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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1999
Commission File Number: 000-24199
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ABSOLUTEFUTURE.COM
(Name of small business issuer in its charter)
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<S> <C>
Nevada 88-0306099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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10900 NE 8th Street, Suite 1414
Bellevue, WA 98004
(Address of principal executive offices including zip code)
(425) 462-6210
(Issuer's telephone number)
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Securities registered under Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Act:
Common Stock $.001 Par Value
Title of Class
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Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days. Yes [X] No [_]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of issuers knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [_]
State issuer's revenues for the most recent fiscal year: $163,258.
On April 10, 2000, the aggregate market value of the voting stock held by
non-affiliates of the issuer was approximately $30,396,395, computed by
reference to the price at which the stock was sold on such date.
There were 21,318,000 shares of common stock $.001 par value outstanding as
of April 10, 2000.
Transitional Small Business Format (check one): Yes [_] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
None
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ABSOLUTEFUTURE.COM
FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
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PART I
ITEM 1. DESCRIPTION OF BUSINESS....................................... 3
ITEM 2. DESCRIPTION OF PROPERTY....................................... 6
ITEM 3. LEGAL PROCEEDINGS............................................. 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 6
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...... 7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................... 8
ITEM 7. FINANCIAL STATEMENTS.......................................... 10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE..................................... 26
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.. 26
ITEM 10. EXECUTIVE COMPENSATION........................................ 27
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................... 29
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 30
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.............................. 31
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PART I
This Form 10-KSB contains forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as "may", "will",
"should", "could", "expects", "plans", "intends", "anticipates", "believes",
"estimates", "predicts", "potential" or "continue" or the negative of such
terms and other comparable terminology. Our forward-looking statements
include, without limitation, statements about our market opportunity, our
strategies, competition, expected activities and expenditures as we pursue our
business plan, and the adequacy of our available cash resources. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. The information set forth under the headings
"Description of Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations", identify important additional
factors that could materially adversely affect our actual results and
performance. All forward-looking statements attributable to us are expressly
qualified in their entirety by the foregoing cautionary statement. Moreover,
neither we nor anyone else assumes responsibility for the accuracy and
completeness of such statements. We undertake no obligation to publicly update
any forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
ITEM 1. DESCRIPTION OF BUSINESS
Introduction
AbsoluteFuture.com, (the "Company") through its wholly owned subsidiary
companies, Absolut Future Tech Inc. and Absolut Future Tech Inc (Canada),
(hereinafter collectively known as the "Company" or "AbsoluteFuture") is a
software developer and consultant to software developers, which specializes in
database applications, security, encryption and Internet communications.
The Company's existing business is the provision of database consulting
services. However, the Company is currently focusing much of its effort on the
development of a new internet security product, SafeMessage. It also owns an
on-line recruiting service known as Internet Interview.
Corporate Background
The Company was formed as Corporate Tours & Travel, Inc. (CTTI), a Nevada
corporation, on September 23, 1993. Absolut Future Tech Inc. (Tech) was formed
as a Nevada corporation on November 16, 1998 to engage in software development
and consulting.
In May 1999, CTTI purchased all of the outstanding capital stock of Tech for
3,000,000 shares of common stock. Shortly afterwards, the officers and
directors of CTTI resigned and CTTI sold an additional 4,000,000 common shares
for $40,000 to a group substantially comprised of the former stockholders of
Tech. Upon completion of the purchase, CTTI was renamed AbsoluteFuture.com,
and representatives of Tech assumed the officer and directors positions of
AbsoluteFuture.com.
The transaction was accounted for as a purchase of CTTI by Tech followed by
a recapitalization. CTTI had net liabilities of $4,060, consisting of accounts
payable at the time of the transaction. Because CTTI had no operations
historically and was a shell company, the purchase did not result in goodwill
and the assumption of liabilities resulted in a reduction of additional paid-
in capital.
Tech had 10,000,000 common shares outstanding at the time of the purchase.
The common shares presented herein are those of CTTI, now renamed
AbsoluteFuture.com. Transactions involving the common stock of Tech prior to
the purchase have been restated to adjust the number of shares by a conversion
ratio of 3:10 in order to reflect the number of CTTI common shares received by
holders of Tech common shares resulting from the recapitalization.
The operating results for CTTI have been included in the Company's
operations from the acquisition date.
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SafeMessage
The Company is currently devoting much effort to the development of
SafeMessage, a secure messaging system for the Internet. SafeMessage provides
a high-security, limited-persistence, guaranteed-status messaging service,
while at the same time it aims to provide the ease of use of email. The
service gives a high level of security, as all messages are encrypted with
Public-Key/Private-Key and/or one-time symmetric negotiated keys. Moreover, no
persistent copies of messages are left on servers and mail servers, and their
archiving systems are bypassed. The service also only sends the message when
the recipient is available to receive the message and gives delivery
notification. The service provides for automatic message expiration and all
messages auto-expire, auto-shred, and auto-delete.
The SafeMessage service is being developed using technology developed by the
Company. The Company filed applications for provisional patents in connection
with the SafeMessage technology in March 2000.
It is currently planned to have the service ready for a beta test in the
second quarter of 2000, with a full commercial launch in the third quarter.
However, until the product has been fully developed and tested, there is no
guarantee that it will work fully in the way that is anticipated, or that it
will be completed on the aforementioned time schedule.
The Company is beginning to undertake marketing studies to test the market
for the SafeMessage service. However, this is at an early stage and there is
no guarantee that the SafeMessage will be accepted in the market nor that it
can be priced at a level that will provide a return on the Company's
investment in its development and launch.
Consulting Services
During 1999, consulting services which were provided to Microsoft
Corporation generated substantially all of the Company's revenues. The Company
expects to increase its consulting revenues in 2000. However, the major
obstacle is being able to recruit software specialists of sufficient skill and
experience. The market for such skilled people is tight and they are highly
sought after by many companies, including the Company's competitors.
Internet Interview
The Company acquired certain assets of Internet Interview on August 11, 1999
for a cash payment of $70,000. The assets included primarily a web page based
recruiting application with a database of over 100,000 records of high tech
personnel. Subsequent to the acquisition, the Company completely redesigned
the software of the Internet Interview system. Many other on-line recruiting
systems rely on a system of holding resumes as Word documents and the use of a
key word search approach. Internet Interview is based on the TechnoBio(TM)
system, an Internet-based interview of a person's skills and experience.
Searches for candidates are based on the TechnoBio(TM) data, resulting in a
rapid and accurate search process.
Patents, Proprietary Technology and Other Intellectual Property
On March 10, 2000, the Company filed two provisional patent applications for
key technologies that will be deployed in the SafeMessage application. The
Company intends to apply for patent protection in the U.S. and overseas for
its other proprietary technologies, where feasible.
The Company's success depends in large part upon its ability to protect its
technology under United States and international patent laws and other
intellectual property laws. U.S. patents have a term of 17 years from date of
issuance or, for more recently filed patent applications, 20 years from the
filing of such applications, and patents in most foreign countries have a term
of 20 years from the proprietary filing date of the patent application.
The Company believes that it owns and has the right to use or license all
proprietary technology necessary to license and market its SafeMessage product
under development. The Company is not aware of the issuance of
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any patents or the filing of any patent applications which relate to processes
or products which utilize the Company's proprietary technology in a manner
which could be similar to or competitive with the Company's products or
processes. The Company has no knowledge that it is infringing upon any
existing patent such that it would be prevented from marketing or licensing
products or services currently being developed by the Company.
The Company may decide for business reasons to protect a patentable invention
as a trade secret. In such event or if patent protection is not available, the
Company must rely upon trade secrets, internal knowledge and continuing
technological innovation to develop and maintain its competitive position. The
Company's employees and consultants have access to the Company's proprietary
information and have signed confidentiality agreements.
Research and Development Spending
During the year ended December 31, 1999 and the period from November 16,
1998 to December 31, 1998, the Company spent $52,561 and $0 respectively on
research and development activities. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
In late 1999 the Company entered into an agreement with its Chief Technology
Officer, William Antony McNamara to purchase a technology he had developed
prior to joining the Company, known as "Local Hard Drive" or "LHD." LHD
consists of two main elements: the infrastructure and the end product. The
infrastructure provides modular implementation of inspecific processes, such
as variable encryption, compression, and transmission techniques, along with
powerful data-packaging facilities. The modularity allows for seamless
adaptation of new technologies and integration of older ones into packages
with a common (and therefore easy-to-program with) interface. The LHD product
uses this infrastructure to provide data-location independence regardless of
the transmission medium, creating a secure, high speed, automatically
synchronized virtual hard-disk across the internet.
The LHD technology and infrastructure has been essential and highly
leveraged in the development of SafeMessage, and will be integral to future
products including the LHD product.
Marketing Strategy
The Company intends to increase its marketing activities and each area of
its business will need extensive marketing effort in order to increase
revenues.
SafeMessage will be marketed initially to corporate customers, particularly
those who handle client confidential information and those who operate from
several centers and require a secure method of communicating between the
centers. Financial, professional and medical organizations are likely to be
among the first targets. However, SafeMessage is still in the process of being
developed and no detailed marketing has yet been undertaken and no commitments
have yet been received for the product.
The Company is working to market Internet Interview based on the new
TechnoBio(TM) system. Potential customers for Internet Interview are
principally recruitment companies. The service is currently offered at no
charge, however, the Company hopes to eventually have a subscription-based
service in place.
Competition
Substantially all of the Company's competitors have, and potential future
competitors could have substantially greater technical, financial, marketing,
and other resources than the Company and have, or could have, greater name
recognition and market acceptance of their products and technologies. No
assurance can be given that the Company's competitors will not develop new
technologies or enhancements to existing services or introduce new services
that will offer superior price or performance features. In such case, the
Company may experience significant price competition, which could have a
material adverse effect on gross margins.
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Employees
The Company presently has ten employees in its Bellevue, Washington office,
of which three are software developers mainly working on the development of
SafeMessage, two are software developers working on third party contracts and
five are in management, marketing and administration. There are no employees
in the Vancouver, BC office.
The business success of AbsoluteFuture.com is, and will continue to be,
highly dependent upon the skills of its software development team. A key
factor affecting the company's profitability and growth will be its ability to
recruit and retain skilled personnel.
Government Contracts and Regulations
The Company is not involved in any Government contracts. The Company is
subject to Government regulations including federal, state, and local
governments and their agencies. The Company endeavors to ensure compliance
with all such laws.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive offices are located at 10900 NE 8th Street, Suite
1414, Bellevue, Washington 98004. The Company leases approximately 2,231 sq.
feet of office space at the address from a non-affiliate. The lease commenced
on January 1, 1999 and has a term of five years. The rental during 1999 was
$27.50 per square foot, giving a total rent in 1999 of $61,353. During 2000,
the rental is $28.50 per square foot. The Company is currently searching for
additional space to lease in the Bellevue, Washington area to support planned
expansion.
The Company has an office in 885 West Georgia Street, Vancouver, British
Columbia, Canada. The office is rented on monthly basis at a rent of
approximately $1,200 per Month.
The Company does not own any real estate.
The Company does not invest in, nor does the Company intend in the future to
invest in real estate or interests in real estate, real estate mortgages or
securities of or interests in persons primarily engaged in real estate
activities.
ITEM 3. LEGAL PROCEEDINGS
On November 30, 1999, the Company filed a lawsuit in the Superior Court of
Washington for King County against Sergei Sheinblum, and his wife alleging
breach of an agreement to assist in the development of the Company; conversion
and unjust enrichment arising out of personal use and/or retention of Company
property and funds; and misrepresentation and tortuous interference with a
business expectancy. Mr. Sheinblum's wife is a shareholder in the Company. The
lawsuit seeks damages in an amount to be proven at trial, but expected to
exceed $100,000, and injunctive relief prohibiting further conduct detrimental
to the Company. The lawsuit is currently pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended December 31, 1999, either through
the solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been traded on the NASD OTC Bulletin Board
market since it began public trading in July of 1999, under the symbol AFTI.
The following table sets forth the high and low bid prices for the Company's
common stock, by quarter.
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High Low
Quarter Ended Bid Bid
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September 30, 1999........................................... $10.625 $0.28
December 31, 1999............................................ $ 0.12 $0.39
March 31, 2000............................................... $ 6.00 $0.34
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The above prices are believed to be representative interdealer quotations,
without retail markup, markdown or other fees or commissions, and may not
represent actual transactions.
On April 10, 2000, the bid price of the Company's common stock was $1.9375
per share. On such date the Company had 70 holders of record of the Company's
common stock.
The Company has not paid any dividends on its common stock and the Board of
Directors presently intends to continue a policy of retaining earnings, if any,
for use in the Company's operations and to finance expansion of its business.
The declaration and payment of dividends in the future, of which there can be
no assurance, will be determined by the Board of Directors in light of
conditions then existing, including earnings, financial condition, capital
requirements and other factors. There are no restrictions that currently
materially limit the Company's ability to pay dividends or which the Company
reasonably believes are likely to limit materially the future payment of
dividends on common stock.
Sales of Unregistered Securities
Unregistered securities were sold within the last three fiscal years in the
following private transactions which were exempt from registration under the
Securities Act of 1933.
In December 1998 and January 1999, Absolut Future Tech Inc. issued 10,000,000
shares of unregistered common stock to the 12 non-U.S. founders of the company.
No underwriter was involved and no commissions were paid. The securities were
exempt from registration under Regulation S of the Securities Act of 1933.
On May 29, 1999, 4,000,000 shares of unregistered stock of the Company were
sold to 18 non-U.S. persons at $0.01 per share for a total cash consideration
of $40,000. No underwriter was involved and no commissions were paid. The
securities were exempt from registration under Regulation S of the Securities
Act of 1933.
On June 10, 1999, the Company issued 3,000,000 shares of unregistered common
stock to the 12 non-U.S. shareholders of Absolut Future Tech Inc. in exchange
for 10,000,000 shares in Absolut Future Tech Inc., which was the entire issued
common stock of Absolut Future Tech Inc. No underwriter was involved and no
commissions were paid. The securities were exempt from registration under
Regulation S of the Securities Act of 1933.
On December 29, 1999, the Company sold 2,200,000 shares of common stock in a
private transaction to Randolph Management Inc., an accredited U.S. investor,
for a cash consideration of $500,000. No underwriters were involved and no
commission was paid. The securities were exempt from registration under Section
4(2) of the Securities Act of 1933.
In January 2000, the Company issued 2,288,000 shares of common stock to 8
non-U.S. holders of notes payable to the Company in consideration for canceling
the principal amounts of the notes which totaled
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$520,000. No underwriters were involved and no commission was paid. The
securities were exempt from registration under Regulation S of the Securities
Act of 1933.
In January 2000, the Company issued 1,250,000 shares of common stock to four
accredited U.S. investors in a private transaction for a cash consideration of
$500,000. No underwriters were involved and no commission was paid. The
securities were exempt from registration under Section 4(2) of the Securities
Act of 1933.
On February 1, 2000, the Company issued 200,000 shares to William Antony
McNamara for the rights to the Local Hard Drive product. No underwriters were
involved and no commission was paid. The securities were exempt from
registration under Section 4(2) of the Securities Act of 1933 and applicable
state regulations.
On February 1, 2000, the Company issued 100,000 shares to a recruiting firm
for services, 30,000 shares to a consultant for services and 50,000 shares to a
non-U.S. person for consulting services. No underwriters were involved and no
commission was paid. The securities were exempt from registration under Section
4(2) of the Securities Act of 1933.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Company is in its early stages of operations.
The Company has a limited operating history and only had operating revenues
from its consulting business in 1999. It anticipates operating losses and
negative operating cash flow for fiscal 2000. The success of the operations
will depend on the growth and commercial acceptance of the Internet and e-
commerce, the viability of its unproven business model, relationships with
strategic partners and key vendors, and the availability of additional capital.
The business is subject to intense competition, rapid technological change,
government regulation and legal uncertainties associated with the Internet, e-
commerce, systems interruptions and security risks. Each section of the
"Description of Business", "Management's Discussion and Analysis of Financial
Condition and Results of Operations", and the other sections of this Form 10-
KSB, describe these and other risk factors in more detail.
Results of Operations
Year Ended December 31, 1999 and the period from November 16, 1998 to December
31, 1998
The Company had minimal operations in the period from November 16, 1998 to
December 31, 1998 and activities for the year ended December 31, 1999
principally related to formation of the Company.
Revenues for the year ended December 31, 1999 derived from consulting
services were $163,258, as compared to no revenues for the 1998 period. This
revenue increase reflects the fact that revenue-generating activities did not
commence until 1999.
Cost of revenue consists of the direct salary and employee benefit costs
related to employees involved in revenue generating activities. Cost of revenue
was $142,171 for the year ended December 31, 1999. Revenue generating
activities did not commence until 1999.
Total operating expenses for 1999 increased significantly over the period
ended December 31, 1998. Total operating expenses of $989,842 were incurred in
the year ended December 31, 1999 compared to total operating expenses of
$25,848 for the period ended December 31, 1998. This represents an increase in
operating expenses of $963,994. The increase in operating expenses for 1999 is
attributed mainly to increased expenditures associated with general and
administrative costs, which increased to $937,281 for the year ended December
31, 1999 from $25,848 for the period ended December 31, 1998 and reflects the
payment of salaries associated with
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an increase in personnel. Research and development expenses in 1999 were
$52,561 and reflect the Company's emphasis on refining and expanding the
capability of the Company's technology.
The Company incurred a net loss of $1,010,164 in 1999 compared to a net loss
of $28,711 in 1998 period.
Management is currently putting much of the Company's efforts and resources
into the development and launch of SafeMessage. Much of the Company's future
prospects depend upon its successful development and it gaining market
acceptance. There is no guarantee or assurance that SafeMessage will be either
a technical or commercial success.
Liquidity and Capital Resources
Net cash used in operating activities for 1999 was $599,573, representing
primarily increases in operating expenses compared to $24,857 for 1998. Net
cash used in investing activities rose to $209,851 for 1999 compared to $24,137
for 1998, an increase of $185,714. Investing activities in 1999 represented
primarily the purchases of property and equipment, technology and a short term
investment used to secure a standby letter of credit. Cash flows from financing
activities in 1999 and 1998 of $658,917 and $201,182, respectively, were
generated from borrowing from shareholders and sales of the Company's common
stock.
The Company had a working capital deficiency of $422,128 at December 31,
1999. At December 31, 1999, the Company had cash and cash equivalents on hand
of $1,681 and other current assets of $17,053. Current liabilities at December
31, 1999 were $440,862.
Subsequent to the 1999 year-end, the Company collected $500,000 on its stock
subscriptions receivable. In addition, it issued 1,250,000 shares of common
stock for $500,000, of which $200,000 in cash had been received by April 10,
2000, and issued 2,288,000 shares of common stock for the conversion of
$520,000 of debt which existed at December 31, 1999. No gain or loss resulted
from the conversion of debt into common stock as the conversion price
approximated fair market value on the commitment date. Accordingly, management
now believes that its liquidity and capital resources are adequate to conduct
its near-term planned operations, although further increases in capital will be
necessary to fund the proposed increase in activities. Potential sources of
liquidity include loans from existing stockholders and others, as well as
additional sales of stock.
Using proceeds from the December 1999 and January 2000 stock sales, the
Company plans to further develop and begin the marketing of the SafeMessage
product. The Company is focused on the development and commercialization of
SafeMessage and related products, as well as the pursuit of corporate partners
and potential acquisition candidates. The primary future needs for capital are
for continued research, development and marketing of products and funding to
support strategic acquisitions. Working capital requirements may vary depending
upon numerous factors including the progress of research and development,
competitive and technological advances, market acceptance of the Company's
products and other factors. The Company anticipates operating with
approximately 20 employees by the end of 2000.
Additional funds will be required to continue operations and, over the longer
term, substantial additional funds will be required to maintain and expand
research and development activities and to further commercialize, with or
without corporation partners, any of the Company's proposed products. In
addition, substantial funds may be required to support strategic acquisitions.
No assurance can be given that satisfactory funding can be arranged on a timely
basis to meet the future needs of the Company or that future revenues and
profits will be sufficient to reduce the Company's long-term funding
requirements.
Effect of new accounting pronouncements
In December 1999, the United States Securities and Exchange Commission (SEC)
released Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in
Financial Statements, which must be adopted by the Company by June 30, 2000.
SAB No. 101 provides guidance on revenue recognition and the SEC staff's views
on the application of accounting principles to selected revenue recognition
issues. The Company does not expect that the adoption of SAB No. 101 will have
a material effect on its consolidated financial statements.
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In March 2000, the Financial Accounting Standards Board Issued Interpretation
No. 44 (FIN No. 44), Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25. FIN No. 44 will be
effective July 1, 2000. However, certain of the conclusions included in the
interpretation apply to events occurring after December 15, 1998 or January 12,
2000. The December 15, 1998 effective date applies prospectively after July 1,
2000 to the accounting treatment for modifications to the exercise prices of
stock option awards occurring after December 15, 1998 and for the definition of
an employee for purposes of determining eligibility to apply APB No. 25 and
related interpretations to accounting for stock option grants to such persons
where the grant occurred after December 15, 1998. The January 12, 2000
effective date applies prospectively after July 1, 2000 to certain fixed stock
award modifications to add a reload feature after January 12, 2000. Management
does not believe the adoption of FIN No. 44 will have a material impact on
Company's financial position or results of operations.
Subsequent events
See notes 5(c) and 12 to the consolidated financial statements for a
discussion of subsequent events.
Contingencies and Commitments
As of December 31, 1999 the Company did not have any material commitments for
capital expenditures.
