-----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, V5sOAZrEC6KeoOI0+3qOI32PCecUiTNBk/sJePce6hym2Q1x70vu/UK//nXJaish ju9B1sj/ySq76JFwQB/Ncw== 0001014909-01-500049.txt : 20010417 0001014909-01-500049.hdr.sgml : 20010417 ACCESSION NUMBER: 0001014909-01-500049 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010416 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTER TECH CORP CENTRAL INDEX KEY: 0001021725 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 841349553 STATE OF INCORPORATION: NV FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10KSB40 SEC ACT: SEC FILE NUMBER: 000-21275 FILM NUMBER: 1602907 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 10KSB40 1 f10ksb_dec2000.txt FORM 10-KSB - 12/31/00 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM l0-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended: December 31, 2000 Commission File No- 0-21275 ENTER TECH CORP. ----------------------------------------------------------------- (Exact Name of Small Business Issuer as specified in its Charter) (Formerly Known as Walnut Capital, Inc.) NEVADA 84-1349553 - ------------------------------- ------------------------ (State or other Jurisdiction of (I.R.S. Employer Identi- Incorporation or Organization) fication Number) 430 East 6th Street, Loveland, Colorado 80537 ----------------------------------------------------------- (Address of principal executive offices including zip code) (970) 669-5292 ---------------------------------------------- Issuer's Telephone Number, Including Area Code Securities Registered Pursuant to Section 12(b) of the Act: None. Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.0001 Par Value Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-8 is not contained in this Form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] The aggregate market value of the Issuer's common stock held by non-affiliates as of March 1, 2001 (valued at the average of the bid and asked price as of March 1, 2001) was $1,192,798. The Issuer had no revenues in its most recent fiscal year. As of March 1, 2001, a total of 17,039,984 shares of common stock were outstanding. Documents incorporated by reference. There are no (1) annual report to security holders; (2) proxy or information statements; or (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act") incorporated by reference herein. Traditional Small Business Disclosures Format (Check one): Yes No X --- ---
TABLE OF CONTENTS Item 1: Description of Business.......................................................................... 3 Item 2: Description of Property.......................................................................... 7 Item 3: Legal Proceedings................................................................................ 7 Item 4: Submission of Matters to a Vote of Security Holders.............................................. 7 Item 5: Market for Common Equity and Related Matters..................................................... 7 Item 6: Plan of Operation................................................................................ 10 Item 7: Financial Statements............................................................................. 11 Item 8: Changes in and Disagreements with Accountants on Accounting Financial Disclosure................. 27 Item 9: Directors and Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act........................................................... 27 Item 10: Executive Compensation........................................................................... 28 Item 11: Security Ownership of Certain Beneficial Owners and Management................................... 29 Item 12: Certain Relationships and Related Transactions................................................... 30 Item 13: Exhibits and Reports on Form 8-K................................................................. 31 Signatures....................................................................................... 33
2 ITEM 1. DESCRIPTION OF BUSINESS GENERAL AND HISTORY Enter Tech Corporation., formerly known as Walnut Capital, Inc. ( the "Company") was incorporated on July 1, 1996, under the laws of the State of Nevada, to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has been in the developmental stage since incorporation and has no active business operations to date. The Company's offices are located at 430 East 6th Street, Loveland, Colorado 80537 and its telephone number is (970) 669-4918. In October 1996, the Company filed a registration statement with the Securities and Exchange Commission on Form 10-SB, whereby it registered its common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "34 Act"). On June 2, 1998, the Company completed a merger of the Company and Links, Ltd., a Wyoming corporation, whereby the Company was the surviving entity. Pursuant to the Articles of Merger filed in the respective States of Wyoming and Nevada, the Company's name was changed from Walnut Capital, Inc. to Enter Tech Corporation to more accurately describe the proposed business of the Company. Following the merger, the Company attempted to complete the development of a prototype of a proposed 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. The prototype eventually became obsolete and could not be mass-produced on terms commercially favorable to the Company. During the first quarter of 2000, the Company moved to acquire and provide additional kiosk-related technologies, services and products through its corporate acquisitions of Shopping mall Online, Inc. and Wavepower, Inc. which are hereinafter discussed. In October of 2000, the Company revised its business plan relative to the proposed kiosk operations. It entered into agreements with Hitdisc.com, Inc. (Hitdisc") and Northern Communications Group, Inc. (NCG"). The licensing agreement with Hitdisc provides that: (1) the Company will purchase and place the music kiosk manufactured by Hitdisc; and (2) Hitdisc will manage the operational aspects of the kiosks, including royalties, software programming and content updating. The Northern Communications Group, Inc. will provide the necessary communication services and management for the installed kiosks under a joint venture agreement with the Company. See Proposed Business Operations below. During late 1999 and early 2000, the Company negotiated with the Reserve Foundation Trust ("Trust") for equity capital to finance the Company's proposed operations. On March 15, 2000, Enter Tech entered into a stock purchase and subscription agreement with the Trust under which it was 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. As of June 12, 2000, $600,000 of additional funds had been received making a total amount received from the Trust of $850,000. At this time the Company was informed by the Trust that it would not be able to complete the scheduled investments as provided under the agreement. After extensive discussions with the Trust in August of 2000 the Company instructed its counsel to take appropriate action to protect the Company's best interests. As of the date hereof, the Trust and the Company are in the process of negotiating a settlement on all issues relating to the stock purchase agreement and the Trust's default thereunder. It is anticipated that, if completed, the settlement will result in the Trust acquiring common stock of the Company in an amount materially less than the 6,000,000 shares for the $850,000 previously invested and an additional investment materially less than the $9,150,000 remaining amount due under the agreement. Although the Company has issued a stock certificate for the 6,000,000 shares to be purchased by the Trust, no shares have or will be delivered to the Trust until the issues between the Trust and the Company have been resolved. 3 On January 7, 2000, the Company, Shopping Mall Online, Inc. ("SMO"), a Washington corporation, and Robert Pratt ("Pratt") and the Company entered into an agreement (the "Agreement"), pursuant to which, among other things, the Company acquired 80% of the outstanding common stock of SMO from Pratt. SMO is developing a concept of Internet shopping and related E-commerce technology. The consideration for the acquisition was 2,400,000 shares of common stock of the Company. This acquisition was made, in part, to provide a marketing outlet for the Company's music kiosk which was then still under development. It was also made in anticipation that the then on-going negotiations with the Reserve Foundation Trust would result in the acquisition of capital to fund the SMO business and the kiosk project. In October of 2000, after the default of the Trust in its capital investments and the inability of the Company to acquire a sufficient amount of additional capital, the Company, SMO and Mr. Pratt agreed to substantially rescind the Company's acquisition of the SMO. The Company returned 80% of SMO's then outstanding stock to Mr. Pratt and received back from him 1,920,000 shares of the Company's common stock. The Company retains 20% of the then outstanding shares of SMO's stock and Mr. Pratt kept 480,000 shares of the Company. Mr. William H. Carpenter, Jr., who had been appointed to the Company's Board of Directors in September of 2000 as SMO's designated nominee, resigned from that position. On February 8, 2000, the Company signed a non-binding letter of intent with Wavepower, Inc., which contemplated the acquisition by the Company of 80% of the outstanding stock of WavePower, Inc., a development stage company intending to develop a network which would move traditional computer applications out of the conventional personal computer and onto a central network which would allow a user to access the power, applications and connectivity of a series of networked computers from their individual terminals. The Company anticipated that equity capital would be acquired from the Reserve Trust Foundation to finance the development activities of Wavepower and the Trust made the Company's acquisition of Wavepower one of the conditions to its obligation under its stock purchase agreement with the Company. On April 19, 2000 the Company acquired 80% of the outstanding stock of Wavepower in exchange for 5,000,000 shares of its common stock and an option to purchase up to 3,000,000 shares of the Company's authorized Preferred Stock over a three-year term ending April 30, 2003 at $.001 per share. The option was to be exercisable increments over its term subject to Wavepower meeting stated amounts of net pre-tax profits. After the acquisition, management of the Company determined that the assets and project of Wavepower were not as represented. On September 12, 2000 Enter Tech Corporation notified management of WavePower of the formal rescission of the Reorganization Agreement dated April 19, 2000, citing several material misrepresentations as to the intellectual property owned by WavePower, the status of the development of Wavepower products and services, the ability of WavePower to bring its products and services to market and the overall originality and viability of the WavePower concept. The letter also served as a demand for return of all stock and funds issued pursuant to that agreement as the stock was not validly issued due to the lack of value in the consideration received from the shares. The transfer agent has been notified that all shares involved in this transaction are not to be transferred. The certificate for the 5,000,000 shares of the Company's common stock has not been returned to the Company. Future litigation may be required to determine the validity of their issuance and status. On June 6, 2000, Enter Tech entered in agreements with a consortium of companies to facilitate development of markets and revenue sources, strategic development partners, business intelligence, investor relations and public relations efforts on a global basis. The Company issued shares of restricted stock to the following in exchange for their promise to perform services of the described natures during the 12-18 month period following the execution of the agreements. Information on these stock issuances is set forth in the following table:
PARTY NUMBER OF SHARES NATURE OF SERVICES The Challenge Limited 900,000 shares Development of Latin American markets, strategic partners and affiliations Profile Venture, Ltd. 800,000 shares Development of Pacific Rim Markets, strategic partners and Affiliations 4 Skyline Marketing Associates, Ltd. 825,000 shares Developments of European Union markets, strategic Partners and affiliations Wall Street Relations Group 300,000 shares Investor and Public Relations Services California Business Intelligence, Inc. 300,000 shares Business Information and Intelligence services
On September 13, 2000, the Company formally notified each of these five companies that their contract was canceled due lack of performance and other potential legal issues and demanded that all of the 3,125,000 shares of restricted common stock be returned to the Company. None of the shares have been returned as of the date of this 10-KSB. The transfer agent has been notified that all shares involved in this transaction are not to be transferred. It is the Company's position that these shares were not validly issued. Future legal action may be required to determine the validity of these shares. On July 21, 2000, Enter Tech was not able to meet payroll because of the Funding problems reported by the Reserve Foundation Trust. The Company began aggressively seeking other sources of funding to continue its operations while the issue with the Reserve Foundation Trust was solved or other substantial funding sources were found. In order to continue operations, the Company approached the employees with an option to be paid minimum wage in cash with the remainder of their salaries being issued in S-8 stock. Qualified employees in general agreed to this method of payment. The Company filed a Registration Statement on Form S-8 on September 12, 2000 in the total aggregate amount of 58,098 shares. Those shares were issued to eight employees as compensation for the period ending September 30, 2000. On August 2, 2000 Enter Tech entered in an agreement with Profile Venture, Ltd to establish several possible investment groups or partners for immediate funding needs of the company. The management of Profile agreed to enter into a subscription agreements for a total of one million dollars in the next ten days for two million shares of Enter Tech restricted stock. Due to the urgency of the financial situation and the apparent favorable relationship with Profile management, the board concluded that sending certificates for the stock prior to having an executed subscription agreement was reasonable, as Profile management indicated that the stock would be held in escrow until the funds were released. Management of Profile then presented a subscription agreement with unacceptable terms to Enter Tech management that was immediately rejected. Profile indicated that this was only a draft agreement, but as further due diligence was completed, Enter Tech found that an agreement had already been consummated and that funds for 100,000 shares at $0.60 per share had been exchanged between Profile and a third party. The funds resulting from that transaction were not delivered to Enter Tech. The company immediately demanded delivery of the funds and all remaining stock. Profile management returned all but 270,000 shares and the 100,000 shares that had been sold to the third party. On further investigation Enter Tech found that these restricted shares were committed as part of this contract as an escrow agreement held against registration of the stock for public sale. The management and legal counsel for Enter Tech are aggressively working towards a solution in this matter. On October 13, 2000, Enter Tech Corporation entered into a joint venture agreement with Northern Communications Group, Inc. (NCG) to provide "last mile" communications solutions and management for connectivity of the Hitdisc music kiosks and other projects requiring communications expertise. NCG has also been developing a high speed, wireless Internet Service Provider (ISP) system that will be deployed as part of the last mile solutions, not only for the kiosk projects, but for other business to business market segments. On October 27, 2000, Enter Tech Corporation entered into a licensing agreement with Hitdisc.com, Inc. whereas Enter Tech will capitalize the production of the Hitdisc "ZapDisc" (TM) kiosk and assist in the placement of the equipment. Hitdisc will provide all management of operational aspects of the kiosk, including royalties, software programming, and daily information updates. As part of the agreement, NCG will be responsible for communications for kiosks purchased and deployed by Enter Tech as part of the licensing agreement. 5 On December 19, 2000, Enter Tech Corporation formed QuickGold 2000, LLC, a limited liability company, registered in the State of Colorado for future marketing purposes that may necessitate a joint venture -type of operational agreement. As of the date of this filing, no activities or members have been added to the LLC. PROPOSED BUSINESS OPERATIONS The Company is a successor to Links, Ltd. a Wyoming corporation, and neither entity has had revenues from operations from its inception. Links, Ltd. was incorporated for the purpose of developing kiosks or vending machines that would market computer software, music and possibly digital video stored on discs. For several years, the Company unsuccessfully attempted to develop a commercially viable kiosk to provide such services. In the beginning of the year 2000, the Company attempted to provide additional kiosk-related technologies and services through its acquisitions of Shopping Mall Online, Inc. and Wavepower, Inc. In the third quarter of 2000, the Company management elected to change their business plans to encompass a third-party agreement with HitDisc.com, Inc., a manufacturer of a kiosk compatible with the concept and design of the company. The agreement calls for Enter Tech to purchase and deploy the Hitdisc kiosks and to provide the communications infrastructure for those units. Hitdisc.com, Inc. will provide management for the entire kiosk system including management of royalties, software development and all normal operational aspects. To facilitate communications infrastructure for the this agreement and for other market segments that the Company has targeted, Enter Tech entered into a joint venture agreement with Northern Communications Group, Inc. ("NCG") on October 13, 2000, whereas they will be the exclusive provider of communications needs for Enter Tech projects including all communications installation and management for the Hitdisc kiosk purchased and deployed by Enter Tech. We cannot assure you that we will ever be able to develop a commercially successful kiosk, nor can we assure you that any kiosk concept licensed from another company will be a commercially viable product. Hitdisc is currently continuing its beta tests prior to attempting further market penetration. The Company has since changed its focus to facilitate the infrastructure and marketing of high-speed Internet access, wireless ISP and related appliances, equipment, software and services in the business-to-business market segment. The Company has researched and projected costs for installation and operation of a basic high-speed Internet access for the hospitality industry. NCG has researched and projected costs of equipment acquisition for this market segment COMPETITION The area of business related to high-speed Internet access, wireless Internet Service Providers (ISP) related telecommunications equipment, and related software and services is crowded with many vendors and marketers, ranging from small to some of the largest multi-national companies. There can be no guarantee that the Company will be able to successfully market any product or service it may develop or to become profitable. At this time, the Company has no patent or proprietary protection with respect to any of its concepts and there is nothing to prevent anyone else from pursuing these potential lines of business. EMPLOYEES As of December 31, 2000, the Company had no full-time employees. 