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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER 33-67766-A
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EMAGISOFT TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-3401044
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(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation or organization)
405 CENTRAL AVENUE, 2nd FLR, ST. PETERSBURG, FL 33701
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(Address of principal executive offices) (Zip Code)
(727) 898-0688
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(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
NONE NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.0001 par value
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
For the fiscal year ended December 31, 1999, consolidated revenues of the issuer
were $ 421,000
As of December 31, 1999, there were 13,174,000 shares of the Registrant's common
stock outstanding. The aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, as of December 31, 1999, was $ 16,467,500.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format Yes / / No /X/
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TABLE OF CONTENTS
Page No.
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PART I.
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . 10
ITEM 7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 14
ITEM 8. CHANGES IN, AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . 28
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS; PROMOTERS AND CONTROL PERSONS
OF THE REGISTRANT; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT . . . . . . . . . . . . . . . . . . . . . . . . 28
ITEM 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . 29
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 29
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . 30
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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PART I
FORWARD-LOOKING STATEMENTS
The information in this report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
'Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such statements are based upon current
expectations that involve risks and uncertainties. In our discussions of the
Company and our business strategy, we have included financial projections of
anticipated future operations. Those projections are based on management's best
estimate of the financial effects of future events and should be viewed with
caution. Any statements or financial projections contained herein that are not
statements of historical facts may be deemed forward-looking statements. For
example, words such as "may," "will," "should," "estimates," "predicts,"
"potential," "continue," "strategy," "believes," "anticipates," "plans,"
"expects," "intends," and similar expressions are intended to identify
forward-looking statements. Any forward-looking statements and financial
projections are not guarantees of future performance and are subject to a number
of risks and uncertainties, some of which are beyond our control. These risks
and uncertainties are described and discussed elsewhere in this report. Because
of these inherent risks and uncertainties, the forward-looking events may not
occur or they may vary materially from those described in this report. You
should not rely on these forward-looking statements or financial projections.
They are only our opinion as of the date of this report.
ITEM 1. BUSINESS
The Company
Through our subsidiaries, we are a provider of Internet software and services.
We have developed and are completing QuickSuite, a comprehensive and integrated
set of Internet-based software tools engineered for the development, deployment,
marketing, and management of commercial Web sites. We are also completing the
installation and deployment of QuickServices, a highly reliable network and data
processing facility for Internet hosting services and support. As a true
Application Service Provider (ASP), we provide our customer with the total
hardware and software solution to their Web needs. The ASP model is the trend in
business-to-business as well as business-to-consumer outsourcing. As an ASP, our
services allow our customers to focus on their core competencies and yet respond
to rapidly changing technologies while reducing the high cost of participation
in e-commerce.
We have two primary sources of revenues: Rental revenues of our QuickSuite
software in connection with the associated Internet Website hosting revenues,
(QuickServices); and revenues from Website design through our Solution Support
Centers. Both revenue sources compliment the others in providing a total
e-commerce solution.
Emagisoft Corporation is a wholly owned subsidiary of Emagisoft Technologies,
Inc. Emagisoft Corporation is the developer of the QuickSuite software and the
QuickServices hosting platform. Emagisoft Corporation will concentrate on the
software development and platform build-out and expansion. Customer service and
product sales are to be handled by the third-party Solution Centers, who act as
Value Added Resellers (VARs) for the company's products and services.
Interactive Media Solutions, Inc. is a wholly owned subsidiary of Emagisoft
Corporation. Interactive Media Solutions, Inc. is a full-service new media
agency providing high-quality digital content and Web site design services. With
the acquisition of Interactive Media Solutions, Inc., Emagisoft Corporation
established the first Solutions Support Center for its products. The Solutions
Support Center model will provide training, support, and development services to
the entire network of QuickSuite developers and resellers.
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Employees
At December 31, 1999, we had 33 employees at our St. Petersburg, Florida
headquarters, organized as follows: 13 in software development; 3 in sales and
marketing; 8 in media design; 9 in administration. We also use approximately 60
contract programmers in the research and development of our software. There are
no collective bargaining agreements in effect. We believe that relations with
our employees are good. None of our employees is represented by a union.
Generally, our employees are employed on an at-will basis. Several of our key
employees are subject to employment agreements. We require all of our employees
to sign a Confidential Information and Invention Assignment Agreement, which
intends to protect information and ideas proprietary to our company and its
subsidiaries.
Network Overview
Our goal is to provide our customers with superior features and performance.
Components of our Internet connectivity solution include a tier-one national
backbone over an ATM network. We include high-performance network architecture
to give customers excellent service 24 hours a day, with 7-day-a-week
reliability. Server throughput and other performance characteristics are
monitored automatically for optimal load leveling and traffic balancing.
Many online services companies experience bottlenecking when reading and writing
data to their disk drives, but with solid state database disk caching, our
drives are writing data to RAM. This decreases the time it takes to access the
disk from 7 to 10 milliseconds down to .035 milliseconds, a significant increase
in disk drive performance. We can configure the unit (MegaCache 4000) as a
cache, a solid-state disk (SSD), or both.
Network Monitoring capabilities are in place to determine many aspects of server
health including availability, CPU usages, hard disk space, and other factors.
When any of these criteria meet or exceeds pre-determined thresholds, the
network administrators are notified. We continuously monitor the network for new
devices and the status of equipment on the network. Discovery and monitoring
also detect devices that are located across Wide Area Networks (WANs).
Emagisoft Corporation generates Web-based reports for proactive trend analysis
on the health of the network. These reports point out trends in performance,
availability, inventory, and exceptions. Analysis of this historical data
provides a clear picture about the devices in the network, and allows network
managers to take action before there is a problem in the network. Emagisoft
Corporation will implement proactive management to alert network administrators
of network and server issues before problems arise.
The Emagisoft e-commerce solution features an unparalleled level of support by
dedicated and fully trained systems and network support staff. Certified
third-party integrators participating in the Emagisoft Solution Center program
will provide initial QuickSuite customization support. All QuickSuite Web sites
will be hosted and administered at Emagisoft's facilities in St. Petersburg,
Florida, and at other locations as they become operational. Support services
will include 24-hour a day dedicated network administration, with systems
support on a standard business day basis and off-hour support available at an
additional fee. Additional customer services and support, including support for
shoppers through third-party providers, will be addressed on an as-needed basis.
Our network delivery plan involves a zero fault tolerance concerning
reliability. To achieve this goal, we have entered into strategic relationships
with WinStar; providers of wireless delivered bandwidth, and are negotiating
with DSL Networks, a provider of a private data network linked directly to the
Internet backbone. These relationships include the delivery of bandwidth for the
operation of our network as well as agent relationships for the reselling of the
bandwidth to end user customers.
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Software Products Overview
Core to the Emagisoft "Total E-commerce Solution" are the QuickSuite software
tools, each based on an easy-to-learn, easy-to-use, integrated Web browser user
interface. QuickSuite technology automates every business function for the
Web-based merchant's operation, providing a comprehensive e-commerce solution to
create dynamic, feature rich Web sites. The "Total E-commerce Solution" empowers
merchants with sophisticated management tools for hands-on business
administration, provides an arsenal of marketing weapons to place them ahead of
their competition, and creates a powerful yet convenient online environment.
The QuickSuite software includes the following modules:
QUICKCOMPOSER - WEB PAGE DEVELOPMENT AND MAINTENANCE TOOL KIT
QuickComposer provides a simplified environment allowing QuickSuite users to
rapidly design, modify, and maintain the visual presentation layers for their
Web sites. QuickComposer allows users to create customized environments, motifs,
and themes thus offering consistency in backgrounds, bullets, banners,
hyperlinks, and navigation bars across their entire Web site - without requiring
technical knowledge. This design strategy provides the flexibility to create
world-class, consistently designed Web content.
QUICKRESOURCES - FORMS AND WORKFLOW GENERATOR
QuickResources is a tool that allows the user to generate Web browser-based
forms that collect and manage information over the Web. These forms enable Web
browser users (Web surfers, purchasing agents, customers, etc.) to enter
information into the QuickSuite customers' database.
QUICKPURCHASE - E-COMMERCE ONLINE CATALOG DATABASE
QuickPurchase is the underlying commerce engine that drives the client's online
e-commerce application for conducting business-to-consumer or
business-to-business sales. Descriptions, specifications, and pricing
information, etc. can be cross-referenced with user-defined departments and
category designations. QuickPurchase enables the manufacturer or reseller to
easily maintain the e-commerce "Storefront" or "Distributor Warehouse" once it
has been published to the Web. QuickPurchase helps online purchasers to quickly
find specific product items through easy-to-use query, sort, and find functions.
QUICKTRANSACT - ONLINE CREDIT CARD PROCESSING SYSTEM
All business payment transactions require a system to facilitate of sending and
receiving payment from the buyer and seller. Emagisoft acts as a gateway for the
manufacturer or reseller, presenting charges to the processor designated by
them. QuickTransact provides the mechanism for exchange of payment
reconciliation and process. QuickTransact facilitates this process through a
service-based solution that captures and processes payment data. Optionally,
the manufacturer or reseller can choose various additional transaction services
including: Authorization, Settlement, Credit, Fraud Screening (through our
strategic partner Cybersource), Delivery Address Verification, and Tax
Calculations.
QUICKSTATISTICS - CLIENT TRACKING SYSTEM
QuickStatistics tracks all Web presence activity specific to each respective
hosted Web site, including numbers of visitors each minute, hour, day, week,
month, and year. It provides detailed information about visitors including:
active sessions, unique sessions, browser type, referring URL, referring search
engine and keyword, network geographic location of user, their desktop browsing
platform, their behavior while at the Web site, etc.
QUICKPOSITION - SEARCH ENGINE PLACEMENT AND INDEXING TOOLS
QuickPosition is a key Internet marketing tool which provides an interactive
environment for collecting and updating information about the Web site for
automated submission and indexing to search engines and link directories.
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The different modules of the software are in various stages of development, with
the release of commercial versions of all modules scheduled for the second and
third quarters of 2000.
Website Design Overview
The QuickSuite solution is a total e-commerce solution including, if desired,
professional Website configuration and design. During the software completion
phase, Emagisoft is funneling beta applications of the software tool to its
subsidiary, Interactive Media Solutions, Inc. (IMS). As Emagisoft's in-house,
Solutions Support Center (SSC), IMS compliments implementation of the QuickSuite
family of software tools and provides us with high quality beta sites showcasing
the software. During these final phases of product development, IMS customers
are not charged for the software component of the E-commerce platform; however,
design service fees as well as hosting fees apply.
Benefits of the QuickSuite Solution
We believe our Total Solutions Provider (TSP) business model provides the
following benefits:
Implementing e-commerce applications in-house by a company is a costly and
involved process. Often up-grades and additional information technologies (IT)
staff is required. Our software and network solutions often result in
substantial cost savings to our customers. Our e-commerce platform gives
customers access to innovative technology traditionally reserved only for large
companies.
Laypeople with minimum technical experience are able to use QuickSuite to
conduct their daily Internet activities. In-house applications often require a
broad range of people with a complex combination of skills with many different
software tools and technologies. The way Web presences are now designed and
maintained, companies have to install many different software applications and,
by proxy ties the users to a particular machine to make it work. QuickSuite
customers, however, are always using the most current version regardless of
where they log in from, as well as not having the hassle of upgrading or
downloading new versions.
The QuickSuite family of software is totally integrated and each module
operates seamlessly with the others. This often results in substantial savings
in time and eliminates compatibility issues often found in other e-commerce
platforms.
The QuickSuite platform is completely browser-based with a user-friendly
interface. Access to the e-commerce site is only limited by permission and
Internet connectivity. Our customers can have full access to all authorized
areas of their e-commerce site from any computer with Internet connectivity,
anywhere in the world.
Customers
We plan to have our Solutions Center Sales Channel market, target, and sell
primarily to companies with annual revenues of at least one-half of a million
dollars and higher, with no limitation on the company size, to include Fortune
1,000, 500, and 100 companies. However, companies with annual revenues between
$1 million and $100 million will be the primary target demographic for
Emagisoft's products and services. Both business-to-business and
business-to-consumer applications benefit from our robust, scalable platform.
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Competition
The Application Service Provider (ASP) model involves the use of third parties
to remotely host a company's applications. The ASP provides software, Internet
hosting, and connectivity, as well as design services, and a wide array of
support functions. The industry, while still in its infancy, is highly
competitive and there are no substantial barriers to entry. The most significant
factors include reliability, quality of services, and an established network of
business references.
Our competition includes large suppliers of Internet solutions including Oracle,
Microsoft, Qwest, GTE, and others who are forming partnerships to provide ASP
solutions. In addition, medium and small sized Internet Service Providers (ISPs)
are forming alliances with software and design firms to complete their ASP
product offerings. Major systems integrators such as Andersen Consulting,
L.L.P., IBM and others provide information technology solutions including
Internet-related products to their customers.
While it is uncertain who will ultimately command the largest market share of
the ASP market, the telecommunications carriers and other providers of bandwidth
will have the advantage of greater economies of scales and the ability to engage
in various forms of price competition. We have formed and are continuing to
pursue strategic alliances with several upstream providers, including WinStar
and DSL Networks, to benefit from their network and pre-existing customer bases.
These relationships include the delivery of bandwidth for the operation of our
network as well as agent relationships for the reselling of the bandwidth to end
user customers.
Our Strategy
We will adopt aggressive marketing and sales strategies that will utilize
e-commerce technologies, traditional marketing, direct mail and telemarketing
programs, and strategic alliances to ensure the broadest possible market
penetration for QuickSuite in the most timely fashion.
A direct sales force will be deployed to quickly establish reseller channels
including: hardware integrators, Web developers, Solutions Centers, VAR's, and
distributors. Resellers will be encouraged to tie-in e-commerce marketing
programs supported by the Emagisoft Website and e-mail promotional programs.
Trade shows, product seminars, and special events will target the reseller
channels to develop and expand this distribution channel. E-mail marketing
campaigns will target small businesses, VAR's, and Fortune 5000 companies.
A focused publicity campaign will disseminate new product release notices and
product reviews by prominent writers and Internet personalities to appropriate
print media. Beta test sites will be developed in conjunction with prominent,
high profile companies, to be presented as third-party endorsement and showcases
for the QuickSuite products.
A comprehensive advertising campaign will concurrently build market awareness of
the "Total E-commerce Solution" and the Emagisoft Web site. Targeted
publications will be chosen for each market segment including end-users, VAR's,
resellers and developers. Co-op advertising programs will also be developed
with the resellers.
Emagisoft is forming and continues to pursue strategic alliances and
partnerships with key industry leaders. Strategic alliances and partnerships
also provide preferred access to technical products, resources, and assistance,
helping to ensure that QuickSuite remains at the leading edge of e-commerce
technology. Publicity campaigns will be deployed for each partnership and
alliance to promote the implicit third-party endorsement and credibility
generated.
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Emagisoft's strategy includes enlisting a network of resellers from 40 major
metropolitan US markets and using traditional channel-support strategies.
Solutions Centers, as we call these resellers, are best suited for marketing and
servicing our products and services. We will help them design a marketing
strategy and offer a series of sales training courses for their integrator
staff. There will also be separate training for the salespeople.
We will be rolling out up to eight new regional facilities, geographically and
strategically located in major US markets. Within these facilities, there will
be a Solutions Support Center with graphic designers and, QuickSuite
professionals who will offer training and support for new and existing Solutions
Centers in that region. There will be a full-service 24/7 Internet Data
Processing Center. We estimate that over the next 24 months, we will establish
relationships with approximately 1500 Value Added Resellers (VARs) and recruit
them as Solutions Centers.
Regional facilities for Emagisoft will expand as we continue to grow. All
Regional Solutions Support Centers will conduct weekly QuickSuite training
Sessions for new and existing Solutions Centers. There will also be an Emagisoft
regional sales manager's office and a product showroom, as well as a regional
Internet Data Processing Center complete with high-bandwidth Internet Data
Communications, rendering servers, application servers, and database servers.
All regional centers will be connected to the Emagisoft corporate headquarters
in St. Petersburg, Florida for centralized administration and coordination as
well as providing redundancy to our network.
Risk Factors
In addition to other information in this report, the following risk factors
should be carefully considered by investors evaluating us. These risks may
impair our ability to obtain favorable operating results and realize our
business prospects. Our limited history of operations makes an evaluation of our
future difficult. Forward-looking statements are subject to known and unknown
factors that may result in our strategy proving to be unsuccessful. Actual
results could differ materially from those projected in any forward-looking
statements.
Our company is in the early stages of development.
Emagisoft Technologies, Inc. is in the final stage of product development and
market strategy implementation. We have very little operating history on which
to evaluate the probability of our future success. The first commercial version
of our software is scheduled for release in the second quarter of 2000. Early
stage companies typically encounter difficulties and risks, as further discussed
in this section. Our continuing viability is contingent on how we address these
risks.
We have a history of losses and expect to incur additional losses in the
future.
We have incurred a net loss of $981,288 in 1999. We expect to derive
substantially all of our revenues from the sale of our software and hosting
revenue from customers using our software. There is no historical information on
the achievability of those sales. We expect to incur significant sales and
marketing, research and development, and general and administrative expenses.
We need to hire additional personnel.
Our future depends on our ability to identify, attract, hire, train, and retain
highly skilled technical, managerial, sales, and marketing personnel. The market
for such personnel is highly competitive. If we fail to successfully attract and
retain a sufficient number of qualified personnel, our business could suffer.
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Key personnel.
Our performance depends on the continued service of several key personnel. We
maintain key life insurance on Kyle Jones, our Chief Executive Officer, William
Egge, our Senior Software Engineer and David Hollis, our Chief Information
Officer in the amount of $ 1,000,000 each. If we lose the services of these and
other executives, our business could suffer in excess of the coverage of the
policies.
Implementation of our products by large customers is complex, time
consuming, and expensive. We expect to experience long sales and implementation
cycles.
Our products and services often require approval by many users within a buying
organization. The implementation is often complex, time consuming, and subject
to lengthy decision processes. Many of our customers will be considering their
Internet presence for the first time, and must change established business
practices to do so. Our targeted customer base includes small and large
customers. It frequently takes several months of expensive and time consuming
negotiations to finalize a large sale.
The business-to-business electronic commerce industry is very competitive.
The participants in the industry are growing exponentially. If we are unable
to compete, the achievability of our business strategy will be seriously harmed.
The market for e-commerce solutions is large and very attractive to other
software and service companies. The relatively low barriers to entry and the
intense competition caused by many entrants to the industry will likely result
in price reductions, reduced gross margins, and loss of market share, any of
which could seriously harm the achievability of our business strategy.
Our expansion plans involve risk.
Our strategy involves establishing a number of regional locations in various
cities of the United States. Each location is subject to hurdles including space
availability and, qualified personnel availability, in addition to differing
costs of living and doing business. If we fail to successfully establish our
regional presence in the anticipated time frame, the achievability of our
business strategy could suffer.
We could be subject to potential liability claims and third-party liability
claims related to products and services we sell.
Our products and services are used to establish our customer's Internet
presence.
Any errors, defects, or other performance problems could result in financial and
other damages to our customers. A product or service liability claim brought
against us, regardless of its validity, would be costly to us. Our customer
contracts are designed to abate or limit our exposure to such claims; existing
or future laws or unfavorable judgments could negate such limits of liability
and prove costly to us.
If the protection of our intellectual property is inadequate, our
Competitors may gain access to our technologies and we may lose customers or
market share.
We depend on our ability to maintain and defend the proprietary aspects of our
technologies. We rely on contractual provisions, confidential procedures, and
trade secrets as well as copyright and trademark laws to protect our software,
documentations, and other materials and trade secrets. We take every possible
measure to protect our property. However, unauthorized parties may successfully
attempt to copy or otherwise steal certain aspects of our intellectual property
and use it to take market share from us. To the extent that we are not
successful in protecting and defending our property rights, our business may
suffer. Third parties may challenge our rights to such intellectual properties.
Any claims, regardless of their validity, would be costly to us.
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We may need to raise additional capital in order to implement and expand
our business strategy. This capital may not be available on acceptable terms, if
at all.
We expect the proceeds from our next private offering will adequately meet our
cash flow requirements for at least the next twelve months. Although we believe
that the cash flows from operations and the cash reserves that result from our
projected financial results will be adequate during our projection periods, they
may not be. After that we may need to raise additional funds, and we cannot be
certain that we will be able to obtain the required financing on favorable
terms, or at all. If we are unable to sustain our cash flow needs from internal
operations and are unable to raise adequate capital to provide such needs, our
business could be seriously harmed. If we have to use additional stock offerings
as a means to raise funds, the stock of existing stockholders will be diluted.
If we are unable to raise additional funds, we may have to reduce operations
significantly.
Our business depends on the continued growth of the Internet and the growth
of electronic commerce. If the growth in the Internet and e-commerce does not
continue, our business will be seriously harmed.
Our strategy depends on the increased acceptance and use of the Internet by
businesses for commerce. The growth of the Internet is unprecedented in its
magnitude and effects on the world economy. There is no certainty as to its
continuance. If acceptance and use of the Internet do not continue to grow, the
demand for our products and services will diminish.
Our hosting platform may experience problems because of high volumes of
traffic.
While the architecture of our hosting platform is sound, it remains unproven in
an environment of high traffic. In addition, end users of our customers'
Websites rely on various means of access to the Internet itself.
Telecommunication companies that provide user gateways sometimes experience
outages and other disruptions of service. These disruptions are often unrelated
to the performance of our products and services. Such disruptions could,
however cause users and, as a result, our customers to perceive our products and
services as not functioning properly, and this could affect our business.
Technology changes affect our business.
Fast changing technology, customer demands, and changing industry standards
typify our market. Our future success depends on our ability to respond to
changes in the market. Our products and services will require continual updates
to respond. We may not be successful in our efforts to adapt to an ever-changing
environment.
We rely on the Internet infrastructure.
The Internet is composed of a network backbone that provides connectivity and
security to the end user. If the use of the Internet continues to grow at the
current levels, the infrastructure may not be able to support the demands placed
on it. Delays or other performance problems could result in the Internet losing
its commercial appeal as a form of media. If the Internet infrastructure is not
expanded to meet the demands of its continued growth, it will lose its viability
as a medium for advertising and commerce, and our business could suffer.
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Our hosting platform faces security risks.
Even though we continually implement security measures, our network may be
vulnerable to unauthorized access by hackers and others, computer viruses, and
other disruptions. The Internet's security has been breached as a result of
intentional or accidental actions of users. Although we intend to continue to
implement security measures, our future measures may be breached. Computer
viruses and other security problems may require interruptions, delays, or other
outages to users accessing our network, which could harm our business.
Some users of online e-commerce services, particularly credit card processing,
are highly concerned about the security of public transmission of personal and
financial information. Although we are confident that the encryption and other
authentication technologies that we employ in our network adequately abate
security concerns, such measures are subject to breach. Security breaches could
result in damage to our reputation and possible litigation and liability, which
could harm our business.
We may become subject to governmental regulation.
The government has thus far taken a hands-off approach to the Internet. With the
increasing use of the Internet and the capture of market share by its e-commerce
providers, this could change. Laws concerning privacy, taxation, content, and
disclosure could be enacted. Such laws could stifle the growth of the Internet
economy and harm our business.
ITEM 2. PROPERTIES
We lease the space where our business offices and network equipment are located.
Our St. Petersburg, Florida main location is approximately 10,000 square feet.
In addition, we lease a facility of approximately 3,000 square feet to house
other programmers. We will be pursuing the lease of additional properties for
our regional Solutions Support Centers during the following three quarters.
ITEM 3. LEGAL PROCEEDINGS
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our stock is not currently traded on the OTC Electronic Bulletin Board, Nasdaq
or any securities exchange.
We have not nor do we intend to, in the near future, declare or pay cash
dividends on our capital stock.
During the 1999 fiscal year, we have issued and sold the following unregistered
securities:
(1) Effective October 29, 1999, the Registrant acquired all of the
outstanding capital stock of Emagisoft Corporation f/k/a Net Advantage,
Inc., a privately held Florida corporation ("Emagisoft"), through an
Exchange of shares of the Registrant for all of the outstanding capital
stock of Emagisoft (the "Acquisition"). The Registrant issued 10,000,000
shares of restricted common stock, $.0001 par value (the "Common Stock")
to the former stockholders of Emagisoft in exchange for an aggregate of
10,000,000 shares of Class A Voting Common Stock of Emagisoft. As part
of the Acquisition, the Registrant also acquired Emagisoft's
wholly-owned subsidiary, Interactive Media Solutions,Inc. ("Interative")
(2) 864,000 shares of Common stock were issued in a private
placement in December 1999 to 24 investors. The aggregate consideration
received for the shares was $1,080,000 or $1.25 per share.
(3) 60,000 shares of Common stock were issued to a consultant for service.
(4) From January 1, 1999 through December 31, 1999, stock options to
purchase an aggregate of 350,000 shares of Common stock were granted to
employees with an exercise price of $1.50 per share. The options expire
10 years from the date of the grant.
(5) In December 1999, stock options to purchase 100,000 shares of Common
stock were issued to an outside party for promotional services to be
rendered over a three-year period. The options have an exercise price of
$2.00 per share. These options are exercisable at the earlier of either
December 30, 2001, or twelve months following the date of the Company's
initial public offering of shares of Common stock to the public.
No underwriters were used in connection with these sales and grants. All
investors were "Accredited Investors", as that term is defined in Rule 501 of
Regulation D, as promulgated under the Securities Act of 1933, and adopted by
the Securities and Exchange Commission. The issuance of securities were exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act and rule 701 promulgated under the Securities Act.
9
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our consolidated
financial statements, and the related notes, elsewhere in this report. In
addition to historical information, this section contains forward-looking
statements that involve known and unknown risks, uncertainties, and assumptions.
The actual results may differ materially from those anticipated and described in
this section. The reader should read this section in combination with the risks
and uncertainties described in Item One of this report under Risk Factors. You
should not rely on any forward-looking statements. They are our opinion as of
the date of this report, and might not take place.
