sole and exclusive remedy for such Default shall be termination in
9
<PAGE>
MASTER AGREEMENT
accordance with Section 9 of this Agreement. Customer's sole and exclusive
remedy for any service interruption or impairment caused by the Year 2000
Problem shall be as set forth in the GeoDial Service Description.
(b) Customer represents that it has been given ample opportunity to make inquiry
into the programming and operational aspects of any and all computer systems
that it utilizes, or intends to utilize, in its business operations, and
Customer hereby warrants that, as to such systems, Customer will make reasonable
efforts to ensure that the Year 2000 Problem will not materially adversely
affect Customer's business operations or performance under this Agreement.
Breach of the foregoing shall constitute an Event of Default under Section 8 of
this Agreement, and NaviNet's sole and exclusive remedy for such Default shall
be termination in accordance with Section 9 of this Agreement.
(c) It is expressly agreed that the indemnification contained in Section 11 of
this Agreement, including the limitations of liability referenced therein, shall
apply to any third-party claims arising out of a breach of the above Year 2000
Problem representations and warranties.
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of
the day and year last written below.
CUSTOMER
/s/ JOHN R. VARSAMES
- -------------------------------
By:
Title: President & CEO
-----------------------
Date: 12/27/99
NAVINET, INC.
/s/ T. C. BROWNE
- -------------------------------
By: T. C. Browne
Title: Chief Executive Officer
-----------------------
Date: 12/30/99
10
<PAGE>
MASTER AGREEMENT
SCHEDULE A - GEODIAL SERVICE DESCRIPTION
& GeoDial SP(TM) Attached
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MASTER AGREEMENT
SCHEDULE B - FACILITIES AND EQUIPMENT
1. EQUIPMENT
1.1 Customer shall install the following equipment in accordance with the
specifications set forth herein.
(a) ________ Back-end _________ circuit(s) (optional);*
(b) ________ RADIUS server(s);
(c) ________ CSU/DSU device(s);
(d) ________ router pod(s) of ______________ TBD _________ type
* NaviNet recommends installation of Back-end circuit(s) in connection with the
use of the NaviNet Data Services. If Customer elects not to install a Back-end
circuit(s), it shall so indicate below.
Back-end circuit(s) to be installed? YES ____ NO ____
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<PAGE>
MASTER AGREEMENT
SCHEDULE C - SERVICE ORDER FORM
13
<PAGE>
MASTER AGREEMENT
SCHEDULE D - SERVICE LEVEL AGREEMENT
In the event that NaviNet's network performance for a given month, as measured
against monthly Inverse Internet Benchmark data for that month, is below the
reported industry average (signified by Inverse assigned letter grade) for that
month in any of the following four categories: 24-Hour Call Failure Rate, Modem
Connect Speed, Average Time to Login, and Average Web Throughput, Customer is
entitled to credit from NaviNet in the next invoice period in an amount equal to
2% of the total invoice for the "below average" month for each of the four
categories in which NaviNet is below the applicable measure.
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MASTER AGREEMENT
SCHEDULE E - FEE SCHEDULE
<TABLE>
<CAPTION>
- ------------------------------------------------------------ --------------------------------------------
BILLABLE LOGINS UNIT FEE 2 YEAR TERM
- ------------------------------------------------------------ --------------------------------------------
<S> <C> <C> <C>
25,000 Less than UC Less than 125,000 $0.342
or equal to
- ------------------------------------------------------------ --------------------------------------------
125,000 Less than UC Less than 250,000 $0.304
or equal to
- ------------------------------------------------------------ --------------------------------------------
250,000 Less than UC Less than 625,000 $0.285
or equal to
- ------------------------------------------------------------ --------------------------------------------
625,000 Less than UC Less than 1,250,000 $0.266
or equal to
- ------------------------------------------------------------ --------------------------------------------
1,250,000 Less than UC Less than 2,500,000 $0.247
or equal to
- ------------------------------------------------------------ --------------------------------------------
2,500,000 Less than UC $O.228
or equal to
- ------------------------------------------------------------ --------------------------------------------
</TABLE>
8XX SERVICE: The usage fee is $0.08 per minute. There is a $750 installation fee
for each T1 (i.e. 24 simultaneous calls) turned-up.
15
<PAGE>
Exhibit 10.14
ENOTE.COM INC.
1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
SECTION 1. PURPOSES OF THE PLAN. The purposes of this 1999
Non-Employee Directors' Stock Option Plan are to attract and retain the best
available individuals for service as Directors of the Company, to provide
additional incentive to the Outside Directors of the Company to serve as
Directors, and to encourage their continued service on the Board. All options
granted hereunder shall be non-statutory stock options.
SECTION 2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means a sale of all or substantially all of the
Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" means the Common Stock of the Company.
(e) "Company" means eNote.com Inc., a Delaware corporation.
(f) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(g) "Corporate Transaction" means a dissolution or liquidation of the
Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "Director" means a member of the Board.
(i) "Employee" means any person, including any officer or Director
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
(k) "Option" means a stock option granted pursuant to the Plan. All
options shall be non-statutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(l) "Optioned Stock" means the Common Stock subject to an Option.
(m) "Optionee" means an Outside Director who receives an Option.
(n) "Outside Director" means a Director who is not an Employee.
(o) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1999 Non-Employee Directors' Stock Option Plan.
(q) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
SECTION 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares which may be
optioned and issued under the Plan is 200,000 Shares of Common Stock (the
"Pool"). The Shares maybe authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without having
been exercised in full, the unpurchased Shares which were subject thereto shall,
unless the Plan has been terminated, become available for future grant under the
Plan. In addition, any Shares of Common Stock that are retained by the Company
upon exercise of an Option in order to satisfy the exercise price for such
Option, or any withholding taxes due with respect to such exercise, shall be
treated as not issued and shall continue to be available under the Plan. If
Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
SECTION 4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan shall
be administered by the Board.
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
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<PAGE>
(ii) Each Outside Director shall be automatically granted
an Option to purchase 20,000 Shares (the "First Option") on the date on which
such person first becomes an Outside Director after the effective date of
this Plan, whether through election by the stockholders of the Company or
appointment by the Board of Directors to fill a vacancy. Each Outside
Director serving on the Board on the effective date of this Plan shall be
granted the First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 5,000 Shares (the "Subsequent Option") on the date of each
Annual Meeting of the Company's stockholders immediately following which such
Outside Director is serving on the Board, provided that, on such date, he or she
shall have served on the Board for at least six (6) months prior to the date of
such Annual Meeting.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall be
for that number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors receiving an
Option on the automatic grant date. Any further grants shall then be deferred
until such time, if any, as additional Shares become available for grant under
the Plan through action of the stockholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 17 hereof.
(c) EXERCISE AND VESTING. The terms of each Option granted hereunder
shall be as follows:
(i) each Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Section 9
below;
(ii) with respect to the First Options the exercise price per
Share shall be 25% of the fair market value per Share on the date of grant of
each Option, determined in accordance with Section 8 hereof;
(iii) with respect to the Subsequent Option the exercise price
per Share shall be equal to 100% of the fair market value per Share on the date
of grant of each such option, determined in accordance with Section 8 hereof;
and
(iv) each First Option shall vest at the rate of 50% of the
total shares per semi-annual period commencing on June 6, 2000.
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<PAGE>
(v) each Subsequent Option shall vest at the rate of 100% of
the total shares on the anniversary of the grant date.
(d) POWERS OF THE BOARD. Subject to the provisions and restrictions of
the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per Share of Options to be granted, which exercise price
shall be determined in accordance with Section 8 of the Plan; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(e) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(f) SUSPENSION OR TERMINATION OF OPTION. If the Chief Executive Officer
or his or her designee reasonably believes that an Optionee has committed an act
of misconduct, such officer may suspend the Optionee's right to exercise any
option pending a determination by the Board (excluding the Outside Director
accused of such misconduct). If the Board (excluding the Outside Director
accused of such misconduct) determines an Optionee has committed an act of
embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
SECTION 5. ELIGIBILITY. Options may be granted only to Outside
Directors. All Options shall be automatically granted in accordance with the
terms set forth in Section 4(b) above. An Outside Director who has been granted
an Option may, if he or she is otherwise eligible, be granted an additional
Option or Options in accordance with such provisions. The Plan shall not confer
upon any Optionee any right with respect to continuation of service as a
Director or nomination to serve as a Director, nor shall it interfere in any way
with any rights which the Director or the Company may have to terminate his or
her directorship at any time.
SECTION 6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become
effective on the date that the Plan is approved by the Board of Directors
subject to the approval of the Plan by the Company's stockholders as provided
for in Section 17 hereof. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 13 of the Plan.
4
<PAGE>
SECTION 7. TERM OF OPTIONS. The term of each Option shall be ten (10)
years from the date of grant thereof unless an Option terminates sooner pursuant
to Section 9 below.
SECTION 8. CONSIDERATION.
(a) FAIR MARKET VALUE. The fair market value of a share of Common
Stock on any date shall be (i) the straight average of the closing sales
price over the five (5) preceeding business days, of a share of Common Stock
as reported on the principal securities exchange on which shares of Common
Stock are then listed or admitted to trading or (ii) if not so reported, the
average of the closing bid and asked prices for a share of Common Stock over
the five (5) preceeding business days as quoted on the National Association
of Securities Dealers Automated Quotation System ("Nasdaq") or (iii) if not
quoted on Nasdaq, the average of the closing bid and asked prices for a share
of Common Stock as quoted by the National Quotation Bureau's "Pink Sheets" or
the National Association of Securities Dealers' OTC Bulletin Board System
over the five (5) preceding business days. If the price of a share of Common
Stock shall not be so reported, the Fair Market Value of a share of Common
Stock shall be determined by the Board in its absolute discretion.
(b) FORM OF CONSIDERATION. The consideration to be paid for the Shares
to be issued upon exercise of an Option shall consist entirely of cash, check,
other Shares of Common Stock having a fair market value on the date of surrender
equal to the aggregate exercise price of the Shares as to which the Option shall
be exercised (which, if acquired from the Company, shall have been held for at
least six months), or any combination of such methods of payment and/or any
other consideration or method of payment as shall be permitted under applicable
corporate law.
SECTION 9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable at such times as are set forth in Section 4(b)
above; provided, however, that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 below has been
obtained. An Option may not be exercised for a fraction of a Share. An Option
shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company. Full payment may
consist of any consideration and method of payment allowable under Section 8(c)
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. A share certificate
for the number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan. Exercise of
an Option in any manner shall result in a decrease in the number of Shares which
5
<PAGE>
thereafter may be available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. If an Outside
Director ceases to serve as a Director, he or she may, but only within sixty
(60) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term as set forth in Section 7 has
expired. To the extent that such Outside Director was not entitled to exercise
an Option at the date of such termination, or does not exercise such Option (to
the extent he or she was entitled to exercise) within the time specified above,
the Option shall terminate and the Shares underlying the unexercised portion of
the Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above, in the
event a Director is unable to continue his or her service as a Director with the
Company as a result of his or her total and permanent disability (as defined in
Section 22(e)(3) of the Code), he or she may, but only within twelve (12) months
from the date of such termination, exercise his or her Option to the extent he
or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of Termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee: (i)
during the term of the Option who is, at the time of his or her death, a
Director of the Company and who shall have been in Continuous Status as a
Director since the date of grant of the Option or (ii) within three (3) months
after the termination of Continuous Status as a Director, the Option may be
exercised, at any time within twelve (12) months following the date of death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of death or the date of termination, as
applicable. Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired. To the extent that
an Optionee was not entitled to exercise the Option at the date of death or
termination or if he or she does not exercise such Option (to the extent he or
she was entitled to exercise) within the time specified above, the Option shall
terminate and the Shares underlying the unexercised portion of the Option shall
revert to the Plan.
SECTION 10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution or pursuant to a
qualified domestic relations order (as defined by the Code or the rules
thereunder). The designation of a beneficiary by an Optionee does not constitute
a transfer. An Option may be exercised during the lifetime of an Optionee only
by the Optionee or a transferee permitted by this Section.
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SECTION 11. ADJUSTMENTS UPON CAPITALIZATION CHANGES; CORPORATE
TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the stockholders of
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of Shares of Common Stock set forth in Sections 4(b)(ii) and
(iii) above, and the number of Shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common or any other increase or decrease in the number of issued Shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS. In the event of a Corporate Transaction,
each option granted pursuant to this Plan shall immediately vest in its
entirety and be exercisable in full immediately prior to such Corporate
Transaction. In the event of a Corporate Transaction including a Change of
Control, and except as otherwise provided in a Stock Option Agreement issued
under the Plan, each outstanding Option shall be assumed or an equivalent
option shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation, unless the successor corporation
does not agree to assume the outstanding Options or to substitute equivalent
options, in which case the Options shall terminate upon the consummation of
the transaction. For purposes of this Section 11(b), an Option shall be
considered assumed, without limitation, if, at the time of issuance of the
stock or other consideration upon such Corporate Transaction or Change of
Control, each Optionee would be entitled to receive upon exercise of an
Option the same number and kind of shares of stock or the same amount of
property, cash or securities as the Optionee would have been entitled to
receive upon the occurrence of such transaction if the Optionee had been,
immediately prior to such transaction, the holder of the number of Shares of
Common Stock covered by the Option at such time (after giving effect to any
adjustments in the number of Shares covered by the Option as provided for in
this Section 11 and after giving effect to the acceleration of vesting
provided for in the first sentence of this Section 11(b)); provided, however,
that if such consideration received in the transaction was not solely common
stock of the successor corporation or its Parent, the Board of Directors may,
with the consent of the successor corporation, provide for the consideration
to be received upon exercise of the Option to be solely common stock of the
successor corporation or its Parent equal to the Fair Market Value of the per
Share consideration received by holders of Common Stock in such transaction.
(c) CERTAIN DISTRIBUTIONS. In the event of any distribution to the
Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without
receipt of consideration by the Company, the Board of Directors
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may, in its discretion, appropriately adjust the price per Share of Common Stock
covered by each outstanding Option to reflect the effect of such distribution.
SECTION 12. TIME OF GRANTING OPTIONS. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section 4(b)
hereof. Notice of the determination shall be given to each Outside Director to
whom an Option is so granted within a reasonable time after the date of such
grant.
SECTION 13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
SECTION 14. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any
other provision of the Plan or any agreement entered into by the Company
pursuant to the Plan, the Company shall not be obligated, and shall have no
liability for failure, to issue or deliver any Shares under the Plan unless such
issuance or delivery would comply with the legal requirements relating to the
administration of stock option plans under applicable U.S. state corporate laws,
U.S. federal and applicable state securities laws, the Code, any stock exchange
or Nasdaq rules or regulations to which the Company may be subject and the
applicable laws of any other country or jurisdiction where Options are granted
under the Plan, as such laws, rules, regulations and requirements shall be in
place from time to time (the "Applicable Laws"). Such compliance shall be
determined by the Company in consultation with its legal counsel. As a condition
to the exercise of an Option, the Company may require the person exercising such
Option to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by law.
SECTION 15. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
SECTION 16. OPTION AGREEMENT. Options shall be evidenced by written
option agreements in such form as the Board shall approve.
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SECTION 17. STOCKHOLDER APPROVAL. The Plan was adopted by the Board
of Directors effective December 6, 1999 and is subject to approval by the
stockholders of the Company in accordance with applicable law, and the
requirements of Rule 16b-3 under Section 16(b) of the Exchange Act. Awards
may be granted under the Plan at any time prior to the receipt of such
shareholder approval; provided, however, that each such grant shall be
subject to such approval. Without limitation on the foregoing, no Option may
be exercised prior to the receipt of such approval. If the Plan is not
approved by the Company's stockholders, then the Plan and all Options then
outstanding hereunder shall automatically terminate and be of no force and
effect.
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Exhibit 10.15
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (the "Agreement") is made, entered into
and effective the 13th day of March 2000, by and between eNote.com Inc., a
Delaware corporation having an office at 185 Allen Brook Lane, Williston,
Vermont 05495 (the "Company"), and Seafont Pty. Ltd., a corporation incorporated
under the laws of Australia with a principal address at Level 2, 31 Bligh Street
Sydney, Australia (the "Purchaser"). The parties hereto agree as follows.
1. SALE AND PURCHASE OF SECURITIES.
(a) AGREEMENT TO PURCHASE AND SELL. The Company agrees to sell to the
Purchaser and, in reliance on the representations, warranties and covenants made
herein by the Company, the Purchaser agrees to purchase from the Company, one or
more Subordinated Convertible Debentures (the "Debentures"), in the form of the
speciman attached hereto as Exhibit A due one year from the date of issue in the
aggregate principal amount of $500,000 with accrued interest at 10% per annum
and convertible into shares of the Company's Common Stock, par value $.01 per
share, at a rate of 1 share per $7 of principal balance converted (the
"Conversion Shares").
(b) PURCHASE PRICE OF SECURITIES. The Purchase Price payable by the
Purchaser for the Debentures shall be Five Hundred Thousand U.S. Dollars
($500,000). Such Purchase Price shall be paid, by bank wire transfer to an
account designated by the Company in writing to the Purchaser, upon the
Company's delivery of the Debentures to the Purchaser.
2. REPRESENTATIONS AND WARRANTIES. To induce the Purchaser to enter
into and perform its obligations under this Agreement, the Company hereby
represents and warrants to the Purchaser as follows:
(a) ORGANIZATION AND EXISTENCE. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware;
it has obtained all licenses and permits and has filed all registrations in all
jurisdictions that are necessary to the operation of its present business. The
Company is duly qualified as a foreign corporation in all jurisdictions where
such qualification is required.
(b) AUTHORIZATION AND NON-CONTRAVENTION. The execution and delivery of
this Agreement by the Company and the performance of the duties of the Company
set forth herein are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, have been approved by the
Company's Board of Directors, do not require the approval of the Company's
stockholders and do not contravene (i) the Company's Certificate of
Incorporation or Bylaws or (ii) any statute, rule, regulation or other law or
any contractual restriction binding on or affecting the Company, and do not
result in or require the creation of any lien, security interest or other charge
or encumbrance upon or with respect to any of its properties.
(c) FULLY-PAID AND NONASSESSABLE SECURITIES. The Conversion Shares to
be delivered to upon the conversion of the Debentures will, on delivery in
accordance with the terms hereof and thereof, be duly authorized, validly
issued, fully paid, nonassessable and free and clear of any and all liens,
encumbrances or restrictions, other than any express restrictions on resale as
described elsewhere in this Agreement or in the Debentures.
(d) ENFORCEABILITY OF OBLIGATIONS. This Agreement is the legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms.
(e) CLAIMS AND LITIGATION. There are no claims, actions or proceedings,
pending or
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threatened, by or against or affecting the Company, including actions before a
court, governmental agency or arbitrator, other than those arising or instituted
after the date of this Agreement and prior to Closing in which the amount
claimed as loss or damage (or if no specific amount is claimed, then the
Company's good faith reasonable estimate of the amount that will be claimed)
exceeds $20,000 in the aggregate. Furthermore, the Company has no knowledge of
any conflict between its rights respecting the tvemail technologies and the
rights of others or of the basis for any claim that has not yet been asserted.
(f) TAXES. The Company has filed all required federal, state and other
tax returns and paid any and all income, sales, property or other taxes due
pursuant thereto or pursuant to any assessment received by the Company, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. All such tax returns filed by the Company
accurately reflect the tax due by the Company for the fiscal periods for which
such returns were filed.
(g) STOCK AND RECORDS. All outstanding capital stock of the Company was
and is properly issued, duly paid and non-assessable, and all books and records
of the Company, including but not limited to its minute books, bylaws, and books
of account, are accurate and complete.
(h) CONVERTIBLE SECURITIES AND STOCK PURCHASE RIGHTS. Except as set
forth on Schedule 1 hereto, no shares of the Company's unissued capital stock
are reserved for any purpose other than. Except as set forth on Schedule 1 there
are no other outstanding commitments, warrants, options, securities convertible
into the Company's stock or other rights to acquire any shares of the Company's
capital stock; there are no preemptive or similar rights with respect to the
issuance or sale of the Company's capital stock; there is no commitment of the
Company to issue or sell any shares of its capital stock; there are no
agreements that now or in the future require the Company to repurchase, redeem,
retire or otherwise acquire any shares of its capital stock; and there are no
agreements (other than agreements designed to require compliance with federal or
state securities laws) restricting the transfer of any shares of the Company's
capital stock.
(i) TITLE TO PROPERTY. The Company has good and marketable title to all
property and assets to be owned by it including, without limitation, all of the
intellectual property and all assets shown in the Company's March 31, 1999
balance sheet, free of all liens, encumbrances, pledges and security interests.
(j) INVESTMENTS. The Company has no ownership interest or other
investment in any other person, corporation, partnership or other entity.
(k) OUTSTANDING GUARANTIES. The Company has no outstanding guaranties
or other agreements relating to the debts or liabilities of any other Person
except for such wholly and partially owned subsidiaries as listed in Exhibit B.
(l) SEC FILINGS. The Company has filed (i) all forms, reports,
statements and other documents required to be filed with the Securities and
Exchange Commission ("SEC'), including, without limitation (1) all Annual
Reports on Form l0-KSB, (2) all Quarterly Reports on Form l0-QSB, (3) all proxy
statements relating to meetings of stockholders (whether annual or special), (4)
all Reports on Form 8-K, (5) all other reports or registration statements and
(6) all amendments and supplements to all such reports and registration
statements (collectively, the "the Company SEC Reports") and (ii) all forms,
reports, statements and other documents required to be filed with any other
applicable federal regulatory authorities (all such forms, reports, statements
and other documents being referred to herein, collectively, as the "the Company
Reports"). The Company Reports were prepared in all material respects in
accordance with the
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requirements of applicable law (including, with respect to the Company SEC
Reports, the Securities Act and Exchange Act, as the case may be, and the roles
and regulations of the SEC thereunder applicable to such the Company SEC
Reports) and (y) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(m) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made in sub-paragraphs (a) through (1) of this Paragraph 2 are true
and correct on the date of this Agreement and shall be true and correct on the
date of the Closing, (ii) shall survive the sale of the Debentures for a period
of one year after the date of the Closing, except to the extent that such
representations and warranties are determined to have been untrue as of the date
hereof or the date of the Closing because of claims or actions (whether based on
alleged violations of securities laws, fraud, preemptive rights or otherwise) by
current or former stockholders of the Company based on events which occurred
prior to the date of this Agreement.
3. AFFIRMATIVE COVENANTS.
(a) SEC REPORTING OBLIGATIONS. For so long as the Company's Common
Stock is registered under the Securities Exchange Act of 1934, as amended, the
Company (i) will file all forms, reports, statements and other documents
required to be filed with the Securities and Exchange Commission ("SEC"),
including, without limitation (1) all Annual Reports on Form 10-KSB, (2) all
Quarterly Reports on Form l0-QSB, (3) all proxy statements relating to meetings
of stockholders (whether annual or special), (4) all Reports on Form 8-K, (5)
all other reports or registration statements and (6) all amendments and
supplements to all such reports and registration statements and (ii) all forms,
reports, statements and other documents required to be filed with any other
applicable federal or state regulatory authorities. The Company Reports shall be
prepared in all material respects in accordance with the requirements of
applicable law (including, the Securities Act and Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
Company Reports) and shall not at the time they are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
(b) TRANSFER REGISTRATION. The Company shall not register any transfer
of the Debentures or upon conversion, the Conversion Shares, not made in
accordance with the provisions of Regulation S ("Reg S"), pursuant to
registration under the Securities Act of 1933, as amended, or pursuant to an
available exemption from registration under such Act. Furthermore, the Company
will not issue the Conversion Shares upon conversion of the Debentures until the
Company is reasonably satisfied that (i) the Debentures are not converted within
the United States, and (ii) that the Conversion Shares shall not be delivered
within the United States upon exercise, other than in offerings deemed to meet
the definition of "offshore transaction" pursuant to Rule 902(h) of the Act,
unless otherwise registered under the Act or an exemption from such registration
is available.
4. CLOSING. The Purchaser shall not be obligated to perform its
obligations hereunder unless all of the following conditions which the Company
is hereby obligated to satisfy and perform shall have been satisfied and
performed on or prior to the Closing.
(a) AUTHORIZATION. Execution and performance of all terms and
conditions hereof by the Company shall have been approved by its Board of
Directors, in a resolution in a manner satisfactory in form and substance to the
Purchaser, and the Company shall have duly executed and delivered this Agreement
and stock certificates evidencing the Purchase hereunder.
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(b) PERFORMANCE. The Company shall have delivered to Purchaser, all of
the schedules, certificates and other papers required to be delivered on or
before the date of this Agreement. None of the Company's representations and
warranties set forth in this Agreement or any information contained in any
schedule, attachment or exhibit hereto or in any writing delivered to the
Purchaser shall be or shall have been discovered by the Purchaser or its
attorneys, accountants, employees or other personnel to be untrue or incorrect
in any material respect on the date of the Closing.
(c) WAIVER. Any Closing condition or covenant specified in this
Paragraph 4 may be waived by the Purchaser, and such waiver shall be deemed to
have been made to the extent the Purchaser agrees to and consummates the Closing
and one or more of the conditions set forth in this Section 4 have not been
fully satisfied.
5. INVESTOR REPRESENTATIONS; TRANSFER. The Purchaser represents and
warrants that it: (i) is an "accredited investor" as defined under federal
securities laws; (ii) is not a "U.S. Person", as defined in Reg S; (iii) that
the Debentures, and, if applicable, the Conversion Shares, are being acquired by
the Purchaser for its own account and the Purchaser is not acquiring the
Debentures or the Conversion Shares for the account or benefit of a "U.S.
Person"; (iv) has its principal place of business in Sydney, Australia; (v) that
such acquisition is made without any present intention of reoffering, reselling
or distributing the Debentures or the Conversion Shares; (vi) prior to making
such acquisition, the Purchaser was given unrestricted access to all of the
Company's books and records for the purpose of personally examining any such
documents as the Purchaser deemed material to his investment decision; and (vii)
prior to making such acquisition, the Purchaser was given an opportunity to ask
questions of and receive answers from the Company's officers, directors,
attorneys and accountants respecting any matter which the Purchaser deemed
material to its investment decision and all such questions have been answered to
the full satisfaction of the Purchaser. The Purchaser further understands that
all certificates representing the Debentures and Conversion Shares shall bear
the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN RELIANCE
ON REGULATION S OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAW, AND
THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
REGULATION S, REGISTRATION UNDER THE ACT OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS. FURTHERMORE, ALL HEDGING TRANSACTIONS
INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
The Purchaser further covenants to only resell the Debentures and the
Conversion Shares in accordance with the provisions of Reg S, pursuant to
registration under the Securities Act of 1933, as amended, or pursuant to an
exemption thereunder and shall not engage in any hedging transactions with
regard to the Debentures or the Conversion Shares unless in compliance with such
Act. The foregoing restrictions on the transferability of the Debentures and the
Conversion Shares shall cease and terminate (i) when such securities shall have
been effectively registered under the Securities Act and all applicable state
securities laws, or otherwise disposed of in accordance with the requirements of
Reg S or another exemption under the Securities Act, or (ii) the Company shall
have received an opinion of counsel reasonably acceptable to the Company to the
effect that such restrictions are no longer required in order to ensure
compliance of any future transfer with the Securities Act and all applicable
state securities laws. Whenever such
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restrictions shall terminate as to any of the Debentures or the Conversion
Shares the holder thereof shall be entitled to receive from the Company, without
expense, new certificates of like tenor not bearing the legend set forth above.
