-----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, IG1CA/gHG029wx8zQ0V6VGAZN8ZzZXc2KhlVUF0ndzOtM/Y6XMFbQ7uGu0JoRAj6 m49+JQw+AHfOJ3WjzuJeHw== 0000950124-00-003324.txt : 20000518 0000950124-00-003324.hdr.sgml : 20000518 ACCESSION NUMBER: 0000950124-00-003324 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20000402 FILED AS OF DATE: 20000517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POPMAIL COM INC CENTRAL INDEX KEY: 0001044738 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 311487885 STATE OF INCORPORATION: MN FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23243 FILM NUMBER: 638927 BUSINESS ADDRESS: STREET 1: 1331 CORPORATE DR STREET 2: SUITE 350 CITY: IRVING STATE: TX ZIP: 75038 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 10QSB 1 FORM 10-QSB 1 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 2, 2000 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ COMMISSION FILE NUMBER 0-23243 - -------------------------------------------------------------------------------- POPMAIL.COM, INC. (Name of Small Business Issuer in Its Charter) MINNESOTA 31-1487885 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1333 CORPORATE DRIVE, SUITE 350, IRVING, TX. 75038 (Address of Principal Executive Offices) 972-550-5500 (Issuer's Telephone Number, Including Area Code) (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of May 12, 2000, there were 36,354,928 shares of common stock, $.01 par value, outstanding. Transitional Small Business Disclosure Format (check One): Yes [ ] No [X] 1 2 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 factors discussed in this Form 10-QSB, 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 the 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 risks identified from time to time in the Company's SEC reports, registration statements and public announcements. - -------------------------------------------------------------------------------- 2 3 POPMAIL.COM, INC. FORM 10-QSB INDEX APRIL 2, 2000
Page PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Balance Sheets - As of April 2, 2000 and January 2, 2000 4 Statements of Operations - For the thirteen weeks ended April 2, 2000 and April 4, 1999 5 Statements of Cash Flows - For the thirteen weeks ended April 2, 2000 and April 4, 1999 6 Condensed Notes to the Financial Statements 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II OTHER INFORMATION ITEM 1. Legal Proceedings 28 ITEM 2. Changes in Securities and Use of Proceeds 28 ITEM 6. Exhibits and Reports on Form 8-K 28 Signatures 29
3 4 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS POPMAIL.COM, INC. BALANCE SHEETS
(Unaudited) April 2, January 2, 2000 2000 ------------------ ------------------ ASSETS CURRENT ASSETS Cash and equivalents $ 1,669,981 $ 1,136,137 Accounts receivable 462,477 275,655 Inventories 114,160 111,807 Other current assets 378,951 483,496 ------------------ ------------------ Total current assets 2,625,569 2,007,095 PROPERTY AND EQUIPMENT, net 16,779,233 14,866,802 GOODWILL, net 81,025,185 36,277,346 OTHER ASSETS 707,829 344,121 ------------------ ------------------ $ 101,137,816 $ 53,495,364 ================== ================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 1,879,596 $ 6,037,518 Convertible promissory notes payable 1,691,665 1,460,417 Current maturities of long-term debt 193,833 193,833 Accounts payable 665,511 1,604,952 Due to affiliates -- 120,000 Accrued expenses 1,297,260 1,286,852 ------------------ ------------------ Total current liabilities 5,727,865 10,703,572 DEFERRED RENT CREDITS 3,516,550 3,650,512 LONG-TERM OBLIGATIONS, less current maturities 1,856,634 1,883,688 ------------------ ------------------ Total liabilities 11,101,049 16,237,772 ------------------ ------------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Common stock, $.01 par value, 100,000,000 shares authorized; 36,352,928 and 24,695,872 shares issued and outstanding 363,529 246,958 Series C 8% convertible preferred stock 30,000 693,000 Series D 8% convertible preferred stock -- 2,288,000 Series E convertible preferred stock 450,000 350,000 Series F preferred stock 48,640,477 -- Additional paid-in capital 92,485,840 74,901,160 Less common stock subscribed and notes receivable from affiliate (2,948,430) (2,850,000) Accumulated deficit (48,984,649) (38,371,526) ------------------ ------------------ Total shareholders' equity 90,036,767 37,257,592 ------------------ ------------------ $ 101,137,816 $ 53,495,364 ================== ==================
The accompanying condensed notes are an integral part of these financial statements. 4 5 POPMAIL.COM, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
Thirteen weeks ended ------------------------------------------ April 2, April 4, 2000 1999 ------------------ ------------------ REVENUES Restaurant sales, net $ 2,446,198 $ 2,332,632 E-mail services 377,405 -- ------------------ ------------------ 2,823,603 2,332,632 COSTS AND EXPENSES: Restaurant food, beverage and retail costs 623,661 606,587 Restaurant operating expenses 1,690,065 1,716,303 Restaurant depreciation 312,784 258,168 Amortization of goodwill 5,456,604 -- Pre-opening expenses -- 572,932 General, administrative and development expenses 3,443,306 480,247 ------------------ ------------------ 11,526,420 3,634,237 ------------------ ------------------ LOSS FROM OPERATIONS (8,702,817) (1,301,605) ------------------ ------------------ OTHER INTEREST INCOME (EXPENSE) Interest expense (588,959) (142,049) Interest income 60,731 38 Debt guarantee costs (155,000) -- Financial advisory services (1,227,078) -- ------------------ ------------------ (1,910,306) (142,011) ------------------ ------------------ NET LOSS $ (10,613,123) $ (1,443,616) ================== ================== BASIC AND DILUTED NET LOSS PER SHARE $ (0.34) $ (0.18) ================== ================== BASIC AND DILUTED WEIGHTED AVERAGE OUTSTANDING SHARES 31,570,115 8,055,476 ================== ==================
