Exhibit 10.19 NONCOMPETITION AND NONDISCLOSURE AGREEMENT THIS NONCOMPETITON AND NONDISCLOSURE AGREEMENT (this "Agreement") is entered into as of ______________________ by and between eRoom System Technologies, Inc., a Nevada corporation ("Company"), and ________________________ ("Sales Representative"). WHEREAS, Company owns certain proprietary, technical, financial and business information regarding the manufacture and distribution of a fully integrated computer-controlled credit card vending systems/in-room refreshment center/in-room safe/and other related systems and accessories that relate to free-standing or built-in refrigerators and/or refreshment centers for use in hotels, motels, hospitals, condos, and other applications relative to the hospitality and related industries (the "Company Products"); and WHEREAS, Company owns other proprietary technology related to electro-mechanical transaction, authorizing, tracking and service provisions which include a remote data processing and transmission system which allows data to be captured, stored, displayed, analyzed and transmitted for processing any of the Company Products ( "Company Technology"); and WHEREAS, there are several completed USA Patents and additional USA and foreign letters of patent pending on the Company Products, as well as trademarks, and copyrights, and other related intellectual property related thereto; and WHEREAS, Sales Representative currently distributes, sells or in other ways supply products and/or systems to the hospitality industry and is desirous to explore the option of providing the Company Products to its current and expanding customer base; and WHEREAS, Company is willing to disclose confidential information to Sales Representative subject to the following terms and conditions. NOW, THEREFORE, the parties agree as follows: 1. Confidentiality of Information. In consideration of the execution of this Agreement, discussion concerning Company's current business or future business regarding the Company Products, Company Technology or any future agreements, Sales Representative agrees that he will neither directly and/or indirectly, individually or as an officer, director or agent of any corporation or other entity, engage in or be interested in the manufacturing, selling or dealing in the Company Products and/or Company Technology or facsimiles thereof without the written approval of Company; nor reveal any of the information received under this Agreement to any third party; nor use such information to manufacture, sell or deal in a similar product; nor to affect in any way current or future sales of the Company Products and/or the Company Technology. 2. Nondisclosure. Sales Representative shall not at any time or in any manner, either directly or indirectly, divulge, disclose or communicate to any person, corporation or other entity or utilize in any manner whatsoever any information concerning any matters affecting or relating to Company's businesses and/or the Company Products (the "Proprietary Material"). This covenant of nondisclosure and non-use includes, without limiting the generality of the foregoing, any of Company's customers, employees, assigns, executors or administrators. Sales Representative further agrees not to disclose to any other person, corporation or entity or utilize any of the Proprietary Material and/or information concerning Company business, the Company Products, and/or the Company Technology; concerning Company's manner of 1
operation of manufacturing; concerning Company's plans, processes or other data with regard to the Company Products, all of which are Proprietary Material without the prior written consent of Company. Sales Representative hereto agrees and stipulates that the business of Company and all information characterized as Proprietary Material and is important, material and confidential and could gravely affect the effective and successful conduct of the business of Company. 3. Return of Proprietary Information. Sales Representative shall deliver all files, documents and other media (and any and all copies and reproductions of any of the foregoing) in her possession or control which contain or pertain to the Proprietary Material upon termination of any business discussions or relationship between the parties, or upon request by Company. Sales Representative agrees that upon termination of her business relationship with Company, Sales Representative shall not retain copies (either hard printed or soft computer storage copies) of any of the Proprietary Material. 4. Nonsolicitation. During the period of business discussions between the parties and for a period of one (1) year after any termination of such discussions and/or any business relationship, neither party will attempt, either directly or indirectly, to induce or attempt to influence any employee of the other party to leave such other party's employ. 5. Default. Any breach of this Agreement by either Company or Sales Representative shall give rise to any and all legal and/or equitable remedies, including but not limited to injunctive relief, against the party in breach of the terms hereof, available in the State of Utah. 6. Entire Agreement. This Agreement constitutes the entire agreement between the parties and superseded any and all written or oral agreements entered into prior to this Agreement. 7. Amendment. This Agreement may be amended only in writing and signed by the parties hereto. 8. Assignment. This Agreement may not be assigned by any party hereto without the prior written consent of the other party sought to be charged. 9. Construction. This Agreement shall be governed by and construed under the laws of the State of Nevada. 10. Attorney's Fees. Should enforcement of this Agreement be necessitated by the act of any party, and should a lawsuit be commenced, the prevailing party in such lawsuit shall be entitled to attorney's fees and costs incurred in such litigation. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
eROOM SYSTEM TECHNOLOGIES, INC. a Nevada corporation By: --------------------------------Steven L. Sunyich Chief Executive Officer By: ------------------------------SALES REPRESENTATIVE
Exhibit 10.20 CONSULTING AGREEMENT THIS CONSULTING AGREEMENT (this "Agreement") is entered into as of ______________________ by and between eRoom System Technologies, Inc., a Nevada corporation ("Company"), and _______________________ ("Consultant"). Company and Consultant are collectively referred to hereinafter as the "Parties". ARTICLE 1. WORK ASSIGNMENTS Section 1.01. Consultant agrees to provide the services outlined in Article 2 hereinbelow. Section 1.02. Term. The Agreement shall commence as of the date hereof and terminate on ______________. ARTICLE 2. DUTIES OF CONSULTANT Section 2.01. Description of Duties. Consultant shall provide the following:______________________________________________________________________ ARTICLE 3. COMPENSATION Section 3.01. Compensation. Consultant shall be paid at the rate of $___________ for all services rendered. Section 3.02. Taxes. The relationship by and among the Parties shall be that of an independent contractor. Contractor shall not receive benefits from the Company, and Contractor shall be solely responsible for paying her state and federal income, disability and social security taxes, as applicable. No provision contained herein shall create an employer/employee relationship between the Parties. ARTICLE 4. PROPRIETARY INFORMATION Section 4.01. Records. (a) All records of the accounts of Company, of any nature, whether existing at the time of Consultant's engagement, procured through the efforts of Consultant, or obtained by Consultant from any other source, and whether prepared by Consultant or otherwise, shall be the exclusive property of Company regardless of who actually purchased the original book, record, or magnetic storage unit on which such information is recorded. (b) All such books and records shall be immediately returned to Company by Consultant on any termination of engagement, whether or not any dispute exists between Company and Consultant at, regarding, and/or following the termination of this Agreement. Section 4.02. Confidentiality. Consultant hereby acknowledges that he has received information regarding the business and all of Company's products, including but not limited to 1
customer lists, product information, designs, patent design and art work, schematics, drawings, software codes and deliverables, hardware specifications and designs, business strategies, employee agreements, all of which information is confidential information (the "Confidential Information"). The parties hereto recognize and acknowledge that the Confidential Information is proprietary and integral to Company's business and agrees to keep such Confidential Information confidential shall not at any time or in any manner, either directly or indirectly, divulge, disclose or communicate to any person, corporation or other entity or utilize in any manner whatsoever any information (including but not limited to the Confidential Information) concerning any matters affecting or relating to Company's businesses and/or the Company's products (the "Proprietary Material"). This covenant of nondisclosure and non-use includes, without limiting the generality of the foregoing, any of Company's customers, employees, assigns, competitors, consultants, executors or administrators. Consultant further agrees not to disclose to any other person, corporation or entity or utilize any of the Proprietary Material and/or Confidential Information concerning Company's business, its products, and/or any of its technologies; concerning Company's manner of operation of manufacturing; concerning Company's plans, processes or other data with regard to its products, all of which are Proprietary Material, without the prior written consent of Company. Consultant hereto agrees and stipulates that Company's and all information characterized as Proprietary Material and/or Confidential Information are important, material and confidential and could gravely affect the effective and successful conduct of Company's business. Consultant further agrees not to disclose the same to any third