Overview
Through our subsidiaries, Emagisoft Technologies, Inc. is a developer and
provider of e-commerce enabling software, and Website design and hosting
services. We were founded in 1996 and operated as a computer systems integrator
and Internet Service Provider until early 1999, when we began development work
on the QuickSuite family of software tools. Initially, the costs of developing
QuickSuite were funded internally through the sale and installation of computers
and third-party software systems, as well as Internet Service Provider hosting
revenues. As the architecture of the software came approached completion, we did
a series of private placement offerings to provide the funds necessary to
complete the products.
We are an Application Service Provider (ASP). An ASP is third-party service firm
that deploys, manages, and remotely hosts a software application through
centrally located servers. Our customers rent our software and our hosting
facilities. Such an arrangement allows our customers to present a robust
e-commerce Internet presence without having to implement and support the
required infrastructure.
Our revenues are derived from software licensing fees and recurring commerce
server provider hosting fees, as well as Website design services. Our pricing
structure allows our customer to scale the cost of our services to their needs.
The software is licensed to our customer in user increments. The commerce server
hosting fees are calculated on the amount of bandwidth required to deliver the
customer's content to the requests of their end users. Initially, the bandwidth
volume is estimated by our customer. Usage is monitored, and customers who
exceed their estimates are allocated additional server capacity and billed
accordingly. During the final phases of development, customers have been
provided free use of our software tools in beta testing, although commerce
server hosting fees apply.
The costs of our revenues include Internet connectivity costs, sales and
marketing expenses, and general and administrative expenses. Internet
connectivity costs include telecommunication and other bandwidth costs. Sales
and marketing expenses consist primarily of salaries, advertising, trade show
expenses, travel, entertainment, and promotional expenses. General and
administrative expenses include: salaries of our software development team
before the development phase, network, and administrative personnel;
professional fees; insurance; training; telephone and supplies; occupancy costs;
depreciation; and other miscellaneous operating expenses.
Although we expect our revenues to increase as we establish and maintain market
share, we have incurred significant costs in developing our products and
establishing our commerce server network, as well as administrative costs
associated therewith. As of December 31, 1999, we had an accumulated deficit of
$ 1,023,512. We expect to incur additional losses and capital expenditures as we
establish our infrastructure and achieve our desired customer base. 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.
10
<PAGE>
Results of Operations
The following table sets forth certain financial data for the periods indicated.
The data has been derived from the consolidated financial statements in this
report. The operating results presented should not be considered indicative of
any future results of operations.
<TABLE>
<CAPTION>
1999 1998
----------- --------
Consolidated Statements Of Operations Data
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . $ 421,004 $216,377
Direct costs . . . . . . . . . . . . . . . . . . 127,900 102,816
----------- --------
Gross profit . . . . . . . . . . . . . . . . . . 293,104 113,561
----------- --------
Operating expenses:
Sales and marketing. . . . . . . . . . . . . . . 16,456 201
General and administrative . . . . . . . . . . . 1,185,593 46,488
Depreciation and amortization. . . . . . . . . . 83,638 43,378
----------- --------
Total operating expenses . . . . . . . . . . . . 1,285,687 90,067
----------- --------
Loss from operations . . . . . . . . . . . . . . (992,583) 23,494
Other income . . . . . . . . . . . . . . . . . . 11,295 -
----------- --------
(Loss) income before provision for income taxes. (981,288) 23,494
Provision for income taxes . . . . . . . . . . . - 8,841
----------- --------
Net (loss) . . . . . . . . . . . . . . . . . . . $ (981,288) $ 14,653
=========== ========
Net (loss) income per share - basic and diluted. $ (.09) $ 0.00
=========== ========
Weighted avg. common shares - basic and diluted 11,043,142 10,827,000
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet Data:
<S> <C> <C>
Cash, cash in escrow . . . $ 1,075,236 $ 25,596
Working capital. . . . . . $ 860,077 $ (6,848)
Total assets . . . . . . . $ 1,986,733 $110,662
Long-term liabilities. . . $ - $ -
Accumulated deficit. . . . $(1,023,512) $(42,224)
Total stockholders' equity $ 1,659,386 $ 68,811
</TABLE>
11
<PAGE>
Revenues
In 1999, we were in a transitional stage. Our focus went from equipment sales
and integration services to Website design and hosting. We also accelerated our
software product development and completed the preliminary hosting platform in
accordance with our business plan. Our revenues increased from $ 216,377 in 1998
to $421,004 in 1999. Revenues from equipment sales comprised 45% of total
revenues in 1999.
Direct Cost of Revenues
The Direct Cost of Revenues consisted primarily of computer equipment for resale
and Internet connectivity costs. Direct costs related to hardware and software
sales increased slightly in spite of the decrease in the related sales revenues.
Our change in focus contributed to the increase in hardware and software
purchased for resale as buying efficiencies decreased. In addition, the size of
the installation engagements decreased and therefore value added billings
decreased.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased from $90,067 in 1998 to
$1,285,687 in 1999. This increase is the result of our refocus on the
development of the QuickSuite platform. Increased salaries and other software
programming costs, as well as professional fees, travel, marketing, and other
operating expenses, were incurred in 1999. In addition, substantial capital
expenditures of approximately $ 400,000 were incurred in 1999 for the
preliminary completion of the hosting platform network, and resulted in an
increase in depreciation expense in 1999.
Software Development Costs
Software development costs of $226,954 were capitalized in 1999 in accordance
with SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." Capitalization of such costs will cease when the
Quicksuite products are substantially complete and ready for its intended use.
At that time, the capitalized costs will be amortized on a straight-line basis
over a three-year period.
Income Taxes
We recorded deferred income tax expense of $ 8,841 in 1998 and a current and
deferred income tax benefit of $ 404,346 in 1999, arising principally from
incurred operating losses. Since it is not reasonably certain that we will
generate taxable income to use the tax benefit, a valuation allowance of $
404,346 has been established.
Balance Sheet Commentary
At December 31, 1999, we had $ 1,075,236 of cash and cash in escrow. These
balances primarily resulted from private financings in July and October of 1999.
The accounts receivable balance of $ 38,694, net of allowance for doubtful
accounts of $16,062, consists primarily of customer billing for Website design
work and monthly hosting services.
Property, plant, and equipment balances increased 559% from December 31, 1998 to
December 31, 1999. Substantial investment in network hardware and software was
required to complete the preliminary network platform.
Current liabilities include accounts payable, accrued liabilities and deferred
revenue at December 31, 1999 of $ 327,347 incurred in the normal course of
business.
12
<PAGE>
Plan of Operations
In 1999, we neared completion of our initial version of the QuickSuite software
tool and finalized our sales and marketing plan. Revenues were minimal and
consisted of revenues from design and hosting of beta Websites. Costs associated
with staffing and corporate infrastructure, including network equipment and
administrative, network personnel costs, were substantial.
Our business plan outlines a rollout of the first version of several of the
QuickSuite modules in second quarter 2000. Several of the modules will be in
version 1 at that point, and the initial marketing efforts including product
branding and promotion will occur. In addition, regional Solutions Support
Centers are scheduled to open during quarters two through four. Each regional
Solutions Support Center will establish our presence in a major metropolitan
area, giving us network, sales, product support, and training facilities. Each
regional Solution Support Center is expected to require approximately 36 persons
to operate. Salesman, Network support personnel, website production personnel,
training and support personnel are required. The St. Petersburg, Florida
Solution Support Center will also require approximately 30 additional staff
during Quarter II to facilitate the product rollout. In addition, each regional
Solution Support Center requires a substantial investment in network and other
equipment. Approximately $400,000 in network and other equipment, furniture and
fixtures and leasehold improvements are budgeted for each SSC.
Initial sales and marketing efforts, general and administrative expenses,
increases in the number of employees, as well as network equipment build out,
will require substantial amounts of cash. Projected negative cash flow for 2000
exceeds $ 13,000,000. Positive cash flow is not anticipated until third quarter
2001, according to our projections. To address this funding need, we are seeking
to raise funds through a private placement. We believe that the funds generated
by this transaction will be sufficient to fund operations for at least 12
months. In the event the funding is not 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 twelve months.
Year 2000 Compliance
Prior to January 1, 2000, there was considerable concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century data due to the two-digit date fields used by many systems. Most reports
today, however, are that computer systems and software programs are functioning
normally and the compliance and remediation work accomplished during the years
leading up to 2000 was effective to prevent any problems. The Company develops,
markets, implements and supports fully integrated enterprise-wide software
applications for public sector organizations and public and private utilities.
The Company has completed the Year 2000 upgrades of its systems. The Company
used existing resources for its Year 2000 compliance efforts, without incurring
significant incremental expenses. As of the date of this Report, the Company has
not experienced any disruption in its products as a result of any failure of any
of its products to function properly as of January 1, 2000. The Company also has
not experienced any Year 2000 failures related to any of its vendors or
suppliers. The Company does not expect to incur any significant costs related to
Year 2000 activities.
Year 2000 compliance has many elements and potential consequences, some of
which may not be foreseeable or may be realized in future periods. In addition,
unforeseen circumstances may arise, and we may not, in the future, identify
equipment or systems that are not Year 2000 compliant.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements, and the related notes
thereto, of Emagisoft Technologies, Inc. and the Report of Independent Auditors
are filed as a part of this Form 10-KSB.
13
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
TOGETHER WITH REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TABLE OF CONTENTS
Independent Auditor's Report Page 14
Consolidated Balance Sheets Page 15
Consolidated Statements of Operations Page 16
Consolidated Statements of Changes in Stockholders' Equity Page 17
Consolidated Statements of Cash Flows Page 18
Notes to Consolidated Financial Statements Page 19
Report of Independent Certified Public Accountants
To Emagisoft Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Emagisoft
Technologies, Inc. (a Florida corporation) and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Emagisoft Technologies, Inc.
and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company has suffered significant
losses from operations and the cash position of the Company raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ ARTHUR ANDERSON LLP
Tampa, Florida,
March 10, 2000
14
<PAGE>
EMAGISOFT TECHNOLOGIES, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1999 AND 1998
---------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1999 1998
------------ ----------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 995,236 $ 25,596
Cash in escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 -
Accounts receivable, net of allowance for doubtful accounts of $16,062 38,694 -
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,883 -
Due from stockholder . . . . . . . . . . . . . . . . . . . . . . . . . 7,611 -
Current portion of deferred tax asset. . . . . . . . . . . . . . . . . - 9,407
------------ ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,187,424 35,003
------------ ----------
PROPERTY AND EQUIPMENT:
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . 75,376 10,060
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 461,747 107,222
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,946 45,160
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . 3,323 -
------------ ----------
595,392 162,442
Less- Accumulated depreciation . . . . . . . . . . . . . . . . . . . . (202,887) (102,852)
------------ ----------
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . 392,505 59,590
------------ ----------
OTHER ASSETS
Software development costs . . . . . . . . . . . . . . . . . . . . . . 226,954 -
Goodwill, net of accumulated amortization of $15,966 . . . . . . . . . 175,625 -
Deferred tax asset, less current portion . . . . . . . . . . . . . . . - 16,069
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,225 -
------------ ----------
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 406,804 16,069
------------ ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,986,733 $ 110,662
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,546 $ 14,547
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 248,893 27,304
Billings in excess of costs and estimated earnings on uncompleted contracts 4,908 -
------------ ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . 327,347 41,851
------------ ----------
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value; 20,000,000 shares authorized,
13,174,000 issued and outstanding. . . . . . . . . . . . . . . . . . . 1,317 1,083
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 2,681,581 109,952
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . (1,023,512) (42,224)
------------ ----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 1,659,386 68,811
------------ ----------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . $1,986,733 $110,662
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
15
<PAGE>
EMAGISOFT TECHNOLOGIES, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
REVENUES:
Architectural and web site design services. . . $ 207,594 $ -
Hardware and software sales and support . . . . 187,532 194,590
Internet provider services. . . . . . . . . . . 25,878 21,787
------------ -----------
Total revenues. . . . . . . . . . . . . . . . . 421,004 216,377
DIRECT COSTS. . . . . . . . . . . . . . . . . . 127,900 102,816
------------ -----------
Gross profit. . . . . . . . . . . . . . . . . . 293,104 113,561
------------ -----------
OPERATING COSTS AND EXPENSES:
Sales and marketing . . . . . . . . . . . . . . 16,456 201
General and administrative. . . . . . . . . . . 1,185,593 46,488
Depreciation and amortization . . . . . . . . . 83,638 43,378
------------ -----------
Total operating costs and expenses. . . . . . . 1,285,687 90,067
------------ -----------
OTHER INCOME:
Interest income, net. . . . . . . . . . . . . . 9,087 -
Other . . . . . . . . . . . . . . . . . . . . . 2,208 -
------------ -----------
Total other income. . . . . . . . . . . . . . . 11,295 -
------------ -----------
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (981,288) 23,494
PROVISION FOR INCOME TAXES. . . . . . . . . . . - 8,841
------------ -----------
NET (LOSS) INCOME . . . . . . . . . . . . . . . $ (981,288) $ 14,653
============ ===========
NET (LOSS) INCOME PER SHARE - BASIC AND DILUTED $ (.09) $ 0.00
============ ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES -
BASIC AND DILUTED . . . . . . . . . . . . . . . 11,540,753 10,827,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
16
<PAGE>
EMAGISOFT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Additional
Paid-in
Capital Total
Common Stock Common Accumulated Stockholders'
------------
Shares Amount Stock Deficit Equity
------------ ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 . . . . . . . . . . . . . 10,827,000 $ 1,083 $ 108,952 $ (56,877) $ 53,158
Contribution of property
and equipment. . . . . . . . . . . . . . . . . . . . - - 1,000 - 1,000
Net income . . . . . . . . . . . . . . . . . . . . . - - - 14,653 14,653
------------ ------- ------------ --------------- -----------
BALANCE, December 31, 1998 . . . . . . . . . . . . . 10,827,000 1,083 109,952 (42,224) 68,811
Shares issued to employees
by principal stockholder . . . . . . . . . . . . . . - - 2,980 - 2,980
Issuance of common shares
for acquisition of Interactive Media Solutions, Inc. 143,000 14 142,986 - 143,000
Issuance of common shares. . . . . . . . . . . . . . 2,204,000 220 2,359,780 - 2,360,000
Fair value of options issued
for promotional services
to be rendered . . . . . . . . . . . . . . . . . . . - - 65,883 - 65,883
Net loss . . . . . . . . . . . . . . . . . . . . . . - - - (981,288) (981,288)
------------ ------- ------------ --------------- -----------
BALANCE, December 31, 1999 . . . . . . . . . . . . . 13,174,000 $ 1,317 $ 2,681,581 $ (1,023,512) $1,659,386
============ ======= ============ =============== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
17
<PAGE>
EMAGISOFT TECHNOLOGIES, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income. . . . . . . . . . . . . . . . . . . . . . . . $ (981,288) $ 14,653
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities-
Depreciation and amortization. . . . . . . . . . . . . . . . . . 83,638 43,378
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . 25,476 8,841
Shares issued to employees by principal stockholder. . . . . . . 2,980 -
Changes in operating assets and liabilities-
Cash in escrow . . . . . . . . . . . . . . . . . . . . . . . . . (80,000) -
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . (38,694) -
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . (4,225) 141
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 58,999 (4,092)
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . 221,589 9,718
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . - (24,440)
Billings in excess of costs and estimated earnings
on uncompleted contracts 4,908 -
----------- ---------
Net cash (used in) provided by operating activities. . . . . . . (706,617) 48,199
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (399,178) (3,981)
Acquisition of Interactive Media Solutions, Inc. . . . . . . . . (50,000) -
Software development costs . . . . . . . . . . . . . . . . . . . (226,954) -
----------- ---------
Net cash used in investing activities. . . . . . . . . . . . . . (676,132) (3,981)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of due to stockholder. . . . . . . . . . . . . . . . . - (43,750)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . 2,360,000 -
Due from stockholder . . . . . . . . . . . . . . . . . . . . . . (7,611) -
----------- ---------
Net cash provided by (used in) financing activities. . . . . . . 2,352,389 (43,750)
----------- ---------
NET INCREASE IN CASH . . . . . . . . . . . . . . . . . . . . . . 969,640 468
CASH, beginning of year. . . . . . . . . . . . . . . . . . . . . 25,596 25,128
----------- ---------
CASH, end of year. . . . . . . . . . . . . . . . . . . . . . . . $ 995,236 $ 25,596
=========== =========
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
<S> <C> <C>
Issuance of common stock for acquisition of
Interactive Media Solutions, Inc.. . . . . . . . . . . . . . . . . . $143,000 $ -
Donation of shares by principal stockholder. . . . . . . . . . . . . $ 2,980 $ -
Contribution of property and equipment . . . . . . . . . . . . . . . $ - $1,000
Fair value of options issued for promotional services to be rendered $ 65,883 $ -
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
18
<PAGE>
1 DESCRIPTION OF BUSINESS
Emagisoft Technologies, Inc. (ETI), formerly known as Manatee American Financial
Corporation (MAFC), was incorporated under the laws of the State of Florida on
September 21, 1994. ETI and subsidiaries (collectively, the Company) is an
applications service provider (ASP) and web site designer. The Company has
developed a comprehensive and integrated set of Internet-based software tools
engineered for power and ease of use in the development, marketing and
management of commercial web sites. These products will enable customers to
create, develop, manage and maintain e-commerce web sites. As an ASP, the
Company provides customers with hardware, software and web site hosting services
necessary to engage in a fully dimensional e-commerce environment and allows
them to focus on their core competencies and still respond to changing
technologies. The Company presently operates its business through its
wholly-owned subsidiary, Emagisoft Corporation (EC), formerly known as Net
Advantage, Inc., which is located in St. Petersburg, Florida.
On June 25, 1999, the Board of Directors (the Board) of EC approved: (i) a
stock split-up of the issued and outstanding shares of the Company's common
stock on a 8,720-to-one basis, so that stockholders of EC received 8,720 shares
of the Company's $.001 par value common stock for every one share of common
stock held by them; and (ii) the authorization of a total of 10,000,000 shares
of common stock. The par value and shares of common stock have been
retroactively restated for all periods presented.
On July 20, 1999, EC purchased 100 percent of the common stock issued and
outstanding of Interactive Media Solutions, Inc. (IMS). IMS was purchased to
act as a solutions center for EC's operations through the offering of training,
support and development services. IMS's services currently include Internet
development, immersive image production, 3D modeling and animation, technical
drawing development and analog-to-digital video conversion.
On September 30, 1999, MAFC acquired all of the outstanding common stock of EC.
For accounting purposes, the acquisition has been treated as a recapitalization
of EC with EC as the acquirer (reverse acquisition). The historical financial
statements prior to September 30, 1999, are those of EC which was formed on
September 21, 1996.
On October 20, 1999, the Board of the Company approved, and stockholders owning
a majority of the Company's outstanding common stock consented to, the
one-for-one stock exchange with the stockholders of ETI, so that the
stockholders of the Company prior to the EC acquisition received one share of
the Company's $.0001 par value common stock for every share of $.001 par value
common stock held by them. The par value and shares of common stock have been
retroactively restated for all periods presented.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company's revenues are recognized as follows:
Architectural and Web Site Design Services
Revenues from architectural and web site design services are recognized in
accordance with SOP 81-1, using the percentage of completion contract method.
19
<PAGE>
Hardware and Software Sales and Support
Revenues from hardware sales related to network installations are recognized in
accordance with the provisions of Statement of Position 81-1, "Accounting for
Performance of Construction-Type and Certain Production-Type Contracts" (SOP
81-1), using the completed contract method.
Revenue from a support contract related to a network installation is recognized
monthly, as amounts are billed over the term of the annual service period.
Revenues from the sale of third-party software are recognized in accordance with
the provisions of SOP 97-2, "Software Revenue Recognition." All events
necessary for revenue recognition under SOP 97-2 typically occur when the
third-party software is delivered.
Internet Provider Services
Revenues from the hosting of web sites are recognized monthly over the hosting
period. The Company customarily bills for these services on a monthly basis.
CASH IN ESCROW
Cash in escrow includes amounts paid for the issuance of common stock.
Subsequent to December 31, 1999, cash in escrow was released to the Company.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation of furniture and fixtures and computer equipment is computed using
the double declining balance method over the estimated useful lives of the
assets, which is typically seven and five years, respectively. The software is
being depreciated over an estimated useful life of three years, using the
straight-line method. Maintenance and repairs are charged to expense as
incurred. Depreciation on property and equipment totaled $67,672 and $43,378
for the years ended December 31, 1999 and 1998, respectively.
SOFTWARE DEVELOPMENT COSTS
Software development costs are accounted for in accordance with SOP 98-1
"Accounting for the Costs of Computer Software Developed or Obtained on Internal
Use." All costs incurred prior to the development stage of a software product
created or obtained for internal use are charged to research and development
expense as incurred. The development stage of a computer software product
begins once the design of the product is created, inclusive of software
configuration and software interfaces. The development stage also includes
coding, installation of software onto hardware and testing. Costs incurred
during the development stage are capitalized and are amortized on a
straight-line basis over three years once the product is substantially complete
and ready for its intended use. The Company ceases capitalization of computer
software costs when the product is substantially complete and ready for its
intended use. Such capitalized costs are reported at the lower of unamortized
cost or net realizable value. Costs of training and maintenance are charged to
expense where the costs are incurred. As of December 31, 1999, no products
developed are substantially complete or ready for its intended use, and
therefore, no amortization of software development costs has occurred.
20
<PAGE>
GOODWILL
Goodwill is the amount paid in excess of the fair market value of net assets
purchased in the IMS acquisition and is being amortized over five years, using
the straight-line method. Amortization expense of $15,966 related to goodwill
is included in depreciation and amortization in the accompanying consolidated
statement of operations for the year ended December 31, 1999.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company. All
material intercompany transactions are eliminated in consolidation.
SIGNIFICANT CONCENTRATIONS
For the years ended December 31, 1999 and 1998, approximately 27 percent and 65
percent of sales, respectively, were attributable to three customers. Any
change in the relationship with these customers could have a potentially adverse
effect on the Company's financial position. No such change is anticipated by
management.
COMPUTATION OF NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period. As a
result of the net loss reported by the Company, any assumption of options being
exercised would have an antidilutive effect on the loss per share; therefore, no
exercise of stock options were assumed and basic and diluted loss per share
amounts are identical.
21
<PAGE>
INCOME TAXES
The Company accounts for income taxes under the liability method, as required by
SFAS No. 109, "Accounting for Income Taxes." The liability method requires
income taxes to be recognized based on income taxes currently payable and the
change in deferred taxes. Deferred taxes are recognized based on the temporary
differences between the financial statement and tax bases of assets and
liabilities at enacted tax rates as of the dates the differences are expected to
reverse.
LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever circumstances
indicate that the carrying amount of an asset may not be recoverable. Due to
the Company's current operating and cash flow loss combined with its historical
operating and cash flow loss, the Company has reviewed its intangible assets for
impairment. Management believes the expected cash flows (undiscounted and
without interest charges) is sufficient to recover the carrying amount of
goodwill and software development costs as stated in the accompanying
consolidated balance sheet. No material impairment in the accompanying
consolidated financial statements has been reflected.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
STOCK OPTIONS
The Company records compensation expense for all stock options, using the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). Under APB 25, if the
exercise price of the Company's employee stock options equals or exceeds the
estimated fair value of the underlying stock on the date of grant, no
compensation expense is generally recognized.
FASB's SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123)
encourages companies to recognize expense for stock-based awards based on their
estimated fair value on the date of grant. SFAS 123 requires the disclosure of
pro forma net income or loss in the notes to the financial statements if the
fair value method is not elected.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1999 and 1998, the carrying amounts of the Company's
financial instruments, which include cash, accounts payable, accrued liabilities
and due to stockholder, are recorded at amounts which approximate fair value
because of the short maturity of these instruments.
22
<PAGE>
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 financial statements to
conform to the 1999 presentation.
GOING CONCERN
The accompanying consolidated 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
budget, 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
reduce costs to such a level that the Company will be able to fund operations
for the next 12 months.
3 ACQUISITION OF INTERACTIVE MEDIA SOLUTIONS, INC.
On July 20,1999, the Company completed the acquisition of IMS through the
payment of $50,000 in cash and the issuance of 143,000 shares of Class A voting
common stock valued at $143,000, for a total purchase price of $193,000, in
exchange for all of the outstanding common stock of IMS and $1,409 of equipment.
IMS generates the majority of its revenues from the design of Internet web
sites. From January 1, 1999, through July 20, 1999, IMS generated a net loss of
approximately $6,200. The acquisition has been accounted for as a purchase,
with the excess purchase price over the fair value of the net assets acquired of
$191,591 allocated to goodwill, which is being amortized on a straight-line
basis over five years. The Company's consolidated financial statements include
the results of operations of IMS Industries since the July 20, 1999,
acquisition.
4 ACCRUED LIABILITIES
Accrued liabilities consists of the following at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Professional fees. . . . . . $ 54,000 $24,999
Payroll and related expenses 76,924 -
Vacation and sick pay. . . . 45,764 -
Sales taxes. . . . . . . . . 6,513 2,305
Other. . . . . . . . . . . . 65,692 -
-------- -------
$248,893 $27,304
======== =======
</TABLE>
23
<PAGE>
5 UNCOMPLETED CONTRACTS
Costs, estimated earnings and billings on uncompleted contracts are summarized
as follows for the year ended December 31, 1999:
<TABLE>
<CAPTION>
Amount
---------
<S> <C>
Costs. . . . . . . $ 13,556
Estimated earnings 7,983
---------
21,539
Less- Billings . . (26,447)
---------
$ (4,908)
=========
</TABLE>
The above total is included in the accompanying consolidated balance sheet under
the caption of billings in excess of costs and estimated earnings on uncompleted
contracts.
6 COMMON STOCK
Upon the reverse acquisition in September 1999, the Company was authorized to
issue 20,000,000 shares of common stock with par value of $.0001 per share.
During 1999, 143,000 shares of common stock were issued for the purchase of IMS
(see Note 3), and 2,204,000 shares were issued through a private placement to
outside investors for $2,360,000.