ITEM 7. FINANCIAL STATEMENTS
10
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ABSOLUTEFUTURE.COM
AND SUBSIDIARIES
TABLE OF CONTENTS
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Independent Auditors' Report.......................................... 12
Consolidated Balance Sheet............................................ 13
Consolidated Statements of Operations................................. 14
Consolidated Statements of Stockholders' Deficit...................... 15
Consolidated Statements of Cash Flows................................. 16
Notes to Consolidated Financial Statements............................ 17
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
AbsoluteFuture.com:
We have audited the accompanying consolidated balance sheet of
AbsoluteFuture.com and subsidiaries as of December 31, 1999, and the related
consolidated statements of operations, stockholders' deficit and cash flows
for the year ended December 31, 1999 and the period from November 16, 1998
(inception) to December 31, 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
AbsoluteFuture.com and subsidiaries as of December 31 1999, and the results of
their operations and their cash flows for the year ended December 31, 1999 and
the period from November 16, 1998 (inception) to December 31, 1998 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
note 10 to the consolidated financial statements, the Company has incurred net
losses since inception and has net capital and working capital deficiencies at
December 31, 1999 that raise substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in note 10. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
KPMG LLP
Seattle, Washington
April 7, 2000
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ABSOLUTEFUTURE.COM AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1999
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ASSETS
Current assets:
Cash............................................................ $ 1,681
Prepaid expenses................................................ 17,053
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Total current assets........................................ 18,734
Property and equipment, net....................................... 63,261
Intangible assets, net of accumulated amortization of $10,834..... 117,166
Restricted cash................................................... 70,277
Deposits.......................................................... 7,906
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Total assets................................................ $ 277,344
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Bank overdraft.................................................. $ 28,784
Accounts payable................................................ 87,540
Accrued employee benefit costs.................................. 11,183
Accrued interest................................................ 42,040
Current portion of note payable................................. 45,000
Loans payable to stockholders................................... 226,315
-----------
Total current liabilities................................... 440,862
-----------
Notes payable to stockholders..................................... 350,000
Note payable, less current portion................................ 170,000
Other long-term obligation........................................ 63,000
Commitments, contingency and subsequent events
Stockholders' deficit:
Preferred stock, $0.001 par value. Authorized 10,000,000 shares;
issued and outstanding no shares............................... --
Common stock $0.001 par value. Authorized 50,000,000 shares;
issued and outstanding 14,400,000 shares....................... 14,400
Additional paid-in capital...................................... 788,913
Stock subscriptions receivable.................................. (501,000)
Deferred stock compensation..................................... (7,964)
Accumulated deficit............................................. (1,038,875)
Accumulated other comprehensive loss............................ (1,992)
-----------
Total stockholders' deficit................................. (746,518)
-----------
Total liabilities and stockholders' deficit................. $ 277,344
===========
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31, 1999 and
period from November 16, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
Period from
Year ended November 16 to
December 31, December 31,
1999 1998
------------ --------------
<S> <C> <C>
Revenue........................................ $ 163,258 --
Costs of revenue............................... 142,171 --
---------- ---------
Gross profit................................. 21,087 --
General, administrative and business
development expenses.......................... 937,281 25,848
Research and development....................... 52,561 --
---------- ---------
Loss from operations......................... 968,755 25,848
Interest expense, net of interest income of
$3,141 in 1999 and $137 in 1998............... 41,409 2,863
---------- ---------
Net loss..................................... $1,010,164 28,711
========== =========
Basic and diluted net loss per share........... $ 0.13 0.02
Weighted average shares used to compute basic
and diluted net loss per share................ 7,786,222 1,554,000
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
Year ended December 31, 1999 and
period from November 16, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
Common stock Accumulated
------------------ Additional Stock Deferred other Total
Number of paid-in subscriptions stock Accumulated comprehensive stockholders'
shares Amount capital receivable compensation deficit loss deficit
---------- ------- ---------- ------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sale of common stock at
inception.............. 225 $ -- 1,000 (1,000) -- -- -- --
Common stock issued in
connection with notes
payable................ 700,388 700 460 -- -- -- -- 1,160
Issuance of common
stock for services..... 2,209,387 2,210 901 -- -- -- -- 3,111
Net loss............... -- -- -- -- -- (28,711) -- (28,711)
---------- ------- ------- -------- ------ ---------- ------ ----------
Balances at December
31, 1998............... 2,910,000 2,910 2,361 (1,000) -- (28,711) -- (24,440)
Sales of common stock.. 6,200,000 6,200 533,800 (500,000) -- -- -- 40,000
Issuance of stock
options................ -- -- 9,102 -- (9,102) -- -- --
Amortization of
deferred compensation.. -- -- -- -- 1,138 -- -- 1,138
Issuance of common
stock in connection
with notes payable..... 90,000 90 2,910 -- -- -- -- 3,000
Acquisition of
Corporate Tours and
Travel, Inc............ 4,100,000 4,100 (8,160) -- -- -- -- (4,060)
Issuance of common
stock for services..... 1,100,000 1,100 248,900 -- -- -- -- 250,000
Comprehensive loss:
Net loss.............. -- -- -- -- -- (1,010,164) -- (1,010,164)
Foreign currency
translation
adjustment............ -- -- -- -- -- -- (1,992) (1,992)
Total comprehensive
loss.................. -- -- -- -- -- (1,010,164) (1,992) (1,012,156)
---------- ------- ------- -------- ------ ---------- ------ ----------
Balances at December
31, 1999............... 14,400,000 $14,400 788,913 (501,000) (7,964) (1,038,875) (1,992) (746,518)
========== ======= ======= ======== ====== ========== ====== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, 1999 and
period from November 16, 1998 (inception) to December 31, 1998
<TABLE>
<CAPTION>
Period from
November 16 to
December 31,
1999 1998
----------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $(1,010,164) $(28,711)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................... 35,597 789
Common stock issued for services................ 250,000 --
Amortization of deferred compensation and
discount on notes payable to stockholders...... 5,208 3,201
Changes in certain assets and liabilities:
Prepaid expenses and other current assets..... (13,917) (3,136)
Accounts payable.............................. 83,480 --
Accrued employee benefit costs................ 11,183 --
Accrued interest.............................. 39,040 3,000
----------- --------
Net cash used in operating activities....... (599,573) (24,857)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.............. (70,532) (18,281)
Acquisition of intangible asset.................. (65,000) --
Purchase of short-term investment, representing
restricted cash................................. (70,277)
Other............................................ (4,042) (5,856)
----------- --------
Net cash used in investing activities....... (209,851) (24,137)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft................................... 28,784 --
Proceeds from notes payable and notes payable to
stockholders.................................... 590,133 201,182
Sales of common stock............................ 40,000 --
----------- --------
Net cash provided by financing activities... 658,917 201,182
----------- --------
Increase (decrease) in cash................. (150,507) 152,188
Cash at beginning of period........................ 152,188 --
----------- --------
Cash at end of period.............................. $ 1,681 $152,188
=========== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest......... $ 1,440 $ --
=========== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Common stock subscriptions receivable............ $ 500,000 $ 1,000
Net liabilities assumed in acquisition of
Corporate Tours and Travel, Inc................. 4,060 --
Common stock issued in connection with issuance
of notes payable................................ 3,000 1,160
Acquisition of technology........................ 63,000 --
=========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Business
AbsoluteFuture.com is the surviving corporation resulting from the May 1999
merger of Corporate Tours & Travel, Inc. (CTTI) and Absolut Future Tech, Inc.
(Tech). For financial reporting purposes, the merger was treated as a
recapitalization of Tech, with Tech as the acquiror of CTTI. The historical
financial statements of AbsoluteFuture.com are those of Tech.
AbsoluteFuture.com and subsidiaries (Company) is an information technology
service provider that has developed core competencies in complex
Internet/intranet solutions. The Company's area of expertise is primarily e-
commerce. The Company's services are generally performed on a contract basis
to organizations with complex information technology operations. The Company
was incorporated in November 1998 and has offices in Bellevue, Washington and
Vancouver, British Columbia. The Company left the development stage in 1999.
(b) Basis of Presentation
The consolidated financial statements include the accounts of
AbsoluteFuture.Com and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
(c) Revenue Recognition
The Company primarily delivers services under time-and-materials contracts.
Revenues earned under time-and-materials contracts are generally recognized as
services are provided. Revenues earned in excess of billings represent revenue
recognized in advance of amounts billed and are included in accounts
receivable. Billings in excess of revenues earned are classified as deferred
revenues.
(d) Restricted Cash
Cash of $70,277 is restricted as to withdrawal at December 31, 1999 and
secures a standby letter of credit which guarantees the Company's obligation
for its leased office facility.
(e) Foreign Currency Translation
Assets and liabilities of the Company's Canadian subsidiary are translated
to U.S. dollars at year-end rates of exchange, and revenues and expenses are
translated using weighted average rates. Gains and losses from foreign
currency translation are included as a component of other comprehensive loss.
Foreign currency transaction gains and losses are included as a component of
other income and expense.
(f) Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization on
property and equipment are calculated using the straight-line method over
their estimated useful lives of three to seven years. Maintenance and repairs
are charged to operating expense as incurred. Leasehold improvements are
amortized over the lesser of the lease term or their estimated useful lives.
(g) Intangible Assets
Intangible assets consist primarily of an acquired Internet web site and
acquired technology. These intangible assets are amortized using the straight-
line method over three years.
17
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(h) Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered impaired,
the impairment to be recognized is measured as the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to
be disposed of are reported at the lower of their carrying amount or fair
value less costs to sell.
(i) Income taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to tax loss carryforwards and differences between
the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those carryforwards and temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is established when necessary to reduce
deferred tax assets to the amount expected to be realized.
(j) Stock Based Compensation
The Company has elected to follow the measurement principles of Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for its employee stock options rather
than the alternative fair value accounting provided for by Statements of
Financial Accounting Standards No. 123 (SFAS No. 123), Accounting for Stock
Based Compensation. Compensation cost for stock options issued to employees is
measured as the excess, if any, of the fair market price of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock. Pro forma results are presented as if compensation cost for stock
options issued to employees had been determined pursuant to SFAS No. 123.
(k) 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 and
disclosure of contingent 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.
(l) Net Loss Per Share
Net loss per share is computed by dividing net loss by the weighted average
number of common shares outstanding during the period. As the Company had a
net loss for the periods presented, basic and diluted net loss per share are
the same for these periods.
The computation of diluted net loss per share excludes options to acquire
220,000 shares of common stock at a weighted average exercise price of $0.60
per share for 1999 because their effect would be antidilutive. In addition,
200,000 shares of common stock have been excluded from the calculation, which
were issued in January 2000 to settle a liability of $63,000 included in other
long-term obligations at December 31, 1999 for the acquisition of technology
in November 1999.
18
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(m) Concentrations of Risk and Financial Instruments
Credit is extended based on an evaluation of a customer's financial
condition, and collateral is generally not required. The Company derived all
of its revenue in 1999 from consulting services provided to one customer in
the United States.
The Company's financial instruments consist of cash, accounts payable,
accrued liabilities and loans and notes payable to stockholders. The fair
value of these instruments, with the exception of non-interest bearing loans
and notes payable for which it is not practicable to estimate fair value,
approximates their financial statement carrying amounts due to their short
maturities.
(n) Segment Information
Revenues consist entirely of fees for consulting services. The Company
organizes its information by management responsibility for client projects.
The Company operates in a single business segment providing e-business
services to customers in the United States and Canada. No revenues were
derived from assets and technology acquired in 1999.
(o) Comprehensive Loss
Comprehensive loss consists of net loss and other gains or losses affecting
stockholders' equity that, under generally accepted accounting principles, are
excluded from results of operations. For the Company, this consists of foreign
currency translation losses. The tax effect on foreign currency translation
losses was not significant.
(p) Advertising Expenses
The Company expenses the cost of advertising and promoting its services as
incurred. Such costs are included in general, administrative and business
development expenses and totaled $36,622 in 1999 and $0 during the period from
November 16, 1998 to December 31, 1998.
(q) New Accounting Pronouncements
In March 1998, the AICPA issued SOP 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires
the capitalization of certain costs incurred in connection with developing or
obtaining software for internal use. The Company adopted SOP 98-1 on January
1, 1999. There was no material impact on the consolidated financial statements
as a result of adoption of SOP 98-1.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes a new model for accounting for derivatives and hedging activities
and supersedes and amends existing accounting standards and is effective for
fiscal years beginning after June 15, 2000. SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value, and
the corresponding derivative gains or losses be either reported in the
statement of operations or as a component of other comprehensive income
depending on the type of hedge relationship that exists with respect to such
derivative. The Company does not expect the adoption of SFAS No. 133 to have a
material impact on its consolidated financial statements.
In December 1999, the United States Securities and Exchange Commission (SEC)
released Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in
Financial Statements, which must be adopted by the Company by June 30, 2000.
SAB No. 101 provides guidance on revenue recognition and the SEC staff's views
on the application of accounting principles to selected revenue recognition
issues. The Company does not expect that the adoption of SAB No. 101 will have
a material effect on its consolidated financial statements.
19
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
In March 2000, the Financial Accounting Standards Board Issued
Interpretation No. 44 (FIN No. 44), Accounting for Certain Transactions
Involving Stock Compensations, an interpretation of APB Opinion No. 25. FIN
No. 44 will be effective July 1, 2000. However, certain of the conclusions
included in the interpretation apply to events occurring after December 15,
1998 or January 12, 2000. The December 15, 1998 effective date applies
prospectively after July 1, 2000 to the accounting treatment for modifications
to the exercise prices of stock option awards occurring after December 15,
1998 and for the definition of an employee for purposes of determining
eligibility to apply APB No. 25 and related interpretations to accounting for
stock option grants to such persons where the grant occurred after December
15, 1998. The January 12, 2000 effective date applies prospectively after July
1, 2000 to certain fixed stock award modifications to add a reload feature
after January 12, 2000. Management does not believe the adoption of FIN No. 44
will have a material impact on Company's financial position or results of
operations.
(2) Property and Equipment
Property and equipment consist of the following at December 31, 1999:
<TABLE>
<CAPTION>
1999 1998
------- ------
<S> <C> <C>
Computer equipment and software............................. $77,932 18,281
Furniture, fixtures and equipment........................... 6,887 --
Leasehold improvements...................................... 3,005 --
------- ------
87,824 18,281
Less accumulated depreciation and amortization.............. 24,563 789
------- ------
$63,261 17,492
======= ======
</TABLE>
(3) Recapitalization, and Acquisition of Assets and Technology
(a) Recapitalization of Absolut Future Tech, Inc.
In May 1999, CTTI purchased all of the outstanding capital stock of Tech for
3,000,000 shares of common stock. Shortly afterwards, the officers and
directors of CTTI resigned and CTTI sold an additional 4,000,000 common shares
for $40,000 to a group substantially comprised of the former stockholders of
Tech. Upon completion of the purchase, CTTI was renamed AbsoluteFuture.com,
and representatives of Tech assumed the officer and directors positions of
AbsoluteFuture.com.
The transaction was accounted for as a purchase, and was treated as a
recapitalization of Tech, with Tech as the acquiror of CTTI. CTTI had net
liabilities of $4,060, consisting of accounts payable at the time of the
transaction. Because CTTI had no operations historically and was a shell
company, the purchase did not result in goodwill and the assumption of
liabilities resulted in a reduction of additional paid-in capital.
Tech had 10,000,000 common shares outstanding at the time of the purchase.
The common shares presented herein are those of CTTI and AbsoluteFuture.com.
Transactions involving the common stock of Tech prior to the purchase have
been restated to adjust the number of shares by a conversion ratio of 3:10 in
order to reflect the number of CTTI common shares received by holders of Tech
common shares resulting from the recapitalization.
The operating results for CTTI have been included in the Company's
operations from the acquisition date.
20
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
The following table presents pro forma results of operations as if the
acquisition had occurred at the beginning of each of the periods presented.
The pro forma information is not necessarily indicative of the combined
results that would have occurred had the acquisitions taken place on November
16, 1998, nor is it necessarily indicative of results that may occur in the
future.
<TABLE>
<CAPTION>
Period from
Year Ended November 16, 1998
1999 to December 31, 1998
---------- --------------------
<S> <C> <C>
Revenue................ $ 163,258 --
Net loss............... 1,010,164 31,871
Net loss per share--
basic and diluted..... .11 .01
</TABLE>
(b) Internet Interview, Inc.
In August 1999, the Company purchased certain net assets from Internet
Interview, Inc. for cash of $70,000. Prior to the purchase, Internet
Interview, Inc. operated an Internet web site which assembled resume
information for individuals seeking employment opportunities. Revenues from
the web site were derived through subscription agreements with customers. Upon
completion of the purchase, the revenue generating activities were curtailed,
the web site was redesigned and refocused on the technology job market and the
service was offered at no charge. In the event revenues derived from the
Internet Interview web site reached certain levels from November 1999 to
January 2000, the sellers were entitled to receive additional consideration.
These levels were not met. Additionally, a services agreement was reached with
a former employee of Internet Interview, Inc. which runs through June 2000 and
provides compensation based upon the attainment of certain revenue goals.
Through December 31, 1999, no payments had been made under this agreement. An
intangible asset of $65,000 representing the fair value of the Internet web
site was recorded in connection with the acquisition.
(c) Acquisition of Technology
In November 1999, the Company entered into an employment agreement
(Agreement) under which the employee conveyed to the Company all of the right,
title and interest to computer software and programs known as the Local Hard
Drive product. Under the Agreement, the Company will issue the employee
200,000 shares of common stock. In addition, the employee will receive a
royalty of 12.5% of any revenues generated from sales of Local Hard Drive
product or derivatives from it. On January 13, 2000, the Agreement was
extended to confirm that the Company's SafeMessage technology was a derivative
of the Local Hard Drive product and sales of SafeMessage would be subject to
the royalty set out in the Agreement. As a result of the transaction, the
Company recorded acquired technology of $63,000, which has not been amortized
at December 31, 1999 as related products have not yet been released. Included
in other long-term obligations is $63,000 at December 31, 1999, representing
the obligation for the issuance of common stock to be settled in 2000.
(4) Income Taxes
The income tax benefit differs from the "expected" income tax benefit
(computed by applying the U.S. federal income tax rate of 34% to pretax
losses) primarily due to the increase in the valuation allowance for deferred
tax assets.
21
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
Significant components of deferred tax assets at December 31, 1999 are as
follows:
<TABLE>
<S> <C>
Deferred tax assets:
Amortization of intangibles................................. $ 1,600
Accrued employee benefits................................... 1,830
Net operating loss carryforwards............................ 349,788
-------
Total deferred tax assets............................... 353,218
Less valuation allowance...................................... 353,218
-------
Net deferred tax assets................................. $ --
=======
</TABLE>
The valuation allowance for deferred tax assets increased by $343,456 in
1999 and $9,762 for the period from November 16, 1998 to December 31, 1998.
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $1,029,000 expiring through 2014 that are primarily available to
offset future taxable income.
(5) Stockholders' Equity
(a) Stock Option and Stock Incentive Compensation Plan
The Company has granted options under its 1999 Stock Option and Stock
Incentive Compensation Plan (Plan). Stock options generally vest over two to
four years and have a ten-year life. During 1999, substantially all of the
stock options were granted with an exercise price approximating estimated fair
value. Under the Plan, 1,000,000 shares of common stock are reserved for the
issuance of options.
A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
Outstanding Options
---------------------------
Weighted
Shares Number average
available of exercise
for grant shares price
--------- ------- --------
<S> <C> <C> <C>
Balances at December 31, 1998................ -- -- $ --
Adoption of Plan............................. 1,000,000
Options granted.............................. (220,000) 220,000 0.60
--------- ------- -----
Balances at December 31, 1999................ 780,000 220,000 $0.60
========= ======= =====
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- --------------------------
Weighted
average Weighted
remaining average
Exercise Number contractual Number exercise
price outstanding life exercisable price
-------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C>
$0.60 220,000 9.75 years 20,000 $0.60
</TABLE>
The weighted-average fair value of options granted in 1999 using the Black-
Scholes model with an average life of five years, expected volatility of 78%,
zero dividend yield and a risk-free interest rate of 5.25% was $0.44 per
option.
22
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
Outstanding options include options to purchase 30,000 shares of common
stock awarded to consultants in 1999. The Company recognizes compensation
expense associated with these options over their vesting periods based upon
their fair value at the measurement date determined using the Black-Scholes
model. For 1999, expense was determined using the same assumptions as were
used to determine the weighted-average fair value of all options granted.
In accordance with the disclosure requirements of SFAS No. 123, if the
Company had elected to recognize compensation cost based on the fair value of
options granted at grant date as prescribed, net loss and net loss per share
would have been increased to the pro forma amounts indicated in the table
below:
<TABLE>
<CAPTION>
Year ended
December 31,
1999
------------
<S> <C>
Net loss:
As reported............................... $1,010,164
Pro forma................................. 1,015,685
Basic and diluted loss per share:
As reported............................... $ 0.13
Pro Forma................................. 0.13
</TABLE>
(b) Common Stock Issued to Consultants
In December 1999, the Company issued 1,100,000 shares of its common stock to
a consulting firm under a 12-month agreement ending in December 2000 whereby
the consulting firm will assist the Company in various areas, including, but
not limited to, finding funding, strategic alliances or other sources of
business, participation in strategic planning and other corporate activities.
The Company recognized expense of $250,000 under this agreement in 1999,
representing the fair value of the common stock on the commitment date as the
shares were fully earned and vested upon issuance. In addition, under the
agreement, the Company is to pay the consulting firm monthly consideration of
$7,500 payable in cash and the Company's common stock.
(c) Sale of Common Stock
In December 1999, the Company sold 2,200,000 shares of common stock for
$500,000. None of the proceeds had been received at December 31, 1999. During
2000, the Company collected the stock subscription receivable.
(6) Notes Payable
(a) Payables to Stockholders
Notes payable to stockholders of $350,000 at December 31, 1999 bear interest
at 12% per annum, payable semiannually, with the final payment of interest and
principal due December 31, 1999. In connection with the issuance of notes
payable to stockholders, 90,000 shares of common stock were issued in 1999 and
700,388 shares were issued during the period from November 16, 1998 to
December 31, 1998 resulting in discounts on the notes of $3,000 and $1,160,
respectively at the time of issuance to be recognized as additional interest
expense over the term the notes are outstanding. Interest expense related to
these notes was $41,409 in 1999 and $2,863 during the period from November 16,
1998 to December 31, 1998. Accrued interest on the notes was $42,040 at
December 31, 1999. Notes payable to stockholders of $350,000 are classified as
long-term at December 31, 1999 as they were converted into 1,540,000 shares of
common stock in 2000.
Loans payable to stockholders are non-interest bearing and have no stated
maturity dates.
23
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(b) Note Payable
The note payable is non-interest bearing and has no stated maturity date. Of
the balance at December 31, 1999, $170,000 was classified as long-term as the
amount was converted to 748,000 shares of common stock in 2000.
(7) Lease Obligations
At December 31, 1999, the Company is obligated under operating lease
agreements expiring through 2003, for equipment and office space. Future
minimum annual payments are:
<TABLE>
<S> <C>
Year ending December 31:
2000.................................. $ 78,252
2001.................................. 65,820
2002.................................. 68,040
2003.................................. 70,272
--------
$282,384
========
</TABLE>
Rent expense was $64,056 for 1999 and $5,113 for the period from November
16, 1998 to December 31, 1998.
(8) Business Segment and Geographic Information
Revenue consists entirely of fees received for consulting services. The
Company organizes its information by management responsibility for client
projects. The Company operates in one business segment, providing e-business
services.
The following geographic information for 1999 includes revenue based on
location of services performed, and property and equipment based on physical
location:
<TABLE>
<S> <C>
Revenue:
United States................................. $163,258
Canada........................................ --
--------
$163,258
========
Property and equipment, net:
United States................................. $ 62,810
Canada........................................ 451
--------
$ 63,261
========
</TABLE>
The Company did not have operations outside the United States prior to 1999.
(9) Lawsuit
In November 1999, the Company filed a lawsuit against a former consultant to
the Company and his wife alleging breach of agreement, misuse of Company funds
and interference with the Company's business. Recoveries, if any, will be
recorded when received.
24
<PAGE>
ABSOLUTEFUTURE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1999 and 1998
(10) Liquidity
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern.
The Company has incurred cumulative losses of $1,038,875 through December
31, 1999 and had a working capital deficit of $422,128 as of December 31,
1999. Management recognizes that in order to meet the Company's capital
requirements, additional financing, in addition to that raised subsequent to
December 31, 1999 as disclosed in note 11, will be necessary. The Company is
evaluating alternative sources of equity financing to improve its cash
position and is undertaking efforts to raise capital.
