-----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, MWWEI8ENWQMC4ngj1dt9qi5IyNFejj21aoHpuJnXtmnyxs8zNK7OeX78gHPoFQpz A3VU06gVx0cDRyKoiXenaA== 0001015402-03-003991.txt : 20031003 0001015402-03-003991.hdr.sgml : 20031003 20031003091833 ACCESSION NUMBER: 0001015402-03-003991 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20031003 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEQUIAM CORP CENTRAL INDEX KEY: 0001123606 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 330875030 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-45678 FILM NUMBER: 03926284 BUSINESS ADDRESS: STREET 1: 300 SUNPORT LANE CITY: ORLANDO STATE: FL ZIP: 32809 BUSINESS PHONE: 4075410774 MAIL ADDRESS: STREET 1: 300 SUNPORT LANE CITY: ORLANDO STATE: FL ZIP: 32809 FORMER COMPANY: FORMER CONFORMED NAME: WEDGE NET EXPERTS INC DATE OF NAME CHANGE: 20000912 10QSB/A 1 doc1.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A (Amendment No. 1) (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to _______________. Commission File Number 333-45678 SEQUIAM CORPORATION (Exact name of registrant as specified in its charter) CALIFORNIA 33-0875030 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 300 SUNPORT LANE, ORLANDO, FLORIDA 32809 (Address, including zip code, of principal executive offices) 407-541-0773 (Registrant's telephone number, including area code) (Former name, former address) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for the such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of the Registrant's Common Stock outstanding as of August 18, 2003 was 40,601,247. DOCUMENTS INCORPORATED BY REFERENCE Transitional Small Business Disclosure Format (Check one): Yes [_] No [X] ================================================================================ FORM 10-QSB/A INDEX Page PART I: FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 3 ITEM 1. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 4 Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . 4 Condensed Consolidated Statements of Operations . . . . . . . . . . . . . . 5 Condensed Consolidated Statements of Stockholders' Deficit. . . . . . . . . 6 Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . 7 Notes to Condensed Consolidated Financial Statements. . . . . . . . . . . . 9 ITEM 3. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . 23 PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 23 ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 23 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a). . . . . . . . . . . . . . . . 30 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2 SEQUIAM CORPORATION Form 10-QSB/A EXPLANATORY NOTE ---------------- We hereby amend our 10-QSB for the period ended June 30, 2003, to correct an error on the balance sheet and to clarify information presented in Notes 8 and 9 to the financial statements. PART I: FINANCIAL INFORMATION ----------------------------- This Quarterly Report on Form 10-QSB includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. These include, among others, the statements about our plans and strategies. When used in this document and the documents incorporated herein by reference, the words "believes," "expects," "anticipates," "intends," "plans," "estimates," or similar expressions are intended to identify, in certain circumstances, forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed in forward-looking statements. Although it is not possible to itemize all of the factors and specific events that could affect the outlook of a technology company like ours operating in a competitive environment, factors that could significantly impact expected results include: the acceptance of our technology; the effect of national and local economic conditions; our outstanding indebtedness; the loss of key employees; competition from technologies developed by other companies; the ability to attract and retain employees; delays in completing the development of our new products caused by a lack of capital or external causes beyond our reasonable control; and the ability to identify and consummate relationships with strategic partners. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure that such plans, intentions or expectations will be achieved. Actual results may differ materially from the forward-looking statements made in this Quarterly Report on Form 10-QSB. We do not intend to update any forward-looking statements, and we hereby disclaim any obligation to update such forward-looking statements. 3
ITEM 1. FINANCIAL STATEMENTS - ---------------------------- SEQUIAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 2003 (Unaudited) December 31, 2002 --------------- ------------------- ASSETS Current assets: Cash $ 40,210 $ 85,922 Accounts receivable, net 45,958 41,141 Prepaid expenses 84,500 - Equipment held for sale 40,706 177,080 --------------- ------------------- Total current assets 211,374 304,143 --------------- ------------------- Property and equipment, net 1,294,637 1,375,398 Software development costs, net 136,145 131,939 Acquired software, net 252,393 288,000 Acquired intellectual properties, net 843,830 - Deposits and other assets 7,800 7,800 --------------- ------------------- Total assets $ 2,746,180 $ 2,107,280 =============== =================== LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Amount due for acquisition $ 44,630 $ 288,457 Accounts payable 674,337 646,331 Accrued expenses 33,109 64,783 Loan from shareholders 795,450 795,450 Stock subscriptions payable 2,266,828 - Accrued shareholder salaries 1,034,792 854,792 --------------- ------------------- Total current liabilities 4,849,146 2,649,813 --------------- ------------------- Long-term debt 1,305,556 1,291,092 --------------- ------------------- Total liabilities 6,154,701 3,940,905 --------------- ------------------- Shareholders' deficit: Common shares 37,382 35,463 Additional Paid-in capital 1,202,898 42,565 Accumulated deficit (4,648,801) (1,911,653) --------------- ------------------- Total shareholders' deficit (3,408,521) (1,833,625) --------------- ------------------- Total liabilities and shareholders' deficit $ 2,746,180 $ 2,107,280 =============== ===================
See accompanying notes to condensed consolidated financial statements. 4
SEQUIAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------------------------------------------ 2003 2002 2003 2002 ------------------------------------------------------ Net sales $ 110,910 $ 213,315 $ 234,104 $ 238,315 Costs and expenses: Software and web development costs 136,941 58,473 278,804 58,473 Non-cash compensation 1,486,895 - 1,547,895 - Selling, general and administrative 394,923 177,295 823,667 258,221 Depreciation and amortization 115,032 5,080 197,871 9,931 ------------------------------------------------------ 2,133,791 240,848 2,848,237 326,625 ------------------------------------------------------ Loss from operations (2,022,881) (27,533) (2,614,133) (88,310) Gain (Loss) on sale of equipment 2,431 (116,439) - Gain on debt settlement 37,315 37,315 Interest expense (25,906) (268) (43,890) (1,104) ------------------------------------------------------ Net loss $(2,009,041) $ (27,801) $(2,737,147) $ (89,414) ====================================================== Net loss per common share: Basic and diluted $ (0.06) $ (0.00) $ (0.08) $ (0.01) ====================================================== Weighted average common shares outstanding: Basic and diluted 36,082,226 24,233,000 36,082,226 14,483,000 ======================================================
See accompanying notes to condensed consolidated financial statements. 5
SEQUIAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT Six months Ended June 30, 2003 (Unaudited) Common Shares -------------------------- Additional Shares Par Paid-in Accumulated Outstanding Value Capital Deficit Total ------------------------------------------------------------------- Balance at December 31, 2002 35,462,609 $ 35,463 $ 42,565 $ (1,911,653) $(1,833,625) Sale of common shares 1,301,667 1,301 349,951 351,252 Beneficial conversion features on long- term debt 400,000 400,000 Common shares issued for services 300,000 300 260,700 261,000 Common shares issued for acquisition of WMW Communications 318,471 318 149,682 150,000 Net Loss (2,737,147) (2,737,147) ------------------------------------------------------------------- Balance at June 30, 2003 37,382,747 $ 37,382 $1,202,898 $ (4,648,801) $(3,408,521) ===================================================================
See accompanying notes to condensed consolidated financial statements. 6
SEQUIAM CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six months Ended June 30, 2003 2002 ------------ --------- Cash flows from operating activities: Net loss $(2,737,147) $(63,545) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 197,871 - Accretion of debt discount 18,750 - Issuance of common stock in exchange for services 261,000 - Loss on sale of equipment 41,139 - Loss on impairment of equipment held for sale 75,000 - Gain on debt settlement (37,315) - Increase in accounts receivable (4,817) - Increase in prepaid expenses and other assets (84,500) - Increase in accounts payable 20,691 - Increase in accrued shareholders salaries 180,000 138,000 Decrease in other accrued expenses (2,113) - Stock subscriptions payable for services 1,366,895 - ----------------------- Net cash used for operating activities (704,546) $ 74,455 ------------ --------- Cash flows from investing activities: Equipment purchases - (2,759) Proceeds from sales of equipment 19,732 - Cash paid for WMW Communications (93,827) - Software development costs capitalized (14,037) (27,021) ------------ --------- Net cash used for investing activities (88,132) (29,780) ------------ --------- Cash flows from financing activities: Proceeds from bridge loan 250,000 - Proceeds from debenture 150,000 - Sale of common stock 351,252 2,000 Repayment of note payable (4,286) - ------------ --------- Net cash provided by financing activities 746,966 2,000 ------------ --------- Net change in cash (45,712) 46,675 Cash, beginning of period 85,922 - ------------ --------- Cash, end of period $ 40,210 $ 46,675 ============ =========
See accompanying notes to condensed consolidated financial statements. 7
SEQUIAM CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Continued) (Unaudited) Non-cash activities: 2003 2002 - -------------------- -------- -------- Common Stock issued for acquisition of WMW Communications $150,000 - Beneficial conversion feature on convertible debt $400,000 -
See accompanying notes to condensed consolidated financial statements. 8 SEQUIAM CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 -Description of Business Sequiam Corporation ("Sequiam" or the "Company") through its wholly owned subsidiaries, Sequiam Software, Inc. and Sequiam Communications, Inc., develops, markets, and supports a portfolio of Internet and print enterprise-wide software products that enable users to acquire, manage, personalize, and present information. In addition, the Company provides application service provider ("ASP") hosting of Internet-enabled solutions, Internet service provider ("ISP") including Internet access and hosting, consulting, application integration, and custom web development and software development services. ASP and ISP hosting is performed using the Company's software and facilities to provide processing, print, mail, archival, and Internet delivery of documents for customers who outsource this activity. On May 9, 2003, the Company acquired substantially all of the assets of Smart Biometrics, Inc. (see Note 9). Effective April 1, 2002, Sequiam Corporation (f/k/a Wedge Net Experts, Inc.), through its wholly owned subsidiary, Sequiam Acquisitions, Inc., merged with Sequiam, Inc. and Sequiam Acquisitions, Inc. survived the merger. Sequiam Acquisitions, Inc. changed its name to Sequiam Software, Inc. on May 1, 2002. Pursuant to the merger agreement, Sequiam Corporation issued 20,000,000 shares of common stock in exchange for all of the outstanding shares of common stock of the Company, consisting of 20,000,000 shares. Additionally, pursuant to the merger agreement, 500,000 shares of Sequiam Corporation's common stock were returned to treasury and cancelled. As a result, the former shareholders of the Company obtained 82.53% of the voting rights of Sequiam Corporation. The transaction was accounted for as a recapitalization of Sequiam Corporation and the results of operations and cash flows presented herein prior to the merger are those of Sequiam, Inc. Sequiam, Inc. was incorporated in Delaware on January 23, 2001 (date of inception) to research, develop, produce and market a document management software product. Since inception, the Company's primary activities have consisted of research and development, and software development activities. Accordingly, the Company had not generated any significant revenues. During 2002, the Company acquired the Brekel Group, Inc. and WMW Communications, Inc. doing business as Access Orlando, and began offering web development, Internet and web hosting and custom software development, while continuing its software development activities. During the Six months ended June 30, 2003, the Company paid $93,827 in cash and $150,000 in common shares related to the acquisition of Access Orlando and the remaining amount due for this acquisition was $44,630 as of June 30, 2003. Note 2 - Summary of Significant Accounting Policies Basis of Presentation - ----------------------- The Company, under the rules and regulations of the Securities and Exchange Commission, has prepared the unaudited condensed consolidated financial statements. The accompanying condensed consolidated financial statements contain all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of such financial statements. 9 Certain information and disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted under such rules and regulations although the Company believes that the disclosures are adequate to make the information presented not misleading. The year-end balance sheet data was derived from the audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes for Sequiam Corporation included in Form 10-KSB filed for the year ended December 31, 2002. Interim results of operations for the periods presented may not necessarily be indicative of the results to be expected for the full year. Net Loss per Common Share - ----------------------------- Basic and diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Common stock warrants are included in the calculation of diluted earnings per common share using the treasury stock method, when the result is dilutive. Common shares underlying the convertible debenture are included in the calculation of diluted earnings per common share using the if-converted method when the result is dilutive. Potential common shares underlying outstanding warrants were 2,400,000 as of June 30, 2003. Potential common shares underlying the convertible debenture are contingent upon certain factors as described in Note 7. Principles of Consolidation - ----------------------------- The consolidated financial statements include the accounts of Sequiam Corporation and its subsidiaries Sequiam Software, Inc., Sequiam Biometrics, Inc., Sequiam Education, Inc. and Sequiam Communications, Inc (the "Company"). All intercompany transactions and accounts have been eliminated. Note 3 -Managements' Plan The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Sequiam has accumulated significant operating losses, a working capital deficit and produced minimal revenues since inception. During the first quarter of 2003 and April 2003, the Company obtained financing from La Jolla Cove Investors, Inc. (the "Investor") as well as additional financing from the sale of its common stock and a loan agreement (see Notes 7, 8 and 9). In addition, the Company has begun to generate revenues on a consistent basis. With the proceeds expected to be received from the Investor, the Company will fund continuing product development and the marketing of the products developed by the Company. The company will also actively seek new acquisitions of proven products and technologies. Management plans to continue to seek additional financing in the form of a private placement of common and preferred stock, debt or some combination thereof to supplement its financing arrangement with the Investor. 10 With the proceeds from the financings described above along with the expected increase in revenues from the sale of the Company's existing products and services, the Company believes there will be sufficient working capital during the next 12 months to support operations during that period. The Company's ability to continue as a going concern remains dependent upon its ability to meet the requirements of its financing agreement with the Investor and execute its business plan. Note 4 - Commitments and Contingencies On October 1, 2002, the Companies Chief Executive Officer and Chief Financial Officer entered into amended and restated employment agreements with Sequiam Corporations and its Subsidiaries. The amended agreements replace separate agreements with Sequiam, Inc. and Brekel Group, Inc. The agreements have an initial term of two years with automatic one-year renewals. The agreements provide for compensation in the form of minimum annual salary of $185,000 and $175,000 respectively, and allow for bonuses in cash, stock or stock options and participation in Company benefit plans. Full time employment is a requirement of the contract. In the event that a change in control of the Company occurs without the prior approval of the then existing Board of Directors, then these contracts will be deemed terminated and compensation of $5 million is payable at termination and $1 million annually for five years subsequent to termination will be due and payable to each employee. Included in accounts payable and accrued expenses at June 30, 2003 are un-reimbursed business expenses of $57,624 and $24,890 owed to Nicholas VandenBrekel and Mark Mroczkowski, respectively. The Company is involved in various claims and legal actions incidental to the normal conduct of its business. On or about October 3, 2002, General Electric Capital Corporation ("GE") filed a lawsuit against Brekel Group, Inc. ("Brekel"), in the Circuit Court of the 9th Judicial Circuit in and for Orange County, located in Orlando, Florida. GE claims that Brekel owes a deficiency balance in the amount of $93,833 for three digital copiers rented under a lease agreement. Brekel has returned possession of the copiers to GE, but Brekel disputes the claim for damages. The court has entered no decisions to date. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company based upon the value of the equipment returned to GE. Brekel entered into a note payable with Xerox Corporation in November 2000 to finance equipment. Brekel also entered into a Document Services Agreement ("Agreement") with Xerox Corporation on November 1, 1999 commencing April 1, 2000. During the 63-month term of the Agreement ending June 30, 2005, Xerox agreed to provide equipment and services in accordance with specified performance standards. Those standards include, among other things, a performance satisfaction guaranty by Xerox. Under the terms of that guaranty, Brekel may terminate the agreement without incurring any early termination charges. Brekel did in March 2001 give proper notice of such termination. On September 3, 2002 Xerox did, contrary to the contract, assert its claim for early termination charges and for monthly minimum service charges on billings made after the termination date. The Company disputes these claims and believes them to be without merit. 11 A competing web-development company has posted an alternative web site for the World Olympian Association ("WOA"), claiming such right was granted to it by the WOA. We are seeking to resolve this conflict with the WOA without resort to litigation. This dispute will not affect our publication of the print magazine "World Olympian," but it has the potential to result in the loss of revenue from the WOA web site. We do not believe the loss of such revenue will have a material, adverse effect on our overall business. Note 5 - Income taxes The Company records income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." The Company has incurred net operating losses since inception resulting in a deferred tax asset, for which a valuation allowance was provided since it is more likely than not that the deferred tax asset will not be realized. Note 6 - Long-lived Assets Held for Disposal The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an investment may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. In connection with the acquisition of Brekel in July 2002, the Company reclassified production equipment acquired from Brekel that is no longer being used for operations to equipment held for disposal. During the Six months ended June 30, 2003, the Company recorded an impairment loss of $75,000 to reduce the equipment to fair market value. The Company believes that $40,706 as of June 30, 2003, is a reasonable estimate of the current fair market value for the remaining equipment to be disposed. The Company expects to sell this remaining equipment by December 30, 2003. Note 7 - Convertible Debenture Sequiam entered into a Securities Purchase Agreement with La Jolla Cove Investors, Inc. (the "Investor"), dated March 5, 2003, pursuant to which it delivered to Investor an 8% Convertible Debenture in the amount of $300,000, convertible into our common stock, and a Warrant to Purchase Common Stock. Upon closing on March 7, 2003, Sequiam received $150,000 less attorneys fees of $2,500, of the total $300,000 principal amount of the 8% Convertible Debenture. When the Securities and Exchange Commission declares this registration statement filed on April 25, 2003, effective, the Company will receive the balance of $150,000. On April 16, 2003, the terms of the debenture and warrant agreement were amended, as set forth in separate letter agreement with the Investor. The conversion rate of the debenture is determined based upon the market rate of our stock as reported on the OTCBB at the time the 12 debenture is converted. If the Market Rate is greater than $0.625, then the debenture will be converted into less than 4,600,000, but equal to or greater than 200,000 shares of common stock. If the Market Rate is $0.625, then the debenture will be converted into 600,000 shares of common stock. If the Market Rate is less than $0.625 but equal to or greater than $0.082, then the debenture will be converted into more than 600,000 but less than 4,600,000 shares of common stock. If the Market Rate is less than $0.082, then the debenture will be converted into more than 4,600,000 shares of common stock. In the event that the debenture is converted at a time when the Market Rate is equal to or less than $0.625, then the company has the option of repaying the debenture in lieu of conversion at 150% of the amount being converted. The company intends to prepay the Debenture if it would convert into more than 4,600,000 shares. The Investor may convert a maximum of 10% of the principal into our common stock