U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT OR [ ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2000 Commission File No. 33-67766-A
EMAGISOFT TECHNOLOGIES, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Florida 65-0422273
------- ----------
State or other jurisdiction (I.R.S. Employer
incorporation or organization Identification No.)
405 Central Avenue, 2nd Floor
St. Petersburg, Florida 33701
--------------------------------
(Address of principal executive offices) (Zip Code)
(727) 898-0688
--------------
(Registrant's telephone number,
including area code)
None
-----------------------
(Former name and address)
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15 (d) of the Exchange Act during the past 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 [ ]
As of March 31, 2000: 13,174,000 shares of common stock were
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
1
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -------- ---------------------
Emagisoft Technologies - Consolidated
Balance Sheets
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 3/31/2000 12/31/1999
- ------ (audited)
------------ ------------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . $ 30,911 $ 995,236
Cash in escrow . . . . . . . . . . . . . . . . . . - 80,000
Accounts receivable. . . . . . . . . . . . . . . . 12,974 38,694
Due from shareholder . . . . . . . . . . . . . . . 7,611 7,611
Prepaid Expenses . . . . . . . . . . . . . . . . . 65,883 65,883
------------ ------------
Total current assets . . . . . . . . . . . . . . . 117,379 1,187,424
PROPERTY AND EQUIPMENT:
Furniture and fixtures . . . . . . . . . . . . . . 74,960 75,376
Computer equipment . . . . . . . . . . . . . . . . 518,003 461,747
Leasehold Improvements . . . . . . . . . . . . . . 6,655 3,323
Software . . . . . . . . . . . . . . . . . . . . . 57,966 54,946
------------ ------------
Total property and equipment . . . . . . . . . . . 657,584 595,392
Less: Accumulated depreciation . . . . . . . . . . (253,090) (202,887)
------------ ------------
Property and equipment, net. . . . . . . . . . . . 404,494 392,505
OTHER ASSETS:
Software development costs . . . . . . . . . . . . 466,517 226,954
Goodwill, net of accumulated amortization. . . . . 166,046 175,625
Other. . . . . . . . . . . . . . . . . . . . . . . 4,225 4,225
------------ ------------
Total other assets . . . . . . . . . . . . . . . . 636,788 406,804
------------ ------------
Total assets . . . . . . . . . . . . . . . . . . . $ 1,158,661 $ 1,986,733
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . $ 104,597 $ 73,546
Accrued liabilities. . . . . . . . . . . . . . . . 145,788 248,893
Billings in excess of costs. . . . . . . . . . . . - 4,908
------------ ------------
Total current liabilities. . . . . . . . . . . . . 250,385 327,347
STOCKHOLDER'S EQUITY:
Common stock, $.0001 par value:
20,000,000 shares authorized,
13,174,000 issued and outstanding. . . . . . . . . 1,317 1,317
Series A convertible preferred, $.0001 par value:
5,000,000 Shares authorized,
O Shares issued and outstanding . . . - -
Additional paid-in capital . . . . . . . . . . . . 2,681,581 2,681,581
Accumulated deficit. . . . . . . . . . . . . . . . (1,774,622) (1,023,512)
------------ ------------
Total stockholders' equity . . . . . . . . . . . . 908,276 1,659,386
------------ ------------
Total liabilities and stockholders' equity . . . . $ 1,158,661 $ 1,986,733
============ ============
</TABLE>
2
<PAGE>
Emagisoft Technologies - Consolidated
Income Statement
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES:
Architectural and web site design services. . $ 45,746 $ -
Hardware and software sales and support . . . 10,908 16,993
Internet provider services. . . . . . . . . . 6,613 22,558
------------ ------------
Total Revenue . . . . . . . . . . . . . . . . 63,267 39,551
DIRECT COSTS. . . . . . . . . . . . . . . . . . 20,936 7,408
------------ ------------
Gross Profit. . . . . . . . . . . . . . . . . . 42,331 32,143
------------ ------------
OPERATING COSTS AND EXPENSES:
Marketing & Sales . . . . . . . . . . . . . . 3,838 -
General and administrative. . . . . . . . . . 732,508 32,059
Depreciation and amortization . . . . . . . . 59,784 40,615
------------ ------------
Total Operating Expenses. . . . . . . . . . . 796,130 72,674
------------ ------------
OTHER INCOME:
Interest income, net. . . . . . . . . . . . . (2,689) -
------------ ------------
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (751,110) (40,531)
PROVISION FOR INCOME TAXES. . . . . . . . . . . - -
------------ ------------
NET (LOSS) INCOME . . . . . . . . . . . . . . . $ (751,110) $ (40,531)
============ ============
NET (LOSS) INCOME PER SHARE - BASIC AND DILUTED ($0.06) ($0.00)
============ ============
</TABLE>
Emagisoft Technologies - Consolidated
Condensed Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash Flow used in Operating Activities: . . . . . . $ (902,133) $ (22,399)
Cash Flow used in Investing Activities: . . . . . . (62,192) -
Cash Flow from Financing Activities:. . . . . . . . - -
------------ ------------
Decrease in Cash. . . . . . . . . . . . . . . . . . (964,325) (22,399)
Cash, beginning . . . . . . . . . . . . . . . . . . 995,236 25,596
------------ ------------
Cash, ending. . . . . . . . . . . . . . . . . . . . $ 30,911 $ 3,197
============ ============
</TABLE>
3
<PAGE>
Note 1. BASIS OF PRESENTATION
The accompanying financial statements are unaudited and have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB promulgated by the
Securities and Exchange Commission. These financial statements reflect all
adjustments, which, in the opinion of management, are necessary for a fair
presentation of financial position, results of operations and cash flows for the
periods presented. All adjustments are of a normal recurring nature. The results
of operations for interim periods are not necessarily indicative of the results
expected for a full year.
These financial statements, including the consolidated balance sheet as of
December 31, 1999, which has been derived from audited financial statements, are
presented in accordance with the requirements of Form 10-QSB and consequently
may not include all disclosures normally required by generally accepted
accounting principles or those normally made in the Company's Form 10-KSB. The
accompanying consolidated financial statements, including the condensed
consolidated statement of cash flows, and related notes should be read in
conjunction with the Company's Form 10-KSB for the fiscal year ended December
31, 1999.
Note 2. LIQUIDITY
The accompanying unaudited financial statements have been prepared assuming the
Company will continue as a going concern. Accordingly, the financial statements
do not include any adjustments that might result from the Company's inability to
continue as a going concern. Management expects to continue to generate losses
during the next 12 months and, based on the current operating budgets, does not
anticipate having sufficient cash on hand or available through current lending
arrangements to fund operations. To address this funding need, the Company's
management is seeking to raise funds through a private placement. Management
believes that the funds generated by this transaction will be sufficient to fund
operations for at least 12 months. In the event all the funding is not received,
management believes it can revise its operating plan to such a level that the
Company will be able to fund operations for the next 12 months.
Note 3. NET LOSS PER COMMON SHARE
Net losses per common share has been computed based upon the weighted average
number of shares of common stock outstanding during the periods. The number of
shares used in the computation is 13,174,000 and 10,827,000 at 3/31/00 and
3/31/99, respectively.
Note 4. SUBSEQUENT EVENTS
Loan
On April 10, 2000, the Company issued three separate convertible notes in the
amounts of $ 250,000, $ 100,000 and $ 260,000, each with an annual interest rate
of 8%. Principal and accumulated interest is payable through cash or the
issuance of the Company's Series A convertible preferred stock, at the option of
the Company, at the earlier of April 09, 2001 or 30 days following the closing
of the first firm commitment, underwritten public offering of the Company's
common stock, raising gross proceeds of at least $ 15,000,000. In addition, at
any time prior to repayment, the Holder's of the notes may elect to convert the
notes to the Company's Series A preferred stock. If Series A convertible
preferred stock is issued to satisfy the notes, the number of shares issued
shall be equal to the sum of principal and accumulated interest divided by a
conversion price of $ 3.60 per share.
Lease Agreement
The Company entered into a subleasing agreement for office space in Hayward,
California to begin operation of its second Solution Support Center to
facilitate Value Added Reseller (VAR) services and product integration. The
lease commenced on April 10, 2000 and ends on November 14, 2003. The terms of
the lease require minimum annual rental payments as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------- ------
<S> <C>
2000 $ 77,635
2001 $ 110,984
2002 $ 114,310
2003 $ 102,641
</TABLE>
4
<PAGE>
ITEM 2. PLAN OF OPERATION
- -------- -------------------
During the first quarter of 2000, we at Emagisoft Technologies, Inc. continued
to develop our products and services in anticipation of the introduction of our
Quicksuite Internet Solution. Software development costs as well as the
build-out of our Internet platform comprised the majority of our operational
costs. Professional fees and travel expenses related to our ongoing financing
activities were substantial.
During the final stage of the development of our products and service models,
marketing and sales expenses are expected to increase substantially. We also
plan to open additional Regional Solution Support Centers to complete our
national market exposure. Our success is contingent on our completing the
development of our products and effectively implementing our sales and marketing
plan. We therefore expect to continue to incur substantial operating losses in
the foreseeable future.
Our capital requirements have been and will continue to be significant, and to
date, have exceeded our cash flow from operations. We have historically
satisfied our cash requirements with private sales of our common stock. We
anticipate the need for additional such private stock sales to satisfy our cash
needs. We believe that the funds generated by these transactions will be
sufficient to fund operations for at least 12 months. In the event not all the
funding is received, we believe we can revise our operating plan to reduce costs
to such a level that the Company will be able to fund operations for the next 12
months.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- ------- ------------------
There are no legal proceedings pending or threatened of any type or otherwise
known to be contemplated to which the Registrant or any of its properties is
subject.
Item 2. Changes in Securities
- -------- -----------------------
On March 23, 2000, the Board adopted an amendment to the Articles of
Incorporation, authorizing the issuance of 5,000,000 shares of 10 percent
non-cumulative, convertible Series A Preferred Stock. As of March 31, 2000,
none of these shares have been issued. The company anticipates raising
capital through the issuance of these shares.
On April 10, 2000 the Company borrowed $ 560,000 pursuant to three promissory
notes. The holders and amounts of the notes are: (1) Barrington Barisic,
$200,000; (2) Richard From - $100,000; and (3) Richard and Alicia From,
$260,000 . The notes are convertible, at the holder's option, to shares
of the Series A Preferred Stock.
Item 3. Defaults Upon Senior Securities
- -------- ----------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- -------- ---------------------------------------------------------
None
Item 5. Other Information
- -------- ------------------
On January 3rd, 2000, the Shareholders adopted and approved the Emagisoft
Technologies, Inc. 1999 Employee Stock Option Plan (the Plan). The Plan allows
for up to 500,000 options on shares of Stock of the Company to be granted. Only
the net number of shares actually issued under the Plan shall be counted against
the 500,000 limit. The Plan provides for both Incentive Stock Options (ISO) and
Non-Statutory Stock Options (NSO).
The granting of and the amounts are at the sole discretion of the Board of
Directors (the Board) or any committee as the Board may designate to administer
the plan. Unless otherwise determined by the Board, options granted pursuant to
the Plan shall have an exercise price, which is not less than the Fair Market
Value of a share of Stock on the date the option is granted. On February 21,
2000, 56,570 options were granted to employees under the Plan.
5
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -------- -------------------------------------
EXHIBITS
- --------
The exhibits listed on the accompanying index to exhibits immediately following
are filed as part of, or incorporated by reference into, this Form 10-QSB.
EXHIBIT DESCRIPTION
NO.
- ------- -----------
2.1 Share Exchange Agreement between Manatee-American Financial Corp. and
Emagisoft Corporation dated as of October 29, 1999 (2)
2.2 Amendment to Share Exchange Agreement between Manatee-American
Financial Corp. And Emagisoft Corporation dated as of January 28,
2000 (3)
3.1 Original and Amended Articles of Incorporation of the Registrant (1)(2)
3.2 Bylaws of the Registrant (1)
3.3 Amendment to the Articles of Incorporation authorizing the issuance of
5,000,000 shares of 10 percent non-cumulative, convertible Series A
Preferred Stock
3.4 Convertible Notes dated April 10, 2000
4.1 Specimen - Common Stock Certificate (1)
10.1 Employment Contracts of Key Management of Emagisoft Technologies, Inc.
(4)
10.2 Specimen - Confidential Information and Invention Assignment Agreement
for Employees (4)
10.3 Business Consulting Agreement between James S. Neader and Emagisoft
Technologies, Inc. (4)
10.4 Option Agreement for Promotional services between Gary Sheffield and
Emagisoft Technologies, Inc. (4)
10.5 Emagisoft Technologies, Inc. 1999 Employee Stock Option Plan
10.6 Written Consent of 1999 Employee Stock Option Plan
16.1 Letter on Change in Certifying Accountant (2)
21.1 Subsidiaries of the Registrant (4)
21.2 Stock Purchase and Sale between Net Advantage, Inc. (KNA) Emagisoft
Corporation and Interactive Media Solutions, Inc. (4)
23.1 Consent of Rachlin Cohen & Holtz LLP, Independent Auditors (2)
----------------------------------------------------------------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form SB-2, as amended, File No.33-67766-A
(2) Incorporated by reference to Form 8-K of the Registrant, dated October
29, 1999
(3) Incorporated by reference to Form 8-K of the Registrant, dated January
28, 2000
(4) Incorporated by reference to Form 10-K of the Registrant, dated March
31, 2000
REPORTS ON FORM 8-K
- ----------------------
A current report on Form 8-K, dated January 28, 2000, was filed with the
Securities and Exchange Commission by Emagisoft Technologies, Inc. to: report an
Amendment to the Share Exchange Agreement between Manatee-American Financial
Corp. and Emagisoft Corporation.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMAGISOFT TECHNOLOGIES, INC.