6 ITEM 2. DESCRIPTION OF PROPERTY On July 1, 2000 Enter Tech entered into a lease agreement to pay $3,000 per month for approximately 2,637 square feet of office space located at 1031 N. Lincoln Avenue, Loveland, Colorado for a term of 5 years. The company has not yet occupied the space. The Company is still currently occupying space at 430 East 6th Street, Loveland, Colorado on a month-to-month basis for a rental fee of $1,500 per month. The Company has not been able to operate efficiently out of the space at 430 East 6th Street,. However, it is still anticipated that the facilities on Lincoln Avenue will provide for adequate space for the projected term of the lease. The Company intends to move into these new facilities when such becomes practicable, depending upon availability of additional capital. The Company has still not finalized its plans for occupancy for the new facility. ITEM 3. 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 and Stiles answered with a counterclaim as described in the Form 10-QSB filed for the quarter ending March 31, 2000. As of December 31, 2000, there has been no material change in the status of this suit. On May 25, 2000, claimant David M. Matus in District Court of Larimar County, Colorado named Enter Tech as a party in a suit along with seven other defendants as described in the Form 10-QSB for the quarter ended June 30, 2000. There has been no discovery to date and the case is its early stages, we cannot predict the outcome of this litigation at this time. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fiscal year 2000 through the solicitation of proxies or otherwise. ITEM 5. MARKET FOR COMMON EQUITY AND RELATED MATTERS. The Company's common stock has been quoted on the OTC Bulletin Board under the symbol ENTR since May 1999. To the knowledge of the Company there have been few trading transactions in its common stock. The following table sets forth high and low bid prices of the common stock of the OTC Bulletin Board for the periods indicated. The bid prices represent prices between dealers, which do not indicate retail markups, markdowns or commissions and the bid prices may not represent actual transactions. Period High Low -------- ------- ------ May 1999 - June 1999 $1.8750 $ .25 July 1999 - September 1999 $ .7815 $ .25 October 1999 - December 1999 $1.1250 $ .75 January 2000 - March 2000 $5.0000 $ .75 April 2000 - June 2000 $3.7500 $1.125 June 2000 - September 2000 $1.6250 $ .25 October 2000 - December 2000 $0.2812 $0.080 The number of records holders of common stock of the Company as of March 1, 2001 was 77. 7 The holders of common stock are entitled to receive dividends as may be declared by the Board of Directors out of funds legally available therefore. The Company has never declared any dividend. It does not anticipate declaring and paying any cash dividend in the foreseeable future. Information with respect to securities sold by the Company without registration under the Securities Act of 1933, as amended ("Securities Act") during the period from January 1, 2000 through March 21, 2001, and the sale of which has not been previously reported under the Securities Exchange Act of 1934, as amended, is set forth in the following paragraphs. On December 1, 2000, the Company authorized the issuance of 500,000 shares of common stock to Sam J. Lindsey, an officer and director of the Company. These shares were issued to Mr. Lindsey as compensation for services rendered to the Company as an officer and director. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. On December 1, 2000, the Company authorized the issuance of 500,000 shares of common stock to Gregory J. Kaiser, an officer and director of the Company. These shares were issued to Mr. Kaiser as compensation for services rendered to the Company as an officer and director. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (i) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. In addition, the Company authorized the issuance of 7,500 shares of restricted stock to Mr. Kaiser for a capital contribution of $15,000 made prior to his involvement with the Company On December 1, 2000, the Company authorized the issuance of 500,000 shares of common stock to D. William Thomas. These shares were issued to Mr. Thomas as compensation for services rendered to the Company as a consultant. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. On December 1, 2000, the Company authorized the issuance of 250,000 shares of common stock to John H. Neas. These shares were issued to Mr. Neas as compensation for services rendered to the Company. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. On December 19, 2000, the Company authorized the issuance of 30,000 shares of common stock to John H. Neas. These shares were issued to Mr. Neas as compensation for services rendered to the Company. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act 8 as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. On December 19, 2000, the Company authorized the issuance of 100,000 shares of common stock to Amy Jo Pikes. These shares were issued to Ms. Pike for investments made by the Pike family on September 7, 2000. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. On December 19, 2000, the Company authorized the issuance of 100,000 shares of common stock to Sean Patrick Pike. These shares were issued to Mr. Pike for investments made by the Pike family on September 7, 2000. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. On December 19, 2000, the Company authorized the issuance of 100,000 shares of common stock to Daniel Richard Pike. These shares were issued to Mr. Pike for investments made by the Pike family on September 7, 2000.. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. On December 19, 2000, the Company authorized the issuance of 214,286 shares of common stock to Mrs. Patty L. Pike. These shares were issued to Mrs. Pike for investments made by the Pike family on September 7, 2000.. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. On December 19, 2000, the Company authorized the issuance of 50,000 shares of common stock to Dale Kreiser. These shares were issued to Mr. Kreiser as compensation for services rendered to the Company. No person acted as an underwriter with respect to this issuance and no underwriting discounts or commissions were paid therefore. These securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities Act. The securities were: (I) acquired for investment; (ii) issued to a consultant of the Company familiar with the Company; and (iii) issued as "restricted securities" as defined under the Securities Act. The Certificates issued to represent these securities contain a restrictive legend denoting their status as restricted securities. All of the above securities were sold in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act as a transaction no involving a public offering under Section 4(2) of the Securities 9 Act. No person acted as an underwriter with respect to the issuances of these securities and no underwriting discounts or commissions were paid thereon. The securities were acquired for investment and issued as "restricted securities" as defined under the Securities Act. ITEM 6. PLAN OF OPERATION RESULTS OF OPERATIONS During the period from the Company's inception on July 1, 1996 until June 2, 1998 the Company engaged in no significant operations other than the search for possible acquisition candidates. The Company received no revenues during this period other than a limited amount of interest income. Since the Company's acquisition of Links, Ltd., the Company has focused on developing a market for its products and on raising capital. The Company currently remains in the development stage and has generated no revenues as of December 31, 2000. LIQUIDITY AND CAPITAL RESOURCES As of the end of the reporting period, the Company had no material cash or cash equivalents. There was no significant change in working capital during this fiscal year other than defined below. As of December 31, 2000, Enter Tech had no material commitments for capital expenditures and no plans to pay dividends to its shareholders. Previously, Enter Tech entered into a subscription agreement with the Reserve Foundation Trust which the Company can only assume as of the end of the reporting period, will not be funded. Enter Tech anticipates that it may not be able to maintain a development schedule that may still move the projects forward and Enter Tech will be dependent upon the acquisition of additional capital to fund its operations over the next 12-month period. The Company previously contemplated the option of acquiring a "kiosk" company that has already developed some or all of the concepts conceived by the Company. On October 27, 2000 Enter Tech entered into a licensing agreement with Hitdisc.com, Inc., a manufacturer of a kiosk compatible with the concept and design of the company. The agreement calls for Enter Tech to purchase and deploy the Hitdisc kiosks and to provide the communications infrastructure for those units in conjunction with NCG. Hitdisc.com, Inc. will provide management for the entire kiosk system including management of royalties, software development and all normal operational aspects. Northern Communications Group, Inc. entered into a joint venture agreement with Enter Tech on October 13, 2000. The agreement as amended to date provides that they will be the exclusive provider of communications needs for Enter Tech projects including all communications installation and management for the Hitdisc kiosk purchased and deployed by Enter Tech. We cannot assure you that we will ever be able to develop a commercially successful kiosk, nor can we assure you that any kiosk concept licensed from another company will be a commercially viable product. There is no assurance that the kiosks will function as planned by Enter Tech and Hitdisc, or can 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. NCG's technology is designed to enhance the kiosk operational design and provide potential customers via high speed Internet access and wireless connectivity in the mall or retail location in addition to the business to business market segment NCG has targeted as part of their marketing plan.. The agreement with NCG may enhance the effectiveness of the Hitdisc kiosk commerce activity and vice versa. Additional employees will be required to continue the development process of the services provided by NCG, most of who are expected to be technical professionals. However it is anticipated that these individuals will be in the employ of NCG, not Enter Tech. We are currently evaluating the projected capital needs for the deployment of the kiosk in conjunction with Hitdisc.com, Inc. and for operation of the agreement with NCG. It is anticipated that operational revenues generated by the NCG joint venture may support the operations of the joint venture. Some currently undefined and unknown circumstances may require additional capital to support future growth. No assurances can be given that these additional funds would be available if necessary. 10 ITEM 7. FINANCIAL STATEMENTS INDEX TO FINANCIAL STATEMENTS ENTER TECH CORP. ---------------- (A Development Stage Company) FINANCIAL STATEMENTS with REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS PAGE NO. -------- Report of Independent Certified Public Accountants 12 Financial Statements: Balance Sheet 13 Statements of Operations 14 Statement of Changes in Stockholders' (Deficit) 15 Statements of Cash Flows 17 Notes to Financial Statements 18 11 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Enter Tech Corp. Loveland, CO We have audited the accompanying balance sheet of Enter Tech Corp. (a development stage company) as of December 31, 2000, and the related statements of operations, stockholders' (deficit) and cash flows for the years ended December 31, 2000 and 1999 and the period from August 18, 1997 (date of inception) through December 31, 2000. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements, referred to above, present fairly, in all material respects, the financial position of Enter Tech Corp. (a development stage company) as of December 31, 2000, and the results of its statements of operations, stockholders' (deficit) and cash flows for the years ended December 31, 2000 and 1999 and the period from August 18, 1997 (date of inception) through December 31, 2000 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1, the Company has sustained operating losses since inception and has a net capital deficiency that raise substantial doubts about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Schumacher & Associates, Inc. Schumacher & Associates, Inc. Certified Public Accountants 2525 Fifteenth Street, Suite 3H Denver, Colorado 80211 April 11, 2001 12 ENTER TECH CORP. ---------------- (A Development Stage Company) BALANCE SHEET December 31, 2000 ASSETS Current Assets: Cash $ 421 ----------- Total Current Assets 421 ----------- Equipment, net of accumulated depreciation of $7,754 14,953 Other assets 48 ----------- TOTAL ASSETS $ 15,422 =========== LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current Liabilities: Accounts payable and accrued expenses 251,557 Stock compensation payable 27,450 Customer deposits 60,000 Notes payable, related parties 668,989 Notes payable, other 250,000 ----------- Total Current Liabilities 1,257,996 ----------- TOTAL LIABILITIES 1,257,996 ----------- Commitments and contingencies - (Notes 1,2,4,5,6,7,8,9,10,11,and 12) Stockholders' (Deficit): Preferred stock, $.0001 par value 5,000,000 shares authorized, 1,000,000 issued and outstanding 100 Common stock, $.0001 par value 100,000,000 shares authorized, 17,012,884 issued and outstanding 1,701 Additional Paid In Capital 7,823,778 Stock subscriptions receivable, services (3,799,764) Accumulated (Deficit) (5,268,389) ----------- TOTAL STOCKHOLDERS' (DEFICIT) (1,242,574) ----------- TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 15,422 =========== The accompanying notes are an integral part of the financial statements. 13
ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENTS OF OPERATIONS For the Period from August 18, 1997 (date of inception) Year Ended Year Ended through December 31, December 31, December 31, 2000 1999 2000 ----------- ----------- ------------ Revenue $ - $ - $ - ----------- ----------- ------------ Expenses: Salaries 117,489 - 117,489 Depreciation 6,935 819 7,754 Management fees - - 30,000 Supplies 19,499 1,647 24,430 Professional fees 812,537 198,441 1,073,373 Rent 71,117 16,200 100,262 Sales promotion - 20,500 20,500 Travel 130,529 34,281 173,873 Telephone 21,495 8,718 36,613 Stock for services 1,873,673 1,258,074 3,131,747 Other 269,902 18,985 290,709 Write down of carrying value of Technology and License Agreement - - 227,943 ----------- ----------- ------------ Total Operating Expenses 3,323,176 1,557,665 5,234,693 ----------- ----------- ------------ Net Operating (Loss) (3,323,176) (1,557,665) (5,234,693) Other Income (Expense): Interest income 5 - 5 Interest expense (33,701) - (33,701) ----------- ----------- ------------ Net (Loss) $(3,356,872) $(1,557,665) $ (5,268,389) ----------- ----------- ------------ Per Share $ (.31) $ (.42) $ (.89) =========== =========== ============ Weighted Average Shares Outstanding 10,743,108 3,683,333 5,887,147 =========== =========== ============ The accompanying notes are an integral part of the financial statements.
14
ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) For the Period from August 18, 1997 (date of inception) through December 31, 1999 Subscriptions Additional Preferred Stock Common Stock Receivable Paid-in Accumulated No./Shares Amount No./Shares Amount Services Capital (Deficit) Total ---------- ------ ---------- ------- ------------- ---------- ----------- ----------- Balance at August 18, 1997 - $ - - $ - $ - $ - $ - $ - Common stock issued for cash, at inception, at $.01 per share - - 2,400,000 240 - 235,684 - 235,924 Net loss for the period ended December 31, 1997 - - - - - - (237,924) (237,924) --------- ------ ---------- ------- ---------- ---------- ------------ ------------ Balance at December 31, 1997 - - 2,400,000 240 - 235,684 (237,924) (2,000) Recapitalization - - 1,250,000 125 - (16,046) - (15,921) Net loss for the year ended December 31, 1998 - - - - - - (115,928) (115,928) --------- ------ ---------- ------- ---------- ---------- ----------- ----------- Balance at December 31, 1998 - - 3,650,000 365 - 219,638 (353,852) (133,849) Common stock issued for services at $.81 - - 200,000 20 - 161,980 - 162,000 Net loss for the year ended December 31, 1999 - - - - - - (1,557,665) (1,557,665) --------- ------ ---------- ------- ---------- ---------- ------------ ------------ Balance at December 31, 1999 - - 3,850,000 385 - 381,618 (1,911,517) (1,529,514) The accompanying notes are an integral part of the financial statements. 15 ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) (Continued) For the Period from August 18, 1997 (date of inception) through December 31, 1999 Subscriptions Additional Preferred Stock Common Stock Receivable Paid-in Accumulated No./Shares Amount No./Shares Amount Services Capital (Deficit) Total ---------- ------ ---------- ------- ------------- ---------- ----------- ----------- Preferred stock issued for services 1,000,000 $ 100 - $ - - $ 249,900 $ - $ 250,000 Common stock issued for services - - 3,428,598 342 - 1,275,452 - 1,275,794 Common stock subscribed for future services - - 3,125,000 313 (3,799,764) 5,273,125 - 1,473,674 Common stock issued for cash - - 1,129,286 113 - 132,387 - 132,500 Common stock issued for acquisitions - - 5,480,000 548 - 35,296 - 35,844 Additional paid-in capital Reserve Foundation Trust - - - - - 476,000 - 600,000 Net loss for the year ended December 31, 2000 - - - - - - (3,356,872) (3,356,872) --------- ------ ---------- ------- ---------- ---------- ----------- ----------- Balance at December 31, 2000 1,000,000 $ 100 17,012,884 $ 1,701 (3,799,764) $7,823,778 $(5,268,389) $(1,242,574) ========= ====== ========== ======= ========== ========== =========== =========== The accompanying notes are an integral part of the financial statements.