6. NOTICE. All notices, requests, demands and other communications
relating to this Agreement shall be in writing, including by facsimile or email,
addressed to the address set forth herein or such other address as any party
shall notify the other party in writing, and shall be effective, in the case of
written notice by mail, upon placement into the mails (first class, postage
prepaid), and in the case of notice by facsimile or email, on the day sent.
7. OTHER PROVISIONS. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by the original parties hereto and their
respective heirs, personal representatives, successors and assigns. This
Agreement shall be governed by the laws of the State of Vermont except to the
extent such laws are preempted by federal law. If any of the provisions
contained in this Agreement are invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby. Any provision of this
Agreement may be waived by the person entitled to the benefit thereof; provided,
no delay or failure on the part of any person in exercising any right hereunder,
and no partial or single exercise thereof, shall constitute a waiver of any
other rights hereunder. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may only
be modified in writing signed by all the parties hereto.
8. SUBMISSION TO EXCLUSIVE JURISDICTION. With respect to actions and
proceedings to enforce the provisions of, arising from, or relating to this
Agreement or the transactions contemplated hereby, each of the parties hereto
consents to personal jurisdiction in the state or federal courts of Vermont and
irrevocably agrees that all such actions and proceedings shall be litigated
exclusively in such courts. Further, each of the parties hereto waives any
objection that it may have to the conduct of any action or proceeding in any
such court based on improper venue or FORUM NON CONVENIENS. Each of the parties
hereto waives personal service of any and all process upon it and agrees that
valid service of process may be made by mail or courier service directed to it
at the address set forth herein and that service so made shall be deemed to be
completed upon the earlier of actual receipt or ten (10) days after the same
shall have been posted.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Note Purchase
Agreement, effective as of the date first above written.
ENOTE.COM INC.
BY: /s/ JOHN VARSAMES
-----------------------------------
JOHN R. VARSAMES, PRESIDENT AND CEO
SEAFONT PTY. LTD.
BY: /s/ ANDREW KELLY
-----------------------------------
NAME: ANDREW KELLY
TITLE: CHIEF EXECUTIVE OFFICER
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EXHIBIT A
[SPECIMAN ONLY]
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN RELIANCE ON REGULATION S
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE ACT OR ANY STATE
SECURITIES LAW, AND THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
REGULATION S, REGISTRATION UNDER THE ACT OR AN EXEMPTION THEREFROM UNDER SAID
ACT AND UNDER ALL APPLICABLE STATE SECURITIES LAWS. FURTHERMORE, ALL HEDGING
TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
A-1 $500,000.00
ENOTE.COM INC
185 ALLEN BROOK LANE
WILLISTON, VERMONT 05495
MARCH 13, 2000
1-YEAR 10 PERCENT SUBORDINATED CONVERTIBLE DEBENTURE
DUE MARCH 13, 2001
eNote.com Inc., a Delaware corporation, (the "Corporation"), for value received,
promises to pay to Seafont Pty. Ltd., an Australian corporation (the "Holder"),
the sum of Five Hundred Thousand U.S. Dollars ($500,000) on March 13, 2001 (the
"due date"), together with interest accrued thereon at the rate of 10 percent
per annum, computed from March 13, 2000 (the "issue date"). Payment of principal
and interest shall be made in lawful money of the United States of America and
shall be wire transferred to the owner hereof at the address appearing below,
unless the conversion option is exercised as set forth below in Section 1. This
Debenture is a duly authorized issue of the Corporation.
This Note is issued pursuant to a Note Purchase Agreement dated March 13, 2000
(the "Purchase Agreement") by and between the Corporation and the Holder.
1. CONVERSION. The holder of this Debenture may at time prior to the
maturity hereof (except that, if the Corporation has called this Debenture for
redemption, the right to convert shall terminate at the close of business on the
second business day prior to the day fixed as the date for such redemption),
convert the principal amount hereof into shares of the Corporation's Common
Stock. The Conversion ratio shall be $7 of debenture principal per share of
Common Stock. To convert this Debenture, the holder hereof must surrender the
same at the office of the Corporation, together with a written instrument of
transfer in a form satisfactory to the Corporation, properly completed and
executed and with a written notice of conversion. All rights of the holder of
this Debenture shall, to the extent of the principal and interest thereof
converted, cease as of the date of such conversion.
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2. FRACTIONAL SHARES. In lieu of issuing any fraction of a share upon
the conversion of this Debenture, the Corporation shall pay to the holder hereof
for any fraction of a share otherwise issuable upon the conversion, cash equal
to the same fraction of $7 per unit.
3. REDEMPTION. The Corporation may at any time prepay in whole or in
part, without penalty, the principal amount, plus accrued interest to
the date of prepayment, of all outstanding debentures of this issue.
4. SUBORDINATION.
a. The Corporation, for itself, its successors and
assigns, covenants and agrees, and each holder of
this Note by his acceptance thereof likewise
covenants and agrees, that the payment of the
principal of and interest on each and all of this
Note shall be subordinate and subject, to the extent
and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all Senior
Indebtedness.
b. Upon any distribution of assets of the Corporation
upon any dissolution, winding up, liquidation, or
reorganization of the Corporation, whether in
bankruptcy, insolvency, or receivership proceedings
or upon an assignment for the benefit of creditors of
any other dissolution, winding up, liquidation, or
reorganization of the Corporation:
(i) All Senior Indebtedness shall first be paid
in full, or provision made for such payment
in full of the principal thereof, and
premium, if any, and interest thereon,
before any payment is made on account of the
principal of, or interest on, the Notes;
(ii) Any payment or distribution of assets of the
Corporation of any kind or character,
whether in cash, property, or securities
(other than stock of the Corporation as
reorganized or readjusted or securities of
the Corporation or any other corporation
provided for by a plan of reorganization or
readjustment the payment of which is
subordinate, at least to the extent provided
in this Section with respect to the Notes,
to the payment of all Senior Indebtedness at
the time outstanding and to any securities
issued in respect thereof under any such
plan of reorganization or readjustment), to
which the holder of this Note would be
entitled except for the provisions of this
Section shall be paid by the liquidating
trustee or agent or other person making such
payment of distribution, whether a trustee
in bankruptcy, receiver, or liquidating
trustee or other trustee or agent, directly
to the holders of Senior Indebtedness or
their representative or representatives or
the trustee or trustees under any indenture
under which any instruments evidencing any
of such Senior Indebtedness may have been
issued, ratably according to the aggregate
amounts remaining unpaid on account of the
principal of, and premium, if any, and
interest on, the Senior Indebtedness held or
represented by each, to the extent necessary
to make payment in full of all Senior
Indebtedness remaining unpaid, after giving
effect to any concurrent payment or
distribution, or provision therefor, to the
holders of such Senior Indebtedness; and
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(iii) In the event that, notwithstanding the
foregoing, any payment or distribution of
assets of the Corporation of any kind or
character, whether in cash, property, or
securities (other than stock of the
Corporation as reorganized or readjusted or
securities of the Corporation or any other
corporation provided for by a plan of
reorganization or readjustment the payment
of which is subordinate, at least to the
extent provided in this Section with respect
to the Note, to the payment of all Senior
Indebtedness at the time outstanding and to
any securities issued in respect thereof
under any such plan of reorganization or
readjustment), shall be received by the
holder of this Note before all Senior
Indebtedness is paid in full, or provision
made for its payment, such payment or
distribution shall be paid over to the
holders of Senior Indebtedness remaining
unpaid or unprovided for or their
representative or representatives or to the
trustee or trustees under any indenture
under which any instruments evidencing any
of such Senior Indebtedness may have been
issued, as provided in the foregoing
subparagraph (2), for application to the
payment of such Senior Indebtedness until
all such Senior Indebtedness shall have been
paid in full after giving effect to any
concurrent payment or distribution, or
provision therefor, to the holders of such
Senior Indebtedness.
c. Subject to the payment in full of all Senior
Indebtedness, the holder of this Note shall be
subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of
cash, property, or securities of the Corporation
applicable to the Senior Indebtedness until the
principal of and interest on this Note shall be paid
in full, and no such payments or distributions in
respect of this Note of cash, property, or securities
distributable to the Senior Indebtedness under the
provisions here shall, as between the Corporation,
its creditors other than the holders of Senior
Indebtedness, and the holder of this Notes, be deemed
to be a payment by the Corporation to or on account
of this Note. It is understood that the provisions of
this Section are and are intended solely for the
purpose of defining the relative rights of the holder
of this Note, on the one hand, and the holders of the
Senior Indebtedness on the other hand. Nothing
contained in this Section is intended to or shall
impair, as between the Corporation, its creditors
other than the holders of Senior Indebtedness, and
the holder of this Note, the absolute and
unconditional obligation of the Corporation to pay
the holder of this Note the principal of and interest
on this Note as and when the same shall become due
and payable in accordance with their terms, or is
intended to or shall affect the relative rights of
the holder of this Note and creditors of the
Corporation other than the holders of the Senior
Indebtedness; nor shall anything herein or therein
prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law upon
default under this Note, subject to the rights, if
any, under this Section of the holders of Senior
Indebtedness in respect of cash, property or
securities of the Corporation received upon the
exercise of any such remedy.
d. Upon any distribution of assets of the Corporation
referred to in this Section, the holder of this Note
shall be entitled to rely upon a certificate of the
liquidating trustee or agent or other person making
any distribution to such holder for the
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purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the
Senior Indebtedness and other indebtedness of the
Corporation, the amount thereof or payable thereon,
and all other facts pertinent thereto or to this
Section.
e. If there shall have occurred a default in the payment
of the principal of (or premium, if any) or interest
on any Senior Indebtedness, then, unless and until
such default shall have been cured or waived, no
payment of principal or interest shall be made by the
Corporation on this Note, and no holder of this Note
shall be entitled to receive any such payment.
Nothing contained in this Section shall, however (1)
affect the obligation of Corporation to make or
prevent the Corporation from making, at any time,
except during the pendency of any dissolution,
winding up, liquidation, or reorganization
proceedings or except as provided in the first
sentence of this subsection, payments of principal of
or interest on this Note, or (2) prevent the
application by any paying agent of any moneys
deposited with it by the Corporation to the payment
of or on account of the principal of, or interest on,
this Note, if, at the time of such deposit, the
paying agent did not have written notice of any event
prohibiting the making of such payment or deposit by
the Corporation; or (3) be construed as preventing
the occurrence of any Event of Default hereunder.
f. No right of any present or future holder of any
Senior Indebtedness of the Corporation to enforce
subordination as herein provided shall at any time or
in any way be prejudiced or impaired by any act or
failure to act on the part of the Corporation or by
any act or failure to act, in good faith, by any such
holder, or by an noncompliance by the Corporation
with the terms, provisions, and covenants of this
Note, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
g. Any renewal or extension of the time of payment of
any Senior Indebtedness or the exercise by the
holders of Senior Indebtedness of any of their rights
under the Senior Indebtedness, including without
limitation the waiver of default thereunder or the
release of any security therefor, may be made or done
all without notice to or assent from the holder of
this Note. No compromise, alteration, amendment,
modification, extension, renewal, or other change of,
or waiver, consent, or other action in respect of,
any liability or obligation under or respect of, or
of any of the terms, covenants, or conditions or any
indenture or other instrument under which any Senior
Indebtedness is outstanding or of such Senior
Indebtedness, and no release of property securing any
Senior Indebtedness, whether or not such release is
in accordance with the provisions of any applicable
document, shall in any way alter or affect any of the
provisions of this Section.
h. "Senior Indebtedness" for purposes of this Section
shall mean all indebtedness (principal and interest)
now existing or hereafter incurred of the Corporation
for money borrowed from banks or other financial
institutions: (i) which is secured by the assets of
the Corporation; and (ii) is not by its express terms
subordinate and junior to or on parity with this
Note.
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<PAGE>
5. DEFAULT. If any of the following events occur ("Event of Default"),
the entire unpaid principal amount of, and accrued and unpaid interest on, this
Debenture shall immediately be due and payable, and the Corporation shall pay
all costs of collection including, but not limited to, reasonable attorneys'
fees and expenses incurred by the owner(s) or its assigns on account of such
collection, whether or not suit is brought:
a. The Corporation fails to pay the principal of this
Debenture at its maturity;
b. The Corporation commences any voluntary proceeding
under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, receivership,
dissolution, or liquidation law or statute, of any
jurisdiction, whether now or subsequently in effect;
or the Corporation is adjudicated as bankrupt by a
court of competent jurisdiction; or the Corporation
petitions or applies for, acquiesces in, or consents
to, the appointment of any receiver or trustee of the
Corporation or for all or substantially all of its
property or assets; or the Corporation makes an
assignment for the benefit of its creditors; or the
Corporation admits in writing its inability to pay
its debts as they mature; or
c. There is commenced against the Corporation any
proceeding relating to the Corporation under any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, dissolution, or
liquidation law or statute, of any jurisdiction,
whether now or subsequently in effect, and the
proceeding remains undismissed for a period of 60
days or the Corporation by any act indicates its
consent to, approval of, or acquiescence in the
proceeding; or a receiver or trustee is appointed for
the Corporation or for all or substantially all of
its property or assets, and the receivership or
trusteeship remains undischarged for a period of 60
days; or a warrant of attachment, execution or
similar process is issued against any substantial
part of the property or assets of the Corporation,
and the warrant or similar process is not dismissed
or bonded within 60 days after the levy.
6. REGISTERED OWNER. The Corporation shall treat the person or persons
whose name or names appear on this Debenture as the absolute owner or owners
hereof for the purpose of receiving payment of, or on account of, the principal
and interest due on this Debenture and for all other purposes, unless and until
written notice satisfactory to the Corporation is provided by the registered
owner of assignment hereof.
7. ASSIGNMENT. The Corporation may assign its rights hereunder to any
person or entity. No assignment of rights or obligations shall be effective
until delivery of written notice of such assignment is made by the assigning
party to the other party hereto.
8. RESTRICTIONS ON TRANSFER. This Note and any shares of the
Corporation's Common Stock received upon conversion of this Note may not be
transferred other than as provided in the Purchase Agreement.
9. RELEASE OF SHAREHOLDERS, OFFICERS AND DIRECTORS. This Debenture is
the obligation of the Corporation only, and no recourse shall be had for the
payment of any principal or interest hereon against
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<PAGE>
any shareholder, officer or director of the Corporation, either directly or
through the Corporation, by virtue of any statute for the enforcement of any
assessment or otherwise. The holder or holders of this Debenture, by the
acceptance hereof, and as part of the consideration for this Debenture, release
all claims and waive all liabilities against the foregoing persons in connection
with this Debenture.
10. GOVERNING LAW. This Debenture and all terms and conditions herein
shall be governed by and construed and in accordance with the laws of the State
of Vermont excluding the state's conflict of law provisions.
IN WITNESS WHEREOF, THE CORPORATION HAS SIGNED THIS DEBENTURE THIS 13TH
DAY OF MARCH, 2000.
ENOTE.COM INC.
BY: [SPECIMAN ONLY]
--------------------------
REGISTERED OWNER:
SEAFONT GROUP HOLDINGS PTY. LTD.
BY: /s/ ANDREW KELLY
----------------
ANDREW KELLEY, CEO
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EXHIBIT B
WebATM, SolutioNet, Ltd. and Navis Technologies, Inc.
13
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SCHEDULE 1
1. 5,000,000 shares of the Company's Convertible Preferred Stock, par
value $.01 per share.
2. Warrants to acquire 2,000,000 shares of the Company's Common Stock par
value $.01 per share.
3. Options to acquire shares of the Company's Common Stock issued to
certain employees and consultants as incentive compensation.
4. 1-Year 12 Percent Convertible Debenture Due May 3, in the principal
amount of $30,000.
5. 1-Year 12 Percent Convertible Debenture Due May 3, 2000, in the
principal amount of $50,000.
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Exhibit 10.16
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made, entered into
and effective the ___ day of _________ 2000, between eNote.com Inc., a Delaware
corporation having an office at 185 Allen Brook Lane, Williston, Vermont 05495
(the "Company"), and _____________________, a ________________ corporation
organized under the laws of the _____________ and having an office at
______________________________, (the "Purchaser"). The parties hereto agree as
follows.
1. SALE AND PURCHASE OF SECURITIES.
(a) AGREEMENT TO PURCHASE AND SELL. The Company agrees to sell to the
Purchaser and, in reliance on the representations, warranties and covenants made
herein by the Company, the Purchaser agrees to purchase from the Company, (i)
______________ shares of the Company's Common Stock (the "Shares") at a price
per share equal to $6 and (ii) a warrant in the form attached hereto as Exhibit
A (the "Warrant") to acquire ____________ shares of the Company's Common Stock
at an exercise price of $.01 per share (the "Warrant Shares").
(b) PURCHASE PRICE OF SECURITIES. The Purchase Price payable by the
Purchaser for the Shares and the Warrants shall be __________________ U.S.
Dollars ($__________). Such Purchase Price shall be paid, by bank wire transfer
to an account designated by the Company in writing to the Purchaser, upon the
Company's delivery of the Stock Certificates to the Purchaser.
2. REPRESENTATIONS AND WARRANTIES. To induce the Purchaser to enter
into and perform its obligations under this Agreement, the Company hereby
represents and warrants to the Purchaser as follows:
(a) ORGANIZATION AND EXISTENCE. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware;
it has obtained all licenses and permits and has filed all registrations in all
jurisdictions that are necessary to the operation of its present business. The
Company is duly qualified as a foreign corporation in all jurisdictions where
such qualification is required.
(b) AUTHORIZATION AND NON-CONTRAVENTION. The execution and delivery of
this Agreement by the Company and the performance of the duties of the Company
set forth herein are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, have been approved by the
Company's Board of Directors, do not require the approval of the Company's
stockholders and do not contravene (i) the Company's Certificate of
Incorporation or Bylaws or (ii) any statute, rule, regulation or other law or
any contractual restriction binding on or affecting the Company, and do not
result in or require the creation of any lien, security interest or other charge
or encumbrance upon or with respect to any of its properties.
(c) FULLY-PAID AND NONASSESSABLE SECURITIES. The Shares and the Warrant
Shares to be delivered to Purchaser pursuant to the terms of this Agreement
and/or upon the exercise of the Warrant will, on delivery in accordance with the
terms hereof and thereof, be duly authorized, validly issued, fully paid,
nonassessable and free and clear of any and all liens, encumbrances or
restrictions, other than the express restrictions on resale described elsewhere
herein.
(d) ENFORCEABILITY OF OBLIGATIONS. This Agreement is the legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms.
<PAGE>
(e) CLAIMS AND LITIGATION. There are no claims, actions or proceedings,
pending or threatened, by or against or affecting the Company, including actions
before a court, governmental agency or arbitrator, other than those arising or
instituted after the date of this Agreement and prior to Closing in which the
amount claimed as loss or damage (or if no specific amount is claimed, then the
Company's good faith reasonable estimate of the amount that will be claimed)
exceeds $20,000 in the aggregate. Furthermore, the Company has no knowledge of
any conflict between its rights respecting the tvemail technologies and the
rights of others or of the basis for any claim that has not yet been asserted.
(f) TAXES. The Company has filed all required federal, state and other
tax returns and paid any and all income, sales, property or other taxes due
pursuant thereto or pursuant to any assessment received by the Company, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. All such tax returns filed by the Company
accurately reflect the tax due by the Company for the fiscal periods for which
such returns were filed.
(g) STOCK AND RECORDS. All outstanding capital stock of the Company was
and is properly issued, duly paid and non-assessable, and all books and records
of the Company, including but not limited to its minute books, bylaws, and books
of account, are accurate and complete.
(h) CONVERTIBLE SECURITIES AND STOCK PURCHASE RIGHTS. Except as set
forth on Schedule 1 hereto, no shares of the Company's unissued capital stock
are reserved for any purpose. Except as set forth on Schedule 1 hereto, there
are no other outstanding commitments, warrants, options, securities convertible
into the Company's stock or other rights to acquire any shares of the Company's
capital stock; there are no preemptive or similar rights with respect to the
issuance or sale of the Company's capital stock; there is no commitment of the
Company to issue or sell any shares of its capital stock; there are no
agreements that now or in the future require the Company to repurchase, redeem,
retire or otherwise acquire any shares of its capital stock; and there are no
agreements (other than agreements designed to require compliance with federal or
state securities laws) restricting the transfer of any shares of the Company's
capital stock.
(i) TITLE TO PROPERTY. The Company has good and marketable title to all
property and assets to be owned by it including, without limitation, all of the
intellectual property and all assets shown in the Company's March 31, 1999
balance sheet, free of all liens, encumbrances, pledges and security interests.
(j) INVESTMENTS. The Company has no ownership interest or other
investment in any other person, corporation, partnership or other entity.
(k) OUTSTANDING GUARANTIES. The Company has no outstanding guaranties
or other agreements relating to the debts or liabilities of any other Person
except for such wholly and partially owned subsidiaries as listed in Exhibit B.
(l) SEC FILINGS. The Company has filed (i) all forms, reports,
statements and other documents required to be filed with the Securities and
Exchange Commission ("SEC'), including, without limitation (1) all Annual
Reports on Form l0-KSB, (2) all Quarterly Reports on Form l0-QSB, (3) all proxy
statements relating to meetings of stockholders (whether annual or special), (4)
all Reports on Form 8-K, (5) all other reports or registration statements and
(6) all amendments and supplements to all such reports and registration
statements (collectively, the "the Company SEC Reports") and (ii) all forms,
reports, statements and other documents required to be filed with any other
applicable federal regulatory authorities (all such forms, reports, statements
and other documents being referred to herein, collectively, as the "the Company
2
<PAGE>
Reports"). The Company Reports were prepared in all material respects in
accordance with the requirements of applicable law (including, with respect to
the Company SEC Reports, the Securities Act and Exchange Act, as the case may
be, and the roles and regulations of the SEC thereunder applicable to such the
Company SEC Reports) and (y) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(m) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made in sub-paragraphs (a) through (1) of this Paragraph 2 are true
and correct on the date of this Agreement and shall be true and correct on the
date of the Closing, (ii) shall survive the sale of Common Stock for a period of
one year after the date of the Closing, except to the extent that such
representations and warranties are determined to have been untrue as of the date
hereof or the date of the Closing because of claims or actions (whether based on
alleged violations of securities laws, fraud, preemptive rights or otherwise) by
current or former stockholders of the Company based on events which occurred
prior to the date of this Agreement. All of such representations and warranties
are deemed to be material.
3. AFFIRMATIVE COVENANTS.
(a) SEC REPORTING OBLIGATIONS. For so long as the Company's Common
Stock is registered under the Securities Exchange Act of 1934, as amended, the
Company (i) will file all forms, reports, statements and other documents
required to be filed with the Securities and Exchange Commission ("SEC"),
including, without limitation (1) all Annual Reports on Form 10-KSB, (2) all
Quarterly Reports on Form l0-QSB, (3) all proxy statements relating to meetings
of stockholders (whether annual or special), (4) all Reports on Form 8-K, (5)
all other reports or registration statements and (6) all amendments and
supplements to all such reports and registration statements and (ii) all forms,
reports, statements and other documents required to be filed with any other
applicable federal or state regulatory authorities. The Company Reports shall be
prepared in all material respects in accordance with the requirements of
applicable law (including, the Securities Act and Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
Company Reports) and shall not at the time they are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
REPORTS TO STOCKHOLDERS. For so long as the Company's Common Stock is
registered under the Securities Exchange Act of 1934, as amended, the Company
will hold an annual meeting of shareholders for the election of directors within
180 days after the end of each of the Company's fiscal years and, within 180
days after the end of each of the Company's fiscal years, will provide the
Company's shareholders with the audited financial statements of the Company as
of the end of the fiscal year just completed prior thereto. Such financial
statements shall be those required by Rule 14a-3 under the Securities Exchange
Act of 1934, as amended, and shall be included in an annual report meeting the
requirements of the Rule. Further, the Company agrees to make available to the
Company's shareholders in printable form within 60 days after the end of each
fiscal quarter of the Company (other than the last fiscal quarter in any fiscal
year) reasonably itemized financial statements of the Company and its
subsidiaries, if any, for the fiscal quarter just ended and a narrative
discussion of such financial statements and the business conducted by the
Company and its subsidiaries, it any, during such quarter.
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(C) TRANSFER REGISTRATION. The Company shall not register any transfer
of the Shares not made in accordance with the provisions of Regulation S ("Reg
S"), pursuant to registration under the Securities Act of 1933, as amended, or
pursuant to an available exemption from registration under such Act.
Furthermore, the Company will not issue the Warrant Shares upon exercise of the
Warrant until the Company is reasonably satisfied that (i) the Warrant is not
exercised within the United States, and (ii) that the Warrant Shares shall not
be delivered within the United States upon exercise, other than in offerings
deemed to meet the definition of "offshore transaction" pursuant to Rule 902(h)
of the Act, unless registered under the Act or an exemption from such
registration is available.
4. CLOSING. The Purchaser shall not be obligated to perform its
obligations hereunder unless all of the following conditions which the Company
is hereby obligated to satisfy and perform shall have been satisfied and
performed on or prior to the Closing.
(a) AUTHORIZATION. Execution and performance of all terms and
conditions hereof by the Company shall have been approved by its Board of
Directors, in a resolution in a manner satisfactory in form and substance to the
Purchaser, and the Company shall have duly executed and delivered this Agreement
and stock certificates evidencing the Purchase hereunder.
(b) PERFORMANCE. The Company shall have delivered to Purchaser, all of
the schedules, certificates and other papers required to be delivered on or
before the date of this Agreement. None of the Company's representations and
warranties set forth in this Agreement or any information contained in any
schedule, attachment or exhibit hereto or in any writing delivered to the
Purchaser shall be or shall have been discovered by the Purchaser or its
attorneys, accountants, employees or other personnel to be untrue or incorrect
in any material respect on the date of the Closing.
(c) CLOSING PAPERS. The Company shall have delivered to the Purchaser
all of the following: (i) an officers' certificate dated the date of the Closing
satisfactory in form and substance to the Purchaser stating that the
representations in Paragraph 2 are true and correct as of such date; (ii)
certified copies satisfactory in form and substance to the Purchaser of the
resolutions described in sub-paragraph 3(a); and (iii) such other materials as
the Purchaser shall reasonably require.
(d) WAIVER. Any Closing condition or covenant specified in this Section
4 may be waived by the Purchaser, and such waiver shall be deemed to have been
made to the extent the Purchaser agrees to and consummates the Closing and one
or more of the conditions set forth in this Section 4 have not been fully
satisfied.
