-----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, VGYqLE6w+UPZyxclwV+OhwPdrjND/hFXwb6x1jQwdigvev5a2QPkWF7IPrZng8d5 kDzeYZsuYVn0MnuF8C6r5A== 0001135432-01-500127.txt : 20010817 0001135432-01-500127.hdr.sgml : 20010817 ACCESSION NUMBER: 0001135432-01-500127 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 20010430 FILED AS OF DATE: 20010816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: E-NET FINANCIAL COM CORP CENTRAL INDEX KEY: 0000926844 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 841273503 STATE OF INCORPORATION: NV FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24512 FILM NUMBER: 1716644 BUSINESS ADDRESS: STREET 1: 3200 BRISTOL STREET STREET 2: SUITE 710 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7145572222 MAIL ADDRESS: STREET 1: 2102 BUSINESS CENTER DRIVE STREET 2: 115E CITY: IRVINE STATE: CA ZIP: 92612 FORMER COMPANY: FORMER CONFORMED NAME: E NET CORP/NV DATE OF NAME CHANGE: 19990513 FORMER COMPANY: FORMER CONFORMED NAME: E NET FINANCIAL CORP DATE OF NAME CHANGE: 19990920 FORMER COMPANY: FORMER CONFORMED NAME: E-NET COM CORP DATE OF NAME CHANGE: 20000127 10KSB 1 doc1.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB [ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED APRIL 30, 2001 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________. COMMISSION FILE NUMBER O-24512 E-NET FINANCIAL.COM CORPORATION (Exact name of registrant as specified in its charter) NEVADA 88-1273503 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3200 BRISTOL STREET, SUITE 700 COSTA MESA, CA 92626 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (714) 866-2100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- ---- Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ] State issuer's revenues for its most recent fiscal year. $10,991,250 for the year ended April 30, 2001. State the aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in rule 12b-2 of the Exchange Act.) $5,688,808.60, based on the closing price of $0.20 for the common stock on August 3, 2001. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of August 3, 2001, there were 38,626,543 shares of common stock, par value $0.001, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE If the following documents are incorporated by reference, briefly describe them and identify the part of the form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990). None. Transitional Small Business Disclosure Format (check one): Yes _____ No __X__ - 1 E-NET FINANCIAL.COM CORPORATION TABLE OF CONTENTS ----------------- PART I Item 1 Description of Business Item 2 Description of Property Item 3 Legal Proceedings Item 4 Submission of Matters to a Vote of Security Holders PART II Item 5 Market for Common Equity and Related Stockholder Matters Item 6 Management's Discussion and Analysis or Plan of Operations Item 7 Financial Statements Item 8 Changes In and Disagreements With Accountants on Accounting and Financial Disclosure PART III Item 9 Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. Item 10 Executive Compensation Item 11 Security Ownership of Certain Beneficial Owners and Management. Item 12 Certain Relationships and Related Transactions. Item 13 Exhibits and Reports on Form 8-K. 2 PART I This Annual Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the "Exchange Act"). These statements are based on management's beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading "Management's Discussion and Analysis of Financial Condition or Plan of Operation." Forward-looking statements also include statements in which words such as "expect," "anticipate," "intend," "plan," "believe," "estimate," "consider" or similar expressions are used. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company's future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements. ITEM 1 - DESCRIPTION OF BUSINESS GENERAL e-Net Financial.Com Corporation ("e-Net" or the "Company") was incorporated in the State of Nevada on August 18, 1988 as Solutions, Incorporated. On July 11, 1994, the Company filed a Registration Statement on Form 10-SB with the Securities and Exchange Commission, which was declared effective on December 22, 1994. At that time, the Company became a reporting company under Section 12(g) of the Securities Exchange Act of 1934, as amended. On August 16, 1996, the Company changed its name to Suarro Communications, Inc., and on February 12, 1999, May 12, 1999 and on January 18, 2000, the Company changed its name to e-Net Corporation, e-Net Financial Corporation and e-Net.Com Corporation, respectively. On February 2, 2000, the Company changed its name to e-Net Financial.Com Corporation. In November of 1999, the Company forward-split its Common Stock on a two-for-one basis, and all references in this Annual Report reflect such forward split. Since inception, the Company has experienced several management changes. e-Net has had a rapid sequence of name changes which reflected significant acquisitions that shifted the Company's primary business operations over very short periods of time. Management has decided that one generic name would have been preferable. As such, e-Net has reserved "ANZA Capital, Inc." with the Nevada Secretary of State and, following and subject to the approval of its shareholders, will undertake to effectuate a change in the name of the corporation. BUSINESS OVERVIEW The Company is a holding company which currently operates through four (4) subsidiaries, namely AMRES, Expidoc, BravoRealty.com, and Titus Real Estate. Since March 1, 1999, the Company has acquired a total of nine companies, six of which have failed, and five of these subsidiaries have never generated any net revenue. e-Net has never developed a business of its own. Of the nine companies purchased by e-Net since March 1, 1999, six were purchased from then-current officers and directors, or parties affiliated with then-current officers and directors, including EMB. The total dollar value attributed to the purchase of these nine companies is approximately $4,400,000. AMRES and Expidoc represent our only significant operations and greater than 95% of our consolidated revenue. Please see further discussion of AMRES and Expidoc below. 3 We have never been profitable, and our net losses have been significant. For the year ended April 30, 2001, our net loss was $6,745,207, or $0.30 per share. For the ten months ended April 30, 2000, our net loss was $1,796,899, or $0.22 per share. See our discussion in Item 6 - Management's Discussion and Analysis or Plan of Operations, for further details concerning our financial results. RECENT CHANGES IN BUSINESS STRATEGY AND CHANGE IN CONTROL Effective March 1, 1999, the Company acquired e-Net Mortgage Corporation, a Nevada corporation ("e-Net Mortgage"), and City Pacific International, U.S.A., Inc., a Nevada corporation ("City Pacific"). Pursuant to the Share Exchange Agreement and Plan of Reorganization dated March 1, 1999, regarding e-Net Mortgage, its shareholders received 2,000,000 shares of Common Stock of the Company in exchange for all of the issued and outstanding stock of e-Net Mortgage, which became a wholly owned subsidiary of the Company. Pursuant to the Share Exchange Agreement and Plan of Reorganization, dated March 1, 1999, regarding City Pacific, its shareholders received 500,000 shares of Common Stock of the Company in exchange for all of the issued and outstanding stock of City Pacific, which became a wholly owned subsidiary of the Company. Effective as of that date, Michael Roth, who had owned 100% of e-Net Mortgage, became Chairman, CEO, President, a director, and the owner of 44% of the common stock of the Company. Also effective as of that date, Al Marchi, who had owned 100% of City Pacific, became a director and the owner of 11% of the outstanding common stock of the Company. Following this transaction, the Company entered into a series of acquisitions as part of its strategy of horizontal market penetration and in an effort to increase revenues. On November 29, 1999, the Company issued Paul Stevens 250,000 shares of its Common Stock in exchange for Mr. Stevens' transfer to the Company of 500,000 shares of Common Stock of EMB Corporation ("EMB") that he owned (the "Stevens EMB Shares"). On December 21, 1999, and in connection with that exchange, the Company entered into agreements with Digital Integrated Systems, Inc. ("DIS"), and EMB to acquire their respective 50% interests in VPN.COM JV Partners, a Nevada joint venture ("VPN Partners") involved in vertically integrated communications systems. In consideration of the purchase of the interests, the Company issued a one-year promissory note to DIS in the amount of $145,000 (the "DIS Note") and tendered to EMB the Stevens EMB Shares. At the time of such transactions, Mr. Stevens was the sole owner of DIS and the President and Chief Executive Officer of VPN Partners. Upon closing of the acquisitions, VPN Partners was integrated with VPNCOM.Net, Inc. (previously known as City Pacific), the other communications entity then owned by the Company. At the time of the transaction, our management believed that VPN Partners and Mr. Stevens would contribute materially to the planned expansion of the Company. On January 12, 2000, as revised on April 12, 2000, the Company entered into an agreement (the "Amended and Restated Purchase Agreement") with EMB to acquire two of its wholly owned subsidiaries, namely American Residential Funding, Inc., a Nevada corporation ("AMRES"), and Bravo Real Estate, Inc., a California corporation ("Bravo Real Estate"). At the time of the acquisition, AMRES was the principal operating company of EMB, and EMB had previously acquired AMRES from AMRES Holding LLC ("AMRES Holding"), a company controlled by Vincent Rinehart (now an officer and director of the Company). The purpose of the acquisition was to acquire market share, revenues, and certain key management personnel. The Company also acquired all of EMB's rights to acquire Titus Real Estate LLC, a California limited liability company ("Titus Real Estate") from its record owners. Titus Real Estate is the management company for Titus Capital Corp., Inc., a California real estate investment trust (the "Titus REIT"), in which the Company has no ownership interest. Titus REIT currently holds 10 apartment buildings in Long Beach, California, six of which are in escrow to be sold. 4 On February 11, 2000, the Company executed a purchase agreement (the "Titus Purchase Agreement") for the acquisition of Titus Real Estate and issued 100,000 shares of its Class B Convertible Preferred Stock (the "B Preferred") to AMRES Holding/Rinehart, and 300,000 shares of its Common Stock to Scott A. Presta, in their capacities as the owner-members of Titus Real Estate. Mr. Rinehart and Mr. Presta were not, at the time, otherwise affiliated with the Company in any way, but both became members of Management in April 2000 (see Item 9). Upon closing, Titus Real Estate became a wholly owned subsidiary of the Company. Management had hoped that the acquisition of Titus Real Estate would increase the Company's overall revenue stream, but because of a lack of funding, the Company took a charge for impairment of goodwill in the amount of $1,155,057 in the fourth quarter 2001 with respect to its investment in Titus Real Estate. On February 14, 2000, in our continuing efforts to expand, the Company acquired all of the common stock of LoanNet Mortgage, Inc., a Kentucky corporation ("LoanNet"), a mortgage broker with offices in Kentucky and Indiana. Pursuant to the Stock Purchase Agreement dated February 14, 2000, the Company issued 250,000 shares of its Common Stock to the selling shareholders of LoanNet, which became a wholly-owned subsidiary of the Company. As of the closing of the transaction, LoanNet also had 400 shares outstanding of 8% non-cumulative, non-convertible preferred stock, the ownership of which has not changed. The preferred stock is redeemable for $100,000. As of February 28, 2001, all three LoanNet offices have been closed. The Company took a charge for impairment of goodwill in the amount of $1,985,012 in the fourth quarter 2001 with respect to its investment in LoanNet. On March 1, 2000, the Company sold VPNCOM.Net, Inc., which had proven to be unprofitable and inconsistent with the Company's changing business structure, to Al Marchi, its then-President. The sales consideration consisted of his 30-day promissory note in the principal amount of $250,000 (paid in full on April 15, 2000), the assumption of the DIS Note, and the return of 250,000 shares of Company Common Stock owned by him. On March 17, 2000, the Company acquired all of the common stock of ExpiDoc.com, Inc., a California corporation ("ExpiDoc"). ExpiDoc is an Internet-based, nationwide notary service, with over 6,500 affiliated notaries, that provides document signing services for various mortgage companies. Pursuant to the Stock Purchase Agreement dated February 14, 2000, the Company issued 24,000 shares of Common Stock of the Company to the selling shareholders of ExpiDoc, which became a wholly owned subsidiary of the Company. As of the closing of the acquisition, the Company entered into management and consulting agreements with ExpiDoc's owners and management, including Mr. Rinehart and Mr. Presta. Mr. Rinehart and Mr. Presta were not, at the time, otherwise affiliated with the Company in any way, but both became members of Management in April 2000 (see Item 9) On April 12, 2000, the Company closed the acquisition of AMRES and Bravo Real Estate. Pursuant to the Amended and Restated Purchase Agreement, the Company issued 7.5 million shares of Common Stock to EMB, representing nearly 40% of the then issued and outstanding common stock of the Company, paid $1,595,000, and issued a promissory note in the initial amount of $2,405,000, and AMRES and Bravo Real Estate became wholly owned subsidiaries of the Company. As of April 30, 2001, the remaining principal balance of the promissory note was $1,055,000, and the note was substantially satisfied effective June 27, 2001, (see discussion of Global Settlement below). On April 12, 2000, James E. Shipley, the former CEO of EMB, was elected Chairman of the Board of Directors of the Company and Vincent Rinehart was elected a Director, President, and Chief Executive Officer of the Company. Bravo Real Estate never commenced operations, had no assets, and is no longer an operating subsidiary. 5 Mr. Shipley was the CEO, President, and a less than 5% owner of EMB at the time of the sale of AMRES and Bravo from EMB to e-Net. Mr. Shipley resigned as Chairman of EMB and became Chairman of e-Net in April 2000, and resigned as an officer of e-Net in December 2000. Mr. Rinehart was never an officer or director of EMB, but was the owner of 2,000,000 shares of EMB common stock, making him an approximate 10% owner of EMB at the time of the sales in April 2000, and continues as an officer and director of the Company (e-Net) and as an officer of all wholly-owned subsidiaries of the Company. On April 12, 2000, in accordance the provisions of the Certificate of Designations, Preferences and Rights of Class B Convertible Preferred Stock, AMRES Holding/Rinehart demanded that its B Preferred be repurchased by the Company for an aggregate of one million dollars. On April 20, 2000, the Company, AMRES Holding/Rinehart, and Mr. Presta amended the Titus Purchase Agreement to provide for the return of 100,000 shares of the Company's preferred stock issued to AMRES Holdings and Mr. Presta upon the issuance of 1,000,000 shares of common stock to them. On May 24, 2000, Michael Roth and Jean Oliver, the sole remaining officers and directors of prior management, resigned their remaining positions with the Company. On that date, Mr. Presta, an executive officer and director of Titus Real Estate, was elected a Director and Secretary of the Company. EVENTS SUBSEQUENT TO FISCAL YEAR END BRIDGE FINANCING On June 27, 2001, the Company entered into an Investment Agreement and related documents with Laguna Pacific Partners, LLP. Under the terms of the agreements, in exchange for $225,000 received by the Company from Laguna Pacific, the Company (i) executed a promissory note in favor of Laguna Pacific in the principal sum of $200,000, bearing interest at the rate of 7% per annum, secured by all of the assets of the Company, and payable on the earlier of nine months from its issuance date or the date the Company's common stock is listed on the NASDAQ Small Cap market, and (ii) executed a Warrant Agreement which entitled Laguna Pacific to acquire up to $250,000 worth of e-Net common stock for the total purchase price of $1.00, calculated at 70% of the closing stock price on the date immediately preceding the exercise date. Also on June 27, 2001, in transactions related to the agreements with Laguna Pacific, the Company formed a wholly-owned subsidiary, Anza Properties, Inc., a Nevada corporation ("Anza") capitalized with $75,000 from the proceeds of the bridge loan, which (i) executed a Bond Term Sheet with e-Net outlining the proposed terms of an offering to raise up to $5,000,000. 6 (ii) entered into an Employment Agreement with Thomas Ehrlich beginning thirty days from the date of the agreement and ending upon the earlier to occur of the liquidation of the real estate portfolio to be owned by Anza or the completion of a NASDAQ Small Cap listing by e-Net. The Employment Agreement provides for a salary of $20,000 per month, payable only by Anza and specifically not guaranteed of e-Net. Mr. Ehrlich will serve as Anza's Vice President and will be a director thereof. In connection with the Employment Agreement, e-Net executed a Stock Option Agreement which entitled Ehrlich to acquire up to 2,000,000 shares of e-Net common stock at the closing price on the date of the Option Agreement, vesting equally over the 12 months following the date of the Employment Agreement, and exercisable only in the event Anza is successful in raising a minimum of $2,000,000 in a contemplated $5,000,000 bond offering, and the holders thereof converting at least $2,000,000 of the bonds into equity of e-Net (any amounts less than $2,000,000 will be applied, pro-rata, to the total options exercisable under the Option Agreement). (iii) entered into a Consulting Agreement with Lawrence W. Horwitz to provide services to Anza. The Consulting Agreement provides for compensation of $20,000 to be paid on its date of execution, and $5,000 per month for eight months beginning September 1, 2001, guaranteed by e-Net. In addition, e-Net executed a Stock Option Agreement which entitled Horwitz to acquire up to 1,000,000 shares of e-Net common stock on terms identical to those of Ehrlich, described above. (iv) entered into an Operating Agreement with e-Net concerning the operations of Anza Properties, Inc. GLOBAL SETTLEMENT On June 26, 2001, e-Net entered into a settlement agreement with EMB Corporation, AMRES Holding LLC, Vincent Rinehart, and Williams de Broe (the "Global Settlement"). As part of the Global Settlement: (i) e-Net issued to EMB 1,500,000 shares of restricted common stock as consideration for EMB's waiver of its registration rights for 7,500,000 shares of e-Net common stock already held by EMB. e-Net issued to EMB a promissory note in the principal amount of $103,404. (ii) e-Net issued to Williams de Broe ("WdB") 3,000,000 shares of restricted common stock as consideration for WdB's release of all claims against e-Net arising under the purported guarantee of EMB's obligation to WdB by e-Net. e-Net received relief of debt to EMB in the amount of $624,766. (iii) e-Net issued to AMRES Holdings, an entity owned by Vincent Rinehart, a convertible note in the principal amount of $485,446. EXECUTIVE COMPENSATION On July 1, 2001, e-Net entered into an Employment Agreement with Vincent Rinehart. Under the terms of the agreement, the Company is to pay to Mr. Rinehart a salary equal to $275,000 per year, subject to an annual increase of 10% commencing January 1, 2002, plus an automobile allowance of $1,200 per month and other benefits, including life insurance. The agreement is for a term of five years and provides for a severance payment in the amount of $500,000 and immediate vesting of all stock options in the event his employment is terminated for any reason, including cause. Mr. Rinehart was granted options to acquire 2,500,000 shares of e-Net common stock at the closing price on the date of the agreement which shall vest over a three year period. The number of shares to be acquired upon exercise of the options shall not be adjusted for a stock split, and is limited to both a maximum value of $1,900,000, and 20% of the outstanding common stock of the Company. 7 DISCUSSION OF OPERATIONS BravoRealty.com, which is not affiliated with the now non-operational Bravo Real Estate, is an internet-based real estate brokerage which was incorporated in May 2000 and began operations in January 2001. AMRES owns 69% of BravoRealty.com, with the balance owned by Vincent Rinehart (15%), David Villarreal (15%), and Kevin Gadawski (1%). Bravorealty.com's business model targets real estate agents as its customers and offers 100% commission retention for the agent, while charging a minimal fixed fee per closed transaction. Bravorealty.com's web site is operational, but it is currently in need of funding to complete its launch and implement the required infrastructure. If e-Net is able to secure the required funding, e-Net will remain the majority shareholder. If the required funding is secured from outside investors, e-Net may retain only a minority ownership position. Titus Real Estate is the management company of Titus REIT. Titus Real Estate, while currently operational, is not expected to provide significant revenues for e-Net. As stated above, Titus REIT is currently the owner of ten apartment buildings in Long Beach, California, six of which are in escrow to be sold. Titus REIT is in need of additional capital in order to expand its operations, and if it successful, the amount of revenue to e-Net through Titus Real Estate may increase. LoanNet is not operating at this time. Due to insufficient capitalization, the Company decided to close all three offices previously in operations in February 2001. On March 30, 2001, the Board of Directors of e-Net rescinded the acquisition of LoanNet due to claimed misrepresentations by LoanNet's management. While in operation, LoanNet recorded cumulative net losses and did not provide any cash flow for the Company. The Company wrote off its full investment in LoanNet in the fourth quarter of 2001. LoanNet's preferred shareholder seized the remaining assets of LoanNet, and took actions which e-Net has interpreted to be his assumption of certain liabilities. AMERICAN RESIDENTIAL FUNDING, INC. ("AMRES") GENERAL The Company, through its wholly owned subsidiary, e-Net Mortgage, had, since 1999, engaged in business as a retail mortgage broker. However, e-Net Mortgage was not capitalized to the level that permitted it to expand its operations outside of its offices in San Jose, and Costa Mesa, California, and Las Vegas, Nevada. With the pending acquisition of American Residential Funding, Inc. ("AMRES"), e-Net Mortgage stopped conducting business in the fourth quarter of the fiscal year ended April 30, 2000. With the completion of the acquisition of AMRES, AMRES has become the principal operating mortgage subsidiary of the Company. It is the intent of the Company for AMRES to operate primarily as a mortgage banker and mortgage broker through an expansion of its existing company-owned and branch operations The name "AMRES" is approved for use by American Residential Funding, Inc. by the California Department of Real Estate, the primary governing body of AMRES. An appropriate DBA filing of AMRES has been done, and the company is regularly referred to as "AMRES". LOAN MAKING AMRES is primarily a loan broker, arranging approximately $50,000,000 a month in home loans. AMRES, through their agents in some 140 branches (1-8 agents in each branch) is licensed in 39 states to originate loans. Although AMRES has a $2,000,000 line of credit with which to fund loans, less than 5% of total loan volume is funded this way. AMRES, through their loan agents, locates prospective borrowers from real estate brokers, home developers, and marketing to the general public. After taking a loan application, AMRES processes the loan package, including obtaining credit and appraisal reports. AMRES then presents the loan to one of approximately 200 approved lenders, who then approve the loan, draw loan documents and fund the loan. AMRES receives a commission for each brokered loan, less what is paid to each agent. 8 LOAN STANDARDS Mortgage loans arranged by AMRES are generally loans with fixed or adjustable rates of interest, secured by first mortgages, deeds of trust or security deeds on residential properties with original principal balances that do not exceed 95% of the value of the mortgaged properties, unless such loans are FHA-insured or VA-guaranteed. Generally, each mortgage loan having a loan-to-value ratio in excess of 80%, or which is secured by a second or vacation home, will be covered by a Mortgage Insurance Policy, FHA Insurance Policy or VA Guaranty insuring against default of all or a specified portion of the principal amount thereof. 95% of all loans originated by AMRES are brokered to lenders and not underwritten or funded by AMRES. The mortgage loans are "one-to-four-family" mortgage loans, which are permanent loans (as opposed to construction or land development loans) secured by mortgages on non-farm properties, including attached or detached single-family or second/vacation homes, one-to-four-family primary residences and condominiums or other attached dwelling units, including individual condominiums, row houses, townhouses and other separate dwelling units even when located in buildings containing five or more such units. Each mortgage loan must be secured by an owner-occupied primary residence or second/vacation home, or by a non-owner occupied residence. The mortgaged property may not be a mobile home. In general, no mortgage loan is expected to have an original principal balance less than $30,000. While most loans will be less than $700,000, loans of up to $2,000,000 may be brokered to unaffiliated third-party mortgage lenders. Fixed rate mortgage loans must be repayable in equal monthly installments which reduce the principal balance of the loans to zero at the end of the term. Credit, Appraisal and Underwriting Standards Each mortgage loan must (i) be an FHA-insured or VA-guaranteed loan meeting the credit and underwriting requirements of such agency, or (ii) meet the credit, appraisal and underwriting standards established by the lender. For certain mortgage loans which may be subject to a mortgage pool insurance policy, the lender may delegate to the issuer of the mortgage pool insurance policy the responsibility of underwriting such mortgage loans, in accordance with the lender's credit appraisal and underwriting standards. A lender's underwriting standards are intended to evaluate the prospective mortgagor's credit standing and repayment ability, and the value and adequacy of the proposed mortgaged property as collateral. In the loan application process, prospective mortgagors will be required to provide information regarding such factors as their assets, liabilities, income, credit history, employment history and other related items. Each prospective mortgagor will also provide an authorization to apply for a credit report which summarizes the mortgagor's credit history. With respect to establishing the prospective mortgagor's ability to make timely payments, the lender will require evidence regarding the mortgagor's employment and income, and of the amount of deposits made to financial institutions where the mortgagor maintains demand or savings accounts. In some instances, mortgage loans may be arranged by the lender under a Limited Documentation Origination Program. For a mortgage loan to qualify for the Limited Documentation Origination Program, the prospective mortgagor must have a good credit history and be financially capable of making a larger cash down payment in a purchase, or be willing to finance less of the appraised value, in a refinancing, than would otherwise be required by the Company. Currently, only mortgage loans with certain loan-to-value ratios will qualify for the Limited Documentation Origination Program. If the mortgage loan qualifies, the lender waives some of its documentation requirements and eliminates verification of income and employment for the prospective mortgagor. The Limited Documentation Origination Program has been implemented relatively recently and accordingly its impact, if any, on the rates of delinquencies and losses experienced on the mortgage loans so originated cannot be determined at this time. 9 The lender's underwriting standards generally follow guidelines acceptable to FNMA ("Fannie Mae") and FHLMC ("Freddie Mac"). The lender's underwriting policies may be varied in appropriate cases. In determining the adequacy of the property as collateral, an independent appraisal is made of each property considered for financing. The appraiser is required to inspect the property and verify that it is in good condition and that construction, if new, has been completed. The appraisal is based on the appraiser's judgment of values, giving appropriate weight to both the market value of comparable homes and the cost of replacing the property. Over 95% of all loans processed are underwritten and funded by approved lenders of AMRES. Very few loans, approximately 5%, are funded by AMRES on their line of credit for future resell. Title Insurance Policies The lender will usually require that, at the time of the origination of the mortgage loans and continuously thereafter, a title insurance policy be in effect on each of the mortgaged properties and that such title insurance policy contain no coverage exceptions, except those permitted pursuant to the guidelines established by FNMA. Applicability of Usury Laws Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 ("Title V"), provides that state usury limitations do not apply to certain types of residential first mortgage loans originated by certain lenders after March 31, 1980. The Federal Home Loan Bank Board is authorized to issue rules and regulations and to publish interpretations governing implementation of Title V, the statute authorizes any state to reimpose interest rate limits by adopting a law or constitutional provision which expressly rejects application of the federal law. In addition, even where Title V is not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V. As of the date hereof, certain states have taken action to reimpose interest rate limits and/or to limit discount points or other charges. The above described laws do not have a material effect on the Company's operations because it acts primarily as a broker to direct lenders. MORTGAGE SOFTWARE AND TECHNOLOGY AMRES currently uses loan origination software developed by an independent third party, which is accessible by its Company-owned offices and at branch offices through an Intranet system. This software can quickly review the underwriting guidelines for a vast number of loan products, including those offered by Fannie Mae and Freddie Mac and select the appropriate loan product for the borrower. The software then allows the routing of pertinent information to the automated underwriting systems employed by Fannie Mae and Freddie Mac, the primary secondary-market purchasers of mortgages, and the automated systems of independent lenders such as IndyMac. Thus, in less than one hour, a borrower can receive loan approval, subject only to verification of financial information and appraisal of the subject property. The software also permits the contemporaneous ordering and review of preliminary title reports and escrow instructions. The AMRES Intranet system allows branch offices to have around-the-clock access to the system. 10 Customer Service and Support AMRES provides branch owners with on-line technical support, training, consulting and implementation services. These services consist of the following: Customer Education and Training AMRES offers training courses designed to meet the needs of end users, integration experts and system administrators. AMRES also trains customer personnel who in turn may train end-users in larger deployments. Training classes are provided at the customers' offices or on-line with an on-line tutorial. No fees are charged the branch for these services. System Maintenance and Support The Company offers telephone, electronic mail and facsimile customer support through its central technical support staff at the Company's headquarters. The Company also provides customers with product documentation and release notes that describe features in new products, known problems and workarounds, and application notes. EXPIDOC NATIONWIDE NOTARY SERVICES ExpiDoc is an Internet-based nationwide notary service that specializes in providing mortgage brokers with a solution to assist with the final step of the loan process: notarizing signatures of the loan documents. This is accomplished through ExpiDoc's automation of the process, its knowledgeable, experienced staff, and proprietary technology. ExpiDoc provides its clients with real-time access to the status of their documents, 24 hours a day. ExpiDoc's proprietary software executes both the front office notary coordination and the back office administration. ExpiDoc currently employs 3 people, located in Costa Mesa. SALES AND MARKETING As of June 30, 2001, the Company marketed and sold its mortgage brokerage services primarily through a direct sales force of loan agents totaling approximately 24 persons based in Costa Mesa, California, as well as approximately 120 loan agents at branch locations. The Company maintains four Company-owned offices in Southern California and approximately 140 branch offices in 39 states. The sales efforts of the Company to market its branch opportunities are located primarily in the Company's Costa Mesa, California headquarters office. Once a branch is opened, a branch manager supervises a licensed branch office and its employees, and receives a percentage of the profits of that branch. AMRES provides accounting, licensing, legal, compliance and lender access for each branch, retaining a percentage of commission generated by loan correspondents at each branch. The branch managers must follow all guidelines set forth by AMRES as well as all regulations of various government agencies and are independently responsible for the expenses incurred at the branch level, including personnel expenses. COMPETITION The Company faces intense competition in the origination, acquisition and liquidation of its mortgage loans. Such competition can be expected from banks, savings and loan associations and other entities, including real estate investment trusts. Many of the Company's competitors have greater financial resources than the Company. 11 PROPRIETARY RIGHTS AND LICENSING The Company's success is dependent, to a degree, upon proprietary technology. The Company may rely on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions with its employees, consultants and business partners to protect its proprietary rights. The Company may seek to protect its electronic mortgage product delivery systems, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. Despite the Company's efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of the Company's systems or to obtain and use information that the Company regards as proprietary. While the Company is not aware that any of its systems infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not claim infringement by the Company with respect to current or future products. Certain components of the electronic mortgage products delivery system currently employed by the Company are not proprietary to the Company and other competitors may acquire such components and develop similar or enhanced systems for the electronic delivery of mortgage products to mortgage brokers and borrowers. In addition, the Company relies on certain software that it licenses from third parties, including software which is used in conjunction with the Company's mortgage products delivery systems. There can be no assurance that such firms will remain in business, that they will continue to support their products or that their products will otherwise continue to be available to the Company on commercially reasonable terms. The loss or inability to maintain any of these software or data licenses could result in delays or cancellations in of contracts with Net Branch operations until equivalent software can be identified and licensed or developed and integrated with the Company's product offerings. Any such delay or cancellation could materially adversely affect the Company's business, financial condition or results of operations. ENVIRONMENTAL MATTERS The Company has not been required to perform any investigation or clean up activities, nor has it been subject to any environmental claims. There can be no assurance, however, that this will remain the case in the future. In the course of its business, the Company may acquire properties securing loans that are in default. Although the Company primarily lends to owners of residential properties, there is a risk that the Company could be required to investigate and clean up hazardous or toxic substances or chemical releases at such properties after acquisition by the Company, and may be held liable to a governmental entity or to third parties for property damage, personal injury and investigation and cleanup costs incurred by such parties in connection with the contamination. In addition, the owner or former owners of a contaminated site may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from such property. TRADE NAMES AND SERVICE MARKS The Company will devote substantial time, effort and expense toward developing name recognition and goodwill for its trade names for its operations. The Company intends to maintain the integrity of its trade names, service marks and other proprietary names against unauthorized use and to protect the licensees' use against claims of infringement and unfair competition where circumstances warrant. Failure to defend and protect such trade name and other proprietary names and marks could adversely affect the Company's sales of licenses under such trade name and other proprietary names and marks. The Company knows of no current materially infringing uses. 12 EMPLOYEES As of June 30, 2001, the Company employed a total of 143 persons. Of the total, 15 officers and employees were employed at the principal executive offices of the Company in Costa Mesa, California, all of whom were engaged in finance and administration. In addition, the Company, through its net branch operations, employed 128 individuals, 29 of whom were engaged in loan administration and 99 of whom were engaged in loan production. None of the Company's employees is represented by a labor union with respect to his or her employment by the Company. ITEM 2 - DESCRIPTION OF PROPERTY Our principal place of business is in Costa Mesa, California, where we lease an approximately 6,800 square foot facility for $190,000 per annum (subject to usual and customary adjustments), under a written lease which terminates in March 2003. This location houses our corporate finance, administration, and sales and marketing functions. ExpiDoc and the Costa Mesa office of AMRES sub-lease space at this facility from e-Net on a month-to-month basis for $1,000 and $4,000, respectively. AMRES leases additional facilities: Long Beach, California (month-to-month, $3,450 per month); Palmdale, California (month-to-month, $ 1,911 per month), and Riverside, California (term expiring in 2003, $2,117 per month). All branch offices are leased in the name of its respective manager, with lease payments made from revenues generated by that branch. The Company does not undertake any liability for those locations. We believe that our current facilities will be adequate to meet our needs, and that we will be able to obtain additional or alternative space when and as needed on acceptable terms. The Company may also hold real estate for sale from time to time as a result of its foreclosure on mortgage loans that may become in default. ITEM 3 - LEGAL PROCEEDINGS The Company is not engaged in any material legal proceedings. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the security holders during the fiscal year. 13 PART II ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The Common Stock of the Company is currently quoted on the OTC Bulletin Board of the National Association of Securities Dealers, Inc., under the symbol "ENNT". When the trading price of the Company's Common Stock is below $5.00 per share, the Common Stock is considered to be "penny stock" that are subject to rules promulgated by the Securities and Exchange Commission (Rule 15g-1 through 15g-9) under the Securities Exchange Act of 1934. These rules impose significant requirements on brokers under these circumstances, including: (a) delivering to customers the Commission's standardized risk disclosure document; (b) providing to customers current bid and offers; (c) disclosing to customers the brokers-dealer and sales representatives compensation; and (d) providing to customers monthly account statements. For several years prior to March of 1999, the market price of the Common Stock of the Company was either nominal or non-existent because the Company had no substantial assets and had little or no operations. However, after the Company entered into an acquisition agreement regarding the purchase of certain assets of e-Net Mortgage and City Pacific in March 1999, the Common Stock of the Company began trading. Following the execution of the initial agreement with EMB to acquire certain of its assets in January 2000, more active trading of the Company's Common Stock commenced. The following table sets forth the range of high and low closing bid prices per share of the Common Stock as reported by Pink Sheets LLC (formerly known as the National Quotation Bureau, L.L.C.), for the periods indicated. HIGH LOW FISCAL YEAR ENDED APRIL 30, 1999: 1st Quarter $ .01 $ .01 - ------------------------------------------------------------------------------- 2nd Quarter $ .01 $ .01 3rd Quarter $ .02 $ .01 4th Quarter $ 6.00 $ .02 FISCAL YEAR ENDED APRIL 30, 2000: 1st Quarter $ 7.50 $ 2.00 - ------------------------------------------------------------------------------- 2nd Quarter $ 7.00 $ 1.19 3rd Quarter $ 12.88 $ 1.00 4th Quarter $ 15.63 $ 3.25 FISCAL YEAR ENDED APRIL 30, 2001: - ------------------------------------------------------------------------------- 1st Quarter $ 3.75 $ 1.43 2nd Quarter $ 1.34 $ 0.28 3rd Quarter $ 1.38 $ 0.25 4th Quarter $ 0.43 $ 0.11 Close on August 8, 2001 $ 0.17 $ 0.17 The Company is unaware of the factors which resulted in the significant fluctuations in the bid prices per share during the periods being presented, although it is aware that there is a thin market for the Common Stock, that there are frequently few shares being traded, and that any sales significantly impact the market. 14 HOLDERS As of April 30, 2001, and August 3, 2001, there were 26,384,884 and 38,626,543 shares, respectively, of Common Stock issued and outstanding which as of August 3, 2001 were held by approximately 66 holders of record. As of April 30, 2001, and August 3, 2001, there were no shares of Class A Convertible Preferred Stock or Class B Convertible Preferred Stock outstanding and there were 20,000 and 18,693 shares, respectively, of Series C Convertible Preferred Stock outstanding. On July 13, 2001, 1,307 shares of Series C Convertible Preferred Stock were converted into 4,666,663 shares of e-Net common stock. DIVIDEND POLICY The Company has not paid any dividends on its Common Stock and does not expect to do so in the foreseeable future. The Company intends to apply its earnings, if any, in expanding its operations and related activities. The payment of cash dividends in the future will be at the discretion of the Board of Directors and will depend upon such factors as earnings levels, capital requirements, the Company's financial condition and other factors deemed relevant by the Board of Directors. RECENT SALES OF UNREGISTERED SECURITIES On May 2, 2000, the Company issued 666,667 shares of common stock to Jupiter European Special Situations Fund, an accredited investor, for which the investor paid $2,000,000. As additional consideration, the Company issued to Jupiter warrants to acquire 333,334 shares of common stock at an exercise price of $3.00 per share. The issuances were exempt pursuant to section 4(2) of the Securities Act of 1933. In May 2000, the Company issued an aggregate of 60,000 shares of common stock to four (4) employees as consideration for services rendered to the Company. The issuances were exempt pursuant to section 4(2) of the Securities Act of 1933. On April 26, 2001, the Company issued 2,500,000 shares of common stock to its wholly-owned subsidiary, AMRES, to provide capitalization under HUD requirements. The issuance was exempt pursuant to section 4(2) of the Securities Act of 1933. On April 27, 2001, the Company issued 150,000 shares of common stock to James E. Shipley, an accredited investor, in satisfaction of a $300,000 note owed to him. The issuance was exempt pursuant to Section 4(2) of the Securities Act of 1933. 