(11) Related Party Transactions
The Company's Chief Executive Officer received no cash compensation for
services rendered during the period from November 16, 1998 to December 31,
1999.
(12) Subsequent Events
(a) Sale of Common Stock and Common Stock Purchase Warrants
In January 2000, the Company sold 1,250,000 shares of its common stock for
$500,000. In connection with this transaction, warrants to purchase 1,250,000
shares of the Company's common stock with an exercise price of $0.45 per share
were issued. The warrants have a two-year term, expiring in January 2002.
(b) Issuance of Common Stock for Services
In January 2000, the Company issued 3,000,000 shares of its common stock
with a fair value of $2,220,000 in connection with consulting arrangements
which begin in 2000.
25
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 21, 2000, Barry L Friedman PC resigned as the Company's auditor
at the request of the Board of Directors. During the two previous fiscal
years, the auditor expressed no adverse opinion, nor was any audit qualified
or modified. There were no disagreements of any kind between the Company and
Barry L Friedman PC. The Board of Directors decided that it wanted to use a
major accounting firm to perform its audit and therefore asked Barry L
Friedman to resign.
On February 21, 2000, the Company engaged KPMG LLP ("KPMG") as its
certifying accountant. Management has not previously consulted with KPMG on
any accounting or financial reporting matters.
Other than the disclosures above, there are no other matters required
pursuant to Form 8-K, or Item 304 of Regulation S-K, to be disclosed herein.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Directors and Executive Officers of the Company
Certain information regarding the directors and executive officers of the
Company follows:
<TABLE>
<CAPTION>
Officer or Director
Name Age Position Held with Company of Company Since
- ---- --- -------------------------- -------------------
<S> <C> <C> <C>
Graham Andrews, M.A.
Ph.D................... 45 Chief Executive Officer, President and Director 1998
Michael Foley........... 45 Director and Secretary 1999
Alina Nikolaeva......... 33 Director 1998
Patrick F. Charles...... 58 Director 1999
William Antony
McNamara............... 35 Chief Technology Officer 1999
Brian P. Abeel.......... 41 Chief Financial Officer 2000
</TABLE>
Graham Andrews, M.A. Ph.D. Mr. Andrews has been president and chief
executive officer of the Company since December 9, 1998. During the past five
years, Mr. Andrews has served as a director of Butte Mining plc (London Stock
Exchange) and Gem River Corporation (Alberta Stock Exchange). He holds a first
class honors degree in mathematics from Oxford University and a Ph.D. in
mathematics from Heriot-Watt University in Edinburgh. He has held various
senior corporate finance positions, including British Petroleum plc (now BP-
Amoco), Chase Investment Bank (part of the Chase Manhattan Bank), NatWest Bank
and W I Carr Limited (part of the Banque Indosuez Group). He is also president
and a director of Consolidated Fortress Resources Inc., which is quoted on the
Canadian Venture Exchange, Chairman of the Board of York Energy, Ltd, which is
quoted on the OFEX Trading Facility in London and as a director of Vantex Oil,
Gas and Minerals, Ltd (Montreal Stock Exchange).
Michael Foley. Mr. Foley became a director and secretary of the Company in
June 1999. From 1994 to September 1999, he was a director of Westward
Exploration, Ltd., which is quoted on the Canadian Venture Exchange. He has
been a director of Winfield Resources Limited, which is to be quoted on the
Canadian Venture Exchange since its formation in 1998. Mr. Foley is the
President of Chase Development Corporation, a private investment Company where
he has served over five years.
Alina Nikolaeva. Ms. Nikolaeva has been a director of the company since
December 9, 1998. Ms. Nikolaeva has a Masters degree from the Academy of
Chemistry in Moscow. She subsequently moved to Vancouver, BC and has just
completed two year's of a law degree at the University of British Columbia.
Patrick F Charles. Mr. Charles was formerly a partner and national director
of legislative consulting services for Coopers and Lybrand and a former
executive vice president of Olivier Management Corporation, a NASDAQ listed
merchant banking company. He is currently a director of Saratoga International
Holdings Corp.
26
<PAGE>
William Antony McNamara. Mr. McNamara became Chief Technology Officer of the
Company in November 1999. He has over 15 years of programming and development
experience. He has won numerous awards for software development work,
including Editor's Choice awards from PC World and PC Magazine. He has held
senior positions as a development manager and software engineer with such
companies as Peter Norton Computing (Symantec)(1989 to 1995), Intersolv (1995
to 1996), SCS/Compute (1996 to 1997), RealNetworks (1997) and Phycom (1997 to
1999).
Brian P. Abeel. Mr. Abeel joined the Company in April 2000 as a consultant
acting in the capacity as Chief Financial Officer. Immediately prior to
joining the Company, he was Executive Vice President and Chief Financial
Officer and a member of the Board of Directors of Laser Technology, Inc., a
manufacturer of laser-based speed and distance measuring devices based in
Englewood, Colorado since November 1999. Laser Technology's stock is traded on
the American Stock Exchange. From 1989 through 1999 Mr. Abeel was employed by
Spectra Lux Corporation, a manufacturer of edge-lighted displays for
commercial and military aircraft applications where he was most recently Co-
President. Mr. Abeel holds a B.A. degree in business administration from the
University of Washington and in 1984 passed the CPA exam.
There are no family relationships among the executive officers. There are no
arrangements or understandings between any officers and any other person
pursuant to which that officer was selected.
Compliance With Section 16(a) of the Exchange Act
Due to an oversight, the following individuals did not file on a timely
basis Forms 3, 4 or 5 reporting changes in beneficial ownership: Graham
Andrews, Patrick Charles, Michael Foley, Alina Nikolaeva and William Antony
McNamara. Also, Randolph Management, a 10 percent shareholder, did not file
Form 5 on its due date. The aforementioned reports will be filed promptly
after filing of this Form 10-KSB.
Schedule of non-compliance with section 16(a) of the Exchange Act
<TABLE>
<CAPTION>
Number of
Number of Transactions
Name Late Reports Not Reported
---- ------------ ------------
<S> <C> <C>
Graham Andrews................................... 3 4
Patrick Charles.................................. 2 3
Alina Nikolaeva.................................. 2 2
William Antony McNamara.......................... 4 5
Michael Foley.................................... 2 2
Randolph Management, Inc......................... 2 1
</TABLE>
ITEM 10. EXECUTIVE COMPENSATION
Employment Contracts
On November 26, 1999, the Company entered into an employment agreement and a
confidentiality, non-disclosure, invention assignment and nonsolicitation
agreement with William Antony McNamara. The term of this agreement is twelve
months. The salary was set at a minimum of $92,000 per year, to be reviewed
for increase by the board of directors on a quarterly basis. In the event that
the Company terminates Mr. McNamara's employment without cause, 90 days
severance will be paid.
On February 28, 2000, the Company entered into an employment agreement and a
confidentiality, non-disclosure, invention assignment and nonsolicitation
agreement with Graham Andrews. The term of this agreement is twelve months.
The salary was set at a minimum of $76,000 per year for working 150 days up to
a maximum of $130,000 for 250 days work. In the event that the Company
terminates Mr. Andrew's employment without cause, 90 days severance will be
paid.
27
<PAGE>
Cash Compensation
The following table shows all cash compensation paid or to be paid by the
Company as well as other compensation paid or accrued during the fiscal years
indicated to the chief executive officer (the "Named Executive"). No executive
officers of the Company as of the end of the Company's last fiscal year had
received salary and bonus for such period which exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Awards Payouts
--------------------- --------------
Annual Compensation
------------------------- Restricted Securities Long Term
Other Annual Stock Underlying Incentive Plan All Other
Name and Salary Bonus Compensation Award(s) Options Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#)(1) ($) ($)
------------------ ---- ------ ----- ------------ ---------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Graham Andrews
CEO, Director.......... 1999 $ 0 $ 0 $ 0 $ 0 50,000 $ 0 $ 0
</TABLE>
- --------
(1) Common Stock Purchase Options
Option Exercises and Holdings
The following table sets forth information with respect to the Named
Executive, concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year December 31, 1999.
Aggregated Options in Last Fiscal Year and Fiscal Year-End Options Values:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at Fiscal in-the-Money Options/SARs
Shares Year-End(#) at Fiscal Year-End($)
Acquired on Value ------------------------- -------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Graham Andrews.......... 0 $ 0 0 50,000 0 $ 0
</TABLE>
- --------
(1) No options were exercisable at the 1999 fiscal year-end.
(2) All options are granted subject to the terms and conditions of the 1999
Stock Incentive and Stock Option Plan.
On April 4, 2000 the Board of Directors of the Company authorized the
granting of options to purchase an additional 291,000 shares of the Company's
Common Stock at $1.52 per share, vesting 25% after four months then ratably
over the remainder of four years. The options were granted to officers and key
employees of the Company. As part of the total grant Mr. Andrews received
options to purchase an additional 100,000 shares.
28
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 10, 2000 by
(i) all persons who own of record or are known to the Company to beneficially
own more than 5% of the issued and outstanding shares of common stock, and
(ii) by each director, each director nominee, each Named Executive named in
the tables under "Executive Compensation" and by all executive officers and
directors as a group:
<TABLE>
<CAPTION>
Amount and Percent of
Nature of Class Based
Beneficial on
Common Stock Beneficial
Name and Address Positions and Offices Held Ownership(1) Ownership(1)
---------------- -------------------------- ------------ ------------
<S> <C> <C> <C>
Graham Andrews.......... President and CEO, Director 1,394,963(2) 6.54%
121 Lakeside
Seattle, WA 98122
Michael Foley........... Director and Secretary 104,500(3) *
Suite 1380
885 West Georgia Street
Vancouver, B.C. V6C 3E8
Canada
Alina Nikolaeva......... Director 804,675(4) 3.77%
2405 Bidwell Street
Vancouver, B.C. V6G 2K8
Canada
Patrick Charles......... Director 114,500(5) *
8756 122 Avenue NE
Kirkland, WA 98033
Randolph Management,
Inc.................... Stockholder 2,200,000 10.32%
550 Old Country Rd,
Suite 314
Hicksville, NY 11801
Eastfield Investments,
Ltd.................... Stockholder 1,648,000(6) 7.30%
Old Bank Chambers
PO Box 428
Grande Rue, St Martins
Guernsey GY1 3WZ
Channel Islands
All Directors and
Officers as a group
(six persons).......... 2,631,138(7) 12.82%
</TABLE>
- --------
* less than one percent
(1) Calculated pursuant to rule 13d-3(d) of the Securities Exchange Act of
1934. Unless otherwise stated below, each such person has sole voting and
investment power with respect to all such shares. Under Rule 13d-3(d),
shares not outstanding which are subject to options, warrants, rights or
conversion privileges exercisable within 60 days are deemed outstanding
for the purpose of calculating the number and percentage owned by such
person, but are not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.
(2) Includes 1,372,463 shares of unregistered Common Stock and 22,500 options
to purchase shares of Common Stock exercisable within 60 days.
(3) Includes 100,000 shares of unregistered Common Stock and 4,500 options to
purchase shares of Common Stock exercisable within 60 days.
29
<PAGE>
(4) Includes 800,175 shares of unregistered Common Stock and 4,500 options to
purchase shares of Common Stock exercisable within 60 days.
(5) Includes 110,000 shares of unregistered Common Stock and 4,500 options to
purchase shares of Common Stock exercisable within 60 days.
(6) Includes 398,000 shares of unregistered Common Stock and 1,250,000
warrants to purchase shares of Common Stock exercisable within 60 days.
(7) Includes 2,572,638 shares of unregistered Common Stock and 58,500 options
to purchase shares of Common Stock exercisable within 60 days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 29, 1999, the Company issued 4,000,000 shares of unregistered common
stock at $.01. Graham Andrews, a director and President of the Company,
purchased 800,000 shares and Michael Foley and Patrick Charles, both directors
of the Company, each purchased 100,000 shares.
On June 10, 1999, the Company agreed to acquire Absolut Future Tech Inc. for
3,000,000 shares of restricted common stock. Graham Andrews and Alina
Nikloaeva, directors of the Company, were also shareholders in Absolut Future
Tech Inc. They received shares as follows: Graham Andrews, 352,463 shares and
Alina Nikolaeva 909,075 shares.
On November 26, 1999, the Company entered into an employment agreement (the
"McNamara Agreement") with William Antony McNamara ("McNamara"), under which
McNamara agreed to become an employee of the Company and its Chief Technology
Officer. Under the McNamara Agreement, McNamara conveyed to the Company all of
the right, title and interest to computer software and programs known as the
Local Hard Drive product. Under the McNamara Agreement, the Company issued to
McNamara 200,000 shares of the Company's restricted common stock. In addition,
McNamara was granted a royalty of 12.5% of any revenues generated from sales
of Local Hard Drive software or derivatives from it. On January 13, 2000, the
McNamara Agreement was extended to confirm that the SafeMessage technology was
a derivative of the Local Hard Drive product and sales of SafeMessage would be
subject to the royalty set out in the McNamara Agreement.
On August 9, 1999 the Company entered into an agreement with Internet
Interview Inc. to acquire substantially all of its assets for $70,000. The
Agreement also called for a payment of $25,000 to be paid to Saratoga
International Holdings Corp ("Saratoga") to reimburse Saratoga for a deposit
paid to Internet Interview Inc. against the purchase price. Mr. Patrick
Charles, a director of the Company is also a director and shareholder in
Saratoga.
During 1999, the Company issued seven notes payable of $50,000 each to a
total value $350,000. The notes carried an interest rate of 12% per annum.
Graham Andrews, president and a director of the Company, subscribed for one of
the notes. In January 2000, these notes payable were converted to restricted
shares of common stock through the issue of 220,000 shares of common stock for
each loan note, for a total issuance of 1,540,000 shares.
30
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed with the Securities Exchange Commission. The
Company shall furnish copies of exhibits for a reasonable fee (covering the
expense of furnishing copies) upon request.
<TABLE>
<C> <S>
3.1 Articles of Incorporation of AbsoluteFuture.com
3.2 Bylaws of AbsoluteFuture.com
10.1 Agreement to acquire assets of Internet Interview, Inc.
10.2 Employment and Non-disclosure Agreement with Graham Andrews
10.3 Employment and Non-disclosure Agreement with William Antony McNamara
10.4 Extension to McNamara Local Hard Drive Agreement
10.5 1999 Stock Option and Stock Incentive Compensation Plan
10.6 Space lease
10.7 Agreement to Acquire Absolut Future Tech, Inc.
16.1 Letter on change in certifying accountants
21.1 Subsidiaries
27.1 Financial Data Schedule
</TABLE>
- --------
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1999.
31
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on April 14, 2000.
AbsoluteFuture.com
/s/ Graham Andrews
By: _________________________________
Graham Andrews
President & Chief Executive
Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Graham Andrews Chief Executive Officer April 14, 2000
______________________________________ President, Director
Graham Andrews
/s/ Patrick Charles Director April 14, 2000
______________________________________
Patrick Charles
/s/ Alina Nikolaeva Director April 14, 2000
______________________________________
Alina Nikolaeva
/s/ Michael Foley Director April 14, 2000
______________________________________
Michael Foley
/s/ Brian Abeel Chief Financial Officer April 14, 2000
______________________________________
Brian Abeel
</TABLE>
32
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
3.1 Articles of Incorporation of AbsoluteFuture.com
3.2 Bylaws of AbsoluteFuture.com
10.1 Agreement to acquire assets of Internet Interview, Inc.
10.2 Employment and Non-disclosure Agreement with Graham Andrews
10.3 Employment and Non-disclosure Agreement with William Antony McNamara
10.4 Extension to McNamara Local Hard Drive Agreement
10.5 1999 Stock Option and Stock Incentive Compensation Plan
10.6 Space lease
10.7 Agreement to Acquire Absolut Future Tech, Inc.
16.1 Letter on change in certifying accountants
21.1 Subsidiaries
27.1 Financial Data Schedule
</TABLE>
- --------
<PAGE>
Exhibit 3.1
Articles of Incorporation
ARTICLES OF INCORPORATION OF ABSOLUTEFUTURE.COM.
KNOW BY ALL THESE PRESENTS: That we, the undersigned, Directors being all
natural persons of the age of eighteen years or more and desiring to form a body
corporate under the laws of the State of Nevada do hereby sign, verify and
deliver in duplicate to the Secretary of State of the State of Nevada, these
Articles of Incorporation:
ARTICLE I NAME The name of the Corporation shall be AbsoluteFuture.com.
ARTICLE II That the registered office of this corporation and resident agent are
both located at 10900 NE 8th Street, Suite 1414, Bellevue WA 98004; but the
corporation may maintain an office in such towns, cities, and places within and
without the State of Nevada as the Board of Directors may from time to time
determine, or as may be designated by the ByLaws of the said corporation. The
Corporation shall exist in perpetuity, from and after the date of filing these
Articles of Incorporation with the Secretary of State of the State of Nevada,
unless dissolved according to law. The resident agent of the corporation will be
Michael Morrison, 1495 Ridgeview Drive, Suite 220, Reno Nevada 89509
ARTICLE III PURPOSES AND POWERS 1. Purposes: Except as restricted by these
Articles of Incorporation, the Corporation is organized for the purpose of
transacting all lawful business for which corporations may be incorporated
pursuant to the Nevada Corporation Code. 2. General Powers: Except as restricted
by these Articles of Incorporation, the Corporation shall have and may exercise
all powers and rights which a corporation may exercise legally pursuant to the
Nevada Corporation Code. 3. Issuance of Shares: The Board of Directors of the
Corporation may divide and issue any class of stock of the Corporation in series
pursuant to a resolution properly filed with the Secretary of State of Nevada.
Such stock may be issued from time to time without action by the stockholders,
for such consideration as may by fixed from time to time by the Board of
Directors, and shares so issued, shall be deemed fully paid stock, and the
holder of such shares shall not be liable for any further payment thereon.
ARTICLE IV CAPITAL STOCK 1. Classes and Number of Shares. The total number of
shares of all classes of stock which the corporation shall have authority to
issue is Sixty Million (60,000,000), consisting of Fifty Million (50,000,000)
shares of Common Stock, par value of $0.001 per share (The "Common Stock") and
Ten Million (10,000,000) shares of Preferred Stock, which have a par value of
$0.001 per share (the "Preferred Stock"). 2. Powers and Rights of Common Stock
(a) Preemptive Right. No shareholders of the Corporation holding common stock
shall have any preemptive or other right to subscribe for any additional un-
issued or treasury shares of stock or for other securities of any class, or for
rights, warrants or options to purchase stock, or for scrip, or for securities
of any kind convertible into stock or carrying stock purchase warrants or
priveleges unless so authorized by the Corporation; (b) Voting Rights and
Powers. With respect to all matters upon which stockholders are entitled to vote
or to which stockholders are entitled to give consent, the holders of the
outstanding shares of the Common Stock shall be entitled to cast thereon one (1)
vote in person or by proxy for each share of the Common Stock standing in
his/her name; (c) Dividends and Distributions (i) Cash Dividends. Subject to the
rights of holders of Preferred Stock, holders of Common Stock shall be entitled
to receive such cash dividends as may be declared thereon by the Board of
Directors from time to time out of assets of funds of the Corporation legally
available therefor; (ii) Other Dividends and Distributions. The Board of
Directors may issue shares of Common Stock in the form of a distribution or
distributions pursuant to a stock dividend or split-up of the shares of the
Common Stock; (iii) Other Rights. Except as otherwise required by the Nevada
Revised Statutes and as may otherwise be provided in these Restated Articles of
Incorporation, each share of the Common Stock shall have identicle powers,
preferences and rights, including rights in liquidation; 3. Preferred Stock. The
powers, preferences, rights, qualifications, limitations and restrictions
pertaining to the Preferred Stock, or any series thereof, shall be such as may
be fixed, from time to time, by the Board of Directors in it's sole discretion,
authority to do so being hereby expressly vested in such board. 4. Issuance of
the Common Stock and the Preferred Stock. The Board of Directors of the
Corporation may from time to time authorize by
<PAGE>
resolution the issuance of any or all shares of the Common Stock and the
Preferred Stock herein authorized in accordance with the terms and conditions
set forth in these Restated Articles of Incorporation for such purposes, in such
amounts, to such persons, corporations, or entities, for such consideration and
in the case of Preferred Stock, in one or more series, all as the Board of
Directors in it's discretion may determine and without any vote or other action
by the stockholders, except as otherwise required by law. The Board of
Directors, from time to time, also may authorize, by resolution, options,
warrants and other rights convertible into Common or Preferred Stock
(collectively "securities.") The securities must be issued for such
consideration, including cash, property, or services, as the Board of Directors
may deem appropriate, subject to the requirement that the value of such
consideration be no less than the par value if the shares issued. Any shares
issued for which the consideration so fixed has been paid or delivered shall be
fully paid stock and the holder of such shares shall not be liable for any
further call or assessment or any other payment thereon, provided that the
actual value of such consideration is not less than the par value of the shares
so issued. The Board of Directors may issue shares of Common Stock in the form
of a distribution or distributions pursuant to a stock divided or split-up of
the shares of the Common Stock only to the then holders of the outstanding
shares of the Common Stock. 5. Cumulative Voting. Except as otherwise required
by applicable law, there shall be no cumulative voting on any matter brought to
a vote of stockholders of the Corporation.
ARTICLE V GOVERNING BOARD OF DIRECTORS The business and affairs of the
Corporation shall be managed by and under the direction of the Board of
Directors. Except as may otherwise be provided pursuant to Section 4 or Article
Fourth hereof in connection with rights to elect additional directors under
specified circumstances, which may be granted to the holders of any class or
series of Preferred Stock, the exact number of directors of the Corporation
shall be determined from time to time by a bylaw or amendment thereto, providing
that the number of directors shall not be reduced to less than three (3). The
directors holding office at the time of the filing of these Restated Articles of
Incorporation shall continue as directors until the next annual meeting and/or
until their successors are duly chosen.
ARTICLE VI The capital stock of this corporation shall not be subject to
assessment to pay debts of the corporation, and no paid up stock and no stock
issued as fully paid shall ever be assessable or assessed. The Articles of
Incorporation shall not be amended in this particular.
ARTICLE VII The period of existence of this corporation shall be perpetual,
subject only to termination by action of its stockholders or by the effect of
law. During the time of the existence of this corporation the following shall be
the doctrine for corporate opportunities: The officers, directors and other
members of management of the Corporation shall be subject to the doctrine of
corporate opportunities only insofar as it applies to business opportunities in
which the Corporation has expressed an interest as determined from time to time
by the Corporation's Board of Directors as evidenced by resolutions appearing in
the Corporation's minutes. When such areas of interest are delineated, all such
business opportunities within such areas of interest which come to the attention
of the officers, directors and other members of management of the Corporation
shall be disclosed promptly to the Corporation and made available to it. The
Board of Directors may reject any business opportunity presented to it and
thereafter any officer, director or other management may avail himself of such
opportunity. Until such time as the Corporation, through its Board of Directors,
has designated an area of interest, the officers, directors and other members of
management of the Corporation shall be free to engage in such areas of interest
on their own and the provisions hereof shall not limit the rights of any
officer, director or other member of management of the Corporation to continue a
business existing prior to the time that such area of interest is designated by
the Corporation. This provision shall not be construed to release any employee
of the Corporation. This provision shall not be construed to release any
employee of the Corporation (other than an officer, director or member of
management) from any duties which he may have to the Corporation.
