-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NK2TMbhEbnA9UZf50VzhySkN1vfFYZwdC8Vu1epmDd2C/yzJBvZB6ZRZ+8Vbl+qd Kbfs4pKRobLc5UGaxwKiBg== 0000950120-01-500027.txt : 20010421 0000950120-01-500027.hdr.sgml : 20010421 ACCESSION NUMBER: 0000950120-01-500027 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010201 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PALADYNE CORP CENTRAL INDEX KEY: 0001043933 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 593562953 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-22969 FILM NUMBER: 1604632 BUSINESS ADDRESS: STREET 1: 615 CRESCENT EXECUTIVE COURT STREET 2: SUITE 128 CITY: LAKE MARY STATE: FL ZIP: 32746 BUSINESS PHONE: 8476220200 MAIL ADDRESS: STREET 1: 615 CRESCENT EXECUTIVE COURT STREET 2: SUITE 128 CITY: LAKE MARY STATE: FL ZIP: 32746 FORMER COMPANY: FORMER CONFORMED NAME: SYNAPTX WORLDWIDE INC DATE OF NAME CHANGE: 19970807 8-K 1 palform8k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) - February 1, 2001 ---------------- PALADYNE CORP. - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-22969 59-3562953 - - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) PO Box 22207, Lake Buena Vista, FL. 32830 - - -------------------------------------------------------------------------------- (Address of principal executive offices) (zip code) Registrant's telephone number, including area code - (407) 909-1723 -------------- 610 Crescent Executive Court, Suite 124, Lake Mary, FL 32746 - - -------------------------------------------------------------------------------- (Former Name or Former Address, if changed since last report) Item 2. Acquisition or Disposition of Assets ------------------------------------ On February 1, 2001, the registrant Paladyne Corp. ("Paladyne"), through its wholly-owned subsidiary E-com Acquisition Corp. ("Acquisition Sub"), merged (the "Merger") with e-commerce support centers, inc., a North Carolina corporation ("ecom"), pursuant to an Agreement and Plan of Merger, dated as of December 21, 2000, as amended (collectively the "Merger Agreement"), among Paladyne, Acquisition Sub and ecom. Upon the Merger, ecom became a wholly-owned subsidiary of Paladyne. For additional information about the Merger, see the initial Form 8-K for an event of February 1, 2001. Based upon discussions subsequent to the Merger, Paladyne, ecom and Gibralter Publishing, Inc., a North Carolina corporation ("Gibralter"), determined that it was necessary to renegotiate and to amend some of the agreements which had became effective upon the Merger. The amendments change the calculation for the issuance of the deferred shares and delay the repayment dates of the two notes (the "Notes") issued by ecom to Gibralter in payment for the assets purchased by ecom from Gibralter immediately prior to the Merger, pursuant to a Second Amendment to Agreement and Plan of Merger ("Second Amendment") and an Amending Agreement, respectively. The Second Amendment was entered into by Paladyne and Terrence J. Leifheit (the "Principal Stockholder"), on behalf of himself and as representative for the other former stockholders of ecom (the "ecom Stockholders"). Section 3.1(iv) of the Merger Agreement originally provided for the ecom Stockholders to receive post-closing an amount of Paladyne Common Stock equivalent to 95% of each whole share of Common Stock or other security convertible into Common Stock issued by Paladyne until Paladyne received $6,500,000 in cash from sales of Common Stock. Section 3.1(iv) as amended provides that beginning as of the date of the Second Amendment and ending the earlier of December 20, 2002 or when Paladyne raises $6,500,000 in cash from sales of Common Stock or Common Stock equivalents (the "New Securities"), Paladyne will issue one share (the "Deferred Shares") of Common Stock to the ecom Stockholders for each $1.00 in gross proceeds received upon the sale of New Securities or issuable upon conversion, exercise or exchange of New Securities. The Amending Agreement amends the original Promissory Note A and Promissory Note B which constitute the Notes, and terminates the Default and Assignment Agreement, the Secondary Operating Agreement, and the Escrow Agreement. These latter Agreements had been included as exhibits to the initial Form 8-K for an event of February 1, 2001. The Amended Promissory Note A issued by ecom to Gibralter in the principal amount of $1,500,000 is repayable in two equal principal installments of $750,000, with the first installment due when Paladyne raises a minimum of $3,000,000 in equity or convertible debt and the second installment due no earlier than six months after the payment of the first installment, and in no event until Paladyne has had a positive cash flow for any three consecutive calendar months. The Amended Promissory Note B issued by ecom to Gibralter in the principal amount of $3,500,000, is repayable in 12 equal quarterly principal payments commencing October 1, 2001, or up to six months thereafter if mutually agreed. Both Notes still bear interest at 10% per annum. The Security Agreement pursuant to which ecom granted to Gibralter a first lien on the purchased assets to secure the repayment of the Notes and the 2 Unconditional Guaranty Agreement whereby Paladyne guaranteed these Notes remain in full force and effect. Item 7. Financial Statements and Exhibits --------------------------------- (a) Financial Statements of Business Acquired. ----------------------------------------- Report of Independent Certified Public Accountants. Balance Sheets, as of September 30, 2000 and December 31, 1999. Statements of Operations for the nine months ended September 30, 2000 and three months ended December 31, 1999. Statements of Capital Deficit as of September 30, 2000 and December 31, 1999. Statements of Cash Flows for the nine months ended September 30, 2000 and three months ended December 31, 1999. Notes to Financial Statements. (b) Pro Forma Financial Information. ------------------------------- Introduction Unaudited Pro Forma Condensed Combined Balance Sheet as of February 28, 2001 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended August 31, 2000. Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended February 28, 2001. (c) Exhibits. -------- *All documents are dated as of April 9, 2001. 10.1.3 Second Amendment to Agreement and Plan of Merger, among Paladyne and Terrence J. Leifheit on behalf of himself and as representative for the former shareholders of ecom. 10.4.4.1 Amended Promissory Note A from ecom to Gibralter in the principal amount of $1,500,000. 3 10.4.5.1 Amended Promissory Note B from ecom to Gibralter in the principal amount of $3,500,000 10.4.11 Amending Agreement among Gibralter, Paladyne and ecom. 