7 INCOME TAXES
The (benefit from) provision for income taxes consists of the following for the
years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- ------
<S> <C> <C>
Current:
Federal. . . . . . . . . . . . $(280,328) $ -
State. . . . . . . . . . . . . (42,955) -
---------- ------
(323,283) -
---------- ------
Deferred:
Federal. . . . . . . . . . . . (70,292) 8,354
State. . . . . . . . . . . . . (10,771) 487
---------- ------
(81,063) 8,841
---------- ------
Valuation allowance adjustment (404,346) -
---------- ------
Total income tax provision . . $ - $8,841
========== ======
</TABLE>
The components of the deferred tax assets consisted of the following at December
31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- -------
<S> <C> <C>
Deferred tax assets:
Accrued expenses . . . . . . . . . . . $ 43,585 $ 9,407
Net operating loss (NOL) carryforwards 360,761 16,069
---------- -------
404,346 25,476
Less- Valuation allowance. . . . . . . (404,346) -
---------- -------
Net deferred tax asset . . . . . . . . $ - $25,476
========== =======
</TABLE>
The provision for income taxes for the years ended December 31, 1999 and 1998,
differs from the amount computed, by applying the U.S. federal statutory tax
rate of 34 percent to net income before provision for income taxes, primarily as
a result of state income taxes.
At December 31, 1999 and 1998, the Company had NOL carryforwards for tax
purposes of approximately $959,000 and $43,000, respectively, and for book
purposes of approximately $1,049,000 and $68,000, respectively, which are
available to offset future taxable income and expire during the years 2016
through 2019.
24
<PAGE>
8 RELATED-PARTY TRANSACTIONS
During 1998, Kyle Jones, the President of the Company, donated approximately
$1,000 of property and equipment and sold approximately $45,000 of property and
equipment in exchange for a note. Kyle Jones took draws from the Company in the
amount of the outstanding note, leaving a zero balance due to stockholder at
December 31, 1998.
The Company also made principal and interest payments on behalf of an employee's
vehicle loan of approximately $2,400 during 1999. These payments have been
treated as advances by the Company and are included in due from stockholder in
the accompanying consolidated balance sheets.
During 1999, Kyle Jones, the president of the Company and principal stockholder,
issued 2,980,000 shares of common stock to employees. Compensation expense of
$2,980 is recorded in general and administrative expense in the accompanying
consolidated statement of operations for the year ended December 31, 1999.
9 COMMITMENTS AND CONTINGENCIES
OPERATING LEASE AGREEMENTS
The Company leases certain facilities under operating leases. The minimum
annual rental payments as of December 31, 1999, under non-cancelable leases, are
as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,. Amount
- ------------- --------
<S> <C>
2000. . . . . $110,883
2001. . . . . 9,789
--------
$120,672
========
</TABLE>
Rent expense was approximately $42,500 for the year ended December 31, 1999.
EMPLOYMENT AGREEMENTS
The Company has entered into various long-term employment agreements with
certain key employees, which call for guaranteed salaries and other benefits,
including provisions for amounts payable in the event the employee is terminated
without cause, or, as a result of a change in control, of approximately
$767,000. In addition, the employment agreements include provisions for the
granting of additional stock options if certain performance and longevity
measures are met.
10 SEGMENT INFORMATION
For the year ended December 31, 1999, the Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information (SFAS
131)." SFAS 131 supersedes FASB's SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise." SFAS 131 establishes standards for the way
that business enterprises report information about operating segments in annual
financial statements. SFAS 131 also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS 131 did not affect results of operations or financial
position, but did affect the disclosure of segment information.
The Company operates through two business segments that offer distinct services.
The Company's Application Service Provider (ASP) segment provides electronic
commerce software and web site hosting services. The Company's web site design
segment, IMS, focuses on high-end web site design services for e-commerce
companies as well as non-commercial customers and provides support for
value-added resellers.
Reportable business segment information is as follows as of December 31, 1999:
<TABLE>
<CAPTION>
ASP Web Site Design Consolidated
----------- ----------------- --------------
<S> <C> <C> <C>
Revenue. . . . . . $ 126,867 $ 294,137 $ 421,004
Operating Expenses 993,389 292,298 1,285,687
NOL. . . . . . . . (903,629) (77,659) (981,288)
Total Assets . . . 1,949,251 37,482 1,986,733
</TABLE>
25
<PAGE>
11 STOCK OPTIONS
During July 1999, the Company granted 350,000 options to employees to purchase
shares of the Company's Class A common stock. The options are exercisable
immediately, at $1.50 per share, which was greater than the approximated fair
market value of the stock at the date of grant. The options expire 10 years from
the date of grant.
In December 1999, the Company issued 100,000 options to buy shares of the
Company's common stock, to an outside party, at a price of $2 per share for
promotional services to be provided over a three-year period beginning December
30, 1999. These options are exercisable at the earlier of either December 30,
2001, or 12 months following the date of the Company's initial public offering
of shares of common stock to the public. The fair market value of $65,883
related to these options is included in prepaid expenses in the accompanying
consolidated balance sheet.
A summary of the status of options issued during 1999 is as follows:
<TABLE>
<CAPTION>
Non- Weighted Avg.
Employees Employees Exercise Price
----------- --------- ---------------
<S> <C> <C> <C>
Outstanding, December 31, 1998. . . - - $ -
Granted . . . . . . . . . . . . . . 350,000 100,000 1.61
Exercised . . . . . . . . . . . . . - - -
Forfeited . . . . . . . . . . . . . - - -
----------- --------- ---------------
Outstanding, December 31, 1999. . . 350,000 100,000 $ 1.61
=========== ========= ===============
Exercisable as of December 31, 1999 350,000 -
=========== =========
Weighted-average fair value
granted during the year . . . . . . $ .76 $ .66
=========== =========
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
- --------------------------------------------------- ---------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Type Price Outstanding Life in Years Price Exercisable Price
- ----------- -------- ----------- ------------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Employees $ 1.50 350,000 9.5 $ 1.50 350,000 $ 1.50
Non-Employees $ 2.00 100,000 3 $ 2.00 - -
------- ------------- -------- ------------ ---------
450,000 8.1 $ 1.61 350,000 $ 1.50
======= ============= ======== ============ =========
</TABLE>
The fair value of options granted during the fiscal year ended December 31,
1999, has been estimated at the date of grant, using a Black-Scholes option
pricing model. The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. The Company's options have characteristics significantly different
from those of traded options, and changes in the subjective assumptions can
materially affect the fair value estimate. The fair value of each option was
estimated on the date of grant based on the following weighted average
assumptions for options granted during 1999:
<TABLE>
<CAPTION>
<S> <C>
Weighted-average expected life . . . . . 10 years
Weighted-average risk-free interest rate 6.48%
Volatility . . . . . . . . . . . . . . . 70%
Dividend yield . . . . . . . . . . . . . -
</TABLE>
26
<PAGE>
Had compensation cost related to options granted to employees been determined
based on the fair value at the grant dates consistent with the method under SFAS
123, the Company's net loss per share would have been reduced to the pro forma
amounts indicated below for the year ended December 31, 1999:
<TABLE>
<CAPTION>
Amount
-----------
<S> <C>
Net loss attributable to common shareholders:
As reported . . . . . . . . . . . . . . . . . $ 981,288
Pro forma . . . . . . . . . . . . . . . . . . 1,314,288
Basic and diluted earnings per share:
As reported . . . . . . . . . . . . . . . . . (.09)
Pro forma . . . . . . . . . . . . . . . . . . (.12)
</TABLE>
The effects of applying SFAS 123 on pro forma disclosures of net loss and
earnings per share for fiscal 1999 are not likely to be representative of the
pro forma effects on net income and loss per share in future years.
12 SUBSEQUENT EVENT
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 27, 2000,
none of these shares have been issued.
On January 3, 2000, the Board adopted the Emagisoft Technologies, Inc. Employee
Stock Option Plan. As of March 27, 2000, 56,570 options (unaudited) have been
granted under the provisions of this plan. Options granted under this plan will
have an exercise price not less than the fair market value of a share of stock
on the date the option is granted, and no option will be exercisable more than
10 years after that date.
27
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors and executive officers of Emagisoft Technologies at December 31,
1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(s)
- ----------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Kyle E. Jones . . . . . . . . . . . . . . . . . 36 Chairman of the Board of Directors, Sole Director
President and Chief Executive Officer
Peter VanSon. . . . . . . . . . . . . . . . . . 46 Executive Vice President and Chief
Financial Officer
William H. Egge, IV . . . . . . . . . . . . . . 30 Vice President of Software Development
Jamie E. Jalazo . . . . . . . . . . . . . . . . 32 Vice President of Sales and Marketing
David T. Hollis . . . . . . . . . . . . . . . . 24 Vice President of Network Engineering
Roger W. Finefrock. . . . . . . . . . . . . . . 34 President, Interactive Media Solutions, Inc.
</TABLE>
KYLE E. JONES founder of Emagisoft, has served as Chairman of the Board of
Directors, President, and Chief Executive Officer of Emagisoft since our
inception. From 1990 to 1996, Mr. Jones was part of a technology business group
comprised of American Data Imaging (ADI), ACOM Corporation, and Computer Output
Microfiche Plus Services (COM), to provide administrative marketing and sales
management support for a variety of network-based electronic records processing
and storage services.
PETER VANSON has served as Chief Financial Officer since July of 1999. From
1983 to 1999, Mr. VanSon has served as President of CPA Financial Services,
P.A., a public accounting firm. From 1977 to 1983, he was with Cherry, Bekaert
and Holland, CPAs, a regional CPA firm. From 1981 to 1983, Mr. VanSon was a
Practice Fellow with the Auditing Standards Division of the American Institute
of CPAs in New York. In addition to being a Certified Public Accountant (CPA),
Mr. VanSon is a Certified Valuation Analyst (CVA), and holds a Series 7
brokerage license and a Bachelor's degree in Accounting from the University of
South Florida.
WILLIAM EGGE joined us in 1996, bringing over ten years experience in
analysis, design, and development of software utilizing object-oriented design
and development tools. Mr. Egge developed the world's most widely used
commercial laser light show software package. He has implemented and designed
various client/server applications for banking, accounting, and credit card
processing and data encryption.
JAMIE JALAZO joined us in January 2000 from Tech Data Corporation, where he
was employed since 1992. His most recent position was Director of Sales. His
responsibilities included the implementation and execution of a business plan
that annually produced over one billion dollars of revenue, along with the
development and training of 100 inside and outside sales people.
DAVID HOLLIS is a Microsoft Certified Systems Engineer, proficient with
Windows NT, Linux, Cisco routers, firewalls, and security products. Prior to
joining us in August of 1999, Mr. Hollis worked at Special Operations Command
Headquarters at MacDill Air Force Base in Tampa, Florida, from November 1998 to
August 1999 where he secured networks for globally sensitive military networks.
Prior to that, he worked at the U.S. Naval Academy, where he installed and
configured ATM/Switched Ethernet networks.
ROGER FINEFROCK founded Interactive Media Solutions, Inc. (a wholly owned
subsidiary of Emagisoft Corporation) in 1991. From 1988 through 1991, he was
project manager and CADD training developer for Schenkel & Schultz Architects.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of the Company's
outstanding common stock, to file with the Commission initial reports of
ownership and reports of changes in ownership of common stock. Such persons are
required by Commission regulation to furnish the Company with copies of all such
reports they file.
28
<PAGE>
To the Company's knowledge, based solely on a review of the copies of
filings furnished to the Company and written or oral representations that no
other reports were required, the Company believes that all of its directors and
executive officers complied during fiscal 1999 with the reporting requirements
of Section 16(a) of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the Chief Executive
Officer:
<TABLE>
<CAPTION>
Restricted Common shares LTIP All Other
Name and Principle Salary Paid Other Annual Stock Underlying Payouts Compensation
Position Year 1999 Bonus Compensation Awards Options
- ------------------ ---- -------------- ----- ------------ ---------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kyle E. Jones,
Pres., CEO . . . . 1999 $ 47,664 $ - $ - 0 100,000sh $ - $ 32,310
1998 $ - $ - $ - 0 - $ - $ -
1997 $ - $ - $ - 0 - $ - $ -
</TABLE>
The following table summarizes the Option Grants of the Chief Executive Officer
and other employees at 12/31/99:
<TABLE>
<CAPTION>
Number of Securities % of Total Options Exercise or
Underlying Options Granted to Employees Base Price Expiration
Name Granted (#) in 1999 ($/Sh) Date
- --------------- -------------------- -------------------- ----------- ----------
<S> <C> <C> <C> <C>
Kyle E. Jones . 100,000 25% $ 1.50/Sh none
Other Employees 250,000 75% $ 1.50Sh none
-------------------- --------------------
Total . . . . . 350,000 100%
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1999, the number of shares of
common stock that were owned beneficially by (i) each person who is known by the
Company to beneficially own more than 5% of the outstanding common stock, (ii)
each director, (iii) the officers identified in the Summary Compensation Table,
and (iv) all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Owner of Class
- ------------------- -------------------- -------------------- --------
<S> <C> <C> <C>
Common Kyle E. Jones, Pres/CEO
and sole director
10460 Roosevelt Blvd., #111
St. Petersburg, FL 33716 100,000 shares (1) [*]
Common The Betterment Trust, 5,552,260 shares 42.15%
Kyle E. Jones, Trustee
10460 Roosevelt Blvd. #111,
St. Petersburg, FL 33716
Common Roger Tichenor 935,780 shares (2) 6.72%
1749 Bridgewater, Dr.
Heathrow, FL 32746
Common Stephen Guarino 750,000 shares 5.69%
3 Downe Circle
Medford, NJ 08055
Common All directors and executive
Officers of the Company as a
Group 1,158,580 shares (3) 7.66%
</TABLE>
[*] Represents less than 1% of the outstanding common stock
(1) 100,000 of total shares represent 100 percent vested options to purchase
common shares
(2) 50,000 of total shares represent 100 percent vested options to purchase
common shares
(3) 150,000 of total shares represent 100 percent vested options to purchase
common shares
29
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8K
13-1 FINANCIAL STATEMENTS
See Item 7 of this Form 10-KSB
13-2 FINANCIAL STATEMENT SCHEDULES
Financial statement schedules have been omitted since they are either not
required, or the information has been otherwise included into this Form 10-KSB.
13-3 EXHIBITS
The exhibits listed on the accompanying index to exhibits immediately following
are filed as part of, or incorporated by reference into, this Form KSB.
EXHIBIT DESCRIPTION
NO.
- ------- ------------
2.1 Share Exchange Agreement between Manatee-American Financial Corp.
and Emagisoft Corporation (2)
3.1 Original and Amended Articles of Incorporation of the Registrant
(1)(2)
3.2 Bylaws of the Registrant (1)
4.1 Specimen - Common Stock Certificate (1)
10.1 Employment Contracts of Key Management of Emagisoft Technologies, Inc.
10.2 Specimen - Confidential Information and Invention Assignment Agreement
for Employees
10.3 Business Consulting Agreement between James S. Neader and Emagisoft
Technologies, Inc.
10.4 Option Agreement for Promotional services between Gary Sheffield and
Emagisoft Technologies, Inc.
16.1 Letter on Change in Certifying Accountant (2)
21.1 Subsidiaries of the Registrant
21.2 Stock Purchase and Sale between Net Advantage, Inc. (NKA) Emagisoft
Corporation and Interactive Media Solutions, Inc.
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, filed October
29, 1999.
13-4 REPORTS ON FORM 8-K
A current report on Form 8-K was filed with the Securities and Exchange
Commission by Emagisoft Technologies, Inc. on October 29, 1999 to: report a
Change in Control of the Registrant; the resulting Acquisition of Assets; a
Change in the Registrant's Certifying Accountant; the filing of Articles of
Amendment to our Articles of Incorporation changing our name to Emagisoft
Technologies, Inc. and increasing our authorized shares of common stock to
50,000,000; the Resignation of Registrant's Director; and the report the
Financial Statements and the Pro Forma Financial Statements
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Form 10-KSB to be
signed on its behalf by the undersigned, who is duly authorized to do so.
EMAGISOFT TECHNOLOGIES, INC.
By: /s/ Peter VanSon
----------------------
Peter VanSon, Chief Financial Officer
30
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Peter VanSon and Kyle E. Jones, and each
of them, his true and lawful attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-KSB, and to file the same, with Exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
hereby ratifying and ratifying and confirming all that each of said
attorneys-in-fact, or substitute or substitutes, may do or cause to do by virtue
hereof.
Pursuant to the requirements of the Securities exchange Act of 1934, this
Form 10KSB has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
DATE SIGNATURE TITLE
- ---- --------- -----
President, Chief Executive Officer and
/s/ KYLE E. JONES Chairman of the Board of Directors
March 28, 2000 (Sole Director) (Principle Executive
Officer)
/s/ PETER VANSON Vice President and
Chief Financial Officer
March 28, 2000 (Principal Financial and
Accounting Officer)
DATE SIGNATURE TITLE
- ---- --------- -----
/s/ KYLE E. JONES Sole Director
March 28, 2000
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
NO.
- ------- ------------
2.1 Share Exchange Agreement between Manatee-American Financial Corp.
and Emagisoft Corporation (2)
3.1 Original and Amended Articles of Incorporation of the Registrant
(1)(2)
3.2 Bylaws of the Registrant (1)
4.1 Specimen - Common Stock Certificate (1)
10.1 Employment Contracts of Key Management of Emagisoft Technologies, Inc.
10.2 Specimen - Confidential Information and Invention Assignment Agreement
for Employees
10.3 Business Consulting Agreement between James S. Neader and Emagisoft
Technologies, Inc.
10.4 Option Agreement for Promotional services between Gary Sheffield and
Emagisoft Technologies, Inc.
16.1 Letter on Change in Certifying Accountant (2)
21.1 Subsidiaries of the Registrant
21.2 Stock Purchase and Sale between Net Advantage, Inc. (NKA) Emagisoft
Corporation and Interactive Media Solutions, Inc.
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, filed October
29, 1999.
31
<PAGE>
Exhibit 10.1 Employment Contracts
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (THIS "AGREEMENT") IS MADE AND ENTERED INTO AS OF THIS
3rd DAY OF January, 2000, BY AND BETWEEN EMAGISOFT TECHNOLOGIES, INC., A FLORIDA
- ---
CORPORATION (HEREINAFTER REFERRED TO AS "EMPLOYER"), AND KYLE E. JONES
(HEREINAFTER REFERRED TO AS "EMPLOYEE").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the continued availability of Employee's services is regarded by
Employer as vitally important to its continued corporate growth and success, and
Employee desires to formalize his employment with Employer and to maximize the
security of his position.
NOW THEREFORE, in consideration of such employment and the premises and
covenants hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee and Employee
----------
hereby accepts such employment, upon the terms and conditions hereinafter set
forth.
2. TERM. Subject to the provisions for termination as hereinafter provided,
----
the term of this Agreement shall be TWO (2) YEARS and shall commence on JANUARY
-------
3RD, 2000, and terminate on JANUARY 3RD, 2002. This Agreement shall be
- --- ------------
automatically renewed for additional one (1) year terms unless either party
gives the other notice to terminate this Agreement at least sixty (60) days
prior to the expiration of the initial term or any one (1) year renewal term.
3. COMPENSATION. Employer shall pay Employee an annual salary of ONE
------------ ---
HUNDRED FOUR THOUSAND DOLLARS ($104,000.00), payable in accordance with
----------------------------------------------
Employer's normal policies but in no event less often than biweekly (the
"Salary"). Employer shall increase the Salary payable to Employee each year
upon the anniversary of Employee's commencement of employment in an amount not
less than five percent (5%) of the salary payable to Employee for the previous
year.
4. EMPLOYEE BENEFITS. Employee shall be entitled to receive or participate
------------------
in all benefit plans and programs of Employer and the Company currently existing
or hereafter made available to executives or senior management of Employer or
any subsidiary corporations of Employer, including Emagisoft Corporation and
Interactive Media Solutions, Inc. (the "Subsidiaries"), including but not
limited to, pension and profit sharing plan, 401(k) plan, incentive savings
plan, stock option plan, group life insurance, dental, hospitalization, surgical
and medical coverage, salary continuation plan, disability coverage and other
fringe benefits.
5. MEDICAL AND DENTAL INSURANCE. During the term of this Agreement,
-------------------------------
Employer shall maintain in full force and effect, at sole cost to Employer, an
all-inclusive policy of medical and dental insurance covering Employee and
dependents of Employee, which policy provides substantially the same limits and
coverage's of Employer's medical and dental insurance provided to executive
officers or senior management of Employer or any of its Subsidiaries.
6. BUSINESS EXPENSES. Employee shall be provided with credit cards issued
------------------
in the name of Employer or the Company, either American Express or
Visa/MasterCard, for business travel, entertainment, lodging and the like, and
Employee shall be entitled to receive proper reimbursement for all reasonable,
out-of-pocket expenses incurred directly by Employee in performing services
hereunder. Employer shall reimburse Employee for such expenses on a monthly
basis, upon submission by Employee of appropriate receipts, vouchers or other
documents in accordance with Employer's policy.
7. AUTOMOBILE EXPENSES. Employer shall provide Employee with an automobile
--------------------
allowance to be determined by the Board of Directors of at least $250.00 per
-------
month, for payment of expenses relating to Employee's operation and use (to
include parking) of an automobile in the course of performing duties under this
Agreement.
32
<PAGE>
8. PORTABLE CELLULAR TELEPHONE AND PAGER. Employer shall provide Employee
---------------------------------------
with an allowance to be determined by the Board of Directors of at least
$100.00, for payment of all costs and expenses incurred in connection with the
operation and use of a portable cellular telephone and/or nationwide alpha
pager, including, but not limited to, monthly service charges and maintenance.
9. STOCK OPTIONS. Employee shall be granted options to purchase shares of
--------------
Common Stock of Employer, par value of $0.0001 per share (the "Common Stock")
under the following terms and conditions:
(a) Employee shall receive an option to purchase up to 100,000 shares of
-------
Employer's Common Stock at a price of $1.50 per share upon execution of this
-----
Agreement.
(b) Employee shall receive: (i) an option to purchase up to 50,000 shares
------
of Common Stock exercisable at a price of $1.75 per share at such time as annual
-----
gross revenues of Employer and Subsidiaries reach $1,500,000, and (ii) options
----------
to purchase up to an additional 50,000 shares of Common Stock exercisable at a
------
price of $1.75 per share for every additional increase in annual gross revenues
-----
of Employer and Subsidiaries of $1,500,000 for the earlier of the first five
----------
years hereunder or until Employer and Subsidiaries reach $15,000,000 in annual
-----------
gross revenues.
(c) Employee shall receive longevity options to purchase up to 100,000
-------
shares of Common Stock per year of employment exercisable at a price of $2.00
-----
per share. The employment of Employee with any Subsidiaries prior to execution
of this Agreement shall be considered as employment hereunder in determining
Employee's entitlement to said longevity options.
(d) Employee shall receive an option to purchase up to 50,000 shares of
------
Common Stock exercisable at a price of $2.00 per share in the event, within two
-----
(2) years of Employee's employment hereunder, all or substantially all of the
business or assets of Employer or Subsidiaries is sold to a third party or
Employer merges with or is acquired by another entity.
10. DUTIES. Employer shall employ Employee in the capacity of
------
PRESIDENT AND CHIEF EXECUTIVE OFFICER to perform such services as are
- -----------------------------------------
customarily associated with such position, subject to the supervision, direction
and any policies and procedures established from time to time by the Board of
Directors of Employer. Employee may also be employed in the same or similar
capacities with Subsidiaries.
11. EXTENT OF SERVICES. Employee shall devote such time, attention and
------------------
energy as is reasonably necessary for Employee to faithfully perform his duties
under this Agreement. Employee may engage in other business activities which do
not conflict with the business of Employer.
12. VACATION & SICK LEAVE. Employee shall be entitled each year to a
-----------------------
vacation of three (3) weeks, during which time Employee's compensation will be
paid in full. Unused days of vacation will accumulate and accrue over to future
years. In addition, Employee shall have such other days off as shall be
determined by Employer and shall be entitled to paid sick leave and paid
holidays in accordance with Employer's policy as established by Employer from
time to time.
13. INCAPACITY OR DISABILITY. In the event Employee shall become so
--------------------------
incapacitated by reason of accident, illness, or other disability that Employee
is unable to carry on substantially all of the normal duties of Employee under
this Agreement for a continuous period of ninety (90) days, this Agreement may
be terminated at Employer's option, at which time Employee shall continue to
receive Employee's Salary, at the rate then in effect, for a period of four (4)
months from the date on which Employee became incapacitated or disabled. If two
(2) or more periods of Employee's incapacity or disability are not separated by
a return to full-time work for at least five (5) consecutive working days, then
such periods of disability shall be considered one continuous period of
incapacity or disability.
33
<PAGE>
14. DEATH. In the event Employee dies during the term of this Agreement,
-----
this Agreement shall be terminated and Employer shall pay to Employee's estate,
within thirty (30) days of Employee's death, an amount equal to thirty-three and
one-third percent (33%) of Employee's Salary at the rate then in effect. Other
death benefits will be determined in accordance with the terms of Employer's or
the Company's benefit plans and programs.
15. TERMINATION; COMPENSATION TO EMPLOYEE UPON TERMINATION. In the event
---------------------------------------------------------
Employer terminates this Agreement for any reason other than in accordance with
Section 2 above or for "Cause" as hereinafter defined, or the disability
(Section 13) or death (Section 14) of Employee, or in the event Employee
terminates this Agreement for any of the following reasons:
(a) Employer fails to pay Employee any installment of Salary, in whole or in
part, when such installment becomes due and payable, and such failure continues
for more than ten (10) days, or
(b) Employer breaches any term, covenant or obligation in this Agreement,
which breach has continued more than thirty (30) days after Employee has given
Employer notice specifying such breach, or
(c) Employer liquidates, dissolves or files a petition in bankruptcy, or
(d) Employer sells all or substantially all of the business or assets of the
Company or Employer to a third party or Employer merges with or is acquired by
another company, then, in such case, Employee shall be entitled to be paid by
Employer, within sixty (60) days of such termination, an amount equal to the
aggregate of all compensation earned by Employee or to which Employee was or
would be entitled to receive, including Salary, for the year in which such
employment was terminated and for the succeeding year. In the event Employee
terminates this Agreement for any of the foregoing reasons, the provisions of
Sections 16 and 17 shall be of no force and effect.