ARTICLE VIII The directors shall have the power to make and alter the By-Laws of
the corporation. By-Laws make by the Board of Directors under the powers so
conferred may be altered, amended or repealed by the Board of Directors or by
the stockholders at any meeting called and held for that purpose.
ARTICLE IX Any shareholder, or shareholders, may sell, assign, or otherwise
transfer their shares and certificate or certificates of stock, or any part
thereof. The aforesaid changes and amendments have been
<PAGE>
consented to and approved by a majority vote of the stockholders holding at
least a majority of each class of stock outstanding and entitled to vote
thereon.
ARTICLE X INDEMNIFICATION The officers and directors of this corporation shall
not be liable to the shareholders or any creditors of the corporation for any
alleged breach of fiduciary duty as such officer and director unless it be
established that the director or officer has committed acts or is personally
responsible for omissions which involve intentional misconduct, fraud or knowing
violation of the law, or the payment of dividends in violation of N.R.S. 78,300.
Further, the corporation does indemnify to the full extent authorized or
permitted by the Nevada Corporation Code any person made, or threatened to be
made, a party to an action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that he, his testator or
interstate is or was a director, officer, employee, fiduciary, or agent of the
Corporation or serves or served any other enterprise at the request of the
Corporation.
ARTICLE XI AMENDMENTS The Corporation reserves the right to amend its Articles
of Incorporation from time to time in accordance with the Nevada Corporation
Code. Any proposed amendment shall be adopted upon receiving the affirmative
vote of holders of a majority of the shares entitled to vote thereon.
ARTICLE XII ADOPTION AND AMENDMENT OF BYLAWS The initial Bylaws of the
Corporation shall be adopted by its Board of Directors. The power to alter of
amend or repeal the Bylaws or adopt new Bylaws shall be vested in the Board of
Directors, but the holders of Common Stock may also alter, amend or repeal the
Bylaws or adopt new Bylaws. The Bylaws may contain any provisions for the
regulation and management of the affairs of the Corporation not inconsistent
with law or these Articles of Incorporation.
ARTICLE XIII REGISTERED OFFICE AND REGISTERED AGENT The address of the initial
registered office of the Corporation is 6425 Meadow Country Dr., Reno, Nevada
89509 and the name of the registered agent at such address is Lewis M. Eslick.
Either the registered office or the registered agent may be changed in the
manner provided by law.
ARTICLE XIV The name and post office addresses of the incorporators are: NAME
ADDRESS Lewis M. Eslick 6425 Meadow Country Dr. Reno, Nevada 89509 NAME ADDRESS
Henry Richard Vicencio, 216 Lemmon Dr. Suite 234 Reno, Nevada 89506 IN WITNESS
WHEREOF, the above-named Incorporators have signed these Articles of
Incorporation on September 21, 1993. /s/ Lewis M. Eslick EX-3.2 3
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Exhibit 3.2
BYLAWS OF ABSOLUTEFUTURE.COM
I Meetings of Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders of this
Company, for the purpose of fixing or changing the number of directors of the
Company, electing directors and transacting such other business as may come
before the meeting, shall be held on such date, at such time and at such place
as may be designated by the Board of Directors.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the president or a vice-president or a majority of the Board of
Directors acting with or without a meeting, or the holder or holders of 10% of
all the shares outstanding and entitled to vote thereat.
Section 3. Place of Meetings. Meetings of shareholders shall be held at the
principal office of the Company, unless the Board of Directors decides that a
meeting shall be held at some other place within or without the State of Nevada
and causes the notice thereof to so state.
Section 4. Notices of Meetings. Unless waived, a written, printed, or
typewritten notice of each annual or special meeting, stating the day, hour and
place and the purpose of purposes thereof shall be served upon or mailed to each
shareholder of record entitled to vote or entitled to notice, not more than
sixty (60) days nor less than ten (10) days before any such meeting. If mailed,
it shall be directed to a shareholder at his or her address as the same appears
on the records of the Company. If a meeting is adjourned to another time and
place, no further notice as to such adjourned meeting need be given if the time
and place to which it is adjourned are fixed and announced at such meeting. In
the event of a transfer of shares after notice has been given and prior to the
holding of the meeting, it shall not be necessary to serve notice on the
transferee. Nothing herein contained shall prevent the setting of a record date
in the manner provided by law for the determination of the shareholders who are
entitled to receive notice of or to vote at any meeting of shareholders or for
any purpose permitted by law.
Section 5. Waiver of Notice. Notice of the time, place and purpose of any
meeting of shareholders may be waived in writing, either before or after the
holding of such meeting, by any shareholder.
Section 6. Quorum. At any meeting of shareholders, the holders of a majority in
amount of the shares of the Company then outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for such meeting but no action required by law, the Articles of Incorporation or
these Bylaws to be authorized or taken by the holders of a designated proportion
of the shares of any particular class, or of each class, may be authorized or
taken by a lesser proportion. The holders of a majority of the voting shares
represented at a meeting in person or by proxy may adjourn such meeting from
time to time, and at such adjourned meeting any business may be transacted as if
the meeting had been held as originally called.
Section 7. Organization. At each meeting of the shareholders, the president, or,
in the absence of the president, a chairman chosen by a majority in interest of
the shareholders present in person or by proxy and entitled to vote, shall act
as chairman, and the secretary of the Company, or, if the secretary of the
Company not be present, the assistant secretary, or if the secretary and the
assistant secretary not be present, any person whom the chairman of the meeting
shall appoint, shall act as secretary of the meeting.
Section 8. Shareholders Entitled to Vote. Every shareholder of record shall be
entitled at each meeting of shareholders to one vote for each share standing in
his name on the books of the Company. A corporation owning shares in this
Company may vote the same by its president or its secretary or its treasurer,
and such officer shall conclusively be deemed to have authority to vote such
shares and to secure any proxies and written waivers and consents in relation
thereto, unless, before a vote is taken or a consent or waiver is acted upon, it
shall be made to appear by a certified copy of the regulations, by-laws or
resolution of the Board of Directors of the corporation owning such shares that
such authority does not exist or is vested in some other officer or person.
Section 9. Shareholder Voting. At each meeting of the shareholders for the
election of directors at which a quorum is present, the persons receiving the
greatest number of votes shall be the directors. Such election may be by ballot
or viva voce, as the shareholders may determine. All other questions shall be
determined by a majority vote of the shares entitled to vote and represented at
the meeting in person or by proxy, unless for any particular purpose the vote of
a greater proportion of the shares, or of any particular class of shares, or of
each class, is otherwise required by law, the Articles of Incorporation or these
Bylaws.
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Section 10. Proxies. At meetings of the shareholders any shareholder of record
entitled to vote thereat may be represented and may vote by a proxy or proxies
appointed by an instrument in writing, but such instrument shall be filed with
the secretary of the meeting before the person holding such proxy shall be
allowed to vote thereunder. No proxy shall be valid after the expiration of six
(6) months after the date of its execution, unless coupled with an interest of
the shareholder executing it shall have specified therein the length of time it
is to continue in force, which in no case shall exceed seven (7) years from the
date of its execution. Section 11. Order of Business and Procedure. The order of
business at all meetings of the shareholders and all matters relating to the
manner of conducting the meeting shall be determined by the chairman of the
meeting, whose decisions may be overruled only by majority vote of the
shareholders present and entitled to vote at the meeting in person or by proxy.
Meetings shall be conducted in a manner designed to accomplish the business of
the meeting in a prompt and orderly fashion and to be fair and equitable to all
shareholders, but it shall not be necessary to follow any manual of
parliamentary procedure.
ARTICLE II Board of Directors
Section 1. General Powers of Board. The powers of the Company shall be
exercised, its business and affairs conducted, and its property controlled by
the Board of Directors, except as otherwise provided by the law of Nevada or in
the Articles of Incorporation.
Section 2. Number and Qualification. The number of directors of the Company,
none of whom need be shareholders or residents of Nevada, shall be at least
three. Without amendment of these Bylaws, the number of directors may be fixed
or changed by resolution adopted by the vote of the majority of directors in
office or by the vote of holders of shares representing a majority of the voting
power at any annual meeting, or any special meeting called for that purpose; but
not reduction of the number of directors shall have the effect of removing any
director prior to the expiration of his term of office.
Section 3. Term of Office. Unless he shall earlier resign, be removed as
hereinafter provided, die, or be adjudged mentally incompetent, each director
shall hold office until the sine die adjournment of the annual meeting of
shareholders for the election of directors next succeeding his election, or the
taking by the shareholders of an action in writing in lieu of such meeting, or,
if for any reason the election of directors shall not be held at such annual
meeting or any adjournment thereof, until the sine die election of directors
held thereafter as provided for in Section 4 of Article I of these Bylaws, or
the taking by the shareholders of an action in writing in lieu of such meeting,
and until his successor is elected and qualified.
Section 4. Removal. Any director may be removed without cause at any special
meeting of shareholders called for such purpose by the vote of the holders of
two-thirds of the voting power entitling them to elect directors in place of
those to be removed, provided that unless all the directors, or all the
directors of a particular class are removed no individual director shall be
removed if the votes of a sufficient number of shares are cast against his
removal which, if cumulatively voted at on election of directors, or of all
directors of a particular class, as the case may be, would be sufficient to
elect at least one director. In case of any such removal, a new director may be
elected at the same meting for the unexpired term of each director removed.
Failure to elect a director to fulfill the unexpired term of any director
removed shall be deemed to create a vacancy in the Board.
Section 5. Resignations. Any director of the company may resign at any time by
giving written notice to the president or the secretary of the Company. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 6. Vacancies. Vacancies in the Board of Directors may be filled by a
majority vote of the remaining directors, even though they be less than a quorum
of the entire number of directors constituting a full Board, until an election
to fill such vacancies is had. Within the meaning of this Section, a vacancy
exists if the board of directors increases the authorized number of directors or
if the shareholders increase the authorized number of directors but fail at the
meeting at which such increase is authorized, or an adjournment thereof, to
elect the additional directors provided for, or if the shareholders fail at any
time to elect the whole authorized number of directors. Any director elected
under the provisions of this Section 6 shall serve until the next annual
election of directors and until their successors are elected and qualified.
Section 7. Meetings. The directors shall hold such meetings from time to time as
they may deem necessary and such meetings as may from time to time be called by
the president or the chairman of the board. Meetings shall be held at the
principal office of the Company or at such other place within or without the
State of Nevada as the president or a majority of the directors may determine. A
regular meeting of the Board of Directors shall be held each year at the same
place as and immediately after the annual meeting of shareholders, or at such
other place and time as shall theretofore have been determined by the Board of
Directors and notice thereof need not
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be given. At its regular annual meeting, the Board of Directors shall organize
itself and elect the officers of the Company for the ensuing year, and may
transact any other business.
Section 8. Notice of Meetings. Notice of each special meeting or, where
required, each regular meeting, of the Board of Directors shall be given to each
director either by being mailed on at least the third day prior to the date of
the meeting or by being telegraphed or given personally or by telephone on at
least twenty-four (24) hours notice prior to the date of meeting. Such notice
shall specify the date and time of the meeting, the purpose or purposes for
which the meeting is called. At any meeting of the Board of Directors at which
every director shall be present, even though without such notice, any business
may be transacted. Any acts or proceedings taken at a meeting of the Board of
Directors not validly called or constituted may be made valid and fully
effective by ratification at a subsequent meeting which shall be legally and
validly called or constituted. Notice of any regular meting of the Board of
Directors need not state the purpose of the meeting and, at any regular meeting
duly held, any business may transacted. If the notice of a special meeting shall
state as a purpose of the meeting the transaction of any business that may come
before the meeting, then at the meeting any business may be transacted, whether
or not referred to in the notice thereof. A written waiver of notice of a
special or regular meeting, signed by the person or person entitled to such
notice, whether before or after the time stated therein shall be deemed the
equivalent of such notice, and attendance of a director at a meeting shall
constitute a waiver of notice of such meeting except when the director attends
the meeting and prior to or at the commencement of such meeting protests the
lack of proper notice.
Section 9. Quorum and Voting. At all meetings of the directors fifty percent of
all of the authorized directors of the company shall constitute a quorum, but
less than fifty percent of the authorized directors may adjourn a meeting of the
directors from time to time, and at adjourned meetings any business may be
transacted as if the meeting had been held as originally called. The act of a
majority of Directors present at any meeting at which there is a quorum shall be
the act of the Board of Directors, except as otherwise provided by law, the
Articles of Incorporation or these Bylaws.
Section 10. Compensation. Directors shall be entitled to receive for services
and expenses such reasonable compensation as the Board of Directors may
determine by affirmative vote of a majority of those directors in office. The
Board of Directors may also delegate its authority to establish reasonable
compensation for directors to one or more officers or directors by an
affirmative vote of a majority of those directors in office. Any vote taken by
the Board of Directors with respect to director compensation shall be effective
irrespective of the financial or personal interest of any of the directors
involved.
Section 11. Committees. The Board of Directors may create any committee of
directors, to be composed of one or more directors, and may delegate to any such
committee any of the authority and powers of the Board of Directors, however
conferred. Each such committee shall serve at the pleasure of the Board of
Directors shall act only in the intervals between meetings of the Board of
Directors and shall be subject to all times to the control and direction of the
Board of Directors. Any such committee may act by a majority of its members. Any
such committee shall keep written minutes of its meetings and report same to the
Board of Directors prior to or at the next regular meeting of the Board of
Directors. Any act or authorization of an act by any such committee within the
authority delegated to it shall be as effective for all purposes as the act or
authorization of the Board of Directors.
ARTICLE III Officers
Section 1. General Provisions. The officers of the Company shall be a president,
such number of vice-presidents as the Board may from time to time determine, a
secretary, a treasurer and such other officers as the directors may elect. The
Company may also have, at the discretion of the Board of Directors, a Chairman
of the Board or Vice Chairman who shall have the duties prescribed by the Board
of Directors. Except as specifically provided in these Bylaws, the directors
shall determine the duties and term of each of the officers of the Company and
shall be responsible for the designation of the Company's chief executive
officer. Officers need not be shareholders of the Company and may be paid such
compensation as the Board of Directors may determine. Any person may hold any
two or more officers and perform the duties thereof. If one person is chosen to
hold the offices of secretary and treasurer, he shall be known as secretary-
treasurer if one person be elected to both of these offices.
Section 2. Election, Term of Office, and Qualification. The officers of the
Company named in Section 1 of this Article III shall be elected by a majority of
the Board of Directors present and constituting a quorum for an indeterminate
term and shall hold office during the pleasure of the Board of Directors. The
qualifications of all officers shall be such as the Board of Directors may see
fit to impose.
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Section 3. Additional Officers, Agents, etc. In addition to the officers
mentioned in Section 1 of this Article III, the Company may have such other
officers, committees, agents, and factors as the Board of Directors may deem
necessary and may appoint, each of whom or each member of which shall hold
office for such period, have such authority, and perform such duties as may be
provided in these Bylaws, or as the Board of Directors may from time to time
determine. The Board of Directors may delegate to any officer or committee the
power to appoint any subordinate officers, committees, agents or factors. In the
absence of any officer of the Company, or for any other reason the Board of
Directors may deem sufficient, the Board of Directors may delegate, for the time
being, the powers and duties, or any of them, of such officer to any other
officer, or to any director.
Section 4. Removal. Any officer of the Company may be removed either with or
without cause, at any time, by resolution adopted by the Board of Directors at
any meeting of the Board, the notices (or waivers of notice) of which shall have
specified that such removal action was to be considered. Any officer appointed
not by the Board of Directors but by an officer or committee to which the Board
shall have delegated the power of appointment may be removed, with or without
cause, by the committee or superior officer (including successors) who made the
appointment, or by any committee or officer upon whom such power of removal may
be conferred by the Board of Directors.
Section 5. Resignations. Any officer may resign at any time by giving written
notice to the Board of Directors, or to the president, or to the secretary of
the Company. Any such resignation shall take effect at the time specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 6. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification, or otherwise, shall be filled in the manner
prescribed in these Bylaws for regular appointments or elections to such office.
ARTICLE IV Duties of the Officers
Section 1. The President. The president shall manage and have general
supervision over the business of the Company and over its several officers,
subject, however, to the control of the Board of Directors. He shall, if
present, preside at all meetings of shareholders and of the Board of Directors.
He shall see that all orders and resolutions of the Board of Directors are
carried into effect, and shall from time to time report to the Board of
Directors all matters within his knowledge which the interests of the
corporation may require to be brought to the notice of the Board. He may sign
with the secretary, the treasurer, or any other proper officer of the company
thereunto authorized by the Board of Directors, certificates for share in the
Company. He may sign, execute and deliver in the name of the Company all deeds,
mortgages, bonds, contracts, or other instruments either when specially
authorized by the Board of Directors or when required or deemed necessary or
advisable by him in the ordinary conduct of the Company's normal business,
except in cases where the signing and execution thereof shall be expressly
delegated by these Bylaws to some other officer or agent of the Company or shall
be required by law or otherwise to be signed or executed by some other officer
or affixed to any instrument requiring the same; and, in general, perform all
duties as from time to time may be assigned to him by the Board of Directors. In
case the president for any reason shall be unable to attend to any of his
duties, such duties may be performed by a vice-president of the Company.
Section 2. Vice-Presidents. The vice-presidents shall perform such duties as are
conferred upon them by these Bylaws or as may from time to time be assigned to
them by the Board of Directors or the president. At the request of the president
(or in his or her absence or disability, the vice-president designated by the
Board) shall perform all the powers of the president. The authority of vice-
presidents to sign in the name of the Company all certificates for shares and
authorized deeds, mortgages, bonds, contracts, notes and other instruments,
shall be coordinate with like authority of the president.
Section 3. The Treasurer. The treasurer shall: (a) Have charge and custody of,
and be responsible for, all funds, securities, notes, contracts, deeds,
documents, and all other indicia of title in the Company and valuable effects of
the Company; receive and give receipts for moneys due and payable to the name of
the Company in such banks, trust companies, or other depositories as shall be
selected by or pursuant to the directions of the Board of Directors; cause such
funds to be discharged by checks or drafts on the authorized depositories of the
Company, signed as the Board of Directors may require; and be responsible for
the accuracy of the amounts of, and cause to be preserved proper vouchers for,
all moneys to be disbursed; (b) Have the right to require from time to time
reports or statements giving such information as he may desire with respect to
any and all financial transactions of the Company from the officers or agents
transacting the same; (c) Keep or cause to be kept at the principal office or
such other office or offices of the Company as the Board of Directors shall from
time to time designate
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correct records of the business and transactions of the Company and exhibit such
records to any of the directors of the Company upon application at such office;
(d) Have charge of the audit and statistical departments of the Company; (e)
Render to the president or the Board of Directors whenever they shall require
him so to do an account of the financial condition of the company and of all his
transactions as treasurer and as soon as practicable after the close of each
fiscal year, make and submit to the Board of Directors a like report for such
fiscal year; and (f) Exhibit at all reasonable times his cash books and other
records to any of the directors of the Company upon application.
Section 4. The Secretary. The secretary shall: (a) Keep the minutes of all
meetings of the shareholders and of the Board of Directors in one or more books
provided for that purpose; (b) See that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) Be custodian of
the corporate records and, if one is provided, of the seal of the Company, and
see that such seal is affixed to all certificates for shares prior to the issue
thereof and to all other documents to which the seal is required to be affixed
and the execution of which on behalf of the Company under its seal is duly
authorized in accordance with the provisions of these Bylaws; (d) Have charge,
directly or through such transfer agent or transfer agents and registrar or
registrars as the Board of Directors shall appoint, of the issue, transfer and
registration of certificates for shares in the Company and of the records
thereof, such records to be kept in such manner as to show at any time the
number of shares in the Company issued and outstanding, the manner in which and
time when such stock was paid for, the names and addresses of the holders of
record thereof, the number of classes of shares held by each, and the time when
each became such holder of record; (e) Exhibit at all reasonable times to any
directors, upon application, the aforesaid records of the issue, transfer, and
registration of such certificates; (f) Sign (or see that the treasurer or other
proper officer of the Company thereunto authorized by the Board of Directors
shall sign), with the president or vice- president, certificates for shares in
the Company; (g) See that the books, reports, statements, certificates, and all
other documents and records required by law are properly kept and filed; and (h)
In general, perform all duties incident to the office of secretary, he shall
perform such duties as are conferred upon him by the officers of the Company, or
the Board of Directors, and in the absence or the inability of the secretary to
act, shall perform all the duties of the secretary and when so acting shall have
all the powers of the secretary. In the event the Board of Directors shall elect
an assistant secretary, he shall perform such duties as are conferred upon him
by the officers of the Company, or the Board of Directors, and in the absence or
inability of the secretary to act, shall perform all the duties of the secretary
and when so acting shall have all the powers of the secretary.
ARTICLE V Indemnification of Directors and Officers
Section 1. Indemnification. The Company shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened or pending action,
suit, or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he, his testator, or intestate is or was a director
or officer of the Company, or is or was serving at the request of the Company as
a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise, or as a member of any committee or
similar body against all expenses (including attorneys' fees), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding (including appeals) or
the defense or settlement thereof or any claim, issue, or matter therein, to the
fullest extent permitted by the laws of Nevada as they may exist from time to
time.
Section 2. Insurance. The proper officers of the Company without further
authorization by the Board of Directors, may in their discretion purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent for another corporation,
partnership, joint venture, trust or other enterprise, against any liability.
Section 3. ERISA. To assure indemnification under this provision of all such
persons who are or were "fiduciaries" of an employee benefit plan governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974",
as amended from time to time, this Article shall, for the purposes hereof, be
interpreted as follows: an "other enterprise" shall be deemed to include an
employee benefit plan; the Company shall be deemed to have requested a person to
serve an employee benefit plan where the performance by such person of his
duties to the Company also imposes duties on, or otherwise involves services by,
such person to the plan or participants or beneficiaries of the plan; excise
taxes assessed on a person with respect to an employee benefit plan pursuant to
said Act of Congress shall be deemed "fines"; and action taken or omitted by a
person with respect to an employee benefit plan in the performance of such
person's duties for a purpose
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reasonably believed by such person to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Company.
Section 4. Contractual Nature. The foregoing provisions of this Article shall be
deemed to be a contract between the Company and each director and officer who
serves in such capacity at any time while this Article is in effect, and any
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts.
Section 5. Construction. For the purposes of this Article, references to "the
Company" include in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director or officer of such
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or as a member of any
committee or similar body shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 6. Non-Exclusive. The Company may indemnify, or agree to indemnify, any
person, and pay any expenses, including attorney's fees in advance of final
disposition of any action, suit or proceeding, if such indemnification and/or
payment is approved by the vote of the shareholders, disinterested directors, or
is in the opinion of independent legal counsel selected by the Board of
Directors for an indemnitee who acted in good faith in a manner he reasonably
believed to be in, or not opposed to, the best interest of the Company.
