-----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, T004SoiDbTPpB9mOL85nKNYHT9Dsmf/aUNSWloobg6dQjaiM3H2KrrZJ+z2Km3iP lp/7kMcXG40nhxEkUZDPQg== 0000950124-00-001956.txt : 20000414 0000950124-00-001956.hdr.sgml : 20000414 ACCESSION NUMBER: 0000950124-00-001956 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 38 CONFORMED PERIOD OF REPORT: 20000102 FILED AS OF DATE: 20000403 DATE AS OF CHANGE: 20000413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POPMAIL COM INC CENTRAL INDEX KEY: 0001044738 STANDARD INDUSTRIAL CLASSIFICATION: 5812 IRS NUMBER: 311487885 STATE OF INCORPORATION: MN FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-23243 FILM NUMBER: 592830 BUSINESS ADDRESS: STREET 1: 4801 WEST 81 STREET STREET 2: SUITE 112 CITY: BLOOMINGTON STATE: MN ZIP: 55437 BUSINESS PHONE: 6128379917 MAIL ADDRESS: STREET 1: 4801 WEST 81 STREET STREET 2: SUITE 112 CITY: BLOOMINGTON STATE: MN ZIP: 55437 FORMER COMPANY: FORMER CONFORMED NAME: CAFE ODYSSEY INC DATE OF NAME CHANGE: 19980526 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL DISCOVERY INC DATE OF NAME CHANGE: 19970821 10KSB 1 FORM 10KSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 2, 2000 COMMISSION FILE NUMBER 0-23243 POPMAIL.COM, INC. (Exact name of registrant as specified in its chapter) MINNESOTA 41-1487885 ------------------------ ----------------------- (State or other jurisdiction of (I.R.S. Employer identification No.) incorporation or organization) 1331 CORPORATE DRIVE, SUITE 350 IRVING, TEXAS 75038 (972) 550-5500 (Address, including zip code, and telephone number of registrant's principal executive offices) ----------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Shares of common stock (par value $.01 per share) Common Stock Purchase Warrants ----------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ------ The Company's revenues for the fiscal year ended January 2, 2000 totaled $12,273,198. As of March 27, 2000, the aggregate market value of the registrant's common stock, $.01 par value, held by non-affiliates of the registrant, computed by reference to the average high and low prices on such date as reported by the NASDAQ SmallCap Market was $90,409,000. As of March 27, 2000, there were outstanding 34,422,928 shares of the registrant's common stock. 2 DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement to be filed within 120 days after the end of the fiscal year covered by this report are incorporated by reference into Items 9, 10, 11 and 12 of Part III hereof. FORWARD-LOOKING STATEMENTS Certain of the matters discussed in the following pages, constitute "forward-looking statements" within the meaning of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended. Forward-looking statements involve a number of risks and uncertainties, and, in addition to the risk and other factors discussed in this Form 10-KSB, other factors that could cause actual results to differ materially are the following: the economic conditions in the new markets into which the Company expands and possible uncertainties in the customer base in these areas; competitive pressures from other restaurant companies and providers of email-based services; ability to raise additional capital required to support the Company's operations and enable the Company to pursue its business plan; government regulation of the Internet; business conditions, such as inflation or a recession, and growth in the general economy; changes in monetary and fiscal policies, other laws and regulations; and other risks identified from time to time in the Company's SEC reports, registration statements and public announcements. 3 TABLE OF CONTENTS
Page PART I ---- ITEM 1. Description of Business................................................................. 1 Risk Factors............................................................................ 8 ITEM 2. Description of Property................................................................. 21 ITEM 3. Legal Proceedings....................................................................... 23 ITEM 4. Submission of Matters to a Vote of Security Holders..................................... 23 PART II ITEM 5. Market for Common Equity and Related Shareholder Matters................................................................................. 24 ITEM 6. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 25 ITEM 7. Financial Statements.................................................................... F-1 ITEM 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................................................ 35 PART III ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act....................................... 36 ITEM 10. Executive Compensation.................................................................. 36 ITEM 11. Security Ownership of Certain Beneficial Owners and Management.............................................................................. 36 ITEM 12. Certain Relationships and Related Transactions.......................................... 36 PART IV ITEM 13. Exhibits and Reports on Form 8-K........................................................ 36
4 PART I ITEM 1. DESCRIPTION OF BUSINESS. PopMail.com, inc. ("PopMail") currently consists of two divisions, the restaurant division and the Internet division. The restaurant division develops, owns and operates restaurants with multiple themed dining rooms designed to appeal to the upscale casual dining market. PopMail has Cafe Odyssey restaurants at the Mall of America in Bloomington, Minnesota which opened in June 1998, and in the Denver Pavilions, which opened in March 1999. Our Internet division consists of two companies, PopMail Network, Inc., ("Network") based in Dallas, TX, a provider of permission and affinity based email services to broadcast stations, professional sports teams and other clients in the media and entertainment industries and the recently formed IZ.com, Inc. ("IZ"), based in Bellevue, WA. The name "IZ was borrowed from IZ.com Incorporated, a Delaware corporation acquired by PopMail in February 2000. IZ only recently commenced its operations. The Company commenced operations as Hotel Mexico, Inc. ("HMI"), which was incorporated in Ohio in January 1994. In 1996, the Company opened the Kenwood Restaurant under the trade name Hotel Discovery, and in August 1997, HMI was reorganized as Hotel Discovery, Inc., a Minnesota corporation. During February 1998, the Company changed the name of its restaurant concept from Hotel Discovery to Cafe Odyssey and changed the name of the Company to Cafe Odyssey, Inc. Pursuant to a merger effective September 1, 1999, the Company acquired popmail.com, inc., a Delaware corporation engaged in the business of providing Internet email services. Following the merger, the Company changed its corporate name from Cafe Odyssey, Inc. to PopMail.com, inc. On December 3, 1999, ROI Acquisition Corporation, a Texas corporation and wholly owned subsidiary of PopMail, acquired, effective as of November 30, 1999, substantially all of the assets and assumed substantially all of the liabilities of ROI Interactive, LLC ("ROI"), a Texas limited liability company. ROI provides exclusive email service and permission-based, opt-in marketing services to television stations and major league sports franchises. Effective February 9, 2000, PopMail acquired IZ.com, Incorporated ("IZ.com"), a Delaware corporation. IZ.com (to be renamed "PopMail Media, Inc.") is attempting to integrate the use of multiple media - television, the Internet and email - to reach 18 to 25 year olds and derive commerce. PopMail Media is attempting to build a brand and marketing strategy that will allow it to dominate its target market. As a result of the PopMail Media acquisition, the Company is changing its strategic focus to apply its multimedia expertise to the email-based marketing business operated by PopMail. The Company is currently modifying its website and television programming efforts in a directed effort to complement PopMail's business strategy. As noted in the Risk Factors section of this Form 10-KSB, the Company has incurred substantial operating losses to date and, as of January 2, 2000, has a deficiency in working capital of approximately $8.7 million. There can be no assurance of the Company's capacity to achieve and sustain profitable operations, and without additional financing (of which there can be no assurance), the Company may not have sufficient funds to support its operations, retire its indebtedness in the ordinary course of business and pursue its business plan. As also noted in the Risk Factors section of this Form 10-KSB, the factors discussed in the preceding paragraph (among other factors) give rise to a risk that the Company's common stock will be delisted from the Nasdaq SmallCap Market, leading to a loss of liquidity and a decrease in the market price of the Company's stock. DESCRIPTION OF POPMAIL NETWORK, INC. Network provides email services that allow its Clients to provide: 1) outbound distribution email messages to registrants of the services and network and 2) web based affinity email accounts to visitors of our Client's sites i.e., joe@yoursitemail.com. Network has over 500 Clients in the broadcast, professional sports teams, media and entertainment industries. Network considers its Clients to be "Affiliates," and the subscribers to ENEWSNOTIFIER(TM) and PopMail(TM) to be "Members" because of their affinity towards, and willingness to receive, information from one or more Affiliates. Together, these combined services create a permission and affinity based email marketing network. The distribution through this network, called "e-channels", is customized for each Member, allowing them to select exactly the content they choose from their favorite broadcast, entertainment and sports companies. "Clients" are defined as entities that either pay Network for services or while not paying for a service, have agreed through contract to provide Network either some right, limited or complete, to communicate with Member(s). As a result, some Network Clients both pay Network money and allow access to Members while other Network Clients may only allow Network access to Members. Network has historically provided customized email services and distribution to meet the marketing 1 5 needs of individual businesses forming a one-to-one relationships with their customers in the broadcast, media, sports and entertainment industries. Network plans to bring more interested consumers ("Members") to its Client's products by extending their brand, marketing efforts and content beyond its own database and to other databases within our network of Clients. Management believes the primary value of Network is the expanding base of Members who have chosen to receive services from a Network Client and who "opt-in" to services, content and products from other Network Clients. Market Rapidly Growing Market: Email is currently the number one application on the Internet according to Forrester Research. Forrester estimates that email will become a $4.8 Billion dollar industry by 2004, of which Network hopes to capture a small share. Growing Demand and Use for Email; The benefits of using email are: low cost and higher response rates compared to traditional advertising and direct mail, global reach, tracking of users interests, ease of use, and near real time delivery. Unique Position Within a Growing Market; Much commercial email is unsolicited and is generic - not targeted to the recipient's needs or interests. The majority of this commercial email is the electronic equivalent of junk mail. Users receive these unsolicited emails from retail and category "opt-in" lists or from lists compiled as they visit various web sites. This approach is increasingly ineffective and disliked by recipients. In fact, growing resentment towards unsolicited commercial email may lead to privacy regulation in the United States. The opposite of unsolicited email is "permission and affinity-based" marketing which has been "opted-in" by recipients. In other words, recipients have replied positively to a request by a company that they will willingly accept email content from a specified source. The next level of the permission basis is affinity, in which recipients have willingly allied with a group or organization of their choice and have sought information from that group, brand, icon or trusted agent. Services At the present time, Network offers two proprietary e-mail services which are described below: - ENEWSNOTIFIER(TM) (ENN) - a permission marketing email service, which allows Clients to collect preference and demographic information from their customers and create a Member database. These organizations can then use this database to send out targeted, personalized and customized messages for marketing purposes. Network provides the Client with a username and password to access the administration area for sending out their own emails. Clients link the services from their site. When a user visits the client's site, they click on the icon which links them to our servers. They then sign up and select the topics of interest to them on the Client's custom service. Network presently offers the ENEWSNOTIFIER service through ROI. - PopMail(TM) is an affinity email service that allows Clients to offer free Web based email boxes on their home pages. Members sign up for a personal email address that contains their affinity group's name (such as JoeSmith@Yoursitemail.com). Clients benefit from the affinity with their customers and higher traffic on their Web site when registrants visit the Client's site to send and receive their email. Clients can also sell advertising. 2 6 The Member visits the Client's site and clicks on the sign up box on the frame that resides on the Client's site. Each page is customized with the client's look and feel. Each time the Member wants to check their email they visit the client's site and enter their username and password in the boxes on the frame. At present, Network targets four vertical markets for its email services: broadcast, media, sports and entertainment. Companies in these vertical markets typically have customers with a stronger affinity for their product or service - such as a favorite sports team, radio station, personality, or publication. Using Network's email services allows Clients to cut through the clutter and inefficiencies of traditional marketing, and more effectively and efficiently promote and brand their content, products or services to their viewers, listeners, fans and customers on the topics and items already of interest to them. Benefits and examples of these programs in action include: - Television Stations - increase ratings by using ENN to notify Members, via email, about news stories of interest to them scheduled for broadcast on their station. - Radio Stations - advertise their brand and drive traffic to their sites by using PopMail(TM). - Sports Teams - provide advanced information to Members, sell tickets and merchandise, and sponsor promotions using ENN. One of Network's goals is to leverage the relationships between the Company's Clients and their customers and to strengthen the PopMail Network. Revenues Network currently generates revenue through the following means: - Annual license fees - Monthly hosting fees - Set up fees Although very little revenue has been generated to date by advertisements and no revenue has been produced from e-commerce up-selling to Members, and there can be no assurance that this will change, Network intends to introduce these revenue generators to its business model within the near future. Competition There are many companies which compete directly or indirectly with PopMail. Those in customer relationship management and outbound email production include public companies such as Critical Path (CPTH), Digital Impact (DIGI) Mail.com(MAIL), Message Media, Inc. (MESG), Kana Communications, Inc., (KANA) 24/7 Media Inc. (TFSM) and Exactis (XACT). There are a host of large and smaller privately held companies. IZ's competitors include InfoBeat, Lifeminders (LFMN), YesMail (YESM) and Netcreations(NTCR). 3 7 At present, there are few affinity based email companies combining affinity content with branded email and permission based email-marketing services specifically towards the vertical markets we are currently in. Strategy Network plans to employ the following growth strategies: - Continue to solidify its presence in its current targeted vertical markets. At present, Network has signed agreements with more than 500 Clients. Many of these Clients have not fully utilized the capability of the Network services by introducing advertising or e-commere for up-selling and, as such, Network is also focusing on the education of its Clients and Members to increase usage and, ultimately, Members. - Grow its existing member databases. - Assist Clients in the development of affinity rich content for distribution through the network to permission based Members. - Resell IZ content through its network. - Seek out and acquire companies that can enhance our goals, member growth and content development. - Form strategic relationships with other businesses that may provide compatible and collaborative Internet services for the Company's Broadcast, Media, Sports and Entertainment Clients. - Select and move aggressively into other vertical markets where Network's products and services can be effective branding and marketing tools. - Generate revenue from each contact between the Company and each Client. Network is currently looking at building e-commerce functionality into its product offerings; this may be done internally or Network may select a strategic partner in order to build its member base more rapidly. The Company will also regularly introduce enhanced versions of its services and product offerings. In addition, Network has begun to penetrate the international market and has begun to develop and deploy bilingual versions of Network's services. Intellectual Property The Company relies on tradename and trademark protection for its proprietary names and logos. PopMail has not registered or sought to register any patents. The Company seeks to protect its know-how and trade secrets primarily through confidentiality and licence agreements. Description of IZ.com, Inc. IZ, based in Bellevue, WA, was recently incorporated as a wholly owned Delaware subsidiary of PopMail. IZ produces web content for ZD Net under contract at the direction of award winning journalist, Jesse Berst. The newsletter called the "Berst Alert" is part of the web based information site called Jesse Berst's Anchor Desk. See: http://www.zdnet.com/anchordesk. The content provided through the Berst Alert is in the form of an affinity email newsletter currently received by approximately 1.6 millions registrants each 4 8 day. IZ is paid a fee to produce the Berst Alert under a one-year non-cancelable agreement expiring in February 2001. IZ plans to create and establish email content newsletters through trusted agents (icons or personalities) with high affinity appeal within the current Network vertical markets: broadcast, media, sports and entertainment. IZ will resell content through Network to its network of affiliated Clients and will establish additional content vertical markets. However, there can be no assurance that IZ will produce any new newsletters. DESCRIPTION OF RESTAURANT DIVISION General PopMail's restaurant division develops, owns and operates restaurants with multiple themed dining rooms designed to appeal to the upscale casual dining market. PopMail owns and operates two full service "Cafe Odyssey" restaurants, one in the Mall of America, located in Bloomington, Minnesota, a suburb of Minneapolis (the "Mall of America Restaurant"). The Mall of America Restaurant opened on June 8, 1998, and the second, which opened on March 15, 1999, at the Denver Pavilions, located in the downtown district of Denver, Colorado (the "Denver Pavilions Restaurant"). PopMail has no current plans to expand the restaurant division through additional owned restaurants. The Company may ultimately license more Cafe Odyssey restaurants or enter into other arrangements for additional restaurants which do not require the Company to invest substantial amounts of capital. In 1996 the Company opened a restaurant in Cincinnati, Ohio (the "Kenwood Restaurant") under the trade name Hotel Discovery. PopMail closed the Kenwood Restaurant in September 1999. In November 1999 the Company entered into an agreement to sell the assets relating to the Kenwood Restaurant, subject to certain contingencies concerning transfer of the liquor license and certain other matters, which contingencies have not yet been fully resolved. In connection with the pending sale, PopMail assigned the lease for the restaurant property to the proposed buyer, who has been making the required lease payments since November 1999. PopMail remains primarily obligated under the lease. Concept PopMail's restaurants are positioned in the upscale casual segment and differentiate themselves from the competition by offering its guests an enveloping experience that combines award winning food with sophisticated, non-intrusive entertainment. While there are restaurants that have a strong food base and others that focus on entertainment, PopMail feels that the "experiential dining" combination it offers is unique to the industry. Based on the concepts of travel, discovery and adventure, each restaurant provides guests with a dining experience in multiple themed environments that capture the romance, passion and nature of exotic locations throughout the world utilizing state-of-the-art technology in sound, video, lighting, scenery and decor. The Mall of America and Denver Pavilions Restaurants contain three dining rooms that replicate the environments of the lost City of Atlantis, the ancient Incan ruins of Machu Picchu in the Andes and the sweeping plains of the Serengeti desert in Tanzania, Africa. 5 9 The menu at each restaurant offers a broad range of cuisine from around the world, including "cultural fusion" menu items such as Barcelona Spring Rolls and Asian Tacos. Features include American, Asian, Jamaican, West Indian, Mexican and European tastes and textures. Menu items are freshly made, using only the highest quality fresh meats, produce, spices and other ingredients. The menu mirrors the exploratory journey and adventure society themes of the restaurants. Each restaurant also has a retail area located at the entrance which includes a collection of adult and children's casual clothing, including T-shirts, sweatshirts, shirts and caps, and a limited amount of other logo merchandise. Restaurant Operations PopMail strives to maintain quality operations through extensive training of its employees and careful supervision of personnel. PopMail has developed a detailed operations manual containing specifications relating to food and beverage preparation, maintenance of premises and employee conduct. Each restaurant is expected to have a director of operations with a staff of five to seven managers and a staff accountant. Each director of operations reports directly to PopMail's President of Restaurant Operations. PopMail requires all kitchen and front-of-the-house managers to complete an intensive six-week training program which includes two weeks of food preparation training in the kitchen, as well as complete cross-training on all other phases of the restaurant's operations. PopMail's restaurant management is then tested on PopMail's philosophy, management strategy, policies, procedures and operating standards. In addition, each prospective guest service employee actually tastes, and is tested on, every food and beverage item on the menu. Daily shift meetings are held prior to lunch and dinner to re-educate the service staff on all menu items, to communicate daily specials, to respond to feedback from comment cards and to reinforce service standards. Competition The food service industry is intensely competitive with respect to food quality, concept, location, service and price. In addition, there are many well-established food service competitors with substantially greater financial and other resources than PopMail and with substantially longer operating histories. PopMail believes that it competes with other full-service dine-in restaurants, take-out food service companies, fast-food restaurants, delicatessens, cafeteria-style buffets and prepared food stores, as well as with supermarkets and convenience stores. Competitors include national, regional and local restaurants, purveyors of carry out food and convenience dining establishments. Competition in the food service business is often affected by changes in consumer tastes, national, regional, and local economic and real estate conditions, demographic trends, traffic patterns, the cost and availability of labor, purchasing power, availability of product, and local competitive factors. PopMail attempts to manage or adapt to these factors, but it should be recognized that some or all of these factors could cause PopMail to be adversely affected. Management is of the opinion that quality food which is pleasingly presented is an absolute requirement within the upscale casual segment of the industry. Cafe Odyssey restaurants have won nine major food awards in three cities, reflecting PopMail's commitment to food excellence. 6 10 Government Regulations PopMail is subject to federal, state and local laws affecting the operation of its restaurants, including zoning, health, sanitation and safety regulation and alcoholic beverage licensing requirements. Each restaurant is operated in accordance with standardized procedures designed to assure compliance with all applicable codes and regulations. The suspension of a food service or liquor license would cause an interruption of operations at the affected restaurant. PopMail believes that it is in compliance with all licensing and other regulations. PopMail is subject to "dram shop" statutes in the State of Minnesota which generally provide a person injured by an intoxicated person the right to recover damages from the establishment or establishments that served alcoholic beverages to the intoxicated person. PopMail has obtained insurance against such potential liability. PopMail is also subject to the Fair Labor Standards Act, which governs minimum wages, overtime and working conditions. A significant portion of PopMail's restaurant employees are paid at rates relating to either the federal or state minimum wage. Accordingly, an increase in the minimum wage would directly increase each restaurant's labor cost. Obtaining alcoholic beverage licenses from various jurisdictions will require disclosure of certain detailed information about directors, officers and greater than 10 percent shareholders of PopMail's equity securities, and will necessitate that such persons be approved by the appropriate liquor licensing authority. EMPLOYEES As of January 2, 2000, PopMail employed 271 persons, including 41 in the Internet email services division and 230 persons in the Company's restaurant operations. Approximately 85 of the Company's employees work part-time. None of PopMail's employees is represented by a collective bargaining organization and the Company has never experienced a work stoppage, strike or labor dispute. The Company believes its relations with its employees are satisfactory. 7 11 RISK FACTORS The following discussion should be read in connection with the Company's consolidated financial statements and related notes included elsewhere in this report. WE HAVE INCURRED LOSSES TO DATE AND IF OUR REVENUES DO NOT IMPROVE, WE WILL NEED ADDITIONAL FINANCING IN ORDER TO CONTINUE OPERATIONS AND PURSUE OUR BUSINESS PLAN. PopMail incurred net losses of approximately $24.2 million during 1999, $6.7 million in 1998 and $4.0 million in 1997 and had a working capital deficit of approximately $8.7 million as of January 2, 2000. Our ability to continue our present operations and successfully implement our expansion plans is contingent upon our ability to increase our revenues and ultimately attain and sustain profitable operations. Even though financing activity subsequent to January 2, 2000 has improved our working capital position (see Note N to the financial statements) without additional financing, the cash generated from our current operations will not be adequate to fund operations and service our indebtedness during 2000. There can be no assurance that additional financing will be available on terms acceptable to the Company or on any terms whatsoever. In the event that we are unable to fund our operations and our business plan, or if we fail to achieve or sustain profitable operations, the market price of our stock will suffer. OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ SMALLCAP MARKET, WHICH DELISTING COULD HINDER YOUR ABILITY TO OBTAIN ACCURATE QUOTATIONS AS TO THE PRICE OF OUR COMMON STOCK, OR DISPOSE OF OUR COMMON STOCK IN THE SECONDARY MARKET. Although our common stock is currently listed on the Nasdaq SmallCap Market, we cannot guarantee that an active public market for our common stock will continue to exist. We have responded to numerous inquiries from of Nasdaq expressing concern over various matters, including but not limited to a "going concern" qualification expressed by our former independent auditors as of January 3, 1999. Accordingly, our securities may be delisted from the Nasdaq SmallCap Market or be required to reapply for listing meeting the Nasdaq initial listing requirements, which are generally more stringent than the requirements currently governing the Company's listing. Additional factors giving rise to such delisting could include, but are not be limited to: (1) a reduction of our net tangible assets to below $2,000,000, (2) a reduction to one active market maker, (3) a reduction in the market value of the public float in our securities to less than $1,000,000, (4) a reduction of the trading price of our Common Stock to less than $1.00 per share or (5) the discretion of the Nasdaq SmallCap Market. In the event our securities are delisted from the Nasdaq SmallCap Market, trading, if any, in our common stock would thereafter be conducted in the over-the-counter markets in the so-called "pink sheets" or the National Association of Securities Dealer's "Electronic Bulletin Board." Consequently, the liquidity of our common stock would likely be impaired, not only in the number of shares which could be bought and sold, but also through delays in the timing of the transactions, reduction in the coverage of our securities by security analysts and the news media, and lower prices for our securities than might otherwise prevail. In addition, our common stock would become subject to certain rules of the Securities and Exchange Commission relating to "penny stocks." These rules require broker-dealers to make special suitability determinations for purchasers other than established customers and certain institutional investors and to receive the purchasers' prior 8 12 written consent for a purchase transaction prior to sale. Consequently, these "penny stock rules" may adversely affect the ability of broker-dealers to sell our common stock and may adversely affect your ability to sell shares of our common stock in the secondary market. WE ARE DEPENDENT ON THE ONGOING SERVICES OF CERTAIN OF OUR EXECUTIVES, THE LOSS OF WHICH COULD HAVE A DETRIMENTAL EFFECT ON OUR PROFITABILITY AND THE MARKET PRICE OF OUR STOCK. Our plan of business development and our day-to-day operations rely heavily on the experience of Stephen D. King, our Chief Executive Officer, Ronald K. Fuller, our President, Jesse Berst, the CEO of our IZ business, Thomas W. Orr, our Chief Financial Officer and Gary Schneider, the CEO of our PopMail Network division. The loss of any of them could adversely affect the success of our operations and strategic plans and, consequently, have a detrimental effect on the market price of our stock. WE MAY BE UNABLE TO HIRE QUALIFIED EMPLOYEES TO HELP IMPLEMENT AND MANAGE OUR EXPANSION PLANS, WHICH INABILITY COULD BE DETRIMENTAL TO THE VALUE OF YOUR INVESTMENT. Our success will depend in large part upon our ability to supplement our existing management team. We will need to hire additional corporate level and management employees to help implement and operate our plans for expansion of our Internet and restaurant divisions. The demand for individuals with management skills is high and many other businesses, most of which have greater name recognition and resources than the Company, compete for their services. Any inability or delay in obtaining additional key employees could have a material adverse effect on our expansion plans and, consequently, the market value of our stock. DUE TO OUR LIMITED OPERATING HISTORY, YOU MAY FIND IT DIFFICULT TO ASSESS OUR ABILITY TO OPERATE PROFITABLY. We have only been operating our Mall of America restaurant since June 1998, and our Denver restaurant since March 1999. In addition, Old Popmail was founded in December 1997, and ROI commenced operations in June 1998. Finally, IZ.com Incorporated was incorporated in February 1999. Consequently, we face the added risks, expenses and difficulties related to developing and operating a new business enterprise. Given our lack of significant operating history, investors may have difficulty assessing the many factors which will determine our ability to generate future profits. ONE INDIVIDUAL CONTROLS A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK AND MAY INFLUENCE OUR AFFAIRS. Following our merger with popmail.com, inc. on September 1, 1999, James L. Anderson was elected to our Board of Directors and served as its Chairman until his resignation on January 24, 2000. Effective February 1, 2000, Mr. Anderson resigned from our Board. Based upon a Schedule 13D filed with the Securities and Exchange Commission on September 13, 1999, as of March 27, 2000, Mr. Anderson indirectly or directly controlled approximately 31.6 percent of our outstanding common stock. Accordingly, he may have the ability to determine the election of members of the Board of Directors and determine the approval of corporate transactions and other matters requiring shareholder approval. Unless and until Mr. Anderson substantially decreases his percentage beneficial ownership in our common stock, he will continue to have significant influence over our affairs. DUE TO THE LARGE NUMBER OF OUTSTANDING OPTIONS AND WARRANTS, OUR SHAREHOLDERS FACE A RISK OF SUBSTANTIAL FUTURE DILUTION AND DOWNWARD PRESSURE ON THE TRADING PRICE OF OUR COMMON STOCK. We have a total of 29,483,118 shares of our common stock reserved for issuance pursuant to our stock options plans, outstanding preferred stock and common purchase warrants. Most of these shares have either registered for resale or are subject to agreements providing for their registration for resale under certain circumstances. Accordingly, our existing shareholders face a substantial risk of dilution and the trading price of our common stock may decrease as these convertible securities are exercised or converted into shares of common stock and subsequently offered for sale through the Nasdaq SmallCap Market. 9 13 WE RELY HEAVILY ON OUR INTELLECTUAL PROPERTY RIGHTS AND OTHER PROPRIETARY INFORMATION; FAILURE TO PROTECT AND MAINTAIN THESE RIGHTS AND INFORMATION COULD PREVENT US FROM COMPETING EFFECTIVELY. Our success and ability to compete are substantially dependent on our internally developed technologies and trademarks, which we seek to protect through a combination of trade secret and trademark law, as well as confidentiality or license agreements with our employees, consultants, and corporate and strategic partners. If we are unable to prevent the unauthorized use of our proprietary information or if our competitors are able to develop similar technologies independently, the competitive benefits of our technologies, intellectual property rights and proprietary information will be diminished. WE MAY NOT PAY DIVIDENDS ON OUR COMMON STOCK, IN WHICH EVENT YOUR ONLY RETURN ON INVESTMENT, IF ANY, WILL OCCUR ON THE SALE OF OUR STOCK. To date, we have not paid any cash dividends on our common stock, and we do not intend to do so in the foreseeable future. Rather, we intend to use any future earnings to fund our operations and the growth of our business. Accordingly, the only return on an investment in our common stock will occur upon its sale. PURSUANT TO ITS AUTHORITY TO DESIGNATE AND ISSUE SHARES OF OUR STOCK AS IT DEEMS APPROPRIATE, OUR BOARD OF DIRECTORS MAY ASSIGN RIGHTS AND PRIVILEGES TO CURRENTLY UNDESIGNATED SHARES WHICH COULD ADVERSELY AFFECT YOUR RIGHTS AS A COMMON SHAREHOLDER. Our authorized capital consists of 100,000,000 shares of capital stock. Our Board of Directors, without any action by the shareholders, may designate and issue shares in such classes or series (including classes or series of preferred stock) as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. As of March 27, 2000, we have 34,422,928 shares of common stock, 275,000 shares of Series E Convertible Preferred Stock and 287,408 shares of Series F Convertible Preferred Stock outstanding. As of such date, a further 31,055,117 shares of common stock have been reserved as follows: - a maximum of 750,000 shares of common stock reserved for issuance upon exercise of the Series E Preferred Shares, 275,000 shares of which are currently outstanding; - a maximum of 7,375,000 shares of common stock reserved for issuance upon conversion of Series F Convertible Preferred Stock; - 3,348,895 shares of common stock issuable upon exercise of options granted under the IZ.com Incorporated stock option plan assumed by the Company; - 2,600,000 shares issuable upon the exercise of the Class A Warrants issued as part of our initial public offering and the partial exercise of the underwriter's over-allotment; - 15,100,889 shares issuable upon the exercise of outstanding warrants; 10 14 - 1,250,000 shares reserved for issuance under our 1997 Stock Option and Compensation Plan, of which options reverting to 1,590,333 shares are currently outstanding (including 340,333 shares which remain subject to shareholder approval); - 250,000 shares for issuance under our 1998 Director Stock Option Plan, of which options relating to 290,000 shares are currently outstanding, of which 40,000 remain subject to shareholder approval; and The rights of holders of preferred stock and other classes of common stock that may be issued could be superior to the rights granted to holders of the Units issued in our initial public offering. Our Board's ability to designate and issue such undesignated shares could impede or deter an unsolicited tender offer or takeover proposal. Further, the issuance of additional shares having preferential rights could adversely affect the voting power and other rights of holders of common stock. MINNESOTA LAW MAY INHIBIT OR DISCOURAGE TAKEOVERS, WHICH COULD REDUCE THE MARKET VALUE OF OUR STOCK. As a corporation organized under Minnesota law, we are subject to certain Minnesota statutes which regulate business combinations and restrict the voting rights of certain persons acquiring shares of its stock. By impeding a merger, consolidation, takeover or other business combination involving the Company or discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of the Company, these regulations could adversely affect the market value of our stock. THE LIMITATIONS ON DIRECTOR LIABILITY CONTAINED IN OUR ARTICLES OF INCORPORATION AND BYLAWS MAY DISCOURAGE SUITS AGAINST DIRECTORS FOR BREACH OF FIDUCIARY DUTY. As permitted by Minnesota law, our Amended and Restated Articles of Incorporation provide that members of our Board of Directors are not personally liable to you or the Company for monetary damages resulting from a breach of their fiduciary duties. These limitations on director liability may discourage shareholders from suing directors for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought against a director by shareholders on the Company's behalf. Furthermore, our Bylaws provide for mandatory indemnification of directors and officers to the fullest extent permitted by Minnesota law. All of these provisions limit the extent to which the threat of legal action against our directors for any breach of their fiduciary duties will prevent such breach from occurring in the first instance. PURSUING AND COMPLETING POTENTIAL ACQUISITIONS COULD DIVERT MANAGEMENT ATTENTION AND FINANCIAL RESOURCES AND MAY NOT PRODUCE THE DESIRED BUSINESS RESULTS. We do not have specific personnel dedicated solely to pursuing and completing acquisitions. As a result, if we pursue any acquisition, our management, in addition to fulfilling their operational responsibilities, could spend significant time, management resources and financial resources to pursue and complete the acquisition and integrate the acquired business with our existing business. 11 15 To finance any acquisition, we may use capital stock or cash or a combination of both. Alternatively, we may borrow money from a bank or other lender. If we use capital stock, our shareholders may experience dilution. If we use cash or debt financing, our financial liquidity would be reduced. In addition, acquisitions may result in nonrecurring charges or the amortization of significant goodwill that could adversely affect our ability to achieve and maintain profitability. Despite the investment of these management and financial resources and completion of due diligence with respect to these efforts, an acquisition may fail to produce the expected revenues, earnings or business and an acquired service or technology may not perform as expected for a variety of reasons, including: - Difficulties in the assimilation of the operations, technologies, products and personnel of the acquired company, - Risks of entering markets in which we have no or limited prior experience, - Expenses of any undisclosed or potential legal liabilities of the acquired company, - The applicability of rules and regulations that might restrict our ability to operate, and - The potential loss of key employees of the acquired company. If we make acquisitions in the future and the acquired businesses fail to perform as expected, our business operating results and financial condition may be materially adversely affected. FAILURE TO MANAGE OUR GROWTH MAY ADVERSELY AFFECT OUR BUSINESS We have grown rapidly and expect to continue to grow rapidly both by hiring new employees and serving new business and markets. Our growth has placed, and will continue to place, a significant strain on our management and our operating and financial systems. Our personnel, systems, procedures and controls may be inadequate to support our future operations. In order to accommodate the increased size of our operations, we will need to hire, train and retain the appropriate personnel to manage our operations. We will also need to improve our financial and management controls, reporting systems and operating systems, all of which will require significant ongoing investments of the efforts of key personnel. IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET PRICE OF OUR COMMON STOCK MAY FALL SIGNIFICANTLY. The market price of publicly traded securities generally reflects, to a large degree, the expectations of industry analysts and significant investors with respect to the short and long-term operating results of the issuers. When issuers fail to meet such expectations, the market price of their publicly traded securities usually decreases, sometimes significantly, and may not recover. There can be no assurance that We will be able to satisfy the expectations of market analysts and investors to avoid a precipitous drop in the market price of our common stock. 12 16 OUR ABILITY, OR INABILITY, TO RESPOND TO VARIOUS COMPETITIVE FACTORS AFFECTING THE RESTAURANT INDUSTRY MAY AFFECT THE MARKET PRICE OF OUR COMMON STOCK. The restaurant industry is highly competitive and is affected by changes in consumer preferences, as well as by national, regional and local economic conditions, and demographic trends. Discretionary spending priorities, traffic patterns, tourist travel, weather conditions, employee availability and the type, number and location of competing restaurants, among other factors, will also directly affect the performance of our restaurants. Changes in any of these factors in the markets where we currently operate our restaurants could adversely affect the results of our operations. Furthermore, the restaurant industry in general is highly competitive based on the type, quality and selection of the food offered, price, service, location and other factors and, as a result, has a high failure rate. The themed restaurant industry is relatively young, is particularly dependent on tourism and has seen the emergence of a number of new competitors. We compete with numerous well-established competitors, including national, regional and local restaurant chains, many of which have greater financial, marketing, personnel and other resources and longer operating histories than us. As a result, we may be unable to respond to the various competitive factors affecting the restaurant industry. 