5-8-00 By: /s/ Kyle E. Jones
----------------- ------------------------------------------
Date Kyle E. Jones, President, Chief Executive Officer
(Sole Director) (Principle Executive Officer)
5-8-00 By: /s/ Peter VanSon
----------------- ------------------------------------------
Date Peter VanSon, Vice President and Chief Financial
Officer (Principal Financial and Accounting Officer)
7
<PAGE>
EXHIBIT NO. 3.3
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
EMAGISOFT TECHNOLOGIES, INC.
Pursuant to the provisions of Section 607.0602 of the Florida Business
Corporation Act, and the authority conferred upon the Board of Directors by the
Articles of Incorporation of Emagisoft Technologies, Inc. (the "CORPORATION"), a
-----------
Florida corporation, the Board of Directors of the Corporation duly adopted
these Articles of Amendment to the Articles of Incorporation of the Corporation
on March 23, 2000 which set forth the preferences, limitations and relative
rights of 5,000,000 shares of Series A Preferred Stock of the Corporation.
The undersigned, acting in his capacity as the sole Director and President of
the Corporation has executed these Articles of Amendment to the Articles of
Incorporation as of March 23, 2000.
ARTICLE I - NAME
----------------
The name of this corporation is Emagisoft Technologies, Inc.
ARTICLE II - AMENDMENT
----------------------
Article III of the Articles of Incorporation is amended to include the
following:
Series A Preferred Stock
- ---------------------------
The Series A Preferred Stock shall have the following powers, preferences
and rights, and qualifications, limitations and restrictions:
SECTION 1. DIVIDENDS.
---------
(A) GENERAL OBLIGATION. Only when, as and if declared by the
-------------------
Corporation's Board of Directors and to the extent permitted under the Florida
Business Corporation Act, the holders of the Series A Preferred Stock (the
"SERIES A PREFERRED") shall be entitled to receive in any fiscal year
--------------------
non-cumulative dividends at a rate of 10% per annum of the original issue price,
as adjusted, in preference to any payment to the holders of all other class of
stock of the Corporation, as provided in this Section 1. The date on which the
---------
Corporation initially issues any share of Series A Preferred shall be deemed to
be its "DATE OF ISSUANCE" regardless of the number of times transfer of such
share of Series A Preferred is made on the stock records maintained by or for
the Corporation and regardless of the number of certificates which may be issued
to evidence such share of Series A Preferred.
(B) COMMON STOCK DIVIDENDS. Only after all dividends have been
------------------------
declared and paid in full for a given calendar year to the holders of the Series
A Preferred under this Section 1, the Corporation may then declare and pay a
---------
dividend upon each share of Common Stock up to an amount equal to the per share
dividend paid to each holder of the Series A Preferred (such amount shall be
referred to as the "COMMON STOCK DIVIDEND"). After the Common Stock Dividend
---------------------
has been paid in full to all holders of Common Stock, the Corporation shall then
pay to the holders of the Series A Preferred at the time of payment of any
additional dividends to the holders of Common Stock those dividends which would
have been paid on the shares of Conversion Stock had such Series A Preferred
been converted immediately prior to the date on which a record is taken for such
Common Stock dividends, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined.
(C) DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as otherwise
---------------------------------------------
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Series A Preferred, such payment
shall be distributed pro rata among the holders thereof based upon the number
of shares of Series A Preferred held by each such holder.
8
<PAGE>
SECTION 2. LIQUIDATION.
-----------
Upon any liquidation, dissolution or winding up of the Corporation (whether
voluntary or involuntary), each holder of shares of Series A Preferred shall be
entitled to be paid, before any distribution or payment is made upon any Common
Stock, an amount in cash equal to the aggregate Liquidation Value of all shares
of Series A Preferred held by such holder (plus all accrued and unpaid dividends
thereon). After the total Liquidation Value of all shares of Series A Preferred
(plus all accrued and unpaid dividends thereon) is paid to the holders of the
Series A Preferred, any remaining assets available to be distributed to the
Corporation's stockholders shall be first distributed pro rata to the holders of
Common Stock until such holders of Common Stock have received, in the aggregate,
an amount equal to the aggregate Liquidation Value (plus all accrued and unpaid
dividends) of the Series A Preferred, then any remaining assets of the
Corporation shall be distributed pro rata among all the holders of the shares of
Series A Preferred and Common Stock based upon the shares of Series A Preferred
and Common Stock held by each such holder. If upon any such liquidation,
dissolution or winding up of the Corporation the Corporation's assets to be
distributed among the holders of shares of Series A Preferred are insufficient
to permit payment to such holders of the aggregate amount which they are
entitled to be paid under this Section 2, then the entire assets available to be
---------
distributed to the Corporation's stockholders shall be distributed pro rata
among the holders of shares of Series A Preferred based upon the aggregate
Liquidation Value (plus all accrued and unpaid dividends) of the Series A
Preferred held by each such holder. Prior to the liquidation, dissolution or
winding up of the Corporation, the Corporation shall pay all accrued and unpaid
dividends with respect to the Series A Preferred, but only to the extent of
funds of the Corporation legally available for the payment of dividends. Not
less than sixty (60) days prior to the payment date stated therein, the
Corporation shall mail written notice of any such liquidation, dissolution or
winding up to each record holder of the Series A Preferred, setting forth in
reasonable detail the amount of proceeds to be paid with respect to each share
of Series A Preferred and each share of Common Stock in connection with such
liquidation, dissolution or winding up. A consolidation or merger of the
Corporation with or into any other corporation or corporations, other corporate
reorganization in which the Corporation is not the surviving entity (unless the
shareholders of the Corporation hold more than 50% of the voting power of the
surviving corporation), or a sale of all or substantially all of the assets of
the Corporation, shall be deemed to be a liquidation, dissolution or winding up
of the Corporation.
SECTION 3. VOTING RIGHTS.
--------------
(A) GENERAL VOTING RIGHTS. The holders of the Series A Preferred shall
---------------------
be entitled to notice of all stockholders meetings in accordance with the
Corporation's bylaws, and as otherwise required by applicable law. Except as
otherwise set forth below, the holders of the Series A Preferred shall be
entitled to vote on all matters submitted to the stockholders for a vote,
together with the holders of Common Stock, voting together as a single class
with each share of Common Stock entitled to one vote per share, each share of
the Series A Preferred Stock entitled to one vote for each share of Common Stock
issuable upon conversion of the Series A Preferred Stock as of the record date
for such vote or, if no record date is specified, as of the date of such vote.
(B) SPECIAL VOTING RIGHTS. Notwithstanding anything else herein to the
---------------------
contrary, and except as otherwise required by law, the shares of Series A
Preferred shall be non-voting; provided, however, so long as at least half of
the Series A Preferred is outstanding, the Corporation will not, without the
affirmative vote or written consent of the holders of at least a majority of
such Series A Preferred then outstanding: (1) create or designate, or authorize
the issuance of, any new class or series of stock (i) ranking senior or having a
preference over, or being on parity with the Series A Preferred with respect to
any rights of the Series A Preferred, or (ii) convertible into any such class or
series of stock; (2) merge or consolidate (where the Corporation's stockholders
retain less than 50% of the voting power) or sell all or substantially all of
the assets or stock of the Corporation, whether in one transaction or a series
of transactions, or whether by outright sale or by merger; (3) liquidate or
dissolve the Corporation, or (4) amend the articles of incorporation or bylaws
that materially and adversely change the rights of the Series A Preferred in a
manner different than other classes of stock.
9
<PAGE>
SECTION 4. CONVERSION.
----------
(A) CONVERSION PROCEDURE.
---------------------
(I) At any time and from time to time, any holder of the Series A
Preferred may convert all or any portion of the Series A Preferred (including
any fraction of a share of Series A Preferred) held by such holder into a number
of shares of Conversion Stock computed by multiplying the number of shares of
Series A Preferred to be converted by $3.60 (plus all accrued and unpaid
dividends) and dividing the result by the Conversion Price then in effect.
(II) Except as otherwise provided herein, each conversion of the
Series A Preferred shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Series A Preferred to be converted have been surrendered for conversion at the
principal office of the Corporation. At the time any such conversion has been
effected, the rights of the holder of the shares of Series A Preferred converted
as a holder of the Series A Preferred shall cease and the Person or Persons in
whose name or names any certificate or certificates for shares of Conversion
Stock are to be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Conversion Stock represented
thereby.
(III) The Corporation may at any time require the automatic
conversion of all of the automatic outstanding shares of Series A Preferred if:
(i) the Corporation is at such time effecting a Qualified Public Offering; or
(ii) at any time the holders of a majority of the then outstanding shares of
Series A Preferred elect to convert their shares of Series A Preferred into
Common Stock. Any such mandatory conversion shall only be effected at the time
of and subject to: (1) as to conversion under subsection (i) above, the closing
of the sale of such shares pursuant to such Qualified Public Offering; or (2) as
to conversion under subsection (ii) above, the surrender for conversion at the
principal office of the Corporation of the certificate or certificates
representing the Series A Preferred to be converted, and upon written notice of
such mandatory conversion delivered to all holders of the Series A Preferred at
least ten (10) days prior to such closing or surrender.
(IV) Notwithstanding any other provision hereof, if a conversion
of the Series A Preferred is to be made in connection with a Qualified Public
Offering, the conversion of any shares of the Series A Preferred may, at the
election of the holder thereof, be conditioned upon the consummation of such
transaction, in which case such conversion shall not be deemed to be effective
until such transaction has been consummated.
(V) As soon as possible after a conversion has been effected (but
in any event within five (5) business days in the case of subsection (1) below),
--------------
the Corporation shall deliver to the converting holder:
(1) a certificate or certificates representing the number of
shares of Conversion Stock issuable by reason of such conversion in such name or
names and such denomination or denominations as the converting holder has
specified;
(2) payment in an amount equal to all accrued dividends with
respect to each share of Series A Preferred converted which have not been paid
prior thereto, plus the amount payable under subsection (x) below with respect
--------------
to such conversion; and
(3) a certificate representing any shares of the Series A
Preferred which were represented by the certificate or certificates delivered to
the Corporation in connection with such conversion but which were not converted.
(VI) If for any reason the Corporation is unable to pay any
portion of the accrued and unpaid dividends on the Series A Preferred being
converted, such dividends may, at the converting holder's option, be converted
into an additional number of shares of Conversion Stock determined by dividing
the amount of the unpaid dividends to be applied for such purpose, by the
Conversion Price then in effect.
10
<PAGE>
(VII) The issuance of certificates for shares of Conversion Stock
upon conversion of the Series A Preferred shall be made without charge to the
holders of such Series A Preferred for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Conversion Stock. Upon conversion of each
share of the Series A Preferred, the Corporation shall take all such actions as
are necessary in order to insure that the Conversion Stock issuable with respect
to such conversion shall be validly issued, fully paid and nonassessable, free
and clear of all taxes, liens, charges and encumbrances with respect to the
issuance thereof.
(VIII) The Corporation shall not close its books against the
transfer of the Series A Preferred or of Conversion Stock issued or issuable
upon conversion of the Series A Preferred in any manner which interferes with
the timely conversion of the Series A Preferred. The Corporation shall assist
and cooperate with any holder of shares of Series A Preferred required to make
any governmental filings or obtain any governmental approval prior to or in
connection with any conversion of shares of Series A Preferred hereunder
(including, without limitation, making any filings required to be made by the
Corporation).
(IX) The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Conversion Stock, solely for the
purpose of issuance upon the conversion of the Series A Preferred, such number
of shares of Conversion Stock issuable upon the conversion of all of the
outstanding Series A Preferred. All shares of Conversion Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Corporation upon each
such issuance). The Corporation shall not take any action which would cause the
number of authorized but unissued shares of Conversion Stock to be less than the
number of such shares required to be reserved hereunder for issuance upon
conversion of the Series A Preferred.
(X) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subparagraph, be delivered upon any
conversion of the Series A Preferred, the Corporation, in lieu of delivering the
fractional share therefor, shall pay an amount to the holder thereof equal to
the Market Price of such fractional interest as of the date of conversion.
(XI) If the shares of Conversion Stock issuable by reason of
conversion of the Series A Preferred are convertible into or exchangeable for
any other stock or securities of the Corporation, the Corporation shall, at the
converting holder's option, upon surrender of the shares of Series A Preferred
to be converted by such holder as provided herein together with any notice,
statement or payment required to effect such conversion or exchange of
Conversion Stock, deliver to such holder or as otherwise specified by such
holder a certificate or certificates representing the stock or securities into
which the shares of Conversion Stock issuable by reason of such conversion are
so convertible or exchangeable, registered in such name or names and in such
denomination or denominations as such holder has specified.