person, corporation and/or entity for a period of three (3) years subsequent to the termination of this Agreement or termination of Consultant as a Consultant of Company, whether such termination is with or without cause. Section 4.03. Products. All ideas, inventions, products or otherwise, relating in any way to Company's business, designed, improved, planned, proposed, altered, modified, refined or enhanced by Consultant shall be considered work for hire to the fullest extent permitted under Nevada law and shall remain at all times the sole property of Company. Consultant shall not be allowed to use such ideas, inventions or products unless she receives the prior written consent of Company. Any and all patents, trademarks, patent filings or the like relating in any way to Company's products shall remain the sole property of Company and upon request, Consultant shall execute any and all documents, filings or contracts assigning the same to Company. Furthermore, whenever requested to do so by Company, Consultant will execute any and all applications, assignments or other instruments that Company deems necessary to protect Company's interests therein. Consultant's obligations hereunder shall survive the termination of Consultant's engagement with respect to inventions, discoveries and improvements conceived or made by Consultant during the term of Consultant's engagement described in this Agreement. ARTICLE 5. NON COMPETITION Section 5.01. Non-Competition. During Consultant's term of engagement set forth in this Agreement, and for a period of two (2) years thereafter, Consultant will not directly or indirectly be an owner, partner, director, manager, officer or employee or otherwise render services or be associated with any business that competes with Company; that during the same period listed herein, Consultant will neither directly and/or indirectly, individually or as an officer, director or agent of any corporation or other entity, engage in or be interested in the manufacturing, selling or dealing in Company's products and/or its technology or facsimiles thereof without Company's 2
written approval; nor reveal any of the Confidential Information and/or Proprietary Materials received under this Agreement to any third party; nor use of the Confidential Information and/or Proprietary Materials to manufacture, sell or deal in any products similar to those manufactured, marketed and/or sold by Company; nor to affect in any way current or future sales of the Company's and/or its technology. Further, Consultant agrees that during the term of this Agreement she shall not hire away or assist other companies in hiring away current employees or Consultants of Company. ARTICLE 6. GENERAL PROVISIONS Section 6.01. Notice. Any notices to be given by either party to the other may be effected either by personal delivery in writing or by mail, registered and certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at their last known addresses as appearing on the books of Company. Section 6.02. Entire Agreement. This Agreement supersedes any an all other agreements, except the sales agreement between Company and Consultant, either oral or written between the parties with respect to the engagement of Consultant by Company for the purposes set forth in Article 2.1, and contains all of the covenants and agreements between the parties with respect to such consulting work whatsoever. Each part to this Agreement acknowledges that no representations, acting on behalf of any party, which are not embodied herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be changed. Section 6.03. Severability. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any manner. Section 6.04. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. Section 6.05. Mandatory Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration in accordance with the Commercial Rules of the American Arbitration Association by a single arbitrator, mutually agreed upon by the Parties, in Las Vegas, Nevada. Judgment upon the award rendered by the arbitrator may be entered into in any court of competent jurisdiction and shall not be appealable. Furthermore, the prevailing party shall be entitled to reasonable attorneys' fees. Section 6.06. Counterparts. This Agreement may be executed in counterparts, each of which shall be constitute an original, but all of which when taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, this Agreement was executed as of the date first set 3
forth above. eRoom System Technologies, Inc., a Nevada Corporation Steven L. Sunyich Chief Executive Officer CONSULTANT 4
Exhibit 10.21 SALES REPRESENTATION AGREEMENT THIS SALES REPRESENTATION AGREEMENT (this "Agreement") is dated this _______ day of ___________________ by and between eRoom System Technologies, Inc. ("Company"), a Nevada Corporation, and ________________________ (referred to hereinafter as "Representative"). W I T N E S S E T H: WHEREAS, Company desires to obtain the services of Representative in representing Company's products and services described more fully in Exhibit "A," attached hereto and incorporated herein by reference (referred to hereinafter as the "Products") and assisting Company in doing business in the "Territory," defined hereinafter; and WHEREAS, Representative represents that he/she/it has extensive knowledge of business opportunities, laws, governmental regulations and procurement practices and desires to represent the Products in the "Territory" and NOW, THEREFORE, in consideration of the mutual agreements and obligations and covenants herein contained, the parties agree as follows: ARTICLE 1: APPOINTMENT 1.01 Representation Appointment. Company hereby appoints Representative to be its representative of the Products in the performance-based protected "Territory," described in Exhibit "B," a copy of which is attached hereto and incorporated herein by reference (the "Territory.") Representative shall be protected in the Territory so long as Representative adheres to the terms and conditions described herein. 1.02 Sales Outside the Territory. Sales made to corporations residing outside of the Territory are subject to the "Commission Schedules," described in Article 4.0 hereof. Notwithstanding the foregoing, Representative may not effect sales of the Products outside the Territory without the express written consent of the Company's Executive Vice President of Sales and Marketing (the "Vice-President"). 1.03 Excluded Sales. This Agreement excludes all "after sales agreements" and sales such as service and maintenance, including, but not limited to parts, spares, replacement units, expansion units, and services. 1.04 Independent Contractor. In making this appointment, Representative is and shall remain, an independent business contractor and nothing herein shall be deemed to imply or create a relationship of employee and employer. Representative shall not represent that Representative has the power or authority to enter into any agreements or contractual obligations on behalf of Company unless Company provides a separate letter of authorization authorizing Representative to execute agreements on behalf of Company. ARTICLE 2: SCOPE OF WORK 2.01 Representative's Obligations. During the term of this Agreement, Representative agrees: 1
(A) To maintain adequate contacts and sales personnel in the Territory necessary to solicit, develop and promote the sale of the Products actively; (B) To provide liaison with Company's potential customers and/or customers' procurement and engineering staffs with respect to developing procurement specifications and ascertaining performance requirements of any sales of the Products. (C) To obtain and transmit to Company information pertaining to the technical needs and requirements of potential customers in the Territory as is applicable to the Products; (D) To provide assistance to Company in discussions, preparations of proposals, and negotiation held in the Territory leading to selling the Products therein; (E) To pay all costs of conducting Representative's business, including commissions or other compensation to employees or other agents/representatives of Representative; (F) To provide monthly active prospect inventories of sales opportunities currently being explored in the Territory; (G) To assist Company in obtaining any relevant financial or other information as requested by Company regarding existing and potential customers with whom Representative intends to sell the Products; (H) To provide reasonable effort to assure active participation and attendance by Representative's personnel in sales meetings and training sessions held by Company; and (I) To provide a designated phone number for contacts or potential customers to call with professional answering service or voice mail. ARTICLE 3: Company OBLIGATION 3.01 Company's Obligations. During the term of this Agreement, Company agrees: (A) To provide Representative, at no cost, written materials relating to the Products necessary to support product promotion and sales efforts; (B) To respond within reasonable time to requests for price and delivery of the Products covered by this Agreement; (C) To provide Representative with current information as to technical improvements in the Products covered hereunder; and (D) To make timely payments of commission and fees earned as specified herein. (E) To prepare proposals and other paperwork arising therefrom upon reasonable notice by Representative and upon Representative providing accurate and sufficient information to Company. ARTICLE 4: COMPENSATION 4.01 Commission. The commission due and payable, as described in this Article, to Representative for a sale or lease or Placement Program of the Products is 5.0% for any sale, whether to an individual or corporate property. The Sales Commission shall be calculated on the retail sales price of the Products as reflected in the executed "Master Sale / Leasing Agreement" by Company and the "Purchasing / Leasing" entity. (A) Payment of Commissions. The Sales Commissions shall be paid to Representative as follows: (i) Lease. Representative shall be paid the Sales Commission pursuant to an executed "Lease Agreement" upon receipt of funding on such lease(s) by Company.