The accompanying condensed notes are an integral part of these financial statements. 5 6 POPMAIL.COM, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
Thirteen weeks ended ------------------------------------------ April 2, April 4, 2000 1999 ------------------ ------------------ OPERATING ACTIVITIES: Net loss $ (10,613,123) $ (1,443,616) Adjustments to reconcile net loss to cash flows from operating activities: Restaurant depreciation 312,784 258,168 Amortization of goodwill 5,456,604 -- Amortization of deferred rent (133,962) 67,966 Amortization of warrant discount 536,522 -- Common stock issued in lieu of compensation -- 197,708 Common stock issued for services and interest 455,498 -- Changes in operating assets and liabilities: Accounts receivable (186,822) -- Inventories (2,353) (41,518) Other current assets 104,545 (378,658) Other assets (363,708) (3,563) Accounts payable (939,441) 2,463,622 Accrued expenses 10,408 97,151 ------------------ ------------------ Net cash provided by (used in) operating activities (5,363,048) 1,217,260 ------------------ ------------------ INVESTING ACTIVITIES: Purchases of property and equipment (2,225,215) (3,913,467) ------------------ ------------------ FINANCING ACTIVITIES: Proceeds from issuance of stock 7,894,502 -- Proceeds from issuance of preferred stock 100,000 -- Proceeds from exercise of options and warrants 5,848,125 -- Proceeds from short-term notes payable -- 1,125,000 Proceeds from long-term debt -- 1,000,000 Tenant allowance collected -- 1,000,000 Advances from shareholder -- 50,000 Payments on advances from shareholders and officers (120,000) 98,842 Payments on short-term notes payable (5,554,695) -- Payments on long-term debt (45,825) (26,132) ------------------ ------------------ Net cash provided by financing activities 8,122,107 3,247,710 ------------------ ------------------ INCREASE IN CASH AND EQUIVALENTS 533,844 551,503 CASH AND EQUIVALENTS, beginning of period 1,136,137 106,247 ------------------ ------------------ CASH AND EQUIVALENTS, end of period $ 1,669,981 $ 657,750 ================== ================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 116,552 $ 95,447 Non-cash item - landlord allowance receivable -- 962,500
The accompanying condensed notes are an integral part of these financial statements. 6 7 POPMAIL.COM, INC. CONDENSED NOTES TO THE FINANCIAL STATEMENTS APRIL 2, 2000 (UNAUDITED) NOTE A - NATURE OF THE BUSINESS PopMail.com, inc. ("the Company" or "PopMail"), consists of two divisions, the restaurant division and the e-mail services division. 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 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month period ended April 2, 2000 are not necessarily indicative of the results that may be expected for the year as a whole. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended January 2, 2000. 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. 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. 7 8 POPMAIL.COM, INC. CONDENSED NOTES TO THE FINANCIAL STATEMENTS (CONT.) APRIL 2, 2000 (UNAUDITED) As of April 2, 2000 and January 2, 2000, 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. NOTE C - BUSINESS COMBINATION On February 9, 2000, the Company completed its merger with IZ.com Incorporated ("IZ.com"), a development stage online convergent media company. The merger was accounted for under the purchase method of accounting with the operations of IZ.com included in the Company's consolidation as of that date. The former stockholders of IZ.com were issued 287,408 shares of 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 currently convertible into common at a rate of 12.977 shares for each share of Series F Preferred. 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 will 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. These financial statements have been prepared assuming shareholder ratification of the merger. With closing costs, the total consideration plus the fair value of the net liabilities assumed resulted in approximately $50,205,000 of goodwill being created in the merger, 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 a net loss of approximately $5,000,000, representing start-up expenses. NOTE D - SHAREHOLDERS' EQUITY Preferred Stock 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 the quarter ended April 2, 2000, 575 shares of Series C were converted into 374,570 shares of common stock leaving 30 shares outstanding at period end. 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 the market value at the time of conversion. During the quarter ended April 2, 2000, all 2200 shares of Series D were converted into 965,647 shares of common stock. Series E - Beginning in October 1999, the Company began issuing shares of Series E convertible preferred stock with a stated value of $2.00 per share in a private placement. As of April 2, 2000, the Company has issued 225,000 shares. 