(B) CONVERSION PRICE.
-----------------
(I) The initial Conversion Price shall be $3.60. In order to
prevent dilution of the conversion rights granted under this Section 4, the
---------
Conversion Price shall be subject to adjustment from time to time pursuant to
this Section 4(b).
-------------
(II) If and whenever on or within twelve (12) months after the
original date of issuance of the Series A Preferred the Corporation issues or
sells, or in accordance with Section 4(c) is deemed to have issued or sold, any
------------
share of Common Stock or other capital stock or any other equity security (the
"DILUTIVE SECURITY") for a consideration per share less than the Conversion
------------------
Price in effect immediately prior to such time, then immediately upon such issue
or sale or deemed issue or sale the Conversion Price shall be reduced to the
lowest net price per share at which any Dilutive Security has been issued or
sold or is deemed to have been issued or sold.
11
<PAGE>
(III) If and whenever on or after twelve (12) months after the original
date of issuance of the Series A Preferred the Corporation issues or sells, or
in accordance with Section 4(c) is deemed to have issued or sold, any Dilutive
------------
Security for a consideration per share less than the Conversion Price in effect
immediately prior to such time, then immediately upon such issue or sale or
deemed issue or sale the Conversion Price shall be reduced to an amount equal to
the existing Conversion Price multiplied by a fraction (1) the numerator of
which is the sum of (A) the total number of shares of Common Stock issue and
outstanding, plus (B) the number of Dilutive Securities that can be purchased at
the existing Conversion Price for the total consideration received for the
issuance of the Dilutive Securities and (2) the denominator of which is the
total number of shares of Common Stock issued and outstanding plus the number of
Dilutive Securities issued or deemed issued in the new issuance or deemed
issuance. For purposes of the foregoing sentence, the total number of shares of
Common Stock issued and outstanding shall be deemed to include the number of
shares of Common Stock that would be outstanding if all outstanding Convertible
Securities were exercised, exchanged or converted, and all securities
exercisable or exchangeable for or convertible into Convertible Securities were
exercised, exchanged or converted, as applicable, and then exercised, exchanged
or converted, as applicable.
(IV) Notwithstanding the foregoing, there shall be no adjustment
to the Conversion Price hereunder with respect to the issuance or sale by the
Corporation of: (1) Other Securities to employees, officers or directors of the
Corporation or consultants to the Corporation; (2) Other Securities in
connection with any merger or consolidation; (3) Other Securities in connection
with any equipment leasing and/or debt financing; (4) Conversion Stock; and (5)
Other Securities issued or reserved for issuance by the Corporation for which
adjustment is made under this Section 4 with respect to Conversion Stock (A) as
---------
a stock dividend payable in shares of Common Stock or Other Securities for which
the Series A Preferred is convertible or (B) upon any subdivision or split-up of
the outstanding shares of Common Stock or Other Securities for which the Series
A Preferred is convertible.
(C) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes of
-------------------------------------------------
determining the adjusted Conversion Price under Section 4(b), and subject to the
------------
exclusions set forth in Section 4(b)(iv), the following shall be applicable:
----------------
(I) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any
---------------------------------
manner grants or sells any Option and the lowest price per share for which any
one share of Common Stock is issuable upon the exercise of any such Option, or
upon conversion or exchange of any Convertible Security issuable upon exercise
of any such Option, is less than the Conversion Price in effect immediately
prior to the time of the granting or sale of such Option, then such share of
Common Stock shall be deemed to be outstanding and to have been issued and sold
by the Corporation at the time of the granting or sale of such Option for such
price per share. For purposes of this paragraph, the "lowest price per share
for which any one share of Common Stock is issuable" shall be equal to the sum
of the lowest amounts of consideration (if any) received or receivable by the
Corporation with respect to any one share of Common Stock upon the granting or
sale of the Option, upon exercise of the Option and upon conversion or exchange
of any Convertible Security issuable upon exercise of such Option. No further
adjustment of the Conversion Price shall be made upon the actual issue of such
Common Stock or such Convertible Security upon the exercise of such Options or
upon the actual issue of such Common Stock upon conversion or exchange of such
Convertible Security.
12
<PAGE>
(II) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in
-------------------------------------
any manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion or
exchange thereof is less than the Conversion Price in effect immediately prior
to the time of such issue or sale, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Corporation at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this paragraph, the "lowest price per share for
which any one share of Common Stock is issuable" shall be equal to the sum of
the lowest amounts of consideration (if any) received or receivable by the
Corporation with respect to any one share of Common Stock upon the issuance or
sale of the Convertible Security and upon the conversion or exchange of such
Convertible Security. No further adjustment of the Conversion Price shall be
made upon the actual issue of such Common Stock upon conversion or exchange of
any Convertible Security, and if any such issue or sale of such Convertible
Security is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 4, no further adjustment of the Conversion Price shall be made by reason
- ---------
of such issue or sale.
(III) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock
--------------------------------------
or shares of other capital stock, Option or Convertible Security is issued or
sold or deemed to have been issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the Corporation therefor
before deducting any reasonable discounts, commissions or expenses. If any
Common Stock or shares of other capital stock, Option or Convertible Security is
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Corporation shall be the Market Price thereof as of the date of receipt. The
fair value of any consideration other than cash and securities shall be
determined in good faith by the Board of Directors of the Corporation.
(IV) RECORD DATE. If the Corporation takes a record of the
------------
holders of Common Stock for the purpose of entitling them: (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities; or (2) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or upon the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(D) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Corporation at
-------------------------------------------
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corpora-tion at
any time combines (by reverse stock split or otherwise) one or more classes of
its outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(E) NOTICES.
-------
(I) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of the Series A
Preferred, setting forth in reasonable detail and certifying the calculation of
such adjustment.
(II) The Corporation shall give written notice to all holders of
the Series A Preferred at least twenty (20) days prior to the date on which the
Corporation closes its books or takes a record: (1) with respect to any
dividend or distribution upon Common Stock; or (2) with respect to any pro rata
subscription offer to holders of Common Stock.
13
<PAGE>
SECTION 5. REGISTRATION OF TRANSFER.
--------------------------
The Corporation shall keep at its principal office a register for the
registration of the Series A Preferred. Upon the surrender of any certificate
representing the Series A Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange there-for
representing in the aggregate the number of shares of Series A Preferred
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of shares of Series A
Preferred as is requested by the holder of the surrendered certificate and shall
be substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series A Preferred represented by such new certificate from
the date to which dividends have been fully paid on such Series A Preferred
represented by the surrendered certificate.
SECTION 6. REPLACEMENT.
-----------
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing shares
of the Series A Preferred, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of Series A Preferred
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Series A Preferred represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
SECTION 7. DEFINITIONS.
-----------
"COMMON STOCK" means, collectively, the Corporation's common stock, par
value $0.01, and any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"CONVERSION STOCK" means shares of the Corporation's Common Stock issuable
upon conversion of the Series A Preferred; provided that if there is a change
such that the securities issuable upon conversion of the Series A Preferred are
issued by an entity other than the Corporation or there is a change in the type
or class of securities so issuable, then the term "Conversion Stock" shall mean
one share of the security issuable upon conversion of the Series A Preferred if
such security is issuable in shares, or shall mean the smallest unit in which
such security is issuable if such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"LIQUIDATION VALUE" of any share of Series A Preferred as of any particular
date shall be equal to $3.60, as adjusted.
"MARKET PRICE" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
Nasdaq System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the Nasdaq System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of twenty-one (21) days consisting of
the day as of which "Market Price" is being determined and the twenty (20)
consecutive business days prior to such day. If at any time such security is
not listed on any securities exchange or quoted in the Nasdaq System or the
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Corporation and the holders of a majority of the
Series A Preferred. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an independent
appraiser experienced in valuing securities jointly selected by the Corporation
and the holders of a majority of the Series A Preferred. The determination of
such appraiser shall be final and binding upon the parties, and the Corporation
shall pay the fees and expenses of such appraiser.
14
<PAGE>
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"OTHER SECURITIES" means any capital stock or other equity securities of
the Corporation, except for the Series A Preferred.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, a limited liability, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"QUALIFIED PUBLIC OFFERING" means any offering by the Corporation of its
capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect, or
any comparable statement under any similar federal statute then in force, in
which the price paid by the public for each share of capital stock or equity
security is at least $10.00 (adjusted for stock splits or stock dividends) and
the aggregate gross proceeds to the Corporation from the sale of all such shares
is not less than $15 million. A Qualified Public Offering shall be deemed to
have occurred upon the effectiveness of the registration statement filed with
respect to such offering, subject to such Qualified Public Offering having been
deemed to have occurred and being reversed and nullified if the closing of the
sale of such shares pursuant to such offering does not occur within ten (10)
business days after such effectiveness.
SECTION 8. AMENDMENT AND WAIVER.
----------------------
No amendment, modification or waiver shall be binding or effective with
respect to any provision of Sections 1 to 9 hereof without the prior written
---------- -
consent of the holders of a majority of the Series A Preferred outstanding at
the time such action is taken; provided that no such action shall change: (a)
the manner in which dividends on the Series A Preferred accrue or the times at
which such dividends become payable or the amount payable on redemption of the
Series A Preferred or the times at which redemption of the Series A Preferred is
to occur, without the prior written consent of the holders of at least
two-thirds of the Series A Preferred then outstanding; (b) the Conversion Price
of the Series A Preferred or the number of shares or class of stock into which
the Series A Preferred is convertible, without the prior written consent of the
holder of at least two-thirds of the Series A Preferred then outstanding; or (c)
the percentage required to approve any change described in clauses (a) and (b)
----------- ---
above, without the prior written consent of the holders of at least two-thirds
of the Series A Preferred then outstanding; and provided further that no change
in the terms hereof may be accomplished by merger or consolidation of the
Corporation with another corporation or entity unless the Corporation has
obtained the prior written consent of the holders of the applicable percentage
of the Series A Preferred then outstanding.
SECTION 9. NOTICES.
-------
Except as otherwise expressly provided hereunder, all notices referred to
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
IN WITNESS WHEREOF, the undersigned has executed these Articles of Amendment to
the Articles of Incorporation as of the 23rd day of March, 2000.
EMAGISOFT TECHNOLOGIES, INC.
By: /S/ Kyle E. Jones
------------------------------------------
Kyle E. Jones, Sole Director and President
15
<PAGE>
EXHIBIT NO. 3.4
CONVERTIBLE NOTES(3) DATED APRIL 10, 2000
NOTE NO. 1
CONVERTIBLE NOTE
----------------
THIS NOTE AND PREFERRED STOCK ISSUABLE UPON ANY CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE PREFERRED STOCK ISSUED UPON
CONVERSION HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE NOTE OR SUCH PREFERRED STOCK UNDER SUCH ACT AND APPLICABLE LAWS
OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
----------------
$250,000.00 April 10, 2000
---------- ----------------
FOR VALUE RECEIVED, the undersigned, EMAGISOFT TECHNOLOGIES, INC., a
Florida corporation (the "Borrower" or the "Company"), hereby promises to pay to
-------- -------
the order of BARRINGTON BARISIC (together with his heirs, personal
-------------------
representatives, successors and assigns, and any such bearer, being hereinafter
referred to collectively as "Holder"), at such times and in such amounts as
------
described herein (the "Note"), the principal sum of TWO HUNDRED FIFTY THOUSAND
---- --------------------------
DOLLARS ($250,000.00), together with interest thereon at the rate set forth
- -------
herein (the "Loan"); provided, however, that in lieu of repayment of the Loan,
----
and in full satisfaction as set forth in Section 2 hereof, Borrower may render
the performance described, and otherwise satisfy the terms and conditions set
forth in Section 2 hereof, such that Borrower shall be deemed to have rendered
full performance of its obligations hereunder and this Note, and the
indebtedness evidenced hereby, shall thereupon be terminated, void and of no
further force or effect upon a conversion of the indebtedness into Conversion
Securities, as defined, and as further described in Section 2. Holder shall
advance Borrower the principal of such Loan in a single payment. For purposes
of this Note, "Borrower" shall mean all successors in interest and assignees,
including, without limitation, pursuant to a merger, consolidation,
reorganization, recapitalization or other similar restructuring event
(collectively, a "Reorganization"), and all endorsers, sureties and guarantors
--------------
and any other person liable or to become liable with respect to the Loan.
1. Interest Rate. Interest shall accrue on the outstanding
--------------
principal balance of this Note from and after the date hereof at the rate of
eight percent (8%) per annum, except upon default and then at a higher rate of
interest as provided below, provided, however, that all outstanding accrued and
unpaid interest shall be immediately due and payable upon the effective date of
conversion of this Note. Interest shall be calculated on the basis of a 360-day
year, and shall be charged on the principal outstanding from time to time for
the actual number of days elapsed.