15 ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under "Risk Factors". The following discussion should be read together with our financial statements and the notes to those financial statements included elsewhere in this annual report. OVERVIEW Except for historical information, the materials contained in this Management's Discussion and Analysis are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) and involve a number of risks and uncertainties. These include the Company's historical losses, the need to manage its growth, general economic downturns, intense competition in the financial services and mortgage banking industries, seasonality of quarterly results, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. Although forward-looking statements in this Annual Report reflect the good faith judgment of management, such statements can only be based on facts and factors currently known by the Company. Consequently, forward-looking statements are inherently subject to risks and uncertainties, actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by the Company in this Annual Report, as an attempt to advise interested parties of the risks and factors that may affect the Company's business, financial condition, and results of operations and prospects. REVENUES Revenues increased by $6,302,080, or 130.4%, to $10,991,250 for the year ended April 30, 2001, compared to $4,689,170 for the ten (10) months ended April 30, 2000. The growth in revenues is primarily attributable to the expansion and growth of AMRES primarily through the brokering of loans. AMRES accounted for approximately 95.7% and 97.6%, of consolidated revenues in the year ended April 30, 2001 and the ten months ended April 30, 2000, respectively. AMRES, as did most of the mortgage industry, benefited greatly from the decline in interest rates over the last twelve months. Typically, as interest rates fall, the refinance market heats up expanding the market of interested borrowers beyond those borrowing for the purchase of their primary residence. AMRES benefited from this market upturn, as they had the capacity in terms of people and infrastructure to accommodate the additional business. More significantly, the growth of the net branch program at AMRES was the major contributor to the growth in revenue. AMRES' net branch program comprised approximately 140 branches as of April 30, 2001, compared to less than ten branches as of April 30, 2000. For the twelve months ended April 30, 2001, the total revenue associated with the Net Branches was approximately $6,947,000. The Company did not evaluate the performance of the Net Branches during the ten months ended April 30, 2000 due to their limited operations. The Net Branch program is expected to continue to be a primary growth vehicle for the Company in the future. In addition, the mortgage banking division of AMRES is expected to expand over the next six to nine months, as evidenced by the its growth in revenue to approximately $218,000 for the year ending April 30, 2001, compared to no revenues for the ten months ended April 30, 2000. Revenues for Expidoc also increased significantly, $187,723 for the period ended April 30, 2001 compared to $38,225 for the period ended April 30, 2000. The increase is primarily attributable to a full year of operating results being included in the consolidated revenues for the full-year ended April 30, 2001, whereas only approximately two months were included as of April 30, 2000 based on the timing of the acquisition of Expidoc in March 2000. 16 Revenues from Titus, approximately $9,000, and Bravorealty.com ("Bravo"), approximately $17,000, were not material for either period presented. See further discussion of Titus below in section titled Impairment of Goodwill - Titus. Bravo became operational in January 2001. For the four months January through April 2001, the management of Bravo focused the majority of their time in attracting a qualified agent base and refining the technological infrastructure to allow the company to process the real estate transactions completed by their agents. During this period, Bravo completed two real estate transactions, earning revenue of approximately $17,000. Management believes that Bravo will be a significant growth vehicle for the Company over the next 12 months, as evidenced by the steady increase in the number of listings and closed transactions generated by Bravo subsequent to year end. Costs and Expenses Commissions Commissions are paid to loan agents on funded loans. Commissions increased by $4,116,153 or 121%, for the year ended April 30, 2001, and to $7,527,903 from $3,411,750 for the year ended April 30, 2000. This increase is primarily related to the increased revenues discussed above. As a percentage of revenue, the cost of revenue decreased by 4.3%, to 68.5% compared to 72.8% for the year ended April 30, 2001 and the ten months ended April 30, 2000, respectively. This decrease is attributable to the Company leveraging its increased revenues as the Company earns a higher commission split (compared to the loan agent) once certain revenue targets are reached. Salaries and Wages Salaries and wages totaled $1,370,839 in fiscal 2001 compared to $1,070,357 in the ten-month period ended April 30, 2000. The increase is directly related to the expansion of AMRES operations. Selling, General and Administrative Expenses Selling, general and administrative expenses totaled $3,491,454 for the year ended April 30, 2001, compared to $1,989,017 for the ten months ended April 30, 2000. This increase of $1,502,432 can be primarily attributed to the business growth of the operating subsidiaries, names AMRES, as additional personnel, office space, and other administrative costs are required to handle the expansion. In addition, the Company incurred costs at the corporate level related to professional services for items such as the filing of a registration statement, auditing, and certain legal services. Effective in the first quarter of fiscal 2002, the Company had implemented significant cost reductions to reduce its administrative expenses at corporate offices. Goodwill amortization relating to the Company's acquisitions of Expidoc, Titus, and LoanNet amounted to $349,104 for the year ended April 30, 2001, compared to $122,749 for the ten months ended April 30, 2000. The increase is attributable to the timing of the acquisitions as all of the acquisitions occurred in the fourth quarter of last year, and as such only partial years worth of amortization of goodwill was recorded for the period ending April 30, 2000. Consulting Expenses To date, the Company has not generated positive cash flow from operations and as such has been forced to fund a portion of these costs through the use of its common stock paid to outside consultants. During the twelve months ended April 30, 2001, general and administrative costs paid in the form of stock to outside consultants totaled approximately $1,855,915, representing 2,863,591 shares of common stock. For the ten months ended April 30, 2000, costs paid in the form of stock to outside consultants was immaterial. The breakout in terms of types of consulting services performed during the year ended April 30, 2001 is summarized below in Note 11 in the financial statements:
Year Ended April 30, 2001 Costs Shares Incurred Issued Financial and Internal Accounting Services $300,512 630,500 Mergers Acquisitions Consulting 888,996 875,945 Bravorealty Start-up Costs 286,337 718,500 Information Technology Consulting 41,650 71,000 Legal Services 338,425 567,646 ------------------ --------- Total $1,855,920 2,863,591 ================== =========
Impairment of Goodwill - LoanNet On February 14, 2000 the Company issued 250,000 shares of common stock for all the issued and outstanding stock of LoanNet Mortgage, Inc., a Kentucky corporation. The Company recorded goodwill in the amount of $2,226,873 as part of the transaction. LoanNet had a limited and unprofitable operating history, but provided the Company with projections and representations which showed positive operational cash flow within the first year of operations. During the first and second quarters of year ended April 30, 2001, the officers of LoanNet began to express the need for a capital infusion of approximately $300,000. These Officers indicated that without this infusion of capital, the business would likely fail. The Company did not have the capital requested by the Officers of LoanNet, and was unable to raise additional capital primarily due to the market conditions and the decline in the Company's stock price. During the third quarter, the Company decided to close all three LoanNet offices and cease operations. On March 30, 2001, the Board of Directors of e-Net, none of whom were officers, directors or management of LoanNet, rescinded the acquisition of LoanNet due to claimed misrepresentations by LoanNet's management, officers and directors. E-Net management demanded the return of the 250,000 shares issued, and attempted to deliver the shares of common stock it received in connection with the acquisition to the original selling shareholder, whom is also the preferred stockholder, the chief executive officer and director of LoanNet. While in operation, LoanNet recorded cumulative net losses and did not provide any cash flow for the Company. The Company wrote off its full investment in LoanNet in the fourth quarter of 2001. LoanNet's preferred shareholder seized the remaining assets of LoanNet, and took actions which e-Net has interpreted by be his assumption of certain liabilities. Management of e-Net is not aware of any claims against e-Net or its subsidiaries in connection with LoanNet. At that point, the Company deemed it appropriate to write off its remaining investment in LoanNet and as such, took a charge for the unamortized portion of goodwill amounting to $1,985,012. Impairment of Goodwill - Titus Real Estate On February 11, 2000 the Company executed a purchase agreement for the acquisition of Titus Real Estate for $1,600,000. The Company allocated the purchase price to goodwill associated with the transaction of $1,600,000 (refer to Note 3 to the consolidated financial statements). Titus is the management company for Titus R.E.I.T. At the time of the acquisition of Titus Real Estate, the then-chairman of the Company was close to finalizing a commitment from investors to raise over $30,000,000 in capital for the R.E.I.T. No commitment was obtained by the Company. 17 Unfortunately, as the securities markets deteriorated, so did the funding for the Titus R.E.I.T. During the year ended April 30, 2001, the Company focused the majority of its efforts on its other subsidiaries, namely AMRES, Expidoc, and Bravo Rrealty.com, and as such, Titus did not provide the Company with any significant revenue or cash flow (approximately $9,000 of revenue for the year ended April 30, 2001). Through April 30, 2001, management has been unsuccessful in obtaining capital for the Titus R.E.I.T. However management intends to actively seek capital for the Titus R.E.I.T. as management believes there is a significant opportunity to generate cash flows for e-Net; however, there are no assurance that such capital will be raised. Since we have been unsuccessful in our capital raising and operating efforts, we found it necessary to impair goodwill by an additional $1,155,057 based on a current liquidation value of the Titus R.E.I.T of an estimated $250,000. Interest Expense Interest expense was $203,306 as of April 30, 2001, compared to $27,343 as of April 30, 2000. This increase is associated with the interest on the notes payable to EMB Corporation relating the Company's acquisition of AMRES. The Company did not make any principal or interest payments on this note during the last eleven months of the year ending April 30, 2001. Subsequent to year end, the notes due to EMB, as well as certain other obligations owed by the Company, were satisfied as part of the "Global Settlement" agreed to by all parties. See further discussion of the Global Settlement in Events Subsequent To Year End beginning on page 6, and in Note 14 to the Consolidated Financial Statements. Net Losses The Company's net losses for the twelve and ten months ended April 30, 2001 and 2000 were ($6,573,527), and ($1,796,899), or ($0.30) and ($0.22) per share respectively. During the most recent twelve-month period, the non-cash expense component of the Company's net loss was significant. For the year ending April 30, 2001, non-cash expense relating to impairment of goodwill and stock paid to consultants and other non-cash expenses amounted to $5,727,544, compared to $1,145,139 for the ten months ended April 30, 2000. The impairment charges relating to goodwill are of a non-recurring nature and as such, the Company believes that with its continued growth in revenues and its ability to leverage its fixed costs against those revenues, it will be able to reduce its net losses in the future. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities was $894,143 and $702,248 and for the year ended April 30, 2001 and the ten months ending April 30, 2000, respectively. For both periods, the Company incurred net losses from operations. Significant non-cash expenses impacting the loss from operations for the period ending April 30, 2001 were depreciation and amortization of $393,439, permanent impairment of goodwill in the amount of $3,140,069, and stock compensation paid to outside consultants and employees of $2,025,825. Significant non-cash expenses impacting the loss from operations for the ten months ending April 30, 2000 were depreciation and amortization of $132,440, and stock compensation recorded on the conversion of preferred shareholders in the amount of $1,000,000. Net cash used in investing activities was $14,634 for the year ended April 30, 2001. Net cash provided by investing activities was $178,188 for the ten month period ended April 30, 2000. The primary contributors to the cash provided by investing activities for the period ended April 30, 2000 were the issuance of a note receivable to a related party in the amount of $39,400 and the net impact of the acquisitions of Titus, Expidoc, and LoanNet amounting to $147,970. 18 Net cash provided by financing activities was $716,080 and $704,326 for the periods ending April 30, 2001 and April 30, 2000 respectively. Cash provided by financing for both periods relates primarily to net proceeds received from private placements of the Company's stock, reduced by payments made on the Company's note payable to EMB corporation related to the acquisition of AMRES. The net proceeds from private placements were $1,699,973 and $1,775,000, while the payments made on related party notes payable amounted to $1,350,000 and $1,530,000 for the periods ended April 30, 2001 and April 30, 2000, respectively. Additionally, the Company received $459,326 during the 10-month period ended April 30, 2000 from the issuance of notes to related parties. During the year ended April 30, 2001, the Company drew down from its line of credit $340,842. On April 7 and May 2, 2000, we completed two private placements raising a total of $4 million less costs of $525,027. These funds were used to finance our current operations and reduce our indebtedness to EMB Corporation ("EMB") to approximately $1.1 million as of April 30, 2001. As part of the agreement for the April 7, 2000, private placement, we were required to file and cause to be declared effective a registration statement with the Securities and Exchange Commission by November 7, 2000. On August 4, 2000, we filed the registration statement and received an initial response from the Commission on or about September 7, 2000. As the private placement agreement called for the registration to be declared effective by November 7, 2000, we incurred monthly liquidated damages with the holders of the Class C Preferred of approximately $40,000 for each full month subsequent to November 7, 2000 in which the registration statement was not declared effective. The Class C Preferred has elected to begin converting their holdings to common stock beginning in July of 2001. On September 15, 2000, we received $125,000 (less costs and fees of $20,000) in exchange for a short-term note payable in the amount of $150,000 due on January 15, 2001. The proceeds were used to fund current operations. The holder of the note payable granted an extension of the due date beyond January 15, 2001. As of August 8, 2001, $39,150 remains due on the note, payable in nine equal monthly installments with no interest. During fiscal 2001, the Company satisfied a note payable due a former related party in the amount of $300,000 plus interest by issuing 150,000 shares of restricted common stock. The stock was valued at $332,666 (the amount of the principal balance plus accrued interest) and no gain or loss was recorded on the settlement. To date, the Company has not generated income from operations and has a stockholders' deficit of $13,301,068. The Company has financed a majority of its operations through the issuance of its common stock. Subsequent to year end, the Company executed a "Global Settlement" with its primary creditors (refer to Note 14 in the Consolidated Financial Statements). Pursuant to this agreement, the company issued 1,500,000 shares of restricted stock to EMB and 3,000,000 shares of restricted stock to Williams de Broe. These shares were tendered to, among other things, satisfy the remaining obligation owed by the Company to EMB relating to the acquisition of AMRES (approximately $1.3 million including accrued interest as of April 30, 2001). This obligation is reflected in long-term liabilities on the Consolidated Financial Statements for the period ending April 30, 2001. Also subsequent to year end, the Company secured "Bridge Financing" in the amount of $200,000 and executed an investment agreement with Laguna Pacific Partners, LLP. In addition, in transactions related to the agreements with Laguna Pacific Partners, LLP, the Company formed a wholly-owned subsidiary, Anza Properties, Inc., which executed a Bond Term Sheet with e-Net outlining the proposed terms of an offering to raise up to $5,000,000. Please refer to Note 14 of the Consolidated Financial Statements for further discussion. Our consolidated financial statements have been prepared assuming the Company will continue as a going concern. Because the Company has incurred significant losses from operations and has excess current liabilities over current assets totaling approximately $375,000, it requires financing to meet its cash requirements. Our auditors included an explanatory paragraph in their report raising substantial doubt about its ability to continue as a going concern. Subsequent to year-end, the Company executed relief from certain obligations by settlement of its creditors. Cash requirements depend on several factors, including but not limited to, the pace at which all subsidiaries continue to grow, become self supporting, and begin to generate positive cash flow, as well as the ability to obtain additional services for common stock or other non-cash consideration. If capital requirements vary materially from those currently planned, the Company may require additional financing sooner than anticipated. At present, there are no firm commitments for any additional financing, and there can be no assurance that any such commitment can be obtained on favorable terms, if at all. Management has implemented a several reductions of costs and expenses to reduce its operating losses. Management plans to continue its growth plans to generate revenues sufficient to meet its cost structure. Management believes that these actions will afford the Company the ability to fund its daily operations and service its remaining debt obligations primarily through the cash generated by operations; however, there are no assurance that management's plans will be successful. No adjustments have been made to the carrying value of assets or liabilities as a result of these uncertainties. 19 ITEM 7 - FINANCIAL STATEMENTS Index to Consolidated Financial Statements e-Net Financial.Com Corporation Report of McKennon Wilson & Morgan LLP F-1 Consolidated Balance Sheets as of April 30, 2001 F-2 Consolidated Statements of Operations for the year ended April 30, 2001 and the ten months ended April 30, 2000 F-3 Consolidated Statements of Stockholder's Equity for year ended April 30, 2001 and the ten months ended April 30, 2001 F-4 Consolidated Statements of Cash Flows for the year ended April 30, 2001 and the ten months ended April 30, 2000 F-8 Notes to the Consolidated Financial Statements F-11 to F-26 ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no events required to be reported by this Item 8. 20 PART III ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Directors and Executive Officers - ----------------------------------- The following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices and positions with the Company held by each person and the date such person became a director or executive officer of the Company. The executive officers of the Company are elected annually by the Board of Directors. The directors serve one year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Unless described below, there are no family relationships among any of the directors and officers. Name Age Position(s) - ---- --- ----------- Scott A. Presta 29 Director Vincent Rinehart 51 Director, President, Chief Executive Officer, and Principal Accounting Officer Mr. Presta has been a director of the Company since April 12, 2000. A former member of the National Association of Securities Dealers, Inc., he was the licensed General Securities Principal of Pacific Coast Financial Services, Inc., ("Pacific Coast"), a brokerage firm in Long Beach, California, from October of 1993 through November of 1995. Following his tenure with the brokerage firm, Mr. Presta formed a series of companies that were involved in the real estate and oil and gas industries, one of which, Titus, was acquired by the Company. Mr. Presta attended California State University Long Beach from 1989 through spring of 1992, when he became employed by Pacific Coast. Mr. Rinehart has been a director and the President and Chief Executive Officer of the Company since April 12, 2000. He also serves in the following capacities: Chairman of the Board of AMRES (commencing in 1997); Chief Executive Officer of Firstline Mortgage, Inc., a HUD-approved originator of FHA, VA, and Title 1 loans (commencing in 1985); and Chairman of the Board of Firstline Relocation Services, Inc., a three office enterprise that provides real estate sales, financing, destination, and departure services to Fortune 500 companies (commencing in 1995). Mr. Rinehart received his B.A. in Business Administration from California State University at Long Beach in 1972. Compliance with Section 16(a) of the Securities Exchange Act of 1934 - ------------------------------------------------------------------------------ Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers and persons who own more than ten percent of a registered class of the Company's equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, none of the required parties are delinquent in their 16(a) filings. 21 Board Meetings and Committees - -------------------------------- During the fiscal year ended April 30, 2001, the Board of Directors met on 20 occasions and took written action on numerous other occasions. All the members of the Board attended the meetings. The written actions were by unanimous consent. The Company presently has no executive committee, nominating committee or audit committee of the Board of Directors. ITEM 10 - EXECUTIVE COMPENSATION Executive Officers and Directors - ----------------------------------- 2000 Stock Compensation Program The Company has reserved shares of Common Stock for issuance under its 2000 Stock Compensation Program (the "Plan"), as amended. At April 30, 2001, 3,803,059 shares of Common Stock had been granted and issued under the Plan. Our Plan was adopted by our board of directors in December 1999 and will be presented to the stockholders for approval at the next annual meeting of stockholders. A total of 5,000,000 shares of common stock has been reserved for issuance under the Plan, as amended to date. The maximum number of shares of common stock which may be awarded under the Plan during any fiscal year to any participant is 600,000 shares. The Plan is administered by the board of directors. The administrator has the power to determine the individuals to whom options, restricted shares or rights to purchase shares shall be granted, the number of shares or securities subject to each option, restricted share, purchase right or other award, the duration, times and exercisability of each award granted, and the price of any share purchase or exercise price of any option. Options granted under the Plan are generally not transferable by the optionee except by will or the laws of descent and distribution, and each option is exercisable, during the lifetime of the optionee, only by the optionee. Options generally must be exercised within 30 days following the end of the optionee's status as an employee or consultant unless extended to 90 days in the discretion of the administrator. Options may be exercised for up to 6 months upon death or disability. However, in no event may an option be exercised later than the earlier of the expiration of the term of the option or five years from the date of the Plan. The Plan may be amended, altered, suspended or terminated by the administrator at any time, but no such amendment, alteration, suspension or termination may adversely affect the terms of any option, restricted share, purchase right or other award previously granted without the consent of the affected participant. Unless terminated sooner, the Plan will terminate automatically in December of 2004. Board Compensation Directors of the Company receive no compensation as a Director but they are entitled to reimbursement for their travel expenses. The Company does not pay additional amounts for committee participation or special assignments of the Board of Directors. 22 Summary Compensation Table - ---------------------------- The Summary Compensation Table shows certain compensation information for services rendered in all capacities for the fiscal years ended April 30, 2001 and 2000. Other than as set forth herein, no executive officer's salary and bonus exceeded $100,000 in any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred.
SUMMARY COMPENSATION TABLE Annual Compensation Long Term Compensation ------------------------------------------ ------------------------------------------ Awards Payouts ------------------------- -------------- RESTRICTED SECURITIES NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION YEAR ($) ($) ($) ($) SARS(#) ($) ($) Vincent Rinehart, 2001 180,697.18 -0- 17,364.36 -0- -0- -0- -0- President (1) 2000 Scott Presta (2). . . . . 2001 -0- -0- -0- -0- -0- -0- -0- 2000 35,000 -0- -0- -0- -0- -0- -0-
(1) In April of 2000, Mr. Rinehart was appointed Chief Executive Officer and President of the Company. (2) Mr. Presta did not receive compensation from the Company in any years represented. However, he did receive wages totaling $35,000 in 2000 for services performed at American Residential Funding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS) NUMBER OF SECURITIES ERCENT OF TOTAL UNDERLYING OPTIONS/SAR'S GRANTED OPTIONS/SAR'S GRANTED TO EMPLOYEES IN EXERCISE OF BASE PRICE NAME FISCAL YEAR (#) ($/SH) ($/SH) EXPIRATION DATE - ---------------------------------------------------------------------------------------------------------------- Vincent Rinehart -0- N/A N/A N/A Scott Presta -0- N/A N/A N/A
23
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES ---------------------------- NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE- SECURITIES UNDERLYING MONEY OPTION/SARS SHARES ACQUIRED ON OPTIONS/SARS AT FY-END (#) AT FY-END ($) NAME EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - ------------------------------------------------------------------------------------------------------------------------ Vincent Rinehart -0- N/A N/A N/A Scott Presta -0- N/A N/A N/A
24 ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of August 3, 2001, certain information with respect to the Company's equity securities owned of record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company's outstanding equity securities; and (iii) all Directors and Executive Officers as a group.
Common Stock ------------ Name and Address of Amount and Nature of Percent Title of Class Beneficial Owner (1) Beneficial Ownership of Class(2) - -------------- ---------------------- --------------------- ----------- Common Stock Vincent Rinehart 1,067,500 2.7% Common Stock Scott A. Presta 115,000 0.3% Common American Residential Funding, Stock Inc. (AMRES) (3) 2,750,000 7.1% Common EMB Corporation (4) 9,000,000 23.3% Stock 10159 E. 11th Street, Suite 415 Tulsa, Oklahoma 74128 Common Willbro Nominees Ltd. (5) 3,000,000 7.8% Stock 6 Broadgate London, EC2M-2RP England Common All officers and directors as a group 1,182,500 3.0% Stock (2 persons)
(1) Unless otherwise noted, the address of each beneficial owner is c/o e-Net Financial.com Corporation, 3200 Bristol Street, Suite 700, Costa Mesa, California 92626. (2) Based on 38,626,543 shares outstanding as of August 3, 2001. (3) In May 2001, the Company issued 2,500,000 shares of common stock to its subsidiary, American Residential Funding, Inc., in order to appropriately capitalize AMRES. In April 2000, the Company issued 250,000 shares of common stock to AMRES. (4) To the best knowledge of the Company, these shares are under the control of the board of directors of EMB. Includes 1,500,000 shares issued to EMB as part of the Global Settlement (see Item 1 - Global Settlement, above). Vincent Rinehart is a shareholder of EMB. Vincent Rinehart holds a limited proxy for all of these shares until December 31, 2001. (5) These shares were issued as part of the Global Settlement involving Williams de Broe (see Item 1 - Global Settlement, above). 25
Preferred Stock --------------- Name and Address of Amount and Nature of Percent Title of Class Beneficial Owner Beneficial Ownership of Class - ---------------- ------------------- --------------------- --------- Series C Cranshire Capital, L.P. 6,531 (1) 36.3% Preferred c/o Downsview Capital, Inc. 666 Dundee Road, Suite 1901 Northbrook, Illinois 60062 Series C EURAM Cap Strat. "A" Fund Limited 4,431 (1) 24.6% Preferred c/o JMJ Capital, Inc. 666 Dundee Road, Suite 1901 Northbrook, Illinois 60062 Series C Keyway Investments, Ltd 4,531 (1) 24.2% Preferred 19 Mount Havlock Douglas, Isle of Man United Kingdom 1M1 2QG Series C The dotCom Fund, LLC Preferred 666 Dundee Road, Suite 1901 Northbrook, Illinois 60062 2,731 (1) 14.6% Series C All officers and directors as a group -0- -0-% Preferred (2 persons)
(1) In April 2000, the Company issued 20,000 shares of Series C Convertible Preferred Stock, (the "C Preferred") for $1,775,000, net of fees of $225,000 in a private placement. As additional consideration, the Company issued warrants to purchase 151,351 shares of the Company's common stock at an initial exercise price of $6.73 per share. The C Preferred has a liquidation value of $2,000,000 and the holder is entitled to receive cumulative dividends at an annual rate of $7.00 per share (7% per annum), payable semi-annually. The C Preferred is convertible, at any time at the option of the holder, into shares of the Company's common stock at a price equal to the lesser of (a) $6.91 per share or (b) 95% of the average closing bid price of the Company's common stock during the five trading days preceding the conversion after 150 days to 85% of the average closing bid price of the common stock during the five trading days immediately preceding such conversion after 240 days. The longer the C Preferred is held the greater discount on conversion into common stock. In the event the holders of C Preferred have not elected to convert at the time of mandatory conversion, the C Preferred will convert at an amount equal to 85% of the purchase price of the holder's C Preferred plus an amount equal to accrued and unpaid dividends, if any, up to and including the date fixed for redemption, whether or not earned or declared. As of July 13, 2001, 2,016 shares of Series C Preferred have been converted into 4,666,663 shares of e-Net common stock, leaving 17,984 shares outstanding. 26 ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Certain Relationships and Related Transactions - -------------------------------------------------- Effective March 1, 1999, the Company acquired e-Net Mortgage Corporation, a Nevada corporation ("e-Net Mortgage"), and City Pacific International, U.S.A., Inc., a Nevada corporation ("City Pacific"). Pursuant to the Share Exchange Agreement and Plan of Reorganization dated March 1, 1999, regarding e-Net Mortgage, its shareholders received 2,000,000 shares of Common Stock of the Company in exchange for all of the issued and outstanding stock of e-Net Mortgage, which became a wholly owned subsidiary of the Company. Pursuant to the Share Exchange Agreement and Plan of Reorganization, dated March 1, 1999, regarding City Pacific, its shareholders received 500,000 shares of Common Stock of the Company in exchange for all of the issued and outstanding stock of City Pacific, which became a wholly owned subsidiary of the Company. Effective as of that date, Michael Roth, who had owned 100% of e-Net Mortgage, became Chairman, CEO, President, a director, and the owner of 44% of the common stock of the Company. Also effective as of that date, Al Marchi, who had owned 100% of City Pacific, became a director and the owner of 11% of the outstanding common stock of the Company. Following this transaction, the Company entered into a series of acquisitions as part of its strategy of horizontal market penetration and in an effort to increase revenues. On November 29, 1999, the Company issued Paul Stevens 250,000 shares of its Common Stock in exchange for Mr. Stevens' transfer to the Company of 500,000 shares of Common Stock of EMB Corporation ("EMB") that he owned (the "Stevens EMB Shares"). On December 21, 1999, and in connection with that exchange, the Company entered into agreements with Digital Integrated Systems, Inc. ("DIS"), and EMB to acquire their respective 50% interests in VPN.COM JV Partners, a Nevada joint venture ("VPN Partners") involved in vertically integrated communications systems. In consideration of the purchase of the interests, the Company issued a one-year promissory note to DIS in the amount of $145,000 (the "DIS Note") and tendered to EMB the Stevens EMB Shares. At the time of such transactions, Mr. Stevens was the sole owner of DIS and the President and Chief Executive Officer of VPN Partners. Upon closing of the acquisitions, VPN Partners was integrated with VPNCOM.Net, Inc. (previously known as City Pacific), the other communications entity then owned by the Company. At the time of the transaction, our management believed that VPN Partners and Mr. Stevens would contribute materially to the planned expansion of the Company. On January 12, 2000, as revised on April 12, 2000, the Company entered into an agreement (the "Amended and Restated Purchase Agreement") with EMB to acquire two of its wholly owned subsidiaries, namely American Residential Funding, Inc., a Nevada corporation ("AMRES"), and Bravo Real Estate, Inc., a California corporation ("Bravo Real Estate"). At the time of the acquisition, AMRES was the principal operating company of EMB, and EMB had previously acquired AMRES from AMRES Holding LLC ("AMRES Holding"), a company controlled by Vincent Rinehart (now an officer and director of the Company). The purpose of the acquisition was to acquire market share, revenues, and certain key management personnel. The Company also acquired all of EMB's rights to acquire Titus Real Estate LLC, a California limited liability company ("Titus Real Estate") from its record owners. Titus Real Estate is the management company for Titus Capital Corp., Inc., a California real estate investment trust (the "Titus REIT"), in which the Company has no ownership interest. Titus REIT currently holds 10 apartment buildings in Long Beach, California, six of which are in escrow to be sold. The Company does not expect to generate significant cash flows from the sale of the holdings of the Titus REIT. 27 On February 11, 2000, the Company executed a purchase agreement (the "Titus Purchase Agreement") for the acquisition of Titus Real Estate and issued 100,000 shares of its Class B Convertible Preferred Stock (the "B Preferred") to AMRES Holding/Rinehart, and 300,000 shares of its Common Stock to Scott A. Presta, in their capacities as the owner-members of Titus Real Estate. Mr. Rinehart and Mr. Presta were not, at the time, otherwise affiliated with the Company in any way, but both became members of Management in April 2000 (see Item 9). Upon closing, Titus Real Estate became a wholly owned subsidiary of the Company. Management had hoped that the acquisition of Titus Real Estate would increase the Company's overall revenue stream. The Company took a charge for impairment of goodwill in the amount of $1,155,057 in the fourth quarter 2000 with respect to its investment in Titus Real Estate. On February 14, 2000, in our continuing efforts to expand, the Company acquired all of the common stock of LoanNet Mortgage, Inc., a Kentucky corporation ("LoanNet"), a mortgage broker with offices in Kentucky and Indiana. Pursuant to the Stock Purchase Agreement dated February 14, 2000, the Company issued 250,000 shares of its Common Stock to the selling shareholders of LoanNet, which became a wholly-owned subsidiary of the Company. As of the closing of the transaction, LoanNet also had 400 shares outstanding of 8% non-cumulative, non-convertible preferred stock, the ownership of which has not changed. The preferred stock is redeemable for $100,000. As of February 28, 2001, all three LoanNet offices have been closed. The Company took a charge for impairment of goodwill in the amount of $1,985,012 in the fourth quarter 2000 with respect to its investment in LoanNet. On March 1, 2000, the Company sold VPNCOM.Net, Inc., which had proven to be unprofitable and inconsistent with the Company's changing business structure, to Al Marchi, its then-President. The sales consideration consisted of his 30-day promissory note in the principal amount of $250,000 (paid in full on April 15, 2000), the assumption of the DIS Note, and the return of 250,000 shares of Company Common Stock owned by him. On March 17, 2000, the Company acquired all of the common stock of ExpiDoc.com, Inc., a California corporation ("ExpiDoc"). ExpiDoc is an Internet-based, nationwide notary service, with over 6,500 affiliated notaries, that provides document signing services for various mortgage companies. Pursuant to the Stock Purchase Agreement dated February 14, 2000, the Company issued 24,000 shares of Common Stock of the Company to the selling shareholders of ExpiDoc, which became a wholly owned subsidiary of the Company. As of the closing of the acquisition, the Company entered into management and consulting agreements with ExpiDoc's owners and management, including Mr. Rinehart and Mr. Presta. Mr. Rinehart and Mr. Presta were not, at the time, otherwise affiliated with the Company in any way, but both became members of Management in April, 2000. (see Item 9) On April 12, 2000, the Company closed the acquisition of AMRES and Bravo Real Estate. Pursuant to the Amended and Restated Purchase Agreement, the Company issued 7.5 million shares of Common Stock to EMB, representing nearly 40% of the then issued and outstanding common stock of the Company, paid $1,595,000, and issued a promissory note in the initial amount of $2,405,000, and AMRES and Bravo Real Estate became wholly owned subsidiaries of the Company. As of April 30, 2001, the remaining principal balance of the promissory note was $1,055,000, and the note was cancelled in its entirety effective June 27, 2001, (see discussion of Global Settlement below). On April 12, 2000, James E. Shipley, the former CEO of EMB, was elected Chairman of the Board of Directors of the Company and Vincent Rinehart was elected a Director, President, and Chief Executive Officer of the Company. Bravo Real Estate never commenced operations, had no assets, and is no longer an operating subsidiary. 28 Mr. Shipley was the CEO, President, and a less than 5% owner of EMB at the time of the sale of AMRES and Bravo from EMB to e-Net. Mr. Shipley resigned as Chairman of EMB and became Chairman of e-Net in April 2000, and resigned as an officer of e-Net in December 2000. Mr. Rinehart was never an officer or director of EMB, but was the owner of 2,000,000 shares of EMB common stock, making him an approximate 10% owner of EMB at the time of the sales in April 2000, and continues as an officer and director of the Company (e-Net) and as an officer of all wholly-owned subsidiaries of the Company. On April 12, 2000, in accordance the provisions of the Certificate of Designations, Preferences and Rights of Class B Convertible Preferred Stock, AMRES Holding/Rinehart demanded that its B Preferred be repurchased by the Company for an aggregate of one million dollars. On April 20, 2000, the Company, AMRES Holding/Rinehart, and Mr. Presta amended the Titus Purchase Agreement to provide for the return of 100,000 shares of the Company's preferred stock issued to AMRES Holdings and Mr. Presta upon the issuance of 1,000,000 shares of common stock to them. On May 24, 2000, Michael Roth and Jean Oliver, the sole remaining officers and directors of prior management, resigned their remaining positions with the Company. On that date, Mr. Presta, an executive officer and director of Titus Real Estate, was elected a Director and Secretary of the Company. On April 13, 2000, Mr. Shipley loaned the Company $300,000 due April 12, 2001, together with interest at 10% per annum. This loan was satisfied by the issuance of 150,000 shares of common stock to Mr. Shipley on or about April 25, 2001. Based on a press release by EMB, effective July 25, 2001, James E. Shipley again became the Chief Executive Officer of EMB. 29 ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS EXHIBIT NO. DESCRIPTION ------------ ----------- 2.1 Share Exchange Agreement and Plan of Reorganization dated March 1, 1999 between the Company and E-Net Mortgage Corporation is incorporated by reference to Exhibit 2.3 to the Annual Report on Form 10-KSB of the Registrant for the fiscal year ended April 30, 1999, filed on August 13, 1999 (the "1999 10-KSB"). 2.2 Share Exchange Agreement and Plan of Reorganization dated March 1, 1999 between the Company and City Pacific International, U.S.A., Inc., is incorporated by reference to Exhibit 2.4 to the 1999 10-KSB. 3.1 Certificate and Articles of Incorporation, as filed with the Nevada Secretary of State on August 18, 1988 is incorporated by reference to the Exhibits to the Registration Statement on Form 10-SB of the Registrant filed on September 1, 1994. 3.2 Certificate of Amendment to Articles of Incorporation, as filed with the Nevada Secretary of State on July 29, 1997, is incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-KSB of the Registrant for the fiscal year ended April 30, 1997, filed on January 4, 1999. 3.3 Certificate of Amendment to Articles of Incorporation, as filed with the Nevada Secretary of State on February 19, 1999, is incorporated by reference to Exhibit 3.4 to the 1999 10-KSB. 3.4 Certificate of Amendment to Articles of Incorporation, as filed with the Nevada Secretary of State on May 12, 1999, is incorporated by reference to Exhibit 3.5 to the 1999 10-KSB. 3.5 Certificate of Amendment to Articles of Incorporation, as filed with the Nevada Secretary of State on January 18, 2000, are incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Registrant filed on January 27, 2000 (the "January 8-K") 3.6 Certificate of Amendment to Articles of Incorporation, as filed with the Nevada Secretary of State on February 2, 2000, is incorporated by reference to Exhibit 3.6 to the Annual Report on Form 10-KSB of the Registrant for the fiscal year ended April 30, 2000, filed on August 1, 2000 (the "2000 10-KSB"). 30 3.7 Certificate of Amendment to Articles of Incorporation, as filed with the Nevada Secretary of State on March 3, 2000, is incorporated by reference to Exhibit 3.7 of the 2000 10-KSB. 3.8 Amended and Restated By-laws of the Registrant is incorporated by reference to Exhibit 3.8 of the 2000 10-KSB. 4.1 Certificate of Designations, Preferences and Rights of Class A Convertible Preferred Stock, as filed with the Nevada Secretary of State on April 7, 2000, is incorporated by reference to Exhibit 4.1 of the 2000 10-KSB. 4.2 Certificate of Designations, Preferences and Rights of Class B Convertible Preferred Stock, as filed with the Nevada Secretary of State on April 7, 2000, is incorporated by reference to Exhibit 4.2 of the 2000 10-KSB. 4.3 Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock, as filed with the Nevada Secretary of State on April 7, 2000, is incorporated by reference to Exhibit 3.7 of the 2000 10-KSB. 10.1 Settlement Agreement dated June 26, 2001 by and between EMB Corporation, e-Net Financial.com Corporation, AMRES Holding LLC, Vincent Rinehart, and Williams de Broe. 10.2 Limited Irrevocable Proxy dated June 27, 2001. 10.3 Promissory Note dated June 27, 2001 executed by e-Net in favor of AMRES Holding LLC. 10.4 Promissory Note dated June 27, 2001 executed by EMB Corporation in favor of Williams de Broe. 10.5 Promissory Note dated June 27, 2001 executed by e-Net in favor of EMB Corporation (later terminated). 10.6 Promissory Note dated June 27, 2001 executed by e-Net in favor of EMB Corporation. 10.7 Redeemable Convertible 10% Promissory Note dated June 28, 2001 executed by e-Net in favor of EMB Corporation. 10.8 Registration Rights Agreement dated June 27, 2001 executed by e-Net in favor of Williams de Broe. 10.9 Investment Agreement dated June 27, 2001 by and between e-Net and Laguna Pacific Partners, LLP 10.10 Secured Promissory Note dated June 27, 2001 executed by e-Net in favor of Laguna Pacific Partners, LLP 31 10.11 Warrant Agreement dated June 27, 2001 by and between e-Net and Laguna Pacific Partners, LLP 10.12 Form of Warrant 10.13 Operating Agreement dated June 27, 2001 by and between e-Net and Anza Properties, Inc. 10.14 ENET Bond Term Sheet by and between e-Net and Laguna Pacific Partners, LLP. 10.15 Employment Agreement dated June 27, 2001 by and between Anza Properties, Inc. and Thomas Ehrlich 10.16 Stock Option Agreement dated June 27, 2001 by and between e-Net and Thomas Ehrlich 10.17 Consulting Agreement dated June 27, 2001 by and between Anza Properties, Inc. and Lawrence W. Horwitz 10.18 Stock Option Agreement dated June 27, 2001 by and between e-Net and Lawrence W. Horwitz 10.19 Employment Agreement dated effective July 1, 2001 by and between e-Net and Vincent Rinehart. (B) REPORTS ON FORM 8-K On March 15, 2001, the Company filed a Form 8-K/A, amending item 7(b) of its Current Report on Form 8-K filed with the Commission on April 19, 2000, to file unaudited pro forma condensed consolidated financial information for the Company reflecting the acquisition of American Residential Funding, Inc. on April 12, 2000. 32 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 14, 2001 e-Net Financial.Com Corporation /s/ Vincent Rinehart ______________________________ By: Vincent Rinehart Its: President and Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Vincent Rinehart Dated: August 14, 2001 _____________________________ By: Vincent Rinehart Its: President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Director /s/ Scott A. Presta Dated: August 14, 2001 _____________________________ By: Scott A. Presta Its: Director 33 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors F-1 Consolidated Balance Sheet as of April 30, 2001 F-2 Consolidated Statements of Operations for the Ten Months Ended April 30, 2000, and the Year Ended April 30, 2001 F-3 Consolidated Statements of Stockholders' Equity (Deficit) for the Ten Months Ended April 30, 2000, and the Year Ended April 30, 2001 F-8 Consolidated Statements of Cash Flows for the Ten Months Ended April 30, 2000, and the Year Ended April 30, 2001 F-8 - F-11 Notes to the Consolidated Financial Statements F-12 - F-28 F-1 REPORT OF INDEPENDENT AUDITORS Board of Directors e-Net Financial.Com Corporation We have audited the accompanying consolidated balance sheet of e-Net Financial.Com Corporation ("e-Net") and subsidiaries (collectively, the "Company") as of April 30, 2001, and the related statements of operations, stockholders' equity (deficit) and cash flows for the ten months ended April 30, 2000, and for the year ended April 30, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of e-Net Financial.Com Corporation and subsidiaries as of April 30, 2001, and the results of their operations and their cash flows for the ten months ended April 30, 2000, and for the year ended April 30, 2001, in conformity with accounting principles generally accepted in the United States. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred operating losses, has a working capital deficit and shareholders' deficit at April 30, 2001. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ McKennon, Wilson & Morgan LLP -------------------------------------- Irvine, California August 8, 2001 F-2