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. 8 9 POPMAIL.COM, INC. CONDENSED NOTES TO THE FINANCIAL STATEMENTS (CONT.) APRIL 2, 2000 (UNAUDITED) Series F - In connection with the IZ.com merger, 287,408 shares of Series F convertible preferred stock were issued to the former stockholders of IZ.com, with an additional 130,508 shares issuable upon the exercise of IZ.com options assumed by PopMail. The Series F shares are currently convertible into shares of the Company's common stock at a rate of 12.977 shares for each share of Series F preferred stock. 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. The Series F preferred stock (including shares issuable upon exercise of IZ.com options) will convert into approximately 10,725,000 shares of the Company's common stock. Private Placements During the quarter ended April 2, 2000, the Company completed a private placement offering of 2,350,000 units priced at $1.00 per unit. Each unit consisted 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. Also during the quarter ended April 2, 2000, the Company completed a second private placement offering of 2,666,667 units priced at $2.25 per unit. Each unit consisted 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. The proceeds from these private placements were used to repay the Company's obligations to affiliates and all but $1,000,000 of the Company's $6,037,518 notes payable outstanding at January 2, 2000. Such proceeds were also used to fund the continuing operating needs of the Company. NOTE E - CONTINGENCIES The Company is involved in various legal actions arising 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 F - NOTES PAYABLE Notes payable consists of the following:
April 2, January 2, 2000 2000 ------------- ------------ Short-term revolving line of credit $ 1,000,000 $ 2,000,000 Short-term revolving loan -- 825,000 Short-term promissory notes, net of discounts -- 2,082,823 Other (a) 879,596 129,695 ------------- ------------ $ 1,879,596 $ 6,037,518 ============= ============
(a) The April 2, 2000 balance represents short term notes assumed in the IZ.com merger. 9 10 POPMAIL.COM, INC. CONDENSED NOTES TO THE FINANCIAL STATEMENTS (CONT.) APRIL 2, 2000 (UNAUDITED) NOTE G - BUSINESS SEGMENTS The Company operates in two reportable segments, restaurant operations and e-mail services. The e-mail marketing services segment began in the third quarter of 1999. Beginning in 2000, the Company's general, administrative and development expenses are included in the e-mail services segment, with the exception of those expenses directly attributable to the restaurant division. Information relating to these segments for the first quarter of 2000 are as follows:
Restaurant e-mail operations services Total ------------- ------------- ------------- Net revenues $ 2,446,198 $ 377,405 $ 2,823,603 Loss from operations (180,312) (8,522,505) (8,702,817) Total assets 14,218,461 86,919,355 101,137,816
NOTE H - SUBSEQUENT EVENTS Related Party Transaction In April 2000, the Company advanced the sum of $245,000 to a partnership controlled by an individual who is a significant shareholder, director and executive officer of the Company. Under the terms of the note receivable issued by the partnership to the Company, the entire principal plus interest accruing at the rate of 5.74% per annum is due to the Company in March 2002. The partnership has pledged 122,500 shares of the Company's common stock as security for the note. Proceeds of the advance were used to purchase additional shares of the Company's stock issued in connection with the ROI acquisition. Accordingly, this note will be classified as a reduction of shareholders' equity in the accompanying financial statements. Warrants In April 2000, the Company re-priced 250,000 previously issued $5.00 per share warrants to $2.00 per share, to induce a warrant holder to exercise warrants previously issued. Private Placement In April 2000, the Board authorized the private placement of up to 700,000 shares of Series G 10% convertible preferred stock. As of May 15, 2000, the Company has issued 600,000 shares at a price of $10 per share. The issuance included an original discount of $1,500,000 and investment banking fees and expenses of $500,000 relating to such share issues, resulting in net proceeds of approximately $4,000,000. In addition, the Company issued warrants for the purchase of 500,000 shares of common stock at $2.51 per share. The Series G shares are convertible into the Company's common stock at a variable price ranging from 97% to 91% of the market value at the time of conversion, subject to certain holding periods as defined in the agreement. Investment Banker Agreement In April 2000, the Company entered into a two-year investment banking agreement with Sands Brothers & Co., LTD. of New York. Sands Brothers will advise the Company on merger and acquisition strategies, capital raising activities and corporate development opportunities. In connection with this agreement, the Company issued Sands Brothers 1,000,000 warrants to purchase the Company's common stock, 500,000 warrants with an exercise price of $1.625 per share and 500,000 with an exercise price of $4.00 per share. 10 11 POPMAIL.COM, INC. CONDENSED NOTES TO THE FINANCIAL STATEMENTS (CONT.) APRIL 2, 2000 (UNAUDITED) Pending Business Acquisition On May 15, 2000, the Company announced it had signed a letter of intent to acquire San Francisco based Fan Asylum, Inc. in an all stock transaction. Consummation of the transaction is subject to approval by the Boards of Directors of both of the companies, negotiation and execution of definitive agreements, and certain other closing conditions. 