ARTICLE VI Seal The Board of Directors may provide a corporate seal, which shall
be in the form of a circle and shall bear the full name of the Company, and the
words "Seal" and "Nevada".
ARTICLE VII Amendment of Bylaws These Bylaws may be amended or added to, or
repealed and superseded by new Bylaws, at any annual or special meeting of
shareholders in the notice (or waivers of notice) of which the intention to
consider such amendment, addition, or repeal is stated, by the affirmative vote
of the holders of record of shares entitling them to exercise a majority of the
voting power on such proposal, or at anytime, by the affirmative vote of the
Board of Directors.
ARTICLE VIII Shares and Their Transfer
Section 1. Certificate for Shares. Every owner of one or more shares in the
Company shall be entitled to a certificate, which shall be in such form as the
Board of Directors shall prescribe, certifying the number and class of paid-up
shares in the Company owned by him. The certificates for the respective classes
of such shares shall be numbered in the order in which they shall be issued and
shall be signed in the name of the Company by the president or vice-president
and by the secretary, or any other proper officer of the Company thereunto
authorized by the Board of Directors, or the treasurer, and the seal of the
Company, if any, may be affixed thereto. A record shall be kept of the name of
the person, firm, or corporation owning the shares represented by each such
certificate and the number of shares represented by each such certificate and
the number of shares represented thereby, the date thereof, and in case of
cancellation, the date of cancellation. Every certificate surrendered to the
Company for exchange or transfer shall be cancelled and no new certificate or
certificates until such existing certificates shall have been so cancelled,
except in cases provided for in Section 2 of this Article. Section 2. Lost,
Destroyed and Mutilated Certificates. If any certificates for shares in this
Company become worn, defaced, or mutilated but are still substantially intact
and recognizable, the directors, upon production and surrender thereof, shall
order the same cancelled and shall issue a new certificate in lieu of same. The
holder of any shares in the Company shall immediately notify the Company if a
certificate therefor shall be lost, destroyed, or mutilated beyond recognition,
and the Board of Directors may, in its discretion, require the owner of the
certificate which has been lost, destroyed, or mutilated beyond recognition, or
his legal surety or sureties as it may direct, not exceeding double the value of
the stock, to indemnify the Company against any claim that may be made against
it on account of the alleged loss, destruction, or mutilation of any such
certificate. The Board of Directors may, however, in its discretion, refuse to
issue any such new certificate except pursuant to legal proceedings, under the
laws of the State of Nevada in such case made and provided.
Section 3. Transfers of Shares. Transfers of shares in the Company shall be made
only on the books of the Company by the registered holder thereof, his legal
guardian, executor, or administrator, or by his attorney
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thereunto authorized by power of attorney duly executed and filed with the
secretary of the Company or with a transfer agent appointed by the Board of
Directors, and on surrender of the certificate or certificates for such shares.
The person in whose name shares stand on the books of the Company shall, to the
full extent permitted by law, be deemed the owner thereof for all purposes as
regards the Company.
Section 4. Regulations. The Board of Directors may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer, and registration of certificates for shares in
the Company. It may appoint one or more transfer agents or one or more
registrars or both, and may require all certificates for shares to bear the
signature of either or both.
ARTICLE IX Depositories, Contracts and Other Instruments Section 1.
Depositories. The president and any vice- president of the Company are each
authorized to designate depositories for the funds of the Company deposited in
its name and the signatories and conditions with respect thereto in each case,
and from time to time, to change such depositories, signatories and conditions,
with the same force and effect as if each such depository, the signatories and
conditions with respect thereto and changes therein had been specifically
designated or authorized by the Board of Directors or by the president, or any
vice-president of the Company, shall be entitled to rely upon the certificate of
the secretary or any assistant secretary of the Company setting forth the fact
of such designation and of the appointment of the officers of the Company or of
both or of other persons who are to be signatories with respect to the
withdrawal of funds deposited with such depository, or from time to time the
fact of any change in any depository or in the signatories with respect thereto.
Section 2. Execution of Instruments Generally. Except as provided in Section 1
of this Article IX, all contracts and other instruments requiring execution by
the Company may be executed and delivered by the president or any vice-president
and authority to sign any such contracts or instruments, which may be general or
confined to specific instances, may be conferred by the Board of Directors upon
any other person or persons. Any person having authority to sign on behalf of
the Company may delegate, from time to time, by instrument in writing, all or
any part of such authority to any person or persons if authorized so to do by
the Board of Directors.
/s/ Lewis M. Eslick
- -------------------
President
<PAGE>
Exhibit 10.1
Agreement to Acquire Assets of Internet Interview Inc.
AGREEMENT FOR SALE AND PURCHASE
OF BUSINESS ASSETS
BETWEEN: AbsoluteFuture.com, a Nevada corporation
10900 NE 8th Street Suite #1414
Bellevue, WA 98004
( "Buyer" )
AND: Internet Interview Inc., a Florida Corporation
20533 Biscayne Blvd. Suite 320
Aventura, Florida ( "Seller")
RECITALS
A. Seller operates a business known as "Internet Interview Inc." which
operates an e-commerce business providing employment resume services to
customers via the internet (the "Business"). Seller owns accounts
receivable, equipment, software, hardware, intellectual property rights,
programs, contracts and other tangible and intangible assets used in
connection with the operation of the Business.
B. Buyer is engaged in the acquisition of businesses for its future operations
including those specializing in e-commerce sales of products and services
and desires to purchase substantially all the assets used or useful, or
intended to be used, in the operation of the Business.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties hereto do hereby agree as follows:
AGREEMENT
1. Effective Date The effective date of this Agreement shall be July 1, 1999,
--------------
("Effective Date").
2. Purchase and Sale At the Closing, as defined in Section 10 herein,
-----------------
Seller shall sell to Buyer and Buyer shall purchase from Seller all of the
assets used in the Business (the "Assets"), including without limitation
the assets listed in the attached Exhibit "2.0", which is incorporated
herein by this reference. The sale, transfer, assignment and delivery by
Seller of the Assets to Buyer shall be effected on the Closing Date, as
defined in said Section 10, by Seller's execution and delivery of documents
and instruments necessary to sell, transfer, assign and deliver the Assets.
At Closing, good, valid and marketable title to the Assets shall be
transferred, assigned and delivered by Seller to Buyer free and clear of
any and all liens, encumbrances, security interests, claims and other
restrictions or charges of any kind whatsoever.
3. Purchase Price for the Assets/Payment of Purchase Price. The purchase
--------------------------------------------------------
price for the Assets is based on payments by Buyer to the Seller of $70,000
at Closing and further payments by Buyer to Seller contingent on Seller's
performance, as described more fully in this Section 3.
a.) Payments at Closing
-------------------
i) Buyer agrees to pay Seller or its assigns $70,000 cash at Closing.
ii) Buyer agrees to pay Saratoga International Holdings Corp. ("SHCC") $25,000
as reimbursement of a deposit SHCC paid to Seller.
b.) Contingent Payment. The purchase price for the Assets shall be adjusted
------------------
according to the "Final Payment Formula" set forth in the attached Exhibit
"3(b)" which is incorporated by this reference. Buyer agrees to pay any
amounts due under this provision to Seller or its assigns in cash or in
shares of Buyer's stock at Buyer's
<PAGE>
sole discretion which payment shall be due and payable on or before
Febraury15, 2000. Should Buyer pay in stock, the price of the shares shall
be as set forth in Section 3(c) herein.
c.) Valuation of Buyer's Stock. The value of Buyer's shares referred to in
---------------------------
this Section 3 shall be based on the average of the five (5) day quoted
closing price of the shares for the sixth through tenth trading days from
date Buyer commences public trading of its shares. In the event any of the
shares issued by Buyer under this Agreement are restricted from trading,
the recipient shall be entitled to receive such shares based on a 25%
discount to the aforementioned average of the five (5) day trading price.
4. Consulting Agreement The parties acknowledge that the willingness of Buyer
--------------------
to enter into this Agreement is contingent upon the ability of Buyer, as
more particularly described in Section 11 herein, to retain the services of
Seller's Officer, Norman Reisch dba "AJAY Enterprises Inc." ("Seller's
Officer") for a minimum of 1 year after the Closing Date. On or before the
Closing Date, the parties hereto agree to enter into a Consulting Agreement
as set forth in the attached Exhibit "4.0" which is incorporated by this
reference.
5. Due Diligence Review Seller shall permit Buyer's employees, agents,
--------------------
accountants, legal counsel and other representatives to have access to
Seller's books, records, employees, counsel, accountants, engineers and
other representatives at all reasonable times for the purpose of conducting
its due diligence investigation. Seller will make available to Buyer for
examination and reproduction all documents and data of every kind and
character relating to this Agreement and the transactions contemplated
hereby, in possession or control of, or subject to reasonable access by
either party. All such due diligence investigation shall be completed and
Buyer shall notify Seller in writing of the satisfaction or removal of this
due diligence review condition by no later than July 31, 1999. Upon mutual
agreement of the parties, additional time may be allowed to complete such
due diligence investigation. Should Buyer ("Reviewing Party") become aware
of any information during its due diligence investigation which, in the
opinion of the Reviewing Party, could have material adverse impact on this
Agreement and/or the transactions contemplated hereby, the Reviewing Party
shall immediately notify Seller ("Receiving Party") in writing of such
information and the concerns which such information has caused. The
Receiving Party shall have a reasonable time to respond to those concerns.
In the event that the concerns cannot be resolved to the satisfaction of
the Reviewing Party, the Reviewing Party shall have the right to terminate
this Agreement without further liability hereunder. Each party shall bear
the costs and expenses of the due diligence investigation hereunder,
including the fees and expenses of professional advisors. Buyer may
terminate this Agreement during the due diligence review period described
herein without any liability to Seller for damages, expenses or failure to
execute the Agreement.
6. Conduct of Business: Interim Operations Upon the Effective Date of this
---------------------------------------
Agreement and pending the Closing and the transactions contemplated
thereby, Seller shall use its best efforts to conduct its business in a
reasonable and prudent manner in accordance with its past practices, to
preserve its existing business organizations and relationships with its
employees, customers, suppliers and others with whom it has a business
relationship, to preserve and protect its properties, and to conduct its
business in compliance with applicable laws and regulations.
6.1 Without the prior written consent of Buyer, Seller shall not:
a.) merge into or with or consolidate with, any other corporation;
b.) amend its articles of incorporation or bylaws;
c.) issue any capital stock or other securities, or grant or enter into any
agreement to grant, any options, convertible rights, warrants, calls, or
agreements relating to its securities;
d.) enter into, or terminate, any material agreement;
e.) engage in any one or more activities or transactions outside the ordinary
course of business;
<PAGE>
f.) enter into any transaction or make any commitment which could result in any
of the warranties and representations of Seller contained in this Agreement
not being true and correct after the occurrence of such transaction or
event.
6.2 Seller shall provide Buyer with complete financial statements for the
year ended December 31, 1998 within ten (10) days following the Effective
Date of this Agreement and monthly financial statements for each month from
January 1, 1999 through the most recent month prior to Closing. If an audit
of Seller's financial statement is requested by Buyer, Seller shall fully
cooperate with Buyer and Buyer's independent auditors in the performance of
such audit.
7. Warranties and Representations of Buyer Buyer warrants and represents to
---------------------------------------
Seller and Selling Shareholder as follows:
a.) Buyer is a corporation duly organized under the laws of the State of
Nevada, validly existing and in good standing, is authorized to exercise
all its corporate powers, rights and privileges and has the corporate power
and authority to own and operate its properties and to carry on its
businesses as now conducted.
b.) Buyer has all requisite legal and corporate power to execute and deliver
this Agreement, consummate the transactions contemplated hereby and perform
its obligations hereunder.
c.) All corporate action on Buyer's part necessary for the authorization,
execution, delivery and performance of all obligations under this Agreement
and for the issuance and delivery of the consideration in payment for
Seller's Assets will be taken, and this Agreement constitutes a legal,
valid and binding obligation of Buyer enforceable according to its terms.
d.) Neither the execution and delivery of this Agreement nor the carrying out
of any of the transactions contemplated hereby will:
i. violate or conflict with any of the terms and conditions or provisions of
the articles of incorporation or bylaws of Buyer;
ii. violate any legal requirement applicable to Buyer;
iii. violate, conflict with, result in a breach of, constitute a default under,
or accelerate or permit the acceleration of the performance required by, or
give any other party the right to terminate, any contract or permit
applicable to Buyer;
iv. result in the creation of any lien, charge or other encumbrance on any
property of Buyer; or
v. require Buyer to obtain or make any waiver, consent, action, approval or
authorization of, or registration, declaration, notice or filing with, any
private non-governmental third party or any governmental authority.
e.) It has no subsidiaries or affiliated companies and does not otherwise own
or control, directly or indirectly, any other corporation, association or
business entity, other than Absolute Future Tech, Inc., a Nevada
corporation.
f.) The securities of Buyer to be issued and delivered in payment for the
Assets, when issued and delivered in accordance with the terms of this
Agreement and for the consideration expressed herein, shall be duly and
validly issued, fully paid and non-assessable.
g.) No suit, action or other proceeding is pending or, to Buyer's best
knowledge, threatened before any governmental authority seeking to restrain
Buyer or prohibit entry into this Agreement or prohibit the Closing, or
seeking damages against Buyer or its properties as a result of the
consummation of this Agreement.
h.) The current authorized capital stock of Buyer consists of 50,000,000 shares
of common stock, $0.001 par value, of which 11,100,000 common shares are
issued and outstanding, along with 10,000,000 shares of preferred stock,
$0.001 par value, none of which are issued and outstanding. There are no
other securities, options,
<PAGE>
warrants, or other rights to purchase any securities of Buyer outstanding
except as set forth in the attached Exhibit "7(h)" which is incorporated
herein by this reference. All outstanding securities of Buyer are duly and
validly issued, are fully paid and non-assessable and were issued in
compliance with all applicable federal and state securities laws.
i.) Buyer is a development stage company with little or no operating history.
Its only business activity to date has been to arrange financing, hire
management and other personnel and develop and implement its business
development plan.
j.) The management prepared financial statements of Buyer are set forth in
Exhibit "7(j)" attached hereto and incorporated by this reference. Other
than as set forth therein, Buyer has no contingent or other liabilities nor
any pending outstanding claims, suits or other proceedings against it.
The warranties and representations of Buyer set forth in hereunder are
exclusive of all other representations of Buyer in this Agreement. All
representations and warranties of Buyer are merged into this Agreement and
do not survive Closing.
8. Warranties and Representations of Seller. Seller warrants and represents
-----------------------------------------
to Buyer, as of the date hereof, as follows:
a.) It is a corporation duly organized under the laws of the State of Florida,
validly existing and in good standing, authorized to exercise all its
corporate powers, rights and privilege and has the corporate power and
authority to own and operate its properties and to carry on its business as
now conducted.
b.) Seller warrants and represents to Buyer that Seller has and will have at
Closing, legal and beneficial ownership of Seller's Assets, free and clear
of any and all liens and encumbrances or other restrictions or limitations
and has, and will have at Closing, all required legal power and authority
to transfer and convey the Assets to Buyer. Seller owns no real property.
All of Seller's tangible personal property is in good condition, reasonable
wear and tear excepted.
c.) It has all requisite legal and corporate power to execute and deliver this
Agreement, consummate the transactions contemplated hereby and perform its
obligations hereunder.
d.) All corporate action on its part necessary for the authorization,
execution, delivery and performance of all obligations under this Agreement
will be taken, and this Agreement constitutes a legal, valid and binding
obligation enforceable according to its terms.
e.) There are no claims, actions, suits, investigations or proceedings against
it pending or, to its knowledge, threatened in any court or before or by
any governmental authority, or before any arbitrator, including without
limitation any tax claims, that might have an adverse effect on it or its
business, and to its knowledge, there is no basis for any such claim,
action, suit, investigation or proceeding that is likely to result in a
judgment, decree or order having an adverse effect on it or its business.
It is not in default under, and no condition exists that would (i)
constitute a default under, or breach or violation of, any legal
requirement, permit or contract applicable to its business or (ii)
accelerate or permit the acceleration of the performance required under, or
give any party the right, to terminate any contract. All required tax
returns have been filed and all payments due thereunder made on a timely
basis.
f.) No suit, action or other proceeding is pending or, to its knowledge,
threatened before any governmental authority seeking to restrain or
prohibit its entry into this Agreement or prohibit the Closing, or seeking
damages against it as a result of the consummation of this Agreement.
g.) Neither the execution and delivery of this Agreement nor the carrying out
of any of the transactions contemplated hereby will:
i. violate or conflict with any of the terms and conditions or provisions of
its articles of incorporation or bylaws;
ii. violate any legal requirement applicable to it;
<PAGE>
iii. violate, conflict with, result in a breach of, constitute a default under,
or accelerate or permit the acceleration of the performance required by,
or give any other party the right to terminate, any contract or permit
applicable to it ;
iv. result in the creation of any lien, charge or other encumbrance on any of
its property other than as provided for herein; or
v. require it to obtain or make any waiver, consent, action, approval or
authorization of, or registration, declaration, notice or filing with, any
private non-governmental third party or any governmental authority.
h.) The financial statements delivered by Seller to Buyer present fairly and
accurately the financial condition and results of operations of Seller as
of the dates of such financial statements, and nothing has occurred since
such dates that could reasonably be expected to have a materially adverse
effect on the financial condition or operations of Seller.
i.) The Assets include all assets, tangible and intangible, reasonably
necessary to carry on the Business as it has been conducted prior to the
date hereof.
j.) No representation, warranty, or covenant made to Buyer in this Agreement
nor any document, certificate, exhibit, or other information given or
delivered to Buyer pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit a material fact
necessary to make the statements contained in this Agreement or the matters
disclosed in the related documents, certificates, information, or exhibits
not misleading. Each of the schedules attached hereto is a true, complete
and accurate list or description, as appropriate, of the items purported to
be listed or described thereon. Seller has not withheld, and will not
withhold, from Buyer knowledge of any events, conditions or fact which may
affect the Business, the Assets, this Agreement or the transactions
contemplated hereby.
9. Covenants
---------
9.1 Approval of Directors Prior to the effective date of this Agreement,
---------------------
Buyer and Seller shall each hold a special meeting of their respective
Boards of Directors to approve the Agreement and the transactions
contemplated thereby.
9.2 Approval of Seller's Shareholders Seller shall (a) cause a special
---------------------------------
meeting of its shareholders to be duly called and held in accordance with
the laws of the State of Florida, its Articles of Incorporation and Bylaws
as soon as reasonably practicable for the purpose of voting on the adoption
and approval of this Agreement, (b) recommend to its shareholders approval
of the Agreement, (c) use its best efforts to obtain the necessary approval
of its shareholders, and (d) take all other action necessary to effect the
Closing.
9.3 Third Party Consents Buyer and Seller each agree to use their
--------------------
respective best efforts to obtain, as soon as reasonably practicable, all
permits, authorizations, consents, waivers and approvals from third parties
or governmental authorities necessary to consummate this Agreement and the
transactions contemplated hereby.
10. Closing Subject to the satisfaction of the conditions set forth in
-------
Sections 11 and 12 herein, the closing of the transactions contemplated
hereby (the "Closing") shall be held at Buyer's offices at 10900 NE 8th
Street Suite #1414 Bellevue, Washington at a date established by the
parties and, if no such date is established by agreement, on August 9,
1999. The date upon which the Closing occurs is hereinafter referred to as
the "Closing Date". If by the close of business on August 27, 1999, Closing
has not occurred, then either party hereto may terminate this Agreement by
written notice to such effect to the other party without liability to any
other party to this Agreement unless the reason for the Closing having not
occurred is (i) such party's willful breach of this Agreement, or (ii) , if
all of the conditions to such party's obligations set forth in Sections 11
and 12 herein have been satisfied or waived in writing by the date
scheduled for the Closing, the failure of such party to perform its
obligations under this Agreement on such date. However, any termination
pursuant to this Section 10 shall not relieve any party hereto who was
responsible for Closing having not occurred of liability for such party's
willful breach of this Agreement or the failure of such party to perform
its obligations under this Section 10 on such date.
<PAGE>
11. Conditions to Obligations of Buyer The obligations of Buyer to carry out
----------------------------------
the transactions contemplated by this Agreement are subject, at the option
of the Buyer, to the satisfaction, or waiver by Buyer, of the following
conditions:
a.) All warranties and representations of Seller contained in this Agreement
shall be true and correct in all material respects as of the Closing and
Seller shall have performed and satisfied in all material respects all
agreements and covenants required by this Agreement to be performed or
satisfied by it at or prior to the Closing.
b.) As of the Closing Date, no suit, action, or other proceeding, shall be
pending or threatened before any court or governmental agency seeking to
restrain Buyer or prohibit the Closing or seeking damages against Buyer as
a result of the consummation of this Agreement.
c.) Since the date of this Agreement and up to and including the Closing
there have not been:
i. any changes in the business, operations, prospects or financial
condition of Seller that had or might have a material adverse effect on
Seller's business; or
ii. any damage, destruction or loss to Seller that had or might have an
adverse effect on its business.
d.) Buyer shall have received the opinion of counsel to Seller, dated as of the
Closing Date, addressed to Buyer and in the form and substance reasonably
satisfactory to Buyer, as set forth in Exhibit "11(d)" attached hereto.
e.) Seller shall have furnished Buyer with a copy of all necessary corporate
action on its behalf approving Seller's execution, delivery and performance
of this Agreement.
f.) Buyer shall have completed its due diligence investigation and the results
thereof have not revealed that any of the warranties and representations of
Seller set forth herein are untrue or incorrect in any respect or otherwise
unsatisfactory to Buyer or that exceptions, if any, have been resolved to
the satisfaction of Buyer.
g.) Buyer shall have received written evidence, in form and substance
satisfactory to it, of the consent to the transactions contemplated by this
Agreement of all governmental and private third parties where the absence
of any such consent would result in a violation of law or breach or default
under any agreement to which Seller is a party.
h.) Buyer shall have entered into a Consulting Agreement with Seller's Officer,
as described in Section 4 herein, to provide management and technical
services to Buyer for a minimum of one year from the Closing Date.
12. Conditions to Obligations of Seller The obligations of Seller to carry
-----------------------------------
out the transactions contemplated by this Agreement are subject, at the
option of the Seller, to the satisfaction, or waiver by Seller, of the
following conditions:
a.) Buyer shall have furnished Seller with copies of all necessary corporate
action on its behalf approving the execution, delivery and performance of
this Agreement.
b.) All warranties and representations of Buyer contained in this Agreement
shall be true and correct in all material respects as of the Closing and
Buyer shall have performed and satisfied in all material respects all
agreements and covenants required by this Agreement to be performed or
satisfied by it at or prior to the Closing.
c.) As of the Closing Date, no suit, action, or other proceeding, shall be
pending or threatened before any court or governmental agency seeking to
restrain Seller or prohibit the Closing or seeking damages against Buyer or
Seller as a result of the consummation of this Agreement.
d.) Seller shall have completed its respective due diligence investigations and
the results thereof have not revealed that any of the warranties and
representations of Buyer set forth herein are untrue or incorrect in any
respect or otherwise unsatisfactory to Seller or that exceptions, if any,
have been resolved to the satisfaction of Seller.