e-NET FINANCIAL.COM CORPORATION Consolidated Balance Sheet April 30, 2001 ---------------- ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 92,886 Accounts receivable, net of allowance for doubtful accounts of $41,508. . . . . . . . . . . . . . . . . . . . . . . . . 480,723 Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . 357,350 Advances to employees . . . . . . . . . . . . . . . . . . . . . . . 65,250 Prepaid and other current assets. . . . . . . . . . . . . . . . . . 84,604 ---------------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 1,080,813 Property and equipment, net of accumulated depreciation of $78,385. 89,985 Goodwill, net of accumulated amortization and impairments of $3,611,922. . . . . . . . . . . . . . . 425,247 Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,307 ---------------- $ 1,607,352 ================ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . $ 494,280 Line of credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 340,842 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 224,628 Commissions payable . . . . . . . . . . . . . . . . . . . . . . . . 260,313 Other current liabilities . . . . . . . . . . . . . . . . . . . . . 135,707 ---------------- Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 1,455,770 Note payable to related party. . . . . . . . . . . . . . . . . . . . 1,055,000 Interest payable on notes to related party . . . . . . . . . . . . . 129,876 Long-term note payable . . . . . . . . . . . . . . . . . . . . . . . 150,000 Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 1,088 ---------------- Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 2,791,734 ---------------- Commitments and contingencies (Note 10). . . . . . . . . . . . . . . - Stockholders' deficit: Class C convertible preferred stock, no par value; liquidation value of $2.00 per share; 20,000 shares issued and outstanding . . . . . . . . . . . . . . . . 2,000,000 Common stock, $0.001 par value; 100,000,000 shares authorized; 26,384,884 issued and outstanding. . . . . . . . . . . . 26,385 Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . 10,378,934 Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . (13,301,068) Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . (26,133) Treasury stock, as adjusted . . . . . . . . . . . . . . . . . . . . (262,500) ---------------- Total stockholders' deficit. . . . . . . . . . . . . . . . . . . . . (1,184,382) ---------------- $ 1,607,352 ===========
See accompanying notes to these consolidated financial statements F-3
e-NET FINANCIAL.COM CORPORATION Consolidated Statements of Operations Ten Year Months Ended Ended April 30, 2000 April 30, 2001 ---------------- ---------------- Revenues: Broker commissions. . . . . . . . . . . . . . . . 4,647,848 10,558,885 Other . . . . . . . . . . . . . . . . . . . . . . 41,322 432,365 ------------- ------------- 4,689,170 10,991,250 ------------- ------------- Cost and expenses: Commissions . . . . . . . . . . . . . . . . . . . . 3,411,750 7,527,903 Salaries and wages. . . . . . . . . . . . . . . . . 1,070,357 1,370,839 Selling, general and administrative.. . . . . . . . 1,989,017 3,491,454 Consulting fees . . . . . . . . . . . . . . . . . . - 1,855,915 Goodwill impairment of LoanNet. . . . . . . . . . . - 1,985,012 Goodwill impairment of Titus. . . . . . . . . . . . - 1,155,057 ------------- ------------- Total costs and expenses. . . . . . . . . . . . . 6,471,124 17,386,180 ------------- ------------- Operating loss. . . . . . . . . . . . . . . . . . (1,781,954) (6,394,930) Interest expense (27,343) (203,306) Other income (expense), net. . . . . . . . . . . . . - 24,709 ------------- ------------- Net loss. . . . . . . . . . . . . . . . . . . . . $ (1,796,899) $ (6,573,527) ============= ============= Basic and diluted net loss per share of common stock $ (0.22) $ (0.30) ============= ============= Weighted average common shares outstanding . . . . . 8,222,636 21,768,836 ============= =============
See accompanying notes to these consolidated financial statements F-4
e-NET FINANCIAL.COM CORPORATION Consolidated Statements of Stockholders' Equity (Deficit) For the Ten Months Ended April 30, 2000, and the year ended April 30, 2001 Class B Class C Mandatory Redeemable Preferred Convertible Preferred Common Stock Shares Amount Shares Amount Shares Amount ---------------------------------- ------------------------- -------------------- Balances, June 30, 1999 - $ - - $ - 7,500,000 7,500 Acquisition of Titus on 100,000 1,000,000 - - 300,000 300 February 11, 2000 Acquisition of LoanNet on - - - - 250,000 250 February 16, 2000 Acquisition of Expidoc on - - - - 24,000 24 March 17, 2000 Recapitalization on - - - - 10,979,937 10,890 April 12, 2000 Dividend deemed distributed - - - - - - at April 12, 2000, for AMRES Issuance of Class C Convertible - - 20,000 1,775,000 - - Preferred, net of costs of $225,000 Value of warrant issued in - - - (281,362) - - connection with Class C Convertible Preferred Value of beneficial conversion - - - (352,941) - - feature of Class C Convertible Preferred Conversion of Class B (100,000) (1,000,000) - - 1,000,000 1,000 Mandatory Redeemable Preferred Contributed capital from EMB - - - - - - Net loss for the ten months ended - - - - - - April 30, 2000 - ----------------------------------- ---------- ------------ --------- ---------- ---------- ----------- Balances, April 30, 2000 . . . . - $ - 20,000 $1,140,697 20,053,937 $20,054
See accompanying notes to these consolidated financial statements F-5
e-NET FINANCIAL.COM CORPORATION Consolidated Statements of Stockholders' Equity (Deficit) For the Ten Months Ended April 30, 2000, and the year ended April 30, 2001 Additional Paid-In Capital Treasury Stock Deferred Compensation Accumulated Deficit Total --------------- -------------- --------------------- ------------------- -------- Balances, June 30, 1999 $ - $ - $ - $ (71,339) $ 63,839) Acquisition of Titus on February 11, 2000. . . . . . . . 599,700 - - - 1,600,000 Acquisition of LoanNet on February 16, 2000. . . . . . . 2,305,375 - - - 2,305,072 Acquisition of Expidoc on March 17, 2000 . . . . . . . . 196,486 - - - 196,510 Recapitalization on April 12, 2000 . . . . . . . . . 2,114,681 (1,991,000) (339,733) - (205,072) Dividend deemed distributed at April 12, 2000, for AMRES . . . - - - (4,000,000) (4,000,000) Issuance of Class C Convertible Preferred, net of costs of $225,000. . . . . . - - - - 1,775,000 Value of warrant issued in connection with Class C Convertible Preferred. . . . . . . . 281,362 - - - - Value of beneficial conversion feature of Class C Convertible Preferred. . . . . . . . 352,941 - - - - Conversion of Class B Mandatory Redeemable Preferred . . 1,999,000 - - - 1,000,000 Contributed capital from EMB . . . . 419,356 - - - 419,356 Net loss for the ten months ended April 30, 2000 . . . . - - - (1,796,899) (1,796,899) ---------- ------------ ---------- ------------ ------------ Balances, April 30, 2000 . . . . .$8,268,901 $(1,991,000) $(339,733) $(5,868,238) $ 1,230,681
See accompanying notes to these consolidated financial statements F-6
e-NET FINANCIAL.COM CORPORATION Consolidated Statements of Stockholders' Equity (Deficit) For the Ten Months Ended April 30, 2000, and the year ended April 30, 2001 Class B Class C Mandatory Redeemable Preferred Convertible Preferred Common Stock Shares Amount Shares Amount Shares Amount ---------------------------------- ------------------------- -------------------- Shares issued in Private Placement on May 2, 2000 - - - - 666,667 $ 667 Accretion of C Preferred to liquidation value - - - 859,303 - - Shares issued to consultants for services - - - - 2,863,591 2,864 Shares issued for deferred salaries - - - - 90,689 90 Shares issued for employee long-term incentives - - - - 60,000 60 Shares issued to AMRES - - - - 2,500,000 2,500 Shares issued for settlement of note payable - - - - 150,000 150 Amortization of deferred stock compensation - - - - - - Value of management services - - - - - - Impairment of treasury stock - - - - - - Net loss - - - - - - --------- ----------- ---------- ----------- ----------- --------- Balances, April 30, 2001. . . . . . - $ - 20,000 $2,000,000 26,384,884 $ 26,385 ========= =========== =========== =========== =========== =========
See accompanying notes to these consolidated financial statements F-7
e-NET FINANCIAL.COM CORPORATION Consolidated Statements of Stockholders' Equity (Deficit) For the Ten Months Ended April 30, 2000, and the year ended April 30, 2001 Additional Paid-In Capital Treasury Stock Deferred Compensation Accumulated Deficit Total --------------- -------------- --------------------- ------------------- -------- Shares issued in Private Placement on May 2, 2000$ $ 1,699,306 $ - $ - $ - $ 1,699,973 Accretion of C Preferred to liquidation value - - - (859,303) - Shares issued to consultants for services 1,539,452 - - - 1,542,316 Shares issued for deferred salaries 49,819 - - - 49,909 Shares issued for employee long-term incentives 119,940 - - - - Shares issued to AMRES 290,000 (292,500) - - 120,000 Shares issued for settlement of note payable 332,516 - - - 332,666 Amortization of deferred stock compensation - - 313,600 - 313,600 Value of management services 100,000 - - - 100,000 Impairment of treasury stock (2,021,000) 2,021,000 - - - Net loss - - - (6,573,527) (6,573,527) ------------ ----------- ---------- -------------- ----------- Balances, April 30, 2001. . . . . $ 10,378,934 $ (262,500) $ (26,133) $ (13,301,068) $ (1,184,382) ============= ============ ========== ============== ============
See accompanying notes to these consolidated financial statements F-8
e-NET FINANCIAL.COM CORPORATION Consolidated Statements of Cash Flows Ten Months Year Ended Ended April 30, 2000 April 30, 2001 ---------------- ---------------- Cash flows from operating activities: Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,796,899) $ (6,573,527) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,440 393,439 Loss from disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 64,139 Provision for doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,699 4,072 Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3,140,069 Fair value of services contributed by an officer . . . . . . . . . . . . . . . . . . . . - 100,000 Stock compensation to consultants. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,542,316 Stock compensation to employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 169,909 Amortization of deferred stock compensation. . . . . . . . . . . . . . . . . . . . . . . - 313,600 Compensation attributable to conversion of B Preferred . . . . . . . . . . . . . . . . . 1,000,000 - Changes in operating assets and liabilities, net of acquisitions: Increase in accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . (99,351) (237,357) Increase in loans held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . - (357,350) Increase (decrease) in other current assets. . . . . . . . . . . . . . . . . . . . . . (2,946) 64,068 Increase in due from employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (65,250) Increase in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,789 150,456 Increase in commission payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 260,313 Increase in accrued interest expense . . . . . . . . . . . . . . . . . . . . . . . . . - 118,016 Increase (decrease) accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . - (33,525) Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . . . . . . . . (10,746) 47,624 Increase (decrease) in other current liabilities . . . . . . . . . . . . . . . . . . . (69,234) 4,845 ---------------- ---------------- Net cash used in operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . (702,248) (894,143) ---------------- ---------------- Cash flows from investing activities: Decrease (increase) in other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,845) 9,128 Acquisitions of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . - (23,762) Issuance (repayment) of note receivable to related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,400 - Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,786) - Purchase of companies, net of cash acquired. . . . . . . . . . . . . . . . . . . . . . . 147,970 - Recapitalization of e-Net, net of cash acquired. . . . . . . . . . . . . . . . . . . . . 12,449 - ---------------- ---------------- Net cash provided by (used in) investing activities. . . . . . . . . . . . . . . . . . . 178,188 (14,634) ---------------- ---------------- Cash flows from financing activities: Proceeds from notes payable to related parties . . . . . . . . . . . . . . . . . . . . . 459,326 - Payments on notes payable to related parties . . . . . . . . . . . . . . . . . . . . . . (1,530,000) (1,350,000) Proceeds from issuance of long-term notes payable. . . . . . . . . . . . . . . . . . . . - 105,000 Payments on notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (79,735) Advances from line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 340,842 Proceeds from private placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,699,973 Proceeds from sale of C Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,775,000 - ---------------- ---------------- Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . . . . . 704,326 716,080 ---------------- ---------------- Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,266 (192,697) Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,317 285,583 ---------------- ---------------- Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 285,583 $ 92,886 ================ ================ Supplemental cash flow information: Cash paid for interest and income taxes was not significant during the periods presented
See accompanying notes to these consolidated financial statements F-9
e-NET FINANCIAL.COM CORPORATION Consolidated Statements of Cash Flows Ten Months Year Ended Ended April 30, 2000 April 30, 2001 ---------------- ---------------- Cash flows from operating activities: Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,796,899) $ (6,573,527) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,440 393,439 Loss from disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 64,139 Provision for doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,699 4,072 Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3,140,069 Fair value of services contributed by an officer . . . . . . . . . . . . . . . . . . . . - 100,000 Stock compensation to consultants. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,542,316 Stock compensation to employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 169,909 Amortization of deferred stock compensation. . . . . . . . . . . . . . . . . . . . . . . - 313,600 Compensation attributable to conversion of B Preferred . . . . . . . . . . . . . . . . . 1,000,000 - Changes in operating assets and liabilities, net of acquisitions: Increase in accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . (99,351) (237,357) Increase in loans held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . - (357,350) Increase (decrease) in other current assets. . . . . . . . . . . . . . . . . . . . . . (2,946) 64,068 Increase in due from employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (65,250) Increase in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,789 150,456 Increase in commission payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 260,313 Increase in accrued interest expense . . . . . . . . . . . . . . . . . . . . . . . . . - 118,016 Increase (decrease) accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . - (33,525) Increase (decrease) in other liabilities . . . . . . . . . . . . . . . . . . . . . . . (10,746) 47,624 Increase (decrease) in other current liabilities . . . . . . . . . . . . . . . . . . . (69,234) 4,845 ---------------- ---------------- Net cash used in operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . (702,248) (894,143) ---------------- ---------------- Cash flows from investing activities: Decrease (increase) in other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,845) 9,128 Acquisitions of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . - (23,762) Issuance (repayment) of note receivable to related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,400 - Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,786) - Purchase of companies, net of cash acquired. . . . . . . . . . . . . . . . . . . . . . . 147,970 - Recapitalization of e-Net, net of cash acquired. . . . . . . . . . . . . . . . . . . . . 12,449 - ---------------- ---------------- Net cash provided by (used in) investing activities. . . . . . . . . . . . . . . . . . . 178,188 (14,634) ---------------- ---------------- Cash flows from financing activities: Proceeds from notes payable to related parties . . . . . . . . . . . . . . . . . . . . . 459,326 - Payments on notes payable to related parties . . . . . . . . . . . . . . . . . . . . . . (1,530,000) (1,350,000) Proceeds from issuance of long-term notes payable. . . . . . . . . . . . . . . . . . . . - 105,000 Payments on notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (79,735) Advances from line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 340,842 Proceeds from private placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,699,973 Proceeds from sale of C Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,775,000 - ---------------- ---------------- Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . . . . . 704,326 716,080 ---------------- ---------------- Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,266 (192,697) Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,317 285,583 ---------------- ---------------- Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 285,583 $ 92,886 ================ ================ Supplemental cash flow information: Cash paid for interest and income taxes was not significant during the periods presented
F-10
e-NET FINANCIAL.COM CORPORATION Consolidated Statements of Cash Flows For the Ten Months For the Year Ended Ended April 30, 2000 April 30, 2001 --------------- ----------------- Supplemental disclosure of non-cash financing and investing activities: B Preferred and common stock issued for acquisition of Titus . . . . . $ 1,600,000 $ - ============ ========= Common stock issued for acquisition of LoanNet . . . . . . . . . . . . $ 2,305,625 $ - ============ ========= Common stock issued for acquisition of ExpiDoc . . . . . . . . . . . . $ 196,510 $ - ============ ========= Dividend deemed distributed resulting from issuance of note payable. . $ 4,000,000 $ - ============ ========= Value of C Preferred beneficial conversion feature . . . . . . . . . . $ 281,362 $ - ============ ========= Value of warrants issued with issuance of C Preferred. . . . . . . . . $ 352,941 $ - ============ ========= Issuance of common stock for conversion of B Preferred . . . . . . . . $ 1,000,000 $ - ============ ========= Capital contributed in satisfaction of debt. . . . . . . . . . . . . . $ 419,356 $ - ============ ========= Acquisition of property and equipment through capital leases . . . . . $ - $ 3,226 ============ ========= Settlement of debt with issuance of common stock . . . . . . . . . . . $ - $ 332,666 ============ ========= Issuance of treasury stock to AMRES. . . . . . . . . . . . . . . . . . $ - $ 292,500 ============ ========= LoanNet acquisition, net of cash acquired: Working capital deficit, other than cash acquired. . . . . . . . . . . $ (55,776) $ - Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . 84,089 - Preferred stock not acquired . . . . . . . . . . . . . . . . . . . . . (100,000) - Purchase price in excess of the net assets acquired. . . . . . . . . . 2,226,873 - Capital Stock issued in acquisition. . . . . . . . . . . . . . . . . . (2,305,625) - ------------ --------- Net cash obtained in acquisition of LoanNet. . . . . . . . . . . . . . $ (150,439) $ - ============ ========= ExpiDoc acquisition, net of cash used: Working capital deficit, other than cash acquired. . . . . . . . . . . $ (11,317) $ - Purchase price in excess of the net assets acquired. . . . . . . . . . 210,296 - Capital stock issued in acquisition. . . . . . . . . . . . . . . . . . (196,510) - ------------ --------- Net cash used to acquire ExpiDoc . . . . . . . . . . . . . . . . . . . $ 2,469 $ - ============ ========= Titus acquisition, net of cash acquired Purchase price in excess of the net assets acquired. . . . . . . . . . $ 1,600,000 $ - Capital stock issued in acquisition. . . . . . . . . . . . . . . . . . (1,600,000) - ------------ ---------
See accompanying notes to these consolidated financial statements F-11 e-NET FINANCIAL.COM CORPORATION Notes to Consolidated Financial Statements NOTE 1 - GENERAL e-Net Financial.Com Corporation ("e-Net"), a Nevada corporation, was originally incorporated on August 18, 1988, under the name of Solutions, Inc. Subsequently, its name was changed to Suarro Communications, Inc. on August 16, 1996, on February 12, 1999, May 12, 1999 and on January 18, 2000, the entity changed its name to e-Net Corporation, e-Net Financial Corporation and e-Net.Com Corporation, respectively. On February 2, 2000, the entity changed its name to e-Net Financial.Com Corporation. Since inception, e-Net has had unprofitable operations. Effective March 1, 1999, e-Net, e-Net Mortgage Corporation ("e-Net Mortgage") and City Pacific International, Inc. ("City Pacific") merged under a Plan of Reorganization. E-Net Mortgage, a Nevada corporation, formally known as the Hospitality Group, Inc., was formed on November 20, 1996, to engage in the business of providing retail and wholesale mortgage products and services. However, such operations did not materially commence. City Pacific, a Nevada corporation, was formed on July 10, 1997, to provide telecommunications products and services for commercial and residential customers, directly or through joint ventures with strategic partners. City Pacific did not achieve material operations. On December 21, 1999, e-Net completed its acquisition of VPN.COM JV Partners, a Nevada joint venture. VPN.COM JV Partners provides comprehensive broadband networks and connectivity. These networks facilitate customized telephone, video teleconferencing, Internet access, and data transfer. City Pacific changed its name to VPNCOM.NET, Inc. on December 23, 1999. E-Net sold VPNCOM.Net, Inc. on March 1, 2000, at a gain of approximately $1.8 million, since this business did not meet its business focus. The gain on the sale, and the historical results of the discontinued operations of VPNCOM.NET, Inc. have been excluded from the historical consolidated financial statements of e-Net due to the change in reporting entity in connection with acquisitions of new businesses as discussed below. On January 20, 2000, e-Net entered into, and announced, definitive agreement to acquire all the issued and outstanding common stock of American Residential Mortgage, Inc. ("AMRES"), as well as Bravo Real Estate, Inc. and Residential Mortgage Corporation ("RMC") from EMB Corporation ("EMB"). RMC was not acquired by amendment to the definitive agreement on April 12, 2000 as discussed below. Bravo Real Estate, Inc. never commenced any form of operations since inception. As further discussed in Note 3, from February to March 2000, e-Net acquired Titus Real Estate, Inc., formerly Mystery Travel, Inc., ("Titus"), LoanNet Mortgage, Inc. ("LoanNet") and Expidoc.com, Inc. ("Expidoc"). On April 12, 2000, as amended, e-Net acquired AMRES and Bravo Real Estate, Inc. from EMB for 7,500,000 shares of common stock, representing approximately 40% of the outstanding voting stock of e-Net and a $4,000,000 note payable. AMRES is a Nevada corporation organized on March 13, 1998, for the purpose of originating and selling HUD-insured mortgages and conventional loans. E-Net, prior to a series of acquisitions in February and March 2000, was considered a blank-check company with limited operating history, and, accordingly, AMRES is considered the acquiror for financial reporting purposes. As such, the acquisition has been accounted for as a recapitalization of AMRES. On May 1, 2000, e-Net and its current chief executive, along with an unrelated individual, formed Bravo Realty.com, Inc. ("Bravo Realty'), internet-based real estate brokerage targeted to minority home buyers. E-Net owns 70% and E-Net's current chief executive owns 15% of Bravo Realty. Bravo Realty commenced operations on or about January 31, 2001; however, as of April 30, 2001, such operations were not significant. F-12 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of e-Net and its wholly-owned subsidiaries, collectively, the "Company." All significant intercompany transactions and balances have been eliminated in consolidation. Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred significant losses from operations, has a working capital deficit totaling approximately $375,000 and requires financing to meet its cash requirements as they become due. Cash requirements depend on several factors, including but not limited to, the pace at which all subsidiaries continue to grow, become self supporting, and begin to generate positive cash flow, as well as the ability to obtain additional services for common stock or other non-cash consideration. If capital requirements vary materially from those currently planned, the Company may require additional financing sooner than anticipated. Subsequent to year-end, the Company executed a settlement agreement with its primary creditors pursuant to which the Company issued 3,325,000 shares of restricted common stock in satisfaction of approximately $234,000 and a contingent liability totaling approximately $424,766. Additionally, subsequent to year-end, the Company secured $200,000 in bridge financing. Management plans to continue to seek capital on favorable terms; however, There are no firm commitments for any additional financing, and there can be no assurance that any such commitment can be obtained on favorable terms, if at all. Management has implemented significant cost reductions and expects to keep its operating costs to a minimum until each is available through financing or operating activities. Management believes that these actions, in addition to the continued growth of the Company's operating subsidiaries, will afford the Company the ability to fund its daily operations and service its remaining debt obligations primarily through the cash generated by operations. However, there are no assurances that the company will continue to experience rapid growth profitably. No adjustments have been made to the carrying value of assets or liabilities as a result of the uncertainty about obtaining cash required to pay obligations as they become due. Change in Reporting Entity The accompanying financial statements in the accounts of AMRES for the periods presented as a result of the reverse acquisition of AMRES on April 12, 2000. The operations of Titus, LoanNet and ExpiDoc are included in operations from the dates of acquisition (see Note 3). Significant Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all liquid investments with a remaining maturity of three months or less to be cash equivalents. Balances in bank accounts may, from time to time, exceed federally insured limits. F-13 Property and Equipment Property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets, ranging from three to seven years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. Goodwill Goodwill represents the excess of purchase price over the fair value of the net assets of acquired businesses as of April 30, 2001. Goodwill is amortized on a straight-line basis over the expected periods to be benefited. Management estimated the periods to be benefited at seven to ten years. During the ten months ended April 30, 2000, and the year ended April 30, 2001, amortization of goodwill amounted to $122,749 and $349,104. See Note 4 for impairment of goodwill. In June 2001, the Financial Accounting Standards Board finalized Statements of Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001, and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142 that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 121. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001, to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company is assessing, but has not yet determined, how the adoption of SFAS 141 and SFAS 142 will impact its financial and results of operations. Impairment of Long-Lived Assets The Company follows the provisions of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." Long-lived assets, including goodwill, of the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates quarterly the recoverability of its long-lived assets based on estimated future cash flows from and the estimated liquidation value of such long-lived assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived asset. The amount of impairment, if any, is measured based on fair value or discounted cash flows, and is charged to operations in the period in which such impairment is determined by management. See Note 4 for the impairment of goodwill. F-14 Income Taxes The Company accounts for income taxes under the provisions of SFAS No. 109, "Accounting for Income Taxes," whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between bases used for financial reporting and income tax reporting purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Revenue Recognition Commissions generated from brokering loans are recognized at the date of close. Notary services related revenue is recognized when the services are performed. Loan origination fees are deferred and amortized over the term of the loan using the effective interest method. Upon the sale of loans to third parties without recourse, such deferred fees are recorded as income. Registration Costs Direct costs to register restricted common shares (the "Registration") are accrued at the time the shares are issued. At April 30, 2000, the Company accrued $125,000 for estimated legal, accounting, and filing fees directly related to the Registration. No additional amounts were accrued as of April 30, 2001. Stock-Based Compensation SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair value based method of accounting for stock-based compensation. However, SFAS No. 123 allows an entity to continue to measure compensation cost related to stock and stock options issued to employees using the intrinsic method of accounting prescribed by Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees." Entities electing to remain with the accounting method of APB No. 25 must make pro forma disclosures of net income (loss) and earnings (loss) per share, as if the fair value method of accounting defined in SFAS No. 123 had been applied. The Company continues to account for stock-based compensation under APB No. 25. Stock-based compensation for non-employees are accounted for using the fair value approach consistent with SFAS No. 123. Treasury Stock The Company accounts for treasury stock at cost. During the year ended April 30, 2001, management determined that the carrying value of its treasury stock was significantly in excess of current market value. Accordingly, management reduced the carrying value of its treasury by $2,021,000, with a corresponding charge to additional paid-in capital. No amounts were reflected as a charge to the Company's accumulated deficit since no excess of amounts originally recorded as paid-in capital existed. F-15 Loss Per Common Share The Company presents basic earnings per share ("EPS") and diluted EPS on the face of all statements of operations. Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. Due to the net losses incurred during the ten months ended April 30, 2000, the year ended April 30, 2001, all common stock equivalents outstanding were considered anti-dilutive and were excluded from the calculations of diluted net loss per share. Anti-dilutive securities which are not included in the calculation of dilutive EPS for the ten months ended April 30, 2000 and the year ended April 30, 2001, which could be dilutive in future periods, include the C Preferred convertible into approximately 481,696 and 18,287,108 shares of common stock, respectively. Reporting Comprehensive Income The Company reports the components of comprehensive income using the income statement approach. Comprehensive income includes net income (loss), as well as certain non-shareholder items that are reported directly within a separate component of stockholders' equity and bypass net income (loss). The provisions of this statement had no impact on the accompanying consolidated financial statements. Disclosures about Segments of an Enterprise and Related Information Management discloses financial and descriptive information about an enterprise's operating segments in annual and interim financial reports issued to stockholders. An operating segment is a component of an enterprise that engages in business activities that generate revenue and incur expense, whose operating results are reviewed by the chief operating decision-maker in the determination of resource allocation performance, and for which discrete financial information is available. See Note 10 for these disclosures. Accounting for Derivative Instruments and Hedging Activities In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes a new model for accounting for derivatives and hedging activities and supersedes and amends existing accounting standards and is effective for fiscal years beginning after June 15, 2000. SFAS No. 133 requires that all derivatives be recognized in the balance sheet at their fair market value, and the corresponding derivative gains or losses be either reported in the statement of operations or as a component of other comprehensive income depending on the type of hedge relationship that exists with respect to such derivative. The adoption of SFAS No. 133 did not have a material impact on it's the Company's consolidated financial statements. F-16 NOTE 3 - ACQUISITIONS Titus Real Estate, Inc. On February 11, 2000, e-Net acquired all the issued and outstanding capital stock of Titus in a tax-free exchange valued at $1.6 million. Titus is an entity which retains rights to manage the operations of a Real Estate Investment Trust ("REIT") that owns certain apartment complexes consisting of 121 units. Titus and AMRES have historically had common management, and such individuals are also officers and key employees of e-Net. The purchase price consisted of 300,000 shares of common stock subject to a share-cancellation amendment dated March 1, 2000, valued at $600,000 and 100,000 shares of Series B Mandatory Redeemable Preferred stock (the "B Preferred") with a redemption price of $1.0 million. A portion of the common shares were subject to cancellation to the extent the value of the 300,000 common shares exceeded a fair market value of $600,000, based on the average closing price of the Company's common stock fifteen trading days prior to June 11, 2000. The holder of the B Preferred was entitled to demand redemption of such shares for $1.0 million at any time after the completion of the acquisition of AMRES. The Board of Directors had the option to deliver ten (10) shares of common stock for each share of B Preferred upon the receipt of demand from the holder of the B Preferred in lieu of payment of cash. On April 12, 2000, the holder of the B Preferred redeemed the 100,000 shares of B Preferred for payment of $1 million. On April 20, 2000, the parties agreed to amend the original contract and satisfy the demand through the issuance of 1,000,000 shares of e-Net's common stock, subject to certain share-cancellation provisions. The amended contract dated April 20, 2000, required the holder of the 1,000,000 common shares to return a number of such shares 90 days from the amendment date (July 20, 2000) in the event the Company's common stock exceeds $2.00 per share. The shares to be returned to the Company were determined based on $2.0 million divided by the average closing bid price of the Company's common stock 15 trading days prior to July 20, 2000, subject to a maximum number of shares to be retained of 1,000,000 shares of common stock. The average price of the Company's common stock the 15 trading days prior to July 20, 2000, was $1.81 per share. Since the number of shares computed exceeded 1,000,000 shares, the holder retained the entire 1,000,000 shares. Upon the conversion of the B Preferred into common stock, the Company recorded a charge to general and administrative expenses for the incremental value of $1.0 million, based on the difference between the $1.0 million carrying value of the B Preferred and the $2.0 million fair value of the common stock. Management allocated the excess of the purchase price over the fair value of the assets acquired of $1.6 million to goodwill. New management of e-Net determined the value of the REIT management contract be included in goodwill since the estimated period to be benefited for both goodwill and the management contract is estimated to be ten years due to the limited operating history of Titus. Accordingly, such excess purchase price over net assets acquired have been combined and included in goodwill in the accompanying consolidated balance sheet .Refer to Note 4 for impairment of the goodwill totaling $1,155,057. The carrying value of goodwill at April 30, 2001 is $250,000. LoanNet Mortgage, Inc. On February 14, 2000, the Company acquired all the issued and outstanding common stock of LoanNet, a privately-held company providing mortgage loans primarily to residential customers in three Eastern states. In connection with this acquisition, the Company issued 250,000 shares of its common stock valued at $2.3 million. Management determined that the common stock issued in connection with this transaction was the best indicator of fair value in light of market conditions at the time, and the active market in the Company's common stock. Management calculated the fair value per share issued using the average closing prices 15 trading days before and after the announcement of such transaction in February 2000. Our common shares issued were restricted, and as a result, we discounted the average trading prices by 10%. The acquisition was accounted for under the purchase method of accounting with the excess of cost over the fair value of the net assets acquired of $2.2 million was allocated to goodwill. LoanNet had few assets, consisting primarily of office equipment valued at approximately $100,000. Goodwill was being amortized on a straight-line basis over seven years prior to the closing of LoanNet's operations at which time goodwill was impaired (see Note 4). F-17 On March 30, 2001, the Board of Directors of e-Net, none of whom were officers, directors or management of LoanNet, rescinded the acquisition of LoanNet due to misrepresentations by LoanNet's management, officers and directors. E-Net management demanded the return of the 250,000 shares issued, and attempted to deliver the shares of common stock it received in connection with the acquisition to the original selling shareholder, whom is also the preferred stockholder, the chief executive officer and director of LoanNet. Also, see Note 4. ExpiDoc.Com, Inc. On March 17, 2000, the Company acquired all the issued and outstanding capital stock of ExpiDoc, a privately held company that provides notary services, for 24,000 shares of the Company's common stock valued at $196,510. Management determined that the common stock issued in connection with this transaction was the best indicator of fair value in light of market conditions at the time, and the active market in the Company's common stock. Management calculated the fair value per share issued using the average closing prices 15 trading days before and after the announcement of such transaction on February 28, 2000. Our common shares issued were restricted, and as a result, we discounted the average trading prices by 10%. The Company provided working capital of $125,000 to Expidoc, as required. The acquisition was treated under the purchase method of accounting with the excess of cost over the fair value of the net liabilities acquired of $210,296 allocated to goodwill. At the time of the acquisition, ExpiDoc had no material operating or investment assets. Goodwill is being amortized on a straight-line basis over seven years. NOTE 4 - GOODWILL The Company's previous business combinations were accounted for purchase method, unless the combination was among common control parties. All future business combinations will be accounted for under the purchase method, which may result in operations, either by amortization or impairment charges, in the future. For purchase business combinations completed prior to June 30, 2001, the net carrying amount of goodwill is $425,247. Amortization expense during the year ended April 30, 2001, was $349,104. The Company intends to adopt the provisions of SFAS 141 and 142 beginning May 1, 2001. The impact of the adoption of SFAS 141 and 142 on the Company's financial position and results of operations could be material. During the year ended April 30, 2001, the Company recorded asset impairment charges related to LoanNet and Titus totaling $1,985,012 and $1,155,057, respectively, in the accompanying consolidated statement of operations. Management determined that LoanNet was unprofitable and required significant cash from financing activities to meet its obligations as they become due and expand in sales and marketing. In February 2001, E-Net management determined to rescind its acquisition of LoanNet as discussed in Note 3. Management of E-Net determined its investment was materially impaired. Since management could not reasonably estimate the residual value, if any, of LoanNet, management impaired all remaining goodwill. The Company acquired Titus, a REIT management company, to significantly increase the REIT assets by obtaining funding of up to $30 million. The Company's then chief executive was in negotiation for a commitment for the funding, however, no definitive