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PALADYNE CORP. -------------- (Registrant) Dated: April 17, 2001 By /s/ John D. Foster ------------------------------------ John D. Foster, Chairman and CEO 5 E-COMMERCE SUPPORT CENTERS, INC. ---------------------------------------- FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2000 AND THREE MONTHS ENDED DECEMBER 31, 1999 E-COMMERCE SUPPORT CENTERS, INC. Contents - - -------------------------------------------------------------------------------- Report of Independent Certified Public Accountants 3 Financial Statements Balance sheets 4 Statements of operations 5 Statements of capital deficit 6 Statements of cash flows 7 Notes to financial statements 8-15 2 E-COMMERCE SUPPORT CENTERS, INC. BALANCE SHEETS - - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors e-commerce support centers, Inc. Jacksonville, North Carolina We have audited the accompanying balance sheets of e-commerce support centers, Inc. as of September 30, 2000 and December 31, 1999 and the related statements of operations, capital deficit and cash flows for the nine months ended September 30, 2000 and the three months ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2000 and December 31, 1999 and the results of its operations and its cash flows for the nine months ended September 30, 2000 and the three months ended December 31, 1999, in conformity with generally accepted accounting principles in the United States of America. As described in Note 5 to the Financial Statements, effective February 1, 2001, the Company was merged into another entity. High Point, North Carolina /s/ BDO Seidman, LLP December 22, 2000, except for Footnote 5, dated February 1, 2001 3 E-COMMERCE SUPPORT CENTERS, INC. BALANCE SHEETS - - --------------------------------------------------------------------------------
September 30, December 31, 2000 1999 - - ---------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ - $ - Accounts receivable, net of allowance for doubtful accounts of $108,000 in 2000 1,086,394 131,811 - - ---------------------------------------------------------------------------------------------- Total current assets 1,086,394 131,811 PROPERTY AND EQUIPMENT, NET OF ACCUMULATED Depreciation and amortization (Notes 2 and 3) 3,980,428 3,237,907 - - ---------------------------------------------------------------------------------------------- $ 5,066,822 $ 3,369,718 - - ---------------------------------------------------------------------------------------------- LIABILITIES AND CAPITAL DEFICIT CURRENT LIABILITIES: Accounts payable $ 386,136 $ 32,653 Accrued expenses 362,692 118,635 Due to affiliate (Note 1) 5,852,085 3,395,239 Current portion of capital lease obligations (Note 3) 712,919 379,138 - - ---------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 7,313,832 3,925,665 LONG-TERM CAPITAL LEASE OBLIGATIONS, LESS current portion (Note 3) 1,044,079 682,632 - - ---------------------------------------------------------------------------------------------- Total liabilities 8,357,911 4,608,297 - - ---------------------------------------------------------------------------------------------- COMMITMENTS (Note 3) CAPITAL DEFICIT Stock subscription receivable (2,000) - Common stock - no par value; authorized 100,000 shares; issued and outstanding 82,000 shares in 2000 - - Additional paid-in capital 2,000 - Accumulated deficit (3,291,089) (1,238,579) - - ---------------------------------------------------------------------------------------------- TOTAL CAPITAL DEFICIT (3,291,089) (1,238,579) - - ---------------------------------------------------------------------------------------------- $ 5,066,822 $ 3,369,718 - - ----------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 4 E-COMMERCE SUPPORT CENTERS, INC. STATEMENTS OF OPERATIONS - - -------------------------------------------------------------------------------- Nine Months Three Months Ended Ended September 30, December 31, 2000 1999 - - -------------------------------------------------------------------------------- REVENUES $ 3,306,968 $ 219,404 - - -------------------------------------------------------------------------------- OPERATING EXPENSES: Call center expenses 2,115,479 441,844 Selling, general and administrative expenses 1,988,066 423,146 Depreciation and amortization 1,155,774 570,356 - - -------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES 5,259,319 1,435,346 - - -------------------------------------------------------------------------------- LOSS FROM OPERATIONS (1,952,351) (1,215,942) OTHER INCOME (EXPENSE) - interest (100,159) (22,637) - - -------------------------------------------------------------------------------- Loss before taxes on income (2,052,510) (1,238,579) TAXES ON INCOME (Note 4) - - - - -------------------------------------------------------------------------------- NET LOSS $ (2,052,510) $ (1,238,579) - - -------------------------------------------------------------------------------- NET LOSS PER SHARE - BASIC AND DILUTED $ (25.03) $ (15.10) - - -------------------------------------------------------------------------------- See accompanying notes to financial statements. 5 E-COMMERCE SUPPORT CENTERS, INC. STATEMENTS OF CAPITAL DEFICIT - - --------------------------------------------------------------------------------
Stock Common Stock Additional Subscription ------------------- Paid-in Accumulated Total Capital Receivable Shares Amount Capital Deficit Deficit - - ------------------------------------------------------------------------------------------------------ AMOUNT, October 1, 1999 $ - - $ - $ - $ - $ - Net loss - - - - (1,238,579) (1,238,579) - - ------------------------------------------------------------------------------------------------------ AMOUNT, December 31, 1999 - - - - (1,238,579) (1,238,579) Issuance of company common stock (2,000) 82,000 - 2,000 - - Net loss - - - - (2,052,510) (2,052,510) - - ------------------------------------------------------------------------------------------------------ AMOUNT, September 30, 2000 $ (2,000) 82,000 $ - $ 2,000 $(3,291,089) $(3,291,089) - - ------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 6 E-COMMERCE SUPPORT CENTERS, INC. STATEMENTS OF CASH FLOWS - - --------------------------------------------------------------------------------
Nine months Three Months Ended Ended September 30, December 31, 2000 1999 - - ---------------------------------------------------------------------------------------------- CASH FLOW FROM OPERATING ACTIVITIES: Net loss $ (2,052,510) $ (1,238,579) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,155,774 570,356 Allowance for doubtful accounts 108,000 - Changes in assets and liabilities: Accounts receivable (1,062,583) (131,811) Accounts payable 353,483 32,653 Accrued expenses 244,057 118,635 Due to affiliate 2,456,846 3,395,239 - - ---------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,203,067 2,746,493 - - ---------------------------------------------------------------------------------------------- CASH FLOW USED IN INVESTING ACTIVITIES - Purchase of property and equipment (890,271) (2,682,090) - - ---------------------------------------------------------------------------------------------- CASH FLOW USED IN FINANCING ACTIVITIES - Principal payments on capital lease obligations (312,796) (64,403) - - ---------------------------------------------------------------------------------------------- Net