5. INVESTOR REPRESENTATIONS; TRANSFER. The Purchaser represents and
warrants that it: (i) an "accredited investor" as defined under federal
securities laws; (ii) is not a "U.S. Person", as defined in Reg S; (iii) that
the Shares, the Warrant and, if applicable, the Warrant Shares, are being
acquired by the Purchaser for its own account and the Purchaser is not acquiring
the Shares, the Warrant, or the Warrant Shares for the account or benefit of a
"U.S. Person"; (iv) has its principal place of business in
______________________; (v) that such acquisition is made without any present
intention of reoffering, reselling or distributing the Shares, the Warrant or
the Warrant Shares; (vi) prior to making such acquisition, the Purchaser was
given unrestricted access to all of the Company's books and records for the
purpose of personally examining any such documents as the Purchaser deemed
material to his investment decision; and (vii) prior to making such acquisition,
the Purchaser was given an opportunity to ask questions of and receive answers
from the Company's officers, directors, attorneys and accountants respecting any
matter which the Purchaser deemed material to its investment decision and all
such questions have been answered to the full satisfaction of the Purchaser. The
Purchaser further understands that all
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<PAGE>
certificates representing shares and warrants of the Purchaser shall bear the
following legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN RELIANCE ON
REGULATION S OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE ACT OR ANY STATE SECURITIES LAW, AND THEY MAY NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO REGULATION S, REGISTRATION UNDER THE ACT
OR AN EXEMPTION THEREFROM UNDER SAID ACT AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS. FURTHERMORE, ALL HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
The Purchaser further covenants to only resell the Shares, the Warrant
or the Warrant Shares in accordance with the provisions of Reg S, pursuant to
registration under the Securities Act of 1933, as amended, or pursuant to an
exemption thereunder and shall not engage in any hedging transactions with
regard to the Shares unless in compliance with such Act. The foregoing
restrictions on the transferability of the Shares shall cease and terminate (i)
when such securities shall have been effectively registered under the Securities
Act and all applicable state securities laws, or otherwise disposed of in
accordance with the requirements of Reg S or another exemption under the
Securities Act, or (ii) the Company shall have received an opinion of counsel
reasonably acceptable to the Company to the effect that such restrictions are no
longer required in order to ensure compliance of any future transfer with the
Securities Act and all applicable state securities laws. Whenever such
restrictions shall terminate as to any of the Shares or the Warrant, the holder
thereof shall be entitled to receive from the Company, without expense, new
certificates of like tenor not bearing the legend set forth above.
6. NOTICE. All notices, requests, demands and other communications
relating to this Agreement shall be in writing, including by facsimile or email,
addressed to the address set forth herein or such other address as any party
shall notify the other party in writing, and shall be effective, in the case of
written notice by mail, upon placement into the mails (first class, postage
prepaid), and in the case of notice by facsimile or email, on the day sent.
7. OTHER PROVISIONS. This Agreement shall be binding upon, inure to the
benefit of and be enforceable by the original parties hereto and their
respective heirs, personal representatives, successors and assigns. This
Agreement shall be governed by the laws of the State of Vermont except to the
extent such laws are preempted by federal law. If any of the provisions
contained in this Agreement are invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby. Any provision of this
Agreement may be waived by the person entitled to the benefit thereof; provided,
no delay or failure on the part of any person in exercising any right hereunder,
and no partial or single exercise thereof, shall constitute a waiver of any
other fights hereunder. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may only
be modified in writing signed by all the parties hereto.
8. SUBMISSION TO EXCLUSIVE JURISDICTION. With respect to actions and
proceedings to enforce the provisions of, arising from, or relating to this
Agreement or the transactions contemplated hereby, each of the parties hereto
consents to personal jurisdiction in the state or federal courts of Vermont and
irrevocably agrees that all such actions and proceedings shall be litigated
exclusively in such courts. Further, each of the parties hereto waives any
objection that it may have to the conduct of any action or proceeding in any
such court based on improper venue
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or FORUM NON CONVENIENS. Each of the parties hereto waives personal service of
any and all process upon it and agrees that valid service of process may be made
by mail or courier service directed to it at the address set forth herein and
that service so made shall be deemed to be completed upon the earlier of actual
receipt or ten (10) days after the same shall have been posted.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement, effective as of the date first above written.
ENOTE.COM INC.
BY: _________________________________
JOHN R. VARSAMES, PRESIDENT AND CEO
[NAME OF PURCHASER]
BY: _________________________________
[NAME, TITLE]
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EXHIBIT A
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EXHIBIT B
WEBATM, INC., SOLUTIONET, LTD. AND NAVIS TECHNOLOGIES, INC.
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SCHEDULE 1
1. 5,000,000 shares of the Company's Convertible Preferred Stock, par
value $.01 per share.
2. Warrants to acquire 2,000,000 shares of the Company's Common Stock par
value $.01 per share.
3. Options to acquire shares of the Company's Common Stock issued to
certain employees and consultants as incentive compensation.
4. 1-Year 12 Percent Convertible Debenture Due May 3, in the principal
amount of $30,000.
5. 1-Year 12 Percent Convertible Debenture Due May 3, 2000, in the
principal amount of $50,000.
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Exhibit 10.22
ENOTE.COM, INC.
2000 INCENTIVE STOCK PLAN
1. PURPOSE OF THE PLAN
This 2000 Incentive Stock Plan is intended to promote the interests of
eNote.com, Inc., a Delaware corporation (the "Company"), by providing the
Employees of and Consultants to the Company and its Subsidiaries, who will be
largely responsible for the management, growth and protection of the business
of the Company, with a proprietary interest in the Company.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms
indicated below.
(a) "Board of Directors" shall mean the Board of Directors of eNote.com,
Inc., a Delaware corporation.
(b) "Cause," when used in connection with the termination of a
Participant's employment with the Company, shall mean the termination of the
Participant's employment by the Company by reason of (i) the conviction of the
Participant by a court of competent jurisdiction as to which no further appeal
can be taken of a crime involving moral turpitude; (ii) the proven commission by
the Participant of an act of fraud upon the Company; (iii) the willful and
proven misappropriation of any funds or property of the Company by the
Participant; (iv) the willful, continued and unreasonable failure by the
Participant to perform duties assigned to him and agreed to by him; (v) the
knowing engagement by the Participant in any direct, material conflict of
interest with the Company without compliance with the Company's conflict of
interest policy, if any, then in effect; (vi) the knowing engagement by the
Participant, without the written approval of the Board of Directors of the
Company, in any activity which competes with the business of the Company or
which would result in a material injury to the Company; or (vii) the knowing
engagement in any activity which would constitute a material violation of the
provisions of the Company's policies and procedures manual or other analogous
employee handbook, if any, then in effect.
(c) "Cash Bonus" shall mean an award of a bonus payable in cash pursuant
to Section 10 hereof.
(d) "Change in Control" shall mean:
(1) a "change in control" of the Company, as that term is contemplated
in the federal securities laws; or
(2) the occurrence of any of the following events:
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(A) any Person becomes, after the effective date of this Plan, the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 40% or
more of the combined voting power of the Company's then outstanding securities;
provided, that the acquisition of additional voting securities, after the
effective date of this Plan, by any Person who is, as of the effective date of
this Plan, the beneficial owner, directly or indirectly, of 10% or more of the
combined voting power of the Company's then outstanding securities, shall not
constitute a "Change in Control" of the Company for purposes of this Section
2(d).
(B) a majority of individuals who are nominated by the Board of
Directors for election to the Board of Directors on any date, fail to be elected
to the Board of Directors as a direct or indirect result of any proxy fight or
contested election for positions on the Board of Directors, or
(3) the Board of Directors determines in its sole and absolute
discretion that there has been a change in control of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" shall mean the Compensation Committee of the Board of
Directors or such other committee as the Board of Directors shall appoint from
time to time to administer the Plan.
(g) "Common Stock" shall mean the Company's Common Stock, par value
$.01 per share.
(h) "Company" shall mean eNote.com, Inc., a Delaware corporation, and
each of its Subsidiaries, and its successors.
(i) "Consultant" shall mean any natural person, including an advisor,
who renders bona fide services to the Company or any Subsidiary, and is
compensated for such services, provided, however, that such services are not
rendered in connection with the offer or sale of securities in a capital raising
transaction and do not directly or indirectly promote or maintain a market for
the company's securities.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(k) "Employee" shall mean any person, including officers and directors,
employed by the Company or any Subsidiary of the Company.
(l) the "Fair Market Value" of a share of Common Stock on any date
shall be (i) the straight average of the closing sales price over the five (5)
preceding business days,
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of a share of Common Stock as reported on the principal securities exchange on
which shares of Common Stock are then listed or admitted to trading or (ii) if
not so reported, the average of the closing bid and asked prices for a share of
Common Stock over the five (5) preceding business days as quoted on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq") or (iii)
if not quoted on Nasdaq, the average of the closing bid and asked prices for a
share of Common Stock as quoted by the National Quotation Bureau's "Pink Sheets"
or the National Association of Securities Dealers' OTC Bulletin Board System
over the five (5) preceding business days. If the price of a share of Common
Stock shall not be so reported, the Fair Market Value of a share of Common Stock
shall be determined by the Committee in its absolute discretion.
(m) "Family Member" shall include (i) a participant's child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law,
niece, nephew or former spouse and shall include adoptive relationships, or (ii)
any person sharing the participant's household other that a tenant or employee.
(n) "Family Entity" shall mean any (i) entity in which more than 50% of
the voting interests are held by the participant and/or Family Members or (ii)
any trust in which the participant and/or Family Members have more than 50% of
the beneficial interest.
(o) "Incentive Award" shall mean an Option, a share of Restricted
Stock, a Stock Appreciation Right, a Stock Bonus or Cash Bonus granted pursuant
to the terms of the Plan.
(p) "Incentive Stock Option" shall mean an Option which is an
"incentive stock option" within the meaning of Section 422 of the Code and which
is identified as an Incentive Stock Option in the agreement by which it is
evidenced.
(q) "Issue Date" shall mean the date established by the Committee on
which certificates representing shares of Restricted Stock shall be issued by
the Company pursuant to the terms of Section 7(d) hereof.
(r) "Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified Stock Option
in the agreement by which it is evidenced.
(s) "Option" shall mean an option to purchase shares of Common Stock of
the Company granted pursuant to Section 6 hereof. Each Option shall be
identified as either an Incentive Stock Option or a Non-Qualified Stock Option
in the agreement by which it is evidenced.
(t) "Participant" shall mean an Employee or Consultant to the Company
to whom an Incentive Award is granted pursuant to the Plan, and, upon his death,
his
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successors, heirs, executors and administrators, as the case may be, to the
extent permitted hereby.
(u) "Person" shall mean a "person," such term is used in Sections 13(d)
and 14(d) of the Exchange Act, and the rules and regulations in effect from time
to time thereunder.
(v) a "Stock Appreciation Right" shall represent the right to receive
in cash the Fair Market Value of a share of Common Stock of the Company, which
right is granted pursuant to Section 8 hereof and subject to the terms and
conditions contained therein.
(w) "2000 Plan" shall mean the eNote.com, Inc. 2000 Incentive Stock
Plan, as it may be amended from time to time.
(x) "Qualified Domestic Relations Order" shall mean a qualified
domestic relations order as defined in the Code, in Title I of the Employee
Retirement income Security Act, or in the rules and regulations as may be in
effect from time to time thereunder.
(y) "Reserved Shares" shall be that number of shares of Common Stock
reserved for issuance over the term of plan as calculated in accordance with
Section 3 hereof.
(z) a share of "Restricted Stock" shall mean a share of Common Stock
which is granted pursuant to the terms of Section 7 hereof and which is subject
to the restrictions set forth in Section 7(b) hereof for so long as such
restrictions continue to apply to such share.
(aa) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
(bb) "Stock Bonus" shall mean a grant of a bonus payable in shares of
Common Stock pursuant to Section 9 hereof.
(cc) "Subsidiary" or "Subsidiaries" shall mean any and all corporations
in which at the pertinent time the Company owns, directly or indirectly, stock
vested with 50% or more of the total combined voting power of all classes of
stock of such corporations within the meaning of Section 424(f) of the Code.
(dd) "Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock or a Incentive Award may vest.
3. STOCK SUBJECT TO THE PLAN
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Under the Plan, the Committee may grant to Participants (i) Options,
(ii) shares of Restricted Stock, (iii) Stock Appreciation Rights, (iv) Stock
Bonuses and (v) Cash Bonuses.
The Committee may grant Options, shares of Restricted Stock and Stock
Appreciation Rights under the Plan with respect to the number of Reserved
Shares. The number of Reserved Shares initially reserved for issuance over the
term of the Plan shall be limited to 1,000,000 shares. This number shall be
subject to an automatic semi-annual adjustment, calculated on the last trading
day of December and June of each year during the term of this 2000 Plan, which
shall increase the number of Reserved Shares by that amount necessary to equate
the total Reserved Shares under the Plan immediately following each adjustment
to 10% of the Company's issued and outstanding Common Stock, provided, however,
that such adjustment shall never decrease the number of Reserved Shares and
shall be inapplicable to the extent the total number of Reserved Shares is equal
to or greater than 10% of the Company's issued and outstanding Common Stock on
the date of any such adjustment. The grant of a Cash Bonus shall not reduce the
number of shares of Common Stock with respect to such Options, shares of
Restricted Stock, Stock Appreciation Rights Stock or Stock Bonuses which may be
granted pursuant to the Plan.
If any outstanding Option expires, terminates or is canceled for any
reason, the shares of Common Stock subject to the unexercised portion of such
Option shall again be available for grant under the Plan. If any shares of
Restricted Stock or Stock Incentive Right, or any shares of Common Stock granted
in a Stock Bonus are forfeited or canceled for any reason, such shares shall
again be available for grant under the Plan.
Shares of Common Stock issued under the Plan may be either newly issued
or treasury shares, at the discretion of the Committee.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Committee of the Board of Directors
consisting of two or more persons, each of whom shall be a "disinterested
person" within the meaning of Rule 16b-3(c)(2) promulgated under Section 16 of
the Exchange Act. The Committee shall from time to time designate the Employees
of and Consultants to the Company who shall be granted Incentive Awards and the
amount and type of such Incentive Awards.
The Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and the
terms of any Incentive Award issued under it and to adopt such rules and
regulations for administering the Plan, as it may deem necessary. Decisions of
the Committee shall be final and binding on all parties.
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The Committee may, in its absolute discretion (i) accelerate the date
on which any Option granted under the Plan becomes exercisable, (ii) extend the
date on which any Option granted under the Plan ceases to be exercisable, (iii)
accelerate the Vesting Date or Issue Date, or waive any condition imposed
pursuant to Section 7(b) hereof, with respect to any share of Restricted Stock
granted under the Plan and (iv) accelerate the Vesting Date or waive any
condition imposed pursuant to Section 8 hereof, with respect to any Stock
Appreciation Right granted under the Plan.
In addition, the Committee may, in its absolute discretion, grant
Incentive Awards to Participants on the condition that such Participants
surrender to the Committee for cancellation such other Incentive Awards
(including, without limitation, Incentive Awards with higher exercise prices) as
the Committee specifies. Notwithstanding Section 3 hereof, Incentive Awards
granted on the condition of surrender of outstanding Incentive Awards shall not
count against the limits set forth in such Section 3 until such time as such
Incentive Awards are surrendered.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Committee in its absolute discretion.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated from and against any cost or
expense (including attorneys' fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, unless, in either case,
such action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it was in
the best interests of the Company.
5. ELIGIBILITY
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be such Employees of the Company and certain Consultants to the
Company, as the Committee, in its absolute discretion, shall select from time to
time.
6. OPTIONS
The Committee may grant Options pursuant to the Plan, which Options shall
be evidenced by agreements in such form as the Committee shall from time to
time approve. Options shall comply with and be subject to the following terms
and conditions:
(a) Identification of Options
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All Options granted under the Plan shall be clearly identified in the
agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options.
(b) Exercise Price
The exercise price of any Non-Qualified Stock Option granted under the
Plan shall be such price as the Committee shall determine on the date on which
such Non-Qualified Stock Option is granted; provided, that such price may not be
less than the minimum price required by law. Except as provided in Section 6(d)
hereof, the exercise price of any Incentive Stock Option granted under the Plan
shall be not less than 100% of the Fair Market Value of a share of Common Stock
on the date on which such Incentive Stock Option is granted.
(c) Term and Exercise of Options
(1) Each Option shall be exercisable on such date or dates
during such period and for such number of shares of Common Stock as shall be
determined by the Committee on the day on which such Option is granted and set
forth in the agreement evidencing the Option; provided, however, that no Option
shall be exercisable after the expiration of ten years from the date such Option
was granted; and, provided, further, that each Option shall be subject to
earlier termination, expiration or cancellation as provided in the Plan.
(2) Each Option shall be exercisable in whole or in part with
respect to whole shares of Common Stock. The partial exercise of an Option shall
not cause the expiration, termination or cancellation of the remaining portion
thereof. Upon the partial exercise of an Option, the agreement evidencing such
Option shall be returned to the Participant exercising such Option together with
the delivery of the certificates described in Section 6(c)(5) hereof.
(3) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no fewer than
five business days in advance of the effective date of the proposed exercise.
Such notice shall be accompanied by the agreement evidencing the Option, shall
specify the number of shares of Common Stock with respect to which the Option is
being exercised and the effective date of the proposed exercise, and shall be
signed by the Participant. The Participant may withdraw such notice at any time
prior to the close of business on the business day immediately preceding the
effective date of the proposed exercise, in which case such agreement shall be
returned to the Participant. Payment for shares of Common Stock purchased upon
the exercise of an Option shall be made on the effective date of such exercise
either (i) in cash, by certified check, bank cashiers check or wire transfer or
(ii) subject to the approval of the Committee, in shares of Common Stock owned
by the
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Participant and valued at their Fair Market Value on the effective date of such
exercise, or (iii) partly in shares of Common Stock with the balance in cash, by
certified check, bank cashiers check or wire transfer. Any payment in shares of
Common Stock shall be effected by the delivery of such shares to the Secretary
of the Company, duly endorsed in blank or accompanied by stock powers duly
executed in blank, together with any other documents and evidences as the
Secretary of the Company shall require from time to time.
(4) Any Option granted under the Plan may be exercised by a
broker-dealer acting on behalf of a Participant if (i) the broker-dealer has
received from the Participant or the Company a duly endorsed agreement
evidencing such Option and instructions signed by the Participant requesting the
Company to deliver the shares of Common Stock subject to such Option to the
broker-dealer on behalf of the Participant and specifying the account into which
such shares should be deposited, (ii) adequate provision has been made with
respect to the payment of any withholding taxes due upon such exercise and (iii)
the broker-dealer and the Participant have otherwise complied with Section
220.3(e)(4) of Regulation T, 12 CFR Part 220.
(5) Certificates for shares of Common Stock purchased upon the
exercise of an Option shall be issued in the name of the Participant and
delivered to the Participant as soon as practicable following the effective date
on which the Option is exercised; provided, however, that such delivery shall be
effected for all purposes when a stock transfer agent of the Company shall have
deposited such certificates in the United States mail, addressed to the
Participant.
(6) During the lifetime of a Participant each Option granted
to him shall be exercisable only by him or, in the case of a non-qualified stock
option, a Family Member or Family Entity of such participant. No Option shall be
assignable or transferable by a participant except by (i) will or by the laws of
descent and distribution or in the case of a non-qualified stock option (ii)
pursuant to a gift or a domestic relations order to a Family Member or Family
Entity.
(d) Limitations on Grant of Incentive Stock Options
(1) The aggregate Fair Market Value of shares of Common Stock
with respect to which "incentive stock options" (within the meaning of Section
422, without regard to Section 422(d) of the Code) are exercisable for the first
time by a Participant during any calendar year under the Plan (and any other
stock option plan of the Company, or any subsidiary of the Company shall not
exceed $100,000. Such Fair Market Value shall be determined as of the date on
which each such Incentive Stock Option is granted. If such aggregate Fair Market
Value of shares of Common Stock underlying such Incentive Stock Options exceeds
$100,000, then Incentive Stock Options granted hereunder to such Participant
shall, to the extent and in the order required by regulations promulgated under
the Code (or any other authority having the force of Regulations), automatically
be deemed to be Non-Qualified Stock Options, but all other terms and
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provisions of such Incentive Stock Options shall remain unchanged. In the
absence of such Regulations (and authority), or if such Regulations (or
authority) require or permit a designation of the options which shall cease to
constitute Incentive Stock Options, Incentive Stock Options shall, to the extent
of such excess and in the order in which they were granted, automatically be
deemed to be Non-Qualified Stock Options, but all other terms and provisions of
such Incentive Stock Options shall remain unchanged.
(2) No Incentive Stock Option may be granted to an individual
if, at the time of the proposed grant, such individual owns, directly or
indirectly (based on the attribution rules in Section 424(d) of the Code) stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or any of its subsidiaries, unless (i) the
exercise price of such Incentive Stock Option is at least 110% of the Fair
Market Value of a share of Common Stock at the time such Incentive Stock Option
is granted and (ii) such Incentive Stock Option is not exercisable after the
expiration of five years from the date such Incentive Stock Option is granted.
(e) Effect of Termination of Employment or Service
(1) If the employment or service of a Participant with the
Company shall terminate for any reason other than Cause, permanent and total
disability (within the meaning of Section 22(e)(3) of the Code) or the death of
the Participant (i) Options granted to such Participant, to the extent that they
were exercisable at the time of such termination, shall remain exercisable until
the expiration of one month after such termination, on which date they shall
expire, and (ii) Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall expire at the close
of business on the date of such termination; provided, however, that no Option
shall be exercisable after the expiration of its term.
(2) If the employment of a Participant with the Company shall
terminate as a result of the permanent and total disability (within the meaning
of Section 22(e)(3) of the Code) of the Participant, the voluntary retirement of
the Participant in accordance with the Company's retirement policy as then in
effect or the death of the Participant (i) Options granted to such Participant,
to the extent that they were exercisable at the time of such termination, shall
remain exercisable until the expiration of one year after such termination, on
which date they shall expire, and (ii) Options granted to such Participant, to
the extent that they were not exercisable at the time of such termination, shall
expire at the close of business on the date of such termination; provided,
however, that no Option shall be exercisable after the expiration of its term.
(3) In the event of the termination of a Participant's
employment for Cause, all outstanding Options granted to such Participant shall
expire at the commencement of business on the date of such termination.
(f) Acceleration of Exercise Date Upon Change in Control
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Upon the occurrence of a Change in Control, each Option granted under
the Plan and outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration, termination or
cancellation pursuant to the terms of the Plan.
7. RESTRICTED STOCK
The Committee may grant shares of Restricted Stock pursuant to the
Plan. Each grant of shares of Restricted Stock shall be evidenced by an
agreement in such form as the Committee shall from time to time approve. Each
grant of shares of Restricted Stock shall comply with and be subject to the
following terms and conditions:
(a) Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the Committee
shall establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates
with respect to such shares. The Committee may divide such shares into classes
and assign a different Issue Date and/or Vesting Date for each class. Except as
provided in Sections 7(c) and 7(f) hereof, upon the occurrence of the Issue Date
with respect to a share of Restricted Stock, a share of Restricted Stock shall
be issued in accordance with the provisions of Section 7(d) hereof. Provided
that all conditions to the vesting of a share of Restricted Stock imposed
pursuant to Section 7(b) hereof are satisfied, and except as provided in
Sections 7(c) and 7(f) hereof, upon the occurrence of the Vesting Date with
respect to a share of Restricted Stock, such share shall vest and the
restrictions of Section 7(c) hereof shall cease to apply to such share.
(b) Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the Committee
may impose such restrictions or conditions, not inconsistent with the provisions
hereof, to the vesting of such shares as it in its absolute discretion deems
appropriate. By way of example and not by way of limitation, the Committee may
require, as a condition to the vesting of any class or classes of shares of
Restricted Stock, that the Participant or the Company achieve certain
performance criteria, such criteria to be specified by the Committee at the time
of the grant of such shares.
(c) Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee with
any interest or right in or with respect to such share, but immediately upon any
attempt to transfer such rights, such share, and all of the
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rights related thereto, shall be forfeited by the Participant and the transfer
shall be of no force or effect.
(d) Issuance of Certificates
(1) Except as provided in Sections 7(c) or 7(f) hereof,
reasonably promptly after the Issue date with respect to shares of Restricted
Stock, the Company shall cause to be issued a stock certificate, registered in
the name of the Participant to whom such shares were granted, evidencing such
shares: provided, that the Company shall not cause to be issued such a stock
certificates unless it has received a stock power duly endorsed in blank with
respect to such shares. Each such stock certificate shall bear the following
legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against transfer)
contained in the eNote.com, Inc. - 2000 Incentive Stock Plan and an
Agreement entered into between the registered owner of such shares
and eNote.com, Inc. A copy of the Plan and Agreement is on file in
the office of the Secretary of eNote.com, Inc. 185 Allen Brook Lane,
Williston, Vermont 05495.
Such legend shall not be removed from the certificate evidencing such shares
until such shares vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to Paragraph 7 (d)(1)
hereof, together with the stock powers relating to the shares of Restricted
Stock evidenced by such certificate, shall be held by the Company. The Company
shall issue to the Participant a receipt evidencing the certificates held by it
which are registered in the name of the Participant.
(e) Consequences Upon Vesting
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Section 7(c) hereof shall cease to apply to such
share. Reasonably promptly after a share of Restricted Stock vests pursuant to
the terms hereof, the Company shall cause to be issued and delivered to the
Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Paragraph 7 (d)(1) hereof, together with
any other property of the Participant held by Company pursuant to Section 7(d)
hereof, provided, however, that such delivery shall be effected for all purposes
when the Company shall have deposited such certificate and other property in the
United States mail, addressed to the Participant.
(f) Effect of Termination of Employment
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(1) If the employment of a Participant with the Company shall
terminate for any reason other than Cause prior to the vesting of shares of
Restricted Stock granted to such Participant, a portion of such shares, to the
extent not forfeited or canceled on or prior to such termination pursuant to any
provision hereof, shall vest on the date of such termination. The portion
referred to in the preceding sentence shall be determined by the Committee at
the time of the grant of such shares of Restricted Stock and may be based on the
achievement of any conditions imposed by the Committee with respect to such
shares pursuant to Section 7(b). Such portion may equal zero.
(2) In the event of the termination of a Participant's
employment for Cause, all shares of Restricted Stock granted to such Participant
which have not vested as of the date of such termination shall immediately be
forfeited.
(g) Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Restricted
Stock which have not theretofore vested (including those with respect to which
the Issue Date has not yet occur-red) shall immediately vest.
8. STOCK APPRECIATION RIGHTS
The Committee may grant Stock Appreciation Rights pursuant to the Plan.
Each grant of Stock Appreciation Rights shall be evidenced by an agreement in
such form as the Committee shall from time to time approve. Each grant of Stock
Appreciation Rights shall comply with and be subject to the following terms and
conditions:
(a) Vesting Date
At the time of the grant of Stock Appreciation Rights, the Committee
shall establish a Vesting Date or Vesting Dates with respect to such rights. The
Committee may divide such shares into classes and assign a different Vesting
Date for each class. Provided that all conditions to the vesting of a Stock
Appreciation Right imposed pursuant to Section 8(c) hereof are satisfied, and
except as provided in Section 8(d) hereof, upon the occurrence of the Vesting
Date with respect to Stock Appreciation Rights, such right shall vest.
(b) Benefit Upon Vesting
Upon the vesting of a Stock Appreciation Right, a Participant shall be
entitled to receive in cash, within 90 days of the date on which such right
vests, an amount in cash in a lump sum equal to the sum of (i) the Fair Market
Value of a share of Common Stock of the Company on the date on which such Stock
Appreciation Right vests and (ii) the aggregate amount of cash dividends paid
with respect to a share of Common Stock of the
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Company during the period commencing on the date on which the Stock Appreciation
Right was granted and terminating on the date on which such right vests.
(c) Conditions to Vesting
At the time of the grant of Stock Appreciation Rights, the Committee
may impose such restrictions or conditions, not inconsistent with the provisions
hereof, to the vesting of such rights as it, in its absolute discretion deems
appropriate. By way of example and not by way of limitation, the Committee may
require, as a condition to the vesting of any class or classes of Stock
Appreciation Rights, that the Participant or the Company achieve certain
performance criteria, such criteria to be specified by the Committee at the time
of the grant of such rights.
