FRAMINGHAM (02/24/2000) - New York, Friday, 2:15 p.m. Network Financial Global has spent four intense months putting together a multibillion-dollar deal. The merger and acquisition lawyers say that the contracts absolutely must be signed before 5 p.m. In addition, the banks must be given full legal authorization to move $450 million in cash, and the clearinghouse must be duly instructed to hand over $4.2 billion in stock to the partners in the deal. If the companies blow this deadline, a $125 million penalty kicks in.

No problem . . . except that one of the required signatories for the three transactions got called to an emergency meeting in London. He thought he'd be back before the deadline, but missed the return flight. Faxed signatures are not allowed, and conventional digital signatures are not acceptable, either, because of the threat of spoofing and the fear of repudiation. The signatures have to carry the full weight of the legal system - just as a hard copy signature does.

Is this penalty going to kick in for lack of a verifiable signature? Not if the fictitious Network Financial Global has a digital receipt system, which will soon carry the legal strength of physical signatures, thanks to the U.S.

Congress. The executive in London would merely have to "sign" the appropriate electronic documents, e-mail them to a specified secure server in New York where the electronic signatures are verified, and the deal is done - all in a matter of seconds.

A new industry is brewing around the electronic equivalent of Federal Express Corp. Remember when "it absolutely has to be there overnight" was good enough?

That was years ago. Today, Internet-speed has engulfed the planet. Tomorrow is an infinity away - we must have it today. Wait, today isn't good enough . . . we have to have it in less than 30 seconds, or watch dollar signs turn to zeros. And so a cadre of companies have begun to specialize in the "Internet Express" business.

Internet Express companies transmit verifiable and legally empowered electronic documents. Conventional e-mail gets from Point A to Point B in a fairly reliable manner. However, conventional e-mail carries no guarantee that the sender is who he claims to be or that the recipient received the message. In addition, there is no tracking mechanism to locate or identify the status of a message in transit from A to B. Internet Express companies, otherwise called digital receipt product vendors, solve various pieces of this problem.

In a rare moment of clarity on how important the Internet is to business, Congress helped the legal standing of Internet Express documents. On Nov. 9, 1999, the House of Representatives passed the Electronic Signatures in Global and National Commerce Act (HR-1714), better known as E-SIGN. The Senate passed a similar bill, and the president is expected to sign a compromise bill into law early this year.

The E-SIGN bill encourages the use of the electronic medium as an alternative to overnight carriers for day-to-day business needs. In a nutshell, the bill gives contracts or other documents signed with digital signatures the same legal validity as paper documents signed with ink. "Millions of Americans are buying everything from cars to stocks online. Electronic signatures will make it easier to conduct business," says Rep. Tom Bliley, Republican from Virginia, chairman of the House Commerce Committee and one of the bill's sponsors.

Legally empowered digital signatures are an obvious prelude to digital receipts. Nonrepudiation is a key benefit. Digital receipts can be used for evidence generation, transfer, verification and retention for countless legal processes. Vendors say their products are particularly appropriate for:

-- Legal financial statements: 401(k), bank or brokerage accounts and mutual funds.

-- Employee information: payroll, benefits, enrollment and discipline.

-- Electronic bills and bill payment processing.

-- Shareholder communications: proxy, earnings and SEC filings.

Because of heavy regulation, the brokerage industry has become the proving ground for digital receipts. In particular, brokerages are using digital receipts to comply with SEC Regulation 10B-10, a 66-year-old rule requiring confirmation of trades within 72 hours. Until now, such confirmations were sent via costly snail mail. But digital receipts marry the cost-effectiveness of e-mail with the superior tracking systems of paper deliveries, says Alexandra Ortiz, electronic signature project manager for Datek, an online brokerage based in New York.

Datek conducts 70,000 trades daily. It now processes many trade confirmations electronically using Integrated Messaging Exchange by Tumbleweed Communications of Redwood City, Calif. The system saves the brokerage as much as $70,000 per day.

"You can't just send an e-mail, even over an SSL-protected link, to a customer and have it meet the SEC rules," says Ortiz, who installed Tumbleweed servers at Datek. "When a trade is completed, the customer is notified by e-mail. He comes down to our server, securely enters and accesses the legally compliant trade confirmation. It saves the customer time, and Datek saves on postage, paper and the handling fees associated with conventional paper confirmations.