(ii) Sales. Representative shall be paid the Sales Commission proportionately to the receipt of payments tendered by the purchaser. For example, if the purchaser agrees to pay one-third down upon execution of a purchase agreement, one-third down upon installation, and one-third down upon acceptance of the Products by such purchaser, Representative shall be paid one-third of his/her/its Sales Commission upon each such payment by such purchaser. (iii) Placement Program. Upon the execution by a hotel or other such related property of a "Hotel Revenue Sharing Lease Agreement" (the "Revenue Sharing Agreement") and Company's acceptance of the same, Representative shall be entitled to a commission for each Refreshment Center placed (the "Revenue Share Commission" or "Placement Program Commission"). The Revenue Share Commission shall be paid to Representative upon Company's receipt of the funding pursuant to each Revenue Sharing Agreement as written below. (The "Sales Commission," "Corporate Sales Commission," "Revenue Share Commission" and "Placement Program Commission" are referred to herein sometimes collectively as the "Commissions.") However, Representative may be entitled to draws against some of the Commissions according to the terms, conditions and schedules set forth in Exhibit "D," a copy of which is attached hereto and incorporated herein by reference. (B) Sales Exclusions. The sales price upon which the Sales Commission is based shall be exclusive of the following: (i) Transportation, shipping, and handling/drayage including packing, freight forwarding charges and insurance; (ii) Taxes and duties of any kind; (iii) Credits and allowances; if any; (iv) Purchases directly by a customer through a general purchasing agency of a corporate headquarters located outside the Territory, unless the same falls within the workings of the "Corporate Sales Commission." (v) Portions of a contract that is executed by a customer directly with Company with no involvement by Representative. Such portions may include changes to the original quantity or scope of work as indicated in the initial contract. 4.02 Prior Contacts. Representative understands that other sales calls may have been made to the same potential customer within the Territory by other representatives of Company, including formal proposals for which a prior claim to the Sales Commission and/or the Revenue Share Commission. In a case such as this, a split commission may apply. (A) "Grandfather" Clause. Company shall grant a six-month "Grandfather" clause (the "Grandfather Period") for each newly assigned Territory (the "New Territory") relative to any prior representative (the "Prior Representative") who represented Company prior to the reassignment of the New Territory. The Prior Representative shall have one (1) week following the reassignment of any New Territory to a subsequent Representative (the "New Representative") to remit a list of all contacts and/or prospective clients to the VicePresident (the "Grandfather List"). The Grandfather List will be sent to the New Representative in the New Territory with the understanding that the individual and/or entities on the Grandfather List shall be maintained, contacted and protected by the Prior Representative during the Grandfather Period. After the Grandfather Period, any of the individuals and/or entities on the Grandfather List who are not either under a "Placement Program Application" (referred to as "PPA"), defined hereinafter, or any other executed agreement with Company shall be turned over to the New Representative. (B) Commission Splitting. In any situation where there is a question of prior sales calls in the Territory, the splitting of any and all commissions described herein, or relative to any other commission dispute, the VicePresident shall make a determination of disposition of commissions, including split commissions with the intention of dividing the same fairly between and/or among all parties fairly. The Vice-President's decision shall be final, except that Representative, or others involved in the sale, shall have a right to 3
appeal the decision in writing stating why the determination is considered unfair. Company's Chief Executive Officer and two other company officers shall review the decision based on such appeal and the decision on the appeal shall be final on all parties. 4.03 Commission Modification. The Sales Commission and the Revenue Share Commission may be subject to modification, upon thirty (30) days written notice to Representative. No such modification shall apply to any proposal for which a customer has signed a PPA. 4.04 Overpayments. Any overpayment of any of the commissions described herein by Company to Representative resulting in a downward adjustment of the price for the purchase, lease, etc. of the Products, any failure to receive payment, repudiation or failure to complete the terms of any contract relating to the Products or Services at no fault of Company, Representative, upon notice from Company shall ensure such overpayment to be repaid. In addition to any other remedy Company may have, Company may withhold from subsequent commissions due Representative the amount of such over payment. Notwithstanding the foregoing if any contract by a Company customer is fulfilled in its entirety and Company is paid in full thereon, such contract shall not be subject to the repayment obligations described in this paragraph. ARTICLE 5: TERM OF AGREEMENT AND TERMINATION 5.01 Term. The term of this Agreement shall be one (1) year from the date of this Agreement (the "Term"). The Term may be extended upon mutual agreement of the parties hereto, for up to a period of two (2) additional one (1) year Terms upon mutual agreement of the parties to this Agreement. 5.02 Termination By Either Party. This Agreement may be terminated by either party at least sixty (60) days before the date of expiration of this Agreement or any extension thereof of the terminating party's intention to terminate. 5.03 Company Termination. Company may terminate this Agreement by providing five (5) days written notice to Representative if: (A) Representative fails to comply with the terms of this Agreement; (B) Representative shall become insolvent, bankrupt or any proceeding by or against Representative as a debtor is commenced or there is a substantial change in ownership or control of Representative's business, whether voluntary or by operation of law; or (C) Representative shall have violated the criminal provisions of applicable laws or resolutions within the Territory. 5.04 Return of Materials Upon Termination. Upon termination of this Agreement, Representative shall immediately return to Company the following: all sales materials, product exemplars, copies of all client lists, Company "Sales & Marketing" book, data sheets, samples, models, technical documents, drawings, blue prints, and other written materials (the "Sales Materials"), which Company provided to Representative. Company reserves the right to withhold any and all Commissions until the return of all of the Sales Materials and products noted above reasonably requested herein by Company at the time of termination. 5.05 Payments Upon Termination. Termination of this Agreement shall not relieve either party of the obligation to pay to the other any amounts payable at the time of termination or which were earned during the Term and payable in the future, except as set forth in the above paragraph. 4
5.06 Representative's Remedies. Upon termination of this Agreement for whatever reason, Company's sole liability to representative, whether by claim or right in court or otherwise, shall be to pay previously earned but unpaid commissions to representative, except as set forth in this section. In no event shall Company be liable for consequential or punitive damages of any kind for: (A) Lost profits, real, anticipatory or otherwise; (B) Lost goodwill, creation of clients, damage to reputation; or (C) Advertising, sales or employee's costs. 5.07 Sales Goals. Representative and the Vice-President have established annual minimum sales goals prior to the execution of this Agreement ("Sales Goals") as set forth on Exhibit "C" to this Agreement, a copy of which is attached hereto and incorporated herein by reference. Representative and Vice-President shall review the Sales Goals quarterly and shall adjust the same accordingly to Company's then current corporate sales and marketing plan for the Territory. Failure to achieve these quarterly Sales Goals may result in adjustments in the Territory, including, but not limited to reducing Territory size, increasing the number of representatives working within the Territory or terminating this Agreement. ARTICLE 6: CONFIDENTIALITY AND CONFLICT OF INTEREST 6.01 Confidential Information. During the Term, Representative agrees not to divulge to anyone, except in the performance of his/her/its duties hereunder, or make use of information and knowledge relating to: (A) Any projects for Company upon which Representative shall have worked or shall be working; (B) Knowledge of any of Company's business, which Representative shall have obtained during the Term which is not generally known in the public domain; or (C) Any proprietary or closely held information of Company not generally available to third parties or in the public domain. 6.02 Non-Competition. Representative may render service to others in a consulting, agency or representative capacity provided that Representative shall not serve any business or organization, or engage in any business on Representative's own behalf which sponsors, produces or sells products or services which compete with or conflict with the Products, Company's business and/or requires contact with any customer, client or end user of the Products and/or Services. ARTICLE 7: FORCE MAJEURE 7.01 Force Majeure. Neither party shall be considered in default or held responsible to the other on account of or arising out of the interruption of its performance under this Agreement by: (A) Epidemics, fire, explosion, flood, unusually severe weather, or any other extraordinary natural disturbance, act of God, or of the public enemy, any civil commotion, riot, insurrection, terrorism, or hostilities, war (declared or otherwise) conditions that may adversely affect the safety of such party's personnel, restrictions due to quarantines, blockades, embargoes, unavailability of materials; unforeseen market shortages or any other cause beyond the reasonable control of such party that arise without the fault or negligence of such party, and that result in the delay of performance hereunder. 5
7.02 Delays. Any delay resulting from the events above shall be deemed excusable. The party whose performance will be delayed by such events will use its best efforts to notify the other with five (5) days after the occurrence of such events and within five (5) days after the cessation thereof. The party whose performance is affected will diligently proceed to perform to the best of its ability upon the resolution of the "Force Majeure" event. ARTICLE 8: DISPUTE RESOLUTION 8.01 Arbitration. Any and all disputes, controversies, claims, or other disagreements arising out of or relating to this Agreement or the actual or alleged breach thereof shall be finally settled through arbitration in accordance with rules of the American Arbitration Association. The arbitration shall be held in Utah and shall be conducted under and in accordance with the American Arbitration Association Rules applicable to Utah using the rules of law not equity. Such arbitration shall be conducted in English and will be conducted on confidential basis in accordance with the terms of the Agreement. ARTICLE 9: GENERAL 9.01 Governing Law. The laws of the State of Nevada shall govern this Agreement. 9.02 Entire Agreement. This Agreement supersedes and replaces all prior sales or representation agreements between Company and Representative and cannot be assigned or transferred by either party without the prior written consent of the other. 9.03 Indemnification. Representative shall indemnify and hold harmless Company from any liability, loss, or damage whatsoever, for injuries (including death) to employees or principals of Representative arising out of Representative's performance of this Agreement or from any losses whatsoever arising out of Representative's breach of this Agreement. 9.04 Conduct. Representative shall at all times conduct itself in accordance with the laws of the Territory and shall insure that Representative's actions do not violate any regulations to which Company is bound. Representative agrees to provide to Company upon request a certification that Representative has not violated the provisions of any such regulations. 9.05 Notices. Any notices or order provided for in this Agreement shall be provided in writing to the other party at the address first set forth above. 9.06 Subsequent Questions. Although this Agreement attempts to address all contributions of circumstances, it is possible that questions will arise which are not adequately answered by this Agreement itself. In such cases, the specific decision of Company shall be binding. 9.07 Attorneys' Fees. In the event of litigation, prevailing party shall have the right to receive court costs and reasonable attorneys' fees. 9.08 Assignment. Representative may not assign this Agreement to any third party person or individual without the express written consent of Company. 6