(d) Effect of Termination of Employment
(1) If the employment of a Participant with the Company shall
terminate for any reason other than Cause prior to the vesting of Stock
Appreciation Rights granted to such Participant a portion of such rights, to the
extent not forfeited or canceled on or prior to such termination pursuant to any
provision hereof, shall vest on the date of such termination. The portion
referred to in the preceding sentence shall be determined by the Committee at
the time of the grant of such Stock Appreciation Right and may be based on the
achievement of any conditions imposed by the Committee with respect to such
rights pursuant to Section 8(c). Such portion may equal zero.
(2) In the event of the termination of a Participant's employment
for Cause, all Stock Appreciation Rights granted to such Participant which have
not vested as of the date of such termination shall immediately be forfeited.
(e) Effect of Change in Control
Upon the occurrence of a Change in Control, all Stock Appreciation
Rights which have not theretofore vested shall immediately vest.
9. STOCK BONUSES
The Committee may, in its absolute discretion, grant Stock Bonuses in
such amounts as it shall determine from time to time. A Stock Bonus shall be
paid at such time and subject to such conditions as the Committee shall
determine at the time of the grant of such Stock Bonus. Certificates for shares
of Common Stock granted as a Stock Bonus shall be issued in the name of the
Participant to whom such grant was made and delivered to such Participant as
soon as practicable after the date on which such Stock Bonus is required to be
paid.
10. CASH BONUSES
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The Committee may, in its absolute discretion, grant in connection with
any grant of Restricted Stock or Stock Bonus or at any time thereafter, a cash
bonus, payable promptly after the date on which the Participant is required to
recognize income for federal income tax purposes in connection with such
Restricted Stock or Stock Bonus, in such amounts as the Committee shall
determine from time to time; provided, however, that in no event shall the
amount of a Cash Bonus exceed the Fair Market Value of the related shares of
Restricted Stock or Stock Bonus on such date. A Cash Bonus shall be subject to
such conditions as the Committee shall determine at the time of the grant of
such Cash Bonus.
11. ADJUSTMENT UPON CHANGES IN COMMON STOCK
(a) Outstanding Restricted Stock and Stock Appreciation Rights
Unless the Committee in its absolute discretion otherwise determines, if
a Participant receives any securities or other property (including dividends
paid in cash) with respect to a share of Restricted Stock, the Issue Date with
respect to which occurs prior to such event, but which has not vested as of the
date of such event, as a result of any dividend, stock split, recapitalization,
merger, consolidation, combination, exchange of shares or otherwise, such
securities or other property will not vest until such share of Restricted Stock
vests, and shall be held by the Company pursuant to Paragraph 7 (d) (2) hereof.
The Committee may, in its absolute discretion, adjust any grant of
shares of Restricted Stock, the Issue Date with respect to which has not
occurred as of the date of the occurrence of any of the following events, or any
grant of Stock Appreciation Rights, to reflect any dividend, stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
similar corporate change as the Committee may deem appropriate to prevent the
enlargement or dilution of rights of Participants under the grant.
(b) Outstanding Options, Increase or Decrease in Issued Shares Without
Consideration
Subject to any required action by the shareholders of the Company, in
the event of any increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or consolidation of shares of Common Stock or
the payment of a stock dividend (but only on the shares of Common Stock), or any
other increase or decrease in the number of such shares effected without receipt
of consideration by the Company, the Committee shall proportionally adjust the
number of shares and the exercise price per share of Common Stock subject to
each outstanding Option.
(c) Outstanding Options, Certain Mergers
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Subject to any required action by the shareholders of the Company, if
the Company shall be the surviving corporation in any merger or consolidation
(except a merger of consolidation as a result of which the holders of shares of
Common Stock receive securities of another corporation), each Option outstanding
on the date of such merger or consolidation shall entitle the Participant to
acquire upon exercise the securities which a holder of the number of shares of
Common Stock subject to such Option would have received in such merger or
consolidation.
(d) Outstanding Options, Certain Other Transactions
In the event of a dissolution or liquidation of the Company, a sale of
all or substantially all of the Company's assets, a merger or consolidation
involving the Company in which the Company is not the surviving corporation or a
merger or consolidation involving the Company in which the Company is the
surviving corporation but the holders of shares of Common Stock receive
securities of another corporation and/or other property, including cash, the
Committee shall, in its absolute discretion, have the power to:
(1) cancel, effective immediately prior to the occurrence of
such event, each Option outstanding immediately prior to such event (whether or
not then exercisable), and, in full consideration of such cancellation, pay to
the Participant to whom such Option was granted an amount in cash, for each
share of Common Stock subject to such Option equal to the excess of (A) the
value, as determined by the Committee in its absolute discretion, of the
property (including cash) received by the holder of a share of Common Stock as a
result of such event over (B) the exercise price of such Option; or
(2) provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then exercisable) for an option
on some or all of the property for which such Option is exchanged and, incident
thereto, make an equitable adjustment as determined by the Committee in its
absolute discretion in the exercise price of the option, or the number of shares
or amount of property subject to the option or, if appropriate, provide for a
cash payment to the Participant to whom such Option was granted in partial
consideration for the exchange of the Option.
(e) Outstanding Options. Other Changes
In the event of any change in the capitalization of the Company or
corporate change other than those specifically referred to in Sections 11 (b),
(c) or (d) hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject to Options outstanding on
the date on which such change occurs and in the per share exercise price of each
such Option as the Committee may consider appropriate to prevent dilution or
enlargement of rights.
(f) No Other Rights
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Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of shares of stock of any
class, the payment of any dividend, any increase or decrease in the number of
shares of stock of any class or any dissolution, liquidation, merger or
consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Common Stock subject to an Incentive Award or the exercise
price of any Option.
12. RIGHTS AS A SHAREHOLDER
No person shall have any rights as a shareholder with respect to any
shares of Common Stock covered by or relating to any Incentive Award granted
pursuant to this Plan until the date of the issuance of a stock certificate with
respect to such shares. Except as otherwise expressly provided in Section 11
hereof, no adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date such stock
certificate is issued.
13. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD
Nothing contained in the Plan or any Incentive Award shall confer upon
any Participant any right with respect to the continuation of his employment by
the Company or interfere in any way with the right of the Company, subject to
the terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Incentive
Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person.
14. SECURITIES MATTERS
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any shares of Common Stock to be issued
hereunder or to effect similar compliance under any state laws. Notwithstanding
anything herein to the contrary, the Company shall not be obligated to cause to
be issued or delivered any
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certificates evidencing shares of Common Stock pursuant to the Plan unless and
until the Company is advised by its counsel that the issuance and delivery of
such certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange on which
shares of Common Stock are traded. The Committee may require, as a condition of
the issuance and delivery of certificates evidencing shares of Common Stock
pursuant to the terms hereof, that the recipient of such shares make such
covenants, agreements and representations, and that such certificates bear such
legends, as the Committee, in its sole discretion, deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall only be effective
at such time as counsel to the Company shall have determined that the issuance
and delivery of shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authorities and
the requirements of any securities exchange on which shares of Common Stock are
traded. The Company may, in its sole discretion, defer the effectiveness of any
exercise of an Option granted hereunder in order to allow the issuance of shares
of Common Stock pursuant thereto to be made pursuant to registration or an
exemption from registration or other methods for compliance available under
federal or state securities laws. The Company shall inform the Participant in
writing of its decision to defer the effectiveness of the exercise of an Option
granted hereunder. During the period that the effectiveness of the exercise of
an Option has been deferred, the Participant may, by written notice, withdraw
such exercise and obtain the refund of any amount paid with respect thereto.
15. WITHHOLDING TAXES
Whenever shares of Common Stock are to be issued upon the exercise of an
Option, the occurrence of the Issue Date or Vesting Date with respect to a share
of Restricted Stock or the payment of a Stock Bonus, the Company shall have the
right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax requirements, if
any, attributable to such exercise, occurrence or payment prior to the delivery
of any certificate or certificates for such shares. In addition, upon the grant
of a Cash Bonus or the making of a payment with respect to a Stock Appreciation
Right the Company shall have the right to withhold from any cash payment
required to be made pursuant thereto an amount sufficient to satisfy the
federal, state and local withholding tax requirements, if any, attributable to
such exercise or grant.
16. AMENDMENT OF THE PLAN
The Board of Directors may at any time suspend or discontinue the Plan
or revise or amend it in any respect whatsoever, provided, however, that without
approval of the shareholders no revision or amendment shall (i) except as
provided in Section 11 hereof, increase the number of shares of Common Stock
that may be issued under the Plan, (ii) materially increase the benefits
accruing to individuals holding Incentive Awards granted
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pursuant to the Plan or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
17. NO OBLIGATION TO EXERCISE
The grant to a Participant of an Option shall impose no obligation upon
such Participant to exercise such Option.
18. TRANSFERS UPON DEATH
Upon the death of a Participant, outstanding Incentive Awards granted
to such Participant may be exercised only by the executors or administrators
of the Participant's estate or by any person or persons who shall have
acquired such right to exercise by will or by the laws of descent and
distribution. No transfer by will or the laws of descent and distribution of
any Incentive Award, or the right to exercise any Incentive Award, shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such
evidence as the Committee may deem necessary to establish the validity of the
transfer and (b) an agreement by the transferee to comply with all the terms
and conditions of the Incentive Award that are or would have been applicable
to the Participant and to be bound by the acknowledgments made by the
Participant in connection with the grant of the Incentive Award.
19. EXPENSES AND RECEIPTS
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used
for general corporate purposes.
20. FAILURE TO COMPLY
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant to comply with any of the terms and
conditions of the Plan or the agreement executed by such Participant
evidencing an Incentive Award, unless such failure is remedied by such
Participant within ten days after having been notified of such failure by the
Committee, shall be grounds for the cancellation and forfeiture of such
Incentive Award, in whole or in part as the Committee, in its absolute
discretion, may determine.
21. EFFECTIVE DATE AND TERM OF PLAN
The Plan was adopted by the Board of Directors effective __________,
2000 subject to approval by the shareholders of the Company in accordance with
applicable law, the requirements of Section 422 of the Code and the
requirements of Rule 16b-3
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under Section 16(b) of the Exchange Act. No Incentive Award may be granted
under the Plan after _______, 2010. Incentive Awards may be granted under the
Plan at any time prior to the receipt of such shareholder approval; provided,
however, that each such grant shall be subject to such approval. Without
limitation on the foregoing, no Option may be exercised prior to the receipt
of such approval, no share certificate shall be issued pursuant to a grant of
Restricted Stock or Stock Bonus prior to the receipt of such approval and no
Cash Bonus or payment with respect to a Stock Appreciation Right shall be paid
prior to the receipt of such approval. If the Plan is not approved by the
Company's shareholders, then the Plan and all Incentive Awards then
outstanding hereunder shall forthwith automatically terminate and be of no
force and effect.
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Exhibit 10.23
JOINT VENTURE AGREEMENT
This Agreement dated as of March 24, 2000 (the "Agreement"), by and
between Seafont Pty. Ltd., a corporation incorporated under the laws of
Australia with a principal address at Level 2, 31 Bligh Street Sydney, Australia
("Seafont") and eNote.com, Inc., a corporation incorporated under the laws of
the State of Delaware, having its principal office at 185 Allen Brook Lane,
Williston, Vermont 05495, USA ("eNote").
W I T N E S S E T H:
WHEREAS, eNote has designed, developed and is marketing in the United
States an Internet appliance including a wireless keyboard and set-top box (the
"Client") to permit users to access via a telephone line and view via television
e-mail and selected Internet web pages ("TVemail(TM)").
WHEREAS, eNote has designed, engineered and developed a system of
software and hardware to implement TVemail(TM). This system is comprised of the
TVemail(TM) appliances, including the wireless keyboard and set-toP box, eNote's
proprietary software (including, but not limited to, all Object Code and Source
Code in whatever form), eNote's proprietary client/server architecture and
database (the "Backbone"), together with all new versions, upgrades,
alterations, localizations and other modifications and improvements to the
TVemail(TM) and Backbone and any component thereof, and instructions and
documentation provided as a unit therewith (collectively, the "TVemail(TM)
System").
WHEREAS, Seafont and its Affiliates, including, but not limited to
Kelley Group Holdings Pty. Ltd., control a large number of distribution channels
and retail locations within the Territory (as defined herein).
WHEREAS, eNote and Seafont (collectively, the "Parties" and each a
"Party") desire to enter into a relationship and this Agreement to create an
Australian corporation ("eNote.com Australia") to distribute, market and sell a
localized version of TVemail(TM) in the Territory.
WHEREAS, neither Seafont nor eNote.com Australia will engage in any
business involving TVemail(TM) or an analogous product outside the Territory.
WHEREAS, eNote.com Australia shall initially be owned equally by
Seafont and eNote.
WHEREAS, eNote shall at all times control 52% of the voting power of
the shareholders of eNote.com Australia in a manner sufficient for eNote to
satisfy certain conditions contained in its directors and officers liability
insurance policy and its product liability insurance policy as well as
consolidate eNote.com Australia with eNote for financial reporting purposes
under U.S. generally accepted accounting principals.
WHEREAS, eNote shall provide to the eNote.com Australia a version of
the TVemail(TM) System, localized to operate in the Territory.
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WHEREAS, eNote shall perform all work associated with the TVemail(TM)
System and any localized version thereof and no alterations or modifications
shall be made to the TVemail(TM) System or any component thereof, including, but
not limited to any changes regarding power supply, modem approval or telephony
interface, except at the direction of eNote.
WHEREAS, Seafont shall contribute to eNote Australia its, expertise,
knowledge and experience in the electronics retail market within the Territory
and shall provide access to its distribution channels and retail locations to
market, distribute and sell TVemail(TM) throughout the Territory.
WHEREAS, eNote shall enter into a License, Technical Assistance, Supply
and Distribution Agreement with eNote Australia to effectuate the objectives of
this Agreement.
WHEREAS, each Party shall contribute an equal amount of capital to
eNote Australia.com.
NOW, THEREFORE, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall, for the purposes of this Agreement, have
the following meanings, except as otherwise expressly provided herein (terms
defined in the singular or the plural include the plural or the singular, as the
case may be):
1.1 "Affiliate" shall mean, as to any Person, any other Person that,
directly or indirectly, controls, is under common control with, or is controlled
by, that Person. For purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
1.2 "Agreement" shall mean this Agreement and any Schedules, Exhibits
and Certificates attached to this Agreement.
1.3 "Appraised Value" shall have the meaning given to that term in
Section 9.5.
1.4 "Appraisal Report" shall have the meaning given to that term in
Section 9.5
1.5 "Backbone" shall the meaning set forth in the whereas clauses to
this Agreement.
1.6 "Breakeven" shall mean positive cash flow from operating
activities, less: (i) the sum of cash used in investing activities; and (ii)
payments under capital lease obligations, as such items are reflected on a
statement of cash flows prepared in accordance with U.S. generally
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accepted accounting principles (such terms having the meanings given in U.S.
generally accepted accounting principles) eNote.com Australia shall be deemed to
have reached Breakeven on the last day of the fourth fiscal quarter if the
foregoing definition is satisfied for each of four (4) full consecutive fiscal
quarters succeeding such day (whether or not such period constitutes a calendar
or fiscal year).
1.7 "Australian Board" shall mean the Board of Directors (or its
equivalent) of eNote.com Australia.
1.8 "Business" shall have the meaning given to that term in Section
2.1(a).
1.9 "Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York, New York, U.S.A. or Sydney,
Australia.
1.10 "Business Plan" shall mean: (i) the business plan agreed upon
by the Parties prior to the Closing Date, covering the period commencing on
the Closing Date and ending on a date agreed to by the Parties, for the
Business and eNote.com Australia, and (ii) after such period and in all other
cases, an annual capital, revenue and expense plan, including a profit and
loss statement and a statement of cash flows for eNote.com Australia,
together with a quarterly cash funding plan with dates of funding, plus
marketing, operational and other business strategies, reflecting the
financial objectives and requirements of eNote.com Australia.
1.11 "Call Option" shall mean eNote's option to acquire the equity
interests of Seafont in eNote.com Australia as further set forth in Section 9.3
hereof.
1.12 "Closing" shall have the meaning set forth in Section 11.1 hereof.
1.13 "Closing Date" shall mean that date identified in Section 11.1
hereof.
1.14 "Competitor" shall mean an entity which is engaged in the
development, design, or distribution of an Internet appliance offering e-mail
and web browsing capabilities using the television as the display device for
such activities.
1.15 "Deadlock Notice" shall mean a notice given by a Party to the
other Party that the following conditions have been satisfied and that the Party
giving Notice is invoking the Deadlock Provisions contained in Section 9.3: (i)
the parties cannot come to an agreement as to an activity to be engaged in by
eNote.com Australia that requires the consent of both the Parties hereto; (ii)
the parties have negotiated in good faith to come to an agreement regarding the
disputed activity for at least thirty (30) days; and (iii) the disputed activity
could reasonably be anticipated to have a material effect on the Business or
eNote.com Australia.
1.16 "Determination Date" shall mean the first date on which either a
Financing Event occurs or Breakeven is reached.
1.17 "Distributable Cash" shall mean, with respect to any relevant
period, "positive cash flow" (determined by deducting from cash flow from
operating activities the sum of cash
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used in investing activities and payments under capital lease obligations, as
reflected on a statement of cash flows prepared in accordance with U.S.
generally accepted accounting principles) but excluding funds from capital
contributions or loans and further excluding a reserve, in an amount reasonably
determined by the Australian Board in its business judgment to be necessary or
appropriate for cash disbursements (other than for repayment of principal under
the Loan Facility) including, but not limited to, provision for the payment of
all outstanding and unpaid current obligations of eNote.com Australia as of such
time.
1.18 "Effective Date" shall have the meaning given to that term in
Section 8.1.
1.19 "eNote.com Australia" shall mean that entity which is to be formed
prior to Closing, which shall be a corporation organized under the laws of
Australia, which shall conduct the Business and which shall be owned and
operated, directly or indirectly, by the Parties in accordance with this
Agreement.
1.20 "eNote's Proprietary Technology" shall mean and include the eNote
brand, the TVemail(TM) System, any component thereof or any of the technology,
software, trade secrets, trademarks, trademark applications, patents, patent
applications, instruction manuals, installation manuals or other intellectual
property licensed pursuant to the License Agreement, or any hardware or software
provided by eNote to eNote.com Australia or any other intellectual property
otherwise owned by or assigned to eNote, including any intellectual property
covered by Section 7.4 hereof.
1.21 "Financing Event" shall mean an infusion of capital paid to eNote
Australia, by a Person or Persons other than the Parties and their Affiliates,
either in exchange for equity or debt of eNote Australia in an amount not less
than Two Million U.S. Dollars $2,000,000.
1.22 "Governmental Body" shall mean any domestic or foreign national,
state or municipal or other local government or multi-national body (including,
but not limited to, the European Union), any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body exercising any
regulatory authority thereunder.
1.23 "IPO" shall have the meaning set forth in Section 9.7.
1.24 "IPO Put Right" shall have the meaning given to that term in
Section 4.2.
1.25 "IPO Target Date" shall have the meaning given to that term in
Section 4.2.
1.26 "License Agreement" shall have the meaning given to that term in
Section 7.1.
1.27 "Localization Costs" shall mean the fully burdened costs of eNote
to localize the TVemail(TM) System to operate in the Territory, network properly
with eNote's Backbone and make other technical changes to the TVemail(TM) System
as approved by the Australian Board and in accordance with this Agreement.
1.28 "Managing Director" shall the meaning set forth in Section 3.3
hereof.
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1.29 "Marks" shall have the meaning set forth in Section 7.7 hereof.
1.30 "Object Code" shall mean: (i) machine executable programming
instructions, substantially in binary form, which are intended to be directly
executable by an operating system after suitable processing and linking, but
without the intervening steps of compilation or assembly; or (ii) other
executable code (e.g., programming instructions written in procedural or
interpretive languages).
1.31 "Person" shall mean an individual, sole proprietorship,
corporation, partnership, limited partnership, limited liability company, joint
venture, trust, unincorporated organization, mutual company, joint stock
company, estate, union, employee organization, bank, trust company, land trust,
business trust or other organization, or a Governmental Body, or their
equivalent under the applicable legal system.
1.32 "Put Option" shall mean eNote's option to sell its equity
interests in eNote.com Australia to Seafont as further set forth in Section 9.3
hereof
1.33 "Source Code" shall mean the human readable form of Object Code
and related system documentation, including comments, procedural language and
material useful for understanding, implementing and maintaining such
instructions (for example, logic manuals, flow charts and principles of
operation).
1.34 "Territory" shall mean all of the countries listed on Exhibit A.
1.35 "Transfer" shall mean the direct or indirect sale, transfer,
pledge, assignment or other disposition of or mortgage, hypothecation, or other
encumbrance or permitting or suffering of any encumbrance of all or any part of
the equity interests in eNote.com Australia; provided, however, that the term
"Transfer" shall not include the pledge of all or any part of the equity
interest in eNote.com Australia held by a Party to secure indebtedness of such
Party owing to a lender so long as such lender agrees and acknowledges in
writing, as part of such pledge, that the interests of such lender are, and
shall at all times be, subject to the terms and conditions of this Agreement,
and that such pledge (and the rights of the lender) is at all times subordinate
to the rights of the other Party pursuant to this Agreement. No lender may
foreclose on a pledge without complying with the provisions of Section 9.4.
1.36 "TVemail(TM)" shall have the meaning set forth in the whereas
clauses to this Agreement.
1.37 "TVemail(TM) System" shall have the meaning set forth in the
whereas clauses to this Agreement.
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ARTICLE II
PURPOSE AND SCOPE OF AGREEMENT
2.1 PURPOSE.
(a) Seafont and eNote jointly undertake to: market and distribute, only
within the Territory, an internet appliance product similar to the TVemail(TM)
product which is being offered by eNote to consumers in the United States and to
support the infrastructure necessary to provide e-mail and selected Internet
service to consumers within the Territory via such appliances (the "Business").
(b) The joint business relationship between Seafont and eNote will
permit the parties to leverage the concept and technical innovations of the
TVemail(TM) System and Seafont's expertise and experience with marketing,
distribution and management within the Territory.
(c) Except as explicitly set forth in this Agreement or in the License
Agreement, neither Seafont nor eNote (or their respective Affiliates) shall have
any obligation to the other to conduct business exclusively with the other
Party, to offer business opportunities to the other party or to refrain from
competition in any manner whatsoever regardless whether the Parties are jointly
engaged in (or may also engage in) a particular activity at a particular time.
2.2 NO PARTNERSHIP.
Nothing in this Agreement shall be construed as creating between the
Parties a partnership, fiduciary or other similar relationship or a joint
venture except as expressly provided for herein. Nothing in this Agreement shall
create or imply any exclusive relationship or any obligation to inform the other
Party, offer to the other Party (or eNote.com Australia) or to include the other
Party in any opportunity which may be available to one of the Parties in the
future, regardless of the relationship between such opportunity and the
Business.
2.3 OVERALL CONDUCT OF BUSINESS.
(a) The Business shall be conducted through joint participation by the
Parties in an independent corporate entity, eNote.com Australia.
(b) Each Party shall hold its interest in eNote.com Australia either
directly or through one or more Affiliates in accordance with Section 9.2. eNote
shall initially own fifty percent (50%) of the issued and outstanding common
stock of eNote.com Australia and Seafont shall initially own the other fifty
percent (50%) of the issued and outstanding common stock of eNote.com Australia,
provided, however, that Seafont shall grant eNote an irrevocable proxy to vote
that number of Seafont's shares such that eNote shall control fifty-two percent
(52%) of the voting power of the shareholders of eNote.com Australia as more
fully set forth in Section 5.6 hereof.
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(c) No Party shall have the right to represent the other Party in
negotiations with third parties. Subject to the prior explicit approval of the
represented Party, no Party shall have the right to enter into an agreement with
a third party for the account of the other Party or for their joint account,
except as expressly provided herein. The Party entering such unauthorized
agreement or causing such liability shall hold the other Party harmless for any
claims raised by a third party.
(d) The Business shall not under any circumstances be conducted in any
way outside the geographical limits of the Territory unless otherwise agreed to
explicitly by the Parties in writing.
ARTICLE 3
ENTITY FORMATION
3.1 FORMATION AND ORGANIZATIONAL DOCUMENTS:
(a) Prior to the Closing Date, Seafont shall cause eNote.com
Australia to be legally and validly formed under the laws of the Commonwealth
of Australia as a company limited by shares.
(b) eNote.com Australia, to the extent legally available, shall have
the name "eNote.com Australia" with such suffixes as are required under the laws
of its formation, or such other name as shall be mutually agreed upon by the
Parties.
(c) The certificate of incorporation, articles of association, or
memorandum (or other similar constituent documents as are specified by the laws
of its formation) which are to be filed with the appropriate governmental
authority to create eNote.com Australia shall be delivered by Seafont to eNote
prior to such filing and shall be subject to eNote's approval. No change or
amendment shall be made to such constituent documents without the consent of
both Parties.
(d) Prior to the Closing, Seafont and eNote shall agree on the Bylaws
which shall be adopted by the Parties. No change or amendment shall be made to
such Bylaws without the unanimous consent of both Parties.
3.2 BOARD OF DIRECTORS: The Parties, as shareholders of eNote.com
Australia, shall cause eNote.com Australia to have five (5) directors who shall
compose the Australian Board. Each of the Parties shall have the right to
nominate two (2) nominees to the Australian Board. The Parties agree to vote
their shares of eNote.com Australia to elect such nominees. In addition to each
of the Party's Nominees, each of the Parties shall cause the Managing Director
to be elected to the Australian Board. The Parties agree that the initial
Directors shall be those persons set forth on Exhibit B hereto.
3.3 MANAGING DIRECTOR: As soon as possible after the execution and
delivery of this Agreement, the Parties shall appoint an officer (the "Managing
Director"), who shall be the Managing Director of eNote.com Australia and shall:
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(a) prepare reports and recommendations for presentation to the
Australian Board, including, without limitation, in respect of decisions which
require the approval of the Australian Board and/or the Parties as shareholders
of eNote.com Australia;
(b) prepare a Business Plan in cooperation with eNote's Chief Financial
Officer for eNote.com Australia which shall be presented to the Australian Board
for approval as well as overall strategic, marketing, advertising and other
general plans for eNote.com Australia;
(c) implement the resolutions of the Australian Board;
(d) advise, supervise and coordinate the business, operations and
management of eNote.com Australia and oversee all day to day operating aspects
of the Business.
3.4 DESIGNATION OF MANAGING DIRECTOR/TERMS OF EMPLOYMENT.
Notwithstanding anything to the contrary contained in this Agreement,
Seafont shall have the exclusive right to designate an individual (in accordance
with the procedures described below) to be employed as the Managing Director.
eNote shall have the right to reject such nominee for good and sufficient cause.
Unless rejected by eNote consistent with the foregoing, the nominee shall be
designated as the Managing Director of eNote.com Australia. The Managing
Director shall be an employee of eNote.com Australia and his or her salary and
benefits shall be paid by and through eNote.com Australia. The Managing Director
shall enter into an employment agreement with eNote.com Australia, satisfactory
to each of the Parties and approved by the Australian Board, consistent with the
principles of this Agreement.