during any month. Under the terms of the amended warrant, the Investor received a warrant to purchase 2,000,000 shares of our common stock, at an exercise price of $1.50 per share. The warrant will expire in March 2006. As of the date of filing this report, the Investor had not exercised any portion of the warrant or converted any portion of the debenture, and no shares of common stock have been issued relative to these agreements. Sequiam is obligated to register the sale of the underlying common stock to be issued upon conversion of the debenture and the exercise of the warrant. Upon the effective date of the registration statement, we will receive the balance of the principal amount of the debenture. Beginning the second full month following the effectiveness of such registration statement, we have the right to cause the Investor to convert at least 5% of the debenture each month and provided that the market price of the Company's common shares is above $0.625, to exercise a portion of the warrant equal to the product of the dollar amount of the debenture being converted multiplied by ten, divided by 1.5 (which will result in the exercise of at least 5% of the related warrant, per month). In the event the Investor breaches the provision to convert at least 5% of the original principal amount of the debenture and exercise the related warrant, the Investor shall not be entitled to collect interest on the debenture for that month. At the time the debenture has been fully converted and the warrant has been fully exercised, the Company will issue additional warrants to the Investor in an amount equal to 6,600,000 minus the number of shares issued to the Investor pursuant to the conversion of the debenture and exercise of the warrants. The additional warrants will have an exercise price of $1.50 per share and will expire three years from the date of issuance. The 8% Convertible Debenture contains a beneficial conversion feature since the calculated conversion amount is lower than the Company's stock price at the date of the agreement. In accordance with EITF 00-27, since the fair value of the beneficial conversion feature exceeded the amount of the proceeds received from the debenture, the Company recorded the beneficial conversion feature as a debt discount of $150,000, which is equal to the proceeds received. The debt discount is being amortized over the life of the debenture of 24 months. As of June 30, 2003, the balance of the debenture, net of the unamortized debt discount of $131,250 was $18,750 and is included in long-term debt. 13 The number of shares to be issued to the selling security holder upon conversion of the 8% Convertible Debenture depends upon the trading price of our common stock. If the selling security holder receives less than 6,600,000 shares of common stock after conversion of the entire amount of the 8% Convertible Debenture and exercise of the entire amount of the Warrant to Purchase Common Stock, then we have agreed, pursuant to the letter agreement dated April 16, 2003, to issue to the selling security holder the difference between 6,600,000 shares and the number of shares received upon conversion of the debenture and exercise of the warrant, at a purchase price of $1.50 per share (regardless of market rate). This right will expire three years after the conversion of the 8% Convertible Debenture. The excess of the aggregate fair value of the common stock that La Jolla would receive upon conversion of the debenture over the total debenture amount ($300,000) depends on the Company's market price. Assuming conversion of the debenture when market prices are $.10, $.0625, $1.00 and $1.88 and assuming the Company did not elect to prepay the debenture when the market rate was at or below $.625, the aggregate excess fair value of the common stock issued over the debenture amount of $300,000 would be approximately $75,000, $75,000, $1,825,000 and $76,000, respectively. When the market price is above $.625 but below $1.88, the excess fair value of the common stock issued over the loan amount would decrease by approximately $200,000 for each $0.10 increase in the market price. Beginning thirty (30) days after this registration statement is declared effective by the Securities and Exchange Commission, the selling security holder has agreed to convert at least 5% but no more than 10% of the 8% Convertible Debenture and exercise at least 5% but no more than 10% of the related Warrant to Purchase Common Stock, per month. However, the selling stockholder has contractually agreed to restrict its ability to convert or exercise its warrants and receive shares of our common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. Sequiam has agreed not to pay any accrued salaries or shareholder loans that are presently outstanding until after the 8% Convertible Debenture is paid in full or converted, except to the extent that any such accrued salaries or shareholder loans are used to perform obligations under a Put and Call Agreement between Nick VandenBrekel, Mark Mroczkowski and the Investor, or unless the Company can pay the accrued salaries out of the proceeds of any additional financing we might obtain. Note 8 - Loan Agreement On May 13, 2003, Sequiam Corporation entered into a loan agreement ("Note") with Lee Harrison Corbin, Attorney-in-Fact For the Trust Under the Will of John Svenningsen, for a principal loan amount of $400,000 under a promissory note bearing interest at five percent (5%) interest. As of the date of the financial statements, Sequiam Corporation had received $250,000 as advances under the Note. The remaining loan proceeds of $150,000 were disbursed in July 2003. In connection with this note, Sequiam Corporation issued two warrants to the holder to purchase 625,000 shares of its common stock at an exercise price of $0.01 per share and 350,000 shares of its common stock at $1.00 per share. The Warrants for 625,000 shares were exercised 14 on June 25, 2003 and the warrants for 350,000 expire in May 2008. The Note contains a beneficial conversion feature since the calculated conversion amount is lower than the Company's stock price at the date of the agreement. In accordance with EITF 00-27, since the fair value of the beneficial conversion feature exceeded the amount of the proceeds received from the Note, the Company recorded the beneficial conversion feature as a debt discount of $250,000, which is equal to the proceeds received. The debt discount is being amortized over the life of the Note of 36 months. As of June 30, 2003, the balance of the Note, net of the unamortized debt discount of $250,000 was $-0- and is included in long-term debt. The outstanding principal balance, together with any and all accrued unpaid interest and any other amounts due and owing under this Note, shall be due and payable on the date that is the earlier of (a) the date that the exercise price is paid to Sequiam Corporation for any portion of the warrants by La Jolla Cove Investors, Inc. (see Note 7), or (b) the date the La Jolla Warrant expires in March 2006. The principal payments to the holder will be made in a percentage of the obligation that is equal to the percentage of the total warrants exercised by La Jolla, such that the Note is fully repaid as the Warrants are exercised by La Jolla. Unless otherwise specifically provided for in the Note, all Note payments shall be applied first to interest and then to principal. Note 9 - Capital Stock During the Six months ended June 30, 2003, the Company issued 210,000 common shares for business advisory services and technology transfer services valued at $171,000 based on the Company's quoted market price on the date of the related agreements. In addition, the Company issued 90,000 shares for investor and public relations services valued at $90,000 in April 2003. On January 2, 2003, Sequiam Corporation sold an aggregate of 10,000 shares of its common stock to two accredited investors at a price of $1.00 per share for proceeds of $10,000. On February 6, 2003, Sequiam Corporation sold an aggregate of 266,667 shares of its common stock to one accredited investor at a price of $0.75 per share for proceeds of $200,002, less a commission of $20,000 for net proceeds of $180,002. On April 25, and June 23, 2003, Sequiam Corporation sold an aggregate of 400,000 shares of its common stock to that same accredited investor at a price of $0.50 per share for proceeds of $200,000, less a commission of $20,000 for net proceeds of $180,000. Sequiam Corporation also granted warrants to this accredited investor to purchase: 800,000 shares of its common stock at $1.50 exercisable through February 6, 2007; one million shares of its common stock at $0.75 exercisable through April 25, 2007; and one million shares of its common stock at $0.75 exercisable through June 23 2007 In connection with such sales, Sequiam Corporation relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. This investor represented in writing that the shares were being acquired for investment and, in addition, the certificates representing the shares bear a restrictive securities legend. The Company agreed to issue 1,553,500 shares for investment banking, investor and public relations, and employee services valued at $1,366,895, which was included in accrued expenses. The 1,553,500 shares were issued in July 2003. 15 The Company also agreed to issue 1,500,000 shares valued at $750,000 for the acquisition of the assets of Smart Biometrics, Inc. on May 9, 2003, and 165,000 shares valued at $149,993 for the acquisition of the assets of Telepartners, Inc. on June 1, 2003. The $899,993 value of the shares was included in current liabilities as stock subscriptions payable and the shares were issued in July 2003. Note 10 - Acquisitions On May 9, 2003, Sequiam Biometrics, Inc., a wholly owned subsidiary of Sequiam Corporation formed on April 21, 2003, acquired substantially all of the assets of Smart Biometrics, Inc. of Sanford, Florida. In consideration for the assets, Sequiam Corporation issued a total of 1,500,000 shares of its common stock to Smart Biometrics, Inc. Smart Biometrics, Inc. is engaged in the development of biometric technologies. The assets acquired by Sequiam Biometrics, Inc. include the BioVault(TM), which is a secure safe that utilizes patent pending technology and protocols to recognize a person's fingerprint to unlock. On June 1, 2003, Sequiam Education, Inc., a wholly owned subsidiary of Sequiam Corporation formed on May 30, 2003, acquired substantially all of the assets of Telepartners, Inc. of West Palm Beach, Florida. In consideration for the assets, Sequiam Corporation issued a total of 165,000 shares of its common stock to Telepartners, Inc. Telepartners, Inc. is engaged in the development of supplemental educational products for schoolchildren in grades 1 through 12. The assets acquired by Sequiam Biometrics, Inc. include the Extended Classroom(TM), which is a supplemental, educational program consisting of a video lesson library of the very lesson concepts that are taught in our public school classrooms in the United States. Each lesson summary has been produced in high quality and digitally mastered, allowing for Internet and television broadcast distribution as well as being offered in CD and video formats ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Recent Developments - -------------------- On May 9, 2003, we acquired substantially all of the assets of Smart Biometrics, Inc., a Florida corporation, in exchange for 1,500,000 shares of our common stock. Smart Biometrics, Inc. developed biometric technology and a product called "BioVault." The technology uses an electronically read fingerprint as a key for a secure locking system. The technology is different from currently existing patented fingerprint-recognition technology because it uses an electronically read fingerprint entry system with no mechanical over-ride and no digital photographs that are more susceptible to tampering. The technology is intended to provide a more secure locking device with faster entry. We acquired the patent application for the BioVault device. We expect the application process to take another 18 months. In the meantime, we have been issued a provisional patent that if the patent is issued, will cause the date of the issuance of the patent to relate back to the initial filing date of the application in March 2003. 16 Smart Biometrics, Inc.'s activities were limited to research and development and a patent application. We acquired the technology, the BioVault device and the patent application. Smart Biometrics, Inc. had no operating history, and therefore, there is no historical financial information regarding our newly-acquired assets. Accordingly, the acquisition was accounted for as a purchase of the assets. We intend to use the BioVault device to create safety locks for guns. We are focusing on refining the prototype for the BioVault device into a final model. We have received a product endorsement from the National Rifle Association, establishing a distributor and dealer network and establishing procedures for direct sales. We have begun to receive revenue from these sales in the third quarter of 2003. On June 1, 2003, we acquired substantially all of the assets of Telepartners, Inc. a Florida corporation, in exchange for 165,000 shares of our common stock. Telepartners, Inc. is engaged in the development of supplemental educational products for schoolchildren in grades 1 through 12. The assets acquired by Sequiam Biometrics, Inc. include the Extended Classroom(TM). The Extended Classroom is a supplemental, educational program consisting of a video lesson library of the very lesson concepts that are taught in our public school classrooms in the United States. Each lesson summary has been produced in high quality and digitally mastered, allowing for Internet and television broadcast distribution as well as being offered in CD and video formats. Quarter Ended June 30, 2003 compared to Quarter Ended June 30, 2002. - -------------------------------------------------------------------- Revenues We derive or plan to derive our revenues from five sources: (i) the sale and licensing of our software products; (ii) consulting, custom software services and web development services; (iii) maintenance agreements in connection with the sale and licensing of software products; (iv) Internet access and web hosting services; (v) sales of the BioVault(TM). We have not yet generated revenues from the sale or licensing of our software products (excluding custom software projects) or the BioVault(TM). Software license revenue will be recognized when all of the following criteria have been met: (a) there is an executed license agreement, and software has been delivered to the customer, (b) the license fee is fixed and payable within twelve months, (c) collection is deemed probable, and (d) product returns are deemed reasonably estimable. Maintenance revenues are recognized ratably over the term of the maintenance contract, typically 12 to 36 months. Custom software services are long-term in nature and revenues are recognized based on a percentage of completion with progress to completion measured based upon later hours incurred. Web development services are performed over a period ranging from a few days to a few weeks and revenues are recognized upon completion of the project. Consulting service revenues are recognized when services are performed. Internet access and web-hosting services are recognized over the period the services are provided, typically month-to-month. Total revenue decreased to $110,910 for the quarter ended June 30, 2003 from $213,315 for the quarter ended June 30, 2002. Software and license fee revenues were unchanged at $-0- for both 2002 and 2003. During second quarter 2002 and 2003, Sequiam Document Management System was still under development, and we did not acquire Access Orlando and its IRP and IRPlicator software 17 products until November 2002. We expect to begin generating revenues from the sale of our DMS and IRP software products in the third quarter of 2003. Other sales for 2003 included consulting, custom software services and web development services totaling $42,398; and Internet access and web-hosting services totaling $68,512. All of the foregoing were 100% increases over 2002 second quarter revenues of $-0- except for a one-time consulting fee of 213,315 earned in the second Quarter of 2002. We observe that large organizations are becoming more interested in warehousing documents for ease of access by its many users. As such, we believe that our DMS product is viable. However we have also observed a number of competing products by companies with greater resources than ours. Our competitors typically add the document management feature into a complimentary suite of software products. As a result, we do not see great market for our Sequiam DMS as a stand-alone product, and in response, we are integrating it into our IRP product line. This is being done by incorporating the document management functions of the DMS product into the remote print software for the IRP line, and we hope to sell the integrated software as a complete package. We also observe that many large organizations are beginning to analyze the cost of their own printing equipment. The $0.05 to $0.08 cost per page of their own desktop equipment can be far in excess of the $0.01 to $0.02 achievable on high volume digital machines either owned in-house or outsourced. Our IRP software allows users to print directly to remote printers thereby solving the connectivity problem and allowing large organizations to realize savings that run into many thousands of dollars per month. We think that trend will continue, and as a result, more competitors will enter the market. We presently have no direct competition for this product. To date, users of our IRP system sold prior to our acquisition of W.M.W. Communications have realized dramatic print cost savings. In the example of the two school district clients, print volumes of as much as 10,000,000 images per month in over 100 schools and administrative offices have been redirected from desktop printers to the District's central print facility at an average savings of $0.045 per image or $450,000 per month. In one such school district demand exceeded the print facility's capacity such that they were again required to use the IRP software to outsource the overflow to a commercial print company. Each of the four installations was sold prior to our acquisition of W.M.W. Communications at an average price of $40,000 per system with annual support provided at $5,000 per year. Pricing for the Internet product will be based upon usage charges as yet undetermined. Targeted customers are large organizations with in-house print facilities and commercial digital printers who wish to use the technology to drive more customer business to their facility. The trend in Internet access is towards broadband access. Dial up service will eventually become obsolete. As a result, we have seen the revenues from our Access Orlando brand steadily decline. We plan to sell that business to any one of several large Internet access providers. We acquired that business from W.M.W. Communications, but we do not consider it to be a part of our long-term business plan. We expect to concentrate on software, database and web development products. 18 We have an agreement with Pachyderm Press, the publisher of the World Olympian Magazine, to share revenues and expenses of publication and to share with them content from our website production. Pachyderm has an agreement with the WOA to Publish the magazine, and we have an agreement to publish and host their website. We expect to earn a 35% share of the merchandising and sponsorship income derived from the website and 50% of the net earnings from the magazine subscriptions and advertising revenue. In the case of the website, the responsibility for revenue generation is with the WOA and in the case of the magazine, the responsibility for revenue generation is with Pachyderm Press. Neither the WOA or Pachyderm Press has been effective at revenue generation and to date, we have not received any revenues from these agreements. Regardless, we continue to provide website development and hosting services to the WOA, and we continue to assist Pachyderm Press with content and other business services. We continue to perform our duties because we believe that our association with the Olympics will be beneficial to future business and because we believe in the Olympic ideals. Publishing is not a part of our overall business plan, but Internet services to publishers and printers is an integral part of our information management business. Operating Expenses Operating expenses increased by $1,892,943, from $240,848 for the quarter ended June 30, 2002 to $2,133,791 for the quarter ended June 30, 2003. This increase is explained below. Selling, general and administrative expenses including non-cash compensation increased $1,704,523 from $177,295 in second quarter 2002 to $1,881,818 in second quarter 2003. We increased our selling and overhead expenditures such as salaries, wages and benefits for administrative and marketing personnel, computer maintenance and supplies, professional services such as investor relations, legal and accounting fees, and corporate travel expenses as a result of expanding our operations, our merger with Sequiam Corporation and our acquisitions of Brekel Group and Access Orlando. We also increased expenditures for marketing including advertising, production of marketing materials, and participation in trade show activities as we completed the development of our software products and introduced web development, web hosting and Internet access services. We also accrued expenses for investment banking, investor and public relations, and employee services valued at $1,366,895, and we agreed to issue 1,553,500 common shares in exchange for those services. Software and web development costs increased by $78,468 from $58,473 in second quarter 2002 to $136,941 in second quarter 2003, due to the establishment and expansion of the development staff beginning in the second quarter 2002. This expansion of staff was needed to expand our products and services and to keep pace with new industry developments and the continued need to improve features and functionality of the Sequiam software products. Depreciation expense increased by $109,952, from $5,080 in second quarter 2002 to $115,032 in second quarter 2003, as a result of depreciation on assets acquired from Brekel in July 2002, and amortization of intellectual properties acquired from W.M.W. Communications., Smart Biometrics, Inc. and Telepartners, Inc. 19 We have grown from 2 employees at June 30, 2002, to 27 employees at June 30, 2003, largely as a result of the acquisition of Brekel Group, Inc., W.M.W. Communications, Inc., Smart Biometrics, Inc. and Telepartners, Inc. The addition of the employees has negatively impacted liquidity and cash flow for the quarter ended June 30, 2003. We can further expect that payroll will be a burden through much of 2003 as we attempt to raise the additional capital necessary to get our products to market. The payroll burden will diminish dramatically