16
<PAGE>
2. Payment of Principal and Interest; Conversion Option.
----------------------------------------------------------
(a) Payment of Principal and Interest. Subject to Holder's
election to convert the Indebtedness (defined below) evidenced hereby into such
number of shares of Conversion Securities (defined below) as described below in
lieu of repayment of the Indebtedness as provided in this Section 2, Borrower
shall pay the entire outstanding principal balance under this Note, together
with all accrued and unpaid interest thereon (collectively, the "Indebtedness"),
------------
at anytime, in the Borrower's sole discretion, on or before the earlier of (i)
one (1) year from the date hereof or (ii) thirty (30) days following the closing
of the first firm commitment, underwritten public offering of the Company's
common stock, par value $0.0001 per share (the "Common Stock") pursuant to an
------------
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), raising gross proceeds to the Company of at least $15,000,000 (an
---
"IPO") (in either case, the "Maturity Date") (the entire term, from the date
--- ---------------
hereof until maturity, hereinafter referred to as the "Loan Term"); provided,
---------
however, that at any time prior to the earlier of (A) Borrower's repayment of
the Indebtedness or (B) the Maturity Date, if Holder so elects in accordance
with subparagraph (c) below, the Borrower may satisfy its obligations hereunder
by issuing and delivering to Holder such number of duly authorized, validly
issued, fully paid and non-assessable shares of Conversion Securities as shall
be equal to the entire outstanding Indebtedness evidenced by this Note, divided
by $3.60 (the "Conversion Formula"). For the purposes hereof, "Conversion
------------------- ----------
Securities" shall mean shares of the Company's Series A preferred stock, par
- ----------
value $0.0001 per share (the "Preferred Stock") offered by the Company to
----------------
outside investors in a private offering.
(b) Conversion. Holder shall, in Holder's sole discretion, at anytime
prior to the earlier of (i) Borrower's repayment of the Indebtedness or (ii) the
Maturity Date, have the right to convert the Indebtedness (in whole and not in
part) evidenced hereby (the "Conversion Option") into such number of Conversion
-----------------
Securities in accordance with the Conversion Formula described above and the
conversion procedure described below.
(c) Conversion Procedure.
(i) Before Holder shall be entitled to exercise the Conversion Option,
Borrower shall give to Holder any necessary subscription documents, including a
subscription agreement, accredited investor questionnaire (in each case, if
any), Investors Rights Agreement, or other documents ("Conversion Securities
---------------------
Documents"). If at anytime following the date of receipt of any Conversion
- ---------
Securities Documents, but prior to the earlier of (A) Borrower's repayment of
-
the Indebtedness or (B) the Maturity Date, Holder intends to accept the
Conversion Option, Holder shall provide Borrower with written notice (the
"Holder Notice") by first class mail, postage prepaid, or by express overnight
---------
courier indicating Holder's intent to accept the Conversion Option. For
purposes hereof, all such notices and other written communications shall be
effective (x) if mailed, five (5) days after mailing, (y) if delivered, upon
delivery and (z) if sent via facsimile, upon confirmation of receipt.
(ii) If Holder informs the Borrower that Holder elects not to accept
---
the Conversion Option, the terms and provisions of the Note, and the rights and
responsibilities thereunder, shall remain in full force and effect.
(iii) If Holder elects to accept the Conversion Option, then together
with the delivery of the Holder Notice, or as soon as practicable after delivery
thereof (and in any event prior to the stated closing of the offering of
Conversion Securities, if any), Holder shall execute and deliver to Borrower any
necessary Conversion Securities Documents prepared by the Borrower in connection
with the offering of such Conversion Securities. Upon receipt of duly executed
Conversion Securities Documents (which, among other things, reaffirms Holder's
"accredited investor" status), Borrower shall as promptly as practicable
thereafter issue and deliver to Holder a certificate(s) for the number of shares
of Conversion Securities to which Holder shall be entitled as aforesaid. The
person(s) entitled to receive the shares of Conversion Securities issuable upon
such conversion of the Note shall be treated for all purposes as the record
holder or holders of such shares of Conversion Securities as of the date of
Borrower's acceptance of such conversion and subscription by its signature on
the Conversion Securities subscription agreement (if any, and if none, then as
Borrower shall otherwise specify).
17
<PAGE>
(iv) Mechanics and Effect of Conversion. No fractional shares of
Conversion Securities shall be issued upon conversion of this Note. In lieu of
Borrower issuing any fractional shares to Holder upon conversion, Borrower shall
pay to Holder the amount of outstanding principal that is not so converted, such
payment to be in the form provided below. Upon (or together with) noticed
conversion of this Note, Holder shall surrender this Note, duly endorsed, at the
principal office of Borrower, together with the Conversion Securities Documents,
as described above. At its expense, as soon as practicable thereafter, Borrower
shall issue and deliver to Holder a certificate(s) for the number of shares of
such Conversion Securities to which Holder shall be entitled upon such
conversion (bearing such legends as are required by the Conversion Securities
Documents and any applicable federal and state securities laws), together with
any cash in lieu of fractional shares or other securities or property to which
Holder is entitled upon conversion under the terms of this Note, including a
check payable to Holder for any cash amounts due hereunder. Upon conversion of
this Note, Borrower shall be deemed to have satisfied and fully forever
discharged all of its obligations hereunder, including, without limitation, the
obligation of repayment of the Indebtedness and this Note and all Indebtedness
evidenced hereby shall immediately be terminated and fully satisfied without
further action by any of the parties hereto and without further rights and
obligations on the part of Borrower.
(d) Acknowledgement by Holder. Holder hereby represents and warrants
to Borrower that Holder has sufficient knowledge and experience of financial and
business matters so that Holder is able to evaluate the merits and risks of
purchasing the Note and Holder has had substantial experience in previous
private and public purchases of securities. Holder is an "accredited investor"
as that term is defined in Rule 501 of Regulation D under the Act.
3. Event of Default.
------------------
Any of the following shall constitute an "Event of Default" under this
----------------
Note, and shall give rise to the remedies provided in Section 4 herein:
(a) The failure by the Borrower to pay or otherwise to satisfy when
due, as contemplated in Section 2, the Indebtedness or the Conversion Option, as
the case may be;
(b) If the Borrower: (i) admits in writing its inability to pay
generally its debts as they mature; (ii) makes a general assignment for the
benefit of creditors; (iii) is adjudicated a bankrupt or insolvent; (iv) files a
voluntary petition in bankruptcy; (v) takes advantage, as against its creditors,
of any bankruptcy law or statute of the United States of America or any state or
subdivision thereof now or hereafter in effect; (vi) has a petition or
proceeding filed against it under any provision of any bankruptcy or insolvency
law or statute of the United States of America or any state or subdivision
thereof, which petition or proceeding is not dismissed within thirty (30) days
after the date of the commencement thereof; (vii) has a receiver, liquidator,
trustee, custodian, conservator, sequestrator or other such person appointed by
any court to take charge of its affairs or assets or business and such
appointment is not vacated or discharged within thirty (30) days thereafter; or
(viii) takes any action in furtherance of any of the foregoing; or
(c) Any merger, liquidation, dissolution or winding up of the Borrower
or its business or any sale of all or substantially all of Borrower's capital
stock or assets; provided, however, the merger or sale of Borrower with a
successor entity that acknowledges and expressly assumes in writing Borrower's
obligations hereunder shall not be considered an "Event of Default" for purposes
hereof.
4. Remedies on Default. If any Event of Default shall occur and be
---------------------
continuing for a period of fifteen (15) business days after notice from Holder,
Holder shall, in addition to any and all other available rights and remedies,
have the right, at Holder's option unless such Event of Default shall have been
cured or waived in writing by Holder (which waiver shall not be deemed to be a
waiver of a subsequent default), to: (a) declare the entire unpaid principal
balance of this Note, together with all interest accrued thereon at the rate
hereinbefore specified to the date of said Event of Default and, thereafter at
the rate of fifteen percent (15%) per annum (or the maximum allowable by law)
and all other sums due by Borrower hereunder, to be immediately due and payable;
and (b) pursue any and all available remedies for the collection of such
principal and interest to enforce its rights as described herein; and in such
case Holder may also recover all costs of suit and other expenses in connection
therewith, including reasonable attorney's fees for collection and the right to
equitable relief (including, but not limited to, injunctions) to enforce
Holder's rights as set forth herein.
18
<PAGE>
5. Certain Waivers. Except as otherwise expressly provided in this
----------------
Note, the Borrower hereby waives diligence, demand, presentment for payment,
protest, dishonor, nonpayment and default with respect to the Indebtedness
evidenced hereby. The Borrower hereby expressly agrees that this Note, or any
payment hereunder, may be extended, modified or subordinated (by forbearance or
otherwise) from time to time, without in any way affecting the liability of the
Borrower.
6. Waivers and Amendments; Cumulative Remedies. Neither any provision
--------------------------------------------
of this Note nor any performance hereunder may be amended or waived orally, but
only by an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought. No right or remedy
conferred upon the parties under this Note is intended to be exclusive of any
other right or remedy contained herein or in any instrument or document
delivered in connection herewith, and every such right or remedy shall be
cumulative and shall be in addition to every other such right or remedy
contained herein and/or now or hereafter existing at law or in equity or
otherwise.
7. Governing Law. This Note shall be deemed to be a contract made
--------------
under the laws of the State of Florida and shall be governed by, and construed
in accordance with, the laws of the State of Florida, without giving effect to
the principles of conflicts of law.
8. Consent to Jurisdiction and Service of Process. The Borrower by
--------------------------------------------------
execution, and Holder by acceptance, hereof each consent to the jurisdiction of
any federal district court in the State of Florida having competent
jurisdiction. The Borrower waives personal service of any summons, complaint or
other process in connection with any such action or proceeding and agrees that
service thereof may be made, as the Holder may elect, by certified mail directed
to the Borrower at the location provided for in Section 10 hereof, or, in the
alternative, in any other form or manner permitted by law.
9. Additional Documents. From time to time Holder will execute and deliver
---------------------
to Borrower such additional instruments as Borrower may reasonably request to
effectuate the purposes of this Note.
10. Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or by
nationally recognized overnight courier or sent via facsimile addressed to:
If to Borrower:
Emagisoft Technologies, Inc.
405 Central Avenue
Second Floor
St. Petersburg, Florida 33701
Attn: Kyle E. Jones, President
Facsimile: (727) 822-7858
If to Holder:
Barrington Barisic
-------------------
c/o Kimmerle Brothers, Inc.
------------------------------
337 M Street
--------------
Fresno, CA 93721
------------------
Facsimile: (559) 233-4678
---------------
or at such other address as shall have been furnished to the other party in
writing. All such notices and other written communications shall be effective
(i) if mailed, five (5) days after mailing, (ii) if delivered, upon delivery,
and (iii) if sent via facsimile, upon confirmation of receipt.
11. Wiring Instructions. Any amount wired to Borrower hereunder shall
--------------------
be wired in accordance with the following wiring instructions:
Bank Name: Nations Bank - Bank of America
Account Name: Emagisoft Technologies, Inc.
Account Number: xxxxxxxxxxxx
Routing number: xxxxxxxxxxx
19
<PAGE>
12. Severability. If any provision of this Note is prohibited or
------------
unenforceable in any jurisdiction, it shall be ineffective in such jurisdiction
only to the extent of such prohibition or unenforceability, and such prohibition
or unenforceability shall not invalidate the balance of such provision to the
extent it is not prohibited or unenforceable nor the remaining provisions
hereof, nor render unenforceable such provision in any other jurisdiction.
13. Assignment. This Note shall inure to the benefit of, and shall be
----------
binding upon, Borrower and Holder and their respective successors and permitted
assigns. Neither party hereto may assign any of its rights or obligations
hereunder without the prior written consent of the other party.
14. Treatment of this Note. To the extent permitted by generally
-------------------------
accepted accounting principles, Borrower will treat, account and report the Note
as debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
15. Facsimile. Any facsimile signature of any party hereto shall
---------
constitute a legal, valid and binding execution hereby by such party.
16. No Stockholder Rights. Nothing contained in this Note shall be
-----------------------
construed as conferring upon Holder or any other person the right to vote or to
consent or to receive notice as a stockholder in respect of meeting of
stockholders for the election of directors of Borrower or any other matters or
any rights whatsoever as a stockholder of Borrower; and no dividends or interest
shall be payable or accrued in respect of this Note or the interest represented
hereby or the Conversion Securities obtainable hereunder until, and only to the
extent that, this Note shall have been converted.
17. Jury Trial. Borrower, by execution, and Holder by acceptance,
-----------
hereof hereby waive all right to a trial by jury in any litigation relating to
this Note and each document incident thereto.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Note on
and as of the date first set forth above.