3.5 ISSUANCE OF SHARES. On the Closing Date, and upon each of the
Parties satisfying their respective initial capital contribution obligations as
provided for in this Agreement and the Business Plan, eNote and Seafont shall
each be entitled to receive fully paid and nonassessable shares of common stock
representing 50% percent of the issued and outstanding equity interests of
eNote.com Australia.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 CAPITAL CONTRIBUTIONS BY THE PARTIES. On the Closing Date each
Party shall contribute Two Hundred Fifty Thousand U.S. Dollars ($250,000) in
immediately available funds to the account of eNote.com Australia as specified
by the Managing Director of eNote.com Australia in consideration for the Common
Stock to be issued to each of the Parties pursuant to Section 3.5. The
contributed capital shall be used only for the payment of approved expenditures
contained in the Business Plan.
4.2 NON-IPO PUT RIGHT. If an IPO has not been consummated by eNote.com
Australia on or before the one and a half year anniversary of the Closing Date
(the "IPO Target Date"), then Seafont shall have a put right (the "IPO Put
Right") to require eNote to purchase Seafont's entire equity interest in
eNote.com Australia for an aggregate purchase price equal to two times the
amount of capital contributed to eNote.com Australia by Seafont. Provided that
an
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IPO has not occurred, Seafont shall provide written notice to eNote thirty (30)
days prior to the IPO Target Date giving notice that it is exercising its IPO
Put Right. In the event that an IPO is not consummated on or before the IPO
Target Date following such notice, ten (10) days after the IPO Target Date
Seafont shall transfer all of its shares in eNote.com Australia to eNote in
consideration for that number of shares of eNote Common Stock, par value $.01
per share, equal to the quotient of (a) two times the aggregate amount of
capital contributed by Seafont to eNote.com Australia in U.S. Dollars, divided
by (b) the Fair Market Value of a share of eNote Common Stock. For purposes of
this section, the Fair Market Value of a share of eNote Common Stock shall equal
the (i) the closing sales price on the preceding business day, of a share of
Common Stock as reported on the principal securities exchange on which shares of
Common Stock are then listed or admitted to trading or (ii) if not so reported,
the average of the closing bid and asked prices for a share of Common Stock on
the preceding business day as quoted on the National Association of Securities
Dealers Automated Quotation System ("Nasdaq") or (iii) if not quoted on the
Nasdaq, the average of the closing bid and asked prices for a share of Common
Stock as quoted by the National Quotation Bureau's "Pink Sheets" or the National
Association of Securities Dealers' OTC Bulletin Board System over on the
preceding business day. If the price of a share of Common Stock shall not be so
reported, the Fair Market Value of a share of Common Stock shall be determined
by reference to the last known sale of Common Stock to an unaffiliated third
party in an arms length transaction.
ARTICLE V
MANAGEMENT OF THE eNOTE.COM AUSTRALIA
5.1 MATTERS REQUIRING JOINT ACTION AS SHAREHOLDERS. Subject to
applicable law, eNote and Seafont agree that any activities by eNote.com
Australia in respect of the following matters shall require the consent and
approval of each of eNote and Seafont as shareholders thereof, or, if such a
requirement is not possible, that the Parties adopt a joint position in respect
of any such decision that the Australian Board shall consider in connection with
approving any action regarding such activity:
(a) approval of any strategic plan;
(b) the adoption, amendment or repeal of any provisions of the charter
documents of eNote.com Australia;
(c) the issuance, redemption, repurchase or retirement of any
securities of eNote.com Australia (including any option, warrant or other right
to purchase an interest in eNote.com Australia, or any securities convertible or
exchangeable into the same);
(d) the sale, transfer or disposal of assets of eNote.com Australia in
excess of One Hundred Thousand U.S. Dollars ($100,000) per fiscal year
(excluding inventory sold in the ordinary course of business);
(e) any merger or consolidation of eNote.com Australia with or into
another entity;
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(f) the organization of, or the acquisition or disposition of, any
interest in another entity by eNote.com Australia other than for purposes of
cash management on a short term basis with a recognized money market
institution;
(g) the borrowing of funds in excess of Two Hundred Thousand Dollars
($200,000) in U.S. Dollars per fiscal year by eNote.com Australia;
(h) the sale, sublicense, encumbrance or other transfer of any
intellectual property rights by eNote.com Australia in a manner inconsistent
with this Agreement or the License Agreement;
(i) the filing by eNote.com Australia of a petition for liquidation,
dissolution or seeking protection from creditors of eNote.com Australia;
(j) approval of the annual operating budget and Business Plan of
eNote.com Australia;
(k) any decision involving a declaration of dividends eNote.com
Australia;
(l) any decision involving the approval of a material agreement between
one of Seafont, eNote or their respective Affiliates and eNote.com Australia
including but not limited to any guarantee given by Seafont or eNote or their
respective Affiliates on behalf of eNote.com Australia;
(m) any action outside the scope of the Business;
(n) any action by eNote Australia outside the Territory;
(o) any early repayment of indebtedness by eNote.com Australia;
(p) adoption of the initial marketing strategy and approval of any
substantial change in the marketing strategy of eNote.com Australia including
the pricing of products and decisions regarding distribution and licensing;
(q) knowingly entering into a transaction or arrangement with a
Competitor;
(r) entering into any contract potentially requiring an aggregate of
payments by eNote.com Australia in excess of five hundred thousand dollars
($500,000) in U.S. Dollars during any fiscal year; and
(s) the termination of the Managing Director
provided that, to the extent that any action requiring the approval of
the Board of Directors is specifically set forth on a line item basis in any
Business Plan of eNote.com Australia, such action shall be deemed to have been
approved except as to subparagraphs (n) and (q) above.
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5.2 FINANCIAL POLICIES, ACCOUNTING, FISCAL YEAR.
(a) All financial statements prepared with respect to eNote.com
Australia shall be prepared in Australian currency and in accordance with the
generally accepted accounting principles in existence in Australia, consistently
applied, provided that eNote.com Australia shall provide such financial
information to the Parties together with such other information as each Party
reasonably requests; all such information shall be provided in a format
reasonably requested by the Parties such that each Party may, at the expense of
eNote.com Australia, prepare financial statements for eNote.com Australia in
accordance with generally accepted accounting principles in existence in the
United States. Such information and financial statements shall be provided in a
time frame allowing the requesting Party to fulfill all of its financial
reporting obligations.
(b) The Australian Board shall select as eNote.com Australia's
independent accountants to provide accounting and auditing services to eNote.com
Australia the same independent accounting firm selected by eNote to provide
eNote with accounting and auditing services. eNote.com Australia shall be
subject to an annual audit by such accountants.
(c) eNote.com Australia shall adopt __________ as the end of its
fiscal year.
(d) eNote.com Australia shall furnish, on a regular basis and as may
be reasonably requested by a Party, such accounting and other information which
a Party reasonably requires to fulfill its reporting and financial planning
objectives and the annual audit report shall be furnished by eNote.com Australia
to the Parties within forty-five (45) days after the end of its fiscal year and
an unaudited statement within thirty (30) days after the end of each fiscal
quarter.
5.3 DIVIDEND POLICY. eNote.com Australia shall distribute dividends or
make other distributions out of Distributable Cash subject to Section 5.1 and
the unanimous approval of the Australian Board.
5.4 SPENDING. Funds available to eNote.com Australia shall only be used
by eNote.com Australia in accordance with the Business Plan, as the same may be
modified from time to time subject to Section 5.1 and the unanimous approval of
the Board of Directors.
5.5 CONSTITUENT DOCUMENTS OF eNOTE.COM AUSTRALIA. The articles of
association, articles of incorporation, by-laws, or constituent documents of
eNote.com Australia shall reflect the provisions set forth in this Article V
with such changes as shall be jointly agreed by the Parties and each of the
Parties shall review and approve such constituent documents prior to the Closing
Date.
5.6 GRANT OF PROXY BY SEAFONT TO eNOTE. The Parties acknowledge that it
is essential for eNote to maintain control of eNote Australia for purposes of
insurance and financial reporting. Accordingly, Seafont agrees to execute an
irrevocable proxy (the "Proxy"), or series of proxies as is necessary from time
to time, reasonably satisfactory to eNote and eNote's counsel, in favor of
eNote, which shall grant eNote the right to vote that number of Seafont's
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shares of common stock of eNote Australia such that, when aggregated with
eNote's shares of common stock of eNote Australia, eNote shall have the power to
vote 52% of eNote Australia's issued and outstanding shares of Common Stock on
any matter requiring the vote of eNote Australia's shareholders. In the event
that Seafont and eNote collectively own less than 52% of the issued and
outstanding shares of Common Stock of eNote Australia, then such proxy shall
grant eNote the right to vote that number of Seafont's shares of common stock of
eNote Australia such that when aggregated with eNote's shares of common stock of
eNote Australia, eNote shall have the power to vote all of the shares of eNote
Australia owned by eNote and Seafont. Seafont, from time to time for the term of
this Agreement, shall at the request of eNote and without further consideration,
execute and deliver further instruments and take such other action as eNote may
reasonably require to more effectively carry out the intent of this Section 5.6.
ARTICLE VI
JOINT PARTICIPATION IN OPPORTUNITIES
6.1 EXCLUSIVITY.
(a) Commencing on the date of this Agreement and continuing for so long
as this Agreement is in effect and Seafont and eNote shall each have an equity
interest in eNote.com Australia, eNote shall not license any of eNote's
Proprietary Technology to a Competitor for use in the Territory.
(b) Commencing on the date of this Agreement and continuing for so long
as this Agreement is in effect, Seafont and its Affiliates shall not, without
the express written consent of eNote, , engage anywhere in the world in any
activity which is, or participate or invest in, or provide or facilitate the
provision of financing to, or assist (whether as owner, part-owner, shareholder,
member, partner, director, officer, trustee, employee, agent or consultant, or
in any other capacity), any Person other than eNote.com Australia, or eNote (or
any subsidiary or affiliate of eNote), whose business, activities, products or
services are, competitive with the TVemail(TM) System. Without implied
limitation, the forgoing covenant shall include hiring or engaging or attempting
to hire or engage for or on behalf of itself or any such competitor any officer
or employee of eNote or eNote.com Australia or any of its direct and/or indirect
subsidiaries and affiliates, or any former employee of eNote or eNote.com
Australia. Notwithstanding anything herein to the contrary, the Seller may make
passive investments in any enterprise the shares of which are publicly traded if
such investment constitutes less than one percent (1%) of the equity of such
enterprise.
6.2 OTHER ACTIVITIES OF THE PARTIES. Notwithstanding anything to the
contrary contained herein, Seafont acknowledges and agrees that, nothing in this
Agreement shall limit or restrain eNote's activities anywhere outside of the
Territory.
6.3 SEVERABILITY. In the event that the restrictions and obligations
set forth in Section 6.1 are invalid for any reason under applicable law,
Section 6.1 shall be reformed to the give effect to the Parties intent therein
to the fullest extent permitted by applicable law. The invalidity or reformation
of Section 6.1 shall not affect the remainder of this Agreement.
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ARTICLE VII
TECHNOLOGY/SOFTWARE/KNOW-HOW/PATENTS/COPYRIGHTS/TRADEMARKS
7.1 eNOTE LICENSE AGREEMENT.
(a) Annexed hereto as Exhibit C is a draft of a License, Technical
Assistance, Supply and Distribution Agreement (the "License Agreement") by which
eNote, in consideration of the performance by Seafont of the obligations and
agreements of Seafont under this Agreement and the obligations of eNote.com
Australia under that License Agreement, shall, or shall cause a direct or
indirect subsidiary of eNote to, extend to eNote.com Australia the rights,
benefits, privileges and obligations set forth therein. The License Agreement
shall be modified to the extent necessary to protect the rights of eNote in its
property under local laws in the country or countries in which eNote.com
Australia provides services, as determined by eNote in its reasonable
discretion. The Parties hereto agree to negotiate the terms of the License
Agreement and settle upon an executable copy within thirty (30) days of the date
hereof. The License Agreement shall be executed on the Closing Date.
(b) In the event that eNote causes a direct or indirect subsidiary to
enter into the License Agreement, eNote shall execute and deliver its guarantee
to eNote.com Australia with respect to the License Agreement.
7.2 eNOTE'S INITIAL TECHNOLOGY DEVELOPMENT.
(a) eNote shall use its best efforts to provide the same software and
hardware functionality under the License Agreement as its TVemail(TM) System in
the United States, subject to localization.
(b) All payments by eNote Australia due to eNote for Localization Costs
shall be deferred until the Determination Date. Thereafter eNote.com Australia
shall pay eNote an amount equal to eNote's fully burdened costs incurred in
connection with the Localization Costs, as invoiced by eNote monthly or pursuant
to an agreed upon payment schedule. eNote shall use its best efforts in
accordance with this Agreement and the License Agreement to complete all
localization requirements in a diligent manner. Notwithstanding the foregoing,
the Localization Costs incurred by eNote prior to the Determination Date shall
not exceed Two Hundred Fifty Thousand U.S. Dollars Seafont consents in writing
to additional expenditures.
7.3 eNOTE ONGOING DEVELOPMENT.
(a) eNote acknowledges the importance to the Business of access by
eNote.com Australia to ongoing development activities. Accordingly, eNote
agrees, at Seafont's oral or written request, to provide the Managing Director
regular access to the following:
(i) plans for all current and future products used in the
eNote TVemail(TM) product and support of such product provided by eNote, on an
annual basis.
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(ii) functional descriptions, development plans, schedules and
periodic status for products and enhancements thereto under development, as soon
as such materials exist.
(iii) data for products regarding design changes, problem
tracking, correction of errors or bugs and proposals for new products.
(b) eNote agrees to make all reasonable efforts to assure the technical
continuity and compatibility of the TVemail(TM) System and the Business in the
Territory whenever reasonably feasible.
(c) All proposed changes and improvements by eNote shall constitute
confidential information of eNote. Seafont acknowledges that eNote shall have
the right to make public announcements relating to current and future products
and all development plans.
(d) For purposes of technology development and assistance, eNote shall
dedicate such time and priority to the requests of eNote.com Australia as is
proportional to the business traffic generated by eNote.com Australia in
relation to the overall business of eNote and its subsidiaries and affiliates.
(e) eNote.com Australia will be entitled to have a designee attend
material product development meetings held by eNote and participate therein
provided eNote.com Australia covers all costs associated with such attendance.
(f) In accordance with the License Agreement, eNote.com Australia shall
pay eNote for all technological work done for the benefit of eNote.com
Australia, including all Localization Costs.
7.4 TECHNOLOGY DEVELOPMENT BY eNOTE.COM AUSTRALIA. Seafont agrees that
any modification or technological advance, discovery or invention in connection
with the eNote's Proprietary Technology or the TVemail(TM) System shall, whether
authorized or unauthorized by eNote, to the full extent permitted by law, be
owned in full by eNote and in any event eNote shall have the full and exclusive
exploitation rights to such modification or technological advance, discovery or
invention, subject to the terms of the License Agreement. Seafont shall cause
eNote.com Australia to execute such documents of assignment as may be required
to give effect to this section. Nothing in this section shall limit or restrict
the provisions contained in Section 7.6(b) which prohibits any Person or Persons
other than eNote and eNote's duly authorized agents from performing any
technical work or any kind on the TVemail(TM) System or any component thereof.
7.5 TERRITORIAL LIMITATION. The term "Territory" as used herein and
with respect to the License Agreement, shall refer to and shall constitute a
limitation on the geographical area where the Business is physically situated
and the geographical area where the services of eNote.com Australia conducting
the Business are permitted to be offered as determined on the basis of
solicitation, advertising, the location of operations, and the location of
TVemail(TM) subscribers. Seafont and eNote agree that each will cause eNote.com
Australia to refrain from
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the conduct of the Business or the provision of any material service outside of
the Territory at any time.
7.6 DISTRIBUTION AND MARKETING CONTRIBUTIONS TO BE PROVIDED BY SEAFONT;
TECHNICAL ASSISTANCE BY eNOTE.
(a) Seafont will endeavor to define and establish ways and means to
assist eNote.com Australia with marketing, sales and distribution in such manner
as will be negotiated, in good faith, during the term of this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Seafont agrees and acknowledges that any technical changes,
localization, modifications, alterations, enhancements, repairs or servicing of
the TVemail(TM) System, or any component thereof, shall only be made by eNote or
eNote's duly authorized agents, and neither eNote Australia, Seafont or its
Affiliates, nor any other Person shall have the right to make or cause to made
any such changes, modifications, alterations, enhancements, repairs or servicing
without the prior written consent of eNote.
7.7 TRADEMARKS.
(a) eNote presently owns the trademarks and trade names set forth on
Exhibit D (the "Marks"). The Marks will be licensed to eNote.com Australia in
accordance with the terms of the License Agreement to market the Business in the
Territory.
(b) eNote shall have control over the defense of any trademark claim,
including appeals, negotiations and the right to effect a settlement or
compromise thereof, provided that: (i) eNote may not partially settle any
trademark claim without the written consent of Seafont unless such settlement
releases Seafont fully; and (ii) eNote shall promptly provide Seafont with
copies of all pleadings or similar document relating to any trademark claim.
ARTICLE VIII
TERM; TERMINATION
8.1 TERM.
The term of this Agreement shall commence on the date of execution and
delivery of this Agreement (the "Effective Date"), subject only to any approvals
required by the administrative authorities in the Territory. The Agreement shall
expire upon the earlier of: (i) when terminated by mutual agreement of the
Parties; (ii) when terminated by either Party in writing pursuant to Section 8.2
hereof; (iii) when one of the Parties, and its Affiliates, no longer hold any
shares of common stock of eNote.com Australia or (v) the Closing failing to
occur prior to June 15, 2000.
8.2 TERMINATION.
The Party which is not in breach of this Agreement shall have the
right to terminate this Agreement upon the occurrence of the events set forth
below:
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(a) The other Party is in material breach of any material term,
condition or covenant of this Agreement and the breaching Party fails to cure
such breach within thirty (30) calendar days after the receipt of written notice
of such breach; or
(b) An event of bankruptcy occurs with respect to the other Party. For
purposes of the foregoing, an event of bankruptcy with respect to a Party means
any of the following circumstances (or the substantial equivalent under
applicable law in any other country): (a) the commencement by the Party of a
voluntary case under the United States Bankruptcy Code or an equivalent law as
applicable to such Party in Australia, (b) the commencement against the Party of
an involuntary case under the United States Bankruptcy Code or an equivalent law
as applicable to such Party in Australia if the case is not vacated with a
ninety calendar days, (c) the entry of a final order by a court of competent
jurisdiction finding the Party to be bankrupt or insolvent, ordering or
approving its liquidation, reorganization or any modification or alteration of
the rights of its general creditors or assuming custody of or appointing a
receiver or other custodian for all or a substantial part of its property and
such order shall not be vacated or stayed upon appeal or otherwise stayed within
ninety calendar days or (d) the Party making an assignment for the benefit of,
or entering into a composition with, its creditors, or appointing or consenting
to the appointment of a receiver or other custodian for all or a substantial
part of its property.
(c) Termination under subsection (a) shall be effective upon delivery
of notice of the expiration of the cure period and termination under subsection
(b) will become effective immediately upon written notice of termination at any
time after the occurrence of the event of bankruptcy.
8.3 EFFECT OF TERMINATION. If, upon termination pursuant to notice
provided under Section 8.2 hereof, the Parties continue to hold joint interests
in eNote.com Australia, the provisions of Section 9.3 of this Agreement shall
apply as if Deadlock Notice had been given, and the provisions of this Agreement
shall remain in force until eNote.com Australia ceases to be jointly owned. As
soon as the Parties cease to hold joint interests in eNote.com Australia, this
Agreement, with the exception of Sections 2.2, 7.3(c), 7.4, 7.6(b) and 12.1,
shall be terminated.
8.4 GOVERNMENTAL APPROVAL. Promptly upon the execution hereof, the
Parties shall inform such administrative authorities in the Territory as may be
required under national anti-trust laws, and notify this Agreement under the
applicable provisions of national laws and shall make such notification as
promptly as practicable following the Effective Date.
8.5 LICENSE AGREEMENT TERMINATION. eNote shall have the unqualified
right to terminate the License Agreement, immediately, at any time if this
Agreement is terminated by eNote pursuant to Section 8.2(a).
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ARTICLE IX
TRANSFERS
9.1 LIMITATION ON TRANSFER. Except as expressly permitted in this
Article IX, neither eNote nor Seafont shall, without the prior written approval
of the other Party (which may be withheld in the sole discretion of such Party),
Transfer its interest in eNote.com Australia or assign its rights or obligations
under this Agreement in any manner whatsoever and any purported Transfer or
assignment in contravention of this Section 9.1 shall be void.
9.2 PERMITTED TRANSFERS AND ASSIGNMENTS.
(a) Notwithstanding Section 9.1, either Party may, at any time upon
compliance with Section 9.2(b), Transfer all or part of its interest in
eNote.com Australia to an Affiliate of such Party or assign its rights and
obligations under this Agreement to an Affiliate, without the prior written
approval of the other Party. Notwithstanding anything to the contrary contained
in this Agreement, the interests of Seafont and its Affiliates in eNote.com
Australia shall be held within an entity which is not an Affiliate with any
Competitor.
(b) Any Transfer by a Party of an interest in eNote.com Australia or
assignment of the rights and obligations as permitted by Section 9.2(a) shall be
effective only upon the execution and delivery by the transferor of an
appropriate irrevocable and unconditional guarantee to continue to be bound by
the provisions of this Agreement and the constituent documents of eNote.com
Australia together with instruments of assumption under which the Affiliate
agrees to be bound by this Agreement and the constituent documents of eNote.com
Australia. An assignment or Transfer shall not release the transferor of any of
its obligations hereunder or under any constituent document relating to
eNote.com Australia.
(c) Notwithstanding anything to the contrary contained in the
Agreement, eNote may Transfer this Agreement and all of its rights and
obligations hereunder to or all of its equity interests in eNote.com Australia
to any Person acquiring all or substantially all of the business of eNote
whether by merger, sale of assets or otherwise, provided, however, that any such
Person agrees in writing to be bound by the terms and conditions of this
Agreement. Upon any such transfer, eNote shall be released from any further
obligation under this Agreement.
9.3 DEADLOCK. Within thirty (30) days after the Deadlock Notice,
eNote.com Australia shall have determined the Appraised Value of eNote.com
Australia as set forth in Section 9.5 (the "Deadlock Valuation"). Within ten
(10) days after the valuation results have been distributed to each of the
Parties, Seafont shall deliver to eNote in writing its determination of a fair
purchase price for 50% of the equity interest in eNote (the "Deadlock Price")
and eNote shall have (i) a put option (the "Put Option") to sell its entire
equity interest in eNote.com Australia to Seafont for the Deadlock Price and
(ii) a call option (the "Call Option") to acquire Seafont's entire equity
interest in eNote.com Australia for the Deadlock Price. eNote shall have fifteen
(15) Business Days from receipt of the Deadlock Price in which to exercise
either the Put Option or the Call Option at its sole discretion. On the
execution date of either the Call Option or the Put Option, the acquiring Party
shall pay to the selling Party 25% of the Deadlock Price and shall deliver a
three-year promissory note for a principal amount equal to 75% of the
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Deadlock Price with interest accruing annually at a rate of Prime plus 1.5%,
with interest payable monthly (the payee shall be entitled to prepay such note
at any time without penalty). Timely performance of such note shall be secured
by a pledge of all the shares of eNote.com Australia held by the acquiring Party
after the acquisition. The acquiring party agrees to execute and deliver such
note, pledge agreement to the selling party and take all other actions and
execute other instruments reasonably necessary to validly effect the provisions
on and intent of this Section 9.3(a). At any time prior to the exercise of the
Call Option or Put Option the parties may agree that they are no longer in
deadlocked and subject to this provision
9.4 RIGHT OF FIRST REFUSAL.
(a) At any time after which a governmental restraint on sale is no
longer enforceable, either Party (the "Seller") intends to sell, assign or
transfer all, but not less than all, of such Party's equity ownership interest
in eNote.com Australia for cash, the Seller shall, prior to any such transfer,
give written notice (the "Seller's Notice") of such intention to the other Party
(the "Offeree"). The Seller's Notice shall include the name of the proposed
transferee, the proposed purchase price for its equity ownership interest in
eNote.com Australia (the "Offered Interest"), the terms of payment of such
purchase price and all other matters relating to such sale and shall be
accompanied by a copy of a binding written agreement of the proposed transferee
to purchase the Offered Interest from the Seller. The Seller's Notice shall
constitute a binding offer by the Seller to sell to the Offeree, or to any
Affiliate of the Offeree designated by the Offeree, the Offered Interest at the
monetary price designated in the Seller's Notice and as payable as provided in
Section 9.4(b). Not later than sixty (60) days after receipt of the Seller's
Notice, the Offeree may elect to purchase the Offered Interest by written notice
stating that the Offeree has accepted the offer contained in the Seller's
Notice, which notice shall fix a time, location and date for the closing of such
purchase, which date shall be not less than fifteen (15) nor more than sixty
(60) days after the delivery of such written, or on such other date as may be
mutually agreed by the Parties.
(b) The place for the closing of any purchase and sale described in
Section 9.5(a) shall be the principal office of eNote.com Australia or at such
other place as the Seller and the Offeree shall agree. At the closing, the
Seller shall accept payment on the terms offered by the proposed transferee
named in the Seller's Notice, provided that the Offeree shall not be required to
meet any non-monetary terms of the proposed transfer, including, without
limitation, delivery of other securities in exchange for the Offered Interest
proposed to be sold. At the closing, the Seller shall execute and deliver to the
Offeree such documents, records, and other instruments of transfer, in form and
substance reasonably satisfactory to the Offeree and its counsel, necessary: (i)
to evidence the Seller's ownership of the Offered Interest in such eNote.com
Australia; and (ii) effectively to transfer the Offered Interests to the
Offeree, free and clear of any liens, charges or other encumbrances, and the
Offeree shall deliver the purchase price for each such Offered Interest, in
immediately available funds. At the closing, the Offeree shall cause the Seller
to be released from all guarantees given in respect of eNote.com Australia (or
if such release is not possible, the Offeree shall execute and deliver an
indemnity agreement to the Seller in customary form with respect to such
guarantees) and eNote.com Australia shall pay and discharge all indebtedness to
the Seller. The Seller shall deliver or execute at the closing any documents,
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records or other instruments of transfer reasonably requested by the Offeree and
necessary to evidence the Offered Interest or effectively to transfer an Offered
Interest.
(c) If the Offeree fails to accept the offer contained in the Seller's
Notice, then the Seller shall be free to sell all, but not less than all, of the
Offered Interest to the designated transferee at a price and on terms no less
favorable to the Seller than described in the Seller's Notice, provided that
such sale is consummated within ninety (90) days after the giving of the
Seller's Notice to the Offeree. As a condition precedent to the effectiveness of
a transfer pursuant to this Section 9.4(c), the proposed transferee(s) shall
agree in writing prior to such transfer to become a party to and bound by the
provisions of this Agreement, and shall thereafter be permitted to transfer such
Ownership Interest only in accordance with this Agreement.
(d) Notwithstanding anything to the contrary contained in this Section
9.4, in no event shall Seafont or its Affiliates be permitted to transfer its
interest in eNote.com Australia to any Competitor.