13 17 INTERNET DIVISION WE ARE ENTERING INTO A NEW BUSINESS VENTURE IN AN EVOLVING INDUSTRY IN WHICH WE HAVE NO EXPERIENCE AND WHICH HAS AN UNPROVEN REVENUE MODEL. The email business adds a significantly different business to our business operations. Some members of our present management have little or no experience with the business of providing email services. The Internet industry is rapidly evolving, extremely competitive, and the market place for internet-related shares has been very volatile. Furthermore, the email business has no proven revenue model. Consequently, there can be no assurance that sufficient revenues will be generated to support our current operations and other capital requirements. IN LIGHT OF RECENT CONSOLIDATION IN THE RADIO INDUSTRY, THE LOSS OF ANY SIGNIFICANT AFFILIATE CONTRACTS WOULD NEGATIVELY IMPACT POPMAIL'S OPERATIONS. The last few years have brought substantial concentration of power among a few players in the radio industry. Consequently, significant portions of the industry are controlled by a relatively few organizations. We already have affiliation contracts in place with 2 of the 5 largest organizations and are in negotiations with the remaining players. In light of such consolidation, however, the loss of any of these significant affiliation contracts or our inability to enter into contracts with other radio industry entities would negatively impact our operations. OUR EMAIL BASED PRODUCTS ARE DEPENDENT UPON THE INTERNET. The success of our services and products will depend in large part upon the continued development and expansion of the Internet. The Internet has experienced, and is expected to continue to experience, significant and geometric growth in the number of users and the amount of traffic. There can be no assurance that the Internet infrastructure will continue to be able to support the demands placed on it by this continued growth. In addition, the Internet could lose its viability due to delays in the development or adoption of new standards and protocols (for example, the next-generation Internet Protocol) to handle increased levels of Internet activity, or due to increased governmental regulation. There can be no assurance that the infrastructure or complementary services necessary to make the Internet a viable commercial marketplace will be developed, or, if developed, that the Internet will become a viable commercial marketplace for services and products 15 18 such as those we offer. If the necessary infrastructure or complementary services or facilities are not developed, or if the Internet does not become a viable commercial marketplace, our business, results of operations, and financial condition will be materially adversely affected. OUR FUTURE SUCCESS WILL DEPEND ON INCREASED ACCEPTANCE OF THE INTERNET AS A MEDIUM OF COMMERCE. The market for Internet email and other services is relatively new and evolving rapidly. Our future success will depend, in part, upon our ability to provide services that are accepted by our existing and future members as an integral part of their business model. The level of demand for Internet email and other services will depend upon a number of factors, including the following: - - - the growth in consumer access to, and acceptance of, new interactive technologies such as the Internet; - - - the adoption of Internet-based business models; and - - - the development of technologies that facilitate two-way communication between companies and target audiences. Significant issues concerning the commercial use of Internet technologies, including security, reliability, cost, ease of use and quality of service, remain unresolved and may inhibit the growth of services that use these technologies. Our future success will depend, in part, on our ability to meet these challenges, which must be met in a timely and cost-effective manner. We cannot be sure that we will succeed in effectively meeting these challenges, and our failure to do so could materially and adversely affect our business. Industry analysts and others have made many predictions concerning the growth of the Internet as a business medium. Many of these historical predictions have overstated the growth of the Internet. These predictions should not be relied upon as conclusive. The market for our Internet email services may not develop, our services may not be adopted and individual personal computer users in business or at home may not use the Internet or other interactive media for commerce and communication. If the market for Internet email and other services fails to develop, or develops more slowly than expected, or if our services do not achieve market acceptance, our business would be materially and adversely affected. INTERNET STOCKS ARE SUBJECT TO MARKET VOLATILITY. The stock market in general, and the market prices for Internet-related companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These fluctuations may adversely affect our stock price. If Internet usage does not continue to grow or its infrastructure fails, our business will suffer. If the Internet does not gain increased acceptance for business-to-consumer electronic commerce, our business will not grow or become profitable. We cannot be certain that the infrastructure or complementary services necessary to maintain the Internet as a useful and easy means of transferring documents and data will continue to develop. The Internet infrastructure may not support the demands that growth may place on it and the performance and reliability of the Internet may decline. INCREASED COMPETITION RESULTING FROM AN INCREASE IN THE NUMBER OF FREE EMAIL PROVIDERS THAT TARGET THE RADIO INDUSTRY MAY HAVE AN ADVERSE EFFECT ON POPMAIL'S FUTURE BUSINESS OPERATIONS. Currently there are hundreds of free email providers, but our management believes that it is currently the only email provider that targets the radio industry. To the extent we are successful within the radio industry, we anticipate others will attempt to compete in the radio segment. Increased competition due to a greater number of free email providers targeting the radio industry may have an adverse affect on our future business operations. WE MAY FACE INCREASING COMPETITION FOR RADIO STATION CUSTOMERS AND INTERNET ADVERTISERS. As a provider of free email, we compete with numerous other email providers, many of which have more capital than us. The principal competitors in the private-label email service business are: CommTouch, WhoWhere, MailChek, iName, and OnMedia. Of these providers, to the knowledge of our management, only MailChek and OnMedia have any radio station customers. The Company views its greatest competitive threat to its ability to establish relationships with radio stations as the potential availability of software that may duplicate many of the features in the PopMail email system. In addition, we face increasing competition for Internet advertisers. THERE IS A RISK THAT GOVERNMENT REGULATION OF THE INTERNET COULD BECOME MORE EXTENSIVE. There are currently few laws or regulations directly applicable to access to or commerce on the Internet. However, due to the increasing popularity and use of the Internet, it is possible that a number of laws and regulations may be adopted with respect to the Internet, covering issues such as user privacy, pricing, characteristics, and quality of products and service. The Telecommunications Reform Act of 1996 imposes criminal penalties on anyone who distributes obscene, indecent, or patently offensive communications on the Internet. Other nations, including Germany, have taken 16 19 actions to restrict the free flow of material deemed to be objectionable on the Internet. The adoption of any additional laws or regulations may decrease the growth of the Internet, which could in turn decrease the demand for our services and products, and increase our cost of doing business or otherwise have an adverse effect on our business, results of operations and financial condition. Moreover, the applicability to the Internet of existing laws in various jurisdictions governing issues such as property ownership, libel, and personal privacy is uncertain and will take years to resolve. Any such new legislation or regulation could have a material adverse effect on our business, results of operations, and financial condition. WE MAY NOT BE ABLE TO GENERATE SUFFICIENT REVENUE IF THE ACCEPTANCE OF ONLINE ADVERTISING, WHICH IS NEW AND UNPREDICTABLE, DOES NOT DEVELOP AND EXPAND AS WE ANTICIPATE. We have to derive a substantial portion of our revenue from online advertising and direct marketing, including both email and Web-based programs. If these services do not continue to achieve market acceptance, we may not generate sufficient revenue to support our continued operations. The Internet has not existed long enough as an advertising medium to demonstrate its effectiveness relative to traditional advertising. Advertisers and advertising agencies that have historically relied on traditional advertising may be reluctant or slow to adopt online advertising. Many potential advertisers have limited or no experience using email or the Web as an advertising medium. They may have allocated only a limited portion of their advertising budgets to online advertising, or may find online advertising to be less effective for promoting their products and services than traditional advertising media. If the market for online advertising fails to develop or develops more slowly than we expect, we may not sustain revenue growth or achieve or sustain profitability. The market for email advertising in general is vulnerable to the negative public perception associated with unsolicited email, known as "spam." Public perception, press reports or governmental action related to spam could reduce the overall demand for email advertising in general, which could reduce our revenue and prevent us from achieving or sustaining profitability. IF WE DO NOT MAINTAIN AND EXPAND OUR MEMBER BASE WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY FOR ADVERTISERS. Our revenue has been derived primarily from advertisers seeking targeted member groups in order to increase their return on advertising investments. If we are unable to maintain and expand our member base, advertisers could find our audience less attractive and effective for promoting their products and services and we could experience difficulty retaining our existing advertisers and attracting additional advertisers. To date, we have relied on referral-based marketing activities to attract a portion of our members and will continue to do so for the foreseeable future. This type of marketing is largely outside of our control and there can be no assurance that it will generate rates of growth in our member base comparable to what we have experienced to date. We would also be unable to grow our member base if a significant number of our current members stopped using our service. Members may discontinue using our service if they object to having their online activities tracked or they do not find our content useful. In addition, our service allows our members to easily unsubscribe at any time by clicking through a link appearing at the bottom of our email messages and selecting the particular categories from which they want to unsubscribe. 17 20 OUR BUSINESS DEPENDS ON OUR ABILITY TO DEVELOP AND MAINTAIN RELEVANT AND APPEALING CONTENT IN OUR EMAIL MESSAGES; IF WE ARE NOT ABLE TO CONTINUE TO DELIVER SUCH CONTENT WE MAY BE NOT ABLE TO MAINTAIN AND EXPAND OUR MEMBER BASE, WHICH COULD NEGATIVELY AFFECT OUR ABILITY TO RETAIN AND ATTRACT THE ADVERTISERS WE NEED TO SUSTAIN REVENUE GROWTH. We have relied on our editorial staff to identify and develop substantially all of our content utilizing content derived from other parties. Because our members' preferences are constantly evolving, our editorial staff may be unable to accurately and effectively identify and develop content that is relevant and appealing to our members. As a result, we may have difficulty maintaining and expanding our member base, which could negatively affect our ability to retain and attract advertisers. If we are unable to retain and attract advertisers our revenue will decrease. Additionally, we license a small percentage of our content from third parties. The loss, or increase in cost, of our licensed content may impair our ability to assimilate and maintain consistent, appealing content in our email messages or maintain and improve the services we offer to consumers. We intend to continue to strategically license a portion of our content for our emails from third parties, including content that is integrated with internally developed content. These third-party content licenses may be unavailable to us on commercially reasonable terms, and we may be unable to integrate third-party content successfully. The inability to obtain any of these licenses could result in delays in product development or services until equivalent content can be identified, licensed and integrated. Any delays in product development or services could negatively affect our ability to maintain and expand our member base. IF WE DO NOT RESPOND TO OUR COMPETITION EFFECTIVELY, WE MAY LOSE CURRENT ADVERTISERS AND FAIL TO ATTRACT NEW ADVERTISERS, REDUCING OUR REVENUES AND HARMING OUR FINANCIAL RESULTS. We face intense competition from both traditional and online advertising and direct marketing businesses. If we do not respond to this competition effectively, we may not be able to retain current advertisers or attract new advertisers, which would reduce our revenue and harm our financial results. Currently, several companies offer competitive email direct marketing services, such as coolsavings.com, MyPoints.com, NetCreations, YesMail.com, Digital Impact and Exactis. We also expect to face competition from online content providers, list aggregators as well as established online portals and community Web sites that engage in direct marketing programs. Additionally, we may face competition from traditional advertising agencies and direct marketing companies that may seek to offer online products or services. WE DEPEND HEAVILY ON OUR NETWORK INFRASTRUCTURE AND IF THIS FAILS IT COULD RESULT IN UNANTICIPATED EXPENSES AND PREVENT OUR MEMBERS FROM EFFECTIVELY UTILIZING OUR SERVICES, WHICH COULD NEGATIVELY IMPACT OUR ABILITY TO ATTRACT AND RETAIN MEMBERS AND ADVERTISERS. Our ability to successfully create and deliver our email messages depends in large part on the capacity, reliability and security of our networking hardware, software and telecommunications infrastructure. Failures within our network infrastructure could result in unanticipated expenses to address such failures and could prevent our members from effectively utilizing our services, which could prevent us from retaining and attracting members and advertisers. The hardware 18 21 infrastructure on which our system operates is located at PSINet in Reston, Virginia. We do not currently have fully redundant systems or a formal disaster recovery plan. Our system is susceptible to natural and man-made disasters, including earthquakes, fires, floods, power loss and vandalism. Further, telecommunications failures, computer viruses, electronic break-ins or other similar disruptive problems could adversely affect the operation of our systems. Our insurance policies may not adequately compensate us for any losses that may occur due to any damages or interruptions in our systems. Accordingly, we could be required to make capital expenditures in the event of unanticipated damage. In addition, our members depend on Internet service providers, or ISPs, for access to our Web site. Due to the rapid growth of the Internet, ISPs and Web sites have experienced significant system failures and could experience outages, delays and other difficulties due to system failures unrelated to our systems. These problems could harm our business by preventing our members from effectively utilizing our services. OUR FUTURE SUCCESS WILL DEPEND ON INCREASED ACCEPTANCE OF THE INTERNET AS A MEDIUM OF COMMERCE. The market for Internet email and other services is relatively new and evolving rapidly. Our future success will depend, in part, upon our ability to provide services that are accepted by our existing and future members as an integral part of their business model. The level of demand for Internet email and other services will depend upon a number of factors, including the following: - - - the growth in consumer access to, and acceptance of, new interactive technologies such as the Internet; - - - the adoption of Internet-based business models; and - - - the development of technologies that facilitate two-way communication between companies and target audiences. Significant issues concerning the commercial use of Internet technologies, including security, reliability, cost, ease of use and quality of service, remain unresolved and may inhibit the growth of services that use these technologies. Our future success will depend, in part, on our ability to meet these challenges, which must be met in a timely and cost-effective manner. We cannot be sure that we will succeed in effectively meeting these challenges, and our failure to do so could materially and adversely affect our business. Industry analysts and others have made many predictions concerning the growth of the Internet as a business medium. Many of these historical predictions have overstated the growth of the Internet. These predictions should not be relied upon as conclusive. The market for our Internet email services may not develop, our services may not be adopted and individual personal computer users in business or at home may not use the Internet or other interactive media for commerce and communication. If the market for Internet email and other services fails to develop, or develops more slowly than expected, or if our services do not achieve market acceptance, our business would be materially and adversely affected. WE MAY INCUR LIABILITY FOR THE INVASION OF PRIVACY The Federal Trade Commission has investigated businesses that have used personally identifiable information without permission or in violation of a stated privacy policy. PopMail has established and communicated to its members a privacy policy. In the event that the 19 22 Company conveys personally identifiable information to its corporate customers without permission or in violation of its stated privacy policy, we may incur liability for the unlawful invasion of privacy. RESTAURANT DIVISION OUR ABILITY, OR INABILITY, TO RESPOND TO VARIOUS COMPETITIVE FACTORS AFFECTING THE RESTAURANT INDUSTRY MAY AFFECT THE MARKET PRICE OF OUR COMMON STOCK. The restaurant industry is highly competitive and is affected by changes in consumer preferences, as well as by national, regional and local economic conditions, and demographic trends. Discretionary spending priorities, traffic patterns, tourist travel, weather conditions, employee availability and the type, number and location of competing restaurants, among other factors, will also directly affect the performance of our restaurants. Changes in any of these factors in the markets where we currently operate our restaurants could adversely affect the results of our operations. Furthermore, the restaurant industry in general is highly competitive based on the type, quality and selection of the food offered, price, service, location and other factors and, as a result, has a high failure rate. The themed restaurant industry is relatively young, is particularly dependent on tourism and has seen the emergence of a number of new competitors. We compete with numerous well-established competitors, including national, regional and local restaurant chains, many of which have greater financial, marketing, personnel and other resources and longer operating histories than us. As a result, we may be unable to respond to the various competitive factors affecting the restaurant industry. WE HAVE ENTERED INTO NON-CANCELABLE LEASES UNDER WHICH WE ARE OBLIGATED TO MAKE PAYMENTS FOR TERMS OF 12 TO 15 YEARS. We have entered into long-term leases relating to the Kenwood, Mall of America and Denver restaurants. These leases are non-cancelable by us (except in limited circumstances) and range in term from 12 to 15 years. Although we have closed the Kenwood restaurant and assigned the related lease to an unrelated third party who is currently making the required lease payments, We remain the primary obligor under the lease. If we decide to close any of our existing restaurants, we may nonetheless be committed to perform our obligations under the applicable lease, which would include, among other things, payment of the applicable base rent for the balance of the respective lease term. Such continued obligations increase our chances of closing a restaurant without receiving an adequate return on our investment. AMONG OTHER ECONOMIC FACTORS OVER WHICH WE HAVE NO CONTROL, THE SUCCESS OF OUR RESTAURANTS WILL DEPEND ON CONSUMER PREFERENCES AND THE PREVAILING LEVEL OF DISCRETIONARY CONSUMER SPENDING. The success of our restaurant division depends to a significant degree on a number of economic conditions over which we have no control, including: - discretionary consumer spending; - the overall success of the malls, entertainment centers and other venues where Cafe Odyssey restaurants are or will be located; - economic conditions affecting disposable consumer income; and - the continued popularity of themed restaurants in general and the Cafe Odyssey concept in particular. Furthermore, most themed restaurants are especially susceptible to shifts in consumer preferences because they open at or near capacity and frequently respond to such shifts by experiencing a decline in revenue growth or of actual revenues. An adverse change in any or all of these conditions would have a negative effect on our operations and the market value of our common stock. OUR RESTAURANT DIVISION IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION WHICH COULD HAVE A NEGATIVE EFFECT ON OUR BUSINESS. The restaurant industry, and to a lesser extent, the retail merchandising industry, are subject to numerous federal, state, and local government regulations, including those relating to: - the preparation and sale of food - building and zoning requirements - environmental protections - minimum wage requirements - overtime - working and safety conditions - the sale of alcoholic beverages - sanitation - relationships with employees - unemployment - workers compensation - citizenship requirements Any change in the current status of such regulations, including an increase in employee benefits costs, workers' compensation insurance rates, or other costs associated with employees, could substantially increase our compliance and labor costs. Because we pay many of our restaurant-level personnel rates based on either the federal or the state minimum wage, increases in the minimum wage would lead to increased labor costs. In addition, our operating results would be adversely affected in the event we fail to maintain our food and liquor licenses. Furthermore, restaurant operating costs are affected by increases in unemployment tax rates, sales taxes and similar costs over which we have no control. 20 23 ITEM 2. DESCRIPTION OF PROPERTY. THE MALL OF AMERICA RESTAURANT Location The Mall of America Restaurant consists of approximately 17,800 square feet located on the third floor of the Mall of America in Bloomington, Minnesota, a suburb of Minneapolis. This site is leased pursuant to a lease agreement dated August 4, 1997. The Mall of America opened in August 1992 with 266 tenants and now holds approximately 520 stores, merchandise carts and attractions, including four large anchor tenants (Macy's, Bloomingdale's, Sears and Nordstrom). The mall encompasses 4.2 million square feet on four enclosed floors, of which 2.5 million square feet are leasable, and employs 11,000 to 13,000 people, depending on the season. More than 93% of the leasable space is under contract, up from 71% five years ago. The mall draws an estimated 40 million visitors per year. Tourists account for 35% to 37% of annual mall traffic, but increases up to 50% in the summer months. Description of Lease The term of the lease is for 12 years, commencing on June 1, 1998. The lease does not provide for renewal terms. The lease provides for the payment of either a minimum annual rent or a percentage rent based on gross sales. The minimum annual rent is $25 per square foot, or $405,375 per year based on approximately 16,215 square feet of leased area. The percentage rent is the amount by which 6% of gross sales exceeds minimum rent. The terms of payment do not change over the course of the lease term. The lease also provided for a waiver of the minimum annual rent only, for the first year of the lease. In addition to the fixed minimum rent and percentage rent, the Company is required to pay its proportionate share of common area maintenance costs; taxes, insurance, maintenance and operating costs. THE DENVER PAVILIONS RESTAURANT Location The Denver Pavilions Restaurant consists of approximately 18,000 square feet located on the third floor of the Denver Pavilions in Denver, Colorado. This site is leased pursuant to a lease agreement dated May 12, 1998 and includes office space utilized for the Company's restaurant division. 21 24 Description Of Lease The term of the lease is for 15 years, commencing on February 27, 1999. The lease also provides for three renewal terms. The lease provides for the payment of either a minimum annual rent or a percentage rent based on gross sales. The minimum annual rent increases throughout the term of the lease from $450,000 per year in years one through five to $568,800 in years 11 through 15. The percentage rent is the amount by which 5% of gross sales exceeds minimum rent. The lease also provides for a tenant allowance. In addition to the fixed minimum rent and percentage rent, the Company is required to pay its proportionate share of common area maintenance costs: taxes, insurance, maintenance and operating costs. THE KENWOOD RESTAURANT Location The Kenwood Restaurant opened in December 1996 under the name Hotel Discovery and was closed by the Company in August 1999. In November 1999, the Company assigned the related lease (described below) in connection with the pending sale of restaurant assets to a third party, who subsequently reopened the restaurant under another name and continues to operate the same. The property is approximately 17,000 square feet in size on three levels and is located at the northeast corner of Sycamore Plaza at Kenwood Shopping Center in Cincinnati, Ohio. Although the third party has paid all payments due under the lease since November 1999, PopMail remains primarily obligated under the lease. Description of Lease The initial term of the lease is 15 years with an option for two additional five-year periods. The lease provides for the payment of both a monthly fixed minimum rent and a percentage rent based on gross sales in excess of an escalating base amount. The monthly fixed minimum rent is $12,833 for the first five years of the initial lease term, $14,117 for the sixth through tenth years of the initial lease term, $15,400 for the eleventh through fifteenth years of the initial lease term. In addition to the fixed minimum rent, the lease provides for the payment of a percentage rent equal to 4% of the gross sales from the restaurant in excess of the following annual gross sales amounts; $3,850,000 for the first five years of the initial lease term, $4,235,000 for the sixth through tenth years of the initial lease term, $4,620,000 for the eleventh through fifteenth years of the initial lease term. No percentage rent was paid in 1998 or 1999. In addition to the fixed minimum rent and percentage rent, the Company is required to pay its proportionate share of common area maintenance costs; taxes, insurance, maintenance and operating costs. IRVING TEXAS OFFICE FACILITIES PopMail's Internet email services division subleases approximately 8,500 square feet of office space in Irving, Texas. PopMail's sublease commenced on September 1, 1998 and expires on December 31, 2001. Rentals of $11,412.00 per month ($136,444 annually) are required under the sublease, in addition to nominal charges for common area maintenance. 22 25 ITEM 3. LEGAL PROCEEDINGS. The Company is involved in legal actions in the ordinary course of its business. Although the outcomes of any such legal actions cannot be predicted, in the opinion of management there is no legal proceeding pending against or involving the Company for which the outcome is likely to have a material adverse effect upon the business, operating results and financial condition of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company did not submit any matters to a vote of security holders during the last quarter of the fiscal year covered by this report. 23 26 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. PRICE RANGE OF COMMON STOCK Since November 3, 1997, the common stock of the Company has been traded in the over-the counter market and quoted on the Nasdaq SmallCap Market. Initially, the Company's common stock was quoted under the symbol "HOTD". On May 21, 1998, the Company changed its corporate name from Hotel Discovery, Inc. to Cafe Odyssey, Inc. In conjunction with this change, effective May 24, 1998, the Company's symbol for its common stock was changed to "CODY." Effective September 1, 1999, the Company acquired popmail.com, inc. and changed its name to PopMail.com, inc. In connection with the change in the Company's name, the Company's symbol for its common stock was changed to "POPM." As described more fully in the Risk Factors section of this Form 10-KSB, there is a substantial risk that PopMail's common stock will be delisted from the Nasdaq SmallCap Market. In the event that such risk materializes, trading, if any, in our common stock would thereafter be conducted in the over-the-counter markets in the so-called "pink sheets" or the National Association of Securities Dealer's "Electronic Bulletin Board." Consequently, the liquidity of our common stock would likely be impaired and the market price of our shares may decrease significantly. The following table sets forth the high and low bid prices of the Company's common stock for the periods indicated. The Nasdaq bid quotations represent inter-dealer prices, without retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions:
HIGH LOW FISCAL YEAR ENDED JANUARY 3, 1999: First Quarter............................ $3.75 $1.88 Second Quarter........................... 5.38 2.25 Third Quarter............................ 3.63 1.00 Fourth Quarter........................... 1.13 .50 FISCAL YEAR ENDED JANUARY 2, 2000: First Quarter............................ 1.03 .56 Second Quarter........................... 3.56 .50 Third Quarter............................ 4.88 1.94 Fourth Quarter........................... 4.09 1.44
As of March 27, 2000, there were approximately 270 shareholders of record of the Company's common stock, and approximately 6,000 other beneficial owners whose shares are held in street name. The Company has never declared or paid any cash dividends or distributions on its capital stock. The Company does not intend to pay any cash dividends on its common stock in the foreseeable future, as the current policy of the Company's Board of Directors is to retain all earnings, if any, to support operations and finance expansion. Future declaration and payment of dividends, if any, will be determined in light of then current conditions, including the Company's earnings, operations, capital requirements, financial condition, restrictions in financing arrangements and other factors deemed relevant by the Board of Directors. RECENT SALES OF UNREGISTERED SECURITIES The following table lists recent sales of unregistered securities by the Company:
TITLE AND CASH OR DESCRIPTION OF AMOUNT OF CONSIDERATION DATE SECURITIES SECURITIES ISSUED TO RECEIVED - - ---------------------------------------------------------------------------------------------------------------------- 1/22/99 Warrant to purchase Warrants to purchase Stephen D. King In connection with Common Stock shares of Common Jerry Ruyan certain guaranties Stock(1) Greg Mosher of a loan Andrew Green - - ---------------------------------------------------------------------------------------------------------------------- 2/23/99 Warrant to purchase Warrant to purchase Frank W. Terrizzi In consideration Common Stock 50,000 shares of for a loan Common Stock - - ---------------------------------------------------------------------------------------------------------------------- 3/3/99 Warrant to purchase Warrants to purchase Stephen D. King In consideration Common Stock an aggregate of Michael Berg of a guaranty of a 500,000 shares of Jack Feltl loan and pledge of Common Stock, at an Cayne Mills certain collateral exercise price of Timothy Maudlin $0.75 - - ---------------------------------------------------------------------------------------------------------------------- 3/18/99 Warrant to purchase Warrant to purchase Stephen D. King In consideration Common Stock 150,000 shares of of a guaranty of a Common Stock, at an loan and pledge of exercise price of certain collateral $1.00 - - ---------------------------------------------------------------------------------------------------------------------- 3/18/99 Warrant to purchase Warrant to purchase Cunningham Group In consideration Common Stock 150,000 shares of Construction Services of certain Common Stock, at an financial exercise price of concessions $0.75 - - ---------------------------------------------------------------------------------------------------------------------- 4/20/99 Warrants to purchase Warrants to purchase J. Jeffrey Brausch & Financial Advisory an aggregate of an aggregate of Company Services 330,000 shares of 330,000 shares of CTC, Inc. common stock at an Common Stock, at an exercise price of $0.75 exercise price of $0.75
- - ------------------- (1) The Guaranty provides for an initial Warrant to purchase 200,000 shares of Common Stock, at an exercise price of $0.75, to be issued to each of the Guarantors. Additionally, penalty Warrants are to be provided for each month after the due date that the loan and guaranties are still outstanding. To date, Warrants to purchase 940,000 shares of Common Stock have been issued. 24 27
TITLE AND CASH OR DESCRIPTION OF AMOUNT OF CONSIDERATION DATE SECURITIES SECURITIES ISSUED TO RECEIVED - - ---------------------------------------------------------------------------------------------------------------------- 4/28/99 Warrants to purchase Warrants to purchase Gulfstream Financial Financial an aggregate of an aggregate of Partners Advisory Services; 1,000,000 shares of 1,000,000 shares of common stock(2) common stock - - ---------------------------------------------------------------------------------------------------------------------- 6/10/99 Common Stock 120,000 Shares Internet Community Concepts Acquisition of 1.5% of the outstanding shares of Internet Community Concepts - - ---------------------------------------------------------------------------------------------------------------------- 8/19/99 Private Placement of Up to 750,000 Units Certain Accredited Offering still in Units consisting of at a price of $2.00 Investors process one share of Series E per Unit 175,000 Convertible Preferred units have sold Stock and one Warrant through Jan. 2, 2000 to purchase one share of Common Stock - - ---------------------------------------------------------------------------------------------------------------------- 9/29/99 Common Stock 75,000 shares NC Capital Markets, Inc. Engagement Fee of $80,000 for Investment Banking services - - ---------------------------------------------------------------------------------------------------------------------- 10/12/99 Warrant to purchase Warrant to purchase Metropolitan Financial 600,000 shares of Capital Advisory Common stock Partners, Services Inc. Warrant to purchase Warrant to purchase Michael Bird In connection with 15,000 shares of 15,000 of Common loan common stock at an - - ---------------------------------------------------------------------------------------------------------------------- 11/3/99 Warrants to purchase Warrants to Gulfstraw an aggregate of purchase an Financial 1,850,000 shares aggregate of Partners of Common Stock 1,850,000 and Blake shares of Capital Partners Common Stock - - ---------------------------------------------------------------------------------------------------------------------- 10/13/99 Common Stock 66,187 shares Cunningham Group Construction Construction Services, LLC Services - - ---------------------------------------------------------------------------------------------------------------------- 11/10/99 Common Stock 288,000 shares Frank Terrizzi As an additional incentive, to excercise immediately, an additional Warrant to purchase 500,000 shares at $2.00 was issued. Additionally, in consideration of further financial services, Warrants to purchase 1,000,000 shares of common stock at an exercise price of $1.50 were issued and Warrant to purchase 350,000 shares of common stock at an exercise price of $1.625 was issued. Conversion $200,000 debt and other financing services
- - ------------------- (2) Terms originally called for warrants to purchase 1,000,000 shares of common stock, one-fourth of which vested once the stock price reached $2.00 per shares for 10 consecutive days at an exercise price of $1.00 per share, one-fourth vested once the stock price reached $4.00 per shares for 10 consecutive days at an exercise price of $2.00 per share, one-fourth vested once the stock price reached $6.00 per shares for 10 consecutive days at an exercise price of $3.00 per share, one-fourth vested once the stock price reached $8.00 per shares for 10 consecutive days at an exercise price of $4.00 per share. Warrants to purchase 500,000 shares of common stock were amended to reduce the exercise price to $2.00 in exchange for the investor agreeing to immediately exercise the warrants. As an additional incentive, an additional Warrant to purchase 500,000 shares at $2.00. Additionally, in consideration of further financial services, Warrants to purchase 1,000,000 shares of common stock at an exercise price of $1.50 were issued and Warrant to purchase 350,000 shares of common stock at an exercise price of $1.625 was issued. 28
TITLE AND CASH OR DESCRIPTION OF AMOUNT OF CONSIDERATION DATE SECURITIES SECURITIES ISSUED TO RECEIVED - - ---------------------------------------------------------------------------------------------------------------------- 11/24/99 (4) Common Stock 900,000 shares LegacyMaker, Inc. In exchange for cancellation of Previously issued Warrant ====================================================================================================================== 11/24/99 Private Placement of $2,000,000 4% Certain accredited $1,393,000 Convertible Debentures Convertible investors Denbentures and Warrants to purchase 150,000 shares of Common Stock at an exercise price of $1.625 -------------------------------------------------------------------------- Warrant to purchase J.P. Carey Securities, Inc. Commissions 125,000 shares of Common Stock at an exercise price of $1.625 ====================================================================================================================== 12/1/99 Private Placement of 2,450,000 shares members of ROI, LLC 450,000 Common Stock in Connection with ROI Acquisition - - ---------------------------------------------------------------------------------------------------------------------- 12/1/99 Private Placement of Warrant to purchase The Hillstreet Fund, L.P. In consideration Warrants 200,000 shares of for a loan common stock at an exercise price of $1.34 - - ---------------------------------------------------------------------------------------------------------------------- 12/6/99 Private Placement of Warrant to purchase Hal Taylor In consideration Warrants 80,000 shares of for a loan common stock at an exercise price of $1.25
(4) Agreement to exchange entered into as of this date. Acted issuance occured subsequent to January 2, 2000. 29
TITLE AND CASH OR DESCRIPTION OF AMOUNT OF CONSIDERATION DATE SECURITIES SECURITIES ISSUED TO RECEIVED - - ---------------------------------------------------------------------------------------------------------------------- 12/10/99 Private Placement of Warrant to purchase eBankerUSA.com, Inc. In consideration Warrants 89,375 shares of for financing Common Stock at an services exercise price of $2.00 - - ---------------------------------------------------------------------------------------------------------------------- 12/10/99 Private Placement of Warrant to purchase American Frontier As finder's fee Warrants 19,500 shares of Financial Corporation for financing Common Stock at an services (see exercise price of eBanker) $1.25 ====================================================================================================================== 12/14/99 Private Placement 628,800 shares of Certain accredited Cash in the amount and Common Stock Warrant investors of $500,000 to purchase 100,000 Consulting Services shares common stock at an excercise price of $1.00 -------------------------------------------------------------------------- -------------------------------------------------------------------------- ======================================================================================================================
