-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C/4YoEn5w2VH7WJO7I4olQizsBQBajwo6AfUndPbI3XAfDDmVDHUQUI8typszQun TIBdqSRc9h4lIJyqmth+rw== 0000950134-00-004654.txt : 20000516 0000950134-00-004654.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950134-00-004654 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTER TECH CORP CENTRAL INDEX KEY: 0001021725 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 841349553 STATE OF INCORPORATION: NV FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-21275 FILM NUMBER: 634400 BUSINESS ADDRESS: STREET 1: 430 EAST 6TH STREET CITY: LOVELAND STATE: CO ZIP: 80537 BUSINESS PHONE: 9706695292 MAIL ADDRESS: STREET 1: 430 EAST 6TH STREET CITY: LOVELAND STATE: CO ZIP: 80537 FORMER COMPANY: FORMER CONFORMED NAME: WALNUT CAPITAL INC DATE OF NAME CHANGE: 19960828 10QSB 1 FORM 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _____________ to _____________ Commission file number: 0-21275 ENTER TECH CORP. --------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 84-1349553 ------ ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 430 East 6th Street, Loveland, Colorado 80537 --------------------------------------------- (Address of principal executive offices) 970-669-4918 * -------------- (Issuer's telephone number) * This is a new number State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of May 12, 2000, the issuer had 12,783,000 shares of common stock outstanding. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] 2 ENTER TECH CORP. Form 10-QSB For the Quarter Ended March 31, 2000 TABLE OF CONTENTS PART I-FINANCIAL INFORMATION.............................................................................1 Item 1. Financial Statements.........................................................................1 Review Report of Independent Certified Public Accountant........................................1 Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999......................................................................2 Consolidated Statements of Operations, Three Months Ended March 31, 2000 and March 31, 1999......................................................3 Consolidated Statements of Cash Flows, Three Months Ended March 31, 2000 and March 31, 1999......................................................4 Notes to Consolidated Financial Statements......................................................5 Item 2. Plan of Operation............................................................................8 PART II-OTHER INFORMATION...............................................................................14 Item 1. Legal Proceedings...........................................................................14 Item 2. Changes in Securities.......................................................................14 Item 5. Other Information...........................................................................15 Item 6. Exhibits and Reports on Form 8-K............................................................16
i 3 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT The Board of Directors Enter Tech Corporation Loveland, Colorado We have reviewed the accompanying balance sheet of Enter Tech Corp. as of March 31, 2000, and the related statements of operations and cash flows for the three months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of Enter Tech Corp. A review of interim financial statements consists principally of inquiries of Company personnel responsible for financial matters and analytical procedures applied to financial data. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. As discussed in the notes to the financial statements, certain conditions indicate that the Company may be unable to continue as a going concern. The accompanying financial statements do not include any adjustments to the financial statements that might be necessary should the Company be unable to continue as a going concern. /s/ SCHUMACHER & ASSOCIATES, INC. Schumacher & Associates, Inc. Certified Public Accountants 2525 Fifteenth Street, Suite 3H Denver, Colorado 80211 May 10, 2000 1 4 ENTER TECH CORP. CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS
March 31 December 31 2000 1999 Current Assets Cash $ 42,011 $ 14 ----------- ------------- Total Current Assets 42,011 14 Receivable, Wave Power 23,515 -- Equipment, net of accumulated depreciation of $1,229 6,963 7,373 ----------- ------------- Total Assets $ 72,489 $ 7,387 =========== ============= LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current Liabilities: Accounts payable $ 52,171 $ 35,512 Stock compensation payable 23,700 1,103,574 Customer deposits 60,000 60,000 Related party payables 357,794 322,009 Notes payable, other 115,806 15,806 ----------- ------------- Total Current Liabilities 609,471 1,536,901 ----------- ------------- Stockholders' (Deficit): Preferred Stock, $.0001 par value, 5,000,000 shares authorized none issued and outstanding -- -- Common Stock, $.0001 par value, 100,000,000 shares authorized 7,783,000 shares issued and outstanding 778 385 Additional paid-in capital 1,470,099 381,618 Accumulated deficit (2,007,859) (1,911,517) ----------- ------------- Total Stockholders' (Deficit) (536,982) (1,529,514) ----------- ------------- Total Liabilities and Stockholders' (Deficit) $ 72,489 $ 7,387 =========== =============
The accompanying notes are an integral part of the financial statements. 2 5 ENTER TECH CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Three Months Ended Ended March 31, March 31, 2000 1999 Revenues $ -- $ -- ------------ ------------ Operating Expenses: Depreciation 410 -- Supplies -- 496 Professional fees 77,162 39,200 Rent 4,500 2,700 Stock issued for services 9,000 -- Travel 2,572 2,255 Telephone 863 2,009 Other 1,835 2,103 ------------ ------------ Total Operating Expenses 96,342 48,763 ------------ ------------ Net Loss $ (96,342) $ (48,763) ============ ============ Per Share $ (.01) $ (.01) ============ ============ Weighted Average Number of Shares Outstanding 7,783,000 3,650,000 ============ ============
The accompanying notes are an integral part of the financial statements. 3 6 ENTER TECH CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Three Months Ended Ended March 31, March 31, 2000 1999 Cash Flows Operating Activities: Net (loss) $ (96,342) $ (48,763) Adjustment to reconcile net (loss) to net cash provided by operating activities: Depreciation 410 -- Stock for services 9,000 -- Increase in receivable, Wave Power (23,515) -- Increase in accounts payable and accrued expenses 16,659 1,575 ------------ ------------ Net Cash (Used in) Operating Activities (93,788) (47,188) ------------ ------------ Cash Flows from Investing Activities -- -- ------------ ------------ Cash Flows from Financing Activities: Common stock issued and additional paid-in capital -- -- Increase in notes payable 100,000 -- Increase in payable, related parties 35,785 47,188 ------------ ------------ 135,785 47,188 ------------ ------------ Increase in Cash 41,997 -- ------------ ------------ Cash, Beginning of Period 14 -- ============ ============ Cash, End of Period $ 42,011 $ -- ============ ============ Interest Paid $ -- $ -- ============ ============ Income Taxes Paid $ -- $ -- ============ ============
The accompanying notes are an integral part of the financial statements. 4 7 ENTER TECH CORP. NOTES TO FINANCIAL CONSOLIDATED STATEMENTS March 31, 2000 (1) Condensed Financial Statements The financial statements included herein have been prepared by Enter Tech Corp. without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and Enter Tech Corp. believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the December 31, 1999 audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts are in some respect's dependent upon the facts that will exist, and procedures that will be accomplished by Enter Tech Corp. later in the year. The management of Enter Tech Corp. believes that the accompanying unaudited condensed financial statements contain all adjustments (including normal recurring adjustments) necessary to present fairly the operations and cash flows for the periods presented. (2) Business Combination On January 7, 2000, the Company entered into an agreement with Shopping Mall Online, Inc. and an individual whereby the Company acquired 80% of the outstanding common stock of Shopping Mall Online. The consideration for the acquisition was 2,400,000 shares of the Company's common stock. The agreement also provides that if for any reason the Company's common stock is not trading above a $1.00 bid price at the time the Rule 144 restrictive legend on the stock certificate for the 2,400,000 shares of the Company's common stock is removed, the Company will issue additional shares of its common stock to the individual. The value of the additional shares to be issued will be equal to the difference between $2.4 million and the value of the 2,400,000 shares of common stock issued under the agreement based on the then existing bid price. The business combination has been accounted for as a purchase. No goodwill has been recorded in the transaction because the former owner of Shopping Mall Online, Inc. now owns 31% of the Company. The 2,400,000 shares of common stock have been recorded at predecessor cost of Shopping Mall Online, Inc. All costs related to development of Shopping Mall Online, Inc. have been expensed. The agreement also provides the voting rights with respect to the common stock of Shopping Mall Online will remain with the individual until the restrictive legend on the 2,400,000 shares of the Company's common stock is removed. If for any reason the Company is declared insolvent or files for bankruptcy protection after the date of the agreement until the restrictive legend on the Company's common stock is removed, Shopping Mall Online will have the right to rescind the agreement. Shopping Mall Online has the right under the agreement to appoint one person nominated by the individual to the board of directors of the 5 8 ENTER TECH CORP. NOTES TO FINANCIAL CONSOLIDATED STATEMENTS March 31, 2000 (2) Business Combination, Continued Company. Prior to the foregoing transaction, Shopping Mall Online was owned solely by this individual. This individual is also the principal owner of Integrity Capital, Inc. Integrity Capital provides investor relations services for the Company. (3) Marketing and Administration of Sales Agreement The Company has entered into an agreement with a previous director of the Company for the marketing and administration of sales through certain identified locations and the division of profits after the director has recovered related costs. The Company currently has orders for the purchase of thirty kiosk software vending units at $50,000 per unit from a previous director. The Company received $60,000 of deposits related to these orders. The Company is uncertain whether it will be able to deliver the units and it is not determinable at this time whether a refund will be required. A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. (4) Stock Purchase and Subscription Agreement On March 15, 2000, the Company signed a Stock Purchase and Subscription Agreement whereby the Reserve Foundation Trust ("trust") will purchase 6,000,000 restricted shares of the Company's common stock for $10,000,000 through a private placement, providing that all terms to the purchase agreement are fulfilled. According to the terms of the Stock Purchase and Subscription Agreement, the full transfer of funds would take place on May 1, 2000, provided that the Company must file its annual Form 10-K or 10-KSB for the year ending December 31, 1999, and complete the acquisition of WavePower, Inc. by May 1, 2000. Demand registration rights after January 2001 and piggyback registration rights are to be granted to the trust if the transaction closes. Upon signing the Stock Purchase and Subscription Agreement, the trust provided the Company with $50,000 in interim financing, which was subsequently increased to $100,000 at March 31, 2000. The debt is to be repaid from the final funding of the private placement. (5) Litigation During February, 2000 the Company commenced litigation against a former officer of the Company alleging failure of the former officer to meet certain performance standards. The Company is seeking cancellation of the agreement to issue 750,000 shares of Company common stock and the payment of $500 per month compensation to the former officer and the return of 500,000 shares of stock previously issued. (See Note 6) A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. 6 9 ENTER TECH CORP. NOTES TO FINANCIAL CONSOLIDATED STATEMENTS March 31, 2000 (6) Basis of Presentation - Going Concern The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Company as a going concern. However, the Company has sustained operating losses since its inception and has a net capital deficiency. Management is attempting to raise additional capital. In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. Management is in the process of attempting to raise additional capital and reduce operating expenses. Management believes that its ability to raise additional capital and reduce operating expenses provide an opportunity for the Company to continue as a going concern. (7) Subsequent Events The Company completed the acquisition of WavePower, Inc. on April 19, 2000. The Company issued certificates for the 5,000,000 shares of restricted common stock as described in the Plan of Reorganization and Acquisition of WavePower, Inc. The shares of restricted common stock that were issued to WavePower, Inc. increased the Company's outstanding shares of common stock to 12,783,000. On April 10, 2000, the board of directors of the Company agreed to establish two voting trusts in which the Company would place 5,000,000 shares of the Company's preferred stock. The first trust will contain 3,000,000 preferred shares being held in reserve for the acquisition of WavePower, Inc. as outlined in the definitive agreement. The second trust will contain 2,000,000 preferred shares of Company stock that will be used for the benefit and distribution to the officers, directors and significant consultants to the Company with the option of a distribution of up to 1,000,000 of these preferred shares for additional compensation as they may, from time to time, come available to the Company. The president of the Company will retain sole voting rights for both trusts. On May 4, 2000, the Reserve Foundation Trust indicated that they would go forward with the dispersal of funds as described in the Stock Purchase and Subscription Agreement. The Company has issued certificates for the 6,000,000 shares of restricted common stock in preparation for delivery once the funding is completed. The shares of restricted common stock issued to the Trust and to WavePower, Inc. bring the Company's issued common stock to 18,783,000. The interim financing the trust provided the Company in the amount of $250,000 is to be repaid in full as per the terms of the Stock Purchase and Subscription agreement on or before May 22, 2000. Litigation against the Company has been threatened during May, 2000 by a corporation which alleges that the Company has not fulfilled an agreement to issue 1,000,000 shares of the Company's common stock in consideration of the waiver of any rights by the corporation or affiliated entities to acquire WavePower, Inc., which the Company acquired on April 19, 2000. The Company is of the view that the conditions precedent to the issuance of such stock were not fulfilled and that the agreement was repudiated. The Company intends to contest any claims. Due to the preliminary stage of the matter, the ultimate resolution of this contingency cannot presently be determined. 