increase(decrease) in cash - - CASH AND CASH EQUIVALENTS, beginning of period - - - - ---------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of period $ - $ - - - ---------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES: Equipment financed through capital leases $ 1,008,024 $ 1,126,173 - - ----------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 7 E-COMMERCE SUPPORT CENTERS, INC. NOTES TO FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- 1. SUMMARY OF Basis of Presentation and Description of Business SIGNIFICANT ACCOUNTING e-commerce support centers, Inc. ("e-com") began operations POLICIES in October 1999 as a division of Gibralter Publishing, Inc. ("Gibralter"). In May of 2000, e-com was incorporated and Gibralter transferred existing call center contracts to e-com. e-com provides outsourced eCRM solutions for both business to business and business to consumer Internet sites. e-com's full spectrum of personalized customer solutions include inbound customer support and Help Desk support using live, one-to-one text chat; live phone support comprised of callback technology and voice/video over IP; multiple, simultaneous email response; customized reporting; proactive site monitoring; and collaborative agent interaction. e-com also provides traditional call center services. These services are provided for companies throughout the United States. The accompanying financial statements include the operations, assets and liabilities of e-com. In December 2000, e-com announced its plan to merge with Paladyne Corp., see Note 5. Immediately prior to the merger, an affiliated Company through common ownership, Gibralter, transferred certain assets and liabilities to e-com. Those assets and liabilities will be reflected in e-com's financial statements at Gibralter's historical cost. The net effect of the transfer of assets and liabilities was recorded as a due to the affiliate. In conjunction with the merger, e-com has entered into a contractual arrangement with Gibralter to provide traditional call center services previously performed by Gibralter. Revenues and expenses specifically identified have been directly attributed to e-com in the financial statements. e-com's costs and expenses in the accompanying financial statements include allocations from Gibralter for centralized legal, accounting, real estate, information technology, and other Gibralter corporate services and infrastructure costs because specific identification of the expenses is not practicable. The expense allocations have been determined on the bases that Gibralter and e-com considered to be reasonable reflections of the utilization 8 E-COMMERCE SUPPORT CENTERS, INC. NOTES TO FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- of services provided or the benefit received by e-com using a ratio of hours worked by customer service representatives. However, the financial information included herein may not necessarily reflect the financial position and results of operations of e-com in the future or what these amounts would have been had it been a separate, stand-alone entity during the periods presented. However, management believe that if e-com had been a stand-alone entity during the periods presented, the expenses would not have been materially different from the allocations presented. REVENUE RECOGNITION AND CREDIT RISK The Company's call center support business records service revenue in the period in which the services are rendered, based on contractual hourly or call rates. Management performs credit evaluations of its customers and generally does not require collateral. CASH AND CASH EQUIVALENTS For the purposes of the statements of cash flows, cash and cash equivalents include amounts in banks and on hand, and highly liquid instruments with an original maturity of three months or less. Due to their relationship with Gibralter previously mentioned, all of ecom's cash receipts are netted against due to affiliate. PROPERTY AND EQUIPMENT Property and equipment is stated at cost and depreciated using the straight-line method over estimated useful lives of the respective assets, as follows: ------------------------------------------------------------ Computer and telephone hardware 3-5 years Computer software 3 years Leasehold improvements Term of lease Furniture and fixtures 7 years Equipment 5 years ------------------------------------------------------------ 9 E-COMMERCE SUPPORT CENTERS, INC. NOTES TO FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties. Management estimates that the carrying amounts of the Company's financial instruments included in the accompanying balance sheets are not materially different from their fair values. LONG-LIVED ASSETS Long-lived assets, such as property and equipment, are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When any such impairment exists, the related assets will be written down to fair value. This policy is in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." INCOME TAXES e-com accounts for income taxes under the asset and liability method in accordance with generally accepted accounting principles. Accordingly, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Valuation allowances are recorded when realization of deferred tax assets can not be considered more likely than not. 10 E-COMMERCE SUPPORT CENTERS, INC. NOTES TO FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ADVERTISING Cost incurred for advertising are expensed when incurred. The charges to expense were not significant for the nine month period ended September 30, 2000 and for the three months ended December 31, 1999. PER SHARE DATA e-com computes earnings per share based upon the weighted average shares outstanding during the period. Earnings per share were, calculated on a proforma bases for the three month period end December 31, 1999. RECENT ACCOUNTING PRONOUNCEMENTS SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. Historically, e-com has not entered into derivatives contracts either to hedge existing risks or for speculative purposes. Accordingly, e-com does not expect adoption of the new standard on January 1, 2001, to affect its financial statements. 11 E-COMMERCE SUPPORT CENTERS, INC. NOTES TO FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- On December 3, 1999, the SEC issued Staff Accounting Bulletin 101 (SAB 101"), Revenue Recognition in Financial Statements. SAB 101 summarizes some of the SEC's interpretations of the application of generally accepted accounting principles to revenue recognition. Revenue recognition under SAB 101 was initially effective for the Company's first fiscal quarter of fiscal year beginning after December 15, 1999. However, SAB 101B, which was released June 26, 2000, delayed adoption of SAB 101 until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Company believes that its revenue recognition practices are in substantial compliance with SAB 101 and that adoption of its provisions would not be material to its prospective annual or quarterly results of operations. 