16
ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENTS OF CASH FLOWS For the Period from August 18, 1997 (date of inception) Year Ended Year Ended through December 31, December 31, December 31, 2000 1999 2000 ----------- ----------- ------------ Cash Flows from Operating Activities: Net (Loss) $(3,356,872) $(1,557,665) $(5,268,389) Adjustment to reconcile net (loss) to net cash provided by operating activities: Depreciation 6,935 819 7,754 Stock for services 1,873,673 1,258,074 3,131,747 (Increase) decrease in other assets (48) - (48) Increase in customer deposits - - 60,000 Increase in accounts payable and accrued expenses 216,045 34,387 251,557 ----------- ---------- ----------- Net Cash (Used in) Operating Activities (1,260,267) (264,385) (1,817,379) ----------- ---------- ----------- Cash Flows from Investing Activities: Acquisition of equipment (14,515) (8,192) (22,707) ----------- ---------- ----------- Net Cash (Used in) Investing Activities (14,515) (8,192) (22,707) ----------- ---------- ----------- Cash Flows from Financing Activities: Preferred and common stock issued and additional paid-in capital 825,515 - 1,045,518 (Increase) in deferred offering costs (124,000) - (124,000) Increase in notes payable, other 234,194 15,806 250,000 Increase in payable, related parties 339,480 256,785 668,989 ----------- ---------- ----------- Net Cash Provided by Financing Activities 1,275,189 272,591 1,840,507 ----------- ---------- ----------- Increase in Cash 407 14 421 Cash, Beginning of Period 14 - - ----------- ----------- ----------- Cash, End of Period $ 421 $ 14 $ 421 =========== =========== =========== Interest Paid $ 33,701 $ - $ 33,701 =========== =========== =========== Income Taxes Paid $ - $ - $ - =========== =========== =========== The accompanying notes are an integral part of the financial statements.
17 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 (1) Summary of Accounting Policies ------------------------------ This summary of significant accounting policies of Enter Tech Corp. (a development stage company) (Company) is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. (a) Description of Business ----------------------- The Company was organized on June 14, 1996 as a Nevada corporation in order to evaluate, structure and complete a merger with, or acquisition of, prospects consisting of private companies, partnerships or sole proprietorships. Effective June 2, 1998, the Company completed a business combination with Links, Ltd. as described in Note (2). The Company is a development stage company since principle planned operations have not yet commenced. The Company has selected December 31 as its year end. (b) Use of Estimates in the Preparation of Financial Statements ----------------------------------------------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. (c) 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 inception and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. 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. 18 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 (c) Basis of Presentation - Going Concern, Continued ------------------------------------------------ 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. (d) Income Taxes ------------ As of December 31, 2000, the Company had net operating losses available for carryover to future years of approximately $5,270,000, expiring in various years through 2020. Utilization of these carryovers may be limited if there is a change in control of the Company. As of December 31, 2000, the company has total deferred tax assets of approximately $1,054,000 due to operating loss carryforwards. However, because of the uncertainty of potential realization of these tax assets, the Company has provided a valuation allowance for the entire $1,054,000. Thus, no tax assets have been recorded in the financial statements as of December 31, 2000. (2) Business Combinations --------------------- On June 2, 1998, Enter Tech Corp. (Company), completed a business combination with Links, Ltd., a development stage company. Pursuant to the business combination, 3,235,000 shares of the Company's common stock were issued for 100% of the issued and outstanding stock of Links, Ltd. Subsequently, 835,000 of the shares issued pursuant to this business combination were canceled resulting in 2,400,000 net shares issued. Since the controlling shareholders of Links, Ltd. own approximately 65.7% of the Company, a controlling interest in the Company, the transaction was accounted for as a reverse acquisition whereby, the equity accounts of Links, Ltd. were carried over into the accompanying financial statements. Links, Ltd. was incorporated on August 18, 1997. 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 provided that if for any reason the Company's common stock was 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 would 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. 19 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 (2) Business Combinations, Continued -------------------------------- 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 provided the voting rights with respect to the common stock of Shopping Mall Online would remain with the individual until the restrictive legend on the 2,400,000 shares of the Company's common stock is removed. On October 27, 2000, the Company agreed to sell the controlling interest in Shopping Mall Online back to its management. The Company redeemed 1,920,000 shares of the Company's common stock from the president of Shopping Mall Online, Inc. in exchange for 1,440,000 shares of Shopping mall Online's common stock being held by the Company. The president of Shopping Mall online retained 480,000 restricted shares of the Company's common stock, and the Company retained 480,000 shares of Shopping Mall Online's common stock. On April 19, 2000, the Company acquired 80% of the outstanding shares of common stock of WavePower, Inc., a development stage company, in exchange for 5,000,000 restricted shares of the Company's common stock under an Acquisition Agreement. In addition, the Company 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, Inc. These shares would be issued upon exercise of an option to be granted to the shareholder. The option would provide: (a) For a three year term ending April 30, 2003; (b) For an exercise price of $.001 per share; (c) For the exercise of up to 1,000,000 shares during each of the following periods during the term of the employment agreement with the option holder: 12th and 13th months, 24th and 25th months, and 35th and 36th months. The option further provides that its exercise of the stated amounts during the respective periods is further conditioned upon WavePower, Inc. meeting stated amounts of net pre tax profits. The acquisition agreement also provides that The remaining 2,000,000 authorized shares of the Company's preferred stock may be issued to the existing member of the Company's management and significant consultants. 20 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 (2) Business Combinations, Continued -------------------------------- The 5,000,000 shares of restricted common stock that were issued to WavePower, Inc. increased the Company's outstanding shares of common stock to 12,783,000. The transaction was recorded at predecessor cost since the 5,000,000 shares were approximately 39% of the Company's total issued and outstanding shares of common stock. Effective September 26, 2000, the Company rescinded this Plan of Reorganization and Acquisition. The former shareholders of WavePower, Inc. have not returned the Company's common stock nor funds advanced to WavePower during the period from April 19, 2000 through the date of rescission. The 5,000,000 shares are shown as outstanding at December 31, 2000. A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. (3) License and Other Intangible Assets ----------------------------------- The former parent company of Links, Ltd. acquired certain technology and license rights from an unrelated third party for $227,943. These intangible assets were contributed to Links, Ltd. Management of the Company reviewed the intangible assets for impairment and provided a valuation allowance for the total $227,943. (4) Notes Payable, Related Parties ------------------------------ As of December 31, 2000, notes payable to related parties totaled $668,989. These notes bear interest at approximately 12% per annum and are payable in one year. (5) Consulting and Employment Agreements ------------------------------------ Effective July 1, 1998, the Company entered into a one year contract with the Vice President of the Company, which required this individual to provide consulting services for fees of $500 per month and 750,000 shares of stock to be issued pursuant to a Form S-8 Registration Statement. The Company has paid no compensation to this individual to date and has not issued the 750,000 shares of stock. The December 31, 2000 financial statements include an accrual of stock and services payable in the amount of $7,500 related to services performed by this individual. 21 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 (5) Consulting and Employment Agreements ------------------------------------ Effective August 25, 1999, the Company entered into an agreement with a consultant to provide management consulting services to assist in developing the Company. The consultant is to be paid $75 per hour plus 1,000 restricted shares of common stock for every hour worked. At December 31, 1999, the Company owed $3,750 in consulting fees. In addition, the Company agreed to compensate the consultant for other services with restricted common stock. Effective January 1, 2000, the Company entered into an agreement with a consultant to provide consulting services for assistance in completing a private placement or secondary offering, and other consulting services. The consultant is to be paid $10,000 per month plus 200,000 shares of restricted common stock per year provided the business plan established for the Company is met. The term is for two years, expiring on December 31, 2001. Effective January 1, 2000, the Company entered into an agreement with a director of the Company, to attempt to build revenues of the Company and assist in the development of the Company's product. The director is to be paid $10,000 per month plus expenses. At December 31, 2000, the Company owed $133,104 in consulting fees to the director. The term is for two years, expiring December 31, 2002, with an option to renew for two additional years. Effective May 15, 2000, the Company entered into an employment agreement with an individual to research market conditions and conduct feasibility studies of projects being considered by the Company. The employee is to be paid $18,000 per year plus certain benefits. The agreement expires on May 15, 2001. Effective May 22, 2000, the Company entered into an executive compensation agreement with the Company's current president. The president is to be paid $10,000 per month plus certain benefits. The term is for two years with an option to renew for an additional two year period on June 30, 2002. Effective August 1, 2000, the Company entered into an agreement with an attorney to provide legal services to the Company. The attorney is to be paid $5,000 per month plus $5,000 per month in publicly traded stock of the Company. The agreement expires on August 1, 2001 with an automatic renewal of one year unless terminated earlier. 22 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 (5) Consulting Agreements, Continued -------------------------------- Effective September 1, 2000, the company entered into an agreement with a consultant to provide assistance in developing business opportunities and revenue. The consultant is to be paid $8,000 monthly plus expenses. The agreement expires on August 31, 2001 with an option to renew for two additional years. (6) Marketing and Administration of Sales Agreement ----------------------------------------------- The Company 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. (7) Preferred Stock --------------- 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 initially had 3,000,000 preferred shares being held in reserve for the acquisition of WavePower, Inc. as outlined in the definitive agreement. Because of the rescission of the WavePower acquisition, the board of directors elected to hold the 3,000,000 preferred shares for future use. The second trust contains 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. As of December, 2000, these 1,000,000 preferred shares were issued to two directors and a consultant of the Company. The 1,000,000 preferred shares were recorded as compensation in the amount of $250,000. The director of the Company will retain sole voting rights for both trusts. 23 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 (7) Preferred Stock, Continued -------------------------- The 5,000,000 shares of preferred stock have the following rights, privileges and limitations: (a) Liquidation preference to receive any distributions in liquidation of the Company up to the amount of $0.10 per share, but does not participate in any additional distributions, (b) Right to vote five votes per share on all issues considered by the shareholders, (c) Convertible into two shares of common stock for each share of preferred, and (d) Callable by the Company upon 30 days written notice at $.001 per share, provided that the holder may convert the preferred into common stock during the 30-day period. (8) Common Stock ------------ During the year ended December 31, 1999, the Company issued 200,000 shares of its restricted common stock in exchange for services. Also during the year ended December 31, 1999, the Company committed to issuing 1,543,000 shares of its restricted common stock in exchange for services. A total of $1,103,574 was accrued to reflect the stock compensation payable at December 31, 1999. All but 20,000 of these shares were issued during 2000. During the year ended December 31, 2000, the Company issued 3,428,598 of its restricted common stock in exchange for services. Also during the year ended December 31, 2000, the Company committed to issuing 50,000 shares of its restricted common stock in exchange for services. The total accrued stock compensation payable at December 31, 2000 was $19,950. Also during the year ended December 31, 2000, the Company issued 1,129,286 shares of its restricted common stock for $132,500 cash. Also during the year ended December 31, 2000, the Company issued 7,500 to its president as an adjustment to a previous issuance. Also during the year ended December 31, 2000, the Company issued 3,125,000 shares of its restricted common stock to various entities in exchange for future marketing and other services to be performed during the 12-18 month period following the execution of the agreements. 24 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 (8) Common Stock, Continued ----------------------- During November 2000, the Company rescinded these agreements due to concern regarding possible violations of various securities and common laws. The Company has requested the return of the 3,125,000 shares which have not been returned. The marketing and other services are being amortized over the agreement periods. Also during the year ended December 31, 2000, the Company hired an entity to procure additional short-term funding. As a result, the Company issued 2,000,000 shares of its restricted common stock. The entity sold 370,000 shares of such stock to a third party for $60,000. The Company has received $10,000, the entity received $15,000 in commissions, and the balance of $35,000 remains due and owing to the Company. The remaining 1,630,000 shares were returned to the Company and canceled. (9) Equity Financing Agreement -------------------------- On March 15, 2000, the Company entered into a stock purchase and subscription agreement with the Reserve Foundation Trust, whereby the trust is to purchase 6,000,000 restricted shares of the Company's common stock in exchange for $10,000,000. When the agreement was signed the trust provided the Company with $50,000 in interim debt financing. That amount was subsequently increased to a total of $250,000. 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 15, 2000. As of September 30, 2000, the Company has not paid this debt. 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 $10,000,000 in funds to the Company. As of June 12, 2000, $600,000 of the subscribed funds had been received. On July 19, 2000, the Board of Directors of the Company met to discuss banking/funding problems with the Reserve Foundation Trust. As of August 1, 2000, the Company instructed corporate counsel to prepare to take whatever action it deemed is appropriate and in the best interest of the Company. As of April 11, 2001, counsel had not yet taken action on the matter. The stock certificates for the 6,000,000 shares of common stock were canceled during the last quarter of 2000. The Company is attempting to make another agreement with the Reserve Foundation Trust whereby the trust would provide additional funding in exchange for restricted shares of the Company's common stock. A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. 25 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2000 (10) Litigation ---------- 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 filed an answer to the complaint on June 29, 2000. Due to the preliminary stage of the matter, the ultimate resolution of this contingency cannot presently be determined. (11) Litigation- Former Officer -------------------------- 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. A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. (12) License Agreement ----------------- Effective October 27, 2000, the Company entered into a license agreement with an entity whereby the Company agreed to purchase 30 dual terminal digital vending machines at a price of $125,000 plus expenses and 60 single terminal digital vending machines at a purchase price not yet determined within three months. The Company agreed to purchase an additional 30 dual terminal digital vending machines at a price of $125,000 plus expenses and 60 single terminal digital vending machines at a purchase price not yet determined within nine months. The Company is also responsible to license this technology and to promote, develop a market, sell and distribute custom music CD products created by the digital vending machines. The term of this agreement shall become effective on the date the manufacturer receives the first purchase order and shall continue for five years, unless terminated in accordance with the terms of the agreement. (13) Joint Venture Agreement ------------------------ Effective October 13, 2000, the Company entered into a joint venture agreement with an entity, whereby the entity would be the exclusive provider of communications needs for the Company's projects including all communications installation and management for the kiosk purchased and deployed by the Company. 