7 10 ITEM 2. PLAN OF OPERATION. The following discussion of our plan of operation should be read together with the financial statements and the related notes in Item 1 of Part I above. As discussed in the notes to the financial statements, there are circumstances which indicate that Enter Tech may be unable to continue as a going concern. We cannot assure you that our plans in that regard will be successful and that we will be able to continue as a going concern. OVERVIEW Enter Tech is a development stage company formed in July 1996 and we have not yet generated revenues from our planned principle operations. Since Enter Tech's acquisition in June 1998 of Links Ltd., also a development stage company, we have focused on attempting to develop a prototype kiosk, or vending machine, through which Links had previously planned to market computer software, music and possibly digital video products stored on disks or computer hard drives. Enter Tech has not yet been successful in developing on its own a commercially feasible prototype of the proposed kiosk and we have continued to evaluate the alternative of acquiring a company which has already developed a similar kiosk concept. We have also recently focused on a strategy of acquiring other companies with proprietary technology or strategic relationships which would complement the kiosk concept, including e-commerce companies which could ultimately lead to the kiosk products being available through internet access. RECENT SIGNIFICANT EVENTS Shopping Mall Online Acquisition On January 7, 2000, Enter Tech acquired 80% of the outstanding common stock of Shopping Mall Online, Inc., a development stage company, in exchange for the issuance of 2,400,000 restricted shares of Enter Tech common stock. Under the acquisition agreement, if Enter Tech's common stock is not publicly trading at a bid price above $1 per share when the stock transfer restrictions are removed for the initial 2,400,000 shares pursuant to Rule 144 under the Securities Act of 1933, Enter Tech must issue additional shares of its common stock. The number of additional shares that may be issued are to be based on a value of those shares equal to the difference between $2,400,000 and the value of the original 2,400,000 shares of common stock at the time the stock transfer restrictions are removed. If at any time while the stock transfer restrictions under Rule 144 are in effect for the shares Enter Tech is declared insolvent or files for bankruptcy protection, Shopping Mall Online has the right to rescind the acquisition agreement. Shopping Mall Online intends to provide web-hosting services and provide exposure to businesses for both consumer and business-to-business e-commerce activity. Shopping Mall Online also plans to act as an aggregate site for advertising, promotional and co-branding activities in connection with the placement of interactive kiosks in venues that support heavy traffic and exposure. We anticipate these venues will include 8 11 regional shopping centers, community retail centers, airports, and other large retail outlets. We anticipate Shopping Mall Online will generate revenues from hosting, banner advertisements and a percentage of sales from customers. WavePower Acquisition On April 19, 2000, Enter Tech acquired 80% of the outstanding shares of common stock of WavePower, Inc., a development stage company, in exchange for the issuance of 5,000,000 restricted shares of Enter Tech common stock. In addition, Enter Tech agreed to reserve 3,000,000 shares of its 5,000,000 authorized shares of preferred stock for issuance as further payment for the acquisition to the former sole shareholder of WavePower in the event that certain performance objectives related to future gross income and net pre-tax profit of WavePower are met. The additional 3,000,000 shares of preferred stock would be issued through exercise of an option to purchase the preferred stock, contingent on meeting the performance objectives, and would be convertible into shares of Enter Tech common stock at the rate of 2 shares of common stock for each share of preferred stock. The agreement also contemplates that the remaining 2,000,000 authorized shares of Enter Tech preferred stock may be issued to the existing members of Enter Tech management and a significant consultant. WavePower plans to become an application service provider and is in the process of developing a network which moves traditional computer applications out of the conventional personal computer and onto a central network. WavePower intends that users will then be able to freely access all of the power, applications and connectivity of a series of networked computers from their own individual terminal. Agreement for $10 Million Equity Financing On March 15, 2000, Enter Tech entered into a stock purchase and subscription agreement with the Reserve Foundation Trust under which the trust is to purchase 6,000,000 restricted shares of Enter Tech common stock in exchange for cash of $10 million. When the agreement was signed, the trust provided Enter Tech with $50,000 in interim debt financing. That amount was subsequently increased to a total of $250,000. On May 4, 2000, the trust indicated that all conditions to the stock purchase had been satisfied and that it would go forward with providing the $10 million in funds to Enter Tech. These funds had not yet been received by Enter Tech as of May 15, 2000. Although Enter Tech has issued stock certificates for the 6,000,000 shares of common stock to be purchased by the trust, these stock certificates are being held for delivery until the trust funds the stock purchase amount of $10 million. Enter Tech currently believes that the $10 million equity funding will occur on or about May 22, 2000, at which time the interim debt financing is to be repaid. However, we cannot assure you that the financing will be completed. 9 12 DESCRIPTION OF OUR CURRENT PLAN OF OPERATION Our current plan of operation for the next 12 months primarily involves the development of our kiosk technology, pursuit of Shopping Mall Online's web-hosting and interactive kiosk placement in shopping malls and other retail outlets, and continued development of WavePower's application service provider network. We plan to devote substantial time and resources to integrating these various business models. In addition, we intend to pursue potential acquisitions or other strategic alliances with suitable kiosk concept or e-commerce companies. We have not established a specific level of revenues, earnings or assets below which we would not consider a potential target company for an acquisition or alliance. Moreover, we may identify an attractive target company which may currently be generating losses but which we believe has a promising business plan. Although we plan to proceed with what we believe is an appropriate level of due diligence in implementing this strategy, we cannot assure you that any acquisition or alliance will be successful or that we will achieve the expected benefits from the transaction. For us to continue to attempt to develop our plan of a kiosk through which to market computer software, music and possibly digital video products, we will need to construct a new prototype kiosk and have that prototype tested before we are able to begin marketing and production of these kiosks. We have in the past used software and hardware developed by third parties to construct prototypes of kiosks and we anticipate any future prototypes will also be developed by third parties. We anticipate that we will develop a prototype kiosk and begin construction of units during the next 12 to 18 months. However, we cannot assure you that we will ever be able to develop a commercially successful kiosk. We are currently involved in negotiations with several major mall developers and retailers who have expressed an interest in the branding and marketing strategies of Shopping Mall Online and the deployment of the kiosk technology and concept. One such group has expressed interest in a beta-test of the kiosk in combination with Shopping Mall Online in a currently undetermined number of malls in the U.S. and Canada. However, we cannot assure you that any such partnerships or relationships with mall developers or retailers will be established. We plan to identify any number of merger candidates that may be brought to our attention through our present associations. We plan to evaluate the candidates using broad criteria. We expect that negotiations with a target company will focus on the percentage of our common stock, as computed following a merger or acquisition, that the target company's stockholders would receive for their share holdings in the target company. Depending upon, among other things, the target company's assets and liabilities, our stockholders will in all likelihood experience dilution in their interest in us following any merger or acquisition. 10 13 LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2000, Enter Tech had $42,011 in cash, including cash supplied from the interim debt financing by Reserve Foundation Trust discussed above, and current liabilities of $609,471. This represented a working capital deficit of $(567,460). As of March 31, 2000, Enter Tech had no material commitments for capital expenditures and no plans to pay dividends to its shareholders. If completed, the Reserve Foundation Trust private placement financing is expected to provide Enter Tech with funds to continue the process of developing the prototype kiosk machine concept within the next 12 months. However, Enter Tech will be required to completely reconstruct an entirely new prototype of the kiosk based upon its concept of the kiosk. Some engineering work has been done to design plans for the components and software to be used in the kiosks, but it is likely that a portion or all of the engineering done to date will need to be completely updated or redone. Enter Tech is also continuing to evaluate the option of acquiring a "kiosk company" which has already developed some or all of the concepts conceived by Enter Tech. As this development or acquisition strategy proceeds, Enter Tech is anticipating the possibility of licensing this technology in foreign countries. We cannot assure you that any commercially favorable relationships with prospective licensees will be established. If the kiosk concept can be developed, additional employees will be needed based upon the development schedule of the kiosk. If a "kiosk company" is acquired Enter Tech will be required to evaluate the need of any current or potential employees of the "kiosk company." If the kiosk concept is developed by Enter Tech as conceived, Enter Tech currently plans to have the product manufactured on a contract basis with a third party manufacturer. Therefore, Enter Tech does not plan to acquire significant additional plant and equipment for the purpose of manufacturing the kiosk. No assurances can be made as to if the kiosk concept will ever be fully developed or if a "kiosk company" can be acquired. There is no assurance that the kiosks will function as planned if Enter Tech is able to develop the kiosks, or acquire a "kiosk company", or be manufactured at a unit cost commercially favorable to Enter Tech. We cannot assure you that Enter Tech will be able to generate any revenues from sales or that any sales will be made of kiosks or from kiosk vending operations. Provided the private placement funding is completed, it is anticipated that the funds should also be able to finance the operations of Shopping Mall Online, Inc. for the next 12 months. Shopping Mall Online is anticipated to provide web hosting services and e-commerce activity. It is expected that Shopping Mall Online is to combine their branding and marketing strategies with the kiosk concept and potentially market to major mall developers and retailers. It is anticipated that Shopping Mall Online will require additional employees to develop the systems and has committed to hire two full time people, one as President and the other as Director of Operations. Additional employees 11 14 will be required as Managers of Business Development, Technology and Systems Administration and Sales. Additional operational personnel will be required within each department. Enter Tech currently has 11 employees, and plans to hire an additional 4 employees by June 30, 2000 and an additional 10 employees by December 31, 2000. Approximately 2,600 square feet of office space is expected to be needed this year as is significant server computers and communication backbone to host the web sites and provide adequate access to the online mall. It is anticipated that Shopping Mall Online will license an established e-commerce application software package from a reputable third party, but this does not preclude the possibility that modifications and independent research or development could be needed. There is no assurance that Shopping Mall Online will become a viable business or generate any revenues from the activities it plans to undertake. Online shopping is crowded with many vendors and there is nothing to prevent any other person or company from pursuing this potential line of business. It is possible that the WavePower acquisition could provide a compatible synergy to the efforts of Shopping Mall Online, Inc. and any kiosk development by Enter Tech or "kiosk company" Enter Tech may contemplate acquiring due to the technology developed by WavePower. WavePower's technology could enhance the kiosk operational design. The acquisition of Wave Power may enhance the effectiveness of Shopping Mall Online's commerce activity and vice versa. Additional employees will be required to continue the development process of WavePower, most of whom are expected to be technical professionals. Enter Tech anticipates that with the private placement funds, we will be able to finance WavePower to continue operations and develop the infrastructure needed to generate revenue, however it is the intention of Enter Tech to aggressively identify other sources of capital for development of Enter Tech and all of its subsidiaries as is necessary for continued operation and to generate revenues. We are currently evaluating the projected capital needs for the development of the kiosk and for the operation of Shopping Mall Online and WavePower. Although we believe that the recent $10 million equity financing, if it is completed, will be sufficient for our cash requirements for the next 12 months, we cannot assure you that we will not need additional funds to fully and successfully implement our strategy. CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS This discussion contains forward-looking statements that involve risks and uncertainties. All statements included in this report, other than statements of historical facts, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, are forward-looking statements. These forward-looking statements include statements about: 12 15 o The future anticipated direction of the high technology and e-commerce industries, o The pending $10 million equity financing from the Reserve Foundation Trust, o Planned acquisitions of operating companies, o Plans for development, expansion and integration of companies which have been acquired, o Planned capital and operating expenditures, o Future funding sources, o Anticipated revenues and sales growth, and o Overall business strategies. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, including such factors as: o Technological developments and consumer preferences in the high technology and e-commerce industries, o The risk that the pending $10 million equity financing from the Reserve Foundation Trust may not be completed, o Expected benefits from development, expansion and integration of acquired companies, o Competition in the markets for our planned businesses, o The availability of adequate financing, o Dependence on existing management, and o Changes in laws or regulations affecting our plan of operation. We caution you that our forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those expressed or implied by the forward-looking statements. 13 16 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Except as set forth herein the Company is not a party to any material pending legal proceedings; nor are any such proceedings involving the Company contemplated by a governmental authority to the knowledge of the Company. On February 24, 2000, the Company initiated a civil action by it against Jerry Stiles, a/k/a Gerald C. Stiles, a former officer of and consultant to the Company, in the District Court of Douglas County, Colorado. The Company requests that: 1) the Court rescinds the contract; and 2) awards the Company damages to be determined at trial. On April 4, 2000, Mr. Stiles filed an answer/counterclaim against the Company that claimed: 1) breach of contract on the Company's part; 2) unpaid compensation; 3) damages for unpaid compensation; 4) damages under the Colorado Securities Act; and 5) fraudulent misrepresentation and non-disclosure to be proven at trial. ITEM 2. CHANGES IN SECURITIES. RECENT SALES OF UNREGISTERED SECURITIES For the period January 1, 2000 through May 11, 2000, Enter Tech issued the following securities without registration under the Securities Act of 1933. 1. On January 7, 2000, Enter Tech issued 2,400,000 shares of common stock to Robert J. Pratt to acquire Shopping Mall Online, Inc. These shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. 2. On March 20, 2000, Enter Tech issued 10,000 shares of common stock to Mark A. Thomas, as compensation for Mr. Thomas acting as an Enter Tech director. These shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. 3. On April 19, 2000, Enter Tech issued 5,000,000 shares of common stock and an option to purchase 3,000,000 shares of preferred stock to Vernon Kendrick in exchange for 80% of the outstanding shares of common stock of WavePower, Inc. These shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. 