11 12 ITEM 2. POPMAIL.COM, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed financial statements and related notes thereto included elsewhere in this report, and the audited financial statements and notes thereto included in the Company's Form 10-KSB for the fiscal year ended January 2, 2000. 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 targets six main vertical markets: broadcast, media, sports, entertainment, technology and gaming industries. 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 and or desired results achieved. 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 email 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. 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. RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED APRIL 2, 2000 AND APRIL 4, 1999 NET SALES Net sales for the restaurant division increased by $113,566 or 5.0% to $2,446,198 for the thirteen weeks ended April 2, 2000 from $2,332,632 for the thirteen weeks ended April 4, 1999. Sales at the Mall of America Restaurant decreased by $196,306 or 13.6% to $1,247,403 for the thirteen weeks ended April 2, 2000 from $1,443,709 for the thirteen weeks ended April 4, 1999. Sales at Denver Pavilions, which opened March 15, 1999, had net sales for the thirteen weeks ended April 2, 2000 of $1,198,795. The Kenwood Restaurant, which had sales of $501,132 for the thirteen weeks ended April 4, 1999, was closed on August 29, 1999 and the Company is currently finalizing the sale of this restaurant. Net sales for the email services division were $377,405. This represents sales generated by set-up fees, hosting fees, license fees and advertising revenues. 12 13 POPMAIL.COM, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) COSTS AND EXPENSES The restaurant food, beverage and retail costs for the thirteen weeks ended April 2, 2000, were $623,661 compared to $606,587 for the thirteen weeks ended April 4, 1999, an increase of $17,074 or 3.0%. The Mall of America Restaurant had food, beverage and retail costs for the thirteen weeks ended April 2, 2000 of $320,527 compared to the thirteen weeks ended April 4, 1999, of $368,057. The Denver Pavilions Restaurant, which opened March 15, 1999, had food, beverage and retail costs for the thirteen weeks ended April 2, 2000, of $303,134. Restaurant operating expenses, which include labor, direct and indirect expenses, and occupancy expenses for the thirteen weeks ended April 2, 2000, were $1,690,065 compared to $1,716,303 for the thirteen weeks ended April 4, 1999, a decrease of $26,238 or 2.0%. Restaurant depreciation expenses for the thirteen weeks ended April 2, 2000, were $312,784 compared to 258,168 for the thirteen weeks ended April 4, 1999, an increase of $54,616 or 21.2%. This increase is due primarily to the addition of the Denver Pavilions Restaurant, which is a larger, better equipped facility then the Kenwood Restaurant included in the prior year depreciation. Goodwill expense for the thirteen weeks ended April 2, 2000 is $5,456,604. This represents the excess of the purchase price and related costs over the fair value of the net assets that the Company acquired through its mergers and acquisitions. The Company amortizes acquired goodwill on a straight-line basis over a three-year period. The Company's executive and administrative offices had general, administrative and development expenses for the thirteen weeks ended April 2, 2000, of $3,443,306 compared to $480,247 for the thirteen weeks ended April 4, 1999, an increase of $2,963,059. This increase reflects the results of the acquisitions of old popmail, ROI and IZ.com., and the additions of the expenses related to those operations. The Company has relocated all of the email division's executive and administrative functions to the corporate office located in Dallas, Texas. The Company has had to address numerous executive and administrative staffing requirements from its mergers and acquisitions, shareowner relationships, etc. 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 throughout 2000. The Company's other income and expense consists of interest income, interest expense, debt guarantee costs and financial advisory services. The interest expense for thirteen weeks ended April 2, 2000 were $588,959 as compared to $142,049 for thirteen weeks ended April 4, 1999. This increase of $446,910 relates to the increased levels of debt outstanding during the current period and the amortization of financing fees capitalized in raising debt. Of the $588,959 of interest expense, $116,552 was paid in cash. The interest income for thirteen weeks ended April 2, 2000 was $60,731 as compared to $38 for 1999. The Company recorded costs associated with the guarantees provided for debt financing for thirteen weeks ended April 2, 2000 of $155,000. The Company recorded costs associated with services provided by third party financial advisors for thirteen weeks ended April 2, 2000 of $1,227,078. These costs were paid with cash and through the issuance of new common stock and warrants. LIQUIDITY AND CAPITAL RESOURCES The Company had a working capital deficit of $3,102,296 at April 2, 2000, compared to working capital deficit of $8,696,477 on January 2, 2000. Cash and cash equivalents were $1,669,981 at April 2, 2000, representing an increase of $533,844 from the cash and cash equivalents of $1,136,137 at January 2, 2000. During the quarter, the Company completed a private placement of 2,350,000 units valued at $1.00 per unit. Each unit consisted of one share of the Company's common 13 14 stock and one five-year warrant to purchase one share of the Company's common stock with an exercise price of $2.00. Also during the quarter, the Company completed a second private placement of 2,666,667 units valued at $2.25 per unit. Each unit consisted 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. The proceeds from these private placements were used to repay certain amounts owed 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. 