after we establish a regular sales cycle of the software products because our ongoing support costs will be minimal compared to our development costs. We expect to distribute our products through value added resellers and other resellers. As a result, we do not expect to increase personnel and related expenses as we go to market with our software. Loss on Sales of Equipment and gain on Debt Settlement A loss on impairment of equipment held for sale of $75,000 was recognized in the first quarter of 2003 based upon the estimated net realizable value of the equipment acquired from Brekel. A net gain of $2,431 was recognized in the second quarter of 2003 on the actual sale of certain equipment acquired from Brekel. A gain of $37,315 was recognized on the settlement of a debt owed to a former creditor of Brekel. Interest Expense Interest expense increased by $25,638, from $268 in second quarter 2002 to $25,906 in second quarter 2003, as a result of an increase in loans from shareholders and a note payable related to leasehold improvements acquired from Brekel Group in July 2002 and accretion of the discount on the convertible debenture of $18,750. The total discount that is being amortized of $150,000 will increase interest expense by $6,250 per month or $75,000 per year beginning March 2003 through February 2005, unless the debenture is converted prior to the due date of the debenture (March 4, 2005), at which time the entire unamortized discount will be expensed. We see only a slight upward trend in our interest expense as a result of the $400,000 loan we received from Lee Corbin on May 13, 2003. We expect to raise additional equity capital through the sale of common stock as opposed to convertible debt securities or traditional loans. However, the debenture issued to La Jolla Cove Investors, Inc., may not be converted to equity until we have accrued significant interest expense. We intend to pay the interest expense as opposed to converting the interest accrued to equity. As a result, we may experience an additional increase in our interest expenses during the remainder of 2003 and into 2004. Net Losses Sequiam Corporation incurred net losses of $2,009,041 and $27,801 for the quarters ended June 30, 2003 and 2002, respectively. We expect to incur additional net losses throughout 2003 as we introduce our products to the marketplace. Liquidity and Capital Resources Cash and cash equivalents decreased to $40,210 as of June 30, 2003 from $46,675 as of June 30, 2002. Net cash used in operating activities was $315,706 for the quarter ended June 30, 2003, as 20 a result of the net loss during the period of $2,009,041, offset by non-cash compensation of $1,366,895, increases in accounts payable and accrued expenses totaling $160,116, and increases in accrued shareholder salaries of $90,000 and other non-cash expenses and losses totaling $87,484. Net cash used for investing activities was $55,335 for the quarter ended June 30, 2003, primarily due to proceeds from the sale of equipment of $2,732 offset by cash paid for the acquisition of Access Orlando of $48,236 and software development costs of $9,831 for the Sequiam DMS product. Net cash provided by financing activities was $411,251 for the quarter ended June 30, 2003. Proceeds from the bridge loan accounted for $250,000 and sales of common stock accounted for $200,000 and was offset by commissions of $45,000. During the quarter ended June 30, 2003, a private investor exercised 625,000 warrants for $6,250. Current liabilities of $5,099,146 exceed current assets of $211,374 by $4,887,772. Of that amount, $1,830,242 or 36.89% is owed to shareholders as loans and accrued but unpaid salaries under employment agreements. The officers of the company are dedicated to its business plan and will place no undue demands on its working capital. They expect payment from future cash flows, equity capital infusions or possible equity capital conversions. Also included in current liabilities, is $44,630 due to W.M.W. Communications for its acquisition. W.M.W. has indicated its willingness to wait for payment until cash flow allows, but we have not reached any formal agreement to defer payment. Also included in current liabilities is $707,446 of accounts payable and accrued expense, most of which accrue to Brekel Group, Inc. and are the subject of continued workout arrangements. Effective July 1, 2001, the Brekel Group, Inc., prior to its acquisition by Sequiam, entered into a lease agreement to rent approximately 60,000 square feet of combined office and manufacturing space through June 30, 2011. As a result of the determination to cease Brekel's operations prior to the acquisition of Brekel, effective July 1, 2002, Sequiam entered into a lease forbearance agreement for 10,000 square feet of the same space for the remaining term of the lease. Pursuant to the lease agreement, we make monthly base rent payments including common area maintenance charges of $9,633, with annual increases of approximately 3% per year beginning in July 2004. As part of the lease forbearance agreement, we executed a note payable to the landlord to reimburse them for lost rents on the 50,000 square feet relinquished to them through June 30, 2004; less rents and principal payments received from us; less 75% of any rents received from replacement tenants; plus any leasing commissions or tenant build out costs required for replacement tenants. The note also includes amounts previously owed by Brekel to the landlord for tenant improvements. The outstanding balance on the note of $1,286,806 as of June 30, 2003 represents $893,112 of deferred rent and $393,694 of tenant improvements. Payments on the note commence July 1, 2004 through June 1, 2010 with interest at 6%. Variables that could impact the amount due under the deferred rent portion of the note include changes in estimated rents to be received from replacement tenants, estimated leasing commissions and estimated tenant build out costs required for replacement tenants. 21 Rental expense for the quarter ended June 30, 2003 was $48,144 and $11,927 for the quarter ended June 30, 2002. The minimum future rentals required under the lease and the maturities of the long-term note payable are as follows:
Debt Year Rentals Maturities - ---- ------- ---------- 2003 $ 86,700 $ 0 2004 117,334 96,429 2005 120,854 188,341 2006 124,480 199,957 2007 128,214 212,384 Thereafter 339,169 589,965 ---------------------- $916,751 $1,286,806 ======================
Since the end of our last fiscal year ending December 31, 2002, we sold securities in four separate private placements, as more fully described in Part II, Item 2, below. As a result, we have received to date total net proceeds of $351,252. We received $186,250 (approximately one-half) of these proceeds during the quarter ending June 30, 2003, and most of this amount is reflected as additional paid-in capital in our financial statements for the period ending June 30, 2003. We also received $250,000 of proceeds from a bridge loan commitment of $400,000. At March 28, 2003, the date we filed our 10-KSB with the SEC, we estimated that we would need minimal additional capital of approximately $500,000 to continue operations during the next twelve months without significant new product sales given that our monthly cash requirements at that time exceeded cash provided by operations by approximately $40,000 per month. By May 15, 2003, the date our 10-QSB was filed with the SEC, we raised $600,000. We now estimate that we will need an additional $600,000 of capital to continue operations during the next twelve month due to higher than expected professional fees associated with the registration we are completing regarding the securities issued to La Jolla Cove Investors, Inc., new acquisitions and bringing our products to market. Our management is undertaking several initiatives to address our liquidity, including the following: (1) continued efforts to increase our revenues from software licenses and other revenue sources; (2) proceeds expected to be received from the convertible debentures and exercise of warrants as described above; (3) proceeds expected to be received from the promissory note and exercise of warrants as described above; (4) continued efforts to obtain additional debt and/or equity financing. Our management believes that these activities will generate sufficient cash flows to sustain our operations during the next twelve months. If we do not obtain at least $600,000 additional capital in the next twelve months, then we will need to curtail operations and reduce expenses accordingly. Application of Critical Accounting Policies We utilize certain accounting policies and procedures to manage changes that occur in our business environment that may affect accounting estimates made in preparation of our financial statements. These estimates relate primarily to our allowance for doubtful accounts receivable. Our strategy for managing doubtful accounts includes stringent, centralized credit policies and 22 collection procedures for all customer accounts. We utilize a credit risk rating system in order to measure the quality of individual credit transactions. We strive to identify potential problem receivables early, take appropriate collection actions, and maintain adequate reserve levels. Management has determined that the allowance for doubtful accounts is adequate at June 30, 2003. ITEM 3. CONTROLS AND PROCEDURES - ----------------------------------- The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the periodic reports filed by the Company with the Securities and Exchange Commission (the "SEC") is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Company's management. Based on their most recent evaluation, which was completed within 90 days of the filing of this Quarterly Report on Form 10-QSB, the Company's Chief Executive Officer and Chief Financial Officer believe that the Company's disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended) are effective. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these internal controls subsequent to the date of the most recent evaluation. PART II. OTHER INFORMATION - ----------------------------- ITEM 2. CHANGES IN SECURITIES - --------------------------------- (c) Recent Sales of Unregistered Securities Common Stock. On February 6, 2003, we sold an aggregate of 266,667 shares of - ------------- our common stock to one accredited investor, Mr. Walter H. Sullivan, III, at a price of $0.75 per share, for proceeds of $200,000, less a commission of $20,000 paid to Cane Consulting, for net proceeds of $180,000. In connection with this transaction, we issued a warrant to purchase an additional 800,000 shares of common stock at a purchase price of $1.50 per share for a period of four years. On April 25, and June 23, 2003, Sequiam Corporation sold an aggregate of 400,000 shares of its common stock to Mr. Sullivan at a price of $0.50 per share for proceeds of $200,000, less a commission of $20,000 paid to Cane Consulting, for net proceeds of $180,000. In connection with this transaction, we issued warrants to purchase an additional 2,000,000 shares of common stock at a purchase price of $0.75 per share for a period of four years. In connection with such sales we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This offer was made exclusively to Mr. Sullivan. Based upon information provided to us by Mr. Sullivan, we determined that he was an accredited investor because he has a net worth of $1,000,000 or more and an annual income of $200,000 or more. Mr. Sullivan represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the shares bear a restrictive legend in accordance with Rule 144. Prior to closing the transaction, we supplied information to Mr. Sullivan in compliance with Rule 502(b). We had a prior business relationship with Mr. Sullivan. We did not publish any advertisement, article, notice or other communication intended for public distribution regarding our intent to make this offering. Mr. Sullivan represented in 23 writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the securities bear a restrictive legend in accordance with Rule 144. There were no underwriters, and the offer was closed upon sale of the stock to Mr. Sullivan. The Company agreed to issue 750,000 shares for investment banking and advisory services valued at $825,000 to Quasar Group, Inc. The certificates for the 750,000 shares were issued in July 2003. In connection with such sales we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This offer was made exclusively to Quasar Group, Inc. Based upon information provided to us by Quasar Group, Inc, we determined that its six shareholders were an accredited investor because they have a net worth of $1,000,000 or more and an annual income of $200,000 or more. Quasar Group, Inc. represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the shares bear a restrictive legend in accordance with Rule 144. Prior to closing the transaction, we supplied information to Quasar Group, Inc. in compliance with Rule 502(b). We had a prior business relationship with Quasar Group, Inc. We did not publish any advertisement, article, notice or other communication intended for public distribution regarding our intent to make this offering. There were no underwriters, and the offer was closed upon sale of the stock to Quasar Group, Inc on May 23, 2003. The Company agreed to issue 250,000 shares for employment services valued at $107,500 to Charles Vollmer. The certificates for the 250,000 shares were issued in July 2003. In connection with such sales we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This offer was made exclusively to Mr. Vollmer. Based upon information provided to us by Mr. Vollmer, we determined that he was an accredited investor because he has a net worth of $1,000,000 or more and an annual income of $200,000 or more. Mr. Vollmer represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the shares bear a restrictive legend in accordance with Rule 144. Prior to closing the transaction, we supplied information to Mr. Vollmer in compliance with Rule 502(b). We had a prior business relationship with Mr. Vollmer. We did not publish any advertisement, article, notice or other communication intended for public distribution regarding our intent to make this offering. There were no underwriters, and the offer was closed upon sale of the stock to Mr. Vollmer on April 28, 2003. The Company agreed to issue 250,000 shares for employment services valued at $140,000 to James Stanley. The certificates for the 250,000 shares were issued in July 2003. In connection with such sales we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This offer was made exclusively to Mr. Stanley. Based upon information provided to us by Mr. Stanley, we determined that he was an accredited investor because he has a net worth of $1,000,000 or more and an annual income of $200,000 or more. Mr. Stanley represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the shares bear a restrictive legend in accordance with Rule 144. Prior to closing the transaction, we supplied information to Mr. Stanley in compliance with Rule 502(b). We had a prior business relationship with Mr. Stanley. We did not publish any advertisement, article, notice or other 24 communication intended for public distribution regarding our intent to make this offering. There were no underwriters, and the offer was closed upon sale of the stock to Mr. Stanley on April 21, 2003. The Company agreed to issue 10,000 shares for employment services valued at $9,700 to Charles Dunn. The certificates for the 10,000 shares were issued in July 2003. In connection with such sales we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This offer was made exclusively to Mr. Dunn. Based upon information provided to us by Mr. Dunn, we determined that he was an accredited investor because he has a net worth of $1,000,000 or more and an annual income of $200,000 or more. Mr. Dunn represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the shares bear a restrictive legend in accordance with Rule 144. Prior to closing the transaction, we supplied information to Mr. Dunn in compliance with Rule 502(b). We had a prior business relationship with Mr. Dunn. We did not publish any advertisement, article, notice or other communication intended for public distribution regarding our intent to make this offering. There were no underwriters, and the offer was closed upon sale of the stock to Mr. Dunn on June 1, 2003. The Company agreed to issue 43,500 shares for employment services valued at $42,195 to James Ring. The certificates for the 43,500 shares were issued in July 2003. In connection with such sales we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This offer was made exclusively to Mr. Ring. Based upon information provided to us by Mr. Ring, we determined that he was an accredited investor because he has a net worth of $1,000,000 or more and an annual income of $200,000 or more. Mr. Ring represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the shares bear a restrictive legend in accordance with Rule 144. Prior to closing the transaction, we supplied information to Mr. Ring in compliance with Rule 502(b). We had a prior business relationship with Mr. Ring. We did not publish any advertisement, article, notice or other communication intended for public distribution regarding our intent to make this offering. There were no underwriters, and the offer was closed upon sale of the stock to Mr. Ring on June 1, 2003. The Company agreed to issue 250,000 shares for public relations and investor relations services valued at $242,500 to Kevin Welch. The certificates for the 250,000 shares were issued in July 2003. In connection with such sales we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This offer was made exclusively to Mr. Welch. Based upon information provided to us by Mr. Welch, we determined that he was an accredited investor because he has a net worth of $1,000,000 or more and an annual income of $200,000 or more. Mr. Welch. represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the shares bear a restrictive legend in accordance with Rule 144. Prior to closing the transaction, we supplied information to Mr. Welch. in compliance with Rule 502(b). We had a prior business relationship with Mr. Welch. We did not publish any advertisement, article, notice or other communication intended for public distribution regarding our intent to make this offering. There were no underwriters, and the offer was closed upon sale of the stock to Mr. Welch on June 1, 2003. 25 The Company agreed to issue 1,500,000 shares for the acquisition of the assets of Smart Biometrics, Inc. valued at $750,000 to Smart Biometrics, Inc. The certificates for the 1,500,000 shares were issued in July 2003. In connection with such sales we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This offer was made exclusively to Smart Biometrics, Inc. Based upon information provided to us by Smart Biometrics, Inc, we determined that its twelve shareholders were an accredited investor because they have a net worth of $1,000,000 or more and an annual income of $200,000 or more. Smart Biometrics, Inc. represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the shares bear a restrictive legend in accordance with Rule 144. Prior to closing the transaction, we supplied information to Smart Biometrics, Inc. in compliance with Rule 502(b). We had a prior business relationship with Smart Biometrics, Inc. We did not publish any advertisement, article, notice or other communication intended for public distribution regarding our intent to make this offering. There were no underwriters, and the offer was closed upon sale of the stock to Smart Biometrics, Inc on May 9, 2003. The Company agreed to issue 165,000 shares for the acquisition of the assets of Telepartners, Inc. valued at $149,993 to Telepartners, Inc. The certificates for the 165,000 shares were issued in July 2003. In connection with such sales we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. This offer was made exclusively to Telepartners, Inc. Based upon information provided to us by Telepartners, Inc, we determined that its ten shareholders were an accredited investor because they have a net worth of $1,000,000 or more and an annual income of $200,000 or more. Telepartners, Inc. represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the shares bear a restrictive legend in accordance with Rule 144. Prior to closing the transaction, we supplied information to Telepartners, Inc. in compliance with Rule 502(b). We had a prior business relationship with Telepartners, Inc. We did not publish any advertisement, article, notice or other communication intended for public distribution regarding our intent to make this offering. There were no underwriters, and the offer was closed upon sale of the stock to Telepartners, Inc on June 1, 2003. Convertible Debenture and Warrants. We entered into a Securities Purchase - ------------------------------------- Agreement with La Jolla Cove Investors, Inc. (the "Investor"), dated March 5, 2003, as amended on April 16, 2003, pursuant to which we delivered to the Investor an 8% Convertible Debenture in the amount of $300,000, convertible into our common stock, and a Warrant to Purchase Common Stock that permits the Investor to purchase up to 2,000,000 shares of common stock at a purchase price of $1.50 per share. In connection with the sale of the Debenture and Warrant, we relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506. We did not publish any advertisement, article, notice or other communication intended for public distribution regarding our intent to make this offering. Based upon information provided to us by the Investor, we determined that it was an accredited investor because it had net assets in excess of $5,000,000. Prior to completing the sale, we supplied information to the Investor in compliance with Rule 502(b). The Investor represented in writing that the shares were being acquired for investment purposes only and not for resale, and, in addition, the certificates representing the securities bear a restrictive legend in accordance with Rule 144. There were no 26 underwriters, and no commissions were paid in connection with this offering. The offer was closed upon closing the transaction with the Investor. We are obligated to register the Investor's sale of the underlying common stock to be issued upon conversion of the 8% Convertible Debenture and the exercise of the Warrant to Purchase Common Stock. Upon closing on March 5, 2003, we received $150,000 of the total $300,000 principal amount of the 8% Convertible Debenture. When the Securities and Exchange Commission declares our registration of the sale of the underlying common stock to be issued upon conversion of the debenture and exercise of the Warrant effective, we will receive the balance of $150,000, provided the Market Rate at that time is $0.10 or greater. The Debenture and Warrant provide for a potential $3,300,000 investment in our company by the selling security holder. Under the terms of the Debenture, as amended on April 16, 2003, provided the "Market Rate" (as defined and determined in accordance with the Debenture) is greater than $0.625, the number of common shares into which the Debenture may be converted is equal to the dollar amount of the Debenture being converted multiplied by eleven, minus the product of the "Conversion Price" multiplied by six and two-thirds times the dollar amount of the Debenture being converted, and the entire foregoing result shall be divided by the Conversion Price. The "Conversion Price" is defined as the lesser of $1.50 per share or 80% of "Market Value" (as defined and determined in accordance with the Debenture)(the "Discount Multiplier"). If the Market Rate is equal to or less than $0.625 on the day the Investor elects to convert a portion of the 8% Convertible Debenture, then we have the right to prepay that portion of the Debenture in which the Investor had elected to convert, at a rate of 150% of such amount, provided the Investor may, in lieu of accepting such prepayment, elect to withdraw its notice of conversion. If the Market Rate is equal to or less than $0.625 and the company does not prepay the Debenture, then the Debenture may only be converted into the number of shares equal to the dollar amount of the Debenture being converted divided by the Conversion Price. The Investor may convert a maximum of 10% of the principal into our common stock during any month, and the Investor is required to convert at least 5% of the Debenture every month, beginning thirty days following effectiveness of the registration statement covering the resale of the underlying shares of common stock. The following chart illustrates the number of shares that will be issued upon conversion of the entire amount of the Debenture at various Market rates. 