14 17 The facts relied on to make the exemption from registration provided by Section 4(2) of the Securities Act of 1933 available for the sales of securities discussed in paragraphs 1 through 3 above were: o the limited number of purchasers, o the sophistication or accreditation of the purchasers, o their access to material information about Enter Tech, o the information furnished to them by Enter Tech, o the absence of any general solicitation or advertising, and o restrictions on transfer of the securities issued to them as indicated by a legend on the certificates representing such securities. ITEM 5. OTHER INFORMATION. Enter Tech is providing the following information in lieu of filing a separate current report on Form 8-K for information required by Items 2 and 7 thereunder. On April 19, 2000, Enter Tech acquired 80% of the outstanding shares of common stock of WavePower, Inc., a development stage company, in exchange for the issuance to Vernon C. Kendrick of 5,000,000 restricted shares of Enter Tech common stock. In addition, Enter Tech agreed to reserve 3,000,000 shares of its 5,000,000 authorized shares of preferred stock for issuance as further payment for the acquisition to the former sole shareholder of WavePower in the event that certain performance objectives related to future gross income and net pre-tax profit of WavePower are met. The additional 3,000,000 shares of preferred stock would be issued through exercise of an option to purchase the preferred stock, contingent on meeting the performance objectives, and would be convertible into shares of Enter Tech common stock at the rate of 2 shares of common stock for each share of preferred stock. The agreement also contemplates that the remaining 2,000,000 authorized shares of Enter Tech preferred stock may be issued to the existing members of Enter Tech management and a significant consultant. The financial statements of WavePower and pro forma financial information giving effect to the acquisition of WavePower called for by Item 7 of the Form 8-K are not included in this report. Enter Tech plans to file those financial statements and pro 15 18 forma financial information by an amendment to this report within 60 days after the date that the original report on Form 8-K was due. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. The following Exhibits are furnished as part of this report: Exhibit 2.1 Reorganization Agreement dated April 19, 2000 among Enter Tech Corporation, WavePower, Inc. and Vernon C. Kendrick.* Exhibit 10.1 Employment Agreement among Vernon C. Kendrick, Enter Tech Corporation and WavePower, Inc.* Exhibit 27.1 Financial Data Schedule.* * Filed herewith. (a) Reports on Form 8-K. We filed one current report on Form 8-K during the quarter ended March 31, 2000. We filed a Form 8-K reporting under Item 2 the acquisition of Shopping Mall Online, Inc. on January 7, 2000. The financial statements related to our acquisition of Shopping Mall Online were filed with our amended current report on Form 8-K/A on March 29, 2000, which also reported under item 5 the signing of a conditional subscription agreement for the private placement of 6,000,000 shares of common stock for $10,000,000. 16 19 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: May 15, 2000 ENTER TECH CORP. By: /s/ SAM LINDSEY ---------------------------- Sam Lindsey, President and Chief Financial Officer 17 20 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------------ ----------- 2.1 Reorganization Agreement dated April 19, 2000 among Enter Tech Corporation, WavePower, Inc. and Vernon C. Kendrick.* 10.1 Employment Agreement among Vernon C. Kendrick, Enter Tech Corporation and WavePower, Inc.* 27.1 Financial Data Schedule.*
* Filed herewith. EX-2.1 2 REORGANIZATION AGREEMENT 1 EXHIBIT 2.1 REORGANIZATION AGREEMENT THIS REORGANIZATION AGREEMENT (the "Agreement") is made and entered into by and among ENTER TECH CORPORATION, a publicly held Nevada corporation (the "Corporation"); WAVEPOWER, INC, a Florida corporation (the "Subsidiary"); and VERNON C. KENDRICK, an individual ("Kendrick") (hereinafter referred to as the "Subscribers"); and, the Corporation, the Subsidiary and the Subscribers being collectively referred to as the "Parties" and each being sometimes hereinafter generically referred to as a "Party"). PREAMBLE: WHEREAS, the Subscribers own 5,000,000 shares of the Subsidiary's common voting stock and no shares of the Subsidiary's preferred stock, such securities being all of the authorized issued and outstanding shares of the Subsidiary's capital stock (there being no other securities; the "Subsidiary Stock"), a corporation engaged in the business more particularly described in Exhibit 0.2 annexed hereto and made a part hereof; and WHEREAS, the Subscribers desire to acquire 5,000,000 shares of the Corporation's voting Common Stock, par value $0.001 per share (the "Stock"), in consideration for their conveyance of shares of the Subsidiary Stock which will constitute 80% of the Subsidiary's authorized, issued and outstanding securities; provided that the transaction qualifies as a tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended: NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the Parties, intending to be legally bound, hereby agree as follows: WITNESSETH: ARTICLE ONE EXCHANGE PROVISIONS 1.1 EXCHANGE (a) Subject to the hereinafter described conditions and Performance Criteria, the Corporation hereby agrees to exchange shares of its voting Common Stock, $0.001 par value, in an amount equal to 5,000,000 shares, with the Subscribers for 4,000,000 voting shares of the 1 2 Subsidiary Stock currently authorized, issued and outstanding (consisting of 5,000,000 shares of voting Common Stock and no shares of Preferred Stock of the Subsidiary) which, upon transfer, will constitute 80% of the Subsidiary's reserved or issued and outstanding securities. (b) Concurrently with the execution of this Agreement and delivery of the Subsidiary Stock to the Corporation, the Corporation shall cause its transfer agent to issue the requisite number of shares of Stock to the Subscribers, allocated to each Subscriber as follows: Vernon C. Kendrick 5,000,000 shares (c) Performance Criteria: Nothing herein shall be construed to prevent the Corporation from issuing the Subscribers additional shares or options to purchase additional shares in connection with the Subsidiary having obtained specified sums of gross income and net pre-tax profit under the management of the Subscriber, which formula shall be agreed upon and set forth in a formal employment agreement with the Subscriber. 1.2 EXEMPTION FROM REGISTRATION (a) Each Subscriber hereby represents, warrants, covenants and acknowledges that: (1) (a) The Stock is being issued without registration under the provisions of Section 5 of the Securities Act of 1933, as amended (the "Act") or of the applicable securities regulations of the State of Nevada (the "Nevada Securities Act") pursuant to exemptions provided pursuant to Section 4(2) of the Act and comparable provisions of the Nevada Securities Act; (b) The Subscribers have represented and warranted that any filings required in conjunction with the transactions contemplated in this Agreement required under the laws of the State of Nevada will be promptly made. (2) All of the Stock will bear legends restricting its transfer, sale, conveyance or hypothecation unless such Stock is either registered under the provisions of Section 5 of the Act and under the Nevada Securities Act, or an opinion of legal counsel, in form and substance satisfactory to legal counsel to the Corporation is provided by the Subscribers to the effect that such registration is not required as a result of applicable exemptions therefrom; (3) The Corporation's transfer agent shall be instructed not to transfer any of the Stock unless the Corporation advises it that such transfer is in compliance with all applicable laws and has been approved by the Corporation; (4) The Subscribers are acquiring the Stock for their own account, for investment purposes only, and not with a view to further sale or distribution; and 2 3 (5) Each Subscriber or his or her advisors have examined the Corporation's latest reports to the Securities and Exchange Commission on Forms 10-KSB, 10-QSB and 8-K (collectively and generically hereinafter referred to as "34 Act Reports"), have been provided with access to all of the Corporation's books and records and have questioned the Corporation's officers and directors as to such matters involving the Corporation as the Subscribers deemed appropriate. (b) The Corporation hereby represents, warrants, covenants and acknowledges that: (1) The Stock is being transferred without registration under the provisions of Section 5 of the Act or under the Nevada Securities Act pursuant to the exemptions provided by Section 4(2) of the Act and comparable provisions of the Nevada Securities Act; (2) All of the Stock will bear legends restricting its transfer, sale, conveyance or hypothecation within the jurisdictional boundaries of the United States, unless such Stock is either registered under the provisions of Section 5 of the Act and under applicable state securities laws, or an opinion of legal counsel is provided by the Corporation certifying that such registration is not required as a result of applicable exemptions therefrom; (3) The Corporation shall not transfer any of the Subsidiary Stock except in compliance with all applicable laws; and (4) The Corporation is acquiring the Subsidiary Stock for its own account, for investment purposes only and not with a view to further sale or distribution. 1.3 LIABILITIES. (a) Any liabilities in any manner encumbering or affecting the Subsidiary or its assets are disclosed on Exhibit 1.3 annexed hereto and made a part hereof (the "Disclosed Subsidiary Liabilities"). (b) The Subscribers hereby covenant and agree to indemnify and hold the Corporation harmless from any liabilities of the Subsidiary or affecting the Subsidiary's assets other than the Disclosed Subsidiary Liabilities ("Undisclosed Subsidiary Liabilities") and the Corporation may, in addition to all other legal or equitable remedies that may be available, offset from any funds, securities or other things of value due to the Subscribers or the Subscribers' affiliates (as that term is most liberally defined for federal securities law purposes), such sums as may be required to make the Corporation whole as a result of the assertion of any Undisclosed Subsidiary Liability against the Subsidiary or its assets. 3 4 ARTICLE TWO REPRESENTATIONS AND WARRANTIES 2.1 THE CORPORATION. The Corporation hereby represents and warrants to each Subscriber, as a material inducement to his, her or its entry into this Agreement, that, except as disclosed in Exhibit 2.1 (the "Corporation's Warranty Exceptions") or in the Corporation's 34 Act Reports filed prior to the date of this Agreement, the following representations and warranties are, to the best of the Corporation's knowledge, materially accurate: (a) The Corporation owns or leases the assets described in the Corporation's 34 Act Reports subject to such changes in inventory and supplies as were required in the ordinary course of business; (b) The Corporation has 100,000,000 shares of Common Stock $0.001 par value, authorized, of which a total of 7,780,000 shares are currently outstanding or reserved, there being no other outstanding securities of any class or of any kind or character of the Corporation (except for certain Preferred Stock described hereinafter), there being no outstanding subscriptions, options, warrants or other agreements or commitments obligating the Corporation to issue or sell any additional shares of the Corporation's Stock or any options or rights with respect thereto, or any securities convertible into any shares of Stock of any class, except with reference to rights granted to the Corporation's officers and certain officers of subsidiaries under employment agreements for bonus awards based upon performance at year end. In addition to the foregoing the Corporation shall have issued to its existing management group as of the date of closing an additional 2,000,000 shares of Preferred Stock $0.001 par value, carrying voting rights of 5 votes for each share of Preferred Stock and conversion rights equal to 2 shares of Common Stock for each share of Preferred Stock. To the extent all of such 2,000,000 shares of preferred stock shall not have been issued by the Closing Date, notwithstanding anything to the contrary herein or in any other agreements between the Corporation and Subsidiary or Subscriber, the Corporation may issue the balance of such 2,000,000 shares of preferred stock to its management. An additional 3,000,000 shares of such Preferred Stock shall be subject to options in favor of Vern Kendrick as described in his employment agreement. Further, nothing herein shall preclude the Corporation from issuing additional Common Stock or Options pursuant to a qualified Employee Stock Option Plan, profit sharing plan or other bonus arrangement as the parties may subsequently determine. (c) The Corporation is not a party to any written or oral agreement which grants an option or right of first refusal or other arrangement to acquire any of its securities or to any agreement that affects the voting rights of any of its securities, nor has the Corporation made any commitment of any kind relating to the issuance of shares of any of the Corporation's securities, whether by subscription, right of conversion, option or 4 5 otherwise; except that an employment agreement may be entered into with the Subscriber which provides for issuance of stock and/or options and/or warrants to the Subscriber. (d) The Corporation is not a party to any agreement or understanding for the sale or exchange of inventory or services for consideration other than cash or at a discount in excess of normal discount for quantity or cash payment; (e) There are presently no contingent liabilities, factual circumstances, threatened or pending litigation, contractually assumed obligations or unasserted possible claims which might result in a material adverse change in the future financial condition or operations of the Corporation; (f) The execution, delivery and performance of this Agreement and the transactions contemplated hereby do not require the consent, authority or approval of any other person or entity except such as have been obtained; (g) Except as otherwise disclosed herein no transactions have been entered into either by or on behalf of the Corporation, other than in the ordinary course of business nor have any acts been performed (including within the definition of the term performed the failure to perform any required acts) which would adversely affect the goodwill of the Corporation; (h) The entering into of this Agreement and the performance thereof has been duly and validly authorized by all required corporate action; (i) (1) The certified, consolidated financial statements of the Corporation and its subsidiaries, including consolidated statements of operations, stockholders investment and cash flows and consolidated balance sheets for its last two fiscal years, and unaudited consolidated financial statements for the period from the last consolidated certified financial statement until the end of the Corporation's fiscal quarter closest to the date of this Agreement, all prepared in accordance with generally accepted accounting principles, consistently applied, are included in the Corporation's 34 Act Reports (the "Corporation's Financial Statements"). (2) The Corporation's Financial Statements, as contained in its 34 Act Reports, fairly present the Corporation's financial condition as of their respective dates and its results of operations for their respective periods in accordance with generally accepted accounting principles, consistently applied; (j) (1) Except as and to the extent reflected or reserved against in the consolidated balance sheet of the Corporation and its subsidiaries (the "Corporation's Interim Balance Sheet), as of Dec. 31, 1999 the Corporation and its subsidiaries had no liabilities or legal obligations of a nature required to be reflected on a corporate balance sheet prepared in accordance with generally accepted accounting principles or disclosed in the notes thereto, whether absolute, accrued, contingent, or otherwise and whether due or to become due (including, without limitation, 5 6 liabilities for taxes and interest, penalties, and other charges payable with respect thereto in respect of or measured by the income of the Corporation through such date, or arising out of any transaction entered into prior thereto). (2) There is no material reasonable basis for the assertion against the Corporation or any