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 expansion of the Internet email services division through equity and debt transactions. Although, management believes the Company will have resources sufficient to meet its working capital needs for the next three quarters from its cash on hand, proceeds available from the exercise of stock options and warrants, and potential additional equity and debt financing, there can be no assurance such financing will be available on acceptable terms. 14 15 RISK FACTORS An investment in our common stock is very risky. You may lose the entire amount of your investment. Prior to making an investment decision, you should carefully review this entire prospectus and consider the following risk factors: 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 $10.6 million during the thirteen weeks ended April 2, 2000, $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 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 15 16 for purchasers other than established customers and certain institutional investors and to receive the purchasers' prior 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, Mr. Anderson controlled indirectly or directly, as of that date, approximately 59.6 percent of our outstanding common stock. 16 17 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 38,899,066 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. 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. 17 18 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 May 12, 2000, we have 36,354,928 shares of common stock, 275,000 shares of Series E Convertible Preferred Stock, 287,408 shares of Series F Convertible Preferred Stock outstanding and 600,000 shares of Series G 10% Convertible Preferred Stock. As of May 5, 2000, a further 38,899,066 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; - 16,100,889 shares issuable upon the exercise of outstanding warrants; - a maximum of 7,224,282 shares of common stock reserved for issuance in connection with the Series G 10% Convertible Preferred Stock and upon exercise of certain warrants issued in connection with the Series G Preferred Stock; - 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 18 19 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. 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. 19 20 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. 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. 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. 20 21 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 BROADCAST INDUSTRY, THE LOSS OF ANY SIGNIFICANT AFFILIATE CONTRACTS WOULD NEGATIVELY IMPACT OUR OPERATIONS. The last few years have brought substantial concentration of power among a few players in the broadcast industry. Consequently, significant portions of the industry are controlled by a relatively few organizations. We currently have over 500 clients. As consolidation increases, these contracts may be merged or lost due to the landscape of the industry. In light of such consolidation, however, the loss of any of these significant affiliation contracts or our inability to enter into contracts with other clients in the broadcast industry 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 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 21 22 - 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 EMAIL PROVIDERS MAY HAVE AN ADVERSE EFFECT ON POPMAIL'S FUTURE BUSINESS OPERATIONS. Currently there are a growing number of email providers and competitors to our business. To the extent we can execute our plan and are successful within the current target vertical markets in which we compete (i.e., broadcast, media, sports and entertainment), we anticipate continued growth of members to our email services. Others currently are competing and will attempt to compete in these vertical markets, which may have an adverse affect on our future business operations. THERE IS A RISK THAT GOVERNMENT REGULATION OF THE INTERNET COULD BECOME MORE EXTENSIVE. 22 23 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 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 need 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 23 24 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. 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. 24 25 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 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. 25 26 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. We have established and communicated to our members a privacy policy. In the event that we convey personally identifiable information to our corporate customers without permission or in violation of our 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. 