All of the above-referenced warrants expire five years after the date of issuance. In all of the above cases, there was no underwriter involved. The Company relied upon Rule 506 of Regulation D and or Section 4(2) of the Securities Act of 1933, as amended. 30 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion should be read in connection with the Company's consolidated financial statements and related notes included elsewhere in this report. Overview PopMail.com, inc. ("the Company" or "PopMail") consists of two divisions, the Internet email services division and the restaurant division. Management's primary focus is to develop the Internet email division by exploring additional revenue sources and complementary services through mergers, acquisitions and joint ventures. The Company is exploring other business acquisitions for the Internet Division. However, no assurance can be given that other mergers or acquisitions will be completed or desired results achieved. 25 31 Future revenue and profits, if any, will depend upon various factors, including the rapidly changing e-commerce community of the Internet, the market acceptance of the Company's current restaurant concept, the quality of restaurant operations, and general economic conditions. The Company's present source of revenue is limited to its existing restaurants and minor fee income from its Internet e-mail services division. There can be no assurances the Company will successfully implement its expansion plans, of the Internet email services or restaurant division, in which case it will continue to be dependent on the revenues from the existing restaurants. The Company also faces all of the risks, expenses and difficulties frequently encountered in connection with the expansion and development of a new and expanding business. With the addition of the Internet email services division, the Company will be hiring senior management to operate that division. As noted in the Risk Factors section of this Form 10-KSB, the Company has incurred substantial operating losses to date and, as of January 2, 2000, has a deficiency in working capital of approximately $8.7 million. There can be no assurance of the Company's capacity to achieve and sustain profitable operations, and without additional financing (of which there can be no assurance), the Company may not have sufficient funds to support its operations, retire its indebtedness in the ordinary course of business and pursue its business plan. The Company has adopted a 52-53-week year ending on the Sunday nearest December 31 of each year. All references herein to "1999" represent a 52-week fiscal year ended January 2, 2000 and "1998" represents a 53-week fiscal year ended January 3, 1999. RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JANUARY 2, 2000 AND JANUARY 3, 1999 Net Sales Net sales for the restaurant division increased by $5,233,563 or 75.5% to $12,166,454 for 1999 from $6,932,891 for 1998. Sales at the Mall of America Restaurant increased by $1,705,481 or 39.8% to $5,988,165 for 1999 from $4,282,684 for 1998. The Mall of America Restaurant was open for the full fifty-two weeks in 1999 vs. 30 weeks in 1998. Sales at Denver Pavilions were $5,008,674 for the 42 weeks of operations in 1999. The Kenwood Restaurant had sales in 1999 of $1,169,615 before it closed on August 29, 1999. The Kenwood Restaurant had sales of $2,650,207 in 1998. The Company is currently finalizing the sale of this restaurant. Net sales for the email service division was $106,744 resulting from the ROI acquisition completed on December 3, 1999. Costs and Expenses The restaurants food, beverage and retail costs were $3,144,513 (25.8% of net sales) for 1999 as compared to $1,897,492 (27.4% of net sales) for 1998, which remain within the normal operating percentage of net sales. This reduction in the percentage change from the prior year indicates stabilization in overall cost of goods sold. Restaurants operating expenses were $8,404,324 (69.1% of net sales) for 1999 as compared to $5,038,105 (72.7% of net sales) for 1998. The increase in restaurant operating expenses is due primarily to the opening of the Denver Pavilions Restaurant. The 74.4% increase in depreciation expense in 1999 is primarily attributable to the new Denver Pavilions Restaurant. 26 32 Goodwill amortization expense for 1999 was $3,933,411. This represents the excess of the purchase price and related costs over the fair value of the net assets of business acquired. The Company amortizes goodwill on a straight-line basis over a three-year period. Remaining goodwill amortization at January 2, 2000 is as follows: $13,277,280 for 2000, $13,277,280 for 2001 and $9,722,786 for 2002. The restaurant division had pre-opening expenses of $939,179 in 1999 as compared to $732,851 in 1998. Of these expenses, $871,220 were for the Denver Pavilions Restaurant and $67,959 related to the start-up site located in Irvine, California. The Company has decided not to open a restaurant at this site. The Company's executive and administrative office located in Bloomington, Minnesota, had general, administrative and development expenses of $5,002,557 for 1999 as compared to $3,081,213 for 1998. This increase reflects the results of the acquisitions of Old Popmail and ROI. The email service division's executive and administrative office located in Dallas, Texas, had general, administrative and development expenses of $1,536,589 for 1999. These expenses represent administrative and development expenses of Old Popmail and ROI since Acquisition. The Company has to address the numerous executive and administrative staffing requirements from its mergers and acquisitions, shareholder relationships, and development costs associated with Internet email software creation. The Company will be seeking additional senior management personnel as well as support staff, which will also have an associated impact on future earnings. The Company expects to continue to incur operating losses during 2000. The Company's other income and expense consist of interest income, interest expense, warrant repricing, debt guarantee cost and financial advisory services. Interest expense for 1999 was $2,357,245 as compared to $130,625 for 1998. This increase of $2,226,620 relates to the financing fees generated in raising debt throughout the year and additional borrowings during the year. Interest income for 1999 was $49,323 as compared to $180,999 for 1998 reflecting lower levels of cash of 1999. The Company recorded a warrant repricing expense of $4,539,311 relating to the Series B Preferred Stock issued in the Popmail Merger. The Company recorded costs associated with the guarantees provided for debt financing for 1999 of $1,607,833. The Company also recorded costs associated with services provided by third party financial advisors for 1999 of $1,489,040. These costs were paid with both the issuances of new common stock and warrants. Liquidity and Capital Resources The Company had a working capital deficit of $8,696,477 at January 2, 2000, compared to a deficit of $3,870,058 on January 3, 1999. Cash and cash equivalents were $1,136,137 at January 2, 2000 representing an increase of $1,029,890 from the cash and cash equivalents of $106,247 at January 3, 1999. During 1999, the Company's principal capital requirements were 27 33 the construction of the Denver Pavilions Restaurant and the acquisition of furniture, fixtures and equipment of approximately $4.2 million, net of landlord contributions, and the acquisition and merger with popmail.com, inc., of approximately $5.1 million. The Company used approximately $5,900,000 in cash for operations and $6,600,000 for investing activities during 1999. The Company generated approximately $13,500,000 in cash from financing activities in 1999. The Company's primary sources of working capital in 1999 were proceeds from the sale of common and preferred stock, and the issuances of warrants and debt. Financing activity in 1999 and early 2000 are described in the Consolidated Financial Statements and Related Notes. 28 34 The Company has no current plans to expand the restaurant division directly. It may do so through licensing or other arrangements where the Company does not invest directly into the business. The Company intends to fund operations and the expansions of the Internet email services division through additional equity and debt transactions. Management believes it has resources sufficient to meet the Company's working capital needs for the next twelve months from its cash on hand, proceeds available from the exercise of stock options and warrants, and additional equity and debt financing. 34 35 ITEM 7. FINANCIAL STATEMENTS POPMAIL.COM, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Certified Public Accountants - Grant Thornton LLP.................................................... F-1 Report of Independent Public Accountants - Arthur Andersen LLP................................................... F-2 Financial Statements Consolidated Balance Sheets........................................... F-3 Consolidated Statements of Operations................................. F-5 Consolidated Statements Shareholders' Equity.......................... F-6 Consolidated Statements of Cash Flows................................. F-8 Notes to Consolidated Financial Statements... ........................ F-11 36 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders PopMail.com, inc. We have audited the accompanying consolidated balance sheet of PopMail.com, inc. and subsidiaries (the Company, formerly Cafe Odyssey, Inc.) as of January 2, 2000 and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PopMail.com, inc. and subsidiaries as of January 2, 2000 and the results of their consolidated operations and their consolidated cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. /s/ GRANT THORNTON LLP Minneapolis, Minnesota March 24, 2000 F-1 37 To PopMail.com, inc. (formerly Cafe Odyssey, Inc.): We have audited the accompanying balance sheet of PopMail.com, inc. (formerly Cafe Odyssey, Inc.) as of January 3, 1999 and the related statements of operations, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts an disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PopMail.com, inc. (formerly Cafe Odyssey, Inc.) as of January 3, 1999 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a net working capital deficit that raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. /s/ ARTHUR ANDERSEN LLP Minneapolis, Minnesota February 19, 1999 F-2 38 POPMAIL.COM, INC. (FORMERLY CAFE ODYSSEY, INC.) CONSOLIDATED BALANCE SHEETS
January 2, January 3, ASSETS 2000 1999 ----------- ------------ Current assets Cash and cash equivalents $ 1,136,137 $ 106,247 Accounts receivable 275,655 - Inventories 111,807 161,463 Other current assets 483,496 452,243 ------------ ------------ Total current assets 2,007,095 719,953 Property and equipment, at cost Leasehold improvements 12,711,082 6,435,925 Equipment and fixtures 5,526,412 4,014,095 Construction in progress - 2,823,920 ------------ ------------ 18,237,494 13,273,940 Less accumulated depreciation and amortization 3,370,692 1,574,392 ------------ ------------ 14,866,802 11,699,548 Goodwill, net of accumulated amortization of $3,933,411 36,277,346 - Other assets, net 344,121 520,487 ------------ ------------ $ 53,495,364 $ 12,939,988 ============ ============
The accompanying notes are an integral part of these financial statements. F-3 39 POPMAIL.COM, INC. (FORMERLY CAFE ODYSSEY, INC.) CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY January 2, January 3, 2000 1999 ------------ ------------ Current liabilities Notes payable $ 6,037,518 $ 2,000,000 Convertible promissory notes payable 1,460,417 150,000 Current maturities of long-term obligations 193,833 199,007 Accounts payable 1,604,952 1,452,648 Due to affiliates 120,000 100,000 Accrued compensation 529,336 539,027 Other accrued expenses 757,516 149,329 ------------ ------------ Total current liabilities 10,703,572 4,590,011 Deferred rent credits 3,650,512 1,755,852 Long-term obligations, less current maturities 1,883,688 755,878 ------------ ------------ Total liabilities 16,237,772 7,101,741 Commitments and contingencies - - Shareholders' equity Common stock, $.01 par value, 100,000,000 shares authorized; 24,695,872 and 8,000,089 shares issued and outstanding 246,958 80,001 Series C 8% convertible preferred stock, par value $.01; $1,000 stated value; authorized 2,000 shares; 605 shares issued and outstanding at January 2, 2000 693,000 - Series D 8% convertible preferred stock, par value $.01; $1,000 stated value; authorized 2,200 shares; 2,200 shares issued and outstanding at January 2, 2000 2,288,000 - Series E convertible preferred stock, par value $.01; $2.00 stated value; authorized 750,000 shares; 175,000 shares issued and outstanding at January 2, 2000 350,000 - Additional paid-in capital 74,901,160 20,281,140 Less common stock subscribed and note receivable from affiliate (2,850,000) (400,000) Accumulated deficit (38,371,526) (14,122,894) ------------ ------------ 37,257,592 5,838,247 ------------ ------------ $ 53,495,364 $ 12,939,988 ============ ============
The accompanying notes are an integral part of these financial statements. F-4 40 POPMAIL.COM, INC. (FORMERLY CAFE ODYSSEY, INC.) CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended ---------------------------------- January 2, January 3, 2000 1999 ------------ ------------ Revenues Restaurant sales, net $ 12,166,454 $ 6,932,891 E-mail services 106,744 - ------------ ------------ 12,273,198 6,932,891 Costs and expenses Restaurant food, beverage and retail costs 3,144,513 1,897,492 Restaurant operating expenses 8,404,324 5,038,105 Restaurant depreciation 1,639,279 940,186 Amortization of goodwill 3,933,411 - Pre-opening expenses 939,179 732,851 Loss on impairment of restaurant related assets - 2,000,000 General, administrative and development expenses 5,002,557 3,081,213 ------------ ------------ 23,063,263 13,689,847 ------------ ------------ Loss from operations (10,790,065) (6,756,956) Other income (expense) Interest expense (2,357,245) (130,625) Interest income 49,323 180,999 Warrant repricing (4,539,311) - Debt guarantee costs (1,607,833) - Financial advisory services (1,489,040) - ------------ ------------ (9,944,106) 50,374 ------------ ------------ Net loss (20,734,171) (6,706,582) Preferred stock dividends and accretion (3,514,461) - ------------ ------------ Loss attributable to common shareholders $(24,248,632) $ (6,706,582) ============ ============ Basic and diluted net loss per share: Net loss $ (2.05) $ (0.84) ============ ============ Loss attributable to common shareholders $ (2.40) $ (0.84) ============ ============ Basic and diluted weighted average outstanding shares 10,108,451 8,000,131 ============ ============
The accompanying notes are an integral part of these financial statements. F-5 41 POPMAIL.COM, INC. (FORMERLY CAFE ODYSSEY, INC.) CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common stock Additional subscribed Common stock Preferred stock paid-in and note Accumulated --------------------- --------------------- Shares Amount Shares Amount capital receivable deficit Total --------- -------- ------- ---------- ------------ ----------- ------------ ------------ Balance at December 28, 1997 8,000,189 $ 80,002 -- $ -- $ 20,152,949 $ (400,000) $ (7,416,312) $ 12,416,639 Issuance of warrants to guarantors -- -- -- -- 128,490 -- -- 128,490 Cancellation of share grant (100) (1) -- -- (299) -- -- (300) Net loss -- -- -- -- -- -- (6,706,582) (6,706,582) --------- -------- ------- ---------- ------------ ----------- ------------ ------------ Balance at January 3, 1999 8,000,089 80,001 -- -- 20,281,140 (400,000) (14,122,894) 5,838,247 Issuance of common stock in lieu of compensation 280,013 2,800 -- -- 194,908 -- -- 197,708 Issuance of common stock for services 351,942 3,519 -- -- 626,339 -- -- 629,858 Warrants issued for services -- -- -- -- 1,301,500 -- -- 1,301,500 Issuance of common stock 180,000 1,800 -- -- 198,200 -- -- 200,000 Common stock issued for conversion of promissory notes payable and payment of interest 197,147 1,971 -- -- 402,787 -- -- 404,758 Stock option conversions 118,999 1,190 -- -- 88,059 -- -- 89,249 Exercise of warrants 2,250,000 22,500 -- -- 2,915,000 -- -- 2,937,500 Sale of Class A convertible preferred stock -- -- 2,000 2,000,000 -- -- -- 2,000,000 Issuance of Class B convertible preferred stock in PopMail acquisition -- -- 2,024 21,589,755 -- -- -- 21,589,755 Warrants issued in PopMail acquisition -- -- -- -- 4,318,956 -- -- 4,318,956 Warrants issued to PopMail guarantor in PopMail acquisition -- -- -- -- 2,700,000 -- -- 2,700,000 Sale of Class C convertible preferred stock -- -- 2,000 2,000,000 -- -- -- 2,000,000 Sale of Class D convertible preferred stock -- -- 2,200 2,200,000 -- -- -- 2,200,000 Sale of Class E convertible preferred stock -- -- 175,000 350,000 -- -- -- 350,000 Note receivable issued to affiliate for purchase of common stock -- -- -- -- -- (2,450,000) -- (2,450,000)
The accompanying notes are an integral part of these financial statements. F-6 42 POPMAIL.COM, INC. (FORMERLY CAFE ODYSSEY, INC.) CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - CONTINUED
Common stock Common stock Preferred stock Additional subscribed -------------------- --------------------- paid-in and note Accumulated Shares Amount Shares Amount capital receivable deficit Total --------- -------- ------- ---------- ------------ ----------- ------------ ------------ Series A, C and D private placement costs -- $ -- -- $ -- $ (722,323) $ -- $ -- $ (722,323) Issuance of common stock in the ROI acquisition 2,750,000 27,500 -- -- 6,254,961 -- -- 6,282,461 Old PopMail stock subscribed -- -- -- -- -- (2,000) -- (2,000) Cash received on common stock subscribed -- -- -- -- -- 2,000 -- 2,000 Conversion of Class A preferred 1,015,999 10,160 (2,000) (2,000,000) 1,989,840 -- -- -- Conversion of Class B preferred 8,633,900 86,339 (2,024) (21,589,755) 21,503,416 -- -- -- Conversion of Class C preferred 917,783 9,178 (1,395) (1,395,000) 1,385,822 -- -- -- Record non-cash preferred stock deemed -- -- -- (3,338,461) 3,338,461 -- -- -- dividend Record preferred stock deemed dividend -- -- -- 3,338,461 -- -- (3,338,461) -- Dividends paid or accrued on preferred -- -- -- 176,000 -- -- (176,000) -- stock Warrants issued to guarantors of notes payable -- -- -- -- 1,232,833 -- -- 1,232,833 Repricing of warrants related to the PopMail -- -- -- -- 4,539,311 -- -- 4,539,311 acquisition Warrants issued for private placement costs in connection with Series A, C and D -- -- -- -- 469,500 -- -- 469,500 issuances Warrants issued in connection with notes payable -- -- -- -- 1,882,450 -- -- 1,882,450 Net loss -- -- -- -- -- -- (20,734,171) (20,734,171) ---------- -------- ------- ------------ ------------ ------------ ------------ ------------ Balance at January 2, 2000 24,695,872 $246,958 177,805 $ 3,331,000 $ 74,901,160 $ (2,850,000) $(38,371,526) $ 37,257,592 ========== ======== ======== ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. F-7 43 POPMAIL.COM, INC. (FORMERLY CAFE ODYSSEY, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended ---------------------------------- January 2, January 3, 2000 1999 ------------ ----------- Operating activities: Net loss $(20,734,171) $(6,706,582) Adjustments to reconcile net loss to cash flows from operating activities: Restaurant depreciation and amortization 1,796,304 940,186 Loss on disposal of property and equipment 57,030 - Loss on impairment of restaurant related assets - 2,000,000 Amortization of goodwill 3,933,411 - Amortization of deferred rent (67,840) 134,352 Amortization of warrant discount 972,333 59,302 Common stock issued in lieu of compensation 197,708 - Common stock issued for services and interest 684,616 - Warrants issued for services 1,301,500 - Warrants issued to guarantors 1,232,833 - Repricing of warrants issued in the PopMail acquisition 4,539,311 - Other 567,177 - Changes in operating assets and liabilities, net of effect of business acquisitions: Accounts receivable 335,982 - Inventories 49,656 (119,697) Other current assets (6,810) (202,200) Other assets 220,278 (336,087) Accounts payable (375,149) 783,268 Accrued expenses (619,327) 205,909 ------------ ----------- Net cash used in operating activities (5,915,158) (3,241,549) Investing activities: Purchases of property and equipment, net (4,125,807) (9,369,574) Issuance of note receivable to affiliate (2,450,000) - ------------ ----------- Net cash used in investing activities (6,575,807) (9,369,574)
The accompanying notes are an integral part of these financial statements. F-8 44 POPMAIL.COM, INC. (FORMERLY CAFE ODYSSEY, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended ---------------------------------- January 2, January 3, 2000 1999 ----------- ------------ Financing activities: Proceeds from issuance of stock $ 200,000 $ - Proceeds from issuance of preferred stock 5,730,000 - Proceeds from short term notes payable 5,020,884 - Payments on short-term notes payable (5,940,271) (200,000) Proceeds from convertible notes payable 2,300,000 - Payments on convertible notes payable (100,000) - Proceeds from long-term debt 1,500,000 3,002,976 Payments on long-term debt (199,007) (1,028,980) Tenant allowance collected 1,962,500 1,621,500 Advances from shareholder/officers 240,000 100,000 Repayment of advances from shareholders/officers (220,000) - Proceeds from exercise of options and warrants 3,026,749 - Payments on cancellation of stock - (300) ----------- ------------ Net cash provided by financing activities 13,520,855 3,495,196 ----------- ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,029,890 (9,115,927) Cash and cash equivalents, beginning of year 106,247 9,222,174 ----------- ------------ Cash and cash equivalents, end of year $ 1,136,137 $ 106,247 =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest $ 703,491 $ 130,625 =========== ===========
The accompanying notes are an integral part of these financial statements. F-9 45 POPMAIL.COM, INC. (FORMERLY CAFE ODYSSEY, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended ---------------------------------- January 2, January 3, 2000 1999 ------------ ---------- Non-cash financing and investing activities: Conversion of preferred stock into common stock $ 3,395,000 $ - Conversion of debt and interest into common stock 404,758 - Preferred stock issued for placement costs 820,000 - Common stock issued for compensation 197,708 - Common stock issued for services 629,858 - Warrants issued for services 1,301,500 - Warrants issued to guarantors of notes payable 1,232,833 - Warrants issued for private placement costs in connection with Series A, C and D issuances 469,500 - Warrants issued in connection with notes payable 1,882,450 - Repricing warrants related to the PopMail acquisition 4,539,311 - Acquisitions: Common stock issued 27,872,216 - Warrants issued 7,018,956 - Fair value of assets acquired (1,583,952) - Liabilities assumed 6,903,537 - ------------ ---------- Purchase price in excess of fair value of assets acquired $ 40,210,757 $ - ============ ==========
The accompanying notes are an integral part of these financial statements. F-10 46 POPMAIL.COM, INC. (FORMERLY CAFE ODYSSEY, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - NATURE OF THE BUSINESS PopMail.com, inc. ("the Company" or "PopMail"), formerly Cafe Odyssey, Inc., consists of two divisions, the restaurant division and the e-mail services division. During 1999, in conjunction with the acquisition of Popmail.com, Inc. the Company changed its name from Cafe Odyssey, Inc. to PopMail.com, inc. The restaurant division develops, owns and operates upscale casual restaurants with multiple themed dining rooms. The Company has "Cafe Odyssey" restaurants at the Mall of America in Bloomington, Minnesota, which opened in June 1998 and at the Denver Pavilions, in Denver, Colorado, which opened in March 1999. The Company closed its Cincinnati, Ohio location in September 1999 and is currently finalizing the sale of this restaurant. The e-mail services division provides permission marketing and affinity-based e-mail communications concentrating primarily on the needs of businesses in the broadcast, media, sports and entertainment industries located throughout the United States. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Fiscal Year The Company has adopted a 52-53 week year ending on the Sunday nearest December 31 of each year. All references herein to "1999" represents a 52-week fiscal year ended January 2, 2000 and "1998" represents a 53-week fiscal year ended January 3, 1999. Cash and Cash Equivalents The Company includes as cash and cash equivalents, cash on hand, bank deposits and all liquid money market investments with original maturities of three months or less when purchased, which are recorded at the lower of cost or market. Inventories Inventories consist primarily of restaurant food and beverages and retail supplies and are stated at the lower of cost or market as determined by the first-in first-out method. F-11 47 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Pre-Opening Costs The direct and incremental costs associated with opening a new restaurant, which consist of hiring and training the initial workforce, mock service and other direct costs, are charged to operations when incurred. Property and Equipment Property and equipment acquired are recorded at cost. Leasehold improvements are capitalized, while repair and maintenance expenses are charged to operations as incurred. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term for financial reporting purposes and accelerated methods for tax purposes. Furniture and equipment are depreciated on a straight-line method over their estimated useful lives of 3 to 15 years. Goodwill Goodwill represents the excess of the purchase price and related costs over the fair value of the net assets of businesses acquired and is amortized on a straight-line basis over three years. Fair Values of Financial Instruments Due to their short-term nature, the carrying value of the Company's current financial assets and liabilities approximates their fair values. The fair value of the Company's borrowings, if recalculated based on current interest rates, would not significantly differ from the recorded amounts. Deferred Rent Credits The restaurant operating leases provide for certain tenant inducements, including up-front cash payments to help cover the costs of construction, and scheduled increases in base rentals over their terms. Rent expense is recognized on a straight-line basis, and deferred rent credits have been established for the differences between the amounts recognized and rent paid. Income Taxes The Company accounts for income taxes using the liability method to recognize deferred income tax assets and liabilities. Deferred income taxes are provided for differences between the financial reporting and tax bases of the Company's assets and liabilities at currently enacted tax rates. Advertising The Company expenses advertising costs as incurred. Advertising expense was approximately $977,000 and $761,000 during 1999 and 1998. F-12 48 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Stock-Based Compensation The Company utilizes the intrinsic value method for stock-based compensation. Under this method, compensation expense is recognized for the amount, if any, by which the market price of the common stock on the date of grant exceeds the exercise price of an option. Pro-forma information related to the fair value method of accounting is contained in note H. Net Loss Per Common Share Basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year. The impact of common stock equivalents has been excluded from the computation of weighted average common shares outstanding, as the net effect would be antidilutive. Use of Estimates Preparing financial statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the 1998 financial statements to conform to the 1999 presentation. These reclassifications had no effect on net loss or shareholders' equity as previously reported. NOTE C - BUSINESS COMBINATIONS On August 29, 1999, the Company completed its merger with Popmail.com, Inc., which was accounted for as a purchase. The results of PopMail's operations have been included with the Company's operations from the date of the merger. Consideration for the merger included the issuance of 2,024 shares of Series B Convertible preferred stock, convertible into 8,633,900 shares of the Company's common shares valued at $21,589,755; the issuance of 4,407,098 five-year warrants to purchase common at an exercise price of $3.00 per share valued at $4,318,956; the assumption of approximately $5,019,000 of notes payable, which required the issuance of 900,000 five-year warrants to the holder of those notes valued at $2,700,000; and $890,000 in closing costs. The total consideration exceeded the fair value of the net liabilities acquired by approximately $33,800,000, which has been recorded as goodwill and is being amortized on a straight-line basis over three years. On December 3, 1999, the Company completed the acquisition of ROI Interactive LLC (ROI). This acquisition was accounted for as a purchase with the results of operations included with the Company's operations from the date of acquisition. Total consideration included the issuance of 2,750,000 shares of the Company's common shares valued at $6,282,461 and $150,000 in closing F-13 49 NOTE C - BUSINESS COMBINATIONS - Continued costs. The total consideration exceeded the fair value of the net liabilities acquired by approximately $6,400,000, which has been recorded as goodwill and is being amortized on a straight-line basis over three years. The following unaudited consolidated pro forma information assumes the above business combinations occurred at the beginning of the respective periods presented. However, the 1998 pro forma information does not include ROI, as it did not begin operations until 1999.
Years ended December 31, -------------------------- 1999 1998 ------------ ----------- Net revenues $13,303,000 $ 6,982,126 Net loss attributable to common shareholders (35,539,000) (20,413,468) Net loss per share attributable to common shareholders $(1.73) $(1.23) Weighted average shares outstanding 20,540,500 16,634,031
The unaudited pro forma information is not necessarily indicative of the combined results that would have occurred had the merger and acquisition occurred on those dates, nor is it indicative of the results that may occur in the future. NOTE D - IMPAIRMENT OF RESTAURANT RELATED ASSETS In 1998, the Company recorded a non-cash write-down of its Cincinnati, Ohio restaurant assets of $2,000,000. This impairment was determined by Company's management based on the operating performance of the restaurant combined with the difference between the carrying amount of the assets and the undiscounted cash flows estimated to be generated. The write-down was calculated in accordance with the requirements of Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", based primarily on operating projections, future discounted cash flows and other relevant market factors. F-14 50 NOTE E - NOTES PAYABLE
Notes payable consists of the following: January 2, January 3, 2000 1999 ---------- --------- Short-term revolving line of credit (a) $3,000,000 $2,000,000 Short-term revolving loan (b) 825,000 - Short-term promissory notes, net of discounts of $192,177 (c) 2,082,823 - Other 129,695 - ---------- ----------- $6,037,518 $ 2,000,000 ========= ==========
(a) In September 1998, the Company entered into a $3,000,000 revolving line of credit with a financial institution collateralized by a leasehold mortgage, security agreement and assignment of rents and income of the Cincinnati restaurant. In addition, two directors and an ex-director of the Company entered into a joint and several limited guaranty of the first $1,000,000 of the Company's borrowings under this credit facility. In consideration of these guarantees, the Company issued 40,000 five-year warrants to each of these individuals at an exercise price of $0.75 per share in November 1998. Guarantees for the other $2,000,000 were obtained later in November 1998 from two of the aforementioned directors and an additional third party whereby two of the directors each severally guaranteed $500,000 and the other third party guaranteed $1,000,000, of such borrowings. All three guarantors pledged certain collateral to the financial institution in connection with the later guarantees. In exchange for such guarantees and pledges of collateral, the Company issued 200,000 five-year warrants each to two of the directors in November 1998, and 400,000 five-year warrants to the other third party in January 1999, all at an exercise price of $0.75 per share. This revolving line of credit facility is due on demand, or, if no demand is made, in July 2000. This credit facility provides for monthly payments of interest accrued on the outstanding unpaid principal balance at a rate equal to the prime rate, or 8.5% as of January 2, 2000 and 7.75% as of January 3, 1999. Each of the guarantee agreements contain provisions which require the issuance of additional warrants and payment of cash penalties if the borrowings were not paid in full by September 30, 1999. As of January 2, 2000, the Company accrued $375,000 for the cash penalties and is obligated for and has recorded 600,000 five-year warrants at an exercise price of $0.75 per share. (b) In March 1999, the Company entered into a $825,000 revolving loan facility with a financial institution collateralized by substantially all of the Company's assets. In addition, the loan is guaranteed by five individuals. In consideration of these guarantees, the Company issued 500,000 five-year warrants in March 1999 (ranging from 25,000 to 250,000 warrants) to these individuals at an exercise price of $0.75 per share. All guarantors pledged certain collateral to the financial institution in connection with these guarantees. This revolving line of credit facility is due on demand, or, if no demand is made, in March 2000. This credit facility provides for monthly payments of interest accrued on the outstanding unpaid principal balance at a rate equal to the prime rate, or 8.5% as of January 2, 2000. (c) In connection with the PopMail merger, the company assumed a note payable for $5,019,387, of which $4,469,387 was repaid shortly after the merger. The remaining $550,000 is payable in monthly payments with interest at the prime rate (8.5% at January 2, 2000). The principal is due on demand, or, if no demand is made, in full amount in January 2000. The loan is uncollateralized. F-15 51 NOTE E - NOTES PAYABLE - Continued In December 1999, the Company entered into a note payable for $200,000. The note is payable in monthly payments for interest at 15%. The principal is due on demand, or, if no demand is made, in full amount in March 2000. In connection with the loan the Company issued 80,000 five-year warrants with an exercise price of $1.25 to the lender. The fair value of these warrants has been recorded as a discount and is being amortized over the life of the note. In December 1999, the Company entered into a note payable for $325,000. The note is payable in monthly payments for interest at 15%. The principal is due on demand, or, if no demand is made, in full amount in March 2000. In connection with the loan the Company issued 89,375 five-year warrants with an exercise price of $2.00 to the lender. The fair value of these warrants has been recorded as a discount and is being amortized over the life of the note. In addition, the Company issued 19,500 five-year warrants at an exercise price of $2.00 per share to a third party as a finders fee on this note. Also in December 1999, the Company entered into a note payable for $1,200,000. At the inception of the loan, the Company prepaid the interest of 13% ($91,000) for the life of the note until the loan matures in July, 2000. In connection with the loan the Company issued 200,000 five-year warrants with an exercise price of $1.34 to the lender. The fair value of these warrants has been recorded as a discount and is being amortized over the life of the note. NOTE F - LONG-TERM OBLIGATIONS Long-term obligations consists of the following:
January 2, January 3, 2000 1999 ---------- ---------- Senior promissory notes, bearing interest at 15.94%, due in monthly $ 755,878 $ 954,885 installments of principal and interest, through July 2002, collaterized by equipment 1,321,643 - 4% senior convertible note payable, net of discount of --------- ---------- $678,357 (a) 2,077,521 954,885 Less current maturities 193,833 199,007 --------- ---------- $1,883,688 $ 755,878 ========= ========== Aggregate future maturities of long-term obligations are as follows: 2000 $ 193,833 2001 1,548,722 2002 334,966 -------- $2,077,521 ==========
F-16 52 NOTE F - LONG-TERM OBLIGATIONS - Continued (a) In November 1999, the Company executed a senior convertible note for $2,000,000 which matures in November 2001 and bears interest at 4%. The note and any unpaid interest is convertible into the Company's common stock at the trading price at the day of the conversion. In connection with this note, the Company issued 275,000 five-year warrants with an exercise price of $1.625 to the lenders and a placement agent. The fair value of these warrants has been recorded as a discount and is being amortized over the life of the note. NOTE G - CONVERTIBLE PROMISSORY NOTES PAYABLE Convertible promissory notes payable consists of the following:
January 2, January 3, 2000 1999 ----------- ---------- Senior convertible note payable, net of discount of $539,583 (a) $1,460,417 $ - Other (b) - 150,000 ----------- ----------- $ 1,460,417 $ 150,000 =========== ===========
(a) In August 1999, the Company executed a senior convertible note for $2,000,000 which matures in August 2000, and bears interest at prime plus 2% (effective interest rate of 10.5% as of January 2, 2000). The note and any unpaid interest is convertible into the Company's common stock at a conversion price of $2.50. In connection with this note, the Company issued 500,000 five-year warrants with an exercise price of $2.50 to the lender. The fair value of these warrants has been recorded as a discount and is being amortized over the life of the note. (b) Consisted of three 8.01% convertible promissory notes which matured in July 1999. The notes were converted into 89,147 shares of the Company's common stock. In May 1999, the Company executed one other convertible promissory note of $300,000 which matured in 1999; $100,000 was repaid and the additional $200,000 was converted into 108,000 shares of the Company's common stock. NOTE H - SHAREHOLDERS' EQUITY Convertible Preferred Stock Series A - In May 1999, the Company issued 2,000 shares of Series A 8% convertible preferred stock with a stated value of $1,000 per share in a private placement transaction. In addition, the Company issued warrants for the purchase of 300,000 shares of the Company's common stock at $3.00 per share to the investor. The preferred stock was convertible into the Company's common stock at a price equal to 65% of the market value at the time of conversion. During 1999, all Series A shares were converted into 1,015,999 shares of common stock. In November 1999, the warrants issued with the Series A shares were re-priced to $1.00 per warrant. In connection with the issuance of the Series A shares, the Company recognized a non-cash deemed dividend of approximately $1,077,000 which was recorded as a discount to preferred stock F-17 53 NOTE H - SHAREHOLDERS' EQUITY - Continued with a corresponding credit to additional paid-in capital. The discount was recognized at the date of issue of the Series A shares, the same date at which the shares were eligible for conversion. The accretion of the discount is reflected in the statement of operations as an adjustment to net loss, but has no effect on total shareholders' equity. The Company also accrued approximately $21,000 in preferred stock dividends in 1999 related to the Series A shares. Series B - In June 1999, the Company issued 2,024 shares of Series B convertible preferred stock in connection with the PopMail merger (see note C). The Series B shares were convertible into 8,633,900 shares of common stock and warrants to purchase 4,407,098 shares of common stock at $3.00 per share. All Series B shares issued in this transaction were converted in 1999. In November 1999, the warrants issued in connection with the Series B conversion were re-priced from $3.00 to $0.75 per share. In connection with this re-pricing, the Company recognized an expense of approximately $4,500,000. Series C - In July 1999, the Company issued 2,000 shares of Series C 8% convertible preferred stock with a stated value of $1,000 per share in a private placement. In addition, the Company issued warrants for the purchase of 300,000 shares of common stock at $3.00 per share to the investor. The Series C shares are convertible into the Company's common stock at a price equal to 65% of the market value at the time of conversion. During 1999, 1,395 shares of Series C were converted into 917,783 shares of common stock. In November 1999, warrants for 200,000 shares issued with the Series C shares were re-priced to $1.00 per warrant. In connection with the issuance of the Series C shares, the Company recognized a non-cash deemed dividend and discount accretion of approximately $1,077,000 similar to that of the Series A shares. The Company also accrued approximately $67,000 in preferred stock dividends in 1999 related to the Series C shares. Series D - In August 1999, the Company issued 2,200 shares of Series D 8% convertible preferred stock with a stated value of $1,000 per share in a private placement. In addition, the Company issued warrants for the purchase of 300,000 shares of common stock at $3.00 per share to the investor. The Series D shares are convertible into the Company's common stock at a price equal to 65% of conversion. No Series D shares were converted during 1999. In connection with the issuance of the Series D shares, the Company recognized a non-cash deemed dividend and discount accretion of approximately $1,185,000 similar to that of the Series A and Series C shares. The Company also accrued approximately $88,000 in preferred stock dividends in 1999 related to the Series D shares. Series E - Beginning in October 1999, the Company issued 175,000 shares of Series E convertible preferred stock with a stated value of $2.00 per share in a private placement. For each Series E share issued, a warrant was also issued for the purchase of a share of common stock at $3.00 per share. Each Series E share is convertible into one share of common stock. Series E shares are not entitled to dividends. All of the convertible preferred stock series contain certain liquidation preference provisions including accrued and unpaid dividends and defined payment amounts per share. In connection F-18 54 NOTE H - SHAREHOLDERS' EQUITY - Continued with the Series A, C, and D shares, warrants for 450,000 shares of common stock at $3.00 per share were issued to a financial advisor. Warrants A summary of the Company's warrant activity is as follows:
Weighted average Shares exercise price --------- ---------------- Outstanding at December 28, 1997 2,964,955 $5.22 Granted 520,000 0.75 Canceled (199,205) 6.50 --------- ----- Outstanding at January 3, 1999 3,285,750 5.58 Granted 15,120,973 1.38 Exercised (2,250,000) 1.31 ----------- ----- Outstanding at January 2, 2000 16,156,723 $2.24 ========== ===== Outstanding warrants at January 2, 2000 are as follows: Exercise price ----------------------------------------- Weighted Number Range average of shares ------------- ----------- ---------- $0.00 - $1.00 $0.69 8,407,098 1.25 - 2.50 1.78 3,388,875 3.00 - 6.50 5.58 4,360,750 ---------- $2.24 16,156,723 ==== ==========
Stock Options The Company maintains two stock option plans (the "Plans"), the 1997 Stock Option and Compensation Plan, which has 1,250,000 common shares reserved for issuance and the 1998 Director Option Plan, which has 250,000 common shares reserved for issuance. At January 2, 2000, the Plans have issued 429,333 options subject to approval of additional authorized shares by the shareholders. The Plans are administered by a stock option committee of the Board of Directors, which has the discretion to determine the number of shares granted, the price of the option, the term of the option and the time period over which the option may be exercised. Stock options granted under these plans generally have an exercise price equal to the fair value of the stock on the date of grant, have a ten year term and vest ratably over three years. F-19 55 NOTE H - SHAREHOLDERS' EQUITY - Continued A summary of the Company's option activity is as follows:
Weighted average Shares exercise price --------- ---------------- Outstanding at December 28, 1997 707,666 $3.11 Granted/repriced 846,166 1.16 Forfeited/repriced (734,666) 3.10 --------- ---- Outstanding at January 3, 1999 819,166 1.11 Granted 1,482,500 1.56 Exercised (118,999) 0.75 Forfeited/canceled (253,334) 0.75 --------- ---- Outstanding at January 2, 2000 1,929,333 $1.37 ========= ====
Outstanding and exercisable options at January 2, 2000 are as follows:
OPTIONS OPTIONS EXERCISABLE OUTSTANDING Exercise price ------------------------- Weighted average Weighted Number remaining Weighted Number Range average of shares contractual life average of shares ------------- -------- --------- ---------------- -------- --------- $0.75 - $1.00 $0.85 914,333 8.32 years $0.87 774,330 1.78 - 3.00 1.84 1,015,000 9.76 years 2.06 130,000 --------- ------- $1.37 1,929,333 $1.04 904,330 ==== ========= ==== =======
On December 10, 1998, the board of directors approved a repricing of all outstanding stock options held by the Company's employees and directors. The new exercise price of $0.75 was greater than the fair market value of the Company's stock on that date. A total of 660,666 options priced at $3.00 to $4.50 were exchanged for options priced at $0.75. The new options vest in three equal installments on the first, second and third anniversaries of the new date of grant. In September, in connection with the PopMail merger, 874,333 outstanding options became fully vested in accordance with the change in control provisions of the Plans. F-20 56 NOTE H - SHAREHOLDERS' EQUITY - Continued Pro forma information regarding the fair value of stock options is as follows:
1999 1998 ------ ------ Net loss As reported $(20,734,121) $(6,706,582) Pro forma (21,173,798) (6,891,308) Basic and diluted EPS As reported (2.05) (0.84) Pro forma (1.97) (0.86)