26 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACOUNTANTS ON ACCOUNTING FINANCIAL DISCLOSURE There have been no disagreements between the Company and its independent accountants on any matter of accounting principals or practices or financial statement disclosures since the Company's inception ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. Certain information with respect to the Directors and Officers of the Company is as follows: Name Age Positions and Offices Held - -------- --- --------------------------------- Sam J. Lindsey 51 Chairman of the Board, Chief Executive Officer and Director Gregory J. Kaiser 47 President, Secretary and Director Mark A. Thomas 34 Director The Company's Directors will serve in such capacity until the next annual meeting of the Company's shareholders and until their successors have been elected and qualified. The Officers serve at the discretion of the Company's Directors. There are no family relationships among the Company's Officers and Directors, nor are there any arrangements or understandings between any of the Directors or Officers of the Company or any person pursuant to which any Officer or Director was or is to be selected as an Officer or Director. The Company presently has no committees. Set forth below are the names of all Directors and Executive Officers of the Company, all positions and offices with the Company held by each such person, the period during which he or she has served as such, and the business experience of such persons during at least the last five years. SAM J. LINDSEY. Mr. Lindsey joined Enter Tech in 1998 and was appointed Chairman of the Board of Directors, CEO and President in July 1999.With the appointment of Mr. Kaiser as President, he remains Chairman and CEO of the company. Since 1993 he has served as a private consultant to numerous emerging growth companies, providing guidance for product development. Previously, he managed the systems engineers and sales staff for XL/Data, where he established and managed over $35,000,000 in operating leases for various clients. From 1979 to 1989, Mr. Lindsey served as President of Job Management and Accounting Software, Inc. where he grew the company from a staff of 3 to more than 20 with locations nationwide. The company developed and sold software for mid-range IBM computers for the construction and job shop-manufacturing environment. He sold his interest in the company to work with public companies providing hardware and software for IBM systems. Mr. Lindsey is a former U.S. Marine and holds a B.S. in Construction and Real Estate Management and Finance from the University of Denver. 27 GREGORY J. KAISER. Mr. Kaiser has been a consultant to Enter Tech since March 1999 in the areas of business formation and capital structure. He was appointed President of the company in June 2000. Previously he served Chief Operating Officer of Jenncor Trading, where he developed a proprietary trading desk in addition to his management duties. Previously he was the Senior Vice President of First Options of Chicago, which was the largest clearing firm on the Philadelphia Stock Exchange. He has held seats on the Chicago Board of Trade and the Pacific Stock Exchange. Mr. Kaiser has been involved in various aspects of financial management, securities, equity options, and financial futures on a professional level since 1976. MARK A. THOMAS. Mr. Thomas worked in the entertainment industry designing and installing post product facilities for over 5 years. His duties involved engineering editing bay, duplication and sound facilities as well as participating in several design teams responsible for digital video production. Being fluent in the communications technology as well as computer networking led him to the telecommunications environment, primarily the convergence of the two technologies. Mr. Thomas was a founder and engineer of NCG, Inc. for a seven year period ending February 2001. Vernon C. Kendrick was issued 4,415,000 shares of the Company's common stock in April of 2000. This stock was issued as consideration in the Company's acquisition of WavePower, Inc. The Company has rescinded the WavePower transaction for misrepresentation of and lack of value in the WavePower stock received by the Company. It is the Company's position that these shares are void and not validly issued. However, pending receipt and cancellation of the certificates for these shares or a binding legal determination that they are not validly issued they are included as outstanding in this report. If these shares were validly issued, they would constitute 25.9% of the Company's outstanding stock. To the knowledge of the Company, Mr. Kendrick has not filed a Form 3 reporting any beneficial ownership of this stock under Section 16(a) of the Securities Exchange Act of 1934. ITEM 10. EXECUTIVE COMPENSATION On January 1, 1999, the Company entered into a Consulting Agreement with Sam J. Lindsey, who has served as a director of the Company since July 30, 1999 and who served as its President from July 30, 1999 through May 31, 2000. Under the Agreement, Mr. Lindsey is to devote his full working time and best efforts to develop revenues for the Company. The agreement, as amended on January 1, 2000 and March 1, 2000: (i) provided for a consulting fee of $5,000 a month from August 1, 1999 through February 29, 2000; (ii) provides for a fee of $10,000 a month from March 1, 2000 through its term ending December 31, 2002; and (iii) provided that he became the Chairman of the Board and Chief Executive Officer of the Company on January 1, 2000. The Company has not had sufficient funds to pay Mr. Lindsey the fees due under the Agreement. Accordingly, for the period from July 30, 1999 through December 31, 1999, be was paid $20,000 in cash and $40,000 in the form of a promissory note. For the year 2000, he was paid $45,750 in cash and $59,250 in the form of a promissory note. These notes bear interest at 12% per annum and are due December 31. 2001. During 1999, the Company paid Gregory J. Kaiser the President, Secretary and a director of the Company, consulting fees of $20,000 in cash and $9,820 in the form of a promissory note. Under the provisions of Consulting and Employment Agreements dated September 1, 1999, May 22, 2000 and July 1, 2000; (i) Mr. Kaiser served as a consultant to the Company from September 1, 1999 through May 31, 2000 and from July 1, 2000 to the present; (ii) he served the Company as an employee at a salary of $9,000 a month for June of 2000 which was paid in cash; (iii) he received consulting fees at the rate of $5,000 a month paid in cash for the four month period ended December 31, 1999 (a total of $20,000); (iv) he has received consulting fees at the rate of $5,000 a month for the period January 1, 2000 through May 31, 2000 and at the rate of $10,000 a month for the period July 1, 2000 through December 31, 2000 which total $85,000 and were paid in the form of a promissory note; and (v) the term of the amended agreement ends June 30, 2002. The promissory notes to Mr. Kaiser bear interest at the rate of 12% per annum and are due December 31, 2001. In December of 2000, the Company issued 500,000 shares of its common stock each to Mr. Lindsey and Mr. Kaiser as additional compensation for services. The Company does not have any retirement, pension, profit-sharing or insurance or medical reimbursement plans for its officers or directors. 28 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of March 1, 2001, the stock ownership of each person known by the Company to be the beneficial owner of five percent or more of the Company's Common Stock, each Director individually and all Directors and Officers of the Company as a group:
Title of Name, Position(s) and Address Amount of Beneficial of Class of Beneficial Owner Ownership Percentage of Class - -------- ------------------------------ --------------------- ------------------- Common Sam J. Lindsey, Chairman of the Board, Chief Executive Officer and Director 3407 Riva Ridge Drive Ft. Collins, Colorado 80526 900,000 5.28% Gregory J. Kaiser, President, Secretary and Director P.O. Box 774104 Steamboat Springs, Colorado 80477 600,000 3.52% Mark A. Thomas, Director 4519 W. 6th Street Greeley, Colorado 80634 60,000 .03% All Officers and Directors as a Group (3 persons) 1,560,000 8.83% D. William Thomas, Beneficial Shareholder 937 East 7th Street Loveland, Colorado 80537 900,000 5.28% E.M.M. Company Trust, Beneficial Shareholder 22585 Seaver Court Santa Clarita, California 91350 1,378,600 8.1% Vernon C. Kendrick, Beneficial Shareholder 255 SW 14th Place Boca Raton, Florida 33432 4,415,000(1) 25.9%(1) The Challenge Limited c/o The Belize Bank, Ltd 60 Market Square #364 Belize City, Belize 900,000(2) 5.28%(2)
- ------------------ (1) These shares we issued in the acquisition of 80% of the stock of WavePower, Inc. in April of 2000. The Company has rescinded that transaction because of misrepresentation of and lack of value in the consideration received for these shares. See Item 1. Above. Accordingly, it is the Company's position that these shares were not validly issued and will not be considered as outstanding by the Company. However, pending receipt and cancellation of the certificate representing these shares and/or a binding legal determination that they are not validly issued they will be listed herein. 29 (2) These shares were issued in exchange for a contractual promise to perform services for the Company. On September 13, 2000, the Company notified the holder that the service contract was canceled for failure of performance and other legal issues and that this stock was not validly issued. It is the Company's position that these shares were not validly issued and will not be considered outstanding by the Company. However, pending receipt and cancellation of the certificate representing these shares and/or a binding legal determination that they are not validly issued, they will be listed herein. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Messrs. Sam J. Lindsey, Gregory J. Kaiser, and Mark A. Thomas, the officers and directors of the Company, may be deemed to be its "parents", as that term is defined under the Securities Act of 1934, by virtue of their positions. In addition, Mr. D. William Thomas, a Founder and a principal shareholder of the Company may be deemed to be such a parent. On January 1, 1999, the Company entered into a Consulting Agreement with Sam J. Lindsey, who became a director and President of the Company on July 30, 1999. Under the agreement Mr. Lindsey is to devote his full working time and best efforts to develop revenues. The agreement is for a two-year term ending December 31, 2000 and provides for monthly payments of $5,000. The Company has not had sufficient funds to make all the payments on this obligation and as of December 31, 1999 the total accrued amount due to Mr. Lindsey was $40,000. The Company has issued its promissory note to Mr. Lindsey for this $40,000. The note is due December 31, 2000 and bears interest at the rate of 12% per annum. It is anticipated that this agreement will remain in place and accruals of or payments on the consulting fee continued, until the Company develops salary compensation package for its officers at which time the agreement will be terminated. In addition to the accrual of the consulting fee to Mr. Lindsey, the Company on November 20, 1999, authorized the issuance of 400,000 shares to him of the common stock. On December 1, 2000, the Company issued 500,000 shares to Mr. Lindsey as compensation for services under the Agreement. On January 1, 1999, the Company entered into a consulting agreement with Mr. D. William Thomas under which he has and is to provide services to the Company. The agreement is for a term of two years ending December 31, 2001 and provides for monthly payments of $5,000. The Company has not had sufficient funds to make all the payments on this obligation and as of December 31, 1999, the total accrued amount due to Mr. Thomas was $40,000. The Company has issued its promissory note to Mr. Thomas for this $40,000. The note is due December 31, 2001 The Company has issued an additional note to Mr. Thomas for $60,000 for the consulting fees for the year 2000. This note also bears 12% interest per annum and is due December 31, 2001, and bears interest at the rate of 12% per annum. This agreement also provides for the issuance to Mr. Thomas of 200,000 shares of common stock per year if certain business goals are met by the Company. On November 20, 1999, the Company authorized the issuance to Mr. Thomas of 500,000 shares of common stock as total stock compensation for all consulting services rendered and to be entered under the agreement. On December 1, 2000,the Company issued 500,000 shares of common stock to Gregory J. Kaiser, as officer and director of the Company. These shares were issued to Mr. Kaiser as compensation for services rendered. On April 19, 2000, the Company issued 4,415,000 shares of its common stock to Vernon C. Kendrick in the transaction in which the Company acquired 80% of the outstanding stock of WavePower, Inc. These 4,415,000 shares would constitute approximately 25.9% of the Company's outstanding stock as of March 1, 2001. The Company has rescinded the WavePower acquisition because of misrepresentation of and lack of value in the consideration received by the Company. The Company has demanded the certificates for these shares be returned for cancellation and has instructed the Company's Transfer Agent that they are not to be transferred. It is the Company's position that these shares are void and not validly issued. However, pending receipt and cancellation of the certificates for the shares and/or a binding legal determination that they were not validly issued they are included in this report. 30 For details of the lease by the Company of its office facilities in Loveland, Colorado from an entity owned by D. William Thomas, a principal shareholder of the Company, see ITEM 2. DESCRIPTION OF PROPERTY. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS.
EXHIBIT NUMBER DESCRIPTION LOCATION - ------- ------------ -------- 3(i).1 Articles of Incorporation Incorporated by Reference to Exhibit 2.1 to the Registrant's Form 10-SB Registration Statement filed on 8/28/96. (No. 0-21275) 3(i).2 Articles of Merger (containing Incorporated by Reference to Exhibit 3(i).2 to Amendment to Articles of the Registrant's Form 10-KSB for the period Incorporation to change name) ended December 31, 1999. (No. 0-21275) 3(ii).1 Bylaws Incorporated by reference to Exhibit 2.2 to the Registrant's Form 10-SB Registration Statement filed on 8/28/96. (No. 0-21275) 3(ii).2 Amendment to Bylaws Incorporated by Reference to Exhibit 3(ii).2 to the Registrant's Form 10-KSB for the period ended December 31, 1999. (No. 0-21275) 10.1 Lock-up Agreements by Company Incorporated by reference to Exhibit 3.1 to Shareholders the Registrant's Form 10-SB Registration Statement filed on 8/28/96. (No. 0-21275) 10.2 Joint Venture Agreement with Incorporated by reference to Exhibit 10-B of A.W. Hogan the Registrant's Form 8-K filed 6/2/98 (No. 0-21275) 10.3 Form 8-K dated 6/2/98 Relative to Incorporated by reference to Form 8-K filed Business Combination with Links, Ltd. on August 12, 1998. (No. 0-21275) 10.4 Consulting Agreement dated 1/1/99 Incorporated by reference to Exhibit 10.2 Between Company and Advance to Form 10-QSB for period ended 6/1/99 Marketing Analysis filed on August 23, 1999. (No. 0-21275) 10.5 Consulting Agreement dated 1/1/99 Incorporated by reference to Exhibit 10.3 to Between Company and Sam J. Lindsey Form 10-QSB for period ended 6/1/99 filed on August 23, 1999. (No. 0-21275) 10.6 Agreement and Plan of Reorganization Incorporated by reference to Exhibit 10.1 to dated 1/7/2000 Between Company and Form 8-K filed on January 21, 2000. (No. 0-21275) and Shopping Mall Online, Inc. 31 10.7 Stock Purchase and Subscription Incorporated by reference to Exhibit 10.7 to Agreement Between Company and Registrant's Form 10-KSB for the period The Reserve Foundation Trust ended December 31, 1999. (No. 0-21275) 10.8 Promissory Note of Company to Incorporated by reference to Exhibit 10.8 to The Reserve Foundation Trust Registrant's Form 10-KSB for the period ended December 31, 1999. (No. 0-21275) 10.9 Reorganization Agreement dated Incorporated by reference to Exhibit 2.1 to Form April 19, 2000 among Enter Tech 10-QSB for Quarter Ended March 31, 2000. Filed Corporation, WavePower, Inc., on May 15, 2000. (No. 0-21275) and Vernon C. Kendrick 10.10 Employment Agreement among Enter Incorporated by Reference to Exhibit 10.1 to Form Tech Corporation, WavePower, Inc., 10-QSB for Quarter Ended March 31, 2000. Filed and Vernon C. Kendrick on May 15, 2000. (No. 0-21275) 10.11 Voting Trust Agreement Incorporated by Reference to Exhibit 10.1 to Form 10-QSB for Quarter Ended March 31, 2000. Filed on May 15, 2000. (No. 0-21275) 10.12 Joint Venture Agreement between Filed Herewith Enter Tech Corporation and Northern Communications Group, Inc. dated 10/13/00 10.13 Licensing Agreement between Enter Filed Herewith Tech Corporation and Hitdisc.com, Inc. dated 10/27/00 10.14 Employment Agreement between Filed Herewith Enter Tech Corporation and Gregory J. Kaiser