EMAGISOFT TECHNOLOGIES INC., A FLORIDA
CORPORATION, AS BORROWER
By: /s/ Kyle E. Jones
--------------------
Name: Kyle E. Jones
------------------
Title: President/CEO
-------------
20
<PAGE>
NOTE NO. 2
----------
CONVERTIBLE NOTE
----------------
THIS NOTE AND PREFERRED STOCK ISSUABLE UPON ANY CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE PREFERRED STOCK ISSUED UPON
CONVERSION HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE NOTE OR SUCH PREFERRED STOCK UNDER SUCH ACT AND APPLICABLE LAWS
OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
----------------
$100,000.00 April 10, 2000
---------- ----------------
FOR VALUE RECEIVED, the undersigned, EMAGISOFT TECHNOLOGIES, INC., a
Florida corporation (the "Borrower" or the "Company"), hereby promises to pay to
-------- -------
the order of RICHARD FROM (together with his heirs, personal representatives,
------------
successors and assigns, and any such bearer, being hereinafter referred to
collectively as "Holder"), at such times and in such amounts as described herein
------
(the "Note"), the principal sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00),
---- --------------------
together with interest thereon at the rate set forth herein (the "Loan");
----
provided, however, that in lieu of repayment of the Loan, and in full
satisfaction as set forth in Section 2 hereof, Borrower may render the
performance described, and otherwise satisfy the terms and conditions set forth
in Section 2 hereof, such that Borrower shall be deemed to have rendered full
performance of its obligations hereunder and this Note, and the indebtedness
evidenced hereby, shall thereupon be terminated, void and of no further force or
effect upon a conversion of the indebtedness into Conversion Securities, as
defined, and as further described in Section 2. Holder shall advance Borrower
the principal of such Loan in a single payment. For purposes of this Note,
"Borrower" shall mean all successors in interest and assignees, including,
without limitation, pursuant to a merger, consolidation, reorganization,
recapitalization or other similar restructuring event (collectively, a
"Reorganization"), and all endorsers, sureties and guarantors and any other
--------------
person liable or to become liable with respect to the Loan.
1. Interest Rate. Interest shall accrue on the outstanding
--------------
principal balance of this Note from and after the date hereof at the rate of
eight percent (8%) per annum, except upon default and then at a higher rate of
interest as provided below, provided, however, that all outstanding accrued and
unpaid interest shall be immediately due and payable upon the effective date of
conversion of this Note. Interest shall be calculated on the basis of a 360-day
year, and shall be charged on the principal outstanding from time to time for
the actual number of days elapsed.
21
<PAGE>
2. Payment of Principal and Interest; Conversion Option.
----------------------------------------------------------
(a) Payment of Principal and Interest. Subject to Holder's
election to convert the Indebtedness (defined below) evidenced hereby into such
number of shares of Conversion Securities (defined below) as described below in
lieu of repayment of the Indebtedness as provided in this Section 2, Borrower
shall pay the entire outstanding principal balance under this Note, together
with all accrued and unpaid interest thereon (collectively, the "Indebtedness"),
------------
at anytime, in the Borrower's sole discretion, on or before the earlier of (i)
one (1) year from the date hereof or (ii) thirty (30) days following the closing
of the first firm commitment, underwritten public offering of the Company's
common stock, par value $0.0001 per share (the "Common Stock") pursuant to an
------------
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), raising gross proceeds to the Company of at least $15,000,000 (an
---
"IPO") (in either case, the "Maturity Date") (the entire term, from the date
--- ---------------
hereof until maturity, hereinafter referred to as the "Loan Term"); provided,
---------
however, that at any time prior to the earlier of (A) Borrower's repayment of
the Indebtedness or (B) the Maturity Date, if Holder so elects in accordance
with subparagraph (c) below, the Borrower may satisfy its obligations hereunder
by issuing and delivering to Holder such number of duly authorized, validly
issued, fully paid and non-assessable shares of Conversion Securities as shall
be equal to the entire outstanding Indebtedness evidenced by this Note, divided
by $3.60 (the "Conversion Formula"). For the purposes hereof, "Conversion
------------------- ----------
Securities" shall mean shares of the Company's Series A preferred stock, par
- ----------
value $0.0001 per share (the "Preferred Stock") offered by the Company to
----------------
outside investors in a private offering.
(b) Conversion. Holder shall, in Holder's sole discretion, at anytime
prior to the earlier of (i) Borrower's repayment of the Indebtedness or (ii) the
Maturity Date, have the right to convert the Indebtedness (in whole and not in
part) evidenced hereby (the "Conversion Option") into such number of Conversion
-----------------
Securities in accordance with the Conversion Formula described above and the
conversion procedure described below.
(c) Conversion Procedure.
(i) Before Holder shall be entitled to exercise the Conversion Option,
Borrower shall give to Holder any necessary subscription documents, including a
subscription agreement, accredited investor questionnaire (in each case, if
any), Investors Rights Agreement, or other documents ("Conversion Securities
---------------------
Documents"). If at anytime following the date of receipt of any Conversion
- ---------
Securities Documents, but prior to the earlier of (A) Borrower's repayment of
the Indebtedness or (B) the Maturity Date, Holder intends to accept the
Conversion Option, Holder shall provide Borrower with written notice (the
"Holder Notice") by first class mail, postage prepaid, or by express overnight
--------------
courier indicating Holder's intent to accept the Conversion Option. For
purposes hereof, all such notices and other written communications shall be
effective (x) if mailed, five (5) days after mailing, (y) if delivered, upon
delivery and (z) if sent via facsimile, upon confirmation of receipt.
(ii) If Holder informs the Borrower that Holder elects not to accept
---
the Conversion Option, the terms and provisions of the Note, and the rights and
responsibilities thereunder, shall remain in full force and effect.
(iii) If Holder elects to accept the Conversion Option, then together
with the delivery of the Holder Notice, or as soon as practicable after delivery
thereof (and in any event prior to the stated closing of the offering of
Conversion Securities, if any), Holder shall execute and deliver to Borrower any
necessary Conversion Securities Documents prepared by the Borrower in connection
with the offering of such Conversion Securities. Upon receipt of duly executed
Conversion Securities Documents (which, among other things, reaffirms Holder's
"accredited investor" status), Borrower shall as promptly as practicable
thereafter issue and deliver to Holder a certificate(s) for the number of shares
of Conversion Securities to which Holder shall be entitled as aforesaid. The
person(s) entitled to receive the shares of Conversion Securities issuable upon
such conversion of the Note shall be treated for all purposes as the record
holder or holders of such shares of Conversion Securities as of the date of
Borrower's acceptance of such conversion and subscription by its signature on
the Conversion Securities subscription agreement (if any, and if none, then as
Borrower shall otherwise specify).
22
<PAGE>
(iv) Mechanics and Effect of Conversion. No fractional shares of
Conversion Securities shall be issued upon conversion of this Note. In lieu of
Borrower issuing any fractional shares to Holder upon conversion, Borrower shall
pay to Holder the amount of outstanding principal that is not so converted, such
payment to be in the form provided below. Upon (or together with) noticed
conversion of this Note, Holder shall surrender this Note, duly endorsed, at the
principal office of Borrower, together with the Conversion Securities Documents,
as described above. At its expense, as soon as practicable thereafter, Borrower
shall issue and deliver to Holder a certificate(s) for the number of shares of
such Conversion Securities to which Holder shall be entitled upon such
conversion (bearing such legends as are required by the Conversion Securities
Documents and any applicable federal and state securities laws), together with
any cash in lieu of fractional shares or other securities or property to which
Holder is entitled upon conversion under the terms of this Note, including a
check payable to Holder for any cash amounts due hereunder. Upon conversion of
this Note, Borrower shall be deemed to have satisfied and fully forever
discharged all of its obligations hereunder, including, without limitation, the
obligation of repayment of the Indebtedness and this Note and all Indebtedness
evidenced hereby shall immediately be terminated and fully satisfied without
further action by any of the parties hereto and without further rights and
obligations on the part of Borrower.
(d) Acknowledgement by Holder. Holder hereby represents and warrants
to Borrower that Holder has sufficient knowledge and experience of financial and
business matters so that Holder is able to evaluate the merits and risks of
purchasing the Note and Holder has had substantial experience in previous
private and public purchases of securities. Holder is an "accredited investor"
as that term is defined in Rule 501 of Regulation D under the Act.
3. Event of Default.
------------------
Any of the following shall constitute an "Event of Default" under this
----------------
Note, and shall give rise to the remedies provided in Section 4 herein:
(a) The failure by the Borrower to pay or otherwise to satisfy when
due, as contemplated in Section 2, the Indebtedness or the Conversion Option, as
the case may be;
(b) If the Borrower: (i) admits in writing its inability to pay
generally its debts as they mature; (ii) makes a general assignment for the
benefit of creditors; (iii) is adjudicated a bankrupt or insolvent; (iv) files a
voluntary petition in bankruptcy; (v) takes advantage, as against its creditors,
of any bankruptcy law or statute of the United States of America or any state or
subdivision thereof now or hereafter in effect; (vi) has a petition or
proceeding filed against it under any provision of any bankruptcy or insolvency
law or statute of the United States of America or any state or subdivision
thereof, which petition or proceeding is not dismissed within thirty (30) days
after the date of the commencement thereof; (vii) has a receiver, liquidator,
trustee, custodian, conservator, sequestrator or other such person appointed by
any court to take charge of its affairs or assets or business and such
appointment is not vacated or discharged within thirty (30) days thereafter; or
(viii) takes any action in furtherance of any of the foregoing; or
(c) Any merger, liquidation, dissolution or winding up of the Borrower
or its business or any sale of all or substantially all of Borrower's capital
stock or assets; provided, however, the merger or sale of Borrower with a
successor entity that acknowledges and expressly assumes in writing Borrower's
obligations hereunder shall not be considered an "Event of Default" for purposes
hereof.
4. Remedies on Default. If any Event of Default shall occur and be
---------------------
continuing for a period of fifteen (15) business days after notice from Holder,
Holder shall, in addition to any and all other available rights and remedies,
have the right, at Holder's option unless such Event of Default shall have been
cured or waived in writing by Holder (which waiver shall not be deemed to be a
waiver of a subsequent default), to: (a) declare the entire unpaid principal
balance of this Note, together with all interest accrued thereon at the rate
hereinbefore specified to the date of said Event of Default and, thereafter at
the rate of fifteen percent (15%) per annum (or the maximum allowable by law)
and all other sums due by Borrower hereunder, to be immediately due and payable;
and (b) pursue any and all available remedies for the collection of such
principal and interest to enforce its rights as described herein; and in such
case Holder may also recover all costs of suit and other expenses in connection
therewith, including reasonable attorney's fees for collection and the right to
equitable relief (including, but not limited to, injunctions) to enforce
Holder's rights as set forth herein.
23
<PAGE>
5. Certain Waivers. Except as otherwise expressly provided in this
----------------
Note, the Borrower hereby waives diligence, demand, presentment for payment,
protest, dishonor, nonpayment and default with respect to the Indebtedness
evidenced hereby. The Borrower hereby expressly agrees that this Note, or any
payment hereunder, may be extended, modified or subordinated (by forbearance or
otherwise) from time to time, without in any way affecting the liability of the
Borrower.
6. Waivers and Amendments; Cumulative Remedies. Neither any provision
--------------------------------------------
of this Note nor any performance hereunder may be amended or waived orally, but
only by an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought. No right or remedy
conferred upon the parties under this Note is intended to be exclusive of any
other right or remedy contained herein or in any instrument or document
delivered in connection herewith, and every such right or remedy shall be
cumulative and shall be in addition to every other such right or remedy
contained herein and/or now or hereafter existing at law or in equity or
otherwise.
7. Governing Law. This Note shall be deemed to be a contract made
--------------
under the laws of the State of Florida and shall be governed by, and construed
in accordance with, the laws of the State of Florida, without giving effect to
the principles of conflicts of law.
8. Consent to Jurisdiction and Service of Process. The Borrower by
--------------------------------------------------
execution, and Holder by acceptance, hereof each consent to the jurisdiction of
any federal district court in the State of Florida having competent
jurisdiction. The Borrower waives personal service of any summons, complaint or
other process in connection with any such action or proceeding and agrees that
service thereof may be made, as the Holder may elect, by certified mail directed
to the Borrower at the location provided for in Section 10 hereof, or, in the
alternative, in any other form or manner permitted by law.
9. Additional Documents. From time to time Holder will execute and deliver
----------------------
to Borrower such additional instruments as Borrower may reasonably request to
effectuate the purposes of this Note.
10. Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or by
nationally recognized overnight courier or sent via facsimile addressed to:
If to Borrower:
Emagisoft Technologies, Inc.
405 Central Avenue
Second Floor
St. Petersburg, Florida 33701
Attn: Kyle E. Jones, President
Facsimile: (727) 822-7858
If to Holder:
Richard From
-------------
5413 Sandpiper Court
----------------------
Rocklin, CA 95765
-------------------
Facsimile: (916) 772-8118
---------------
or at such other address as shall have been furnished to the other party in
writing. All such notices and other written communications shall be effective
(i) if mailed, five (5) days after mailing, (ii) if delivered, upon delivery,
and (iii) if sent via facsimile, upon confirmation of receipt.
11. Wiring Instructions. Any amount wired to Borrower hereunder shall
--------------------
be wired in accordance with the following wiring instructions:
Bank Name: Nations Bank - Bank of America
Account Name: Emagisoft Technologies, Inc.
Account Number: xxxxxxxxxxxxx
Routing number: xxxxxxxxxx
24
<PAGE>
12. Severability. If any provision of this Note is prohibited or
------------
unenforceable in any jurisdiction, it shall be ineffective in such jurisdiction
only to the extent of such prohibition or unenforceability, and such prohibition
or unenforceability shall not invalidate the balance of such provision to the
extent it is not prohibited or unenforceable nor the remaining provisions
hereof, nor render unenforceable such provision in any other jurisdiction.