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1999 and 1998: risk-free interest rates of 6.41% and 6.01%; no expected dividend yield, expected lives of 3 and 7 years; and expected volatility of 150% and 80%. Warrants and options granted for services were valued at the fair value of the warrant or option granted or the value of the services provided, whichever is more easily determinable. NOTE I - INCOME TAXES As of January 2, 2000 and January 3, 1999, the Company's deferred taxes consisted primarily of net operating loss carryforwards, pre-opening costs not currently deductible and accelerated methods of depreciation. The Company has recorded a full valuation allowance against the net deferred tax asset due to the uncertainty of realizing the related benefits. As of January 2, 2000, the Company had net operating loss carryforwards of approximately $40 million, which, if not used, will expire through 2019. NOTE J - COMMITMENTS AND CONTINGENCIES Operating Leases The Company has entered into operating leases for its existing restaurants which have an initial lease term of ten to fifteen years with an option for renewal. These leases contain provisions for contingent rentals based on a percentage of gross revenues, as defined, and provisions for payments of real estate taxes, insurance and common area costs. In addition, certain of these leases provide for tenant inducements and rent abatement. Total rent expense, including common area costs, real estate taxes and percentage rent, was $1,385,139 and $604,146 for 1999 and 1998, respectively. The Company also leases office space at the Corporate headquarters in Minneapolis and in Dallas. The total expense for these facilities in was $151,801 and $104,035 for 1999 and 1998, respectively. F-21 57 NOTE J - COMMITMENTS AND CONTINGENCIES - Continued Future minimum rental payments are as follows as of January 2, 2000: 2000 $ 1,339,809 2001 1,258,904 2002 1,066,795 2003 1,038,347 2004 1,084,432 Thereafter 8,471,589 ---------- $14,259,876 ==========
Litigation The Company is involved in various legal actions rising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position or the results of its operations. NOTE K - RELATED PARTY TRANSACTIONS During 1998, the Company entered into a revolving note payable with significant shareholder, director and executive officer to the Company to fund its working capital as necessary. The maximum amount of this note was $100,000, which was outstanding at January 3, 1999. This note was paid in full in 1999. During 1999, the Company entered into four $60,000, 18% notes payable with two shareholders and officers of the Company with principal plus interest payable at maturity. In addition to the stated interest, an amount of 3% of the principal is due at maturity. Two of the notes matured in 1999 and were paid in full. The two remaining notes are due in January 2000. In December 1999, the Company entered into a promissory note receivable of $2,450,000 with a partnership controlled by a significant shareholder, director and executive officer of the Company. The principal plus interest of 5.74% is due to the Company in December 2002. The Partnership has pledged 1,225,000 shares of the Company's common stock as security for the note. Proceeds of this note were used to purchase shares of the Company's stock issued in connection with the ROI acquisition (see note C). Accordingly, this note has been classified as a reduction of shareholders' equity in the accompanying financial statements. Krienik Advertising, Inc., an Ohio corporation whose President, Chief Executive Officer and 100% shareholder is a director of the Company, provided marketing and advertising services to the Company. Fees paid for these services, including payments for subcontracted media, printing, production and research services, were approximately $677,000 and $741,000 during 1999 and 1998, respectively. F-22 58 NOTE L - BUSINESS SEGMENTS The Company operates in two reportable segments, restaurant operations and e-mail marketing services. The e-mail marketing services segment began in 1999 with the PopMail merger. The Company's general, administrative and development expenses are included in the restaurant operations segment with the exception of those expenses directly attributable to the e-mail division. Information relating to these segments for 1999 are as follows:
Restaurant e-mail operations marketing Total ---------- --------- ----- Net revenues $12,166,454 $ 106,744 $ 12,273,198 Operating loss (5,426,808) (5,363,257) (10,790,065) Total assets 14,531,247 41,414,117 55,945,364 Equipment depreciation and amortization 1,639,279 157,025 1,796,304 Capital expenditures, net of acquisition 4,027,388 98,419 4,125,807
NOTE M - FOURTH QUARTER ADJUSTMENTS During the fourth quarter of 1999, the Company recorded several adjustments and transactions that affect, in part, previous quarters including the following approximate amounts: Expenses related to stock warrants and stock options for services, re-pricings, and financial guarantees $ 8,000,000 Adjustments to equipment and depreciation 950,000 Accruals for financing fees, preferred stock dividends, and financial advisory services 1,200,000 ---------- Increase to net loss attributable to common shareholders $10,150,000 ==========
Had the above adjustments been recorded in the appropriate periods, net loss attributable to common shareholders would have increased by approximately $970,000 in each of the first two quarters and approximately $550,000 in the third quarter of the year ended January 2, 2000. NOTE N - SUBSEQUENT EVENTS (UNAUDITED) PRIVATE PLACEMENTS In January 2000, the Company executed a private placement memorandum authorizing the issuance of 2,350,000 units valued at $1.00 per unit. Each unit consists of one share of the Company's common stock and one five-year warrant to purchase one share of the Company's common stock with an exercise price of $2.00. As of March 24, 2000, the Company has issued all 2,350,000 units related to this placement. F-23 59 NOTE N - SUBSEQUENT EVENTS (UNAUDITED) - Continued Also in January 2000, the Company executed a private placement memorandum authorizing the issuance of 2,666,667 units valued at $2.25 per unit. Each unit consists of one share of the Company's common stock and one five-year warrant to purchase one share of the Company's common stock with an exercise price of $3.00. As of March 24, 2000, the Company has issued all 2,666,667 units related to this placement. The proceeds of these private placements were used to repay the due to affiliates and all but $1,000,000 of the Company's $6,037,518 notes payable that were outstanding at January 2, 2000, as well as to fund the continuing operating needs of the Company. MERGER WITH IZ.COM INCORPORATED On February 9, 2000, the Company completed a merger with IZ.com Incorporated ("IZ.com"), a development stage online convergent media company. The merger will be accounted for under the purchase method of accounting. The former shareholders of IZ.com were issued 287,408 shares of newly created Series F Convertible preferred stock, with an additional 130,508 shares issuable upon the exercise of IZ.com options assumed by PopMail. Both the Series F and option shares are convertible into common at a rate of 12.977 shares. This conversion ratio will increase to a rate of 25.66 shares, upon approval of the merger by the shareholders of PopMail. Assuming conversion of all potentially issuable shares at the higher conversion rate, they would convert into approximately 10,725,000 shares of the Company's common stock valued at approximately $47,825,000, using a share price based upon the average closing price of the five business days prior to the closing of the transaction. With estimated closing costs of $250,000, the total consideration plus the fair value of the net liabilities assumed will result in approximately $49,000,000 of goodwill, which will be amortized on a straight-line basis over three years. During the period from February 9, 1999 (inception) through December 31, 1999, IZ.com incurred net losses of approximately $5,000,000, representing start-up expenses. WARRANTS In March 2000, the Company took several actions to induce warrant holders to exercise warrants previously issued. Holders of 750,000 warrants at $2.00 per share were issued 250,000 additional 5-year warrants with an exercise price of $5.00 per share. Additionally, the Company re-priced 850,000 previously issued $3.00 per share warrants to $2.00 per share. Computer Hardware Addition In February 2000, the Company purchased computer hardware and the related infrastructure for its e-mail services division for approximately $1,800,000. F-24 60 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On September 30, 1999, Arthur Andersen LLP and the Company agreed to the resignation of Arthur Andersen LLP as independent public accountants of Registrant. The reports of Arthur Andersen LLP on the financial statements of the Company for the past two years, the most recent of which is the fiscal year ended January 3, 1999, contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to audit scope or accounting principles. However, reference is made to said reports which includes an explanatory paragraph that describes the uncertainty over the Company's ability to continue as a going concern described in Note 1 of the financial statements. The Registrant's Board of Directors participated in and approve the decision to change independent accountants. In connection with its audits for the two most recent periods and through September 30, 1999, there were no disagreements with Arthur Andersen LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Arthur Andersen LLP would have cause them to make reference thereto in their report on the financial statements for such years. During the two most recent fiscal years and through September 30, 1999, there were no reportable events (as defined in Regulation S-B Item 304(a)(1)(iv)). Arthur Andersen LLP has furnished the Company with a letter addressed to the SEC stating that it agrees with the above statements. A copy of the letter is included in an exhibit to the Company's Current Report on Form 8-K filed with the SEC on October 1, 1999. The Company engaged Grant Thornton LLP as its new independent accountants as of September 30, 1999. During the two most recent periods and through September 30, 1999, the Company has not consulted with Grant Thronton LLP on items which (1) were or should have been subject to SAS 50 or (2) concerned the subject matter of a disagreement or reportable event with the former auditor (as described in Regulation S-B Item 304(a)(2)). 35 61 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Information in response to this Item is incorporated herein by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-KSB. ITEM 10. EXECUTIVE COMPENSATION Information in response to this Item is incorporated herein by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-KSB. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information in response to this Item is incorporated herein by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-KSB. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information in response to this Item is incorporated herein by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-KSB. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 2.1 Agreement and Plan of Merger dated as of June 1, 1999 among Cafe Odyssey, Inc, Stephen D. King, PopMail.com, inc., all of the Holders of Common Stock of Popmail.com, inc. and Cafe Odyssey Acquisition Subsidiary, Inc. (incorporated herein by reference to Exhibit 2.0 of the Registrant's Current Report on Form 8-K dated June 22, 1999 and filed on June 25, 1999). 2.2 Agreement and Plan of Reorganization among ROI InterActive, LLC, Cafe Odyssey, Inc. and ROI Acquisition Corporation (incorporated herein by reference to Exhibit 2.0 to the Company's Current Report on Form 8-K dated December 17, 1999.) 2.3 First Amendment to Agreement and Plan of Reorganization, dated November 12, 1999 by and among Parent, Sub, the Company, and the Members. (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated December 17, 1999.) 2.4 Agreement and Plan of Reorganization dated as of January 21, 2000 among PopMail.com, inc., IZ.com Incorporated, IZ Acquisition Corporation, and Virtual Group LLC. 36 62 (incorporated herein by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K dated February 9, 2000 and filed on February 24, 2000) 3.1(A) Articles of Incorporation, as amended (incorporated herein by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended April 4, 1999). 3.1(B) Certificate of Designation of Series B Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1(b) to the Registrant's report on Form 8-K dated June 22, 1999 and filed on June 25, 1999). 3.1(C) Certificate of Designation of Series C 8% Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1(c) to the Registrant's report on Form 8-K dated July 13, 1999 and filed on July 23, 1999) 3.1(D) Certificate of Designation of Series D 8% Convertible Preferred Stock (incorporated hereby by reference to Exhibit 3.1(d) to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 3.1(E) Articles of Amendment of Articles of Incorporation filed on September 3, 1999 (incorporated hereby by reference to Exhibit 3.1(d) to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 3.1(F) Certificate of Designation of Series F Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K dated February 9, 2000 filed on February 24, 2000) 3.1(G) Certificate of Designation of Series E Convertible Preferred Stock 3.2 By-laws (incorporated herein by reference to Exhibit 3.2 to the 1997 SB -2). 4.1 Form of Warrant Agreement (incorporated herein by reference to Exhibit 4 to the 1997 SB-2) 4.2 Form of Warrant (the series of Warrants initially covers 4,407,098 shares of common stock; subject to adjustment) (incorporated herein by reference to Exhibit 4.0 to the Registrant's Current Report on Form 8-K dated June 22, 1999) 4.3 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.2. 4.4 Common Stock Purchase Warrant issued to J. Jeffrey Brausch & Company 4.5 Warrant to Purchase Shares of Common Stock issued to J. Jeffrey Brausch & Company 4.6 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.5. 4.7 Form of Common Stock Purchase Warrant (IPO Series) 37 63 4.8 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.7. 4.9 Warrant to Purchase Shares of Common Stock of the Company 4.10 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.9. 4.11 Form of Warrant to Purchase Shares of Common Stock of the Company (GW- 1) 4.12 Form of Warrant to Purchase Shares of Common Stock of the Company (GW- 2) 4.13 Form of Warrant to Purchase Shares of Common Stock of the Company (MB- 1) 4.14 Form of Warrant to Purchase Shares of Common Stock of the Company (GFP Series) 4.15 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.14. 4.16 Warrant to Purchase Shares of Common Stock issued to Hillstreet Fund, L.P. 4.17 Warrant to Purchase Shares of Common Stock issued to Andrew Baum 4.18 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.17. 4.19 Warrant to Purchase Shares of Common Stock Issued to Metropolitan Capital Partners, Inc. (MCP-1) 4.20 Warrant to Purchase Shares of Common Stock Issued to Metropolitan Capital Partners, Inc. (MCP-2) 4.21 Warrant to Purchase Shares of Common Stock Issued to Wayne L. Teidge (WT-1) 4.22 Warrant to Purchase Shares of Common Stock Issued to Metropolitan Capital Partners, Inc. (HT-1) 4.23 Warrant to Purchase Shares of Common Stock Issued to eBanker USA.com, Inc. (EB-1) 4.24 Warrant to Purchase Shares of Common Stock Issued to eBanker USA.com, Inc. (EB-2) 10.1 Indenture of Lease dated November 9, 1994 between Phillip E. Stephens, Trustee and Kenwood Restaurant, Inc; First Amendment to Lease dated May 3, 1995 by and between Phillip E. Stephens, Trustee and Kenwood Restaurant, Zinc.; by Second Amendment to Lease dated , 1996 between Phillip E. Stephens, Trustee and Kenwood Restaurant Limited Partnership; Second Amendment to Agreement dated October 18, 1996 between Phillip E. Stephens, Trustee and Kenwood Restaurant Limited Partnership; and Addendum to Second Amendment to Lease dated October 18, 1996 between Phillip E. 38 64 Stephen, Trustee and Kenwood Restaurant Limited Partnership (Kenwood Restaurant) (incorporated herein by reference to Exhibit 10.1 to the 1997 SB-2). 10.2 Lease dated August 4, 1997 between Mall of America Company and Hotel Mexico, Inc. (Mall of America Restaurant) (incorporated herein by reference to Exhibit 10.2 to the 1997 SB-2). 10.3 1997 Stock Option and Compensation Plan (incorporated herein by reference to Exhibit 10.4 to the 1997 SB-2). 10.4 Employment Agreement between the Company and Ronald K. Fuller dated March 17, 1997 (incorporated herein by reference to Exhibit 10.5 to the 1997 SB-2). 10.5 Amendment to 1997 Stock Option and Compensation Plan (incorporated herein by reference to Exhibit 10.6 to the 1997 SB-2). 10.6 Second Amendment to 1997 Stock Option and Compensation Plan (incorporated herein by reference to Exhibit 10.7 to the 1997 SB-2). 10.7 Third Amendment dated February 25, 1998 to the Company's 1997 Stock Option and Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report in Form 10-QSB for the quarter ended June 28, 1998 (the "2-Q98 10-QSB"). 10.8 1998 Director Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to the 2Q98 10-QSB). 10.9 Shopping Center Lease dated May 12, 1998 between Denver Pavilions, L.P. and the Company (incorporated herein by reference to Exhibit 10 to the Company's current Report on Form 8-K filed on May 27, 1998). 10.10 Open-End Leasehold Mortgage, Security Agreement and Assignment of Rents, Income and Proceeds made as of September 23, 1998 by the Company to The Provident Bank ("Provident")(incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for the quarter ended September 27, 1998 (the "3Q98 10-QSB")). 10.11 Revolving Promissory Note Mortgage Loan dated September 23, 1998 between the Company and Provident (incorporated herein by reference to Exhibit 10.2 to the 3Q98 10-QSB). 10.12 Security Agreement dated as of September 23, 1998 between the Company and Provident (incorporated herein by reference to Exhibit 10.3 to the 3Q98 10-QSB). 10.13 Agreement Among Guarantors dated November 16, 1998 among Stephen D. King, Jerry L. Ruyan, Greg C. Mosher and the Company (incorporated herein by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-KSB for the fiscal year needed 1/4/99 (the "1998 10-KSB)). 39 65 10.14 Agreement Among Guarantors dated January 22, 1999 among Stephen D. King, Jerry L. Ruyan, Greg C. Mosher and the Company (incorporated hereby reference to Exhibit 10.19 to the 1998 10-KSB.) 10.15 Warrant No. PL-1 dated November 16, 1998 to purchase 40,000 shares of common stock of the Company issued to Stephen D. King (incorporated hereby reference to Exhibit 10.19 to the 1998 10-KSB.) 10.16 Schedule identifying material details of other warrants issued by the Company substantially identical to the warrant filed as Exhibit 10.15. 10.17 Indemnification and Contribution Agreement dated March 3, 1999 among Michael A. Bird, John E. Feltl, Stephen D. King, Timothy I. Maudlin, Wayne W. Mills and the Company (incorporated hereby reference to Exhibit 10.19 to the 1998 10-KSB.) 10.18 Promissory Note dated March 10, 1999 of the Company to BankWindsor (incorporated hereby reference to Exhibit 10.19 to the 1998 10-KSB.) 10.19 Warrant No. BWL-1 dated March 3, 1999 to purchase 25,000 shares of common stock of the Company issued to Michael A. Bird (incorporated hereby reference to Exhibit 10.19 to the 1998 10-KSB.) 10.20 Schedule identifying material details of other warrants issued by the Company substantially identical to the warrant filed as Exhibit 10.24 (incorporated hereby reference to Exhibit 10.19 to the 1998 10-KSB.) 10.21 Warrant No. PL2-1 dated March 18, 1999 to purchase 150,000 shares of common stock of the Company issued to Stephen D. King (incorporated herein by reference to Exhibit 10.26 to the Amendment to the 1998 10-KSB). 10.22 Common Stock Purchase Warrant to purchase 300,000 shares of Cafe Odyssey, Inc. dated as of May 14, 1999, issued to The Shaar Fund Ltd. (Incorporated hereby by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended April 4, 1999) 10.23 Schedule identifying material details of additional warrants issued by the Company substantially identical to the warrant filed as Exhibit 10.22. 10.24 Securities Purchase Agreement, dated as of May 14, 1999, between Cafe Odyssey, Inc., and The Shaar Fund Ltd. (Incorporated hereby by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended April 4, 1999) 10.25 Registration Rights Agreement, dated May 14, 1999, between Cafe Odyssey, Inc., and The Shaar Fund Ltd. (Incorporated hereby by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended April 4, 1999) 10.26 Indemnification Agreement between Cafe Odyssey, Inc. LegacyMaker, Inc. (Incorporated hereby by reference to Exhibit 10.1 to the Registrant's Form 8-K dated June 22, 1999 and filed on June 25, 1999) 40 66 10.27 Escrow Agreement by and among popmail.com, inc., James L. Anderson, as Attorney-in-Fact for certain Shareholders, Cafe Odyssey, Inc., Cafe Odyssey Acquisition Subsidiary, Inc. and Thompson & Knight, a professional corporation. (Incorporated hereby by reference to Exhibit 10.2 to the Registrant's Form 8-K dated June 22, 1999 and filed on June 25, 1999) 10.28 Agreement by and between Cafe Odyssey, Inc. and James L. Anderson (Incorporated hereby by reference to Exhibit 10.3 to the Registrant's Form 8-K dated June 22, 1999 and filed on June 25, 1999) 10.29 Indemnification Agreement between popmail.com, Inc. and Stephen D. King (Incorporated hereby by reference to Exhibit 10.4 to the Registrant's Form 8-K dated June 22, 1999 and filed on June 25, 1999) 10.30 Employment Agreement by and between Cafe Odyssey, Inc. and Stephen D. King (Incorporated hereby by reference to Exhibit 10.5 to the Registrant's Form 8-K dated June 22, 1999 and filed on June 25, 1999) 10.31 Form of Warrant issued in connection with the Series C 8% Convertible Preferred Stock (Incorporated hereby by reference to Exhibit 10.1 to the Registrant's Form 8-K dated July 13, 1999 and filed on July 23, 1999) 10.32 Schedule identifying material details of additional warrants issued by the Company substantially identical to the warrant filed as Exhibit 10.31. 10.33 Securities Purchase Agreement, dated July 13, 1999 between the Company and The Shaar Fund Ltd. (Incorporated hereby by reference to Exhibit 10.2 to the Registrant's Form 8-K dated July 13, 1999 and filed on July 23, 1999) 10.34 Registration Rights Agreement, dated July 13, 1999 between the Company and The Shaar Fund Ltd. (Incorporated hereby by reference to Exhibit 10.3 to the Registrant's Form 8-K dated July 13, 1999 and filed on July 23, 1999) 10.35 Amended and Restated Employment Agreement dated October 5, 1999 by and between Cafe Odyssey, Inc., a Minnesota corporation (the "Company"), and Thomas W. Orr (the "Executive"). (Incorporated herein by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-QSB for Quarter ended October 4, 1999.) 10.36 Securities Purchase Agreement, dated July 13, 1999 between the Registrant and The Shaar Fund Ltd. (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.37 Form of Warrant issued in connection with the Series D 8% Convertible Preferred Stock (Incorporated hereby by reference to Exhibit 10.2 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.38 Schedule identifying material details of additional warrants issued by the Company substantially identical to the warrant filed as Exhibit 10.37. 41 67 10.39 Registration Rights Agreement, dated July 13, 1999 between the Registrant and The Shaar Fund Ltd. (Incorporated hereby by reference to Exhibit 10.3 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.40 Loan Agreement by and between the Registrant and Fairview Partners dated as of August 24, 1999. (Incorporated hereby by reference to Exhibit 10.4 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.41 Form of Senior Convertible Note dated August 24, 1999. (Incorporated hereby by reference to Exhibit 10.5 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.42 Form of Warrant to Purchase Common Stock of the Registrant issued to Fairview Partners. (Incorporated hereby by reference to Exhibit 10.6 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.43 Support Agreement dated as of August 24, 1999 among Stephen D. King, the Registrant and Fairview Partners. (Incorporated hereby by reference to Exhibit 10.7 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.44 First Deed of Trust, Security Agreement and Fixture Financing Statement dated as of August 24, 1999, between the Registrant and the Public Trustee of Denver County, Colorado. (Incorporated hereby by reference to Exhibit 10.8 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.45 Agreement Between Landlord and Lender dated as of August 24, 1999 by Denver Pavilions, L.P. and the Registrant. (Incorporated hereby by reference to Exhibit 10.9 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.46 Escrow Agreement dated August 25, 1999, by and between Fairview Partners, the Registrant and Johnson Trust Company. (Incorporated hereby by reference to Exhibit 10.10 to the Registrant's Form 8-K dated September 1, 1999 and filed on September 16, 1999) 10.47 Registration Rights Agreement, dated January 21, 2000 between the Registrant and the stockholders of IZ.com, Incorporated. (incorporated herein by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K dated filed on February 24, 2000) 10.48 Pledge Agreement dated December 3, 1999 between King Family Partners and the Company. 10.49 First Amendment to Pledge Agreement dated December 3, 1999 dated March 28, 2000 between King Family Partners and the Company. 10.50 Amended and Restated Promissory Note in the amount of $2,450,000 dated December 3, 1999 of King Family Partners to the Company. 10.51 Promissory Note in the amount of the $245,000 dated March 30, 2000 of King Family Partners to the Company. 42 68 10.52 Employment Agreement entered into as of February 9, 2000, by and between Jesse Berst and the Company. 10.53 Amendment to Employment Agreement dated July 27, 1999 by and between the Company and Ronald K. Fuller. 21 Subsidiaries 23.1 Consent of Grant Thornton, LLP 23.2 Consent of Arthur Andersen LLP 27 Financial Data Schedule (B) REPORTS ON FORM 8-K On November 15, 1999, the Company filed an amendment to a report on Form 8-K/A relating to its acquisition of Popmail.com, Inc. On December 17, 1999, the Company filed a report on Form 8-K relating to its acquisition of ROI Interactive, LLC. 43 69 SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POPMAIL.COM, INC. ("Registrant") Dated: , 2000 By: /s/ Stephen D. King ---------------- ---------------------------------------- Stephen D. King Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on , 2000 by the following persons on behalf of the Registrant, in the capacities indicated. SIGNATURE TITLE - - --------- ----- /s/ Stephen D. King Chief Executive Officer and Director - - ---------------------------------- Stephen D. King (Principal Executive Officer) /s/ Thomas W. Orr Chief Financial Officer and Director - - ---------------------------------- Thomas W. Orr (Principal Financial and Accounting Officer) /s/ Ronald K. Fuller President and Director - - ---------------------------------- Ronald K. Fuller /s/ Michael L. Krienik Director - - ---------------------------------- Michael L. Krienik /s/ Frank Wood Director - - ---------------------------------- Frank Wood 44 70 /s/ Gary Schneider President of Corporate Development and - - ---------------------------------- Director Gary Schneider /s/ Jesse Berst Chief Operating Officer and Director - - ---------------------------------- Jesse Berst 45 EX-3.1(G) 2 EXHIBIT 3.1(G) 1 EXHIBIT 3.1 (g) POPMAIL.COM, INC. CERTIFICATE OF DESIGNATION OF SERIES E CONVERTIBLE PREFERRED STOCK Pursuant to Section 401(3)(b) of the Business Corporation Act of the State of Minnesota, PopMail.com, inc., formerly known as Cafe Odyssey, Inc. (the "Company"), a corporation organized and existing under the Business Corporation Act of the State of Minnesota, DOES HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors of the Company by the Articles of Incorporation of the Company, and in accordance with the provisions of Section 401(3)(a) of the Business Corporation Act of the State of Minnesota, the Board of Directors of the Company as of September 22, 1999, adopted the following resolution creating a series of preferred stock designated as Series E Convertible Preferred Stock: RESOLVED: That pursuant to the authority vested in the Board of Directors of the Company in accordance with the provisions of its Articles of Incorporation, as amended, a series of preferred stock, $.01 par value, to be titled the "Series E Convertible Preferred Stock" (the "Preferred Shares") of the Company is hereby created and designated. The number of shares of Preferred Shares shall be 750,000 shares. The voting powers, preferences and relative, participating, optional and other special rights of the Preferred Shares, and the qualifications, limitations and restrictions thereof, are as follows: 1. Designation. The series of preferred stock established hereby shall be designated the "Series E Convertible Preferred Stock" (and shall be referred to herein as the "Preferred Shares") and the authorized number of Preferred Shares shall be 750,000, subject to adjustment as hereinafter provided. 2. Voting Rights. Holders of Preferred Shares shall have no vote on any matters submitted to the holders of Common Stock. Without the affirmative vote of the holders (acting together as a class) of at least a majority of Preferred Shares at the time outstanding given in person or by proxy at any annual or special meeting, or, if permitted by law, in writing without a meeting, the Company shall not alter, change or amend the preferences or rights of the Preferred Shares. 3. Dividends. There are no rights to dividends. 4. Liquidation Right and Preference. In the event of the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Preferred Shares shall be entitled to receive in cash, out of the assets of the Company, an amount equal to Two Dollars ($2.00) per share for each outstanding Preferred Share (herein, "Liquidation Value"), before any payments shall be made or any assets distributed to the holders of Common Stock or any other class of shares of the Company ranking junior to Preferred Shares. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company are insufficient to pay the Liquidation Value, the holders of such Preferred Shares shall share pro rata in any such distribution in proportion to the full amounts to which they would otherwise be respectively entitled. Following such payment to the holders of Preferred Shares upon such liquidation, dissolution or a winding up of the Company, the holders of Common Stock and Preferred Shares shall then share ratably in all the assets of the Company thereafter remaining. For purposes of this joint distribution of assets to the holders of Common Stock and the holders of Preferred Shares, each holder of Preferred Shares should be regarded as owning that number of Common Stock into which such Preferred Shares would then be convertible. 2 5. Conversion Rights. a. Conversion. The Company and holder of the Preferred Shares shall be entitled to convert any or all of such Preferred Shares into shares of Common Stock. The number of shares of Common Stock issuable upon such conversion shall be determined as follows: (1) divide $2.00 by the lesser of (i) $2.00, or (ii) seventy (70) percent of the average closing market price of the Company's Common Stock during the ten (10) trading days immediately preceding the Filing Date (as defined in Section 6 herein); and multiplying the quotient determined in (1) by the number of Preferred Shares being converted. b. Conversion Mechanics -- Holder. In order to exercise the conversion privilege, a holder of Preferred Shares shall (1) notify the Company in writing of such holder's intent to convert a specified portion of such shares (the "Conversion Notice" and the date of such notice which shall be the same or later than the date notice is given, the "Conversion Notice Date") and (2) provide, on or prior to the Conversion Notice Date, to the Company at its principal office the certificate evidencing the Preferred Shares being converted, duly endorsed to the Company and accompanied by written notice to the Company that the holder elects to convert a specified portion or all of such Shares. Preferred Shares converted at the option of the Holder shall be deemed to have been converted on the day of receipt by the Company of the certificate representing such shares for conversion in accordance with the foregoing provisions (the "Conversion Date"), and at such time the rights of the holder of such Preferred Shares other than the right to receive shares of Common Stock upon conversion of the Preferred Shares pursuant to the terms hereof, as such holder, shall cease and such holder shall be treated for all purposes as the record holder of Common Stock issuable upon conversion. As promptly as practicable on or after the Conversion Date, the Company shall issue and mail or deliver to such holder a certificate or certificates for the number of Common Stock issuable upon conversion, computed to the nearest full shares, and a certificate or certificates for the balance of Preferred Shares surrendered, if any, not so converted into Common Stock. c. Conversion Mechanics -- Company. At its election, the Company may automatically convert the Preferred Shares. Notice of the conversion to the holder shall be given by mailing via first-class mail a notice of the Company's intent to convert a specified portion of such shares (the "Conversion Notice") not less than ten (10) business days prior to the effectiveness of such conversion. As promptly as practicable on or after such conversion by the Company, the Company shall issue and mail or deliver to such holder a certificate or certificates for the number of Common Stock issuable upon conversion, computed to the nearest full shares, and a certificate or certificates for the balance of Preferred Shares surrendered, if any, not so converted into Common Stock. 6. Registration Rights. After May 1, 2000 (the "Filing Date"), the Company shall, on a one-time basis, prepare and file a registration statement under the 1933 Act covering the resale of the shares of Common Stock issued or issuable upon conversion of the Preferred Shares. The Company shall bear all expenses and fees incurred in connection with the preparation, filing, and amendment of such registration statement, except that each holder of Preferred Shares shall pay all fees, disbursements and expenses of any counsel or expert retained by such holder and all underwriting discounts and commissions, filing fees and any transfer or other taxes relating to the Shares included in the Registration Statement. Each holder of preferred shares shall cooperate with the Company in the preparation and filing of any Registration Statement, and in the furnishing of information concerning the holder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt under the Securities Act of 1933 as to any proposed distribution. 2 3 7. Other Terms of Series E Convertible Preferred Shares. a. Consolidation, Merger, Exchange, etc. If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another company, or the sale of all or substantially all of its assets to another company, shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the holders of Preferred Shares shall thereafter have the right to receive, in lieu of Common Stock of the Company, such shares of stock, securities, cash or other assets as would have been issued or payable with respect to or in exchange for such number of shares of Common Stock receivable upon a conversion of such Preferred Shares had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the holders of the Preferred Shares to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities, cash or other assets thereafter receivable upon the conversion of such Preferred Shares. The Company shall not effect any such reorganization, reclassification, consolidation, merger or sale, unless prior to the consummation thereof the surviving company (if other than the Company), the company resulting from such consolidation or the company purchasing such assets shall assume by written instrument executed and mailed to the registered holders of the Preferred Shares at the last address of such holders appearing on the Books of the Company, the obligation to deliver to such holders such shares of stock, securities, cash or other assets as, in according to the foregoing provisions, such holders may be entitled to receive. b. Stock Split, Stock Dividend, Recapitalization, etc. If the Company, at any time while any Preferred Shares are outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions payable in shares of its capital stock (whether payable in shares of its Common Stock or of capital stock of any class), (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Conversion Price in effect immediately prior thereto shall be adjusted so that the holder of any Preferred Shares thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which such holder would have owned or have been entitled to receive after the happening of any of the events described above had such Preferred Shares been converted immediately prior to the happening of such event or the record date therefor, whichever is earlier. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. c. Notice of Certain Events. If: (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or 3 4 (iv) the approval of any shareholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all of substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Company; then the Company shall mail to the holders of Preferred Shares, at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up is expected to become effective, and (z) the date as of which it is expected that holders of Common Stock shall be entitled to exchange such shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Certificate to be duly executed in its corporate name on this day of , 1999. POPMAIL.COM, INC. By: /s/ Thomas W. Orr --------------------------- Thomas W. Orr Chief Financial Officer 4 EX-4.3 3 EXHIBIT 4.3 1 Exhibit 4.3 SCHEDULE OF WARRANTS ISSUED IN POPMAIL TRANSACTION
NUMBER OF DATE OF WARRANT SHARES OF ISSUANCE NAME OF WARRANT RECIPIENT NO. COMMON STOCK 6/22/99 Jeff Crabtree PM-1 44,065 6/22/99 Bruce Campbell PM-2 88,148 6/22/99 Keleigh Ahman PM-3 22,040 6/22/99 Randy Isbell PM-4 22,040 The Marcos A. and Sonya Nance Rodriguez PM-5 3,155,464 6/22/99 Children's Trust No. 2 6/22/99 James A. Gammon PM-6 52,885 6/22/99 The Sonya Nance Trust PM-7 22,040 6/22/99 Toni Bryan PM-8 88,148 6/22/99 James Anderson PM-9 215,948 6/22/99 Travis Reese PM-10 348,160 6/22/99 Paul Martin PM-11 348,160