Nothing herein shall prevent Employer from terminating this Agreement and
Employee's employment hereunder for "Cause." "Cause" shall mean: (a)
Employee's conviction of a felony under any federal or state law, or (b) the
commission or participation of Employee in an injurious act of fraud,
misrepresentation, embezzlement or dishonesty against Employer, or (c)
Employee's substantial neglect of his duties hereunder, or (d) Employee's breach
of any term, covenant or obligation in this Agreement. This Agreement shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to Employee a notice of termination specifying which act or
omission to act of Employee constitutes Cause, including the particulars
therefor, and Employee, within thirty (30) days of receipt of such notice,
either: (i) cures such act or omission to act, or (ii) provides notice to
Employer that he disputes such termination. In the event Employee provides
timely notice to Employer that he challenges such termination, the dispute shall
then be submitted to an arbitrator agreed upon by Employer and Employee. If the
parties cannot agree upon an arbitrator, they shall each select an arbitrator
and the arbitrators so selected shall choose a third arbitrator to hear the
dispute. The decision of the arbitrator(s) shall be binding upon Employer and
Employee. During the pendency of any dispute, Employer shall continue to pay
salary to Employee, at the rate then in effect, and Employee shall continue to
perform his duties under this Agreement. In the event Employee fails to either
timely cure the act or omission to act or provide notice to Employer of a
dispute thereof, this Agreement shall be considered terminated and Employer
shall have no further obligation to pay compensation to Employee hereunder,
except for payment of any compensation accrued through the date of termination.
All such accrued compensation shall be paid to Employee in a lump sum on the
date of termination.
16. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee recognizes
------------------------------------------------
and acknowledges that trade secrets and proprietary information and processes of
Employer and Subsidiaries, as they may exist from time to time, are valuable,
special, and unique assets of the business of Employer and Subsidiaries, access
to and knowledge of which are essential to the performance of Employee's duties
hereunder. Employee shall not, during or after the term of this Agreement, in
whole or in part, disclose such secrets, information or processes including, but
not limited to, names of customers and potential customers, names, locations and
other identifying information concerning vendors and suppliers of Employer and
Subsidiaries, prospective and current business transactions and arrangements,
electronic processing, electronic data processing, work processing and/or
computer programs, runs and other electronic products and records, price lists,
training materials, business methods, procedures and forms of Employer and
Subsidiaries, and advertising and promotional materials and sources, to any
person, firm, corporation, association or other entity for any reason or purpose
whatsoever, nor shall Employee make use of any such property for his own
purposes or for the benefit of any person, firm, corporation or other entity
(except Employer and Subsidiaries) under any circumstances during or after the
term of this Agreement; provided that after the term of this Agreement these
restrictions shall not apply to such secrets, information and processes which
are then in the public domain (provided that Employee was not responsible,
directly or indirectly, for such secrets, information or processes entering the
public domain without Employer's consent). Employee agrees to hold as
Employer's property all memoranda, books, papers, letters, computer disks,
customer lists, price lists, advertising and promotional materials, contracts,
and other data, and all copies thereof and therefrom, in any way relating to the
business and affairs of Employer and Subsidiaries, whether made by him or
otherwise coming into his possession, and on demand of Employer, at any time, to
deliver the same to Employer.
34
<PAGE>
17. COVENANT NOT TO COMPETE. During the term hereof and for a period of one
-----------------------
(1) year thereafter in the event Employee's employment is terminated for Cause,
Employee shall not within a radius of one hundred (100) miles of any geographic
area within which Employer or any of its Subsidiaries has an office, enter into
or engage in any business in competition with the business of Employer or any of
its Subsidiaries, as it now exists or may exist in the future, either as an
individual on his own account, or as a partner, or joint venturer, or as an
officer, director or stockholder of a corporation, or otherwise. It is agreed
by the parties hereto that if any portion of this covenant not to compete is
held to be unreasonable, arbitrary or against public policy, the covenant herein
shall be considered divisible both as to time and geographical area, and each
month of the specified period shall be deemed a separate period of time, and
each county or parish of each State in the United States of America shall be
deemed a separate geographical area, so that the lesser period of time or
geographical area shall remain effective so long as the same is not
unreasonable, arbitrary, or against public policy. The parties hereto agree
that, in the event any court determines the specified time period or the
specified geographical area to be unreasonable, arbitrary, or against public
policy, a lesser time period or geographical area which is determined to be
reasonable, non-arbitrary and not against public policy may be enforced against
Employee.
18. REMEDIES. If there is a breach or threatened breach of the provisions
--------
of Sections 16 or 17 of this Agreement, Employer shall be entitled to an
injunction restraining Employee from such breach. Nothing herein shall be
construed as prohibiting Employer from pursuing any other remedies for such
breach or threatened breach.
19. PRIOR EMPLOYMENT AGREEMENT. Employee and Employer's subsidiary,
----------------------------
Emagisoft Corporation f/k/a Net Advantage, Inc., are parties to an Employment
Agreement dated as of July 15, 1999 ("Prior Agreement"). It is intended that
this Agreement shall supersede and replace the Prior Agreement, and upon
execution of this Agreement the Prior Agreement shall be cancelled and of no
further force and effect and the rights and obligations of the parties under the
Prior Agreement shall be deemed null and void. Employee understands and agrees
that any option to purchase shares of common stock or other securities of
Emagisoft Corporation, which has been granted to or received by Employee under
the Prior Agreement, shall be cancelled and considered null and void.
20. NOTICES. Any notice required or permitted to be given under this
-------
Agreement shall be sufficient if in writing and if sent by certified or
registered mail, return receipt requested, to the parties at the following
addresses:
In the case of Employer: 405 Central Avenue, Second Floor
--------------------------------
St. Petersburg, FL 33701
---------------------------
Attention: Kyle E. Jones
-------------------------
In the case of Employee: 405 Central Avenue, Second Floor
--------------------------------
St. Petersburg, FL 33701
---------------------------
or at such other place as the parties may later designate.
21. ATTORNEY'S FEES. Should Employer or Employee institute legal
----------------
action, whether at law or in equity, to enforce any provision hereunder, the
prevailing party shall be entitled to receive from the other party all costs and
reasonable attorney's fees, including, but not limited to, fees for trial and
appeals or other legal proceedings.
22. CONSENT TO JURISDICTION AND VENUE. The parties hereby consent to
-----------------------------------
personal jurisdiction and venue, for any action brought by Employer or Employee
arising out of a breach or threatened breach of this Agreement, in Pinellas
County, Florida. The parties agree that any action arising under this Agreement
or out of the relationship established by this Agreement shall be brought only
and exclusively in Pinellas County, Florida.
23. WAIVER OF BREACH. The waiver by a party of a breach of any
------------------
condition of this Agreement by the other party shall not be construed as a
waiver by such party of any subsequent breach by the other party.
35
<PAGE>
24. ASSIGNMENT. This Agreement may not be assigned by either party hereto
----------
without the written consent of both parties.
25. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
-----------------
the parties. It may be changed only by an agreement in writing signed by the
parties hereto.
26. GOVERNING LAW. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the laws of the State of Florida.
27. HEADINGS. The headings in this Agreement are inserted for
--------
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
28. COUNTERPARTS. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but together which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
FOR EMPLOYER:
EMAGISOFT TECHNOLOGIES, INC. WITNESSES:
/s/ Peter VanSon /s/ Frank P. Rothschild
------------------ --------------------------
Peter VanSon, Chief Financial Officer
/s/ William Egge
------------------
FOR EMPLOYEE: WITNESSES:
/s/ Kyle E. Jones /s/ Frank P. Rothschild
-------------------- -------------------------
Kyle E. Jones
/s/ William Egge
------------------
ACKNOWLEDGMENT OF EMAGISOFT CORPORATION
---------------------------------------
The undersigned, a party to that certain Employment Agreement dated as of July
15, 1999, between Emagisoft Corporation and Kyle E. Jones ("Prior Agreement"),
acknowledges and agrees that upon execution of this Agreement by Employer and
Employee, the Prior Agreement shall be cancelled and of no further force and
effect, and the rights and obligations of the undersigned under the Prior
Agreement shall be deemed null and void.
FOR EMAGISOFT CORPORATION: /s/ Peter VanSon
------------------
Peter VanSon,
Chief Operating Officer
36
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (THIS "AGREEMENT") IS MADE AND ENTERED INTO AS OF THIS
3rd DAY OF January, 2000, BY AND BETWEEN EMAGISOFT TECHNOLOGIES, INC., A FLORIDA
- ---
CORPORATION (HEREINAFTER REFERRED TO AS "EMPLOYER"), AND PETER VANSON
(HEREINAFTER REFERRED TO AS "EMPLOYEE").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the continued availability of Employee's services is regarded by
Employer as vitally important to its continued corporate growth and success, and
Employee desires to formalize his employment with Employer and to maximize the
security of his position.
NOW THEREFORE, in consideration of such employment and the premises and
covenants hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee and Employee
----------
hereby accepts such employment, upon the terms and conditions hereinafter set
forth.
2. TERM. Subject to the provisions for termination as hereinafter provided,
----
the term of this Agreement shall be TWO (2) YEARS and shall commence on JANUARY
-------
3RD, 2000, and terminate on JANUARY 3RD, 2002. This Agreement shall be
- --- ------------
automatically renewed for additional one (1) year terms unless either party
gives the other notice to terminate this Agreement at least sixty (60) days
prior to the expiration of the initial term or any one (1) year renewal term.
3. COMPENSATION. Employer shall pay Employee an annual salary of
------------
SEVENTY-EIGHT THOUSAND DOLLARS ($78,000.00), payable in accordance with
- ----------------------------------------------
Employer's normal policies but in no event less often than biweekly (the
"Salary"). Employer shall increase the Salary payable to Employee each year
upon the anniversary of Employee's commencement of employment in an amount not
less than five percent (5%) of the salary payable to Employee for the previous
year.
4. EMPLOYEE BENEFITS. Employee shall be entitled to receive or participate
------------------
in all benefit plans and programs of Employer and the Company currently existing
or hereafter made available to executives or senior management of Employer or
any subsidiary corporations of Employer, including Emagisoft Corporation and
Interactive Media Solutions, Inc. (the "Subsidiaries"), including but not
limited to, pension and profit sharing plan, 401(k) plan, incentive savings
plan, stock option plan, group life insurance, dental, hospitalization, surgical
and medical coverage, salary continuation plan, disability coverage and other
fringe benefits.
5. MEDICAL AND DENTAL INSURANCE. During the term of this Agreement,
-------------------------------
Employer shall maintain in full force and effect, at sole cost to Employer, an
all-inclusive policy of medical and dental insurance covering Employee and
dependents of Employee, which policy provides substantially the same limits and
coverage's of Employer's medical and dental insurance provided to executive
officers or senior management of Employer or any of its Subsidiaries.
6. BUSINESS EXPENSES. Employee shall be provided with credit cards issued
------------------
in the name of Employer or the Company, either American Express or
Visa/MasterCard, for business travel, entertainment, lodging and the like, and
Employee shall be entitled to receive proper reimbursement for all reasonable,
out-of-pocket expenses incurred directly by Employee in performing services
hereunder. Employer shall reimburse Employee for such expenses on a monthly
basis, upon submission by Employee of appropriate receipts, vouchers or other
documents in accordance with Employer's policy.
7. AUTOMOBILE EXPENSES. Employer shall provide Employee with an automobile
--------------------
allowance to be determined by the Board of Directors of at least $250.00 per
-------
month, for payment of expenses relating to Employee's operation and use (to
include parking) of an automobile in the course of performing duties under this
Agreement.
37
<PAGE>
8. PORTABLE CELLULAR TELEPHONE AND PAGER. Employer shall provide Employee
---------------------------------------
with an allowance to be determined by the Board of Directors of at least
$100.00, for payment of all costs and expenses incurred in connection with the
operation and use of a portable cellular telephone and/or nationwide alpha
pager, including, but not limited to, monthly service charges and maintenance.
9. STOCK OPTIONS. Employee shall be granted options to purchase shares of
--------------
Common Stock of Employer, par value of $0.0001 per share (the "Common Stock")
under the following terms and conditions:
(a) Employee shall receive an option to purchase up to 50,000 shares of
------
Employer's Common Stock at a price of $1.50 per share upon execution of this
-----
Agreement.
(b) Employee shall receive: (i) an option to purchase up to 50,000 shares
------
of Common Stock exercisable at a price of $1.75 per share at such time as annual
-----
gross revenues of Employer and Subsidiaries reach $1,500,000, and (ii) options
----------
to purchase up to an additional 50,000 shares of Common Stock exercisable at a
------
price of $1.75 per share for every additional increase in annual gross revenues
-----
of Employer and Subsidiaries of $1,500,000 for the earlier of the first five
----------
years hereunder or until Employer and Subsidiaries reach $15,000,000 in annual
-----------
gross revenues.
(c) Employee shall receive longevity options to purchase up to 50,000 shares
------
of Common Stock per year of employment exercisable at a price of $2.00 per
-----
share. The employment of Employee with any Subsidiaries prior to execution of
this Agreement shall be considered as employment hereunder in determining
Employee's entitlement to said longevity options.
(d) Employee shall receive an option to purchase up to 50,000 shares of
------
Common Stock exercisable at a price of $2.00 per share in the event, within two
-----
(2) years of Employee's employment hereunder, all or substantially all of the
business or assets of Employer or Subsidiaries is sold to a third party or
Employer merges with or is acquired by another entity.
10. DUTIES. Employer shall employ Employee in the capacity of
------
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER to perform such services as
- ----------------------------------------------------
are customarily associated with such position, subject to the supervision,
direction and any policies and procedures established from time to time by the
Board of Directors of Employer. Employee may also be employed in the same or
similar capacities with Subsidiaries.
11. EXTENT OF SERVICES. Employee shall devote such time, attention and
------------------
energy as is reasonably necessary for Employee to faithfully perform his duties
under this Agreement. Employee may engage in other business activities which do
not conflict with the business of Employer.
12. VACATION & SICK LEAVE. Employee shall be entitled each year to a
-----------------------
vacation of three (3) weeks, during which time Employee's compensation will be
paid in full. Unused days of vacation will accumulate and accrue over to future
years. In addition, Employee shall have such other days off as shall be
determined by Employer and shall be entitled to paid sick leave and paid
holidays in accordance with Employer's policy as established by Employer from
time to time.
13. INCAPACITY OR DISABILITY. In the event Employee shall become so
--------------------------
incapacitated by reason of accident, illness, or other disability that Employee
is unable to carry on substantially all of the normal duties of Employee under
this Agreement for a continuous period of ninety (90) days, this Agreement may
be terminated at Employer's option, at which time Employee shall continue to
receive Employee's Salary, at the rate then in effect, for a period of four (4)
months from the date on which Employee became incapacitated or disabled. If two
(2) or more periods of Employee's incapacity or disability are not separated by
a return to full-time work for at least five (5) consecutive working days, then
such periods of disability shall be considered one continuous period of
incapacity or disability.
38
<PAGE>
14. DEATH. In the event Employee dies during the term of this Agreement,
-----
this Agreement shall be terminated and Employer shall pay to Employee's estate,
within thirty (30) days of Employee's death, an amount equal to thirty-three and
one-third percent (33%) of Employee's Salary at the rate then in effect. Other
death benefits will be determined in accordance with the terms of Employer's or
the Company's benefit plans and programs.
15. TERMINATION; COMPENSATION TO EMPLOYEE UPON TERMINATION. In the event
---------------------------------------------------------
Employer terminates this Agreement for any reason other than in accordance with
Section 2 above or for "Cause" as hereinafter defined, or the disability
(Section 13) or death (Section 14) of Employee, or in the event Employee
terminates this Agreement for any of the following reasons:
(a) Employer fails to pay Employee any installment of Salary, in whole or in
part, when such installment becomes due and payable, and such failure continues
for more than ten (10) days, or
(b) Employer breaches any term, covenant or obligation in this Agreement,
which breach has continued more than thirty (30) days after Employee has given
Employer notice specifying such breach, or
(e) Employer liquidates, dissolves or files a petition in bankruptcy, or
(f) Employer sells all or substantially all of the business or assets of the
Company or Employer to a third party or Employer merges with or is acquired by
another company,
then, in such case, Employee shall be entitled to be paid by Employer, within
sixty (60) days of such termination, an amount equal to the aggregate of all
compensation earned by Employee or to which Employee was or would be entitled to
receive, including Salary, for the year in which such employment was terminated
and for the succeeding year. In the event Employee terminates this Agreement
for any of the foregoing reasons, the provisions of Sections 16 and 17 shall be
of no force and effect.
Nothing herein shall prevent Employer from terminating this Agreement and
Employee's employment hereunder for "Cause." "Cause" shall mean: (a)
Employee's conviction of a felony under any federal or state law, or (b) the
commission or participation of Employee in an injurious act of fraud,
misrepresentation, embezzlement or dishonesty against Employer, or (c)
Employee's substantial neglect of his duties hereunder, or (d) Employee's breach
of any term, covenant or obligation in this Agreement. This Agreement shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to Employee a notice of termination specifying which act or
omission to act of Employee constitutes Cause, including the particulars
therefor, and Employee, within thirty (30) days of receipt of such notice,
either: (i) cures such act or omission to act, or (ii) provides notice to
Employer that he disputes such termination. In the event Employee provides
timely notice to Employer that he challenges such termination, the dispute shall
then be submitted to an arbitrator agreed upon by Employer and Employee. If the
parties cannot agree upon an arbitrator, they shall each select an arbitrator
and the arbitrators so selected shall choose a third arbitrator to hear the
dispute. The decision of the arbitrator(s) shall be binding upon Employer and
Employee. During the pendency of any dispute, Employer shall continue to pay
salary to Employee, at the rate then in effect, and Employee shall continue to
perform his duties under this Agreement. In the event Employee fails to either
timely cure the act or omission to act or provide notice to Employer of a
dispute thereof, this Agreement shall be considered terminated and Employer
shall have no further obligation to pay compensation to Employee hereunder,
except for payment of any compensation accrued through the date of termination.
All such accrued compensation shall be paid to Employee in a lump sum on the
date of termination.
16. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee recognizes
------------------------------------------------
and acknowledges that trade secrets and proprietary information and processes of
Employer and Subsidiaries, as they may exist from time to time, are valuable,
special, and unique assets of the business of Employer and Subsidiaries, access
to and knowledge of which are essential to the performance of Employee's duties
hereunder. Employee shall not, during or after the term of this Agreement, in
whole or in part, disclose such secrets, information or processes including, but
not limited to, names of customers and potential customers, names, locations and
other identifying information concerning vendors and suppliers of Employer and
Subsidiaries, prospective and current business transactions and arrangements,
electronic processing, electronic data processing, work processing and/or
computer programs, runs and other electronic products and records, price lists,
training materials, business methods, procedures and forms of Employer and
Subsidiaries, and advertising and promotional materials and sources, to any
person, firm, corporation, association or other entity for any reason or purpose
whatsoever, nor shall Employee make use of any such property for his own
purposes or for the benefit of any person, firm, corporation or other entity
(except Employer and Subsidiaries) under any circumstances during or after the
term of this Agreement; provided that after the term of this Agreement these
restrictions shall not apply to such secrets, information and processes which
are then in the public domain (provided that Employee was not responsible,
directly or indirectly, for such secrets, information or processes entering the
public domain without Employer's consent). Employee agrees to hold as
Employer's property all memoranda, books, papers, letters, computer disks,
customer lists, price lists, advertising and promotional materials, contracts,
and other data, and all copies thereof and therefrom, in any way relating to the
business and affairs of Employer and Subsidiaries, whether made by him or
otherwise coming into his possession, and on demand of Employer, at any time, to
deliver the same to Employer.
39
<PAGE>
17. COVENANT NOT TO COMPETE. During the term hereof and for a period of one
-----------------------
(1) year thereafter in the event Employee's employment is terminated for Cause,
Employee shall not within a radius of one hundred (100) miles of any geographic
area within which Employer or any of its Subsidiaries has an office, enter into
or engage in any business in competition with the business of Employer or any of
its Subsidiaries, as it now exists or may exist in the future, either as an
individual on his own account, or as a partner, or joint venturer, or as an
officer, director or stockholder of a corporation, or otherwise. It is agreed
by the parties hereto that if any portion of this covenant not to compete is
held to be unreasonable, arbitrary or against public policy, the covenant herein
shall be considered divisible both as to time and geographical area, and each
month of the specified period shall be deemed a separate period of time, and
each county or parish of each State in the United States of America shall be
deemed a separate geographical area, so that the lesser period of time or
geographical area shall remain effective so long as the same is not
unreasonable, arbitrary, or against public policy. The parties hereto agree
that, in the event any court determines the specified time period or the
specified geographical area to be unreasonable, arbitrary, or against public
policy, a lesser time period or geographical area which is determined to be
reasonable, non-arbitrary and not against public policy may be enforced against
Employee.
18. REMEDIES. If there is a breach or threatened breach of the provisions
--------
of Sections 16 or 17 of this Agreement, Employer shall be entitled to an
injunction restraining Employee from such breach. Nothing herein shall be
construed as prohibiting Employer from pursuing any other remedies for such
breach or threatened breach.
19. PRIOR EMPLOYMENT AGREEMENT. Employee and Employer's subsidiary,
----------------------------
Emagisoft Corporation f/k/a Net Advantage, Inc., are parties to an Employment
Agreement dated as of July 15, 1999 ("Prior Agreement"). It is intended that
this Agreement shall supersede and replace the Prior Agreement, and upon
execution of this Agreement the Prior Agreement shall be cancelled and of no
further force and effect and the rights and obligations of the parties under the
Prior Agreement shall be deemed null and void. Employee understands and agrees
that any option to purchase shares of common stock or other securities of
Emagisoft Corporation, which has been granted to or received by Employee under
the Prior Agreement, shall be cancelled and considered null and void.
20. NOTICES. Any notice required or permitted to be given under this
-------
Agreement shall be sufficient if in writing and if sent by certified or
registered mail, return receipt requested, to the parties at the following
addresses:
In the case of Employer: 405 Central Avenue, Second Floor
--------------------------------
St. Petersburg, FL 33701
---------------------------
Attention: Kyle E. Jones
-------------------------
In the case of Employee: 4661 Laurel Oak Lane N.E.
-----------------------------
St. Petersburg, FL 33703
---------------------------
or at such other place as the parties may later designate.
21. ATTORNEY'S FEES. Should Employer or Employee institute legal
----------------
action, whether at law or in equity, to enforce any provision hereunder, the
prevailing party shall be entitled to receive from the other party all costs and
reasonable attorney's fees, including, but not limited to, fees for trial and
appeals or other legal proceedings.
22. CONSENT TO JURISDICTION AND VENUE. The parties hereby consent to
-----------------------------------
personal jurisdiction and venue, for any action brought by Employer or Employee
arising out of a breach or threatened breach of this Agreement, in Pinellas
County, Florida. The parties agree that any action arising under this Agreement
or out of the relationship established by this Agreement shall be brought only
and exclusively in Pinellas County, Florida.
23. WAIVER OF BREACH. The waiver by a party of a breach of any
------------------
condition of this Agreement by the other party shall not be construed as a
waiver by such party of any subsequent breach by the other party.
40
<PAGE>
24. ASSIGNMENT. This Agreement may not be assigned by either party hereto
----------
without the written consent of both parties.
25. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
-----------------
the parties. It may be changed only by an agreement in writing signed by the
parties hereto.
26. GOVERNING LAW. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the laws of the State of Florida.
27. HEADINGS. The headings in this Agreement are inserted for
--------
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
28. COUNTERPARTS. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but together which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
FOR EMPLOYER:
EMAGISOFT TECHNOLOGIES, INC. WITNESSES:
/s/ Kyle E. Jones /s/ Frank P. Rothschild
-------------------- -------------------------
Kyle E. Jones, President
/s/ David T. Hollis
----------------------
FOR EMPLOYEE: WITNESSES:
/s/ Peter VanSon /s/ Frank P. Rothschild
------------------ -------------------------
Peter VanSon
/s/ David T. Hollis
----------------------
ACKNOWLEDGMENT OF EMAGISOFT CORPORATION
---------------------------------------
The undersigned, a party to that certain Employment Agreement dated as of July
15, 1999, between Emagisoft Corporation and Peter VanSon ("Prior Agreement"),
acknowledges and agrees that upon execution of this Agreement by Employer and
Employee, the Prior Agreement shall be cancelled and of no further force and
effect, and the rights and obligations of the undersigned under the Prior
Agreement shall be deemed null and void.
FOR EMAGISOFT CORPORATION: /s/ Kyle E. Jones
--------------------
Kyle E. Jones, President
41
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (THIS "AGREEMENT") IS MADE AND ENTERED INTO AS OF THIS
3rd DAY OF January, 2000, BY AND BETWEEN EMAGISOFT TECHNOLOGIES, INC., A FLORIDA
- ---
CORPORATION (HEREINAFTER REFERRED TO AS "EMPLOYER"), AND WILLIAM H. EGGE IV
(HEREINAFTER REFERRED TO AS "EMPLOYEE").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the continued availability of Employee's services is regarded by
Employer as vitally important to its continued corporate growth and success, and
Employee desires to formalize his employment with Employer and to maximize the
security of his position.
NOW THEREFORE, in consideration of such employment and the premises and
covenants hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee and Employee
----------
hereby accepts such employment, upon the terms and conditions hereinafter set
forth.
2. TERM. Subject to the provisions for termination as hereinafter provided,
----
the term of this Agreement shall be TWO (2) YEARS and shall commence on JANUARY
-------
3RD, 2000, and terminate on JANUARY 3RD, 2002. This Agreement shall be
- --- ------------
automatically renewed for additional one (1) year terms unless either party
gives the other notice to terminate this Agreement at least sixty (60) days
prior to the expiration of the initial term or any one (1) year renewal term.