9.09 Amendment. This agreement shall not be amended, modified and/or altered without the express written consent of each party to this Agreement. 7
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement the day and the year first named above. EROOM SYSTEM TECHNOLOGIES, INC. REPRESENTATIVE a Nevada corporation
By: --------------------------------Steven L. Sunyich Chief Executive Officer By: -------------------------------
Exhibit 10.22 EXECUTIVE EMPLOYMENT AGREEMENT THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement"), dated ______________________, is by and between _____________________ ("Employee") and RoomSystems, Inc. ("Employer"). R E C I T A L S: WHEREAS, Employer's board of directors (the "Board") desires to employ Employee in an executive capacity and the Employee desires to be so employed in such capacity; NOW THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE I Term 1.1 Employment. Employer employs Employee and Employee accepts employment under the terms and conditions of this Agreement. 1.2 Term. The term of this Agreement shall be for ____________ (____) months with an open option thereon as set forth herein and shall be effective as of ______________________, and shall terminate on ____________________, unless extended by mutual agreement of the parties. Upon mutual agreement of the parties, this Agreement may be extended for an additional period upon written notice given to Employee not less than three (3) months prior to the termination of this Agreement. A. Option Term. Upon mutual agreement of the parties, and upon the condition that there is no breach of any condition or term of this Agreement at the time of exercise, this Agreement may be extended for an additional twelve (12) months on the same terms and conditions of this Agreement, unless modified or amended upon the written consent of Employer and Employee. ARTICLE II Compensation 2.1 Compensation. For all services rendered by Employee, Employer shall pay Employee the salary commencing on ___________________, of $____________ per year. Salary payments shall be subject to withholding and other applicable taxes. A. Salary Adjustment. Employer and Employee recognize that certain "Events" (as defined in the following paragraph) may occur which will give rise to a salary increase. Upon the occurrence of any one of the Events listed in the following paragraph, Employee's salary shall be increased to $______________ per year during the term of this Agreement. Such increase shall be automatic upon the happening of any one of the Events listed below. 1
B. Definition of "Events." For purposes of this Agreement and particularly, the salary increases described in the foregoing paragraph, any one of the following shall be considered an "Event": i. Merger. A merger with a third party entity, whereby at least fifty-one percent (51%) of Employer's outstanding common stock is merged with such entity. ii. Sale/Acquisition. A sale or acquisition of at least fifty-one percent of Employer's outstanding common stock or the sale of all or substantially all of Employer's assets to a third party entity. iii. Capital. Employer's raising at least $4 million through the sale of equity securities by September 30, 1999, unless otherwise extended by the parties hereto. iv. Debt Facility. A debt facility is put in place offering Employer a debt facility of at least $6 million. C. Second Salary Adjustment. Upon Employer's successful funding of an IPO or a similar transaction, Employee's base compensation shall automatically increase to $________________. 2.2 Earned Monetary Bonuses. Employee shall be entitled to an annual bonus as determined by the Company's compensation committee (to be formed). Employee's performance shall be reviewed annually to determine the payment of bonuses. 2.3 Automobile Allowance. Employee shall be entitled to an automobile allowance of $_______ per month, payable in equal payments. Employer shall pay Employee's automobile insurance and reasonable maintenance. 2.4 Stock Option Consideration. Employee, as partial consideration for his services, shall be entitled to receive Stock Options as determined by the Company's Stock Option Committee (to be formed). Such determination shall be made on an annual basis. 2.5 Employee Benefits. In addition to the foregoing, Employee shall be entitled to the following: A. Health Insurance. Employer shall provide and pay for health, dental and life insurance for Employee and his family with an insurance carrier of Employer's choice. The benefits offered under this paragraph shall include a standard executive employee health and life insurance program. B. Expenses. Employee may incur reasonable expenses for promoting Employer's business, including expenses for entertainment, travel and similar items. Employer will reimburse Employee for all such reasonable expenses upon Employee's presentation of an itemized account of such expenditures. Employer shall provide Employee with a Diner's Club, American Express or other credit card for his use in promoting and representing Employer, dependent upon Employee's credit worthiness. C. Vacations. Employee shall be entitled each year to "Flexible Time Off" ("FTO") commensurate with a "Grade I" employee, as described in Employer's Employee Handbook. 2
ARTICLE III Duties of Employee 3.1 Duties. Employee is engaged as ______________________________; and shall have authority over such decision-making and managerial duties regarding the business of Employer; and shall supervise and direct all of the business of Employer according to business plans and strategies provided by Employer, reporting only to the Board. The precise services of Employee may be extended or curtailed by mutual agreement of Employer and Employee from time to time. 3.2 Extent of Services. Employee shall devote so much of his productive time, ability and attention to the business of the Company as is necessary to fulfill his duties; and shall perform all such duties in a professional, ethical and businesslike manner. Employee will not, either during the term of this Agreement and for a period of twelve (12) months thereafter, directly or indirectly engage in any other business, either as an employee, employer, consultant, principal, officer, director, advisor, or in any other business capacity, which is competitive with the business of the Company, without the express written consent of the Company. Furthermore, the Board may require that Employee account for his time spent performing his duties hereunder at any time. Upon such notice, Employee shall account for his time and deliver such accounting to the Board until further notified. Based upon such records, the Board, in its sole discretion, may adjust Employee's FTO and/or salary during such period accordingly. 3.3 Engaging in Other Employment. Employee hereby agrees to undertake the responsibilities for and devote his productive time, abilities, and attention to the business of Employer during the term of this Agreement. 3.4 Regulations. Employee agrees to comply with all federal, state and local laws, ordinances, and regulations in the conduct of his business on behalf of Employer. 3.5 Accountability. Employee shall be directly responsible to the Board . ARTICLE IV Duties of Employer 4.1 Payment of Compensation and Provision of Benefits. During the terms hereof, Employer agrees to pay all compensation, benefits, allowances and FTO due to Employee as set forth herein. 4.2 Working Facilities. Employer shall provide offices, stenographic help and such other facilities and services as are suitable to his position and appropriate for the performance of his duties. ARTICLE V Disability; Death During Employment 5.1 Disability. If Employee is unable to perform his services by reason of illness or incapacity for a period of more than one (1) month, the compensation thereafter payable to him during the continued period of such illness or incapacity for a period not to exceed 3
twelve (12) shall be sixty percent (60%) of Employee's then current salary. Employee's full compensation shall be reinstated upon his recovery. Notwithstanding anything to the contrary, Employer may terminate this Agreement at any time after Employee shall be absent from his employment, for whatever cause, for a continuous period of more than twelve months (12), and the obligations of Employer shall thereupon terminate. If it is determined, pursuant to the terms of this Agreement, that Employee is disabled or incapacitated and cannot discharge the duties and responsibilities contemplated hereunder, Employer shall have the right to hire an employee to replace him in whatever position he may have at that time. A. Disability Insurance. In lieu of the foregoing, Employer may obtain disability insurance for Employee. Should this occur, paragraph 5.1 shall be null and void and the terms of said disability insurance shall govern, so long as the terms in such policy are equal to or greater than the terms outlined in Section 5.1. 5.2 Death During Employment. If Employee dies during the term of employment, Employer shall pay to the estate of Employee the compensation which would otherwise be payable to Employee up to the end of the month in which death occurs. In addition, Employer shall pay a sum equal to two (2) year's compensation payable in three equal monthly installments after the death of Employee to the spouse of Employee or if he is not survived by his spouse, then to Employee's heirs in equal shares, or if there are no such surviving heirs, to the estate of Employee. ARTICLE VI Confidential Information; Trade Secrets; Proprietary Rights 6.1 Confidentiality. Employee hereby acknowledges that he has received information regarding the business of Employer, including but not limited to customer lists, product information, business strategy, employee agreements, which information is confidential information (the "Confidential Information"). The parties hereto recognize and acknowledge that the Confidential Information is proprietary and integral to Employer's business and agrees to keep such Confidential Information confidential and not disclose the same to any third person, corporation and/or entity for a period of three (3) years subsequent to the termination of this Agreement or termination of Employee as an employee of Employer, whether such termination is with or without cause. 6.2 Products. All products relating to Employer's business, designed, improved or enhanced by Employee, will be the sole property of Employer and Employee will not be allowed to possess or use them unless Employer agrees in writing thereto. Whenever requested to do so by Employer, Employee will execute any and all applications, assignments or other instruments that Employer deems necessary to protect Employer's interests therein. Employee's obligations hereunder shall survive the termination of Employee's employment with respect to inventions, discoveries and improvements conceived or made by Employee during the term of Employee's employment described in this Agreement. ARTICLE VII Non-Competition 7.1 Non-Competition. During Employee's term of employment set forth in this Agreement, and for a period of one (1) year thereafter, Employee will not directly or 4