EX-4.4 4 EXHIBIT 4.4 1 EXHIBIT 4.4 HOTEL MEXICO, INC. COMMON STOCK PURCHASE WARRANT Hotel Mexico, Inc., an Ohio corporation (the "COMPANY"), hereby agrees that, for value received, J. JEFFREY BRAUSCH & COMPANY, or its assigns, is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time after July 30, 1998, and before 5:00 p.m., Minneapolis, Minnesota time, on July 30, 2002, Fifteen Thousand Seven Hundred Fifty (15,750) shares of the no par value Common Stock of the Company (the "COMMON STOCK"), at an exercise price of $3.75 per share, subject to adjustment as provided herein. 1. EXERCISE OF WARRANT. The purchase rights granted by this Warrant shall be exercised (in minimum quantities of 100 shares) by the holder surrendering this Warrant with the form of exercise attached hereto duly executed by such holder, to the Company at its principal office, accompanied by payment, in cash or by cashier's check payable to the order of the Company, of the purchase price payable in respect of the Common Stock being purchased. If less than all of the Common Stock purchasable hereunder is purchased, the Company will, upon such exercise, execute and deliver to the holder hereof a new Warrant (dated the date hereof) evidencing the number of shares of Common Stock not so purchased. As soon as practicable after the exercise of this Warrant and payment of the purchase price, the Company will cause to be issued in the name of and delivered to the holder hereof, or as such holder may direct, a certificate or certificates representing the shares purchased upon such exercise. The Company may require that such certificate or certificates contain on the face thereof a legend substantially as follows: "The transfer of the shares represented by this certificate is restricted pursuant to the terms of a Common Stock Purchase Warrant dated July 30, 1997, issued by Hotel Mexico, Inc., a copy of which is available for inspection at the offices of Hotel Mexico, Inc. Transfer may not be made except in accordance with the terms of the Common Stock Purchase Warrant. In addition, no sale, offer to sell or transfer of the shares represented by this certificate shall be made unless a registration statement under the Federal Securities Act of 1933, as amended (the "ACT"), with respect to such shares is then in effect or an exemption from the registration requirements of the Act is then in fact applicable to such shares." 2. NEGOTIABILITY AND TRANSFER. This Warrant is issued upon the following terms, to which each holder hereof consents and agrees: (a) Until this Warrant is duly transferred on the books of the Company, the Company may treat the registered holder of this Warrant as absolute owner hereof for all purposes without being affected by any notice to the contrary. 2 (b) Each successive holder of this Warrant, or of any portion of the rights represented thereby, shall be bound by the terms and conditions set forth herein. 3. ANTIDILUTION ADJUSTMENTS. If the Company shall at any time hereafter subdivide or combine its outstanding shares of Common Stock, or declare a dividend payable in Common Stock, the exercise price in effect immediately prior to the subdivision, combination or record date for such dividend payable in Common Stock shall forthwith be proportionately increased, in the case of combination, or proportionately decreased, in the case of subdivision or declaration of a dividend payable in Common Stock, and each share of Common Stock purchasable upon exercise of this Warrant, immediately preceding such event, shall be changed to the number determined by dividing the then current exercise price by the exercise price as adjusted after such subdivision, combination or dividend payable in Common Stock. No fractional shares of Common Stock are to be issued upon the exercise of the Warrant, but the Company shall pay a cash adjustment in respect of any fraction of a share which would otherwise be issuable in an amount equal to the same fraction of the market price per share of Common Stock on the day of exercise as determined in good faith by the Company. In case of any capital reorganization or any reclassification of the shares of Common Stock of the Company, or in the case of any consolidation with or merger of the Company into or with another corporation, or the sale of all or substantially all of its assets to another corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a part of such reorganization, reclassification, consolidation, merger or sale, as the case may be, lawful provision shall be made so that the holder of the Warrant shall have the right thereafter to receive, upon the exercise hereof, the kind and amount of shares of stock or other securities or property which the holder would have been entitled to receive if, immediately prior to such reorganization, reclassification, consolidation, merger or sale, the holder had held the number of shares of Common Stock which were then purchasable upon the exercise of the Warrant. In any such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interest thereafter of the holder of the Warrant, to the end that the provisions set forth herein (including provisions with respect to adjustments of the exercise price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the exercise of the Warrant. When any adjustment is required to be made in the exercise price, initial or adjusted, the Company shall forthwith determine the new exercise price, and (a) prepare and retain on file a statement describing in reasonable detail the method used in arriving at the new exercise price; and 3 (b) cause a copy of such statement to be mailed to the holder of the Warrant as of a date within ten (10) days after the date when the circumstances giving rise to the adjustment occurred. 4. TRANSFERABILITY; REGISTRATION RIGHTS. Prior to making any disposition of the Warrant or of any Common Stock purchased upon exercise of the Warrant, the holder will give written notice to the Company describing briefly the manner of any such proposed disposition. The holder will not make any such disposition until (i) the Company has notified him that, in the opinion of its counsel, registration under the Act is not required with respect to such disposition, or (ii) a registration statement covering the proposed distribution has been filed by the Company and has become effective. The holder then will make any disposition only pursuant to the conditions of such opinion or registration. The Company agrees that, upon receipt of written notice from the holder hereof with respect to such proposed distribution, it will use its best efforts, in consultation with the holder's counsel, to ascertain as promptly as possible whether or not registration is required, and will advise the holder promptly with respect thereto, and the holder will cooperate in providing the Company with information necessary to make such determination. If, at any time one (1) year after the date hereof and prior to the expiration of seven (7) years from the date hereof, the Company shall propose to file any registration statement under the Securities Act of 1933, as amended, covering a public offering of the Company's Common Stock and permitting the inclusion of shares of selling shareholders, it will notify the holder hereof at least thirty (30) days prior to each such filing and will include in the registration statement (to the extent permitted by applicable regulation) the Common Stock purchased by the holder or purchasable by the holder upon the exercise of the Warrant to the extent requested by the holder hereof. Notwithstanding the foregoing, the number of shares of the holders of the Warrants proposed to be registered thereby shall be reduced pro rata with any other selling shareholder (other than the Company) upon the request of the managing underwriter of such offering. If the registration statement or offering statement filed pursuant to such forty-five (45) day notice has not become effective within six months following the date such notice is given to the holder hereof, the Company must again notify such holder in the manner provided above. At any time one (1) year after the date hereof and prior to the expiration of four (4) years from the date hereof, and provided that a registration statement on Form S-3 (or its equivalent) is then available to the Company, and on a one-time basis only, if the holders of 51% or more of the warrants and the shares acquired upon exercise of the Warrants request the registration of the shares on Form S-3 (or its equivalent), the Company shall promptly thereafter use its best efforts to effect the registration under the Securities Act of 1933, as amended, of all such shares which such holders request in writing to be so registered, and in a manner corresponding to the methods of distribution described in such holders' request. All expenses of any such registrations referred to in this Section 4, except the fees of counsel to such holders and underwriting commissions or discounts shall be borne by the Company. 4 The Company will mail to each record holder, at the last known post office address, written notice of any exercise of the rights granted under this Section 4, by certified or registered mail, return receipt requested, and each holder shall have thirty (30) days from the date of deposit of such notice in the U.S. Mail to notify the Company in writing whether such holder wishes to join in such exercise. The Company will furnish the holder hereof with a reasonable number of copies of any prospectus included in such filings and will amend or supplement the same as required during the period of required use thereof. The Company will maintain the effectiveness of any registration statement or the offering statement filed by the Company, whether or not at the request of the holder hereof, for at least six (6) months following the effective date thereof. In the case of the filing of any registration statement, and to the extent permissible under the Act and controlling precedent thereunder, the Company and the holder hereof shall provide cross indemnification agreements to each other in customary scope covering the accuracy and completeness of the information furnished by each. The holder of the Warrant agrees to cooperate with the Company in the preparation and filing of any such registration statement or offering statement, and in the furnishing of information concerning the holder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt under the Act as to any proposed distribution. 5. CASHLESS EXERCISE OPTION. (a) Provided the Company's Common Stock shall then be traded on an exchange or quoted by NASDAQ or otherwise traded as described in 5(d) hereof, the holder of this Warrant shall have the right to require the Company to convert this Warrant (the "CONVERSION RIGHT"), at any time from July 30, 1998 and prior to its expiration, into shares of Common Stock as provided for in this Section 5. Upon exercise of the Conversion Right, the Company shall deliver to the holder (without payment by the holder of any exercise price) that number of shares of Common Stock equal to the quotient obtained by dividing (x) the value of the Warrant at the time the Conversion Right is exercised (determined by subtracting the aggregate exercise price for the Warrant Shares in effect immediately prior to the exercise of the Conversion Right from the aggregate Fair Market Value (as determined below) for the Warrant Shares immediately prior to the exercise of the Conversion Right) by (y) the Fair Market Value of one share of Common Stock immediately prior to the exercise of the Conversion Right. (b) The Conversion Right may be exercised by the holder, at any time or from time to time, prior to its expiration, on any business day, by delivering a written notice (the "CONVERSION NOTICE") to the Company at the offices of 5 the Company exercising the Conversion Right and specifying (i) the total number of shares of Stock the Warrantholder will purchase pursuant to such conversion, and (ii) a place, and a date not less than five (5) nor more than twenty (20) business days from the date of the Conversion Notice for the closing of such purchase. (c) At any closing under Section 5(b) hereof, (i) the holder will surrender the Warrant, (ii) the Company will deliver to the holder a certificate or certificates for the number of shares of Common Stock issuable upon such conversion, together with cash, in lieu of any fraction of a share, and (iii) the Company will deliver to the holder a new Warrant representing the number of shares, if any, with respect to which the Warrant shall not have been exercised. (d) "FAIR MARKET VALUE" of a share of Common Stock as of a particular date (the "DETERMINATION DATE") shall mean: (i) If the Company's Common Stock is traded on an exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") National Market System, or the Small Cap Market, then the average closing or last sale prices, respectively, reported for the ten (10) business days immediately preceding the Determination Date. (ii) If the Company's Common Stock is not traded on an exchange or on the NASDAQ National Market System, or the Small Cap Market, but is traded in the over-the-counter market, then the average of the closing bid and asked prices reported for the ten (10) business days immediately preceding the Determination Date. 6. NOTICES. The Company shall mail to the registered holder of the Warrant, at his last known post office address appearing on the books of the Company, not less than fifteen (l5) days prior to the date on which (a) a record will be taken for the purpose of determining the holders of Common Stock entitled to dividends (other than cash dividends) or subscription rights, or (b) a record will be taken (or in lieu thereof, the transfer books will be closed) for the purpose of determining the holders of Common Stock entitled to notice of and to vote at a meeting of stockholders at which any capital reorganization, reclassification of shares of Common Stock, consolidation, merger, dissolution, liquidation, winding up or sale of substantially all of the Company's assets shall be considered and acted upon. 7. RESERVATION OF COMMON STOCK. A number of shares of Common Stock sufficient to provide for the exercise of the Warrant upon the basis herein set forth shall at all times be reserved for the exercise thereof. 6 8. MISCELLANEOUS. Whenever reference is made herein to the issue or sale of shares of Common Stock, the term "COMMON STOCK" shall include any stock of any class of the Company other than preferred stock with a fixed limit on dividends and a fixed amount payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company. The Company will not, by amendment of its Articles of Incorporation or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act or deed, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by the Company, but will, at all times in good faith, assist, insofar as it is able, in the carrying out of all provisions hereof and in the taking of all other action which may be necessary in order to protect the rights of the holder hereof against dilution. Upon written request of the holder of this Warrant, the Company will promptly provide such holder with a then current written list of the names and addresses of all holders of warrants originally issued under the terms of, and concurrent with, this Warrant. The representations, warranties and agreements herein contained shall survive the exercise of this Warrant. References to the "holder of" include the immediate holder of shares purchased on the exercise of this Warrant, and the word "holder" shall include the plural thereof. This Common Stock Purchase Warrant shall be interpreted under the laws of the State of Minnesota. All shares of Common Stock or other securities issued upon the exercise of the Warrant shall be validly issued, fully paid and non-assessable, and the Company will pay all taxes in respect of the issuer thereof. Notwithstanding anything contained herein to the contrary, the holder of this Warrant shall not be deemed a stockholder (including, no right to vote on any matters coming before the shareholders) of the Company for any purpose whatsoever until and unless this Warrant is duly exercised. IN WITNESS WHEREOF, this Warrant has been duly executed by Hotel Mexico, Inc., this 30th day of July, 1997. HOTEL MEXICO, INC. By /s/ Stephen D. King --------------------------- Title: Chief Executive Officer 7 WARRANT EXERCISE FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of Common Stock of Hotel Mexico, Inc. to which such Warrant relates and herewith makes payment of $ therefor in cash or by certified check, and requests that such shares be issued and be delivered to, , the address for which is set forth below the signature of the undersigned. Dated: -------------------------- - - ------------------------------ ----------------------------------------- (Taxpayer's I.D. Number) (Signature) ----------------------------------------- ----------------------------------------- (Address) -------------------------------- ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of Common Stock of Hotel Mexico, Inc. to which the within Warrant relates and appoints , attorney, to transfer said right on the books of Hotel Mexico, Inc. with full power of substitution in the premises. Dated: -------------------------- ------------------------------------ (Signature) ------------------------------------ ------------------------------------ (Address) 8 CASHLESS EXERCISE FORM (To be executed upon exercise of Warrant pursuant to Section 5) The undersigned hereby irrevocably elects a cashless exercise of the right of purchase represented by the within Common Stock Purchase Warrant for, and to purchase thereunder, shares of Common Stock, as provided for in Section 5 therein. If said number of shares shall not be all the shares purchasable under the within Common Stock Purchase Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher number of shares. Please issue a certificate or certificates for such Common Stock in the name of, and pay any cash for any fractional shares to: NAME ------------------------------------------------------------- (Please Print Name) ADDRESS ------------------------------------------------------------- ------------------------------------------------------------- SOCIAL SECURITY NO. -------------------------------------------------------- SIGNATURE --------------------------------------------------------------------- NOTE: The above signature should correspond exactly with the name on the first page of this Common Stock Purchase Warrant or with the name of the assignee appearing in the assignment form on the preceding page. EX-4.5 5 EXHIBIT 4.5 1 EXHIBIT 4.5 The Warrant and the securities issuable upon exercise of this Warrant (the "Securities") have not been registered under the Securities Act of 1933 (the "Securities Act") or under any state securities or Blue Sky laws ("Blue Sky Laws"). No transfer, sale, assignment, pledge, hypothecation or other disposition of this Warrant or the Securities or any interest therein may be made except (a) pursuant to an effective registration statement under the Securities Act and any applicable Blue Sky Laws or (b) if the Company has been furnished with both an opinion of counsel for the holder, which opinion and counsel shall be reasonably satisfactory to the Company, to the effect that no registration is required because of the availability of an exemption from registration under the Securities Act and applicable Blue Sky Laws, and assurances that the transfer, sale, assignment, pledge, hypothecation or other disposition will be made only in compliance with the conditions of any such registration or exemption. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF CAFE ODYSSEY, INC. WARRANT NO. JJB-1 Bloomington, Minnesota April 20, 1999 This certifies that, for value received, J. JEFFREY BRAUSCH & COMPANY, or its successors or assigns ("Holder") is entitled to purchase from Cafe Odyssey, Inc. (the "Company") Three Hundred Thousand (300,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock"), at any time and from time to time from the date hereof until April 20, 2004, at an exercise price of $0.75 per share (the "Exercise Price"), subject to adjustment as herein provided. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which each Holder consents and agrees: 2 a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. The Warrant may not be transferred, and the Shares underlying this Warrant may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price 2 3 shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while any Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that each Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if such Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrants) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Warrant Holders had carried out the terms of 3 4 the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to each Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 6. Registration Rights. If at any time on or after October 1, 1999, the Company shall propose to file any registration statement (other than any registration on Form S-4, S-8 or any other similarly inappropriate form, or any successor forms thereto) under the 1933 Act covering a public offering of the Company's Common Stock, it will notify the Holder hereof at least thirty (30) days prior to each such filing and will use its best efforts to include in the Registration Statement (to the extent permitted by applicable regulation), the Common Stock purchased or purchasable by the Holder upon the exercise of the Warrant to the extent requested by the Holder hereof within twenty (20) days after receipt of notice of such filing (which request shall specify the interest in this Warrant or the Warrant Shares intended to be sold or disposed of by such Holder and describe the nature of any proposed sale or other disposition thereof); provided, however, that if a greater number of Warrants and Warrant Shares is offered for participation in the proposed offering than in the reasonable opinion of the managing underwriter of the proposed offering can be accommodated without adversely affecting the proposed offering, then the amount of Warrant and Warrant Shares proposed to be offered by such Holders for registration, as well as the number of securities of any other selling shareholders participating in the registration, shall be proportionately reduced to a number deemed satisfactory by the managing underwriter. The Company shall bear all expenses and fees incurred in connection with the preparation, filing, and amendment of the Registration Statement with the Commission, except that the Holder shall pay all fees, disbursements and expenses of any counsel or expert retained by the Holder and all underwriting discounts and commissions, filing fees and any transfer or other taxes relating to the Shares included in the Registration Statement. The Holder of this Warrant agrees to cooperate with the Company in the preparation and filing of any Registration Statement, and in the furnishing of information concerning the Holder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt under the 1933 Act as to any proposed distribution. 7. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 8. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holders. 9. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to Cafe Odyssey, Inc., 4801 West 4 5 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, Cafe Odyssey, Inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. CAFE ODYSSEY, INC. /s/ Stephen D. King ------------------------------- Stephen D. King Chairman of the Board 5 6 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ____________________ of the shares of Common Stock of Cafe Odyssey, Inc. (the "Shares") to which such Warrant relates and herewith makes payment of $_____________ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, _______________________________, the address for whom is set forth below the signature of the undersigned: Dated: ____________________ _________________________________________ (Signature) _________________________________________ _________________________________________ (Address) X X X ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto _____________________________________ the right to purchase shares of Common Stock of Cafe Odyssey, Inc. to which the within Warrant relates and appoints ____________________ attorney, to transfer said right on the books of _________________ with full power of substitution in the premises. Dated: ____________________ _________________________________________ (Signature) _________________________________________ _________________________________________ (Address) 6 EX-4.6 6 EXHIBIT 4.6 1 EXHIBIT 4.6
Date of Name of Warrant Number of Shares Expiration Issuance Warrant Recipient No. of Common Stock Date 4/20/99 CTC, Inc. CTC-1 30,000 4/20/2004
EX-4.7 7 EXHIBIT 4.7 1 EXHIBIT 4.7 THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAW. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF, AND NO TRANSFER OF THE SECURITIES WILL BE MADE BY THE COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. CAFE ODYSSEY, INC. COMMON STOCK PURCHASE WARRANT Warrant No. IPO- Cafe Odyssey, Inc., a Minnesota corporation (the "Company"), hereby agrees that, for value received, , or his or her assigns, is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time after November 3, 1998, and before 4:30 p.m., Minneapolis, Minnesota time, on November 3, 2002, ( ) shares of the $.01 par value Common Stock of the Company, at an exercise price of $6.50 per Share, subject to adjustment as provided herein. 1. EXERCISE OF WARRANT. The purchase rights granted by this Warrant shall be exercised (in minimum quantities of 100 shares) by the holder surrendering this Warrant with the form of exercise attached hereto duly executed by such holder, to the Company at its principal office, accompanied by payment, in cash or by cashier's check payable to the order of the Company, of the purchase price payable in respect of the Shares being purchased. If less than all of the Shares purchasable hereunder is purchased, the Company will, upon such exercise, execute and deliver to the holder hereof a new Warrant (dated the date hereof) evidencing the number of Shares not so purchased. As soon as practicable after the exercise of this Warrant and payment of the purchase price, the Company will cause to be issued in the name of and delivered to the holder hereof, or as such holder may direct, a certificate or certificates representing the Shares purchased upon such exercise. The Company may require that such certificate or certificates contain on the face thereof a legend substantially as follows: "The transfer of the shares represented by this certificate is restricted pursuant to the terms of a Common Stock Purchase Warrant dated November 7, 1997, issued by Cafe Odyssey, Inc., a copy of which is available for inspection at the offices of Cafe Odyssey, Inc. Transfer may not be made except in accordance with the terms of the Common Stock Purchase Warrant. In addition, no sale, offer to sell or transfer of the shares represented by this certificate shall be made unless a Registration Statement under the Securities Act of 1933, as amended (the "Act"), with respect to such shares is then in effect or an exemption from the registration requirements of the Act is then in fact applicable to such shares." 2. NEGOTIABILITY AND TRANSFER. This Warrant is issued upon the following terms, to which each holder hereof consents and agrees: (a) Except where directed by a court of competent jurisdiction pursuant to the dissolution or liquidation of a corporate holder hereof for the period ending one year from November 3, 1997, title to this Warrant may not be sold, transferred, assigned or hypothecated, except that within such one-year period title to this Warrant may 2 be transferred only to R. J. Steichen & Company (the "Underwriter"), or to a person who is both an officer and shareholder, or both an officer and employee, of the Underwriter, or to a successor (or both an officer and shareholder, or both an officer and employee) in interest to the business of the Underwriter, by endorsement (by the holder hereof executing the form of assignment attached hereto) and delivery in the same manner as in the case of a negotiable instrument transferable by endorsement and delivery subject to the requirements of Section 4 hereof. (b) Until this Warrant is duly transferred on the books of the Company, the Company may treat the registered holder of this Warrant as absolute owner hereof for all purposes without being affected by any notice to the contrary. (c) Each successive holder of this Warrant, or of any portion of the rights represented thereby, shall be bound by the terms and conditions set forth herein. 3. ANTIDILUTION ADJUSTMENTS. If the Company shall at any time hereafter subdivide or combine its outstanding shares of Common Stock, or declare a dividend payable in Common Stock, the exercise price in effect immediately prior to the subdivision, combination or record date for such dividend payable in Common Stock shall forthwith be proportionately increased, in the case of combination, or proportionately decreased, in the case of subdivision or declaration of a dividend payable in Common Stock, and the number of Shares purchasable upon exercise of this Warrant, immediately preceding such event, shall be changed to the number determined by dividing the then current exercise price by the exercise price as adjusted after such subdivision, combination or dividend payable in Common Stock and against the number of Shares purchasable upon the exercise of this Warrant immediately preceding such event, so as to achieve an exercise price and number of Shares purchasable after such event proportional to such exercise price and number of Shares purchasable immediately preceding such event. No adjustment in exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents ($0.05) in such price; provided, however, that any adjustments which are not required to be so made shall be carried forward and taken into account in any subsequent adjustment. All calculations hereunder shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No fractional Shares are to be issued upon the exercise of the Warrant, but the Company shall pay a cash adjustment in respect of any fraction of a Share which would otherwise be issuable in an amount equal to the same fraction of the market price per share of Common stock on the day of exercise as determined in good faith by the Company. In case of any capital reorganization or any reclassification of the Common Stock of the Company, or in the case of any consolidation with or merger of the Company into or with another corporation, or the sale of all or substantially all of its assets to another corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a part of such reorganization, reclassification, consolidation, merger or sale, as the case may be, lawful provision shall be made so that the holder of the Warrant shall have the right thereafter to receive, upon the exercise hereof, the kind and amount of shares of stock or other securities or property which the holder would have been entitled to receive if, immediately prior to such reorganization, reclassification consolidation, merger or sale, the holder had held the number of Shares which were then purchasable upon the exercise of the Warrant. In any such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interest thereafter of the holder of the Warrant, to the end that the 2 3 provisions set forth herein (including provisions with respect to adjustments of the exercise price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the exercise of the Warrant. When any adjustment is required to be made in the exercise price, initial or adjusted, the Company shall forthwith determine the new exercise price, and (a) prepare and retain on file a statement describing in reasonable detail the method used in arriving at the new exercise price; and (b) cause a copy of such statement to be mailed to the holder of the Warrant as of a date within ten (10) days after the date when the circumstances giving rise to the adjustment occurred. 4. REGISTRATION RIGHTS. Prior to making any disposition of the Warrant or of any Shares purchased upon exercise of the Warrant, the holder will give written notice to the Company describing briefly the manner of any such proposed disposition. The holder will not make any such disposition until (i) the Company has notified him or her that, in the opinion of its counsel, registration under the Act is not required with respect to such disposition, or (ii) a Registration Statement covering the proposed distribution has been filed by the Company and has become effective. The Company agrees that, upon receipt of written notice from the holder hereof with respect to such proposed distribution, it will use its best efforts, in consultation with the holder's counsel, to ascertain as promptly as possible whether or not registration is required, and will advise the holder promptly with respect thereto, and the holder will cooperate in providing the Company with information necessary to make such determination. If, at any time prior to the expiration of seven (7) years from November 3, 1997, the Company shall propose to file any Registration Statement (other than any registration on Forms S-4, S-8 or any other similarly inappropriate form or Registration Statement with respect to an initial public offering in which there are no selling shareholders) under the Securities Act of 1933, as amended, covering a public offering of the Company's Units or shares, it will notify the holder hereof at least thirty (30) days prior to each such filing and will include in the Registration Statement (to the extent permitted by applicable regulation), the shares purchased by the holder or purchasable by the holder upon the exercise of the Warrant to the extent requested by the holder hereof. Notwithstanding the foregoing, the number of shares of the holders of the Warrants proposed to be registered thereby shall be reduced pro rata with any other selling shareholder (other than the Company) upon the reasonable request of the managing underwriter of such offering. If the Registration Statement or Offering Statement filed pursuant to such thirty (30) day notice has not become effective within six months following the date such notice is given to the holder hereof, the Company must again notify such holder in the manner provided above. At any time prior to the expiration of five (5) years from November 3, 1997, and provided that a registration statement on Form S-3 (or its equivalent) is then available to the Company, and on a one-time basis only, if the holders of 50% or more of the Warrants and/or the Shares acquired upon exercise of the Warrants request the registration of the Shares on Form S-3 (or its equivalent), the Company shall promptly thereafter use its best efforts to effect the registration under the Act of all such shares which such holders request in writing to be so registered, and in a manner corresponding to the methods of distribution described in such holders' request. 3 4 All expenses of any such registrations referred to in this Section 4, except the fees of counsel to such holders and underwriting commissions or discounts, filing fees, and any transfer or other taxes applicable to such shares, shall be borne by the Company. Upon effectiveness of a Registration Statement which includes Common Stock purchased or purchasable upon the exercise of this Warrant in accordance with a valid demand under this Section 4, the rights under this Warrant of all holders to make another such demand shall terminate. Each purchaser or transferee of a portion of this Warrant is responsible to determine whether his or her demand rights under this paragraph have been terminated by such an exercise. Any Warrants issued upon transfers subsequent to such an exercise shall have all of the demand registration provisions under this Section 4 deleted. The Company will mail to each record holder, at the last known post office address, written notice of any exercise of the rights granted under this Section 4, by certified or registered mail, return receipt requested, and each holder shall have twenty (20) days from the date of deposit of such notice in the U.S. mail to notify the Company in writing whether such holder wishes to join in such exercise. The Company will furnish the holder hereof with a reasonable number of copies of any prospectus included in such filings and will amend or supplement the same as required during the period of required use thereof. The Company will maintain, at its expense, the effectiveness of any Registration Statement or the Offering Statement filed by the Company, whether or not at the request of the holder hereof, for at least six (6) months following the effective date thereof. In the case of the filing of any Registration Statement, and to the extent permissible under the Act and controlling precedent thereunder, the Company and the holder hereof shall provide cross indemnification agreements to each other in customary scope covering the accuracy and completeness of the information furnished by each. The holder of the Warrant agrees to cooperate with the Company in the preparation and filing of any such Registration Statement or Offering Statement and in the furnishing of information concerning the holder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt under the Act as to any proposed distribution. 5. RIGHT TO CONVERT. (a) The holder of this Warrant shall have the right to require the Company to convert this Warrant (the "Conversion Right"), at any time after November 3, 1998 and prior to its expiration, into Common Stock as provided for in this Section 5. Upon exercise of the Conversion Right, the Company shall deliver to the holder (without payment by the holder of any exercise price) that number of shares of Common Stock equal to the quotient obtained by dividing (x) the value of the Warrant at the time the Conversion Right is exercised (determined by subtracting the exercise price for one Warrant Share in effect immediately prior to the exercise of the Conversion Right from the Fair Market Value (as determined below) for one Warrant Share immediately prior to the exercise of the Conversion Right) by (y) the Fair Market Value of one share of Common Stock immediately prior to the exercise of the Conversion Right. 4 5 (b) The Conversion Right may be exercised by the holder, at any time or from time to time, prior to its expiration, on any business day, by delivering a written notice (the "Conversion Notice") to the Company at the offices of the Company exercising the Conversion Right and specifying (i) the total number of shares of Common Stock the Warrantholder will purchase pursuant to such conversion, and (ii) a place, and a date not less than five (5) nor more than twenty (20) business days from the date of the Conversion Notice, for the closing of such purchase. (c) At any closing under Section 5(b) hereof, (i) the holder will surrender the Warrant, (ii) the Company will deliver to the holder a certificate or certificates for the number of shares of Common Stock issuable upon such conversion, together with cash, in lieu of any fraction of a share, and (iii) the Company will deliver to the holder a new Warrant representing the number of shares, if any, with respect to which the Warrant shall not have been converted. (d) "Fair Market Value" of a share of Common Stock as of a particular date (the "Determination Date") shall mean: (i) If the Company's Common Stock is traded on an exchange or is quoted on The Nasdaq National Market or The Nasdaq SmallCap Market, then the average closing or last sale prices, respectively, reported for the ten (10) business days immediately preceding the Determination Date. (ii) If the Company's Common Stock is not traded on an exchange or on The Nasdaq National Market or The Nasdaq SmallCap Market, but is traded in the over-the-counter market, then the average of the closing bid and asked prices reported for the ten (10) business days immediately preceding the Determination Date. (iii) If the Company's Common Stock is not publicly traded and there has been a bona fide sale for cash on an arm's-length basis within 45 days prior to the Determination Date of such Common Stock by the Company privately to one or more investors unaffiliated with the Company (a "Qualifying Sale"), then the most recent such sales price; and (iv) If the Company's Common Stock is not publicly traded and there has been no Qualifying Sale, then the appraised fair market value of such stock, as determined by mutual agreement of the Company and the holder of the Warrant; or if the parties cannot agree to such valuation, then each of the Company and the holder shall select an arbitrator and such arbitrators shall select a third, and such three arbitrators shall determine (in accordance with the Commercial Arbitration Rules of the American Arbitration Association, such expenses to be borne equally by the parties) the fair market value (without any discount for lack of marketability or minority interest) of a share of Common Stock of the Company. 6. NOTICES. The Company shall mail to the registered holder of the Warrant, at his or her last known post office address appearing on the books of the Company, not less than fifteen (15) days prior to 5 6 the date on which (a) a record will be taken for the purpose of determining the holders of Common Stock entitled to dividends (other than cash dividends) or subscription rights, or (b) a record will be taken (or in lieu thereof, the transfer books will be closed) for the purpose of determining the holders of common stock entitled to notice of and to vote at a meeting of shareholders at which any capital reorganization, reclassification of common stock, consolidation, merger, dissolution, liquidation, winding up or sale of substantially all of the Company's assets shall be considered and acted upon. 7. RESERVATION OF COMMON STOCK. A number of shares of Common Stock sufficient to provide for the exercise of the Warrant and the shares of Common Stock included therein upon the basis herein set forth shall at all times be reserved for the exercise thereof. 8. MISCELLANEOUS. Whenever reference is made herein to the issue or sale of shares of Common Stock, the terms "Common Stock" or "Shares" shall include any stock of any class of the Company other than preferred stock that has a fixed limit on dividends and a fixed amount payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company. The Company will not, by amendment of its Articles of Incorporation or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act or deed, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by the Company, but will, at all times in good faith, assist, insofar as it is able, in the carrying out of all provisions hereof and in the taking of all other action which may be necessary in order to protect the rights of the holder hereof against dilution. Upon written request of the holder of this Warrant, the Company will promptly provide such holder with a then current written list of the names of all holders of warrants originally issued under the terms of, and concurrent with, this Warrant. The representations, warranties and agreements herein contained shall survive the exercise of this Warrant. References to the "holder of" include the immediate holder of shares purchased on the exercise of this Warrant, and the word "holder" shall include the plural thereof. This Common Stock Purchase Warrant shall be interpreted under the laws of the State of Minnesota. All Shares or other securities issued upon the exercise of the Warrant shall be validly issued, fully paid and non-assessable, and the Company will pay all taxes in respect of the issue thereof. Notwithstanding anything contained herein to the contrary, the holder of this Warrant shall not be deemed a stockholder of the Company for any purpose whatsoever until and unless this Warrant is duly exercised. IN WITNESS WHEREOF, this Warrant has been duly executed by Cafe Odyssey, Inc., this 16th day of June, 1999. CAFE ODYSSEY, INC. By --------------------------------- Its --------------------------------- 6 7 WARRANT EXERCISE FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, shares of Common Stock of Cafe Odyssey, Inc. to which such Warrant relates and herewith makes payment of $ therefor in cash or by certified check, and requests that such shares be issued and be delivered to, , the address for which is set forth below the signature of the undersigned. Dated: ---------------- - - --------------------------- ------------------------------ (Taxpayer's I.D. Number) (Signature) ------------------------------ ------------------------------ (Address) X X X ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of Common Stock of Cafe Odyssey, Inc. to which the within Warrant relates and appoints , attorney, to transfer said right on the books of Cafe Odyssey, Inc. with full power of substitution in the premises. Dated: ------------------- ------------------------------ (Signature) ------------------------------ ------------------------------ (Address) 7 8 CASHLESS EXERCISE FORM (To be executed upon exercise of Warrant pursuant to Section 5) The undersigned hereby irrevocably elects a cashless exercise of the right of purchase represented by the within Common Stock Purchase Warrant for, and to purchase thereunder, shares of Common Stock, as provided for in Section 5 therein. If said number of shares shall not be all the shares purchasable under the within Common Stock Purchase Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher number of shares. Please issue a certificate or certificates for such Common Stock in the name of, and pay any cash for any fractional shares to: Name ----------------------------- (Please Print Name) Address ----------------------------- ----------------------------- Social Security No. ------------------------ Signature ----------------------------- NOTE: The above signature should correspond exactly with the name on the first page of this Common Stock Purchase Warrant or with the name of the assignee appearing in the assignment form on the preceding page. 8 EX-4.8 8 EXHIBIT 4.8 1 EXHIBIT 4.8 SCHEDULE OF WARRANTS IN IPO SERIES
NUMBER OF DATE OF WARRANT SHARES OF ISSUANCE NAME OF WARRANT RECIPIENT NO. COMMON STOCK - - -------- ------------------------- ------- ------------ 6/16/99 Dennis Hanish IPO-2 1,725 6/16/99 John Ryden IPO-3 1,725 6/16/99 Duane Anderson IPO-4 300 6/16/99 Victor Greenstein IPO-5 725 6/16/99 Bruce LeDuc IPO-6 3,714 6/16/99 Constance Berman IPO-7 742 6/16/99 Bernard Weber IPO-8 742 6/16/99 Miles Braufman IPO-9 371 6/16/99 Joseph Buska IPO-10 6,584 6/16/99 Wayne W. Mills IPO-11 28,533 6/16/99 Douglas Pritchard IPO-12 620 6/16/99 Dennis Nielsen IPO-13 3,600 6/16/99 Ernest Andberg IPO-14 2,000 6/16/99 Mark Bystrom IPO-15 2,000 6/16/99 John Nielsen IPO-16 1,400 6/16/99 Patrick M. Sidders IPO-17 1,900 6/16/99 David Dalvey IPO-18 7,500 6/16/99 Thomas Jamison IPO-19 7,500 6/16/99 David Lantz IPO-20 7,500 6/16/99 Vicki Lynn Anderson IPO-21 600 6/16/99 John E. Feltl IPO-22 170,219