3. COMPENSATION. Employer shall pay Employee an annual salary of
------------
SEVENTY-EIGHT THOUSAND DOLLARS ($78,000.00), payable in accordance with
- ----------------------------------------------
Employer's normal policies but in no event less often than biweekly (the
"Salary"). Employer shall increase the Salary payable to Employee each year
upon the anniversary of Employee's commencement of employment in an amount not
less than five percent (5%) of the salary payable to Employee for the previous
year.
4. EMPLOYEE BENEFITS. Employee shall be entitled to receive or participate
------------------
in all benefit plans and programs of Employer and the Company currently existing
or hereafter made available to executives or senior management of Employer or
any subsidiary corporations of Employer, including Emagisoft Corporation and
Interactive Media Solutions, Inc. (the "Subsidiaries"), including but not
limited to, pension and profit sharing plan, 401(k) plan, incentive savings
plan, stock option plan, group life insurance, dental, hospitalization, surgical
and medical coverage, salary continuation plan, disability coverage and other
fringe benefits.
5. MEDICAL AND DENTAL INSURANCE. During the term of this Agreement,
-------------------------------
Employer shall maintain in full force and effect, at sole cost to Employer, an
all-inclusive policy of medical and dental insurance covering Employee and
dependents of Employee, which policy provides substantially the same limits and
coverage's of Employer's medical and dental insurance provided to executive
officers or senior management of Employer or any of its Subsidiaries.
6. BUSINESS EXPENSES. Employee is authorized to incur reasonable expenses
------------------
as determined by the Board of Directors on behalf of Employer in performing his
duties, including expenses for general administration of the Employer's office,
travel, transportation, entertainment, gifts and similar items, which expenses
shall be paid by Employer.
7. STOCK OPTIONS. Employee shall be granted options to purchase shares of
--------------
Common Stock of Employer, par value of $0.0001 per share (the "Common Stock")
under the following terms and conditions:
(a) Employee shall receive an option to purchase up to 50,000 shares of
------
Employer's Common Stock at a price of $1.50 per share upon execution of this
-----
Agreement.
(b) Employee shall receive: (i) an option to purchase up to 50,000 shares
------
of Common Stock exercisable at a price of $1.75 per share at such time as annual
-----
gross revenues of Employer and Subsidiaries reach $1,500,000, and (ii) options
----------
to purchase up to an additional 50,000 shares of Common Stock exercisable at a
------
price of $1.75 per share for every additional increase in annual gross revenues
-----
of Employer and Subsidiaries of $1,500,000 for the earlier of the first five
----------
years hereunder or until Employer and Subsidiaries reach $15,000,000 in annual
-----------
gross revenues.
42
<PAGE>
(c) Employee shall receive longevity options to purchase up to 50,000 shares
------
of Common Stock per year of employment exercisable at a price of $2.00 per
-----
share. The employment of Employee with any Subsidiaries prior to execution of
this Agreement shall be considered as employment hereunder in determining
Employee's entitlement to said longevity options.
(d) Employee shall receive an option to purchase up to 50,000 shares of
------
Common Stock exercisable at a price of $2.00 per share in the event, within two
-----
(2) years of Employee's employment hereunder, all or substantially all of the
business or assets of Employer or Subsidiaries is sold to a third party or
Employer merges with or is acquired by another entity.
8. DUTIES. Employer shall employ Employee in the capacity of EXECUTIVE
------ ---------
VICE PRESIDENT - SOFTWARE DEVELOPMENT to perform such services as are
- -----------------------------------------
customarily associated with such position, subject to the supervision, direction
and any policies and procedures established from time to time by the Board of
Directors of Employer. Employee may also be employed in the same or similar
capacities with Subsidiaries.
9. EXTENT OF SERVICES. Employee shall devote such time, attention and
-------------------
energy as is reasonably necessary for Employee to faithfully perform his duties
under this Agreement. Employee may engage in other business activities which do
not conflict with the business of Employer.
10. VACATION & SICK LEAVE. Employee shall be entitled each year to a
-----------------------
vacation of three (3) weeks, during which time Employee's compensation will be
paid in full. Unused days of vacation will accumulate and accrue over to future
years. In addition, Employee shall have such other days off as shall be
determined by Employer and shall be entitled to paid sick leave and paid
holidays in accordance with Employer's policy as established by Employer from
time to time.
11. INCAPACITY OR DISABILITY. In the event Employee shall become so
--------------------------
incapacitated by reason of accident, illness, or other disability that Employee
is unable to carry on substantially all of the normal duties of Employee under
this Agreement for a continuous period of ninety (90) days, this Agreement may
be terminated at Employer's option, at which time Employee shall continue to
receive Employee's Salary, at the rate then in effect, for a period of four (4)
months from the date on which Employee became incapacitated or disabled. If two
(2) or more periods of Employee's incapacity or disability are not separated by
a return to full-time work for at least five (5) consecutive working days, then
such periods of disability shall be considered one continuous period of
incapacity or disability.
12. DEATH. In the event Employee dies during the term of this Agreement,
-----
this Agreement shall be terminated and Employer shall pay to Employee's estate,
within thirty (30) days of Employee's death, an amount equal to thirty-three and
one-third percent (33%) of Employee's Salary at the rate then in effect. Other
death benefits will be determined in accordance with the terms of Employer's or
the Company's benefit plans and programs.
13. TERMINATION; COMPENSATION TO EMPLOYEE UPON TERMINATION. In the event
---------------------------------------------------------
Employer terminates this Agreement for any reason other than in accordance with
Section 2 above or for "Cause" as hereinafter defined, or the disability
(Section 13) or death (Section 14) of Employee, or in the event Employee
terminates this Agreement for any of the following reasons:
(a) Employer fails to pay Employee any installment of Salary, in whole or in
part, when such installment becomes due and payable, and such failure continues
for more than ten (10) days, or
(b) Employer breaches any term, covenant or obligation in this Agreement,
which breach has continued more than thirty (30) days after Employee has given
Employer notice specifying such breach, or
(g) Employer liquidates, dissolves or files a petition in bankruptcy, or
43
<PAGE>
(h) Employer sells all or substantially all of the business or assets of the
Company or Employer to a third party or Employer merges with or is acquired by
another company,
then, in such case, Employee shall be entitled to be paid by Employer, within
sixty (60) days of such termination, an amount equal to the aggregate of all
compensation earned by Employee or to which Employee was or would be entitled to
receive, including Salary, for the year in which such employment was terminated
and for the succeeding year. In the event Employee terminates this Agreement
for any of the foregoing reasons, the provisions of Sections 16 and 17 shall be
of no force and effect.
Nothing herein shall prevent Employer from terminating this Agreement and
Employee's employment hereunder for "Cause." "Cause" shall mean: (a)
Employee's conviction of a felony under any federal or state law, or (b) the
commission or participation of Employee in an injurious act of fraud,
misrepresentation, embezzlement or dishonesty against Employer, or (c)
Employee's substantial neglect of his duties hereunder, or (d) Employee's breach
of any term, covenant or obligation in this Agreement. This Agreement shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to Employee a notice of termination specifying which act or
omission to act of Employee constitutes Cause, including the particulars
therefor, and Employee, within thirty (30) days of receipt of such notice,
either: (i) cures such act or omission to act, or (ii) provides notice to
Employer that he disputes such termination. In the event Employee provides
timely notice to Employer that he challenges such termination, the dispute shall
then be submitted to an arbitrator agreed upon by Employer and Employee. If the
parties cannot agree upon an arbitrator, they shall each select an arbitrator
and the arbitrators so selected shall choose a third arbitrator to hear the
dispute. The decision of the arbitrator(s) shall be binding upon Employer and
Employee. During the pendency of any dispute, Employer shall continue to pay
salary to Employee, at the rate then in effect, and Employee shall continue to
perform his duties under this Agreement. In the event Employee fails to either
timely cure the act or omission to act or provide notice to Employer of a
dispute thereof, this Agreement shall be considered terminated and Employer
shall have no further obligation to pay compensation to Employee hereunder,
except for payment of any compensation accrued through the date of termination.
All such accrued compensation shall be paid to Employee in a lump sum on the
date of termination.
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee recognizes
---------------------------------------------
and acknowledges that trade secrets and proprietary information and processes of
Employer and Subsidiaries, as they may exist from time to time, are valuable,
special, and unique assets of the business of Employer and Subsidiaries, access
to and knowledge of which are essential to the performance of Employee's duties
hereunder. Employee shall not, during or after the term of this Agreement, in
whole or in part, disclose such secrets, information or processes including, but
not limited to, names of customers and potential customers, names, locations and
other identifying information concerning vendors and suppliers of Employer and
Subsidiaries, prospective and current business transactions and arrangements,
electronic processing, electronic data processing, work processing and/or
computer programs, runs and other electronic products and records, price lists,
training materials, business methods, procedures and forms of Employer and
Subsidiaries, and advertising and promotional materials and sources, to any
person, firm, corporation, association or other entity for any reason or purpose
whatsoever, nor shall Employee make use of any such property for his own
purposes or for the benefit of any person, firm, corporation or other entity
(except Employer and Subsidiaries) under any circumstances during or after the
term of this Agreement; provided that after the term of this Agreement these
restrictions shall not apply to such secrets, information and processes which
are then in the public domain (provided that Employee was not responsible,
directly or indirectly, for such secrets, information or processes entering the
public domain without Employer's consent). Employee agrees to hold as
Employer's property all memoranda, books, papers, letters, computer disks,
customer lists, price lists, advertising and promotional materials, contracts,
and other data, and all copies thereof and therefrom, in any way relating to the
business and affairs of Employer and Subsidiaries, whether made by him or
otherwise coming into his possession, and on demand of Employer, at any time, to
deliver the same to Employer.
15. COVENANT NOT TO COMPETE. During the term hereof and for a period of one
-----------------------
(1) year thereafter in the event Employee's employment is terminated for Cause,
Employee shall not within a radius of one hundred (100) miles of any geographic
area within which Employer or any of its Subsidiaries has an office, enter into
or engage in any business in competition with the business of Employer or any of
its Subsidiaries, as it now exists or may exist in the future, either as an
individual on his own account, or as a partner, or joint venturer, or as an
officer, director or stockholder of a corporation, or otherwise. It is agreed
by the parties hereto that if any portion of this covenant not to compete is
held to be unreasonable, arbitrary or against public policy, the covenant herein
shall be considered divisible both as to time and geographical area, and each
month of the specified period shall be deemed a separate period of time, and
each county or parish of each State in the United States of America shall be
deemed a separate geographical area, so that the lesser period of time or
geographical area shall remain effective so long as the same is not
unreasonable, arbitrary, or against public policy. The parties hereto agree
that, in the event any court determines the specified time period or the
specified geographical area to be unreasonable, arbitrary, or against public
policy, a lesser time period or geographical area which is determined to be
reasonable, non-arbitrary and not against public policy may be enforced against
Employee.
44
<PAGE>
16. REMEDIES. If there is a breach or threatened breach of the provisions
--------
of Sections 16 or 17 of this Agreement, Employer shall be entitled to an
injunction restraining Employee from such breach. Nothing herein shall be
construed as prohibiting Employer from pursuing any other remedies for such
breach or threatened breach.
17. PRIOR EMPLOYMENT AGREEMENT. Employee and Employer's subsidiary,
----------------------------
Emagisoft Corporation f/k/a Net Advantage, Inc., are parties to an Employment
Agreement dated as of July 15, 1999 ("Prior Agreement"). It is intended that
this Agreement shall supersede and replace the Prior Agreement, and upon
execution of this Agreement the Prior Agreement shall be cancelled and of no
further force and effect and the rights and obligations of the parties under the
Prior Agreement shall be deemed null and void. Employee understands and agrees
that any option to purchase shares of common stock or other securities of
Emagisoft Corporation, which has been granted to or received by Employee under
the Prior Agreement, shall be cancelled and considered null and void.
18. NOTICES. Any notice required or permitted to be given under this
-------
Agreement shall be sufficient if in writing and if sent by certified or
registered mail, return receipt requested, to the parties at the following
addresses:
In the case of Employer: 405 Central Avenue, Second Floor
--------------------------------
St. Petersburg, FL 33701
---------------------------
Attention: Kyle E. Jones
-------------------------
In the case of Employee: 11555 Tradewinds Blvd.
------------------------
Largo, FL 33773
-----------------
or at such other place as the parties may later designate.
19. ATTORNEY'S FEES. Should Employer or Employee institute legal
----------------
action, whether at law or in equity, to enforce any provision hereunder, the
prevailing party shall be entitled to receive from the other party all costs and
reasonable attorney's fees, including, but not limited to, fees for trial and
appeals or other legal proceedings.
20. CONSENT TO JURISDICTION AND VENUE. The parties hereby consent to
-----------------------------------
personal jurisdiction and venue, for any action brought by Employer or Employee
arising out of a breach or threatened breach of this Agreement, in Pinellas
County, Florida. The parties agree that any action arising under this Agreement
or out of the relationship established by this Agreement shall be brought only
and exclusively in Pinellas County, Florida.
21. WAIVER OF BREACH. The waiver by a party of a breach of any
------------------
condition of this Agreement by the other party shall not be construed as a
waiver by such party of any subsequent breach by the other party.
22. ASSIGNMENT. This Agreement may not be assigned by either party hereto
----------
without the written consent of both parties.
23. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
-----------------
the parties. It may be changed only by an agreement in writing signed by the
parties hereto.
24. GOVERNING LAW. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the laws of the State of Florida.
25. HEADINGS. The headings in this Agreement are inserted for
--------
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
45
<PAGE>
26. COUNTERPARTS. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but together which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
FOR EMPLOYER:
EMAGISOFT TECHNOLOGIES, INC. WITNESSES:
/s/ Kyle E. Jones /s/ Peter VanSon
-------------------- ------------------
Kyle E. Jones, President
/s/ Frank P. Rothschild
-------------------------
FOR EMPLOYEE: WITNESSES:
/s/ William Egge /s/ Peter VanSon
------------------ ------------------
William H. Egge IV
/s/ Frank P. Rothschild
-------------------------
ACKNOWLEDGMENT OF EMAGISOFT CORPORATION
---------------------------------------
The undersigned, a party to that certain Employment Agreement dated as of July
15, 1999, between Emagisoft Corporation and William H. Egge IV ("Prior
Agreement"), acknowledges and agrees that upon execution of this Agreement by
Employer and Employee, the Prior Agreement shall be cancelled and of no further
force and effect, and the rights and obligations of the undersigned under the
Prior Agreement shall be deemed null and void.
FOR EMAGISOFT CORPORATION: /s/ Kyle E. Jones
--------------------
Kyle E. Jones, President
46
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (THIS "AGREEMENT") IS MADE AND ENTERED INTO AS OF THIS
3rd DAY OF January, 2000, BY AND BETWEEN EMAGISOFT TECHNOLOGIES, INC., A FLORIDA
- ---
CORPORATION (HEREINAFTER REFERRED TO AS "EMPLOYER"), AND DAVID HOLLIS
(HEREINAFTER REFERRED TO AS "EMPLOYEE").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the continued availability of Employee's services is regarded by
Employer as vitally important to its continued corporate growth and success, and
Employee desires to formalize his employment with Employer and to maximize the
security of his position.
NOW THEREFORE, in consideration of such employment and the premises and
covenants hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee and Employee
----------
hereby accepts such employment, upon the terms and conditions hereinafter set
forth.
2. TERM. Subject to the provisions for termination as hereinafter provided,
----
the term of this Agreement shall be TWO (2) YEARS and shall commence on JANUARY
-------
3RD, 2000, and terminate on JANUARY 3RD, 2002. This Agreement shall be
- --- ------------
automatically renewed for additional one (1) year terms unless either party
gives the other notice to terminate this Agreement at least sixty (60) days
prior to the expiration of the initial term or any one (1) year renewal term.
3. COMPENSATION. Employer shall pay Employee an annual salary of
------------
SEVENTY-EIGHT THOUSAND DOLLARS ($78,000.00), payable in accordance with
- ----------------------------------------------
Employer's normal policies but in no event less often than biweekly (the
"Salary"). Employer shall increase the Salary payable to Employee each year
upon the anniversary of Employee's commencement of employment in an amount not
less than five percent (5%) of the salary payable to Employee for the previous
year.
4. EMPLOYEE BENEFITS. Employee shall be entitled to receive or participate
------------------
in all benefit plans and programs of Employer and the Company currently existing
or hereafter made available to executives or senior management of Employer or
any subsidiary corporations of Employer, including Emagisoft Corporation and
Interactive Media Solutions, Inc. (the "Subsidiaries"), including but not
limited to, pension and profit sharing plan, 401(k) plan, incentive savings
plan, stock option plan, group life insurance, dental, hospitalization, surgical
and medical coverage, salary continuation plan, disability coverage and other
fringe benefits.
5. MEDICAL AND DENTAL INSURANCE. During the term of this Agreement,
-------------------------------
Employer shall maintain in full force and effect, at sole cost to Employer, an
all-inclusive policy of medical and dental insurance covering Employee and
dependents of Employee, which policy provides substantially the same limits and
coverage's of Employer's medical and dental insurance provided to executive
officers or senior management of Employer or any of its Subsidiaries.
6. BUSINESS EXPENSES. Employee is authorized to incur reasonable expenses
------------------
as determined by the Board of Directors on behalf of Employer in performing his
duties, including expenses for general administration of the Employer's office,
travel, transportation, entertainment, gifts and similar items, which expenses
shall be paid by Employer.
7. STOCK OPTIONS. Employee shall be granted options to purchase shares of
--------------
Common Stock of Employer, par value of $0.0001 per share (the "Common Stock")
under the following terms and conditions:
(a) Employee shall receive an option to purchase up to 50,000 shares of
------
Employer's Common Stock at a price of $1.50 per share upon execution of this
-----
Agreement.
47
<PAGE>
(b) Employee shall receive: (i) an option to purchase up to 50,000 shares
------
of Common Stock exercisable at a price of $1.75 per share at such time as annual
-----
gross revenues of Employer and Subsidiaries reach $1,500,000, and (ii) options
----------
to purchase up to an additional 50,000 shares of Common Stock exercisable at a
------
price of $1.75 per share for every additional increase in annual gross revenues
-----
of Employer and Subsidiaries of $1,500,000 for the earlier of the first five
----------
years hereunder or until Employer and Subsidiaries reach $15,000,000 in annual
-----------
gross revenues.
(c) Employee shall receive longevity options to purchase up to 50,000 shares
------
of Common Stock per year of employment exercisable at a price of $2.00 per
-----
share. The employment of Employee with any Subsidiaries prior to execution of
this Agreement shall be considered as employment hereunder in determining
Employee's entitlement to said longevity options.
(d) Employee shall receive an option to purchase up to 50,000 shares of
------
Common Stock exercisable at a price of $2.00 per share in the event, within two
-----
(2) years of Employee's employment hereunder, all or substantially all of the
business or assets of Employer or Subsidiaries is sold to a third party or
Employer merges with or is acquired by another entity.
8. DUTIES. Employer shall employ Employee in the capacity of CHIEF
------ -----
INFORMATION OFFICER to perform such services as are customarily associated with
- --------------------
such position, subject to the supervision, direction and any policies and
procedures established from time to time by the Board of Directors of Employer.
Employee may also be employed in the same or similar capacities with
Subsidiaries.
9. EXTENT OF SERVICES. Employee shall devote such time, attention and
-------------------
energy as is reasonably necessary for Employee to faithfully perform his duties
under this Agreement. Employee may engage in other business activities which do
not conflict with the business of Employer.
10. VACATION & SICK LEAVE. Employee shall be entitled each year to a
-----------------------
vacation of three (3) weeks, during which time Employee's compensation will be
paid in full. Unused days of vacation will accumulate and accrue over to future
years. In addition, Employee shall have such other days off as shall be
determined by Employer and shall be entitled to paid sick leave and paid
holidays in accordance with Employer's policy as established by Employer from
time to time.
11. INCAPACITY OR DISABILITY. In the event Employee shall become so
--------------------------
incapacitated by reason of accident, illness, or other disability that Employee
is unable to carry on substantially all of the normal duties of Employee under
this Agreement for a continuous period of ninety (90) days, this Agreement may
be terminated at Employer's option, at which time Employee shall continue to
receive Employee's Salary, at the rate then in effect, for a period of four (4)
months from the date on which Employee became incapacitated or disabled. If two
(2) or more periods of Employee's incapacity or disability are not separated by
a return to full-time work for at least five (5) consecutive working days, then
such periods of disability shall be considered one continuous period of
incapacity or disability.
12. DEATH. In the event Employee dies during the term of this Agreement,
-----
this Agreement shall be terminated and Employer shall pay to Employee's estate,
within thirty (30) days of Employee's death, an amount equal to thirty-three and
one-third percent (33%) of Employee's Salary at the rate then in effect. Other
death benefits will be determined in accordance with the terms of Employer's or
the Company's benefit plans and programs.
13. TERMINATION; COMPENSATION TO EMPLOYEE UPON TERMINATION. In the event
---------------------------------------------------------
Employer terminates this Agreement for any reason other than in accordance with
Section 2 above or for "Cause" as hereinafter defined, or the disability
(Section 13) or death (Section 14) of Employee, or in the event Employee
terminates this Agreement for any of the following reasons:
(a) Employer fails to pay Employee any installment of Salary, in whole or in
part, when such installment becomes due and payable, and such failure continues
for more than ten (10) days, or
48
<PAGE>
(b) Employer breaches any term, covenant or obligation in this Agreement,
which breach has continued more than thirty (30) days after Employee has given
Employer notice specifying such breach, or
(i) Employer liquidates, dissolves or files a petition in bankruptcy, or
(j) Employer sells all or substantially all of the business or assets of the
Company or Employer to a third party or Employer merges with or is acquired by
another company,
then, in such case, Employee shall be entitled to be paid by Employer, within
sixty (60) days of such termination, an amount equal to the aggregate of all
compensation earned by Employee or to which Employee was or would be entitled to
receive, including Salary, for the year in which such employment was terminated
and for the succeeding year. In the event Employee terminates this Agreement
for any of the foregoing reasons, the provisions of Sections 16 and 17 shall be
of no force and effect.
Nothing herein shall prevent Employer from terminating this Agreement and
Employee's employment hereunder for "Cause." "Cause" shall mean: (a)
Employee's conviction of a felony under any federal or state law, or (b) the
commission or participation of Employee in an injurious act of fraud,
misrepresentation, embezzlement or dishonesty against Employer, or (c)
Employee's substantial neglect of his duties hereunder, or (d) Employee's breach
of any term, covenant or obligation in this Agreement. This Agreement shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to Employee a notice of termination specifying which act or
omission to act of Employee constitutes Cause, including the particulars
therefor, and Employee, within thirty (30) days of receipt of such notice,
either: (i) cures such act or omission to act, or (ii) provides notice to
Employer that he disputes such termination. In the event Employee provides
timely notice to Employer that he challenges such termination, the dispute shall
then be submitted to an arbitrator agreed upon by Employer and Employee. If the
parties cannot agree upon an arbitrator, they shall each select an arbitrator
and the arbitrators so selected shall choose a third arbitrator to hear the
dispute. The decision of the arbitrator(s) shall be binding upon Employer and
Employee. During the pendency of any dispute, Employer shall continue to pay
salary to Employee, at the rate then in effect, and Employee shall continue to
perform his duties under this Agreement. In the event Employee fails to either
timely cure the act or omission to act or provide notice to Employer of a
dispute thereof, this Agreement shall be considered terminated and Employer
shall have no further obligation to pay compensation to Employee hereunder,
except for payment of any compensation accrued through the date of termination.
All such accrued compensation shall be paid to Employee in a lump sum on the
date of termination.
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee recognizes
---------------------------------------------
and acknowledges that trade secrets and proprietary information and processes of
Employer and Subsidiaries, as they may exist from time to time, are valuable,
special, and unique assets of the business of Employer and Subsidiaries, access
to and knowledge of which are essential to the performance of Employee's duties
hereunder. Employee shall not, during or after the term of this Agreement, in
whole or in part, disclose such secrets, information or processes including, but
not limited to, names of customers and potential customers, names, locations and
other identifying information concerning vendors and suppliers of Employer and
Subsidiaries, prospective and current business transactions and arrangements,
electronic processing, electronic data processing, work processing and/or
computer programs, runs and other electronic products and records, price lists,
training materials, business methods, procedures and forms of Employer and
Subsidiaries, and advertising and promotional materials and sources, to any
person, firm, corporation, association or other entity for any reason or purpose
whatsoever, nor shall Employee make use of any such property for his own
purposes or for the benefit of any person, firm, corporation or other entity
(except Employer and Subsidiaries) under any circumstances during or after the
term of this Agreement; provided that after the term of this Agreement these
restrictions shall not apply to such secrets, information and processes which
are then in the public domain (provided that Employee was not responsible,
directly or indirectly, for such secrets, information or processes entering the
public domain without Employer's consent). Employee agrees to hold as
Employer's property all memoranda, books, papers, letters, computer disks,
customer lists, price lists, advertising and promotional materials, contracts,
and other data, and all copies thereof and therefrom, in any way relating to the
business and affairs of Employer and Subsidiaries, whether made by him or
otherwise coming into his possession, and on demand of Employer, at any time, to
deliver the same to Employer.
49
<PAGE>
15. COVENANT NOT TO COMPETE. During the term hereof and for a period of one
-----------------------
(1) year thereafter in the event Employee's employment is terminated for Cause,
Employee shall not within a radius of one hundred (100) miles of any geographic
area within which Employer or any of its Subsidiaries has an office, enter into
or engage in any business in competition with the business of Employer or any of
its Subsidiaries, as it now exists or may exist in the future, either as an
individual on his own account, or as a partner, or joint venturer, or as an
officer, director or stockholder of a corporation, or otherwise. It is agreed
by the parties hereto that if any portion of this covenant not to compete is
held to be unreasonable, arbitrary or against public policy, the covenant herein
shall be considered divisible both as to time and geographical area, and each
month of the specified period shall be deemed a separate period of time, and
each county or parish of each State in the United States of America shall be
deemed a separate geographical area, so that the lesser period of time or
geographical area shall remain effective so long as the same is not
unreasonable, arbitrary, or against public policy. The parties hereto agree
that, in the event any court determines the specified time period or the
specified geographical area to be unreasonable, arbitrary, or against public
policy, a lesser time period or geographical area which is determined to be
reasonable, non-arbitrary and not against public policy may be enforced against
Employee.