26 27 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. 27 28 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is involved in routine legal actions in the ordinary course of its business. Although outcome of any such legal actions cannot be predicted with certainty, 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 financial position or results of operations of the Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 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 ---- ------------- ---------- --------- ------------- 12/23/99 Warrant to purchase Warrant to Montgomery & Associates In consideration for Common Stock purchase 16,666 financial services shares at an exercise price of $2.00 Various Warrants to purchase Warrants to Stephen D. King Issued in connection dates Common Stock purchase an Jerry L. Ruyan with Guaranty from aggregate of Andrew Green 12/31/99 340,000 shares at to an exercise price 2/29/2000 of $0.75 1/19/2000 Warrants to purchase Warrant to Gulfstream Financial In consideration for Common Stock purchase 700,000 Partners, LLC financial services shares at an exercise price of $2.00 1/19/2000 Units consisting of 2,350,000 Units Certain accredited $2,350,000 common stock and consisting of 1 investors Warrants to purchase share of common Common Stock stock and one warrant to purchase one share of common stock at an exercise price of $2.00 1/26/2000 Warrants to purchase Warrant to Frank W. Terrizzi In consideration for Common Stock purchase 100,000 consulting services shares at an exercise price of $1.00 (1) 1/31/2000 Series E Preferred Series E Preferred Certain accredited $450,000 Stock and Warrants Stock and Warrants investors to purchase Common to purchase an Stock aggregate of 175,000 shares at an exercise price of $3.00 2/9/2000 Warrants to purchase Warrant to Blake Capital Partners, In consideration of Common Stock purchase 150,000 LLC financial services shares at an exercise price of $2.25 2/9/2000 Units consisting of 2,457,608 Units Certain accredited $6,165,878 common stock and consisting of 1 investors Warrants to purchase share of common Common Stock stock and 1 warrant to purchase one share of common stock at an exercise price of $3.00
(1) 50,000 shares vest only if company is sold in taxable event to shareholders. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS 4.1 Form of Warrant to Purchase Shares of Common Stock issued to The Montgomery Fund (MF-1) 4.2 Form of Warrant to Purchase Shares of Common Stock (99 Series) 4.3 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.2 4.4 Warrant to Purchase Shares of Common Stock issued to Frank W. Terrizzi (FT-1) 4.5 Form of Warrant to Purchase Shares of Common Stock (E Series) 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 Warrant to Purchase Shares of Common Stock (2000 Series) 4.8 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.7 4.9 Form of Warrant to Purchase Shares of Common Stock of the Company (GFP and BCP Series)(incorporated herein by reference to Exhibit 4.14 to the Registrant's Annual Report on Form 10-KSB for the year ended January 2, 2000). 4.10 Schedule identifying material details of warrants issued by the Company substantially identical to the warrant filed as Exhibit 4.9. 21 Subsidiaries of the Company 27 Financial Data Schedule (B) REPORTS ON FORM 8-K On January 25, 2000, the Company filed a Current Report on Form 8-K dated January 24, 2000, under Item 5, announcing that a letter of intent had been signed regarding the merger with IZ.com. On February 15, 2000, the Company filed a Current Report on Form 8-K/A dated December 18, 1999, under Item 7, filing the financial statements of ROI Interactive, LLC and the pro forma financial statements of the Company. On February 24, 2000, the Company filed a Current Report on Form 8-K dated February 9, 2000, under Items 2, 5 and 7 announcing the completion of the merger with IZ.com and the appointment of Jesse Berst to the Board of Directors. No financial statements were filed at this time. 28 29 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POPMAIL.COM, INC. By: /s/ Thomas W. Orr ------------------- Thomas W. Orr Chief Financial Officer Date: May 17, 2000 29 EX-4.1 2 WARRANT TO PURCHASE SHARES ISSUED TO (MF-1) 1 EXHIBIT 4.1 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. MF-1 Bloomington, Minnesota December 23, 1999 This certifies that, for value received, THE MONTGOMERY FUND, or its successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") Sixteen Thousand Six Hundred Sixty-Six (16,666) 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 23, 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-4.2 3 WARRANT TO PURCHASE SHARES (99 SERIES) 1 EXHIBIT 4.2 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. 99-X Bloomington, Minnesota January 19, 2000 This certifies that, for value received, _____________________________, or its 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 January 19, 2005, 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 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 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 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-4.3 4 SCHEDULE IDENTIFYING MATERIAL IN EXHIBIT 4.2-FILED 1 EXHIBIT 4.3