9.5 APPRAISED VALUE.
(a) For purposes of this Agreement, the term "Appraised Value" for
eNote.com Australia shall mean the fair market value established by an
independent appraiser pursuant to the following procedures:
(i) during the thirty (30) days following the delivery of a
notice requiring valuation, the Parties shall attempt to select an independent
appraiser to determine the fair market value of eNote.com Australia in existence
on the date of such notice. In the event that the Parties are unable to agree on
the selection of an independent appraiser, they shall give notice to eNote.com
Australia's independent accounts, and request the appointment of an independent
appraiser;
(ii) the independent appraiser appointed pursuant to this
Section 9.5 shall, within sixty (60) days after its appointment, deliver to both
Parties a written appraisal report (the "Appraisal Report") which sets forth the
fair market value of eNote.com Australia;
(iii) the determination of the independent appraiser as set
forth in the Appraisal Report shall be final and shall not be subject to appeal
or redetermination;
(iv) for purposes of this Agreement, an independent appraiser
shall mean an international investment banking firm which is not at that time
rendering services to one of the Parties or any Affiliate of either Party and
which has not rendered services to one of the Parties for the preceding two (2)
years and which does not have a commitment to render services in the future to
one of such Parties or any such Affiliates;
(v) the fees and expenses incurred by the independent
appraiser, if any, shall be paid equally by the Parties; and
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(vi) the Parties will cooperate with the independent appraiser
and provide all information reasonably requested in order to allow such
appraiser to prepare the Appraisal Report.
(b) Except as otherwise set forth in this Agreement, each Party shall
remain liable for its existing obligations with respect to eNote.com Australia
(including, without limitation, any obligations to make funding contributions)
until the closing of any such sale.
9.7 INITIAL PUBLIC OFFERING.
(a) Subject to the consent of both Parties, eNote.com Australia shall
be permitted to register its securities with those governmental authorities
deemed appropriate by the Australian Board and the Australian Board may issue
that number of securities of eNote.com Australia to the public in an
underwritten public offering (an "IPO") pursuant to any such registration and
cause such securities to be listed on those exchanges that the Australian Board
deems appropriate.
(b.) Upon the consummation of an IPO, the transfer restrictions on each
Party's interest in eNote.com Australia contained in this Section 9 shall
terminate and the Parties shall be permitted transfer their interests in
eNote.com Australia, subject to compliance with all applicable securities laws.
9.8 PRIVATE PLACEMENT.
(a) Subject to the consent of both Parties, eNote.com Australia shall
be permitted to develop a private placement memorandum and issue equity
securities to third parties deemed appropriate by the Australian Board provided
that any such equity issuance shall be in accordance with any applicable
securities laws.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1 CERTAIN REPRESENTATIONS AND WARRANTIES OF SEAFONT. Seafont makes
the following representations and warranties for the benefit of eNote and
eNote.com Australia, each of which shall survive the execution and delivery of
this Agreement:
(a) Organization and Standing. Seafont is a duly organized and validly
existing corporation in good standing under the laws of Australia.
(b) Corporate Action. Seafont has all necessary corporate power and
has taken all corporate action required to authorize the execution and delivery
of this Agreement and does not require the consent of any third party which has
not been obtained.
10.2 CERTAIN REPRESENTATIONS AND WARRANTIES OF eNOTE. eNote makes the
following representations and warranties for the benefit of Seafont and
eNote.com Australia, each of which shall survive the execution and delivery of
this Agreement:
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(a) Organization and Standing. eNote is a duly organized and validly
existing corporation in good standing under the laws of Delaware.
(b) Corporate Action. eNote has all necessary corporate power and has
taken all corporate action required to authorize the execution and delivery of
this Agreement and does not require the consent of any third party which has not
been obtained.
ARTICLE XI
CLOSING
11.1 CLOSING. Provided that the closing conditions set forth in Section
11.3 have been satisfied, on ___________, or on such other date as agreed upon
by the Parties (the "Closing Date"), the commencement of the Business shall
begin (the "Closing").
11.2 CLOSING DELIVERIES. On the Closing Date and at the Closing:
(a) eNote and eNote.com Australia shall execute and deliver the
executed License Agreement.
(b) eNote and Seafont shall each contribute $250,000 to eNote.com
Australia in accordance with Section 4.1.
(c) eNote.com Australia shall issue certificates to each of Seafont and
eNote representing 50% of the issued and outstanding of Common Stock of
eNote.com Australia.
(d) Seafont shall execute and deliver the executed Proxy to eNote.
(e) Seafont shall deliver an opinion of counsel to eNote which opines
to the enforceability of the Proxy under Australian law.
11.3 CLOSING CONDITIONS. Prior to the Closing Date the following
conditions shall be satisfied:
(a) eNote.com Australia shall be a validly formed corporation under the
laws of Australia in accordance with the terms of this Agreement.
(b) The Business Plan shall be prepared and approved by each of the
Parties.
11.4 SURVIVAL. Except as explicitly set forth in this Agreement, the
Closing shall not terminate any provision of this a Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 CONFIDENTIAL INFORMATION.
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(a) At all times following the date hereof, each Party shall keep
strictly confidential and not disclose, use, divulge, publish or otherwise
reveal, directly or through another Person, (A) any confidential, non-public
information of the other Party or its Affiliates which was disclosed pursuant to
the License Agreement, or (B) any confidential, non-public information: (i)
relating to the business of the other Party and its Affiliates and obtained as a
result of the preparation and negotiation of this Agreement, the performance by
the Parties of their obligations hereunder, or the joint conduct by the Parties
of activities pursuant to this Agreement; or (ii) relating to the business of
eNote.com Australia, including, but not limited to, documents and/or information
regarding customers, costs, profits, markets, sales, products, product
development, key personnel, pricing policies, operational methods, technology,
know-how, technical processes, formulae, or plans for future development of or
concerning eNote.com Australia (collectively, "Confidential Information"),
except as may be necessary for the directors, employees or agents of its and its
Affiliates to perform their respective obligations under this Agreement or in
connection with filings with Governmental Bodies under Section 8.4 hereof or as
otherwise required under applicable law, including, in the case of eNote, the
rules and regulations promulgated under the Securities Exchange Act of 1934
provided that neither Party shall make any disclosure required under applicable
law before providing the other Party with a reasonable opportunity to seek a
protective order. Each Party shall cause any Persons receiving information in
accordance with the terms hereof to retain it in confidence. Upon termination of
this Agreement, each Party shall either destroy or return to the other all
memoranda, notes, records, reports and other documents (including all copies
thereof) relating to the Confidential Information of the other Party and
eNote.com Australia which such Party may then possess or have under its control
(except information owned by eNote.com Australia which such Party continues to
own after such termination). Notwithstanding the foregoing, the following shall
not constitute Confidential Information: (w) information which was already
otherwise known to the recipient at the time of its receipt in connection with
this Agreement, (x) information which is or becomes freely and generally
available to the public through no wrongful act of the recipient, (y)
information which is rightfully received by the recipient from a third party
legally entitled to disclose such information without breach by the recipient of
this Agreement or (z) in connection with legal action initiated by a Party to
enforce rights under this Agreement, provided that adequate safeguards (such as
protective orders) are maintained.
12.2 GOVERNING LAW/ARBITRATION.
(a) This Agreement, and the rights and liabilities of the Parties
hereunder, shall be governed by the substantive laws of Australia
(b) The Parties shall attempt to resolve any dispute hereunder through
an alternative dispute mechanism such as arbitration of mediation before
commencing litigation.
12.3 PRESS RELEASE. Except as may be required by law, the execution and
content of this Agreement shall be kept in confidence by the Parties until and
subject to the publication of a press release relating thereto, the content and
timing of which shall be jointly agreed upon.
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12.4 ENTIRE AGREEMENT. Except for the agreements specifically referred
to in this Agreement, this Agreement constitutes the entire agreement among the
Parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. No amendment, supplement, modification,
waiver or termination of this Agreement shall be implied or be binding unless
executed in writing by the Party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall waiver constitute a
continuing waiver unless otherwise expressly therein provided.
12.5 ASSIGNMENT. All of the terms and provisions of this Agreement by
or for the benefit of the Parties shall be binding upon and inure to the benefit
of their successors, and permitted assigns. The rights and obligations provided
by this Agreement may not be assigned, except in accordance with Sections 9.2
and 9.4. Except as expressly provided herein, nothing herein is intended to
confer upon any Person, other than the Parties and their permitted successors,
heirs and permitted assigns as provided herein, any rights or remedies under or
by reason of this Agreement. For purposes of this Section 12.5, Assignment shall
be deemed to include any change of control of Seafont as a result of a merger or
a stock sale which results in the shareholders of Seafont immediately prior to
such merger or stock sale, holding less than 50% of the issued and capital stock
of Seafont immediately after such merger or stock sale.
12.6 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given
(except as may otherwise be specifically provided herein to the contrary): (i)
if delivered by hand to the Party to whom said notice or other communication
shall have been directed, upon such receipt; (ii) if mailed by certified or
registered mail with postage prepaid, return receipt requested, on the third
business day after mailing; (iii) if transmitted by facsimile, on the date of
transmission, with such transmittal followed by delivery of a confirmation copy
via one of the other methods set out herein or (iv) if mailed via
internationally know overnight courier such as Federal Express on the second
business day after mailing. All notices shall be addressed as set forth below or
to any other address such Party shall notify to the other Party in accordance
with this Section:
(a) If to Seafont to: Level 2, 31 Bligh Street
Sydney, Australia
with a copy to: Chris Coudounaris
Keating Associates
Sydney, Australia
(b) If to eNote to: 185 Allen Brook Lane
Williston, VT 05495
Attn: President
Facsimile: 802 288 9000
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with a copy to: H. Kenneth Merritt, Jr., Esq.
Merritt & Merritt
30 Main Street, Suite 330
P.O. Box 5839
Burlington, VT 05402
12.7 COUNTERPARTS. This Agreement may be executed and delivered in one
or more counterparts, each of which shall be deemed to be an original, and all
of which when taken together shall constitute one and the same instrument and
shall become effective when copies hereof, bearing the signatures of each of the
Parties, shall have been received by Seafont and eNote.
12.8 EXPENSES. The Parties agree that, except as otherwise set forth in
this Agreement, eNote.com Australia shall pay all of the legal and other fees
and expenses relating to its formation, including, without limitation, the
filing of certificates and registration fees. Each Party shall pay all of its
own legal and other fees and expenses incurred in connection with this
Agreement, the transactions contemplated hereby, and the negotiations leading to
the same.
12.9 FURTHER ASSURANCES. Each Party shall perform all other acts and
execute and deliver all other documents as may be necessary or appropriate to
carry out the purposes and intent of this Agreement, as reasonably requested by
the other Party.
12.10 SEVERABILITY. If any provision of this Agreement shall be held to
be incomplete, illegal, invalid or unenforceable, or if it becomes necessary to
amend the Agreement in order to comply with an administrative or governmental
order, the remaining provisions of the Agreement shall stay in force and the
unenforceable, void or incomplete provision shall be replaced by a valid
provision or amendment reflecting the economic and business objectives of the
original Agreement as best as possible, provided however, that if any
replacement provision or amendment would lead to a change in the fundamental
economic and business terms of this Agreement, each Party shall have the right
to terminate this Agreement in accordance with Section 8.1 of this Agreement.
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IN WITNESS WHEREOF, the Parties have executed this Joint Venture
Agreement as of the date and year first above written.
SEAFONT GROUP HOLDINGS PTY. LTD.
By: \s\ ANDREW KELLY
--------------------------------------
Name: Andrew Kelly
Title: Chief Executive Officer
ENOTE.COM, INC.
By: \s\ JOHN VARSAMES
--------------------------------------
Name: John Varsames
Title: President and Chief Executive Officer
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EXHIBIT A
TERRITORY
1. Australia
2. New Zealand
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EXHIBIT B
INITIAL DIRECTORS OF ENOTE.COM AUSTRALIA
JOHN VARSAMES
MIKE GRENNAN
ANDREW KELLY
[OTHER NOMINEE OF SEAFONT]
OTHER INDEPENDENT DIRECTOR]
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EXHIBIT C
FORM OF LICENSE AGREEMENT
LICENSE, TECHNICAL ASSISTANCE, SUPPLY AND DISTRIBUTION
AGREEMENT
This Agreement dated as of _____ ___, 2000 (the "Agreement"),
by and between eNote.com Australia, a corporation incorporated under the laws of
Australia with a principal address at ____________________________________ (the
"Licensee"), eNote.com Inc., a corporation incorporated under the laws of the
State of Delaware, having its principal office at 185 Allen Brook Lane,
Williston, Vermont 04595, USA ("eNote") and, solely as to Articles 2, 4, 5, 6
and 7, Seafont Pty. Ltd., a corporation incorporated under the laws of Australia
with a principal address at Level 2, 31 Bligh Street Sydney, Australia
("Seafont").
W I T N E S S E T H:
WHEREAS, eNote has designed, developed and is marketing in the
United States an Internet appliance including a wireless keyboard and set-top
box (the "Client") to permit retail end-users to access via a telephone line and
view via a television e-mail and select Internet web pages ("TVemail(TM)").
WHEREAS, Seafont and eNote are parties to Joint Venture Agreement
dated as of ______ __,2000, providing for the formation of Licensee and the
commercialization of TVemail(TM) in the Territory (the "Joint Venture
Agreement").
WHEREAS, Licensee and its Affiliates (as such term is defined
in the Joint Venture Agreement), including, but not limited to Kelley Group
Holdings Pty. Ltd., control a large number of distribution channels and retail
locations selling electronic equipment within the Territory as defined on
Exhibit A.
WHEREAS, eNote has designed, engineered and developed a system
of software and hardware to implement TVemail(TM). This system is comprised of
the TVemail(TM) appliances, including the wireless keyboard and set-top box,
eNote's proprietary software (including, but not limited to, all Object Code and
Source Code as defined in the Joint Venture Agreement in whatever form), eNote's
proprietary client/server architecture and database (the "Backbone"), together
with all new versions, upgrades, alterations, localizations and other
modifications and improvements to the TVemail(TM) and Backbone and any component
thereof, and instructions and documentation provided as a unit therewith
(collectively, the "TVemail System").
WHEREAS, eNote is the owner of rights to registered and
unregistered service marks and trademarks (the "Marks") as depicted on Exhibit
B.
WHEREAS, eNote is willing, in accordance with the terms and
conditions of this Agreement, to permit Licensee to use and display the Marks in
connection with the marketing and sale of TVemail(TM) to retail end-users in the
Territory.
WHEREAS, eNote and Licensee desire to enter into a relationship and
this Agreement to provide certain technological assistance from eNote to
Licensee.
WHEREAS, eNote and Licensee desire to provide for the
exclusive distribution, marketing and sale by Licensee of a localized version of
TVemail(TM) and access to the Backbone and the TVemail System to retaIl
end-users in the Territory .
NOW THEREFORE, the parties agree as follows:
ARTICLE 1
1.1 GRANT OF LICENSE
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(a) eNote hereby grants to Licensee, subject to the terms and
conditions of this Agreement, the exclusive, non-transferable license and right
to use the Marks (i) solely within the Territory and (ii) solely on and in
connection with the marketing, sale and distribution of TVemail(TM) products,
including any modifications and upgrades thereto, and in connection with the
marketing, sale and distribution of the services provided in association
therewith, and the documentation sold as a unit therewith. Nothing in this
Agreement shall be construed to limit the right of eNote to grant other
exclusive or non-exclusive licenses to third parties outside of the Territory.
Nothing in this Agreement shall be construed to prohibit eNote from licensing
third parties to manufacture or repair TVemail(TM) productS, PROVIDED that such
license shall prohibit the licenseE from sales of TVemail(TM) products and
services (apart from manufacturing and repair services) in the Territory.
(b) Licensee shall not use the Marks in connection with sales or offers
to sell Products or Services outside the Territory without the prior written
consent of eNote in each instance, which consent may be withheld by eNote in its
sole discretion. The Parties acknowledge that the web site(s) operated by
Licensee are distributed worldwide, and use of the Marks on or in connection
therewith shall not operate as a violation of this Agreement so long as such
sites reflect that eNote's Products and Services may be sold and distributed by
Licensee only in the Territory.
(c) Licensee shall not effect registration or recordation of any Mark
in the Territory in its own name. eNote shall use best efforts to effect
registration of the Marks in the Territory in its own name and at its own
expense. Licensee shall co-operate with e-Note to make such recordations as may
be necessary or proper to effect recordation of Licensee as an authorized user
and licensee of the Marks in the Territory. Any such recordation shall be
effected at Licensee's expense.
(d) Upon the expiration or termination of this Agreement for any
reason, Licensee's rights in and to use of the Marks shall immediately cease.
Licensee and eNote agree that any recordation shall be cancelled. Licensee shall
at any time during or after termination of this Agreement, at no further
compensation but no expense to Licensee, execute any document as eNote may
request from time to time to ensure that all right, title and interest in the
Marks resides and vests exclusively in eNote its successors and assigns. This
provision shall survive any expiration or termination of this Agreement for any
reason.
(e) eNote shall retain any and all rights in and to the Marks,
including the goodwill represented thereby, not expressly granted by this
Agreement. This provision shall survive any expiration or termination of this
Agreement for any reason.
(f) Licensee acknowledges eNote's right, title and interest in and to
the Marks and eNote's exclusive right to use and license the use of the Marks,
and agrees not to claim title to any of the Marks or any right to use of any
Mark except as specifically provided in this Agreement. Licensee shall not
contest or deny the validity or enforceability of any Mark or oppose or seek to
cancel any registration or recordation of any Mark by eNote or any licensee of
eNote in any jurisdiction within or without the Territory, nor aid nor abet any
third party in doing so, either during or after the term of this Agreement.
Licensee shall not use any mark which in the reasonable judgment of eNote is
confusingly similar to, deceptive or misleading with respect to, or dilutes, or
in any way damages the Marks, and shall, at eNote's request, cancel and abandon
use of any such marks. However, during the term of this Agreement, use by
Licensee of the corporate name "eNote.com Australia" shall not be a breach of
this Agreement. This provision shall survive any expiration or termination of
this Agreement for any reason.
(g) Any and all goodwill in the Marks arising from Licensee's use of
the Marks shall inure to the exclusive benefit of eNote, and Licensee shall not
during the term of this Agreement or thereafter assert any claim to such
goodwill. Licensee shall not take any action detrimental to such goodwill. This
provision shall survive any expiration or termination of this Agreement for any
reason.
1.2 QUALITY CONTROL
(a) Licensee shall not, without the prior written consent of eNote,
alter or modify, nor permit any third party to alter or modify, the Marks as
same may appear on any TVemail(TM) product, packaging or the documentation
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provided in connection therewith, or in electronic form in association with the
services provided in association with TVemail(TM).
(b) Licensee shall use the Marks and conduct the merchandising and sale
of TVemail(TM) in a commercially appropriate manner, consistent with and
enhancing the goodwill of eNote, and in conformity with local cultural norms and
regulatory requirements. Licensee shall inform eNote of any changes to eNote
documentation or merchandising materials necessary to conform to local cultural
or legal requirements. Licensee shall comply at all times at its sole expense
with all applicable laws and regulations pertaining to the promotion,
merchandising, distribution and sale of TVemail(TM) products and services. The
Marks shall be used with notices or legends with respect to eNote's interest in
the Marks as may be applicable under local trademark laws or as reasonably
requested by eNote.
(c) Licensee shall not use the Marks, nor permit any third party to use
the Marks, in association with any other name or mark without the prior written
consent of eNote in each instance.
(d) Licensee may use the Marks on or in connection with any marketing
or merchandising materials in any media developed by Licensee only with the
prior written consent of eNote in each instance, provided that such consent
shall not be withheld unreasonably. All such materials shall be consistent with
the then-current quality standards and corporate positioning of TVemail(TM) as
same shall be communicated to Licensee from time to time. Specimens shall be
provided to such eNote employees as eNote may designate from time to time. eNote
shall review any such materials in a timely basis, and, in the event of
rejection of such materials, provide instructions to Licensee as to how the
materials may be modified to comply with then-current standards. Any materials
not rejected within ten (10) business days of submission shall be deemed
accepted. Licensee shall use the Marks in connection with such materials only in
the form and media as approved by eNote.
(e) If at any time eNote determines that any use of any Mark does not
confirm to standards as provided in this Agreement, eNote shall inform Licensee
of such nonconformity. Provided Licensee is not then in default of any other
provision of this Agreement or any other Agreement between the parties, Licensee
may use the materials in the non-conforming form, but shall make any changes
mandated by eNote in any subsequent materials run, PROVIDED HOWEVER, that
non-conforming uses in any electronic media shall be corrected as soon as
reasonably practicable.
1.3 BEST EFFORTS
Licensee shall use best efforts to promote, distribute and sell
TVemail(TM) in the Territory so as to maintain and enhance the goodwill of the
Marks.
1.4 INFRINGEMENT
(a) eNote warrants that it is the owner of the Marks listed on Exhibit
B or licenses same from others and is authorized to license such Marks as
provided in this Agreement. eNote may from time to time adopt and use other
marks which shall be added to Exhibit B.
(b) eNote shall have the sole right, at its expense, to defend,
compromise and settle any claim or action brought against eNote or Licensee
alleging that any Mark infringes on the intellectual property rights of any
third party, PROVIDED that eNote shall indemnify and hold harmless Licensee from
and against any monetary damage resulting to Licensee arising out of or in
connection with such claim or action provided that Licensee shall give eNote
immediate notice of any such claim or action, and is given reasonable assistance
and sole authority to settle any such claims or actions. In the defense or
settlement of such claims, eNote shall in its sole discretion either: obtain for
the Licensee the right to use any trademark or replace or modify the trademark
so that it is non-infringing and obtain registrations and/or recordations of the
new mark(s) as otherwise provided in this Agreement. Licensee shall immediately
upon request of eNote cease and desist from use of any Mark alleged to infringe
rights of any third party. Licensee shall give eNote prompt notice of any
infringement of the Marks in the Territory, and reasonable assistance in
resolution of any dispute with regard thereto.
1.5 SPECIFIC PERFORMANCE
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In addition to any other remedies available to eNote with respect to a
breach by Licensee of its obligations pursuant to this Article 1, eNote shall
have the right to specific performance of any Licensee obligation hereunder, and
injunctive relief to prevent any breach or threatened breach of Licensee's
obligations hereunder without proof of irreparable harm or the posting of a
bond. This provision shall survive expiration or termination of this Agreement.
ARTICLE 2
TECHNICAL ASSISTANCE
2.1 TECHNICAL MODIFICATIONS
(a) The parties recognize that technical modifications may be required
to exploit the TVemail(TM) System in the Territory. eNote agrees to provide such
technical assistance in accordance with the terms and requirements of the Joint
Venture Agreement until the Determination Date as defined therein. eNote shall
perform all work associated with modifications, upgrades, and adaptations to the
TVemail(TM) System and any localized version thereof and Licensee shall have no
right or authority to alter or modify the TVemail(TM) System or any component
thereof, including, but not limited to, any changes or modifications
necessitated by power supply, modem approval or telephony interface.
(b) eNote agrees to use best efforts to assist Licensee and provide
reasonable consulting services to Licensee with respect to engineering and
exploitation of the Technology in the Territory at the expense of Licensee on a
time and materials basis and such other terms and conditions as eNote may
provide, and Licensee shall approve, from time to time, provided that such
assistance shall be compatible with eNote's development schedules as may be in
effect from time to time, all parties recognizing the technological limitations
potentially inherent in localization. eNote shall at all times during the term
of this Agreement consider in good faith Licensee's suggestions and requests
with regard to exploitation of the Technology in the Territory.
2.2 NEW VERSIONS OF THE TVeMAIL(TM) SYSTEM
eNote shall use best efforts to provide Licensee with any corrected,
modified or updated hardware and software associated with the TVemail(TM) System
in a locally compatible version upon release and modification to meet local
requirements, subject to regulatory approvals and inherent localization
limitations, as further provided by the parties in accordance with a development
schedule negotiated in good faith by eNote and Licensee from time to time, which
schedule shall at a minimum include payment to eNote for reasonable development
costs associated with local modifications, the time frame for implementation and
testing of the hardware and software, be compatible with eNote's development
schedules, and such other terms and conditions to which eNote and Licensee may
agree.
2.3 OWNERSHIP OF TECHNOLOGY
(a) All TVemail(TM), Tvemail(TM) System and Backbone hardware and
software, including source code and object code in any form, and including any
and all improvements, alterations, modifications, adaptations and enhancements
and any documentation provided therewith (the "Technology") shall be the sole
and exclusive property of eNote, and no patent or copyright license or ownership
interest therein shall be deemed granted by this Agreement. Licensee agrees that
it will not copy, reproduce, alter, modify, reverse engineer, adapt, enhance or
make improvements to the Technology. This provision shall survive expiration or
termination of this Agreement.
(b) Licensee agrees that it will not challenge the ownership interest
of eNote in any patent, copyright or other proprietary interest, existing or
later issued, registered or unregistered, in the Technology during the term of
this Agreement or thereafter. Nothing contained in this Agreement shall be
construed as conferring by implication, estoppel or otherwise any license or
right in any Technology patent or copyright whether or not the exercise of any
right granted by this Agreement necessarily employs an invention or any existing
or later issued patent or copyright interest. This provision shall survive
expiration or termination of this Agreement.
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(c) Licensee agrees during the term of this Agreement and thereafter to
execute any document on request of eNote, at no further compensation but no
expense to Seafont or Licensee, to vest exclusive ownership rights in the
Technology in eNote, its successors and assigns. This provision shall survive
expiration or termination of this Agreement.
(d) In addition to any other remedies available to eNote with respect to
a breach by Licensee of its obligations pursuant to this Section 2.3, eNote
shall have the right to specific performance of any Licensee and/or Seafont
obligation hereunder, and injunctive relief to prevent any breach or threatened
breach of Licensee's and/or Seafont obligations hereunder without proof of
irreparable harm or the posting of a bond. This provision shall survive
expiration or termination of this Agreement.
ARTICLE 3
SUPPLY AND DISTRIBUTION
3.1 GRANT OF DISTRIBUTION RIGHTS IN THE TERRITORY.
(a) Subject to the terms and conditions of this Agreement, eNote
appoints Licensee as its exclusive distributor in the Territory of TVemail(TM)
products, including any modifications and upgrades as the parties may agree in
accordance with Article 2 above (the "Products"), and the services provided in
association therewith, which shall include electronic access and connection to
the TVemail (TM) System through standardized procedures established by eNote to
the Backbone as designated by eNote (the "Services").
(b) Licensee shall conduct its business in the purchase and resale of
Products and Services as a principal for its own account solely at its own risk
and expense.
(c) Licensee shall sell Products and Services only in accordance with
the specifications and installation guidelines as established by eNote and
communicated to Licensee from time to time.
(d) The benefits and obligations of this Agreement are personal to
Licensee. Licensee shall not sell, transfer or assign its rights and obligations
pursuant to the grant of rights provided in this Section 3, by operation of law
or otherwise, nor appoint sub-Licensees, without the prior written consent of
eNote in each instance, which consent may be withheld in by eNote in its sole
discretion.
(e) Except as otherwise expressly agreed by eNote in advance, this
Agreement shall control all aspects of the dealings between eNote and Licensee
with respect to the sale and distribution in the Territory of the Products and
Services and any additional or different terms in any Licensee order are hereby
rejected.
3.2 SUPPLY OBLIGATIONS
(a) eNote will sell and ship Products, as available, to Licensee to
such location or locations in the Territory as the Licensee may designate in a
commercially reasonable manner for resale by Licensee.
(b) All orders are subject to acceptance.
(c) eNote will employ commercially reasonable efforts to fill
Licensee's orders promptly upon acceptance, but reserves the right to allocate
available Product inventories among distributors at its discretion.
(d) eNote shall co-operate and work with Licensee to enable prompt and
efficient installation of Product and Service availability. eNote shall provide
to retail end-users, in accordance with the terms of this Agreement, access to
the Backbone and TVemail(TM) System.