16. REMEDIES. If there is a breach or threatened breach of the provisions
--------
of Sections 16 or 17 of this Agreement, Employer shall be entitled to an
injunction restraining Employee from such breach. Nothing herein shall be
construed as prohibiting Employer from pursuing any other remedies for such
breach or threatened breach.
17. PRIOR EMPLOYMENT AGREEMENT. Employee and Employer's subsidiary,
----------------------------
Emagisoft Corporation f/k/a Net Advantage, Inc., are parties to an Employment
Agreement dated as of July 15, 1999 ("Prior Agreement"). It is intended that
this Agreement shall supersede and replace the Prior Agreement, and upon
execution of this Agreement the Prior Agreement shall be cancelled and of no
further force and effect and the rights and obligations of the parties under the
Prior Agreement shall be deemed null and void. Employee understands and agrees
that any option to purchase shares of common stock or other securities of
Emagisoft Corporation, which has been granted to or received by Employee under
the Prior Agreement, shall be cancelled and considered null and void.
18. NOTICES. Any notice required or permitted to be given under this
-------
Agreement shall be sufficient if in writing and if sent by certified or
registered mail, return receipt requested, to the parties at the following
addresses:
In the case of Employer: 405 Central Avenue, Second Floor
--------------------------------
St. Petersburg, FL 33701
---------------------------
Attention: Kyle E. Jones
-------------------------
In the case of Employee: 10353 Abbotsford Drive
------------------------
Tampa, FL 33626
-----------------
or at such other place as the parties may later designate.
19. ATTORNEY'S FEES. Should Employer or Employee institute legal
----------------
action, whether at law or in equity, to enforce any provision hereunder, the
prevailing party shall be entitled to receive from the other party all costs and
reasonable attorney's fees, including, but not limited to, fees for trial and
appeals or other legal proceedings.
20. CONSENT TO JURISDICTION AND VENUE. The parties hereby consent to
-----------------------------------
personal jurisdiction and venue, for any action brought by Employer or Employee
arising out of a breach or threatened breach of this Agreement, in Pinellas
County, Florida. The parties agree that any action arising under this Agreement
or out of the relationship established by this Agreement shall be brought only
and exclusively in Pinellas County, Florida.
21. WAIVER OF BREACH. The waiver by a party of a breach of any
------------------
condition of this Agreement by the other party shall not be construed as a
waiver by such party of any subsequent breach by the other party.
22. ASSIGNMENT. This Agreement may not be assigned by either party hereto
----------
without the written consent of both parties.
50
<PAGE>
23. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
-----------------
the parties. It may be changed only by an agreement in writing signed by the
parties hereto.
24. GOVERNING LAW. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the laws of the State of Florida.
25. HEADINGS. The headings in this Agreement are inserted for
--------
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but together which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
FOR EMPLOYER:
EMAGISOFT TECHNOLOGIES, INC. WITNESSES:
/s/ Kyle E. Jones /s/ Peter VanSon
-------------------- ------------------
Kyle E. Jones, President
/s/ Frank P. Rothschild
-------------------------
FOR EMPLOYEE: WITNESSES:
/s/ David T. Hollis /s/ Peter VanSon
---------------------- ------------------
David Hollis
/s/ Frank P. Rothschild
-------------------------
ACKNOWLEDGMENT OF EMAGISOFT CORPORATION
---------------------------------------
The undersigned, a party to that certain Employment Agreement dated as of July
15, 1999, between Emagisoft Corporation and David Hollis ("Prior Agreement"),
acknowledges and agrees that upon execution of this Agreement by Employer and
Employee, the Prior Agreement shall be cancelled and of no further force and
effect, and the rights and obligations of the undersigned under the Prior
Agreement shall be deemed null and void.
FOR EMAGISOFT CORPORATION: /s/ Kyle E. Jones
--------------------
Kyle E. Jones, President
51
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this
20TH day of July, 1999, by and between INTERACTIVE MEDIA SOLUTIONS, INC., a
- ----
Florida corporation (hereinafter referred to as "Employer"), and ROGER W.
FINEFROCK (hereinafter referred to as "Employee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the continued availability of Employee's services is regarded by
Employer as vitally important to its continued corporate growth and success, and
Employee desires to formalize his employment with Employer and to maximize the
security of his position.
NOW THEREFORE, in consideration of such employment and the premises and
covenants hereinafter set forth, the parties hereto agree as follows:
SECTION 1: EMPLOYMENT. Employer employs Employee and Employee accepts
----------
employment upon the terms and conditions hereinafter set forth.
SECTION 2: TERM. Subject to the provisions for termination as
----
provided, the term of this Agreement shall begin on JULY 20TH, 1999, and shall
---------
terminate one (1) year hence. This Agreement shall be automatically renewed for
additional one (1) year terms unless either party gives the other notice to
terminate this Agreement at least sixty (60) days prior to the expiration of the
initial term or any one (1) year renewal term.
SECTION 3: COMPENSATION.
------------
(a) For all services rendered by Employee under this agreement, Employer
shall pay Employee an annual base salary, to be determined by its Board of
Directors, but in no event shall the annual salary be less than SEVENTY-EIGHT
-------------
THOUSAND DOLLARS ($78,000), plus the annual salary raise described in
- ----------------------------
subparagraph (b) below, per year, payable in equal installments pursuant to the
Employer's normal payroll schedule for Employees.
(b) The Board of Directors shall increase the base salary amount each year
on the anniversary of Employee's commencement of employment in an amount within
the discretion of the Board of Directors, but in no event shall this increase be
less than five per cent (5%) of the salary of the previous year.
(c) In addition to the annual base salary, at the discretion of the Board
of Directors, Employee may be paid a bonus.
(d) In addition to the above paragraphs (a), (b), and (c), the Board of
Directors shall take such measures as to adopt performance milestones for the
Employer corporation, and shall, from time to time, award Employer-corporation
stock based upon the Employer-corporation's completion of these performance
milestones.
(e) In addition to the above paragraphs (a), (b), (c), and (d), the Board
of Directors and the Employee shall jointly take such measures as to adopt
agreed-upon and reasonable performance milestones for the Employee, and shall,
from time to time, award cash bonuses based upon Employee's completion of these
performance milestones.
SECTION 4: DUTIES. Employee shall serve as PRESIDENT of the Employer,
------ ---------
and shall assume such duties as are normally and reasonably associated with such
position. In these capacities, Employee shall be responsible for duties as
outlined in the job description attached to this employment agreement as
attachment A. The services to be performed by Employee may be extended or
curtailed from time to time at the direction of Employer's Board of Directors or
the Chief Executive Officer.
SECTION 5: EXPENSES. Employee is authorized to incur reasonable
--------
expenses as determined by the Board of Directors on behalf of Employer in
performing his duties, including expenses for general administration of the
Employer's office, travel, transportation, entertainment, gifts and similar
items, which expenses shall be paid by Employer.
SECTION 6: VACATIONS. Employee shall be entitled each year to a
---------
vacation of fifteen (15) weekdays, no two of which need be consecutive, but in
no event shall more than five (5) days be consecutive without the consent of the
Chief Executive Officer, during which time compensation shall be paid in full.
52
<PAGE>
SECTION 7: DISABILITY. If Employee is unable to perform his services
----------
by reason of illness or incapacity for a period of more than eight consecutive
weeks, the compensation otherwise payable during the continued period of illness
or incapacity shall be reduced by 20 percent. Employee's full compensation
shall be reinstated upon his return to employment and the discharge of his full
duties. Notwithstanding anything here to the contrary, Employer may terminate
this agreement at any time after Employee has been absent from employment, for
whatever cause, for a continuous period of more than 90 calendar days and all
obligations of Employer, except those outlined in Section 13 of this Agreement,
shall cease upon that termination.
SECTION 8: TERMINATION.
-----------
(a) For Cause - Nothing herein shall prevent Employer from terminating
this Agreement and Employee's employment hereunder for "Cause." "Cause" shall
mean: (a) Employee's conviction of a felony under any federal or state law, or
(b) the commission or participation of Employee in an injurious act of fraud,
misrepresentation, embezzlement or dishonesty against Employer, or (c)
Employee's substantial neglect of his duties hereunder, or (d) Employee's breach
of any term, covenant or obligation in this Agreement. This Agreement shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to Employee a notice of termination specifying which act or
omission to act of Employee constitutes Cause. Upon termination of this
Agreement for Cause, Employer shall have no further obligation to pay
compensation to Employer hereunder, except for payment of any compensation
accrued through the date of termination. All such accrued compensation shall be
paid to Employee in a lump sum within thirty (30) days of the date of
termination.
(b) Without Cause - Employee's employment may be terminated by Employer at
any time without cause upon fifteen (15) days prior written notice to Employee.
If Employer terminates Employee without cause as described in Section 8(a),
Employee shall be entitled to three months compensation as outlined in the
Agreement.
SECTION 9: INSURANCE. Employer shall use its best efforts to maintain
---------
in force for the benefit of Employee, throughout the term of this agreement:
(a) An all-inclusive policy of health and dental insurance, including
dental coverage, covering the Employee and his family which provides benefits
similar to those provided to Employees in similar positions in the industry in
which Employer is engaged.
SECTION 10: SICK LEAVE.
-----------
(a) Sick leave is compensable only on bona fide sickness of the Employee,
and if any sick leave is taken for five or more consecutive days, the Employee
shall present a doctor's certificate to the personnel officer. The Employee is
entitled to twelve (12) working days of sick leave with pay (excluding the time
during which he is not regularly assigned to work) for a calendar year of
service, on the submission of satisfactory proof of the necessity for sick
leave. Employer may, at its option, compel Employee to attend an independent
medical examination by a doctor of Employer's choosing to confirm the diagnosis
contained in the Employee's doctor's certificate. For the purpose of computing
sick leave, each Employee shall be considered to work no more than five days
each week and sick leave shall accrue at the rate of one day per month.
(b) Holidays occurring during sick leave shall not be counted as a day of
sick leave.
(c) Sick leave shall not be taken as vacation time, nor compensated for in
cash at any time except under Section 10(a) above.
(d) A full-time, regular Employee is entitled to three (3) days'
bereavement leave with pay which shall be charged against his accumulated sick
leave. Bereavement leave is applicable when death occurs in the Employee's
immediate family. For purposes of this section, immediate family shall be
Employee's spouse, parents, children, siblings, grandchildren or grandparents.
53
<PAGE>
SECTION 11: NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee
---------------------------------------------
recognizes and acknowledges that Employer's trade secrets and proprietary
information and processes, as they may exist from time to time, are valuable,
special, and unique assets of Employer's business, access to and knowledge of
which are essential to the performance of Employee's duties hereunder. Employee
shall not, during or after the term of this Agreement, in whole or in part,
disclose such secrets, information or processes including, but not limited to,
names of customers and potential customers, names, locations and other
identifying information concerning Employer's vendors and suppliers, prospective
and current business transactions and arrangements, electronic processing,
electronic data processing, work processing and/or computer programs, runs and
other electronic products and records, price lists, training materials, business
methods, procedures and forms of Employer, and advertising and promotional
materials and sources, to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall Employee make use of any
such property for his own purposes or for the benefit of any person, firm,
corporation or other entity (except Employer) under any circumstances during or
after the term of this Agreement; provided that after the term of this Agreement
these restrictions shall not apply to such secrets, information and processes
which are then in the public domain (provided that Employee was not responsible,
directly or indirectly, for such secrets, information or processes entering the
public domain without Employer's consent). Employee agrees to hold as Employer's
property all memoranda, books, papers, letters, computer disks, customer lists,
price lists, advertising and promotional materials, contracts, and other data,
and all copies thereof and therefrom, in any way relating to Employer's business
and affairs, whether made by him or otherwise coming into his possession, and on
demand of Employer, at any time, to deliver the same to Employer.
SECTION 12: COVENANT NOT TO COMPETE. During the term hereof and for a period
------------------------
of one (1) year thereafter in the event Employee's employment is terminated for
Cause, Employee shall not within a radius of one hundred (100) miles of any
geographic area within which Employer, or any affiliate or subsidiary of
Employer, has an office, enter into or engage in any business in competition
with the business of Employer, as it now exists or may exist in the future,
either as an individual on his own account, or as a partner, or joint venturer,
or as an officer, director or stockholder of a corporation, or otherwise. It is
agreed by the parties hereto that if any portion of this covenant not to compete
is held to be unreasonable, arbitrary or against public policy, the covenant
herein shall be considered divisible both as to time and geographical area, and
each month of the specified period shall be deemed a separate period of time,
and each county or parish of each State in the United States of America shall be
deemed a separate geographical area, so that the lesser period of time or
geographical area shall remain effective so long as the same is not
unreasonable, arbitrary, or against public policy. The parties hereto agree
that, in the event any court determines the specified time period or the
specified geographical area to be unreasonable, arbitrary, or against public
policy, a lesser time period or geographical area which is determined to be
reasonable, non-arbitrary and not against public policy may be enforced against
Employee.
SECTION 13: EMPLOYEE INCENTIVE OPTION TO PURCHASE STOCK. The Employee, at
--------------------------------------------
any time during the term of this agreement, has the option to participate in any
Employee Stock Purchase Plan adopted by the Board of Directors.
SECTION 14: LEGAL PROCEEDINGS. No proceedings, civil or criminal, which
------------------
relate to the business of the Employer, shall be commenced by Employee except
with the approval of the counsel of the Employer, and all proceedings, if
commenced, shall be under the sole direction of counsel.
SECTION 15: LEGAL PROCEEDINGS AGAINST EMPLOYER. The Employee shall not
----------------------------------
commence any action relating to his employment until thirty (30) days after
service of notice of claim on the Employer.
SECTION 16: NOTICES. Any notice required or permitted to be given under
-------
this Agreement shall be sufficient if in writing and if sent by certified or
registered mail to:
In the case of Employer: 405 Central Avenue, Suite 202
--------------------------------
St. Petersburg, FL 33701
---------------------------
Attention: Kyle E. Jones
---------------------------
In the case of Employee: Roger W. Finefrock
--------------------
405 Central Avenue, Suite 202
--------------------------------
St. Petersburg, FL 33701
---------------------------
or at such other place as the parties may later designate.
SECTION 17: WAIVER OF BREACH. The waiver by Employer of a breach of any
------------------
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee.
54
<PAGE>
SECTION 18: ASSIGNMENT. The rights and obligations of Employer under this
----------
Agreement shall inure to the benefit of and shall be binding upon Employer's
successors and assigns.
SECTION 19: ENTIRE AGREEMENT. This instrument contains the entire
-----------------
agreement of the parties. It may not be changed orally but only by an agreement
in writing signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
SECTION 20: CHOICE OF LAWS. This contract shall be interpreted and
----------------
enforced in accordance with the laws of the State of Florida.
SECTION 21: ENFORCEMENT BY INJUNCTION. The services to be rendered by
-------------------------
Employee are of a unique and original character entitling Employer to
enforcement of this contract by injunction or other relief in a court of equity.
SECTION 22: HEADINGS. The headings in this Agreement are inserted for
--------
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
FOR EMPLOYER: WITNESSES:
INTERACTIVE MEDIA SOLUTIONS, INC.
/s/
-----------------------------
By: /s/ /s/
------------------------------ -----------------------------
FOR EMPLOYEE: WITNESSES:
/s/ Roger Finefrock /s/
- ---------------------------------- -----------------------------
Roger W. Finefrock
/s/
-----------------------------
55
<PAGE>
ATTACHMENT A
TO EMPLOYMENT AGREEMENT BETWEEN
ROGER W. FINEFROCK AND INTERACTIVE MEDIA SOLUTIONS, INC.
--------------------------------------------------------
TITLE: PRESIDENT
- -----
SUMMARY:
- -------
Serve as the presiding officer of the Board of Directors, and in that capacity,
guides the deliberations and activities of that group. Responsible for directing
the organization with the objective of providing maximum profit and return on
invested capital; establishing short-term and long-range objectives, plans, and
policies subject to the approval of the Board of Directors; and representing the
organization with its major customers, the financial community and the public.
RESPONSIBILITIES:
- ----------------
- - Develops the basic objectives, policies, and operating plans of the
business; submits these to the Board of Directors for approval.
- - Insures that organization policies are uniformly understood and properly
interpreted and administered by subordinates; reviews and approves
proposed internal policies of subordinate units.
- - Insures that adequate plans for future development and growth of the
business are prepared, and participates in their preparation;
periodically presents such plans for general review and approval by the
Board of Directors.
- - Presents proposed operating and capital expenditure budgets for review and
approval by the Board of Directors.
- - Plans and directs all investigations and negotiations pertaining to
mergers, joint ventures, the acquisition of businesses, or the sale of
major assets.
- - Takes necessary actions to protect and enhance the organization's
investments in subsidiaries and affiliates.
- - Represents the organization as appropriate in its relationships with major
customers, suppliers, competitors, commercial and investment bankers,
government agencies, professional societies and similar groups.
- - Analyzes operating results of the organization and its principal
components relative to established objectives and insures that appropriate
steps are taken to correct unsatisfactory conditions.
- - Insures the adequacy and soundness of the organization's financial
structure and, reviews projections of working capital requirements.
Negotiates and otherwise arranges for any outside financing that
may be indicated.
- - Prescribes the specific limitations of the authority of subordinates
regarding policies, contractual commitments, expenditures, and personnel
actions. Reviews and approves the appointment, employment, transfer
or termination of all key executives. Resolves any conflicts arising
between operating groups, staff units and other elements under immediate
supervision.
- - Performs other related duties as assigned by the Board of Directors.
- - Reports directly to the Board of Directors.
56
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made and
entered into as of the 3rd day of January, 2000, by and between INTERACTIVE
---
MEDIA SOLUTIONS, INC., a Florida corporation (hereinafter referred to as
"Employer") and ROGER W. FINEFROCK (hereinafter referred to as "Employee").
WHEREAS, Employer and Employee previously entered into that certain
Employment Agreement dated July 20, 1999 (the "Agreement"); and
WHEREAS, Employer and Employee believe it to be in their respective
interests to amend the Agreement to provide for the grant to Employee of options
to purchase shares of common stock of Emagisoft Technologies, Inc., a Florida
corporation ("Emagisoft Technologies"), an affiliate company of Employer.
NOW, THEREFORE, for the mutual consideration set forth herein, and for good
and valuable consideration, the receipt and sufficiency of which is acknowledged
by Employer and Employee, the parties hereto agree as follows:
1. The above recitals are true and correct.
2. The Agreement is hereby amended to provide that Employee shall be
granted options to purchase shares of common stock of Emagisoft Technologies,
par value of $0.0001 per share (the "Common Stock") on the following terms and
conditions:
(a) Employee shall receive: (i) an option to purchase up to 25,000
shares of Common Stock exercisable at a price of $1.75 per share at such time as
annual gross revenues of Employer reach $500,000, and (ii) options to purchase
up to 25,000 shares of Common Stock exercisable at a price of $1.75 per share
for every additional increase in annual gross revenues of Employer of $500,000
for the earlier of the first five years hereunder or until Employer reaches
$10,000,000 in annual gross revenues. For purposes of this Section 2(a), annual
gross revenues of Employer shall be determined on a calendar year basis
commencing in 2000.
(b) Employee shall receive longevity options to purchase up to 50,000
shares of Common Stock per year of employment under the Agreement exercisable at
a price of $2.00 per share.
(c) Employee shall receive an option to purchase up to 50,000 shares of
Common Stock exercisable at a price of $2.00 per share in the event, within (2)
years of Employee's employment, all or substantially all of the business or
assets of Employer or Emagisoft Technologies is sold to a third party or
Employer or Emagisoft Technologies merges with or is acquired by another entity.
3 Any other amendments or modifications to the Agreement and/or this
Amendment shall be in writing and executed by Employer and Employee. In the
event of any conflict between the terms of this Amendment and the terms of the
Agreement, this Amendment shall prevail. All of the other terms, conditions and
provisions of the Agreement not inconsistent with this Amendment shall remain in
full force and effect and shall apply to this Amendment. This Amendment may be
executed in counterparts, each of which shall be deemed an original, but
together which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment to Employment
Agreement as of the day and year first above written.
FOR EMPLOYER:
EMAGISOFT TECHNOLOGIES, INC. WITNESS:
/s/ Kyle E. Jones /s/
- -------------------- --------------------
Kyle E. Jones, President
FOR EMPLOYEE: WITNESS:
/s/ Roger Finefrock /s/
- -------------------- --------------------
Roger Finefrock
ACKNOWLEDGMENT OF EMAGISOFT TECHNOLOGIES, INC.
----------------------------------------------
The undersigned, an affiliate company of Employer, acknowledges and agrees upon
execution of this Amendment by Employer and Employee to grant to Employee
options to purchase shares of Common Stock of the undersigned on the terms and
conditions set forth in Section 2 of this Amendment.
EMAGISOFT TECHNOLOGIES, INC.
/s/ Kyle E. Jones
--------------------
Kyle E. Jones, President
57
<PAGE>
Exhibit 10.2 Specimen - Confidential Information and Invention
Assignment Agreement
CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT
AGREEMENT FOR EMPLOYEE
This CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT (the
"Agreement") is made between Emagisoft Technologies, Inc. (the "Company") and
the undersigned employee.
In consideration for my employment with the Company (which for purposes of
this Agreement shall be deemed to include any subsidiaries or Affiliates1 of the
Company), the receipt of confidential information while associated with the
Company, and other good and valuable consideration, I, the undersigned
individual, agree that:
1. Term of Agreement. This agreement shall continue in full force and
--------------------
effect for the duration of my employment by the Company (the "Period of
Employment") and shall continue thereafter until terminated through a written
instrument signed by both parties.
2. Confidentiality.
----------------
a. Definitions."Proprietary Information" is all information and any idea
------------
whatever form, tangible or intangible, pertaining in any manner to the business
of the Company, or any of its Affiliates, or its employees, clients,
consultants, or business associates, which was produced by any employee or
consultant of the Company in the course of his or her employment or consulting
relationship or otherwise produced or acquired by or on behalf of the Company.
All Proprietary Information not generally known outside of the Company's
organization, and all Proprietary Information so known only through improper
means, shall be deemed "Confidential Information." By example and without
limiting the foregoing definition, Proprietary and Confidential shall include,
but not be limited to:
i. Formulas, research and development techniques, processes, trade secrets,
computer programs, software, electronic codes, mask works, inventions,
innovations, patents, patent applications, discoveries, improvements, data,
know-how, formats, test results and research projects:
ii. information about costs, profits, markets, sales, contracts and lists of
customers, and distributors
iii. business, marketing, and strategic plans;
iv. forecasts, unpublished financial information, budgets, projections, and
customer identities, characteristics and agreements; and
v. employee personnel files and compensation information.
1. For purposes of this Agreement, "Affiliate" shall mean any person or entity
that directly or indirectly controls, is controlled by, or is under common
control with the Company.
Confidential Information is to be broadly defined, and includes all
information that has or could have commercial value or other utility in the
business in which the Company is engaged or contemplates engaging, and all
information of which the unauthorized disclosure could be detrimental to the
interests of the Company, whether or not such information is identified as
Confidential Information by the Company.
b) Existence of Confidential Information.The Company owns and has developed
---------------------------------------
and compiled, and will develop and compile, certain trade secrets, proprietary
techniques and other Confidential Information which have great value to its
business. This Confidential Information includes not only information disclosed
by the Company to me, but also information developed or learned by me during the
course of my employment with the Company.
c) Protection of Confidential Information. I will not, directly or
------------------------------------------
indirectly, use, make available, sell, disclose or otherwise communicate to any
--
third party, other than in my assigned duties and for the benefit of the
Company, any of the Company's Confidential Information, either during or after
my employment with the Company. I acknowledge that I am aware that the
unauthorized disclosure of Confidential Information of the Company may be highly
prejudicial to its interests, an invasion of privacy and an improper disclosure
of trade secrets.
58
<PAGE>
d) Delivery of Confidential Information. Upon request, or when my employment
-------------------------------------
with the Company terminates, I will immediately deliver to the Company all
copies of any and all materials and writings received from, created for, or
belonging to the Company including, but not limited to, those which relate to or
contain Confidential Information.
e) Location and Reproduction. I shall maintain at my workstation and/or any
---------------------------
other place under my control only such Confidential Information as I have a
current "need to know." I shall return to the appropriate person or location or
otherwise properly dispose of Confidential Information once that need to know no
longer exists. I shall not make copies of or otherwise reproduce Confidential
Information unless there is a legitimate business need of the Company for
reproduction.
f) Prior Actions and Knowledge. I represent and warrant that from the time
-----------------------------
of my first contact with the Company I held in strict confidence all
Confidential Information and have not disclosed any Confidential Information,
directly or indirectly, to anyone outside the Company, or used, copied,
published, or summarized any Confidential Information, except to the extent
otherwise permitted in this agreement.
g) Third-Party Information. I acknowledge that the Company has received and
-------------------------
in the future will receive from third parties their confidential information
subject to a duty on the Company's part to maintain the confidentiality of such
information and to use it only for certain limited purposes. I agree that,
during the Period of Employment and thereafter, I will hold all such
confidential information in the strictest confidence and
not to disclose or use it, except as necessary to perform my obligations
hereunder and as is consistent with the Company's agreement with such third
parties.
h) Third parties. I represent that my employment with the Company does not
---------------
and will not breach any agreements with or duties to a former employer or any
other third party. I will not disclose to the Company or use on its behalf any
confidential information belonging to others and I will not bring onto the
premises of the Company any confidential information belonging to any such party
unless consented to in writing by such party.