of its subsidiaries of any liability or obligation which is not fully reflected or reserved against in the Corporation's various securities filings or in the Corporation's Interim Balance Sheet or disclosed in the notes thereto, except liabilities or obligations incurred since Dec. 31, 1999 in the ordinary course of Corporation business. (k) Since the date of the Corporation's Financial Statements no events have occurred nor have any facts been discovered which could have a material adverse effect on the financial status, results of operations or prospects of the Corporation; (1) On the Closing Date of this Agreement, the Corporation's net liabilities, excluding liabilities as a result of the transaction contemplated hereby, shall not exceed those disclosed in its annual financial report for the twelve month period ended Dec. 31, 1999, by more than $25,000, and since that date and such filing, there has not been any materially adverse change in the financial condition, operations or prospects of the Corporation; (m) The Corporation and its subsidiaries do not have any liabilities which constitute a lien or charge on their securities or assets; (n) The Corporation and each of its subsidiaries has good, valid and marketable title to all of its assets, subject to no mortgage, pledge, lien, encumbrance, security interest or charge, except as disclosed in the Corporation's Financial Statements, and can and will retain free and clear title thereto after Closing on this transaction, free and clear of any liens whatsoever; (o) There are no claims, actions, suits, proceedings or investigations pending or threatened against the Corporation or any of its subsidiaries except as disclosed in the Corporation's securities filings and the Corporation does not know of any basis for any such claim, action, suit, proceeding or investigation; (p) During the past 12 months neither the Corporation nor any of its subsidiaries have disposed of any assets or contractual rights which disposition, in the opinion of the Corporation's management, has had or will in the future have a materially adverse impact on the business of the Corporation and its subsidiaries taken as a whole; (q) (1) The Corporation has filed with the appropriate governmental agencies all tax returns and tax reports required to be filed; all federal, state and local income, profits, franchise, sales, use, occupation, property or other taxes due have been fully paid, and, the Corporation is not a party to any action or proceeding by any 6 7 governmental authority for assessment or collection of taxes, nor has any claim for assessments been asserted against the Corporation or its assets, nor is the Corporation aware of any facts or circumstances which could give rise to the assertion of any viable, material claim; and (2) All taxes that the Corporation is or was required to withhold or collect have been duly withheld or collected and to the extent required have been paid to the proper governmental authority or person; (r) The Corporation and each of its current, material operating subsidiaries is, as of the date of this Agreement, a validly existing corporation, organized pursuant to the laws of the their respective jurisdictions of incorporation and qualified to do business in each state where required to do so, with all legal and corporate authority and power to conduct its business and to own its properties and possesses all necessary permits and licenses required in connection with the conduct of its business; (s) The conduct of the Corporation's business is in material compliance with applicable federal, state and local governmental statutes, rules, regulations, ordinances and decrees; (t) The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and compliance with the terms of this Agreement will not conflict with or result in a breach in any of the terms or provisions of, or constitute a default under, the certificate of incorporation or bylaws of the Corporation; any indenture, contract, other material agreement or instrument to which the Corporation or any of its subsidiaries or their respective assets are bound; or, violate any applicable regulation, judgment, order or decree of any governmental instrumentality or court, domestic or foreign, having jurisdiction over the Corporation, its securities, assets or properties; (u) This Agreement constitutes a binding obligation of the Corporation, enforceable against it in accordance with the terms hereof, and has been authorized by all required corporate action; (v) (1) The Corporation has not experienced any material difficulties with the management or recruiting of employees for its business, nor does the Corporation have any reason to believe that any such difficulties will arise in the future. (2) None of the employees of the Corporation or its subsidiaries are represented by labor unions, nor does the Corporation have any reason to believe that any of its employees desire to be represented by labor unions; and (3) The Corporation has no reason to believe that any of its employees have any potential claims against the Corporation, its subsidiaries or their successors in interest based on violations of equal employment laws, occupational health and safety standards or any other legally protected rights; 7 8 (w) (1) The Corporation has not generated any hazardous wastes or engaged in activities which could be interpreted as potential violations of laws, statutes, regulations ordinances or judicial decrees in any manner regulating the generation or disposal of hazardous waste. (2) There are no on-site or off-site locations where the Corporation or any of its subsidiaries has stored, disposed or arranged for the disposal of chemicals, pollutants, contaminants, wastes, toxic substances, petroleum or petroleum products; there are no underground storage tanks located on property owned or leased by the Corporation or any of its subsidiaries; and, no polychlorinated hiphenyle are used or stored at any property owned or leased by the Corporation or any subsidiary; (x) (1) The Corporation currently has in full force and effect insurance policies of the kind and in coverage amounts adequate to meet its current insurance requirements; and (2) There are no impediments to obtaining hazard and liability insurance covering all of the Corporation's assets and operations, at commercially reasonable insurance rates, nor does the Corporation have any basis for believing that such insurance, at such rates, will not be obtainable by the Corporation in the future; (y) All of the information reflected in the foregoing representations and warranties is complete and accurate, and does not omit any information required to make the information provided non-misleading, accurate and meaningful, in light of the nature of this transaction; and (z) There is no material fact, development or threatened development that materially adversely affects, or is likely to materially adversely affect the business of the Corporation, which the Corporation has not publicly disclosed or privately disclosed, either expressly or by reasonable implication, to the Subscribers. 2.2 THE SUBSIDIARY. The Subsidiary and each of the Subscribers, jointly and severally, hereby represent and warrant to the Corporation, as a material inducement to the Corporation's entry into this Agreement, that, except as specified on Exhibit 2.2 annexed hereto and made a part hereof (the "Subsidiary's Warranty exceptions"), the following representations and warranties are, to the best of their knowledge, materially accurate: (a) (1) Exhibits 2.2(a) Subsidiary's Property Inventory (Real and Personal), 2.2(a-1) Subsidiary Technology and Intellectual Property, 2.2(a-2) Functional Specifications and 2.2(a-3) Patents and Copyrights contain a complete and accurate list of all real and all personal property owned by the Subsidiary, 8 9 tangible, intangible and inchoate (the term Subsidiary in the context of this Article being deemed to include all subsidiaries of the Subsidiary and sibling corporation's of the Subsidiary, the assets and operations of which are to be included among the subjects of this Agreement), and the principal terms of all patents, trademarks, copyrights, trade names, domain names, service marks, other intellectual property, franchises and licenses held by the Subsidiary for use in manufacture and sale of computer related products, including identification of the licensor, the formulae for royalty or other payments thereunder, the expiration dates, and other terms of any extensions or renewals permitted thereunder. Except as disclosed on Exhibit 2.2 the Subsidiary has good and defensible title to all of its material properties and assets, including without limitation those reflected in the Subsidiary's financial statements and those used or located on property controlled by Subsidiary in its business (except assets leased or sold in the ordinary course of business), subject to no mortgage, pledge, lien, charge, security interest, encumbrance or material restriction (2) The operations of any affiliated entities which comprise the total business of which the Subsidiary has been a part since its inception have been consolidated as to ownership and control under the Subsidiary, in a manner resulting in the control and ownership thereof by the Subsidiary, and, as a consequence of the transactions contemplated by this Agreement, all such assets and operations shall become the indirect property (through ownership of the Subsidiary's capital stock) of the Corporation. The Subsidiary owns or possesses legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, and other proprietary rights and processes necessary to complete its business plan (together, the "Intellectual Property") without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind with respect to the Intellectual Property of any other person or entity other than (i) such licenses or agreements arising from the purchase of "off the shelf" or standard products and (ii) licenses with customers for their use of Intellectual Property entered into in the ordinary course of Subsidiary's business. No employee of Subsidiary is obligated under any contract (including licenses, covenants or commitments of any nature) other agreement, or subject to any judgment, decree or order of any court or administrative body, that would interfere with his duties to the Subsidiary or that would conflict with the Subsidiary's business. The Subsidiary has taken all reasonable and customary actions to protect and maintain the confidentiality and secrecy of all Intellectual Property. (b) (1) The Subsidiary has 20,000,000 shares of voting Common Stock, $0.001 par value, authorized, 5,000,000 shares of which are currently issued, and 5,000,000 shares of Preferred Stock, $0.001 par value, no shares of which currently issued and outstanding there being no other authorized or outstanding securities of any class or of any kind or character of the Subsidiary. 9 10 (2) There are no outstanding subscriptions, options, warrants or other agreements or commitments obligating the Subsidiary or any Subscriber to issue or sell any additional shares of Subsidiary Stock or any options or rights with respect thereto, or any securities convertible into any shares of Subsidiary Stock of any class; (c) Upon conveyance of the Subsidiary Stock by the Subscribers, the Corporation will become the owner of 80% of the Subsidiary's authorized, issued and outstanding equity securities; (d) As of the, Closing Date on this Agreement, the Subsidiary will not be a party to any written or oral agreement which grants any option or right of first refusal or other arrangement to acquire any of its securities or to any agreement that will affect the voting rights of any of its securities, nor have the Subscriber or the Subsidiary made any commitment of any kind relating to the issuance of shares of any of the Subsidiary's equity securities, whether by subscription, right of conversion, option or otherwise; (e) The Subsidiary is not a party to any agreement or understanding for the sale or exchange of inventory or services for consideration other than cash or at a discount in excess of normal discounts for quantity or cash payment; (f) There are presently no contingent liabilities, factual circumstances, threatened or pending litigation, contractually assumed obligations or unasserted possible claims known to the Subsidiary which might result in a material adverse change in the future financial condition or operations of the Subsidiary; (g) The execution, delivery and performance of this Agreement and the transactions contemplated hereby do not require the consent, authority or approval of any other person or entity, except such as have been obtained; (h) No transactions have been entered into either by or on behalf of the Subsidiary, other than in the ordinary course of business nor have any acts been performed (including within the definition of the term performed the failure to perform any required acts) which would materially adversely affect the goodwill of the Subsidiary; (i) The entering into of this Agreement and the performance required hereunder has been duly and validly authorized by all required corporate action; (j) (1) Annexed hereto and made a part hereof as composite Exhibit 2.2(j) are: (a) an unaudited balance sheet of the Subsidiary as of November 30, 1999, with the related statement of operations and accumulated deficit and unaudited statements of cash flows for the from inception to November 30, 1999 (such balance sheets, statements of operations and other statements are referred to herein as the "Subsidiary's Financial Statements"). 10 11 (2) The Subsidiary's Financial Statements fairly present the financial condition of the Subsidiary as of the dates thereof, and the results of operations of the Subsidiary for the periods indicated, in each case in accordance with generally accepted accounting principles applied on a consistent basis; (3) Except as and to the extent reflected or reserved against in the Subsidiary's Balance Sheet, the Subsidiary had no liabilities or legal obligations of a nature required to be reflected on a corporate balance sheet prepared in accordance with generally accepted accounting principles or disclosed in the notes thereto, whether absolute, accrued, contingent, or otherwise and whether due or to become due (including, without limitation, liabilities for taxes and interest, penalties, and other charges payable with respect thereto (a) in respect of or measured by the income of the Subsidiary through such date, or (b) arising out of any transaction entered into prior thereto). (4) There is no basis for the assertion against the Subsidiary of any liability or obligation which is not fully reflected or reserved against in the Subsidiary's Interim Balance Sheet or disclosed in the notes thereto, except liabilities or obligations incurred since November 30, 1999 in the ordinary course of the Subsidiary's business consistent with its past practice. (k) Except as reflected in the Subsidiary's Financial Statements, since Nov. 30, 1999 the Subsidiary has not suffered any material adverse change in its financial condition, assets, liabilities or business; or suffered any material casualty loss (whether or not insured); (1) On the Closing Date of this Agreement, the Subsidiary's aggregate liabilities, whether accrued or inchoate, shall not exceed $25,000 (including liabilities owed to the Subscribers) and such liabilities shall not require any payments, other than as specifically disclosed in Exhibit 1.3, and the Subsidiary's unaudited Financial Statement shall reflect paid-in capital of not less than $25,000. (m) None of the properties or assets used in the business of the Subsidiary are subject to any mortgage, pledge, lien, security interest, conditional sale agreement, encumbrance, or charge of any kind, except as disclosed in Exhibit 1.3; (n) (1) There are no claims, actions, suits, proceedings or investigations pending or threatened by or against the Subsidiary and the Subsidiary does not know of any basis for any such claim, action, suit, proceeding, or investigation; (2) The Subsidiary is not subject to any liabilities or potential liabilities that will subject the Corporation, or its affiliates, stockholders, officers, directors, agents or advisors to any claims or liabilities predicated or emanating from product liability, torts or violations of law attributable to the Subsidiary or for which the Subsidiary assumed responsibility or which can in any manner be imputed to the Subsidiary or its assets; 11 12 (o) The Subsidiary has no liabilities involving expenses attributable directly, indirectly or incidentally to any litigation; (p) Except as otherwise disclosed in the Subsidiary's Financial Statements the Subsidiary has good, valid, and marketable title to all its properties, licenses, and