commitment was obtained by management of Titus. Due to the passage of time and the lack of a firm commitment to raise capital to expand the operations of the REIT, management determined that an impairment of goodwill was appropriate. Management determined that future any significant cash flows would be generated through a sale of the REIT, after liquidation of all assets. Management estimated that the sale of the REIT would net the Company at least $250,000, net of costs to sell. Accordingly, management determined an impairment of the net carrying value of goodwill and the expected net cash flows to be recovered. F-18 NOTE 5 - LOANS HELD FOR SALE The Company held five conventional uninsured mortgages totaling $357,350 as of April 30, 2001. These loans were originated by AMRES with various interest rates ranging from 7-13%, per annum, funded using, and collateralized by, the Company's warehouse credit line (Note 8) and were subsequently sold to investors within one month of balance sheet date. The Company did not impair any loans at April 30, 2001. NOTE 6 - ADVANCES TO OFFICERS As of April 30, 2001, the Company had amounts due from an officer of $50,000. This advance was repaid in May 2001. NOTE 7 - PROPERTY AND EQUIPMENT Property and equipment consists of the following as of April 30, 2001: Equipment $ 130,858 Furniture and fixtures 107,586 -------- 238,444 Less: accumulated depreciation (78,385) -------- $ 160,059 ========= During the ten months ended April 30, 2000, and the year ended April 30, 2001, depreciation expense totaled $31,826 and $44,335, respectively. Also, the Company impaired $64,139 of equipment as of April 30, 2001. NOTE 8 - LINE OF CREDIT The Company maintains a $2,000,000 warehousing line of credit which will mature March 31, 2002. The agreement is personally guaranteed by the Company's chief executive officer. The credit agreement calls for various ratios and net worth requirements, minimum utilization requirements, and limits the warehouse period to 45 days for any specific loan. The interest rate as of April 30, 2001, was 9% per annum calculated on the daily outstanding balance. The adjustable interest rate is based upon a published prime rate plus 1.5% and is payable monthly. The line of credit is collateralized by the loans held for sale as referenced above. F-19 NOTE 9 - NOTES PAYABLE In connection with the acquisition of AMRES, the Company issued a note payable in the amount of $4,000,000, interest at 10% per annum to EMB. On April 12, 2000, the Company made a principal reduction of $1,595,000 on this note. During May 2000, the note was reduced to $1,055,000 through proceeds received from a private placement of the Company's common stock. Subsequent to April 30, 2001, all principal and interest except $103,000 was satisfied by settlement of certain EMB debts guaranteed by the Company totaling $424,766 through the issuance 3,000,000 shares of the Company's common stock and the settlement of an EMB debt to AMRES Holdings (former shareholder of AMRES prior to being acquired by EMB) totaling $485,446 (see Note 14). In connection with the settlement transaction, EMB expressly forgave principal and interest totaling approximately $172,000. The balance of $103,000 is due December 15, 2001 and has a mandatory conversion into the Company's common stock upon maturity at the option of the Company. On April 13, 2000, a former officer loaned the Company $300,000, due April 12, 2001, together with interest at 10% per annum. On July 7, 2000, the note, including accrued interest of $32,666 was converted into 150,000 shares of restricted common stock. As of April 30, 2001, the Company had two notes payable aggregating $35,518, interest at 10% per annum due on August 31, 2000. Subsequent to April 30, 2001, these notes were assumed by a third party in exchange for amounts that were due to the Company. As of April 30, 2001, the Company had a 10% note payable totaling $150,000. On July 2, 2001, the parties entered into a settlement agreement whereby the Company paid $43,280 of principal, issued 325,000 shares of common stock to reduce the note by $63,440, and will pay the remaining $43,280 over ten months beginning August 5, 2001, together with interest at 10% per annum. See Note 14. NOTE 10 - COMMITMENTS AND CONTINGENCIES Capital Leases The Company acquired equipment and furniture under capital lease obligations over 24 months. The present value of future annual minimum lease payments under capital leases are as follows: Years Ending April 30, --------- 2002 106,387 2003 1,180 -------- 107,567 Less amount representing interest (1,369) -------- 106,198 Less current portion (105,110) -------- Long-term portion $ 1,180 ========= As of April 30, 2001, the Company had $85,958 of equipment and furniture under capital leases, at cost. Operating Leases The Company leases its corporate office located in Costa Mesa, California, under a non-cancelable operating lease from unrelated third parties that expires on March 31, 2002. In addition, the Company leases certain of its branch offices under non-cancelable operating leases that expire through 2005. The Company also has various equipment leases that expire at various dates ranging from one to five years. Rental expense for the ten-month period ended April 30, 2000, and the year ended April 30, 2001, was $186,322 and $510,182, respectively. F-20 Minimum future annual rental payments under the lease agreements with a term in excess of one year at April 30, 2001, are as follows: Years Ending April 30 -------- 2002 $ 337,963 2003 274,490 2004 54,676 2005 9,446 -------- $ 676,575 ======== As of April 30, 2001, the Company was in default on certain capital lease obligations which management is currently in negotiation to settle such amounts. There are no assurances that management will be successful in reaching a favorable settlement. Litigation The Company is subject to a limited number of claims and actions, which arise in the ordinary course of business. The litigation process is inherently uncertain, and it is possible that the resolution of the company's existing and future litigation may adversely affect the Company. Management is unaware of any matters that may have material impact on the Company's consolidated financial position, results of operations or cash flows. Employment agreements AMRES has entered into an executive employment agreement with its chief executive officer, which provides for annual compensation, allowances, medical benefits and life insurance. The agreement also provides for incentive bonuses upon meeting certain criteria. On June 1, 2001, the Company's board of directors consisting of Mr. Presta and Mr. Rinehart approved a new compensation arrangement for Mr. Rinehart in his capacity as chief executive of e-Net (see Note 14). The Company is also a party to other employment agreements in the normal course of business. Future annual minimum payments for employment compensation packages are as follows: Year End April 30, 2002 $ 428,615 2003 507,784 2004 547,723 2005 378,226 2006 67,105 ------- $ 1,929,453 ========== F-21 Investment Banking Agreement On May 27, 1999, the Company entered into an agreement with an investment banker to seek debt financing through public or private offerings or debt or equity securities and in seeking merger and acquisition candidates. Per the agreement, the Company granted the investment banker options to purchase 200,000 shares of the Company's common stock at an exercise price of $0.13, expiring on May 31, 2001. Additionally, the Company was required to pay $60,000 for the initial twelve months. In addition, the agreement specified that the investment banker will receive a percentage of consideration received in a merger, acquisition, joint venture, debt or lease placement and similar transactions through May 31, 2001. The Company valued these options using the Black Scholes model at $3.14 per share for total consulting expenses of $627,200 and amortized such an expense over the course of the contract. As of April 30, 2001, the Company had a deferred compensation of $26,133 in connection with this agreement. In April 2000, the parties agreed to amend the agreement to eliminate the fee based on a percentage of the consideration of a transaction, and to grant the investment banker 200,000 shares of the Common Stock and to cancel the options to purchase 200,000 shares. These shares were not issued; however, through August 7, 2001, the investment banker had rights to receive such shares by amendment amongst the parties. Accordingly, such shares are included in the outstanding shares at April 30, 2001. On August 7, 2001, the Company agreed to settle a dispute over the terms of the amendment in exchange for 1,500,000 of the Company's restricted common stock (see Note 14). No additional compensation charges will be incurred as a result of the final settlement since the historical financial statements reflects the value of the services rendered. Guarantee of Debt On July 6, 2000, the Company guaranteed to a third party the debt of EMB totaling $657,349. The guarantee was provided due to the EMB sale of AMRES to ensure repayment of the note since EMB had limited assets. On June 26, 2001, this guarantee was satisfied with the issuance of 3,000,000 shares of the Company's restricted common stock (see note 14). NOTE 11 - STOCKHOLDERS' EQUITY (DEFICIT) General In March 2000, the Company amended its Articles of Incorporation to change the authorized number of shares of its $0.001 par value common stock from 20,000,000 to 100,000,000. Additionally, the Board of Directors authorized the issuance of 1,000,000 shares of preferred stock. The preferred stock may be divided into and issued in one or more series. Class B Mandatorily Redeemable Preferred Stock In connection with the acquisition of Titus Real Estate Inc. the Company issued 100,000 shares of B Preferred. The note was converted into 1,000,000 shares of common stock on April 20, 2000, subject to certain cancellation provisions. See Note 3 for further discussion of the Company's B Preferred. F-22 Class C Convertible Preferred Stock In April 2000, the Company issued 20,000 shares of Class C Convertible Preferred Stock, (the "C Preferred") for $1,775,000, net of fees of $225,000 in a private placement. As additional consideration, the Company issued warrants to purchase 151,351 shares of the Company's common stock at an initial exercise price of $6.73 per share. The C Preferred has a liquidation value of $2,000,000 and the holder is entitled to receive cumulative dividends at an annual rate of $7.00 per share (7% per annum), payable semi-annually. No dividends have been declared. The C Preferred is convertible, at any time at the option of the holder, into shares of the Company's common stock at a price equal to the lesser of (a) $6.91 per share or (b) 95% of the average closing bid price of the Company's common stock during the fifteen trading days preceding the conversion after 150 days to 85% of the average closing bid price of the common stock during the fifteen trading days immediately preceding such conversion after 240 days. The longer the C Preferred is held the greater discount on conversion into common stock. In the event the holders of C Preferred have not elected to convert at the time of mandatory conversion, the C Preferred will convert at an amount equal to 85% of the purchase price of the holder's C Preferred plus an amount equal to accrued and unpaid dividends, if any, up to and including the date fixed for redemption, whether or not earned or declared. As of April 30, 2001, no shares of C Preferred have been converted into common stock. Subsequent to April 30, 2001, shareholders converted 2,016 shares of C preferred to 4,666,663 shares of the Company's restricted common stock. During the year ended April 30, 2001, the Company accreted the difference between the carrying value and the liquidation value totaling $859,303. Common Stock On February 14, 2000, the Company issued 250,000 shares of restricted common stock valued at $2,305,625 or $9.22 per share in exchange for all the outstanding common stock of LoanNet in a transaction accounted for under the purchase method of accounting. See Note 3 for further discussion. On March 17, 2000, the Company issued 24,000 shares of restricted common stock valued at $196,510 or $8.19 per share in exchange for all the outstanding common stock of ExpiDoc in a transaction accounted for under the purchase method of accounting. See Note 3 for further discussion. In connection with the reverse acquisition of AMRES, the shares totaling 10,779,937 retained by the shareholders of e-Net are considered as issued in connection with the recapitalization in the accompanying consolidated statements of stockholders' equity (deficit). On May 2, 2000, the Company sold 666,667 shares of common stock for $1,699,973, net of fees and commissions of $300,027 in a private placement and issued warrants to purchase 333,334 shares of the Company's common stock at an exercise price of $3.00 per share. The shares and warrants were subject to registration which was not effected. In July 2000, the Company issued 150,000 shares of restricted common stock in satisfaction of a note payable to a former officer, of $300,000 and accrued interest of $32,666. In April 2001, the Company issued 2,500,000 shares of restricted common stock to AMRES valued at $292,500 to capitalize AMRES based on the closing price of the Company's common stock on the date of issuance. These shares are presented in the accompanying financial statements as treasury stock. F-23 In May 2000, in connection with the stock deferral plan that was effective in 1999, the Company issued to employee 5,000 shares at the Company's common stock that were registered under an S-8 filing and recorded compensation expense at $3.38 per share for a total of $16,900. In July 2000 the Company issued additional shares totaling 3,630 shares of the Company's restricted stock and recorded compensation expense at $1.40 per share for a total of $5,097, a 10% discount for the restriction of the stock. In December, 2000, the Company issued additional shares totaling 38,059 shares of the Company's common stock that were registered and recorded compensation expense at $ 0.56 per share for a total of $21,313. Also, in April, 2001, the Company issued additional shares totaling 44,000 shares of the Company's common stock that were registered and recorded compensation expenses at $ $0.15 per share for a total of $6,600. In June 2000, in connection with the stock bonus plan that was effective in 1999, the Company issued 60,000 shares of the Company's common stock that were registered and recorded compensation expense at $2.00 per shares for a total of $120,000. At various dates from May 2000 through April 30, 2001, the Company issued 2,863,591 shares of common stock, valued at $1,542,316 to various consultants. Consulting services performed during the year ended April 30, 2001 is summarized below: F-24
Year Ended April 30, 2001 Costs Shares Incurred Issued Financial and Internal Accounting Services $300,512 630,500 Mergers Acquisitions Consulting 888,996 875,945 Bravo Realty Start-up Costs 286,337 718,500 Information Technology Consulting 41,650 71,000 Legal Services 338,425 567,646 ------------------ --------- Total $1,855,920 2,863,591 ================== =========
Stock Options and Warrants Stock-option and warrant activity during the ten months ended April 30, 2000 and the year ended April 30, 2001, was as follows:
Weighted Weighted Range of Average Average Exercise Exercise Fair Value of Options Prices Price Options Granted --------- ------------ -------- --------------- Outstanding, June 30, 1999. - - - - Granted. . . . . . . . . . 788,687 $1.00-6.73 $ 2.40 $2.84 Canceled . . . . . . . . . (475,000) 1.50 1.50 - Exercised. . . . . . . . . (162,336) 1.00 1.00 - --------- Outstanding, April 30, 2000 151,351 $6.73 $ 6.73 $6.00 Granted. . . . . . . . . . 333,334 $ .00 $ 3.00 $1.42 Canceled . . . . . . . . . - - - - Exercised. . . . . . . . . - - - - --------- Outstanding, April 30, 2001 484,685 $3.00- 6.73 $ 4.16 $2.85 =========
F-25 The 484,685 options and warrants outstanding and exercisable at April 30, 2001, expire in April 2005 through May 2005. Pro forma effects of options granted to employees are not significant. NOTE 12 - INCOME TAXES At April 30, 2001, the Company had net operating loss carry-forwards for federal and state income tax purposes totaling approximately $5.3 million and $2.7 million, respectively, which for federal reporting purposes, begin to expire in 2008 and fully expire in 2021. For state purposes, the net operating loss carry-forwards begin to expire in 2003 and fully expire in 2006. The utilization of these net operating losses may be substantially limited by the occurrence of certain events, including changes in ownership. The net deferred tax assets at April 30, 2001 and 2000, before considering the effects of the Company's valuation allowance amounted to approximately $2.0 million and $710,000, respectively. The Company provided an allowance for substantially all its net deferred tax assets since they are unlikely to be realized through future operations. The valuation allowance for net deferred tax assets increased approximately $1.3 million and $685,000 during the year and the ten months ended April 30, 2001 and 2000, respectively. The Company's provision for income taxes differs from the benefit that would have been recorded, assuming the federal rate of 34%, due to the valuation allowance for net deferred tax assets. NOTE 13 - SEGMENT AND OTHER INFORMATION Segments were determined based on services provided by each segment. Accounting policies of the segments are the same as those described in the summary of significant accounting policies. Performance of the segments is evaluated on operating income before income taxes, excluding reorganization and restructuring charges, unusual gains and losses, and interest expense. For the year ended April 30, 2001 management has provided the following information with respect to its operating segments (in thousands):
Revenues: Operating Income (loss) Assets 2000 2001 2000 2001 2000 2001 ---- ---- ---- ---- ---- ---- Loan brokering Corporate. . . . . . .. $ 4,648 $ 3,612 $ (426) $ (98) $ 2,675 $ 535 Loan brokering Net Branches . . . . . . - 6,947 - 25 - 92 Mortgage banking. . . . . . . . . . . . - 218 - (19) - 357 Notary Services . . . . . . . . . . . . 38 188 (37) (39) 306 217 REIT Management . . . . . . . . . . . . 3 27 3 (48) 1,568 251 ------ ------- --------- --------- ------- ------- $ 4,689 $ 10,992 (460) (179) 4,549 1,452 ====== ======= Amortization and impairment of goodwill (123) (3,489) Compensatory stock (1,000) (2,026) Corporate (199) (700) 322 154 --------- -------- ------- ------- Total $(1,782) $(6,394) $ 4,871 1,606 ======== ========== ======== =======
F-26 e-NET FINANCIAL.COM CORPORATION Notes to Consolidated Financial Statements The primary historical activities of AMRES has been brokering retail residential real estate mortgages. AMRES commenced its mortgage banking division in fiscal 2001, which currently has $2,000,000 in warehouse lines, and funds directly about 5% of the loans originated by AMRES agents. Loans funded are primarily second mortgages and subprime loans. AMRES owns and operates four corporate-owned branches in Long Beach, Costa Mesa, Riverside, and Palmdale, California. The significant growth has been from their branch offices, which are operated by managers for a profit. As of April 2001, over 140 such branches were producing over $40,000,000 in monthly loans. The Company did not evaluate the performance of the NetBranches or the mortgage banking operations during the year ended 2000. ExpiDoc provides a loan document signing service, with available notaries nationwide. BravoRealty.com, which is not affiliated with the now non-operational Bravo Real Estate, is an internet-based real estate brokerage which began operations in January 2001. Bravorealty.com's business model targets real estate agents as its customers and offers 100% commission retention for the agent, while charging a minimal fixed fee per closed transaction. The operations of Titus are not significant. NOTE 14: SUBSEQUENT EVENTS Global Settlement of Debts On June 26, 2001, e-Net entered into a settlement agreement with EMB Corporation ("EMB"), AMRES Holding LLC, Vincent Rinehart, and Williams de Broe, PLC (the "Global Settlement"). As part of the Global Settlement: i) e-Net issued to EMB 1,500,000 shares of restricted common stock as consideration for EMB's waiver of its registration rights for 7,500,000 shares of e-Net common stock already held by EMB. The shares issued were valued at $0.14 per share based on 10% discount from the closing price on the date of the agreement. The Company will record a settlement expense of $202,500 with regard to this issuance. ii) E-Net issued to Williams de Broe ("WdB") 3,000,000 shares of restricted common stock as consideration for WdB's release of all claims against e-Net arising under the purported guarantee of EMB's obligation to WbD by e-Net. The parties agreed that $424,766 be credited as additional consideration to apply to the EMB notes payable. iii) EMB acknowledges its obligations to pay all outstanding leases covering equipment and/or furniture now in the possession of e-Net as contemplated by the agreement. Management expects to settle these leases for less than $20,000. iv) EMB assigns its rights of a portion of e-Net's note payable totaling $485,446 to AMRES Holdings LLC, a related party. v) EMB forgave principal and interest totaling $172,000. The balance of $103,000 convertible notes was issued, interest at 10% per annum. The note has a mandatory conversion into the Company's common stock on December 15, 2001. Bridge Financing On June 26, 2001, the Company entered into an agreement and related documents with Laguna Pacific Partners, LLP ("Laguna Pacific"). Under the terms of the agreements, in exchange for $200,000 received by the Company from Laguna Pacific, the Company: i) executed a promissory note in favor of Laguna Pacific in the principal sum of $200,000, bearing interest at the rate of 7% per annum, secured by all the assets of the Company, and payable on the earlier of nine months from its issuance date or the date the Company's common stock is listed on the NASDAQ Small Cap market, and ii) executed a warrant agreement which entitled Laguna Pacific to acquire up to $250,000 worth of e-Net common stock for the total purchase price of $1.00, calculated at 70% of the closing stock price on the date immediately preceding the exercise date. The value of the warrant of approximately $350,000 will be amortized over the over the nine months using the effective interest method was interest expense. On June 26, 2001, in transactions related to the agreements with Laguna Pacific, the Company formed a wholly-owned subsidiary, Anza Properties, Inc., a Nevada corporation ("Anza"), which i) executed a Bond Term Sheet with e-Net outlining the proposed terms of an offering to raise up to $5,000,000, ii) entered into an employment agreement with an individual beginning thirty days from the date of the agreement and ending upon the earlier to occur of the liquidation of the real estate portfolio to be owned by Anza or the completion of a NASDAQ Small Cap listing by e-Net. The employment agreement provides for a salary of $20,000 per month, payable only by Anza and specifically not guaranteed of e-Net. The employee will serve as Anza's Vice President and will be a director thereof. In connection with the employment agreement, e-Net executed a stock option agreement which entitled Ehrlich to acquire up to 2,000,000 shares of e-Net common stock at the closing price on the date of the options agreement, vesting equally over the 12 months following the date of the employment agreement, and exercisable only in the event Anza is successful in raising a minimum of $2,000,000 in a contemplated $5,000,000 bond offering, and the holders thereof converting at least $2,000,000 of the bonds into equity of e-Net (any amounts less than $2,000,000 will be applied, pro-rata, to the total options exercisable under the Option Agreement). The options are subject to an anti-dilution provision in the event of future issuances of common stock or a reverse stock split. The holder in no event can the option holder own more than 10% of the issued and outstanding common stock in the event of a reverse stock split. The Company will assess the value of these options, F-27 iii) entered into a consulting agreement with an individual to provide services to Anza. The consulting agreement provides for compensation of $20,000 to be paid on its date of execution, and $5,000 per month for eight months beginning September 1, 2001, guaranteed by e-Net. In addition, e-Net executed a stock option agreement, which entitled the holder to acquire up to 1,000,000 shares of e-Net common stock on terms identical to those described above in ii) above. The options are subject to an anti-dilution provision in the event of future issuances of common stock or a reverse stock split. The holder in no event can the option holder own more than 5% of the issued and outstanding common stock in the event of a reverse stock split. The Company will assess the value of these options. Employment Agreement On June 1, 2001, e-Net entered into an Employment Agreement with Vincent Rinehart. Under the terms of the agreement, the Company is to pay to Mr. Rinehart a salary equal to $275,000 per year, subject to an annual increase of 10% commencing January 1, 2002, plus an automobile allowance of $1,200 per month and other benefits, including life insurance. The agreement is for a term of five years and provides for a severance payment in the amount of $500,000 and immediate vesting of all stock options in the event his employment is terminated for any reason, including cause. Mr. Rinehart was granted options to acquire 2,500,000 shares of e-Net common stock at the closing price on the date of the agreement, which shall vest monthly over a three- year period. The options are subject to an anti-dilution provision in the event of future issuances of common stock or a reverse stock split. The holder in no event can the option holder own more than 20% of the issued and outstanding common stock in the event of a reverse stock split. The Company will assess the value of these options. Stock Issuance On June 14, 2001, Class C Preferred stockholders exercised their option and converted 1,616 shares of Class C Preferred stock into 3,741,671 of the Company's restricted common stock. These shares were trading at $0.14 per share. No expense was realized with this transaction. Also, on July 13, 2001 an additional 400 shares of the Class C were converted at the option of the shareholders into 924,992 shares of the Company's restricted common stock. These shares were trading at $0.14 per share. No expense was realized with regard to this transaction. Subsequent to April 30, 2001 through August 1, 2001, the Company issued an aggregate of 600,000 shares of the Company's restricted common stock and a total of 2,200,000 of the Company's registered common stock under a Form S-8 to consultants. These shares were valued at $385,900 and the Company charged this amount to consulting expense. Shares were issued for business development, legal, internal accounting and finance services, as well as additional compensation to a consultant to launch BravoRealty. On May 7, 2001, the Company entered into a settlement agreement whereby, the Company was to issue a total of 1,500,000 shares of the Company's restricted common stock to settle a dispute over an amendment of an investing banking agreement entered into on May 27, 1999 (see Note 10). As of April 30, 2001, the Company had a 10% note payable totaling $150,000. On July 2, 2001, the parties entered into a settlement agreement whereby the Company paid $43,280 of principal, issued 325,000 shares of common stock to reduce the note by $63,440, and will pay the remaining $43,280 over ten months beginning August 5, 2001, together with interest at 10% per annum. F-28 EX-10.1 3 doc2.txt SETTLEMENT AGREEMENT This is a Settlement Agreement (the "Agreement") among the following persons and entities, effective as of the ___ day of June, 2001: EMB Corporation, a Hawaii corporation ("EMB"); e-Net Financial.Com Corporation, a Nevada corporation ("e-Net"); AMRES Holding LLC, a Nevada corporation ("AMRES Holding"); Vincent Rinehart ("Rinehart"; collectively, AMRES Holding and Rinehart are the "Rinehart Parties"); and Williams de Broe, an investment banking firm domiciled in England, United Kingdom ("WdB"). RECITALS -------- A. On or about May 7, 1999, EMB, AMRES Holding and Rinehart entered into a Stock Purchase Agreement (the "Stock Purchase Agreement"), whereby EMB acquired all of the shares of common stock of American Residential Funding, Inc., a Nevada corporation ("AMRES Funding"), from AMRES Holding. The provisions of the Stock Purchase Agreement provided for the contingency of a rescission of the AMRES Funding acquisition under certain enumerated circumstances or a subsequent issuance of additional EMB Common Stock to AMRES Holding in the event that the initial 2,000,000 shares of EMB Common Stock issued to AMRES Holding pursuant to the Stock Purchase Agreement did not have an aggregate value of at least $2,000,000 as of December 31, 2000 (collectively, the "Contingent EMB / AMRES Holding Transaction"). B. EMB and the Rinehart Parties agree that, as of December 31, 2000, the initial 2,000,000 shares of EMB Common Stock issued to AMRES Holding had a value, which, in the aggregate, was less than $2,000,000. AMRES Holding did not elect to rescind the AMRES Funding acquisition and reserved its rights to demand a subsequent issuance of additional EMB Common Stock. C. On or about April 12, 2000, EMB and e-Net entered into an Amended and Restated Purchase Agreement (the "e-Net / EMB Agreement"), whereby e-Net, among other things, acquired all of the common stock of AMRES Funding from EMB. Among the provisions of the e-Net / EMB Agreement were (i) Paragraph 2.2, which provided for the issuance of 7,500,000 shares of e-Net Common Stock (the "Initial e-Net Shares") to EMB, such stock to be registered with the Securities and Exchange Commission (the "SEC") pursuant to the registration requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the issuance of a promissory note of e-Net in favor of EMB in the initial amount of $4,000,000 (the "Initial e-Net / EMB Note"), (ii) Paragraph 3.9, which provided that e-Net was obligated to prosecute with diligence the registration of the Initial e-Net Shares, and (iii) EMB's obligation to pay all outstanding leases covering equipment and/or furniture that were to be utilized by e-Net in the operation of the businesses transferred to it by the e-Net / EMB Agreement. D. The Initial e-Net / EMB Note has been partially paid by e-Net, such that the sum of the current, outstanding, aggregate principal balance of the Initial e-Net / EMB Note and another obligation of e-Net in favor of EMB is US$1,213,616, including interest on the obligations accrued to the date hereof (collectively, the "e-Net Obligations"). E. On or about August 4, 2000, e-Net caused to be filed with the SEC a Registration Statement on Form S-1, which included the Initial e-Net Shares. Subsequent thereto, comments concerning the Registration Statement from the SEC were received by e-Net. On or about April 5, 2001, e-Net caused to be filed with the SEC an Amended Registration Statement (the "S-1/A"). Subsequent thereto, e-Net received comments concerning the S-1/A from the SEC. EMB acknowledges that, as of the date of this Agreement, e-Net does not have the financial resources available to devote to the completion of a response to the latest comments of the SEC nor to complete the registration process. F. On or about July 6, 1998, WdB entered into an agreement with EMB (the "EMB / WdB Loan Agreement") to lend EMB the sum of $700,000 (the "Initial EMB / WdB Obligation"). G. On or about September 12, 2000, WdB and EMB entered into a revision of the EMB / WdB Loan Agreement, which, among other things, (i) extended the maturity date for the Initial EMB / WdB Obligation to January 6, 2001, (ii) provided for interest on the then-unpaid principal balance of $657,349 at a rate of ten percent (10%) per annum with a penalty interest rate of twenty-four percent (24%) per annum, effective on the maturity date, in the event that the Initial EMB / WdB Obligation then remained unpaid, and (iii) a purported guarantee of the Initial EMB / WdB Obligation by e-Net. As of the date of this Agreement, the Initial EMB / WdB Obligation to WdB remains unpaid, with a principal balance and accrued interest to the date of this Agreement in the sum of $657,349. H. In connection with the revision of the EMB / WdB Loan Agreement, the then-Chairman of the Board of e-Net executed a document on behalf of e-Net in favor of WdB, which document purported to act as e-Net's guarantee of the Initial EMB / WdB Obligation. Such purported obligation was not included in the Stock Purchase Agreement. I. During Rinehart's tenure as Chief Executive Officer of e-Net, e-Net has not tendered to Rinehart any compensation for his services in such capacity, but Rinehart has received continuing compensation from AMRES Funding. In connection with the transactions contemplated herein, Rinehart and e-Net wish to provide for the delivery to Rinehart of certain consideration with respect to such executive services that were rendered through and including May 31, 2001, as well as with respect to certain other related items, but not including personal guarantees executed by Rinehart for the benefit of e-Net and or AMRES Funding. J. Bryan Cave LLP has provided legal services to EMB and e-Net and, in connection therewith, has discussed certain matters with Rinehart, in his role as president of e-Net and its subsidiaries and affiliates, and with other individuals who serve, or have served, as executive officers or directors of more than one of the parties hereto. The parties wish to provide waivers of any potential conflicts that may exist in respect of such representations. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] AGREEMENT --------- NOW, THEREFORE, in consideration of these presents and for such good and other consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: General Provisions: 1. The recitals set forth above are incorporated by reference. Further, all parties to this Agreement acknowledge and agree that the settlements contained herein are in compromise and settlement of disputed claims between various of the parties hereto, that the recitals, provisions, and covenants contained herein are not to be construed as an admission of liability by any party, all of which parties expressly deny any such liability, and that each of the parties expressly acknowledges that the execution hereof does not constitute any assent to any of such claims. 2. Each party will bear his or its own costs and attorneys fees associated with the negotiation of this Agreement. 3. All parties to this Agreement agree to take such reasonable actions, including, but not limited to, acknowledging, delivering or executing instruments and documents, as may be required to effectuate the purposes of this Agreement or to consummate the transactions that are contemplated herein. 4. This Agreement embodies the entire understanding and agreement among the parties with respect to the subject matters contained herein and supersedes any and all prior understandings and agreements relating to the subject matters. 5. This Agreement shall be binding upon and inure to the benefit of the successors, assigns, and personal representatives of the parties. 6. This Agreement is made with reference to the laws of the State of California and shall be interpreted and enforced under and pursuant to California law. 7. This Agreement may be executed in counterparts and, when taken together, each of which shall serve as an original. 8. At all material times herein, the parties have had the opportunity to meet and confer with counsel of their own choosing to discuss the terms of this Agreement and the effect of executing the same. 9. Except for the covenants, conditions, representations and warranties otherwise contained in this Agreement, each of the parties hereby forever releases and discharges each other party, its respective current and former shareholders, officers, directors, employees, contractors, brokers, representatives, affiliates, insurers, attorneys, agents, and successors and assigns thereof from any and all claims, sanctions, or demands of every kind and nature, known and unknown, suspected and unsuspected, disclosed and undisclosed, for damages, actual, consequential or punitive, past present and future, arising out of or connected with any matter occurring on or prior to the date hereof, including but not limited to any claims, whether arising under the transactions previously entered into by the parties or otherwise. The parties hereto each represent and warrant to the others that he or it is the owner of and has not transferred any claims being hereby released. The parties each acknowledge that the foregoing is a general release intended to be interpreted broadly; provided, however, such release, in respect of (i) WdB, shall not apply to the obligations created by the New EMB / WdB Obligation, (ii) EMB, shall not apply to the obligations created by either of the Interim e-Net / EMB Note (as defined in Paragraph 19 hereof) or the Final e-Net / EMB Note (as defined in Paragraph 24 hereof), (iii) the Rinehart Parties, shall not apply to the obligations created by the New e-Net / AMRES Note (as defined in Paragraph 19 hereof) and to any employment-related obligations between Rinehart and e-Net and its subsidiaries, and (iv) all of the parties insofar as any of them is a holder of equity securities from and after the date of this Agreement. 10. Each of the parties hereto hereby acknowledges that he or it has been fully advised of Section 1542 of the Civil Code of the State of California, and that except for the obligations arising out of this Agreement, the section and the benefits thereof are hereby waived. Section 1542 reads as follows: "Ageneral release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." In that regard, each of the parties hereto hereby acknowledge that he or it may have sustained losses which are presently unknown or unsuspected, that such damages and other losses as were sustained might otherwise, but for this release, have given rise to additional complains, actions, causes of action, claims demands and debts in the future. Nevertheless, the parties acknowledge that this release has been negotiated and agreed upon in light of this realization and, being fully aware of this situation, the parties nevertheless intend to release, acquit and forever discharge each other from any and all such unknown claims, including damages which are unknown or unanticipated. This release may be pleaded as a defense or as a bar to any action or proceeding which may be brought, instituted or taken with respect to any matters which are in any way related to the Action and/or any claims released in this Agreement. 11. The parties hereto acknowledge and agree to the following methods to resolve any disputes between them in respect of the transactions contemplated by this Agreement. a. Negotiation. Any party disputing a matter under this Agreement (individually, a "Participant," and, collectively, the "Participants") shall attempt in good faith to resolve any controversy, claim or dispute of whatever nature between the Participants arising out of or related to this Agreement or the construction interpretation, performance, breach, termination, enforceability or validity hereof (a "Dispute") promptly by negotiation between the Participants. If a party is not a Participant, he or it shall not be bound by any resolution of the Dispute under this Paragraph 11. Any Participant may require that any other party become a Participant hereunder. Any Participant involved in the Dispute may give written notice (herein the "Dispute Notice") of the Dispute at any time. If the Dispute is not resolved within thirty (30) days after delivery of the Dispute Notice, any Participant involved in the Dispute may initiate mediation as provided in subsection (b) below. b. Mediation. If the Dispute is not resolved by negotiation, the Participants shall make a good faith attempt to settle the Dispute by mediation. If the Participants cannot agree on the rules and procedures for the mediation, then the Commercial Dispute Resolution Procedures of the American Arbitration Association in effect on the date of this Agreement (herein the "AAA Rules") shall apply. If the Participants cannot agree on the selection of a mediator within sixty (60) days after delivery of the Dispute Notice, the mediator will be selected pursuant to the AAA Rules. Unless the Participants otherwise agree, the mediator shall be a neutral and impartial lawyer with excellent academic and professional credentials, who has actively practiced law for at least fifteen (15) years, who has both training and experience as a mediator, and who has not previously been involved in the subject matter of this Agreement. If the dispute has not been resolved by mediation as provided above within ninety (90) days after the delivery of the Dispute Notice, then the dispute shall be determined by arbitration as provided in subsection (c) below. c. Arbitration. If negotiation and mediation has not resolved the Dispute, the Dispute shall be determined by binding arbitration in Orange County, California (or other location mutually acceptable to the Participants) by one arbitrator. If the Participants cannot agree on the rules and procedures for the arbitration, then the AAA Rules shall apply. If the Participants cannot agree on the selection of an arbitrator within one hundred twenty (120) days after delivery of the Dispute Notice, the arbitrator shall be selected pursuant to the AAA Rules. Unless the Participants otherwise agree, the arbitrator shall be a neutral and impartial lawyer with excellent academic and professional credentials who has actively practiced law for at least fifteen (15) years, who has both training and experience as an arbitrator, and who has not previously been involved in the subject matter of this Agreement. The arbitrator's award shall be based on applicable law and judicial precedent. Judgment on the award rendered by the arbitrator may be entered into in any court having jurisdiction thereof. d. Costs. All costs and expenses incurred in connection with any mediation or arbitration hereunder shall be divided evenly between the Participants; provided, however, each party shall pay his or its own attorneys' fees and other costs and expenses incurred by and for such party with respect to such mediation and arbitration. e. Injunctive Relief. Any Participant may seek from any court having jurisdiction hereof any interim, provisional, or injunctive relief that may be necessary to protect the rights or property of any Participant or maintain the status quo before, during, or after the pendency of the arbitration proceeding. The institution and maintenance of any judicial action or proceeding for any such interim, provisional, or injunctive relief shall not constitute a waiver of the right or obligation of any Participant to submit the Dispute to arbitration, including any claims or disputes arising from the exercise of any such interim, provisional, or injunctive relief. The procedure set forth in this Paragraph 11 is the sole procedure for resolving disputes and no party shall resort to litigation except to the extent necessary to toll the running of an applicable statute of limitations. 12. CONSISTENT WITH THE CALIFORNIA RULES OF PROFESSIONAL CONDUCT, THE PARTIES HERETO HAVE BEEN ADVISED THAT BRYAN CAVE LLP HAS REPRESENTED, DIRECTLY OR INDIRECTLY, MORE THAN ONE OF THE PARTIES HERETO. THIS PARAGRAPH 12 SERVES TO CONFIRM THAT EACH OF THE "REPRESENTED" PARTIES HEREBY CONSENTS TO SUCH "REPRESENTATION," WHETHER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR OTHERWISE. THE PARTIES HERETO ACKNOWLEDGE THAT BRYAN CAVE LLP HAS TAKEN ITS STANDARD STEPS TO ENSURE THAT THE CONFIDENCES AND DOCUMENTS OF THE RESPECTIVE PARTIES ARE NOT SHARED WITH THE OTHER PARTIES HERETO IN RESPECT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. 13. The parties hereto agree that e-Net and EMB, being publicly-held companies, have an obligation to advise the public of the general terms of this Agreement. e-Net and EMB will mutually approve and issue a press release in respect of the material terms of this Agreement. e-Net or EMB will file such information concerning this Agreement with the SEC as each has been so advised by their respective counsel. 14. EMB and WdB, as further consideration for the transactions set forth in this Agreement, hereby agree to grant to e-Net management limited, irrevocable proxies in the form attached hereto as Exhibit "A", which cover, with respect to WdB, the WdB / E-Net Shares and, with respect to EMB, the Initial e-Net Shares and the Additional e-Net Shares. The certificates representing the Initial e-Net Shares and the Additional e-Net Shares are, or upon their issuance by e-Net's transfer agent shall be, held by Bryan Cave llp (until April 13, 2002) for the benefit of EMB and its shareholders, and shall not be released to EMB or any other party, absent instructions from EMB and e-Net (consent to which instructions e-Net shall not unreasonably withhold or delay) or a valid court order. These proxies shall be valid through and including December 31, 2001, and shall be limited in scope, valid solely for the purpose of voting on e-Net management proposals concerning (i) corporate refinancing, recapitalization, and restructuring, (ii) executive compensation, (iii) change of corporate name and/or domicile, and (iv) election and/or appointment of officers and directors. 