3. Proprietary Rights, Inventions and New Ideas.
--------------------------------------------------
a) Definition, The term "Subject Ideas or Inventions" includes any and all
-----------
ideas, processes, trademarks, service marks, inventions, designs, technologies,
computer hardware or software, original works of authorship, formulas,
discoveries, patents, copyrights, copyrightable works, products, marketing and
business ideas, and all improvements, know-how, data, rights, and claims related
to the foregoing that, whether or not patentable, which are conceived, developed
or created which: (i) relate to the Company's current or contemplated business
or activities; (ii) relate to the Company's actual or demonstrably anticipated
research or development; (iii) result from any work performed by me for the
Company; (iv) involve the use of the Company's equipment, supplies, facilities
or trade secrets; (v) result from or are suggested by any work done by the
Company or at the Company's request, or any projects specifically assigned to
me; or (vi) result from my access to any of the Company's memoranda, notes,
records, drawings, sketches, models, maps, customer lists, research results,
data, formulae, specifications, inventions, processes, equipment or other
materials (collectively, "Company Materials").
b) Company Ownership. All right, title and interest in and to all Subject
------------------
Ideas and Inventions, including but not limited to all registrable and
patentable rights which may subsist therein, shall be held or owned solely by
the Company, and where applicable, All Subject Ideas and Inventions shall be
considered works made for hire. I shall mark all Subject Ideas and Inventions
with the Company's copyright or other proprietary notice as directed by the
Company and shall take all actions deemed necessary by the Company to protect
the Company's rights therein. In the event that the Subject Ideas and Inventions
shall be deemed not to constitute works made for hire, or in the event that I
should otherwise, by operation of law, be deemed to retain any rights (whether
moral rights or otherwise) to any Subject Ideas and Inventions, I agree to
assign to the Company, without further consideration, my entire right, title and
interest in and to each and every such Subject Idea and Invention.
c) Maintenance of records. I agree to keep and maintain adequate and current
----------------------
written records of all Subject Ideas and Inventions and their development made
by me (solely or jointly with others) during the term of my employment with the
Company. These records will be in the form of notes, sketches, drawings and any
other format that may be specified by the Company. These records will be
available to and remain the sole property of the Company at all times.
d) Determination of Subject Ideas and Inventions. I further agree that all
------------------------------------------------
information and records pertaining to any idea, process, trademark, service
mark, invention, technology, computer hardware or software, original work of
authorship, design, formula, discovery, patent, copyright, product, and all
improvements, know-how, rights and claims related to the foregoing
("Intellectual Property"), that I do not believe to be a Subject Idea or
Invention, but that is conceived, developed, or reduced to practice by the
Company (alone by me or with others) during the Period of Employment and
thereafter, shall be disclosed promptly to me by the Company (such disclosure to
be received in confidence). The Company shall examine such information to
determine if in fact the Intellectual Property is a Subject Idea or Invention
subject to this agreement.
59
<PAGE>
e) Access. Because of the difficulty of establishing when any Subject Ideas
-------
or Inventions are first conceived by me, or whether they result from my access
to Confidential Information or Company Materials, I agree that any Subject Idea
and Invention shall, among other circumstances, be deemed to have resulted from
my access to Company materials if: (i) it grew out of or resulted from my work
with the Company or is related to the business of the Company, and (ii) it is
made, used, sold, exploited or reduced to practice, or an application for a
patent, trademark, copyright or other proprietary protection is filed thereon,
by me or with my significant aid, after termination of the Period of employment.
f) Assistance. I further agree to assist the Company in every proper way
-----------
(but at the Company's expense) to obtain and from time to time enforce patents,
copyrights and other rights or registrations on said Subject Ideas and
Inventions in any and all countries, and to that end will execute all documents
necessary:
i to apply for, obtain and vest in the name of the Company alone (unless
the Company otherwise directs) letters patent, copyrights or other analogous
protection in any country throughout the world and when so obtained or vested to
renew and restore the same; and
ii to defend any opposition proceedings in respect of such applications and
any opposing proceedings or petitions or applications for revocation of such
letters patent, copyright or any other analogous protection; and
iii to cooperate with the Company (but at the Company's expense) in any
enforcement or infringement proceeding on such letters patent, copyright or
other analogous protection.
g) Authorization to Company.In the event the Company is unable, after
---------------------------
reasonable effort, to secure my signature on any patent, copyright or other
analogous protection relating to a Subject Idea and Invention, whether because
of my physical or mental incapacity or for any other reason whatsoever, I hereby
irrevocably designate and appoint the Company and its duly authorized officers
and agents as my agent and attorney-in-fact, to act for and on my behalf and
stead to execute and file any such application, applications or other documents
and to do all other lawfully permitted acts to further the prosecution,
issuance, and enforcement of letters patent, copyright or other analogous rights
or protections thereon with the same legal force and effect as if executed by
me. My obligation to assist the Company in obtaining and enforcing patents and
copyrights for Subject Ideas and Inventions in any and all countries shall
continue beyond the termination of my relationship with the Company, but the
Company shall compensate me at a reasonable rate after such termination for the
time actually spent by me at the Company's request on such assistance.
h) Exhibit. I acknowledge the there are no currently existing ideas,
--------
processes, inventions, discoveries, marketing or business ideas or improvements
which I desire to exclude from the operation of this agreement. To the best of
my knowledge, there is no other contract to assign inventions, trademarks,
copyrights, ideas, processes, discoveries or other intellectual property that is
now in existence between me and any other person (including any business or
government entity).
i) No Use of Name. I shall not at any time use the Company's name or any of
----------------
the Company trademark(s) or trade name(s) in any advertising or publicity
without prior written consent of the Company.
4 . Competitive Activity.
----------------------
a) Acknowledgement. I acknowledge that the pursuit of the activities
----------------
forbidden by Section 4 (b) below would necessarily involve the use, disclosure
or misappropriation of Confidential Information.
b) Prohibited Activity. To prevent the above-described disclosure,
---------------------
misappropriation and breach, I agree that during my employment and for a period
--
of one (1) year after termination of the Period of Employment, without the
Company's express written consent, I shall not, directly or indirectly, (i)
employ, solicit for employment, or recommend for employment any person employed
by the Company (or any Affiliate); and (ii) engage in any present or
contemplated business activity that is or may be competitive with the Company
(or any Affiliate) in any state where the Company conducts its business, unless
I can prove that any action taken in contravention of this subsection (ii) was
done without the use in any way of Confidential Information.
5 . Representation and warranties. I represent and warrant (i) that I have no
-------------------------------
obligations, legal or otherwise, inconsistent with the terms of this Agreement
or with my undertaking a relationship with the Company; (ii) that the
performance of services called for by this Agreement do not and will not violate
any applicable law, rule or regulation or any proprietary or other right of any
third party; (iii) that I will not use in the performance of my responsibilities
for the Company any materials or documents of a former employer; and (iv) that I
have not entered into or will enter into any agreement (whether oral or written)
in conflict with this Agreement.
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<PAGE>
6 . Termination Obligations.
-------------------------
a) Upon the termination of my relationship with the Company or promptly upon
the Company's request, I shall surrender to the Company all equipment, tangible
Proprietary Information, documents, books, notebooks, records, reports, notes,
memoranda, drawings, sketches, models, maps, contracts, lists, computer disks
(and other computer-generated files and data), and any other data and records of
any kind, and copies thereof (collectively, "Company Records"), created on any
medium and furnished to, obtained by, or prepared by myself in the course of or
incident to my employment, that are in my possession or under my control.
b) My representations, warranties, and obligations contained in this
Agreement shall survive the termination of the Period of Employment.
c) Following any termination of the Period of Employment, I will fully
cooperate with the Company in all matters relating to my continuing obligations
under this Agreement.
d) In the event that I leave the employ of the Company I hereby grant
consent to notification by the Company to my new employer about my rights and
obligations under this Agreement.
e) Upon termination of the Period of Employment, I will execute a
Certificate acknowledging compliance with this Agreement in the form reasonably
provided by the Company.
7 . Injunctive Relief. I acknowledge that my failure to carry out any obligation
------------------
under this Agreement, or a breach by me of any provision herein, will constitute
immediate and irreparable damage to the Company, which cannot be fully and
adequately compensated in money damages and which will warrant preliminary and
other injunctive relief, an order for specific performance, and other equitable
relief. I further agree than no bond or other security shall be required in
obtaining such equitable relief and I hereby consent to the issuance of such
injunction and to the ordering of specific performance. I also understand that
other action may be taken and remedies enforced against me.
8 . Modification. No modification if this Agreement shall be valid unless made
-------------
in writing and signed by both parties.
9 . Binding Effect. This Agreement shall be binding upon me, my heirs,
----------------
executors, assigns and administrators and is for the benefit of the Company and
-----
its successors and assigns.
10 . Arbitration. Any dispute or controversy arising out of or relating to any
------------
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in St. Petersburg, Florida, in accordance with
the rules then in effect of the American Arbitration Association. The arbitrator
may grant injunctions or other relief in such dispute or controversy. The
decision of the arbitrator shall be final, conclusive and binding on the parties
to the arbitration. Judgment may be entered on the arbitrator's decision in any
court having jurisdiction; provided, however, that the arbitrator shall not have
the power to alter or amend this Agreement.
11 . Governing Law. This Agreement shall be construed in accordance with, and
---------------
all actions arising under or in connection therewith shall be governed by, the
internal laws of the State of Florida (without reference to conflict of law
principles).
12 . Integration. This Agreement sets forth the parties' mutual rights and
------------
obligations with respect to proprietary information, prohibited competition, and
intellectual property. It is intended to be the final, complete, and exclusive
statement of the terms of the parties' agreements regarding these subjects. This
Agreement supersedes all other prior and contemporaneous agreements and
statements on these subjects, and it may not be contradicted by evidence of any
prior or contemporaneous statements or agreements. To the extent that the
practices, policies, or procedures of the Company, now or in the future, apply
to myself and are inconsistent with the terms of this Agreement, the provisions
of this Agreement shall control unless changed in writing by the Company.
13 . Construction. This Agreement shall be construed as a whole, according to
-------------
its fair meaning, and not in favor of or against any party. By way of example
and not limitation, this Agreement shall not be construed against the party
responsible for any language in this Agreement. The headings of the paragraphs
hereof are inserted for convenience only, and do not constitute part of and
shall not be used to interpret this Agreement.
14 . Attorney's Fees. Should either I or the Company, or any heir, personal
-----------------
representative, successor or permitted assign of either party, resort to legal
proceedings to enforce this Agreement, the prevailing party (as defined in
Florida statutory law) in such legal proceeding shall be awarded, in addition to
such other relief as may be granted, attorney's fees and costs incurred in
connection with such proceeding.
15 . Severability. If any term, provision, covenant or condition of this
-------------
Agreement, or the application thereof to any person, place or circumstance,
--
shall be held invalid, unenforceable or void, the remainder of this Agreement
and such term, provision, covenant or condition as applied to other persons,
place and circumstances shall remain in full force and effect.
61
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16 . Rights Cumulative. The rights and remedies provided by this Agreement are
------------------
cumulative, and the exercise of any right or remedy by either the Company or me
(or by that party's successor), whether pursuant hereto, to any other agreement,
or to law, shall not preclude or waive that party's right to exercise any or all
other rights and remedies. This Agreement will inure to the benefit of the
Company and its successors and assigns.
17 . Nonwaiver. The failure of either the Company or me, whether purposeful or
----------
otherwise, to exercise in any instance any right, power or privilege under this
Agreement or under law shall not constitute a waiver of any other right, power
or privilege, nor of the same right, power or privilege in any other instance.
Any waiver by the Company or by me must be in writing and signed by either
myself, if I am seeking to waive any of my rights under this Agreement, or by an
officer of the Company (other than me) or some other person duly authorized by
the Company.
18 . Notices. Any notice, request, consent or approval required or permitted to
--------
be given under this Agreement or pursuant to law shall be sufficient if it is in
writing, and if and when it is hand delivered or sent by regular mail, with
postage prepaid, to my residence (as noted in the Company's records), or to the
Company's principal office, as is the case may be.
19 . Date Of Effectiveness. This Agreement shall be deemed effective as of the
----------------------
commencement of my employment with the Company.
20 . Agreement to Perform Necessary Acts. I agree to perform any further acts
-------------------------------------
and execute and deliver any documents that may be reasonably necessary to carry
out the provisions of this Agreement.
21 . Assignment. This Agreement may not be assigned without the Company's prior
-----------
written consent.
22 . Compliance with the Law. I agree to abide by all federal, state, and local
------------------------
laws, ordinances and regulations.
23 . Employee Acknowledgement.I acknowledge that I have had the opportunity to
-------------------------
consult legal counsel in regard to this Agreement, that I have read and
understand this Agreement, that I am fully aware of its legal effect, and that I
have entered into it freely and voluntarily and based on my own judgment and not
on any representation or promises other than those contained in this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth below.
CAUTION: THIS AGREEMENT CREATES IMPORTANT OBLIGATIONS OF TRUST AND AFFECTS THE
EMPLOYEE'S RIGHTS TO INVENTIONS AND OTHER INTELLECTUAL PROPERTY THE EMPLOYEE MAY
DEVELOP DURING HIS OR HER EMPLOYMENT.
Dated: __________________
___________________________________________________
Employee Signature
Printed Employee name: _______________________________________
Emagisoft Technologies, Inc.
By: ___________________________________________
Name: ________________________________________
Title: __________________________________________
62
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EXHIBIT 10.3 BUSINESS CONSULTING AGREEMENT BETWEEN JAMES S. NEADER
AND EMAGISOFT TECHNOLOGIES, INC.
BUSINESS CONSULTANT AGREEMENT
-----------------------------
THIS BUSINESS CONSULTANT AGREEMENT (the "Agreement") is made and entered into as
of the 2nd day of December, 1999, by and between EMAGISOFT TECHNOLOGIES, INC.,
--- --------
its principal place of business at 405 Central Avenue, 2nd Floor, St.
---------------------------------------
Petersburg, Florida 33701 ("Emagisoft"), and JAMES S. NEADER, residing at 396
- --------------------------- ---
Coffee Pot Riviera N.E., St. Petersburg, Florida 33704 ("Neader").
- -------------------------------------------------------------
W I T N E S S E T H
WHEREAS, Emagisoft desires to engage Neader to provide services in the areas of
capital raising and customer marketing to support the business and growth of
Emagisoft and its subsidiaries, Emagisoft Corporation and Interactive Media
Solutions, Inc. (collectively referred to as "Subsidiaries"); and
WHEREAS, Neader desires to assist Emagisoft through introductions to members of
the members of the investment community and to potential customers who can
utilize the products and/or services offered by Emagisoft and Subsidiaries.
NOW, THEREFORE, in consideration of the premises and the mutual promises and
covenants contained herein, the parties agree as follows:
1. AGREEMENT; SCOPE
1.1 ENGAGEMENT.
----------
Emagisoft hereby agrees to engage Neader to provide the services specified in
Section 2 below and Neader hereby agrees to provide such services to Emagisoft
and Subsidiaries upon the terms and conditions hereinafter set forth.
1.2 RELATIONSHIP OF THE PARTIES.
------------------------------
It is expressly acknowledged by the parties hereto that Neader is an independent
contractor and nothing in this Agreement is intended nor shall be construed to
create an employer/employee relationship, a joint venture of any kind including
any landlord/tenant relationship between Emagisoft and Neader. Emagisoft shall
not have any right to exercise any control or discretion over the manner or
method by which Neader performs services hereunder; provided, however, the
services to be provided by Neader hereunder shall be provided in a manner
consistent with the professional standards governing such services and the
provisions of this Agreement. Neither party shall have any authority to act for
the other party, except as expressly provided herein.
2. SERVICES
2.1 INTRODUCTIONS TO THE INVESTMENT COMMUNITY.
---------------------------------------------
Neader has substantial contacts among members of the investment community
throughout Florida and the United States. Neader shall introduce these contacts
to Emagisoft so as to enable Emagisoft to establish relationships with said
persons for investment of capital in Emagisoft. Emagisoft understands and
agrees that Neader shall only make introductions to potential investors and
conduct only ministerial, non-sales activities with respect to the offer or sale
of any securities to be issued by Emagisoft.
2.2 INTRODUCTIONS TO POTENTIAL CUSTOMERS.
---------------------------------------
Neader has contacts who are potential customers that can utilize the products
and/or services offered by Emagisoft and Subsidiaries. Neader shall introduce
these contacts to Emagisoft so as to establish relationships with said persons
for the purchase of products and/or services offered by Emagisoft or
Subsidiaries. Neader understands and agrees that he shall only make
introductions to potential customers, and shall not negotiate or in any way
participate in the establishment of the terms of any arrangements entered into
between Emagisoft and any customer that Neader introduces hereunder.
2.3 ADDITIONAL SERVICES.
--------------------
Neader may provide such further and additional services as is necessary to
fulfill its engagement or may be mutually agreed upon by the parties.
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2.4 BEST EFFORTS.
-------------
Neader shall devote such time and best efforts as may be reasonable necessary to
perform the foregoing services. Emagisoft expressly acknowledges and
understands that Neader cannot guarantee results concerning the investment of
capital, or the purchase or use of any products or services offered by Emagisoft
or Subsidiaries by any person introduced to Emagisoft by Neader.
2.5 LIMITATION OF SERVICES.
------------------------
It is expressly acknowledged that Neader has not agreed with Emagisoft, in this
Agreement or any other agreement, verbal or written, to participate in any
manner in the offer or sale of any security.
The compensation paid to Neader herein is not, and shall not be construed as,
compensation for the offer or sale of any security.
The parties agree that the services to be provided by Neader shall not be for
the purpose of affecting the price of any security.
3. COMPENSATION
Emagisoft shall pay and deliver to Neader the funds, securities or other
property or assets as specified in Exhibit A hereto. Any such property or
assets shall be free and clear of all liens and encumbrances.
4. EMAGISOFT REPRESENTATIONS AND WARRANTIES
Emagisoft hereby represents and warrants to Neader, as follows:
4.1 AUTHORIZATION.
-------------
Emagisoft has the full power and authority to enter into this Agreement and to
carry out the transactions contemplated hereunder.
4.2 NO VIOLATION.
-------------
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereunder will violate any provision of the charter or
by-laws of Emagisoft or, violate, or be in conflict with, or constitute a
default under, any agreement or commitment to which Emagisoft is a party, or
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority.
5. CONFIDENTIALITY AND NON-DISCLOSURE
During and after the term of this Agreement, Neader shall maintain the
confidentiality of and shall not furnish, release, disclose or otherwise make
available to third parties, in any form whatsoever, without the prior written
consent of Emagisoft, any names, addresses, telephone or telefax numbers,
business plans, subscription agreements, private placement memoranda, financial
projections or other information, written or oral (the "Confidential
Information"), relating, in any manner, to any investment of capital in
Emagisoft made by any contact introduced by Neader hereunder. Neader recognizes
and acknowledges that the Confidential Information shall be considered the
property of Emagisoft and that Emagisoft has expended considerable time and
expense in obtaining and developing the Confidential Information.
6. INJUNCTIVE RELIEF
In the event of a breach or threatened breach of the provisions of Section 5 of
this Agreement, Neader agrees that Emagisoft shall be entitled to an injunction
enjoining and restraining such breach or threatened breach and such other
remedies as may be available to Emagisoft. Neader agrees and acknowledges that
a breach or threatened breach of the provisions of Section 5 shall cause
Emagisoft to suffer irreparable damages, including Emagisoft's inability to
prove specific money damages.
7. MERGER OF EMAGISOFT
Emagisoft and Neader acknowledge and agree that the rights and obligations of
the parties in this Agreement shall remain in full force and effect,
notwithstanding the merger of Emagisoft into another corporation or other
business. In such event, it is expressly agreed that the surviving corporation
or business of such merger shall be bound by and comply with the terms and
conditions of this Agreement, including the compensation payable to Neader in
Exhibit A.
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8. INDEMNIFICATION
Emagisoft shall indemnify and hold Neader harmless from and against any claims,
causes of action, suits, demands, obligations, liabilities, damages, judgments,
costs and expenses by reason of or resulting from the services rendered by
Neader under this Agreement, except where the same shall arise due to the gross
negligence or willful misconduct of Neader. It is expressly understood that
Neader shall have no involvement in or responsibility or liability for any of
the following matters: (a) the offer and/or sale to investors or other
purchasers of securities of Emagisoft, (b) regulatory securities filings made or
required to be made by Emagisoft, or (c) compliance of Emagisoft with securities
laws and regulations. Emagisoft shall indemnify and hold Neader harmless from
and against any claims, causes of action, suits, demands, obligations,
liabilities, damages, judgments, costs and expenses by reason of or resulting
from any of the foregoing matters.
Neader shall indemnify and hold Emagisoft harmless from and against any claims,
causes of action, suits, demands, obligations, liabilities, damages, judgments,
costs and expenses by reason of or resulting from the gross negligence or
willful misconduct of Neader in rendering services under this Agreement or with
respect to securities laws liabilities arising from information provided or
statements made by Neader to investors and other purchasers of securities of
Emagisoft.
9. TERM
The term of this Agreement shall commence upon execution hereof by Emagisoft and
Neader, and shall continue for a period of one (1) year, unless terminated
sooner by Neader upon giving Emagisoft at least thirty (30) days written notice.
10. MISCELLANEOUS
10.1 AMENDMENT AND MODIFICATION.
----------------------------
This Agreement may only be amended or modified by a writing signed by the party
against whom enforcement of any such amendment or modification is sought.
10.2 NOTICES.
-------
Any written notice to be given hereunder by a party to the other party may be
effected by personal delivery, facsimile transmission or by mail, postage
prepaid with return receipt requested. Mailed notices shall be addressed to the
parties at the addresses appearing in the introductory paragraph of this
Agreement, but any party may change his address by written notice in accordance
with this Agreement. Notices delivered personally or by facsimile transmission
shall be deemed to have been given upon actual receipt thereof; mailed notices
shall be deemed communicated as of three (3) days after mailing.
10.3 ASSIGNMENT.
----------
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
either party without the prior written consent of the other party.
10.4 PUBLICITY.
---------
Neither Neader nor Emagisoft shall make or issue, or cause to be made or issued,
and public announcement or other disclosure of this Agreement or the terms and
conditions thereof without the prior written consent of the other party;
provided, however, this provision shall not apply to any public announcement or
other disclosure required to be made by law or by rule or regulation of any
federal or state governmental authority, except that the party required to make
such public announcement or disclosure shall consult with the other party
concerning the timing and content of such public announcement or disclosure
before it is made.
10.5 GOVERNING LAW.
--------------
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Florida.
10.6 LITIGATION.
----------
The prevailing party in any litigation relating to the interpretation,
application or enforcement of any provision of this Agreement shall be entitled
to recover against the other party costs and reasonable attorneys' fees.
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10.7 COUNTERPARTS.
------------
This Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
10.8 HEADINGS.
--------
The headings in this Agreement are inserted for convenience only and shall not
constitute a part hereof or affect in any way the meaning or interpretation of
this Agreement.
10.9 ENTIRE AGREEMENT.
-----------------
This Agreement, including Exhibit A hereto, sets forth the entire agreement of
the parties hereto and supersedes any prior agreements or understanding, whether
oral or written, between the parties.
10.10 FURTHER ASSISTANCE.
-------------------
Each party agrees that it shall from time to time take such further actions and
execute such additional instruments as may be reasonably necessary to implement
and carry out the intent and purpose of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Business Consultant
Agreement to be duly executed as of the day and year first above written.
WITNESSES: EMAGISOFT TECHNOLOGIES, INC.
/s/ Kyle E. Jones
- ------------------------------ --------------------------------------
Title: President & CEO
- ------------------------------
WITNESSES:
- ------------------------------ /s/ James S. Neader
----------------------------------
JAMES S. NEADER
- ------------------------------
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EXHIBIT A
---------
COMPENSATION PAYABLE TO NEADER
Upon execution of the Agreement, Emagisoft shall issue and deliver to Neader
and/or his designee(s) SIXTY THOUSAND (60,000) shares of Common Stock of
Emagisoft, which shares shall be unregistered and restricted under applicable
Federal and State securities laws.
On an ongoing basis during the term of this Agreement, Emagisoft and/or
Subsidiaries shall pay a commission of FIVE PERCENT (5%) on any sales of
products and/or services as a result of an introduction made by Neader.
Emagisoft and Subsidiaries will pay commissions to Neader within thirty (30)
days after receipt of payment from the customer introduced by Neader.
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EXHIBIT 10.4 OPTION AGREEMENT FOR PROMOTIONAL SERVICES BETWEEN
GARY SHEFFIELD AND EMAGISOFT TECHNOLOGIES, INC.
December 30, 1999
Mr. Gary Sheffield
850 Pinellas Point Drive South
St. Petersburg, Florida 33705
Re: Promotional Arrangement
Dear Gary,
We are pleased that you have taken an interest in Emagisoft Technologies, Inc.
We see great things happening with the Quicksuite Family of Software Products
and believe the Company is poised for success.
This will confirm our agreement to grant you a stock option in consideration of
you performing certain promotional activities on behalf of the Company. Your
high profile and many public contacts in your baseball career provide an
opportunity for significant exposure of Emagisoft.
It is our intention to provide you with promotional items including shirts,
caps, etc. with Emagisoft logos (including Emagisoft, QuickSuite and Interactive
Media Solutions) for you to wear in public and during media events. You agree
to wear those items as much as possible to provide adequate exposure of the
logos. In addition, we will assist you and provide you with the appropriate
information that you will give in response to inquiries about the company. You
also agree to include information about the Company and or its subsidiaries, to
be provided by the Company, on web sites and web cards that you have produced
for public distribution. The term of this agreement is three (3) years from its
execution.
In consideration for performing the promotional activities above, Emagisoft
Technologies, Inc. will grant to you, upon execution of this agreement, an
option to purchase One Hundred Thousand (100,000) shares of its common stock at
$2.00 per share. The transferability of the shares to be issued upon exercise
of the option will be restricted, and any stock certificate representing the
option shares will bear a restrictive transfer legend. The option will be
exercisable, in whole or in part, the earlier of twenty-four (24) months from
the date hereof or twelve months following the date of the Company's Initial
Public Offering of shares of common stock to the public. The option will be
exercisable for a three (3) year term after the date initially becomes
exercisable. The option will not be assignable without the consent of the
Company.
The number of shares of common stock subject to the option will be equitably
adjusted in the event of any change in the issued and outstanding shares of
common stock of Emagisoft by reason of any stock split, stock dividend,
recapitalization, merger, or other similar corporate change.
The option will be subject to cancellation by the Company in the event you fail
to perform the agreed upon promotional activities to the reasonable satisfaction
of the Company.