13. Survival and Indemnification
----------------------------
a.) All representations and warranties of Seller made in this Agreement shall
survive the Closing Date of this Agreement.
b.) Seller agrees to indemnify and hold harmless Buyer from and against any and
all damages, liabilities, obligations, penalties, fines, judgments, claims,
deficiencies, losses, costs, expenses and assessments arising out of,
resulting from or in any way related to (i) a breach of, or failure to
perform or satisfy any of, the warranties and representations, covenants
and agreements made by Seller in this Agreement or in any document or
certificate delivered by Seller at the Closing, (ii) the existence of any
liabilities or obligations of Seller other than those disclosed in this
Agreement.
<PAGE>
14. News Releases Prior to Closing neither party shall issue or approve a news
-------------
release or other announcement concerning the transactions contemplated by
this Agreement without the prior written consent of the other as to the
contents of the announcement and its release, which approval shall not be
unreasonably withheld.
15. Finder's Fees To the best of the knowledge and belief of the parties
-------------
hereto there are no agents, brokers, finders or other persons or entities
representing either party for which acquisition fees are payable in
connection with this transaction other than the finder's fee Agreement
between Buyer's and Coast Northwest Management LLC, a copy of which is
attached hereto as Exhibit "15.0" and incorporated by this reference for
which payments thereunder are the sole obligation of Buyer.
16. Expenses Each party shall bear the costs and expenses of its own fees and
--------
expenses of professional advisors and other costs relating to this
Agreement.
17. Entire Agreement This Agreement, together with all exhibits attached
----------------
hereto, constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, by
any of the parties or by any officer or representative of any party. No
amendment or modification of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
18. Binding Effect This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective successors and assigns;
but neither this Agreement nor any of the rights, benefits or obligations
hereunder shall be assigned, by operation of law or otherwise, by either
party hereto without the prior written consent of the other party, which
approval shall not be unreasonably withheld. However, Buyer and Seller
agree that Buyer may assign this Agreement to a subsidiary company
controlled by Buyer.
19. Survival of Warranties and Representations All warranties and
------------------------------------------
representations, covenants and agreements by Seller shall expressly survive
the Closing.
20. Governing Law This Agreement and the documents and instruments delivered
-------------
pursuant hereto shall be governed by and construed in accordance with the
laws of the State of Washington. Each party hereto irrevocably submits to
the jurisdiction of the federal and state courts located within King
County, State of Washington, in any action or proceeding arising out of or
relating to this Agreement. Each party hereto consents to service of
process by any means authorized by applicable law, as well as service of
process by certified mail, return receipt required, and waives the defense
of an inconvenient forum to the maintenance of such action or proceeding in
any such court.
21. Severability The provisions of this Agreement are severable. If any one or
------------
more provisions may be determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions, to the extent enforceable,
shall nevertheless be binding and enforceable.
22. Non-Waiver Failure by any party at any time to require performance of the
----------
other party of the provisions of this Agreement shall in no way affect any
party's rights hereunder to enforce the same, nor shall any such waiver by
either party of any breach be held to be a waiver of any succeeding breach
or waiver of this clause.
23. Remedies The rights and remedies provided by this Agreement are
--------
cumulative and the use of any one right or remedy by any party hereto shall
not preclude or constitute a waiver of its rights to use any or all other
remedies. Such rights and remedies are given in addition to any other
rights and remedies a party may have by law, statute or otherwise.
24. Attorneys' Fees In the event the services of an attorney at law are
---------------
necessary to enforce any of the terms of this Agreement or to resolve any
disputes arising under this Agreement, the prevailing party shall be
entitled to recover its attorney's fees as determined by the appropriate
trial or appellate court.
25. Counterparts and Facsimile Signature This Agreement may be executed in one
------------------------------------
or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
<PAGE>
Execution and delivery of this agreement by exchange of facsimile copies
bearing the facsimile signature of a party hereto shall constitute a valid
and binding execution and delivery of this Agreement by such part. Such
facsimile copies shall constitute enforceable original documents.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
<TABLE>
<CAPTION>
<S> <C> <C>
Buyer: Seller:
AbsoluteFuture.com Internet Interview Inc.
/s/ Graham Andrews, President /s/ Norman Reisch August 12, 1999
August 10, 1999 /s/ Thomas S. Morsey August 12, 1999
ASSET LIST
</TABLE>
Physical Asset Inventory:
3 servers
1 monitor
1 router
1 hard boot adapter
The above assets are on location at our T-1 connection provided,
International Wire & Communications Inc.
10700 North Kendall Dr. Suite 300
Miami, FL 33176
(305) 273-7978
fax (305) 273-1887
The following assets are on location at
200 Leslie Dr. Suite 910
Hallandale, FL 33009
(954) 455-7724
fax (954) 455-9841
3 printers
3 monitors
3 computers
1 fax machine
3 keyboards
2 phones
3 office chairs
1 file cabinet
misc. connecting hardware
misc. software both purchased and self developed
Intangible Assets
All customer contracts, agreements, and relationships, along with customer
lists and other such proprietary information used in the Business.
All trade names, trademarks, and other intellectual property rights used in
or associated with the Business, along with any applications therefor.
All rights to the bank account located at First Union National Bank,
account no. 202 0000 552 196, including without limitation all merchant
banking agreements and agreements with individual customers relating
thereto.
Seller agrees to execute such assignment or other documentation as Buyer
may reasonably request in order to evidence the transfer of any of the
foregoing.
<PAGE>
Exhibit "3(b)"
FINAL PAYMENT FORMULA
The purchase price of the Assets shall be adjusted and the final payment
shall be based on the average level of monthly revenue based on reported
revenues during the months of November 1999, December 1999, and January
2000.
Assuming the revenue level is $10,000 or more, Seller or its assigns shall
be paid $50,000 plus $5000 per $1000 of revenue over the $10,000 level.
Buyer, at its sole discretion, shall have the right to pay the first
$50,000 in cash or by issuance of its shares and the balance by payment of
up to 70% in shares and 30% or more in cash. Any shares issued by Buyer
under this provision shall be priced as set forth in Section 3(c) of this
Agreement.
<PAGE>
OPINION OF SELLER'S COUNSEL
, 1999
------------------------------------
Graham Andrews
Absolute Future Tech. Inc.
10900 NE 8th Street Suite #1414
Bellevue, WA 98004
Dear Mr. Andrews:
We have acted as counsel to Internet Interview Inc. (the "Company"), in
connection with that certain Agreement for Sale and Purchase of Business
Assets, dated July 1, 1999 (the "Agreement"), between the Company and
Absolute Future Tech. Inc. ("Buyer"), providing for the sale of
substantially all of the Company's business assets.
This opinion is being rendered pursuant to Section 11(d) of the Agreement.
Unless otherwise defined herein, the definitions of capitalized terms used
in this opinion shall be the same as those set forth in the Agreement.
In arriving at this opinion, we have examined originals or copies,
certified to our satisfaction, of the following:
1. The Agreement;
2. The Articles of Incorporation and by-laws of the Company;
3. The corporate records of the Company;
4. Such other records, documents and papers as we deemed necessary to examine
for purposes of this opinion.
Based on the above, and subject to the qualifications set forth below, it
is our opinion that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and has full power to carry
on its business as it is now being conducted and is duly qualified to do
business and is in good standing as a foreign corporation in all other
states where the nature of such Company's business or the location of such
Company's assets make such qualification necessary and where the failure to
so qualify would have a material adverse effect on such Company or its
assets.
2. The Company has full corporate power and authority to enter into the
Agreement, and perform its obligations thereunder, and the execution,
delivery and performance of the Agreement by the Company have been duly and
validly authorized by all requisite corporate action, including shareholder
action, and the Agreement has been duly executed and delivered by the
Company.
3. The Agreement is valid and binding upon the Company and is enforceable
against the Company in accordance with its terms except as limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general. The enforceability of the obligations of the
Company under the Agreement is, with respect to the availability of
equitable remedies, also subject to general principles of equity and the
discretion of the court having jurisdiction thereof.
4. Neither the execution nor delivery of the Agreement by the Company nor
the consummation of the transactions contemplated thereby will constitute a
default or an event which would with notice or lapse of time or both
constitute a default under or violation or breach of (i) the Company's
Articles of Incorporation or
<PAGE>
Bylaws, or (ii) to the best of our knowledge, any material indenture,
license, lease, agreement or other instrument or any writ, judgment, or
decree to which any Company is a party or by which any Company or its
properties may be bound nor would such execution, delivery or consummation
constitute an event which would permit any party to any agreement or
instrument to terminate it or to accelerate the maturity of any
indebtedness or obligation of any Company or an event that would result in
the creation or imposition of any lien or encumbrance on any asset of any
Company.
5. No action of or filing with any governmental or public body or authority
is required to authorize or is otherwise required for the validity of
execution, delivery and performance by the Company of the Agreement.
6. We do not know of or have reason to believe that the Company is a party
to any pending suit, action, investigation or inquiry by any governmental
body, or arbitration proceedings or any material labor dispute relating to
or affecting any Company, its assets or its business.
7. No fact or circumstance has come to our attention which gives us cause to
believe that any representation or warranty by any Company set forth in the
Agreement is untrue in any material respect.
8. To the best of our knowledge, there is no governmental permit, license,
certificate of inspection, authorization, filing or registration which is
material to the Company's business and which has not been secured or made.
None of the transactions contemplated by the Agreement will terminate or
violate, either by virtue of the terms thereof or because of the
non-assignability thereof, any governmental permit, license, certificate of
inspection, other authorization, filing or registration necessary to the
conduct of the Company's business.
We have assumed that documents we have reviewed in connection with this
opinion which purport to have been executed by parties other than the
Company have been duly executed by such parties and that such parties had
all requisite power to enter into and perform all obligations thereunder,
that execution and delivery thereof has been duly authorized by all
requisite action and that the subject instruments are valid and binding
upon said parties.
We have assumed the authenticity of all documents submitted to us as
originals, and the conformity to originals of all documents submitted to us
as copies.
Sincerely,
(ii) Employment and Non-disclosure Agreements with William Antony
McNamara
<PAGE>
Exhibit 10.2
Employment and Non-Disclosure Agreement with Graham Andrews
Employment Agreement
This Employment Agreement (this "Agreement"), between AbsoluteFuture .com and
its 100% owned subsidiary Absolute Future Tech Inc., both Nevada corporations
("Employer"), and, Graham Andrews ("Employee");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employer desires to retain the services of Employee upon the terms and
conditions set forth herein; and
WHEREAS, Employee is willing to provide services to Employer upon the terms and
conditions set forth herein;
A G R E E M E N T S:
- - - - - - - - - -
NOW, THEREFORE, for and in consideration of the foregoing premises and for other
good and valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, Employer and Employee hereby agree as follows:
1. EMPLOYMENT
Employer will employ Employee and Employee will accept employment by Employer as
its President & Chief Executive Officer upon the terms and conditions set forth
herein.
2. ATTENTION, EFFORT AND DUTIES
2.1. Attention and Effort
Employee will devote a minimum of 150 days each calendar year to the Employer's
business and during such days will devote substantially all of his productive
time, ability, attention and effort to Employer's business and will skillfully
serve its interests during the term of this Agreement; provided, however, that
Employee may devote reasonable periods of time to (a) engaging in personal
investment activities, (b) serving on the Board of Directors of other
corporations, if such service would not otherwise be prohibited by paragraph 8
hereof, and (c) engaging in charitable or community service activities, so long
as none of the foregoing additional activities materially interfere with
Employee's duties as President and Chief Executive Officer.
2.2. Duties
The Employee will carry out the duties of President and Chief Executive Officer
of the Company. As such he will be responsible to the board of directors of the
Company for the overall business strategy of the Company, for implementing the
strategy and for the overall direction and control of the business.
3. TERM
Unless otherwise terminated pursuant to paragraph 6 of this Agreement,
Employee's term of employment under this Agreement shall begin on January 1,
2000, and expire on December 31, 2001.
4. COMPENSATION
During the term of this Agreement, Employer agrees to pay or cause to be paid to
Employee, and Employee agrees to accept in exchange for the services rendered
hereunder by him, the following compensation:
4.1. Salary
Employee's compensation shall consist of a base annual salary of seventy -
eight thousand dollars ($78,000) before all legally required payroll deductions
and voluntary payroll deductions, if any, authorized by Employer for the minimum
of 150 days devoted to the work of the Company. The salary shall rise to a
maximum of one hundred and thirty thousand dollars ($130,000) for working a
minimum of 250 days for the Company each year. The salary shall be pro-rated,
should the number of days worked each year lie between 150 and 250 days. Such
annual salary shall be paid in substantially equal installments and at the same
intervals as other executive employees of Employer are paid.
<PAGE>
4.2. Bonus
4.3. Stock as Payment
Employee may elect, in his absolute discretion, to receive common shares of
the Employer or its parent in payment of salary amounts, and/or for any salary
payments and bonus payments not paid by the Employer when due and accrued as a
corporate debt payable to Employee. The value of any shares issued by the
Corporation under this provision of this Agreement shall be based on the closing
bid price of the common shares as reported on the OTC Bulletin Board on the date
the Corporation receives notice from Employee. In the event the Corporation
issues restricted shares under this provision such published per share trade
price shall be discounted forty percent (30%).
5. BENEFITS
During the term of this Agreement, Employee will be entitled to participate,
subject to and in accordance with applicable eligibility requirements, in fringe
benefit programs as shall be provided from time to time by Employer to its
executive employees. Nothing in this Agreement shall preclude Employer from
terminating, altering or modifying any such benefit at any time in Employer's
sole discretion.
6. TERMINATION
Employment of Employee pursuant to this Agreement may be terminated as follows,
but in any case, the provisions of the Noncompetition Agreement referred to in
paragraph 8 hereto shall survive the termination of this Agreement and the
termination of Employee's employment hereunder:
6.1. By Employer
With or without Cause (as defined below), Employer may terminate the employment
of Employee at any time during the term of employment upon giving Notice of
Termination.
6.2. By Employee
Employee may terminate his employment at any time, for any reason, upon giving
Notice of Termination.
6.3. Automatic Termination
This Agreement and Employee's employment hereunder shall terminate automatically
upon the death or total disability of Employee. The term "total disability" as
----------------
used herein shall mean Employee's inability to perform the duties of the
President and Chief Executive Officer for a period or periods aggregating 120
calendar days in any 12-month period as a result of physical or mental illness,
loss of legal capacity or any other cause beyond Employee's control, unless
Employee is granted a leave of absence by Employer. Employee and Employer
hereby acknowledge that Employee's ability to perform the duties specified in
paragraph 1 hereof is of the essence of this Agreement. Termination hereunder
shall be deemed to be effective (a) at the end of the calendar month in which
Employee's death occurs or (b) immediately upon a determination by Employer of
Employee's total disability, as defined herein.
6.4. Notice
The term "Notice of Termination" shall mean at least 90 days' written notice of
---------------------
termination of Employee's employment, during which period Employee's employment
and performance of services will continue; provided, however, that Employer may,
-------- -------
upon notice to Employee and without reducing Employee's compensation during such
period, excuse Employee from any or all of his duties during such period. The
effective date of the termination of Employee's employment hereunder shall be
the date on which such 90-day period expires.
7. TERMINATION PAYMENTS
In the event of termination of the employment of Employee, all compensation and
benefits set forth in this Agreement shall terminate except as specifically
provided in this paragraph 7:
7.1. Termination by Employer
If Employer terminates Employee's employment without Cause prior to the end of
the term of this Agreement, Employee shall be entitled to receive (a)
termination payments equal to three (3) months' annual salary; and (b) any
unpaid annual salary which has accrued for services already performed as of the
date termination of Employee's employment becomes effective. If Employee is
terminated by Employer for Cause, Employee shall not be entitled to receive any
of the foregoing benefits, other than those set forth in clause (b) above.
<PAGE>
7.2. Termination by Employee
In the case of the termination of Employee's employment by Employee, Employee
shall not be entitled to any payments hereunder, other than those set forth in
clause (b) of subparagraph 7.1 hereof.
7.3. Expiration of Term
In the case of a termination of Employee's employment as a result of the
expiration of the term of this Agreement, Employee shall not be entitled to
receive any payments hereunder, other than those set forth in clause (b) of
subparagraph 7.1 hereof.
7.4. Payment Schedule
All payments under this paragraph 7 shall be made to Employee at the same
interval as payments of salary were made to Employee immediately prior to
termination.
7.5. Cause
Wherever reference is made in this Agreement to termination being with or
without Cause, "Cause" shall include, without limitation, the occurrence of one
-----
or more of the following events:
(a) Failure or refusal to carry out the lawful duties of Employee as
President and Chief Executive Officer of Employer or to carry out any
directions of Employer, which directions are reasonably consistent with the
duties of the President and Chief Executive Officer of Employer;
(b) Violation by Employee of a state or federal criminal law involving the
commission of a crime against Employer or a felony;
(c) Use by Employee during the term of this agreement of illegal controlled
substances; deception, fraud, misrepresentation or dishonesty by Employee;
any incident materially compromising Employee's reputation or ability to
represent Employer with the public; any act or omission by Employee which
impairs Employer's business, good will or reputation; or
(d) Any other material violation of any provision of this Agreement.
8. CONFIDENTIALITY, INVENTIONS, NONSOLICITATION AND NONCOMPETITION
Employee hereby enters into and agrees to be bound by the Confidential
Information, Invention, Nonsolicitation and Noncompetition Agreement (the
"Noncompetition Agreement") attached hereto. In the event of a breach of or
threatened breach by Employee of the provisions of the Noncompetition Agreement,
Employer shall be entitled to immediately terminate Employee's right to receive
any and all payments which may be due or become due under the terms of this
Agreement, it being acknowledged that the provisions of this paragraph 8 and of
the Noncompetition Agreement are essential to Employer, and that Employer would
not enter into this Agreement if it did not include this paragraph 8 and the
Noncompetition Agreement incorporated hereby. Nothing in this paragraph 8 shall
be construed to limit Employer's entitlement to any other remedies or relief set
forth, including, without limitation, such remedies and relief as are referred
to in the Noncompetition Agreement.
9. REPRESENTATIONS AND WARRANTIES
In order to induce Employer to enter into this Agreement, Employee represents
and warrants to Employer that neither the execution nor the performance of this
Agreement or the Noncompetition Agreement by Employee will violate or conflict
in any way with any other agreement by which Employee may be bound, or with any
other duties imposed upon Employee by corporate or other statutory or common
law.
10. NOTICE AND CURE OF BREACH
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than pursuant to the definition of "Cause" set forth in
-----
subparagraph 7.5 hereof, before such action is taken, the party asserting the
breach of this Agreement shall give the other party at least 14 days' prior
written notice of the existence and the nature of such breach before taking
further action hereunder and shall give the party purportedly in breach of this
Agreement the opportunity to correct such breach during the 14-day period.
11. FORM OF NOTICE
All notices given hereunder shall be given in writing, shall specifically refer
to this Agreement and shall be personally delivered or sent by telecopy or other
electronic facsimile transmission or by registered or certified mail, return
receipt requested, at the address set forth below or at such other address as
may hereafter be designated by notice given in compliance with the terms hereof:
If to Employee: Graham Andrews
-------------------------
----------------------------------------
<PAGE>
----------------------------------------
----------------------------------------
If to Employer: The Directors
---------------------------
AbsoluteFuture.com
----------------------------------------
10900 N.E. 8th Street
----------------------------------------
Suite 1414
----------------------------------------
Bellevue, WA 98004
----------------------------------------
Copy to: John Deery-Schmitt
----------------------------------------
Perkins Coie
----------------------------------------
1201 Third Avenue
----------------------------------------
Suite 4800
----------------------------------------
Seattle, WA 98101-3099
----------------------------------------
If notice is mailed, such notice shall be effective upon mailing, or if notice
is personally delivered or sent by telecopy or other electronic facsimile
transmission, it shall be effective upon receipt.
12. ASSIGNMENT
This Agreement is personal to Employee and shall not be assignable by Employee.
Employer may assign its rights hereunder to (a) any corporation resulting from
any merger, consolidation or other reorganization to which Employer is a party
or (b) any corporation, partnership, association or other person to which
Employer may transfer all or substantially all of the assets and business of
Employer existing at such time. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.
13. WAIVERS
No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.
14. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, nor consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by Employer and
Employee, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by Employer and Employee.
15. APPLICABLE LAW
This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the state of Washington, without regard to any
rules governing conflicts of laws.
15.1. Severability
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.
<PAGE>
16. HEADINGS
All headings used herein are for convenience only and shall not in any way
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
17. COUNTERPARTS
This Agreement, and any amendment or modification entered into pursuant to
paragraph 16 hereof, may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
18. ADVICE OF COUNSEL
Employee acknowledges having had ample opportunity to review this Agreement and
the Noncompetition Agreement and to seek legal advice from counsel of Employee's
choosing regarding the terms of this Agreement and the Noncompetition Agreement,
and has either sought such advice or has freely chosen to forego it.
19. ENTIRE AGREEMENT
This Agreement (including the Noncompetition Agreement) on and as of the date
hereof constitutes the entire agreement between Employer and Employee with
respect to the subject matter hereof and all prior or contemporaneous oral or
written communications, understandings or agreements between Employer and
Employee with respect to such subject matter are hereby superseded and nullified
in their entireties.
IN WITNESS WHEREOF, the parties have executed and entered into this Agreement on
the date set forth above.
EMPLOYEE:
/s/ Graham Andrews
--------------------------------
EMPLOYER:
By Patrick Charles
-----------------------------
Its Director
---------------------------
<PAGE>
Confidential Information, Inventions,
Nonsolicitation and Noncompetition Agreement
Graham Andrews, an individual ("Employee") and AbsoluteFuture.com, a Nevada
corporation ("Employer"), hereby enter into this Confidential Information,
Inventions, Nonsolicitation and Noncompetition Agreement ("Noncompetition
Agreement").
RECITALS
1. Employer is engaged in the business of providing consulting services to the
computer and high-technology industries. To date, employer has concentrated its
consulting business in the Puget Sound region of Washington State, but Employer
anticipates expanding the geographical area in which it provides consulting
services to include the states of Oregon and Idaho and all of Washington State.
Employer is also in the business of developing computer software for sale,
license and/or lease throughout the world.
2. Employer possesses and will continue to develop trade secrets, proprietary
information, secret technology, engineering data and customer information that
constitute valuable, special and unique assets of Employer. Employer has
incurred considerable expense and risk in developing its confidential and
proprietary information and materials, and it expects to continue doing so.
3. Upon execution of the Employment Agreement (the "Employment Agreement") to
which this Noncompetition Agreement is attached and into which this
Noncompetition Agreement is incorporated by reference, Employee will become
employed by Employer as President and Chief Executive Officer of Employer.