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the quarter ended December 31, 2000. 32 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunder duly authorized. SIGNATURE TITLE DATE /s/ Sam J. Lindsey Chairman of the Board, April 12, 2001 - ------------------ (Chief Executive Officer and Director) /s/ Mark A Thomas Director April 12, 2001 - ----------------- /s/ Gregory J. Kaiser Secretary and Director April 12, 2001 - --------------------- (Principal Financial and Accounting Officer) 33 EX-10 2 joint_venture.txt EXHIBIT 10.12-JOINT VENTURE AGMT. EXHIBIT 10.12 ------------- JOINT VENTURE AGREEMENT THIS AGREEMENT, made and entered into in the city of Loveland, Colorado, by and between Enter Tech Corporation, hereinafter called " ENTR", wherever the context hereof so requires or admits, and Northern Communications Group, Inc., hereinafter call "NCG", wherever the context hereof so requires or admits. Executed on this ______ day of ______________, 2000. WITNESSES WHEREAS, ENTR has certain marketing and technical capabilities and desires a Joint Venture with NCG on products and services offered by NCG for the purpose of selling these products and services to retail markets, and; WHEREAS, ENTR may introduce NCG to certain clients for additional marketing capabilities not covered by the this agreement and NCG may introduce ENTR to certain clients for additional marketing capabilities not covered by this agreement and the parties will establish separate and sole terms and conditions outside the agreement herein. NOW THEREFORE, in consideration of mutual covenants and agreements hereinafter contained, it is agreed as follows: 1. PLAN OF JOINT VENTURE: On terms and conditions hereinafter set forth, the parties hereinafter desire to establish a telephony-related sales and distribution channel for products and services that mutually benefit both entities. 2. EXCLUSIVITY: 1. NCG will be named exclusive provider of telephony "last-mile" solutions for ENTR projects that require such services. This exclusive relationship shall include NCG's technical expertise and experience in; (a) providing the most efficient equipment for the particular project, (b) managing and maintaining third-party relationships with vendors, and (c) ongoing management of telephony needs and related programming issues. 2. ENTR shall have non-exclusive, but priority rights to market proprietary communication technology currently being developed by NCG. ENTR shall have the right to re market certain equipment and supplies at reasonable profit margins as mutually determined. 3. MARKETING: ENTR and NCG will retain their respective offices and warehouses and will maintain accounting records of all related sales transactions. Either party will have the right to review at any time the others' accounting records specific to this agreement. ENTR will be solely responsible for all sales and marketing activities related to its projects and NCG shall be solely responsible for all sales and marketing activities related to its normal course of business. However, a joint sales and marketing plan shall be mutually agreed upon as it relates to the wireless Internet Service currently under development. This plan shall include potential cost allocations related to market penetration and definitions of exactly what each entity shall be responsible for in the development of this market. 4. ALLOCATION OF EXPENSE, REVENUE AND INCOME: NCG shall have the allocation of all expenses, revenue and income as it relates to providing last-mile solutions to ENTR projects. In cases where NCG can and does provide the wireless Internet Service to ENTR project customers where the expense of installation and monthly service fees are borne directly by the project partners, ENTR and NCG agree to equally split net income generated by any related installation that is originally paid to ENTR. This shall include not only services to the project itself, but also market penetration of other retail, communications solutions, and wireless Internet Service provided. 5. MANUFACTURING: NCG shall provide all products related to the wireless technology, either through known vendors or through manufacturing agreements with known entities. 6. CONSTRUCTION: This agreement and all conditions hereto has been executed in the State of Colorado and shall be construed pursuant to the laws hereof. 7. DISPUTE RESOLUTION: In the event of any dispute between the two parties it is agreed that the dispute with be resolved using Binding Arbitration administered by a certified arbitrator. The arbitration shall take place in the state of Colorado. 8. TERMINATION: This Agreement may be terminated by either party with 90 days written notice of default on any terms of the Agreement. Each party shall have a 90-day right to cure period upon receiving written notice from the other party. 9. NOTICES: Any notices which any of the parties hereto may desire to serve upon any of the other parties hereto shall be in writing and shall be conclusively deemed to have been received by the party to whom addressed if mailed, postage prepaid, Registered Mail, to the following addresses: ENTR: Enter Tech Corporation 430 East 6th Street Loveland, CO 80537 Attn: Greg Kaiser NCG: Northern Communications Group, Inc. 2383 West 8th Street Loveland, CO 80537 Attn: Steve Sycks 10. MODIFICATION AND ASSIGNMENT: This Agreement may not be modified, amended or assigned, in whole or in part, except by an instrument of writing executed by all of the parties hereto. 2 11. SUCCESSORS OF INTEREST: This agreement shall be binding upon and inure to the benefit of heirs, successors, representatives and assigns of the parties hereto. 12. COUNTERPARTS: This agreement may be executed in multiple counterparts, each of which shall be deemed a duplicate original. 13. INTEGRATION: This agreement represents the sole agreement of the parties with respect to the subject matter hereof, and all other agreements, written or oral, are hereby revoked. IN WITNESS HEREOF, the parties hereto have executed this agreement as of the day and date first hereinbefore set forth. Enter Tech Corporation By: -------------------------------- Northern Communications Group, Inc. By: -------------------------------- 3 EX-10 3 service_agmt.txt EXHIBIT 10.13-LICENSING AGREEMENT EXHIBIT 10.13 ------------- EQUIPMENT SALE & NETWORK SERVICE AGREEMENT ------------------------------------------ This Equipment Sale & Network Service Agreement ("Agreement") is dated this 27th day of October, 2000, and entered into by and between Hitdisc.com, Inc., a California corporation doing business as Zapdisc ("Manufacturer") and Enter Tech Corporation, a Nevada corporation("ETC") with reference with the following facts ZapDisc and ETC are sometimes referred to hereafter as the "Party" or collectively as the "Parties". RECITALS WHEREAS, Manufacturer owns certain patented technology for the distribution of digital products and is willing to sell certain equipment, license certain technology and provide certain networking services as more particularized below, WHEREAS, ETC desires to purchase Manufacturer's equipment, license certain technology to be networked and serviced in accordance with the terms herein, NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants, and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows: 1.0 DEFINITIONS. For purposes of this Agreement: 1.1 DVM. "DVM" shall mean Manufacturer's digital vending machine which consists of a fully automated kiosk which can deliver digital products in the form of custom music CDs. 1.2 Territory. "Territory" shall consist of the United States unless otherwise mutually agreed to by the Parties hereto in writing. 1.3 Customers. "Customers" shall mean the purchasers of any custom music CDs created by Manufacturer's DVMs. 1.4 Delivery Period. The "Delivery Period" for each DVM is the period commencing on the first date Manufacturer receives an order and payment for the purchase for each DVM consistent with the process set forth in Paragraph 3.0 below and ending one (1) year from the date of Manufacturer's receipt of each order. 1.5 Software. "Software" shall mean Manufacturer's propriety computer programming and code which enables the DVMs to operate as well as the proprietary interface with the Network. 1.6 Network. The "Network" consists of the database of digital content stored on the DVMs and the servers located at Manufacturer's facilities as well as the interface by which digital data may be transmitted between the DVM and Manufacturer's facilities. The physical communication medium through which said data will be transmitted (bandwidth, e.g., DSL, satellite, T-1 or other method) shall not be considered part of the Network. 2.0 SALE OF EQUIPMENT. (a) Subject to the terms and conditions of this Agreement, ETC hereby agrees to purchase from Manufacturer and Manufacturer hereby agrees to sell and deliver to ETC the DVMs for the purchase price specified in Paragraph 3.5 of this Agreement (the "Purchase Price"). Each DVM shall be purchased in accordance with the procedures set forth in Paragraph 3.0 of this Agreement and shall be subject to the terms and conditions specified herein. (b) Manufacturer further agrees to provide ETC with a nonexclusive license to use Manufacturer's Software and Network (hereinafter collectively referred to as the "Programs") in connection with the DVM, subject to the terms and conditions specified herein. Notwithstanding any provision in this Agreement to the contrary, Manufacturer shall retain all right, title and interest in and to any Programs provided to ETC in connection with the DVMs being acquired by ETC hereunder. Manufacturer hereby grants to ETC a nonexclusive license to utilize the Programs in connection with the operation and use of the DVMs pursuant to Paragraph 6.0 of this Agreement. (c) In addition to any other remedy Manufacturer may have, including the remedies set forth below, Manufacturer reserves the right to terminate ETC's license if ETC fails to comply with any term or condition hereof, subject to Paragraph 9.5 below. ETC agrees upon written notice from Manufacturer of any termination of the license granted pursuant to this paragraph and in accordance with any more specific directions from Manufacturer, to deliver immediately to Manufacturer all Programs and copies thereof, and all other tangible items and materials in the possession or custody of Buyer embodying the Programs. (d) ETC shall not accept orders from potential joint ventures or other purchasers of any DVMs to be delivered or placed in service outside the Territory unless otherwise mutually agreed to by the Parties hereto in writing. (e) Nothing in this Agreement shall be construed to preclude Manufacturer from marketing, selling, servicing or networking the DVMs directly in the Territory or from marketing, selling, licensing or servicing DVMs to or for any third party which might market, sell or lease DVMs in the Territory and Manufacturer expressly reserves the right to do so; provided, however, that Manufacturer agrees that it shall not sell or license DVMs to any other joint venture which is structured in a manner as the ETC. (f) Each and every DVM purchased from Manufacturer under this Agreement must be marketed by ETC with Manufacturer's trademark logos and the tradename, Zapdisc, consistent with the graphics set forth on Exhibit "A" attached hereto. 2.1 ETC Duties and Responsibilities. ETC agrees to use its best efforts to promote, develop a market, sell, and distribute custom music CD products created by the DVMs to Customers in the Territory. Among such other actions as may be necessary to generate sales from the DVMs in the Territory, ETC agrees to perform the following duties: (a) ETC will engage in sales promotion activities in which each DVM shall be designated by its trade name and identified as Manufacturer's DVM that is being marketed by ETC as an independent entity, and ETC will maintain a qualified administrative organization for the DVMs in the Territory. (b) ETC will maintain an administrative staff in connection with the installation and operation of each DVM as well as sufficient quantities of all consumable items including, without limitation, recordable CDs, jewel cases and appropriate paper stock for purchase receipts for the operation of each DVM, all of which shall comply with Manufacturer's specifications. In addition, ETC will maintain a customer service department to respond to any customer service calls received by ETC from Customers who purchased products from the DVMs in the Territory in a prompt and courteous manner. (c) ETC shall at all times conduct its business in a manner that will reflect favorably on Manufacturer as well as the DVMs and will not engage in any deceptive, misleading, illegal or unethical business practice. ETC agrees not to make any representations or give any warranties or guarantees to any person, including, without limitation it joint venture partners, vendors or other third parties with whom it contracts, concerning the DVMs or the Network Services as set forth in Paragraph 8.0 below unless expressly authorized in writing by Manufacturer. 2 (d) Manufacturer shall have the right not more than once every three months and on reasonable notice and during normal business hours to visit and inspect ETC's places of business for the purpose of verifying to the satisfaction of Manufacturer that ETC is performing its obligations under this Agreement and for purposes of conducting an audit of ETC's business operations and sales. (e) ETC, not later than the tenth day following the end of each month, shall provide Manufacturer with a report as to the sales of digital products to Customers for each DVM. The monthly sales report shall list for each DVM the total dollar amount of digital products sold to Customers together with a breakdown of the identity of each music track reproduced. (f) ETC will assist Manufacturer in assessing customer requirements for the DVMs and in developing modifications and improvements of the DVMs, with a view towards maximizing the potential market for the DVMs in the Territory. ETC will keep Manufacturer fully informed of all governmental, commercial and industrial activities or plans that could or do affect the sale of DVMs in the Territory. (g) ETC shall locate and negotiate the venue for each point of sale location for the deployment of DVMs. Each point of sale location for each DVM shall be a secure environment that is enclosed and does not expose the DVM to the elements. With regard to dual terminal DVMs, Manufacturer recommends that each point of sale location have established customer foot traffic of 750K to 1.5M people on a monthly basis. (h) ETC shall arrange for the installation of and access to bandwidth at each point of sale location for each DVM with sufficient capacity for the operation of the Network Services to be provided by Manufacturer in accordance with Paragraph 8.0 of this Agreement. ETC acknowledges and agrees that each point of sale location for each DVM shall have minimum bandwidth of 512 kilobites to 1 megabite. ETC shall continue to make available to Manufacturer at each point of sale location for each DVM sufficient bandwidth (512 kilobites to 1 megabite) for the operation of the Network Services to be provided by Manufacturer in accordance with Paragraph 8.0 of this Agreement (i) ETC will comply with all applicable laws and regulations and will not knowingly assist or participate in any violation of laws or regulations applicable to Manufacturer or ETC, including regulations promulgated by the U.S. Department of Commerce prohibiting the export of DVMs to certain countries. (j) In the event ETC receives written notice from Manufacturer that a Customer has requested a refund consistent with Paragraph 2.5(f), ETC agrees to remit payment to the Customer in the amount requested within fifteen (15) days of the receipt of Manufacturer's notice and provide Manufacturer with written confirmation that the refund by ETC has been disbursed. 2.2 Representations Regarding Ownership and Control of ETC. The ETC represents and warrants to the Manufacturer that: (a) The persons listed on Exhibit "B" are the only persons who have any interest, of record or beneficially, in the joint ventures involving ETC. The identification of the persons listed on Exhibit "B" is for informational purposes only and so to enable Manufacture to determine whether it is obligated to respond to information requests concerning the DVMs. (b) Other than the person identified Paragraph 2.2(a) above, no other person, firm or corporation has or will have any right, option or privilege under any circumstances to acquire any interest, of record or beneficially, in the joint ventures involving ETC. (c) ETC will provide written notice to the Manufacturer no sooner than twenty (20) days prior to any contemplated change in the ownership or interest in ETC, or in the identity of the persons who have authority and responsibility for the management of ETC's business, and will not enter into any agreement to effect any such change without the prior written approval of the Manufacturer. 3 2.3 ETC Milestones. ETC agrees that a failure by ETC to order and take delivery of a sufficient number of DVMs to meet the milestones set forth below shall be cause for termination by Manufacturer of this Agreement and of all of ETC's rights hereunder: (a) Three Months : At least thirty (30) dual terminal DVMs (60 single terminal DVMs at a purchase price which has yet to be determined). (b) Nine Months : At least another thirty (30) DVMs (60 single terminal DVMs at a purchase price which has yet to be determined). 2.4 ETC Expenses. (a) ETC shall be responsible for all expenses incurred by it in connection with the implementation and performance of its duties and obligations under this Agreement, including but not limited to: (i) Any and all costs incurred in fulfilling ETC's duties and responsibilities as provided in Paragraph 2.1 above; (ii) Salaries for ETC's personnel; (iii) Any and all costs and expenses associated with establishing and maintaining ETC's sales organization, customer service department and general and administrative offices; (iv) Advertising and promotion expenses; and (v) Any and all taxes, duties, tariffs or charges which may be imposed on ETC. (b) In addition to the foregoing expenses, ETC shall be responsible for each of the following expenses incurred in connection with the installation of each DVM: (i) Any and all costs incurred in fulfilling ETC's duties and responsibilities as provided in Paragraph 2.1 above; (ii) Transporting the DVM from Manufacturer's facilities to the point of sale location in the Territory; (iii) Any and all costs associated with identifying and securing the point of sale location in the Territory; (iv) Any and all costs associated with installing the communication medium (bandwidth costs) through which Manufacturer will operate the Network; (v) Any and all other operational costs associated with the point of sale location. (c) In addition to the foregoing expenses, ETC shall be responsible for each of the following expenses incurred in connection with the ongoing operation and use of each DVM; (i) Any and all costs associated with the point of sale location in the Territory, including, by way of example, rent; (ii) Any and all costs associated with maintaining the communication medium (bandwith costs) through which Manufacturer will operate the Network; (iii) Any and all costs associated with maintaining an adequate supply of all consumable items including, without limitation, recordable CDs, jewel cases and appropriate paper stock for purchase receipts for the operation of each DVM, all of which shall comply with Manufacturer's specifications; 4 (iv) Any and all costs associated with advertising displayed on the plasma screen incorporated with each DVM. Manufacturer and ETC agree that they shall use their best efforts and negotiate in good faith in the event an opportunity arises for a national advertising campaign incorporating DVMs owned by ETC and DVMs owned by Manufacturer; (v) Any and all costs associated with the sales and reporting of sales of products by each DVM; (vi) Any and all costs associated with the collection of cash, processing of credit cards and issuances of any credits relative to the sales of products to Customers. 