(e) eNote shall pack properly all items for shipment. Shipping dates
are estimates, and eNote shall not be liable for loss or damage due to delay
resulting from
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any cause beyond its reasonable control. The shipper will be
selected by eNote unless Licensee requests a reasonable alternative.
3.3 PRICES, COSTS, PAYMENTS
(a) All sales of Products to Licensee shall be made pursuant to this
Agreement at such then current landed wholesale Product prices as may be
communicated to Licensee from time to time, plus five (5%) percent. In addition,
Licensee shall pay to eNote royalties on various Services offered through the
TVemail(TM) system, depending on which Services are offered by Licensee and
selected by the consumer. Base wholesale Product prices, fees and royalties
shall be on terms no less favorable than those offered to other Licensees and
resellers of similar Product volumes in other Territories. Product payments
shall be net thirty (30) days from date of invoice therefore. Royalty fees shall
accrue on sales of Services by Licensee, and shall be payable monthly commencing
with the month following commencement of the Service to each customer.
(b) From time to time eNote may upgrade and add or offer additional
features to Products and Services. eNote will use commercially reasonable
efforts to give advance notice to Licensee of price changes and Product
upgrades, fees and royalties therefore, provided that eNote shall not be
required to offer any particular Product or Service except as otherwise provided
in this Agreement.
(c) Product prices shall be FOB eNote's manufacturing facility or point
of shipment. Risk of loss shall pass to and be borne by Licensee on delivery by
eNote to the common carrier. Licensee shall pay all shipping, freight and
handling costs, insurance, demurrage, duties, sales excise and other taxes or
charges as may be levied on eNote on the sale or use of the Product and Services
in the Territory (other than taxes imposed on eNote's income therefrom)
applicable or attributable to the Products.
(d) Licensee shall be invoiced in, and all payments shall be made in,
currency of the United States.
(e) Payments shall be made to eNotes's address as specified to Licensee
from time to time. Any unpaid amount due eNote under this Agreement shall bear
interest at a rate of 1 1/2 % per month until paid in full. Licensee shall be
responsible for eNote's reasonable costs of collection including reasonable
attorneys' fees.
3.4 MARKETING POLICIES
(a) Licensee will at all times maintain adequate inventories of eNote
Products will promote vigorously and effectively the sale of eNote Products and
Services in the Territory in conformity with eNote's established marketing
policies and programs. Licensee will use its best efforts to sell eNote Products
and Services, representing the eNote brand with diligence and integrity.
(b) Licensee represents that it is familiar with the Products and
Services of eNote and with relevant laws and requirements applicable to sale,
installation, use and operation of the Products and Services in the Territory.
Licensee will at all times operate in conformity with such laws and regulations.
(c) Licensee will cooperate with eNote in providing for continuous and
effective advertising and promotion of Products and Services throughout the
Territory, and agrees to participate in, actively promote and faithfully comply
with the terms and conditions of such cooperative advertising and merchandising
programs as eNote may establish and offer from time to time, providing such
programs are consistent with local customs, laws and regulations, and further
provided that expenses in association therewith shall be subject to further by
agreement of Licensee and eNote. Nothing herein shall prevent Licensee from
independently advertising and marketing the Products and Services within the
Territory subject to Article 1.
3.5 WARRANTY [WARRANTY PROCEDURES][WARRANTY LIMITATIONS][THIRD PARTY
WARRANTIES]
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(a) Licensee shall make no warranty, oral or written, with regard to
the Products or Services other than eNote's limited warranty, if
any, contained in such written materials as eNote shall supply to
Licensee for distribution to purchasers from time to time and in
electronic form via the TVemail(TM) System.
(b) eNote warrants to the consumer that the TVemail(TM)equipment
shall be free of material defects and in manufacture and
workmanship and the TVemail(TM)system shall operate in a manner
consistent with the specifications contained in instruction
manuals and specifications as provided to the consumer, provided
that this warranty shall not extend to defects or damage caused
by misuse or negligence by the consumer or other third party.
eNote shall at its option repair or replace any non-conforming
hardware or software for the period as prescribed in such
instruction manuals and specifications. THIS WARRANTY IS IN LIEU
OF ALL OTHER PRODUCT AND SERVICE WARRANTIES EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY. REPAIR OR PREPLACEMENT OF HARDWARE AND/OR
SOFTWARE SHALL BE THE SOLE AND EXCLUSIVE REMEDY IN THE EVENT OF A
DEFECTIVE OR NON-CONFORMING PRODUCT. IN NO EVENT SHALL ENOTE BE
LIABLE FOR ANY OTHER OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR
IN CONNECTION WITH ANY DEFECTIVE OR NON-CONFORMING PRODUCT, EVEN
IF IT HAS BEEN MADE AWARE OF THE POSSIBLITY OF SUCH DAMAGES.
3.6 [MAINTENANCE AND REPAIR OF PRODUCT UNITS]
3.7 [SOFTWARE SUPPORT OBLIGATIONS] [SYSTEM SUPPORT OBLIGATIONS]
3.8 [INDEMNIFICATION - SUBJECT TO WARRANTY]
3.9 [SALES VOLUME REQUIREMENTS]
3.10 [SECURITY INTEREST]
3.11 [NON-COMPETE - EXTENT OF NON-COMPETITION]
ARTICLE 4
TERM AND TERMINATION
4.1 This Agreement shall commence immediately and terminate and be of no further
force or effect upon the occurrence of the following [SPECIFIC INITIAL TERM?]:
(a) Termination, cancellation or expiration of the Joint Venture
Agreement prior to the Determination Date.
(b) A party may terminate this Agreement immediately upon default in the
performance of the terms and conditions of this Agreement by any other party,
which default shall continue and remain uncured for a period of sixty (60) days
following notice specifying such default, which notice shall give reasonable
particulars of the default and of the intention of the party serving such notice
of intent to terminate.
(c) By mutual agreement of the parties.
(d) Immediately upon notice upon the occurrence of any event of
bankruptcy by any party. For purposes of this Agreement, an event of bankruptcy
with respect to a party means any of the following circumstances (or the
substantial equivalent under applicable law in any other country): (a) the
commencement by the party of a voluntary case under the United States Bankruptcy
Code or an equivalent law as applicable to such party in any jurisdiction in the
Territory, (b) the commencement against the party of an involuntary case under
the United States Bankruptcy Code or an equivalent law as applicable to such
party in any jurisdiction in the Territory if the case is not vacated with a
ninety calendar days, (c) the entry of a final order by a court of competent
jurisdiction finding the party to be bankrupt or insolvent, ordering or
approving its liquidation, reorganization or any modification or alteration of
the rights of its general creditors or assuming custody of or appointing a
receiver or other custodian for all or a substantial part of its property and
such order shall not be vacated or stayed upon appeal or otherwise stayed within
ninety calendar days or (d) the party makes an assignment for the benefit of, or
enters into a composition with its creditors, or appoints or consents to the
appointment of a receiver or other custodian for all or a substantial part of
its property.
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ARTICLE 5
OBLIGATIONS ON TERMINATION
5.1 OBLIGATIONS ON TERMINATION. On termination of this Agreement for any reason,
Licensee shall cease to be an authorized Licensee or distributor of eNote and
all rights granted to Licensee and Seafont pursuant to this Agreement shall
revert back to eNote.
(a) Licensee will immediately cease and desist from further use of the
Marks. Licensee will not at any time after such termination use or permit any
such Mark to be used in any manner in connection with any business conducted by
it or in which it may have an interest, or otherwise as descriptive of or
referring to anything other than Products or Services of eNote. Regardless of
the cause of termination, Licensee will immediately take all appropriate steps
to remove and cancel its listings in telephone books and other directories,
public records or elsewhere that contain the eNote's name or Marks, and change
its name to remove any reference to "eNote." or "eNote.com." If Licensee fails
to obtain such removals or cancellations promptly, eNote may make application
for such removals or cancellations on behalf of Licensee and in Licensee's name
and in such event Licensee will render every assistance.
(b) All amounts owing by Licensee to eNote shall, not withstanding prior
terms of sale, become immediately due and payable.
(c) All unshipped Product orders shall be canceled without liability of
either party to the other.
(d) Licensee, at the option of eNote, will resell and deliver to eNote
on demand, free and clear of liens and encumbrances, Products and materials
bearing the Marks as eNote shall elect to repurchase at the original price of
the Product and materials, provided that eNote shall not be obligated to pay
Licensee for any item originally provided free of charge.
5.2 Neither party shall be liable to the other because of such termination for
compensation, reimbursement or damages on account of the loss of prospective
profits or anticipated sales, or on account of expenditures, investments, lease
or commitments in connection with the business or goodwill of eNote or Licensee.
5.3 Nothing in this Agreement shall be construed to constitute Licensee as a
partner or joint venturer of eNote. Licensee shall be solely responsible for any
commitments incurred or assumed by it during the term of this Agreement, and
eNote shall not be responsible in any manner unless eNote has assumed
responsibility for such expense in each instance in writing.
5.4 In addition to any other remedies available to eNote with respect to a
breach by Licensee or Seafont of its obligations pursuant to this Article 5,
eNote shall have the right to specific performance of any Licensee obligation
hereunder, and injunctive relief to prevent any breach or threatened breach of
Licensee's obligations hereunder without proof of irreparable harm or the
posting of a bond. This Article 5 shall survive termination of this Agreement
ARTICLE 6
CONFIDENTIALITY
6.1 OBLIGATIONS OF CONFIDENTIALITY. At all times following the date of this
Agreement, each of Seafont and Licensee shall keep strictly confidential and not
disclose, use, divulge, publish or otherwise reveal, directly or through any
third party or person except in furtherance of the purposes of this Agreement
and the Joint Venture Agreement. Any confidential, non-public information
relating to the Technology and the business of eNote and its Affiliates obtained
as a result of the preparation and negotiation of this Agreement, or the
performance by the parties of their obligations hereunder, or the joint conduct
of any the party of activities pursuant to the Joint Venture Agreement
(collectively, "Confidential Information") Except as may be necessary for the
directors, employees or agents of such party and its Affiliates to perform their
respective obligations under this Agreement or in connection with filings with
governmental bodies or as otherwise required under applicable law, PROVIDED that
neither Seafont
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nor Licensee shall make any disclosure required under applicable law before
providing eNote with a reasonable opportunity to seek a protective order.
6.2 Seafont and Licensee shall cause any person or entity receiving Confidential
Information in accordance with the terms hereof to retain it in confidence.
6.3 Upon termination of this Agreement, Seafont and Licensee shall either
destroy or return to eNote all memoranda, notes, records, reports and other
documents (including all copies thereof) relating to the Confidential
Information, which it may then possess or have under its control.
6.4 Notwithstanding the foregoing, the following shall not constitute
Confidential Information: (a) information which was already otherwise known to
the recipient at the time of its receipt in connection with this Agreement, (b)
information which is or becomes freely and generally available to the public
through no wrongful act of the recipient, (c) information which is rightfully
received by the recipient from a third party legally entitled to disclose such
information without breach by the recipient of this Agreement or (d) in
connection with legal action initiated by a party to enforce rights under this
Agreement or the Joint Venture Agreement, provided that adequate safeguards
(such as protective orders) are maintained.
6.5 In addition to any other remedies available to eNote with respect to a
breach by Licensee of its obligations pursuant to this Article 6, eNote shall
have the right to specific performance of any Licensee or Seafont obligation
hereunder, and injunctive relief to prevent any breach or threatened breach of
Licensee's or Seafont's obligations hereunder without proof of irreparable harm
or the posting of a bond. The obligations of Seafont and Licensee pursuant to
this Article 6 shall survive termination of this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 ENTIRE AGREEMENT. Except for the agreements specifically referred to in this
Agreement, this Agreement constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No amendment, supplement, modification,
waiver or termination of this Agreement shall be implied or be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall waiver constitute a
continuing waiver unless otherwise expressly therein provided.
7.2 ASSIGNMENT. All of the terms and provisions of this Agreement are personal
to Licensee and Seafont, and may not be assigned nor transferred, by operation
of law or otherwise, except as regards Seafont, as provided in the Joint Venture
Agreement. This Agreement, and the rights and obligations of eNote hereunder,
shall be binding and inure to the benefit of eNote, its successors and assigns.
7.3 NOTICES. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given (except as may
otherwise be specifically provided herein to the contrary): (i) if delivered by
hand to the party to whom said notice or other communication shall have been
directed, upon such receipt; (ii) if mailed by certified or registered mail with
postage prepaid, return receipt requested, on the third business day after
mailing; (iii) if transmitted by facsimile, on the date of transmission, with
such transmittal followed by delivery of a confirmation copy via one of the
other methods set out herein or (iv) if mailed via internationally known
overnight courier such as Federal Express on the second business day after
mailing. All notices shall be addressed as set forth below or to any other
address such party shall notify to the other Party in accordance with this
Section:
(a) If to Seafont to: Level 2, 31 Bligh Street
Sydney, Australia
with a copy to:
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(b) If to eNote to: 185 Allen Brook Lane
Williston, VT 05495 USA
Attn: President
Facsimile: (802) 288 9000
with a copy to: H. Kenneth Merritt, Jr., Esq.
Merritt & Merritt
30 Main Street, Suite 330
Box 5839
Burlington, VT 05402 USA
(c) If to Licensee to: eNote.com Australia
with a copy to:
7.4 COUNTERPARTS. This Agreement may be executed and delivered in one or more
counterparts, each of which shall be deemed to be an original, and all of which
when taken together shall constitute one and the same instrument and shall
become effective when copies hereof, bearing the signatures of each of the
Parties, shall have been received by Seafont, Licensee and eNote.
7.5 SEVERABILITY. If any provision of this Agreement shall be held to be
incomplete, illegal, invalid or unenforceable, or if it becomes necessary to
amend the Agreement in order to comply with an administrative or governmental
order, the remaining provisions of the Agreement shall stay in force and the
unenforceable, void or incomplete provision shall be replaced by a valid
provision or amendment reflecting the economic and business objectives of the
original Agreement.
7.6 GOVERNING LAW. This Agreement is made in and shall be governed in accordance
with the federal laws of the United States of America and laws of the State of
Vermont, USA, without regard to conflict of laws principles. The parties agree
that any claim or action arising out of or in connection with this Agreement
shall be resolved by a federal or state court located in Burlington, Vermont,
USA and Seafont and Licensee expressly consent to the exclusive jurisdiction of
such courts. The parties shall not raise in connection therewith, and hereby
waive, the inconvenience of the forum, the lack of personal jurisdiction, the
sufficiency of service of process so long as same is effected in accordance with
the laws and regulations governing foreign service, and any right to trial by
jury.
7.7 ACKNOWLEDGMENTS. Each party acknowledges that no representation or
statement, and no understanding or agreement except for the Joint Venture
Agreement, has been made, or exists, and that in entering into this Agreement
each party has not relied on anything done or said or on any presumption in fact
or in law (a) with respect to this Agreement, or to the duration, termination or
renewal of this Agreement, or with respect to the relationship between the
parties, other than as expressly set forth in this Agreement; or (b) that in any
way tends to change or modify the terms, or any of them, of this Agreement or to
prevent this Agreement becoming effective; or (c) that in any way affects or
relates to the subject matter hereof. Licensee and Seafont also acknowledge that
the terms and conditions of the license granted pursuant to this Agreement, and
the distribution rights, and each of them, are reasonable and fair and
equitable.
7.8 HEADINGS. Headings used in this Agreement are provided for convenience only
and shall not be used to construe meaning or intent.
7.9 FORCE MAJEURE. No party shall be liable for any loss or damage or be deemed
to be in breach of the Agreement to the extent that performance of such party's
obligations or attempts to cure any breach under this Agreement are delayed or
prevented as a result of any event or circumstance beyond its reasonable
control, including without limitation, war, hostilities, civil war or rebellion
(whether war be declared or not), strike, lockout or other industrial dispute,
or act of God.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date and year first above written.
SEAFONT GROUP HOLDINGS PTY. LTD.
By:__________________________________
Name: Andrew Kelley
Title: President
eNOTE.COM, INC.
By:__________________________________
Name: John R. Varsames, President
Title:
eNOTE.COM AUSTRALIA
By:__________________________________
Name:
Title:
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EXHIBIT A
TERRITORY
3. Australia
4. New Zealand
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EXHIBIT B
MARKS
Marks appearing below, together with such marks as eNote may in future adopt and
use.
TRADEMARKS/SERVICE MARKS
1. eNote.com(TM)
2. TVemail(TM)
3. PCemail(TM)
4. WebATM(TM)
5. Twirp(TM)
6. AIRMOUSE(R)
7. Browserless Internet(TM)
8. TVewriter(TM)
9. EZ Color(TM)
10. BuyMail(TM)
11. TVemail.. The Answering Machine for the Internet(TM)
12. Get connected ... Simply(TM)
13. Simply Communicate(TM)
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EXHIBIT D
eNOTE'S TRADEMARKS AND TRADE NAMES
TRADEMARKS/SERVICE MARKS
14. eNote.com(TM)
15. TVemail(TM)
16. PCemail(TM)
17. WebATM(TM)
18. Twirp(TM)
19. AIRMOUSE(R)
20. Browserless Internet(TM)
21. TVewriter(TM)
22. EZ Color(TM)
23. BuyMail(TM)
24. TVemail.. The Answering Machine for the Internet(TM)
25. Get connected ... Simply(TM)
26. Simply Communicate(TM)
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Exhibit 10.24
SERVICE AND PRIVATE LABEL AGREEMENT
This Service and Private Label Agreement (the "AGREEMENT") is made this
20th day of March 2000 (the "EFFECTIVE DATE") by and between eNote.com Inc., a
Delaware Corporation with its principal place of business at 185 Allen Brook
Lane, Williston, Vermont 05495 ("ENOTE"), and CoolEmail.com, Inc., an Illinois
Corporation with its principal place of business at 315 Park Avenue, Glencoe,
Illinois 60022 ("CEM").
RECITALS
WHEREAS, CEM has developed a proprietary software and Internet-based
communication system that provides integrated messaging of e-mail, voicemail,
calendaring, reminders, and other services via a product called CoolEmail ("CEM
SERVICES");
WHEREAS, eNote has developed a proprietary software and Internet-based
communication system and associated appliances which, among other features,
permit users to view, send and receive e-mail and content using television and a
phone line and is engaged in the business of providing messaging and information
via a standard television interface ("TVemail(TM)");
WHEREAS, eNote wishes to obtain from CEM certain CEM Services for
resale and integration with eNote products; and
WHEREAS, CEM is willing to provide such CEM Services privately labeled
as the services of eNote to eNote customers in accordance with the terms and
conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the parties agree as follows:
ARTICLE 1. SERVICES
1.1 CEM will provide to eNote and its individual and business
customers, in accordance with the terms and conditions of this
Agreement, a fully supported version of the CEM Services privately
labeled as the services of eNote for integration into eNote
product offerings (the "ENOTE PRIVATE LABEL CEM SERVICE").
<PAGE>
1.2 CEM shall be solely responsible for the maintenance of the eNote
Private Label CEM Service. eNote and CEM shall be jointly
responsible for supporting the eNote Private Label CEM Service.
CEM shall bear primary responsibility for ensuring the reliability
of the eNote Private Label CEM Service.
1.3 eNote expects up to 50,000 members to make use of the eNote
Private Label CEM Service during the first 12 months of this
Agreement.
1.4 CEM will provide to eNote its basic Private Label CEM product,
consisting at a minimum of the e-mail backbone service, features
and functions listed in SCHEDULE B hereof. eNote and CEM may from
time to time amend this Agreement to add additional features and
functions to the eNote product offering at such prices and other
terms as the parties may then agree.
1.5 CEM will provide eNote and its users, at eNote's cost as specified
in SCHEDULE A hereof, with a dedicated national toll free number
for use by eNote users, if so requested by eNote.
1.6 CEM will provide eNote with a private label web site (the "ENOTE
WEB SITE")for eNote users. The URL for such web site shall be
chosen, registered/reserved and licensed by eNote. CEM will
provide the eNote users with an e-mail address from one of a set
of multiple domain names specified by eNote. eNote shall provide
CEM with the appropriate Domain Name Server (DNS) numbers.
1.7 At no additional cost to eNote, CEM shall provide support for the
eNote support department and ensure that the eNote Private Label
CEM Service meets the following specifications: Uptime shall
exceed, on average, 99% of scheduled uptime; response-time for
system failure or defects or problems in CEM's equipment or
software (unless caused by facts or circumstances beyond CEM's
control, such as, without limitation, systemic problems with the
Internet, regional power failures, strike, war, riot and the like)
not exceeding, on average, 1 hour; all other support and fix
implementations not exceeding, on average, 4 hours. Any problems
materially affecting the operation of eNote Private Label CEM
Services shall be reported to
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eNote within one hour of detection by CEM. Corrective actions and
progress must be reported as requested by eNote. CEM shall
maintain it's data operations in a data center of CEM's choosing,
that monitors the Private Label CEM Services 24 hours per day, 7
days per week, 365 days per year.
ARTICLE 2. PAYMENT
2.1 WHOLESALE PRICING. eNote shall pay CEM for Private Label CEM Services
at the wholesale pricing rates provided in SCHEDULE A hereof, based
upon the final configuration chosen by eNote.
2.2 BILLING AND PAYMENT. CEM will bill eNote monthly for each eNote user
("ENOTE USER") using the eNote Private Label CEM Service. CEM will
bill eNote for eNote User usage by the 15th of month following the
month of usage. eNote shall pay CEM 30 days following the date of
invoice. eNote agrees that it will be responsible for billing and
collecting payment from eNote Users.
2.3 USER INVOICING; RETAIL PRICING. CEM will provide eNote with all of
the information necessary for eNote to invoice eNote Users. Retail
pricing to eNote Users of various service levels and fees (if any)
will be at the sole discretion of eNote.
2.4 AUDIT AND INSPECTION. eNote or its agents shall have the right to
audit and inspect the books and records of CEM, and make copies
thereof, as same relate to the usage by eNote users of the eNote
Private Label CEM Service upon reasonable notice, during regular CEM
business hours. Any discrepancy revealed by such inspection shall be
remedied within five (5) days by the party required to tender
payment. In the event the inspection discloses an over-payment by
eNote that is in excess of ten percent (10%), CEM shall bear the
costs of the audit in all cases where the cost of the audit exceeds
the amount of the over-payment disclosed (as reasonably determined by
CEM). CEM shall maintain such books and records in accordance with
generally accepted accounting principles, and retain copies thereof
for the term of this Agreement (and any renewal terms) and for at
least one (1) year following any expiration or termination of this
Agreement. eNote's right of audit and inspection pursuant to this
Section shall
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survive any expiration or termination of this Agreement by a further
period of three (3) months.
ARTICLE 3. PRODUCT INTEGRATION
3.1 ENROLLMENT AND LOGIN. CEM shall host the sign-up procedure as well as
the login to the eNote Private Label CEM Service.
3.2 BASIC FEATURE SET. Aside from any modifications necessary to provide
private labeling in accordance with this Agreement, the features and
function set of the eNote user interface will be consistent with the
then-current private label production version of CoolEmail, which
shall consist, at a minimum, of the standard features and functions
provided in SCHEDULE B hereof for the eNote Basic Service Release.
3.3 CHANGES TO THE BASIC FEATURE SET. eNote may request changes to the
look and feel of the eNote User site. CEM will do its best to
accommodate eNote change requests, but any and all changes must be
reasonably technologically and economically feasible. Changes will be
billed to eNote at $150/hour. CEM staff will work with eNote to
establish an estimated budget before any change work begins. No such
change work will be undertaken by CEM without the prior written
approval by both parties of specifications, costs and scheduling.
ARTICLE 4. PROPRIETARY RIGHTS
4.1 BRANDS. During the term hereof, each Party shall have the right to
display the trade names, trademarks, service marks and logos (the
"BRANDS") of the other Party solely for the purposes and as set forth
in this Agreement.
4.2 LIMITED LICENSE. Subject to the terms and conditions of this
Agreement, CEM hereby grants eNote a non-exclusive, worldwide,
non-transferable, limited license to use, reproduce and display CEM's
Brands in order to display and publish the eNote Private Label CEM
Service and to market and promote the eNote Private Label CEM
Service. Subject to the terms and conditions of this Agreement, eNote
hereby grants CEM a non-exclusive, worldwide, non-transferable,
limited license to use, reproduce and display eNote's Brands in order
to create and maintain the eNote Private Label CEM
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Service and to market and promote the eNote Private Label CEM
Service. All use by either Party of the other's Brands shall inure
solely to the benefit of the Party owning the Brands. Neither Party
shall take any action that would infringe, dilute or conflict with
the other's right and ownership in its Brands. Each Party
acknowledges the other's exclusive ownership of such other Party's
Brands, and except for the license granted in this Section, this
Agreement does not grant either Party any right, title or interest in
or to the other's Brands.
4.3 CEM PROPERTY. eNote acknowledges and agrees that CEM owns all right,
title and interest in and to the CEM web site, the CEM Brands, all
source and object code used in the CEM System whether developed
specifically for the integration of the eNote Private Label CEM
Services or otherwise, together with the instructions and manuals
sold or provided as a unit therewith (together, the "CEM PROPERTY").
Except for the limited license of eNote to the CEM Brands, nothing in
this Agreement confers on eNote any license, right of ownership,
title or interest in CEM Property. To the extent that eNote is deemed
to own any rights in the CEM Property, eNote hereby assigns and
conveys to CEM, its successors and assigns, any and all such rights
and agrees to execute any additional documents reasonably necessary
to effect, evidence and record such assignment. This obligation to
execute such additional documents shall survive any expiration or
termination of this Agreement.
4.4 SERVICE BRANDING. CEM may use the phrase, "powered by CoolEmail" and
related logo in association with the eNote Brands on all static and
dynamic pages served by eNote Users.
4.5 ENOTE PROPERTY. Nothing in this Agreement shall be deemed to confer
any right, title or interest in the eNote Brands, the TVemail(TM)
System and its backbone or any other eNote product or property
whatsoever (the "ENOTE PROPERTY"), which shall remain the sole and
exclusive property of eNote. To the extent that CEM is deemed to own
any rights in the eNote Property, CEM hereby assigns and conveys to
eNote, its successors and assigns, any and all such rights and agrees
to execute any additional documents reasonably necessary to effect,
evidence and record such assignment. This obligation
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<PAGE>
to execute such additional documents shall survive any expiration or
termination of this Agreement.
4.6 INDEMNIFICATION. The parties each agree to indemnify and hold
harmless the other party from and against loss or damage, including
reasonable attorneys' fees and costs, sustained by reason of any use
of the other party's Brands in accordance with this Agreement.
4.7 PUBLICITY. eNote and CEM agree to cooperate in developing and issuing
joint press releases from time to time. No press releases may be
issued without advance review and approval of both parties hereto.
4.8 REMEDIES. The parties acknowledge that the rights and obligations of
the parties pursuant to this Article are special and unique, and that
in the event of breach, monetary damages might be insufficient to
compensate the injured party. Therefore, in addition to any other
remedy available at law or equity, the parties agree that the injured
party shall be entitled to specific performance to prevent a breach
or threatened breach of this Section, and to injunctive relief,
without further proof of irreparable harm or the posting of a bond.
ARTICLE 5. TERM AND TERMINATION
5.1 TERM; RENEWAL. Unless other wise terminated pursuant to this Article,
this Agreement shall remain in effect for an initial term of
thirty-six (36) months from the Effective Date hereof (the "TERM").
Thereafter, this Agreement shall renew automatically for successive
six (6) month terms unless terminated by a party upon written notice
no later than forty-five (45) days before the expiration of any term.