indirectly be an owner, partner, director, manager, officer or employee or otherwise render services or be associated with any business that competes with Employer. ARTICLE VIII Termination / Note Purchase 8.1 Termination With Cause. With cause, Employer may terminate this Agreement upon thirty (30) days' notice to Employee. In such event, Employee shall continue to render his services and shall be paid his regular compensation up to the date of termination. Severance allowance shall be equal to six (6) month's salary of Employee. For purposes of this Agreement, termination "with cause" shall be for any of the following: A. Any breach of any material obligations owed to Employer; B. Failure to follow the directive of the Company's board of directors; or C. Conviction of a felony or any act involving moral turpitude. 8.2 Termination Without Cause. Employer may terminate Employee without cause upon thirty (30) days written notice. Upon termination without cause by employer, Employee shall be entitled to cash compensation equal to the greater of the following: (A) the then existing base salary of Employee, as defined in Article 2.1, for the remainder of the term of this Agreement; or (B) the then existing base salary of Employee, as defined in Article 2.1, for a period of one (1) year from the date of termination without cause. In the event of termination without cause, all cash compensation, as referred to above, shall be paid to Employee on a bi-monthly basis. 8.3 Reserved. 8.4 Termination Upon Sale of Business. Notwithstanding anything to the contrary, Employer may terminate this Agreement upon thirty (30) days' written notice upon the happening of any of the following events which any one event will be treated as a termination without cause for purposes of severance allowance pursuant to this Agreement. A. The sale by Employer of substantially all of its assets to a single purchaser or a group of associated purchasers; B. The sale, exchange or other disposition, in one transaction, of at least fifty percent (50%) of the outstanding common shares of the Employer; C. A decision by Employer to terminate its business and liquidate its assets; or the merger or consolidation of Employer in a transaction in which the shareholders of Employer receive at least fifty percent (50%) of the outstanding voting shares of the new or continuing corporation. D. Notwithstanding the foregoing, should Employer agree to sell all or substantially all of its assets, Employer shall purchase Employee's Shares for an amount of the greater of the Stock Purchase Price or the same price sold by other of Employer's shareholders. ARTICLE IX 5
General Provisions 9.1. Waiver of Breach. The waiver by Employer of breach of any provisions of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. No waiver shall be valid unless in writing and signed by an authorized officer of Employer. 9.2 Assignment. Employee acknowledges that the services to be rendered by him are unique and personal. Accordingly, Employee may not assign any of his rights under this Agreement. The rights and obligations of Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Employer. 9.3 Modification. This Agreement may not be modified, changed or altered orally but only by an agreement in writing signed by the party against an enforcement of any waiver, change, modification, extension or discharge as sought. 9.4. Governing Law. This Agreement shall be governed by and construed under the laws of the State of Nevada. 9.5 Integration Clause. This instrument contains the entire agreement between the parties hereto and supersedes any and all prior written and/or oral agreements. This Agreement may be altered or modified only in writing signed by the parties hereto. 9.6 Notices. Any notice required or desired to be given under this Agreement shall be deemed given if in writing sent by certified mail to the parties at each party's last known address. 9.7 Attorneys' Fees. Should any party seek the enforcement of any term of this Agreement, the prevailing party thereunder shall be entitled to attorneys' fees and costs for the enforcement of such term or provision. 9.8 Arbitration. In the event of any dispute arising under this Agreement, including any dispute regarding the nature, scope or quality of services provided by either party hereto, its is hereby agreed that such dispute shall be resolved by binding arbitration to be conducted by the American Arbitration, to be arbitrated in accordance with its rules and regulations and procedures in Las Vegas, Nevada. In the event of any such arbitration, pending resolution of the arbitration and the award of costs by the arbitrator, each party hereto shall advance one-half of the amounts, if any, requested by the arbitrator and/or the sponsoring organization. 6
IN WITNESS WHEREOF, the parties executed this Agreement as of the date first written above. EMPLOYEE
EMPLOYER By: _____________________________ Its:______________________________ 7
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISTRIBUTED DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, ITS TERRITORIES, POSSESSIONS, OR AREAS SUBJECT TO ITS JURISDICTION, OR TO OR FOR THE ACCOUNT OR BENEFIT OF A "U.S. PERSON" AS THAT TERM IS DEFINED IN RULE 902 OR REGULATION S OF THE ACT, AT ANY TIME PRIOR TO ONE (1) YEAR AFTER THE ISSUANCE OF THIS CERTIFICATE, EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER SUCH ACT, OR (ii) IN COMPLIANCE WITH AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. ANY SALES, TRANSFERS OR DISTRIBUTIONS OF THE SECURITIES MUST BE MADE IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S OF THE ACT." OFFSHORE LOAN SUBSCRIPTION AGREEMENT Dear Subscriber: You (the "Subscriber") hereby agree to purchase, and eRoom System Technologies, Inc., a Nevada corporation (the "Company") hereby agrees to issue and to sell to you and other Subscribers, 9% Secured, Subordinated Notes (the "Notes") and Common Stock of the Company. The amount of your purchase is set forth on the signature page hereof. The form of Note is annexed hereto as Exhibit A. The Notes and the Common Stock are sometimes referred to as the "Securities". The Company shall issue and deliver to the Subscriber, the Note and Common Stock against payment by wire transfer of the Purchase Price. The following terms and conditions shall apply to this subscription. 1. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. The Subscriber hereby represents and warrants to and agrees with the Company that: (a) INFORMATION ON COMPANY. The Subscriber has been furnished with information concerning its operations, financial condition and other matters as the Subscriber has requested, and considered all factors the Subscriber deems material in deciding on the advisability of investing in the Securities (such information in writing is referred to as the "Written Information"). (b) INFORMATION ON SUBSCRIBER. The Subscriber is an "accredited investor", as such term is defined by the Commission under the Securities Act of 1933, as amended, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States privately and publicly-owned companies in private placements in the past and, with his representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Subscriber to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment. The Subscriber has the authority and is duly and legally qualified to purchase and own the Securities. The Subscriber is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.
(c) PURCHASE OF SECURITIES. On the Closing Date, the Subscriber will purchase the Note and Common Stock for his own account and not with a view to any distribution thereof. (d) COMPLIANCE WITH SECURITIES ACT. The Subscriber understands and agrees that the Securities have not been registered under the Securities Act of 1933, as amended (the "1933 Act") by reason of their issuance in a transaction that does not require registration under the 1933 Act, and that such Securities must be held unless a subsequent disposition is registered under the 1933 Act or is exempt from such registration. (e) RESTRICTIVE LEGEND. The Securities shall bear the following legend (the "Legend"): "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISTRIBUTED DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, ITS TERRITORIES, POSSESSIONS, OR AREAS SUBJECT TO ITS JURISDICTION, OR TO OR FOR THE ACCOUNT OR BENEFIT OF A "U.S. PERSON" AS THAT TERM IS DEFINED IN RULE 902 OR REGULATION S OF THE ACT, AT ANY TIME PRIOR TO ONE (1) YEAR AFTER THE ISSUANCE OF THIS CERTIFICATE, EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER SUCH ACT, OR (ii) IN COMPLIANCE WITH AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. ANY SALES, TRANSFERS OR DISTRIBUTIONS OF THE SECURITIES MUST BE MADE IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S OF THE ACT." (f) TRANSFERABILITY. The Company need not register a transfer of any Securities, and may also instruct its transfer agent not to register the transfer of the Shares, unless the conditions specified in the foregoing Legend and under Regulation S are satisfied, to the extent applicable. (g) COMMUNICATION OF OFFER. The offer to sell the Securities was directly communicated to the Subscriber. At no time was the Subscriber presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer. (h) CORRECTNESS OF REPRESENTATIONS. The Subscriber represents that the foregoing representations and warranties are true and correct as of the date hereof and, unless the Subscriber otherwise notifies the Company prior to the Closing Date (as hereinafter defined), shall -2-
be true and correct as of the Closing Date. The foregoing representations and warranties shall survive the Closing Date. (i) OFFSHORE TRANSACTION. The Subscriber represents and warrants to the Company as follows: (i) The Subscriber is not a "U.S. Person" as defined in Regulation S under the 1933 Act ("Regulation S"); specifically the Subscriber is not: (1) a natural person resident in the United States of America, including its territories and possessions ("United States"); (2) a partnership or corporation organized or incorporated under the laws of the United States; (3) an estate of which any executor or administrator is a U.S. Person; (4) a trust of which any trustee is a U.S. Person; (5) an agency or branch of a foreign entity located in the United States; (6) a non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person; (7) a discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (8) a partnership or corporation: (A) organized or incorporated under the laws of any foreign jurisdiction; and (B) formed by a U.S. Person principally for the purpose of investing in securities not registered under the 1933 Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Act) who are not natural persons, estates or trusts. (ii) At the time the buy-order for the Securities was originated, the Subscriber was outside the United States. (iii) The Subscriber is purchasing the Securities for its own account and not on behalf of any U.S. Person and a sale of the Securities has not been pre-arranged with a purchaser in the United States. -3-
(iv) All offers and sales of the Securities prior to the expiration of a period (the "Distribution Compliance Period") commencing on the Closing Date (as defined herein) and ending one year thereafter shall only be made in compliance with Regulation S, pursuant to registration of the Securities under the 1933 Act and applicable state securities laws or pursuant to an exemption from such registration; and all offers and sales after the expiration of the Distribution Compliance Period shall be made only pursuant to such registration or to such exemption from registration. (v) The Subscriber understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Subscriber set forth herein and in the Subscription Agreement in order to determine the applicability of such exemptions and the suitability of the Subscriber to acquire the Securities. (vi) The purchase of the Securities by the Subscriber is not a transaction (or an element of a series of transactions) that is part of any plan or scheme to evade the registration provisions of the 1933 Act. 2. COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to and agrees with the Subscriber, except as disclosed in the Reports and Other Written Information, that: (a) DUE INCORPORATION. The Company and each of its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the respective jurisdictions of their incorporation and have the requisite corporate power to own their properties and to carry on their business as now being conducted; and is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a material adverse effect on the business, operations or prospects or condition (financial or otherwise) of the Company, except in Utah, the District of Columbia, New York, Florida, Georgia and Illinois. (b) OUTSTANDING STOCK. All issued and outstanding shares of capital stock of the Company and each of its subsidiaries has been duly authorized and validly issued and are fully paid and non-assessable. (c) AUTHORITY; ENFORCEABILITY. This Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity; and the Company has full corporate power and authority necessary to enter into this Agreement and to perform its obligations hereunder and all other agreements entered into by the Company relating hereto. -4-