DATE WARRANT NUMBER OF EXERCISE PRICE/ ISSUED WARRANT HOLDER NO. SHARES EXPIRATION DATE 1/19/2000 Gulfstream Financial Partners, LLC 99-1 700,000 Exercise Price: $2.00 Expires: 1/19/2005 1/19/2000 Blake Capital Partners, LLC 99-2 250,000 Exercise Price: $2.00 Expires: 1/19/2005 1/19/2000 Wayne W. Mills 99-3 500,000 Exercise Price: $2.00 Expires: 1/19/2005 1/19/2000 Continental Holdings, Ltd. 99-4 350,000 Exercise Price: $2.00 Expires: 1/19/2005 1/19/2000 Ralph H. Grills, Jr. 99-5 100,000 Exercise Price: $2.00 Expires: 1/19/2005 1/19/2000 Barry Hollander 99-6 100,000 Exercise Price: $2.00 Expires: 1/19/2005 1/19/2000 McCandish Partners, Inc. 99-7 50,000 Exercise Price: $2.00 Expires: 1/19/2005 1/19/2000 Falconberg Corporation 99-8 250,000 Exercise Price: $2.00 Expires: 1/19/2005 1/19/2000 US Bank Trust, NA, Trustee FBO 99-9 25,000 Exercise Price: $2.00 William M. Mower IRA Expires: 1/19/2005 1/19/2000 William M. Mower 99-10 25,000 Exercise Price: $2.00 Expires: 1/19/2005
EX-4.4 5 WARRANT TO PURCHASE SHARES ISSUED - FRANK TERRIZZI 1 EXHIBIT 4.4 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. FT-1 Bloomington, Minnesota January 26, 2000 This certifies that, for value received, FRANK W. TERRIZZI., or his successors or assigns ("Holder") is entitled to purchase from PopMail.com, inc. (the "Company") One Hundred Thousand (100,000) 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 January 26, 2005 (the "Warrant Exercise Period") and at an exercise price (the "Exercise Price") of $1.00 per Share, subject to adjustment as herein provided. This Warrant 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) Warrants to purchase 50,000 Shares shall vest on the date hereof. (b) Warrants to purchase the remaining 50,000 Shares granted hereunder shall vest if, and only if, the Company sells all or substantially all of its assets, or is a party to a merger, which results in a taxable event to its shareholders; provided, however, that if the Shares described in this subsection (b) have not vested by January 26, 2001, then all rights with respect to such Shares shall lapse. To the extent vested, this Warrant may be exercised, in part or in full, at any time during the Warrant Exercise Period. 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 2 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 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 2 3 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 (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 3 4 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. 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. 4 5 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-4.5 6 FORM OF WARRANT TO PURCHASE SHARES (E SERIES) 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 POPMAIL.COM, INC. WARRANT NO. E-X Bloomington, Minnesota January 31,2000 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 during the period set forth in Section 1 hereof (the "Warrant Exercise Period"), at an exercise price of $3.00 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 Warrant Exercise Period shall commence on the date hereof and shall expire on January 31, 2003. 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 2 3 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. 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, 3 4 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 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-4.6 7 SCHEDULE INDENTIFYING MATERIAL IN EXHIBIT 4.5 1 EXHIBIT 4.6
DATE WARRANT NUMBER OF EXERCISE PRICE/ ISSUED WARRANT HOLDER NO. SHARES EXPIRATION DATE 1/31/2000 Leonard H. Timmel E-1 50,000 Exercise price: $3.00 Expires: 1/31/2003 1/31/2000 Satya P. Garg E-2 100,000 Exercise price: $3.00 Expires: 1/31/2003 1/31/2000 Christopher Miller E-3 25,000 Exercise price: $3.00 Expires: 1/31/2003
EX-4.7 8 FORM OF WARRANT TO PURCHASE SHARES (2000 SERIES) 1 EXHIBIT 4.7 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. 2000-X Bloomington, Minnesota February 9, 2000 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 February 9, 2005, at an exercise price of $3.00 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 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. Registration Rights. By no later than thirty (30) days from the date hereof, the Company shall, on a one-time basis only, prepare and file a registration statement ("Registration Statement") with the SEC covering the resale of all of the Shares. The Company shall bear the expense of such registration, except that the undersigned shall bear any broker's fees or commissions or fees of its own attorney payable or incurred in connection with the sale of such shares of Common Stock. 5. 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 3 4 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. 6. Company Redemption Option. Notwithstanding anything to the contrary contained in this Warrant, following the effectiveness of the Registration Statement, the Company's Board of Directors shall have the right to redeem the Warrant at a redemption price of $.01 per Share if the average closing price of the Company's Common Stock for any ten (10) consecutive trading days is at least $6.00 per share (as appropriately adjusted for stock splits, stock dividends and combinations). Notice of redemption to the Holder shall be given by mailing via first class mail a notice of such redemption not less than thirty (30) days prior to the date fixed for redemption. Any notice given in 4 5 the manner described above shall be conclusively presumed to have been given whether or not the Holder receives the notice. 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-4.8 9 SCHEDULE IDENTIFYING MATERIAL AS FILED-EXHIBIT 4.7 1