15. Notices. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by facsimile, electronic or digital transmission method; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (e.g., Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: To e-Net: --------- e-Net Financial.Com Corporation Attention: Vincent Rinehart, President 3200 Bristol Street Suite 700 Costa Mesa, CA 92626 To EMB: - -------- EMB Corporation Attention: Ben Campbell, President 715 Main Street Suite F Jenks, OK 74037 To the Rinehart Parties: - -------------------------- Vincent Rinehart - and - AMRES Holding LLC 4425 Atlantic Avenue Suite A-15 Long Beach, CA 90807 To WdB: - -------- Williams de Broe Attention: Julian Parker 6 Broadgate London, EC2M-2RP England or to such other place and with such other copies as either party may designate as to itself by written notice to the others. e-Net / EMB Provisions with Respect to the S-1/A: 16. In addition to the consideration referenced above, and as additional consideration to EMB for the withdrawal by e-Net of the S-1/A, on or before June 30, 2001, the termination of the registration process for the Initial e-Net Shares, and e-Net's obligations to EMB therefor, e-Net shall issue 1,500,000 shares of e-Net Common Stock to EMB (the "Additional e-Net Shares") in a transaction exempt from the registration requirements of Section 5 of the 1933 Act. Said Additional e-Net Shares shall constitute restricted stock. The certificates evidencing the Additional e-Net Shares shall bear e-Net's standard form restrictive legend and a legend stating that the shares represented thereby are the subject of the proxy referenced in Paragraph 14, above. e-Net's transfer agent shall be instructed to place "stop transfer" instructions in its records with respect to such shares. 17. EMB and e-Net each acknowledge that the issuance by e-Net of 3,000,000 shares of its common stock to WdB constitutes additional consideration in favor of EMB which, therefore, credits e-Net with the sum of US$424,766 against the e-Net Obligations, leaving an unpaid balance, including interest accrued to the date of this Agreement, of US$788,850 (the "Remaining e-Net Obligations"). 18. EMB acknowledges its obligations to pay of all outstanding leases covering equipment and/or furniture now in the possession of e-Net, as contemplated by the e-Net / EMB Agreement. EMB / Rinehart Parties Provisions with Respect to the Contingent EMB / AMRES Holding Transaction: 19. In addition to the consideration referenced above, and as additional consideration to AMRES Holding for its release of EMB in respect of the Contingent EMB / AMRES Holding Transaction, EMB shall irrevocably assign to AMRES Holding that portion of EMB's interest in the Remaining e-Net Obligations equaling US$485,446, shall keep the remainder of the Remaining e-Net Obligations equaling US$303,404, and shall issue e-Net instructions on the schedule and in the manner set forth in the following Paragraph in order to memorialize the Remaining e-Net Obligations in the form of promissory notes in favor of AMRES Holding (the "New e-Net / AMRES Note") and in favor of EMB (the "Interim e-Net / EMB Note"). EMB, e-Net, and the Rinehart Parties acknowledge that (in conjunction with e-Net), the Rinehart Parties may negotiate and allocate between themselves the principal, interest, and terms in, and disposition of, the New e-Net / AMRES Note, all in reference to the purported obligation of e-Net to Rinehart, as set forth in Recital I. 20. Concurrently with the execution of this Agreement, EMB shall tender the Initial e-Net / EMB Note to e-Net and shall authorize e-Net to cancel the e-Net Obligations. As soon as is practicable for a prudent person following e-Net's receipt of the Initial e-Net / EMB Note, e-Net shall issue (i) the New e-Net / AMRES Note to AMRES Holding in the initial principal amount of US$485,446, in such form and containing such terms and conditions as e-Net and AMRES Holding shall agree, and (ii) the Interim e-Net / EMB Note to EMB, in the initial principal amount of US$303,404, in such form and containing such terms and conditions as e-Net and EMB shall agree. WdB / e-Net Provisions with Respect to the Initial EMB / WdB Obligation: 21. In addition to the consideration referenced above, and as additional consideration to WdB for its deferral of its rights and remedies under the document that purports to be e-Net's guarantee of the Initial EMB / WdB Obligation, e-Net shall issue 3,000,000 shares of its common stock to WdB (the "WdB / e-Net Shares"), in a transaction exempt from the registration requirements of Section 5 of the 1933 Act. Said e-Net shares shall constitute restricted stock. The certificates evidencing the e-Net shares shall bear e-Net's standard form restrictive legend and a legend stating that the shares represented thereby are the subject of the proxy referenced in Paragraph 14, above. e-Net's transfer agent shall be instructed to place "stop transfer" instructions in its records with respect to such shares. In connection with such issuance of e-Net shares to WdB, e-Net shall provide WdB certain incidental rights, in the form attached hereto as Exhibit "B." WdB shall release e-Net from any obligation that WdB believes may have been created against e-Net by such purported guarantee document and shall create no new obligation of e-Net in favor of WdB in respect of the Initial EMB / WdB Obligation, however constituted currently or in the future. WdB / EMB Provisions with Respect to the Initial EMB / WdB Obligation: 22. In addition to the consideration referenced above, and as additional consideration to WdB for its cancellation of the Initial EMB / WdB Obligation, in acknowledgment of e-Net having issued 3,000,000 shares of its common stock to WdB (in the WdB / e-Net Shares issuance) and of WdB reducing the aggregate amount of the Initial EMB / WdB Obligation by US$360,000, EMB shall issue to WdB a new promissory note in favor of WdB in the original principal amount of US$348,109, all due and payable on March 31, 2002, together with interest at the rate of ten percent (10%) per annum, with penalty interest at the rate of twelve percent (12%) per annum from and after the maturity date until paid in full, in the form attached hereto as Exhibit "C" (the "New EMB / WdB Obligation"). Such new promissory note shall be free of any guarantee, absolute, contingent, or otherwise from e-Net or any other individual or entity. 23. In addition to the consideration referenced above, and as additional consideration to WdB for its deferral of its rights and remedies under the Initial EMB / WdB Obligation, including approximately 14/24ths of the interest from the maturity date of the Initial EMB / WdB Obligation through the date of this Agreement, EMB shall issue to WdB 147,000 shares of EMB Common Stock in a transaction exempt from the registration requirements of Section 5 of the 1933 Act. Said EMB shares shall constitute restricted stock. The certificates evidencing the EMB shares shall bear EMB's standard form restrictive legend and a legend stating that the shares represented thereby are the subject of the proxy referenced in Paragraph 14, above. EMB's transfer agent shall be instructed to place "stop transfer" instructions in its records with respect to such shares. e-Net / EMB Provisions with Respect to the Initial EMB / WdB Obligation: 24. In addition to the consideration referenced above, and as additional consideration to e-Net for the WdB / e-Net Shares issuance, EMB shall deem the principal of the Interim e-Net / EMB Note to have been reduced, as of the date of this Agreement, by the sum of US$200,000, thereby leaving an unpaid principal balance of US$103,404 as of the date of this Agreement. In connection therewith, and deemed to occur concurrently with the execution of this Agreement, EMB shall tender the Interim e-Net / EMB Note to e-Net and shall authorize e-Net (i) to cancel the Interim e-Net / EMB Note and (ii) as soon as is practicable for a prudent person following e-Net's receipt of the Interim e-Net / EMB Note, e-Net shall issue the Final e-Net / EMB Note to EMB, in the initial principal amount of US$103,404, in such form and containing such terms and conditions as e-Net and EMB shall agree. [SIGNATURES ON FOLLOWING PAGE] IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. EMB CORPORATION By: Ben Campbell, President /s/ Kenneth J. Quilt Kenneth J. Quilt , Secretary/Treasurer E-NET FINANCIAL.COM CORPORATION By: Scott Presta Scott Presta, Secretary AMRES HOLDING LLC By: /s/ Vincent Rinehart Vincent Rinehart, Managing Partner WILLIAMS DE BROE By: /s/ Julian Parker Julian Parker for and on behalf of William de Broe EX-10.2 4 doc3.txt EXHIBIT "A" ----------- LIMITED IRREVOCABLE PROXY The undersigned stockholder of e-Net Financial.Com Corporation, a Nevada corporation (the "Company"), hereby irrevocably (to the full extent permitted by law) appoints Vincent Rinehart and any individual designated by said individual, the attorney and proxy of the undersigned with full power of substitution and resubstitution, to the full extent of the undersigned's rights with respect to the 9,000,000 shares of common stock of the Company beneficially owned by the undersigned as of the date hereof (the "Shares") through and including December 31, 2001. This Proxy is irrevocable (to the fullest extent permitted by law), shall be deemed coupled with an interest, and is granted in connection with the Settlement Agreement of even date hereof by and among the Company, the undersigned, and certain other parties (the "Agreement"). Any and all certificates representing the Shares shall bear a legend stating that such Shares are the subject of this Proxy. The attorney and proxy named above shall be empowered at any time prior to termination of this Proxy to exercise all voting and other rights (including, without limitation, the power to execute and deliver written consent with respect to the Shares) of the undersigned in his own discretion at every annual or special meeting of the stockholders of the Company and at every continuation or adjournment thereof, and on every action or approval by written consent of the stockholders of the Company in lieu of any such meeting, WITH RESPECT ONLY TO THE FOLLOWING MATTERS: (i) corporate refinancing, recapitalization and restructuring, (ii) executive compensation, (iii) change of corporate name and/or domicile, and (iv) election and/or appointment of officers and directors. Any obligation of the undersigned hereunder shall be binding upon successors and assigns of the undersigned. If any term or other provision of this Proxy is determined to be invalid, illegal, or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Proxy shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the undersigned agrees with the Company to negotiate in good faith to modify this Proxy so as to effect the original intent of the parties as closely as possible. Dated: 6/27/01____________________ By: Kenneth J. Quilt, Secretary "Stockholder" EX-10.3 5 doc4.txt PROMISSORY NOTE $485,446.00 Costa Mesa, CA June 27, 2001 FOR VALUE RECEIVED, the undersigned, e-NET FINANCIAL.COM CORPORATION, a Nevada corporation, promises to pay to AMRES HOLDING LLC, a Nevada corporation, or order, the principal sum of Four Hundred Eighty-Five Thousand Four Hundred Forty-Six and no/100 dollars ($485,446.00), together with interest on the outstanding balance of such principal sum computed at the rate of ten percent (10%) per annum from date hereof. The entire principal balance, together with accrued interest, shall be due and payable, in full, on December 15, 2002. There shall be no penalty for prepayment of principal at any time following the date hereof. If this Note is not paid in full when it becomes due, Maker agrees to pay all costs and expenses of collection, including reasonable attorney's fees. e-NET FINANCIAL.COM CORPORATION By: /s/ Scott Presta - ---------------------------- Scott Presta, Director EX-10.4 6 doc5.txt EXHIBIT "C" ----------- PROMISSORY NOTE US$348,109.00 Jenks, OK June 27, 2001 FOR VALUE RECEIVED, the undersigned, EMB Corporation, a Hawaii corporation, promises to pay to Williams de Broe, or order, the principal sum of Three Hundred Forty-Eight Thousand One Hundred Nine and no/100 dollars (US$348,109.00), together with interest on the outstanding balance of such principal sum computed at the rate of ten percent (10%) per annum from date hereof. The entire principal balance, together with accrued interest, shall be due and payable, in full, on March 31, 2002. Any principal balance and/or interest remaining unpaid on or after April 1, 2002, shall accrue interest at the penalty rate of twelve percent (12%) per annum until such time as all moneys due hereunder, including accrued interest, are paid in full. There shall be no penalty for prepayment of principal at any time following the date hereof. If this Note is not paid in full when it becomes due, Maker agrees to pay all costs and expenses of collection, including reasonable attorney's fees. EMB Corporation, a Hawaii corporation By: /s/ Kenneth J. Quilt Secretary EX-10.5 7 doc6.txt PROMISSORY NOTE $303,404.00 Costa Mesa, CA June 27, 2001 FOR VALUE RECEIVED, the undersigned, e-NET FINANCIAL.COM CORPORATION, a Nevada corporation, promises to pay to EMB CORPORATION, a Hawaii corporation, or order, the principal sum of Three Hundred Three Thousand Four Hundred Four and no/100 dollars ($303,404.00), together with interest on the outstanding balance of such principal sum computed at the rate of ten percent (10%) per annum from date hereof. The entire principal balance, together with accrued interest, shall be due and payable, in full, on December 15, 2002. There shall be no penalty for prepayment of principal at any time following the date hereof. If this Note is not paid in full when it becomes due, Maker agrees to pay all costs and expenses of collection, including reasonable attorney's fees. e-NET FINANCIAL.COM CORPORATION By: /s/ Vincent Rinehart - ------------------------------------- Vincent Rinehart, President EX-10.6 8 doc7.txt PROMISSORY NOTE $103,404.00 Costa Mesa, CA June 27, 2001 FOR VALUE RECEIVED, the undersigned, e-NET FINANCIAL.COM CORPORATION, a Nevada corporation, promises to pay to EMB CORPORATION, a Hawaiian Corporation, or order, the principal sum of One Hundred Three Thousand Four Hundred Four and no/100 dollars ($103,404.00), together with interest on the outstanding balance of such principal sum computed at the rate of ten percent (10%) per annum from date hereof. The entire principal balance, together with accrued interest, shall be due and payable, in full, on December 15, 2002. There shall be no penalty for prepayment of principal at any time following the date hereof. If this Note is not paid in full when it becomes due, Maker agrees to pay all costs and expenses of collection, including reasonable attorney's fees. e-NET FINANCIAL.COM CORPORATION By: /s/ Vincent Rinehart - ------------------------------------ Vincent R. Rinehart, President EX-10.7 9 doc8.txt THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT"), AND HAVE BEEN SOLD IN RELIANCE ON CERTAIN EXEMPTIONS FROM REGISTRATION PROVIDED BY REGULATION D UNDER THE SECURITIES ACT. REDEEMABLE CONVERTIBLE 10% PROMISSORY NOTE DUE DECEMBER 15, 2002 June 28, 2001 Costa Mesa, California e-Net Financial.Com Corporation, a Nevada corporation (hereinafter called the "Issuer"), for value received, hereby promises to pay to the Holder, as defined below, on December 15, 2002 (the "Maturity Date"), in immediately available funds in the initial principal amount of One Hundred Three Thousand Four Hundred Four and no/100 Dollars ($103,404.00), and to pay interest on the principal sum outstanding at the rate of ten percent (10%) per annum (the "Note Interest Rate"), payable upon maturity or any earlier conversion of this Note. Accrual of interest shall commence on the date hereof and shall continue until payment in full of the outstanding principal sum has been made or duly provided for. The interest so payable will be paid to the person in whose name this Note is registered on the records of the Issuer regarding registration and transfers of Notes (the "Note Register"). The principal of, and interest on, this Note are payable in legal tender of the United States of America. Unless this Note is earlier redeemed or converted in accordance with its terms, the Issuer will pay the outstanding principal of and all accrued and unpaid interest due upon this Note on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of record of this Note as of the tenth (10th) day prior to the Maturity Date and addressed to such Holder at the last address appearing on the Note Register. ARTICLE I DEFINITIONS The capitalized terms used in this Note shall have the respective meanings specified in the Annex I, Annex of Defined Terms. ARTICLE II EXCHANGES AND TRANSFER Section 2.1 Exchange and Registration of Transfer of Note. The Holder may, at its option, surrender this Note at the office of the Issuer and receive in exchange therefor a Note or Notes, each in the denomination of Ten Thousand Dollars ($10,000.00) or an integral multiple of $10,000.00 or any amount in excess thereof, but not more than one Note in any lesser amount, each dated of the date of this Note, and payable to the Holder, or subject to Section 4.2 hereof, payable to such other Person, as may be designated by such Holder. The aggregate principal amount of such Note or Notes exchanged in accordance with Section 2.1 shall equal the aggregate unpaid principal amount of this Note as of the date of such surrender; provided, however, that upon such exchange there shall be filed with the Issuer the name and address for all purposes hereof of the Holder of the Note or Notes delivered in such exchange. This Note, when presented for registration of transfer or for exchange or conversion, shall (if so required by the Issuer) be duly endorsed by, or be accompanied by a written instrument of transfer in form reasonably satisfactory to the Issuer duly executed by, the Holder duly authorized in writing. Section 2.2 Loss, Theft; Destruction of Note. Upon receipt of evidence satisfactory to the Issuer of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security reasonably satisfactory to the Issuer, or, in the case of any such mutilation, upon surrender and cancellation of this Note, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Note, a new Note of like tenor and unpaid principal amount dated as of the date hereof. This Note shall be held and owned upon the express condition that the provisions of this Section 2.2 are exclusive with respect to the replacement of a mutilated, destroyed, lost or stolen Note and the Issuer shall have no further responsibility whatsoever with respect to the mutilated , destroyed, lost or stolen Note, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement of a negotiable instrument or other securities without their surrender. Section 2.3 Absolute Owner. The Issuer may deem the person in whose name this Note shall be registered upon the registry books of the issuer to be, and may treat it as, the absolute owner of this Note (whether or not this Note shall be overdue) for the purpose of receiving payment of or on account of the principal of this Note, for the Conversion of this Note and for all other purposes, and the Issuer shall not be affected by any notice to the contrary, unless such notice is accompanied by surrender of this Note. All such payments and such conversion shall be valid and effective to satisfy and discharge the liability upon this Note to the extent of the sum or sums so paid or the conversion so made. ARTICLE III CONVERSION OF NOTE Section 3.1 Optional Conversion; Conversion Price. At the option of the Holder, at any time from time to time after the expiration of the Restricted Period until this Note is paid in full, this Note may be converted, either in whole or in part up to the principal amount hereof (or in case some portion of this Note shall be converted prior to such date, then that the portion that is not so converted), together with interest accrued thereon to the relevant Conversion Date, into Common Stock of the Issuer (calculated as to each conversion to the nearest 1/100th of a share), at the conversion price the ("Conversion Price"), equal to the volume-weighted trading average price during the ten (10) consecutive Trading Days immediately preceding the Conversion Date (the "Valuation Period"); provided, however, that, in lieu of issuing either or both of the Conversion Shares or Interest Shares, the Issuer may redeem such portion of the principal or interest of this Note in respect of which Conversion has been requested. Section 3.2 Exercise of Conversion Privilege. (a) In order to exercise the conversion privilege, either in whole or in part, the Holder shall surrender this Note to the Issuer during usual business hours at its principal office and shall give written notice to the Issuer in the form attached hereto in Annex II (the "Conversion Notice") at said office that the Holder elects to convert this Note. (b) The Conversion Notice shall specify whether the Holder desires to receive its interest accumulated to date in cash or Interest Shares. If the holder elects to receive Interest Shares, the number of Shares issuable shall be calculated at the same Conversion Price applicable to any conversion of principal of this Note. (c) As promptly as practicable upon the receipt of any Conversion Notice, and surrender of this Note, the Issuer shall convert the Note and issue the Common Stock. The Issuer shall (i) issue the Common Stock issuable upon such conversion in accordance with the provisions of this Article 3, and (ii) deliver or direct its transfer agent to deliver by overnight delivery to the Holder a certificate or certificates representing the number of shares of Common Stock to which the Holder is entitled by virtue of such conversion. (d) The Conversion Notice shall also state the name (with address) of the person who is to become the holder of the Common Stock issued at conversion in connection with such conversion. Upon surrender for conversion, this Note shall be accompanied by a proper assignment hereof to the Issuer or in blank. (e) Such conversion shall be deemed to have been effected at the time at which the Conversion Notice indicates, so long as this Note shall have been surrendered as aforesaid at such time and at such time the rights of the Holder as holder of this Note shall cease and the person or persons in whose name or names the Common Stock issued at conversion shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the Common Stock represented thereby. (f) The Conversion Notice shall constitute a contract between the Holder and the Issuer, whereby the Holder shall be deemed to subscribe for the number of shares of Common Stock that it will be entitled to receive upon such conversion and in payment and satisfaction of such subscription (and for any cash adjustment to which it is entitled pursuant to Section 3.3), to surrender this Note and to release the Issuer from all liabilities thereon. Section 3.3 Fractional Shares. No fractional share of Common Stock of the Issuer or scrip representing fractional Common Stock shall be issued upon conversion of this Note. Instead of any fractional Common Stock which would otherwise be issuable upon conversion of this Note, the Issuer shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction. No cash payment of less than $1.00 shall be required. ARTICLE IV REDEMPTION Section 4.1 Redemption. The Note being issued hereunder is subject to redemption by the Issuer in whole or in part at any time or from time to time, but not later than the Maturity Date, unless earlier converted or redeemed pursuant to Section 3.1, above. The redemption price payable in cash shall be par value of this Note, or such pro rata amount as is then being redeemed, and all interest accrued thereon to the date of redemption. ARTICLE V STATUS; RESTRICTIONS ON TRANSFER Section 5.1 Status of Note. This Note is a direct, general and unconditional obligation of the Issuer ranking pari passu with all other unsecured indebtedness of the Issuer, enforceable in accordance with its terms subject, as to enforcement, to bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting creditors' rights and to general principles of equity. Section 5.2 Restrictions on Transfer. This Note, and any Common Stock of the Issuer issued according to the terms hereof, have not been and will not be registered under the Securities Act. This Note may not be offered or sold, directly or indirectly, assigned, transferred, hypothecated or pledged in the absence of an effected registration statement under the Securities Act, or the opinion of counsel to the Issuer that such transaction is exempt from registration under the Securities Act. ARTICLE VI COVENANTS The Issuer covenants and agrees that so long as this Note shall be outstanding: Section 6.1 Conversion. The Issuer will punctually issue shares of Common Stock at conversion, according to the terms hereof and of the Purchase Agreement. Section 6.2 Notice of Default. If any one or more events occur which constitute or with the giving of notice or the lapse of time or both, would constitute an Event of Default or if the Holder shall demand the issuance of Common Stock or take any other action permitted upon the occurrence of any such Event of Default, the Issuer will forthwith give notice to the Holder, specifying the nature and status of the Event of Default or other event or of such demand or action, as the case may be. Section 6.3 Preservation of Existence. The Issuer will preserve and maintain its existence, rights, franchises and privileges that are not material to both (i) the performance of its obligations under this Note and the Purchase Agreement; and (ii) the conduct of its business as presently or proposed to be conducted. Section 6.4 Compliance with Laws. The Issuer will comply in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. Section 6.7 Inspection of Property, Books and Records. The Issuer will keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities and will permit representatives of the Holder at the Holder's expense to visit and inspect any of its respective properties, to examine and make abstracts from any of its respective books and records and to discuss its respective affairs, finances and accounts with its respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. ARTICLE VII EVENTS OF DEFAULT; REMEDIES Section 7.1 Events of Default. "Event of Default" wherever used herein means any of the following events: (a) default in the due and punctual payment of the principal of, interest on, this Note when and as the same shall become due and payable, and continuance of such default for a period of thirty (30) calendar days; or (b) the Issuer shall fail to perform, or observe any covenant, agreement or obligation of the Issuer in this Note and the continuance of such default for a period of forty-five (45) calendar days after there has been given to the Issuer by a Holder a written notice specifying such default and requiring it to be remedied; or (c) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Issuer a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer under the Bankruptcy Code or any other Federal or State law, or appointing a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Issuer or of any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order unstated and in effect for a period of 90 calendar days; or (d) the institution by the Issuer of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable Federal or State law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Issuer or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Issuer in furtherance of any such action; or (e) (i) the Issuer is unable to pay its debts as they fall due, stops, or suspends or threatens in writing to stop or suspend payment of all or any material part of its debts (other than debts contested in good faith by appropriate proceedings), begins negotiations or takes any proceeding or other step with a view to readjustment, rescheduling or deferral of all of its Indebtedness (or any material thereof) that it will or might otherwise be unable to pay when due or seeks the appointment of a statutory manager or proposes in writing or makes a general assignment or an arrangement or composition with or for the benefit of its creditors or any group or class thereof or files a petition for suspension of payments or other relief of debtors of for bankruptcy or is declared bankrupt or a moratorium or statutory management is agreed or declared with respect of or affecting all or any material part of the Indebtedness of the Issuer, or (ii) the Issuer ceases or threatens in writing to cease to carry all or any material part of the business carried on by the Issuer taken as a whole and as a result of such cessation or threat of cessation, the Issuer will not be able to perform or comply with its payment obligations under this Notes. Section 7.2 Acceleration of Maturity, Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case any Holder may rescind any Conversion Notice given to the Issuer (but only if the Conversion Shares or the Interest Shares so requested have not then been issued) and obtain payment in immediately available funds for the entire outstanding principal amount of the Note that remains unconverted and unredeemed and all interest accrued thereon, by a notice in writing to the Issuer, and upon any such declaration the principal amount of this Note shall become immediately due and payable by virtue of such rescission. Section 7.3 Remedies Not Waived. No course of dealing between the Issuer and the Holder or any delay in exercising any rights hereunder shall operate as a waiver by the Holder. ARTICLE VIII MISCELLANEOUS Section 8.1 Register. (a) The Issuer shall keep at its principal office a register in which the Issuer shall provide for the registration of this Note. Upon any transfer of this Note in accordance with the terms of this Note, the Issuer shall register such transfer in the Note register. (b) The Issuer, may deem the person in whose name this Note shall be registered upon the registry books of the Issuer to be, and may treat it as, the absolute power if this Note (whether or not this Note shall be overdue) for the purpose of receiving payment of interest on or principal of this Note, for the conversion of this Note and for all other purposes, and the Issuer shall not be affected by any notice to the contrary. All such payments and such conversions shall be valid and effective to satisfy and discharge the liability upon this Note to the extent of the sum or sums so paid or the conversion or conversions so made. Section 8.2 Withholding. To the extent required by applicable law, the Issuer may withhold amounts for or on account of any taxes imposed or levied by or on behalf of any taxing authority in the United States having jurisdiction over the Issuer from any payments made pursuant to this Note. Section 8.3 Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of California. Section 8.4 Headings. The headings of the Articles and Sections of this Note are solely for convenience only and do not constitute a part of this Note. IN WITNESS WHEREOF, the Issuer has caused this Note to be signed by its duly authorized officer and attested by its duly authorized officer, on the date of this Note. e-NET FINANCIAL.COM CORPORATION By: /s/ Scott Presta Name: Scott Presta ---------------------- Title: Director ATTEST: By: ---------------------------------- Name: ------------------------- Title: ------------------------- ANNEX I E-NET FINANCIAL.COM CORPORATION REDEEMABLE CONVERTIBLE 10% NOTE ANNEX OF DEFINED TERMS "Common Shares" or "Common Stock" shall mean shares of the Common Stock, $.001 par value of the Issuer. "Conversion Date" shall mean any day on which all or some part of the principal amount of this Note is converted into Conversion Shares in accordance with the terms of this Note. "Conversion Notice" shall have the meaning set forth in Section 3.2. "Conversion Price" shall have the meaning set forth in Section 3.1. "Conversion Shares" shall mean all Common Shares issued or issuable upon conversion of this Note, including the Interest Shares, if any. "Event of Default" shall have the meaning set forth in Section 7.1. "Holder" means EMB Corporation and any subsequent holder hereof or of any Notes for which this Note is exchanged pursuant to Article 2. "Indebtedness" shall mean the (i) all indebtedness of the Issuer or other obligations for borrowed money or other claims which would, in accordance with generally accepted accounting principles, be classified as a liability on the balance sheet of the Issuer. "Interest Shares" shall mean any Conversion Shares issued or issuable, at the election of any Note holder, in lieu of interest accrued on any Note at the time of conversion. "Issuer" shall mean e-Net Financial.Com Corporation and any successor corporation by merger, consolidation, sale or exchange of all or substantially all of the Issuer's assets, or otherwise. "Note" shall mean this Redeemable Convertible 10% Note or such other Note or Notes exchanged therefor as provided in Section 2.1. "Person" shall mean an individual , a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof . "SEC" shall mean the United States Securities and Exchange Commission. "Securities Act" shall mean the United States Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as in effect at the time. "Valuation Period" shall have the meaning set forth in Section 3.1. 2 ANNEX II E-NET FINANCIAL.COM CORPORATION REDEEMABLE CONVERTIBLE 10% NOTE NOTICE OF CONVERSION (To be Executed by the Registered Holder in order to Convert any Note) The undersigned hereby irrevocably elects to convert $_________ of the above Note into Shares of Common Stock of e-Net Financial.Com Corporation (the "Company") according to the conditions set forth in such Note, as of the date written below. If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date of Conversion:_________________ Conversion Price:____________________ Name of Holder:_____________________ Address:______________________________ ______________________________ Signature:_______________________________________ (Print Name and Title of Signatory) EX-10.8 10 doc9.txt REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June __, 2001, is entered into by and among e-Net Financial.com Corporation, a Nevada corporation (the "COMPANY"), and Williams de Broe, an investment banking firm domiciled in England, United Kingdom ("WDB"). WHEREAS: A. In connection with the Settlement Agreement by and among the Company, WdB and certain other parties entered into contemporaneously with this Agreement (the "SETTLEMENT AGREEMENT"), the Company has agreed, upon the terms and subject to the conditions of the Settlement Agreement, to issue to WdB 3,000,000 shares of the Company's common stock, $.001 par value per share (the "COMMON STOCK"); and B. To induce WdB to execute and deliver the Settlement Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "1933 ACT"), and applicable state securities laws. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and WdB hereby agree as follows: 1. DEFINITIONS. ----------- As used in this Agreement, the following terms shall have the following meanings: a. "INVESTOR" means WdB, any transferee or assignee thereof to whom WdB assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9. b. "PERSON" means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency. c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous basis ("RULE 415"), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (the "SEC"). d. "REGISTRABLE SECURITIES" means the Common Stock and any shares of capital stock issued or issuable with respect to the Common Stock as a result of any stock split, stock dividend, recapitalization, exchange, anti-dilution rights, liquidated damages payment or similar event or otherwise. e. "REGISTRATION STATEMENT" means a registration statement of the Company filed under the 1933 Act and pursuant to Rule 415. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Settlement Agreement. 2. REGISTRATION. ------------ a. Piggy-Back Registrations. If at any time prior to the expiration of ------------------------ the Registration Period (as defined in Section 3(a)) the Company proposes to file with the SEC a Registration Statement relating to an offering for its own account or the account of others under the 1933 Act of any of its securities (other than on Form S-8 (or its equivalent at such time) relating to equity securities issuable in connection with stock option or other employee benefit plans or on Form S-4 (or its equivalent at such time) relating to equity securities issuable in connection with a business combination) the Company, if, --- and only if, (i) the Company, in its sole discretion, deems that it would not be - -------------------------------------------------------------------------------- contrary to the best interests of the Company and its stockholders and (ii) the - -------------------------------------------------------------------------------- managing underwriter(s), if any, involved in an offering of the Company's - -------------------------------------------------------------------------------- securities which are the subject of the Registration Statement shall approve in - -------------------------------------------------------------------------------- the manner set forth hereinbelow, shall promptly send to each Investor written - ----------------------------------- notice of the Company's intention to file a Registration Statement and of such Investor's rights under this Section 2(a) and, if within twenty (20) days after receipt of such notice, such Investor shall so request in writing, the Company shall include in such Registration Statement all or any part of the Registrable Securities such Investor requests to be registered, subject to the priorities set forth in Section 2(b) below. The obligations of the Company under this Section 2(a) may be waived by WdB or an Investor, as the case may be. If an offering in connection with which an Investor is entitled to registration under this Section 2(b) is an underwritten offering, then each Investor whose Registrable Securities are included in such Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and conditions as other shares of Company common stock included in such underwritten offering. If a registration pursuant to this Section 2(a) is to be an underwritten public offering and the managing underwriter(s) advise the Company in writing, that in their reasonable good faith opinion, marketing or other factors dictate that a limitation on the number of shares of Company common stock which may be included in the Registration Statement is necessary to facilitate and not adversely affect the proposed offering, then the Company shall include in such registration: (1) first, all securities the Company proposes to sell for its own account, (2) second, up to the full number of securities proposed to be registered for the account of the holders of securities entitled to inclusion of their securities in the Registration Statement by reason of demand registration rights, and (3) third, the securities requested to be registered by the Investor and other holders of securities entitled to participate in the registration, as of the date hereof, drawn from them pro rata based on the number each has requested to be included in such registration. b. Allocation of Registrable Securities. If there be more than one --------------------------------------- Investor at the time of a Section 2(a) event, the initial number of Registrable Securities included in any Registration Statement and each increase in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held, or which could be held, by each Investor at the time the Registration Statement covering such initial number of Registrable Securities or increase thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers any of such Person's Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining number of Registrable Securities included in such Registration Statement for such transferor. Any shares of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then held by such Investors. c. Legal Counsel. In the event that shares of Common Stock held by the ------------- Investors are included in a Registration Statement as provided for in Section 2(a) hereof and subject to Section 5 hereof, the Investor holding a majority-in-interest of Registrable Securities that are the subject of the relevant Registration Statement shall have the right to select one legal counsel to review and oversee any offering pursuant to Section 2(a) ("LEGAL COUNSEL"). The Company shall reasonably cooperate with Legal Counsel in performing the Company's obligations under this Agreement. 3. RELATED OBLIGATIONS. -------------------- Whenever an Investor has requested that any Registrable Securities be registered pursuant to Section 2(a), the Company will use commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations: a. The Company use commercially reasonable efforts to cause such Registration Statement (which shall not contain any untur statement of a material fact or omit to state a material facat required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading), that relates to the Registrable Securities to become effective as soon as possible after such filing and keep such Registration Statement effective pursuant to Rule 415 at all times until the date as of which the Investors shall have sold all of the Registrable Securities included in the Registration Statement, unless the same may be sold without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto), in which event the Company may terminate the effetiveness of such Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) (the "REGISTRATION PERIOD"). b. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. c. The Company shall permit Legal Counsel to review and comment upon a Registration Statement and all amendments and supplements thereto at least seven (7) days prior to their filing with the SEC, and not file any document in a form to which Legal Counsel reasonably objects. The Company shall not submit a request for acceleration of the effectiveness of a Registration Statement or any amendment or supplement thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably withheld. The Company shall furnish to Legal Counsel, without charge, (i) any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to any Registration Statement, (ii) promptly after the same is prepared and filed with the SEC, one copy of any Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits and (iii) upon the effectiveness of any Registration Statement, one copy of the prospectus included in such Registration Statement and all amendments and supplements thereto. d. The Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any Registration Statement, ten (10) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor. e. The Company shall use reasonable efforts to (i) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or "blue sky" laws of such jurisdictions in the United States as Legal Counsel or any Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel and each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or "blue sky" laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose. f. In the event Investors who hold a majority-in-interest of the Registrable Securities being offered in the offering select underwriters for the offering, the Company shall enter into and perform its obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the underwriters of such offering. g. As promptly as practicable after becoming aware of such event, the Company shall notify Legal Counsel and each Investor in writing of the happening of any event as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission 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 were made, not misleading, and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to Legal Counsel and each Investor (or such other number of copies as Legal Counsel or such Investor may reasonably request). The Company shall also promptly notify Legal Counsel and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel and each Investor by facsimile on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. h. The Company shall use commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify Legal Counsel and each Investor who holds Registrable Securities being sold (and, in the event of an underwritten offering, the managing underwriters) of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose. i. At the request of any Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) if required by an underwriter, a letter, dated such date, from the Company's independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, and (iii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the underwriters and the Investors. j. The Company shall make available for inspection by (i) any Investor, (ii) Legal Counsel, (iii) any underwriter participating in any disposition pursuant to a Registration Statement, (iv) one firm of accountants or other agents retained by the Investors, and (v) one firm of attorneys retained by such underwriters (collectively, the "INSPECTORS") all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the "RECORDS"), as shall be reasonably deemed necessary by each Inspector, and cause the Company's officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall hold in strict confidence and shall not make any disclosure (except to an Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (x) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (y) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (z) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement of which the Inspector has knowledge. Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. k. The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor's expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. l. If requested by the managing underwriters or an Investor, the Company shall (i) immediately incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters and the Investors agree should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and any other terms of the underwritten (or best efforts underwritten) offering of the Registrable Securities to be sold in such offering; (iii) make all required filings of such prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement if requested by a shareholder or any underwriter of such Registrable Securities. m. The Company shall use commercially reasonable efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities. n. The Company shall otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder and the Company shall use commercially reasonable efforts to file with the SEC in a timely manner all reports and documents required of the Company under the 1933 Act and the 1934 Act (as defined in Section 6(a)). o. Within two (2) business days after the Registration Statement which includes the Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that the Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A. ---------- p. The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investors of Registrable Securities pursuant to a Registration Statement. 4. OBLIGATIONS OF THE INVESTORS. ------------------------------- a. At least seven (7) days prior to the first anticipated filing date of the Registration Statement which shall include share of Common Stock held by the Investors, the Company shall notify each Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of such Investor's Registrable Securities included in such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself and the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. b. Each Investor by such Investor's acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor's election to exclude all of such Investor's Registrable Securities from such Registration Statement. c. In the event any Investor elects to participate in an underwritten public offering pursuant to Section 2, each such Investor agrees to enter into and perform such Investor's obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the managing underwriter of such offering and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Securities. 5. EXPENSES OF REGISTRATION. -------------------------- All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company. 6. INDEMNIFICATION. --------------- In the event any Registrable Securities are included in a Registration Statement under this Agreement: a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor who holds such Registrable Securities, the directors, officers, partners, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"), and any underwriter (as defined in the 1933 Act) for the Investors, and the directors and officers of, and each Person, if any, who controls, any such underwriter within the meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint or several, (collectively, "INDEMNIFIED DAMAGES") incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto ("CLAIMS"), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other "blue sky" laws of any jurisdiction in which Registrable Securities are offered ("BLUE SKY FILING"), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or (iv) any material violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, "VIOLATIONS"). The Company shall reimburse the Investors and each such underwriter or controlling person, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person or underwriter for such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(d); (ii) with respect to any preliminary prospectus, shall not inure to the benefit of any such person from whom the person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such person) if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected in the prospectus, as then amended or supplemented, if such prospectus was timely made available by the Company pursuant to Section 3(d), and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used it; (iii) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(d); and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 10. b. In connection with any Registration Statement in which an Investor is participating, each such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement, each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any Indemnified Party may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(d), such Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 10. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented. c. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in any distribution, to the same extent as provided above, with respect to information such persons so furnished in writing expressly for inclusion in the Registration Statement. d. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Company shall pay reasonable fees for only one separate legal counsel for the Investors, and such legal counsel shall be selected by the Investors holding a majority-in-interest of the Registrable Securities included in the Registration Statement to which the Claim relates. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person that relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action. e. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred. f. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law. 7. CONTRIBUTION. ------------ To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities. 8. REPORTS UNDER THE 1934 ACT. ------------------------------ With a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration ("RULE 144"), the Company agrees to: a. make and keep public information available, as those terms are understood and defined in Rule 144; b. file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company's obligations under Section 4(c) of the Settlement Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and c. furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the investors to sell such securities pursuant to Rule 144 without registration. 9. ASSIGNMENT OF REGISTRATION RIGHTS. ------------------------------------ The rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act and applicable state securities laws; provided, however, that the transferee or assignee may subsequently transfer or assign all or any portion of the Registrable Securities if an exemption from registration under the 1933 Act is applicable to such transfer or assignment; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements of the Settlement Agreement. 10. AMENDMENT OF REGISTRATION RIGHTS. ----------------------------------- Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investors who then hold one hundred percent (100%) of the Registrable Securities. 11. MISCELLANEOUS. ------------- a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities. b. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to the Company: e-Net Financial.com Corporation 3200 Bristol Street, Suite 700 Costa Mesa, California 92626 USA Attention: Vincent Rinehart If to WdB: Williams de Broe 6 Broadgate London, EC2M-2RP England Attention: Julian Parker And, if to any Investor other than WdB, to the last known address of such Investor, and if none is available, then to the Investor in care of WdB; or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party five days prior to the effectiveness of such change. c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. d. This Agreement shall be governed by and construed in all respects by the internal laws of the State of California (except for the proper application of the United States federal securities laws), without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of California. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the County of Orange, State of California, for the adjudication of any dispute hereunder. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. e. This Agreement and the Settlement Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement and the Settlement Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof. f. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto. g. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. h. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. i. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. j. All consents and other determinations to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by Investors holding a majority-in-interest of the Registrable Securities. k. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party. l. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. [SIGNATURES ON FOLLOWING PAGE] IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of day and year first above written. COMPANY: WdB: E-NET FINANCIAL.COM CORPORATION WILLIAMS de BROE By: /s/ Vincent Rinehart By: Vincent Rinehart, President (name and title) EXHIBIT A --------- FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT [TRANSFER AGENT] Attn: Re: e-NET FINANCIAL.COM CORPORATION --------------------------------- Ladies and Gentlemen: We are counsel to e-Net Financial.com Corporation, a Nevada corporation (the "COMPANY"). Pursuant to that certain Settlement Agreement (the "SETTLEMENT AGREEMENT") entered into by and among the Company, Williams de Broe ("WDB") and certain other parties, the Company issued to WdB 3,000,000 shares of its common stock, par value $ 0.001 per share (the "COMMON SHARES"). In connection with the Settlement Agreement, the Company also has entered into a Registration Rights Agreement with WdB (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed, among other things and subject to certain limitations, to register the Registrable Securities (as defined in the Registration Rights Agreement), consisting of the Common Shares, under the Securities Act of 1933, as amended (the "1933 ACT"). In connection with the Company's obligations under the Registration Rights Agreement, on _________, 200_, the Company filed a Registration Statement on Form [S-1] (File No. _____________) (the "REGISTRATION STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities which names each of those persons or entities identified below (the "HOLDERS") as a selling stockholder thereunder. In connection with the foregoing, we advise you that a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement. Very truly yours, [ISSUER'S COUNSEL] By:________________________ [LIST NAMES OF HOLDERS] EX-10.9 11 doc10.txt INVESTMENT AGREEMENT -------------------- This INVESTMENT AGREEMENT (this "Agreement") is by and between E-Net Financial.com, Inc. (the "Company") and Laguna Pacific Partners, LP ("Laguna") and is executed on , 2001 (the "Closing Date"). Upon execution of this Agreement, Laguna shall provide to the Company $200,000 (the "Principal"), via wire transfer (the "Investment"). The terms of the Investment shall be as follows: 1. The Principal shall be repaid in accordance with that certain Promissory Note, a form of which is attached hereto as Exhibit "A". In the ----------- event a payment date falls on a weekend or holiday, then the applicable payment date shall be the next business day after the payment date. All payments shall be made in the name of Laguna Pacific Partners, LP, and shall be addressed as follows: Laguna Pacific Partners, LP; 18301 Von Karman Avenue, Suite 850; Irvine, California 92612-1008, Attn: Lawrence W. Horwitz. 2. The obligations of the Company shall be secured as follows: (1) a UCC-1 first priority Financing Statement encumbering all of the assets of the Company, including, but not limited to, its accounts receivable, intellectual property, furniture, fixtures and equipment, but NOT the assets of the subsidiaries; and (b) all shares of the Company shall be pledged by Vincent Rinehart, with a blank stock power providing Laguna with the right to transfer such shares to Laguna Pacific Partners, LP brokerage account (account information to be delivered at that time) in the event of default hereunder and sell the shares in order to collect any unrecovered funds from cash receivables of Company. Laguna shall have the right to inspect any and all books and records of the Company upon one day's written notice. In the event the Company fails to comply with the previous sentence, it shall be deemed to be in breach of this Agreement at which time, all outstanding principal, late fee(s) and/or default payment(s) will become immediately due and payable in full. In the event of a default, in addition to all other remedies provided by law, Laguna shall be entitled to attach all receivables of the Company and its subsidiaries and collect all such funds. 3. Laguna shall receive the following return for its investment hereunder: it shall receive a Warrant to receive $225,000 in stock (calculated in accordance with the terms of the Warrant, a form of which attached hereto as Exhibit "B"); the aggregate exercise price of this Warrant shall be $1.00 in - ------------ total. At all times during which any of the principal remains outstanding, the - --- amount of such Warrant shall be $225,000 plus any amounts subject to the adjustment set forth in the Warrant. The shares underlying the Warrant shall be entitled to the registration rights set forth in the Warrant. 4. The parties hereto understand that this Agreement has been prepared by Lawrence W. Horwitz. In preparing this Agreement, Mr. Horwitz is representing only Laguna Pacific Partners, LP. The Company has retained independent counsel to review and advise the Company regarding the legal and financial implications of this Agreement and associated Exhibits. 5. In the event of a dispute related to or arising from the terms of this Agreement, such dispute shall be resolved in Orange County, California and the prevailing party shall be entitled to all attorneys' fees and costs. This Agreement shall be interpreted in accordance with Delaware law. This Agreement reflects the entire understanding of the parties hereto regarding the matters set forth herein. This Agreement may only be amended with the express written mutual consent of Laguna and the Company. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. E NET FINANCIAL.COM, INC. By: /s/ Vincent Rinehart Vincent R. Rinehart Its: President & CEO LAGUNA PACIFIC PARTNERS, LP By: /s/ Lawrence W. Horwitz Lawrence W. Horwitz Its: President of General Partner, Strawberry Canyon Capital, Inc. By: /s/ Thomas H. Ehrlich Thomas H. Ehrlich Its: President of General Partner, Manhattan Network, Inc. FOR THE LIMITED PURPOSE OF THE STOCK PLEDGE SET FORTH HEREIN: By: /s/ Vincent Rinehart Vincent Rinehart EXHIBIT "A" ----------- FORM OF SECURED PROMISSORY NOTE EXHIBIT "A" ----------- SECURED PROMISSORY NOTE $200,000 Dated: ____________, 2001 1. Principal. For value received, E-Net Financial.com, Inc., a --------- corporation and all of its subsidiary and affiliated corporations, jointly and severally ("Maker"), promises to pay to the order of Laguna Pacific Partners, ----- LP, a Delaware limited partnership ("Holder"), at 18301 Von Karman Avenue, Suite ------ 850; Irvine, California 92612-1008, or at such other place as Holder may designate in writing, the principal sum of $200,000 (the "Obligation"), which ---------- represents the principal amount to be advanced by Holder to Maker plus all accrued interest. 2. Interest. Interest on the unpaid principal amount of the Obligation -------- outstanding shall accrue at a rate per month equal to 7% percent per annum. Computations of interest shall be made on the basis of a 30-day month, and the actual number of days elapsed. 3. Payments. Maker shall pay to Holder the Obligation in the following -------- manner: (a) One payment consisting of principal and interest on the Maturity Date (as defined below). (b) "Maturity Date" shall mean the sooner to occur of either: (1) nine ------------- months from the date of this Note; or (2) the listing of Maker upon the NASDAQ Small Cap market stock exchange. 4. Transaction. This Note is the Promissory Note issued by Maker to ----------- Holder to evidence the Obligation. 5. Prepayment. Maker shall be entitled to prepay this Note prior to ---------- the Maturity Date without premium or penalty, provided, however, the terms of the related Warrant shall remain in full force and effect. 6. Applications of Payments. Payments received by Holder pursuant to -------------------------- the terms hereof shall be applied in the following manner: (1) to the payment of all expenses, charges, late payment fees, costs and fees incurred by or payable to Holder and for which Maker is obligated pursuant to the terms of this Note; (2) to the payment of all interest accrued to the date of such payment; and (3) to the payment of principal. 7. Security. As security and collateral for the Obligation, Maker -------- hereby grants to Holder a continuing security interest in, and assigns to Holder, all of Maker's interest in all of its assets. Any stock and assets held by Holder shall be returned to Maker upon payment in full of this note. Maker further agrees to pledge all stock issued by each of its subsidiaries by delivering original certificates to the law offices of Senn, Palumbo and Meulemans, LLP, with a blank stock power and medallion guarantee. 8. Events of Default. The occurrence of any of the following events ------------------- shall constitute an Event of Default hereunder (a) Failure of Maker to pay the principal and interest upon the Maturity (b) Failure of Maker to pay any amount or perform any obligation under the Agreement; (c) Maker shall admit in writing his inability to, or be generally unable to, pay his undisputed debts as such undisputed debts become due; (d) Maker shall: (1) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of all or a substantial part of his property; (2) make a general assignment for the benefit of his creditors; (3) commence a voluntary case under the United States Bankruptcy Code; (4) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of debts; (5) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against him in an involuntary case under the United States Bankruptcy Code; or (6) take any action for the purpose of effecting any of the foregoing; (e) A proceeding or case shall be commenced, without the application or consent of Maker, in any court of competent jurisdiction, seeking: (1) his financial reorganization, liquidation or arrangement, or the composition or readjustment of his debts, (2) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of Maker or of all or any substantial part of his property; or (3) similar relief in respect of Maker under any law relating to bankruptcy, insolvency, reorganization or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 30 or more days; or an order for relief against Maker shall be entered in an involuntary case under the United States Bankruptcy Code; or (f) A final judgment or judgments issued by a court of competent jurisdiction for the payment of money in excess of $5,000 in the aggregate (exclusive of judgment amounts fully covered by insurance where the insurer has admitted liability in respect of such judgment) or in excess of $10,000 in the aggregate (regardless of insurance coverage) shall be rendered by a one or more governmental persons having jurisdiction against Maker and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution of the relevant judgment shall not be procured, within 30 days from the date of entry of such judgment and Maker shall not, within that 30-day period, or such longer period during which execution of the same shall have been stayed, appeal from and cause the execution of such judgment to be stayed during such appeal. 9. Remedies; Late Payment Penalty; Default Interest Rate. Upon the --------------------------------------------------------- occurrence of an Event of Default and without demand or notice, Holder may declare the principal amount then outstanding of, and the accrued interest on, the Obligation of Maker to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Maker and Maker may exercise all rights and remedies available to it under the Agreement or any succeeding agreement). 10. Waiver. Maker hereby waives diligence, presentment, protest and ------ demand, notice of protest, dishonor and nonpayment of this Note and expressly agrees that, without in any way affecting the liability of Maker hereunder, Holder may extend any maturity date or the time for payment of any installment due hereunder, accept security, release any party liable hereunder and release any security now or hereafter securing this Note. Maker further waives, to the full extent permitted by law, the right to plead any and all statutes of limitations as a defense to any demand on this Note, or on any deed of trust, security agreement, lease assignment, guaranty or other agreement now or hereafter securing this Note. 11. Attorneys' Fees; Costs. Maker agrees to pay to Holder all costs ------------------------ and expenses including attorneys' fees and costs, incurred by Holder in connection with the negotiation, preparation or execution of the Loan and this Note. If this Note is not paid when due or if any Event of Default occurs, Maker promises to pay all costs of enforcement and collection, including but not limited to, Holder's attorneys' fees, whether or not any action or proceeding is brought to enforce the provisions hereof. 12. Severability. Every provision of this Note is intended to be ------------ severable. In the event any term or provision hereof is declared by a court of competent jurisdiction, to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. 13. Interest Rate Limitation. Holder and Maker stipulate and agree -------------------------- that none of the terms and provisions contained herein or in the Agreement shall ever be construed to create a contract for use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of the State of California. In such event, if any Holder of this Note shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of the State of Delaware, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of Holder, be credited to the payment of the sums due hereunder or returned to Maker. 14. Number and Gender. In this Note the singular shall include the ------------------- plural and the masculine shall include the feminine and neuter gender, and vice versa, if the context so requires. 15. Headings. Headings at the beginning of each numbered paragraph of -------- this Note are intended solely for convenience and are not to be deemed or construed to be a part of this Note. 16. Choice of Law. This Note shall be governed by and construed in --------------- accordance with the laws of the State of California. Any action to enforce this Note shall be brought in state or federal courts located in Orange County, California. 17. Miscellaneous. ------------- (a) All notices and other communications provided for hereunder shall be in writing and shall be delivered by United States mail, certified or registered, return receipt requested to the respective party at the address provided in the Agreement or otherwise provided for such purpose. (b) No failure or delay on the part of Holder or any other holder of this Note to exercise any right, power or privilege under this Note and no course of dealing between Maker and Holder shall impair such right, power or privilege or operate as a waiver of any default or an acquiescence therein, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative to, and not exclusive of, any rights or remedies, which Holder would otherwise have. No notice to or demand on Maker in any case shall entitle Maker to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Holder to any other or further action in any circumstances without notice or demand. (c) Maker and any endorser of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice. (d) Maker may not assign its rights or obligations hereunder without prior written consent of Holder. Subject to compliance with applicable federal and state securities laws, Holder may: (1) assign all or any portion of this Note without the prior consent of Maker; or (2) sell or agree to sell to one or more other persons a participation in all or any part of the Note without the prior consent of Maker. Upon surrender of the Note, Maker shall execute and deliver one or more substitute notes in such denominations and of a like aggregate unpaid principal amount or other amount issued to Holder and/or to Holder's designated transferee or transferees. Holder may furnish any information in the possession of Holder concerning Maker, or any of its respective subsidiaries, from time to time to assignees and participants (including Prospective assignees and participants). (e) It is hereby acknowledged that Lawrence W. Horwitz and the law firm of Senn Palumbo Meulemans, LLP have a conflict of interest in preparing this Note. As a result, such parties are only representing the Holder in connection with the preparation and execution of this Note. The Maker has acknowledged that it has retained independent counsel in connection with such representation. Maker releases Holder, Lawrence W. Horwitz and Senn Palumbo Meulemans, LLP from any conflicts of interest pertaining to all documents drafted in formation of subsidiary, Mr. Ehrlich, Mr. Horwitz and Holder. IN WITNESS WHEREOF, Maker has caused this Note to be duly executed and delivered to Holder as of the day and year and at the place first above written. "MAKER" E NET FINANCIAL.COM, INC. By:_____________________________ _____________________________ Its:____________________________ "HOLDER" LAGUNA PACIFIC PARTNERS, LP By: ________________________________ By: ____________________________ Lawrence W. Horwitz Thomas H. Ehrlich Its: President of General Partner, Its: President of General Partner, Strawberry Canyon Capital, Inc. Manhattan Network, Inc. EXHIBIT "B" ----------- FORM OF WARRANT AGREEMENT EXHIBIT "B" ----------- WARRANT AGREEMENT ----------------- This WARRANT AGREEMENT (this "Agreement") is made and entered into as of , 2001, between E-Net Financial, Inc., a Nevada corporation (the "Company") and Laguna Pacific Partners, LP, a Delaware limited partnership ("Holder"). R E C I T A L S --------------- WHEREAS, the Company proposes to issue to Holder $225,000 in warrants, subject to adjustment set forth herein (the "Warrants"), each such Warrant entitling the holder thereof to purchase shares of Common Stock of the Company (the "Exercise Shares," "Shares," or the "Common Stock"); and WHEREAS, the Warrants which are the subject of this Agreement will be issued by the Company to Holder as part of consideration payable to Holder in connection with a loan by the Holder pursuant to the terms of that certain Secured Promissory Note, of even date herewith (the "Note"). NOW, THEREFORE, in consideration of the promises and the mutual agreements herein set forth, the parties hereto agree as follows: A G R E E M E N T ----------------- 1. Warrant Certificates. The warrant certificates will be delivered to -------------------- Laguna Pacific Partners, LP immediately upon the signing of this Agreement (the "Warrant Certificates") and shall be in the form set forth in Exhibit A, --------- attached hereto and made a part hereof, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Warrant Agreement. 2. Right to Exercise Warrants. Each Warrant may be exercised from the --------------------------- date of this Agreement until 11:59 P.M. (Pacific time) on , 2005 (the "Expiration Date"). The aggregate exercise price of this Warrant, regardless of the number of shares into which it is exercised, shall be $1.00 in total (the "Exercise Price"). The number of shares into which this Warrant may be exercised shall be defined herein as the "Exercise Shares". The price at which the Exercise shares is to be calculated shall be defined as follows: (a) If the Exercise Shares are traded in the over-the-counter market and not on any national securities exchange and not in the NASDAQ Reporting System, the number of Exercise Shares shall be calculated using 70% of the trading price calculated as follows: the closing price, for the last business day prior to the date on which this Warrant is exercised, or, if not so reported, the average of the closing bid and asked prices for an Exercise Share as of the date of exercise. (b) If the Exercise Shares are listed on the NASDAQ Reporting System, the closing price on the principal national securities exchange on which they are so listed or traded or in the NASDAQ Reporting System, as the case may be, on the last business day prior to the date of the exercise of this Warrant. The closing price referred to in this Clause (b) shall be the last reported sales price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case on the national securities exchange on which the Exercise Shares are then listed or in the NASDAQ Reporting system. 3. Mutilated or Missing Warrant Certificates. In case any of the --------------------------------------------- Warrant Certificates shall be mutilated, lost, stolen or destroyed prior to its expiration date, the Company shall issue and deliver, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and in substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent right or interest. 4. Reservation of Shares. The Company will at all times reserve and ----------------------- keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Shares or its authorized and issued Shares held in its treasury for the purpose of enabling it to satisfy its obligation to issue Shares upon exercise of Warrants, the full number of Shares deliverable upon the exercise of all outstanding Warrants. The Company covenants that all Shares which may be issued upon exercise of Warrants will be validly issued, fully paid and nonassessable outstanding Shares of the Company. 5. Rights of Holder. The Holder shall not, by virtue of anything ------------------ contained in this Warrant Agreement or otherwise, prior to exercise of this Warrant, be entitled to any right whatsoever, either in law or equity, of a stockholder of the Company, including without limitation, the right to receive dividends or to vote or to consent or to receive notice as a shareholder in respect of the meetings of shareholders or the election of directors of the Company of any other matter. 6. Investment Intent. Holder represents and warrants to the Company ------------------ that Holder is acquiring the Warrants for investment and with no present intention or reselling any of the Warrants. 7. Certificates to Bear Language. The Warrants and the certificate or ------------------------------ certificates therefor shall bear the following legend by which each holder shall be bound. "THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE." The Shares and the certificate or certificates evidencing any such Shares shall bear the following legend: "THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE." Certificates for Warrants without such legend shall be issued if such Warrants or Shares are sold pursuant to an effective registration statement under the Securities Act of 1933 (the "Act") or if the Company has received an opinion from counsel reasonably satisfactory to counsel for the Company, that such legend is no longer required under the Act. 8. Piggyback Registration Rights. If the Company at any time proposes ------------------------------ to register any of its securities under the Act, including under an SB-2 Registration Statement or otherwise, the Company will cause all of the shares of common stock underlying the Warrants owned by Holder to be registered under the Act (with the securities which the Company at the time propose to register), all to the extent requisite to permit the sale or other disposition by the Holder. 9. Indemnification. --------------- (a) In the event of any registration of any of its securities under the Act pursuant to this Section, the Company hereby indemnifies and holds harmless the Holder (which phrase shall include any underwriters of such securities), their respective directors and officers, and each other person who participates, in the offering of such securities and each other person, if any, who controls the Holder or such participating persons within the meaning of the Act, against any losses, claims, damages or liabilities, joint or several, to which each Holder or any such director or officer or participating person or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Act, any preliminary Private Placement Memorandum prospectus or final prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse each Holder and each director, officer or participating or controlling person for any legal or any other expenses reasonably incurred by the Holder or such director, officer or participating or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary prospectus or prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by the Holder specifically stating that it is for use therein. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holder or such directors, officer or participating or controlling person, and shall survive the transfer of such securities by the Holder. (b) Rule 144. If the Company shall be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company will use its best efforts timely to file all reports required to be filed from time to time with the SEC (including but not limited to the reports under Section 13 and 15(d) of the 1934 Act referred to in subparagraph (c)(1) of Rule 144 adopted by the SEC under the Act). If there is a public market for any securities of the Company at any time that the Company is not subject to the reporting of either of said Section 13 or 15(d), the Company will, upon the request of Holder, use its best efforts to make publicly available the information concerning the Company referred to in subparagraph (c)(2) of said Rule 144. The Company will furnish to Holder, promptly upon request, (i) a written statement of the Company's compliance with the requirements of subparagraphs (c)(1) or (c)(2), as the case may be, of said Rule 144, and (ii) written information concerning the Company sufficient to enable Holder to complete any Form 144 required to be filed with the SEC pursuant to said Rule 144. 10. Consolidation, Merger or Sale of the Company. If the Company is a --------------------------------------------- party to a consolidation, merger or transfer of assets which reclassifies or changes its outstanding Common Stock, the successor corporation (or corporation controlling the successor corporation or the Company, as the case may be) shall by operation of law assume the Company's obligations under this Warrant Agreement. 11. Successors. All the covenants and provisions of this Agreement by ---------- or for the benefit of the Company or Holder shall bind and inure to the benefit of their respective successor and assigns hereunder. 12. Counterparts. This Agreement may be executed in any number of ------------ counterparts and each of such counterparts shall for all proposes be deemed to be an original, and such counterparts shall together constitute by one and the same instrument. 13. Notices. Any notice, request, instruction, or other document ------- required by the terms of this Agreement, or deemed by any of the parties hereto to be desirable, to be given to any other party hereto shall be in writing and shall be given by facsimile, personal delivery, overnight delivery, or mailed by registered or certified mail, postage prepaid, with return receipt requested, to the principal business address of each of the parties hereto. The persons and addresses set forth above may be changed from time to time by a notice sent as aforesaid. If notice is given by facsimile, personal delivery, or overnight delivery in accordance with the provisions of this Section, said notice shall be conclusively deemed given at the time of such delivery. If notice is given by mail in accordance with the provisions of this Section, such notice shall be conclusively deemed given seven days after deposit thereof in the United States mail. Any change affecting Holder must be signed by Both General Partners of Laguna Pacific Partners, LP. 14. Supplements and Amendments. The Company may from time to time ---------------------------- supplement or amend this Warrant Agreement without the approval of any Holders of Warrants in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision, or to make any other provisions in regard to matters or questions herein arising hereunder which the Company may deem necessary or desirable and which shall not materially or adversely affect the interest of the Holder. 15. Severability. If for any reason any provision, paragraph or term ------------ of this Warrant Agreement is held to be invalid or unenforceable, all other valid provisions herein shall remain in full force and effect and all terms, provisions and paragraphs of this Warrant shall be deemed to be severable. 16. Governing Law and Venue. This Warrant shall be governed by the -------------------------- laws of the state of Delaware, as Laguna Pacific Partners is a limited partnership formed under the laws of Delaware. Any proceeding arising under this Warrant Agreement shall be instituted in the Orange, State of California. 17. Headings. Paragraphs and subparagraph headings, used herein are -------- included herein for convenience of reference only and shall not affect the construction of this Warrant Agreement nor constitute a part of this Warrant Agreement for any other purpose. 18. Independent Counsel. It is acknowledged that the Company has been -------------------- advised to seek independent counsel in connection with this agreement and the associated documentation. Neither Lawrence W. Horwitz, nor Senn Palumbo Meulemans, LLP are providing any legal advice to the Company in connection with this transaction, their sole representation is legal representation of Laguna Pacific Partners, LP. [SIGNATURES FOLLOW NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the date and year first above written. "COMPANY" E NET FINANCIAL.COM, INC. By: Its: "HOLDER" LAGUNA PACIFIC PARTNERS, LP By: ____________________________________ Lawrence W. Horwitz Its: President of General Partner, Strawberry Canyon Capital, Inc. By: ____________________________________ Thomas H. Ehrlich Its: President of General Partner, Manhattan Network, Inc. APPENDIX "A" ------------ FORM OF NOTICE OF EXERCISE Appendix "A" ------------ NOTICE OF EXERCISE 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 CERTAIN STATES, 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, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE. ELECTION TO PURCHASE The undersigned hereby elects irrevocably to exercise the within Warrant and to purchase _______________________ shares of Common Stock of E-Net Financial.com, Inc. and hereby makes payment of $1.00 in payment of the Exercise Price pursuant hereto. Please issue the shares as to which this Warrant is exercised in accordance with the instructions given below. The undersigned represents and warrants that the exercise of the within Warrant was solicited by the member firm of the National Association of Securities Dealers, Inc. ("NASD") listed below. If not solicited by an NASD member, please write "unsolicited" in the space below. _____________________________________________ (Insert Name of NASD Member or "Unsolicited") Dated: ________________________ Signature: ________________________________ INSTRUCTIONS FOR REGISTRATION OF SHARES Name (print) __________________________________________________________________ Address (print) _______________________________________________________________ ASSIGNMENT FOR VALUE RECEIVED, _______________________________________________ does hereby sell, assign and transfer unto _______________________________________________, the right to purchase ________________shares of Common Stock of E-Net Financial.com, Inc., evidenced by the within Warrant, and does hereby irrevocably constitute and appoint __________________________________________ attorney to transfer such right on the books of E-Net Financial.com, Inc., with full power of substitution on the premises. Dated: ________________, ________ Signature: _________________________________ Notice: The signature of Election to Purchase or Assignment must correspond with the name as written upon the face of the within Warrant in every particular without alteration or enlargement or any change whatsoever. The signature(s) must by guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with membership in an approved signature guarantee Medallion Program), pursuant to S.E.C. Rule 17Ad-15. _____________________________________________ Signature Guarantee EX-10.10 12 doc11.txt 1 SECURED PROMISSORY NOTE ----------------------- $200,000 Dated: ____________, 2001 1. Principal. For value received, E-Net Financial.com, Inc., a --------- corporation and all of its subsidiary and affiliated corporations, jointly and severally ("Maker"), promises to pay to the order of Laguna Pacific Partners, ----- LP, a Delaware limited partnership ("Holder"), at 18301 Von Karman Avenue, Suite ------ 850; Irvine, California 92612-1008, or at such other place as Holder may designate in writing, the principal sum of $200,000 (the "Obligation"), which ---------- represents the principal amount to be advanced by Holder to Maker plus all accrued interest. 2. Interest. Interest on the unpaid principal amount of the Obligation -------- outstanding shall accrue at a rate per month equal to 7% percent per annum. Computations of interest shall be made on the basis of a 30-day month, and the actual number of days elapsed. 3. Payments. Maker shall pay to Holder the Obligation in the following -------- manner: (a) One payment consisting of principal and interest on the Maturity Date (as defined below). (b) "Maturity Date" shall mean the sooner to occur of either: (1) nine -------------- months from the date of this Note; or (2) the listing of Maker upon the NASDAQ Small Cap market stock exchange. 4. Transaction. This Note is the Promissory Note issued by Maker to ----------- Holder to evidence the Obligation. 5. Prepayment. Maker shall be entitled to prepay this Note prior to ---------- the Maturity Date without premium or penalty, provided, however, the terms of the related Warrant shall remain in full force and effect. 6. Applications of Payments. Payments received by Holder pursuant to -------------------------- the terms hereof shall be applied in the following manner: (1) to the payment of all expenses, charges, late payment fees, costs and fees incurred by or payable to Holder and for which Maker is obligated pursuant to the terms of this Note; (2) to the payment of all interest accrued to the date of such payment; and (3) to the payment of principal. 7. Security. As security and collateral for the Obligation, Maker -------- hereby grants to Holder a continuing security interest in, and assigns to Holder, all of Maker's interest in all of its assets. Any stock and assets held by Holder shall be returned to Maker upon payment in full of this note. Maker further agrees to pledge all stock issued by each of its subsidiaries by delivering original certificates to the law offices of Senn, Palumbo and Meulemans, LLP, with a blank stock power and medallion guarantee. 8. Events of Default. The occurrence of any of the following events ------------------- shall constitute an Event of Default hereunder (a) Failure of Maker to pay the principal and interest upon the Maturity (b) Failure of Maker to pay any amount or perform any obligation under the Agreement; (c) Maker shall admit in writing his inability to, or be generally unable to, pay his undisputed debts as such undisputed debts become due; (d) Maker shall: (1) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of all or a substantial part of his property; (2) make a general assignment for the benefit of his creditors; (3) commence a voluntary case under the United States Bankruptcy Code; (4) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of debts; (5) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against him in an involuntary case under the United States Bankruptcy Code; or (6) take any action for the purpose of effecting any of the foregoing; (e) A proceeding or case shall be commenced, without the application or consent of Maker, in any court of competent jurisdiction, seeking: (1) his financial reorganization, liquidation or arrangement, or the composition or readjustment of his debts, (2) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of Maker or of all or any substantial part of his property; or (3) similar relief in respect of Maker under any law relating to bankruptcy, insolvency, reorganization or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 30 or more days; or an order for relief against Maker shall be entered in an involuntary case under the United States Bankruptcy Code; or (f) A final judgment or judgments issued by a court of competent jurisdiction for the payment of money in excess of $5,000 in the aggregate (exclusive of judgment amounts fully covered by insurance where the insurer has admitted liability in respect of such judgment) or in excess of $10,000 in the aggregate (regardless of insurance coverage) shall be rendered by a one or more governmental persons having jurisdiction against Maker and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution of the relevant judgment shall not be procured, within 30 days from the date of entry of such judgment and Maker shall not, within that 30-day period, or such longer period during which execution of the same shall have been stayed, appeal from and cause the execution of such judgment to be stayed during such appeal. 