(d) ADDITIONAL ISSUANCES. There are no outstanding agreements or preemptive or similar rights affecting the Company's Common Stock or equity and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of Common Stock or equity of the Company or other equity interest in any of the subsidiaries of the Company, except as described in the Written Information or except as waived. (e) CONSENTS. No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, or any of its affiliates, the NASD, NASDAQ or the Company's Shareholders is required for execution of this Agreement, and all other agreements entered into by the Company relating thereto, including, without limitation, issuance and sale of the Securities, and the performance of the Company's obligations hereunder. (f) NO VIOLATION OR CONFLICT. Assuming the representations and warranties of the Subscriber in Paragraph 1 are true and correct and the Subscriber complies with its obligations under this Agreement, neither the issuance and sale of the Securities nor the performance of its obligations under this Agreement and all other agreements entered into by the Company relating thereto by the Company will: (i) violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the articles of incorporation, charter or by laws of the Company, or any of its affiliates, (B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company, or any of its affiliates of any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its affiliates or over the properties or assets of the Company, or any of its affiliates, (C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company, or any of its affiliates is a party, by which the Company, or any of its affiliates is bound, or to which any of the properties of the Company, or any of its affiliates is subject, or (D) the terms of any "lock-up" or similar provision of any underwriting or similar agreement to which the Company, or any of its affiliates is a party; or (ii) result in the creation or imposition of any lien, charge or encumbrance upon the Securities or any of the assets of the Company, or any of its affiliates. (g) THE SECURITIES. The Securities upon issuance: (i) are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject to restrictions upon transfer under the 1933 Act and State laws; (ii) have been, or will be, duly and validly authorized and on the date of issuance on the Closing Date, as hereinafter defined, will be duly and validly issued, fully paid and nonassessable; -5-
(iii) will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company; and (iv) will not subject the holders thereof to personal liability by reason of being such holders. (h) LITIGATION. Other than as described in the Reports and other Written Information, there is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its affiliates that would affect the execution by the Company or the performance by the Company of its obligations under this Agreement, and all other agreements entered into by the Company relating hereto. (i) INFORMATION CONCERNING COMPANY. The Written Information contain all material information relating to the Company and its operations and financial condition as of their respective dates which information is required to be disclosed therein. Since the date of the financial statements included in the Written Information, and except as modified in the Written Information, there has been no material adverse change in the Company's business, financial condition or affairs not disclosed in the Written Information. The Written Information does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (j) STOP TRANSFER. The Securities are restricted securities as of the date of this Agreement. The Company will not issue any stop transfer order or other order impeding the sale and delivery of the Securities at such time as the Securities are registered for public sale or an exemption from registration is available. (k) DEFAULTS. Neither the Company nor any of its subsidiaries is in violation of its Articles of Incorporation or By Laws. Neither the Company nor any of its subsidiaries is (i) in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a material adverse effect on the Company (except as to agreements in default as of the date hereof), (ii) in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters, or (iii) to its knowledge in violation of any statute, rule or regulation of any governmental authority material to its business, excluding qualifications otherwise referred to in this Securities Loan Agreement. (l) NO INTEGRATED OFFERING. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would prevent the offering from qualifying for the exemption from registration under the 1933 Act. Neither the Company nor any of its affiliates or subsidiaries will take any action or steps that would cause the offering of the Securities to be so effected. -6-
(m) USE OF PROCEEDS. The proceeds of the Subscriber's funds to be released to the Company will be used for working capital and for expenses of its offering. (n) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor to its knowledge, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of the Act) in connection with the offer or sale of the Securities. (o) OFFSHORE TRANSACTION. The Company has not offered the Securities to any person in the United States, any identifiable groups of U.S. citizens abroad or to any "U.S. Person" as that term is defined in Regulation S. (p) NO DIRECTED SELLING EFFORTS. In regard to this transaction, the Company has not conducted any "directed selling efforts" as that term is defined in Rule 902 of Regulation S nor has the Company conducted any general solicitation relating to the offer and sale of the securities that are the subject of this transaction to persons resident within the United States or elsewhere. (q) CORRECTNESS OF REPRESENTATIONS. The Company represents that the foregoing representations and warranties are true and correct as of the date hereof in all material respects and, unless the Company otherwise notifies the Subscriber prior to the Closing Date, shall be true and correct in all material respects as of the Closing Date. The foregoing representations and warranties shall survive the Closing Date. 3. EXEMPT OFFERING. This Offering is being made pursuant to an exemption from the registration provisions of the Securities Act of 1933, as amended. On the Closing Date, the Company will provide an opinion acceptable to Subscriber from the Company's legal counsel opining on the exemption as it relates to the offer and issuance of the Securities and as to other matters. A form of the legal opinion is annexed hereto as Exhibit B. The Company will provide, at the Company's expense, such other legal opinions in the future as are reasonably necessary for the sale of the Common Stock. 4. REISSUANCE OF SECURITIES. The Company agrees to reissue certificates representing the Securities without the legends set forth in Sections 1(e) and 1(f) above at such time as (a) the holder thereof is permitted to dispose of such Securities pursuant to Rule 144(k) under the Act, or (b) upon resale subject to an effective registration statement after the Securities are registered under the Act. The Company agrees to cooperate with the Subscriber in connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary to allow such resales provided the Company and its counsel receive reasonably requested certifications from the Subscriber and selling broker, if any. 5. REDEMPTION. The Company may not redeem the Securities without the consent of the holder of the Securities. -7-
6. LEGAL EXPENSE. The Company shall pay to counsel to the Subscribers its fee of for services rendered to the Subscribers in reviewing this Agreement in the maximum amount of $25,000. 7. COVENANTS OF THE COMPANY. The Company covenants and agrees with the Subscriber as follows: (a) The Company will advise the Subscriber, promptly after it receives notice of issuance by the Securities and Exchange Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose. (b) The Company will use its best efforts to obtain a listing and trading of its Common Stock on the NASDAQ SmallCap Stock Market, and will comply in all respects with the Company's reporting, filing and other obligations under the by laws or rules of the National Association of Securities Dealers ("NASD") and such exchanges, as applicable. The Company will provide the Subscriber, copies of all notices it receives notifying the Company of the threatened and actual delisting of the Common Stock on any exchange or quotation system on which the Common Stock becomes listed. (c) The Company shall notify the SEC, NASD and applicable state authorities, in accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Subscriber and promptly provide copies thereof to Subscriber. (d) Until at least three (3) years after the effectiveness of the Registration Statement on Form SB-2 or such other Registration Statement described in Section 10 hereof, the Company will (i) cause its Common Stock to be registered under Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in all respects with its reporting and filing obligations under the Exchange Act, (iii) comply with all requirements related to any registration statement filed pursuant to this Agreement and (iv) use its commercial best efforts to obtain and continue the listing or trading of the Common Stock on NASDAQ SmallCap Stock Market and will comply in all respects with the Company's reporting, filing and other obligations under the by laws or rules of the NASD and NASDAQ, as appropriate. The Company will not take any action or file any document (whether or not permitted by the Act or the Exchange Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said Acts until the later of (i) three (3) years after the effective date of the Registration Statement on Form SB-2 or such other Registration Statement described in Section 10 hereof, or (ii) the sale by the Subscribers of all the Common Stock issued pursuant to this Agreement. (e) The Company undertakes to use the proceeds of the Subscriber's funds for working capital and expenses of its initial public offering. -8-