DATE WARRANT HOLDER WARRANT NUMBER OF EXERCISE PRICE/ ISSUED NO. SHARES EXPIRATION DATE 2/9/2000 Timothy I. Maudlin 2000-1 66,667 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Richard C. Lockwood 2000-2 200,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Jeffrey I. Werbalowsky 2000-3 100,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Opportune Investments 2000-4 373,333 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Steven A. Lyman 2000-5 22,222 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Jerry Ruyan 2000-6 44,444 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Edward Hayes 2000-7 10,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Scott and Francis Lee Free, trustees of 2000-8 22,222 Exercise price $3.00 the Fee Family Trust dtd 2/10/67 Expires 2/9/2005 2/9/2000 Robert Seiler 2000-9 44,444 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Arthur Engel Trust 1988 2000-10 222,222 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Warner C. Lusardi Family Trust 2000-11 111,111 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Mary Kirtz 2000-12 50,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Christopher D. Snell 2000-13 20,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Gregory P. Mills Trust 2000-14 10,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Stephen C. Particia A. Tadolini 2000-16 10,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Barry Nussbaum 2000-17 38,888 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Dean and Kathy L. Mills 2000-18 10,000 Exercise price $3.00 Expires 2/9/2005
2
DATE WARRANT HOLDER WARRANT NUMBER OF EXERCISE PRICE/ ISSUED NO. SHARES EXPIRATION DATE 2/9/2000 George M. Nix 2000-19 10,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 US Bank Trust, NA Trustee FBO Bruce D. 2000-20 50,000 Exercise price $3.00 Leduc Expires 2/9/2005 SEP/IRA No. 352130-4 2/9/2000 Bruce Leduc 2000-21 25,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Michael A. Bird 2000-22 20,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 CO Right Investments, Inc. 2000-23 444,444 Exercise price $3.00 Expires 2/9/2005 2/9/2000 A. Larry Katz 2000-25 44,444 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Gerald W. and Sandra L. Rogers 2000-26 10,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Fortman Cline AG 2000-27 222,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 CLB Investments Corp. 2000-28 50,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Stephen Marcus 2000-29 226,167 Exercise price $3.00 Expires 2/9/2005
3
DATE ISSUED WARRANT HOLDER WARRANT NO. NUMBER OF EXERCISE PRICE/ SHARES EXPIRATION DATE 2/9/2000 George M. Nix 2000-19 10,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 US Bank Trust, NA Trustee FBO Bruce D. 2000-20 50,000 Exercise price $3.00 Leduc Expires 2/9/2005 SEP/IRA No. 352130-4 2/9/2000 Bruce Leduc 2000-21 25,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Michael A. Bird 2000-22 20,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 CO Right Investments, Inc. 2000-23 444,444 Exercise price $3.00 Expires 2/9/2005 2/9/2000 A. Larry Katz 2000-25 44,444 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Gerald W. and Sandra L. Rogers 2000-26 10,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Fortman Cline AG 2000-27 222,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 CLB Investments Corp. 2000-28 50,000 Exercise price $3.00 Expires 2/9/2005 2/9/2000 Stephen Marcus 2000-29 226,167 Exercise price $3.00 Expires 2/9/2005
EX-4.10 10 SCHEDULE IDENTIFYING MATERIAL IN EXHIBIT 4.9-FILED 1 EXHIBIT 4.10 SCHEDULE OF WARRANTS ISSUED (GFP SERIES AND BCP SERIES)
DATE OF NAME OF WARRANT RECIPIENT WARRANT NUMBER OF EXERCISE PRICE ISSUANCE NO. SHARES OF EXPIRATION DATE COMMON STOCK 11/3/99 Gulfstream Financial Partners GFP-13 250,000 Exercise price $2.00 2401 PGA Boulevard, Suite 190 Expires 4/28/04 Palm Beach Gardens, FL 33410 11/3/99 Blake Capital Partners, LLC GFP-14 250,000 Exercise price $2.00 Expires 4/28/04 12/2/99 Gulfstream Financial Partners GFP-14(2) 500,000 Exercise price $1.50 Expires 12/2/2004 12/1/99 Henry Fong, Jr. GFP-15a 50,000 Exercise price $1.625 Expires 12/1/2004 12/1/99 Lauren Fong GFP-15b 50,000 Exercise price $1.625 Expires 12/1/2004 12/1/99 Benjamin Private School GFP-15c 50,000 Exercise price $1.625 Fed I.D.: 59-1536502 Expires 12/1/2004 12/1/99 Barry Hollander GFP-15d 50,000 Exercise price $1.625 Expires 12/1/2004 12/1/99 Gulfstream Financial Partners, GFP-15e 150,000 Exercise price $1.625 LLC Expires 12/1/2004 12/2/99 Blake Capital Partners BCP-1 500,000 Exercise price $1.625 Expires 12/1/2004 2/9/2000 Blake Capital Partners BCP-2 150,000 Exercise price $2.25 Expires 2/9/2005 4/18/2000 Blake Capital Partners BCP-3 250,000 Exercise price $2.00 Expires 4/18/2005
EX-21 11 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 SUBSIDIARIES popmail.com (Delaware), inc., a Delaware corporation PopMail Network, Inc., a Texas corporation IZ.com, a Delaware corporation Cafe Odyssey, LLC, a Minnesota limited liability corporation EX-27 12 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-2000 JAN-02-2000 APR-02-2000 1,669,981 0 462,477 0 114,160 2,625,569 20,491,986 3,712,753 101,137,816 5,727,865 1,856,634 0 49,120,477 363,529 40,552,761 101,137,816 2,446,198 2,823,603 623,661 11,526,420 1,971,037 0 588,959 (10,613,123) 0 (10,613,123) 0 0 0 (10,613,123) (0.34) (0.34)
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