9. Remedies; Late Payment Penalty; Default Interest Rate. Upon the --------------------------------------------------------- occurrence of an Event of Default and without demand or notice, Holder may declare the principal amount then outstanding of, and the accrued interest on, the Obligation of Maker to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Maker and Maker may exercise all rights and remedies available to it under the Agreement or any succeeding agreement). 10. Waiver. Maker hereby waives diligence, presentment, protest and ------ demand, notice of protest, dishonor and nonpayment of this Note and expressly agrees that, without in any way affecting the liability of Maker hereunder, Holder may extend any maturity date or the time for payment of any installment due hereunder, accept security, release any party liable hereunder and release any security now or hereafter securing this Note. Maker further waives, to the full extent permitted by law, the right to plead any and all statutes of limitations as a defense to any demand on this Note, or on any deed of trust, security agreement, lease assignment, guaranty or other agreement now or hereafter securing this Note. 11. Attorneys' Fees; Costs. Maker agrees to pay to Holder all costs ------------------------ and expenses including attorneys' fees and costs, incurred by Holder in connection with the negotiation, preparation or execution of the Loan and this Note. If this Note is not paid when due or if any Event of Default occurs, Maker promises to pay all costs of enforcement and collection, including but not limited to, Holder's attorneys' fees, whether or not any action or proceeding is brought to enforce the provisions hereof. 12. Severability. Every provision of this Note is intended to be ------------ severable. In the event any term or provision hereof is declared by a court of competent jurisdiction, to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. 13. Interest Rate Limitation. Holder and Maker stipulate and agree -------------------------- that none of the terms and provisions contained herein or in the Agreement shall ever be construed to create a contract for use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of the State of California. In such event, if any Holder of this Note shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of the State of Delaware, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of Holder, be credited to the payment of the sums due hereunder or returned to Maker. 14. Number and Gender. In this Note the singular shall include the ------------------- plural and the masculine shall include the feminine and neuter gender, and vice versa, if the context so requires. 15. Headings. Headings at the beginning of each numbered paragraph of -------- this Note are intended solely for convenience and are not to be deemed or construed to be a part of this Note. 16. Choice of Law. This Note shall be governed by and construed in --------------- accordance with the laws of the State of California. Any action to enforce this Note shall be brought in state or federal courts located in Orange County, California. 17. Miscellaneous. ------------- (a) All notices and other communications provided for hereunder shall be in writing and shall be delivered by United States mail, certified or registered, return receipt requested to the respective party at the address provided in the Agreement or otherwise provided for such purpose. (b) No failure or delay on the part of Holder or any other holder of this Note to exercise any right, power or privilege under this Note and no course of dealing between Maker and Holder shall impair such right, power or privilege or operate as a waiver of any default or an acquiescence therein, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative to, and not exclusive of, any rights or remedies, which Holder would otherwise have. No notice to or demand on Maker in any case shall entitle Maker to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Holder to any other or further action in any circumstances without notice or demand. (c) Maker and any endorser of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice. (d) Maker may not assign its rights or obligations hereunder without prior written consent of Holder. Subject to compliance with applicable federal and state securities laws, Holder may: (1) assign all or any portion of this Note without the prior consent of Maker; or (2) sell or agree to sell to one or more other persons a participation in all or any part of the Note without the prior consent of Maker. Upon surrender of the Note, Maker shall execute and deliver one or more substitute notes in such denominations and of a like aggregate unpaid principal amount or other amount issued to Holder and/or to Holder's designated transferee or transferees. Holder may furnish any information in the possession of Holder concerning Maker, or any of its respective subsidiaries, from time to time to assignees and participants (including Prospective assignees and participants). (e) It is hereby acknowledged that Lawrence W. Horwitz and the law firm of Senn Palumbo Meulemans, LLP have a conflict of interest in preparing this Note. As a result, such parties are only representing the Holder in connection with the preparation and execution of this Note. The Maker has acknowledged that it has retained independent counsel in connection with such representation. Maker releases Holder, Lawrence W. Horwitz and Senn Palumbo Meulemans, LLP from any conflicts of interest pertaining to all documents drafted in formation of subsidiary, Mr. Ehrlich, Mr. Horwitz and Holder. IN WITNESS WHEREOF, Maker has caused this Note to be duly executed and delivered to Holder as of the day and year and at the place first above written. "MAKER" E NET FINANCIAL.COM, INC. By: /s/ Vincent R. Rinehart Vincent R. Rinehart Its: President & CEO "HOLDER" LAGUNA PACIFIC PARTNERS, LP By: /s/ Lawrence W. Horwitz By: s/ Thomas H. Ehrlich Lawrence W. Horwitz Thomas H. Ehrlich Its: President of General Partner, Its: President of General Partner, Strawberry Canyon Capital, Inc. Manhattan Network, Inc. EX-10.11 13 doc12.txt WARRANT AGREEMENT ----------------- This WARRANT AGREEMENT (this "Agreement") is made and entered into as of , 2001, between E-Net Financial, Inc., a Nevada corporation (the "Company") and Laguna Pacific Partners, LP, a Delaware limited partnership ("Holder"). R E C I T A L S --------------- WHEREAS, the Company proposes to issue to Holder $225,000 in warrants, subject to adjustment set forth herein (the "Warrants"), each such Warrant entitling the holder thereof to purchase shares of Common Stock of the Company (the "Exercise Shares," "Shares," or the "Common Stock"); and WHEREAS, the Warrants which are the subject of this Agreement will be issued by the Company to Holder as part of consideration payable to Holder in connection with a loan by the Holder pursuant to the terms of that certain Secured Promissory Note, of even date herewith (the "Note"). NOW, THEREFORE, in consideration of the promises and the mutual agreements herein set forth, the parties hereto agree as follows: A G R E E M E N T ----------------- 1. Warrant Certificates. The warrant certificates will be delivered to -------------------- Laguna Pacific Partners, LP immediately upon the signing of this Agreement (the "Warrant Certificates") and shall be in the form set forth in Exhibit A, --------- attached hereto and made a part hereof, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Warrant Agreement. 2. Right to Exercise Warrants. Each Warrant may be exercised from the --------------------------- date of this Agreement until 11:59 P.M. (Pacific time) on , 2005 (the "Expiration Date"). The aggregate exercise price of this Warrant, regardless of the number of shares into which it is exercised, shall be $1.00 in total (the "Exercise Price"). The number of shares into which this Warrant may be exercised shall be defined herein as the "Exercise Shares". The price at which the Exercise shares is to be calculated shall be defined as follows: (a) If the Exercise Shares are traded in the over-the-counter market and not on any national securities exchange and not in the NASDAQ Reporting System, the number of Exercise Shares shall be calculated using 70% of the trading price calculated as follows: the closing price, for the last business day prior to the date on which this Warrant is exercised, or, if not so reported, the average of the closing bid and asked prices for an Exercise Share as of the date of exercise. (b) If the Exercise Shares are listed on the NASDAQ Reporting System, the closing price on the principal national securities exchange on which they are so listed or traded or in the NASDAQ Reporting System, as the case may be, on the last business day prior to the date of the exercise of this Warrant. The closing price referred to in this Clause (b) shall be the last reported sales price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case on the national securities exchange on which the Exercise Shares are then listed or in the NASDAQ Reporting system. 3. Mutilated or Missing Warrant Certificates. In case any of the --------------------------------------------- Warrant Certificates shall be mutilated, lost, stolen or destroyed prior to its expiration date, the Company shall issue and deliver, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and in substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent right or interest. 4. Reservation of Shares. The Company will at all times reserve and ----------------------- keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Shares or its authorized and issued Shares held in its treasury for the purpose of enabling it to satisfy its obligation to issue Shares upon exercise of Warrants, the full number of Shares deliverable upon the exercise of all outstanding Warrants. The Company covenants that all Shares which may be issued upon exercise of Warrants will be validly issued, fully paid and nonassessable outstanding Shares of the Company. 5. Rights of Holder. The Holder shall not, by virtue of anything ------------------ contained in this Warrant Agreement or otherwise, prior to exercise of this Warrant, be entitled to any right whatsoever, either in law or equity, of a stockholder of the Company, including without limitation, the right to receive dividends or to vote or to consent or to receive notice as a shareholder in respect of the meetings of shareholders or the election of directors of the Company of any other matter. 6. Investment Intent. Holder represents and warrants to the Company ------------------ that Holder is acquiring the Warrants for investment and with no present intention or reselling any of the Warrants. 7. Certificates to Bear Language. The Warrants and the certificate or ------------------------------ certificates therefor shall bear the following legend by which each holder shall be bound. "THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE." The Shares and the certificate or certificates evidencing any such Shares shall bear the following legend: "THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE." Certificates for Warrants without such legend shall be issued if such Warrants or Shares are sold pursuant to an effective registration statement under the Securities Act of 1933 (the "Act") or if the Company has received an opinion from counsel reasonably satisfactory to counsel for the Company, that such legend is no longer required under the Act. 8. Piggyback Registration Rights. If the Company at any time proposes ------------------------------ to register any of its securities under the Act, including under an SB-2 Registration Statement or otherwise, the Company will cause all of the shares of common stock underlying the Warrants owned by Holder to be registered under the Act (with the securities which the Company at the time propose to register), all to the extent requisite to permit the sale or other disposition by the Holder. 9. Indemnification. --------------- (a) In the event of any registration of any of its securities under the Act pursuant to this Section, the Company hereby indemnifies and holds harmless the Holder (which phrase shall include any underwriters of such securities), their respective directors and officers, and each other person who participates, in the offering of such securities and each other person, if any, who controls the Holder or such participating persons within the meaning of the Act, against any losses, claims, damages or liabilities, joint or several, to which each Holder or any such director or officer or participating person or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Act, any preliminary Private Placement Memorandum prospectus or final prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse each Holder and each director, officer or participating or controlling person for any legal or any other expenses reasonably incurred by the Holder or such director, officer or participating or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary prospectus or prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by the Holder specifically stating that it is for use therein. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holder or such directors, officer or participating or controlling person, and shall survive the transfer of such securities by the Holder. (b) Rule 144. If the Company shall be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company will use its best efforts timely to file all reports required to be filed from time to time with the SEC (including but not limited to the reports under Section 13 and 15(d) of the 1934 Act referred to in subparagraph (c)(1) of Rule 144 adopted by the SEC under the Act). If there is a public market for any securities of the Company at any time that the Company is not subject to the reporting of either of said Section 13 or 15(d), the Company will, upon the request of Holder, use its best efforts to make publicly available the information concerning the Company referred to in subparagraph (c)(2) of said Rule 144. The Company will furnish to Holder, promptly upon request, (i) a written statement of the Company's compliance with the requirements of subparagraphs (c)(1) or (c)(2), as the case may be, of said Rule 144, and (ii) written information concerning the Company sufficient to enable Holder to complete any Form 144 required to be filed with the SEC pursuant to said Rule 144. 10. Consolidation, Merger or Sale of the Company. If the Company is a --------------------------------------------- party to a consolidation, merger or transfer of assets which reclassifies or changes its outstanding Common Stock, the successor corporation (or corporation controlling the successor corporation or the Company, as the case may be) shall by operation of law assume the Company's obligations under this Warrant Agreement. 11. Successors. All the covenants and provisions of this Agreement by ---------- or for the benefit of the Company or Holder shall bind and inure to the benefit of their respective successor and assigns hereunder. 12. Counterparts. This Agreement may be executed in any number of ------------ counterparts and each of such counterparts shall for all proposes be deemed to be an original, and such counterparts shall together constitute by one and the same instrument. 13. Notices. Any notice, request, instruction, or other document ------- required by the terms of this Agreement, or deemed by any of the parties hereto to be desirable, to be given to any other party hereto shall be in writing and shall be given by facsimile, personal delivery, overnight delivery, or mailed by registered or certified mail, postage prepaid, with return receipt requested, to the principal business address of each of the parties hereto. The persons and addresses set forth above may be changed from time to time by a notice sent as aforesaid. If notice is given by facsimile, personal delivery, or overnight delivery in accordance with the provisions of this Section, said notice shall be conclusively deemed given at the time of such delivery. If notice is given by mail in accordance with the provisions of this Section, such notice shall be conclusively deemed given seven days after deposit thereof in the United States mail. Any change affecting Holder must be signed by Both General Partners of Laguna Pacific Partners, LP. 14. Supplements and Amendments. The Company may from time to time ---------------------------- supplement or amend this Warrant Agreement without the approval of any Holders of Warrants in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision, or to make any other provisions in regard to matters or questions herein arising hereunder which the Company may deem necessary or desirable and which shall not materially or adversely affect the interest of the Holder. 15. Severability. If for any reason any provision, paragraph or term ------------ of this Warrant Agreement is held to be invalid or unenforceable, all other valid provisions herein shall remain in full force and effect and all terms, provisions and paragraphs of this Warrant shall be deemed to be severable. 16. Governing Law and Venue. This Warrant shall be governed by the -------------------------- laws of the state of Delaware, as Laguna Pacific Partners is a limited partnership formed under the laws of Delaware. Any proceeding arising under this Warrant Agreement shall be instituted in the Orange, State of California. 17. Headings. Paragraphs and subparagraph headings, used herein are -------- included herein for convenience of reference only and shall not affect the construction of this Warrant Agreement nor constitute a part of this Warrant Agreement for any other purpose. 18. Independent Counsel. It is acknowledged that the Company has been -------------------- advised to seek independent counsel in connection with this agreement and the associated documentation. Neither Lawrence W. Horwitz, nor Senn Palumbo Meulemans, LLP are providing any legal advice to the Company in connection with this transaction, their sole representation is legal representation of Laguna Pacific Partners, LP. [SIGNATURES FOLLOW NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the date and year first above written. "COMPANY" E NET FINANCIAL.COM, INC. By: /s/ Vincent R. Rinehart Vincent R. Rinehart Its: President & CEO "HOLDER" LAGUNA PACIFIC PARTNERS, LP By: /s/ Lawrence W. Horwitz Lawrence W. Horwitz Its: President of General Partner, Strawberry Canyon Capital, Inc. By: /s/ Thomas H. Ehrlich Thomas H. Ehrlich Its: President of General Partner, Manhattan Network, Inc. APPENDIX "A" ------------ FORM OF NOTICE OF EXERCISE Appendix "A" ------------ NOTICE OF EXERCISE 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 CERTAIN STATES, 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, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE. ELECTION TO PURCHASE The undersigned hereby elects irrevocably to exercise the within Warrant and to purchase _______________________ shares of Common Stock of E-Net Financial.com, Inc. and hereby makes payment of $1.00 in payment of the Exercise Price pursuant hereto. Please issue the shares as to which this Warrant is exercised in accordance with the instructions given below. The undersigned represents and warrants that the exercise of the within Warrant was solicited by the member firm of the National Association of Securities Dealers, Inc. ("NASD") listed below. If not solicited by an NASD member, please write "unsolicited" in the space below. ___________________________________________________ (Insert Name of NASD Member or "Unsolicited") Dated: ________________________ Signature: ________________________________ INSTRUCTIONS FOR REGISTRATION OF SHARES Name (print) __________________________________________________________________ Address (print) _______________________________________________________________ ASSIGNMENT FOR VALUE RECEIVED, _______________________________________________ does hereby sell, assign and transfer unto _______________________________________________, the right to purchase ________________shares of Common Stock of E-Net Financial.com, Inc., evidenced by the within Warrant, and does hereby irrevocably constitute and appoint __________________________________________ attorney to transfer such right on the books of E-Net Financial.com, Inc., with full power of substitution on the premises. Dated: ________________, ________ Signature: _____________________________________________ Notice: The signature of Election to Purchase or Assignment must correspond with the name as written upon the face of the within Warrant in every particular without alteration or enlargement or any change whatsoever. The signature(s) must by guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with membership in an approved signature guarantee Medallion Program), pursuant to S.E.C. Rule 17Ad-15. _____________________________________________ Signature Guarantee EX-10.12 14 doc13.txt NUMBER ____________ WARRANT WARRANT TO PURCHASE __________SHARES See reverse for certain definitions E-NET FINANCIAL.COM, INC. COMMON STOCK PURCHASE WARRANT Will be void if not exercised prior to 11:50 P.M. Pacific Time on , 2005 THIS CERTIFIES THAT FOR VALUE RECEIVED, LAGUNA PACIFIC PARTNERS, LP THE REGISTERED HOLDER OR ASSIGNS ("HOLDER"), Is entitled to purchase from E-Net Financial.com, Inc., a Nevada corporation (the "Company") at any time after 9:00 A.M. Pacific Time on June, 2001 at the purchase price share of $1.00 (the "Warrant Price"), the number of shares of Common Stock of the Company set forth above (the "Shares"). The number of shares purchasable upon exercise of each warrant evidenced hereby and the Warrant Price per Share shall be subject to adjustment from time to time as set forth in the Warrant Agreement referred to below. The Warrants expire on , 2005. Holders will not have any rights or privileges of shareholder of the Company prior to exercise of the Warrants. Holders of the Warrants evidenced hereby and the shares of Common Stock issuable upon exercise hereof have certain rights with respect to registration with the Securities and Exchange Commission of the Warrants and Common Stock issuable upon exercise hereof. These registration rights are set forth in that certain Warrant Agreement of even date herewith pursuant to which this Warrant Certificate has been issued. The Warrant evidenced hereby may be exercised in whole or in part by presentation of this Warrant certificate with the Purchase Form on the reverse side hereof fully executed (with a signature guarantee as provided on the reverse side hereof) and simultaneous payment of the Warrant Price (subject to adjustment) at the principal office of the Company. Payment of such price shall be made at the option of the Holder in cash or by certified check or bank draft. The Warrants evidenced hereby are part of a duly authorized issue of Common Stock Purchase Warrants with rights to purchase an aggregate of up to shares of Common Stock of the Company. Upon any partial exercise of the Warrant evidenced hereby, there shall be countersigned and issued to the Holder a new Warrant Certificate in respect of the Shares as to which the Warrants evidenced hereby shall not have been exercised. This Warrant Certificate may be exchanged at the office of the Company by surrender of this Warrant Certificate properly endorsed with a signature guarantee either separately or in combination with one or more other Warrants for one or more new Warrants to purchase the same aggregate number of Shares as evidenced by the Warrant or Warrants exchanged. No fractional Shares will be issued upon the exercise of rights to purchase hereunder, but the Company shall pay the cash value of any fraction upon the exercise of one or more Warrants. The Holder hereof may be treated by the Company and all other persons dealing with this Warrant Certificate as the absolute owner hereby, any notice to the contrary notwithstanding, and until such transfer is on such books, the Company may treat the Holder as the owner for all purposes. Dated: E-NET FINANCIAL.COM, INC. _________________________________ _____________________________ Secretary Chief Executive Officer 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 CERTAIN STATES, AND MY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) AB EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE. THE SECURITIES REPRESENTD BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF CERTAIN STATES, AND MAY BOT BE OFFERED, SOLD TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSE D OF EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICALBE STATE LAWS, (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULED UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE. ELECTION TO PURCHASE The undersigned hereby elects irrevocable to exercise the within Warrant and to purchase shares of Common Stock of E-Net Financial.com, Inc. and hereby makes payment of $1.00 in payment of the Exercise Price pursuant hereto. Please issue the shares as to which this Warrant is exercised in accordance with the instructions given below. The undersigned represents and warrants that the exercise of the within Warrant was solicited by the member firm of the National Association of Securities Dealers, Inc., ("NASD") listed below. If not solicited by an NASD member, please write "Unsolicited" in the space below. (Insert Name of NASD Member or "Unsolicited") Dated:_______________________ Signature: _______________________________ INSTRUCTIONS FOR REGISTRATION OF SHARES Name (print)_________________________________________________ Address (print)______________________________________________ ASSIGNMENT FOR VALUE RECEIVED,______________________does hereby sell, assign and transfer unto____________________, the right to purchase _______________shares of Common Stock of E-Net Financial.com, Inc., evidenced by the within full power of substitution on the premises. Dated:_______________ , 20_____ Signature:________________________ NOTICE: The signature of Election to Purchase or Assignment must correspond with the name as written upon the face of the within Warrant in every particular without alteration or enlargement or any change whatsoever. The signature(s) must be guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with membership in an approved signature guarantee Medallion Program), pursuant to S.E.C. Rule 17Ad-15. _________________________________________ Signature Guarantee EX-10.13 15 doc14.txt 1 OPERATING AGREEMENT ------------------- This OPERATING AGREEMENT (this "Agreement") is by and between E-Net Financial.com, Inc. ("Parent") and Anza Properties, Inc. ("Subsidiary"). It is acknowledged that the Subsidiary shall conduct an offering on a best efforts basis of secured bonds for the purpose of acquiring real estate. The purpose of this Agreement is to provide for the terms, pursuant to which, the Subsidiary shall be operated. 1. Thomas Ehrlich shall be the vice president of real estate acquisitions of the Subsidiary in accordance with the terms of a separate Employment Agreement. Vince Rinehart shall be the president of the subsidiary. Messrs. Ehrlich and Rinehart shall constitute the Board of Directors of the Subsidiary until termination of Mr. Ehrlich's Employment Agreement or the mutual agreement of the parties hereto. It is understood that certain clerical tasks, such as accounting and payroll of the Subsidiary shall be the responsibility of the Parent. It is further understood that the obligation of E-Net Financial, Inc. to repay the bridge loan in the amount of $200,000 is independent of the performance of the Subsidiary in successfully completing the proposed offering of Bonds. 2. Any bank account established for the Subsidiary shall require the written approval, with signatures of both Mr. Ehrlich and Mr. Rinehart for the transfer of funds of any amount in excess of $500. It is further acknowledged that the unanimous consent of Mr. Ehrlich and Mr. Rinehart shall be required in order to acquire or dispose of any real estate in connection with operations of the Subsidiary, which neither parties consent will not be unreasonably withheld without written explanation for such action. Upon Company securing national market approval, Mr. Ehrlich shall be relieved of all rights and obligations under this Agreement. 3. There shall be no lien or encumbrance placed upon the assets of the Subsidiary unless unanimously agreed by Mr. Ehrlich and Mr. Rinehart and shares issued by the Subsidiary to the Parent shall not be encumbered or otherwise transferred without the express written consent of both parties hereto. It is hereby acknowledged that Mr. Rinehart has represented that he is retaining independent counsel in connection with the development and execution of all documentation associated with the bridge financing and the bond financing referenced in this Operating Agreement. Mr. Horwitz and the law firm, Senn Palumbo Meulemans, LLP, will only represent Mr. Ehrlich and Laguna Pacific Partners, LP in connection with the execution of such documentation. Mr. Horwitz and any law firm affiliated with Mr. Horwitz provide legal representation to Mr. Ehrlich and Laguna Pacific Partners, LP only. [SIGNATURES FOLLOW NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of this 27th day of June, 2001. E NET FINANCIAL.COM, INC. By: /s/ Vincent R. Rinehart Vincent R. Rinehart Its: President & CEO ANZA PROPERTIES, INC. By: /s/ Thomas H. Ehrlich Thomas H. Ehrlich Its: Vice President EX-10.14 16 doc15.txt E-NET BOND TERM SHEET --------------------- This TERM SHEET is intended to summarize the terms pursuant to which Anza Properties, Inc., a wholly owned subsidiary of E-Net Financial.com, Inc. (the "Company") would issue secured convertible debentures (the "Bonds"). 1. The Company (OTCBB trading) would form a wholly owned subsidiary (the "Subsidiary"). 2. The Subsidiary would raise money on a best efforts basis utilizing the issuer exemption. It is understood that these best efforts are independent of any obligation on the part of the Company to pay back the $200,000 bridge loan provided by Laguna Pacific Partners, LLP. 3. These Bonds would be subject to the following terms: a. Each Bond would be in the amount of $5,000. The Subsidiary would rely upon Regulation D which provides that a private offering may be conducted with no more than 35 nonaccredited investors. b. Each Bond would provide for interest at a minimum rate of 90% of the net operating income (defined as rent less ordinary and reasonable operating expenses) payable bi-monthly, commencing the later to occur of either: (1) three months from the issuance of the Bond; or (2) the closing by the Subsidiary upon its initial real estate project. In addition, the Company would issue three-year warrants in the principal amount of 5% of the amount of the Bond investment. The exercise price of such Warrants shall be the market price of the Company upon the date the Bonds are converted. The shares underlying these warrants shall be contained in the registration statement registering the shares underlying the Bonds. In addition, each investor shall receive additional interest in Company restricted stock which shall provide an aggregate return of 15% (subject to the registration rights set forth herein). The value of the restricted stock shall be calculated as the weighted average of the trading price of the Company's stock during the 30-day period prior to the date upon which the interest is calculated. c. Proceeds from the sale of the Bonds would be used to acquire apartment complexes, or mini-warehouses/self-storage facilities located anywhere in the United States producing the highest return to Subsidiary reviewed and available from such properties at that time. d. The Bonds are for a three year term, at which time all principal would be paid back in full; however, if the public parent Company processes a NATIONAL EXCHANGE application during this three year period of time, the bondholders would be required to convert their shares into registered shares at 80% of the average closing market price during the 10 trading days proceeding NATIONAL EXCHANGE clearance. It is critical that this conversion be in the control of the Company and that the conversion take place no later than NATIONAL EXCHANGE approval to assure that the bonds provide the Company with the required equity to secure NATIONAL EXCHANGE status. Further, it is not unusual for a company to go effective with a registration statement simultaneous with a NATIONAL EXCHANGE listing (this is done with IPOs all the time). e. The Bonds will be secured with the real estate owned by the Subsidiary. The Subsidiary would be restricted from placing mortgage debt upon the Company which caused the real estate portfolio to generate less than 130% in rental income in excess of its aggregate mortgage payments. While it is contemplated that the proceeds of the Bonds may frequently be used as the initial payment to acquire real estate (to avoid the time consuming process of loan approval and to provide negotiating leverage). Up to 5% of the proceeds of the Bonds shall be used to pay off the bridge loan provided by Laguna Pacific Partners, LP and $25,000 of this 5% shall be used to provide additional working capital to the Company. 4. In addition, 25% of the proceeds derived from the issuance of the Bonds shall be allocated to costs associated with the funding of the Bonds, including, but not limited to, office overhead, marketing costs, salaries of employees, due diligence, identifying possible property acquisitions, other associated costs and general operating capital. 5. By affixing its signature below, the entities set forth below are evidencing their interest in proceeding with a bridge loan in order to finance certain costs associated with the raising of the Bond funding and to instruct legal counsel to prepare definitive documentation evidencing the terms of the proposed offering of Bonds. It is hereby understood that Lawrence W. Horwitz and the law firm of Senn Palumbo Meulemans, LLP are exclusively representing Laguna Pacific Partners, LP in the subject transaction and that the Company has its own independent counsel approving all documentation. [SIGNATURES FOLLOW ON NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of this 26th day of June, 2001. E NET FINANCIAL.COM, INC. By: /s/ Vincent R. Rinehart Vincent R. Rinehart Its: President & CEO LAGUNA PACIFIC PARTNERS, L.P. By: /s/ Lawrence W. Horwitz Lawrence W. Horwitz Its: President of General Partner, Strawberry Canyon Capital, Inc. By: /s/ Thomas H. Ehrlich Thomas H. Ehrlich Its: President of General Partner, Manhattan Network, Inc. EX-10.15 17 doc16.txt EMPLOYMENT AGREEMENT -------------------- This EMPLOYMENT AGREEMENT ("Agreement") is made, entered into, and effective as of , 2001 (the "Effective Date"), by and between Anza Properties, Inc., a Nevada corporation (the "Company" or "Subsidiary"), a wholly owned Subsidiary of E-Net Financial.com, Inc. (the "Parent Company") and Thomas Ehrlich, an individual ("Employee") (collectively, the "Parties"). R E C I T A L S --------------- A. Company is engaged in the business of acquiring, operating and selling real estate and maintains an office in the State of California. Company/Subsidiary will cause to be completed and delivered, all necessary filings with each state and federal agency any and all documents required to meet all state and federal requirements for offering Investors the opportunity to purchase Bonds from Company. B. Company desires to have an employment agreement with Employee as its Vice President of Anza Properties, subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, the Parties hereto hereby agree as follows: A G R E E M E N T ----------------- 1. Term of Employment. --------------------- a. Specified Period. Company hereby employs Employee and Employee ------------------ accepts employment with Company beginning upon the date which is 30 days from the date of this Agreement and terminating upon the earlier to occur of : (i) the liquidation of the real estate portfolio owned by the Subsidiary; or (ii) the completion of a National Exchange listing. b. Compensation. Employee shall receive a salary of $20,000 per month, ------------- during the initial one-year term of this Agreement. This amount shall be paid only by the Subsidiary and Employee shall have no recourse against the Parent Company for such salary. c. Employee shall also receive two million stock options to acquire common stock of Parent Company in the form attached hereto as Exhibit"A". If ---------- the Company is unable to provide such stock options, it shall provide Employee with opportunity to purchase the same number of shares, at the same price, with the same registration rights, as set forth in Exhibit"A". ---------- d. Employment Term Defined. "Employment term" refers to the entire -------------------------- period of employment of Employee by Company, whether for the period provided above, or whether terminated earlier as hereinafter provided or extended by mutual agreement between Company and Employee. 2. Duties and Obligations of Employee. Employee shall serve, as Vice ------------------------------------ President of the Company. Employee shall report to the Board of Directors of the Company. Employee will be placed on the Board of Directors of the Parent Company, during the term of this Agreement, notified of all meetings and open to attending meetings when it will not interfere with management of Subsidiary. Employee has full authority to make policy of the Company regarding Employee's duties and office and marketing operations. Employee must approve any documents referring to or affecting the Company and all documents produced by the Subsidiary and/or Parent Company, transferring any funds raised by the Company. The Parent Company is responsible for calculating and delivering all salary checks to Employee for disbursement to all employee's, 24 hours prior to agreed upon paydays, which are twice per month. 3. Exclusivity, Non-Disclosure. Employee agrees to perform Employee's ---------------------------- services efficiently and to the best of Employee's ability. Employee agrees throughout the term of this Agreement to devote the time and skill necessary, in employee's opinion to perform the duties as needed for the management of Subsidiary. Employee, serving, as Vice President of Subsidiary, will have complete control and authority to hire employees, set policy of employee's and terminate employee's according to accepted California Employee laws. Company authorizes Employee to choose the location of Subsidiary office, which will be rented/leased through the Company. 4. Employee Stock Option. Simultaneous with the execution of this ----------------------- Agreement, Employee shall receive an option to acquire shares of stock of the -- Parent Company as noted in Exhibit"A" attached hereto. ---------- 5. Termination of Employment. Employee shall be subject to termination ------------------------- in the event of: a. Being found guilty of criminal or fraudulent misconduct or the Subsidiary is ordered by a governmental agency to cease operations. b. Termination Upon Death or Disability. ----------------------------------------- (i) Death: This Agreement shall terminate immediately upon the death ------ of Employee. Employee's heirs or party designated, will receive prorated stock options to the amount of capital raised as of the time of death of Employee along with all unpaid salary due Employee. Company will maintain a $1 million dollar life insurance policy in favor of Employees heir or person(s) designated by Employee for term of this Employment Agreement. Such policy shall be in effect in the Company's name within 30 days from this signing. (ii) Disability: Company reserves the right to terminate this Agreement if, ----------- due to illness or injury, either physical or mental, Employee is unable to perform Employee's customary duties as an employee of Company, unless reasonable accommodation can be made to allow Employee to continue working, for more than 30 days in the aggregate out of a period of twelve consecutive months. The disability shall be determined by a certification from a qualified physician trained in the specific area of proposed disability and approved by both Employee and Company, which will not be unreasonably with held. If Employee is unable to participate in the choice of physician, employee's heir or person(s) designated will choose physician with full cooperation of Company. Such a termination shall be effected by giving ten days' written notice of termination to Employee by Company. Termination pursuant to this provision shall not prejudice Employee's rights to receive disability insurance payments or the continued compensation pursuant to Section 4(c) of this Agreement. c. Effect of Merger, Transfer of Assets, or Dissolution. Without the ------------------------------------------------------ prior written consent of Employee, this Agreement shall not be terminated by any voluntary or involuntary dissolution of Company or the parent Company resulting from a merger or consolidation or a transfer of all or substantially all of the assets of Company. In the event of any such merger or consolidation or transfer of assets, Employee's rights, benefits, and obligations hereunder shall be assigned to the surviving or resulting corporation or the transferee of Company's assets or Employee shall have the option to terminate Employment Agreement and receive all stock options and all remaining salary yet unpaid per this one year contract. d. Payment on Termination. Notwithstanding any provision of this ------------------------ Agreement, if Company terminates this Agreement without cause, other than upon death or disability as set forth above, it shall immediately pay Employee the remaining salary amount and vested stock options for the remaining outstanding term of this Agreement or any renewal thereof at the then current rate of compensation e. Legal Fees. If Company violates any terms and conditions of this ----------- Employee Agreement, Parent Company guarantees to pay all legal fees incurred by Employee to enforce this contract 6. General Provisions. ------------------- a. Binding Effect. This Agreement shall be binding upon and inure to --------------- the benefit of the Parties hereto their respective devisees, legatees, heirs, legal representatives, successors, and permitted assigns. The preceding sentence shall not affect any restriction on assignment set forth elsewhere in this Agreement. b. Notices. Any notice, request, instruction, or other document ------- required by the terms of this Agreement, or deemed by any of the Parties hereto to be desirable, to be given to any other Party hereto shall be in writing and shall be given by facsimile, personal delivery, overnight delivery, or mailed by registered or certified mail, postage prepaid, with return receipt requested, to the Company at the address of its corporate office and to the Employee at the Employee's home address as it appears in the Employee's personnel records. Subject to all other provisions of this Agreement, any attempt to assign or transfer this Agreement or any of the rights conferred hereby, by judicial process or otherwise, to any person, firm, Company, or corporation without the prior written consent of the other party, shall be invalid, and may, at the option of such other party, result in an incurable event of default resulting in termination of this Agreement and all rights hereby conferred. Any Transfer or assignment of this Subsidiary must meet with approval of Employee as Vice President of Anza Properties. c Choice of Law. This Agreement and the rights of the Parties --------------- hereunder shall be governed by and construed in accordance with the laws of the State of California including all matters of construction, validity, performance, and enforcement and without giving effect to the principles of conflict of laws. In the event of any legal action being taken by Company or Employee, all parties agree to the matter being resolved in the courts in the city of Los Angeles. d. Indemnification. Company shall indemnify, defend and hold Employee --------------- harmless, to the fullest extent of the law, for all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries and deficiencies, including interest, penalties and reasonable attorney's fees that Employee shall incur or suffer that arise from, result from or relate to the execution of Employee's duties under this Agreement or any liabilities incurred by the Company, its parent or any of its affiliated companies prior to this agreement and during this agreement. Employee will adhere to the representation presented in subsidiaries Private Placement Memorandum. Employee will refrain from delivering any documentation to any party without first obtaining written approval from Company. Such documentation will be approved or disapproved in writing by Company and delivered to Employee within 2 business days from receipt of such documentation from Employee to Company. Company will totally support Employee in his efforts to manage Subsidiary in all reasonable matters. e. Entire Agreement. Except as provided herein, this Agreement, ----------------- including exhibits, contains the entire agreement of the Parties, and supersedes all existing negotiations, representations, or agreements and all other oral, written, or other communications between them concerning the subject matter of this Agreement. There are no representations, agreements, arrangements, or understandings, oral or written, between and among the Parties hereto relating to the subject matter of this Agreement that are not fully expressed. f. Modification. No change, modification, addition, or amendment to this ------------ Agreement shall be valid unless in writing and signed by all Parties hereto. g. Independent Counsel.. Both Employee and the Company (the "Parties") --------------------- hereby agree and acknowledge that the law firm of Senn Palumbo Meulemans, LLP ("SPM"), is representing only the Employee in the drafting of this Agreement, as it has a conflict of interest in representing both the Employee and the Company. The Company has acknowledged that it has retained independent counsel to review this Agreement prior to its execution. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the Effective Date. "COMPANY" "EMPLOYEE" ANZA PROPERTIES, INC. Thomas Ehrlich /s/ Vincent R. Rinehart /s/ Thomas Ehrlich BY: Vincent R. Rinehart Thomas Ehrlich ITS: President & CEO An individual EXHIBIT "A" ----------- FORM OF STOCK OPTION AGREEMENT EXHIBIT "A" ----------- OPTION NO._________ STOCK OPTION AGREEMENT ---------------------- This STOCK OPTION AGREEMENT is made and entered into on , 2001, by and between E-Net Financial.com, Inc. ("Company"), and Thomas Ehrlich, an individual (referred to herein as the "Optionee"), with reference to the following recitals of facts: WHEREAS, the Company desires to grant the Optionee a stock option ("Option") to purchase shares of common stock of the Company (the "Shares") upon the terms and conditions hereinafter stated; and NOW, THEREFORE, in consideration of the covenants herein set forth, the parties hereto agree as follows: 1. Shares; Price. The Company hereby grants to Optionee the right to --------------- purchase, upon and subject to the terms and conditions herein stated, two million Shares for cash at the closing price of the Shares as of the date of this Agreement, such price being not less than the fair market value per share of the Shares covered by these Options as of the date hereof. 2. Term of Option. This Option shall expire, and all rights hereunder --------------- to purchase the Shares shall terminate five years from the date hereof. 3. Exercise. This Option shall be exercised by delivery to the Company -------- of: (a) a written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information set forth on the form of Notice of Exercise attached hereto as Appendix A; (b) a check or cash in ---------- the amount of the purchase price of the Shares covered by the notice. This Option shall be exercisable upon $2 million being converted to equity in the Company from the contemplated bond offering. All amounts less than that shall be exercisable on a pro-rata basis (i.e., if $1 million from the $5 million offering is converted into equity in E-Net from the bond offering, then 20% of the subject options shall be exercisable, regardless of whether the subject listing occurs). 4. Termination of Employment or Engagement. If Optionee shall cease to --------------------------------------- serve as an Employee of the Company or Parent Company, whether voluntarily or involuntarily, other than by the conclusion of the term of Optionee's written agreement, Optionee shall retain all rights set forth herein for vested Options and all non-vested options shall terminate and be of no further force or effect. 5. Recapitalization. The number of Shares covered by this Option, shall ---------------- not be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of shares or the payment of a stock dividend, or any other increase or decrease in the number of such shares affected without receipt of consideration by the Company; provided however that the conversion of any convertible securities of the Company shall not be deemed having been "effected without receipt of consideration by the Company. The exercise price of this Option shall not be adjusted upon such a subdivision or consolidation of the shares. The number of such Shares shall be increased/decreased on a pro rata basis in accordance with any stock split, provided, however, in the event of a reverse stock split, the amount of options shall not be reduced below 60% of the amount issued under this option and under no circumstances shall the exercise price of this option be adjusted. Provided, however at no time shall the aggregate shares exercisable under this Option equal greater than 10% of the total shares outstanding on a fully diluted basis (such calculation to be performed at the time of the initial exercise). In the event of a proposed dissolution or liquidation of the Company, a merger or consolidation in which the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, all options granted herein shall immediately vest and be exercisable. Subject to any required action by the stockholders of the Company, if the Company shall be the surviving entity in any merger or consolidation, this Option thereafter shall pertain to and apply to the securities to which a holder of Shares equal to the Shares subject to this Option would have been entitled by reason of such merger or consolidation, and the vesting provisions of Section 3 shall continue to apply. 6. Registration Rights. The Optionee shall have the right to register -------------------- Shares covered by vested options on Form S-8 pursuant to Optionee's Employment Agreement to which this Option is an Exhibit. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. E-NET FINANCIAL.COM, INC. ________________________________ BY: ITS: THOMAS EHRLICH _________________________________ Thomas Ehrlich, Optionee APPENDIX "A" ------------ FORM OF NOTICE OF EXERCISE APPENDIX "A" ------------ NOTICE OF EXERCISE E-Net Financial.com, Inc 3200 Bristol Street, Suite 700 Costa Mesa, CA 92626 (date) RE: EXERCISE OF STOCK OPTION Notice is hereby given pursuant to Section 1 of my Employment Agreement that I elect to purchase the number of shares set forth below at the exercise price set forth in my option agreement: Stock Option dated: ______________________ Number of shares being purchased: ______________________ Option Exercise Price: $______________________ A check in the amount of the aggregate price of the shares being purchased is attached. I hereby confirm that such shares are being acquired by me for my own account for investment purposes, and not with a view to, or for resale in connection with, any distribution thereof. Further, I understand that, as a result of this exercise of rights, I will recognize income in an amount equal to the amount by which the fair market value of the Shares exceeds the exercise price. I agree to report such income in accordance with then applicable law and to cooperate with Company in establishing the withholding and corresponding deduction to the Company for its income tax purposes. I agree to provide to the Company such additional documents or information as may be required by law. _____________________________________ (Signature) _____________________________________ (Name of Optionee) EX-10.16 18 doc20.txt OPTION NO._________ STOCK OPTION AGREEMENT ---------------------- This STOCK OPTION AGREEMENT is made and entered into on , 2001, by and between E-Net Financial.com, Inc. ("Company"), and Thomas Ehrlich, an individual (referred to herein as the "Optionee"), with reference to the following recitals of facts: WHEREAS, the Company desires to grant the Optionee a stock option ("Option") to purchase shares of common stock of the Company (the "Shares") upon the terms and conditions hereinafter stated; and NOW, THEREFORE, in consideration of the covenants herein set forth, the parties hereto agree as follows: 1. Shares; Price. The Company hereby grants to Optionee the right to --------------- purchase, upon and subject to the terms and conditions herein stated, two million Shares for cash at the closing price of the Shares as of the date of this Agreement, such price being not less than the fair market value per share of the Shares covered by these Options as of the date hereof. 2. Term of Option. This Option shall expire, and all rights hereunder --------------- to purchase the Shares shall terminate five years from the date hereof. 3. Exercise. This Option shall be exercised by delivery to the Company -------- of: (a) a written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information set forth on the form of Notice of Exercise attached hereto as Appendix A; (b) a check or cash in ---------- the amount of the purchase price of the Shares covered by the notice. This Option shall be exercisable upon $2 million being converted to equity in the Company from the contemplated bond offering. All amounts less than that shall be exercisable on a pro-rata basis (i.e., if $1 million from the $5 million offering is converted into equity in E-Net from the bond offering, then 20% of the subject options shall be exercisable, regardless of whether the subject listing occurs). 4. Termination of Employment or Engagement. If Optionee shall cease to --------------------------------------- serve as an Employee of the Company or Parent Company, whether voluntarily or involuntarily, other than by the conclusion of the term of Optionee's written agreement, Optionee shall retain all rights set forth herein for vested Options and all non-vested options shall terminate and be of no further force or effect. 5. Recapitalization. The number of Shares covered by this Option, shall ---------------- not be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of shares or the payment of a stock dividend, or any other increase or decrease in the number of such shares affected without receipt of consideration by the Company; provided however that the conversion of any convertible securities of the Company shall not be deemed having been "effected without receipt of consideration by the Company. The exercise price of this Option shall not be adjusted upon such a subdivision or consolidation of the shares. The number of such Shares shall be increased/decreased on a pro rata basis in accordance with any stock split, provided, however, in the event of a reverse stock split, the amount of options shall not be reduced below 60% of the amount issued under this option and under no circumstances shall the exercise price of this option be adjusted. Provided, however at no time shall the aggregate shares exercisable under this Option equal greater than 10% of the total shares outstanding on a fully diluted basis (such calculation to be performed at the time of the initial exercise). In the event of a proposed dissolution or liquidation of the Company, a merger or consolidation in which the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, all options granted herein shall immediately vest and be exercisable. Subject to any required action by the stockholders of the Company, if the Company shall be the surviving entity in any merger or consolidation, this Option thereafter shall pertain to and apply to the securities to which a holder of Shares equal to the Shares subject to this Option would have been entitled by reason of such merger or consolidation, and the vesting provisions of Section 3 shall continue to apply. 6. Registration Rights. The Optionee shall have the right to register -------------------- Shares covered by vested options on Form S-8 pursuant to Optionee's Employment Agreement to which this Option is an Exhibit. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. E-NET FINANCIAL.COM, INC. /s/ Vincent R. Rinehart BY: Vincent R. Rinehart ITS: President & CEO THOMAS EHRLICH /s/ Thomas Ehrlich Thomas Ehrlich, Optionee Appendix "A" ------------ FORM OF NOTICE OF EXERCISE APPENDIX "A" ------------ NOTICE OF EXERCISE E-Net Financial.com, Inc 3200 Bristol Street, Suite 700 Costa Mesa, CA 92626 (date) Re: Exercise of Stock Option Notice is hereby given pursuant to Section 1 of my Employment Agreement that I elect to purchase the number of shares set forth below at the exercise price set forth in my option agreement: Stock Option dated: ______________________ Number of shares being purchased: ______________________ Option Exercise Price: $______________________ A check in the amount of the aggregate price of the shares being purchased is attached. I hereby confirm that such shares are being acquired by me for my own account for investment purposes, and not with a view to, or for resale in connection with, any distribution thereof. Further, I understand that, as a result of this exercise of rights, I will recognize income in an amount equal to the amount by which the fair market value of the Shares exceeds the exercise price. I agree to report such income in accordance with then applicable law and to cooperate with Company in establishing the withholding and corresponding deduction to the Company for its income tax purposes. I agree to provide to the Company such additional documents or information as may be required by law. ____________________________ (Signature) ____________________________ (Name of Optionee) EX-10.17 19 doc17.txt CONSULTING AGREEMENT -------------------- This CONSULTING AGREEMENT (this "Agreement") is made and entered into as of , 2001, by and between Anza Properties, Inc. (hereinafter referred to as the "Company") and Lawrence W. Horwitz (hereinafter referred to as the "Consultant") (collectively, the "Parties"). R E C I T A L S --------------- WHEREAS, Consultant is a licensed attorney in the state of California who has provided legal services and related advice to the Company; WHEREAS, the Company wishes to engage the services of Consultant to provide legal and general business consulting services (the "Consulting Services"). NOW, THEREFORE, in consideration of the mutual promises herein contained, the Parties hereto hereby agree as follows: 1. CONSULTING SERVICES Consultant hereby agrees to utilize its best efforts in performing the Consulting Services. It is understood that Consultant shall provide approximately 20 hours per week on matters for the Company, eight hours of, which will involve the Consultant physically being at the Company's principal place of business. The Company understands that this amount of time may vary and that the Consultant may perform Consulting Services for other companies. These consulting services shall include the negotiation and documentation of real estate transactions; the drafting of real estate management and similar contracts; assistance in analyzing the financial viability of potential real estate projects and other general legal and business matters. It is agreed that the provision of these services is on behalf of the holder of the Bonds issued by the Company and shall not be construed as the legal representation of the Company or any of its affiliated companies. 2. TERM OF AGREEMENT This Agreement shall be in full force and effect commencing upon the date hereof and concluding 12 months thereafter ("Termination Date"). On or before the Termination Date the parties shall mutually discuss whether an extension of this Agreement under the terms contained herein or different terms shall be appropriate. 3. COMPENSATION TO CONSULTANT The Consultant's compensation for the Consulting Services shall be as follows: (a) $20,000 payable upon execution of this Agreement; (b) Commencing November 1, 2001 the Consultant shall receive $5,000 per month for eight consecutive months. E-Net Financial guarantees the payment of this amount. (c) One million options in the form attached hereto as Exhibit "A". ----------- 4. INDEPENDENT CONTRACTOR Both the Company and the Consultant agree that the Consultant will act as an independent contractor in the performance of his duties under this Agreement. Nothing contained in this Agreement shall be construed to imply that Consultant, or any consultant, agent or other authorized representative of Consultant, is a partner, joint venture participant, agent, officer or consultant of Company. 5. MISCELLANEOUS (a) Waiver. No waiver by a party of any provision of this Agreement ------- shall be considered a waiver of any other provision or any subsequent breach of the same or any other provision. The exercise by a party of any remedy provided in this Agreement or at law shall not prevent the exercise by that party of any other remedy provided in this Agreement or at law. (b) Assignment. This Agreement shall be binding upon and inure to the ----------- benefit of the Parties hereto and no assignment shall be allowed without first obtaining the written consent of the non-assigning party. (c) Severability. In any condition or covenant herein contained is ------------- held to be invalid or void by any court of competent jurisdiction, the same shall be deemed severable form the remainder of this Agreement and shall in no way effect the other covenants and conditions contained herein. (d) Amendment. This Agreement may be amended only by a written agreement ---------- executed by all Parties hereto. (e) Conflict of Interest. Both Consultant and the Company (the "Parties") ----------------------- hereby agree and acknowledge that Lawrence W. Horwitz and the law firm of Senn Palumbo Meulemans, LLP ("SPM"), is representing only the Consultant in the drafting of this Agreement, as it has a conflict of interest in representing both the Consultant and the Company. The Company has acknowledged that it has retained independent counsel to review this Agreement prior to its execution. [SIGNATURES FOLLOW NEXT PAGE] IN WITNESS WHEREOF, the Parties hereto have placed their signatures hereon on the day and year first above written. "COMPANY" "CONSULTANT" ANZA PROPERTIES, INC. Lawrence W. Horwitz /s/ Vince Rinehart /s/ Lawrence W. Horwitz By: Vince Rinehart Lawrence W. Horwitz Its: President FOR THE LIMITED PURPOSE OF THE GUARANTEE SET FORTH HEREIN: E-NET FINANCIAL.COM, INC. /s/ Vince Rinehart By: Vince Rinehart Title: President & CEO EXHIBIT "A" ----------- FORM OF STOCK OPTION AGREEMENT EXHIBIT "A" ----------- OPTION NO._________ STOCK OPTION AGREEMENT ---------------------- This STOCK OPTION AGREEMENT is made and entered into , 2001, by and between E-Net Financial.com, Inc. ("Company"), and Lawrence W. Horwitz, an individual (referred to herein as the "Optionee"), with reference to the following recitals of facts: WHEREAS, the Company desires to grant the Optionee a stock option ("Option") to purchase shares of common stock of the Company (the "Shares") upon the terms and conditions hereinafter stated; and NOW, THEREFORE, in consideration of the covenants herein set forth, the parties hereto agree as follows: 1. Shares; Price. The Company hereby grants to Optionee the right to --------------- purchase, upon and subject to the terms and conditions herein stated, one million Shares for cash at the closing price of the Shares as of the date of this Agreement, such price being not less than the fair market value per share of the Shares covered by these Options as of the date hereof. 2. Term of Option. This Option shall expire, and all rights hereunder --------------- to purchase the Shares shall terminate five years from the date hereof. 3. Exercise. This Option shall be exercised by delivery to the Company -------- of: (a) a written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information set forth on the form of Notice of Exercise attached hereto as Appendix A; (b) a check or cash in ---------- the amount of the purchase price of the Shares covered by the notice. This Option shall be exercisable in its entirety upon $2 million being converted to equity in the Company the contemplated bond offering. All amounts less than that shall be exercisable on a pro-rata basis (i.e., if $1 from the $5 million offering is converted into equity in E-net from the bond offering, then 20% of the subject options shall be exercisable, regardless of whether the subject listing occurs). 4. Termination of Independent Contractor Status. If Optionee shall ------------------------------------------------- cease to serve as an independent contractor whether voluntarily or involuntarily, other than by the conclusion of the term of Optionee's written Consulting Agreement, then Optionee shall retain all rights set forth herein for vested Options and all non vested options shall terminate and be of no further force or effect. 5. Recapitalization. The number of Shares covered by this Option, shall ---------------- not be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of shares or the payment of a stock dividend, or any other increase or decrease in the number of such shares affected without receipt of consideration by the Company; provided however that the conversion of any convertible securities of the Company shall not be deemed having been "effected without receipt of consideration by the Company. The exercise price of this Option shall not be adjusted upon such a subdivision or consolidation of the shares. The number of such Shares shall be increased/decreased on a pro rata basis in accordance with any stock split, provided, however, in the event of a reverse stock split, the amount of options shall not be reduced below 60% of the amount issued under this option and under no circumstances shall the exercise price of this option be adjusted. Provided, however at no time shall the aggregate shares exercisable under this Option equal greater than 5% of the total shares outstanding on a fully diluted basis (such calculation to be performed at the time of the initial exercise). In the event of a proposed dissolution or liquidation of the Company, a merger or consolidation in which the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, all options granted herein shall immediately vest and be exercisable. Subject to any required action by the stockholders of the Company, if the Company shall be the surviving entity in any merger or consolidation, this Option thereafter shall pertain to and apply to the securities to which a holder of Shares equal to the Shares subject to this Option would have been entitled by reason of such merger or consolidation, and the vesting provisions of Section 3 shall continue to apply. 6. Registration Rights. The Optionee shall have the right to register -------------------- Shares covered by vested options on Form S-8 pursuant to Optionee's Consulting Agreement to which this Option is an Exhibit. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. E-NET FINANCIAL.COM, INC. BY: ITS: LAWRENCE HORWITZ _________________________________ Lawrence W. Horwitz, Optionee APPENDIX "A" ------------ FORM OF NOTICE OF EXERCISE APPENDIX "A" ------------ NOTICE OF EXERCISE E-Net Financial.com, Inc 3200 Bristol Street, Suite 700 Costa Mesa, CA 92626 (date) RE: EXERCISE OF STOCK OPTION Notice is hereby given pursuant to Section 3 of my Consulting Agreement that I elect to purchase the number of shares set forth below at the exercise price set forth in my option agreement: Stock Option dated: ______________________ Number of shares being purchased: ______________________ Option Exercise Price: $_____________________ A check in the amount of the aggregate price of the shares being purchased is attached. I hereby confirm that such shares are being acquired by me for my own account for investment purposes, and not with a view to, or for resale in connection with, any distribution thereof. Further, I understand that, as a result of this exercise of rights, I will recognize income in an amount equal to the amount by which the fair market value of the Shares exceeds the exercise price. I agree to report such income in accordance with then applicable law and to cooperate with Company in establishing the withholding and corresponding deduction to the Company for its income tax purposes. I agree to provide to the Company such additional documents or information as may be required by law. (Signature) (Name of Optionee) EX-10.18 20 doc18.txt OPTION NO._________ STOCK OPTION AGREEMENT ---------------------- This STOCK OPTION AGREEMENT is made and entered into , 2001, by and between E-Net Financial.com, Inc. ("Company"), and Lawrence W. Horwitz, an individual (referred to herein as the "Optionee"), with reference to the following recitals of facts: WHEREAS, the Company desires to grant the Optionee a stock option ("Option") to purchase shares of common stock of the Company (the "Shares") upon the terms and conditions hereinafter stated; and NOW, THEREFORE, in consideration of the covenants herein set forth, the parties hereto agree as follows: 1. Shares; Price. The Company hereby grants to Optionee the right to --------------- purchase, upon and subject to the terms and conditions herein stated, 1 million Shares for cash at the closing price of the Shares as of the date of this Agreement, such price being not less than the fair market value per share of the Shares covered by these Options as of the date hereof. 2. Term of Option. This Option shall expire, and all rights hereunder --------------- to purchase the Shares shall terminate five years from the date hereof. 3. Exercise. This Option shall be exercised by delivery to the Company -------- of: (a) a written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information set forth on the form of Notice of Exercise attached hereto as Appendix A; (b) a check or cash in ---------- the amount of the purchase price of the Shares covered by the notice. This Option shall be exercisable in its entirety upon $2 million being converted to equity in the Company the contemplated bond offering. All amounts less than that shall be exercisable on a pro-rata basis (i.e., if $1 from the $5 million offering is converted into equity in E-net from the bond offering, then 20% of the subject options shall be exercisable, regardless of whether the subject listing occurs). 4. Termination of Independent Contractor Status. If Optionee shall ------------------------------------------------- cease to serve as an independent contractor whether voluntarily or involuntarily, other than by the conclusion of the term of Optionee's written Consulting Agreement, then Optionee shall retain all rights set forth herein for vested Options and all non vested options shall terminate and be of no further force or effect. 5. Recapitalization. The number of Shares covered by this Option, shall ---------------- not be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of shares or the payment of a stock dividend, or any other increase or decrease in the number of such shares affected without receipt of consideration by the Company; provided however that the conversion of any convertible securities of the Company shall not be deemed having been "effected without receipt of consideration by the Company. The exercise price of this Option shall not be adjusted upon such a subdivision or consolidation of the shares. The number of such Shares shall be increased/decreased on a pro rata basis in accordance with any stock split, provided, however, in the event of a reverse stock split, the amount of options shall not be reduced below 60% of the amount issued under this option and under no circumstances shall the exercise price of this option be adjusted. Provided, however at no time shall the aggregate shares exercisable under this Option equal greater than 5% of the total shares outstanding on a fully diluted basis (such calculation to be performed at the time of the initial exercise). In the event of a proposed dissolution or liquidation of the Company, a merger or consolidation in which the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, all options granted herein shall immediately vest and be exercisable. Subject to any required action by the stockholders of the Company, if the Company shall be the surviving entity in any merger or consolidation, this Option thereafter shall pertain to and apply to the securities to which a holder of Shares equal to the Shares subject to this Option would have been entitled by reason of such merger or consolidation, and the vesting provisions of Section 3 shall continue to apply. 6. Registration Rights. The Optionee shall have the right to register -------------------- Shares covered by vested options on Form S-8 pursuant to Optionee's Consulting Agreement to which this Option is an Exhibit. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. E-NET FINANCIAL.COM, INC. /s/ Vincent R. Rinehart BY:Vincent R. Rinehart ITS: President & CEO MR. LAWRENCE HORWITZ /s/ Lawrence W. Horwitz Lawrence W. Horwitz, Optionee Appendix "A" ------------ FORM OF NOTICE OF EXERCISE APPENDIX "A" ------------ NOTICE OF EXERCISE E-Net Financial.com, Inc 3200 Bristol Street, Suite 700 Costa Mesa, CA 92626 (date) Re: Exercise of Stock Option Notice is hereby given pursuant to Section 3 of my Consulting Agreement that I elect to purchase the number of shares set forth below at the exercise price set forth in my option agreement: Stock Option dated: ______________________ Number of shares being purchased: ______________________ Option Exercise Price: $_____________________ A check in the amount of the aggregate price of the shares being purchased is attached. I hereby confirm that such shares are being acquired by me for my own account for investment purposes, and not with a view to, or for resale in connection with, any distribution thereof. Further, I understand that, as a result of this exercise of rights, I will recognize income in an amount equal to the amount by which the fair market value of the Shares exceeds the exercise price. I agree to report such income in accordance with then applicable law and to cooperate with Company in establishing the withholding and corresponding deduction to the Company for its income tax purposes. I agree to provide to the Company such additional documents or information as may be required by law. (Signature) (Name of Optionee) EX-10.19 21 doc19.txt EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is entered and effective into as of this 1st day of June, 2001, by and between Vincent Rinehart (the "Employee"), and e-Net Financial.com, Inc., a Nevada corporation, and all of their subsidiaries (the "Company"). W I T N E S S E T H: The parties agree as follows: 1. The Company hereby agrees to employ the Employee to render services to the Company during the Employment Period, as that term is hereinafter defined, as President and CEO of the Company (Chairman, CEO and President of ENet; and Chairman and CEO of American Residential Funding, Inc., BravoRealty.com, Titus Real Estate & Expidoc.com). The Employee agrees to be employed by the Company in such capacity and agrees that throughout the Employment Period he will perform all such duties as shall be necessary for him to perform consistent with his positions or as shall be assigned to him. The Employee further agrees to devote his best efforts to the performance and discharge of his duties and responsibilities. Notwithstanding the foregoing, the Company confirms that Employee shall be involved at the rate of approximately 8 hours per week in the operations of Titus Real Estate, Lavington Financial, and Firstline Companies. 2. The Company agrees to pay Employee, as full compensation for the services to be rendered by the Employee hereunder, and the Employee agrees to accept as full compensation therefore (except as noted in 2(a)), a salary during the Employment Period at an annualized rate of $275,000.00, subject to an annual increase of 10% commencing Jan. 1, 2002, which compensation shall be payable in arrears in equal monthly installments in accordance with the normal payroll policies of the Company from time to time in effect, subject to withholding for Federal, state and local income taxes, FICA, FUTA and other legally required withholding taxes and contributions. It is agreed that the various subsidiaries are additionally bound by all provisions of this agreement, and shall be fully liable to pay any and all amounts due as noted in this agreement, even in the event any subsidiaries are sold. The company shall also pay employee an auto allowance of $1,200.00 per month plus insurance and gas, as well as other compensation noted below. (a) Employee has incurred significant liability as an officer of E-NetFinancial.com and American Residential Funding, Inc., having provided services since April 14, 2000 and April 1, 1997 respectively. These liabilities include personally guarantying $2,000,000 in a Bank Line of credit, personally guarantying $75,000 in a Bank Line of credit, personally guarantying numerous equipment leases, signing as responsible party in over 40 state licensing matters, securing a large loan to Enet with Employees personally owned 1,000,000 shares of Enet, liability to shareholders (and other creditor) actions with significantly inadequate D&O insurance, and the like. In lieu of receiving compensation in cash for this liability, the Board has authorized the payment of stock options as fully described in the attached addendum. 3. Employment Period. (a) The "Employment Period" hereunder shall commence on the date hereof and shall terminate five (5) years from the date hereof, which is June 1, 2006. (b) Notwithstanding paragraph 3(a), the Employment Period, and the Employee's employment hereunder, shall terminate on such earlier date on which any of the following events occurs: (ii) the death of the Employee, (iii) the resignation of the Employee, (iv) the termination by the Board of the Employee's employment with the Company for disability (as hereinafter defined in (c)), or (v) the termination by the Board of the Employee's employment with the Company, upon fifteen (15) days' prior written notice to the Employee hereunder, for cause (as hereafter defined in (d). (vi) the termination of Employee's employment with the Company by the Board of an acquiring company that acquired a minimum of 51% the Company, to which Employee shall receive compensation as noted in (e). (c) The term "disability," as used herein with respect to the termination of the Employee's employment with the Company, shall mean the Employee's inability to perform effectively the substantial portion of his duties hereunder because of physical or mental disability for a cumulative period of 180 days in any consecutive twelve month period during the Employment Period. (d) The term "cause," as used herein with respect to the termination of the Employee's employment with the Company, shall mean any of the following: (i) willful and persistent failure or refusal to perform material, significant and appropriate obligations under this Agreement, with proper written notice having been given and time to make corrections; (ii) the conviction of the Employee for any felony; any other action of the Employee that is reported in the general or trade press or otherwise achieves a general notoriety, involving conduct that is illegal, immoral or scandalous, and that materially reduces the value of the Employee's services and significantly discredits the Employee and the Company's business. (e) If the Company (or acquiring company) elects to terminate the Employee, due to merger, acquisition or other business considerations, or for any cause, then the Company shall immediately pay to Employee $500,000 as severance pay, and all stock and options shall be accelerated and immediately vested prior to such acquisition or merger. All assets of the Company and the acquiring company, including cash, clients, customers and all physical assets, shall secure this claim. Employee has full rights under California law to lien and seize any assets of the Company until such obligation is paid in full. Upon full receipt of severance pay and vested securities, the Company shall have no further obligation to Employee. 4. The compensation provided for hereunder shall be exclusive of and in addition to any benefits which may become available to the Employee, and which shall become available to the Employee, when and as the same becomes available to other employees of the Company according to him and their respective positions under, and pursuant to the terms of, any stock option, pension plan, group life insurance plan, hospitalization plan, medical services plan, disability plan or any other employee benefit plan, program or policy provided by the Company during the Employment Period. In this regard, the Company shall furnish Employee and his family full Blue Cross of California coverage, disability insurance the premium for which shall be payable per quarter and shall also provide term life insurance in the amount of $1,000,000 for benefit of Employee. 5. The Company agrees to reimburse the Employee for all reasonable travel, entertainment and other expenses which are incurred by the Employee during the Employment Period in connection with the performance of the Employee's duties hereunder, provided that the general scope of such expenses are approved by the Board in advance and such expenses are itemized and presented to the Company in writing in a form then prescribed by the Company in its general policies relating to reimbursement of employee business expenses. 6. In addition, the Company shall establish various bonus, stock option, stock grant, and profit sharing plans, under which the Company shall be fully liable to Employee in providing and paying the additional compensation as noted. 7. All notices and other communications hereunder shall be given in writing by hand delivery or by registered or certified mail, return receipt requested, postage prepaid, addressed to the party to receive the same at its respective address set forth below, or at such other address as may from time to time be designated by either party to the other hereunder in accordance with this Section: If to the Employee: 16271 Sundancer Ln., Huntington Beach, Ca. 92649 If to the Company: 3200 Bristol St., Ste. 700, Costa Mesa, Ca 92626 All such notices and communications hereunder shall be effective and deemed given, if mailed, when delivered, as evidenced by the acknowledgment of receipt issued with respect thereto by the applicable postal authorities, and, if delivered by hand, when received, as evidenced by the signed acknowledgment of receipt of the person to whom such notice or communication shall have been addressed. 8. This Agreement constitutes the entire agreement of the parties hereto with respect to the Employee's employment by the Company and supersedes and terminates all prior agreements, arrangements and policies between the Employee and the Company, as well as all of it's majority owned subsidiaries, with respect to the subject matter hereof. 9. No failure by either party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder by either party preclude any other or future exercise of that right or any other right hereunder by that party. 10. In case any one or more of the provisions of this Agreement should be found to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 11. This Agreement, and the respective rights, duties and obligations of the parties hereunder, shall be governed by and construed in accordance with the laws of the State of California. 12. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by, the Company's successors and assigns. The rights and obligations of the Employee under this Agreement may only be assigned with the prior written consent of the Company. 13. This Agreement may not be amended, terminated or superseded except by an agreement in writing, executed by the Company and the Employee. 14. The Employee hereby acknowledges that, in connection with his review of the terms and conditions of this Agreement, including, without limitation, the undertakings, restrictions and waivers set forth herein, he has had the opportunity to consult with and be represented by his own counsel, who may advise him concerning the execution and delivery of this Agreement by him. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date first above written. E-Net Financial.com, Inc. By: /s/ Scott Presta Name: Scott Presta Director /s/ Vincent Rinehart By: Vincent Rinehart OPTION NO. 01 STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT is made and entered into on June 1 2001, by and between E-net Financial.com, Inc. ("Company"), and Vincent Rinehart, an individual, and officer of the Company (referred to herein as the "Optionee"), with reference to the following recitals of facts: WHEREAS, the Company desires to grant the Optionee a stock option ("Option") to purchase shares of common stock of the Company (the "Shares") upon the terms and conditions hereinafter stated; and NOW, THEREFORE, in consideration of the covenants herein set forth, the parties hereto agree as follows: 1. Shares; Price. The Company hereby grants to Optionee the right to --------------- purchase, upon and subject to the terms and conditions herein stated, 2.5 million (2,500,000) Shares for cash (or other consideration acceptable to the Board of Directors of the Company, which shall include a loan to Optionee from the Company) at the closing price of the Shares as of the date of this Agreement, such price being not less than the fair market value per share of the Shares covered by these Options as of the date hereofThese shall vest over the one year period of time during which the Employment Agreement to which this Agreement is an Exhibit is in full force and effect. 2. Term of Option. This Option shall expire, and all rights hereunder --------------- to purchase the Shares shall terminate five years from the date hereof. This Option shall earlier terminate subject to Paragraphs 5 and 6 hereof . 3. Exercise. This Option shall be exercised by delivery to the Company -------- of (a) a written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information set forth on the form of Notice of Exercise attached hereto as Appendix A, (b) a check or cash in the amount of the purchase price of the Shares covered by the notice (in which the Company shall be obligated to loan Optionee such funds to cover the purchase). 4. Termination of Employment or Engagement. If Optionee shall cease to --------------------------------------- serve as an employee of the Company for any reason, whether voluntarily or involuntarily, other than by the conclusion of the term of Optionee's written employment agreement, then Optionee shall retain all rights set forth herein for vested Options and all non-vested options shall terminate and be of no further force or effect. 5. Recapitalization. The number of Shares covered by this Option, shall ---------------- not be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of shares or the payment of a stock dividend, or any other increase or decrease in the number of such shares affected without receipt of consideration by the Company; provided however that the conversion of any convertible securities of the Company shall not be deemed having been "effected without receipt of consideration by the Company." The exercise price of this Option shall not be adjusted upon such a subdivision or consolidation of the shares. The number of such Shares shall be increased/decreased on a pro rata basis in accordance with any stock split, provided, however, the amount of options shall not be reduced by more than 20% of the amount issued under this option and under no circumstances shall the exercise price of this option be adjusted. 6. In the event of a proposed dissolution or liquidation of the Company, a merger or consolidation in which the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, all options granted herein shall immediately vest and be exercisable. Subject to any required action by the stockholders of the Company, if the Company shall be the surviving entity in any merger or consolidation, this Option thereafter shall pertain to and apply to the securities to which a holder of Shares equal to the Shares subject to this Option would have been entitled by reason of such merger or consolidation, and the vesting provisions of Section 3 shall continue to apply. 7. Registration Rights. The Optionee shall have the right to register -------------------- Shares covered by vested options on Form S-8 pursuant to Optionee's Employment Agreement to which this Option is an Exhibit. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. E-Net Financial.com, Inc. By: /s/ Scott Presta Name: Scott Presta Director /s/ Vincent Rinehart By: Vincent Rinehart Vincent Rinehart Employment Contract Dated June 1, 2001 Amendment to Stock Option Agreement No. 1 Dated July 2, 2001 Rinehart and E-Net Financial agree to amend the Stock Option agreement to limit the maximum compensation that may earned by Rinehart upon execution of this agreement. Therefore, the paragraph below shall become a part of and supercede the Stock Option Agreement relating to these issues; all other terms of the Agreement shall remain the same: "Upon the options being converted into common stock, the total compensation received by Rinehart shall not exceed either $1,900,000 or 20% of the outstanding number of common shares, fully diluted, whichever is greater. Options shall be vested at the rate of 33 1/3% each year, becoming fully vested on June 1, 2004." e-Net Financial.com Corp. - -------------------------------- ------------------------------- Scott Presta, Director Vincent Rinehart -----END PRIVACY-ENHANCED MESSAGE-----