2. PROPERTY AND Property and equipment is summarized as follows: EQUIPMENT September 30, December 31, 2000 1999 ----------------------------------------------------------- Computer and telephone hardware $ 2,026,668 $ 1,468,085 Computer software 3,402,142 2,186,394 Leasehold improvements 698,841 698,841 Furniture and fixtures 276,974 194,974 Equipment 159,106 117,142 ----------------------------------------------------------- 6,563,731 4,665,436 Accumulated depreciation and amortization (2,583,303) (1,427,529) ----------------------------------------------------------- Property and equipment, net $ 3,980,428 $ 3,237,907 ----------------------------------------------------------- 12 E-COMMERCE SUPPORT CENTERS, INC. NOTES TO FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- Assets recorded under capital leases and included in property and equipment are as follows: September 30 December 31 2000 1999 ----------------------------------------------------------- Computer and telephone hardware $ 872,629 $ 491,405 Computer software 1,256,249 863,768 ----------------------------------------------------------- 2,128,878 1,355,173 Accumulated depreciation and amortization (938,459) (578,027) ----------------------------------------------------------- Net assets under lease obligations $ 1,190,419 $ 777,146 ----------------------------------------------------------- 3. CAPITAL LEASE Future minimum lease payments on capital leases for the OBLIGATIONS 12-month period ended September 30 are summarized as follows: ----------------------------------------------------------- 2001 $ 855,371 2002 615,659 2003 508,984 2004 15,153 ----------------------------------------------------------- Total payments 1,995,167 Less amount representing interest 238,169 ----------------------------------------------------------- Present value of minimum lease payments 1,756,998 Less current portion 712,919 ----------------------------------------------------------- Long term portion of capital lease obligations $ 1,044,079 ----------------------------------------------------------- 13 E-COMMERCE SUPPORT CENTERS, INC. NOTES TO FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- 4. INCOME TAXES Provisions for federal and state income taxes consist of the following: Nine Months Three Months Ended Ended September 30, December 31, 2000 1999 ----------------------------------------------------------- Deferred: Federal $ (737,000) $ (421,000) State (100,000) (57,000) Valuation allowance 837,000 478,000 ----------------------------------------------------------- Total deferred - - ----------------------------------------------------------- Provision for income taxes $ - $ - ----------------------------------------------------------- The Company's effective tax rate differs from the statutory federal tax rate in 2000 and 1999 as shown in the following table: Nine Months Three Months Ended Ended September 30, December 31, 2000 1999 ----------------------------------------------------------- U.S. federal income taxes at the statutory rate $ (737,000) $ (421,000) State taxes, net (100,000) (57,000) Changes in valuation allowance 837,000 478,000 ----------------------------------------------------------- Provision for income taxes $ - $ - ----------------------------------------------------------- 14 E-COMMERCE SUPPORT CENTERS, INC. NOTES TO FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- The tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and liabilities as of September 30, 2000 and December 31, 1999 are presented below: September 30, December 31, 2000 1999 ----------------------------------------------------------- Allowance for doubtful accounts $ 42,000 $ - Net operating loss carryforwards 795,000 478,000 Valuation allowances (837,000) (478,000) ----------------------------------------------------------- Net deferred taxes $ - $ - ----------------------------------------------------------- The Company has recorded a valuation allowance against deferred tax assets due to uncertainties regarding the Company's ability to generate a sufficient level of taxable income in future periods. In the event that realization of the deferred tax assets is considered more likely than not in future periods, the Company may reduce the valuation allowance. Due to the change in ownership, future utilization of net operating loss carryforwards will be limited. 5. SUBSEQUENT Effective February 1, 2001, ecom merged into Paladyne Corp., EVENTS in exchange for Paladyne redeemable Preferred Stock. 15 Pro Forma Financial Data Introduction The following pro forma financial data is based upon the historical financial statements of Paladyne Corp. ("Paladyne") and have been prepared to illustrate the effects on such historical financial data of the acquisition of e-commerce support centers, inc. ("ecom"). The unaudited pro forma statements of operations combine the historical consolidated statements of operations of Paladyne for the six months ended February 28, 2001 and the year ended August 31, 2000 with the historical statements of operations for ecom for the six months ended December 31, 2000 and the year ended September 30, 2000, respectively. The ecom acquisition is assumed to have been consummated on September 1, 1999. The unaudited pro forma balance sheet of Paladyne as of February 28, 2001 includes the acquisition of ecom, which was consummated on February 1, 2001 and reflects the results of operations of ecom for the one month ended February 28, 2001. The pro forma financial data is provided for comparative purposes only and does not purport to represent the actual financial position or results of operations of Paladyne that actually would have been obtained if the ecom acquisition had been consummated on the date specified, nor is it necessarily indicative of the results of operations that may be achieved in the future. The pro forma financial data is based on certain assumptions and adjustments described in the notes thereto and should be read in conjunction with the historical financial statements of Paladyne and ecom. B-1 UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET FEBRUARY 28, 2001 PALADYNE (A) ------------ (UNAUDITED) ASSETS: Current Assets Cash and cash equivalents $ 398,459 Short term investments 242,666 Accounts receivable, net 1,531,289 Prepaid expenses and other current assets 120,939 ------------ Total Current Assets 2,293,353 Property and equipment, net 3,188,137 Goodwill, net 9,520,256 (B) Capitalized software development costs, net 417,936 Other assets 52,272 ------------ TOTAL ASSETS $ 15,471,954 ============ LIABILITIES & STOCKHOLDERS' EQUITY: Current Liabilities Notes payable $ 1,850,000 (C) Accounts payable 1,229,008 Accrued expenses 601,355 Due to Affiliate 128,911 Accrued preferred stock dividends 129,200 Current portion of capital lease obligations 797,247 Current portion of long-term debt 431,466 (C) ------------ Total Current Liabilities 5,167,187 Long-term capital lease obligations 881,753 Long-term debt 3,068,534 (C) ------------ Total Liabilities 9,117,474 ------------ Stockholders' Equity Preferred Stock - Series A 137 Preferred Stock - Series B 4,100 (D) Common Stock 8,460 Additional paid-in capital 12,879,848 (D) Accumulated deficit (6,538,065) ------------ Total Stockholders' Equity 6,354,480 ------------ TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 15,471,954 ============ Footnotes (A) The unaudited historical balance sheet of Paladyne includes the acquisition of ecom on February 1, 2001 and reflects the results of ecom's operations for the one month ended February 28, 2001. (B) The excess of the purchase price over the net assets acquired of approximately $9,373,000 was recorded as goodwill and will be amortized over a 15 year period. Amortization expense of approximately $52,000 was recorded in February 2001 relating to this goodwill. The purchase price was based on the fair value of Paladyne's common stock and the number of shares obtainable upon conversion of the convertible preferred stock issued as acquisition consideration. The purchase price was allocated based on the estimated fair value of the net assets acquired. The purchase allocation is preliminary and is subject to change based upon final appraisals of the assets acquired. (C) Debt of $5,000,000 was assumed in the acquisition, including a short-term $1,500,000 note payable and a long- term $3,500,000 note payable. Interest expense of approximately $42,000 was recorded in February 2001 relating to this debt. (D) Stock valued at approximately $5,765,000 was issued, representing the purchase price, in the acquisition consisting of 4,100,000 shares of convertible preferred stock with a par value of $.001. B-2 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2000
HISTORICAL PRO FORMA -------------------------- -------------------------------- ECOM ACQUISITION PALADYNE (A), (E) ADJUSTMENTS COMBINED ------------ ------------ ------------ ------------ (UNAUDITED) REVENUES $ 5,521,865 $ 3,526,372 $ - $ 9,048,237 COST OF REVENUES 3,366,400 2,557,323 - 5,923,723 ------------ ------------ ------------ ------------ Gross Profit 2,155,465 969,049 - 3,124,514 EXPENSES: Selling & G&A 2,047,982 2,411,212 4,459,194 Depreciation & Amortization 62,656 1,726,130 624,882 (B) 2,413,668 - ------------ ------------ ------------ ------------ Income (Loss) from Operations 44,827 (3,168,293) (624,882) (3,748,348) OTHER INCOME (EXPENSE): Interest Income 7,594 - - 7,594 Interest Expense (24,418) (122,796) (500,000) (C) (647,214) Loss on disposal of assets (31,814) - - (31,814) Other Income 16,460 - - 16,460 ------------ ------------ ------------ ------------ Net Income (Loss) 12,649 (3,291,089) (1,124,882) (4,403,322) Cumulative Convertible Preferred Stock Dividend 40,800 40,800 ------------ ------------ ------------ ------------ NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (28,151) $ (3,291,089) $ (1,124,882) $ (4,444,122) ============ ============ ============ ============ Net loss per common share - basic and diluted $ (0.00) - - $ (0.56) Weighted average common shares outstanding - 7,958,843 - - (D) 7,958,843 basic and diluted
Footnotes (A) The unaudited historical financial statements of ecom were based on a December year end and have been adjusted to to reflect the results of operations for the year ended September 30, 2000. (B) Adjustments to record the amortization of goodwill resulting from the ecom acquisition. (C) Adjustment to reflect the interest expense related to the notes payable signed by ecom in connection with the purchase of the property and equipment immediately prior to the acquisition. (D) The convertible preferred stock issued in connection with the acquisition was anti-dilutive as of August 31, 2001 and has no effect on net loss per common share. (E) The results of operations of ecom for the year ended September 30, 2000 included the results of operations for three months ended September 30, 2000 which is also included in the results of operations for the six months ended December 31, 2000. There were no unusual transactions during the three months ended September 30, 2000. B-3 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 28, 2001
HISTORICAL PRO FORMA -------------------------- -------------------------------- ECOM ACQUISITION PALADYNE (A), (F) ADJUSTMENTS COMBINED ------------ ------------ ------------ ------------ (UNAUDITED) (UNAUDITED) REVENUES $ 2,353,389 $ 3,277,312 $ (897,082) (B) $ 4,733,619 COST OF REVENUES 1,287,434 1,994,898 (153,330) (B) 3,129,002 ------------ ------------ ------------ ------------ Gross Profit 1,065,955 1,282,414 (743,752) 1,604,617 EXPENSES: Selling & G&A 2,160,141 1,554,941 (805,183) (B) 2,909,899 Depreciation & Amortization 232,545 770,516 (130,357) (B) 1,185,145 312,441 (C) ------------ ------------ ------------ ------------ Income (Loss) from Operations (1,326,731) (1,043,043) (120,653) (2,490,427) OTHER INCOME (EXPENSE): Interest Income 21,048 - - 21,048 Interest Expense (57,721) (66,773) 57,473 (B) (317,021) (250,000) (D) Other Income 6,986 - - 6,986 ------------ ------------ ------------ ------------ Net Income (Loss) (1,356,418) (1,109,816) (313,180) (2,779,414) Cumulative Convertible Preferred Stock Dividend 20,400 - - 20,400 ------------ ------------ ------------ ------------ NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (1,376,818) $ (1,109,816) $ (313,180) $ (2,799,814) ============ ============ ============ ============ Net loss per common share - basic and diluted $ (0.16) - - $ (0.33) Weighted average common shares outstanding - 8,458,956 - - (E) 8,458,956 basic and diluted
Footnotes (A) The unaudited historical financial statements of ecom were based on a December year end and have been adjusted to to reflect the results of operations for the six months ended December 31, 2000. (B) Adjustment to remove the results of operations of ecom for the one month ended February 28, 2001 as these amounts are already included in Paladyne's historical financial statements. (C) Adjustment to record the amortization of goodwill resulting from the ecom acquisition. (D) Adjustment to reflect the interest expense related to the notes payable signed by ecom in connection with the purchase of property and equipment immediately prior to the acquisition. (E) The convertible preferred stock issued in connection with the acquisition was anti-dilutive as of February 28, 2001 and has no effect on net loss per common share. (F) The results of operations of ecom for the six months ended December 31, 2000 included the results of operations for three months ended September 30, 2000 which are also included in the results of operations for the year ended September 30, 2000. There were no unusual transactions during the three months ended September 30, 2000. B-4 EX-10 2 exhibit1013.txt EXHIBIT 10.1.3 EXHIBIT 10.1.3 SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER dated as of April 9, 2001 (the "Second Amendment Agreement"), by and among PALADYNE CORP., a Delaware -------------------------- corporation ("Parent"), and the TERRENCE J. LEIFHEIT, in his individual capacity ------ and as representative for the other former shareholders of e-commerce support centers, inc., a North Carolina corporation ("Principal Stockholder"). Capitalized terms used herein without definition shall have the respective meanings ascribed to such terms in the Merger Agreement. R E C I T A L S --------------- Parent and e-commerce support centers, inc. ("ecom") have previously entered into an Agreement and Plan of Merger, dated as of December 21, 2000 (the "Merger Agreement"), whereby a subsidiary of Parent would merge with and into ecom, and ecom would become a wholly-owned subsidiary of Parent (the "Merger"). The Merger was effective as of February 1, 2001. Subsequent to the Merger, Parent and Principal Stockholder have become aware of certain outstanding issues that need to be addressed by amendment to the Merger Agreement. The parties wish to modify and amend the Merger Agreement as provided herein. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties, intending to be legally bound, agree as follows: 1. Section 3.1(iv) of the Merger Agreement is hereby deleted in its entirety and replaced with the following: (iv) Beginning as of the date of this Agreement and continuing until the earlier of (i) three (3) years from the date hereof or (ii) Parent receives, in the aggregate, $6.5 Million in cash from sales of Common Stock (or Common Stock equivalents) (the "New Securities") of Parent (not -------------- including issuances of stock underlying currently outstanding options and warrants), Parent will, simultaneously with the issuance of the New Securities, issue to the Stockholders, without further payment of cash or other consideration by the Stockholders, one (1) share of Common Stock (the "Deferred Shares") for each $1.00 in gross proceeds upon the sale of New --------------- Securities or issuable upon conversion, exercise or exchange of New Securities. 2. By reason of the change in Section 3.1(iv) of the Merger Agreement as provided in Paragraph 1 above, the term "Deferred Shares" shall be substituted for the term "Antidilution Shares" in the Merger Agreement. 3. Except as otherwise specifically set forth in this Second Amendment Agreement, the provisions of the Merger Agreement and First Amendment to Merger Agreement, dated as of February 1, 2001, shall remain in full force and effect. This Second Amendment Agreement supersedes all prior agreements between the parties with respect to the matters addressed herein and constitutes the entire agreement between the parties on the subjects herein. The provisions of this Second Amendment Agreement may not be amended, deleted or modified in whole or in part without the express written consent of all parties to this Second Amendment Agreement, which will be executed with the same formality as this Second Amendment Agreement. This Second Amendment Agreement will be subject to and governed by the laws of the State of North Carolina, without respect to the principles of the choice of law or the conflicts of law. This Second Amendment Agreement will be binding upon and inure to the benefit of the parties hereto, their heirs, successors and assigns. This Second Amendment Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same document. IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set forth above. PARENT: PALADYNE CORP. By: /s/ John D. Foster ------------------------------------ John D. Foster, Chairman PRINCIPAL STOCKHOLDER: /s/ Terrence J. Leifheit ------------------------------------ Terrence J. Leifheit, on behalf of himself and as representative for the other former shareholders of e-commerce support centers, inc. 2 EX-10 3 exhibit10441.txt EXHIBIT 10.4.4.1 EXHIBIT 10.4.4.1 AMENDED PROMISSORY NOTE A $1,500,000.00 April 9, 2001 Raleigh, North Carolina FOR VALUE RECEIVED, the undersigned, e-commerce support centers, inc., a North Carolina corporation (the "Company"), and a wholly-owned subsidiary of Paladyne Corp., a Delaware corporation ("Paladyne"), hereby promises to pay to the order of Gibralter Publishing, Inc., a North Carolina corporation ("Gibralter"), the principal sum of One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00), or so much thereof as shall be outstanding from time to time during the term hereof. All principal and interest shall be paid and collected in immediately available funds in lawful money of the United States of America. Interest shall accrue from February 1, 2001 and continue up to and through the Maturity Date. The principal shall be due and payable in two equal installments of $750,000 each, together with accrued interest thereon. The first installment shall be due upon the Paladyne's raising a minimum of $3,000,000 in equity or convertible debt. The second installment shall be due no earlier than six (6) months after payment of the first installment, and in no event shall the second installment be due until Paladyne has had a positive cash flow for any three (3) consecutive calendar months (the "Maturity Date"). Gibralter covenants and agrees that all payments made by the Company under this Note shall be credited to reduce the amount of outstanding principal and interest due and owing hereunder. Interest hereunder shall be computed on the basis of the actual number of days elapsed in a 365-day year, and shall be calculated on the outstanding principal balance hereunder at an annual rate of interest equal to ten percent (10%) per annum. In addition to principal and interest, the Company agrees to pay all costs of collection, including, without limitation, reasonable attorneys' fees if the indebtedness evidenced hereby is collected by or through an attorney-at-law. The Company at its option may prepay the indebtedness evidenced by this Note in whole or in part without penalty or premium but with accrued interest to the date of such prepayment of the principal amount prepaid. This Note amends Promissory Note A issued on February 1, 2001 in accordance with the terms of an Agreement and Plan of Merger, dated as of December 21, 2000, and as amended (the "Merger Agreement"), among the Company, Paladyne and E-com Acquisition Corp. All capitalized terms used herein and not otherwise defined shall have their respective meanings as set forth in the Merger Agreement. This Note is secured by a security interest granted pursuant to a Security Agreement, dated as of the 1st day of February, 2001 (the "Security Agreement"). The following events shall constitute a default under this Note (each, a "Default"): (a) the Company's failure to pay one or more Monthly Payments when such payments are due hereunder; (b) the Company's failure to pay all outstanding and accrued but unpaid interest on the Maturity Date; or (c) a default or breach shall occur under any other promissory note, loan or credit agreement, lien instrument, or other financing document to which the Company is a party and which default or breach is not cured within any applicable grace period thereunder. In consideration of the loan evidenced by this Note, Paladyne hereby irrevocably, absolutely and unconditionally guarantees prompt payment of this Note in full, when due, whether by acceleration or otherwise, to Gibralter, its successors, endorsees, or assigns, irrespective of the genuineness, validity or enforceability of this Note, or the existence of any security for payment of this Note, pursuant to that certain Unconditional Guaranty Agreement, dated as of the 1st day of February, 2001 (the "Guaranty"). No delay or failure on the part of Gibralter or on the part of any holder of this Note in the exercise of any right, power or privilege granted under this Note, or otherwise available by agreement, at law or in equity, shall impair any such right, power or privilege or be construed as a waiver thereof. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege. No waiver shall be valid against Gibralter unless made in writing and signed by Gibralter, and then only to the extent expressly specified therein. This Note shall not be subordinated, assigned, or otherwise transferred by the Company without the prior written consent of Gibralter. Time is of the essence hereunder. This Note shall be governed by the laws of the State of North Carolina. PRESENTMENT AND NOTICE OF DISHONOR ARE HEREBY WAIVED. IN WITNESS WHEREOF, the Company has caused this Note to be executed in its name and attested to by its authorized officers, and its corporate seal to be hereunto affixed, all as of the date first above written. COMPANY: E-COMMERCE SUPPORT CENTERS, INC. (a North Carolina corporation) ATTEST: By: /s/ Terrence J. Leifheit ------------------------------------ Terrence J. Leifheit, President /s/ Clifford A. Clark - - ------------------------------------ Clifford A. Clark, Secretary [CORPORATE SEAL] 2 EX-10 4 exhibit10451.txt EXHIBIT 10.4.5.1 EXHIBIT 10.4.5.1 AMENDED PROMISSORY NOTE B $3,500,000.00 April 9, 2001 Raleigh, North Carolina FOR VALUE RECEIVED, the undersigned, e-commerce support centers, inc., a North Carolina corporation (the "Company") hereby promises to pay to the order of Gibralter Publishing, Inc., a North Carolina corporation ("Gibralter"), at its principal office, or at such other place as the holder hereof may designate, the principal sum of Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00), plus all accrued and unpaid interest thereon. All principal and interest shall be paid in collected and immediately available funds in lawful money of the United States of America. Interest shall accrue from February 1, 2001 and continue up to and through the date on which all principal and interest under this Note is to be paid in full. Interest shall be computed on the basis of actual number of days elapsed in a 365-day year, and shall be calculated on the outstanding principal balance hereunder at an annual rate of interest equal to ten percent (10%) per annum. Principal and interest under this Note shall be payable in twelve (12) consecutive equal quarterly installments of principal, plus accrued interest, each on the first business day of each calendar quarter during the term hereof, beginning on October 1, 2001 (each, a "Quarterly Installment Payment" and collectively, the "Quarterly Installment Payments"). The Company and Gibralter can defer the initial payment under this Note for up to two (2) additional calendar quarters by mutual agreement. If one or more Quarterly Installment Payments are not made on the date due, notwithstanding that a Default (as defined below) has not occurred, additional interest shall accrue on all past due principal and accrued interest hereunder at a rate of four and one-half percent (4.5%) per annum (the "Additional Interest") (so that aggregate interest is increased to 14.5%) until such time as the Company cures all past due payments of principal and accrued interest. This Note amends Promissory Note B, issued on February 1, 2001, in accordance with the terms of an Agreement and Plan of Merger, dated as of December 21, 2000, among the Company, E-com Acquisition Corp. and Paladyne Corp., a Delaware corporation ("Paladyne"), and as amended (the "Merger Agreement"). All capitalized terms used herein and not otherwise defined shall have their respective meanings as set forth in the Merger Agreement. This Note is secured by a security interest granted pursuant to a Security Agreement dated as of the 1st day of February, 2001 (the "Security Agreement"). The following events shall constitute a default under this Note (each, a "Default"): (a) the Company's failure to make three (3) Quarterly Installment Payments during the term of this Note and which default is not cured in accordance with the terms and conditions below; or (b) a default or breach shall occur under any other promissory note, loan or credit agreement, lien instrument, or other financing document to which the Company is a party and which default or breach is not cured within any applicable grace period thereunder. If a Default occurs under this Note, Gibralter may at any time thereafter take the following actions: (a) foreclose its security interest or lien against the Option Assets; (b) bring an action at law or equity against the Company for all amounts due and then owing or to be paid under this Note; (c) accelerate the maturity of the Note, whereupon the Note shall be immediately due and payable in full; and (d) exercise any rights and remedies as provided under this Note, or as provided by law or equity. In consideration of the loan evidenced by this Note, Paladyne has irrevocably, absolutely and unconditionally guaranteed prompt payment of this Note in full, when due, whether by acceleration or otherwise, to Gibralter, its successors, endorsees, or assigns, irrespective of the genuineness, validity or enforceability of this Note, or the existence of any security for payment of this Note, pursuant to an Unconditional Guaranty Agreement, dated as of the 1st day of February, 2001 (the "Guaranty"). Until a Default has occurred, if the Company shall fail to pay all or part of any Quarterly Installment Payments, Paladyne may cure any and all past due payments of principal and accrued interest by making the next Quarterly Installment Payment; provided, however, that Quarterly Installment Payments shall increase by an amount equal to the quotient derived by dividing (i) the aggregate amount of past due principal and interest, by (ii) the number of remaining Quarterly Installment Payments. In addition to principal and interest, the Company agrees to pay all costs of collection, including, without limitation, reasonable attorneys' fees if the indebtedness evidenced hereby is collected by or through an attorney-at-law. The Company at its option may prepay the indebtedness evidenced by this Note in whole or in part at any time without penalty or premium but with accrued interest to the date of such prepayment of the principal amount prepaid. No delay or failure on the part of Gibralter or on the part of any holder of this Note in the exercise of any right, power or privilege granted under this Note, or otherwise available by agreement, at law or in equity, shall impair any such right, power or privilege or be construed as a waiver thereof. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege. No waiver shall be valid against Gibralter unless made in writing and signed by Gibralter, and then only to the extent expressly specified therein. This Note shall not be subordinated, assigned or otherwise transferred by the Company without the prior written consent of Gibralter. Any debt financing incurred by either the Company or Paladyne after the date hereof shall be subject to the prior written approval of Gibralter (which approval shall not be unreasonably withheld) until all obligations of the Company under this Note are satisfied in full. Time is of the essence hereunder. This Note shall be governed by the laws of the State of North Carolina. PRESENTMENT AND NOTICE OF DISHONOR ARE HEREBY WAIVED. 2 IN WITNESS WHEREOF, the Company has caused this Note to be executed in its name and attested to by its authorized officers, and its corporate seal to be hereunto affixed, all as of the date first above written. COMPANY: E-COMMERCE SUPPORT CENTERS, INC. (a North Carolina corporation) ATTEST: By: /s/ Terrence J. Leifheit ------------------------------------ Terrence J. Leifheit, President /s/ Clifford A. Clark - - ------------------------------------ Clifford A. Clark, Secretary [CORPORATE SEAL] 3 EX-10 5 exhibit10411.txt EXHIBIT 10.4.11 EXHIBIT 10.4.11 AMENDING AGREEMENT AGREEMENT, dated as of April 9, 2001, by and among Gibralter Publishing, Inc., a North Carolina corporation ("Gibralter"), Paladyne Corp., a Delaware corporation ("Paladyne"), and e-commerce support centers, inc., a North Carolina corporation and wholly-owned subsidiary of Paladyne ("ecom"). R E C I T A L S --------------- WHEREAS, Paladyne, ecom and E-COM ACQUISITION CORP., a North Carolina corporation and wholly-owned subsidiary of Paladyne ("Acquisition Sub"), and ecom entered into an Agreement and Plan of Merger dated December 21, 2000 (and which closed on February 1, 2001 (the "Closing")) and as amended (the "Merger Agreement"), whereby Acquisition Sub was merged with and into ecom (the "Merger"); and WHEREAS, Paladyne, ecom and Gibralter entered into certain other related agreements at the time of the Closing; and WHEREAS, however, because of changes in the business and the business plan of ecom due to certain unforeseen conditions, it is advantageous to all parties to amend or eliminate certain arrangements entered into by them at the time of the Merger. NOW, THEREFORE, in consideration of the premises and mutual covenants and obligations hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties, intending to be legally bound hereby, agree as follows: 1. Amendments to Promissory Notes. ------------------------------ (a) Promissory Note A, dated February 1, 2001, is amended and restated in the form attached hereto as Exhibit A. (b) Promissory Note B, dated February 1, 2001, is amended and restated in the form attached hereto as Exhibit B. 2. Termination of Agreements. ------------------------- (a) The Default and Assignment Agreement, dated February 1, 2001, by and among ecom, Gibralter, and Paladyne is hereby terminated. (b) The Secondary Operating Agreement, dated February 1, 2001, by and among ecom and Gibralter is hereby terminated. 3. Termination of Escrow. --------------------- (a) The Escrow Agreement, dated February 1, 2001, by and among Gibralter, ecom, Paladyne, and Kilpatrick Stockton (the "Escrow Agent") is hereby terminated. (b) By this Agreement, Gibralter, ecom, and Paladyne hereby give notice to the Escrow Agent that the Escrow Agreement described above is terminated, due to the termination of the Default and Assignment Agreement and the Secondary Operating Agreement (the "Escrowed Agreements"). The Escrow Agent is hereby directed to deliver the Escrowed Agreements to Paladyne for termination. 4. Continuation of Agreements. Notwithstanding the amendments to -------------------------- Promissory Note A and Promissory Note B, and the termination of the Default and Assignment Agreement, the Secondary Operating Agreement, and the Escrow Agreement, as described above, 4.1 ecom confirms that the Security Agreement dated February 1, 2001 between ecom and Gibralter remains in full force and effect; and 4.2 Paladyne confirms that the Unconditional Guaranty Agreement, dated February 1, 2001 among ecom, Paladyne, and Gibralter remains in full force and effect. 5. ecom Receivables. Gibralter acknowledges that ecom or Paladyne can ---------------- obtain bank or institutional financing which is to be secured by the receivables of ecom (the "Receivables"), provided, that, if needed, Gibralter could obtain a second security interest in the Receivables. Gibralter further acknowledges that Paladyne may offer and sell up to $500,000 principal amount of Convertible Subordinated Debentures. 6. Miscellaneous. ------------- 6.1 Notices. All notices, requests, demands, delivery of Documents ------- and any and all other communications hereunder shall be in writing, sent via US mail, first class, postage prepaid, upon proof of sending thereof to the following addresses: (i) If to Gibralter: Gibralter Publishing, Inc. 1650A Gum Branch Road Jacksonville, NC 28540 (ii) If to Paladyne: Paladyne Corp. P.O. Box 22207 Lake Buena Vista, FL 32830 Attention: John Foster, Chairman (iii) If to ecom: e-commerce support centers, inc. 1650A Gum Branch Road Jacksonville, NC 28540 or at such other address as any of the parties to this Agreement may hereafter designate in the manner set forth above to the others. 6.2 Governing Law. This Agreement shall be construed and enforced in ------------- accordance with the law of the State of North Carolina applicable to contracts entered into and performed entirely within North Carolina. 2 6.3 Counterparts. This Agreement may be executed in two or more ------------ counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the even that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation on the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 6.4 Binding Agreement. This Agreement shall be binding upon and inure ----------------- to the benefit of the parties and their successors and permitted assigns. The assignment by a party of the Agreement or any rights hereunder shall not affect the obligations of such party under this Agreement. 6.5 Entire Agreement. This Agreement sets forth the entire agreement ---------------- among the parties hereto as to the subject matter herein, and cannot be amended, modified or terminated except by a writing executed by the parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed the day and year first above written. Gibralter: GIBRALTER PUBLISHING, INC. By: /s/ Terrence J. Leifheit ------------------------------------ Name: Terrence J. Leifheit Title: President Paladyne: PALADYNE CORPORATION By: /s/ John D. Foster ------------------------------------ Name: John D. Foster Title: Chairman ecom: E-COMMERCE SUPPORT CENTERS, INC. By: /s/ Terrence J. Leifheit ------------------------------------ Name: Terrence J. Leifheit Title: President 3 EXHIBIT A 4 EXHIBIT B 5 -----END PRIVACY-ENHANCED MESSAGE-----