assets, real, personal and mixed, tangible and intangible; (q) (1) Since its inception the Subsidiary has not disposed of any assets or contractual rights which disposition has had or will in the future have a materially adverse effect on the business of the Subsidiary and no such disposition will be made by the Subsidiary outside the ordinary course of business during the interim between execution of this Agreement and the Closing, unless this Agreement shall have been terminated, without the prior written consent of the Corporation; (2) Neither the Subsidiary nor its subsidiaries, if any, have, during the six months proceeding the date of this Agreement, distributed any unusual amounts of income to their stockholders, agents, employees or any related parties. (r) The Subsidiary has filed with the appropriate governmental agencies all tax returns and tax reports required to be filed; all United States, state and local income, profits, franchise, sales, use, occupation, property or other taxes due have been fully paid, except as listed on Exhibit 1.3; and, the Subsidiary is not a party to any action or proceeding by any governmental authority for assessment or collection of taxes, nor has any claim for assessments been asserted against the Subsidiary or its assets; (s) The Subsidiary is, as of the date of this Agreement, a validly existing corporation, organized pursuant to the laws of the State of Florida (and its subsidiaries and sibling corporations are validly organized and in good standing under their laws of their corporate domiciles), with all legal and corporate authority and power to conduct its business and to own its properties and possesses all necessary permits and licenses required in connection with the conduct of its business; (t) The conduct of the Subsidiary's business is in material compliance with all applicable federal, state and local governmental statutes, rules, regulations, ordinances and decrees; (u) The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and compliance with the terms of this Agreement will not conflict with or result in a breach in any of the terms or provisions of, or constitute a default under, the Articles of Incorporation or By-Laws of the Subsidiary; any indenture, other material agreement or instrument to which the Subsidiary or its stockholders are a party or by which the Subsidiary or its assets are bound; or, any applicable regulation, judgment, order or decree of any governmental instrumentality or court, domestic or foreign, having jurisdiction over the Subsidiary, its securities or its properties; 12 13 (v) This Agreement constitutes the valid and binding agreement of the Subsidiary and is enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law, no such proceeding being anticipated or under consideration); (w) (1) The Subsidiary has not experienced any material difficulties with the management or recruiting of employees for its business, nor does the Subsidiary have any reason to believe that any such difficulties will arise in the future. (2) Employees of the Subsidiary are not represented by labor unions; and (3) The Subsidiary has no reason to believe that any of its employees have any potential claims against the Subsidiary or its successors in interest based on violations of equal employment laws, occupational health and safety standards or any other legally protected rights; (x) (1) The Subsidiary has no reason to believe that it has generated any hazardous wastes or engaged in activities which violate or could be interpreted as violating any laws, statutes, regulations ordinances or judicial decrees in any manner regulating the generation or disposal of hazardous waste. (2) There are no on-site or off-site locations where the Subsidiary has stored, disposed or arranged for the disposal of chemicals, pollutants, contaminants, wastes, toxic substances, petroleum or petroleum products; there are no underground storage tanks located on property owned or leased by the Subsidiary; and, no polychlorinated hiphenyle are used or stored at any property owned or leased by the Subsidiary; (y) All of the information reflected in the foregoing representations and warranties is complete and accurate, and does not omit any information required to make the information provided non-misleading, accurate and meaningful, in light of the nature of this transaction. There is no material fact, development or threatened development that materially adversely affects, or is likely to materially adversely affect the business of the Subsidiary, which the Subscriber has not disclosed, either expressly or by reasonable implication, to the Corporation. (z) Exhibit 2.2 (aa) contains a list and description of material contracts to which the Subsidiary is a party, whether written or oral. The Subsidiary has not breached, or committed any default under, any material contract to which it is a party. To the best of the knowledge of the Subsidiary and the Subscriber, no other person has violated or breached or committed any default under any material contract. Furthermore, to the best of the Subsidiary and Subscriber's knowledge, no event has occurred and no circumstance or condition exists that 13 14 (with or without notice or lapse of time) will, or could be reasonably expected to (a) result in a violation or breach of any of the provisions of any such material contract (b) give any person the right to declare a default or exercise any remedy under any material contract (c) give any person the right to accelerate the maturity or performance of any material contract or (d) give any person the right to cancel, terminate or modify any such material contract. Subsidiary has not waived any of its material rights under any material contract. (aa) Exhibit 2.2 (bb) contains a list of each Employee, whether full or part time and whether currently being paid or not, of Subsidiary, such employees' beginning date, salary, position, description of material duties, credentials, including educational background and experience, a description of fringe benefits applicable to such employee, a copy of written employment agreements and a description of any verbal employment agreements. Subsidiary and Subscriber are not aware of any verbal employment agreements. Subsidiary and Subscriber are not aware of any circumstances or conditions which could lead to the loss of any such employees. Such Exhibit also sets forth each salary, bonus, deferred compensation, incentive compensation, medial termination pay and/or other plan, program or agreement (collectively, the "Plan") sponsored, maintained or contributed to or required to be contributed to by Subsidiary for the benefit of any employee. Subsidiary is in compliance in all medical respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended. Such Exhibit also contains a separate list, identified as such, of employees Subsidiary anticipates hiring and their anticipated start date and terms of employment. No employee or prospective employee has been promised any compensation, raises, stock, options, fringe benefits or other remuneration except as provided on Exhibit 2.2 (bb). (bb) Subsidiary has in place procedures to insure that on a regular basis software code and other Intellectual Property prepared by its employees is available to and usable by the Subsidiary and is in accessible form (i.e. such information is not contained in encrypted files, stored offsite or otherwise under the control of any employee without access thereto by the Subsidiary). All such procedures are described in detail in Exhibit 2.2(cc). The Subsidiary has the legal right to all software and other Intellectual Property produced by the employees in connections with, relating to or arising out of any project or matter of the Subsidiary. Each employee is bound to uphold the confidentiality of any Intellectual Property of the Subsidiary and, is legally prohibited from utilizing any of such Intellectual Property for any other employer, person, firm, entity, venture or endeavor of any kind or nature whatsoever. (cc) Subsidiary is the lessee of a lease for its business premises, the material terms and conditions of which (description and location of premises, square footage rent, expense payments, term, options to renew and to lease additional space, rent escalation factors and other important matters) are set forth on Exhibit 2.2 (dd). A true copy of such lease, and any amendments thereto, has been delivered to the Company. Such lease is in full force and effect, there have been no uncured defaults thereunder and there are no events which, upon lapse of time or the giving of notice, would constitute a default by either party to such lease. 14 15 2.3 THE SUBSCRIBERS. Each Subscriber hereby represents and warrants to the Corporation, as a material inducement to the Corporation's entry into this Agreement, that, except as specified on Exhibit 2.3 annexed hereto and made a part hereof (the "Subscribers' Warranty exceptions"), the following representations and warranties are, to the best of the Subscribers' knowledge, materially accurate; (a) Each Subscriber will, on the Closing Date, own the Subsidiary stock, registered in his her or its name and subject to no liens, pledges or encumbrances, and will convey good title thereto to the Corporation, there being no outstanding subscriptions, options, warrants or other agreements or commitments obligating the Subscriber to sell any of his shares of the Subsidiary's Stock or any options or rights with respect thereto; (c) All of the information reflected in the foregoing representations and warranties and, the representations and warranties made by the Subsidiary, are complete and accurate, and do not omit any information required to make the information provided non-misleading, accurate and meaningful, in light of the nature of this transaction; (d) (1) Annexed hereto and made a part hereof as composite Exhibit 2.3(c) are completed officers and directors questionnaires pertaining to each Subscriber and company questionnaires pertaining to the Subsidiary, which each Subscriber has either completed or reviewed, on forms provided by the Corporation's legal counsel (collectively hereinafter referred to as the Questionnaires"); and (2) The Questionnaires have been completed and answered in an accurate and complete fashion, and do not fail to disclose any information necessary to render the information provided, not misleading. (d) Annexed hereto and made a part hereof as Exhibit 2.3(d) is a complete, accurate and not misleading, narrative disclosure document providing the information called for by Securities and Exchange Commission Regulation SB with reference to the Subsidiary, its operations and background. ARTICLE THREE CONDITIONS 3.1 CONDITION SUBSEQUENT (a) The obligations of the Parties are subject to the condition subsequent that the Subsidiary's Financial Statements comply or can within the 90 day period following the Closing on this Agreement be made to comply with the requirements of Regulation S-B promulgated under the Securities Exchange Act of 1934. 15 16 (b) In the event that the Securities and Exchange Commission advises the Corporation that the financial statements of the Subsidiary (excluding pro forma financial statements) filed with the Form 8-K of the Corporation relating to the acquisition of the Subsidiary, or an amendment thereto, fail to comply in a material respect with generally accepted accounting principals or the requirements of Regulation S-B and the Securities and Exchange Commission is unwilling to waive such deficiencies, the Corporation and the Subsidiary will use their best efforts to correct the subject financial statements in such manner as will satisfy the Securities and Exchange Commission's objections thereto or cause the Securities and Exchange Commission to withdraw its objections; provided that, if such corrections are not affected or such objections withdrawn within three months after any deficiencies are raised by the Securities and Exchange Commission, the Corporation may elect to rescind this Agreement, ab initio, unless the Parties can, at such time, agree on a restructuring of this transaction in a manner meeting the applicable reporting requirements imposed by applicable United States and state securities law requirements. 3.2 CONDITIONS TO THE CORPORATION'S OBLIGATIONS The obligations of the Corporation under this Agreement are subject to the Subsidiary's (the term Subsidiary in the context of this Article being deemed to include all subsidiaries of the Subsidiary and sibling corporations of the Subsidiary, the assets and operations of which are to be included among the subjects of this Agreement) and Subscribers' satisfaction, or the written waiver by the Corporation, of the following conditions prior to Closing (the "Conditions Precedent"): (a) That all covenants, agreements, actions, proceedings, instruments and documents required to be carried out or delivered by a Subscriber or the Subsidiary pursuant to this Agreement shall have been performed, complied with or delivered to the Corporation in accordance with the terms thereof. (b) That the warranties and representations made by the Subscribers and the Subsidiary in this Agreement shall be true and correct in all material respects on and as of the date of Closing and shall be deemed to be made on and as of such date. (c) That there are no material violations of any laws, statutes, ordinances, orders, regulations or requirements of any governmental authority affecting the Subsidiary or its assets, nor will there be any at the time of Closing. (d) There is no action, suit or proceeding pending or threatened against or affecting the Subsidiary or its assets in any court or before or by any federal, provincial, state, county or municipal department, commission, board, bureau, agency or other governmental instrumentality which would affect the Subscriber's or the Subsidiary's ability to perform hereunder or which could affect the business of the Subsidiary in a materially adverse manner. 16 17 (e) That the Subsidiary is in material compliance with all applicable federal, state or local statutes, regulations, rules or ordinances applicable to the it, its securities or assets and that the transactions contemplated hereby will not result in any violations thereof. (f) That the issuance of the Stock and the transfer of the Subsidiary Stock complies with the requirements for exemption from registration under the statutes, regulations and rules applicable thereto and of comparable provisions of the laws of the Corporation's and the Subscriber's state of domicile. (g) That all licenses, patents and intellectual property rights heretofore held or owned by the Subsidiary continue to be in good standing and not subject to legal or other challenges, and that after Closing on this Agreement, they will continue to remain in full force, effect and validity, and that the Subsidiary shall have had properly assigned to it all patents, copyrights, trademarks, trade secrets, processes, concepts, plans, working drawings and other intellectual property rights of any nature developed by Vern C. Kendrick in connection with the business of Subsidiary. (h) That the operations of any affiliated entities which comprise the total business of which the Subsidiary has been a part since its inception have been consolidated as to ownership and control under the Subsidiary, in a manner resulting in the control and ownership thereof by the Subsidiary, and, that as a consequence of the transactions contemplated by this Agreement, all such assets and operations shall become the indirect property (through ownership of the Subsidiary's capital stock) of the Corporation. (i) That the Subsidiary and Subscriber shall have furnished to the Corporation such books, records, minutes, documentation, information, and data as the Corporation may have requested in order to complete its due diligence investigation prior to closing and shall have permitted the Corporation and its agents to inspect the business of the Subsidiary and investigate its Intellectual Property. 