27 [GRAPHIC OMITTED] Under the terms of the amended Warrant, the Investor received a Warrant to purchase 2,000,000 shares of our common stock, at an exercise price of $1.50 per share. Provided the Market Rate is above $0.625 per share, then the Investor is required to exercise a portion of the Warrant equal to the amount of the Debenture being converted multiplied by 10, and the entire result divided by 1.50. Provided the Market Rate is above $0.625, the Investor is required to exercise at least 5% of the Warrant each month, beginning thirty days following effectiveness of the registration statement covering the resale of the underlying shares of common stock. The Warrant will expire in March 2006. As of the date of filing this report, the Investor had not exercised any portion of the Warrant or converted any portion of the Debenture, and no shares of common stock have been issued. How the Warrant and the Debenture Conversion Formula Work Together. - ------------------------------------------------------------------- Market Rate between $0.626 and $1.88.If the Debenture is converted at a Market - --------------------------------------- Rate between $0.626 and $1.88, then as the Debenture is converted, a commensurate amount of the Warrant must be exercised pursuant to paragraph 7 of the 04-16-03 Letter Agreement with the Investor, resulting in an overall equity investment equal to 80% of the then Market Rate. 28 Market Rate between $0.082 and $0.625. If the Debenture is converted at a Market - -------------------------------------- Rate that is equal to or less than $0.625 but equal to or greater than $0.082, then (a) we will receive an equity investment from the Debenture equal to 80% of the then Market Rate, (b) less than 4,600,000 shares would be issued upon conversion of the Debenture, and (c) the Warrant would not be required to be exercised at that time (but we would have the option of prepaying the Debenture at 150% to avoid conversion). Market Rate less than $0.082. If the Debenture is converted at a Market Rate - ------------------------------- that is less than $0.082, then we will receive an equity investment that is less than 80% of the then Market Rate and issue more than 4,600,000 shares of common stock upon conversion of the Debenture (but we will have the option of prepaying the Debenture at 150% to avoid conversion). Market Rate greater than $1.88. If the Debenture is converted at a Market Rate - ------------------------------- that is greater than $1.88, then we will receive an equity investment that is less than 80% of the then Market Rate, but we will issue less than 6,600,000 shares of common stock as a result of the Debenture and Warrant (but pursuant to the 04-16-03 Letter Agreement, we have agreed to issue additional shares at $1.50 per share up to a total of 6,600,000 shares). The selling security holder will experience greater returns on its equity investment as the Market Rate of our common stock increases above $1.88 per share. The Investor has contractually agreed to restrict its ability to convert or exercise its warrants and receive shares of our common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. This will not prevent the Investor from receiving 4.99% of our outstanding common stock upon conversion of a portion of the debenture and exercise of a portion of the Warrant, then selling those shares, then further converting the debenture and exercising the Warrant in like fashion. The conversion price of the 8% Convertible Debenture and the exercise price of the Warrant to Purchase Common Stock may be adjusted in certain circumstances, such as if we pay a stock dividend, subdivide or combine outstanding shares of common stock into a greater or lesser number of shares, or take such other actions as would otherwise result in dilution of the selling security holder's position prior to conversion. We have agreed not to pay any accrued salaries or shareholder loans that are presently outstanding until after the 8% Convertible Debenture is paid in full or converted, except to the extent that any such accrued salaries or shareholder loans are used to perform obligations under a Put and Call Agreement between Nick VandenBrekel, Mark Mroczkowski and the Investor, or 29 unless we can pay the accrued salaries out of the proceeds of any additional financing we might obtain. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) - ---------------------------------------------------- (a) Exhibits: 2.1 Asset Purchase Agreement with Smart Biometrics, Inc. is hereby incorporated by this reference to our Form 8-K filed with the Securities and Exchange Commission on May 23, 2003. 2.2 Asset Purchase Agreement with Telepartners, Inc. 4.1 Securities Purchase Agreement dated March 5, 2003, between Sequiam Corporation and La Jolla Cove Investors, Inc. is hereby incorporated by this reference to Exhibit 4.1 to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003. 4.2 8% Convertible Debenture, dated March 5, 2003, issued to La Jolla Cove Investors, Inc. is hereby incorporated by this reference to Exhibit 4.2 to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003. 4.3 Warrant to Purchase Common Stock, dated March 5, 2003, issued to La Jolla Cove Investors, Inc. is hereby incorporated by this reference to Exhibit to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003. 4.4 Side Letter Agreement, dated March 5, 2003, between Sequiam Corporation and La Jolla Cove Investors, Inc. is hereby incorporated by this reference to Exhibit 4.4 to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003. 4.5 Registration Rights Agreement dated March 5, 2003, between Sequiam Corporation and La Jolla Cove Investors, Inc. is hereby incorporated by this reference to Exhibit 4.5 to our Form 8-K filed with the Securities and Exchange Commission on March 13, 2003. 4.6 Letter Agreement, dated April 16, 2003, by and between La Jolla Cove Investors, Inc. and Sequiam Corporation is hereby incorporated by this reference to Exhibit 4.1 to our Form 8-K filed with the Securities and Exchange Commission on April 17, 2003. 10.1 Put and Call Agreement by and between La Jolla Cove Investors, Inc., Nicholas VandenBrekel and Mark Mroczkowski, dated April 16, 2003, is hereby incorporated by reference to Exhibit 10.1 our Form 10-KSB/A, Amendment No. 1, filed with the Securities and Exchange Commission on April 21, 2003. 10.2 Employment Agreement with Charles Vollmer is hereby incorporated by this reference to our Form SB-2/A filed with the Securities and Exchange Commission on June 23, 2003. 10.3 Letter Agreement amending Employment Agreement with Charles Vollmer is hereby incorporated by this reference to our Form SB-2/A filed with the Securities and Exchange Commission on June 23, 2003. 30 10.4 Letter Agreement amending a private equity financing with La Jolla Cove Investors, Inc. is hereby incorporated by this reference to our Form 8-K filed with the Securities and Exchange Commission on April 16, 2003. 10.5 Employment Agreement with James Ring is hereby incorporated by this reference to our Form SB-2/A filed with the Securities and Exchange Commission on June 23, 2003. 10.6 Employment Agreement with Charles Dunn is hereby incorporated by this reference to our Form SB-2/A filed with the Securities and Exchange Commission on June 23, 2003. 10.7 Private Placement Agreement with the Quasar Group, Inc. 10.8 Advisory service Agreement with Kevin Welch 21.1 Subsidiaries 31.1 Section 901 Certification Nicholas VandenBrekel 31.2 Section 901 Certification Mark Mroczkowski 32.1 Certification Pursuant To Rule 15d-14(B) and 18 U.S.C. Sec.1350 Nicholas VandenBrekel 32.2 Certification Pursuant To Rule 15d-14(B) and 18 U.S.C. Sec.1350 Mark Mroczkowski (b) Reports on Form 8-K: The following reports on Form 8-K were filed during the quarter ending June 30, 2003: Form 8-K filed on May 23, 2003, regarding the acquisition of the assets of Smart Biometrics, Inc. Form 8-K/A filed on April 17, 2003, regarding an amendment to a private equity financing with La Jolla Cove Investors, Inc. 31 SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SEQUIAM CORPORATION Date: August 19, 2003 By: /s/ Nicholas H. VandenBrekel - ----------------------------------------------- Nicholas H. VandenBrekel, Chief Executive Officer By: /s/ Mark Mroczkowski - ----------------------------------------------- Mark L. Mroczkowski, Chief Financial Officer Date: August , 2003 /s/ Mark L. Mroczkowski - ----------------------- Mark L. Mroczkowski Chief Financial Officer 32 EX-2.2 3 doc2.txt Exhibit 2.2 ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into effective as of June 1, 2003 (the "Effective Date"), by and among SEQUIAM EDUCATION, INC., a Florida corporation ("Buyer"), and TELEPARTNERS, INC., a Florida corporation ("Seller"), with reference to the following recitals: Seller is a producer and publishing distributor of specialized supplemental educational programs (the "Programs"). Seller's business shall be referred to herein as, the "Business." Seller's principal place of business is located at 500 Australian Ave., Suite 730, West Palm Beach, Florida 33401. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, all the assets used in or useful to the Business, including, without limitation: all intellectual property related to the research, development, production and distribution of the Programs; Seller's names and logos; and Seller's trademarks and service marks, on the terms and conditions set forth in this Agreement. Buyer and Seller intend that immediately following the purchase by Buyer from Seller of substantially all of the assets of the Business, Seller will cease to operate the Business and that thereafter neither Seller nor its principals will compete with Buyer as provided in the terms and conditions set forth in this Agreement. Buyer is a wholly-owned subsidiary of Sequiam Corporation, a California corporation ("Sequiam"). For federal income tax purposes, it is intended that this Agreement shall qualify as a reorganization within the meaning of Section 368(c) of the Internal Revenue Code (the "Code"). NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of Seller and Buyer (each, a "Party") hereby agrees as follows: Purchase and Sale of Assets. - ---------------------------- Sale and Delivery. Seller agrees to sell and deliver to Buyer, and based upon the representations and warranties of Seller set forth herein, Buyer agrees to purchase and accept from Seller, on the terms and subject to the conditions set forth in this Agreement, and for the purchase price described in Section 0, all right, title and interest in and to all of the assets used by or useful to Seller in the Business, including without limitation, those certain assets and property identified in this Section and its related subsections (such assets and property are hereinafter referred to as the "Assets"). The Assets shall specifically include, but shall not be limited to, all right, title and interest in and to the following: Intellectual Property. All right, title and interest in and to any and all present and future intellectual property rights with respect to the Business, including, without limitation, the designs, know-how, trade secrets, processes, compositions, scripts, working drafts, plans, files, notebooks and records, production and edited videotapes, proprietary and technical information, sales and marketing concepts and materials, computer software, licenses of technology, and any and all other intangible personal property, together with all rights to and applications, licenses and franchises for, any of the foregoing, relating to the Business and all other intangible personal property used in or useful in the Business or with the Programs (all written and produced materials relating thereto hereinafter are referred to as the "Materials"); Names and Logos. All right, title and interest in and to the name, "Telepartners," and all right, title and interest in and to any and all other names and logos created, developed and/or used by Seller in the Business (identified on Schedule 1.1(b); Trademarks. All right, title and interest in and to any and all of the trademarks and service marks used by Seller in connection with the Business. Confidentiality Agreements. [omitted] Contracts. All right, title and interest in and to those certain contracts to which Seller is a party, identified on Schedule 1.1(e); Tangible Business Property. All of Seller's tangible property, including without limitation, inventory, work-in-progress, furniture, and electronic equipment identified on Schedule 1.1(f) (collectively, "Tangible Property"). Customer Lists. All of Seller's customer lists and business contacts identified on Schedule 1.1(g). Purchase Price. The purchase price to be paid for the Assets shall be One Hundred Sixty-Five (165,000) shares of common stock of Sequiam (the "Purchase Price" and the "Stock"). The Purchase Price shall be paid in accordance with Section 0(d) below. Liabilities. It is expressly understood and agreed that Buyer shall not be liable for any of the obligations or liabilities of Seller of any kind or nature, including, without limitation, any of the following debts, duties, liabilities or obligations which arose or will arise out of the ownership or operation of the Business at any time or use of the Assets prior to the Closing (as defined in Section 2 below): (i) payroll expenses or liabilities; (ii) any "Tax" (as defined in Section 0 below) whatsoever, including, without limitation, any Tax liability owed to the Internal Revenue Service, and any Tax liability, fees or other assessments owed to the State of Florida, or any regional or local government entity located therein; (iii) product liability; (iv) loans secured by the Assets or any portion thereof; and (v) liability to employees, including, without limitation, sick leave, vacation benefits, health care benefits (including under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended), other accrued employee benefits, or employee liability claims. Taxes. Any and all state and local property taxes and assessments imposed upon the Assets shall be prorated between Buyer and Seller as of the Closing Date (as defined in Section 2 below). Buyer will not be responsible for any business, occupation, withholding, or similar tax, or any taxes of any kind related to any period before the Closing. Operations. Buyer shall not be responsible for any operating expenses of the Business at any time or of the Assets for any period before the Closing. Beginning on the Closing Date, Buyer shall be solely (and Seller shall not be) responsible for all operating expenses of the Assets. 34 Allocation of the Purchase Price. The parties intend to allocate the Purchase Price among the Assets as set forth on attached Schedule 0, and to abide by such allocation for all purposes including, without limitation, the reporting of all taxes. Notwithstanding the foregoing, the parties agree to adjust the allocation of the Purchase Price to the extent required to comply with Section 1060 of the "Code" (as defined in Section 0(e) below) and regulations promulgated thereunder. Expenses. Except as otherwise expressly provided herein, the parties shall each be responsible for the payment of any and all of its own expenses, including, without limitation, the fees and expenses of counsel, accountants, and other advisors, arising out of or relating directly or indirectly to the transactions contemplated by this Agreement. Closing. The purchase and sale of the Assets and the consummation of the other transactions contemplated by this Agreement shall be closed (the "Closing") as soon as all of the conditions to closing set forth in Sections 7 and 8 can be reasonably satisfied, but in no event beyond June 15, 2003 (the "Closing Date"). If all of the conditions to closing set forth in Sections 0 and 0 below have not been satisfied or waived on or before the Closing Date, then either Buyer or Seller may terminate this Agreement by written notice to the other party, whereupon neither party shall have any obligation to consummate the transactions contemplated herein. The Closing Date may be extended by agreement of the parties. The Closing shall be consummated at the offices of Sequiam Education, Inc., 300 Sunport Lane, Orlando, Florida 32809. (a) At the Closing, Seller shall deliver or cause to be delivered to Buyer the following: (i) a Certificate of Good Standing from the Florida Secretary of State, showing that Seller was validly formed and is in good standing; (ii) documents reasonably acceptable to Buyer evidencing that Seller has the necessary corporate authority to enter into this Agreement and consummate the transactions contemplated herein, including without limitation, resolutions or minutes of the meeting of each of the Directors and Shareholders of Seller approving this Agreement; (iii) an original assignment in the form of attached Exhibit "A" (the "Assignment"), duly executed by Seller; (iv) an original bill of sale in the form of attached Exhibit "B" (the "Bill of Sale"), duly executed by Seller; the originals and all copies of the Contracts identified on Schedule 1.1(e), shall be attached to the Assignment; and an executed non-disclosure agreement and assignment of Materials in the form of attached Exhibit "C" (the "Non-Disclosure Agreement"), executed by Seller and each person that was an employee of Seller at any time during the thirty (30) days prior to the Effective Date through the Closing Date. (b) At the Closing, Buyer shall deliver or cause to be delivered to Seller irrevocable instructions (the "Instructions") to Sequiam's transfer agent, duly executed on behalf of Sequiam, 35 authorizing and instructing the transfer agent to issue Two Hundred Fifty Thousand (250,000) shares of common stock of Sequiam to Seller, in accordance with Section 2(d) below. (c) All payments, documents, and instruments to be delivered on the Closing Date pursuant to this Agreement shall be regarded as having been delivered simultaneously, and no document or instrument shall be regarded as having been delivered until all documents and instruments to be delivered on the Closing Date have been delivered or delivery thereof shall have been waived by the party to whom such delivery was to be made. The Purchase Price shall be paid to Seller only in accordance with paragraph (d) below. (d) Upon Closing, Buyer shall deliver the Instructions to Sequiam's transfer agent, and Sequiam's transfer agent shall issue to the Seller share certificates for Two Hundred Fifty Thousand (250,000) shares of common stock of Sequiam within five (5) business days of receipt of the Instructions (the "Certificate"). The Certificate shall contain the following legend: The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "ACT"), or the securities laws of any state, and may not be offered, sold, transferred, pledged, hypothecated or otherwise disposed of except pursuant to (i) an effective registration statement under the ACT and any applicable state laws, or valid exception thereto, (ii) to the extent applicable, in accordance with Rule 144 under the ACT (or any similar rule under the ACT relating to the disposition of securities), and (iii) an opinion of counsel, reasonably satisfactory to counsel to the issuer, that an exemption from registration under the ACT and applicable state law is available and such transfer is made in accordance with Rule 144. (e) Upon Closing, Buyer shall be entitled to possession of all Assets, and Seller shall provide Buyer reasonable access to all of Seller's facilities for a reasonable time following Closing to obtain possession of all Assets. Representations and Warranties of Seller. Seller hereby represents and warrants to Buyer as follows: Organization and Standing. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. Seller has full corporate power and authority to own the Assets and operate the Business as heretofore conducted. Authority to Contract. Seller has the right, power, legal capacity, and authority to enter into and perform the obligations under this Agreement, and no approvals or consents of any persons or entities are necessary in connection with Seller's performance under this Agreement. Corporate Action. The execution and delivery of this Agreement by Seller has been duly authorized by all necessary corporate action on the part of Seller, and this Agreement, when executed and delivered, shall constitute a valid and binding obligation of Seller, enforceable in accordance with its terms, except as such validity and enforceability may be affected by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting enforcement of creditors' rights. No Brokers. No broker, finder or similar agent has been employed by or on behalf of Seller in connection with this Agreement or the transactions contemplated hereby, and Seller has not entered 36 into any agreement or understanding of any kind with any person for the payment of any brokerage commission, finder's fee or any similar compensation in connection with this Agreement or the transactions contemplated hereby. No Conflicts. To the best of Seller's knowledge, the consummation of the transactions contemplated by this Agreement will not result in or constitute any of the following: (1) a breach of any term or provision of any other agreement between Seller and a third party; (2) a default or an event that, with notice, lapse of time, or both, would be a default, breach, or violation of the articles of incorporation or bylaws of Seller; (3) an event that would permit any party to terminate any agreement or to accelerate the maturity of any indebtedness or other obligation of Seller; or (4) the creation or imposition of any lien, charge, or encumbrance on any of the Assets. Title. Seller has good and marketable title to all of the Assets, in each case free and clear of all liens, charges or encumbrances, any restrictions on transfer, or any claims of any nature whatsoever. Litigation. There are no actions, suits, claims or other proceedings (collectively, "Litigation") pending or, to the best of Seller's knowledge, contemplated or threatened against Seller or the Assets and no such actions, to the best of Seller's knowledge, that would prevent the transfer of the Assets. Full Disclosure. None of the representations or warranties furnished by Seller in this Agreement, including the Schedules and Exhibits to this Agreement and any other document or instrument furnished by Seller to Buyer pursuant to or in connection with this Agreement, contains or will contain any untrue statement of a material fact, or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. Completeness. The Documents are in all material respects complete and correct. The personal property reflected in the Records constitutes all such personal property necessary for the conduct by Seller of the Business as now conducted. Taxes. (a) All Tax Returns (as defined below) required to be filed by Seller shall have been filed (giving effect to extensions granted with respect thereto) prior to December 31, 2003, and all such Tax Returns shall be true, correct and complete in all material respects. Seller is not currently the beneficiary of any extension of time within which to file a Tax Return, nor has any such extension been requested by Seller. (b) Except as identified in Schedule 1.3, to the knowledge of Seller, all Taxes owed by or relating to Seller (whether or not shown on any Tax Return) have been paid. (c) There are no liens for Taxes upon any of the Assets. (d) To the best of Seller's knowledge, no dispute or claim has been raised or claimed, and no such dispute or claim is threatened, by any taxing authority or any other governmental authority in connection with or relating to any Taxes of Seller. No deficiency for any Taxes has been proposed, asserted or assessed against Seller that has not been resolved and paid in full. There are no outstanding waivers, extensions, or comparable consents regarding the 37 application of the statute of limitations with respect to any Taxes or Tax Returns that have been given by or relate to Seller (including the time for filing of Tax Returns or paying Taxes) and Seller has no pending requests for any such waivers, extensions, or comparable consents. (e) Except as identified in Schedule 1.3, Seller has complied in all respects with applicable laws, rules, regulations and other legal requirements relating to the payment and withholding of Taxes (including, without limitation, withholding of Taxes pursuant to Sections 1441, 1442, 1445, and 1446 of the Internal Revenue Code of 1986, as amended (the "Code") or similar provisions under any applicable state and foreign laws) and has within the time and manner prescribed by law, paid over to the proper governmental authorities all amounts required to be so withheld and paid over under applicable laws. (f) Seller is not a party to and is not bound by nor has any obligation under any Tax-sharing allocation or indemnity agreement or similar contract or arrangement. (g) Seller is, and has been at all times since its incorporation, properly characterized as a corporation for federal and applicable state and local income tax purposes. (h) Seller does not expect any taxing authority, or other governmental authority, to claim or assess any additional Taxes payable by or relating to Seller for any period ending on or prior to the Closing Date and, to the knowledge of Seller, there are no facts which could constitute grounds for the assessment of any Taxes payable by or relating to Seller for any period on or prior to the Closing Date. (i) None of the Assets are "tax exempt use property" within the meaning of Section 168(h) of the Code. (j) Seller is not subject to liability as a transferee pursuant to Code Section 6901 et seq., nor will Buyer be subject to such liability as a direct or indirect result of its purchase of the Assets. (k) Seller does not have a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States and the relevant foreign jurisdiction. For purposes of this Agreement, "Tax" or "Taxes" shall mean any federal, state, local, foreign or other tax, levy, impost, fee, assessment or other government charge, including, without limitation, income, estimated income, business, occupation, franchise, property, payroll, personal property, sales, transfer, use, employment, commercial rent, occupancy, escheat or withholding taxes, and any premium, together with any interest, penalties and additions in connection with the foregoing. For purposes of this Agreement, "Tax Return" shall mean any return (including any information return) declaration, report, estimate, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any governmental authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of, or compliance with, any legal requirement relating to any Tax. 38 Employee Benefits. At Closing, Seller shall have no outstanding liability or obligation to any current or former employee of Seller. Seller and its affiliates have complied in all material respect with (a) the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and (b) the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. No individual shall accrue or receive additional benefits, service or accelerated rights to payments of benefits under any employee benefit plan, or become entitled to severance, termination allowance or similar benefits as a direct result of the transactions contemplated by this Agreement. Compliance. To Seller's knowledge, Seller has complied and is in compliance with all laws, rules, regulations, ordinances, orders, decrees, writs, injunctions, building codes, safety, fire and health approvals, certificates of occupancy or other governmental restrictions applicable to the Business or the Assets. Use of Trade Name. To the best knowledge of Seller, no other party has obtained the right to use the trade name "Telepartners," or any substantially similar names. Trade Names, Trademarks and Copyrights. Seller has no knowledge of any infringement or alleged infringement by others of any trade name, trademark, service mark or copyright used at any time in connection with the Assets or Business. Seller has not infringed, and is not now infringing, on any trade name, trademark, service mark or copyright belonging to any person, firm or corporation with respect to the Business or Assets. Seller is not a party to any license, agreement, or arrangement, whether as a licensee, licensor, franchisor, franchisee, or otherwise, with respect to any trademarks, service marks, trade names, or applications for them, or any copyrights. Seller owns, or holds adequate licenses or other rights to use all trademarks, service marks, trade names and copyrights necessary or used for the Business or in connection with the Assets and such use does not, and to the best of Seller's knowledge, will not, conflict with, infringe on, or otherwise violate any rights of others. Seller has the right to sell or assign to Buyer all such owned trademarks, trade names, service marks, and copyrights, and all such licenses or other rights. Contracts. The Contracts listed on attached Schedule 1.1(g) are all of the material Contracts used or useful in the Business. A complete and accurate copy of each of the Contracts identified on Schedule 1.1(g) shall be delivered to Buyer prior to Closing and the originals of each of the Contracts shall be attached to the Assignment at Closing. Seller warrants and represents that it is not currently in breach of, nor has it breached, any of its obligations under the respective Contracts. Seller further warrants and represents that it has not waived any of the rights or interests owed to it pursuant to the Contracts. Other Contracts. Except as otherwise disclosed herein, Seller is not a party to, nor are the Assets bound by, any material distributor's or manufacturer's representative or agency agreement, any output or requirements agreements; or any other material agreement not identified in this Agreement. Compliance with the Law. To the best of Seller's knowledge, the operations of the Business have been conducted in accordance with all applicable laws, regulations and other requirements of the United States of America and of all states, municipalities and other political subdivisions and agencies thereof, having jurisdiction over the Business, the failure to comply with which would have a material adverse effect on the operation or properties of the Business. Seller has not received notice of any asserted present or past violation of any applicable federal, state or local 39 statute, law or regulation (including, without limitation, OSHA and environmental laws, any applicable building, zoning or other law, ordinance or regulation) materially affecting either the Business or the Assets, and no such material violation exists. To the best of Seller's knowledge, Seller has procured and has maintained in effect all local, state and federal permits required which does not materially have a material adverse effect on the operation of the Business. Future Use. Seller does not have any information, and is not aware of any facts, which would or could adversely affect the future use of the Assets by Buyer in the manner previously used by the Seller prior to the Effective Date. Experience. The Seller is sufficiently experienced in financial and business matters to be capable of evaluating the merits and risks of its investments, and to make an informed decision relating thereto, and to protect its own interests in connection with the purchase of the Stock. Own Account. The Seller is purchasing the Stock as principal for its own account. The Seller is purchasing the Stock for investment purposes only and not with an intent or view towards further sale or distribution (as such term is used in Section 2(11) of the Securities Act of 1933, as amended (the "Securities Act")) thereof, and has not pre-arranged any sale with any other purchaser. Exemption. The Seller understands that the offer and sale of the Stock are not being registered under the Securities Act based on the exemption from registration provided by Rule 506 promulgated under Section 4(2) of the Securities Act and that the Buyer is relying on such exemption. Importance of Representations. The Seller understands that the Stock is being offered and sold to it in reliance on an exemption from the registration requirements of the Securities Act, and that the Buyer is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Seller set forth herein in order to determine the applicability of such safe harbor and the suitability of the Seller to acquire the Stock. No Registration. The Stock has not been registered under the Securities Act and may not be transferred, sold, assigned, hypothecated or otherwise disposed of unless such transaction is the subject of a registration statement filed with and declared effective by the Securities and Exchange Commission (the "SEC") or unless an exemption from the registration requirements under the Securities Act is available. The Seller represents and warrants and hereby agrees that all offers and sales of the Stock shall be made only pursuant to such registration or to such exemption from registration. The Seller acknowledges that the Stock shall contain a restrictive legend in accordance with Rule 144. Notwithstanding the foregoing, Buyer represents and warrants and hereby agrees that the Stock shall be registered on a "favored nations" basis with any and all other stock registered in the first registration that Sequiam shall file subsequent to the Closing ("Piggy-back Rights"). Risk. The Seller acknowledges that the purchase of the Stock involves a high degree of risk, is aware of the risks and further acknowledges that it can bear the economic risk of the Stock, including the total loss of its investment. Current Information. The Seller has been furnished with or has acquired copies of all requested information concerning the Buyer and Sequiam, including a copy of the Form 10-KSB for the 40 period ending December 31, 2002 and Form 10-QSB for the period ending March 31, 2003 as filed, respectively. Independent Investigation. The Seller, in making the decision to purchase the Stock subscribed for, has relied upon independent investigations made by it and its purchaser representatives, if any, and the Seller and such representatives, if any, have prior to any sale to it, been given access and the opportunity to examine all material contracts and documents relating to this offering and an opportunity to ask questions of, and to receive answers from, the Buyer or any person acting on its behalf concerning the terms and conditions of this offering. The Seller and its advisors, if any, have been furnished with access to all materials relating to the business, finances and operation of the Buyer and materials relating to the offer and sale of the Stock which have been requested. The Seller and its advisors, if any, have received complete and satisfactory answers to any such inquiries. No Recommendation or Endorsement. The Seller understands that no federal, state or provincial agency has passed on or made any recommendation or endorsement of the Stock. Non-Affiliate Status. The Seller is not an affiliate of the Buyer nor is any affiliate of the Seller an affiliate of the Buyer. No Advertisement or General Solicitation. The sale of the Stock has not been advertised through any article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; or through any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Representations and Warranties of Buyer. Buyer hereby represents and warrants to Seller as follows: Organization and Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. Buyer has full power and authority to own its assets and operate its business as heretofore conducted. Authority to Contract. Buyer has the right, power, legal capacity, and authority to enter into and perform the obligations under this Agreement, and no approvals or consents of any persons or entities are necessary in connection with Buyer's performance under this Agreement. Action. The execution and delivery of this Agreement by Buyer has been duly authorized by all necessary corporate action on the part of Buyer, and this Agreement, when executed and delivered, shall constitute a valid and binding obligation of Buyer, enforceable in accordance with its terms, except as such validity and enforceability may be affected by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting enforcement of creditors' rights. No Brokers. No broker, finder or similar agent has been employed by or on behalf of Buyer in connection with this Agreement or the transactions contemplated hereby, and Buyer has not entered into any agreement or understanding of any kind with any person for the payment of any brokerage commission, finder's fee or any similar compensation in connection with this Agreement or the transactions contemplated hereby. 41 No Conflicts. To the best of Buyer's knowledge, the consummation of the transactions contemplated by this Agreement will not result in or constitute any of the following: (1) a breach of any term or provision of this Agreement; (2) a default or an event that, with notice, lapse of time, or both, would be a default, breach, or violation of the articles of organization or operating agreement of Buyer; or (3) an event that would permit any party to terminate any agreement or to accelerate the maturity of any indebtedness or other obligation of Buyer. Disclosure. No representation or warranty by Buyer and no statement or certificate furnished or to be furnished by or on behalf of Buyer to Seller or its agents pursuant to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. Conduct of Business Pending Closing. During the period commencing on the date hereof and continuing through the Closing Date, Seller covenants and agrees (except as expressly contemplated by this Agreement or to the extent that Buyer shall otherwise consent in writing) to ensure that: Qualification. Seller shall remain in good standing in Florida. Access. Buyer and its authorized representatives shall have reasonable access to the Assets, the customers of the Business, and Seller's personnel engaged in the Business in order to verify further Seller's representations and warranties set forth in this Agreement. Maintain Assets. Seller shall maintain the Assets in good working condition and shall take reasonable steps to insure that the Assets are not damaged, lost, destroyed or impaired. Tax Assessments and Audits. Seller shall furnish promptly to Buyer a copy of all notices of proposed assessment or similar notices or reports that are received from any taxing authority and which relate to Seller's operations for periods ending on or prior to the Closing Date. Additional Covenants. Covenants of Seller. During the period from the date hereof through the Closing Date, Seller agrees to: (a) use commercially reasonable efforts to comply promptly with all applicable legal requirements with respect to the transactions contemplated by this Agreement, and shall cooperate promptly with, and furnish information to Buyer in connection with, any such requirements imposed upon Buyer or upon any of Buyer's affiliates in connection herewith; (b) use commercially reasonable efforts to bring about the satisfaction of the conditions precedent to Closing set forth in Section 0; and maintain the confidentiality of the transactions contemplated by this Agreement, and any and all information concerning Buyer and its business acquired by Seller in connection with this Agreement, for a period of two (2) years after Closing. 42 continue to perform any and all obligations required of it under the Contracts and take any and all lawful measures to protect the rights and interests owed to it under the Contracts. Covenants of Buyer. During the period from the date hereof to the Closing Date, Buyer agrees to: (a) use commercially reasonable efforts to comply promptly with all requirements that applicable legal requirements may impose upon it with respect to the transactions contemplated by this Agreement, and shall cooperate promptly with, and furnish information to, Seller in connection with any such requirements imposed upon Buyer in connection herewith; (b) use commercially reasonable efforts to obtain any and all of Buyer's Consents required to be obtained in connection with the transactions contemplated by this Agreement; (c) use commercially reasonable efforts to bring about the satisfaction of the conditions precedent to Closing set forth in Section 0; and (d) maintain the confidentiality of the transactions contemplated by this Agreement, and any and all information concerning Seller and the Business acquired by Buyer in connection with this Agreement, for a period of two (2) years after Closing. Further Assurances. At any time and from time to time after the Closing, each party shall, without further consideration, execute and deliver to the other such other instruments of transfer and shall take such other actions as the other may reasonably request to carry out the purpose and intent of this Agreement. Confidentiality. (a) Acknowledgment. Each of Buyer and Seller acknowledges the confidential and proprietary nature of the Confidential Information (as defined below), agrees to hold and keep the same as provided in this Section 0, and otherwise agrees to each and every restriction and obligation in this Section 0. (b) Confidential Information. Confidential Information means and includes any and all: (i) Materials and all trade secrets concerning the business and affairs of either Buyer or Seller (the "Provider") provided to the other party (the "Recipient"), including data, know-how, compositions, concepts and ideas, past, current, and planned research and development, current and planned production or distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, all iand any other information, however documented, that is a trade secret within the meaning of the applicable state trade secret law; (ii) information concerning the business and affairs of the Provider (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, and personnel training techniques and materials, however documented) that has been or may hereafter be provided or shown to the Recipient by the Provider or by the Provider's representatives or is otherwise obtained from review of Provider documents or property or discussions with the Provider's representatives by the Recipient or by the Recipient's representatives (including current or prospective financing sources) or representatives of the Recipient's representatives irrespective of the form of the communication, and also includes all notes, 43 analyses, compilations, studies, summaries, and other material prepared by the Recipient or the Recipient's representatives containing or based, in whole or in part, on any information included in the foregoing. Any trade secrets of the Provider will also be entitled to all of the protections and benefits under the applicable state trade secret law and any other applicable law. (c) Restricted Use of Confidential Information. The Recipient agrees that the Confidential Information (a) will be kept confidential by the Recipient and the Recipient's representatives and (b) without limiting the foregoing, will not be disclosed by the Recipient or the Recipient's representatives to any person except as expressly otherwise permitted by the terms of this Section 0. It is understood that the Recipient may disclose Confidential Information to only those of the Recipient's representatives who (i) require such material for the purpose of evaluating the Transaction, and (ii) are informed by the Recipient of the confidential nature of the Confidential Information and the obligations of this Section 0. The Recipient further agrees that the Recipient and the Recipient's representatives will not use any of the Confidential Information either for any reason or purpose other than to evaluate the Transaction or in any way detrimental to the Provider (it being acknowledged that any use other than evaluation of and negotiating the Transaction will be deemed detrimental). The Recipient also agrees to be responsible for enforcing the terms of this Section 0 as to the Recipient's representatives and the confidentiality of the Confidential Information and to take such action, legal or otherwise, to the extent necessary to cause them to comply with the terms and conditions of this Section 0 and thereby prevent any disclosure of the Confidential Information by any of the Recipient's representatives (including all actions that the Recipient would take to protect its own trade secrets and confidential information). (d) Exceptions. All of the foregoing obligations and restrictions do not apply to that part of the Confidential Information that the Recipient demonstrates (a) was or becomes generally available