We look forward to and value your participation in the growth of our Company.
If you are in agreement with the foregoing, please sign below and return an
original copy to us.
Sincerely,
/s/ Kyle E. Jones
- ------------------------------
Kyle E. Jones
President/CEO
I understand and accept the terms of the agreement above:
/s/ Gary Sheffield 12/30/99
- ------------------------------ ----------------
Gary Sheffield Date
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<PAGE>
EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT
Emagisoft Technologies, Inc.
Emagisoft Corporation - Wholly-owned subsidiary of Emagisoft Technologies,
Inc.
Interactive Media Solutions, Inc. - Wholly-owned subsidiary of Emagisoft
Corporation
EXHIBIT 21.2 STOCK PURCHASE AND SALE BETWEEN NET ADVANTAGE, INC. (NKA)
EMAGISOFT CORPORATION AND INTERACTIVE MEDIA SOLUTIONS, INC.
STOCK PURCHASE AND SALE AGREEMENT
BY AND AMONG
NET ADVANTAGE, INC.,
INTERACTIVE MEDIA SOLUTIONS, INC.
AND
ROGER W. FINEFROCK
This Stock Purchase Agreement ("THE AGREEMENT"), dated as of the 20th day of
July, 1999 is made and entered into by and among NET ADVANTAGE, INC., a Florida
corporation ("PURCHASER"), INTERACTIVE MEDIA SOLUTIONS, INC., a Florida
corporation ("IMS") and ROGER W. FINEFROCK ("SELLER").
W I T N E S S E T H:
WHEREAS, the Seller desires to sell, and Purchaser desire to purchase, One
Thousand [1000] shares of common stock of IMS ("THE SHARES"), which shares
constitutes one hundred percent (100%) of the issued and outstanding shares of
capital stock of the IMS;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein, the parties hereby agree, as follows:
1. SALE AND PURCHASE OF THE SHARES; CLOSING.
----------------------------------------------
Seller agrees to sell to the Purchaser, and the Purchaser agrees to purchase
from Seller, the Shares upon the terms and subject to the conditions herein.
The closing of the transactions contemplated by this Agreement ("CLOSING") shall
occur on the date hereof at the law offices of Purchaser's counsel, Englander &
Fischer, P.A., 721 First Avenue North, St. Petersburg, Florida, or at such other
time and place as the parties shall mutually agree.
2. PURCHASE PRICE; METHOD OF PAYMENT.
-------------------------------------
The purchase price to be paid by Purchaser to Seller for the Shares shall
be FIFTY THOUSAND AND ($50,000.00) NO\100 DOLLARS plus the Purchaser's
conveyance to the Seller of One Hundred Forty Three Thousand (143,000) Class A
Voting Common Stock ("PURCHASE PRICE").
3. CLOSING; DELIVERY OF SHARES.
------------------------------
3.1 Closing shall occur at the offices of the Purchaser's counsel, Englander &
Fischer, P.A., 721 First Avenue North, St. Petersburg, Florida commencing at
9:00 AM on a date mutually agreeable to both Purchaser and Seller ("CLOSING").
3.2 At Closing, Seller shall deliver to the Purchaser the Certificate
representing the Shares, duly endorsed for transfer to the Purchaser. After the
Closing, the parties shall execute and deliver such additional documents and
take such additional actions as any party or his or its counsel may reasonably
deem to be practical and necessary in order to consummate the transactions
contemplated by this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF SELLER AND IMS.
------------------------------------------------------
4.1 The Seller individually and jointly, on behalf of himself and IMS,
represents and warrants to Purchaser that the following statements are true and
complete as of the date hereof and will be correct and complete as of the
Closing (as though made then and as though the Closing were substituted for the
date of this Agreement throughout this Section):
(a) Execution, Delivery, and Validity. The Seller has full capacity,
------------------------------------
power and authority to make, execute, deliver, perform and consummate this
Agreement and the other documents and instruments required or contemplated by
this Agreement. This Agreement has been duly executed and delivered by Seller
and constitutes legal, valid and binding obligations of such shareholder,
enforceable against such shareholder in accordance with their respective terms.
(b) Ownership of Shares. Seller is the lawful record and beneficial
----------------------
owner of that number of the Shares which is set forth opposite such
shareholder's name on the disclosure schedule attached hereto as Exhibit 1.
Seller owns no other equity interest, option, debenture or other right to
purchase or acquire shares in IMS other than as is set forth opposite the name
of the Seller on the exhibit. Seller is in possession of certificates
evidencing his ownership of IMS owned by him (or has delivered to IMS a duly
executed lost certificate affidavit which complies with the requirements of
IMS's bylaws or the reasonable request of Purchaser's counsel), all of which are
fully paid and non-assessable. Seller has good title to the Shares, with no
restrictions on voting rights and other incidents of record and beneficial
ownership, and the absolute right to sell and transfer such is free and clear of
all claims, liens, pledges, security interests, restrictions on voting rights
and the other incidents of record and beneficial ownership, and the absolute
right to sell and transfer such shares is free and clear of all claims, liens,
pledges, security interests, restrictions or encumbrances of any nature
whatsoever. There are no voting trusts, shareholder agreements or other
understandings between Seller and any other person or entity with respect to the
voting of or any other matters with respect to the IMS Shares. Upon
consummation of the purchase and sale of the shares pursuant to this Agreement,
the Seller will convey to Purchaser good and marketable title to the IMS shares
(including any IMS shares issued upon good exercise of IMS options, if any)
owned by the Seller, free and clear of all claims, liens, pledges, security
interests, restrictions or encumbrances of any nature whatsoever.
(c) Organization and Existence of IMS. IMS is duly organized and
--------------------------------------
validly existing under the laws of the laws of the State of Florida, with all
requisite power and authority to own all of its properties and assets and to
carry on its business as it is now being conducted. IMS is duly qualified to do
business and is in good standing in all jurisdictions where the nature of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on IMS. IMS does not own,
directly or indirectly, any capital stock of any other corporation or any
equity, profit sharing, participation or other interest in any corporation,
Limited Liability Company, partnership, joint venture or other entity.
(d) Execution, Delivery, and Validity. IMS has full right, power and
------------------------------------
authority to make, execute, deliver, perform and consummate this Agreement and
the other documents and instruments required or contemplated by this Agreement.
The execution, delivery and performance of this Agreement and all other
agreements and instruments contemplated hereby to which IMS is a party have been
duly authorized and approved by IMS's Board of Directors, in complete conformity
to IMS's Bylaws. This Agreement and all other agreements and instruments
contemplated hereby to which IMS is a party have been duly and validly executed
and delivered by IMS, and each constitutes the legal, valid and binding
obligations of IMS, enforceable against IMS in accordance with its terms.
(e) Non-Contravention. The execution, delivery and performance of this
------------------
Agreement and the consummation of the transactions contemplated hereby or
compliance with the fulfillment of the terms and provisions hereof or of any
other agreement or instrument contemplated hereby, do not and will not: (i)
conflict with or result in a breach of any of the provisions of the Articles of
Incorporation or By-Laws of IMS or any agreement among IMS's shareholders and
IMS with respect to the Seller's shares; (ii) contravene in any material respect
any law, rule or regulation or any order, writ, award, judgment, decree or other
determination which affects or binds IMS or any of its properties or assets; or
(iii) will result in a breach of, constitute a default under, or give rise to a
right of acceleration, termination or the imposition of penalties under any
material contract, deed of trust, mortgage, trust, lease, governmental or other
license, permit or other authorization, contract, agreement, note or any other
agreement, instrument or restriction to which IMS is a party or by which any of
its properties or assets may be affected or bound.
(f) Consents. No material authorization, consent, approval, permit or
---------
license of, or filing registration with, any governmental or public body or
authority, any lender or lessor or any other person is required to authorize, or
is required in connection with, the execution, delivery and performance by IMS
of this Agreement or the agreements contemplated hereby.
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(g) Capitalization of IMS.
------------------------
(i) Exhibit 2 discloses the true and accurate capitalization of IMS as
of the date hereof and as of the Closing. All of the issued and outstanding
shares of IMS Common Stock have been duly authorized and are validly issued,
fully paid and non-assessable.
(ii) Neither the Seller nor any IMS shareholder owns or possesses any
options, warrants, equity appreciation or other equity linked rights of IMS, nor
purchase rights, subscription rights, conversion rights, exchange rights, equity
appreciation, or other contracts or commitments that could require IMS to issue,
sell or otherwise cause to become outstanding any additional capital stock or
that relate in any way to IMS capital stock.
(iii) No shares of IMS capital stock have been issued in violation of any
preemptive rights or anti-dilution right, and no shares of IMS capital stock
have been issued in violation of any federal or state securities law.
(h) Corporate Records. IMS has delivered to Purchaser true and
-------------------
complete copies of IMS's Articles of Incorporation and Bylaws as in effect as of
the date hereof, which Articles and Bylaws will not be amended changed or
altered through the date of Closing. The minute book of IMS, which has been
made available to Purchaser, contain the minutes of all meetings of, and
consents to all actions taken without meetings by, the IMS Board of Directors
(and any committee thereof) and the shareholders of IMS since the formation of
IMS.
(i) Financial Statements. IMS has furnished to Purchaser each of its
----------------------
financial statements, which are unaudited (COLLECTIVELY, THE "FINANCIAL
---------
STATEMENTS"). The Financial Statements accurately reflect the books and
--
accounts of IMS and fairly present the financial position of IMS as of the dates
given and the results of operations of IMS for the periods indicated.
(j) Undisclosed Liabilities. Except as set forth in Exhibit 3 attached
------------------------
hereto, IMS has no liabilities or obligations of any type, nature or
description, known or unknown, asserted or unasserted, direct or indirect,
absolute or contingent, other than those which have been incurred in the
ordinary course of business, and none of which is a liability resulting from
breach of contract, breach of warranty (other than an ordinary course warranty),
fraud or other tort, infringement or lawsuit).
(k) Absence of Certain Changes. There has not been: (i) any
------------------------------
transaction not in the ordinary course of IMS's business; (ii) any material
adverse change in the assets, liabilities (whether absolute, accrued, contingent
or otherwise), business or prospects of IMS taken as a whole; (iii) any
mortgage, pledge or subjection to lien, charge, or encumbrance of any kind,
except liens for taxes not due, of any of IMS's properties or assets; (iv) any
amendment, modification or termination of any materiel lease, contract or
agreement to which IMS is a party; (v) any increase in, or commitment to
increase, the compensation payable or to become payable to any officer,
director, employee or agent of IMS, or bonus payment or similar arrangement made
to or with any of such officers, directors, employees or agents, other than
routine increases made in the ordinary course of business; (vi) any occurrence
or assumption of any liability, except for liabilities incurred in the ordinary
course of business and consistent with past practices; (vii) any alteration in
the manner of keeping the books, accounts or records of IMS, or in the
accounting practices therein reflected; or (viii) any sale or transfer of any
IMS's assets or any cancellation of any debts or claims other than in the
ordinary course of business.
(l) Related Party Transactions. IMS has not been a party to any
-----------------------------
material transaction (other than employee compensation and other ordinary
incidents of employment) with a person who was, at the time, a Related Party,
and IMS currently has no contractual obligations to any Related Party. "Related
Party" means any present or former officer or director of IMS, any present or
former holder of any shares of the issued and outstanding common stock of IMS,
or any other person who, to the knowledge of IMS, at the time relevant to the
determination, is or was a spouse, child, parent, or sibling of any of the
aforementioned persons or is or was a trust or similar entity for the benefit of
any of the foregoing persons. Except as set forth on the disclosure schedule
corresponding to this Section, no material property or interest in any material
property which is used in the operations of IMS or any Intellectual Property of
IMS is owned by or leased or licensed by or to any Related Party.
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<PAGE>
(m) Litigation. There are no actions, suits, claims, audits,
-----------
investigations, or proceedings (judicial, administrative or arbitration) pending
or, to the knowledge of the Seller or IMS, threatened or any facts known to
Seller or IMS which could given rise to any actions, suits, claims,
investigations or proceedings, against IMS, whether at law or in equity and
whether civil or criminal in nature, before or by any federal, state, municipal
or other court, arbitrator, governmental department, commission, agency or
instrumentality, domestic or foreign. Nor are there any judgments, decrees or
orders of any such court, arbitrator, governmental department, commission,
agency outstanding against either the Seller or IMS (i) which have, or could
reasonably be expected to have, a material adverse effect on the assets,
liabilities or prospects of the business of IMS, or (ii) which seek specifically
to prohibit, restrict or delay consummation of the transactions contemplated
hereby or fulfillment of any of the conditions of this Agreement.
(n) Compliance with Laws. IMS, its property and assets, and IMS's use
----------------------
of the real property on which its business is currently conducted is in
compliance in all material respects with all applicable statutes, laws,
ordinances, rules, regulations, subdivision and plat restrictions, requirements
and orders of governments and governmental bodies (federal, state, local or
foreign), including without limitation, all zoning rules, and regulations, and
IMS has received no notice asserting any non-compliance with any of the
foregoing. IMS has complied in all material respects with all administrative
and judicial judgments, orders or decrees (federal, state, local or foreign) to
which it is currently subject.
(o) Permits and Other Regulatory Matters. To the knowledge of IMS, IMS
-------------------------------------
is in compliance in all respects with the terms and conditions of U.S. and
foreign regulatory permits, licenses and other governmental authorizations and
approvals necessary to the ownership or operation of IMS's properties, if any,
and the conduct of IMS's business as the business is currently operated.
(p) Taxes. IMS has delivered to Purchaser copies of all original and
------
amended federal, state, local and foreign income tax returns and information
returns filed by IMS for each of the fiscal years of its existence, and except
as specifically set forth in the Exhibit attached hereto: (i) IMS has duly and
timely filed or caused to be filed all tax returns and information returns
required to be filed by it or for which it may be held responsible; (ii) all
such tax returns are true and accurate in all material respects; (iii) IMS has
paid all taxes due and payable and any deficiencies or assessment notices which
have been received by it; (iv) no income, information, business or occupation,
or franchise tax returns of IMS have been audited by the taxing authorities; (v)
there are no agreements, waivers or other arrangements providing for an
extension of time with respect to the filing of any tax returns of IMS or the
payment by, or the assessment against, IMS of any taxes, assessments or other
governmental charges, duties, penalties, interest, or fines (SUCH GOVERNMENTAL
CHARGES, DUTIES, PENALTIES, INTEREST AND FINES BEING COLLECTIVELY REFERRED TO AS
"OTHER CHARGES"); and (vi) there are no suits, actions, claims, investigations,
inquiries or other proceedings pending or to the knowledge of IMS threatened
against IMS in respect of taxes, assessments or Other Charges, or any matters
under discussion with any governmental authority relating to taxes, assessments
or Other Charges, or any claims or additional taxes, assessments or Other
Charges asserted by any such authority.
(q) Contracts and Leases. All manufacturing, marketing, distribution,
----------------------
sales, service, license, provider, consulting, employment and severance
agreements to which IMS is a party, all confidentiality or non-competition
agreements to which IMS is a party either for the benefit of a third party, all
contracts with any Related Party (or any affiliate of a Related Party), all real
and personal property leases and other contracts, agreements, licenses,
franchises, commitments and other similar agreements to which IMS is a party or
by which any of its assets are bound (COLLECTIVELY, THE "CONTRACTS") have been
disclosed and provided to the Purchaser. IMS has delivered or made available to
Purchaser a correct and complete copy of (or a written description of the
significant terms of) each of the Contracts, as amended to date.
(i) The Contracts are valid and binding obligations of the parties
thereto and are in full force and effect, enforceable in accordance with their
respective terms;
(ii) As of the date hereof, IMS has performed and will continue to
perform through the date of Closing, all material obligations required to be
performed by it under the Contracts;
(iii) Neither IMS nor, to the knowledge of IMS, any other party of
the Contract is in default thereunder (as to payments due or otherwise) nor has
any event occurred which, with notice or the passage of time or both, could
constitute a default thereunder;
(iv) IMS has not released or waived any material right under any
Contract.
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(r) Title to Assets. All of the material tangible assets and
------------------
properties of IMS are located at IMS's principal place of business in Pinellas
County, Florida. IMS owns and has good and marketable title to all of its
material properties and assets, free and clear of all liens, claims,
encumbrances, equities, security interests, charges and restrictions, except for
liens, if any, for taxes not due and for any liens and the like in favor of
Purchaser. No currently effective financing statement under the Uniform
Commercial Code with respect to any of the properties and assets of IMS has been
filed in any jurisdiction, and neither IMS, nor anyone on its behalf, has signed
any financing statement or security agreement authorizing anyone to file any
financing statement, lien or other encumbrance against any assets or properties
of IMS.
(s) Insurance.IMS has provided the Purchaser with each and every policy
---------
of insurance to which it is a party, each of which is in full force and effect
and enforceable in accordance with its terms.
(t) Labor and Employment.
-----------------------
(i) Since the date of its legal creation, on August 22, 1994, IMS has not
experienced any material interference with or impairment of the business of
IMS by labor. IMS is not experiencing union organization efforts or
negotiations, or requests for negotiations, for any representation or any labor
contract relating to the employees of IMS. There are no severance obligations
of IMS.
(ii) IMS has no: (A) contracts with labor organizations or other collective
bargaining agreements; (B) contracts with any of its officers, directors or
other employees; (C) contracts with independent contractors or consultants; (D)
"employee benefit plans" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); (E) "employee welfare benefit
-----
plans" as defined in Section 3(1) of ERISA that provide medical, health, life
insurance or other welfare-type benefits for current or future retirees or
former employees of IMS or their spouses or dependents (other than in accordance
with Part 6 of Subtitle B of Title I of ERISA and Code Section 4980B ("COBRA");
-----
(F) other profit sharing, deferred compensation, bonus, stock option, stock
purchase, welfare, vacation, holiday, sick pay, or other plans or arrangements
for the benefit of employees maintained or contributed to by IMS; (G) employee
regulations or handbooks which relate in any way to the employees of IMS; or (H)
former employees of IMS or their spouses or dependants currently receiving or
entitled to receive medical, life insurance or other welfare-type benefits
pursuant to COBRA.
(iii) IMS has complied in all material respects with all applicable laws,
rules and regulations relating to the employment of labor, including those
relating to nondiscrimination, wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by appropriate
governmental authorities. IMS has complied in all material respects with all
applicable laws, rules and regulations relating to employee benefits, including
ERISA, and with the requirements of COBRA. No unfair labor practice complaint
is pending against IMS before the National Labor Relations Board or any state or
local agency, nor has any charge of discrimination been filed against IMS with
the Equal Employment Opportunity Commission or any similar state or local agency
at any time during the three-year period preceding the date hereof.
(iv) A true, complete and correct list as of the date hereof, of all
employees and officers of IMS and their compensation is set forth in Exhibit 4.
(u) Environment, Health and Safety. IMS has complied in all material
----------------------------------
respects with, and is in compliance in all material respects with, any and all
Environmental Laws (as hereafter defined), and no claim, action, suit, demand,
proceeding (including administrative proceeding), or notice of violation has
been filed or commenced against IMS alleging any failure to comply with any
Environmental Laws or alleging any actual or potential liability thereunder. In
addition, and without limiting the generality of the foregoing, except as set
forth on the disclosure schedule corresponding to this Section and except that
this representation and warranty is qualified by materiality:
(i) There are no facts, events, circumstances, activities, practices,
incidents, actions, plans or conditions related to past or present operations
conducted by IMS on or off the properties, facilities or premises on which it
has conducted or operated business that could form the basis for any claim,
action, demand, suit, proceeding (including administrative proceeding), hearing,
notice of violation or liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1974, the Toxic
Substances Control Act of 1976, the Refuse Act of 1989, the Emergency Planning
and Community Right-to-Know Act of 1986, each as amended, or any other law (or
rule or regulation thereunder) of any federal, state, local or foreign
government (or agency thereof)(including common law), concerning release or
threatened release of any Hazardous Substance (as hereafter defined), pollution,
protection of worker health and safety or protection of the environment
(collectively, "Environmental Laws").
-------------------
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(ii) IMS has not generated, treated, stored, handled, transported or
disposed of any substance, arranged for disposal of any substance or owned or
operated any property or facility in any manner which could form the basis for
any present or future claim, suit, hearing, proceeding (including administrative
proceeding), demand or action (under the common law or pursuant to any statute)
seeking cleanup of or compensation for damage to any site, location or body of
water (surface or subsurface) or compensation for illness or personal injury.
(iii) IMS has not (A) taken any action or failed to act in any manner that
could form the basis for any claim or liability under the Occupational Safety
and Health Act, as amended, or any other law (or rule or regulation thereunder)
of any federal, state, local or foreign government (or agency thereof)
(including common law) concerning worker health and safety or (B) exposed any
employee to any substance or condition which could form the basis for any
present or future claim, suit, hearing, proceeding (including administrative
proceeding), demand or action (under the common law or pursuant to statute)
seeking compensation for property damage or illness or personal injury.
(iv) IMS has obtained and has complied in all material respects, all terms
and conditions of all permits, licenses and other authorizations which are
required under, and has complied in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables which are contained in, all Environmental
Laws, including rules, codes, plans, orders, decrees, judgments, injunctions,
and regulations thereunder, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemical or
industrial, hazardous or toxic materials or wastes into ambient air, surface
water, ground water or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemical or industrial, hazardous or toxic
materials or wastes.
(v) No real property owned, operated or used by IMS contains any underground
storage tanks, materials or equipment containing asbestos or polychlorinated
biphenyls, or landfills, surface impoundments or waste disposal areas.
(vi) IMS has not, either expressly or by operation of law, assumed or
undertaken any liability, including, without limitation, any obligation for
corrective or remedial action, of any other person or entity with respect to any
Environmental Laws.
(vii) On and prior to the Effective Date, IMS has not buried, stored,
spilled, leaked, discharged, emitted, released, placed or located any Hazardous
Substance on any real property owned, operated or used by IMS. As used herein,
"Hazardous Substance" means any hazardous or toxic substance, material or waste,
-------------------
which is regulated by any local governmental authority, the State of Florida or
the United States Government. The term "Hazardous Substance" includes, without
limitation: (A) any material or substance which is listed or defined as a
"hazardous waste" "extremely hazardous waste", "restricted hazardous waste" ,
"hazardous substance" or "toxic substance" under any municipal, state or federal
law, code or other regulation; (B) petroleum; (C) asbestos; (D) polychlorinated
biphenyl; (E) any material or substance which is designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act,
as amended; (F) any material or substance which is defined as "hazardous waste"
pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act,
as amended; (G) any material or substance which is defined as a Response,
Compensation and Liability Act, as amended; (H) any material or substance which
is defined as a toxic substance in the Toxic Substances Control Act, as amended;
or (I) any substance which contaminates soil or ground water and causes
degradation of the soil and/or water to the extent that remediation efforts are
needed to restore the soil or water to its natural state.
4.2 Seller and IMS acknowledge that neither Leonard S. Englander nor the law
firm of Englander & Fischer, P.A. have represented the Seller or IMS in this
transaction. The Seller recognizes that Leonard S. Englander and the law firm
of Englander & Fischer, P.A. are Purchaser's counsel.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
----------------------------------------------------
The Purchaser hereby warrants and represents to Seller that as a result of
discussions with Seller, and extensive personal observation of the conduct of
IMS's business, Purchaser has personally reviewed and is fully advised with
respect to the business, financial condition, assets, liabilities and prospects
of IMS. The Purchaser is purchasing the Shares for investment purposes only and
not for resale or with a view to the distribution thereof. The Purchaser
acknowledges and agrees that the Shares have not been registered under the
Securities Act of 1933 or Chapter 517, Florida Statutes.
6. EMPLOYMENT AGREEMENT.
---------------------
At the Closing, Seller and IMS shall execute and deliver an Employment Agreement
containing, inter alia, the Seller's covenant not to compete.
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7. ENTIRE AGREEMENT. This Agreement contains the entire agreement
-----------------
between the parties and shall not be modified except in writing signed by the
parties hereto.
8. BENEFIT. This Agreement shall inure to the benefit of and be
-------
binding upon the parties hereto, their respective successors, assigns, heirs and
personal representatives.
9. GOVERNING LAW.
--------------
9.1 This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Florida, without reference to principles of choice of law
or conflicts of law thereunder.
9.2 The exclusive venue of any action brought to enforce or construe this
Agreement shall be St. Petersburg, Pinellas County, Florida.
9.3 In any action brought to enforce or construe this Agreement, the prevailing
party shall be entitled to an award of reasonable attorney fees, through all
appeals, if any.
THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY
LEFT BLANK
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
WITNESSES: "SELLER"
/s/ Leonard Englander /s/ Roger W. Finefrock
- ----------------------------- ----------------------------
ROGER W. FINEFROCK
/s/ Frank P. Rothschild
- -------------------------------
"IMS"
INTERACTIVE MEDIA
SOLUTIONS, INC., A FLORIDA
CORPORATION
/s/ Leonard Englander BY: /s/ Roger W. Finefrock
- --------------------------- -----------------------------
ITS PRESIDENT
/s/ Frank P. Rothschild ATTEST: /s/ Roger W. Finefrock
- ------------------------------ -----------------------------
ITS SECRETARY
"PURCHASER"
NET ADVANTAGE, INC., A FLORIDA
CORPORATION
/s/ Alex Danilov BY: /s/ Kyle E. Jones
- -------------------- -----------------------
ITS PRESIDENT
/s/ Frank P. Rothschild ATTEST: /s/ Kyle E. Jones
- --------------------------- -------------------
ITS SECRETARY
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EXHIBIT 1
---------
Shareholder Name Number of Shares
Roger W. Finefrock 1000
EXHIBIT 2
---------
As of the date hereof and as of Closing, the authorized capital stock of IMS
consisted of 1,000 shares of Common Stock, $.01 par value, of which 1,000 shares
are issued and outstanding.
EXHIBIT 3
---------
UNDISCLOSED LIABILITIES
None
EXHIBIT 4
---------
Name of Employee or Officer Compensation
Roger Finefrock $34,840
David Stanford $28,340
Mike Miller $20,072
Thomas Alspaugh $25,002
Shane Verheyen $22,500
77
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