2.5 Manufacturer's Obligations. Manufacturer shall perform the following duties pursuant to this Agreement: (a) Manufacturer will use its best efforts to supply ETC's purchase orders for the DVMs on the terms and conditions of this Agreement; provided, however, that Manufacturer shall be under no obligation to ETC to sell or continue distribution of the DVMs, whether or not on the existing price list, beyond sixty (60) days after notice of discontinuation from Manufacturer to ETC; provided further, that Manufacturer reserves the right to make substitutions and modifications in the DVMs if such substitutions or modifications do not materially adversely affect overall DVM performance. ETC also acknowledges that, because of manufacturing scheduling, Manufacturer may sometimes be unable to supply orders to be delivered consistent with Paragraph 3.1 below. In this event, Manufacturer shall advise ETC of its estimated delivery date as soon as is reasonably practicable after receipt of the order but in no event shall delivery of any DVM be greater than one (1) year from the date of Manufacturer's receipt of a purchase order from ETC as provided for in Paragraph 3 below. (b) Manufacturer will provide reasonable training for ETC's technical and marketing personnel on an as needed basis, at no charge. (c) Once the DVM is delivered by ETC at the point of sale location in the Territory, Manufacturer will provide the initialization for each DVM. Such initialization will include ensuring that the DVM database is secure and operational and that access to Manufacturer's Network is established provided that ETC has properly set up the point of sale location with the communication medium (bandwidth) as set forth in Paragraphs 2.1(h) and 2.4(b)(iii) above. (d) Once the DVM has been initialized, Manufacturer will maintain and exclusively operate the Network as well as the databases on each DVM. (e) Manufacturer will keep ETC informed of changes in DVMs, specifications and deliveries and of governmental, commercial and industrial activities or plans that affect the sale of DVMs in the Territory. (f) Manufacturer will also maintain a customer service department including a toll free number to respond to any customer service calls received by Customers of ETC who purchased products from the DVMs in the Territory in a prompt and courteous manner. Manufacturer agrees to keep ETC periodically informed of Customer complaints. Manufacturer will advise ETC in writing in the event of a Customer request for a refund. Such written advice shall include the Customer's name address and reason for requesting a refund together with the amount requested. (g) Manufacturer will provide the warranty services as provided for in Paragraph 4.0 below. 2.6 ETC's Right To Use Manufacturer's Documentation, Trademarks and Markings. (a) ETC is hereby granted the right to reproduce, at its expense, Manufacturer's publicly distributed documentation relating to the DVMs and to use such documentation in connection with the operation of the DVMs. Reproduction of Manufacturer trademarks, logos, symbols, etc., shall be true reproductions. 5 (b) During the term of this Agreement, ETC is hereby granted permission to use Manufacturer's trademarks and trade names in connection with ETC's obligations under this Agreement. ETC recognizes Manufacturer's exclusive ownership of such marks and names and agrees not to take any action inconsistent with such ownership. ETC shall discontinue using any of Manufacturer's trademarks, trade names, logos and symbols immediately upon expiration or termination of this Agreement subject to Paragraph 9.5 below. (c) ETC will not remove or make or permit any alterations in any tags, labels or other identifying markings placed by Manufacturer on any DVMs. ETC will not add any identifying marks, tags, or labels to any DVMs; provided, however, that ETC shall have the right to place a serial number of the back of each DVM for purposes of maintaining ETC's business records and operations. 2.7 Independent Contractor Without Liability to Manufacturer. ETC will act as an independent contractor under the terms of this Agreement and not as an agent or legal representative of Manufacturer for any purpose, and ETC has no right or authority to assume or create any obligation of any kind, express or implied, on behalf of Manufacturer to ETC's customers or to any other person. All agreements between ETC and its vendors, third parties with whom it otherwise contracts and Customers are the sole responsibility of ETC, and shall have no effect on ETC's obligations under this Agreement. Except for any product liability claims, ETC shall be wholly responsible for, and shall indemnify and hold Manufacturer free and harmless from, any and all claims, demands, actions, any losses or damages arising therefrom and any fees, costs, and expenses related thereto (including attorneys fees generated by counsel whose appointment shall be at Manufacturer's election and discretion) arising out of the acts of ETC, its agents, employees and servants, or any of them. 3.0 PURCHASE ORDERS AND DELIVERY. 3.1 Purchase Orders. (a) During the term of this Agreement, ETC shall issue a written purchase order to Manufacturer for each DVM, which purchase order shall state: "This purchase order is placed under the terms and conditions of the ETC Agreement between ETC and Manufacturer, dated October 27, 2000. Purchase orders from ETC shall be deemed accepted by Manufacturer only upon execution by Manufacturer of a written acknowledgment of the order. Delivery dates for each DVM so ordered shall be determined by mutual agreement, which agreement shall be evidenced solely by the delivery schedule set forth in Manufacturer's acknowledgment. The foregoing method shall be the only method by which ETC commits to purchase DVMs from Manufacturer and Manufacturer commits to sell DVMs to Buyer. ETC agrees to assist Manufacturer in its production planning by providing Manufacturer each calendar quarter with a forecast of ETC's anticipated orders during the next six months. (b) ETC hereby acknowledges that Manufacturer has not completed the design for nor has Manufacturer built a single terminal DVM. Accordingly, in the event ETC submits to Manufacturer a Purchase Order for the delivery of a single terminal DVM(s), Manufacturer reserves the right to delay acceptance of that portion of the Purchase Order which includes a single terminal DVM(s) for a period not to exceed ninety (90) days so as to allow Manufacturer the time necessary to complete the design and development of the single terminal DVM. Manufacture will give ETC an artist rendering of the single terminal DVM as well as the Purchase Price as soon as commerically practical. ETC shall have ten (10) days from receipt of the rendering and Purchase Price to approve the same. In the event ETC does not approve the rendering or the Purchase Price, ETC may cancel that portion of the Purchase Order relating to the single terminal DVM without charge. (c) Initial Minimum Order. ETC agrees that its initial Purchase Order shall not be for less than nine (9) dual terminal DVM's. 6 3.2 Manufacturer's Rights Regarding Acceptance of Orders from ETC and Allocation of Supplies. Manufacturer shall use its best efforts, whenever orders for DVMs exceed available supplies, to fairly and reasonably allocate the available supply; however, Manufacturer shall have the right to reduce the quantities of DVMs which may be ordered by ETC. In the event Manufacturer so reduces the quantities of DVMs, ETC shall have no claim of any kind against the Manufacturer for its refusal to accept orders by the Manufacturer as a result of allocations made by the Manufacturer as described herein. 3.3 Cancellation. (a) ETC may cancel any purchase order for a DVM by giving Manufacturer one hundred twenty (120) days advance written notice of such cancellation. (b) ETC may cancel any order by notice to Manufacturer, provided that ETC shall pay a cancellation charge based upon the purchase price relating to the DVMs canceled in accordance with the following schedule: Number of Days Before Charge as a Percentage Delivery Date of Purchase Price --------------------- ---------------------- 120 25% 90 35% 60 50% 30 80% In the event of cancellation, ETC will have no rights in partially completed goods. (c) If ETC postpones delivery of an order and subsequently cancels that order, Manufacturer may, at its option, use the original delivery date to calculate the cancellation charge for that order. 3.4 Delivery & Acceptance. (a) Each DVM shall be delivered to ETC F.O.B. Manufacturer's facilities. Delivery of the DVM to a common carrier shall be deemed a satisfactory delivery by Manufacturer to ETC. ETC agrees to pay all freight, insurance, packing and other transportation charges related to said delivery. Manufacturer shall arrange for the freight, insurance, packing and other transportation charges related to said delivery and to prepay such charges, in which event ETC shall reimburse Manufacturer in the amount thereof within ten (10) days of presentation by Manufacturer of evidence of payment. In connection with the delivery of the DVM, ETC may designate in writing, not less than ten (10) business days prior to the shipment date, the carrier for shipment and the amount of insurance and nature of coverage. If ETC fails to so designate any or all such items, Manufacturer, at its discretion, may specify any item not so designated. Manufacturer shall select, at its discretion, the types and amount of crating. (b) ETC shall inspect each DVM promptly upon receipt thereof at the shipping destination and may reject any DVM which fail in any significant respect to meet Manufacturer's written specifications as set forth on Exhibit "C" attached hereto. DVMs not rejected by written notification to Manufacturer within ten (10) days of receipt shall be deemed to have been accepted. ETC's rejection shall not be effective unless the rejected DVM is returned freight prepaid by ETC to Manufacturer in a timely fashion not to exceed thirty (30) days of receipt. As promptly as commercially reasonable but not later than thirty (30) days after receipt by Manufacturer of a properly rejected DVM, Manufacturer shall, at its option and expense, either repair or replace said properly rejected Equipment. Manufacturer will prepay transportation charges back to ETC and credit ETC's account for any costs of transportation in the United States incurred by ETC in connection with the return to Manufacturer of a properly rejected DVM; otherwise ETC shall pay ground transportation charges in both directions. (c) Risk of loss or damage to the DVM shall pass to ETC upon delivery by Manufacturer to a common carrier for shipment. 7 3.5 Price. (a) The Purchase Price for each dual terminal DVM purchased pursuant to this Agreement shall be One Hundred Twenty Five Thousand Dollars ($125,000.00US) together with an initialization fee for the services as set forth in Paragraph 2.5(c) in the amount of Twenty Five Hundred Dollars ($2,500.00) per day plus travel expenses. The Purchase Price does not include the Network service charges as set forth in Paragraph 8.0 below or the extended warranty maintenance charges set forth in Paragraph 7.0 below. It is hereby expressly understood by ETC that Manufacturer and ETC have not agreed upon a sales price for a single terminal DVM. (b) Payment terms are seventy five percent (75%) of the Purchase Price at the time Manufacturer accepts a purchase order with the balance payable prior to shipment of the DVM. All payments shall be made at Manufacturer's principal place of business in Irvine, California, without deduction or offset. Each invoice submitted by Manufacturer shall reference ETC's purchase order number. Payment shall be made without regard to whether ETC has made or may make any inspection or use of the DVM. (c) Each shipment shall be treated as a separate transaction, but in the event of any default of ETC, Manufacturer may decline to make further shipments without in any way affecting its rights hereunder. If, despite any default by ETC, Manufacturer elects to continue to make shipments, Manufacturer's action shall not constitute a waiver of any default by ETC or in any way affect Manufacturer's legal remedies for any such default. (d) Manufacturer may assess service charges not exceeding one and one-half percent (1.5%) per month, or such lesser amount as may be permitted by applicable law, on past due accounts. (e) Manufacturer retains a security interest in each DVM to secure performance of ETC's payment obligations for the Purchase Price. If ETC shall fail to pay any portion of the Purchase Price, Manufacturer shall have the right, without liability, to repossess the DVM and to avail itself of any legal remedy. ETC agrees to execute and deliver such financing statements and other documentation as Manufacturer may reasonably request to perfect and protect Manufacturer's interests in the DVM. Title to the DVM shall remain with Manufacturer until the total Purchase Price, together with any service charges assessed thereon, has been paid in full. 3.6 Taxes. The Purchase Price set forth in Paragraph 3.5(a) above is exclusive of any sales, use or privilege tax, customs duty or import, excise tax based on gross revenue or any similar tax or charge which might be levied as a result of the production, sale or shipment of any DVM or the use of any DVM by ETC. ETC agrees to pay and otherwise be fully responsible for any such taxes (except for taxes based on the net income of Manufacturer). Any personal property taxes assessable on the DVM after delivery shall be borne by ETC. Manufacturer shall have the right, but shall not be obligated, to pay any such taxes directly, in which event ETC shall promptly reimburse Manufacturer in the amount thereof upon presentation by Manufacturer of evidence of payment. 4.0 LIMITED WARRANTY. (a) Manufacturer warrants to Buyer that, for a period of one hundred twenty (120) days from delivery, each DVM will conform in all material respects to Manufacturer's written specifications for the item attached hereto as Exhibit "C" and will be free from defects in materials and workmanship. Manufacturer's obligation under this warranty is limited to, at Manufacturer's option, repairing or replacing, at Manufacturer's facility or at the location of the DVM, at Manufacturer's option, any DVM or parts thereof that Manufacturer determines not to conform to this warranty. ETC shall promptly notify Manufacturer in writing of any alleged defects in the DVM and specifically describe the problem. Manufacturer shall have no obligations under this warranty with respect to any defect unless it receives notice and a description of such defect no later than ten (10) business days following the expiration of the warranty period. Upon receipt of such notice, Manufacturer shall either advise ETC that warranty service shall be provided at the location of the DVM or shall instruct ETC as to the part or parts of the DVM that ETC shall ship back to Manufacturer for repair or replacement. Manufacturer will pay the costs of transporting repaired or replaced DVM back to ETC and will reimburse ETC for costs of transporting the DVM to Manufacturer which Manufacturer determines to have been defective; otherwise, ETC shall pay all costs of transportation in both directions. 8 (b) Manufacturer represents and warrants that it has title to the DVMs to be conveyed hereunder and has the right to sell the same and that at the time of delivery, each DVM shall be free of any security. (c) The limited warranty provided by Manufacturer does not impose any duty or liability upon Manufacturer for: (i) Any damage or defect occurring, at any time, during shipment of products. When returning products to Manufacturer for repair or replacement, ETC assumes all risk of loss or damage, and agree to use any shipping containers which might be provided by Manufacturer and to ship the products in the manner prescribed by Manufacturer; (ii) Any damage caused by unauthorized adjustment, repair or service by anyone other than personnel of Manufacturer or ETC's trained and authorized repair agents; (iii) Repair, damage or increase in service time caused by the failure to provide a continuously suitable installation environment, including, but not limited to: (1) neglect or misuse, (2) a failure or sudden surge of electrical power, (3) improper air conditioning or humidity control, or (4) any other cause other than ordinary use; (iv) Repair, damage or increase in service time caused by fire, flood, earthquake, water, wind, lightning or other natural disaster, strike, inability to obtain materials or utilities, war, civil disturbance or any other cause beyond Manufacturer's reasonable control; (v) Failure of the communication medium (bandwidth) supplied by ETC for purposes of Manufacturer operation of the Network as provided for herein; (vi) Any statements made about the DVM by ETC, its representatives or agents, unless such statements are in a written document signed by an officer of Manufacturer. Such statements as are not included in a signed writing do not constitute warranties, shall not be relied upon by ETC and are not part of the contract of sale; (vii) Any damage arising from the use of the DVMs in any application, other than the retail application for which they are intended, unless, upon request, such use is specifically approved in writing by Manufacturer. DVMs are sophisticated CD duplication units and are not sold or distributed for personal, family or household purposes; or (viii) All statements, technical information and recommendations contained in this Agreement are based on tests Manufacturer believes to be reliable, but the accuracy or completeness thereof is not guaranteed and Manufacturer neither assumes nor authorizes any person to assume any other liability or warranty in connection with its DVMs. (d) Upgraded limited warranty. In the event ETC requests that Manufacturer provide on-site repair of any defects in the materials and workmanship of a DVM for the limited warranty period consistent with Paragraph 4.0(a) above, ETC shall pay in advance to Manufacturer at time of delivery an on-site warranty service fee in the amount of Twenty Five Thousand Dollars ($25,000.00). THE FOREGOING WARRANTIES APPLY ONLY TO THE ETC AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. (e) Manufacturer shall in no event have obligations or liabilities to ETC or any other person for loss of profits, loss of use or incidental, special or consequential damages, whether based on contract, tort (including negligence), strict liability, or any other theory or form of action, even if Manufacturer has been advised of the possibility thereof, arising out of or in connection with the sale, delivery, use, repair or performance of the DVM or the Programs, or any failure or delay in connection with any of the foregoing. Without 9 limiting the generality of the preceding sentence, Manufacturer shall not be liable for personal injury or property damage with the exception of product liability claims. In no event shall the liability of Manufacturer arising in connection with any DVM sold hereunder exceed the actual amount paid by ETC to Manufacturer for a single DVM delivered hereunder. 5.0 PATENT AND TRADEMARK INDEMNITY. 