3.3 CONDITIONS TO THE SUBSCRIBERS' OBLIGATIONS The obligations of the Subscribers under this Agreement are subject to the Subscriber's satisfaction, or the written waiver thereof by the Subscribers, of the following conditions prior to Closing (the 'Subscribers' Conditions Precedent"): (a) That all covenants, agreements, actions, proceedings, instruments and documents required to be carried out or delivered by the Corporation pursuant to this Agreement shall have been performed, complied with or delivered to the Subscriber in accordance with the terms thereof. (b) That the warranties and representations made by the Corporation in this Agreement shall be true and correct in all material respects on and as of the date of Closing and shall be deemed to be made on and as of such date. 17 18 (c) That the issuance of the Stock and the transfer of the Subsidiary Stock complies with the requirements for exemption from registration under the statutes, regulations and rules applicable thereto, including, without limitation, the provisions of Sections 4(l), 4(2) or 4(6) of the Securities Act of 1933, as amended, of Regulation D promulgated thereunder, and of comparable provisions of the laws of the Corporation's and the Subscriber's state of domicile. (d) That the Corporation shall have furnished to Subscriber such books, records, minutes and other documents as it may reasonably request and require to complete its due diligence investigation prior to closing. (e) That the Corporation and the holders of 5,315,000 shares currently owned and controlled by the current officers, directors, affiliates and founders of the Corporation shall have entered into and executed a Shareholder's Agreement with Subscriber providing (i) for continuity of business operations; (ii) for the expansion of the current board of directors to seven members, an additional two members of which shall be appointed by Subscriber for three years, and (iii) that an affirmative vote of 66 2/3% of all directors shall be required to dilute or reverse the existing capital structure without equivalent consideration; acquire subsidiaries in a manner which is unfairly dilutive to any Corporation shareholders; or otherwise take action which materially changes the existing corporate capital structure without equivalent consideration or fundamental mission; all for a period of three years from closing. A similar shareholders agreement shall have been entered into with Subscriber re: the Subsidiary on the same terms. Notwithstanding the foregoing, however, any supermajority provisions contained in such shareholders agreements shall apply only during those periods of time when Subsidiary's business performance and pre-tax profits shall equal or better the performance schedule and standards set forth in Exhibit 3.3(e). ARTICLE FOUR CLOSING 4.1 CLOSING DATE. The effective date of the Closing on this transaction shall be April 19, 2000. Closing will be held by telephone conference arranged by the Corporation at a mutually agreeable time but may be adjourned and reconvened at a physical location, if required, at the request of either Party. If closing at a physical location is required, it shall take place at the Corporation's offices in Delray Beach, Florida, during normal business hours, at a mutually convenient time within ten business days following the adjourned teleconference closing session. 18 19 4.2 ITEMS DELIVERED AT CLOSING BY THE SUBSIDIARY AND THE SUBSCRIBER. Prior to the Closing, the Subscribers will deliver the following items to the Corporation, which shall be held in escrow until completion of the Closing (a) Certificates for all of the Subsidiary Stock, duly endorsed or with stock power attached with appropriate signature guarantees, in form and substance adequate to permit immediate transfer thereof to the Corporation; (b) A certification from an officer of the Subsidiary to the effect that after consulting with counsel to the Subsidiary or other legal counsel acceptable to the Corporation, he or they reasonably believe that: (1) The issuance of the Stock to the Subscribers will not require any actions in the Subscriber's state of domicile, other than such actions as have been taken no later than the fifth day prior to Closing, in order to comply with such state's laws, regulations and rules governing private placements, and that such issuance will not violate any such laws, regulations or rules; and (2) The transfer of the Subsidiary Stock as contemplated by this Agreement meets the requirements of the exemption from registration requirements provided by Sections 4(l), 4(2) or 4(6) of the Securities Act of 1933, as amended. (c) A certification from the Subsidiary's chief financial officer indicating that, after a review of the Subsidiary's books and records from the date of the Subsidiary's latest financial statements annexed hereto until the fifth day prior to Closing, such review did not give such officer cause to believe that any materially detrimental matters have occurred, or that there have been any materially detrimental changes in the financial condition of the Subsidiary, other than as disclosed in this Agreement. (d) An investment letter, in the form annexed hereto as Exhibit 4.2(d). (e) An opinion letter, from Subsidiary's counsel, to the effect that no person or entity has any prior legal right to acquire any portion of the Subsidiary's assets, business or shares of stock pursuant to or arising out of a certain Reorganization Agreement among Novus Environmental, Inc., a Delaware Corporation, WavePower, Inc., a Florida corporation and Vernon C. Kendrick dated on or about January 20, 2000. 4.3 ITEMS DELIVERED AT CLOSING BY THE CORPORATION. Prior to the Closing, the Corporation will deliver the following to the Subscriber, which shall be held in escrow until completion of the Closing: 19 20 (a) Certificates for the Stock, in denominations of 25,000 shares or greater. (b) An opinion from the Corporation's legal counsel that the issuance of the Stock as contemplated by this Agreement will meet the requirements of the exemption from registration requirements provided by Section 4.2 of the Securities Act of 1933, as amended. (c) A certification from the Corporation's chief financial officer indicating that, after a review of the Corporation's books and records from the date of the Corporation's latest financial statements annexed hereto until the fifth day prior to Closing, such review did not give such officer cause to believe that any materially detrimental matters have occurred, or that there have been any materially detrimental changes in the financial condition of the Corporation, other than as disclosed in this Agreement. 4.4 CLOSING COSTS. Except as expressly provided in this Agreement, each Party shall pay their own Closing costs. This extends to all attorney's fees incurred prior to closing, however all post closing attorneys fees shall be paid by the Corporation insofar as any such fees have been incurred on the business of the Corporation or the Subsidiary, however not on behalf of the Subscriber. ARTICLE FIVE BROKER 5.1 THE SUBSCRIBER. The Subscribers and the Subsidiary represent and warrant to the Corporation that it will not be subject to and will indemnify and hold it harmless against any claims of brokers, "finders", or other intermediaries for commissions or other compensation in connection with this Agreement and the consummation of the transactions contemplated hereby. 5.2 THE CORPORATION. The Corporation hereby represents and warrants that it has dealt with no brokers, "finders", or other intermediaries in conjunction with his contemplated purchase of the Subsidiary. ARTICLE SIX COVENANTS 6.1 MAINTENANCE OF SUBSIDIARY: Except as approved by the Corporation's Chief Executive Officer: 20 21 (b) The Subsidiary shall not sell or transfer any of the its material assets, real, personal, tangible or intangible, other than in the ordinary course of business, without the Corporation's explicit prior written consent. (c) The Subsidiary will keep all of its material assets in good standing, order and repair and shall cause any and all necessary remedies and repairs thereto to be made on or before the Closing. (d) The Subsidiary shall preserve all of its contractual rights in good standing. (e) The operations of any affiliated entities which comprise the total business of which the Subsidiary has been a part since its inception will be consolidated as to ownership and control under the Subsidiary, in a manner resulting in the control and ownership thereof by the Subsidiary, and, as a consequence of the transactions contemplated by this Agreement, all such assets and operations shall become the indirect property (through ownership of the Subsidiary's capital stock) of the Corporation. 6.2 COOPERATION. The Corporation and the Subsidiary and their agents shall have reasonable access to the premises and assets of the other for the purpose of familiarizing themselves with the operations of each other's business. The Subsidiary and the Corporation agree to cooperate with each other and to render a reasonable amount of assistance in the orderly integration of the business of the Subsidiary into the Corporation's operations and the familiarization of the Parties therewith. 6.3 POST CLOSING LEGAL ACTIVITIES (a) The Corporation's general counsel will prepare and file all required reports of the transactions contemplated by this Agreement with the Securities and Exchange Commission, such reports to include a detailed report of special event on Form 8-K, any required proxy materials, and such other matters as, in the opinion of management, may be required. (b) The Parties hereby covenant and agree to fully cooperate with the Corporation's general counsel in the timely preparation and filing of all such materials and reports, which are due on or before the tenth day following Closing. 6.4 EMPLOYMENT OF SUBSCRIBERS (a) The Subscribers hereby covenant and agree that Vernon C. Kendrick shall remain in the employ of the Subsidiary, as its chief executive officer and President, and that he shall remain as Chairman of the Board of Directors of the Subsidiary for a period of at least 36 months following Closing on this Agreement, and that he shall use his best efforts and 21 22 diligence to assure the success of the Subsidiary's business, and that he shall serve in an official capacity with the Corporation if so requested and appropriately compensated. (b) The Parties hereby acknowledge that Vernon C. Kendrick, who serves as an executive officer of the Subsidiary shall be paid annual compensation for their services to the Corporation and its subsidiaries, including the Subsidiary, in a sum to be agreed upon for his services to both the Corporation and the Subsidiary. (c) The Parties hereby agree that Vernon C. Kendrick shall execute an Employment Agreement in form and substance as set forth in Exhibit 6.4(c) attached hereto. 6.5 SECONDARY OFFERING The Corporation hereby covenants and agrees to use its best efforts to effect a secondary offering of its securities of at least $5,000,000 within 180 days following the Closing on this Agreement, and to loan a portion of the proceeds to the Subsidiary on a subordinated, long term basis. 6.6 PRIVATE PLACEMENT Upon closing of this Agreement the Subscriber and the Corporation agree to utilize their respective resources on a "best efforts" basis to assist the Corporation to obtain an additional paid in capital of at least $2,000,000, for a share price to be established by mutual agreement. To the extent funds raised by the Corporation pursuant to a secondary offering of its securities exceeds $5 million, the Corporation's obligations under this paragraph shall be deemed satisfied. ARTICLE SEVEN MISCELLANEOUS 7.1 AMENDMENT. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is evinced by a written instrument, subscribed by the Party against which such modification, waiver, amendment, discharge or change is sought. 7.2 NOTICE. All notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly given on the first business day after mailing by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: 22 23 To the Corporation: Enter Tech Corporation Attention: Sam Lindsey, President 430 E. 6th Street Loveland, CO. 80537 To the Subsidiary: WavePower, Inc. Attention: Vernon C Kendrick, President 75 N.E. 6th Ave. Delray Beach, Fl. 33483 or such other address or to such other person as any Party shall designate to the other for such purpose in the manner hereinafter set forth. Copies of any notice shall also be sent to Jay C. Salyer, Jr. Esq., General Counsel to the Subsidiary, by facsimile to (954) 792-1007. 7.3 ENTIRE AGREEMENT. This instrument, together with the instruments referred to herein, contain all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. All prior agreements whether written or oral are merged herein and shall be of no force or effect. 7.4 SURVIVAL. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and Closing hereon and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 7.5 SEVERABILITY. If any provision or any portion of any provision of this Agreement, other than one of the conditions precedent or subsequent, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby. 7.6 GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Colorado and any legal proceedings pertaining directly or indirectly to the rights or obligations of the Parties hereunder shall, to the extent legally permitted, be held in a Court of competent 23 24 jurisdiction in the Larimer County, City of Loveland, State of Colorado, and shall be subject to the mediation procedures of such Court. 7.7 INDEMNIFICATION. Each Party hereby irrevocably agrees to indemnify and hold the other Parties harmless from any and all liabilities and damages (including legal or other expenses incidental thereto), contingent, current, or inchoate to which they or any one of them may become subject as a direct, indirect or incidental consequence of any action by the indemnifying Party or as a consequence of the failure of the indemnifying Party to act, whether pursuant to requirements of this Agreement or otherwise. Such indemnification shall include, but shall not be limited to, loss, damage or expense, including reasonable attorneys fees relating to or arising out of the failure or inaccuracy of any representation, warranty or covenant made by such party pursuant to such agreement. In the event it becomes necessary to enforce this indemnity through an attorney, with or without litigation, the successful Party shall be entitled to recover from the indemnifying Party, all costs incurred including reasonable attorneys' fees throughout any negotiations, trials or appeals, whether or not any suit is instituted. 7.8 LITIGATION. (a) In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. (b) In the event of any dispute arising under this Agreement, or the negotiation thereof or inducements to enter into the Agreement, the dispute shall, at the request of any Party, be exclusively resolved through the following procedures: (1) First, the issue shall be submitted to mediation before a mediation service in Denver, Colorado to be selected by lot from four alternatives to be provided two by each Party. The mediation efforts shall be concluded within ten business days after their initiation unless the Parties unanimously agree to an extended mediation period; (2) In the event that mediation does not lead to a resolution of the dispute then at the request of any Party, the Parties shall submit the dispute to binding arbitration before an arbitration service located in Denver, Colorado to be selected by lot, from four alternatives to be provided; and (3) Expenses of mediation shall be borne by the Subsidiary, if successful. Expenses of mediation, if unsuccessful and of arbitration shall be borne by the Party or Parties against whom the arbitration decision is rendered. If the terms of the arbitral award do not establish a prevailing Party, then the expenses of unsuccessful mediation and arbitration shall be borne equally by the Parties. 24 25 7.9 BENEFIT OF AGREEMENT. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representatives, estate, heirs and legatees. 7.10 CAPTIONS. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 7.11 NUMBER AND GENDER. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 7.12 FURTHER ASSURANCES. The Parties agree to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, stock certificates and other documents, as may, from time to time hereafter, be required herein to effect the intent and purpose of this Agreement. 7.13 STATUS. Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, employer-employee relationship, lessor-lessee relationship, or principal-agent relationship; rather, the relationships established hereby are those of purchaser and seller. 7.14 COUNTERPARTS. This Agreement may be executed in any number of counterparts. All executed counterparts shall constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. Execution by exchange of facsimile transmission shall be deemed legally sufficient to bind the signatory; however, the Parties shall, for aesthetic purposes, prepare a fully executed original version of this Agreement, which shall be the document filed with the Securities and Exchange Commission. 7.15 LICENSE. This Agreement is the property of Jay C. Salyer, Jr., Esq. for use hereof by the Parties is authorized hereby solely for purposes of this transaction and, the use of this form of agreement or of any derivation thereof without Jay C. Salyer, Jr. Esq.'s prior written permission is prohibited. 25 26 7.16 EXHIBIT INDEX.