EX-4.9 9 EXHIBIT 4.9 1 EXHIBIT 4.9 The Warrant and the securities issuable upon exercise of this Warrant (the "Securities") have not been registered under the Securities Act of 1933 (the "Securities Act") or under any state securities or Blue Sky laws ("Blue Sky Laws"). No transfer, sale, assignment, pledge, hypothecation or other disposition of this Warrant or the Securities or any interest therein may be made except (a) pursuant to an effective registration statement under the Securities Act and any applicable Blue Sky Laws or (b) if the Company has been furnished with both an opinion of counsel for the holder, which opinion and counsel shall be reasonably satisfactory to the Company, to the effect that no registration is required because of the availability of an exemption from registration under the Securities Act and applicable Blue Sky Laws, and assurances that the transfer, sale, assignment, pledge, hypothecation or other disposition will be made only in compliance with the conditions of any such registration or exemption. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. Bloomington, Minnesota ---- , 1999 ---------------- This certifies that, for value received, , or his ---------------- successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") ( ) fully paid and nonassessable shares ---------------- --------- (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock"), at any time and from time to time from the date hereof until , 2004, at an exercise price of $0.75 per share (the "Exercise - - ------------ --- Price"), subject to adjustment as herein provided. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. a. Exercise for Cash. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. 2 2 b. Cashless Exercise. Upon receipt of a notice of cashless exercise, the Company shall deliver to the Holder (without payment by the Holder of any exercise price) that number of Shares that is equal to the quotient obtained by dividing (x) the value of the Warrant on the date that the Warrant shall have been surrendered (determined by subtracting the aggregate exercise price for the Shares in effect on the Exercise Date from the aggregate Fair Market Value (hereinafter defined) for the Shares by (y) the Fair Market Value of one share of Common Stock. A notice of "cashless exercise" shall state the number of Shares as to which the Warrant is being exercised. "Fair Market Value" for purposes of this Section (b) shall mean the average of the Common Stock closing prices reported by the principal exchange on which the Common Stock is traded, or the last sale prices as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") National Market or SmallCap Market, as the case may be, for the ten (10) business days immediately preceding the Exercise Date or, in the event no public market shall exist for the Common Stock at the time of such cashless exercise, Fair Market Value shall mean the fair market value of the Common Stock as the same shall be determined in the good faith discretion of the Board of Directors, after full consideration of all factors then deemed relevant by such Board in establishing such value, including by way of illustration and not limitation, the per share purchase price of Common Stock or per security convertible into one share of Common Stock of the most recent sale of shares of Common Stock or securities convertible into Common Stock by the Company after the date hereof all as evidenced by the vote of a majority of the directors then in office. 2. Transferability of This Warrant. This Warrant is issued upon the following terms, to which each Holder consents and agrees: a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. The Warrant may not be transferred, and the Shares underlying this Warrant may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less 3 3 than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while any Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding 4 4 shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that each Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if such Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrants) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Warrant Holders had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to each Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 6. Registration Rights. If at any time after April 1, 2000, and prior to the fifth anniversary of the date hereof, the Company shall propose to file any registration statement (other than any registration on Form S-4, S-8 or any other similarly inappropriate form, or any successor forms thereto) under the 1933 Act covering a public offering of the Company's Common Stock (a "Registration Statement"), it will notify the Holder hereof at least thirty (30) days prior to each such filing and will use its best efforts to include in the Registration Statement (to the extent permitted by applicable regulation), the Common Stock purchased or purchasable by the Holder upon the exercise of the Warrant to the extent requested by the Holder hereof within twenty (20) days after receipt of notice of such filing (which request shall specify the interest in this Warrant or the Warrant Shares intended to be sold or disposed of by such Holder and describe the nature of any proposed sale or other disposition thereof); provided, however, that if a greater number of Warrants and Warrant Shares is offered for participation in the proposed offering than in the reasonable opinion of the managing underwriter of the proposed offering can be accommodated without adversely affecting the proposed offering, then the amount of Warrant and Warrant Shares proposed to be offered by such Holders for registration, as well as the 5 5 number of securities of any other selling shareholders participating in the registration, shall be proportionately reduced to a number deemed satisfactory by the managing underwriter. The Company shall keep the Registration Statement effective and current until the earlier to occur of (i) the date all the Shares are sold, (ii) the date all of the Shares may be sold under Rule 144(k) under the Securities Act or (iii) the expiration date of this Warrant. The Company shall bear all expenses and fees incurred in connection with the preparation, filing, and amendment of the Registration Statement with the Commission, except that the Holder shall pay all fees, disbursements and expenses of any counsel or expert retained by the Holder and all underwriting discounts and commissions, filing fees and any transfer or other taxes relating to the Shares included in the Registration Statement. The Holder of this Warrant agrees to cooperate with the Company in the preparation and filing of any Registration Statement, and in the furnishing of information concerning the Holder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt under the 1933 Act as to any proposed distribution. 7. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 8. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holders. 9. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By: /s/ Thomas W. Orr ----------------------------------- Its: Chief Financial Officer ----------------------------------- 6 6 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder,_____________________ of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $_____________ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, , the address for whom is set forth below the _______________________________ signature of the undersigned: Dated: ----------------------- ------------------------------------ (Signature) ------------------------------------ ------------------------------------ (Address) X X X ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto ______________ the right to purchase __________ shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints _____________ attorney to transfer said right on the books of PopMail.com, inc. with full power of substitution in the premises. Dated: ------------------------- ------------------------------------ (Signature) ------------------------------------ ------------------------------------ (Address) 7 EX-4.10 10 EXHIBIT 4.10 1 EXHIBIT 4.10 Material Details of the Warrants Substantially Identical to the Warrant Filed as Exhibit 4.9
Date of Name of Warrant No. of Shares of Exercise Price -------------- Issuance Warrant Recipient No. Common Stock Expiration Date -------- ----------------- --- ------------ --------------- 9/30/99 Jerry L. Ruyan PL-10 30,000 $0.75 9/30/2004 10/31/99 Jerry L. Ruyan PL-11 30,000 $0.75 10/31/2004 11/30/99 Stephen D. King PL-12 30,000 $0.75 11/30/2004 11/30/99 Jerry L. Ruyan PL-13 30,000 $0.75 11/30/2004 12/31/99 Stephen D. King PL-14 30,000 $0.75 12/31/2004 12/31/99 Jerry L. Ruyan PL-15 30,000 $0.75 12/31/2004 1/31/2000 Stephen D. King PL-16 30,000 $0.75 1/31/2005 1/31/2000 Jerry L. Ruyan PL-17 30,000 $0.75 1/31/2005 2/29/2000 Stephen D. King PL-18 30,000 $0.75 2/29/2005 2/29/2000 Jerry L. Ruyan PL-19 30,000 $0.75 2/29/2005
EX-4.11 11 EXHIBIT 4.11 1 Exhibit 4.11 The Warrant and the securities issuable upon exercise of this Warrant (the "Securities") have not been registered under the Securities Act of 1933 (the "Securities Act") or under any state securities or Blue Sky laws ("Blue Sky Laws"). No transfer, sale, assignment, pledge, hypothecation or other disposition of this Warrant or the Securities or any interest therein may be made except (a) pursuant to an effective registration statement under the Securities Act and any applicable Blue Sky Laws or (b) if the Company has been furnished with both an opinion of counsel for the holder, which opinion and counsel shall be reasonably satisfactory to the Company, to the effect that no registration is required because of the availability of an exemption from registration under the Securities Act and applicable Blue Sky Laws, and assurances that the transfer, sale, assignment, pledge, hypothecation or other disposition will be made only in compliance with the conditions of any such registration or exemption. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. GW-1 Bloomington, Minnesota , 1999 This certifies that, for value received, GABRIEL WISDOM, or his successors or assigns (the "Holder") is entitled to purchase from PopMail.com, inc. (the "Company") One Hundred Thirty Thousand (130,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock") at an exercise price of $1.80 per share (the "Exercise Price"), subject to adjustment as herein provided. This Warrant may be exercised by Holder at any time after the date hereof; provided that, Holder shall in no event have the right to exercise this Warrant or any portion thereof later than the third (3rd) anniversary of the date hereof. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which Holder consents and agrees: 2 a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. The Warrant may not be transferred, and the Shares underlying this Warrant may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to 3 be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while this Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if this Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrant) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrant as if the Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, 4 conveyance, lease or other transfer and the Holder had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to the Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. Redemption of Warrants a. Redemption Price. This Warrant may be redeemed at the option of the Company, at any time after the date hereof following a period of 20 consecutive trading days where the per share average closing bid price of the Common Stock exceeds $40.00, on notice as set forth in Section 5(b), and at a redemption price equal to $.01 per Share outstanding at the time of redemption. For purposes of this Section, the closing bid price of the Common Stock shall be determined by the closing bid price as reported by Nasdaq so long as the Common Stock is quoted on Nasdaq and, if the Common Stock is listed on a national securities exchange, shall be determined by the last reported sale price on the primary exchange on which the Common Stock is traded. b. Notice of Redemption. In the case of the redemption of this Warrant, the Company shall give notice of such redemption to the holder of this Warrant as hereinafter provided in this Section 5(b). Notice of redemption to the holder of thisWarrant shall be given by mailing by first-class mail a notice of such redemption not less than 30 days prior to the date fixed for redemption. Any notice which is given in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives the notice. Such notice shall specify the date fixed for redemption, the place of redemption and the redemption price of $.01 at which this Warrant is to be redeemed, and shall state that payment of the redemption price of this Warrant will be made on surrender of the Warrant at such place of redemption, and that if not exercised by the close of business on the date fixed for redemption, the exercise rights of this Warrant shall expire unless extended by the Company. Such notice shall also state the current Exercise Price and the date on which the right to exercise this Warrant will expire unless extended by the Company. c. Payment of Warrants on Redemption; Deposit of Redemption Price. If notice of redemption shall have been given as provided in Section 5(b), the redemption price of $.01 per outstanding Share shall, unless this Warrant is theretofore exercised pursuant to the terms hereof, become due and payable on the date and at the place stated in such notice. On and after such date of redemption, the exercise rights of this Warrant shall expire. On presentation and surrender of this Warrant at such place of payment in such notice specified, this Warrant shall be paid and redeemed at the redemption price of $.01 per outstanding Share. 5 6. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 7. Registration Rights. a. Piggyback Registration Rights. If the Company, after the date hereof and prior to the third (3rd) anniversary of the date hereof, shall file a registration statement with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended, for the purpose of registering shares of Common Stock for sale to the public, the Company shall give to the Holder at least twenty (20) days advance written notice of its intention to file such registration statement and Holder shall have the right to have included in such registration statement such number of the Shares as it shall designate to the Company within ten (10) days after the date of such notice, provided that the number of Shares to be included in such registration statement, when added to all the other shares to be included therein, does not exceed the number of shares which the Company and its underwriters, if any, reasonably fix for inclusion. The Holder shall furnish the Company with such information as may be required in connection with such registration statement and will cooperate to cause such registration to become effective at the earliest practicable time. If the shares to which such registration relates are to be sold in an underwritten offering, the Holder, as a condition to the inclusion of the shares in the registration statement, shall agree that its Shares will be sold only as a part of such underwritten offering and at the price and upon the terms fixed by the Company and its underwriters, subject to the right of the Holder to withdraw the Shares therefrom. b. Demand Registration Rights. On a one-time basis only,during the term of this Warrant, upon request by the Holder or Holders of a majority in interest of this Warrant, and of any Shares, the Company will promptly take all necessary steps to register or qualify, under the 1933 Act and the securities laws of such states as the holders may reasonably request, such number of Shares issued and to be issued upon conversion of the Warrants requested by such holders in their request to the Company. The Company shall keep effective and maintain any registration, qualification, notification, or approval specified in this section for such period as may be reasonably necessary for such Holder or Holders of this Warrant and/or such Shares to dispose thereof and from time to time shall amend or supplement the prospectus used in connection therewith to the extent necessary in order to comply with applicable law. 8. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 9. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holder. 6 10. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By -------------------------------------- Its ------------------------------------- 7 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, , the address for whom is set forth below the signature of the undersigned: Dated: ----------------------- ----------------------------------- (Signature) ----------------------------------- ----------------------------------- (Address) * * * ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints attorney, to transfer said right on the books of with full power of substitution in the premises. Dated: ----------------------- ----------------------------------- (Signature) ----------------------------------- ----------------------------------- (Address) EX-4.12 12 EXHIBIT 4.12 1 Exhibit 4.12 The Warrant and the securities issuable upon exercise of this Warrant (the "Securities") have not been registered under the Securities Act of 1933 (the "Securities Act") or under any state securities or Blue Sky laws ("Blue Sky Laws"). No transfer, sale, assignment, pledge, hypothecation or other disposition of this Warrant or the Securities or any interest therein may be made except (a) pursuant to an effective registration statement under the Securities Act and any applicable Blue Sky Laws or (b) if the Company has been furnished with both an opinion of counsel for the holder, which opinion and counsel shall be reasonably satisfactory to the Company, to the effect that no registration is required because of the availability of an exemption from registration under the Securities Act and applicable Blue Sky Laws, and assurances that the transfer, sale, assignment, pledge, hypothecation or other disposition will be made only in compliance with the conditions of any such registration or exemption. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. GW-2 Bloomington, Minnesota September 28, 1999 This certifies that, for value received, GABRIEL WISDOM, or his successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") Seventy Thousand (70,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock") at an exercise price of $3.00 per share (the "Exercise Price"), subject to adjustment as herein provided. This Warrant may be exercised by Holder at any time after the two (2) year anniversary of the date hereof; provided that, Holder may exercise this Warrant prior to such two (2) year anniversary with the prior written consent of the Company or upon a Change of Control (as hereinafter defined). Holder shall in no event have the right to exercise this Warrant or any portion thereof later than the fifth (5th) anniversary of the date hereof, at which time this Warrant shall expire. For the purposes of this Warrant, "Change of Control" shall mean the sale in one or more private transactions of fifty percent (50%) or more of the outstanding shares of the Company's Common Stock. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. 1 2 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which Holder consents and agrees: a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. The Warrant may not be transferred, and the Shares underlying this Warrant may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing 3 Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while this Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if the Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrant) to 4 the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrant as if the Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Holder had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to the Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 6. Registration Rights. a. Piggyback Registration Rights. If the Company, at any time after eighteen months from the issuance of this Warrant, shall propose to file any registration statement (other than any registration on Form S-4, S-8 or any other similarly inappropriate form, or any successor forms thereto) under the 1933 Act covering a public offering of the Company's Common Stock, it will notify the Holder hereof at least thirty (30) days prior to each such filing and will use its best efforts to include in the Registration Statement (to the extent permitted by applicable regulation), the Common Stock purchased or purchasable by the Holder upon the exercise of the Warrant to the extent requested by the Holder hereof within twenty (20) days after receipt of notice of such filing (which request shall specify the interest in this Warrant or the Warrant Shares intended to be sold or disposed of by such Holder and describe the nature of any proposed sale or other disposition thereof); provided, however, that if a greater number of Warrants and Warrant Shares is offered for participation in the proposed offering than in the reasonable opinion of the managing underwriter of the proposed offering can be accommodated without adversely affecting the proposed offering, then the amount of Warrant and Warrant Shares proposed to be offered by such Holders for registration, as well as the number of securities of any other selling shareholders participating in the registration, shall be proportionately reduced to a number deemed satisfactory by the managing underwriter. The Company shall bear all expenses and fees incurred in connection with the preparation, filing, and amendment of the Registration Statement with the Commission, except that the Holder shall pay all fees, disbursements and expenses of any counsel or expert retained by the Holder and all underwriting discounts and commissions, filing fees and any transfer or other taxes relating to the Shares included in the Registration Statement. The Holder of this Warrant agrees to cooperate with the Company in the preparation and filing of any Registration Statement, and in the furnishing of information concerning the Holder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt under the 1933 Act as to any proposed distribution. 5 b. Demand Registration Rights. On a one-time basis only, during the three year period commencing two years after the date of this Warrant, upon request by the Holder and of any Shares, the Company will promptly take all necessary steps to register or qualify, under the 1933 Act and the securities laws of such states as the holders may reasonably request, such number of Shares issued and to be issued upon conversion of the Warrants requested by such holders in their request to the Company. The Company shall keep effective and maintain any registration, qualification, notification, or approval specified in this section for such period as may be reasonably necessary for the Holder of the Warrant and/or the Shares to dispose thereof and from time to time shall amend or supplement the prospectus used in connection therewith to the extent necessary in order to comply with applicable law. 7. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 8. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holder. 9. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By -------------------------------------- Its ------------------------------------- 6 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, , the address for whom is set forth below the signature of the undersigned: Dated: ---------------------------- ----------------------------------- (Signature) ----------------------------------- ----------------------------------- (Address) * * * ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints attorney, to transfer said right on the books of with full power of substitution in the premises. Dated: ----------------------- ---------------------------------------- (Signature) ---------------------------------------- ---------------------------------------- (Address) EX-4.13 13 EXHIBIT 4.13 1 EXHIBIT 4.13 THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH REGISTRATION OR EXEMPTION. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. MB-1 Bloomington, Minnesota October 12, 1999 This certifies that, for value received, MICHAEL BIRD, or his successors or assigns (AHolder@) is entitled to purchase from PopMail.com, inc. (the "Company") Fifteen Thousand (15,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock") at any time and from time to time from the date hereof until October 12, 2004, at an exercise price of $2.00 per share (the "Exercise price"), subject to adjustment as herein provided. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which each Holder consents and agrees: a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. 2 b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. Prior to making any disposition of this Warrant or of any of the Shares underlying this Warrant, the Holder will give written notice to the Company describing the manner of any such proposed disposition. The Warrant may not be transferred, and the Shares may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall 2 3 amount to not less than $.05 per share. b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while any Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that each Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if such Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrants) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Warrant Holders had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to each Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 3 4 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 6. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 7. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holders. 8. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By: ------------------------------ Its: -------------------------- 4 5 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, , the address for whom is set forth below the signature of the undersigned: Dated: -------------------------- ------------------------------------ [Signature] ------------------------------------ [Printed] ------------------------------------ ------------------------------------ [Address] * * * ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints attorney, to transfer said right on the books of with full power of substitution in the premises. Dated: -------------------------- ------------------------------------ [Signature] ------------------------------------ [Printed] ------------------------------------ ------------------------------------ [Address] 5 EX-4.14 14 EXHIBIT 4.14 1 EXHIBIT 4.14 THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH REGISTRATION OR EXEMPTION. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. GFP-14 Bloomington, Minnesota December 2, 1999 This certifies that, for value received, GULFSTREAM FINANCIAL PARTNERS, or its successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") Five Hundred Thousand (500,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock"), at any time and from time to time from the date hereof until December 2, 2004 (the "Warrant Exercise Period"), at an exercise price of $1.50 per share (the "Exercise Price"), subject to adjustment as herein provided. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which each Holder consents and agrees: a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. 2 b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. Prior to making any disposition of this Warrant or of any of the Shares underlying this Warrant, the Holder will give written notice to the Company describing the manner of any such proposed disposition. The Warrant may not be transferred, and the Shares may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act, and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. 2 3 b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while any Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that each Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if such Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrants) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Warrant Holders had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to each Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 3 4 6. Registration Rights. If at any time during the Warrant Exercise Period, the Company shall propose to file any registration statement (other than any registration on Form S-4, S-8 or any other similarly inappropriate form, or any successor forms thereto) (the "Registration Statement") under the 1933 Act covering a public offering of the Company's Common Stock, it will notify the Holder hereof at least thirty (30) days prior to each such filing and will use its best efforts to include in the Registration Statement (to the extent permitted by applicable regulation), the Common Stock purchased or purchasable by the Holder upon the exercise of the Warrant to the extent requested by the Holder hereof within twenty (20) days after receipt of notice of such filing (which request shall specify the interest in this Warrant or the Shares intended to be sold or disposed of by such Holder and describe the nature of any proposed sale or other disposition thereof); provided, however, that if a greater number of Common Stock is offered for participation in the proposed offering than in the reasonable opinion of the managing underwriter of the proposed offering can be accommodated without adversely affecting the proposed offering, then the amount of Shares proposed to be offered by such Holders for registration, as well as the number of securities of any other selling shareholders participating in the registration, shall be proportionately reduced to a number deemed satisfactory by the managing underwriter. The Company shall bear all expenses and fees incurred in connection with the preparation, filing, and amendment of the Registration Statement with the Commission, except that the Holder shall pay all fees, disbursements and expenses of any counsel or expert retained by the Holder and all underwriting discounts and commissions, filing fees and any transfer or other taxes relating to the Shares included in the Registration Statement. The Holder of this Warrant agrees to cooperate with the Company in the preparation and filing of any Registration Statement, and in the furnishing of information concerning the Holder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt under the 1933 Act as to any proposed distribution. 7. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 8. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holders. 9. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By:___________________________________ Its: ________________________________ 4 5 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ____________________ of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $_____________ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, _______________________________, the address for whom is set forth below the signature of the undersigned: Dated: ____________________ _______________________________________ (Signature) _______________________________________ _______________________________________ (Address) ~ ~ ~ ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto _____________________________________ the right to purchase shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints ____________________ attorney, to transfer said right on the books of _________________ with full power of substitution in the premises. Dated: ____________________ _______________________________________ (Signature) _______________________________________ _______________________________________ (Address) 5 EX-4.15 15 EXHIBIT 4.15 1 EXHIBIT 4.15 SCHEDULE OF WARRANTS ISSUED (GFP SERIES)
NUMBER OF DATE OF WARRANT SHARES OF EXERCISE ISSUANCE NAME OF WARRANT RECIPIENT NO. COMMON STOCK PRICE - - -------- ------------------------- ------- ------------ -------- 11/3/99 Gulfstream Financial Partners GFP-13 250,000 $ 2.00 2401 PGA Boulevard, Suite 190 Palm Beach Gardens, FL 33410 11/3/99 Blake Capital Partners, LLC GFP-14 250,000 $ 2.00 12/2/99 Gulfstream Financial Partners GFP-14(2) 500,000 $ 1.50 12/1/99 Henry Fong, Jr. GFP-15a 50,000 $ 1.625 12/1/99 Lauren Fong GFP-15b 50,000 $ 1.625 12/1/99 Benjamin Private School GFP-15c 50,000 $ 1.625 Fed I.D.: 59-1536502 12/1/99 Barry Hollander GFP-15d 50,000 $ 1.625 12/1/99 Gulfstream Financial Partners, LLC GFP-15e 150,000 $ 1.625 12/2/99 Blake Capital Partners BCP-1 500,000 $ 1.50
EX-4.16 16 EXHIBIT 4.16 1 EXHIBIT 4.16 The Warrant and the securities issuable upon exercise of this Warrant (the "Securities") have not been registered under the Securities Act of 1933 (the "Securities Act") or under any state securities or Blue Sky laws ("B1ue Sky Laws"). No transfer, sale, assignment, pledge, hypothecation or other disposition of this Warrant or the Securities or any interest therein may be made except (a) pursuant to an effective registration statement under the Securities Act and any applicable Blue Sky Laws or (b) if the Company has been furnished with both an opinion of counsel for the holder, which opinion and counsel shall be reasonably satisfactory to the Company, to the effect that no registration is required because of the availability of an exemption from registration under the Securities Act and applicable Blue, Sky Laws, and assurances that the transfer, sale, assignment, pledge, hypothecation or other disposition will be made only in compliance with the conditions of any such registration or exemption. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. Warrant No. December 1, 1999 Bloomington, Minnesota This certifies that, for value received, THE, HILLSTREET FUND, L.P., or its successors or assigns ("Holder") is entitled to purchase from Popmail.com, Inc., a Minnesota corporation, (tile "Company") Two Hundred Thousand ($200,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock"), at any time after the date hereof and prior to December 1, 2004 (the "Warrant Exercise Period"), at an exercise price of $1.34 per share (tile "Exercise Price"), subject to adjustment as herein provided. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall leave been surrendered and payment for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require 2 that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which each Holder, consents and agrees: (a) Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. (b) This Warrant may not be exercised and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. (c) The Warrant may not be transferred, and the Shares may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. (d) Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: (a) Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock 3 Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. (b) Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (c) Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days there after shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (d) Effect of Reorganization, Reclassification, Merger, etc. If at any time while any Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that each Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if such Warrant had been exercised 4 immediately prior to such capital reorganization reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrants) to the end that the provisions set forth herein shall herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidate on, merger, sale, conveyance, lease or other transfer and the Warrant Holders had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to each Holder such shares of stock, securities, cash oi- property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 6. Registration Rights. (a) Piggyback Registration Rights. Provided that the Shares are not then included in a Current registration statement of the Company, if the Company, at any time before the fifth anniversary of the issuance of this Warrant, shall file a registration statement with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended, for the purpose of registering shares of Common stock for sale to the public, the Company shall give to the Holder at least twenty (20) days advance written notice of its intention to file such registration statement and Holder shall have the right to have included in such registration statement such number of the Shares as it shall designate to the Company within ten (10) days after the date of such notice, provided that the number of Shares to be included in such registration statement, when added to all the other shares to be included therein, does not exceed the number of shares which the Company and its underwriters, if any, reasonably fix for inclusion. If the number of Shares to be included in such registration statement is less than the total number of Shares which the Holder has requested to be included, then the Holder and other holders of shares of Common Stock or other securities of the Company entitled to include shares of Common Stock in such registration shall participate in the underwriting pro rata based upon the total number of shares of Common Stock requested to be registered by all of such holders. The Holder shall furnish the Company with such information as may be required in connection with such registration statement and will cooperate to cause such registration to become effective at the earliest practicable time. If the shares to which such registration relates are to be sold in an underwritten offering, the Holder, as a condition to the inclusion of the shares in the registration statement, shall agree that its Shares will be sold only as a part of such underwritten offering at the price and upon the terms fixed by the Company and its underwriters, subject to the right of the Holder to withdraw the Shares therefrom. 5 (b) Demand Registration Rights. On a one-time basis only, during the three year period commencing two years after the date of this Warrant, upon request by the Holder or Holders of a majority in interest of this Warrant, and any Shares, the Company will promptly take all necessary steps to register or qualify, under the 1933 Act and the securities laws of such states as the holder may reasonably request, such number of Shares issued and to be issued upon conversion of the Warrants and shares of common stock of the Company owned at such time by such holders pursuant to the conversion of that certain $2,000.000 Senior Convertible Note issued as of the date of this Warrant requested by such holders in their request to the Company. The Company shall keep effective and maintain any registration, qualification, notification, or approval specified in this section for such period as may be reasonably necessary for such Holder or Holders of this Warrant and/or such Shares to dispose thereof and from time to time shall amend or supplement the prospectus used in connection therewith to the extent necessary in order to comply with applicable law. 7. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 8. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the (Company agrees in writing and has obtained the written consent of the Holders. 9. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at its address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, Inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, Popmail.com, Inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. Popmail.com, Inc. /s/ Stephen D. King Stephen D. King Chairman of the Board 6 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of Common Stock of Popmail.com, Inc. (the "Shares") to which such Warrant relates and herewith makes payment of $ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to , the address for whom is set forth below the signature of the undersigned: Dated: -------------------------------------- (Signature) -------------------------------------- -------------------------------------- (Address) 7 ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of Common Stock of Popmail.com, Inc. to which the within Warrant relates and appoints attorneys, to transfer said right on the books of with full power of substitution in the premises. Dated: ------------------------- -------------------------------------- (Signature) -------------------------------------- -------------------------------------- (Address) EX-4.17 17 EXHIBIT 4.17 1 EXHIBIT 4.17 THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH REGISTRATION OR EXEMPTION. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. AB-1 Bloomington, Minnesota December 1, 1999 This certifies that, for value received, ANDREW BAUM, or his successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") Forty Thousand (40,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock") at any time and from time to time from the date hereof until December 1, 2004, at an exercise price of $2.00 per share (the "Exercise price"), subject to adjustment as herein provided. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. a. Exercise for Cash. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. b. Cashless Exercise. Upon receipt of a notice of cashless exercise, the Company shall deliver to the Holder (without payment by the Holder of any exercise price) that number of Shares that is equal to the quotient obtained by dividing (x) the value of the Warrant on 2 (hereinafter defined) for the Shares by (y) the Fair Market Value of one share of Common Stock. A notice of "cashless exercise" shall state the number of Shares as to which the Warrant is being exercised. "Fair Market Value" for purposes of this Section (b) shall mean the average of the Common Stock closing prices reported by the principal exchange on which the Common Stock is traded, or the last sale prices as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") National Market or SmallCap Market, as the case may be, for the ten (10) business days immediately preceding the Exercise Date or, in the event no public market shall exist for the Common Stock at the time of such cashless exercise, Fair Market Value shall mean the fair market value of the Common Stock as the same shall be determined in the good faith discretion of the Board of Directors, after full consideration of all factors then deemed relevant by such Board in establishing such value, including by way of illustration and not limitation, the per share purchase price of Common Stock or per security convertible into one share of Common Stock of the most recent sale of shares of Common Stock or securities convertible into Common Stock by the Company after the date hereof all as evidenced by the vote of a majority of the directors then in office. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which each Holder consents and agrees: a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. Prior to making any disposition of this Warrant or of any of the Shares underlying this Warrant, the Holder will give written notice to the Company describing the manner of any such proposed disposition. The Warrant may not be transferred, and the Shares may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all 2 3 times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while any Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all 3 4 of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that each Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if such Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrants) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Warrant Holders had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to each Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 6. Piggyback Registration Rights. If at any time prior to December 1, 2004, the Company shall propose to file any registration statement (other than any registration on Form S-4, S-8 or any other similarly inappropriate form, or any successor forms thereto) (the "Registration Statement") under the 1933 Act covering a public offering of the Company's Common Stock, it will notify the Holder hereof at least thirty (30) days prior to each such filing and will use its best efforts to include in the Registration Statement (to the extent permitted by applicable regulation), the Common Stock purchased or purchasable by the Holder upon the exercise of the Warrant to the extent requested by the Holder hereof within twenty (20) days after receipt of notice of such filing (which request shall specify the interest in this Warrant or the Shares intended to be sold or disposed of by such Holder and describe the nature of any proposed sale or other disposition thereof); provided, however, that if a greater number of Shares is offered for participation in the proposed offering than in the reasonable opinion of the managing underwriter of the proposed offering can be accommodated without adversely affecting the proposed offering, then the amount of Shares proposed to be offered by such Holders for registration, as well as the number of securities of any other selling shareholders participating in the registration, shall be proportionately reduced to a number deemed satisfactory by the managing underwriter. The Company shall bear all expenses and fees incurred in connection with the preparation, filing, and amendment of the Registration Statement with the Commission, except that the Holder shall pay all fees, disbursements and expenses of any counsel or expert retained by the Holder and all underwriting discounts and commissions, filing fees and any transfer or other taxes relating to the Shares included in the Registration Statement. The 4 5 Holder of this Warrant agrees to cooperate with the Company in the preparation and filing of any Registration Statement, and in the furnishing of information concerning the Holder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt under the 1933 Act as to any proposed distribution. 7. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 8. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holders. 9. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By: -------------------------------- Its: ---------------------------- 5 6 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, , the address for whom is set forth below the signature of the undersigned: Dated: ------------------------- ------------------------------------ [Signature] ------------------------------------ [Printed] ------------------------------------ ------------------------------------ [Address] * * * ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints attorney, to transfer said right on the books of with full power of substitution in the premises. Dated: ------------------------- ------------------------------------ [Signature] ------------------------------------ [Printed] ------------------------------------ ------------------------------------ [Address] 6 EX-4.18 18 EXHIBIT 4.18 1 EXHIBIT 4.18 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.17.