13. Assignment. This Note shall inure to the benefit of, and shall be
----------
binding upon, Borrower and Holder and their respective successors and permitted
assigns. Neither party hereto may assign any of its rights or obligations
hereunder without the prior written consent of the other party.
14. Treatment of this Note. To the extent permitted by generally
-------------------------
accepted accounting principles, Borrower will treat, account and report the Note
as debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
15. Facsimile. Any facsimile signature of any party hereto shall
---------
constitute a legal, valid and binding execution hereby by such party.
16. No Stockholder Rights. Nothing contained in this Note shall be
-----------------------
construed as conferring upon Holder or any other person the right to vote or to
consent or to receive notice as a stockholder in respect of meeting of
stockholders for the election of directors of Borrower or any other matters or
any rights whatsoever as a stockholder of Borrower; and no dividends or interest
shall be payable or accrued in respect of this Note or the interest represented
hereby or the Conversion Securities obtainable hereunder until, and only to the
extent that, this Note shall have been converted.
17. Jury Trial. Borrower, by execution, and Holder by acceptance,
-----------
hereof hereby waive all right to a trial by jury in any litigation relating to
this Note and each document incident thereto.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Note on
and as of the date first set forth above.
EMAGISOFT TECHNOLOGIES INC., A FLORIDA
CORPORATION, AS BORROWER
By: /s/ Kyle E. Jones
--------------------
Name: Kyle E. Jones
--------------------
Title: President/CEO
-------------
25
<PAGE>
NOTE NO. 3
----------
CONVERTIBLE NOTE
----------------
THIS NOTE AND PREFERRED STOCK ISSUABLE UPON ANY CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE PREFERRED STOCK ISSUED UPON
CONVERSION HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE NOTE OR SUCH PREFERRED STOCK UNDER SUCH ACT AND APPLICABLE LAWS
OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
----------------
$260,000.00
- -----------
April 10, 2000
--
FOR VALUE RECEIVED, the undersigned, EMAGISOFT TECHNOLOGIES, INC., a
Florida corporation (the "Borrower" or the "Company"), hereby promises to pay to
-------- -------
the order of RICHARD & ALICIA FROM (together with his heirs, personal
------------------------
representatives, successors and assigns, and any such bearer, being hereinafter
referred to collectively as "Holder"), at such times and in such amounts as
------
described herein (the "Note"), the principal sum of TWO HUNDRED SIXTY THOUSAND
---- --------------------------
DOLLARS ($260,000.00), together with interest thereon at the rate set forth
herein (the "Loan"); provided, however, that in lieu of repayment of the Loan,
----
and in full satisfaction as set forth in Section 2 hereof, Borrower may render
the performance described, and otherwise satisfy the terms and conditions set
forth in Section 2 hereof, such that Borrower shall be deemed to have rendered
full performance of its obligations hereunder and this Note, and the
indebtedness evidenced hereby, shall thereupon be terminated, void and of no
further force or effect upon a conversion of the indebtedness into Conversion
Securities, as defined, and as further described in Section 2. Holder shall
advance Borrower the principal of such Loan in a single payment. For purposes
of this Note, "Borrower" shall mean all successors in interest and assignees,
including, without limitation, pursuant to a merger, consolidation,
reorganization, recapitalization or other similar restructuring event
(collectively, a "Reorganization"), and all endorsers, sureties and guarantors
--------------
and any other person liable or to become liable with respect to the Loan.
1. Interest Rate. Interest shall accrue on the outstanding
--------------
principal balance of this Note from and after the date hereof at the rate of
eight percent (8%) per annum, except upon default and then at a higher rate of
interest as provided below, provided, however, that all outstanding accrued and
unpaid interest shall be immediately due and payable upon the effective date of
conversion of this Note. Interest shall be calculated on the basis of a 360-day
year, and shall be charged on the principal outstanding from time to time for
the actual number of days elapsed.
26
<PAGE>
2. Payment of Principal and Interest; Conversion Option.
----------------------------------------------------------
(a) Payment of Principal and Interest. Subject to Holder's
election to convert the Indebtedness (defined below) evidenced hereby into such
number of shares of Conversion Securities (defined below) as described below in
lieu of repayment of the Indebtedness as provided in this Section 2, Borrower
shall pay the entire outstanding principal balance under this Note, together
with all accrued and unpaid interest thereon (collectively, the "Indebtedness"),
------------
at anytime, in the Borrower's sole discretion, on or before the earlier of (i)
one (1) year from the date hereof or (ii) thirty (30) days following the closing
of the first firm commitment, underwritten public offering of the Company's
common stock, par value $0.0001 per share (the "Common Stock") pursuant to an
------------
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), raising gross proceeds to the Company of at least $15,000,000 (an
---
"IPO") (in either case, the "Maturity Date") (the entire term, from the date
--- ---------------
hereof until maturity, hereinafter referred to as the "Loan Term"); provided,
---------
however, that at any time prior to the earlier of (A) Borrower's repayment of
the Indebtedness or (B) the Maturity Date, if Holder so elects in accordance
with subparagraph (c) below, the Borrower may satisfy its obligations hereunder
by issuing and delivering to Holder such number of duly authorized, validly
issued, fully paid and non-assessable shares of Conversion Securities as shall
be equal to the entire outstanding Indebtedness evidenced by this Note, divided
by $3.60 (the "Conversion Formula"). For the purposes hereof, "Conversion
------------------- ----------
Securities" shall mean shares of the Company's Series A preferred stock, par
- ----------
value $0.0001 per share (the "Preferred Stock") offered by the Company to
----------------
outside investors in a private offering.
(b) Conversion. Holder shall, in Holder's sole discretion, at anytime
prior to the earlier of (i) Borrower's repayment of the Indebtedness or (ii) the
Maturity Date, have the right to convert the Indebtedness (in whole and not in
part) evidenced hereby (the "Conversion Option") into such number of Conversion
-----------------
Securities in accordance with the Conversion Formula described above and the
conversion procedure described below.
(c) Conversion Procedure.
(i) Before Holder shall be entitled to exercise the Conversion Option,
Borrower shall give to Holder any necessary subscription documents, including a
subscription agreement, accredited investor questionnaire (in each case, if
any), Investors Rights Agreement, or other documents ("Conversion Securities
---------------------
Documents"). If at anytime following the date of receipt of any Conversion
- ---------
Securities Documents, but prior to the earlier of (A) Borrower's repayment of
-
the Indebtedness or (B) the Maturity Date, Holder intends to accept the
Conversion Option, Holder shall provide Borrower with written notice (the
"Holder Notice") by first class mail, postage prepaid, or by express overnight
---------
courier indicating Holder's intent to accept the Conversion Option. For
purposes hereof, all such notices and other written communications shall be
effective (x) if mailed, five (5) days after mailing, (y) if delivered, upon
delivery and (z) if sent via facsimile, upon confirmation of receipt.
(ii) If Holder informs the Borrower that Holder elects not to accept
---
the Conversion Option, the terms and provisions of the Note, and the rights and
responsibilities thereunder, shall remain in full force and effect.
(iii) If Holder elects to accept the Conversion Option, then together
with the delivery of the Holder Notice, or as soon as practicable after delivery
thereof (and in any event prior to the stated closing of the offering of
Conversion Securities, if any), Holder shall execute and deliver to Borrower any
necessary Conversion Securities Documents prepared by the Borrower in connection
with the offering of such Conversion Securities. Upon receipt of duly executed
Conversion Securities Documents (which, among other things, reaffirms Holder's
"accredited investor" status), Borrower shall as promptly as practicable
thereafter issue and deliver to Holder a certificate(s) for the number of shares
of Conversion Securities to which Holder shall be entitled as aforesaid. The
person(s) entitled to receive the shares of Conversion Securities issuable upon
such conversion of the Note shall be treated for all purposes as the record
holder or holders of such shares of Conversion Securities as of the date of
Borrower's acceptance of such conversion and subscription by its signature on
the Conversion Securities subscription agreement (if any, and if none, then as
Borrower shall otherwise specify).
27
<PAGE>
(iv) Mechanics and Effect of Conversion. No fractional shares of
Conversion Securities shall be issued upon conversion of this Note. In lieu of
Borrower issuing any fractional shares to Holder upon conversion, Borrower shall
pay to Holder the amount of outstanding principal that is not so converted, such
payment to be in the form provided below. Upon (or together with) noticed
conversion of this Note, Holder shall surrender this Note, duly endorsed, at the
principal office of Borrower, together with the Conversion Securities Documents,
as described above. At its expense, as soon as practicable thereafter, Borrower
shall issue and deliver to Holder a certificate(s) for the number of shares of
such Conversion Securities to which Holder shall be entitled upon such
conversion (bearing such legends as are required by the Conversion Securities
Documents and any applicable federal and state securities laws), together with
any cash in lieu of fractional shares or other securities or property to which
Holder is entitled upon conversion under the terms of this Note, including a
check payable to Holder for any cash amounts due hereunder. Upon conversion of
this Note, Borrower shall be deemed to have satisfied and fully forever
discharged all of its obligations hereunder, including, without limitation, the
obligation of repayment of the Indebtedness and this Note and all Indebtedness
evidenced hereby shall immediately be terminated and fully satisfied without
further action by any of the parties hereto and without further rights and
obligations on the part of Borrower.
(d) Acknowledgement by Holder. Holder hereby represents and warrants
to Borrower that Holder has sufficient knowledge and experience of financial and
business matters so that Holder is able to evaluate the merits and risks of
purchasing the Note and Holder has had substantial experience in previous
private and public purchases of securities. Holder is an "accredited investor"
as that term is defined in Rule 501 of Regulation D under the Act.
3. Event of Default.
------------------
Any of the following shall constitute an "Event of Default" under this
----------------
Note, and shall give rise to the remedies provided in Section 4 herein:
(a) The failure by the Borrower to pay or otherwise to satisfy when
due, as contemplated in Section 2, the Indebtedness or the Conversion Option, as
the case may be;
(b) If the Borrower: (i) admits in writing its inability to pay
generally its debts as they mature; (ii) makes a general assignment for the
benefit of creditors; (iii) is adjudicated a bankrupt or insolvent; (iv) files a
voluntary petition in bankruptcy; (v) takes advantage, as against its creditors,
of any bankruptcy law or statute of the United States of America or any state or
subdivision thereof now or hereafter in effect; (vi) has a petition or
proceeding filed against it under any provision of any bankruptcy or insolvency
law or statute of the United States of America or any state or subdivision
thereof, which petition or proceeding is not dismissed within thirty (30) days
after the date of the commencement thereof; (vii) has a receiver, liquidator,
trustee, custodian, conservator, sequestrator or other such person appointed by
any court to take charge of its affairs or assets or business and such
appointment is not vacated or discharged within thirty (30) days thereafter; or
(viii) takes any action in furtherance of any of the foregoing; or
(c) Any merger, liquidation, dissolution or winding up of the Borrower
or its business or any sale of all or substantially all of Borrower's capital
stock or assets; provided, however, the merger or sale of Borrower with a
successor entity that acknowledges and expressly assumes in writing Borrower's
obligations hereunder shall not be considered an "Event of Default" for purposes
hereof.
4. Remedies on Default. If any Event of Default shall occur and be
---------------------
continuing for a period of fifteen (15) business days after notice from Holder,
Holder shall, in addition to any and all other available rights and remedies,
have the right, at Holder's option unless such Event of Default shall have been
cured or waived in writing by Holder (which waiver shall not be deemed to be a
waiver of a subsequent default), to: (a) declare the entire unpaid principal
balance of this Note, together with all interest accrued thereon at the rate
hereinbefore specified to the date of said Event of Default and, thereafter at
the rate of fifteen percent (15%) per annum (or the maximum allowable by law)
and all other sums due by Borrower hereunder, to be immediately due and payable;
and (b) pursue any and all available remedies for the collection of such
principal and interest to enforce its rights as described herein; and in such
case Holder may also recover all costs of suit and other expenses in connection
therewith, including reasonable attorney's fees for collection and the right to
equitable relief (including, but not limited to, injunctions) to enforce
Holder's rights as set forth herein.
28
<PAGE>
5. Certain Waivers. Except as otherwise expressly provided in this
----------------
Note, the Borrower hereby waives diligence, demand, presentment for payment,
protest, dishonor, nonpayment and default with respect to the Indebtedness
evidenced hereby. The Borrower hereby expressly agrees that this Note, or any
payment hereunder, may be extended, modified or subordinated (by forbearance or
otherwise) from time to time, without in any way affecting the liability of the
Borrower.
6. Waivers and Amendments; Cumulative Remedies. Neither any provision
--------------------------------------------
of this Note nor any performance hereunder may be amended or waived orally, but
only by an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought. No right or remedy
conferred upon the parties under this Note is intended to be exclusive of any
other right or remedy contained herein or in any instrument or document
delivered in connection herewith, and every such right or remedy shall be
cumulative and shall be in addition to every other such right or remedy
contained herein and/or now or hereafter existing at law or in equity or
otherwise.
7. Governing Law. This Note shall be deemed to be a contract made
--------------
under the laws of the State of Florida and shall be governed by, and construed
in accordance with, the laws of the State of Florida, without giving effect to
the principles of conflicts of law.