to the public other than as a result of a disclosure by the Recipient or the Recipient's representatives or (b) was available, or becomes available, to the Recipient on a non-confidential basis prior to its disclosure to the Recipient by the Provider or Provider's representatives. Nothing contained in this Section 0 shall limit or otherwise apply to Buyer's use and disclosure of the Assets after the Closing. (e) Required Disclosure. The Recipient or such Recipient's representative may furnish that portion (and only that portion) of the Confidential Information that is required to be disclosed under the applicable federal and state securities laws. (f) Return of Confidential Information. If this Agreement is terminated for any reason, then (a) the Recipient (i) will promptly deliver to the Provider all documents or other materials furnished by the Provider or any of Provider's representative to the Recipient or the Recipient's representatives constituting Confidential Information, together with all copies and summaries thereof in the possession or under the control of the Recipient or the Recipient's representatives, and (ii) will destroy materials generated by the Recipient or the Recipient's representatives that include or refer to any part of the Confidential Information, without retaining a copy of any such material or (b) alternatively, if the Provider requests or gives its prior written consent to the Recipient's request, the Recipient will destroy all documents or other matters constituting Confidential Information in the possession or under the control of the Recipient or the Recipient's representatives. Any such destruction pursuant to the foregoing must be confirmed by the Recipient in writing to the Provider (such confirmation must include a list of the destroyed materials). (g) Remedies. The Recipient agrees to indemnify and hold the Provider and its stockholders harmless from any damages, loss, cost, or liability (including legal fees and the cost of enforcing this indemnity) arising out of or resulting from any unauthorized use or disclosure by the Recipient or the Recipient's representatives of the Confidential Information or other violation of this Section 0. In addition, because an award of money damages (whether pursuant to the foregoing sentence or otherwise) would be inadequate for any breach of this Section 0 by the Recipient or the Recipient's representatives and any such breach would cause the Provider irreparable harm, the Recipient also agrees that, in the event of 44 any breach or threatened breach of this Section 0, the Provider will also be entitled, without the requirement of posting a bond or other security, to equitable relief, including injunctive relief and specific performance. Such remedies will not be the exclusive remedies for any breach of this Agreement but will be in addition to all other remedies available at law or equity to the Provider. Press Releases. Except as required by applicable law, Seller shall not make any public statement or press releases concerning this Agreement or the transactions contemplated hereby except for such written information as shall have been approved in writing as to form and content by Buyer, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, following the Closing, Buyer may announce its ownership of the Assets. Conditions Precedent to Buyer's Performance. The obligations of Buyer to consummate the transactions contemplated hereby shall be subject to the satisfaction, at or prior to the Closing Date, of the following conditions: Covenants. Seller shall have performed and complied with, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed or complied with prior to or at the Closing, including without limitation, delivery of those documents and things required by Section 2(a) above. Representations and Warranties. All of the representations and warranties made by Seller in this Agreement shall be true, accurate, complete and correct in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of the Closing Date. Actions Affecting Closing. No suit, action, investigation, inquiry or other proceeding by any governmental body or other person or legal or administrative proceeding shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby. Consents. All necessary agreements and consents of any person or entity to the consummation of the transactions contemplated by this Agreement shall have been obtained. Adverse Changes. During the period from the Effective Date to the Closing Date, there shall not occur any materially adverse change in the operations, financial condition, liabilities, Assets, or prospects of the Business. Payment of Taxes. All past due or preexisting tax liabilities of Seller, including all sales, use, property, payroll, withholding and any other federal, state or local taxes and assessments, shall be paid by Seller on or before the Closing Date. Approval of Documentation. The form and substance of all certificates, instruments, opinions, and other documents delivered to Buyer under this Agreement, shall be satisfactory in all reasonable respects to Buyer and its counsel. Stockholders Consent. The sale of Assets pursuant to this Agreement shall have been approved by the requisite votes of the stockholders of Seller pursuant to Seller's Certificate of Incorporation, as amended, and in accordance with Florida law. 45 Conditions Precedent to Seller's Performance. The obligations of Seller to consummate the transactions contemplated hereby shall be subject to the satisfaction, at or prior to the Closing, of the following conditions: Covenants. Buyer shall have performed and complied with, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed or complied with prior to or at the time of Closing, including without limitation, delivery of those documents and things required by Section 2(b) above. Representations and Warranties. All of the representations and warranties made by Buyer in this Agreement shall be true, accurate, complete and correct in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of the Closing Date. Actions Affecting Closing. No action shall be pending or threatened before any governmental entity in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, and no investigation that might eventuate in any such action shall be pending or threatened. No Litigation. No order of any court shall have been issued or entered which would be violated by the completion of the transactions contemplated hereby. No person or entity who or which is not a party to this Agreement shall have commenced or threatened to commence any Litigation seeking to restrain or prohibit, or to obtain substantial damages in connection with, this Agreement or the transactions contemplated by this Agreement. Consents. All necessary agreements and consents of any person or entity to the consummation of the transactions contemplated by this Agreement shall have been obtained. Approval of Documentation. The form and substance of all certificates, instruments, and other documents delivered to Seller under this Agreement shall be satisfactory in all reasonable respects to Seller and its counsel. Stockholders Consent. The purchase of Assets pursuant to this Agreement shall have been approved by the requisite votes of the stockholders of Buyer pursuant to Buyer's Articles of Incorporation, as amended, Bylaws, as amended, and in accordance with Florida law. Post-Closing Covenants. No Retention of Employees. Except as identified on Schedule 9.1, Buyer has made no commitment to assume or otherwise acquire any employment relationship that may exist between Seller and Seller's employees as of the Closing Date. Resale Permit. [omitted] Use of Trade Names. After the Closing Date, neither Seller nor its affiliates shall use or employ in any manner, directly or indirectly, the following trade names: (a) Telepartners; (b) Synergy Broadcasting Network; (c) Extended Classroom; or any substantially similar names. 46 Sale of Stock. Seller agrees and covenants on its behalf and on behalf of its affiliates, that neither Seller nor its affiliates shall at any time during the two-year period following Closing, do any of the following: (a) engage in any short sales with respect to Sequiam's common stock, (b) sell options or similar instruments with respect to the Stock, or (c) sell the Stock except in strict compliance with Rule 144. Termination. This Agreement may be terminated at any time prior to the Closing: (a) by mutual consent of Buyer and Seller; (b) by Seller, on the one hand, or by Buyer, on the other hand, by written notice to the other party or parties hereto if the sale of Assets shall not have been consummated on or before June 15, 2003 (or such later date as Buyer and Seller may agree), provided that in the case of a termination under this clause (b), the party or parties terminating this Agreement shall not then be in material breach of any of their obligations under this Agreement; (c) by Buyer if there has been a material misrepresentation, material breach of warranty or material breach of covenant by Seller under this Agreement and Buyer is not then in material default of Buyer's obligations hereunder; provided, however, Seller shall have thirty (30) days after receiving written notice of such breach to cure; or (d) by Seller if there has been a material misrepresentation, material breach of warranty or material breach of covenant by Buyer under this Agreement and Seller is not then in material default of its obligations hereunder; provided, however, Buyer shall have thirty (30) days after receiving written notice of such breach to cure. Upon termination of this Agreement as provided above, this Agreement shall terminate and there shall be no liability or obligation thereafter arising on the part of any party hereto or their respective directors, officers, employees, agents or other representatives; provided, however, in the event of termination of this Agreement as provided in clause (b), (c) or (d) of this Section 0, such termination shall be without prejudice to any rights that the terminating party may have against the breaching party or parties or any other person under the terms of this Agreement or otherwise. Indemnification. Indemnification by Seller. From and after the Closing, Seller, jointly and severally, shall indemnify, defend and hold harmless Buyer and its shareholders, officers, directors, managers, constituent members, constituent partners, beneficiaries, trustees, affiliates, agents, employees, representatives, assigns, attorneys, heirs, predecessors, and successors (collectively, "Buyer's Indemnified Parties") from and against any and all claims, demands, actions, causes of action, judgments, settlements, losses, damages, liabilities, compromises, injuries, lawsuits, deficiencies, obligations, costs and expenses, including reasonable attorneys' fees, expert witness fees and related costs as incurred by Buyer, including any and all costs associated with defense of this Agreement or the transactions contemplated herein, or any other claim before a bankruptcy court or other court, trustee or receiver regarding this Agreement, the Assets or the transactions contemplated herein (collectively, "Claims"), whether such Claims are fixed or contingent, that any Buyer's Indemnified Parties shall incur or suffer, that arise, result from or relate to: 47 (a) any breach of, or failure by Seller to perform, any of its representations, warranties, covenants, or agreements set forth in this Agreement but subject to each and all of the terms, conditions and limitations set forth therein; (b) any event or circumstance occurring prior to the Closing which is attributable or related to the operation or ownership of the Business or Assets by Seller; or (c) any obligation, debt or liability of Seller. Indemnification by Buyer. From and after the Closing, Buyer shall indemnify, defend and hold harmless Seller and their respective shareholders, officers, directors, managers, constituent members, constituent partners, beneficiaries, trustees, affiliates, agents, employees, representatives, assigns, attorneys, heirs, predecessors, and successors (collectively, "Seller's Indemnified Parties") from and against any and all Claims, whether such Claims are fixed or contingent, that any Seller's Indemnified Parties shall incur or suffer, that arise, result from or relate to: (a) any breach of, or failure by Buyer to perform, any of its representations, warranties, covenants, or agreements in this Agreement but subject to each and all of the terms, conditions and limitations set forth therein; or (b) any event or circumstance occurring following the Closing which is attributable or related to the operation or ownership of the Assets by Buyer. Survival. Notwithstanding any provision of this Agreement to the contrary, the indemnity obligations of the parties in this Section 0 and the covenants set forth in Section 0 and Section 0 shall be deemed to be continuing and shall survive the Closing. General Provisions. Destruction of Property. If any of the Assets shall be substantially damaged or destroyed by fire or other cause prior to Closing, Seller shall immediately notify Buyer and furnish Buyer a written statement of the amount of insurance, if any, payable on account thereof. In the event of such damage or destruction, Buyer may elect (i) to require that Seller restore the Intellectual Property to the condition on the date of this Agreement or (ii) to declare this Agreement null and void. Notices. All notices and other communications under or in connection with this Agreement shall be in writing and shall be deemed given (a) if delivered personally, upon delivery, (b) if delivered by registered or certified mail, return receipt requested, upon the earlier of actual delivery or three days after being so mailed, or (c) if given by telecopy, upon confirmation of transmission by telecopy, in each case to the parties at the following addresses: If to Buyer, addressed to: SEQUIAM EDUCATION, INC. Attn: Mr. Mark Mroczkowski 300 Sunport Lane Orlando, Florida 32809 With a copy to: 48 LEE & GODDARD LLP Attn: Raymond A. Lee, Esq. 18500 Von Karman Avenue, Suite 400 Irvine, California 92612 (b) If to Seller, addressed to: TELEPARTNERS, INC. Attn: James D. Ring 500 Australian Ave, Suite 730 West Palm Beach, Florida 33401 Severability. The provisions of this Agreement are intended by the parties to be severable and divisible, and the invalidity or unenforceability of a provision or term herein shall not invalidate or render unenforceable any other provision or term of this Agreement. Entire Agreement. This Agreement, including the exhibits and schedules attached hereto and other documents referred to herein, contains the entire understanding of the parties hereto in respect of its subject matter and supersedes all prior and contemporaneous agreements and understandings, oral and written, between the parties with respect to such subject matter. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Buyer and Seller and their respective successors, heirs and assigns; provided, however, that no party shall directly or indirectly transfer or assign any of such party's respective rights or obligations hereunder in whole or in part without the prior written consent of the other party, and any such transfer or assignment without said consent shall be void. Subject to the immediately preceding sentence, this Agreement is not intended to benefit, and shall not run to the benefit of or be enforceable by, any other person or entity other than the parties hereto and their permitted successors and assigns. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same Agreement. Attorneys' Fees. In the event of any legal, equitable or administrative action or proceeding (each, a "Proceeding") brought by any party under this Agreement, the prevailing party shall be entitled to recover the reasonable fees of its attorneys and any costs incurred in such Proceeding, including costs of appeal, if any, in such amount that the court or administrative body having jurisdiction over such Proceeding may award. Arbitration. If a dispute or claim shall arise with respect to any of the terms or provisions of this Agreement, then either party may, by notice as herein provided, require that the dispute be submitted under Commercial Arbitration Rules of the American Arbitration Association to an arbitrator in good standing with the American Arbitration Association within fifteen (15) days after such notice is given. Any such arbitrator so selected is to mutually acceptable to both parties. If both parties are unable to agree upon a single arbitrator, each party shall appoint one (1) arbitrator. If either party does not appoint an arbitrator within five (5) days after the other party has given notice of the name of its arbitrator, the single arbitrator appointed by the party giving notice shall be the sole arbitrator and such arbitrator's decision shall be binding upon both parties. If two (2) arbitrators are appointed, these two (2) shall appoint a third arbitrator who shall be the sole 49 arbitrator who shall resolve the dispute. The written decision of the single arbitrator ultimately appointed by or for both parties shall be binding and conclusive on the parties. All proceedings before the arbitrator shall be held in Orange County, Florida unless another location is agreed to by the parties. Survival. Except as expressly provided herein, the representations, warranties, agreements and indemnities contained in this Agreement shall survive the execution and delivery of this Agreement and the completion of the transactions contemplated herein. Incorporation. The recitals, schedules and exhibits to this Agreement are incorporated herein and, by this reference, made a part hereof as if fully set forth in each section of this Agreement as applicable. Amendment. This Agreement may be amended at any time by a written instrument executed by Buyer and Seller. Any amendment effected pursuant to this Section shall be binding upon all parties hereto. Waiver. Any term or provision of this Agreement may be waived in writing at any time by the party or parties entitled to the benefits thereof. Any waiver effected pursuant to this Section shall be binding upon all parties hereto. No failure to exercise and no delay in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude the exercise of any other right, power or privilege. No waiver of any breach of any covenant or agreement hereunder shall be deemed a waiver of any preceding or subsequent breach of the same or any other covenant or agreement. Construction. The section and subsection headings used herein are inserted for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. As used in this Agreement, the masculine, feminine or neuter gender, and the singular or plural, shall be deemed to include the others whenever and wherever the context so requires. As used herein, Buyer shall include Buyer's designee who purchases or accepts the Assets from Seller. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, County of Orange without giving effect to any principle or doctrine regarding conflicts of laws. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the Effective Date. "SELLER" TELEPARTNERS, INC., a Florida corporation By: James D. Ring, Chairman "BUYER" 50 SEQUIAM EDUCATION, INC., a Florida corporation By: Mark L. Mroczkowski, Secretary and CFO 51 SCHEDULE 0(b) NAMES AND LOGOS TELEPARTNERS, INC. SBN (and SBN.tv) The Extended Classroom (and The Extended Classroom.tv) TELEPARTNERS, INC. CONNECTING THE WORLD TO PEOPLE SBN.TV EXTENDED CLASSROOM.TV - -------------------------------------------------------------------------------- SCHEDULE 0(b)
SCHEDULE 1.1(e) CONTRACTS - ---------------------------------------------------------------------- Second-Party(ies) Names Title of Agreement Date - ---------------------------- ------------------------------ -------- Bobby Goldsboro Productions Joint Venture Agreement 11/01/02 - ---------------------------- ------------------------------ -------- Teachers (5) Services Engagement Agreements 7/02/02 - ---------------------------- ------------------------------ -------- Flagler Museum Master Agreement for Services 9/01/02 - ---------------------------- ------------------------------ -------- Crestline - Sheraton Master Agreement for Services 3/01/02 - ----------------------------------------------------------------------
SCHEDULE 00
SCHEDULE 1.1(f) TANGIBLE PROPERTY EQUIPMENT FURNITURE & FIXTURES 4 - HP 7855 Computers 1 - 3 ft. x 7 ft. Wood Conference Table 5 - 15" Monitors with Keyboards 1 - 3 ft. x 6 ft. Wood Desk with 4 ft. Return 1 - HP 1700 Printer 1 - 3 ft. x 7 ft. Wood Desk 1 - Epson 1200 Scanner 1 - 3 ft. x 6 ft. Glass Desk with 3 ft. Return 1 - HP Laser Jet 4 Printer 1 - 3 ft. X 6 ft. Glass Desk 1 - HP Office Jet 700 Printer/Fax/Copier/Scanner 1 - 3 ft. x 6 ft. Reception Desk 1 - Epson 1280 Printer 1 - 2 ft. x 5 ft. Wood Desk 1 - 52 inch Toshiba TV 10 - Black Leather Office Chairs 1 - Sony Digital Audio/Video Control Center 3 - 7 ft. Black Leather Sofas 6 - Battery Backups plus Surge Protectors 2 - 3 Ft. x 6 ft. Wood Book Cases 1 - Paper Cutter 2 - 4-Drawer Metal File Cabinets 2 - Kenmore Air Filters 1 - 2 Drawer Metal File Cabinet 1 - Honeywell Air Filter 1 - 48 in. Round Conference Table with 4 Chairs 7 - 3ft. x 4ft. Whiteboards 1 - 3 ft. x 6 ft. folding table 1 - Brothers Intellifax 775 1 - Linksys Firewall Router Model BEFSX41 1 - 32 inch Refrigerator 1 - Emerson Microwave
SCHEDULE 00
SCHEDULE 0 ALLOCATION OF PURCHASE PRICE - --------------------------------------------------------------- Asset Allocation - -------------------------------------------------- ----------- 1. INTELLECTUAL PROPERTY, INCLUDING MATERIALS $200,000.00 - -------------------------------------------------- ----------- - -------------------------------------------------- ----------- 2. PRODUCTION EQUIPMENT, FURNITURE AND $ 10,000.00 OFFICE EQUIPMENT, AND ELECTRONIC EQUIPMENT - -------------------------------------------------- ----------- - ---------------------------------------------------------------