NUMBER OF DATE OF WARRANT SHARES OF ISSUANCE NAME OF WARRANT RECIPIENT NO. COMMON STOCK - - -------- ------------------------- ------- ------------ 12/1/99 Metropolitan Capital Partners, Inc. AB-2 10,000 12/1/99 Ramel Shorte AB-3 10,000
EX-4.19 19 EXHIBIT 4.19 1 EXHIBIT 4.19 THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH REGISTRATION OR EXEMPTION. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. MCP-1 Bloomington, Minnesota October 12, 1999 This certifies that, for value received, METROPOLITAN CAPITAL PARTNERS, INC., or its successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") Six Hundred Thousand (600,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock"), at any time during the period (the "Warrant Exercise Period") and at the exercise prices (the "Exercise Prices") set forth in Section 1, subject to adjustment as herein provided. This Warrant is being issued in connection with that certain Financial Public Relations Agreement (the "Agreement") between the Company and Metropolitan Capital Partners, Inc. dated October 12, 1999, and is subject to the following provisions, terms and conditions: 1. Vesting of Warrant Shares. Holder's rights to purchase the Shares under this Warrant are exercisable only to the extent that all, or any portion thereof, has vested in the Holder. The Warrant shall vest in five lots, as provided below, until fully vested: (a) Lot 1. Warrants to purchase 100,000 Shares at an Exercise Price of $2.00 per Share shall vest when the closing price per share of the Company's Common Stock is at or above $2.00 for ten (10) consecutive trading days. (b) Lot 2. Warrants to purchase 100,000 Shares at an Exercise Price of $4.00 per Share shall vest when the closing price per share of the Company's Common Stock is at or above $4.00 for ten (10) consecutive trading days. (c) Lot 3. Warrants to purchase 100,000 Shares at an Exercise Price of $5.00 per Share shall vest when the closing price per share of the Company's Common Stock is at or above $5.00 for ten (10) consecutive trading days. (d) Lot 4. Warrants to purchase 100,000 Shares at an Exercise Price of $6.00 per Share shall vest when the closing price per share of the Company's Common Stock is at or above $6.00 for ten (10) consecutive trading days. (e) Lot 5. Warrants to purchase 200,000 Shares at an Exercise Price of $8.00 per Share shall vest when the closing price per share of the Company's Common Stock is at or above $8.00 for ten (10) consecutive trading days. 2 Notwithstanding anything to the contrary contained herein, if (i) the lots described in subsections (a), (b) and (c), above, have not vested by July 31, 2000, and (ii) the lots described in subsections (d) and (e), above, have not vested by December 31, 2000, then all rights with respect to such lots shall lapse. To the extent vested, this Warrant may be exercised, in part or in full, at any time prior to October 12, 2004. 2. Exercise of Warrant. a. Exercise for Cash. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. b. Cashless Exercise. Upon receipt of a notice of cashless exercise, the Company shall deliver to the Holder (without payment by the Holder of any exercise price) that number of Shares that is equal to the quotient obtained by dividing (x) the value of the Warrant on the date that the Warrant shall have been surrendered (determined by subtracting the aggregate exercise price for the Shares in effect on the Exercise Date from the aggregate Fair Market Value (hereinafter defined) for the Shares by (y) the Fair Market Value of one share of Common Stock. A notice of "cashless exercise" shall state the number of Shares as to which the Warrant is being exercised. " Fair Market Value" for purposes of this Section (b) shall mean the average of the Common Stock closing prices reported by the principal exchange on which the Common Stock is traded, or the last sale prices as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") National Market or SmallCap Market, as the case may be, for the ten (10) business days immediately preceding the Exercise Date or, in the event no public market shall exist for the Common Stock at the time of such cashless exercise, Fair Market Value shall mean the fair market value of the Common Stock as the same shall be determined in the good faith discretion of the Board of Directors, after full consideration of all factors then deemed relevant by such Board in establishing such value, including by way of illustration and not limitation, the per share purchase price of Common Stock or per security convertible into one share of Common Stock of the most recent sale of shares of Common Stock or securities convertible into Common Stock by the Company after the date hereof all as evidenced by the vote of a majority of the directors then in office. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to 2 3 which each Holder consents and agrees: a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. Prior to making any disposition of this Warrant or of any of the Shares underlying this Warrant, the Holder will give written notice to the Company describing the manner of any such proposed disposition. The Warrant may not be transferred, and the Shares may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, 3 4 multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while any Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that each Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if such Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrants) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Warrant Holders had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. 4 5 The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to each Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 6. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 7. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holders. 8. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By:_____________________________________ Its:__________________________________ 5 6 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ____________________ of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $_____________ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, _____________________________, the address for whom is set forth below the signature of the undersigned: Dated: ____________________ ____________________________________ [Signature] ____________________________________ [Printed] ____________________________________ ____________________________________ [Address] ~ ~ ~ ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto _____________________________________ the right to purchase shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints ____________________ attorney, to transfer said right on the books of _________________ with full power of substitution in the premises. Dated: ____________________ ____________________________________ [Signature] ____________________________________ [Printed] ____________________________________ ____________________________________ [Address] 6 EX-4.20 20 EXHIBIT 4.20 1 EXHIBIT 4.20 THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH REGISTRATION OR EXEMPTION. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. MCP-2 Bloomington, Minnesota December 1, 1999 This certifies that, for value received, METROPOLITAN CAPITAL PARTNERS, INC., or its successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") One Hundred Fifty Thousand (150,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock") at any time and from time to time from the date hereof until December 1, 2004, at an exercise price of $1.00 per share (the "Exercise Price"), subject to adjustment as herein provided. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. a. Exercise for Cash. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. b. Cashless Exercise. Upon receipt of a notice of cashless exercise, the Company shall deliver to the Holder (without payment by the Holder of any exercise price) that number of Shares that is equal to the quotient obtained by dividing (x) the value of the Warrant on the date that the Warrant shall have been surrendered (determined by subtracting the aggregate exercise price for the Shares in effect on the Exercise Date from the aggregate Fair Market Value (hereinafter defined) for the Shares by (y) the Fair Market Value of one share of Common Stock. A 2 notice of "cashless exercise" shall state the number of Shares as to which the Warrant is being exercised. "Fair Market Value" for purposes of this Section (b) shall mean the average of the Common Stock closing prices reported by the principal exchange on which the Common Stock is traded, or the last sale prices as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") National Market or SmallCap Market, as the case may be, for the ten (10) business days immediately preceding the Exercise Date or, in the event no public market shall exist for the Common Stock at the time of such cashless exercise, Fair Market Value shall mean the fair market value of the Common Stock as the same shall be determined in the good faith discretion of the Board of Directors, after full consideration of all factors then deemed relevant by such Board in establishing such value, including by way of illustration and not limitation, the per share purchase price of Common Stock or per security convertible into one share of Common Stock of the most recent sale of shares of Common Stock or securities convertible into Common Stock by the Company after the date hereof all as evidenced by the vote of a majority of the directors then in office. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which each Holder consents and agrees: a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. Prior to making any disposition of this Warrant or of any of the Shares underlying this Warrant, the Holder will give written notice to the Company describing the manner of any such proposed disposition. The Warrant may not be transferred, and the Shares may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within 2 3 which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while any Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in 3 4 exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that each Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if such Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrants) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Warrant Holders had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to each Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 6. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 7. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holders. 8. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By: -------------------------------- Its: ------------------------------- 4 5 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, , the address for whom is set forth below the signature of the undersigned: Dated: --------------------------- ----------------------------------- [Signature] ----------------------------------- [Printed] ----------------------------------- ----------------------------------- [Address] * * * ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints attorney, to transfer said right on the books of with full power of substitution in the premises. Dated: --------------------- ----------------------------------- [Signature] ----------------------------------- [Printed] ----------------------------------- ----------------------------------- [Address] 5 EX-4.21 21 EXHIBIT 4.21 1 EXHIBIT 4.21 THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH REGISTRATION OR EXEMPTION. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. WT-1 Bloomington, Minnesota December 1, 1999 This certifies that, for value received, WAYNE L. TEIDGE, or his successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") Twenty Thousand (20,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock"), at any time and from time to time from the date hereof until December 1, 2004 (the "Warrant Exercise Period"), at an exercise price of $1.625 per share (the "Exercise Price"), subject to adjustment as herein provided. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrant. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of Common Stock), by the surrender of this Warrant (properly endorsed, if required, at the Company's principal office in Bloomington, Minnesota, or such other office or agency of the Company as the Company may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company at any time within the period above named), and upon payment to it by certified check, bank draft or cash of the purchase price for such Shares. The Company agrees that the Shares so purchased shall have and are deemed to be issued to the Holder as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Shares as aforesaid. Certificates for the Shares of Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time. The Company may require that any such new Warrant or any certificate for Shares purchased upon the exercise hereof bear a legend substantially similar to that which is contained on the face of this Warrant. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which each Holder consents and agrees: a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. 2 b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. c. Prior to making any disposition of this Warrant or of any of the Shares underlying this Warrant, the Holder will give written notice to the Company describing the manner of any such proposed disposition. The Warrant may not be transferred, and the Shares may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act, and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. 2 3 b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while any Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that each Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if such Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrants) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Warrant Holders had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to each Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 3 4 6. Registration Rights. If at any time during the Warrant Exercise Period, the Company shall propose to file any registration statement (other than any registration on Form S-4, S-8 or any other similarly inappropriate form, or any successor forms thereto) (the "Registration Statement") under the 1933 Act covering a public offering of the Company's Common Stock, it will notify the Holder hereof at least thirty (30) days prior to each such filing and will use its best efforts to include in the Registration Statement (to the extent permitted by applicable regulation), the Common Stock purchased or purchasable by the Holder upon the exercise of the Warrant to the extent requested by the Holder hereof within twenty (20) days after receipt of notice of such filing (which request shall specify the interest in this Warrant or the Shares intended to be sold or disposed of by such Holder and describe the nature of any proposed sale or other disposition thereof); provided, however, that if a greater number of Common Stock is offered for participation in the proposed offering than in the reasonable opinion of the managing underwriter of the proposed offering can be accommodated without adversely affecting the proposed offering, then the amount of Shares proposed to be offered by such Holders for registration, as well as the number of securities of any other selling shareholders participating in the registration, shall be proportionately reduced to a number deemed satisfactory by the managing underwriter. The Company shall bear all expenses and fees incurred in connection with the preparation, filing, and amendment of the Registration Statement with the Commission, except that the Holder shall pay all fees, disbursements and expenses of any counsel or expert retained by the Holder and all underwriting discounts and commissions, filing fees and any transfer or other taxes relating to the Shares included in the Registration Statement. The Holder of this Warrant agrees to cooperate with the Company in the preparation and filing of any Registration Statement, and in the furnishing of information concerning the Holder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt under the 1933 Act as to any proposed distribution. 7. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 8. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holders. 9. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By: s/ Thomas W. Orr Its: CFO 4 5 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, , the address for whom is set forth below the signature of the undersigned: Dated: ----------------------- ----------------------------------- (Signature) ----------------------------------- ----------------------------------- (Address) * * * ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the right to purchase shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints attorney, to transfer said right on the books of with full power of substitution in the premises. Dated: ----------------------- ----------------------------------- (Signature) ----------------------------------- ----------------------------------- (Address) 5 EX-4.22 22 EXHIBIT 4.22 1 EXHIBIT 4.22 THE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS ("BLUE SKY LAWS"). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT OR THE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE BLUE SKY LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH BOTH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT NO REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY LAWS, AND ASSURANCES THAT THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION WILL BE MADE ONLY IN COMPLIANCE WITH THE CONDITIONS OF ANY SUCH REGISTRATION OR EXEMPTION. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF POPMAIL.COM, INC. WARRANT NO. HT-1 Minneapolis, Minnesota December 6, 1999 This certifies that, for value received, HAL TAYLOR, or his successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") Eighty Thousand (80,000) fully paid and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par value (the "Common Stock") at an exercise price of $1.25 per share (the "Exercise Price"), subject to adjustment as herein provided. This Warrant may be exercised by Holder at any time, provided that Holder shall in no event have the right to exercise this Warrant or any portion thereof later than the fifth (5th) anniversary of the date hereof, at which time this Warrant shall expire. This Warrant is subject to the following provisions, terms and conditions: 1. Exercise of Warrants. The Exercise Price may be paid in cash or by check to the order of the Company, or any combination of cash or check, subject to adjustment as provided in Section 4 hereof. Upon surrender of the Warrant Certificate with the annexed Form of Election to Purchase duly executed, together with payment of the Exercise Price (as hereinafter defined) for the Shares purchased, at the Company's executive offices currently located at Suite 112, 4801 West 81st Street Bloomington, MN 55437, the registered Holder shall be entitled to receive a certificate or certificates for the Shares so purchased. The purchase rights represented by each Warrant Certificate are exercisable at the option of the Holder hereof, in whole or in part (but not as to fractional shares of the Common Stock). In the case of the purchase of less than all the Shares purchasable under any Warrant Certificate, the Company shall cancel said Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate of like tenor for the balance of the Shares purchasable thereunder. 2. Transferability of this Warrant. This Warrant is issued upon the following terms, to which Holder consents and agrees: a. Until this Warrant is transferred on the books of the Company, the Company will treat the Holder of this Warrant registered as such on the books of the Company as the absolute owner hereof for all purposes without being affected by any notice to the contrary. b. This Warrant may not be exercised, and this Warrant and the Shares underlying this Warrant shall not be transferable, except in compliance with all applicable state and federal securities laws, regulations and orders, and with all other applicable laws, regulations and orders. 1 2 c. The Warrant may not be transferred, and the Shares underlying this Warrant may not be transferred, without the Holder obtaining an opinion of counsel satisfactory in form and substance to the Company's counsel stating that the proposed transaction will not result in a prohibited transaction under the Securities Act of 1933, as amended ("Securities Act"), and applicable Blue Sky laws. By accepting this Warrant, the Holder agrees to act in accordance with any conditions reasonably imposed on such transfer by such opinion of counsel. d. Neither this issuance of this Warrant nor the issuance of the Shares underlying this Warrant have been registered under the Securities Act. 3. Certain Covenants of the Company. The Company covenants and agrees that all Shares which may be issued upon the exercise of the rights represented by this Warrant, upon issuance and full payment for the Shares so purchased, will be duly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue hereof, except those that may be created by or imposed upon the Holder or its property, and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such actions as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective purchase price per share of the Common Stock issuable pursuant to this Warrant. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved free of preemptive or other rights for the exclusive purpose of issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and number of Shares are subject to the following adjustments: a. Adjustment of Exercise Price for Stock Dividend, Stock Split or Stock Combination. In the event that (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into or exercisable for Common Stock ("Common Stock Equivalents") shall be paid by the Company, (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares, or (iii) the Company shall combine its outstanding shares of Common Stock, by reclassification or otherwise, then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (a) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (b) the total number of shares of Common Stock outstanding immediately after such event, and the resulting quotient shall be the adjusted Exercise Price per share. No adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than $.05 per share. b. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to this Section, the Holder shall thereafter 2 3 (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. c. Notice as to Adjustment. Upon any adjustment of the Exercise Price and any increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrant, then, and in each such case, the Company within thirty (30) days thereafter shall give written notice thereof, by first class mail, postage prepaid, addressed to each Holder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, and shall set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. d. Effect of Reorganization, Reclassification, Merger, etc. If at any time while this Warrant is outstanding there should be any capital reorganization of the capital stock of the Company (other than the issuance of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 4(a) hereof), or any consolidation or merger of the Company with another corporation, or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its property to any other corporation, which is effected in such a manner that the holders of Common Stock shall be entitled to receive cash, stock, securities, or assets with respect to or in exchange for Common Stock, then, as a part of such transaction, lawful provision shall be made so that Holder shall have the right thereafter to receive, upon the exercise hereof, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, which the Holder would have been entitled to receive upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer, if this Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer. In any such case, appropriate adjustments (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant (including the adjustment of the Exercise Price and the number of Shares issuable upon the exercise of the Warrant) to the end that the provisions set forth herein shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrant as if the Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Holder had carried out the terms of the exchange as provided for by such capital reorganization, consolidation or merger. The Company shall not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to the Holder such shares of stock, securities, cash or property as in accordance with the foregoing provisions such Holder shall be entitled to purchase. 3 4 5. No Rights as Stockholders. This Warrant shall not entitle the Holder as such to any voting rights or other rights as a stockholder of the Company. 6. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota. 7. Amendments and Waivers. The provisions of this Warrant may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given, unless the Company agrees in writing and has obtained the written consent of the Holder. 8. Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Holder shall be mailed, delivered, or telefaxed and confirmed to the Holder at his or her address set forth on the records of the Company; or if sent to the Company shall be mailed, delivered, or telefaxed and confirmed to PopMail.com, inc., 4801 West 81st Street, Suite 112, Bloomington, MN 55437 or to such other address as the Company or the Holder shall notify the other as provided in this Section. IN WITNESS WHEREOF, PopMail.com, inc. has caused this Warrant to be signed by its duly authorized officer in the date set forth above. POPMAIL.COM, INC. By Thomas W. Orr Its CFO 4 5 SUBSCRIPTION FORM To be signed only upon exercise of Warrant. The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ____________________ of the shares of Common Stock of PopMail.com, inc. (the "Shares") to which such Warrant relates and herewith makes payment of $_____________ therefor in cash, certified check or bank draft and requests that a certificate evidencing the Shares be delivered to, _______________________________, the address for whom is set forth below the signature of the undersigned: Dated: ____________________ ___________________________________________ (Signature) ___________________________________________ ___________________________________________ (Address) ~ ~ ~ ASSIGNMENT FORM To be signed only upon authorized transfer of Warrant. FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto _____________________________________ the right to purchase shares of Common Stock of PopMail.com, inc. to which the within Warrant relates and appoints ____________________ attorney, to transfer said right on the books of _________________ with full power of substitution in the premises. Dated: ____________________ ___________________________________________ (Signature) ___________________________________________ ___________________________________________ (Address) EX-4.23 23 EXHIBIT 4.23 1 EXHIBIT 4.23 VOID AFTER 3:30 P.M., MOUNTAIN TIME, ON THE EXPIRATION DATE WARRANT TO PURCHASE COMMON SHARES POPMAIL.COM, INC. Warrant No. EB-1 This is to Certify That, FOR VALUE RECEIVED, eBANKER USA.COM, INC., 1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203 ("Holder"), is entitled to purchase, subject to the provisions of this Warrant, from POPMAIL.COM, INC. ("Company"), a Minnesota corporation, at any time until 3:30 P.M., Mountain Time, on December 10, 2004 ("Expiration Date"), 121,875 Common Shares of the Company. Notwithstanding the foregoing, the Holder shall be required to exercise this Warrant during the thirty (30) days after the last trading day that the closing bid price of a Common Share exceeds $6.00 (as adjusted in the same manner that adjustments in the Exercise Price are made as provided herein) for twenty (20) consecutive trading days. If not exercised during such thirty (30) day period, the Expiration Date shall be the thirtieth day. The purchase price per Common Share shall initially be $2.00. The number of Common Shares to be received upon the exercise of this Warrant and the price to be paid for a Common Share may be adjusted from time to time as hereinafter set forth. The purchase price of a Common Share in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price." This Warrant is or may be one of a series of warrants identical in form issued by the Company to purchase Common Shares of the Company and the term "Warrants" as used herein means all such Warrants (including this Warrant). The Common Shares, as adjusted from time to time, underlying the Warrants are hereinafter sometimes referred to as "Warrant Shares" and include all Common Shares that have been issued upon the exercise of the Warrants and all unissued Common Shares underlying the Warrants. This Warrant is being issued in connection with that certain Loan Agreement between the Company and eBanker USA.Com, Inc. dated December 10, 1999 (the "Loan Agreement"). (A) VESTING OF WARRANT SHARES. Holder's rights to purchase the Warrant Shares hereunder are exercisable only to the extent that all, or any portion thereof, have vested in the Holder. The Warrant Shares shall vest on the vesting dates set forth below until the Warrant is fully vested, as set forth in the following schedule: (1) Warrants to purchase up to 89,375 Common Shares shall vest on the date hereof; and (2) Warrants to purchase up to 32,500 Common Shares shall vest upon the Company's election, pursuant to the Loan Agreement, to extend the date on which the outstanding principal balance of the Company's loan from eBanker USA.Com, Inc. is due. 2 Notwithstanding anything to the contrary contained herein, in the event that the Company does not elect to extend the date on which its loan from eBanker USA.Com, Inc. is due, that portion of the Warrant described in Paragraph (a)(2) shall lapse. (B) EXERCISE OF WARRANT. To the extent vested, this Warrant may be exercised in whole or in part at any time or from time to time until the Expiration Date or if the Expiration Date is a day on which banking institutions are authorized by law to close, then on the next succeeding day which shall not be such a day, by presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Common Shares specified in such Form, together with all federal and state taxes applicable upon such exercise. The Company agrees not to merge, reorganize or take any action that would terminate this Warrant unless provisions are made as part of such merger, reorganization or other action which would provide the holders of this Warrant with an equivalent of this Warrant as specified in Section (i) hereof. The Company agrees to provide notice to the Holder that any tender offer is being made for the Company's Common Shares no later than three business days after the day the Company becomes aware that any tender offer is being made for outstanding Common Shares of the Company. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Common Shares purchasable hereunder. Upon receipt by the Company of this Warrant at the office of the Company or at the office of the Company's stock transfer agent, in proper form for exercise and accompanied by the Purchase Form and the Exercise Price, the Holder shall be deemed to be the holder of record of the Common Shares issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Common Shares shall not then be actually delivered to the Holder. (C) RESERVATION OF SHARES. The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Warrant such number of Common Shares as shall be required for issuance or delivery upon exercise of this Warrant. (D) FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a Common Share called for upon any exercise hereof, the Company shall, upon receipt by the Company or the Company's stock transfer agent of the Exercise Price on such fractional share, pay to the Holder an amount in cash equal to such fraction multiplied by the current value of such fractional share, determined as follows: (1) If the Common Shares are listed on a national securities exchange or a foreign exchange, are admitted to unlisted trading privileges on such an exchange, or are listed for trading on a trading system of the National Association of Securities Dealers, Inc. ("NASD") such as The Nasdaq SmallCap Market ("SCM") or the Nasdaq National Market ("NNM") or the OTC Bulletin Board, then the current value shall be the last reported sale price of the Common Shares on such an exchange or system on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average of the 2 3 closing bid prices for the Common Shares for such day on such exchange or such system shall be used; or (2) If the Common Shares are not so listed on such exchange or system or admitted to unlisted trading privileges, the current value shall be the average of the last reported bid prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Shares are not so listed or admitted to unlisted trading privileges and if bid prices are not so reported, the current value shall be an amount, not less than book value, determined in such reasonable manner as may be prescribed by the board of directors of the Company. (E) EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the Holder thereof to purchase (under the same terms and conditions as provided by this Warrant) in the aggregate the same number of Common Shares purchasable hereunder. This Warrant may not be sold, transferred, assigned, or hypothecated except in compliance with federal and state securities laws. Any transfer or assignment shall be made by surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and with funds sufficient to pay any transfer tax; whereupon the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any warrants issued in substitution for or replacement of this Warrant, or into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Subject to such right of indemnification, any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. (F) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (G) ADJUSTMENT PROVISIONS. (1) Adjustments of the Exercise Price. 3 4 (A) If the Company subdivides its outstanding Common Shares into a greater number of Common Shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced. Conversely, if the Company combines its outstanding Common Shares into a lesser number of Common Shares, the Exercise Price in effect immediately prior to such combination shall be proportionally increased. In case of a subdivision or combination, the adjustment of the Exercise Price shall be made as of the effective date of the applicable event. A distribution on Common Shares, including a distribution of Convertible Securities, to shareholders of the Company on a pro rata basis shall be considered a subdivision of Common Shares for the purposes of this subsection (1)(A) of this Section, except that the adjustment will be made as of the record date for such distribution and any such distribution of Convertible Securities shall be deemed to be a distribution of the Common Shares underlying such Convertible Securities. (B) If the Company shall at any time distribute or cause to be distributed to its shareholders, on a pro rata basis, cash, assets, or securities of any entity other than the Company, then the Exercise Price in effect immediately prior to such distribution shall automatically be reduced by an amount determined by dividing (x) the amount (if cash) or the value (if assets or securities) of the holders' of Warrants (as such term is defined in the first paragraph hereof) pro rata share of such distribution determined assuming that all holders of Warrants had exercised their Warrants on the day prior to such distribution, by (y) the number of Common Shares issuable upon the exercise of Warrants (as such term is defined in the first paragraph hereof) by the holders thereof on the day prior to such distribution. (C) If the Company defaults in making any payment required pursuant to a promissory note dated December 10, 1999, in the amount of $325,000 from the Company to eBanker USA.Com, Inc., the Exercise Price shall be reduced to $0.01. (3) No Adjustment for Small Amounts. Anything in this Section (f) to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Exercise Price unless and until the net effect of one or more adjustments, determined as above provided, shall have required a change of the Exercise Price by at least one cent, but when the cumulative net effect of more than one adjustment so determined shall be to change the actual Exercise Price by at least one cent, such change in the Exercise Price shall thereupon be given effect. (4) Number of Shares Adjusted. Upon any adjustment of the Exercise Price pursuant to subsection (1)(A) or (B) of this Section, the Holder of this Warrant shall thereafter (until another such adjustment) be entitled to purchase, at the new Exercise Price, the number of Common Shares, calculated to the nearest full share, obtained by multiplying the number of Common Shares initially issuable upon exercise of this Warrant by the Exercise 4 5 Price specified in the first paragraph hereof and dividing the product so obtained by the new Exercise Price. (5) Definitions. (A) Whenever reference is made in this Section (f) to the distribution of Common Shares, the term "Common Shares" shall mean the Common Shares of the Company authorized as of the date hereof and any other class of stock ranking on a parity with such Common Shares. However, subject to the provisions of Section (i) hereof, Common Shares issuable upon exercise hereof shall include only Common Shares of the class designated as Common Shares of the Company as of the date hereof. (B) Whenever reference is made in this Section (f) to the distribution of Convertible Securities, the term "Convertible Securities" shall mean options or warrants or rights for the purchase of Common Shares of the Company or for the purchase of any stock or other securities convertible into or exchangeable for Common Shares of the Company. (6) Determination of Date of Issue. In case the Company shall take a record of the holders of Common Shares for the purpose of entitling them to receive a dividend or other distribution payable in Common Shares or in Convertible Securities, then such record date shall be deemed to be the date of the issue of the Common Shares deemed to have been issued upon the declaration of such dividend or the making of such other distribution, as the case may be. (7) Treasury Shares. For the purpose of this Section (f), Common Shares at any relevant time owned or held by, or for the account of, the Company shall not be deemed outstanding. (H) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of Section (f) hereof, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office, and with its stock transfer and warrant agent, if any, an officer's certificate showing the adjusted Exercise Price determined as herein provided and setting forth in reasonable detail the facts requiring such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holder and the Company shall, forthwith after each such adjustment, deliver a copy of such certificate to the Holder. (I) NOTICES TO HOLDERS. So long as this Warrant shall be outstanding and unexercised (i) if the Company shall pay any dividend or make any distribution upon the Common Shares or (ii) if the Company shall offer to the holders of Common Shares for subscription or purchase by them any shares of stock of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, 5 6 liquidation or winding up of the Company shall be effected, then, in any such case, the Company shall cause to be delivered to the Holder, at least 10 days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Shares of record shall be entitled to exchange their Common Shares for securities or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (J) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding Common Shares of the Company (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of an issuance of Common Shares by way of dividend or other distribution or of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding Common Shares of the class issuable upon exercise of this Warrant) or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Company shall cause effective provision to be made so that the Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property which the Holder would have received upon such reclassification, capital reorganization or other change, consolidation, merger, sale or conveyance had this Warrant been exercised prior to the consummation of such transaction. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (i) shall similarly apply to successive reclassifications, capital reorganizations and changes of Common Shares and to successive consolidations, mergers, sales or conveyances. In the event the Company spins off a subsidiary by distributing to the shareholders of the Company as a dividend or otherwise the stock of the subsidiary, the Company shall reserve for the life of this Warrant, shares of the subsidiary to be delivered to the Holders of the Warrants upon exercise to the same extent as if they were owners of record of the Warrant Shares on the record date for distribution of the shares of the subsidiary. (K) REGISTRATION UNDER THE SECURITIES ACT OF 1933. (1) By no later than March 10, 2000, the Company will file and have declared effective a registration statement under the Securities Act of 1933, as amended (the "Act"), registering the Warrant Shares for resale. If for any reason such registration statement is not declared effective on or before March 10, 2000, the Exercise Price shall be reduced to $1.50. If such registration statement is not declared effective on or after March 11, 2000 and on or before April 9, 2000, the Exercise Price shall be reduced to $1.25 commencing April 10, 2000. The Exercise Price shall be reduced an additional $0.25 for each thirty (30) day period or portion thereof commencing May 10, 2000, that such registration statement is not declared effective; provided that, the Exercise Price shall not be reduced to below $0.25. 6 7 Upon any reduction in the Exercise Price pursuant to this Section (j)(1), the number of Warrant Shares the Holder of this Warrant shall be entitled to purchase shall be increased to such number as is determined by dividing $178,500 by the reduced Exercise Price. Nothing contained herein shall relieve the Company of the requirement to file and have declared effective such registration statement by March 10, 2000, or relieve the Company for liability for any damages that the Holder may incur as a result of the failure of the Company to comply with such requirement. (2) In connection with such registration statement, the Company shall: (A) Supply to each selling Holder a copy of the registration statement and a reasonable number of copies of the preliminary, final and other prospectus in conformity with requirements of the Act and the Rules and Regulations promulgated thereunder and such other documents as the Holders shall reasonably request. (B) Bear the complete cost and expense (other than any selling commissions relating to the sale of the Warrant Shares, which shall be paid by the sellers thereof) of such registration statement. (C) Keep effective such registration statement until the first of the following events occur: (i) 12 months have elapsed after the effective date of such registration statement or (ii) all of the registered Warrant Shares issued by the Company either before or after the effective date of such registration statement have been publicly sold under such registration statement. (D) Use its best efforts to register or qualify the Warrant Shares for sale in those states requested by the person selling the Warrant Shares; provided that, the Company shall not be required to register or qualify Warrant Shares for sale in any state in which the sale of the Warrant Shares by the person selling the Warrant Shares would be exempt from having to be registered or qualified in such state. The determination of whether or not such an exemption exists shall be made by counsel for the Company and such determination shall be provided in writing to the person desiring to sell Warrant Shares in a state. (E) Indemnify and hold harmless each such Holder and each underwriter, within the meaning of the Act, who may purchase from or sell for any such Holder, any Warrant Shares, from and against any and all losses, claims, damages, and liabilities (including but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing, defending or settling any claim) arising from (i) any untrue or alleged untrue statement of a material fact contained in any registration statement furnished pursuant to clause (A) of this subsection, or any prospectus included therein or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (unless such untrue statement or omission or such alleged untrue statement or omission was based upon information furnished or required to be 7 8 furnished in writing to the Company by such Holder or underwriter expressly for use therein), which indemnification shall include each person, if any, who controls any such Holder or underwriter within the meaning of the Act; provided, however, that the Company shall not be so obligated to indemnify any such Holder or underwriter or controlling person unless such Holder and underwriter shall at the same time indemnify the Company, its directors, each officer signing any registration statement or any amendment to any registration statement and each person, if any, who controls the Company within the meaning of the Act, from and against any and all losses, claims, damages and liabilities (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing, defending or settling any claim) arising from (i) any untrue or alleged untrue statement of a material fact contained in any registration statement or prospectus furnished pursuant to Clause (A) of this subsection, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but the indemnity of such Holder, underwriter or controlling person shall be limited to liability based upon information furnished, or required to be furnished, in writing to the Company by such Holder or underwriter or controlling person expressly for use therein. The Company shall not be liable for amounts paid in settlement of any such litigation if such settlement was effected without the consent of the Company. The indemnity agreement of the Company herein shall not inure to the benefit of any such underwriter (or to the benefit of any person who controls such underwriter) on account of any losses, claims, damages, liabilities (or actions or proceedings in respect thereof) arising from the sale of any of such Warrant Shares by such underwriter to a person if such underwriter failed to send or give a copy of the prospectus furnished pursuant to Clause (A) of this subsection, as the same may then be supplemented or amended (if such supplement or amendment shall have been furnished to the Holders pursuant to said Clause (A)), to such person with or prior to the written confirmation of the sale involved. (3) Each Holder shall supply such information as the Company may reasonably require from such Holder, or any underwriter for such Holders, for inclusion in such registration statement or posteffective amendment. (4) The Company's agreements with respect to the Warrant Shares in this Section will continue in effect regardless of the exercise or surrender of this Warrant. (5) Any notices or certificates by the Company to the Holder and by the Holder to the Company shall be deemed delivered if in writing and delivered personally or sent by certified mail, return receipt requested, to the Holder, addressed to the Holder at the Holder's address as set forth on the Warrant or stockholder register of the Company, or, if the Holder has designated, by notice in writing to the Company, any other address, to such other address, and, if to the Company, addressed to it at 4801 West 81st Street, Suite 112, Bloomington, Minnesota 55437. The Company may change its address by written notice to the Holder. 8 9 (L) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. The Company may cause the following legend, or one similar thereto, to be set forth on the Warrants and on each certificate representing Warrant Shares or any other security issued or issuable upon exercise of this Warrant not theretofore distributed to the public or sold to underwriters for distribution to the public pursuant to Section (j) hereof; unless legal counsel for the Company is of the opinion as to any such certificate that such legend, or one similar thereto, is unnecessary: "The securities represented by this certificate may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement made under the Securities Act of 1933 (the "Act") and under any applicable state securities law, or pursuant to an exemption from registration under the Act and under any applicable state securities law, the availability of which is to be established to the satisfaction of the Company." (M) EXCHANGE PROVISIONS. (1) For purposes of this Section (l), this Warrant shall be deemed to represent the same number of Warrants as there are Warrant Shares underlying this Warrant. For example, if there are 10,000 Warrant Shares underlying this Warrant, then for purposes of this Section (l) the Holder shall be deemed to hold 10,000 Warrants. (2) For purposes of this Section (l), the following terms shall have the following meanings: (A) "Current Market Value of a Warrant Share" shall be the current value of a Warrant Share as determined under Section (c)(1) or (2) hereof except that the time of the determination thereunder shall be the last business day prior to the day the Company receives a notice from the Holder under this Section (l). (B) "Warrant Value" shall mean the Current Market Value of a Warrant Share minus or less the Exercise Price payable under this Warrant as of the close of business on the last business day prior to the day the Company receives a notice from the Holder under this Section (l). (3) The Holder shall have the right to exchange, in a cashless transaction, all or part of the Holder's Warrants for Common Shares issued by the Company at anytime prior to the Expiration Date of such Warrants by providing written notice ("Notice") to the Company. (4) Within 10 days after receipt of such Notice by the Company, the Company shall issue the number of Common Shares of the Company to the Holder which is determined by dividing the Warrant Value of the Warrants being exchanged by the Current Market Value of a Warrant Share as of the date the Notice is received by the Company. 9 10 (5) The Holder shall surrender the Warrant which the Holder is exchanging for Common Shares upon receipt thereof. If the entire Warrant is being exchanged by the Holder for Common Shares, the Company shall cancel the entire Warrant. If less than the entire Warrant is being exchanged for Common Shares, the Company shall issue a new Warrant to the Holder representing the portion of this Warrant which was not exchanged for Common Shares. (N) APPLICABLE LAW. This Warrant shall be governed by, and construed in accordance with, the laws of the state of Colorado. Dated: December 10, 1999 POPMAIL.COM, INC. By: -------------------------------------- Thomas W. Orr, Chief Financial Officer 10 11 PURCHASE FORM Dated: ----------------------------------- The undersigned hereby irrevocably elects to exercise the Warrant to the extent of purchasing shares of Common Shares and hereby makes payment of $ in payment of the actual exercise price thereof. INSTRUCTIONS FOR REGISTRATION OF SHARES Name: --------------------------------------------------------------------------- (Please typewrite or print in block letters) Address: ------------------------------------------------------------------------ Signature: ---------------------------------------------------------------------- ASSIGNMENT FORM Dated: ----------------------------------- FOR VALUE RECEIVED, ------------------------------------------------------------- hereby sells, assigns and transfers unto ---------------------------------------- Name: --------------------------------------------------------------------------- (Please typewrite or print in block letters) Address: ------------------------------------------------------------------------ the right to purchase Common Shares represented by this Warrant to the extent of Common Shares as to which such right is exercisable and does hereby irrevocably constitute and appoint, attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Signature: ----------------------------------------- EX-4.24 24 EXHIBIT 4.24 1 EXHIBIT 4.24 VOID AFTER 3:30 P.M., MOUNTAIN TIME, ON THE EXPIRATION DATE WARRANT TO PURCHASE COMMON SHARES POPMAIL.COM, INC. Warrant No. EB-2 This is to Certify That, FOR VALUE RECEIVED, AMERICAN FRONTEER FINANCIAL CORPORATION, 1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203 ("Holder"), is entitled to purchase, subject to the provisions of this Warrant, from POPMAIL.COM, INC. ("Company"), a Minnesota corporation, at any time until 3:30 P.M., Mountain Time, on December 10, 2004 ("Expiration Date"), 19,500 Common Shares of the Company. Notwithstanding the foregoing, the Holder shall be required to exercise this Warrant during the thirty (30) days after the last trading day that the closing bid price of a Common Share exceeds $6.00 (as adjusted in the same manner that adjustments in the Exercise Price are made as provided herein) for twenty (20) consecutive trading days. If not exercised during such thirty (30) day period, the Expiration Date shall be the thirtieth day. The purchase price per Common Share shall initially be $2.00. The number of Common Shares to be received upon the exercise of this Warrant and the price to be paid for a Common Share may be adjusted from time to time as hereinafter set forth. The purchase price of a Common Share in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price." This Warrant is or may be one of a series of warrants identical in form issued by the Company to purchase Common Shares of the Company and the term "Warrants" as used herein means all such Warrants (including this Warrant). The Common Shares, as adjusted from time to time, underlying the Warrants are hereinafter sometimes referred to as "Warrant Shares" and include all Common Shares that have been issued upon the exercise of the Warrants and all unissued Common Shares underlying the Warrants. (A) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part at any time or from time to time until the Expiration Date or if the Expiration Date is a day on which banking institutions are authorized by law to close, then on the next succeeding day which shall not be such a day, by presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Common Shares specified in such Form, together with all federal and state taxes applicable upon such exercise. The Company agrees not to merge, reorganize or take any action that would terminate this Warrant unless provisions are made as part of such merger, reorganization or other action which would provide the holders of this Warrant with an equivalent of this Warrant as specified in Section (i) hereof. The Company agrees to provide notice to the Holder that any tender offer is being made for the Company's Common Shares no later than three business days after the day the Company becomes aware that any tender offer is being made for outstanding Common Shares of the Company. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Common Shares purchasable hereunder. Upon receipt by the Company of this Warrant at the office of the Company or at the office of the Company's stock transfer agent, in proper form for exercise and accompanied by the 2 Purchase Form and the Exercise Price, the Holder shall be deemed to be the holder of record of the Common Shares issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Common Shares shall not then be actually delivered to the Holder. (B) RESERVATION OF SHARES. The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Warrant such number of Common Shares as shall be required for issuance or delivery upon exercise of this Warrant. (C) FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a Common Share called for upon any exercise hereof, the Company shall, upon receipt by the Company or the Company's stock transfer agent of the Exercise Price on such fractional share, pay to the Holder an amount in cash equal to such fraction multiplied by the current value of such fractional share, determined as follows: (1) If the Common Shares are listed on a national securities exchange or a foreign exchange, are admitted to unlisted trading privileges on such an exchange, or are listed for trading on a trading system of the National Association of Securities Dealers, Inc. ("NASD") such as The Nasdaq SmallCap Market ("SCM") or the Nasdaq National Market ("NNM") or the OTC Bulletin Board, then the current value shall be the last reported sale price of the Common Shares on such an exchange or system on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average of the closing bid prices for the Common Shares for such day on such exchange or such system shall be used; or (2) If the Common Shares are not so listed on such exchange or system or admitted to unlisted trading privileges, the current value shall be the average of the last reported bid prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Shares are not so listed or admitted to unlisted trading privileges and if bid prices are not so reported, the current value shall be an amount, not less than book value, determined in such reasonable manner as may be prescribed by the board of directors of the Company. (D) EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the Holder thereof to purchase (under the same terms and conditions as provided by this Warrant) in the aggregate the same number of Common Shares purchasable hereunder. This Warrant may not be sold, transferred, assigned, or hypothecated except in compliance with federal and state securities laws. Any transfer or assignment shall be made by surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and with funds sufficient to pay any transfer tax; 2 3 whereupon the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any warrants issued in substitution for or replacement of this Warrant, or into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Subject to such right of indemnification, any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. (E) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (F) ADJUSTMENT PROVISIONS. (1) Adjustments of the Exercise Price. (A) If the Company subdivides its outstanding Common Shares into a greater number of Common Shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced. Conversely, if the Company combines its outstanding Common Shares into a lesser number of Common Shares, the Exercise Price in effect immediately prior to such combination shall be proportionally increased. In case of a subdivision or combination, the adjustment of the Exercise Price shall be made as of the effective date of the applicable event. A distribution on Common Shares, including a distribution of Convertible Securities, to shareholders of the Company on a pro rata basis shall be considered a subdivision of Common Shares for the purposes of this subsection (1)(A) of this Section, except that the adjustment will be made as of the record date for such distribution and any such distribution of Convertible Securities shall be deemed to be a distribution of the Common Shares underlying such Convertible Securities. (B) If the Company shall at any time distribute or cause to be distributed to its shareholders, on a pro rata basis, cash, assets, or securities of any entity other than the Company, then the Exercise Price in effect immediately prior to such distribution shall automatically be reduced by an amount determined by dividing (x) the amount (if cash) or the value (if assets or securities) of the holders' of Warrants (as such term is defined in the first paragraph hereof) pro rata share of such distribution determined assuming that all holders of Warrants had exercised their 3 4 Warrants on the day prior to such distribution, by (y) the number of Common Shares issuable upon the exercise of Warrants (as such term is defined in the first paragraph hereof) by the holders thereof on the day prior to such distribution. (C) If the Company defaults in making any payment required pursuant to a promissory note dated December 10, 1999, in the amount of $325,000 from the Company to eBanker USA.com, Inc., the Exercise Price shall be reduced to $0.01. (3) No Adjustment for Small Amounts. Anything in this Section (f) to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Exercise Price unless and until the net effect of one or more adjustments, determined as above provided, shall have required a change of the Exercise Price by at least one cent, but when the cumulative net effect of more than one adjustment so determined shall be to change the actual Exercise Price by at least one cent, such change in the Exercise Price shall thereupon be given effect. (4) Number of Shares Adjusted. Upon any adjustment of the Exercise Price pursuant to subsection (1)(A) or (B) of this Section, the Holder of this Warrant shall thereafter (until another such adjustment) be entitled to purchase, at the new Exercise Price, the number of Common Shares, calculated to the nearest full share, obtained by multiplying the number of Common Shares initially issuable upon exercise of this Warrant by the Exercise Price specified in the first paragraph hereof and dividing the product so obtained by the new Exercise Price. (5) Definitions. (A) Whenever reference is made in this Section (f) to the distribution of Common Shares, the term "Common Shares" shall mean the Common Shares of the Company authorized as of the date hereof and any other class of stock ranking on a parity with such Common Shares. However, subject to the provisions of Section (i) hereof, Common Shares issuable upon exercise hereof shall include only Common Shares of the class designated as Common Shares of the Company as of the date hereof. (B) Whenever reference is made in this Section (f) to the distribution of Convertible Securities, the term "Convertible Securities" shall mean options or warrants or rights for the purchase of Common Shares of the Company or for the purchase of any stock or other securities convertible into or exchangeable for Common Shares of the Company. (6) Determination of Date of Issue. In case the Company shall take a record of the holders of Common Shares for the purpose of entitling them to receive a dividend or other distribution payable in Common Shares or in Convertible Securities, then such record date shall be deemed to be the date of the issue of the Common Shares deemed to have been 4 5 issued upon the declaration of such dividend or the making of such other distribution, as the case may be. (7) Treasury Shares. For the purpose of this Section (f), Common Shares at any relevant time owned or held by, or for the account of, the Company shall not be deemed outstanding. (G) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of Section (f) hereof, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office, and with its stock transfer and warrant agent, if any, an officer's certificate showing the adjusted Exercise Price determined as herein provided and setting forth in reasonable detail the facts requiring such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the Holder and the Company shall, forthwith after each such adjustment, deliver a copy of such certificate to the Holder. (H) NOTICES TO HOLDERS. So long as this Warrant shall be outstanding and unexercised (i) if the Company shall pay any dividend or make any distribution upon the Common Shares or (ii) if the Company shall offer to the holders of Common Shares for subscription or purchase by them any shares of stock of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then, in any such case, the Company shall cause to be delivered to the Holder, at least 10 days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Shares of record shall be entitled to exchange their Common Shares for securities or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (I) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding Common Shares of the Company (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of an issuance of Common Shares by way of dividend or other distribution or of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding Common Shares of the class issuable upon exercise of this Warrant) or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Company shall cause effective provision to be made so that the Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property which the Holder would have received upon such reclassification, capital reorganization or other change, consolidation, merger, sale or 5 6 conveyance had this Warrant been exercised prior to the consummation of such transaction. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (i) shall similarly apply to successive reclassifications, capital reorganizations and changes of Common Shares and to successive consolidations, mergers, sales or conveyances. In the event the Company spins off a subsidiary by distributing to the shareholders of the Company as a dividend or otherwise the stock of the subsidiary, the Company shall reserve for the life of this Warrant, shares of the subsidiary to be delivered to the Holders of the Warrants upon exercise to the same extent as if they were owners of record of the Warrant Shares on the record date for distribution of the shares of the subsidiary. (J) REGISTRATION UNDER THE SECURITIES ACT OF 1933. (1) By no later than March 10, 2000, the Company will file and have declared effective a registration statement under the Securities Act of 1933, as amended (the "Act"), registering the Warrant Shares for resale. If for any reason such registration statement is not declared effective on or before March 10, 2000, the Exercise Price shall be reduced to $1.50. If such registration statement is not declared effective on or after March 11, 2000 and on or before April 9, 2000, the Exercise Price shall be reduced to $1.25 commencing April 10, 2000. The Exercise Price shall be reduced an additional $0.25 for each thirty (30) day period or portion thereof commencing May 10, 2000, that such registration statement is not declared effective; provided that, the Exercise Price shall not be reduced to below $0.25. Upon any reduction in the Exercise Price pursuant to this Section (j)(1), the number of Warrant Shares the Holder of this Warrant shall be entitled to purchase shall be increased to such number as is determined by dividing $39,000 by the reduced Exercise Price. Nothing contained herein shall relieve the Company of the requirement to file and have declared effective such registration statement by March 10, 2000, or relieve the Company for liability for any damages that the Holder may incur as a result of the failure of the Company to comply with such requirement. (2) In connection with such registration statement, the Company shall: (A) Supply to each selling Holder a copy of the registration statement and a reasonable number of copies of the preliminary, final and other prospectus in conformity with requirements of the Act and the Rules and Regulations promulgated thereunder and such other documents as the Holders shall reasonably request. (B) Bear the complete cost and expense (other than any selling commissions relating to the sale of the Warrant Shares, which shall be paid by the sellers thereof) of such registration statement. (C) Keep effective such registration statement until the first of the following events occur: (i) 12 months have elapsed after the effective date of such registration statement or (ii) all of the registered Warrant Shares issued by the 6 7 Company either before or after the effective date of such registration statement have been publicly sold under such registration statement. (D) Use its best efforts to register or qualify the Warrant Shares for sale in those states requested by the person selling the Warrant Shares; provided that, the Company shall not be required to register or qualify Warrant Shares for sale in any state in which the sale of the Warrant Shares by the person selling the Warrant Shares would be exempt from having to be registered or qualified in such state. The determination of whether or not such an exemption exists shall be made by counsel for the Company and such determination shall be provided in writing to the person desiring to sell Warrant Shares in a state. (E) Indemnify and hold harmless each such Holder and each underwriter, within the meaning of the Act, who may purchase from or sell for any such Holder, any Warrant Shares, from and against any and all losses, claims, damages, and liabilities (including but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing, defending or settling any claim) arising from (i) any untrue or alleged untrue statement of a material fact contained in any registration statement furnished pursuant to clause (A) of this subsection, or any prospectus included therein or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (unless such untrue statement or omission or such alleged untrue statement or omission was based upon information furnished or required to be furnished in writing to the Company by such Holder or underwriter expressly for use therein), which indemnification shall include each person, if any, who controls any such Holder or underwriter within the meaning of the Act; provided, however, that the Company shall not be so obligated to indemnify any such Holder or underwriter or controlling person unless such Holder and underwriter shall at the same time indemnify the Company, its directors, each officer signing any registration statement or any amendment to any registration statement and each person, if any, who controls the Company within the meaning of the Act, from and against any and all losses, claims, damages and liabilities (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing, defending or settling any claim) arising from (i) any untrue or alleged untrue statement of a material fact contained in any registration statement or prospectus furnished pursuant to Clause (A) of this subsection, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but the indemnity of such Holder, underwriter or controlling person shall be limited to liability based upon information furnished, or required to be furnished, in writing to the Company by such Holder or underwriter or controlling person expressly for use therein. The Company shall not be liable for amounts paid in settlement of any such litigation if such settlement was effected without the consent of the Company. The indemnity agreement of the Company herein shall not inure to the benefit of any such underwriter (or to the benefit of any person who controls such underwriter) on account of any losses, claims, damages, 7 8 liabilities (or actions or proceedings in respect thereof) arising from the sale of any of such Warrant Shares by such underwriter to a person if such underwriter failed to send or give a copy of the prospectus furnished pursuant to Clause (A) of this subsection, as the same may then be supplemented or amended (if such supplement or amendment shall have been furnished to the Holders pursuant to said Clause (A)), to such person with or prior to the written confirmation of the sale involved. (3) Each Holder shall supply such information as the Company may reasonably require from such Holder, or any underwriter for such Holders, for inclusion in such registration statement or posteffective amendment. (4) The Company's agreements with respect to the Warrant Shares in this Section will continue in effect regardless of the exercise or surrender of this Warrant. (5) Any notices or certificates by the Company to the Holder and by the Holder to the Company shall be deemed delivered if in writing and delivered personally or sent by certified mail, return receipt requested, to the Holder, addressed to the Holder at the Holder's address as set forth on the Warrant or stockholder register of the Company, or, if the Holder has designated, by notice in writing to the Company, any other address, to such other address, and, if to the Company, addressed to it at 4801 West 81st Street, Suite 112, Bloomington, Minnesota 55437. The Company may change its address by written notice to the Holder. (K) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. The Company may cause the following legend, or one similar thereto, to be set forth on the Warrants and on each certificate representing Warrant Shares or any other security issued or issuable upon exercise of this Warrant not theretofore distributed to the public or sold to underwriters for distribution to the public pursuant to Section (j) hereof; unless legal counsel for the Company is of the opinion as to any such certificate that such legend, or one similar thereto, is unnecessary: "The securities represented by this certificate may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement made under the Securities Act of 1933 (the "Act") and under any applicable state securities law, or pursuant to an exemption from registration under the Act and under any applicable state securities law, the availability of which is to be established to the satisfaction of the Company." (L) EXCHANGE PROVISIONS. (1) For purposes of this Section (l), this Warrant shall be deemed to represent the same number of Warrants as there are Warrant Shares underlying this Warrant. For example, if there are 10,000 Warrant Shares underlying this Warrant, then for purposes of this Section (l) the Holder shall be deemed to hold 10,000 Warrants. 8 9 (2) For purposes of this Section (l), the following terms shall have the following meanings: (A) "Current Market Value of a Warrant Share" shall be the current value of a Warrant Share as determined under Section (c)(1) or (2) hereof except that the time of the determination thereunder shall be the last business day prior to the day the Company receives a notice from the Holder under this Section (l). (B) "Warrant Value" shall mean the Current Market Value of a Warrant Share minus or less the Exercise Price payable under this Warrant as of the close of business on the last business day prior to the day the Company receives a notice from the Holder under this Section (l). (3) The Holder shall have the right to exchange, in a cashless transaction, all or part of the Holder's Warrants for Common Shares issued by the Company at anytime prior to the Expiration Date of such Warrants by providing written notice ("Notice") to the Company. (4) Within 10 days after receipt of such Notice by the Company, the Company shall issue the number of Common Shares of the Company to the Holder which is determined by dividing the Warrant Value of the Warrants being exchanged by the Current Market Value of a Warrant Share as of the date the Notice is received by the Company. (5) The Holder shall surrender the Warrant which the Holder is exchanging for Common Shares upon receipt thereof. If the entire Warrant is being exchanged by the Holder for Common Shares, the Company shall cancel the entire Warrant. If less than the entire Warrant is being exchanged for Common Shares, the Company shall issue a new Warrant to the Holder representing the portion of this Warrant which was not exchanged for Common Shares. (M) APPLICABLE LAW. This Warrant shall be governed by, and construed in accordance with, the laws of the state of Colorado. Dated: December 10, 1999 POPMAIL.COM, INC. By: -------------------------------------- Thomas W. Orr, Chief Financial Officer 9 10 PURCHASE FORM Dated: ------------------------------ The undersigned hereby irrevocably elects to exercise the Warrant to the extent of purchasing shares of Common Shares and hereby makes payment of $ in payment of the actual exercise price thereof. INSTRUCTIONS FOR REGISTRATION OF SHARES Name: -------------------------------------------------------------------------- (Please typewrite or print in block letters) Address: ----------------------------------------------------------------------- Signature: --------------------------------------------------------------------- ASSIGNMENT FORM Dated: ------------------------------ FOR VALUE RECEIVED, ------------------------------------------------------------ hereby sells, assigns and transfers unto -------------------------------------- Name: ------------------------------------------------------------------------- (Please typewrite or print in block letters) Address: ---------------------------------------------------------------------- the right to purchase Common Shares represented by this Warrant to the extent of Common Shares as to which such right is exercisable and does hereby irrevocably constitute and appoint, attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Signature: -------------------------------------------- EX-10.16 25 EXHIBIT 10.16 1 TYPE: EX-10.16 EXHIBIT 10.16
Date of Name of Warrant Number of Shares Expiration Issuance Warrant Recipient No. of Common Stock Date 11/16/98 Jerry L. Ruyan PL-2 40,000 11/16/2003 11/05/98 Greg C. Mosher PL-3 40,000 11/05/2003 11/16/98 Stephen D. King PL-4 200,000 11/16/2003 11/16/98 Jerry L. Ruyan PL-5 200,000 11/16/2003 1/22/99 Andrew Green PL-6 200,000 1/22/2004 1/22/99 Andrew Green PL-7 200,000 1/22/2004 2/23/99 Frank W. Terrizzi PL-8 50,000 2/23/2004 2/14/00 Greg C. Mosher PL-9 40,000 11/5/2003 3/18/99 Stephen D. King PL2-1 150,000 3/18/2004 3/18/99 Jeffrey P. Stebbins PL2-3 150,000 3/18/2004
EX-10.23 26 EXHIBIT 10.23 1 EXHIBIT 10.23 Schedule of Additional Warrants Issued in Connection with Series A 8% Convertible Preferred Stock
Date of Name of Warrant Number of Shares Expiration Issuance Warrant Recipient No. of Common Stock Date 5/14/99 Progressive Group A-2 150,000 5/14/2004
EX-10.32 27 EXHIBIT 10.32 1 EXHIBIT 10.32 Schedule of additional Warrants Issued in Connection with Series C 8% Convertible Preferred Stock
No. of Shares Date of Name of Warrant Warrant of Common Exercise Expiration Issuance Recipient No. Stock Price Date - - -------- --------------- ------- ------------- -------- ---------- 7/13/99 Progressive Group C-2 150,000 $3.00 7/13/2004 11/12/99 The Shaar Fund, Ltd. C-1b 100,000 $3.00 7/13/2004 11/12/99 The Shaar Fund, Ltd. C-3 200,000 $2.00 7/13/2004
EX-10.38 28 EXHIBIT 10.38 1 EXHIBIT 10.38 Schedule of additional Warrants Issued in Connection with Series D 8% Convertible Preferred Stock
Date of Name of Warrant Number of Shares Expiration Issuance Warrant Recipient No. of Common Stock Date - - -------- ----------------- ------- ---------------- ---------- 8/31/99 Progressive Group D-2 150,000 8/31/2004
EX-10.48 29 EXHIBIT 10.48 1 EXHIBIT 10.48 PLEDGE AGREEMENT This PLEDGE AGREEMENT made this 3rd day of December, 1999, between KING FAMILY PARTNERS, an Ohio limited partnership ("Pledgor"), and POPMAIL.COM, INC., a Minnesota corporation (the "Company"), as secured party. W I T N E S S E T H: WHEREAS, Pledgor has executed and delivered that promissory note of even date herewith payable to the Company in the principal amount of $2,450,000 (the "Note"); WHEREAS, Pledgor owns 125,000 shares of the common stock, $.01 par value, of the Company (the "Shares"); WHEREAS, Pledgor has agreed to grant the Company a security interest in the Shares to secure the payment of all indebtedness owed by Pledgor to the Company pursuant to the Note; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises set forth herein, and in consideration of other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Pledgor hereby grants to the Company a security interest in all of Pledgor's right, title and interest in and to the Shares, together with all distributions, additions, substitutions or replacements for any of the foregoing property and together with proceeds of any and all of the foregoing property, each whether now owned or hereafter acquired (the "Collateral"), as security for the payment and performance of each and every debt, liability and obligation of Pledgor pursuant to the Note (the "Secured Obligations"). 2. Pledgor has good and marketable title to and will at all times keep the Collateral free of all liens and encumbrances, except for the security interest created hereby, and has full power and authority to execute this Pledge Agreement, to perform Pledgor's obligations hereunder and to subject the Collateral to the security interest created hereby. Pledgor has made no other assignment, transfer, conveyance, pledge or grant of a security interest in the Collateral. Pledgor shall not, without the prior written consent of the Company, which will not be unreasonably withheld or delayed, sell, convey, assign, pledge, grant a security interest in or otherwise transfer or encumber all or any part of the Collateral. All costs of keeping the Collateral free of any liens, encumbrances and security interests prohibited by this Pledge Agreement and removing the same, if they should arise, shall be borne and paid by Pledgor. 3. Pledgor will upon receipt deliver to the Company as additional Collateral hereunder all securities distributed on account of the Shares such as stock, dividends and securities resulting from stock splits, reorganizations and recapitalizations. 4. Pledgor will duly endorse, in blank, each and every instrument constituting the Shares by signing on said instrument or by signing a separate assignment or other documents of transfer, if required by the Company, and will at any time or times hereafter perform such other acts as the Company may request to establish, maintain, perfect and enforce the Company's security interest in the Collateral and rights under this Agreement. 2 5. Pledgor shall execute and shall pay all costs of filing this Pledge Agreement and any financing or termination statement, or application for lien, with respect to the Collateral, and Pledgor hereby appoints the Company as attorney-in-fact for Pledgor to do whatever the Company may deem necessary to perfect or continue perfected the security interest of the Company in the Collateral. 6. Loss or damage to the Collateral shall not release Pledgor from his obligations hereunder. 7. The Company's duty of care with respect to Collateral in its possession shall be deemed fulfilled if the Company exercises reasonable care in physically safekeeping such Collateral or, in the case of Collateral in the custody or possession of a bailee or other third party, exercises reasonable care in the selection of the bailee or other third party, and the Company need not otherwise preserve, protect, insure or care for any Collateral. The Company shall have no liability or responsibility to any third party for any action taken or omitted with respect to the Collateral on the direction of any third party. 8. The Company, in the name of Pledgor or otherwise, after the occurrence of an Event of Default, shall have the authority but shall not be obligated to (a) demand, collect, receive and receipt for, compromise, compound, settle, prosecute and discontinue any suits or proceedings in respect of any and all of the Collateral; (b) take any action which the Company deems necessary or desirable in order to realize on the Collateral, including, without limitation, the power to perform any contract, to endorse in the name of Pledgor any checks, drafts, notes or other documents which are Collateral or are received in payment or on account of the Collateral; (c) to transfer any of the Collateral into its name or that of its nominee, and to notify the obligor on or issuer of any Collateral to the Company of any amounts due or distributable thereon; (d) to apply any proceeds of any Collateral against any item or items of the Secured Obligations as the Company, in its sole discretion, may determine, whether the same shall be due or not due; (e) at its option, without demand or notice, declare all or any part of the Secured Obligations immediately due and payable; and (f) exercise, in addition to the foregoing rights and remedies and any other rights and remedies granted under any other agreement or applicable law, all rights and remedies of a secured party under the Uniform Commercial Code or any other applicable law, including the right to receive all dividends or distributions with respect to, and to exercise all voting and other rights as a holder of, the Securities, and the right to offer and sell the Collateral privately or publicly. Until the occurrence of an Event of Default, Pledgor shall be entitled to receive all distributions and to exercise all voting rights with respect to the Securities. At the Company's request, Pledgor shall cooperate with the Company and do all things necessary to enable the Company to sell any and all of the Collateral in compliance with all applicable securities and other laws and regulations. 9. As used herein, the term "Event of Default" shall have the meaning assigned to such term in the Note. 10. Pledgor agrees to pay all of the Company's costs, including reasonable attorneys' fees, in the collection of any of the Secured Obligations and the enforcement of the Company's rights. If any notification of intended disposition of any of the Collateral is required by law, such notification shall be deemed reasonably and properly given if mailed at least 10 days before such disposition addressed to Pledgor at the following address: 8260 North Creek Drive, Cincinnati, Ohio 45236. 11. No delay or failure by the Company in the exercise of any right or remedy shall constitute a waiver thereof, and no single or partial exercise by the Company of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. 2 3 12. This Agreement shall take effect when signed by Pledgor and delivered to the Company, and Pledgor waives notice of the Company's acceptance hereof. 13. Pledgor shall be responsible for and shall indemnify and hold the Company harmless from the payment of all state and federal taxes payable as a result of any sale of any or all of the Collateral. 14. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one agreement. 15. The rights, options, powers and remedies granted in this Agreement and the other Loan Documents shall extend to the Company and to its heirs, representatives, successors and assigns and shall be binding upon Pledgor and his heirs, representatives, successors and assigns; provided, however, that notwithstanding the foregoing, Pledgor shall not be entitled to assign any of his rights or obligations under this Agreement or the Note without the prior written consent of the Company. 16. This Agreement shall be governed by the laws of the State of Minnesota and, unless the context otherwise requires, all terms used herein which are defined in Articles 1 and 9 of the Uniform Commercial Code, as in effect in such state, shall have the meanings therein stated. If any provision or application of this Agreement is held unlawful or unenforceable in any respect, such illegality or unenforceability shall not affect any other provisions or applications which can be given effect and this Agreement shall be construed as if the unlawful or unenforceable application had never been contained herein or prescribed hereby. All representations and warranties contained in this Agreement shall survive the execution, delivery and performance of this Agreement in the creation and payment of the Secured Obligations. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. PLEDGOR: KING FAMILY PARTNERS, an Ohio limited partnership By: s/ Stephen D. King --------------------------------------------- Its General Partner Stephen D. King, President THE COMPANY: POPMAIL.COM, INC., a Minnesota corporation By: s/ Thomas W. Orr --------------------------------------------- Thomas W. Orr Chief Financial Officer 3 EX-10.49 30 EXHIBIT 10.49 1 EXHIBIT 10.49 FIRST AMENDMENT TO PLEDGE AGREEMENT DATED DECEMBER 3, 1999 This FIRST AMENDMENT TO PLEDGE AGREEMENT DATED DECEMBER 3, 1999, is made this 28th day of March, 2000, between KING FAMILY PARTNERS, an Ohio limited partnership ("Pledgor"), and POPMAIL.COM, INC., a Minnesota corporation (the "Company"), as secured party. W I T N E S S E T H: WHEREAS, Pledgor has executed and delivered that certain promissory note dated December 3, 1999, payable to the Company in the principal amount of $2,450,000 (the "December 1999 Note"); WHEREAS, Pledgor owns 1,250,000 shares of the common stock, $.01 par value, of the Company (the "Shares"), which were pledged to the Company as security for Pledgor's obligations under the December 1999 Note pursuant to a Pledge Agreement dated as of December 3, 1999 (the "Pledge Agreement"); WHEREAS, Pledgor has executed another promissory note dated March 28, 2000, payable to the Company in the amount of $245,000 (the "March 2000 Note"); WHEREAS, Pledgor has agreed to modify the terms of the Pledge Agreement so that the Pledge Agreement, as amended, will secure all amounts due and owing under the March 2000 Note, in addition to all amounts due and owing under the December 1999 Note. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises set forth herein, and in consideration of other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. The term "Shares" as used in the Pledge Agreement shall be deemed to include the 122,500 shares of common stock, par value $.01 per share, of the Company acquired by Pledgor on or about March 30, 2000. 2. The term "Secured Obligations" as used in the Pledge Agreement shall, in addition to all of Pledgor's obligation's to the Company arising out of the December 1999 Note, also be deemed to include all of Pledgor's obligations for the payment and performance of each and every debt, liability and obligation pursuant to the March 2000 Note. 3. Except as expressly amended hereby, all other terms and conditions of the Pledge Agreement shall remain in full force and effect. [SIGNATURE PAGE TO FOLLOW] 2 IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. PLEDGOR: KING FAMILY PARTNERS, an Ohio limited partnership By: SDK Investments, Inc., its General Partner By: /s/ Stephen D. King --------------------------------------------- Stephen D. King, President THE COMPANY: POPMAIL.COM, INC., a Minnesota corporation By: /s/ Thomas W. Orr --------------------------------------------- Thomas W. Orr Chief Financial Officer 2 EX-10.50 31 EXHIBIT 10.50 1 EXHIBIT 10.50 AMENDED AND RESTATED PROMISSORY NOTE Bloomington, Minnesota $2,450,000.00 December 3, 1999 FOR VALUE RECEIVED, KING FAMILY PARTNERS, an Ohio limited partnership (the "Maker"), hereby unconditionally promises to pay to POPMAIL.COM, INC., a Minnesota corporation, or its successors and assigns (the "Payee"), at Bloomington, Minnesota or at such other place or places as may be designated by Payee from time to time, the sum of Two Million Four Hundred Fifty Thousand Dollars ($2,450,000.00) (the "Principal Sum"). The Principal Sum, plus interest thereon from the date hereof at the rate of 5.74 percent per annum, shall be due and payable by Maker to Payee on December 3, 2002 (the "Maturity Date") in any coin or currency of the United States of America which, at the time of payment, is legal tender for the payment of public and private debts. All payments on account of this Note, when paid, shall be applied first to the payment of all interest then due on the unpaid balance of this Note and the balance, if any, shall be applied to reduction of the unpaid balance of the Principal Sum. This Note may be prepaid in full or in part at any time without premium. Maker agrees to immediately pay to Holder hereof, upon demand, all losses, costs and expenses (including attorneys' fees) incurred by Holder for collection and enforcement of this Note in the event of default or otherwise. Maker waives presentment, protest and demand, notice of protest, notice of dishonor and non-payment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time without in any way affecting the liability of Maker. The terms, conditions and provisions of this Note shall be construed and enforced according to the laws of the State of Minnesota. Notwithstanding any of the provisions of this Note, Payee shall look solely to the Collateral (as defined in that certain Pledge Agreement between Maker and PopMail.com, inc. dated December 3, 1999) for the satisfaction of the obligations of this Note or any obligation in any other instrument securing payment hereof and shall not seek a personal judgment against Maker except to the extent the laws of the State of Minnesota make a judgment against Maker necessary in order to enforce the terms of such instruments. In no event shall the Payee seek to enforce or collect a deficiency judgment with respect to this Note against Maker. 1 2 This Note supersedes all provisions of any and all previous promissory notes delivered by Maker on December 3, 1999, in favor of Payee in the principal amount of $2,450,000.00. IN WITNESS WHEREOF, the duly authorized officer of Maker has caused this Note to be executed on the date first above written. King Family Partners, an Ohio limited partnership By: SDK Investments, Inc., its General Partner By: /s/ Stephen D. King ---------------------------------- Stephen D. King President Acknowledged and accepted by POPMAIL.COM, INC., this 29th day of March, 2000: By: s/ Thomas W. Orr --------------------------------- Name: Thomas W. Orr Title: CFO 2 EX-10.51 32 EXHIBIT 10.51 1 EXHIBIT 10.51 PROMISSORY NOTE Bloomington, Minnesota $245,000.00 March 30, 2000 FOR VALUE RECEIVED, KING FAMILY PARTNERS, an Ohio limited partnership (the "Maker"), hereby unconditionally promises to pay to POPMAIL.COM, INC., a Minnesota corporation, or its successors and assigns (the "Payee"), at Bloomington, Minnesota or at such other place or places as may be designated by Payee from time to time, the sum of Two Hundred Forty-Five Thousand Dollars ($245,000.00) (the "Principal Sum"). The Principal Sum, plus interest thereon from the date hereof at the rate of 5.74 percent per annum, shall be due and payable by Maker to Payee on March 30, 2003 (the "Maturity Date") in any coin or currency of the United States of America which, at the time of payment, is legal tender for the payment of public and private debts. All payments on account of this Note, when paid, shall be applied first to the payment of all interest then due on the unpaid balance of this Note and the balance, if any, shall be applied to reduction of the unpaid balance of the Principal Sum. This Note may be prepaid in full or in part at any time without premium. Maker agrees to immediately pay to Holder hereof, upon demand, all losses, costs and expenses (including attorneys' fees) incurred by Holder for collection and enforcement of this Note in the event of default or otherwise. Maker waives presentment, protest and demand, notice of protest, notice of dishonor and non-payment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time without in any way affecting the liability of Maker. The terms, conditions and provisions of this Note shall be construed and enforced according to the laws of the State of Minnesota. Notwithstanding any of the provisions of this Note, Payee shall look solely to the Collateral (as defined in that certain Pledge Agreement between Maker and PopMail.com, inc. dated December 3, 1999, and amended as of even date herewith) for the satisfaction of the obligations of this Note or any obligation in any other instrument securing payment hereof and shall not seek a personal judgment against Maker except to the extent the laws of the State of Minnesota make a judgment against Maker necessary in order to enforce the terms of such instruments. In no event shall the Payee seek to enforce or collect a deficiency judgment with respect to this Note against Maker. 2 IN WITNESS WHEREOF, the duly authorized officer of Maker has caused this Note to be executed on the date first above written. King Family Partners, an Ohio limited partnership By: SDK Investments, Inc., its General Partner By: s/ Stephen D. King ------------------------------------------ Stephen D. King President EX-10.52 33 EXHIBIT 10.52 1 EXHIBIT 10.52 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made and entered into as of February 9th, 2000, by and between Jesse Berst (the "Employee") and Popmail.com, Inc. (the "Company"). RECITALS A. IZ.com Incorporated, a Delaware corporation ("IZ.com"), the Company and certain other parties are entering into an Agreement and Plan of Reorganization dated as of February 9, 2000, which provides for the merger (the "Merger") of a newly formed, wholly-owned subsidiary of the Company with and into IZ-com. B. The Company desires to retain the services of the Employee and the Employee desires to be employed by the Company from and after the Merger, on the terms and subject to the conditions set forth in this Agreement. AGREEMENT In consideration of the mutual covenants herein contained, the continuing employment of the Employee by the Company, and other good and Valuable consideration, the receipt and sufficiency of which arc hereby acknowledged, the parties agree as follows: 1. Duties and Scope of Employment. The Company shall employ the Employee in the position of Chief Operating Officer, with such duties, responsibilities and compensation as in effect as of the Effective Date. Only the Board of Directors of the Company in consultation with the Chief Executive Officer (the "Board") shall have the tight to revise such responsibilities from time to time as the Board may deem necessary or appropriate. 2. At-Will Employment; Severance. The Company and the Employee acknowledge that the Employee's employment is and shall continue to be at-will, as defined under applicable law. If the Employee's employment terminates for any reason, Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as follows: If the Employee's employment is terminated by the Company without cause within two years after commencement of his employment with the Company, the Employee will be entitled to a one-time severance payment equal to six months of the Employee's base salary as of the termination date. The Employee's stock option agreement(s) will also provide that in such an event, all shares will vest which would otherwise have vested through the date of termination and during the following six months as if the options had vested on a monthly basis beginning on the Employee's employment commencement date. The foregoing benefits are contingent on the Employee entering into a severance agreement in such form as the Company reasonably requests, which will include a waiver of any additional claims against the Company. For purposes of the foregoing, "cause" means one or more of the following: (i) material breach of any confidentiality, invention assignment or other agreement with the Company which breach is not cured within ten (10) days of receipt of written notice from the Company; (ii) negligence in the performance of duties or nonperformance or misperformance of such duties that in the good faith judgment of 2 the Company adversely affects the operations or reputation of the Company; (iii) refusal to abide by or comply with the good faith directives of the Board of Directors or the Company's standard policies and procedures, which actions continue for a period of at least ten (10) days after written notice from the Company; (iv) any willful dishonesty, fraud, or misappropriation of funds with respect to the business or affairs of the Company; (v) conviction by, or entry of a plea of guilty or nolo contendre in, a court of competent and final jurisdiction for any crime which constitutes a felony in the jurisdiction involved; or (vi) abuse of alcohol or drugs (legal or illegal) that, in the Company's judgment, materially impairs your ability to perform your duties. 3. Compensation and Benefits. (a) Base Compensation. The Company shall pay the Employee as compensation for the Employee's services an annual base salary of $250,000. Such salary shall be subject to applicable tax withholding and shall be paid periodically in accordance with normal Company payroll practices. Such salary shall be subject to review on an annual basis, but shall not be subject to reduction during the term of Employee's employment. (b) Performance Bonus. The Employee shall be eligible for an annual performance bonus, to be determined by the Company, in accordance with the Company's customary practices for officer compensation. (c) Benefits. The Employee shall be eligible to participate in the employee benefit plans which are available or which become available to other employees of the Company, with the adoption or maintenance of such plans to be in the discretion of the Company, subject in each case to the generally applicable terms and conditions of the plan or program in question and to the determination of any committee administering such plan or program. (d) Termination of Employment. In the event the Employee's employment with the Company terminates (i) the Company shall pay the Employee any unpaid base salary due for periods prior to the date of termination of employment ("Termination Date"); (ii) the Company shall pay the Employee all of the Employee's accrued and unused vacation through the Termination Date; and (iii) following submission of proper expense reports by the Employee, the Company shall reimburse the Employee for all expenses reasonably and necessarily incurred by the Employee in connection with the business of the Company prior to termination. These payments shall be made promptly upon termination and within the period of time mandated by applicable law. In addition, in the event the Employee's employment with the Company terminates, the Employee shall be entitled to any benefits due to him under the agreements, plans and practices referred to in Sections 2 and 3(c) hereof. 4. No Impediment to Agreement. The Employee hereby represents to the Company that the Employee is not, as of the date hereof, and will not be during the Employee's employment with the Company, employed under contract, oral or written, by any other person, firm or entity in a manner that conflicts in any material respect with the Employee's ability to 2 3 perform his duties under this Agreement, and is not and will not be bound by the provisions of any restrictive covenant or confidentiality agreement which would constitute an impediment to, or restriction upon, the Employee's ability to enter this Agreement and perform the duties of Employee's employment. 5. Successors; Personal Services. The services and duties to be performed by the Employee hereunder are personal and may not be assigned or delegated. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Employee, the Employee's heirs and representatives. 6. Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to Employee at the home address, which Employee most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its CEO. 7. Miscellaneous Provisions. (a) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (b) Entire Agreement. This Agreement and the other agreements, plans and practices referred to herein shall supersede and replace all prior agreements or understandings relating to the subject matter hereof, and no agreement, representations or understandings (whether oral or written or whether express or implied) which are not expressly set forth or referred to in this Agreement have been made or entered into by either party with respect to the relevant matter hereof. (c) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal substantive laws of the State of Delaware without reference to any choice of law rules. (d) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. 3 4 (e) No Assignment of Benefits. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's proct ss, and any action in violation of this subsection shall be void. (f) Employment Taxes. All payments made pursuant to this Agreement will be subject to withholding of all applicable income, health insurance and employment taxes. (g) Assignment by Company. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company. In the case of any such assignment, the term "Company" when used in a section of this Agreement shall mean the corporation that actually employs the Employee. (h) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. (i) Effective Date. This Agreement shall become effective on the date (the "Effective Date") on which the Merger is consummated. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY: POPMAIL.COM, INC. By /s/ Stephen King ----------------------------- Title C.E.O. --------------------------- Employee: /s/ Jesse Berst -------------------------------- Jesse Berst 4 EX-10.53 34 EXHIBIT 10.53 1 EXHIBIT 10.53 AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment to Employment Agreement is made as of July 27, 1999 by and between CAFE ODYSSEY, INC., a Minnesota corporation (the "Company"), and RONALD K. FULLER (the "Executive"). WHEREAS, the Company and Executive are parties to an Employment Agreement dated as of March 17, 1997 (the "Employment Agreement"); and WHEREAS, the Company and Executive desire to amend the Employment Agreement; NOW, THEREFORE, in consideration of the covenants and agreements contained herein, the parties hereto agree to amend the Employment Agreement as follows: 1. Executive's Base Salary shall be $250,000 as of September 1, 1999. Executive shall be paid a monthly bonus of $4,167 on each of July 30 and August 30. Executive shall be paid $12,500 on June 30, reflecting the accrual of such monthly bonus from April 1, 1999. 2. Section 3.1 of the Employment Agreement shall be amended to read in its entirety as follows: 3.1 Termination of Employment. Executive's employment under this Agreement may be terminated by the Company or Executive at any time for any reason; provided, however, that if Executive's employment is terminated by the Company during the term of this Agreement for a reason other than for Cause, or if Executive terminates his employment for "Good Reason" (as defined in Section 3.2(b) below), he shall continue to receive his Base Salary, Base Bonus, Incentive Bonus (the annual amount of which shall equal the sum of the Incentive Bonus payments made to Executive for the four quarters preceding termination) and the benefits listed in Sections 2.2 and 2.4 above for a period of two (2) years from the date of termination. The termination shall be effective as of the date specified by the party initiating the termination in a written notice delivered to the other party, which date shall not be earlier than the date such notice is delivered to the other party. This Agreement shall terminate in its entirety immediately upon the death of Executive. Except as expressly provided to the contrary in this section or applicable law, Executive's rights to pay and benefits shall cease on the date his employment under this Agreement terminates. IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the date set forth above. CAFE ODYSSEY, INC. By s/ Stephen D. King s/ Ronald K. Fuller --------------------- ---------------------- Chairman of the Board RONALD K. FULLER EX-21 35 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES popmail.com (Delaware), inc., a Delaware corporation PopMail Network, Inc., a Texas corporation IZ.com, a Delaware corporation EX-23.1 36 EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated March 24, 2000, accompanying the consolidated financial statements included in the Annual Report of PopMail.com, inc. (formerly Cafe Odyssey, Inc.) on Form 10-KSB for the year ended January 2, 2000. We hereby consent to the incorporation by reference of said report in the Registration Statements of PopMail.com, inc. on Forms S-3 (File No. 333-80241, File No. 333-85243, File No. 333-88199, File No. 333-93317, File No. 333-96109, and File No. 333-32232) and on Forms S-8 (File No. 333-62729 and File No. 333-62747). /s/ GRANT THORNTON LLP Minneapolis, Minnesota April 3, 2000 EX-23.2 37 EXHIBIT 23.2 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accounts, we hereby consent to the incorporation of our report dated February 19, 1999 included in this Form 10-KSB, into the Company's previously filed Registration Statement File Nos. 333-80241, 333-85243, 333-88199, 333-93317, 333-96109, 333-62729 and 333-62747. ARTHUR ANDERSEN LLP Minneapolis, Minnesota April 3, 2000 EX-27 38 FINANCIAL DATA SCHEDULE
5 YEAR JAN-02-2000 JAN-03-1999 JAN-02-2000 1136137 0 275655 0 111807 2007095 18237494 3370692 53495364 10703572 0 0 3331000 246958 33679634 53495364 12166454 12166454 3144513 23063263 9944106 0 2357245 (24248632) 0 0 0 0 0 (24248632) (2.40) (2.40)
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