8. Consent to Jurisdiction and Service of Process. The Borrower by
--------------------------------------------------
execution, and Holder by acceptance, hereof each consent to the jurisdiction of
any federal district court in the State of Florida having competent
jurisdiction. The Borrower waives personal service of any summons, complaint or
other process in connection with any such action or proceeding and agrees that
service thereof may be made, as the Holder may elect, by certified mail directed
to the Borrower at the location provided for in Section 10 hereof, or, in the
alternative, in any other form or manner permitted by law.
9. Additional Documents. From time to time Holder will execute and deliver
---------------------
to Borrower such additional instruments as Borrower may reasonably request to
effectuate the purposes of this Note.
10. Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or by
nationally recognized overnight courier or sent via facsimile addressed to:
If to Borrower:
Emagisoft Technologies, Inc.
405 Central Avenue
Second Floor
St. Petersburg, Florida 33701
Attn: Kyle E. Jones, President
Facsimile: (727) 822-7858
If to Holder:
Richard & Alicia From
------------------------
5413 Sandpiper Court
----------------------
Rocklin, CA 95765
-------------------
Facsimile: (916) 772-8118
---------------
or at such other address as shall have been furnished to the other party in
writing. All such notices and other written communications shall be effective
(i) if mailed, five (5) days after mailing, (ii) if delivered, upon delivery,
and (iii) if sent via facsimile, upon confirmation of receipt.
11. Wiring Instructions. Any amount wired to Borrower hereunder shall
--------------------
be wired in accordance with the following wiring instructions:
Bank Name: Nations Bank - Bank of America
Account Name: Emagisoft Technologies, Inc.
Account Number: xxxxxxxxxxxx
Routing number: xxxxxxxxxxxx
29
<PAGE>
12. Severability. If any provision of this Note is prohibited or
------------
unenforceable in any jurisdiction, it shall be ineffective in such jurisdiction
only to the extent of such prohibition or unenforceability, and such prohibition
or unenforceability shall not invalidate the balance of such provision to the
extent it is not prohibited or unenforceable nor the remaining provisions
hereof, nor render unenforceable such provision in any other jurisdiction.
13. Assignment. This Note shall inure to the benefit of, and shall be
----------
binding upon, Borrower and Holder and their respective successors and permitted
assigns. Neither party hereto may assign any of its rights or obligations
hereunder without the prior written consent of the other party.
14. Treatment of this Note. To the extent permitted by generally
-------------------------
accepted accounting principles, Borrower will treat, account and report the Note
as debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
15. Facsimile. Any facsimile signature of any party hereto shall
---------
constitute a legal, valid and binding execution hereby by such party.
16. No Stockholder Rights. Nothing contained in this Note shall be
-----------------------
construed as conferring upon Holder or any other person the right to vote or to
consent or to receive notice as a stockholder in respect of meeting of
stockholders for the election of directors of Borrower or any other matters or
any rights whatsoever as a stockholder of Borrower; and no dividends or interest
shall be payable or accrued in respect of this Note or the interest represented
hereby or the Conversion Securities obtainable hereunder until, and only to the
extent that, this Note shall have been converted.
17. Jury Trial. Borrower, by execution, and Holder by acceptance,
-----------
hereof hereby waive all right to a trial by jury in any litigation relating to
this Note and each document incident thereto.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Note on
and as of the date first set forth above.
EMAGISOFT TECHNOLOGIES INC., A FLORIDA
CORPORATION, AS BORROWER
By: /s/ Kyle E. Jones
--------------------------------------
Name: Kyle E. Jones
-------------------------------
Title: President/CEO
-------------------------------
30
<PAGE>
EXHIBIT NO. 10.5
EMAGISOFT TECHNOLOGIES, INC.
1999 EMPLOYEE STOCK OPTION PLAN
1. PURPOSES.
The purpose of the Emagisoft Technologies, Inc. 1999 Employee Stock Option
Plan (the "Plan") is to foster and promote the long-term financial success of
the Company and materially increase shareholder value by (a) motivating
-
superior performance by means of performance-related incentives, (b)
-
encouraging and providing for the acquisition of an ownership interest in the
Company by Employees and (c) enabling the Company to attract and retain the
-
ser-vices of an outstanding management team upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
2. DEFINITIONS.
(a) Certain Definitions. Capitalized terms used herein without definition
--------------------
shall have the respective meanings set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
---
"Board" means the Board of Directors of the Company.
-----
"Cause" means (i) the willful failure by the Participant (other than due to
----- -
physical or mental illness) to perform substantially his duties as an employee
of the Company or any Subsidiary after reasonable notice to the Participant of
such failure, (ii) the Participant's engaging in serious misconduct that is
injurious to the Company or any Subsidiary, (iii) the Participant's having been
convicted of, or entered a plea of guilty or nolo contendere to, a crime that
constitutes a felony or a misdemeanor if such misdemeanor involves moral
turpitude or affects the Company or any Subsidiary or (iv) the breach by the
Participant of any written covenant or agreement with the Company or any
Subsidiary not to disclose any information pertaining to the Company or any
Subsidiary or not to compete or interfere with the Company or any Subsidiary.
"Change in Control" means the occurrence of any of the following events:
-------------------
(i) the members of the Board at the beginning of any consecutive
twenty-four calendar month period (the "Incumbent Directors") cease for any
-------------------
reason to constitute at least a majority of the members of the Board, provided
that any director whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the members of
the Board then still in office who were members of the Board at the beginning of
such twenty-four calendar month period other than as a result of a proxy
contest, or any agreement arising out of an actual or threatened proxy contest,
shall be treated as an Incumbent Director; or
(ii) any "person," including a "group" (as such terms are used in Sections
13(d) and 14(d)(2) of the Act, but excluding the Company, any Subsidiary or any
employee benefit plan of the Company or any Subsidiary is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) under the Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities; or
(iii) the stockholders of the Company shall approve a definitive agreement
(A) for the merger or other business combination of the Company with or into
-
another corporation, a majority of the directors of which were not directors of
the Company immediately prior to the merger and in which the stock-holders of
the Company immediately prior to the effective date of such merger own a
percentage of the voting power in such corporation that is less than one-half of
the percentage of the voting power they owned in the Company immediately prior
to such transaction or (B) for the sale or other disposition of all or
-
substantially all of the assets of the Company to any other entity; provided, in
--------
each case, that such transaction shall have been consummated; or
31
<PAGE>
(iv) the purchase of Stock pursuant to any tender or exchange offer made by
any "person," including a "group" (as such terms are used in Sections 13(d) and
14(d)(2) of the Act), other than the Company, any Subsidiary, or an employee
benefit plan of the Company or any Subsidiary, for 20% or more of the Stock of
the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
"Change in Control Price" means the highest price per share of Stock offered in
------------------------
conjunction with any transaction resulting in a Change in Control (as determined
in good faith by the Committee if any part of the offered price is payable other
than in cash) or, in the case of a Change in Control occurring solely by reason
of a change in the composition of the Board, the highest Fair Market Value of
the Stock on any of the 30 trading days immediately preceding the date on which
a Change in Control occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Committee" means the Compensation Commit-tee of the Board or such other
---------
committee as the Board may from time to time designate to administer the Plan
(or in the absence of any such designation, the Board), provided that following
the Merger or an IPO, any such committee shall consist of two or more members,
each of whom shall be a "Non-Employee Director" within the meaning of Rule
16b-3, as promulgated under the Act.
"Company" means Emagisoft Technologies, Inc., a Florida corporation, and any
-------
successor thereto.
"Disability" means, unless otherwise determined by the Committee with respect to
----------
a particular Option, disability of the Participant within the meaning of any
long-term disability plan maintained by the Company.
"Employee" means any employee of the Company or any Subsidiary.
--------
"Fair Market Value" means, on any date, (i) prior to the Merger or an IPO, as
------------------- -
determined and established by the Committee based on such relevant facts, which
may include opinions of "independent experts," or annual appraisals of the fair
market value of the Company as may be available to the Committee, and (ii)
following the Merger or an IPO, the closing price of the Stock on a national
securities exchange -(or on such other recognized quotation system on which the
trading prices of the Stock are quoted at the relevant time) on such date,
provided that in the event that there are no Stock transactions reported on such
exchange (or such other system) on such date, Fair Market Value shall mean the
closing price on the immediately pre-ceding date on which Stock transactions
were so reported.
"IPO" means an initial public offering of the Company's Stock.
---
"Merger" means the merger transaction pursuant to which the Corporation will be
------
merged with and into Manatee American Financial Corporation, a Florida
corporation, in accordance with a Plan of Merger adopted by the Board of
Directors and Stockholders of the Corporation.
"Option" means the right to purchase Stock at a stated price for a specified
------
period of time. For purposes of the Plan, an Option may be either (i) an
"Incentive Stock Option" (ISO) within the meaning of Section 422 of the Code or
-----------------------
(ii) a "Non--statutory Stock Option" (NSO). Unless the Committee shall
--
otherwise specify at the time of grant, any Option granted hereunder shall be a
Non-statutory Stock Option.
"Participant" means any Employee designated by the Committee to receive an
-----------
Option under the Plan.
32
<PAGE>
"Retirement" means termination of a Participant's employment on or after the
----------
normal retirement date or, with the Committee's approval, on or after any early
retirement date established under any retirement plan maintained by the Company,
or any Subsidiary in which the Participant participates.
"Stock" means the [Class A] common stock of the Company, par value [$.0001] per
-----
share.
"Subsidiary" means any corporation in which the Company owns, directly or
----------
indirectly, stock representing 50% or more of the voting power of all classes
of stock entitled to vote and any other business organization, regardless of
form, in which the Company possesses directly or indirectly 50% or more of the
total combined equity interests in such organization.
(b) Gender and Number. Except when otherwise indicated by the context,
-------------------
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.
3. POWERS OF THE COMMITTEE
The Committee shall be responsible for the administration of the Plan,
including, without limitation, determining which Employees receive Options, what
kind of Options are granted under the Plan and for what number of shares, and
the other terms and conditions of each such Option. The Committee may
establish different terms and conditions for different types of Options, for
different Participants receiving the same type of Option and for the same
Participant for each Option such Participant may receive, whether or not
granted at different times. The Committee shall have the responsibility of
construing and interpreting the Plan and of establishing and amending such rules
and regulations, as it may deem necessary or desirable for the proper
administration of the Plan. Any decision or action taken or to be taken by the
Committee, arising out of or in connection with the construction,
administration, interpretation and effect of the Plan and of its rules and
regulations, shall, to the maximum extent permitted by applicable law, be
within its absolute discretion (except as otherwise specifically pro-vided
herein) and shall be conclusive and binding upon the Company, all Participants
and any person claiming under or through any Participant.
4. STOCK SUBJECT TO PLAN
(a) Number. Subject to the provisions of Section 4(b) and (c), the number
------
of shares of Stock subject to Options under the Plan may not exceed 500,000
shares of Stock, plus any shares which, after the effective date of the Plan,
become available for Options under this Plan in accordance with Section 4(b)
below. Without limiting the generality of the foregoing, whenever shares are
received by the Company in connection with the exercise of any Option granted
under the Plan, only the net number of shares actually issued shall be counted
against the foregoing limit. The shares to be delivered under the Plan may
consist, in whole or in part, of treasury Stock or authorized but unissued Stock
not reserved for any other purpose.
(b) Canceled, Terminated, or Forfeited Options. Any shares of Stock subject
------------------------------------------
to any Option granted hereunder which for any reason is canceled, terminated or
otherwise settled without the issuance of any Stock shall be available for
further Options under the Plan.
(c) Adjustment in Capitalization. In the event of any Stock dividend or
------------------------------
Stock split, re-capitalization (including, without limitation, the payment of
an extraordinary cash dividend), merger, consolidation, combination, spin-off,
distribution of assets to stockholders, exchange of shares, or other similar
corporate change or other similar event that affects the Stock such that an
adjustment is required to preserve, or to prevent enlargement of, the benefits
or potential benefits made available under this Plan, then the Committee shall,
in such manner as the Committee shall deem equitable, adjust any or all of (i)
--
the number and kind of shares which thereafter may be optioned and sold under
the Plan (including, without termination, adjusting the limits on the number and
types of Options that may be made under the Plan), (ii) the number and kinds of
--
shares subject to outstanding Options and (iii) the exercise price with respect
---
to any of the foregoing. Additionally, the Committee may make pro-visions for a
cash payment to a Participant or a person who has an outstanding Option.
However, the number of shares subject to any Option shall always be a whole
number.
33
<PAGE>
5. STOCK OPTIONS
(a) Grant of Options. Options may be granted to Participants at such
------------------
time or times as shall be deter-mined by the Committee. Options granted under
the Plan may be of two types: (i) Incentive Stock Options and (ii)
- --
Non-statutory Stock Options, provided that no Incentive Stock Option shall be
--------
granted to any Employee who is not eligible to receive such an Option under
Section 422 of the Code and the regulations thereunder. The Committee shall
have complete discretion in deter-mining the number of Options, if any, to be
granted to a Participant. Without limiting the foregoing, the Commit-tee may
grant Options containing provisions for the issuance to the Participant, upon
exercise of such Option and payment of the exercise price therefor with
previously owned shares of Stock, of an additional Option for the number of
shares so delivered. Each Option shall be evidenced by an Option agreement
that shall specify the type of Option granted, the exercise price, the duration
of the Option, the number of shares of Stock to which the Option pertains, and
such other terms and conditions not inconsistent with the Plan as the Committee
shall determine.