(f) The Company covenants and agrees that until the Note is fully paid, the Company will not seek the protection of any bankruptcy protection or insolvency laws or encourage, solicit or assist any other person to seek such protection on the Company's or its creditors' behalf. (g) EXCEPTIONS TO CORPORATE STANDING OF SUBSIDIARIES. The Company will promptly take such action as may be necessary to cause the Company and each of its subsidiaries to eliminate the exceptions to the affirmative representations made in Section 2(a) of this Loan Subscription Agreement. (h) MOST FAVORED NATION PROVISION. Until the Notes are paid in full, in the event the Company offers to sell any securities to any person in any public offering or private placement, the Company shall offer to exchange the Securities purchased by the Subscribers for the securities offered to such other person, on the same basis and for the same consideration as offered to such other person; provided however, that such right shall not apply to the anticipated initial public offering or to the offer and sale of securities to employees, consultants, officers or directors, or to the exercise of options. The Company shall give the Subscribers five (5) days notice of the intent to make any such offering, during which period the Subscribers shall have the right to accept such offer in exchange for the full amount of such Subscribers Note plus accrued interest. After the lapse of the five (5) day period the right to such exchange will be extinguished unless the Subscriber gives prior notice of acceptance of the exchange. The Company will be relieved of the obligation hereunder if it does not consummate the offer to other investors. 8. COVENANTS OF THE COMPANY AND SUBSCRIBER REGARDING INDEMNIFICATIONS. (a) The Company agrees to indemnify, hold harmless, reimburse and defend Subscriber, Subscriber's officers, directors, agents, affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon Subscriber which results, arises out of or is based upon (i) any misrepresentation by Company or breach of any warranty by Company in this Agreement or in any Exhibits or Schedules attached hereto, or the Written Information; or (ii) any breach or default in performance by Company of any covenant or undertaking to be performed by Company hereunder, or any other agreement entered into by the Company and Subscribers relating hereto. (b) Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company at all times against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Company which results, arises out of or is based upon (a) any misrepresentation by Subscriber in this Agreement or in any Exhibits or Schedules attached hereto; or (b) any breach or default in performance by Subscriber of any covenant or undertaking to be performed by Subscriber hereunder, or any other agreement entered into by the Company and Subscribers relating hereto. (c) The procedures set forth in Section 10.6 shall apply to the indemnifications set forth in Sections 8(a) and 8(b) above. 9. INTENTIONALLY DELETED. -9-
10.1 REGISTRATION OF COMPANY SECURITIES AND REGISTRATION RIGHTS OF SUBSCRIBERS. (a) The Company shall file with the Commission within 25 days of the Closing Date (the "Filing Date"), and use its reasonable commercial efforts to cause to be declared effective a Form SB-2 registration statement, (or such other form that it is eligible to use) in order to register the Registerable Securities (the Common Stock and securities issued or issuable by virtue of ownership of the Common Stock being the "Registerable Securities") for resale and distribution under the Act. The Company shall use its reasonable commercial efforts to cause the registration statement described in this paragraph to be declared effective by the Commission on or before 180 days after the Closing Date ("Effective Date"). (b) Provided the Registrable Securities are not otherwise registered for resale by the Subscriber or Holder pursuant to an effective registration statement or exempt from registration under the Act, until five years after the Closing Date, the Company at any time proposes to register any of its securities under the Act for sale to the public, whether for its own account or for the account of other security holders or both, except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Registrable Securities for sale to the public, each such time it will give at least 30 days' prior written notice to the record holder of the Registrable Securities of its intention so to do. Upon the written request of the holder, received by the Company within 30 days after the giving of any such notice by the Company, to register any of the Registrable Securities, the Company will cause such Registrable Securities as to which registration shall have been so requested to be included with the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent required to permit the sale or other disposition of the Registrable Securities so registered by the holder of such Registrable Securities (the "Seller"). 10.2 REGISTRATION PROCEDURES. If and whenever the Company is required by the provisions hereof to effect the registration of any shares of Registrable Securities under the Act, the Company will, as expeditiously as possible: (a) prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as herein provided), and promptly provide to the holders of Registrable Securities copies of all filings and Commission letters of comment; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for eighteen (18) months following the effective date of such registration date and comply with the provisions of the Act with respect to the disposition of all of the Registrable Securities covered by such registration statement in accordance with the Seller's intended method of disposition set forth in such registration statement for such period; (c) furnish to the Seller, and to each underwriter if any, such number of copies of the registration statement and the prospectus included therein (including each preliminary -10-
prospectus) as such persons reasonably may request in order to facilitate the public sale or their disposition of the securities covered by such registration statement; (d) use its best efforts to register or qualify the Seller's Registrable Securities covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as the Seller and in the case of an underwritten public offering, the managing underwriter shall reasonably request, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e) list the Registrable Securities covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed; (f) immediately notify the Seller and each underwriter under such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (g) make available for inspection by the Seller, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by the Seller or underwriter, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all publicly available, nonconfidential information reasonably requested by the seller, underwriter, attorney, accountant or agent in connection with such registration statement. 10.3 PROVISION OF DOCUMENTS. (a) At the request of the Seller, provided a demand for registration has been made pursuant to Section 10, the Registrable Securities will be included in a registration statement filed pursuant to this Section 10. In the event of a firm commitment underwritten public offering in which the Registrable Securities are so included, other than the Company's initial public offering, the lockup, if any, requested by the managing underwriter may not exceed ninety (90) days after the effective date thereof. (b) In connection with each registration hereunder, the Seller will furnish to the Company in writing such information and representation letters with respect to itself and the proposed distribution by it as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws. In connection with each registration pursuant to Section 10.1(ii) covering an underwritten public offering, the Company and the Seller agree to enter into a written agreement with the managing underwriter in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature. -11-
10.4 RESTRICTION ON SALE OF COMMON STOCK. The Common Stock purchased pursuant to this Loan Subscription Agreement may not be sold until the lapse of 180 days from the closing of the initial public offering unless the consent of the Company thereto is obtained in writing. The Seller shall also defer sale of such Common Stock if required by the NASD or NASDAQ in connection with the Company's initial public offering, but not for any period exceeding one year from the closing of the initial public offering, unless the consent to do so is granted in writing by Anthony Heller. 10.5. EXPENSES. All expenses incurred by the Company in complying with Section 10, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, fee of one counsel, if any, to represent all the Sellers, and costs of insurance are called "Registration Expenses". All underwriting discounts and selling commissions applicable to the sale of Registrable Securities, including any fees and disbursements of any special counsel to the Seller, are called "Selling Expenses". The Seller shall pay the fees of its own additional counsel, if any. The Company will pay all Registration Expenses in connection with the registration statement under Section 10. All Selling Expenses in connection with each registration statement under Section 10 shall be borne by the Seller and may be apportioned among the Sellers in proportion to the number of shares sold by the Seller relative to the number of shares sold under such registration statement or as all Sellers thereunder may agree. 10.6. INDEMNIFICATION AND CONTRIBUTION. (a) In the event of a registration of any Registrable Securities under the Act pursuant to Section 10, the Company will indemnify and hold harmless the Seller, each officer of the Seller, each director of the Seller, each underwriter of such Registrable Securities thereunder and each other person, if any, who controls such Seller or underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which the Seller, or such underwriter 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 in any registration statement under which such Registrable Securities was registered under the Act pursuant to Section 10, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the 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 the Seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such Seller, the underwriter or -12-
any such controlling person in writing specifically for use in such registration statement or prospectus. (b) In the event of a registration of any of the Registrable Securities under the Act pursuant to Section 10, the Seller will indemnify and hold harmless the Company, and each person, if any, who controls the Company within the meaning of the Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter 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 in the registration statement under which such Registrable Securities were registered under the Act pursuant to Section 10, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the 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 the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the Seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such Seller, as such, furnished in writing to the Company by such Seller specifically for use in such registration statement or prospectus, and provided, further, however, that the liability of the Seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the Registrable Securities sold by the Seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the gross proceeds received by the Seller from the sale of Registrable Securities covered by such registration statement. (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 10.6(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 10.6(c) if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 10.6(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in -13-
any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified parties shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) In order to provide for just and equitable contribution in the event of joint liability under the Act in any case in which either (i) the Seller, or any controlling person of the Seller, makes a claim for indemnification pursuant to this Section 10.6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 10.6 provides for indemnification in such case, or (ii) contribution under the Act may be required on the part of the Seller or controlling person of the Seller in circumstances for which indemnification is provided under this Section 10.6; then, and in each such case, the Company and the Seller will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Seller is responsible only for the portion represented by the percentage that the public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, provided, however, that, in any such case, (A) the Seller will not be required to contribute any amount in excess of the public offering price of all such securities offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 11. MISCELLANEOUS. (a) NOTICES. All notices or other communications given or made hereunder shall be in writing and shall be personally delivered or deemed delivered the first business day after being telecopied (provided that a copy is delivered by first class mail) to the party to receive the same at its address set forth below or to such other address as either party shall hereafter give to the other by notice duly made under this Section: (i) if to the Company, to eRoom System Technologies, Inc., c/o Gregory L. Hrncir, 3770 Howard Hughes Parkway, Suite 175, Las Vegas, Nevada 89109, telecopier number (702) 792-2403 with a copy to Michael J. Bonner, Esq., Kummer Kaempfer Bonner & Renshaw, 3800 Howard Hughes Parkway, 7th Floor, Las Vegas, Nevada, 89109, telecopier number (702) 796-7181 (ii) if to the Subscriber, to the name, address and telecopy number set forth on the signature page hereto, with a copy by telecopier only to Anthony Heller. Any notice that may be given pursuant to this Agreement, or any document delivered in connection with the foregoing may be given by the Subscriber on the first business day after the observance dates in the United States of America by Orthodox Jewry of Rosh Hashanah, Yom Kippur, the first two days of the Feast of Tabernacles, Shemini Atzeret, Simchat Torah, the first two and final two days of Passover and Pentecost, with such notice to be deemed given and effective, at the election -14-