EXHIBIT "A" - ------------ ASSIGNMENT OF LICENSES, CONTRACTS, AND OTHER - -------------------------------------------- INTANGIBLE PROPERTY AND ASSUMPTION AGREEMENT - -------------------------------------------- (Telepartners to Sequiam Education) THIS ASSIGNMENT OF LICENSES, CONTRACTS, AND OTHER INTANGIBLE PROPERTY AND ASSUMPTION AGREEMENT ~ Telepartners to Sequiam Education (this "Assignment"), is made effective as of June 1, 2003 (the "Effective Date"), by and between TELEPARTNERS, INC., a Florida corporation ("Assignor"), and SEQUIAM EDUCATION, INC., a Florida corporation ("Assignee"). FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby assigns and transfers unto Assignee, effective as of the Effective Date, all right, title, claim and interest in, to and under all of the assets used in or useful to the Assignor's business of researching, developing and manufacturing the Programs (the "Business"), including, without limitation: the Materials and all intellectual property related to the research, development, production and distribution of the Programs; Seller's names and logos; and Seller's trademarks and service marks, on the terms and conditions set forth in the Agreement , as defined in Section 4 below (collectively, the "Assets"). The Assets include, but are not limited to, those identified on Attachment "A," attached hereto. ------------- FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby assigns and transfers unto Assignee, effective as of the Effective Date, all of Assignor's right, claim and interest in, to and under Assignor's rights and privileges in and to those certain contracts by and between Assignor and certain third-parties, attached hereto as Attachment "B" (collectively, the "Contracts"). Assignee shall have all of the same right, privilege and interest in, to and under the Contracts as Assignor and shall be able to enforce such Contracts to the full extent permitted by law without participation from Assignor. In the event that Assignee is not able to enforce the Contracts to the full extent available to Assignor, then Assignor shall enforce the Contracts for and on behalf of Assignee, at Assignee's direction and Assignee's sole cost and expense. ASSIGNOR AND ASSIGNEE FURTHER HEREBY AGREE AND COVENANT AS FOLLOWS: Assumption Related to Assets. Except as set forth in Section 2 below, Assignee - ----------------------------- hereby assumes any debt, duty, obligation and liability of Assignor directly related to the Assets to the extent that such debt, duty, liability or obligation arises from and after the Effective Date hereof (each, a "Prospective Obligation"). From and after the Effective Date hereof, Assignor hereby retains any and all debts, duties, liabilities and obligations directly related to the Assets other than the Prospective Obligations. Retention of Obligations Under Confidentiality Agreements/Indemnity. From and - -------------------------------------------------------------------- after the Effective Date hereof, Assignor hereby retains any and all debts, duties, liabilities and obligations pursuant to the Confidentiality Agreements, whether arising before or after the Effective Date (each, an "Employment Obligation"). Assignor hereby indemnifies Assignee and each Representative of Assignee against and shall defend, protect and hold harmless Assignee and each such Representative from and against any and all Claims from time to time incurred by Assignee or such Representative concerning any Employment Obligation. The term "Representative" means and includes, with respect to Assignee, each shareholder, director, officer, manager, constituent member, constituent partner, trustor, beneficiary, trustee, successor-in-interest, predecessor-in-interest, affiliate, employee, agent, attorney or other representative of Assignee, expressly excluding however, any other party to this Assignment. The term "Claim" means and includes any claim, demand, action, cause of action, loss, damage, judgment, award, compromise or settlement, debt, responsibility, liability, obligation, lien, encumbrance, cost or expense, including reasonable attorneys fees, expert witness fees, accounting fees and related costs, incurred by a party hereto or any Representative of such party. Possession. From and after the Effective Date hereof, Assignee shall have sole - ---------- possession of the Assets. Representations and Warranties. Assignor hereby affirms and renews each - ------------------------------- representation and warranty of Assignor set forth in Section 3 of the Asset Purchase Agreement by and between Assignor and Assignee, dated as of June 1, 2003 (the "Agreement"), and its related subsections, which are hereby incorporated into this Assignment. Binding Effect. This Assignment shall be binding on and inure to the benefit - -------------- of the parties hereto, their heirs, executors, administrators, successors in interest and assigns. Governing Law. This Assignment shall be governed by and construed in - -------------- accordance with the laws of the State of California. Further Assurances. Both parties shall provide all further assurances, shall - ------------------- take all further actions and shall execute, acknowledge, verify, certify, enter into, deliver, record and/or file any and all agreements, contracts, amendments, assignments, statements, certificates, instruments and other documents necessary or appropriate to close, consummate and effect the transactions contemplated by this Assignment. IN WITNESS WHEREOF, the parties have executed, delivered and entered into this Assignment as of the Effective Date hereof. "ASSIGNOR" TELEPARTNERS, INC. a Florida corporation By:_________________________________________________ James D. Ring, Chairman "ASSIGNEE" SEQUIAM EDUCATION, INC., a Florida corporation By:_________________________________________________ Mark L. Mroczkowski, Secretary and CFO ATTACHMENT "A" ASSETS - ------ 1. INTELLECTUAL PROPERTY. All right, title and interest in and to any and all - -------------------------- present and future intellectual property rights with respect to the Business, including, without limitation, the designs, know-how, trade secrets, processes, compositions, scripts, working drafts, plans, files, notebooks and records, production and edited videotapes, proprietary and technical information, sales and marketing concepts and materials, computer software, licenses of technology, and any and all other intangible personal property, together with all rights to and applications, licenses and franchises for, any of the foregoing, relating to the Business and all other intangible personal property used in or useful in the Business or with the Programs; 2. NAMES AND LOGOS. All right, title and interest in and to the name, - ------------------- "Telepartners," and all right, title and interest in and to any and all other names and logos created, developed and/or used by Seller in the Business (identified on Schedule 1.1(b); 3. TRADEMARKS. All right, title and interest in and to any and all of the - -------------- trademarks and service marks used by Seller in connection with the Business; 4. CONTRACTS. All right, title and interest in and to those certain contracts - ------------- to which Seller is a party, identified on Schedule 1.1(e); ---------------- 5. TANGIBLE BUSINESS PROPERTY. All of Seller's tangible property, including - ------------------------------ without limitation, inventory, work-in-progress, furniture, and electronic equipment. 6. CUSTOMER LISTS. All of Seller's customer lists and business contacts. - ------------------
ATTACHMENT "B" CONTRACTS - --------- - ---------------------------------------------------------------------- Second-Party(ies) Names Title of Agreement Date - ---------------------------- ------------------------------ -------- Bobby Goldsboro Productions Joint Venture Agreement 11/01/02 - ---------------------------- ------------------------------ -------- Teachers (5) Services Engagement Agreements 7/02/02 - ---------------------------- ------------------------------ -------- Flagler Museum Master Agreement for Services 9/01/02 - ---------------------------- ------------------------------ -------- Crestline - Sheraton Master Agreement for Services 3/01/02 - ----------------------------------------------------------------------
[Please attach original contracts] EXHIBIT "B" - ------------ BILL OF SALE (Tangible Property from Telepartners to Sequiam Education) FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, effective as of June 1, 2003 (the "Effective Date"), the undersigned, TELEPARTNERS, INC., a Florida corporation ("Assignor"), hereby grants, bargains, conveys, transfers, assigns and delivers unto SEQUIAM EDUCATION, INC., a Florida corporation ("Assignee"), all of Assignor's right, title and interest in and to those certain tangible assets (the "Assigned Assets") specifically identified on Attachment "A" attached hereto and -------------- incorporated herein by this reference. TO HAVE AND TO HOLD the Assigned Assets unto Assignee and its successors and assigns forever, Assignor hereby represents and warrants to Assignee and its successors and assigns that Assignor has the right, power and authority to transfer the Assigned Assets to Assignee and that Assignor hereby agrees to defend the title to the Assigned Assets unto Assignee and its successors and assigns against any person claiming an interest in the Assigned Assets, or any part thereof. Assignor hereby affirms and renews each representation and warranty of Assignor set forth in Section 3 of the Asset Purchase Agreement by and between Assignor and Assigne, dated June 1, 2003 (the "Agreement"), and its related subsections, which are hereby incorporated into this Bill of Sale. This Bill of Sale may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument and each of which taken separately shall constitute an original for all purposes. IN WITNESS WHEREOF, Assignor has made, executed and delivered this Bill of Sale as of the Effective Date hereof. "ASSIGNOR" TELEPARTNERS, INC., a Florida corporation By:___________________________________ James D. Ring, Chairman Exhibit "B" - Page 1
ATTACHMENT "A" TANGIBLE PROPERTY - ----------------- EQUIPMENT FURNITURE & FIXTURES 4 - HP 7855 Computers 1 - 3 ft. x 7 ft. Wood Conference Table 5 - 15" Monitors with Keyboards 1 - 3 ft. x 6 ft. Wood Desk with 4 ft. Return 1 - HP 1700 Printer 1 - 3 ft. x 7 ft. Wood Desk 1 - Epson 1200 Scanner 1 - 3 ft. x 6 ft. Glass Desk with 3 ft. Return 1 - HP Laser Jet 4 Printer 1 - 3 ft. X 6 ft. Glass Desk 1 - HP Office Jet 700 Printer/Fax/Copier/Scanner 1 - 3 ft. x 6 ft. Reception Desk 1 - Epson 1280 Printer 1 - 2 ft. x 5 ft. Wood Desk 1 - 52 inch Toshiba TV 10 - Black Leather Office Chairs 1 - Sony Digital Audio/Video Control Center 3 - 7 ft. Black Leather Sofas 6 - Battery Backups plus Surge Protectors 2 - 3 Ft. x 6 ft. Wood Book Cases 1 - Paper Cutter 2 - 4-Drawer Metal File Cabinets 2 - Kenmore Air Filters 1 - 2 Drawer Metal File Cabinet 1 - Honeywell Air Filter 1 - 48 in. Round Conference Table with 4 Chairs 7 - 3ft. x 4ft. Whiteboards 1 - 3 ft. x 6 ft. folding table 1 - Brothers Intellifax 775 1 - Linksys Firewall Router Model BEFSX41 1 - 32 inch Refrigerator 1 - Emerson Microwave
EXHIBIT "C" - ------------ AGREEMENT REGARDING CONFIDENTIAL INFORMATION AND WORK PRODUCTS This AGREEMENT REGARDING CONFIDENTIAL INFORMATION AND WORK PRODUCTS (this "AGREEMENT") is entered into effective as of June 1, 2003 (the "EFFECTIVE DATE"), by and between SEQUIAM EDUCATION, INC., a Florida corporation (the "COMPANY"), and ___________________ ("EMPLOYEE"), with reference to the following recitals: Employee has been an employee of Telepartners, Inc., a Florida corporation ("Seller"). Pursuant to that certain Asset Purchase Agreement by and between the Company and Seller, dated as of the Effective Date hereof (the "Purchase Agreement"), Seller agreed to cause Employee to enter into this Agreement with the Company. Employee desires to enter into this Agreement in satisfaction of the conditions set forth in the Purchase Agreement. NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants contained herein, and the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. ----------- The term "CONFIDENTIAL INFORMATION" means proprietary techniques and confidential information that the Seller has transferred or will transfer to the Company or that Employee received or will receive under conditions of confidentiality. Confidential Information is to be broadly defined and includes (i) all information that has or could have commercial value or other utility in the business in which either the Seller or the Company is or was engaged or in which the Company contemplates engaging, (ii) all information that, if disclosed without authorization, could be detrimental to the interest of the Company, whether or not such information is identified as Confidential Information by the Seller or the Company; and (iii) all information relating to the business formerly conducted by Seller and to be conducted by the Company, whether previously existing, now existing or arising hereafter, whether conceived or developed by others or by Employee alone or with others, and whether or not conceived or developed during regular working hours. By example and without limitation, Confidential Information includes all information relating to techniques, processes, formulas, trade secrets, inventions, discoveries, improvements, research or development test results, specifications, data, know-how, formats, marketing plans, business plans, strategies, forecasts, non-published financial information, budgets, projections, and customer and supplier identities, characteristics, and agreements. The term "Confidential Information" shall not include any information of the type specified above to the extent that such information is or becomes publicly known or generally utilized by others engaged in the same business or activities in which the Company utilized, developed or otherwise acquired such information (other than by reason of Employee's breach of this Exhibit "B" - Page 3 Agreement). Failure to mark any Confidential Information as confidential shall not affect its status as Confidential Information under this Agreement. The term "WORK PRODUCTS" means and includes, without limitation, designs, processes, compositions, scripts, working drafts, plans, files, notebooks and records, production and edited videotapes, proprietary and technical information, sales and marketing concepts and materials, computer software, licenses of technology, used in or useful in the Business or with the Programs, a process, financial data, financial plans, product plans, business plans, a list (whether in written form or otherwise) of actual or potential customers or suppliers, which is not commonly known by or available to the public and which information (i) derives economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 2. Ownership. --------- 2.1 Confidential Information. Employee hereby acknowledges and agrees that ------------------------ all right, title and interest in and to any Confidential Information shall be and shall remain the exclusive property of the Company, and that any Confidential Information which Employee acquired from the Seller or acquires from the Company was and is received in confidence and as a fiduciary of the Seller or the Company. 2.2 Work Products. Employee hereby acknowledges that any and all -------------- Work Products which may have been or are made, developed or conceived of in whole or in part by Employee, or any of Employee's representatives working with Employee, in connection with the services performed by Employee on behalf of Seller or the Company or relating to the business of the Seller or the Company, shall belong solely and exclusively to the Company. (a) Assignment of Work Product. Employee hereby assigns to the Company -------------------------- Employee's entire right, title and interest, including all patent, copyright, trade secret, trademark and other proprietary rights, in any and all Work Products. (b) Documentation. Employee shall, at no charge to the Company, execute and -------------- aid in the preparation of any and all documentation that the Company may consider necessary or helpful to obtain or maintain, at the Company's expense, any patents, copyrights, trademarks or other proprietary rights. The Company shall reimburse Employee for reasonable out-of-pocket expenses incurred under this Section. (c) REASONABLENESS OF RESTRICTIONS. EMPLOYEE HAS CAREFULLY READ AND ------------------------------ CONSIDERED THE PROVISIONS OF THIS SECTION AND, HAVING DONE SO, HEREBY AGREES THAT THE RESTRICTIONS SET FORTH IN SUCH SECTION ARE FAIR AND REASONABLE AND ARE REASONABLY REQUIRED FOR THE PROTECTION OF THE INTERESTS OF THE COMPANY AND ITS BUSINESS. 3. Disclosure and Use. At all times from and after the Effective Date, ------------------ Employee shall hold in trust, keep confidential and shall not directly or indirectly make use of, copy, disclose, reveal, report, publish or transfer to any third party any Confidential Information or Work Products without the prior written approval of the Company. Employee shall not cause the transmission, removal, or transport of Confidential Information or Work Products from the Company's principal places of business or such other place specified by the Company without prior written approval of the Company. Employee acknowledges that the unauthorized use or disclosure of Confidential Information or Work Products may be highly prejudicial to the interest of the Company. Employee will not publish, disclose or otherwise disseminate such Confidential Information or Work Products without the prior written approval of the Company. 4. Return of Company's Property. Within three (3) calendar days following ---------------------------- the sale, transfer or assignment of all of Employee's ownership interest in the Company, Employee shall deliver to the Company all of the Company's or any of its affiliates' property and the Company's or any of its affiliates' non-personal documents and data of any nature and in whatever medium provided to Employee, including, without limitation, information pertaining to the Company or any of its affiliates or the Seller or any of its affiliates, and Employee will return to the Company and will not take with Employee any such property, documents or data of any description or any reproduction thereof, or any documents containing or pertaining to any Confidential Information or Work Products. 5. Remedies. Each party hereto has carefully read and considered the -------- provisions of this Agreement and, having done so, agrees that the restrictions set forth in this Agreement are fair and reasonable and are reasonably required for the protection of the interests of each party hereto. 5.1 Injunctive Relief. Each party hereto acknowledges and agrees that ------------------ (i) the covenants and the restrictions contained in this Agreement are necessary, fundamental, and required for the protection of the Company and its business; (ii) such covenants relate to matters which are of a special, unique, and extraordinary character that gives each of such covenants a unique and extraordinary value; and (iii) a breach of any of such covenants will result in irreparable harm and damages to the Company which cannot be adequately compensated by a monetary award. Accordingly, it is expressly agreed that in addition to all other remedies available at law or in equity, the non-defaulting party shall be entitled to seek injunctive or other equitable relief to restrain or enjoin Employee from breaching any such covenant or to specifically enforce the provisions of this Agreement. 5.2 Cumulative Remedies. Notwithstanding any provision of this -------------------- Agreement to the contrary, the parties agree that no remedy conferred by any specific provision of this Agreement (including without limitation, this Section) is intended to be exclusive of any other remedy, and that each and every remedy shall be cumulative and shall be in addition to every other remedy available at law, in equity, by statute or otherwise. 5.3 Severability. In the event that any one or more provisions of ------------ this Agreement shall be held to be invalid or unenforceable, the validity and enforceability of the remainder hereof shall not in any way be affected or impaired thereby. Moreover, if any one or more of the provisions contained in this Agreement are held to be excessively broad as to duration, scope, activity or subject, such provisions will be construed by limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable law. 6. General Provisions. ------------------- 6.1 Attorneys Fees. In any action (including, without limitation, -------------- any mediation, arbitration, administrative proceeding or judicial proceeding) between or among the parties to enforce or interpret any of the terms or provisions of this Agreement, the prevailing party in such action shall be entitled to receive its reasonable costs and expenses incurred in connection with such action, including without limitation, reasonable attorneys fees, expert witness fees and accounting fees. 6.2 No Waiver. A waiver by any party of a breach of any of the ---------- covenants, conditions or agreements under this Agreement made or to be performed by any other party shall not be construed as a waiver of such breach by any other party or as a waiver of any succeeding breach of the same or any other covenant, agreement, restriction or condition of this Agreement. 6.3 Modifications. No alteration, change or modification of or to ------------- this Agreement shall be effective unless it is made in writing and signed by all parties hereto. 6.4 Entire Agreement. This Agreement contains the entire ----------------- understanding between the parties relating to the transactions contemplated by this Agreement, and all prior agreements, understandings, representations and statements relating to the transactions contemplated herein are superseded by this Agreement and shall be of no further force or effect. 6.5 Execution and Counterparts. This Agreement may be executed in -------------------------- any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. This Agreement shall not become effective unless and until it is fully executed; provided, however, that copies of signatures received by telefacsimile shall be deemed to be original signatures, provided originals of such copies are delivered within a reasonable time following the Effective Date hereof. 6.6 Further Assurances. Each party shall sign any other and ------------------ further instruments and documents and shall take any other and further actions as might be necessary or proper in order to accomplish the intent and purposes of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the Effective Date hereof. SEQUIAM EDUCATION, INC., a Florida corporation By:_______________________________________ [Employee Signature] Mark L. Mroczkowski, Secretary and CFO Print Name:___________________________ EX-10.9 4 doc3.txt Exhibit 10.9 Quasar Group, Inc. 1746 Cole Boulevard Building 21, Suite 225 Golden, CO 80401-3210 May 23, 2003 Mark L. Mroczkowski Chief Financial Officer Sequiam Corporation 300 Sunport Lane Orlando, Florida 32809 Dear Mark: This letter agreement (the "Agreement") will confirm the understanding between Quasar Group, Inc. ("QG") and Sequiam Corporation (the "Company") as follows: 1. RETENTION. The Company hereby retains QG to act as its agent in the --------- private placement of ten million common shares of Sequiam Corporation at $0.50 per share. Such placement shall be referred to as the "Transaction." The shares issued in the private placement will be restricted pursuant to Rule 144 and be further restricted from any sale for a period of two full years from the date of the transaction. The Company will also be granted an option to repurchase the shares beginning two years from the date of the transaction as follows: Year 2 - 2,500,000 shares at $5.00 per share Year 3 - 2,500,000 shares at $10.00 per share Year 4 - 2,500,000 shares at $15.00 per share Year 5 - 2,500,000 shares at $20.00 per share 2. QG'S ROLE. As part of its engagement and subject to the conditions ---------- contained herein, QG hereby agrees to: (a) assist in structuring the financing and the terms of the Securities; (b) if requested, assist in preparing a private placement memorandum (the "Memorandum") describing the Company and the Securities; (c) review with the Company a list of the Investors to whom the Memorandum will be provided; (d) assist the Company in the preparation of communications, as necessary, to be used in placing the Securities, whether in the form of letter, circular, notice or otherwise; and (e) assist and advise the Company with respect to the negotiation of the sale of the Securities to the Investors. It is understood that QG's assistance in the Transaction will be subject to the satisfactory completion of such investigation and inquiry into the affairs of the Company as QG deems appropriate under the circumstances (such investigation hereinafter to be referred to as "Due Diligence") and to the receipt of all internal approvals of QG in connection with the Transaction. QG shall have the right in its sole discretion to terminate this Agreement if the outcome of the Due Diligence is not satisfactory to QG or if approval of its internal committees is not obtained ("Early Termination"). 