Exhibit Description ------- ----------- 0.2 Business Description 1.3 Disclosed Subsidiary Liabilities 2.1 Corporation's Warranty Exceptions 2.2 Subsidiary's Warranty Exceptions 2.2(a) Subsidiary Property Inventory (Real and Personal) 2.2(a-1) Subsidiary Technology and Intellectual Property 2.2(a-2) Functional Specifications 2.2(a-3) Patents and Copyrights 2.2(j) Subsidiary's Financial Statements 2.2(aa) Subsidiary's Contracts 2.2(bb) Subsidiary's Employee Matters 2.2(cc) Subsidiary's Software Security Procedures 2.2(dd) Subsidiary's Lease Terms 2.3 Subscriber's Warranty Exceptions 2.3(c) Questionnaires 2.3(d) Regulation SB Narrative Disclosure 3.3(e) Subscriber's Performance Standards 4.2 Subscriber's Deliveries at Closing 4.2(d) Investment Letter (Subsidiary) 6.4(c) Employment Agreement
26 27 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed effective as of the 19th day of April, 2000. SIGNED, SEALED AND DELIVERED IN OUR PRESENCE: ENTER TECH CORPORATION - ----------------------------------- By: /s/ SAM LINDSEY - ----------------------------------- ---------------------------------- Sam Lindsey, President (CORPORATE SEAL) Attest: ------------------------------ Secretary WAVEPOWER, INC. - ----------------------------------- By: /s/ VERNON C. KENDRICK - ----------------------------------- ---------------------------------- Vernon C. Kendrick, President (CORPORATE SEAL) Attest: ------------------------------ Secretary SUBSCRIBERS /s/ VERNON C. KENDRICK - ----------------------------------- - ----------------------------------- ---------------------------------- Vernon C. Kendrick, Subscriber 27 28 EXHIBITS
Exhibit Description ------- ----------- 0.2 Business Description 1.3 Disclosed Subsidiary Liabilities 2.1 Corporation's Warranty Exceptions 2.2 Subsidiary's Warranty Exceptions 2.2(a) Subsidiary Property Inventory (Real and Personal) 2.2(a-1) Subsidiary Technology and Intellectual Property 2.2(a-2) Functional Specifications 2.2(a-3) Patents and Copyrights 2.2(j) Subsidiary's Financial Statements 2.2(aa) Subsidiary's Contracts 2.2(bb) Subsidiary's Employee Matters 2.2(cc) Subsidiary's Software Security Procedures 2.2(dd) Subsidiary's Lease Terms 2.3 Subscriber's Warranty Exceptions 2.3(c) Questionnaires 2.3(d) Regulation SB Narrative Disclosure 3.3(e) Subscriber's Performance Standards 4.2 Subscriber's Deliveries at Closing 4.2(d) Investment Letter (Subsidiary) 6.4(c) Employment Agreement
28 EX-10.1 3 EMPLOYMENT AGREEMENT - VERNON C. KENDRICK 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and among VERNON C. KENDRICK, an individual residing in the State of Florida (the "President"); ENTER TECH CORPORATION, a publicly held Nevada corporation (the "Company"); and, WAVEPOWER, INC. a Florida corporation (the "Consolidated Subsidiary", the Consolidated Subsidiary, the President and the Company being collectively referred to as the "Parties" and generically as a "Party"). PREAMBLE: WHEREAS, the Company, as the Consolidated Subsidiary's 80% stockholder, and the Consolidated Subsidiary's Board of Directors are of the opinion that in conjunction with effectuation of the Consolidated Subsidiary's future plans, the Consolidated Subsidiary must obtain the services of a qualified chief operating officer; and WHEREAS, the President has a broad administrative and financial background, and has, prior to the acquisition of the Consolidated Subsidiary by the Company, served as the president of the Consolidated Subsidiary and is thoroughly knowledgeable with all aspects of its operations; and WHEREAS, the President is agreeable to serving as the President and chief operating officer, on the terms and conditions hereinafter set forth: NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows: ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 1 OF 14 CO_DOCS_A #62620 V1 WORD97 2 WITNESSETH: ARTICLE ONE TERM, RENEWALS, EARLIER TERMINATION 1.1 TERM. This Agreement shall be for an initial term of three years, commencing on the 30th day of April, 2000. Notwithstanding the foregoing but subject to continuation of the President's rights to compensation under Article Three hereof, this Agreement is subject to termination by the Chairman of the Company's Board of Directors (the "Chairman") at any time at least 66.6% of the Board of Directors of the Company carry a vote of no confidence in the President. 1.2 RENEWALS. This Agreement shall be renewed automatically, after expiration of the original term, on a continuing annual basis, unless the Party wishing not to renew this Agreement provides the other Party with written notice of its election not to renew ("Termination Election Notice") on or before 90 days prior to termination of the then current term. 1.3 EARLIER TERMINATION. The Consolidated Subsidiary shall have the right to terminate this Agreement prior to the expiration of its Term, or of any renewals thereof, subject to the provisions of Section 1.4: (a) For Cause: The Consolidated Subsidiary may terminate the President's employment under this Agreement at any time for cause. Such termination shall be evidenced by written notice thereof to the President, which notice shall specify the cause for termination. For purposes hereof, the term "cause" shall mean the inability, refusal or failure of the President to perform his duties under this Agreement for a period in excess of 90 days, the refusal of the President to follow the directions of the Company's Chairman; dishonesty, theft, or conviction of a crime. (b) Discontinuance of Business: In the event that the Consolidated Subsidiary discontinues operating its business, this Agreement shall terminate as of the last day of the month on which the Consolidated Subsidiary ceases operation with the same force and effect as if such last day of the month were originally set as the termination date hereof. (c) Death: This Agreement shall terminate immediately on the death of the President. 1.4 FINAL SETTLEMENT. Upon termination of this Agreement and payment to the President of all amounts due him hereunder, the President or his representative shall execute and deliver to the Consolidated Subsidiary on a form prepared by the Consolidated Subsidiary a receipt for such sums and a release of all claims, except such claims as may have been submitted pursuant to the terms of this Agreement and which remain unpaid, and, shall forthwith tender to the Consolidated Subsidiary all records, manuals and written procedures, as may be desired by the Consolidated Subsidiary for the continued conduct of its business. ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 2 OF 14 CO_DOCS_A #62620 V1 WORD97 3 ARTICLE TWO SCOPE OF EMPLOYMENT 2.1 RETENTION The Consolidated Subsidiary hereby hires the President and the President hereby accepts such employment, in accordance with the terms, provisions and conditions of this Agreement. 2.2 GENERAL DESCRIPTION OF DUTIES. The President shall perform the duties generally associated with the position of chief executive officer of the Consolidated Subsidiary and such other duties as are, from time to time, delegated to him by the Company's Chairman. In amplification of the foregoing, the President shall be responsible for the following matters: (a) Assisting the Company's vice president with compliance by the Company with its reporting and disclosure obligations pertaining to the Consolidated Subsidiary and its officers and directors to the Securities and Exchange Commission and to state and provincial securities regulatory authorities; (b) Compliance by the Consolidated Subsidiary and its subsidiaries with all of their tax reporting obligations; (c) Compliance by the Consolidated Subsidiary and its subsidiaries with all of their obligations under the laws of the provinces, states and countries in which they are incorporated or doing business; (d) Analysis of financial data concerning the Consolidated Subsidiary's performance, as well as financial data concerning potential Consolidated Subsidiary acquisitions; (e) Preparation and implementation of strategic plans for the Consolidated Subsidiary, subject to parameters established by the Company's chief executive officer; and (f) Supervision of the Consolidated Subsidiary's operations and personnel and integration of the Consolidated Subsidiary's legal, accounting and administrative affairs with those of the Company in a manner reducing duplication related costs and expenses. ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 3 OF 14 CO_DOCS_A #62620 V1 WORD97 4 2.3 STATUS. Throughout the term of this Agreement, the President shall serve as the Consolidated Subsidiary's president and chief executive officer. In the event that he is not elected to such position, then, at the option of the President, this Agreement will be deemed terminated, effective as of the earliest time that it can be reasonably determined that such election will not take place. 2.4 EXCLUSIVITY. The President shall, unless specifically otherwise authorized by the Company's Chairman, on a case by case basis, devote his business time exclusively to the affairs of the Consolidated Subsidiary. ARTICLE THREE COMPENSATION 3.1 COMPENSATION. As consideration for the President's future services to the Consolidated Subsidiary and for his entry into this Agreement, the Consolidated Subsidiary hereby grants the President the following compensation: (a) Options to purchase 3,000,000 shares of the Company's Series A preferred stock at an exercise price of par value per share, each share of which shall carry five votes per share and which shall be convertible to one share of common stock per share of preferred stock, subject to standard anti-dilutive provisions, and exercisable as follows: (1) 1,000,000 shares may be exercised during the 12th through 13th months following the date of this Agreement; (2) 1,000,000 shares may be exercised during the 24th through 25th months following the date of this Agreement; and (3) 1,000,000 shares may be exercised during the 35th through 36th months following the date of this Agreement. The above described options shall vest only in proportion to the relative success achieved by the Executive in meeting the objectives of the Business Plan he has proposed to and which has been approved by the Company, as follows: If the Executive achieves 100% or more of the profit projections contained in the Business Plan, the options otherwise vesting during such period of time fully vest. However if the Executive achieves less than ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 4 OF 14 CO_DOCS_A #62620 V1 WORD97 5 100% of the profit projections in the Business Plan but greater than 75% thereof in any particular time period, then 50% of the options which would otherwise be exercisable during such period may be exercised and the balance thereof would lapse. If the Executive achieves greater than or equal to 50% of said profit projections but less than 75% then only 25% of said options shall vest and the balance would lapse. If the Executive achieves less than 50% of said profit projections then none of the options for that profit period shall vest. Notwithstanding the foregoing, the Executive shall be entitled to 100% of the above options regardless of any success ratio in the event the Company fails to timely and adequately provide capital funding to the Subsidiary. (b) An annual bonus payable in shares of the Company's common stock, determined by dividing 3 % of the Consolidated Subsidiary's pre-tax profits for the subject calendar year by the average bid price for the Company's common stock at during the last five trading days prior to the end of the last day of each year and the initial five days of the new year, provided, however, that this Agreement shall have been in effect for at least one half of the subject year. (c) An annual cash bonus equal to 3% of the Consolidated Subsidiary's pre-tax profits for the subject calendar year, provided, however, that this Agreement shall have been in effect for at least one half of the subject year. (d) A salary of $104,000 per year, payable in arrears in accordance with the Company's payroll procedures, but subject to review on an annual basis, with the expectation of the Parties that it will be increased as increased profits and cash flow from operations permit but never decreased below $104,000 per year. Notwithstanding the foregoing, such salary shall be $5,000 per month prior to June 1, 2000. 3.2 EXEMPTION FROM REGISTRATION (a) The President hereby represents, warrants, covenants and acknowledges that: (1) The stock being issued as compensation under Section 3. 1 (a) of this Agreement (the "Stock") will be issued without registration under the provisions of Section 5 of the Securities Act of 1933, as amended (the "Act") or the securities regulatory laws and regulations of the State of Nevada (the "Nevada Securities Act") pursuant to exemptions provided pursuant to Section 4(2) of the Act and comparable provisions of the Nevada Securities Act; (2) The President shall be responsible, at the Consolidated Subsidiary's expense, for preparing and filing any reports concerning this transaction with the Florida Securities Commission, and payment of any required filing fee; ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 5 OF 14 CO_DOCS_A #62620 V1 WORD97 6 (3) All of the Stock will bear legends restricting its transfer, sale, conveyance or hypothecation unless such Stock is either registered under the provisions of Section 5 of the Act and under the Nevada Securities Act, or an opinion of legal counsel, in form and substance satisfactory to legal counsel to the Company is provided by the President to the effect that such registration is not required as a result of applicable exemptions therefrom; (4) The Company's transfer agent shall be instructed not to transfer any of the Stock unless the Company advises it that such transfer is in compliance with all applicable laws; (5) The President is acquiring the Stock for his own account, for investment purposes only, and not with a view to further sale or distribution; and (6) The President or his advisors have examined the Company's latest reports to the Securities and Exchange Commission on Forms 10-KSB, IO-QSB and 8-K (collectively and generically hereinafter referred to as "34 Act Reports"), have been provided with access to all of the Company's books and records and have questioned the Company's officers and directors as to such matters involving the Company as the President deemed appropriate. (b) Notwithstanding the provisions of Section 3.2(a), the shares reserved for exercise of the options described in Section 3.1(b) shall, to the extent legally allowable based on the Company's ability to meet applicable legal requirements, be listed with any stock exchange or securities market on which the Company's common stock is admitted to trading. 