Employee acknowledges that the nature of his employment with Employer may
provide opportunities for training, experience, and professional development.
Employer is willing to employ Employee under the terms set forth in the
Employment Agreement, provided that Employee agrees to the terms and conditions
of this Noncompetition Agreement.
4. This Agreement is essential to Employer, and Employer will not employ
Employee without it.
AGREEMENTS
For the reasons recited above, and in consideration of the mutual promises and
covenants set forth in this Agreement, and in further consideration of
Employee's employment as President and Chief Executive Officer with Employer,
the compensation paid to him by Employer, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Employee hereby agrees as follows:
1. Definitions
1.1 "Competing Business" means any business whose efforts are in competition
with the efforts of Employer. A Competing Business includes any business whose
efforts involve any research and development, products or services in
competition with products or services which are, during and at the end of the
Term, either (a) produced, marketed or otherwise commercially exploited by
Employer or (b) in actual or demonstrably anticipated research or development by
Employer.
1.2 "Confidential Information" means any information that (a) relates to the
business of Employer, (b) is not generally available to the public, and (c) is
conceived, compiled, developed, discovered or received by, or made available to,
Employee during the Term, whether solely or jointly with others, and whether or
not while engaged in performing work for Employer. Confidential Information
includes information, both written and oral, relating to Inventions, trade
secrets and other proprietary information, technical data, products, services,
finances, business plans, marketing plans, legal affairs, suppliers, clients,
prospects, opportunities, contracts or assets of Employer. Confidential
Information also includes any information which has been made available to
Employer by or with respect to third parties and which Employer is obligated to
keep confidential.
1.3 "Invention" means any product, device, technique, know-how, computer
program, algorithm, method, process, procedure, improvement, discovery or
invention, whether or not patentable or copyrightable and whether or not reduced
to practice, that (a) is within the scope of Employer's business, research or
investigations or results from or is suggested by any work performed by Employee
for Employer and (b) is created, conceived, reduced to practice, developed,
discovered, invented or made by Employee during the Term, whether solely or
jointly with others, while engaged in performing work for Employer.
1.4 "Material" means any product, prototype, model, document, diskette, tape,
picture, design, recording, writing or other tangible item which contains or
manifests, whether in printed, handwritten, coded, magnetic or other form, any
Confidential Information, Invention or Proprietary Right.
<PAGE>
1.5 "Person" means any corporation, partnership, trust, association,
governmental authority, educational institution, individual or other entity.
1.6 "Proprietary Right" means any patent, copyright, trade secret, trademark,
trade name, service mark, maskwork or other protected intellectual property
right in any Confidential Information, Invention or Material.
1.7 "Term" means the term of Employee's employment with Employer, whether on a
full-time, part-time or consulting basis.
2. Ownership and Use
2.1 Employer will be the exclusive owner of all Confidential Information,
Inventions, Materials and Proprietary Rights. To the extent applicable, all
Materials will constitute "works for hire" under applicable copyright laws.
2.2 Employee assigns and transfers, and agrees to assign and transfer, to
Employer all rights and ownership that Employee has or will have in Confidential
Information, Inventions, Materials and Proprietary Rights, subject to the
limitations set forth in Section 2.5 and in the notice below. Employee will take
such action (including signature and assistance in preparation of documents or
the giving of testimony) as may be requested by Employer to evidence, transfer,
vest or confirm Employer's rights and ownership in Confidential Information,
Inventions, Materials and Proprietary Rights. Employee agrees to keep and
maintain adequate and current written records of all Inventions and Proprietary
Rights during the Term. The records will be in the form of notes, sketches,
drawings, and any other format that may be specified by Employer. The records
will be available to and remain the sole property of Employer at all times.
If Employer is unable for any reason to secure Employee's signature to
fulfill the intent of the foregoing paragraph or to apply for or to pursue any
application for any United States or foreign patents or copyright registrations
covering Inventions assigned to Employer above, then Employee irrevocably
appoints Employer and its authorized agents as his agent and attorney in fact,
to transfer, vest or confirm Employer's rights and to execute and file any such
applications and to do all other lawful acts to further the prosecution and
issuance of letters patent or copyright registrations with the same legal force
as if done by Employee.
2.3 Except as required for performance of Employee's work for Employer or as
authorized in writing by Employer, Employee will not (a) use, disclose, publish
or distribute any Confidential Information, Inventions, Materials or Proprietary
Rights or (b) remove any Materials from Employer's premises.
2.4 Employee will promptly disclose to Employer all Confidential Information,
Inventions, Materials or Proprietary Rights.
Section 3. Further Obligations
3.1 During the Term, Employee will not, directly or indirectly, engage in, be
employed by, perform services for or otherwise participate in any Competing
Business or any other activity which conflicts with the commercial interests of
Employer.
3.2 Employee warrants that his execution, delivery and performance of this
Agreement and the performance of his other obligations and duties to Employer
will not cause any breach, default or violation of any other employment,
nondisclosure, confidentiality, consulting or other agreement to which Employee
is a party or by which Employee may be bound. Attached as Exhibit B is a list of
all prior agreements now in effect under which Employee has agreed to keep
information confidential or not to compete or solicit employees of any Person.
3.3 Employee agrees that he will not use in performance of his work for Employer
or disclose to Employer any trade secret, confidential or proprietary
information of any prior employer or other Person if and to the extent that such
use or disclosure may cause a breach, default or violation of any obligation or
duty that Employee owes to such other Person (e.g., under any agreement or
applicable law). Employee warrants that his compliance with this paragraph will
not prohibit, restrict or impair the performance of his work, obligations and
duties to Employer.
Section 4. Noncompetition and Nonsolicitation
4.2 During the Term and for one year after the end of the Term, Employee agrees
that he will not (except on behalf of or with the prior written consent of
Employer), directly or indirectly (a) solicit, divert, appropriate to or accept
on behalf of any Competing Business, or (b) attempt to solicit, divert,
appropriate to or accept on behalf of any Competing Business, any business from
any customer or actively sought prospective customer of
<PAGE>
Employer with whom Employee has dealt, whose dealings with Employer have been
supervised by Employee or about whom Employee has acquired Confidential
Information in the course of his employment.
Section 5. Termination of Relationship
5.1 Employee hereby authorizes and specifically agrees to allow Employer to
deduct from his wages the value of any property (including equipment, goods, or
other items provided to him by Employer during his employment) which Employee
fails to return when requested to do so by Employer, provided that such
deduction (a) does not exceed the cost of the item, (b) does not reduce
Employee's wages below minimum wage, (c) is not made for normal wear and tear on
or nonwillful loss or breakage of the provided item(s), and (d) is accompanied
with a list of all items for which deductions are being made.
5.2 Employee agrees that at the end of the Term Employee will deliver to
Employer (and will not keep in his possession, re- create or deliver to anyone
else) any and all Materials and other property belonging to Employer, its
successors or assigns. Employee agrees to sign and deliver the "Termination
Certification" attached as Exhibit B.
5.3 At the end of the Term, Employee agrees to provide the name of his new
employer, if any, and consent to notification by Employer to his new employer
about his rights and obligations under this Agreement in the form of Exhibit C.
Section 6. Terms of Employment
Nothing in this Noncompetition Agreement shall modify any of the terms
Employee's employment as set forth in the Employment Agreement between Employee
and Employer executed contemporaneously with this Agreement.
Section 7. Miscellaneous
7.1 Survival. This Noncompetition Agreement will survive the end of the Term.
7.2 Injunctive Relief; Costs. Employee acknowledges that if Employee does not
abide by his obligations in this Noncompetition Agreement, Employer will suffer
immediate and irreparable harm, and that the damage to Employer will be
difficult to measure and financial relief will be incomplete. Accordingly,
Employer will be entitled to injunctive relief and other equitable remedies in
the event of a breach by Employee of any obligation under this Noncompetition
Agreement. The rights and remedies of Employer under this section are in
addition to all other remedies. Further, in any legal action or other proceeding
in connection with this Noncompetition Agreement (e.g., to recover damages or
other relief), the prevailing party will be entitled to recover its reasonable
attorneys' fees and other costs incurred.
7.3 Severability. This Noncompetition Agreement will be enforced to the fullest
extent permitted by applicable law. If for any reason any provision of this
Noncompetition Agreement is held to be invalid or unenforceable to any extent,
then (a) such provision will be interpreted, construed or reformed to the extent
reasonably required to render the same valid, enforceable and consistent with
the original intent underlying such provision and (b) such invalidity or
unenforceability will not affect any other provision of this Agreement or any
other agreement between Employer and Employee.
7.5 Governing Law; Jurisdiction; Venue. This Agreement will be governed by the
laws of the state of Washington without regard to principles of conflicts of
law. Employee irrevocably consents to the jurisdiction and venue of the state
and federal courts located in King County, Washington in connection with any
action relating to this Agreement. Employee will not bring any action relating
to this Agreement in any other court.
7.5 Amendments. Neither this Noncompetition Agreement nor any provision may be
amended except by written agreement signed by the parties. 7.6 Waivers. No
waiver of any breach shall be considered valid unless in writing, and no waiver
shall be a waiver of any subsequent breach.
7.7 Acknowledgment. Employee has carefully read all of the provisions of this
Agreement and agree that (a) the same are necessary for the reasonable and
proper protection of Employer's business, (b) Employer has been induced to enter
into and/or continue its relationship with Employee in reliance upon his
compliance with the provisions of this Agreement, (c) every provision of this
Agreement is reasonable with respect to its scope and duration, (d) Employee has
executed this Agreement without duress or coercion from any source, and (e)
Employee has received a copy of this Agreement.
<PAGE>
This Agreement shall be effective as of January 1 , 2000.
-----------------------
/s/ Graham Andrews
------------------------------
Signature
Graham Andrews
ACCEPTED:
AbsoluteFuture.com
By Patrick Charles
------------------------------
Its Director
------------------------------
<PAGE>
EXHIBIT A
LIST OF INCLUDED INVENTIONS AND
WORKS OF AUTHORSHIP
<TABLE>
<CAPTION>
Identifying Number
Title Date or Brief Description
----- ---- ---------------------
<S> <C> <C>
_____ No inventions or improvements
_____ Additional Sheets Attached
</TABLE>
Signature of Employee: /s/ Graham Andrews
---------------------------------
Print Name of Employee: Graham Andrews
---------------------------------
Date: January 1, 2000
-----------------------------
<PAGE>
EXHIBIT B
The following is a list of all prior agreements with former employers or others
to which Graham Andrews ("Employee") is a party in which Employee agreed to
maintain the confidentiality of the information of, or not to compete with or
solicit the employees or customers of a third party.
_____ No Agreements
_____ See below
_____ Additional sheets attached
Signature of Employee: /s/ Graham Andrews
-----------------------------
Print Name of Employee: Graham Andrews
-----------------------------
Date: March 1, 2000
----------------------------
<PAGE>
EXHIBIT C
NOTIFICATION TO NEW EMPLOYERS
Dear [name of new employer's president]:
We understand that our former employee, Graham Andrews, has accepted employment
with your company. This letter is to advise you that Mr. Andrews signed a
Confidential Information, Inventions Nonsolicitation and Noncompetition
Agreement with our Company that remains in full force and effect. At the time
Mr. Andrews left our company, we advised him of his continuing obligations under
the Agreement and Mr. Andrews signed a Termination Certificate affirming his
obligations under the Agreement. A copy of the Termination Certificate, dated
__________, ____, is enclosed so that any conflict with these obligations can be
avoided during his employment with you.
Very truly yours,
[Signature of Company president or corporate counsel]
[Typed name]
<PAGE>
Exhibit 10.3
Employment and Non-Disclosure Agreement with William Antony McNamara
This Employment Agreement (this "Agreement"), dated as of November 26, 1999
between AbsoluteFuture.com, a Nevada corporation ("Employer"), and William
Antony McNamara, an individual ("Employee");
W I T N E S S E T H:
WHEREAS, Employer desires to retain the services of Employee upon the terms and
conditions set forth herein; and
WHEREAS, Employee conceived and has partially developed, prior to entering
employment with Employer or any of its subsidiaries, computer software and/or
programs to which the parties refer as the Local Hard Drive Product, all rights
in and to which Local Hard Drive Product Employer desires to obtain; and
WHEREAS, Employee is willing to provide services to Employer and to assign to
Employer all rights in and to the Local Hard Drive Product upon the terms and
conditions set forth herein;
A G R E E M E N T S:
NOW, THEREFORE, for and in consideration of the foregoing premises and for other
good and valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, Employer and Employee hereby agree as follows:
EMPLOYMENT
Employer will employ Employee and Employee will accept employment by Employer as
its Chief Technical Officer upon the terms and conditions set forth herein.
ATTENTION, EFFORT AND DUTIES
Attention and Effort
Employee will devote all of his entire productive time, ability, attention and
effort to Employer's business and will skillfully serve its interests during the
term of this Agreement; provided, however, that Employee may devote reasonable
periods of time to (a) engaging in personal investment activities, (b) serving
on the Board of Directors of other corporations, if such service would not
otherwise be prohibited by paragraph 8 hereof, and (c) engaging in charitable or
community service activities, so long as none of the foregoing additional
activities materially interfere with Employee's duties as Chief Technical
Officer.
Duties
The Chief Technical Officer has a leadership role with respect to all technical
operations and developments in Employer's business. The duties of the Chief
Technical Officer shall include, without limitation, reporting to the Chief
Executive Officer from time to time and as requested; coordinating with the
Chief Executive Officer and the Director of Business Development with respect to
projects for clients of Employer; developing and supervising others in
developing software for use in Employer's products and projects; performing and
supervising implementation of quality control with respect to products and
project implementation; advising Employer with respect to technology
acquisitions; and ensuring that Employer's technical, mechanical and computer
systems are operating as expected.
TERM
Unless otherwise terminated pursuant to paragraph 6 of this Agreement,
Employee's term of employment under this Agreement shall begin on November 26,
1999, and expire on November 26, 2000.
COMPENSATION
During the term of this Agreement, Employer agrees to pay or cause to be paid to
Employee, and Employee agrees to accept in exchange for the services rendered
hereunder by him, the following compensation:
Salary
Employee's compensation shall consist of an annual salary of ninety-two thousand
dollars ($92,000) before all legally required payroll deductions and voluntary
payroll deductions, if any, authorized by Employee. Such annual salary shall be
paid in substantially equal installments and at the same intervals as other
executive employees of Employer are paid.
One-Time Grant of Stock Effective Upon Execution of Agreement
Subject to action by Employer's Board of Directors and in compliance with
applicable state and federal securities laws, upon execution of this Agreement
by both parties, Employer shall grant Employee 200,000 shares of Employer's
restricted common stock. The grant of stock described in this sub-paragraph
shall be a one-time event and shall not be construed to represent part of
Employee's annual salary described in sub-paragraph 4.1 of this Agreement.
Employee shall be responsible for all withholding and/or other tax consequences
to him arising from the grant described in this paragraph.
<PAGE>
BENEFITS
During the term of this Agreement, Employee will be entitled to participate,
subject to and in accordance with applicable eligibility requirements, in fringe
benefit programs as shall be provided from time to time by Employer to its
executive employees. Nothing in this Agreement shall preclude Employer from
terminating, altering or modifying any such benefit at any time in Employer's
sole discretion.
TERMINATION
Employment of Employee pursuant to this Agreement may be terminated as follows,
but in any case, the provisions of the Noncompetition Agreement referred to in
paragraph 8 hereto shall survive the termination of this Agreement and the
termination of Employee's employment hereunder:
By Employer
With or without Cause (as defined below), Employer may terminate the employment
of Employee at any time during the term of employment upon giving Notice of
Termination (as defined below).
By Employee
Employee may terminate his employment at any time, for any reason, upon giving
Notice of Termination.
Automatic Termination
This Agreement and Employee's employment hereunder shall terminate automatically
upon the death or total disability of Employee. The term "total disability" as
used herein shall mean Employee's inability to perform the duties of the Chief
Technical Officer for a period or periods aggregating 120 calendar days in any
12-month period as a result of physical or mental illness, loss of legal
capacity or any other cause beyond Employee's control, unless Employee is
granted a leave of absence by Employer. Employee and Employer hereby
acknowledge that Employee's ability to perform the duties specified in paragraph
1 hereof is of the essence of this Agreement. Termination hereunder shall be
deemed to be effective (a) at the end of the calendar month in which Employee's
death occurs or (b) immediately upon a determination by Employer of Employee's
total disability, as defined herein.
Notice
The term "Notice of Termination" shall mean at least 90 days' written notice of
termination of Employee's employment, during which period Employee's employment
and performance of services will continue; provided, however, that Employer may,
upon notice to Employee and without reducing Employee's compensation during such
period, excuse Employee from any or all of his duties during such period. The
effective date of the termination of Employee's employment hereunder shall be
the date on which such 90-day period expires.
TERMINATION PAYMENTS
In the event of termination of the employment of Employee, all compensation and
benefits set forth in this Agreement shall terminate except as specifically
provided in this paragraph 7:
Termination by Employer
If Employer terminates Employee's employment without Cause prior to the end of
the term of this Agreement, Employee shall be entitled to receive (a)
termination payments equal to three (3) months' annual salary; and (b) any
unpaid annual salary which has accrued for services already performed as of the
date termination of Employee's employment becomes effective. If Employee is
terminated by Employer for Cause, Employee shall not be entitled to receive any
of the foregoing benefits, other than those set forth in clause (b) above.
Termination by Employee
In the case of the termination of Employee's employment by Employee, Employee
shall not be entitled to any payments hereunder, other than those set forth in
clause (b) of subparagraph 7.1 hereof.
Expiration of Term
In the case of a termination of Employee's employment as a result of the
expiration of the term of this Agreement, Employee shall not be entitled to
receive any payments hereunder, other than those set forth in clause (b) of
subparagraph 7.1 hereof.
Payment Schedule
All payments under this paragraph 7 shall be made to Employee at the same
interval as payments of salary were made to Employee immediately prior to
termination.
Cause
Wherever reference is made in this Agreement to termination being with or
without Cause, "Cause" shall include, without limitation, the occurrence of one
or more of the following events:
(a) Failure or refusal to carry out the lawful duties of Employee as Chief
Technical Officer of Employer or to carry out any directions of Employer, which
directions are reasonably consistent with the duties of the Chief Technical
Officer of Employer;
(b) Violation by Employee of a state or federal criminal law involving the
commission of a crime against Employer or a felony;
<PAGE>
(c) Use by Employee during the term of this agreement of illegal controlled
substances; deception, fraud, misrepresentation or dishonesty by Employee; any
incident materially compromising Employee's reputation or ability to represent
Employer with the public; any act or omission by Employee which impairs
Employer's business, good will or reputation; or
(d) Any other material violation of any provision of this Agreement.
CONFIDENTIALITY, INVENTIONS, NONSOLICITATION AND NONCOMPETITION
Employee hereby enters into and agrees to be bound by the Confidential
Information, Invention, Nonsolicitation and Noncompetition Agreement (the
"Noncompetition Agreement") attached hereto. In the event of a breach of or
threatened breach by Employee of the provisions of the Noncompetition Agreement,
Employer shall be entitled to immediately terminate Employee's right to receive
any and all payments which may be due or become due under the terms of this
Agreement, it being acknowledged that the provisions of this paragraph 8 and of
the Noncompetition Agreement are essential to Employer, and that Employer would
not enter into this Agreement if it did not include this paragraph 8 and the
Noncompetition Agreement incorporated hereby. Nothing in this paragraph 8 shall
be construed to limit Employer's entitlement to any other remedies or relief set
forth, including, without limitation, such remedies and relief as are referred
to in the Noncompetition Agreement.
REPRESENTATIONS AND WARRANTIES
In order to induce Employer to enter into this Agreement, Employee represents
and warrants to Employer that neither the execution nor the performance of this
Agreement or the Noncompetition Agreement by Employee will violate or conflict
in any way with any other agreement by which Employee may be bound, or with any
other duties imposed upon Employee by corporate or other statutory or common
law.
LOCAL HARD DRIVE PRODUCT
Representations and Warranties
In order to induce Employer to enter into this Agreement, Employee represents
and warrants to Employer that to the best of Employee's knowledge: (a) the
Local Hard Drive Product does not infringe or misappropriate any patent,
copyright, trade secret or other proprietary right of any third party; (b)
Employee is sole owner of, and possessor of all rights in and to, the Local Hard
Drive Product, and (c) Employee has all necessary rights to assign the Local
Hard Drive Product to Employer hereunder, and such assignment will not violate
any agreement or other obligation of Employee to any third party. Employee will
indemnify and hold harmless Employer against any claim that Employer's transfer
or use of the Local Hard Drive Product infringes or misappropriates any patent,
copyright, trade secret or other proprietary right of any third party, or
otherwise breaches any representation or warranty of Employee under this Section
10.1.
Entitlement to Royalties
In partial consideration for Employee's agreement to assign to Employer all
rights in and to the Local Hard Drive Product, effective upon execution of this
Agreement, Employee shall be entitled to royalties of twelve-and-one-half
percent (12.5 %) of Employer's gross receipts on sales, leases or other
transfers of the Local Hard Drive Product or rights to use the Local Hard Drive
Product to third parties.
Assignment of Rights
For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Employee hereby assigns and transfers, and agrees to assign
and transfer, to Employer all right title and interest (including, without
limitation, any and all copyright, patent, trademark, trade secret and other
intellectual property or proprietary rights of any kind, including rights of
registration) in and to the Local Hard Drive Product defined in paragraph ___
hereto.
Additional Action
Employee will take such action (including signature and assistance in
preparation of documents or the giving of testimony) as may be requested by the
Company to evidence, transfer, vest or confirm the Company's rights and
ownership in the Local Hard Drive Product. If Employer is unable for any reason
to secure Employee's signature to fulfill the intent of paragraph 10.2 of this
Agreement or to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering the Local Hard Drive Product
assigned to Employer above, then Employee irrevocably appoints Employer and its
authorized agents as his agent and attorney in fact, to transfer, vest or
confirm Employer's rights and to execute and file any such applications and to
do all other lawful acts to further the prosecution and issuance of letters
patent or copyright registrations with the same legal force as if done by
Employee.
19.1. NOTICE AND CURE OF BREACH
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than pursuant to the definition of "Cause" set forth in
subparagraph 7.5 hereof, before such action is taken, the party asserting the
breach of this Agreement shall give the
<PAGE>
other party at least 14 days' prior written notice of the existence and the
nature of such breach before taking further action hereunder and shall give the
party purportedly in breach of this Agreement the opportunity to correct such
breach during the 14-day period.
19.2. FORM OF NOTICE
All notices given hereunder shall be given in writing, shall specifically refer
to this Agreement and shall be personally delivered or sent by telecopy or other
electronic facsimile transmission or by registered or certified mail, return
receipt requested, at the address set forth below or at such other address as
may hereafter be designated by notice given in compliance with the terms hereof:
If to Employee: William Antony McNamara
If to Employer: President
AbsoluteFuture.com
10900 N.E. 8th Street
Suite 1414
Bellevue, WA 98004
Copy to: John Deery-Schmitt
Perkins Coie
1201 Third Avenue
Suite 4800
Seattle, WA 98101-3099
If notice is mailed, such notice shall be effective upon mailing, or if notice
is personally delivered or sent by telecopy or other electronic facsimile
transmission, it shall be effective upon receipt.