Everyone wins."

Other large brokerage houses with huge trading volumes are starting to get on the Internet Express bandwagon. TD Waterhouse Group will begin using Tumbleweed's digital receipts system for its trade confirmations in April, the company announced last month. Others are sure to follow. All have unique needs for their particular business confirmations, but still have to meet the SEC's 72-hour regulation.

Organizations can choose between two basic architectures when building digital receipt systems, regardless of their applications: Web server or direct-to-user.

Companies such as CertifiedMail.com, Click2Send, ValiCert and Tumbleweed follow the Web server approach. In this model, the recipient is ultimately responsible for checking for waiting transmissions.

In online trading, for example, the process begins when a brokerage notifies the trading client, usually via an e-mail, that a message is waiting on a secure Web server. The trader then surfs to the server, which can reside at a brokerage firm's site or at a server farm run by an Internet Express vendor or other third party.

The trader identifies himself to the server with a personal identification number or similar password mechanism, and retrieves the digitally signed message from the secure server. The brokerage firm is then notified electronically that the trader properly identified himself and retrieved the message. Transaction complete, and the trader cannot deny he got the message.

These systems are like "an electronic notary or an archiving system that can be used in court as the legal equivalent of paper," says David Jevans, vice president of corporate development at ValiCert, a digital receipt vendor in Mountain View, Calif.

Click2Send and CertifiedMail.com offer variations of this model through which customers create electronic online identities at the vendors' servers. With these two hosted services, the sender deposits a digitally signed message at the hosted server and then alerts the user to the waiting message.

Conversely, an enterprise can deploy the direct-to-user approach offered by companies such as PostX in Cupertino, Calif. and PrivateExpress in San Mateo, Calif. This method is like conventional e-mail: It delivers nonrepudiable messages directly to a software client on the recipient's PC, says Daniel Abbot, marketing director at PostX.

The advantage is that recipients need not take the extra step of logging on to a Web server for their messages. The user subscribes to the service of the company - perhaps a bank or brokerage firm. Software is downloaded to a subscriber's client machine where a secure identity and link is created to the company's main servers. When a trade or money transfer is to be confirmed, for example, an e-mail is sent to the customer.

The "registered mail" is then opened, and the sender is notified of the message's receipt. Voila! Legally recognized communications over the Internet, and neither sender nor recipient can deny participating in the electronic communication.

As business-to-business e-commerce applications grow in popularity, more companies will implement digital receipt systems. Electronic orders to manufacturers will carry the same legal weight and obligations as printed purchase orders. Contracts of all sorts can now be generated, agreed upon and enforced in the electronic equivalent of legal stone.

The impact on network performance is negligible for digital receipt systems because the traffic is largely incoming from the Internet, vendors say. Of course, this assumes that the company uses dedicated servers or hires the vendor for that service.

The architecture you choose (Web-based or direct-to-user; hosted or in-house) depends on the size of your organization and the resources you maintain in-house. It also depends on whether you want to tie the digital receipt system into your existing PKI. Of course, initial costs are another factor to consider.

High-end systems are deployed at an enterprise's site. They require not only dedicated servers, but also extensive software deployment, particularly to integrate an existing PKI. The systems can cost between $150,000 and $1 million, ValiCert's Jevans says.

Initial costs can increase if you want to hire the vendor to help you with implementation, but vendors say their assistance isn't mandatory. "Installing a digital receipt system isn't all that difficult. A day or so to implement, then a couple of days of training," Jevans says.

Less expensive alternatives may be available, but then again, you'll be sacrificing enterprise expertise. For example, Click2Send began with services and prices for small companies and individuals but is now marketing to larger corporations and prices its corporate services wares on a case-by-case basis.

A final word of warning: While Congress clears the legal path for digital receipts, it's difficult to say that every vendor is ready for prime time. As usual, the technology available today is only a weeks away from the next generation. When choosing a vendor, test thoroughly.

Schwartau is president of Interpact, founder of Infowar.Com and the author of CyberShock, a book due out in April. You can reach him at winns@gte.net.