3.3 BENEFITS The President shall be entitled to a benefit package equal to the most favorable benefit package provided by the Company or its subsidiaries to any of its employees, officers, directors, consultants or agents, other than the Company's Chairman. 3.4 INDEMNIFICATION The Consolidated Subsidiary will defend, indemnify and hold the President harmless from liabilities, suits, judgments, fines, penalties or disabilities, including expenses associated directly, therewith (e.g. legal fees, court costs, investigative costs, witness fees, etc.) resulting from any reasonable actions in good faith on behalf of the Consolidated Subsidiary, to the fullest extent legally permitted, and in conjunction therewith, shall assure that all required expenditures are made by the Consolidated Subsidiary in a manner making it unnecessary for the President to incur any out of pocket expenses; provided, however, that the President permits the Consolidated ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 6 OF 14 CO_DOCS_A #62620 V1 WORD97 7 Subsidiary to select and super-vise all personnel involved in such defense and that the President waive any conflicts of interest that such personnel may have as a result of also representing the Consolidated Subsidiary or other Consolidated Subsidiary personnel and agrees to hold them harmless from any matters involving such representation, except such as involve fraud or bad faith. ARTICLE FOUR SPECIAL COVENANTS 4.1 CONFIDENTIALITY. The President acknowledges that, in and as a result of his employment hereunder, he will be developing for the Consolidated Subsidiary, making use of, acquiring and/or adding to, confidential information of special and unique nature and value relating to such matters as the Consolidated Subsidiary's trade secrets, systems, procedures, manuals, confidential reports and lists of clients and lenders; consequently, as material inducement to the entry into this Agreement by the Consolidated Subsidiary, the President hereby covenants and agrees that he shall not, at anytime during or following the terms of his employment hereunder, directly or indirectly, personally use, divulge or disclose, for any purpose whatsoever, any of such confidential information which has been obtained by or disclosed to him as a result of his employment by the Consolidated Subsidiary, or the Consolidated Subsidiary's affiliates. In the event of a breach or threatened breach by the President of any of the provisions of this Section 4. 1, the Consolidated Subsidiary, in addition to and not in limitation of any other rights, remedies or damages available to the Consolidated Subsidiary, whether at law or in equity, shall be entitled to a permanent injunction in order to prevent or to restrain any such breach by the President, or by the President's partners, agents, representatives, servants, employers, employees, affiliates and/or any and all persons directly or indirectly acting for or with him. 4.2 SPECIAL REMEDIES. In view of the irreparable harm and damage which would undoubtedly occur to the Consolidated Subsidiary as a result of a breach by the President of the covenants or agreements contained in this Article Four, and in view of the lack of an adequate remedy at law to protect the Consolidated Subsidiary's interests, the President hereby covenants and agrees that the Consolidated Subsidiary shall have the following additional rights and remedies in the event of a breach hereof: (a) The President hereby consents to the issuance of a permanent injunction enjoining him from any violations of the covenants set forth in Section 4.1 hereof; and ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 7 OF 14 CO_DOCS_A #62620 V1 WORD97 8 (b) Because it is impossible to ascertain or estimate the entire or exact cost, damage or injury which the Consolidated Subsidiary may sustain prior to the effective enforcement of such injunction, the President hereby covenants and agrees to pay over to the Consolidated Subsidiary, in the event he violates the covenants and agreements contained in Section 4.2 hereof, the greater of: (i) Any payment or compensation of any kind received by him because of such violation before the issuance of such injunction, or (ii) The sum of One Hundred Thousand ($100,000.00) Dollars per violation, which sum shall be liquidated damages, and not a penalty, for the injuries suffered by the Consolidated Subsidiary as a result of such violation, the Parties hereto agreeing that such liquidated damages are not intended as the exclusive remedy available to the Consolidated Subsidiary for any breach of the covenants and agreements contained in this Article Four, prior to the issuance of such injunction, the Parties recognizing that the only adequate remedy to protect the Consolidated Subsidiary from the injury caused by such breaches would be injunctive relief. 4.3 CUMULATIVE REMEDIES. The President hereby irrevocably agrees that the remedies described in Section 4.3 hereof shall be in addition to, and not in limitation of, any of the rights or remedies to which the Consolidated Subsidiary is or may be entitled to, whether at law or in equity, under or pursuant to this Agreement. 4.4 ACKNOWLEDGMENT OF REASONABLENESS. The President hereby represents, warrants and acknowledges that he has carefully read and considered the provisions of this Article Four and, having done so, agrees that the restrictions set forth herein are fair and reasonable and are reasonably required for the protection of the interests of the Consolidated Subsidiary, its officers, directors and other employees; consequently, in the event that any of the above-described restrictions shall be held unenforceable by any court of competent jurisdiction, the President hereby covenants, agrees and directs such court to substitute a reasonable judicially enforceable limitation in place of any limitation deemed unenforceable and, the President hereby covenants and agrees that if so modified, the covenants contained in this Article Four shall be as fully enforceable as if they had been set forth herein directly by the Parties. In determining the nature of this limitation, the President hereby acknowledges, covenants and agrees that it is the intent of the Parties that a court adjudicating a dispute arising hereunder recognize that the Parties desire that this covenant not to compete be imposed and maintained to the greatest extent possible. ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 8 OF 14 CO_DOCS_A #62620 V1 WORD97 9 4.5 UNAUTHORIZED ACTS. The President hereby covenants and agrees that he will not do any act or incur any obligation on behalf of the Consolidated Subsidiary of any kind whatsoever, except as authorized by the Company. 4.6 NON-COMPETITION The Executive agrees that he shall not compete directly or indirectly with the Company for a period of three years following termination of his employment. For this purpose competition shall include developing or exploiting any technology which competes directly or indirectly with technology developed by or under active development by the Subsidiary during the Executive's tenure at the Subsidiary. 4.7 TECHNOLOGY OWNERSHIP The Executive hereby transfers, sets over and assigns unto the Subsidiary the technology and intellectual property previously developed by him and more fully described in the Reorganization Agreement between the Subsidiary, Vernon C. Kendrick and the Corporation. The Executive further agrees that all technology and intellectual property developed or acquired by him during the term of his employment with the Subsidiary shall be owned by the Subsidiary without further consideration, and he will execute and deliver such instruments and documents without further consideration as may be necessary to convey title to such technology to the Corporation. 4.8 QUALIFICATION. The provisions of this Article Four shall not apply in the event that the reorganization agreement pursuant to which the Corporation acquired the Consolidated Subsidiary is rescinded, except as to confidential information pertaining to the Corporation and its other subsidiaries. ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 9 OF 14 CO_DOCS_A #62620 V1 WORD97 10 ARTICLE.FIVE MISCELLANEOUS 5.1 NOTICES. All notices, demands or other communications hereunder shall be in writing, and unless otherwise provided, shall be deemed to have been duly given on the first business day after mailing by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: TO THE PRESIDENT: Vernon C .Kendrick 75 N. E. 6th Avenue Delray Beach, Fl. 33483 TO THE CONSOLIDATED SUBSIDIARY: Vernon C. Kendrick, President WAVEPOWER, INC. 75 N. E. 6th Avenue Delray Beach, Fl. 33483 Copy to: Sam Lindsey, President ENTER TECH CORPORATION 430 E. 6th Street Loveland, CO. 80537 TO THE COMPANY Sam Lindsey, President ENTER TECH CORPORATION 430 E. 6th Street Loveland, CO. 80537 or to such other address or to such other person as any party shall designate to the other for such purpose in the manner hereinafter set forth. The Parties acknowledge that Jay C. Salyer, Jr., Esq., who serves as legal counsel to Vernon C. Kendrick, has acted as scribner for the Parties in this transaction and that because of the inherent conflict of interests involved, it has advised the Company to retain independent counsel to review this Agreement on its behalf. ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 10 OF 14 CO_DOCS_A #62620 V1 WORD97 11 5.2 AMENDMENT. NO modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the Party against which the enforcement of said modification, waiver, amendment, discharge or change is sought. 5.3 MERGER. This instrument contains all of the understandings and agreements of the Parties with respect to the subject matter discussed herein. All prior agreements whether written or oral, are merged herein and shall be of no force or effect. 5.4 SURVIVAL. The several representations, warranties and covenants of the Parties contained herein shall survive the execution hereof and shall be effective regardless of any investigation that may have been made or may be made by or on behalf of any Party. 5.5 SEVERABILITY. If any provision or any portion of any provision of this Agreement, or the application of such provision or any portion thereof to any person or circumstance shall be held invalid or unenforceable, the remaining portions of such provision and the remaining provisions of this Agreement or the application of such provision or portion of such provision as is held invalid or unenforceable to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be effected thereby. 5.6 GOVERNING LAW AND VENUE. This Agreement shall be construed in accordance with the laws of the State of Florida and any proceeding arising between the Parties in any matter pertaining or related to this Agreement shall, to the extent permitted by law, be held in a forum selected by the Company within the State of Florida 5.7 LITIGATION. In any action between the Parties to enforce any of the terms of this Agreement or any other matter arising from this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including reasonable attorneys' fees up to and including all negotiations, trials and appeals, whether or not litigation is initiated. ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 11 OF 14 CO_DOCS_A #62620 V1 WORD97 12 5.8 BENEFIT OF AGREEMENT. This Agreement may not be assigned by either Party without the prior written consent of the other. Subject to the restrictions on transferability and assignment contained herein, the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, their successors, assigns, personal representative, estate, heirs and legatees. 5.9 CAPTIONS. The captions in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provisions hereof. 5.1 0 NUMBER AND GENDER. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the Party or Parties, or their personal representatives, successors and assigns may require. 5.11 FURTHER ASSURANCES. The Parties hereby agree to do, execute, acknowledge and deliver or cause to be done, executed or acknowledged or delivered and to perform all such acts and deliver all such deeds, assignments, transfers, conveyances, powers of attorney, assurances, recipes, records and other documents, as may, from time to time, be required herein to effect the intent and purposes of this Agreement. 5.12 STATUS. Nothing in this Agreement shall be construed or shall constitute a partnership, joint venture, agency, or lessor-lessee relationship; but, rather, the relationship established hereby is that of employer-employee. 5.13 COUNTERPARTS. This Agreement may be executed in any number of counterparts. All executed counterparts shall constitute one Agreement notwithstanding that all signatories are not signatories to the original or the same counterpart. ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 12 OF 14 CO_DOCS_A #62620 V1 WORD97 13 5.14 LICENSE. This Agreement is the property of Jay C. Salyer, Jr., Esq. The use hereof by the Parties is authorized hereby solely for purposes of this transaction and, the use of this form of agreement or of any derivation thereof without Jay C. Salyer, Jr., Esq.'s prior written permission is prohibited. * * * ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 13 OF 14 CO_DOCS_A #62620 V1 WORD97 14 IN WITNESS WHEREOF, the Parties have executed this Agreement, effective as of the ________ day of April, 2000. Signed, Sealed & Delivered In Our Presence ENTER TECH CORPORATION - -------------------------------- - -------------------------------- By: /S/ SAM LINDSEY ------------------------- Sam Lindsey, President (CORPORATE SEAL) Attest: --------------------- Secretary WAVEPOWER, INC. - -------------------------------- - -------------------------------- By: /S/ VERNON C. KENDRICK ------------------------- Vernon C. Kendrick, President (CORPORATE SEAL) Attest: --------------------- Secretary PRESIDENT - -------------------------------- ________________________________ /S/ VERNON C. KENDRICK ---------------------------- Vernon C. Kendrick ================================================================================ PLEASE INITIAL: CORPORATION:______ PRESIDENT:______ PAGE 14 OF 14 CO_DOCS_A #62620 V1 WORD97 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND STATEMENTS OF OPERATIONS FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-QSB FOR THE YEAR TO DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 MAR-31-2000 0 0 0 0 0 42,011 8,192 (1,229) 72,489 609,471 0 0 0 778 (537,760) 72,489 0 0 0 0 96,342 0 0 0 0 0 0 0 0 (96,342) 0 0
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