of the Subscriber on a holiday date that precedes such notice. Any notice received by the Subscriber on any of the aforedescribed holidays may be deemed by the Subscriber to be received and effective as if such notice had been received on the first business day after the holiday. (b) CLOSING. The consummation of the transactions contemplated herein shall take place at the offices of Snow Becker Krauss P.C., New York, New York upon the satisfaction of all conditions to Closing set forth in this Agreement. The closing date shall be April 13, 2000 (the "Closing Date"). (c) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement represents the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by both parties. No right or obligation of either party shall be assigned by that party without prior notice to and the written consent of the other party. (d) EXECUTION. This Agreement may be executed by facsimile transmission, and in counterparts, each of which will be deemed an original. (e) LAW GOVERNING THIS AGREEMENT. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York. Both parties and the individuals executing this Agreement and other agreements on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. (f) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION. The Company and Subscriber acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. Subject to Section 13(e) hereof, each of the Company and Subscriber hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law. -15-
(g) AUTOMATIC TERMINATION. This Agreement shall automatically terminate without any further action of either party hereto if the Closing shall not have occurred by the fifteenth (15th) business day following the date this Agreement is accepted by the Subscriber. -16-
Please acknowledge your acceptance of the foregoing Subscription Agreement by signing and returning a copy to the undersigned whereupon it shall become a binding agreement between us. eRoom System Technologies, Inc. By: STEVEN L. SUNYICH Chief Executive Officer Dated: April ___, 2000 Purchase Price: $ Amount of Note $ (Equal to the Purchase Price) Number of Shares of Common Stock: (Equal to the product of 0.13334 multiplied by the Purchase Price) ACCEPTED: Dated as of April ___, 2000 By: -17-
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISTRIBUTED DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, ITS TERRITORIES, POSSESSIONS, OR AREAS SUBJECT TO ITS JURISDICTION, OR TO OR FOR THE ACCOUNT OR BENEFIT OF A "U.S. PERSON" AS THAT TERM IS DEFINED IN RULE 902 OR REGULATION S OF THE ACT, AT ANY TIME PRIOR TO ONE (1) YEAR AFTER THE ISSUANCE OF THIS CERTIFICATE, EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER SUCH ACT, OR (ii) IN COMPLIANCE WITH AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. ANY SALES, TRANSFERS OR DISTRIBUTIONS OF THE SECURITIES MUST BE MADE IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S OF THE ACT." SECURED, SUBORDINATED NOTE FOR VALUE RECEIVED, eROOM SYSTEM TECHNOLOGIES, INC., a Nevada corporation (hereinafter called "Borrower"), hereby promises to pay to __________________ (the "Holder") or order, without demand, the sum of ______________ $_________, with simple interest accruing at the annual rate of 9%, on October ___, 2000 or such earlier date on which the Borrower consummates a public offering of securities ("Closing") (the "Maturity Date"). The following terms shall apply to this Note: ARTICLE I DEFAULT RELATED PROVISIONS 1.1 PAYMENT GRACE PERIOD. The Borrower shall have a two (2) day grace period to pay any monetary amounts due under this Secured Note ("Note"), after which grace period a default interest rate of 16% per annum shall apply to the amounts owed hereunder, provided, however, if the Maturity Date occurs upon Closing there shall be no grace period and this Note shall be payable at Closing. 1.2 INTEREST RATE. On the Maturity Date, accelerated or otherwise, the Borrower shall pay interest at the annual rate of 9% per annum. ARTICLE II EVENT OF DEFAULT The occurrence of any of the following events of default ("Event of Default") shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, all without demand, presentment or notice, or grace period, all of which hereby are expressly waived:
2.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails to pay any installment of principal or interest hereon when due and such failure continues for a period of two (2) days after written notice to the Borrower from the Holder. 2.2 BREACH OF COVENANT. The Borrower breaches any material covenant or other term or condition of this Note or the Loan Subscription Agreement and such breach continues for a period of seven (7) days after written notice to the Borrower from the Holder. 2.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or warranty of the Borrower made herein, in the Loan Subscription Agreement entered into by the Holder and Borrower in connection with this Note, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith shall be false or misleading. 2.4 RECEIVER OR TRUSTEE. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 2.5 JUDGMENTS. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of forty-five (45) days. 2.6 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower. 2.7 LISTING. The Common Stock of the Company shall not qualify for listing on the NASDAQ SmallCap Market or the Company receives notification that the Borrower is not in compliance with the conditions for such listing. 2.8 CONFESSION OF JUDGMENT. A confession of judgment by the Borrower or a default (not existing as of the date of this Note) under any one or more obligations in an aggregate monetary amount in excess of $100,000. 2.9 REGISTRATION DEFAULT. The occurrence of a failure to comply with the terms of Section 10 of the Loan Subscription Agreement. 2.10 CROSS DEFAULT. The occurrence of a material default or an Event of Default as that term is defined in any other material agreement to which the Company is a party (not existing as of the date of the Note). ARTICLE III MISCELLANEOUS 3.1 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise 2
thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 3.2 NOTICES. Any notice herein required or permitted to be given shall be in writing and any notice that may be given pursuant to this Agreement, or any document delivered in connection with the foregoing may be given by the Holder or the Company on the first business day after the observance dates in the United States of America by Orthodox Jewry of Rosh Hashanah, Yom Kippur, the first two days of the Feast of Tabernacles, Shemini Atzeret, Simchat Torah, the first two and final two days of Passover and Pentecost, with such notice to be deemed given and effective, at the election of the person giving Notice on a holiday date that precedes such notice. Any notice received on any of the aforedescribed holidays may be deemed to be received and effective as if such notice had been received on the first business day after the holiday. For the purposes hereof, the address and fax number of the Holder is as set forth on the first page hereof. The address and fax number of the Borrower shall be eRoom System Technologies, Inc., c/o Gregory Hrncir, Esq., 3770 Howard Hughes Parkway, Suite 175, Las Vegas, Nevada 89109, telecopier number (702) 792-2403. Both Holder and Borrower may change the address and fax number for service by service of notice to the other as herein provided. 3.3 AMENDMENT PROVISION. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. 3.4 ASSIGNABILITY. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder. 3.5 COST OF COLLECTION. If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys' fees. 3.6 GOVERNING LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York. Any action brought by either party against the other concerning this Note shall be brought only in the state courts of New York or in the federal courts located in the state of New York. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. 3.7 MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 3
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its Chief Executive Officer on this 13th day of April, 2000. By: Steven L. Sunyich Chief Executive Officer WITNESS: 4
EXHIBIT 16.01 [Original Printed on Letterhead of Arthur Andersen LLP] Office of the Chief Accountant Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 April 10, 2000 Dear Sir/Madam: We have read the Change in Accountants section of the Registration Statement on Form SB-2 of eRoom System Technology, Inc. to be filed with the Securities and Exchange Commission and are in agreement with the statements contained therein. Very truly yours,
/s/ Arthur Andersen LLP Arthur Andersen LLP
Mr. Derek K. Ellis, CFO, eRoom System Technology, Inc.
Exhibit 21.01 List of Subsidiaries 1. RoomSystems, Inc., a Nevada corporation 2. RSi BRE, Inc., a Nevada corporation
EXHIBIT 23.01 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors eRoom System Technologies, Inc. As independent certified public accountants, we hereby consent to the use of our report dated April 13, 2000 with respect to the consolidated financial statements of eRoom System Technologies, Inc. included in this Registration Statement on Form SB-2, and consent to the use of our name in the "Experts" section of this Registration Statement.
/s/ HANSEN, BARNETT & MAXWELL -----------------------------HANSEN, BARNETT & MAXWELL Salt Lake City, Utah
April 13, 2000
ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF DECEMBER 31, 1999, AND STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999, AND IS QUALIFITED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS BASIC EPS DILUTED
YEAR DEC 31 1999 DEC 31 1999 113,252 0 121,720 (15,000) 697,033 923,255 561,080 (268,804) 4,365,247 3,521,981 2,372,480 0 7,504,149 2,217 (7,530,219) 4,365,247 144,282 592,409 118,010 362,523 (1,549,171) 0 1,444,532 334,525 0 334,525 0 0 0 334,525 (0.09) (0.09)
YEAR DEC 31 1998 DEC 31 1998 1,850 0 39,555 (3,900) 1,488,354 1,527,109 712,877 (203,381) 2,520,289 4,885,453 2,884,289 0 1,332,953 3,532 (3,764,591) 2,520,289 916,650 1,011,462 711,355 793,256 6,888,214 0 1,922,638 (8,592,646) 0 (8,592,646) (407,000) 0 0 (8,999,646) (2.98) (2.98)
CONSENT The undersigned hereby consents to be named as a director designee of eRoom System Technologies, Inc., a Nevada corporation (the "Company"), in the Company's Registration Statement on Form SB-2 to be filed with the United States Securities and Exchange Commission on or about April 13, 2000, and all amendments thereto, in connection with the Company's proposed initial public offerings of its common stock. This consent is made as of this 12th day of April 2000.
/s/ Alan C. Ashton ---------------------------------Alan C. Ashton, an individual
CONSENT The undersigned hereby consents to be named as a director designee of eRoom System Technologies, Inc., a Nevada corporation (the "Company"), in the Company's Registration Statement on Form SB-2 to be filed with the United States Securities and Exchange Commission on or about April 13, 2000, and all amendments thereto, in connection with the Company's proposed initial public offerings of its common stock. This consent is made as of this 12th day of April 2000.
/s/ S. Leslie Flegel -----------------------------------S. Leslie Flegel, an individual