5.1 Indemnity. Manufacturer will defend, at its own expense, any suit or proceeding against ETC in a court of the United States for the direct infringement of United States patents and trademarks by the DVM purchased from Manufacturer hereunder. Manufacturer shall pay all damages and costs finally awarded against ETC because of direct infringement; provided, however, that Manufacturer shall not be obligated to defend or be liable for costs or damages awarded in any suit or proceeding for infringement of patents by any other products, or any completed DVM, system, assembly, combination, method or process, in which, or in the manufacture or testing of which, any DVM purchased from Manufacturer may be used; and provided further that Manufacturer's obligations to pay such damages and costs shall not apply to any alleged infringement occurring after ETC has received notice of such alleged Infringement unless Manufacturer thereafter gives to ETC written consent for such continuing alleged infringement. Manufacturer's liability hereunder shall not exceed the purchase price paid by ETC for the infringing DVM, and Manufacturer shall not be liable for any collateral, incidental or consequential damages awarded against ETC. 5.2 Notice. Manufacturer's duties under this Paragraph 5.1 are conditioned upon ETC giving Manufacturer prompt written notice of commencement of any suit or proceeding or any claim of infringement and furnishing to Manufacturer a copy of each communication relating to the alleged infringement and giving to Manufacturer all authority (including the right to exclusive control of the defense of any such suit or proceeding), information and assistance (at Manufacturer's expense) necessary to defend or settle such suit or proceeding. Manufacturer shall not be bound by any settlement made without Manufacturer's prior written consent. 5.3 Injunction. If in any such suit or proceeding ETC's continued use of any item of DVM is enjoined, or if by reason of any claim of infringement Manufacturer deems it advisable to do so, Manufacturer may at its option and expense, (i) procure for ETC the right to continue using such DVM, (ii) modify or replace such DVM with noninfringing DVM, provided that such modification does not materially affect performance, or (iii) remove such DVM, grant ETC a credit thereon as depreciated on a straight_line 3_year basis and accept its return. If infringement is alleged prior to completion of deliveries of the DVM, Manufacturer may decline to make further shipments without being in breach of this Agreement. THE FOREGOING STATES THE SOLE AND EXCLUSIVE LIABILITY OF MANUFACTURER FOR PATENT, TRADEMARK AND COPYRIGHT INFRINGEMENT AND IS IN LIEU OF ANY AND ALL WARRANTIES OR SIMILAR OBLIGATIONS, EXPRESS OR IMPLIED, IN REGARD THERETO. 6.0 SOFTWARE LICENSE. 6.1 Software. Notwithstanding any contrary provision in this Agreement, Manufacturer shall retain all right, title and interest in and to any Programs provided to ETC in connection with the DVMs being acquired by ETC hereunder. Manufacturer hereby grants to ETC a restrictive, nonexclusive license under which ETC may use the Programs solely in connection with the DVMs pursuant to the terms and conditions of the Zapdisc Digital Vending Machine Software System License attached hereto, marked Exhibit "D" and fully incorporated hereat by this reference. In the event of a conflict in the terms or conditions of this Agreement and the Zapdisc Digital Vending Machine Software System License attached hereto, marked Exhibit "D", the terms and conditions of the latter 10 shall control. ETC agrees to maintain the confidentiality of the Programs and to instruct and obligate their employees and agents to do the same. Without limiting the generality of the foregoing, ETC shall not reproduce or modify all or any portion of the Programs, nor shall ETC disclose, sell, sublicense or otherwise transfer or make available all or any portion of the Programs to any third party, without the prior express written consent of Manufacturer. 6.2 Termination. In addition to any other remedy Manufacturer may have, Manufacturer reserves the right to terminate ETC's license if ETC fails to comply with any term or condition hereof, subject to Paragraph 9.5 below. ETC agrees upon written notice from Manufacturer of any termination of the license granted pursuant to this Paragraph 6.2 and in accordance with any more specific directions from Manufacturer, subject to Paragraph 9.5 below, to deliver immediately to Manufacturer all Software and copies thereof and all other tangible items and materials in the possession or custody of ETC embodying the Software. 7.0 EXTENDED WARRANTY SERVICE. Upon expiration of the initial limited warranty as set forth in Paragraph 4.0 above, and upon the request of ETC, Manufacturer (or its authorized representative) will provide on-site technical support for situations where ETC's personnel have been unable to correct problems associated with the DVMs. It is agreed that if the required on-site technical support is mutually determined by ETC and Manufacturer (or its authorized representative) to be necessary due to a defect under the DVM warranty or is readily correctable with normal maintenance procedures, ETC shall be billed at the then prevailing Manufacturer rate for such on-site technical support. 8.0 NETWORK SERVICES 8.1 In addition to the sale of the DVM, Manufacturer will provide ETC with access to its propriety database for the digital distribution and sale of custom music CDs. The Network services to be provided by Manufacturer are set forth on Exhibit "E" attached hereto. Manufacturer's obligation to provide ETC with the Network Services as provided for in this Paragraph 8.0 shall be conditioned upon ETC's compliance with its obligations hereunder, including, without limitation, Paragraph 2.1. 8.2 In consideration for the Network Services to be provided hereunder, ETC shall, on no less than a monthly basis, pay Manufacturer a fee of no less than Thirty Five Cents ($0.35) per sound track reproduced ("Royalty Fee") based upon Manufacturer's current licensing agreements. Manufacturer reserves the right to increase the Royalty Fee upon thirty (30) days notice to ETC in the event of an increase in Manufacturer's existing or new licensing agreements. In addition to the Royalty Fee, ETC shall pay to Manufacturer a monthly "Network Service Fee" as follows: (ii) Five Hundred Dollars ($500.00) per DVM for the first ten (10) units payable in advance on the first of each month as well as a license fee, payable within ten (10) days after the end of each month, for Manufacturer's patented technology as well as twenty five percent (25%) of the net revenue generated by each DVM; (iii) From eleven (11) to twenty five (25) units, the Network Service Fee for Manufacturer's patented technology and proprietary software shall be equal to five percent (5%) of the gross monthly revenue and twenty five percent (25%) of the net monthly revenue generated by each DVM, payable within ten (10) days after the end of each month, with a guaranteed minimum of Four Hundred Fifty Dollars ($450.00) per DVM per month payable in advance on the first of each month; 11 (iv) From twenty six (26) to fifty (50) units, the Network Service Fee for Manufacturer's patented technology and proprietary software shall be equal to two and one-half percent (2.5%) of gross monthly revenue and twenty five percent (25%) of the net monthly revenue generated by each DVM, payable within ten (10) days after the end of each month, with a guaranteed minimum of Four Hundred Fifty Dollars ($450.00) per DVM per month payable in advance on the first of each month; and (v) After the sale of fifty (50) units, the Network Service Fee shall computed at two and one-half percent (2.5%) of gross monthly revenue as well as twenty five percent (25%) of the net monthly revenue generated by all DVMs, payable within ten (10) days after the end of each month, with a guaranteed minimum of fifty (50) DVMs at Four Hundred Fifty Dollars ($450.00) per unit per month, payable in advance on the first of each month, together with two and one-half percent (2.5%) of gross monthly revenue on a maximum of fifty (50) DVMs, payable within ten (10) days after the end of each month. In the event there are no net revenues, ETC and Manufacturer shall renegotiate in good faith the Network Service Fee. For purposes of this Paragraph 8.2, "net revenue" shall be calculated consistent with the formula set forth on Exhibit "F" hereto. 8.3 In the event ETC fails to pay any of the fees required by Paragraph 8.2 above, in addition to any other remedy available at law or in equity, Manufacturer shall have the right to immediately notify ETC of the default in payment in writing. ETC shall have the right to cure the default within ten (10) days of Manufacturer's notice. In the event, ETC fails to cure said default within ten (10) days, ETC's access to the Network may be terminated by Manufacturer without any further notice. 8.4 ETC hereby acknowledges that the content database which will be available through the Network presently consists solely of independent music sound tracks which are made available to Manufacturer pursuant to Manufacturer's existing licensing agreement with The Orchard, LLC, an independent music label. ETC hereby further acknowledges that Manufacturer makes no representations or warranties whatsoever as to: (1) the continued availability of content from The Orchard, LLC for the Term as defined below; (2)the popularity of the independent content licensed from The Orchard, LLC; or (3) the rate or cost at which such music sounds tracks may be sold through the DVMs. 9.0 TERM & TERMINATION. 9.1 Term. The initial term of this agreement shall become effective and commence on the date Manufacturer receives the first purchase order and shall continue for five (5) years, unless earlier terminated as otherwise provided herein. After the initial five (5) year term, this Agreement shall continue in effect until terminated by either party as otherwise provided herein for additional periods of one (1) year duration each. Either Party shall have the right, upon one hundred twenty (120) days written notice delivered by either party to the other, to terminate this Agreement effective on any anniversary of the effective date, provided that this Agreement shall not be terminated pursuant to this sentence prior to the expiration of the initial five (5) year term described above. 9.2 Renewal. This Agreement may be renewed by a written renewal agreement consented to by Manufacturer and ETC, which renewal agreement shall specify the renewal period and the terms and conditions to be applicable in said renewal period. In the absence of such a written renewal agreement, this Agreement will terminate as set forth in Paragraph 9.1, unless it is terminated earlier in accordance with Paragraphs 9.3 and 9.4. 9.3 Termination by Manufacturer. Manufacturer may terminate this Agreement prior to the termination date set forth in paragraph 9.1 upon failure by the ETC to meet any of the milestones set forth in paragraph 2.3 by giving notice to ETC. Further and notwithstanding any provision herein to the contrary, in the event Manufacturer's existing licensing 12 agreement with The Orchard, LLC as set forth in Paragraph 8.4 is terminated or not renewed, Manufacturer has the right, upon thirty (30) days advance written notice to ETC, to terminate the Network Services to be provided in Paragraph 8.0 of this Agreement. 9.4 Termination by Either Party. Either Party may, by written notice to the other party, terminate this Agreement in any one or more of the following events: (vi) Failure to Pay: Failure of the other party to make any payment when due in accordance with the terms of this Agreement, if such default continues for five (5) business days or more after notice to such other party; (vii) Material Default: Material failure of the other Party to observe, keep or perform any of the covenants, terms or conditions herein, if such default continues for ten (10) business days or more after notice to such other party; or (viii) Insolvency. In the event: (i) A receiver is appointed for the other Party or for substantially all of such Party's assets; (ii) The other Party becomes insolvent or unable to pay its debts as they mature in the ordinary course of business; (iii) The other Party makes an assignment for the benefit of its creditors; (iv) Proceedings are commenced by or for the other Party under bankruptcy, insolvency or debtor's relief law; or (v) The other Party is sequestered by any government authority or is liquidated or dissolved. 9.5 Consequences upon Termination. (a) In the event this Agreement is terminated for reasons other than a non-monetary default, ETC shall continue to have the rights in Paragraph 2.6 and Manufacturer will continue to provide the Network Services set forth in Paragraph 8.0 to ETC for each DVM purchased hereunder and operating at a point of sale location for a period of one hundred eighty (180) days from the date of termination, provided ETC complies with each of the following conditions: (i) Perform all of the duties and responsibilities as set forth in Paragraph 2.1; and (ii) Pay all monies due Manufacturer under this Agreement, including, without limitation, the fees due under Paragraphs 3.5(a) and 8.2. (b) Notwithstanding any provision herein to the contrary, in the event Manufacturer's existing licensing agreement with The Orchard, LLC as set forth in Paragraph 8.4 is terminated or not renewed, Manufacturer has the right, upon thirty (30) days advance written notice to ETC, to terminate, without any liability, the Network Services to be provided in Paragraph 8.0 of this Agreement. 9.6 Return of the Programs Required. Upon termination of this Agreement for any reason whatsoever, ETC shall return to Manufacturer, at Manufacturer's expense, promptly and without charge (except as hereinafter provided) the Software and Network for all DVMs. 13 9.7 ETC's Duty To Cease Advertising and Turn Over Records to Manufacturer. Upon termination of this Agreement, ETC shall: (a) Return to Manufacturer each sign having any Manufacturer name or trademark (whether or not any such material or signs have been paid for in full by ETC) and discontinue advertising such DVMs and parts; and (b) Turn over to the Manufacturer, free of charge, copies of all of its sales records, service records and other records and data relating to sales of products by each DVM. 9.8 No Release of ETC from Obligations. Any termination of this Agreement shall not release ETC from paying any amount which may then be owing to Manufacturer or from any obligation to pay for any DVMs or parts which may have been ordered by ETC and not shipped prior to such termination. In the event of any termination of this Agreement, all obligations owed by ETC to Manufacturer and to its affiliates shall become immediately due and payable on the effective date of termination whether otherwise then due or not (without presentment, demand, protest or notice of any kind, all of which are hereby waived by ETC); and Manufacturer may offset and deduct from any or all amounts owed to ETC, any or all amounts owed by ETC to Manufacturer, rendering to ETC the excess, if any. 9.9 Manufacturer Relieved from Obligation To Ship DVMs to ETC. (a) In the event of termination of this Agreement by either party or automatically as provided herein, Manufacturer is relieved from any obligation to make any further shipments hereunder, and may cancel all of ETC's unshipped orders for DVMs or parts, irrespective of previous acceptance by Manufacturer, except those DVMs or parts which are proved to Manufacturer's satisfaction to have been sold by ETC pursuant to a valid and binding obligation prior to the receipt by ETC of notice of termination; provided, however, that payment therefor shall be cash in advance Manufacturer shall have no obligation or liability to ETC or its prospective customers in connection with any such cancellation. (b) In the event of termination of this Agreement by either party or automatically as provided herein, ETC will be entitled to a refund less a cancellation fee in accordance with the following schedule: Number of Days Before Charge as a Percentage Termination Date of Purchase Price --------------------- ---------------------- 120 25% 90 35% 60 50% 30 80% 10.0 PROPRIETARY MATERIALS. (a) Any and all documentation, patents, manuals, designs, drawings and plans relating to the DVMs (collectively, "Proprietary Technical Materials") that Manufacturer may furnish to ETC shall be in ETC's possession solely for the purpose of operating, servicing and repairing the DVMs and for no other purpose. ETC is not hereby granted a license nor authorized to grant any license or sublicenses to use the Proprietary Technical Materials. ETC agrees to maintain the confidentiality of all Proprietary Technical Materials and to instruct and obligate their employees and customers to do the same. (b) Without limiting the generality of the foregoing, ETC may not reproduce or copy any Proprietary Technical Materials or transfer, assign, license, sublicense, loan, pledge, encumber, disclose or otherwise make available all or any portion of such Proprietary Technical Materials to any other person or entity, without the prior express written consent of Manufacturer. Title to and ownership of the Proprietary Technical Materials shall at all times remain in Manufacturer. ETC agrees, upon notice from Manufacturer of any termination of the license granted pursuant to this Agreement and in accordance with any more specific directions from Manufacturer, to deliver immediately to Manufacturer all Proprietary Technical Materials and all copies thereof. 14 11.0 INDUSTRIAL PROPERTY RIGHTS (a) ETC agrees that all industrial property rights to the DVMs are and shall remain the sole property of Manufacturer. The use of ETC of any Industrial Property Rights (including, but not limited to, any trademark, trade name or copyrighted material) is authorized only for the purposes herein set forth; and upon termination of this Agreement for any reason, such authorization shall cease. ETC agrees to identify Manufacturer as the owner of the industrial property rights to the DVMs provided hereunder in any use of such DVMs, including without limitation, business dealings with any vendor or other third party(s) with whom ETC contracts, and to require each such part(y) to identify Manufacturer in the same manner. ETC is authorized to use Manufacturer's trademarks, tradenames and copyrighted material in the name of DVMs under this Agreement, provided that any materials so used shall be identified as subject to a trademark, tradename or copyright as applicable and subject to the terms of the Software License Agreement attached hereto as Exhibit "D" for any software licensed hereunder. (b) ETC acknowledges that by reason of its relationship to Manufacturer hereunder it will have access to certain information and materials concerning Manufacturer's patents, manuals, designs, drawings and plans relating to the DVMs (including but not limited to information and materials contained in Technical Data which may be provided by Manufacturer) which is confidential and of substantial value to Manufacturer, which value would be impaired if such information were disclosed to third parties. ETC agrees that it shall not use in any way for its own account or the account of any third party, nor disclose to any third party, any such confidential information which is revealed to it by Manufacturer or which it obtains as a result of the relationship created by this Agreement. ETC will take every reasonable precaution to protect the confidentiality of such information, treating such information as if it were ETC's own confidential business information. Upon request by ETC, Manufacturer shall advise if it considers any particular information or materials to be confidential. ETC will not publish any technical description of the DVMs beyond the descriptions published by Manufacturer. ETC's obligations with regard to confidentiality and Industrial Property Rights as established by this Agreement shall survive the termination of this Agreement. 