5.2 TERMINATION FOR CONVENIENCE. During the first twelve (12) month
period following the Effective Date hereof, either party may
terminate this Agreement without cause upon ninety (90) days' prior
written notice.
5.3 TERMINATION FOR CAUSE. This Agreement may be terminated immediately
by either party, for cause, upon written notice to the other party,
upon the occurrence of any of the following event: (i) if the other
ceases to do business or otherwise terminates its
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business operations for a period of sixty (60) days; (ii) if the
other shall fail to promptly secure or renew any license,
registration permit, authorization or approval necessary for the
conduct of its business in the manner contemplated by this Agreement,
or if any such license, registration, permit, authorization, or
approval is revoked or suspended and not reinstated within thirty
(30) days; or (iii) if the other breaches any material provision of
this Agreement, including, without limitation, any failure to pay
invoices within the time period set forth in Section 2.3 hereof,
twenty (20) days of written notice describing such breach and the
intent to terminate.
5.4 TERMINATION WITHOUT NOTICE. This Agreement may be terminated by
either party without any requirement of notice if the other becomes
insolvent or seeks protection under any bankruptcy, receivership,
trust, deed, creditor arrangement, composition, or comparable
proceeding, or if any such proceeding is instituted against such
party by its creditors and not dismissed within forty-five (45)
days.
5.5 NOT EXCLUSIVE REMEDY. Termination shall not be the sole remedy under
this Agreement and whether or not termination is effected, all other
remedies shall remain available.
5.6 NO LIABILITY FOR CERTAIN TERMINATIONS. Each party acknowledges and
agrees that the rights of termination pursuant to Sections 5.1, 5.2
and 5.4 are absolute. Neither party shall incur any liability
whatsoever for any damage, loss or expense of any kind suffered or
incurred by the other (including, without limitation, lost profits)
arising from due to any termination of this Agreement by a party that
has otherwise complied with the terms of this Agreement, whether or
not the terminating party was aware of the possibility of such
damages, loss or expense.
ARTICLE 6. CONDUCT
6.1 SPAM. CEM and eNote will use commercially reasonable efforts to
ensure that the eNote Private Label CEM Service will not be used for
chain letters, junk mail, spamming or any use of distribution lists
to any person who has not given specific permission to be included in
such a process.
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<PAGE>
6.2 COOPERATION. The parties agree to co-operate to ensure that the eNote
Private Label CEM Service and the associated eNote Web Site are
restricted to the fullest extent permitted by law in order to
preclude liability of either party from transmission of: (i) obscene,
pornographic or sexually explicit materials; (ii) messages promoting
abusive, threatening, hateful or violent behavior; (iii) messages
advocating prohibited forms of discrimination; or (iv) messages
promoting criminal or illegal activities, provided however, that none
of the foregoing shall be deemed to impose a duty on either party to
monitor communications by or between eNote Users.
6.3 ADVERTISING. All eNote advertisements on the eNote Private Label CEM
Service shall comply with the rules set forth in Sections 6.1 and 6.2
above.
6.4 CERTAIN RIGHTS TO DENY USER ACCESS. eNote Users may be denied
continuing access to the Private Label CEM Service for behavior that
is inconsistent with the policies and principles set forth in this
Article. Such policies and principles may be revised without notice.
ARTICLE 7. CONFIDENTIALITY
7.1 CONFIDENTIAL INFORMATION. The parties acknowledge that as a result of
this Agreement, each may become privy to the confidential business
information and trade secrets of the other, as well as private,
confidential information concerning the customers and users of the
parties' respective Internet and telephony services. Each party
agrees that all such confidential information and trade secrets,
including, but not limited to, software, inventions, algorithms,
know-how, ideas, business and marketing plans, technical information,
financial information and information regarding customers (including
registration data and e-mail content) ("CONFIDENTIAL INFORMATION") it
obtains from or by reason of the services provided to the disclosing
party (the "DISCLOSING PARTY") shall remain the sole property of the
Disclosing Party and/or its customers (as appropriate). Except as
expressly and unambiguously permitted in this Agreement, without the
prior written consent of the Disclosing Party in each instance (which
consent may be withheld at the sole discretion of the Disclosing
Party), the party receiving Confidential Information (the "RECEIVING
PARTY") shall hold in confidence and not use or disclose,
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<PAGE>
except in furtherance of this Agreement, any Confidential Information
of the Disclosing Party and/or its customers (as appropriate), and
shall similarly bind its employees, principals and contractors in
writing. [In particular, but without limitation, CEM shall not use or
disclose to any third party either during or after the term of this
Agreement, except under court order, any registration data or other
information or content contained in or provided by any eNote User in
a communication in any media, or any information concerning eNote
User usage data, except in the form of compiled and aggregated data
which does not identify or describe any individual eNote User or the
substance of such eNote user's communications.] [Awaiting resolution
of advertising rights set forth in Section 6.1 hereof]
7.2 PUBLIC DOMAIN INFORMATION. Only such Disclosing Party information
that is in the public domain (other than as a result of a breach of
this Agreement) and information disclosed by the Disclosing Party to
a third party free of restrictions on disclosure shall be excluded
from the definition of Confidential Information.
7.3 RETURN OF CONFIDENTIAL MATERIALS. Upon termination of this Agreement,
unless specifically provided herein, all rights and licenses granted
under this Agreement shall terminate, and each party shall return to
the other all Confidential Information, in any media, then in its
possession or under its control. Each party agrees to certify to such
return if requested by the other party.
7.4 SURVIVAL OF OBLIGATIONS. The obligations of confidentiality contained
in this Agreement shall survive expiration or termination of this
Agreement for three (3) years, provided however, that the obligations
concerning customer Confidential Information shall survive in
perpetuity.
7.5 REMEDIES. The parties acknowledge that the rights and obligations of
the parties pursuant to this Article are special and unique, and that
in the event of breach, monetary damages might be insufficient to
compensate the injured party. Therefore, in addition to any other
remedy available at law or equity, the parties agree that the injured
party shall be entitled to specific performance to prevent a breach
or threatened breach of this
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<PAGE>
Article, and to injunctive relief, without further proof of
irreparable harm or the posting of a bond.
ARTICLE 8. WARRANTIES
8.1 AUTHORITY FOR AGREEMENT.
(a) Each of the Parties represents and warrants to the other that:
(i) it has full power and legal right to execute and deliver this
Agreement and to perform its obligations under this Agreement; (ii)
the execution, delivery, and performance of this Agreement have been
authorized by all required action, corporate or otherwise, and do not
violate or conflict with any provisions of its charter or bylaws or
any of its contractual obligations or requirements of law binding on
it; (iii) this Agreement constitutes its legal, valid, and binding
obligation, enforceable against it in accordance with its terms; and
(v) it has and will maintain in full force and effect throughout the
term of this Agreement all governmental permits, licenses, and
authorizations required on its part to perform its obligations under
this Agreement.
(b) EXCEPT AS OTHERWISE SET FORTH IN THIS SECTION, NEITHER CEM NOR
ENOTE MAKES ANY EXPRESS OR IMPLIED WARRANTIES WHATSOEVER WITH RESPECT
TO THE SERVICES LICENSED UNDER THIS AGREEMENT AND EXPRESSLY DISCLAIMS
ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPORSE, OR OF NON-INFRINGEMENT.
8.2 PERFORMANCE. CEM warrants and represents that the eNote Private Label
CEM Service will operate substantially in conformity with the
specifications as provide in SCHEDULE B hereto and the operating
guidelines in this Agreement and any instructions provided by CEM to
eNote or eNote Users, and that any fixes, patches, work-arounds or
modifications necessary to the operation of the eNote Private Label
CEM Service will be performed by CEM in a timely manner at no
additional cost to eNote or eNote Users.
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<PAGE>
ARTICLE 9. MISCELLANEOUS
9.1 ENTIRE AGREEMENT. Upon execution by both parties, this Agreement
shall constitute the entire agreement between the parties with
respect to the subject matter hereof and shall supersede all prior
and contemporaneous communications whether oral or written.
9.2 GEOGRAPHIC LIMITATION. The terms and conditions of this agreement are
limited to eNote Private Label CEM Service pertaining to, and
originating from the United States.
9.3 AMENDMENT AND WAIVER. Any provision of this Agreement may be amended
and the observance of any provision of this Agreement may be waived
(either generally or in any particular instance and either
retroactively or prospectively) only with the written consent of all
parties hereto.
9.4 CONTROLLING LAW. This Agreement is made in, and shall be governed by
and construed under the laws of, the State of Illinois and the United
States without regard to conflicts of laws provisions thereof. The
sole jurisdiction and venue for actions related to the subject matter
hereof shall be the Illinois and United States federal courts having
within their jurisdiction the location of CEM's principal place of
business. Both parties consent to the exclusive jurisdiction of such
courts and agree that process may be served in the manner provided
herein for giving of notices or otherwise as allowed by Illinois or
federal law. The parties hereby also waive their right to trial by
jury on causes of action that are based on this Agreement.
9.5 ATTORNEYS' FEES. If either the eNote or CEM employs attorneys to
enforce any rights arising out of or relating to this Agreement, the
prevailing party shall be entitled to recover its reasonable
attorneys' fees, costs, and other expenses.
9.6 NOTICES. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given to the party to be notified in
writing and shall be deemed effectively given upon date of personal
delivery, upon date of delivery by confirmed facsimile or electronic
transmission (with duplicate original sent by United States mail) or
three business days after deposit with the United States Post Office
by registered or certified mail, postage prepaid, and addressed to
the party to be notified at the address
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<PAGE>
indicated for such party on the signature page hereof, or at such
other address as such party may designate with like notice.
9.7 SEVERABILITY. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be illegal, invalid or
unenforceable, such provision shall be limited or eliminated to the
minimum extent necessary so as to ensure that the rest of this
Agreement remains in full force and effect and remains enforceable.
9.8 TRANSITION. In the event this Agreement is terminated, CEM will work
with eNote to transition eNote Users to a new service provider.
9.9 TAXES. eNote shall pay any and all taxes associated with the use of
the eNote private label CEM System apart from taxes imposed on CEM's
income therefrom.
9.10 INDEPENDENT CONTRACTOR. CEM, in its performance under this Agreement,
is acting solely as an independent provider of services to eNote. No
joint venture or partnership shall be deemed created by this
Agreement or the performance of the parties.
9.11 ASSIGNMENT. This Agreement shall be binding on the successors and
assigns of the parties.
{SIGNATURE PAGE FOLLOWS}
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
their behalf on the date and year first above written.
Accepted by: /s/ John R. Varsames Accepted by: /s/ Michael O'Roark
------------------------- ---------------------
John R. Varsames Michael O'Roark
President and CEO President
eNote.com Inc CoolEmail.com, Inc.
185 Allen Brook Lane 315 Park Avenue
Williston, VT 05495 Glencoe, IL 60022
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SCHEDULE A
Schedule of Private Label Pricing
YEAR 1
1. No charge for basic email backbone
2. $0.10/month for first phone activated account on a eNote (TVemail(TM)) unit
and $0.25/month for all additional phone activated accounts on a eNote
(TVemail(TM)) unit.
3. $0.065/minute for phone accessed accounts on CEM lines
4. Pass through of payphone access charges. Currently $0.285/payphone call
5. Should eNote elect to run their own lines then:
5.1. There is a $25,000 set up fee per inbound telephony pod. Each inbound
telephony pod can accommodate 2,500 - 5,000 calls per day. Each pod
can handle 24 simultaneous calls.
5.2. Phone access cost would drop to $0.015/minute
6. $150.00/hour for custom development time
7. Approximately $20,000.00 (at CEM's actual cost) for the attachment server.
Final price to be included in a separate agreement that covers attachments.
8. CEM and eNote shall share net advertising revenue derived from the eNote
Web Site and telephone access to the CEM hosted eNote email service
equally.
YEAR 2
1. Same as in Year 1 except:
1.1 $995.00/month for every 250,000 email address in the eNote CEM service
2. $0.25/month for first phone activated account on an eNote (TVemail(TM))
unit and $0.25/month for all additional phone activated accounts on an
eNote (TVemail(TM)) unit.
YEAR 3
1. Same as in Year 2 except:
1.2 0 - 100,000 mailboxes $0.10/month per mailbox
100,001 - 250,000 mailboxes $0.09/month per mailbox
250,001 - 500,000 mailboxes $0.08/month per mailbox
500,000 + mailboxes $0.07/month per mailbox
-A-1-
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SCHEDULE B
Standard Features Available in the eNote Basic Service Release
- - Basic email service:
- Read
- Reply
- Forward
- Delete
- 6 Megs of storage
- POP3 access
- CEM service via private toll-free number
- Consolidation of external email accounts generally supported by CEM
service
Enhanced Features Available in the eNote Basic Service Release
These features are subject to additional development time. A separate budget and
contract will be developed to address these features:
- - Attachment translation
- - Address book with synchronization between the CEM address book and the
eNote address book
-B-1-
<PAGE>
Exhibit 10.25
THIS AGREEMENT is entered into on this 24 day of March 2000 by and
between eNote.com, Inc., a Delaware corporation with a registered address at 185
Allen Brook Lane, Williston, Vermont 05495, Delaware, United States ("ENOTE"),
and EESKY TELECOM a.s., a Czech joint stock company with a registered address at
Olsanska 5, Prague 3 130 00 ("TELECOM", and together with eNote, collectively,
the "Parties" and each a "Party" (including, possibly, a subsidiary of Party, as
noted below)).
RECITALS
WHEREAS, eNote is engaged in the business of developing, manufacturing
and marketing low cost Internet appliances for consumers and businesses;
WHEREAS, eNote has developed TVemail(TM), a television based,
non-interactive, low-cost, easy-to-use appliance that allows customers access to
email, news, information and shopping via the Internet without the need for a PC
or any Internet related know-how (the "SERVICE");
WHEREAS, eNote and Telecom desire to explore opportunities for
cooperation in marketing and distributing the Service in the Czech Republic and
the Slovak Republic, with a view to potentially expanding the relationship to
market and distribute the Service in other countries throughout Central and
Eastern Europe and beyond;
WHEREAS, pursuant to Section 269(2) of Act No. 513/1999 Coll., as
amended, the Commercial Code of the Czech Republic, the Parties have entered
into this Agreement to set forth their mutual understandings in respect of a
possible transaction on the terms set forth herein;
NOW, THEREFORE, the Parties hereby agree as follows:
1. THE VENTURE. It is presently contemplated that the venture (the
"VENTURE") would involve the Parties cooperating in marketing and distributing
the Service in the Territory on substantially the following terms and
conditions:
(a) THE TERRITORY. Initially, the Territory would be the Czech
Republic and the Slovak Republic. The Parties would negotiate to expand the
Territory on mutually agreeable terms to include any or all of those countries
generally considered to be within Central and Eastern Europe as specifically
agreed to by the Parties (the "EXPANSION COUNTRIES").
(b) RELATIONSHIP OF PARTIES. The Parties would carry out the
Venture either through a joint venture, revenue sharing or exclusive
distributorship arrangement, or other vehicle mutually agreed upon by the
Parties.
(c) EXCLUSIVITY. During the term of the Venture, neither Party
would have the right to market or distribute in the Territory any service that
is similar to, or competes with, the Service, other than pursuant to the
Venture.
(d) EXPANSION COUNTRIES. eNote would agree to keep Telecom
informed of any and all discussions or negotiations undertaken by or on behalf
of eNote in relation to the marketing or distribution of the Service in any
Expansion Country that is not then within the Territory. In such event, eNote
would confer with Telecom to determine if eNote and Telecom could agree to an
arrangement for the marketing and distribution of the Service in the applicable
Expansion Country on mutually acceptable terms.
(e) STRUCTURE. Either Party would have the right to accomplish
the Venture directly or through one or more subsidiaries.
2. CONDITIONS. Consummation of the Venture would be subject to:
(a) negotiation and execution of all definitive agreements
providing for the Venture (collectively, the "DEFINITIVE AGREEMENTS"), mutually
acceptable in form and substance to both Parties;
<PAGE>
(b) receipt of all necessary approvals by both Parties,
including without limitation, all internal corporate approvals and, if
applicable, all approvals required under applicable competition and other laws
and contracts; and
(c) completion of all necessary due diligence to the
respective satisfaction of each Party.
3. COOPERATION. Within fifteen (15) business days after the date
hereof, eNote shall deliver to Telecom a technical package for the Service. The
technical package shall include all information regarding the Service that is
necessary for Telecom to evaluate the Service and the feasibility of marketing
and distributing the Service in the Territory, including information regarding
the technical parameters of the Service and marketing data for the Service.
Promptly after execution of this Agreement, each Party shall identify a
representative and cause its representative to cooperate with the other Party's
representative to develop an economic model for the Venture. Within thirty (30)
days after the date hereof, the Parties shall cause their respective
representatives to meet to discuss the economic model developed for the Venture
and determine whether the Parties will continue pursuing the Venture. If the
Parties' representatives determine to continue pursuing the Venture, at such
meeting they shall also discuss the final structure of the Venture, including
whether each Party will participate directly or through one or more subsidiaries
and whether the Venture will be accomplished through a joint venture, revenue
sharing or distributorship arrangement and the Expansion Countries that will be
included in the Territory. If the Parties shall determine to continue pursuing
the Venture, the Parties shall undertake to negotiate the final terms of the
Venture and, if appropriate, to prepare, negotiate, execute and deliver the
Definitive Agreements, and upon the execution and delivery thereof, if any, the
terms, provisions and conditions contained therein shall supersede all of the
terms, provisions and conditions of this Agreement. Neither Party shall be bound
in any way to proceed with the Venture unless and until the Definitive
Agreements providing for the Venture are executed and then only to the extent
therein provided.
4. EXCLUSIVITY. From the date hereof until the earlier of (a) the
termination of this Agreement and (b) the execution of the Definitive
Agreements, neither Party will, and each Party shall cause its respective
officers, directors, employees, affiliates, representatives, advisors and agents
(collectively, "REPRESENTATIVES") not to, without the prior written consent of
the other Party, directly or indirectly, discuss, negotiate, undertake,
authorize, recommend, propose or enter into any venture, partnership or other
similar arrangement involving the marketing or distribution in the Czech
Republic, the Slovak Republic or any of the Expansion Countries of the Service
or any service similar to or that competes with the Service.
5. CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS.
(a) DUTY OF CONFIDENTIALITY. Each Party (such Party, a
"RECIPIENT") receiving Confidential Information (as hereinafter defined) from
the other Party (such Party, a "DISCLOSING PARTY") agrees that, until the
earlier of the execution of the Definitive Agreements and the date that is two
years after the termination of this Agreement, it shall keep confidential and
will not disclose to any individual, business, corporation, trust,
unincorporated organization, government, governmental body, agency, political
subdivision or other entity (each, a "PERSON"), and that it will not use, either
for its own benefit or for the benefit of any other Person, any such
Confidential Information other than disclosures to those of its Representatives,
lenders, investors and shareholders as are necessary for purposes of evaluating
and effecting the Venture and except as otherwise may be agreed to in writing by
the Disclosing Party. Each Recipient shall mark as confidential all Confidential
Information received by it which it delivers to its Representatives, shall
inform its Representatives of the confidential nature of such Confidential
Information and shall instruct its Representatives to keep such Confidential
Information confidential in accordance with the terms and conditions of this
provision.
(b) CONFIDENTIAL INFORMATION. For purposes hereof,
"CONFIDENTIAL INFORMATION" shall mean, in respect of any Recipient, any and all
information relating to the other Party, or the other Party's activities in the
Czech Republic, the Slovak Republic or any of the Expansion Countries, or the
Service, whether presented in written or oral form, together with analysis,
compilations, studies or other documents prepared by the Recipient, or its
Representatives, which contain or otherwise incorporate such information.
Confidential Information shall also include any
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information relating to the contents of this Agreement, the Definitive
Agreements, or the transactions contemplated hereby or thereby. Confidential
Information shall not include information that (i) is or becomes available to
the public other than as a result of a disclosure by the Recipient or its
Representatives in violation of this provision, (ii) is obtained by the
Recipient from a source other than the Disclosing Party that is not in violation
of a contractual obligation to such Disclosing Party with respect to such
portions of such Confidential Information, or (iii) is approved for release by
the Disclosing Party.
(c) RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION. At the
request of a Disclosing Party, a Recipient will promptly destroy or return any
Confidential Information of the Disclosing Party, together with all copies in
its possession, except for those portions of such Confidential Information
consisting of analysis, compilations, studies or other documents prepared by the
Recipient, or its Representatives, which the Recipient will either destroy or
retain and keep confidential subject to the terms and conditions of this
provision.
(d) LEGAL DUTY TO DISCLOSE. If a Recipient becomes legally
compelled to disclose any Confidential Information, such Recipient will promptly
provide the Disclosing Party with notice to permit it to seek a protective order
or other appropriate remedy and/or to waive compliance with these provisions. A
Recipient will disclose only that portion of such Confidential Information that
such Recipient is legally required to disclose.
(e) PUBLIC STATEMENTS. Each Party shall consult with the other
Party and obtain the prior written consent of the other Party before (i)
responding to any third party statement or announcement regarding the Venture or
the content of this Agreement, and (ii) issuing any press release or otherwise
making any public statements, announcements or filings with respect to the
Venture or this Agreement, and shall not issue any such press release or make
any such public statement, announcement or filing prior to such consultation,
except as may be required by applicable law or regulations.
6. TERMINATION. This Agreement shall terminate (a) upon the
determination of the Parties not to continue pursuing the Venture as
contemplated in Section 3, (b) upon the determination of the Board of Directors
or other duly authorized statutory body or individual of either Party not to
approve or proceed with the Venture, (c) at the election of either Party, after
the date that is sixty (60) days after the date of this Agreement, (d) at the
election of Telecom, if eNote shall breach any provision of this Agreement, or
(e) at the election of eNote, if Telecom shall breach any provision of this
Agreement. Any such termination shall be effective upon written notice from the
terminating Party to the other Party. Sections 5 and 7 hereof shall survive any
termination or expiration of this Agreement.
7. MISCELLANEOUS.
(a) BINDING PROVISIONS. Except for Sections 3, 4, 5 and 6
hereof and this Section 7, which the Parties represent and agree are binding on
themselves, this Agreement is not a binding agreement, but rather a statement of
mutual intention. This Agreement shall not constitute an agreement on future
contract. The Parties shall not have any obligation with respect to any of the
transactions contemplated hereby or in the Definitive Agreements unless and
until each such Definitive Agreement is satisfactory to each of the Parties
thereto, as conclusively evidenced by the execution and delivery thereof at its
sole discretion.
(b) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Czech Republic.
(c) AMENDMENTS AND MODIFICATIONS. This Agreement may be
amended, modified and supplemented only by written agreement signed by both
Parties.
(d) WAIVER OF COMPLIANCE. Any of the terms or conditions of
this Agreement that may be lawfully waived may be waived at any time by the
Party that is entitled to the benefits thereof. Any such waiver by either Party
shall be in writing and signed on behalf of such Party.
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(e) NOTICES. Notices or other communications hereunder shall
be in writing and shall be deemed given effectively (i) upon delivery if
delivered personally, (ii) upon delivery if delivered by courier or (iii) upon
receipt if given by telefax, in each case if addressed as follows:
If to Telecom:
Olsanska 5
130 00 Prague 3
Attention: Bessel Kok
Fax: +420 2 7146 9895
with a copy to:
Weil, Gotshal & Manges v.o.s.
Charles Bridge Center
K i ovnicke nam. 1
110 00 Prague 1,
Czech Republic
Attention: Managing Partner
Fax: +420 2 2140 7310
If to eNote:
185 Allen Brook Lane
P.O. Box 1138
Williston, VT 05495
Attention: John Varsames
Fax: 802-288-9340
or such other address as shall be furnished in writing by either Party.
(f) ASSIGNMENT. The binding provisions of this Agreement shall
be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either of
the Parties without the prior written consent of the other Party.
(g) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the Parties in respect of the subject matter
contained herein, and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any executive, officer, director, employee or representative of
either Party.
(i) ARBITRATION. Any and all disputes arising out of or
relating to this Agreement, including its interpretation shall be resolved in
arbitration in accordance with this Section. Any right by either Party to appeal
to any court shall be excluded. Arbitration shall be conducted under the Rules
of Arbitration of the International Chamber of Commerce (the "RULES"). The
arbitration tribunal shall consist of three arbitrators appointed in accordance
with the Rules. The seat of the arbitration tribunal shall be in Vienna, Austria
and the language of the arbitration shall be English.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained in this Agreement, or in any other document, agreement or
instrument referred to herein, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such document, agreement or instrument,
and the Parties shall attempt to deliver the benefits of such provision in a
manner that is not invalid, illegal or unenforceable.
4
<PAGE>
(k) EXPENSES. Unless otherwise provided in the Definitive
Agreements, each Party shall pay its own expenses in connection with this
Agreement and the transactions contemplated thereby.
(l) REGULATORY CONTACTS. Each Party agrees to consult with the
other in advance of any material communications with governmental or regulatory
authorities regarding the Venture.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
EESKYTELECOM a.s.
By: /s/ A.F. Bessel Kok
----------------------------
Name: A.F. Bessel Kok
----------------------------
Title: Chief Operating Officer
----------------------------
ENOTE.COM, INC.
By: /s/ John R. Varsames
----------------------------
Name: John R. Varsames
----------------------------
Title: President and CEO
----------------------------
5
<PAGE>
ENOTE.COM INC. SUBSIDIARIES AS OF DECEMBER 31, 1999
WEBATM, INC -- 100% OWNED
SOLUTIONNET, LTD. -- 55% OWNED
NAVIS, INC. -- 100% OWNED
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director whose signature appears below
constitutes and appoints John R. Varsames his or her true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
to sign, individually, in the name on behalf of the undersigned in any and all
capacities stated below, the Annual Report on Form 10-KSB of eNote.com, Inc. for
the fiscal year ended December 31, 1999 and any and all amendments thereto,
which amendments may make such changes in such Form 10-KSB as such
attorney-in-fact may deem appropriate, and to file the same with all exhibits
thereto and other documents in connection therewith with the Securities and
Exchange Commission, granting to such attorney-in-fact and agent, full power and
authority to do all such other acts and execute all such other documents as he
may deem necessary or desirable in connection with the foregoing, as fully as
the undersigned might or could do in person, hereby ratifying and confirming all
that such attorney-in-fact and agent may lawfully do or cause to be done by
virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ LEE ABRAHAM Director March 31, 2000
- ----------------------------
Lee Abraham
/s/ STANLEY M. BLAU Director March 27, 2000
- ----------------------------
Stanley M. Blau
/s/ JAMES BOWMAN Director March 28, 2000
- ----------------------------
James Bowman, Ph.D.
/s/ CHARLES W. QUATT Director March 31, 2000
- ----------------------------
Charles Quatt, Ph.D.
/s/ VICTOR REICHENSTEIN Director March 29, 2000
- ----------------------------
Victor Reichenstein
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OUR BALANCE
SHEET AT DECEMBER 31, 1999 AND OUR CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31,1999 AS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 324,392
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 814,773
<CURRENT-ASSETS> 1,175,371
<PP&E> 713,564
<DEPRECIATION> 98,023
<TOTAL-ASSETS> 2,291,068
<CURRENT-LIABILITIES> 797,982
<BONDS> 0
0
5,000,000
<COMMON> 100,495
<OTHER-SE> (3,607,409)
<TOTAL-LIABILITY-AND-EQUITY> 2,291,068
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,081,714
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,999
<INCOME-PRETAX> (3,033,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,033,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,033,300)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