3. TERM. This engagement will commence on the date of this agreement and ---- terminate on the earlier to occur of: (i) Early Termination; (ii) the Closing of the Transaction; or (iii) thirty-six months from the date of this agreement. 4. EXCLUSIVE PERIOD. For a period of forty-five days from the date of ----------------- this agreement, the Company will not contact or solicit potential Investors to purchase the Securities without QG's prior written approval, which will not be unreasonably withheld. The Company represents, warrants and agrees the QG's engagement hereunder shall, for the referenced forty-five day period, be an exclusive engagement and that no other financial advisor, broker or agent is or will be authorized by it during such period to perform services on its behalf of any type that QG has been engaged to perform hereunder. 5. PLACEMENT; BEST EFFORTS. It is understood that QG's involvement in the ------------------------ Transaction is strictly on a best efforts basis and that the consummation of the Transaction will be subject to, among other things, market conditions. Nothing contained herein constitutes a commitment on the part of QG to purchase any Securities or on the part of the Company to sell any Securities and the final decision to issue the same shall be subject to the discretionary approval of the Company. 6. PRIVATE PLACEMENT MEMORANDUM. If necessary, The Company will prepare a ----------------------------- Memorandum with the assistance of its counsel and QG. The Company will advise, represent and warrant to QG in writing that the Memorandum is accurate in all material respects and does not contain an untrue statement of material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein in light of the circumstances under which they are made, not misleading. The Company authorizes QG to transmit the Memorandum to prospective Investors consistent with the requirements under Section 4(2) of the Securities Act of 1933, as amended (the "Act") and applicable state securities laws. 7. COOPERATION. The Company will furnish, or cause to be furnished, to QG ----------- all information reasonably requested by QG for purposes of rendering services hereunder (all such information being the "Information"). In addition, the Company agrees to make available to QG upon request from time to time, the officers, directors, accountants, counsel and other advisors to the Company. The Company recognizes and confirms that QG (a) will use and rely on the Information and on information available from generally recognized public sources in performing the services contemplated by this Agreement without having independently verified the same; (b) does not assume responsibility for the accuracy or completeness of the Information; and (c) will not make an appraisal of any of the assets or liabilities of the Company. The Company agrees that all Information furnished to QG in connection with this Agreement shall be accurate in all material respects at the time provided, and that if such Information, in whole or in part, becomes materially inaccurate, misleading or incomplete during the term of QG's engagement hereunder, the Company shall promptly so advise QG in writing and correct any such inaccuracy or omission. The Company shall also furnish or cause to be furnished to QG at closing of the sale of Securities copies of such agreements, certificates, opinions and other documents delivered at such closing as QG shall reasonably request. The Company has not taken, and will not take, any action directly or indirectly, so as to cause the transactions contemplated by this agreement to fail to be entitled to exemption under Section 4(2) of the Act. 8. EXPENSE REIMBURSEMENT. QG shall provide the Company with a monthly ---------------------- invoice, itemizing all third-party expenditures incurred by it in connection with performing the services undertaken by it hereunder. Company agrees to reimburse QG within 30 days of receipt all such invoiced expenditures. Third-party expenditures reimbursable hereunder shall include, but are not limited to, amounts paid to third parties for such costs as printing, telephone, telex, courier service, accommodations, food and travel. In the event that QG proposes to undertake any single project or travel, the expenses of which are reasonably expected to exceed $5,000, then QG will submit to Company in writing a brief description of the projected amount and purpose of the proposed expenditures. Company shall not be required to reimburse QG for any expenditure incurred in connection with such a project or travel unless the proposed project or trip has received prior approval of Company. 9. COMPENSATION. As compensation for the services to be rendered by QG ------------ hereunder, the Company agrees to pay QG the following: (a) INITIAL SHARE ISSUANCE. Within 30 days of the execution of ------------------------ this Agreement, the Company shall issue 750,000 shares of its common stock to QG as compensation for services performed by QG under the terms of this Agreement for the benefit of the Company. Such services shall include but not be limited to advisory services for acquisition of Smart Biometrics, advisory services for acquisition of certain targeted companies, advice on finance and business development, technology assessment and assistance with current and future private placement of Sequiam equity. Shares issued hereunder shall be restricted pursuant to Rule 144 and be further restricted from any sale for a period of two full years from date of issuance. Such shares shall be fully earned upon issuance. (b) SUCCESS FEE. At the Closing of the Transaction, the Company ------------ agrees to pay QG at closing, from the proceeds of the sale of the Securities, a cash transaction fee (the "Success Fee") equal to ten percent (10.0%) of the aggregate gross proceeds raised from the sale of the Securities. (c) ADDITIONAL SUCCESS FEE. At the Closing of the Transaction, ------------------------ the Company shall also issue to QG at Closing warrants to purchase shares of common stock in the Company in an amount equal to ten percent (10%) of the number of shares of common stock of the Company that have been issued in the Transaction. The warrants shall be purchasable at any time from one year after Closing of the Transaction until four years thereafter. The exercise price for the warrants shall be $0.50/share. 10. GOVERNING LAWS. This letter agreement will be governed by and --------------- construed in accordance with the laws of the State of Florida applicable to agreements made and to be fully performed therein. The Company irrevocably submits to the jurisdiction of any court of the State of Florida located in the County of Orange or in the United States District Court for the Middle District of Florida for the purpose of any suit, action or other proceeding arising out of this letter agreement or our engagement hereunder. Each of the Company and QG hereby waives any right it may have to a trial by jury in respect of any claim brought by or on behalf of either party based upon, arising out of or in connection with this letter agreement, our engagement hereunder or the transactions contemplated hereby. 11. CONFIDENTIALITY. Except as required by law, this Agreement and the --------------- services and advice to be provided by QG hereunder and the Indemnity Letter, shall not be disclosed to third parties without QG's prior written permission. Notwithstanding, QG shall be permitted to advertise the services it provided in connection with the Transaction subsequent to its consummation. Such expense shall not be reimbursable under Paragraph 8 hereof. 12. CONFLICTS. The Company acknowledges that QG and its affiliates may --------- have and may continue to have investment banking and other relationships with parties other than the Company pursuant to which QG may acquire information of interest to the Company. QG shall have no obligation to disclose such information to the Company or to use such information in connection with any contemplated transaction. 13. BENEFICIARIES. It is understood that QG is being engaged hereunder ------------- solely to provide the services described above to the Company and that QG is not acting as an agent or a fiduciary of, and shall have no duties or liabilities to, the equity holders of the Company or any third party in connection with its engagement hereunder, all of which are expressly waived. No one other than the Company is authorized to rely upon the engagement of QG hereunder or any statements, advice, opinions or conduct by QG 14. NO BROKERS. The Company represents and warrants to QG that there are ----------- no brokers, representatives or other persons which have an interest in compensation due to QG from any transaction contemplated herein or which would otherwise be due any fee, commission or remuneration upon consummation of any Transaction. 15. AUTHORIZATION. The Company and QG represent and warrant that each has ------------- all requisite power and authority to enter into and carry out the terms and provisions of this Agreement and the execution, delivery and performance of this Agreement does not breach or conflict with any agreement, document or instrument to which it is a party or bound. 16. MISCELLANEOUS. This Agreement constitutes the entire understanding and ------------- agreement between the Company and QG with respect to the subject matter hereof and supersedes all prior understandings or agreements between the parties with respect thereto, whether oral or written, express or implied. Any amendments or modifications must be executed in writing by both parties. This Agreement, the Indemnity Letter and all rights, liabilities and obligations hereunder and thereunder shall be binding upon and inure to the benefit of each party's successors but may not be assigned without the prior written approval of the other party. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument. The descriptive headings of the Sections of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. 17. NON-CIRCUMVENTION. The Company acknowledges that QG intends to ----------------- introduce it to various individuals and entities that may be, or become, interested in investing in Company, its affiliates and business ventures. The Company and QG acknowledge that the ultimate form and timing of investment or assistance provided by such persons may be different than that currently contemplated by this Agreement. Accordingly, Company and QG agree that any investment in, or providing of other business assistance by individuals or entities introduced to the Company through the direct or indirect efforts of QG shall entitle QG to a fee or other compensation commensurate with the benefit derived by the Company or its affiliates and with the level of compensation contemplated in this Agreement. In the event that such assistance is provided to the Company in a form or at a time that is not explicitly covered by the terms of this Agreement, Company and QG agree to negotiate in good faith toward agreement upon the form and timing of such compensation. In the event that Company and QG are unable to reach agreement upon such compensation, then the compensation shall be set and finally resolved by arbitration by a sole arbitrator in accordance with the CPR Rules for Non-Administered Arbitration, and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. Please confirm that the foregoing correctly sets forth our agreement by signing the enclosed duplicate of this letter in the space provided and returning it, whereupon this letter shall constitute a binding agreement as of the date first above written. Very truly yours, Quasar Group, Inc. By: /s/ David R. Allen - ----------------------------------- David R. Allen, PhD. Chairman, President and CEO AGREED TO AND ACCEPTED AS OF THE ABOVE DATE: Sequiam Corporation By: ------------------------------- Mark L. Mroczkowski Senior Vice President and CFO EX-10.10 5 doc4.txt Exhibit 10.10 Advisory Service Agreement THIS CONSULTING AGREEMENT ("Agreement") is entered into this __th day of May 2003 by and between Sequiam Corporation, a Florida corporation located at 300 Sunport Lane, Orlando, Fl 32809 ("Company"), and Kevin Welch located at 468 North Camden Dr., Suite 200, Beverly Hills, CA 90210 ("Advisor"). RECITALS Advisor, through the expenditure of considerable money, time and effort, has created and developed, and is continuing to improve an efficient system for providing advisory services ("Services") to private and public companies. The Company desires to obtain the assistance of Advisor, and Advisor is willing to provide such assistance, with respect to the Services. NOW in consideration of the mutual covenants and promises contained herein, the sufficiency of which is hereby acknowledged by each of the parties, the Company and Advisor hereby agrees as follows: 1. Appointment as Advisor / Scope of Services: The Company hereby engages Advisor as an advisor in connection with the Services. Advisor hereby agrees to perform such advisory services upon the terms and conditions hereinafter set forth. Advisor shall provide advise on capital market management and financial public relations; advise on re-listing the Company's securities on NASDAQ small-cap or AMEX; design and arrange public and investor relations agreements for the Company; monitor OTC Internet Message Boards regarding the Company; review Company due diligence presentations to market makers; advise on the distribution of Company news and relevant information to market makers, advise regarding the development of financial media and market awareness programs; advise on the distribution of press releases to Company shareholders; advise regarding the presentation of the Company to various media, periodical sources, and provide advise regarding appropriate national and regional media outlets, including appropriate trade journals; and to use its reasonable best endeavors to comply with all reasonable requests of the Company in relation to the performance of the Services as outlined herein. Term: Unless sooner terminated in accordance with the termination provisions set forth in this Agreement, the term of this Agreement shall be for a period of One (1) year commencing on the date hereof. Services of the Advisor: The parties agree that the work performed by Advisor will be governed by the general terms and conditions of this Agreement. The services performed by Advisor may be performed at days and times, and in order and sequence as Advisor deems desirable. Advisor is not a registered broker dealer or associated person of such, and is not purporting to act in any capacity requiring registration as a broker dealer or associated person. Advisor's Fee: As compensation for Advisor's services pursuant hereto as outlined in Section 1 of this Agreement, the Company agrees to pay follows: Advisor shall receive Two Hundred and Fifty Thousand common shares of the Company. Company shall register shares issued in connection with this Agreement on Form S-8 with the Securities and Exchange Commission. Advisor shall receive Warrants to purchase Three Hundred Thousand common shares of the Company. Such warrants shall expire one year from the date of this agreement and the exercise price shall be the market price at the exercise date. Expenses: Advisor's expenses will be paid by the Company after obtaining written approval by the Company. Arbitration: The parties shall resolve any disputes arising hereunder before a panel of one arbitrator selected in accordance with the rules of the American Arbitration Association. The arbitration shall be held in Orlando, Florida. Disputes under this Agreement as well as all of the terms and conditions of this Agreement shall be governed in accordance with the laws of the State of Florida (without regard to its conflicts of law principles). The successful party in the arbitration proceedings shall be entitled to an award of reasonable attorney's fees and costs from the arbitrator. Obligations of the Company: The Company hereby agrees to cooperate with the Advisor and to provide Advisor with access to all information reasonably requested by Advisor related to the Services. Representations and Warranties of the Advisor: Advisor hereby represents and warrants as of the date hereof each of the following: Advisor has the requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Advisor and the consummation by Advisor of the transactions contemplated hereby have been duly authorized by Advisor, and no other action on the part of Advisor is necessary to authorize this Agreement and such transaction. Representations and Warranties of the Company: Company hereby represents and warrants as of the date hereof each of the following: Company has the requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by Company and the consummation by Company of the transactions contemplated hereby have been duly authorized by Company, and no other corporate proceedings on the part of Company is necessary to authorize this Agreement and such transaction. Independent Contractor: Advisor and Advisor's personnel will act as independent contractors in the performance of the Services under this Agreement. Accordingly, Advisor will be responsible for payment of all federal, state and local taxes on compensation paid under this Agreement, including income and social security taxes, unemployment insurance, and any other taxes due relative to Advisor's personnel. This Agreement neither expressly nor impliedly creates a relationship of principal and agent, or employment and employer, between Advisor and Advisor's personnel and the Company. Termination: The Company and Advisor may terminate this Agreement at any time with mutual consent and either party may terminate this Agreement with Thirty (30) days written notice under the following conditions: By the Company. - ----------------- If during the Term of this Agreement, Advisor is unable to provide the Services as set forth herein for Thirty (30) consecutive days because of illness, or other incapacity of Advisor; or, if Advisor willfully breaches or neglects the duties required to be performed herein. By Advisor. - ------------ If the Company breaches this Agreement or fails to honor any payments made to Advisor in common shares; or fail to provide information or documents required herein; or, If the Company ceases business, files a petition in a court of bankruptcy, sells controlling interest to a third party, or sells substantially all of its assets to another corporation. In the event either party elects to terminate for cause or this Agreement is terminated prior to the expiration Term, the Company shall be responsible to pay Advisor for unreimbursed expenses accrued. 12. Notice: Any notice of communication to be given under the terms of this Agreement shall be in writing and delivered in person or deposited certified or registered, in the United States mail, postage prepaid, addressed as follows: If to Advisor: Mr. Kevin Welch 468 North Camden Drive, Suite 200 Beverly Hills, CA 90210 If to Company: Mr. Nick VandenBrekel Sequiam Corporation 300 Sunport Lane Orlando, FL 32809 13. Counterparts: This Agreement may be executed in separate counterparts and via facsimile, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. 14. Entire Agreement: This Agreement constitutes and embodies the full and complete understanding and agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior understandings whether oral or in writing and may not be modified except by writing signed by the parties hereto. IN WITNESS WHEROF, this Consulting Agreement has been executed as of the day and year first written above. The Company: Sequiam Corporation By: __________________________________________ Nick VandenBrekel, Chief Executive Officer The Advisor: __________________________________________ Kevin Welch EX-21.1 6 doc5.txt Exhibit 21.1 Subsidiaries ------------ Sequiam Software, Inc., a California corporation, doing business as Sequiam and Sequiam, Inc. Sequiam Communications, Inc. (formerly Brekel Group, Inc.), a Delaware corporation, doing business as Sequiam Sports and Olympic Publications. Sequiam Biometrics, Inc., a Florida corporation. Sequiam Education, Inc. a Florida corporation EX-31.1 7 doc6.txt Exhibit 31.1 I, Nicholas VandenBrekel, certify that: 1. I have reviewed this Quarterly Report on Form 10-QSB of Sequiam Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [intentionally omitted]; (c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 19, 2003 /s/ Nicholas H. VandenBrekel Nicholas VandenBrekel President & Chief Executive Officer EX-31.2 8 doc7.txt Exhibit 31.2 I, Mark Mroczkowski, certify that: 6. I have reviewed this Quarterly Report on Form 10-QSB of Sequiam Corporation; 7. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 8. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 9. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [intentionally omitted]; (c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 10. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 19, 2003 /s/ Mark Mroczkowski Mark Mroczkowski Senior Vice President, Secretary, Chief Financial Officer & Principal Financial Officer EX-32.1 9 doc8.txt Exhibit 32.1 CERTIFICATION PURSUANT TO RULE 15d-14(b) and 18 U.S.C. Sec.1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Sequiam Corporation (the "Company") on Form 10-QSB for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Nicholas VandenBrekel, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Nicholas H. VandenBrekel Nicholas VandenBrekel President and Chief Executive Officer August 19, 2003 EX-32.2 10 doc9.txt Exhibit 32.2 CERTIFICATION PURSUANT TO RULE 15d-14(b) and 18 U.S.C. Sec.1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Sequiam Corporation (the "Company") on Form 10-QSB for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark Mroczkowski, Senior Vice President, Secretary, Chief Financial Officer & Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Mark Mroczkowski Mark Mroczkowski Senior Vice President, Secretary, Chief Financial Officer & Principal Financial Officer August 19, 2003 -----END PRIVACY-ENHANCED MESSAGE-----