12.0 NON-DISCLOSURE AND CONFIDENTIALITY. The Parties acknowledge that during the course of this association with each other and their respective subsidiaries and affiliates, each will be exposed to documents and other information regarding the confidential affairs of the other and their respective subsidiaries and affiliates, including without limitation information about their respective past, present and future financial condition, the markets for their respective products, key personnel, trade secrets, current and prospective customer lists, operational methods, acquisition plans, prospects, plans for future development and other business affairs and information about each other and their respective subsidiaries and affiliates, all of which is information not readily available to the public (the "Confidential Information"). The Parties further acknowledge that the services to be performed under this Agreement are of a special, unique, unusual, extraordinary and intellectual character. In recognition of the foregoing, the Parties covenant and agree as follows: 12.01 No Disclosure or Use of Confidential Information. At no time shall either Party ever divulge, disclose, or otherwise use any Confidential Information, unless and until such information is easily available in the public domain by reason other than that Party's unauthorized disclosure or use thereof, unless such disclosure or use is expressly authorized by that Party's President in writing in advance of such disclosure or use. 12.02 Return of Manufacturer's Property, Records and Files. Upon the termination of this Agreement at any time and for any reason, or at any other time as a Party's President may so direct, each Party shall promptly deliver to the other all of the property and equipment of that Party and its subsidiaries (including any cell phones, pagers, credit cards, personal computers, etc.) and any and all documents, records, and files, including any notes, memoranda, customer lists, reports or any and all other documents, including any copies thereof, whether in hard copy form or on a computer disk o hard drive, which relate to that Party, its subsidiaries, affiliates, successors or assigns, and/or their respective past and present officers, directors, employees of that Party (collectively, the "Party's Property, Records and Files"); it being 15 expressly understood that, upon termination of this Agreement, neither Party shall be authorized to retain any of the other Party's Property, Records and Files, except to the extent expressly so authorized in writing by the other Party's President. 13. NONCOMPETITION AND NON-SOLICITATION. 13.1. Noncompetition and Other Matters. During the term of this Agreement and for a five (5) year period immediately following the date of termination of this Agreement at any time and for any reason ("Restrictive Period"), ETC shall not in any city, town, county, parish or other municipality in any state of the United States (the names of each such city, town, parish, or other municipality, including, without limitation, the name of each county in the State of California, being expressly incorporated by reference herein), or any other place in the world, where Manufacturer, or its subsidiaries, affiliates, successors, or assigns, engages in Manufacturer's business as described herein (the "Business"), directly or indirectly, (i) engage in a competing business for ETC's own account; (ii) enter the employ of, or render any consulting services to, any entity that competes with Manufacturer, or its subsidiaries, affiliates, successors, or assigns, in the Business; or (iii) become interested in any such entity in any capacity, including, without limitation, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant provided, however, ETC may own, directly or indirectly, solely as a passive investment, securities of any entity traded on any national securities exchange if ETC is not a controlling person of, or a member of a group which controls, such entity and does not, directly or indirectly own 1% or more of any class of securities of such entity. 13.2 Noninterference. During the Restrictive Period, ETC shall not, directly or indirectly, solicit, induce, or attempt to solicit or induce any officer, director, employee, agent or consultant of Manufacturer or any of its subsidiaries, affiliates, successors or assigns to terminate his or her employment or other relationship with the Manufacturer or its subsidiaries, affiliates, successors or assigns for the purpose of associating with any competitor of Manufacturer or its subsidiaries, affiliates, successors or assigns, or otherwise encourage any such person or entity to leave or sever his, her or its employment or other relationship with Manufacturer or its subsidiaries, affiliates, successors or assigns for any other reason. 13.3 Nonsolicitation. During the Restrictive Period, ETC shall not, directly or indirectly, solicit, induce, or attempt to solicit or induce, any customers, clients, vendors, suppliers or consultants then under contract to Manufacturer or its subsidiaries, affiliates, successors or assigns, to terminate his, her or its relationship with Manufacturer or its subsidiaries, affiliates, successors or assigns, for the purpose of associating with any competitor of Manufacturer or its subsidiaries, affiliates, successors or assigns, or otherwise encourage such customers, clients, vendors, suppliers or consultants then under contract to terminate his, her or its relationship with the Manufacturer or its subsidiaries, affiliates, successors or assigns for any reason. 14. RIGHTS AND REMEDIES UPON BREACH. If either Party breaches, or threatens to commit a breach of, any of the provisions of Paragraphs 11, 123 or 13 above (the "Restrictive Covenants"), the non-breaching Party and its subsidiaries, affiliates, successors or assigns shall have the following rights and remedies, each of which shall be independent of the others and severally enforceable, and each of which shall be in addition to, and not in lieu of, any other rights or remedies available to the non-breaching Party or its subsidiaries, affiliates, successors or assigns at law or in equity. 14.01 Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction by injunctive decree or otherwise, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the non-breaching Party or its subsidiaries, affiliates, successors or assigns and that money damages would not provide an adequate remedy to the non-breaching Party or its subsidiaries, affiliates, successors or assigns. 14.02 Accounting. The right and remedy to require the breaching Party to account for and pay over to the non-breaching Party or its subsidiaries, affiliates, successors or assigns, as the case may be, all compensation, profits, monies, accruals, increments or other benefits derived or received by the breaching Party as a result of any transaction or activity constituting a breach of any of the Restrictive Covenants. 16 14.03 Severability of Covenants. The Parties acknowledge and agree that the Restrictive Covenants are reasonable and valid in geographic and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be effected and shall be given full force and effect without regard to the invalid portions. 14.04 Modification by the Court. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be (it being the intent of the parties that any such reduction be limited to the minimum extent necessary to render such provision enforceable), and, in its reduced form, such provision shall then be enforceable. 14.05 Enforceability in Jurisdictions. Each Party intends to and hereby confers jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographic scope of such covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants unenforceable by reason of the breadth of such scope or otherwise, it is the intention of each Party that such determination not bat or in any way effect the right of the non-breaching Party or its subsidiaries, affiliates, successors or assigns to the relief provided herein in the courts of any other jurisdiction within the geographic scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. 15. GENERAL. 15.1 Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties concerning the subject matter hereof and supersedes all prior agreements, negotiations and understandings of the parties. No representation, promise, modification or amendment shall be binding upon either party as a warranty or otherwise, unless in writing and signed on behalf of each party by a duly authorized representative. Although ETC may use its standard purchase order form to give any order or other notice provided for hereunder, said order or notice will be governed by the terms and conditions of this Agreement, and any term or condition set forth in any such standard form which is inconsistent with or in addition to the terms and conditions of this Agreement shall have no force or effect. 15.2 Notices. All notices and other communications under this Agreement shall be in writing and shall be given by facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three (3) days after mailing or twenty-four (24) hours after transmission of a facsimile to the respective persons named below: If to Manufacturer: Mr. Mark V. Asdourian, CEO Hitdisc.com, Inc. 5 Park Plaza, Suite 820 Irvine, California 92614 Fax: 949.221.0019 If to Supplier: Mr. Greg Kaiser President Enter Tech Corporation 430 East 6th Street Loveland, Colorado 80537 Fax: 970.669.4921 17 Any party may change such party's address for notices by notice duly given pursuant hereto. 15.3 Assignment. Neither Party may assign this Agreement, in whole or in part, without the prior written consent of the other, except that the Manufacturer may assign this Agreement without such consent to any successor in interest or to any parent, subsidiary or affiliated company of the Manufacturer in connection with a sale or merger. Any assignment in violation of this section shall be void. 15.4 Force Majeure. If the performance of this Agreement or any obligation hereunder, except the making of payments hereunder, is prevented, restricted or interfered with by reason of fire, flood, earthquake, explosion or other casualty or accident; strikes or labor disputes; inability to procure parts, supplies or power; war or other violence; any law, order, proclamation, regulation, ordinance, demand or requirement of any government agency; or any other act or condition whatsoever beyond the reasonable control of the affected party, the party so affected, upon giving prompt notice to the other party, shall be excused from such performance to the extent of such prevention, restriction or interference; provided, however, that the party so affected shall take all reasonable steps to avoid or remove such causes of nonperformance and shall resume performance hereunder with dispatch whenever such causes are removed. 15.5 Amendments; Waivers. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms or covenants hereof may be waived, only by a written instrument executed by the parties, or in the case of a waiver, by the party waiving compliance. The failure of any party at any time or times to require performance of any provision hereof shall in no manner effect the right of such party at a later time to enforce the same. No waiver by any party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waive of the breach of any other term or covenant contained in this Agreement. 15.6 No Other Warranty or Representation. ETC hereby acknowledges that it has not entered into this Agreement in reliance upon any warranty or representation by any person or entity, verbal or written, including, without limitation, any representation or warranty concerning the projected sales of custom music CDs by the DVMs, the cost of such products, the rate at which advertising may be charged or any other financial projections concerning the operation or use of DVMs, except for the limited warranties or representations specifically set forth herein. 15.7 Arbitration. Any claim, dispute or controversy arising out of or in connection with or relating to this Agreement or the breach or alleged breach thereof shall be submitted by the parties to binding arbitration in the County of Orange, State of California, before a panel of three (3) arbitrators agreeable to both Parties. The cost of the arbitration shall be equally divided between the Parties. If the Parties cannot agree on a panel within two (2) weeks after arbitration is requested in writing by either of them, the arbitration shall proceed in Orange County, California, before a panel appointed by the American Arbitration Association and under the rules then obtaining of that Association. The award shall be binding, each Party hereby expressly waiving its right to appeal, and rendered in such form that judgment may be entered thereon in any court having jurisdiction thereof. 18 15.8 Attorneys' Fees. If any legal or arbitration or other proceeding is initiated so as to enforce the terms of this Agreement, or as a result of an alleged breach, dispute, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party within the meaning of Civil Code section 1717 shall be entitled to recover reasonable attorney fees and other costs incurred in the action or proceeding, in addition to any other relief to which he, she or it is entitled as a matter of law. 15.9 Interpretation. This Agreement has been negotiated at arms length in California between persons knowledgeable in the matters addressed herein. Each party hereby represents that he, she or it has been represented or had the opportunity to be represented by experienced and knowledgeable legal counsel. Accordingly, any rule of law, including without limitation, Civil Code section 1654, or any other statutes, legal decisions or common law principles of similar effect, which would require interpretation of any ambiguities in this Agreement 15.10 Press Releases. This Agreement and/or its contents is not to be publicly announced without prior written consent from ETC and Manufacturer. 15.11 Applicable Law. This Agreement shall be governed by the laws of the State of California as such laws are applied to contracts between California residents entered into and to be performed entirely within the State of California. 15.12 Counterparts. This Agreement may be executed by the Parties hereto via facsimile in separate counterparts, each of which, when so executed and delivered, shall be an original, but all such counterparts together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. MANUFACTURER: Enter Tech Corporation: Hitsdisc.com, Inc. /s/ Mark V. Asdourian /s/ Greg Kaiser - ------------------------------- --------------------------------- By: Mark V. Asdourian By: Greg Kaiser Its: CEO Its: President 19 EX-10 4 kaiser_emplagmt.txt EXHIBIT 10.14-EMPLOYMENT AGMT. EXHIBIT 10.14 ------------- EXECUTIVE COMPENSATION AGREEMENT This Agreement made and entered into effective as of May 22, 2000 by and between Enter Tech Corporation a Nevada Corporation ("Employer") and Gregory J. Kaiser ("Employee"). WITNESSETH A) Recitals 1) Employer is a Nevada corporation in good standing which is authorized to transact business in the State of Colorado. It maintains its principal office at 430 E. 6th St. Loveland, CO 80537. 2) Employee has agreed to accept employment with the employer under the terms and conditions recited herein. NOW, THEREFORE, IT IS AGREED, B) Terms and Conditions 1) Employer hereby engages Employee in the capacity of President, Employee's address and social security number is as follows, Address P.O. Box 774104 Steamboat Springs, CO 80477 Social Security 331460267 2) The general duties assigned to the Employee shall be (Exhibit A): plus such other duties compatible with the foregoing as may be assigned, from time to time, by the Board of Directors of ETC. 3) Employee's base compensation shall be $9000 per month 4) Executive benefits granted to the Employee: a) Participation in a major medical / dental plan for family coverage. b) Participation in a life / disability insurance plan. c) Participation in a cash and or stock bonus plan . d) Participation in a stock option and or stock purchase plan . e) Employee shall be entitled to a reasonable expense account, which shall be reviewed from time to time by the Board of Directors of ETC. 6) Employee shall be reimbursed all reasonable and necessary business expenses with limitations on travel, lodging, meals and entertainment as established by the Board of Directors of ETC. 7) The Employee's term of employment shall be three (3) years subject to the following: a) Employee shall be entitled at any one time six (6) consecutive weeks of absence from his normal duties due to illness or physical disability. b) Employee may be terminated only for cause, which shall be defined as meaning negligence in the performance of their duties or an act of malfeasance. 8) Employee shall be entitled to annual vacation with pay and benefits as follows: a) Employee is entitled to a total of four (4) weeks of vacation annually for years one through three of employment, five (5) weeks annually for years four and five and six (6) weeks annually there after. 9) Employee shall be required to utilize their best efforts in accordance with their educational and professional background, in carrying out their duties and shall not engage in any conduct which may be considered in the business community as being a conflict of interest with the Employer. 10) Should a dispute arise between the parties, it shall be referred to the American Arbitration Association in Denver, Colorado for resolution and the decision of the arbitrator shall be binding and conclusive and may be entered in any court of jurisdiction as a judgement. 11) If it become necessary for either party to give formal notice to the other concerning any term or condition of the Agreement, notices shall be sent Registered Mail to the Employer and Employee address of record at time of Employment. 12) The benefits hereunder may not be assigned by the Employee, nor may they delegate any of the duties assigned to them by the Employer without specific prior approval of the Board of Directors of ETC. 2 13) This agreement shall be construed; under and pursuant to the laws of the State of Colorado. 14) This Agreement shall be executed in counterparts, each which shall be deemed an original. IN WITNESS WHERE OF, the parties have executed this Agreement as of the first day and year set forth above. Employer: Employee: Enter Tech Corporation Gregory J. Kaiser BY: BY: ---------------------------------- ---------------------------------- 3 -----END PRIVACY-ENHANCED MESSAGE-----