(b) Option Price. Unless otherwise determined by the Committee at the time
-------------
of grant, Options granted pursuant to the Plan shall have an exercise price
which is not less than the Fair Market Value of a share of Stock on the date the
Option is granted.
(c) Exercise of Options. Options awarded under the Plan shall be
---------------------
exercisable at such times and shall be subject to such restrictions and
conditions including the performance of a minimum period of service or the
satisfaction of performance goals, as the Commit-tee may impose, either at or
after the time of grant of such Options; provided that no Option shall be
-------------
exercisable for more than 10 years after the date on which it is granted. No
Option shall be exercisable, and shall be deemed terminated and cancelled, if it
is not exercised during the periods set forth in this Plan and the Option.
(d) Payment. The Committee shall establish procedures governing the
-------
exercise of Options. No shares shall be delivered pursuant to any exercise of
an Option unless arrangements satisfactory to the Committee have been made to
assure full payment of the option price therefor. Without limiting the
generality of the foregoing, the Committee may provide, on such terms and
conditions as the Committee determines appropriate, that payment of the option
price may be made (i) in cash or its equivalent, (ii) by exchanging shares of
- --
Stock owned by the optionee (which are not the subject of any pledge or other
security interest), (iii) through an arrangement with a broker approved by the
---
Company whereby payment of the exercise price is accomplished with the proceeds
of the sale of Stock or (iv) by any combination of the fore-going, provided that
-- -------------
the combined value of all cash and cash equivalents paid and the Fair Market
Value of any such Stock so tendered to the Company, valued as of the date of
such tender, is at least equal to such option price.
(e) Termination of Employment Due to Death, Disability or Retirement.
-----------------------------------------------------------------------
Unless otherwise determined by the Committee at the time of grant, in the event
a Participant's employment terminates by reason of death, Disability or
Retirement, any Options granted to such Participant which are exercisable at the
date of his or her death, Disability or Retirement may be exercised at any time
prior to the earlier of the expiration of the term of the Options or within six
(6) months (or such other period as the Committee shall determine at the time of
grant) following the Participant's termination of employment. Unless otherwise
determined by the Committee at the time of grant, any Options, which have not
become exercisable in accordance with the terms thereof, shall be cancelled upon
the Participant's termination of employment.
(f) Termination of Employment for Any Other Reason. Unless otherwise
----------------------------------------------------
determined by the Committee at or after the time of grant, in the event the
employment of the Participant shall terminate for any reason other than those
described in Section 5(e), any Options granted to such Participant which are
exercisable at the date of the Participant's termination of employment shall be
exercisable at any time prior to the earlier of the expiration of the term of
the Options or within six (6) months (or such other period as the Committee
shall determine at the time of grant) following the Participant's termination of
employment (any Options which have not become exercisable in accordance with the
terms thereof shall be cancelled upon the Participant's termination of
employment); provided that, if a Participant's employment is terminated for
--------------
34
<PAGE>
Cause, all Options granted to such Participant which are exercisable at the
date of the Participant's termination of employment shall be exercisable at any
time prior to the earlier of the expiration of the term of the Options or within
sixty (60) days (or such other period as the Committee shall determine at the
time of grant) following the Participant's termination of employment (any
Options which have not become exercisable in accordance with the terms thereof
shall be cancelled upon the Participant's termination of employment).
(g) Incentive Stock Options. Notwithstanding anything in the Plan to the
-------------------------
contrary, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code.
(h) Buyout. The Committee may at any time offer to buy out an Option
------
previously granted for a payment in cash, based on such terms and conditions as
the Committee shall establish and communicate to the optionee at the time that
such offer is made.
6. CHANGE IN CONTROL
(a) Accelerated Vesting and Payment. Subject to the provisions of
----------------------------------
Section 6(b) below, in the event of a Change in Control, each Option shall be,
at the discretion of the Committee, either canceled in ex-change for a payment
in cash of an amount equal to the excess, if any, of the Change in Control Price
over the exercise price for such Option, or fully exercisable regardless of the
exercise schedule otherwise applicable to such Option.
(b) Alternative Options. Notwithstanding Section 6(a), no cancellation,
--------------------
acceleration of exercisability, vesting, cash settlement or other payment shall
occur with respect to any Option if the Committee reasonably determines in good
faith prior to the occurrence of a Change in Control that such Option shall be
honored or assumed, or new rights substituted therefor (such honored, assumed
or substituted option hereinafter called an "Alternative Option"), by a
Participant's employer (or the parent or a Subsidiary of such employer)
immediately following the Change in Control, provided that any such Alternative
Option must:
(i) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to or better
than the rights, terms and conditions applicable under such Option, including,
but not limited to, an identical or better exercise or vesting schedule and
identical or better timing and methods of payment;
(ii) have substantially equivalent economic value to such Option
(determined at the time of the Change in Control);
(iii) have terms and conditions which provide that in the event that
the Participant's employment is involuntarily terminated or constructively
terminated, any conditions on a Participant's rights under, or any restrictions
on transfer or exercisability applicable to, each such Alternative Option
shall be waived or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a termination by a
Participant following a material reduction in the Participant's base salary or
a Participant's incentive compensation opportunity or a material reduction
in the Participant's responsibilities, in any such case without the
Participant's written consent.
7. AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board at any time may terminate or suspend the Plan, and from time to time
may amend or modify the Plan, except that no amendment, modification, or
------------
termination of the Plan shall in any manner adversely affect any Option
theretofore granted under the Plan, without the consent of the Participant to
whom such Option was granted. Notwithstanding the foregoing, the Board may not
increase the total number of shares of Stock subject to the Plan without
shareholder approval (except pursuant to Section 4(c)).
35
<PAGE>
8. MISCELLANEOUS PROVISIONS
(a) Non-transferability of Options. Unless the Committee shall permit (on
--------------------------------
such terms and conditions as it shall establish) an Option to be transferred to
a member of the Participant's immediate family or to a trust or similar vehicle
for the benefit of such immediate family members (collectively, the "Permitted
Transferees"), no Option shall be assignable or transferable except by will or
the laws of descent and distribution, and except to the extent required by law,
no right or interest of any Participant shall be subject to any lien, obligation
or liability of the Participant. All rights with respect to Options granted to
a Participant under the Plan shall be exercisable during his life-time only by
such Participant or, if applicable, the Permitted Transferees. The rights of a
Permitted Transferee shall be limited to the rights conveyed to such Transferee,
who shall be subject to and bound by the terms of the agreement or agreements
between the Participant and the Company.
(b) Beneficiary Designation. Each Participant under the Plan may from time
-----------------------
to time name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid or by whom any
right under the Plan is to be exercised in case of his death. Each designation
will revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Participant in writing with the Commit-tee during his lifetime. In the absence
of any such designation, benefits remaining unpaid at the Participant's death
shall be paid to or exercised by the Participant's surviving spouse, if any, or
otherwise to or by his or her estate.
(c) No Guarantee of Employment or Participation. Nothing in the Plan shall
--------------------------------------------
interfere with or limit in any way the right of the Company, or any Subsidiary
to terminate any Participant's employment at any time, nor to confer upon any
Participant any right to continue in the employ of the Company, or any
Subsidiary. No Employee shall have a right to be selected as a Participant,
or, having been so selected, to receive any future Options.
(d) Tax Withholding. The Company shall have the right to deduct from all
----------------
amounts paid to a Participant in cash (whether under this Plan or otherwise) any
taxes required by law to be withheld in respect of Options under this Plan. No
shares shall be issued pursuant to any Option unless and until arrangements
satisfactory to the Committee shall have been made to satisfy any withholding
tax obligations applicable with respect to such Option. Without limiting the
generality of the foregoing, the Company shall have the right to retain, or the
Committee may, subject to such terms and conditions as it may establish from
time to time, permit Participants to elect to tender, Stock (including Stock
issuable in respect of an Option) to satisfy, in whole or in part, the amount
required to be withheld.
(e) Compliance with Legal and Exchange Requirements. The Plan, the
-----------------------------------------------------
granting and exercising of Options thereunder, and the other obligations of the
Company under the Plan, shall be subject to all applicable Federal and State
laws, rules, and regulations, and to such approvals by any regulatory or
governmental agency as may be required. The Company, in its discretion, may
postpone the granting and exercising of Options, the issuance or delivery of
Stock under any Option or any other action permitted under the Plan to permit
the Company, with reasonable diligence, to complete such stock exchange listing
or registration or qualification of such Stock or other required action under
any Federal or State law, rule, or regulation and may require any Participant
to make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of Stock in compliance
with applicable laws, rules, and regulations. The Company shall not be
obligated by virtue of any provision of the Plan to recognize the exercise of
any Option or to otherwise sell or issue Stock in violation of any such laws,
rules, or regulations; and any postponement of the exercise of any Option under
this provision shall not extend the term of such Options, and neither the
Company nor its directors or officers shall have any obligation or liability
to the Participant with respect to any Option (or Stock issuable there-under)
that shall lapse because of such postponement.
(f) Indemnification. Each person who is or shall have been a member of the
---------------
Committee or of the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be made a party or in which he may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with the
Company's approval, or paid by him in satisfaction of any judgment in any such
action, suit, or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or By-laws, by con-tract, as a matter of
law, or otherwise.
36
<PAGE>
(g) Effective Date. Subject to the approval of the shareholders of the
---------------
Company, the Plan shall be effective on January 3, 2000. No Options may be
granted under the Plan after January 3, 2010.
(h) No Limitation on Compensation. Nothing in the Plan shall be construed
-------------------------------
to limit the right of the Company to establish other plans or to pay
compensation to its employees, in cash or property, in a manner that is not
expressly authorized under the Plan.
(i) Deferrals. The Committee may postpone the exercising of Options, the
---------
issuance or delivery of Stock under any Option or any action permitted under the
Plan to prevent the Company or any Subsidiary from being denied a Federal income
tax deduction with respect to any Option other than an Incentive Stock Option.
(j) Governing Law. The Plan shall be construed in accordance with and
--------------
governed by the laws of the State of Florida, without reference to principles of
conflict of laws which would require application of the law of another
jurisdiction, except to the extent that the corporate law of the State of
[Delaware] specifically and mandatorily applies.
(k) No Impact On Benefits. Except as may otherwise be specifically stated
-----------------------
under any employee benefit plan, policy or program, no amount payable in
respect of any Option shall be treated as compensation for purposes of
calculating an Employee's right under any such plan, policy or program.
(l) No Constraint on Corporate Action. Nothing in this Plan shall be
-------------------------------------
construed (i) to limit, impair or otherwise affect the Company's right or power
-
to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure, or to merge or consolidate, or dissolve,
liquidate, sell, or transfer all or any part of its business or assets or (ii)
--
except as provided in Section 7, to limit the right or power of the Company, or
any Subsidiary to take any action which such entity deems to be necessary or
appropriate.
37
<PAGE>
EXHIBIT 10.6
CONSENT TO ACTION TAKEN
BY THE SOLE DIRECTOR AND
THE SHAREHOLDERS OF
EMAGISOFT TECHNOLOGIES, INC.
The undersigned, being the sole director, and the holders of a majority of the
issued and outstanding shares of capital stock, of EMAGISOFT TECHNOLOGIES, INC.,
a Florida corporation (the "Corporation"), hereby consent in writing to the
corporate actions specified below and adopt and approve the following
resolutions pursuant to Sections 607.0704 and 607.0821, Florida Statutes:
BE IT RESOLVED:
Technologies, Inc. Employee Stock Option Plan substantially in the form
presented to the stockholders
1. That the stockholders hereby authorize, approve and adopt the Emagisoft
and attached hereto as Exhibit "A" to these resolutions.
2. That the appropriate officers of the Corporation be, and each of them
hereby is, authorized and empowered on behalf of the Corporation to pay any fees
and expenses and to do such other acts and things as may be necessary or
appropriate to carry out the intent and accomplish the purposes of the foregoing
resolutions and the transactions contemplated thereby.
IN WITNESS WHEREOF, the undersigned, being the sole director, and the holders of
a majority of the issued and outstanding shares of capital stock, of the
Corporation, hereby authorize the above corporate action and adopt and approve
the above resolutions on the 3rd day of January, 2000.
---
THE BETTERMENT TRUST
BY: /s/ Kyle E. Jones BY: /s/ Kyle E. Jones
- ---------------------------------- ----------------------------------
KYLE E. JONES KYLE E. JONES, TRUSTEE
Director 5,582,260 shares of common stock
By: /s/ William H. Egge IV By: /s/ Roger Tichenor
- ---------------------------------- ----------------------------------
WILLIAM H. EGGE IV ROGER TICHENOR
477,680 shares of common stock 595,530 shares of common stock
By: /s/ Peter VanSon
- ----------------------------------
PETER VANSON
268,460 shares of common stock
The issued and outstanding shares of capital stock of the Corporation consist of
13,174,000 shares of common stock.
38