19.3. ASSIGNMENT
This Agreement is personal to Employee and shall not be assignable by Employee.
Employer may assign its rights hereunder to (a) any corporation resulting from
any merger, consolidation or other reorganization to which Employer is a party
or (b) any corporation, partnership, association or other person to which
Employer may transfer all or substantially all of the assets and business of
Employer existing at such time. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.
19.4. WAIVERS
No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.
19.5. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, nor consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by Employer and
Employee, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by Employer and Employee.
20. APPLICABLE LAW
This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the state of Washington, without regard to any
rules governing conflicts of laws.
20.1. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover
<PAGE>
shall have the power to reform such provision to the extent necessary for such
provision to be enforceable under applicable law.
20.2. HEADINGS
All headings used herein are for convenience only and shall not in any way
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
20.3. COUNTERPARTS
This Agreement, and any amendment or modification entered into pursuant to
paragraph 16 hereof, may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
20.4. ADVICE OF COUNSEL
Employee acknowledges having had ample opportunity to review this Agreement and
the Noncompetition Agreement and to seek legal advice from counsel of Employee's
choosing regarding the terms of this Agreement and the Noncompetition Agreement,
and has either sought such advice or has freely chosen to forego it.
20.5. ENTIRE AGREEMENT
This Agreement (including the Noncompetition Agreement) on and as of the date
hereof constitutes the entire agreement between Employer and Employee with
respect to the subject matter hereof and all prior or contemporaneous oral or
written communications, understandings or agreements between Employer and
Employee with respect to such subject matter are hereby superseded and nullified
in their entireties.
IN WITNESS WHEREOF, the parties have executed and entered into this Agreement on
the date set forth above.
EMPLOYEE:
EMPLOYER:
By
Its
Confidential Information, Inventions, Nonsolicitation and Noncompetition
Agreement William Antony McNamara, an individual ("Employee") and
AbsoluteFuture.com, a Nevada corporation ("Employer"), hereby enter into this
Confidential Information, Inventions, Nonsolicitation and Noncompetition
Agreement ("Noncompetition Agreement").
RECITALS
1. Employer is engaged in the business of providing consulting services to the
computer and high-technology industries. To date, employer has concentrated its
consulting business in the Puget Sound region of Washington State, but Employer
anticipates expanding the geographical area in which it provides consulting
services to include the states of Oregon and Idaho and all of Washington State.
Employer is also in the business of developing computer software for sale,
license and/or lease throughout the world.
2. Employer possesses and will continue to develop trade secrets, proprietary
information, secret technology, engineering data and customer information that
constitute valuable, special and unique assets of Employer. Employer has
incurred considerable expense and risk in developing its confidential and
proprietary information and materials, and it expects to continue doing so.
3. Upon execution of the Employment Agreement (the "Employment Agreement") to
which this Noncompetition Agreement is attached and into which this
Noncompetition Agreement is incorporated by reference, Employee will become
employed by Employer as Chief Technical Officer of Employer. Employee
acknowledges that the nature of his employment with Employer may provide
opportunities for training, experience, and professional development. Employer
is willing to employ Employee under the terms set forth in the Employment
Agreement, provided that Employee agrees to the terms and conditions of this
Noncompetition Agreement.
4. This Agreement is essential to Employer, and Employer will not employ
Employee without it.
AGREEMENTS
For the reasons recited above, and in consideration of the mutual promises and
covenants set forth in this Agreement, and in further consideration of
Employee's employment as Chief Technical Officer with Employer, the
<PAGE>
compensation paid to him by Employer, stock granted to him by Employer, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Employee hereby agrees as follows:
1. Definitions
1.1 "Competing Business" means any business whose efforts are in competition
with the efforts of Employer. A Competing Business includes any business whose
efforts involve any research and development, products or services in
competition with products or services which are, during and at the end of the
Term, either (a) produced, marketed or otherwise commercially exploited by
Employer or (b) in actual or demonstrably anticipated research or development by
Employer.
1.2 "Confidential Information" means any information that (a) relates to the
business of Employer, (b) is not generally available to the public, and (c) is
conceived, compiled, developed, discovered or received by, or made available to,
Employee during the Term, whether solely or jointly with others, and whether or
not while engaged in performing work for Employer. Confidential Information
includes information, both written and oral, relating to Inventions, trade
secrets and other proprietary information, technical data, products, services,
finances, business plans, marketing plans, legal affairs, suppliers, clients,
prospects, opportunities, contracts or assets of Employer. Confidential
Information also includes any information which has been made available to
Employer by or with respect to third parties and which Employer is obligated to
keep confidential.
1.3 "Invention" means any product, device, technique, know-how, computer
program, algorithm, method, process, procedure, improvement, discovery or
invention, whether or not patentable or copyrightable and whether or not reduced
to practice, that (a) is within the scope of Employer's business, research or
investigations or results from or is suggested by any work performed by Employee
for Employer and (b) is created, conceived, reduced to practice, developed,
discovered, invented or made by Employee during the Term, whether solely or
jointly with others, while engaged in performing work for Employer.
1.4 "Material" means any product, prototype, model, document, diskette, tape,
picture, design, recording, writing or other tangible item which contains or
manifests, whether in printed, handwritten, coded, magnetic or other form, any
Confidential Information, Invention or Proprietary Right.
1.5 "Person" means any corporation, partnership, trust, association,
governmental authority, educational institution, individual or other entity.
1.6 "Proprietary Right" means any patent, copyright, trade secret, trademark,
trade name, service mark, maskwork or other protected intellectual property
right in any Confidential Information, Invention or Material.
1.7 "Term" means the term of Employee's employment with Employer, whether on a
full-time, part-time or consulting basis.
2. Ownership and Use
2.1 Employer will be the exclusive owner of all Confidential Information,
Inventions, Materials and Proprietary Rights. To the extent applicable, all
Materials will constitute "works for hire" under applicable copyright laws.
2.2 Employee assigns and transfers, and agrees to assign and transfer, to
Employer all rights and ownership that Employee has or will have in Confidential
Information, Inventions, Materials and Proprietary Rights, subject to the
limitations set forth in Section 2.5 and in the notice below. Employee will take
such action (including signature and assistance in preparation of documents or
the giving of testimony) as may be requested by Employer to evidence, transfer,
vest or confirm Employer's rights and ownership in Confidential Information,
Inventions, Materials and Proprietary Rights. Employee agrees to keep and
maintain adequate and current written records of all Inventions and Proprietary
Rights during the Term. The records will be in the form of notes, sketches,
drawings, and any other format that may be specified by Employer. The records
will be available to and remain the sole property of Employer at all times.
If Employer is unable for any reason to secure Employee's signature to
fulfill the intent of the foregoing paragraph or to apply for or to pursue any
application for any United States or foreign patents or copyright registrations
covering Inventions assigned to Employer above, then Employee irrevocably
appoints Employer and its authorized agents as his agent and attorney in fact,
to transfer, vest or confirm Employer's rights and to execute and file any such
applications and to do all other lawful acts to further the prosecution and
issuance of letters patent or copyright registrations with the same legal force
as if done by Employee.
2.3 Except as required for performance of Employee's work for Employer or as
authorized in writing by Employer, Employee will not (a) use, disclose, publish
or distribute any Confidential Information, Inventions, Materials or Proprietary
Rights or (b) remove any Materials from Employer's premises.
2.4 Employee will promptly disclose to Employer all Confidential Information,
Inventions, Materials or Proprietary Rights.
2.5
<PAGE>
Exhibit A is a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets to be covered by this agreement,
in addition to those listed by the LHD Product Specification; or, if no such
-------------------------
list is attached, Employer represents that there are no such Additional
Inventions.
NOTICE: Notwithstanding any other provision of this Noncompetition
- ------
Agreement to the contrary, this Noncompetition Agreement does not obligate
Employee to assign or offer to assign to Employer any of Employee's rights in an
invention for which no equipment, supplies, facilities or trade secret
information of Employer was used and which was developed entirely on Employee's
own time, unless (a) the invention relates (i) directly to the business of
Employer or (ii) to Employer's actual or demonstrably anticipated research or
development, or (b) the invention results from any work performed by Employee
for Employer; provided, however that, notwithstanding any provision of this
-------- -------
Noncompetition Agreement to the contrary, Employee acknowledges that he has
irrevocably assigned to Employer all rights in and to the Local Hard Drive
Product as provided in the Employment Agreement between Employee and Employer
executed contemporaneously with this Agreement. This satisfies the written
notice and other requirements of RCW 49.44.140.
Section 3. Further Obligations
3.1 During the Term, Employee will not, directly or indirectly, engage in, be
employed by, perform services for or otherwise participate in any Competing
Business or any other activity which conflicts with the commercial interests of
Employer.
3.2 Employee warrants that his execution, delivery and performance of this
Agreement and the performance of his other obligations and duties to Employer
will not cause any breach, default or violation of any other employment,
nondisclosure, confidentiality, consulting or other agreement to which Employee
is a party or by which Employee may be bound. Attached as Exhibit B is a list of
all prior agreements now in effect under which Employee has agreed to keep
information confidential or not to compete or solicit employees of any Person.
3.3 Employee agrees that he will not use in performance of his work for Employer
or disclose to Employer any trade secret, confidential or proprietary
information of any prior employer or other Person if and to the extent that such
use or disclosure may cause a breach, default or violation of any obligation or
duty that Employee owes to such other Person (e.g., under any agreement or
applicable law). Employee warrants that his compliance with this paragraph will
not prohibit, restrict or impair the performance of his work, obligations and
duties to Employer.
Section 4. Noncompetition and Nonsolicitation
4.2 During the Term and for one year after the end of the Term, Employee agrees
that he will not (except on behalf of or with the prior written consent of
Employer), directly or indirectly (a) solicit, divert, appropriate to or accept
on behalf of any Competing Business, or (b) attempt to solicit, divert,
appropriate to or accept on behalf of any Competing Business, any business from
any customer or actively sought prospective customer of Employer with whom
Employee has dealt, whose dealings with Employer have been supervised by
Employee or about whom Employee has acquired Confidential Information in the
course of his employment.
Section 5. Termination of Relationship
5.1 Employee hereby authorizes and specifically agrees to allow Employer to
deduct from his wages the value of any property (including equipment, goods, or
other items provided to him by Employer during his employment) which Employee
fails to return when requested to do so by Employer, provided that such
deduction (a) does not exceed the cost of the item, (b) does not reduce
Employee's wages below minimum wage, (c) is not made for normal wear and tear on
or nonwillful loss or breakage of the provided item(s), and (d) is accompanied
with a list of all items for which deductions are being made.
5.2 Employee agrees that at the end of the Term Employee will deliver to
Employer (and will not keep in his possession, re- create or deliver to anyone
else) any and all Materials and other property belonging to Employer, its
successors or assigns. Employee agrees to sign and deliver the "Termination
Certification" attached as Exhibit B.
5.3 At the end of the Term, Employee agrees to provide the name of his new
employer, if any, and consent to notification by Employer to his new employer
about his rights and obligations under this Agreement in the form of Exhibit C.
Section 6. Terms of Employment
Nothing in this Noncompetition Agreement shall modify any of the terms
Employee's employment as set forth in the Employment Agreement between Employee
and Employer executed contemporaneously with this Agreement.
Section 7. Miscellaneous
7.1 Survival. This Noncompetition Agreement will survive the end of the Term.
7.2 Injunctive Relief; Costs. Employee acknowledges that if Employee does not
abide by his obligations in this Noncompetition Agreement, Employer will suffer
immediate and irreparable harm, and that the damage to Employer will be
difficult to measure and financial relief will be incomplete. Accordingly,
Employer will be entitled to injunctive relief and other equitable remedies in
the event of a breach by Employee of any obligation
<PAGE>
under this Noncompetition Agreement. The rights and remedies of Employer under
this section are in addition to all other remedies. Further, in any legal action
or other proceeding in connection with this Noncompetition Agreement (e.g., to
recover damages or other relief), the prevailing party will be entitled to
recover its reasonable attorneys' fees and other costs incurred.
7.3 Severability. This Noncompetition Agreement will be enforced to the fullest
extent permitted by applicable law. If for any reason any provision of this
Noncompetition Agreement is held to be invalid or unenforceable to any extent,
then (a) such provision will be interpreted, construed or reformed to the extent
reasonably required to render the same valid, enforceable and consistent with
the original intent underlying such provision and (b) such invalidity or
unenforceability will not affect any other provision of this Agreement or any
other agreement between Employer and Employee.
7.5 Governing Law; Jurisdiction; Venue. This Agreement will be governed by the
laws of the state of Washington without regard to principles of conflicts of
law. Employee irrevocably consents to the jurisdiction and venue of the state
and federal courts located in King County, Washington in connection with any
action relating to this Agreement. Employee will not bring any action relating
to this Agreement in any other court.
7.5 Amendments. Neither this Noncompetition Agreement nor any provision may be
amended except by written agreement signed by the parties.
7.6 Waivers. No waiver of any breach shall be considered valid unless in
writing, and no waiver shall be a waiver of any subsequent breach.
7.7 Acknowledgment. Employee has carefully read all of the provisions of this
Agreement and agree that (a) the same are necessary for the reasonable and
proper protection of Employer's business, (b) Employer has been induced to enter
into and/or continue its relationship with Employee in reliance upon his
compliance with the provisions of this Agreement, (c) every provision of this
Agreement is reasonable with respect to its scope and duration, (d) Employee has
executed this Agreement without duress or coercion from any source, and (e)
Employee has received a copy of this Agreement.
This Agreement shall be effective as of November 26, 1999.
/S/ WILLIAM ANTONY MCNAMARA
ACCEPTED:
- --------
/S/ GRAHAM ANDREWS
PRESIDENT
<PAGE>
EXHIBIT 10.4
PRODUCT DISCLOSURE AND AGREEMENT
This Produce Disclosure and Agreement (this "Agreement"), dated as of 13/th/
January, 2000 between AbsoluteFuture.com, a Nevada corporation ("Employer"), and
William Antony McNamara, an individual ("Employee");
1 SafeMessage and LOCAL HARD DRIVE PRODUCT
1.1 Relation to LHD
Employer (Absolute Future, as represented by Graham Andrews) and Employee
(William Antony McNamara) hereby acknowledge that the SafeMessage product, as
defined in Attachment 1, is based upon and subject to the same terms as laid out
in the contracts entitled "Confidential Information, Inventions, Nonsolicitation
and Noncompetition Agreement" and "Employment Agreement", both signed on
26-November-1999.
1.2 Entitlement to Royalties
Employee is entitled to the same royalty agreement for SafeMessage as defined in
the aforementioned contracts.
2 ALL OTHER CLAUSES
All other clauses of the aforementioned contracts remain in full effect, and
apply to the SafeMessage product and work upon it exactly as upon the LHD
product and as they work upon that. This explicitly includes, but is not limited
not, clauses concerning breach, necessity of notice, assignment of rights, and
waivers.
3 AMENDMENTS IN WRITING
This contract shall serve as an amendment to the aforementioned contracts and
Agreements.
4 HEADINGS
All headings used herein are for convenience only and shall not in any way
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
5 ENTIRE AGREEMENT
This Agreement (including the Noncompetition Agreement) on and as of the date
hereof constitutes the entire agreement between Employer and Employee with
respect to the subject matter hereof and all prior or contemporaneous oral or
written communications, understandings or agreements between Employer and
Employee with respect to such subject matter are hereby superseded and nullified
in their entireties.
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IN WITNESS WHEREOF, the parties have executed and entered into this Agreement on
the date set forth above.
EMPLOYEE:
/s/ William Antony McNamara
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EMPLOYER:
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By /s/ Graham Andrews
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Its President
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EXHIBIT 10.5
ABSOLUTEFUTURE.COM
1999 STOCK OPTION & STOCK INCENTIVE COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the Absolutefuture.com 1999 Stock Incentive Compensation
Plan (the "Plan") is to enhance the long-term shareholder value of
Absolutefuture.com, a Nevada corporation (the "Company"), by offering
opportunities to selected persons to participate in the Company's growth and
success, and to encourage them to remain in the service of the Company and its
Related Corporations (as defined in Section 2) and to acquire and maintain stock
ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"Award" means an award or grant made pursuant to the Plan, including,
without limitation, awards or grants of Stock Awards and Options, or any
combination of the foregoing.
"Board" means the Board of Directors of the Company.
"Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be conclusive and binding.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Common Stock" means the common stock, par value $0.001 per share, of the
Company.
"Corporate Transaction" has the meaning set forth in Section 12.3.1.
"Disability," unless otherwise defined by the Plan Administrator, means a
mental or physical impairment of the Participant that is expected to result in
death or that has lasted or is expected to last for a continuous period of 12
months or more and that causes the Participant to be unable, in the opinion of
the Company, to perform his or her duties for the Company or a Related
Corporation and to be engaged in any substantial gainful activity.
"Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.
"Effective Date" has the meaning set forth in Section 16.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the average of the high and low per share sales prices for the Common
Stock as reported by the Nasdaq National Market for a single trading day or (b)
if the Common Stock is listed on the New York Stock Exchange or the American
Stock Exchange, the average of the high and low per share sales prices for the
Common Stock as such price is officially quoted in the composite tape of
transactions on such exchange for a single trading day. If the Common Sotck is
not listed on the Nasdaq National Market, the New York Stock Exchange or the
American Stock Exchange and the Common Stock is listed on the NASD
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OTC Bulletin Board, then the average of the high and low per share sales prices
for the Common Stock as reported by the NASD OTC Bulletin Board for a single
trading day. If there is no such reported price for the Common Stock for the
date in question, then such price on the last preceding date for which such
price exists shall be determinative of Fair Market Value.
"Good Reason" means the occurrence of any of the following events or
conditions and the failure of the Successor Corporation to cure such event or
condition within 30 days after receipt of written notice from the Participant:
(a) a change in the Participant's status, title, position or
responsibilities (including reporting responsibilities) that, in the
Participant's reasonable judgment, represents a substantial reduction in the
status, title, position or responsibilities as in effect immediately prior
thereto; the assignment to the Participant of any duties or responsibilities
that, in the Participant's reasonable judgment, are materially inconsistent with
such status, title, position or responsibilities; or any removal of the
Participant from or failure to reappoint or reelect the Participant to any of
such positions, except in connection with the termination of the Participant's
employment for Cause, for Disability or as a result of his or her death, or by
the Participant other than for Good Reason;
(b) a reduction in the Participant's annual base salary;
(c) the Successor Corporation's requiring the Participant (without the
Participant's consent) to be based at any place outside a 35-mile radius of his
or her place of employment prior to a Corporate Transaction, except for
reasonably required travel on the Successor Corporation's business that is not
materially greater than such travel requirements prior to the Corporate
Transaction;
(d) the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof) in
which the Participant was participating at the time of a Corporate Transaction,
including, but not limited to, the Plan, or (ii) provide the Participant with
compensation and benefits substantially equivalent (in terms of benefit levels
and/or reward opportunities) to those provided for under each material employee
benefit plan, program and practice as in effect immediately prior to the
Corporate Transaction;
(e) any material breach by the Successor Corporation of its obligations to
the Participant under the Plan or any substantially equivalent plan of the
Successor Corporation; or
(f) any purported termination of the Participant's employment or service
relationship for Cause by the Successor Corporation that is not in accordance
with the definition of Cause under the Plan.
"Grant Date" means the date on which the Plan Administrator completes the
corporate action relating to the grant of an Award and all conditions precedent
to the grant have been satisfied, provided that conditions to the exercisability
or vesting of Awards shall not defer the Grant Date.
"Incentive Stock Option" means an Option to purchase Common Stock granted
under Section 7 with the intention that it qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
"Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
"Option" means the right to purchase Common Stock granted under Section 7.
"Option Term" has the meaning set forth in Section 7.3.
"Parent," except as otherwise provided in Section 8.3 in connection with
Incentive Stock Options, means any entity, whether now or hereafter existing,
that directly or indirectly controls the Company.
"Participant" means (a) the person to whom an Award is granted; (b) for a
Participant who has died, the personal representative of the Participant's
estate, the person(s) to whom the Participant's rights under the Award
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have passed by will or by the applicable laws of descent and distribution, or
the beneficiary designated in accordance with Section 11; or (c) the person(s)
to whom an Award has been transferred in accordance with Section 11.
"Plan Administrator" means the Board or any committee or committees
designated by the Board to administer the Plan under Section 3.1.
"Related Corporation" means any Parent or Subsidiary of the Company.
"Retirement" means retirement as of the individual's normal retirement date
under the Company's 401(k) Plan or other similar successor plan applicable to
salaried employees, unless otherwise defined by the Plan Administrator from time
to time for purposes of the Plan.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Award" means shares of Common Stock or units denominated in Common
Stock granted under Section 9, the rights of ownership of which may be subject
to restrictions prescribed by the Plan Administrator.
"Subsidiary," except as otherwise provided in Section 8.3 in connection
with Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company.
"Successor Corporation" has the meaning set forth in Section 12.3.
"Termination Date" has the meaning set forth in Section 7.6.
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board and/or a committee or
committees (which term includes subcommittees) appointed by, and consisting of
two or more members of, the Board (a "Plan Administrator"). If and so long as
the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act,
the Board shall consider in selecting the members of any committee acting as
Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act.
Notwithstanding the foregoing, the Board may delegate the responsibility for
administering the Plan with respect to designated classes of eligible persons to
different committees consisting of two or more members of the Board, subject to
such limitations as the Board deems appropriate. Committee members shall serve
for such term as the Board may determine, subject to removal by the Board at any
time.
3.2 Administration and Interpretation by Plan Administrator
Except for the terms and conditions explicitly set forth in the Plan, the
Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and the terms of any instrument evidencing the Award and may
from time to time adopt and change rules and regulations of general application
for the Plan's administration. The Plan Administrator's interpretation of the
Plan and its rules and regulations, and all actions taken and determinations
made by the Plan Administrator pursuant to the Plan, shall be conclusive and
binding on all parties involved or affected. The Plan Administrator may
delegate administrative duties to such of the Company's officers as it so
determines.
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SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 12.1, a
maximum of 1,000,000 shares of Common Stock shall be available for issuance
under the Plan.
Shares issued under the Plan shall be drawn from authorized and unissued
shares or shares now held or subsequently acquired by the Company
4.2 Limitations
(a) Subject to adjustment from time to time as provided in Section 12.1,
not more than an aggregate of 300,000 shares shall be available for issuance
pursuant to grants of Stock Awards under the Plan.
(b) Subject to adjustment from time to time as provided in Section 12.1,
not more than 100,000 shares of Common Stock may be made subject to Stock Awards
under the Plan to any individual in the aggregate in any one fiscal year of the
Company, except that the Company may make additional one-time grants of up to
500,000 shares to newly hired individuals, such limitation to be applied in a
manner consistent with the requirements of, and only to the extent required for
compliance with, the exclusion from the limitation on deductibility of
compensation under Section 162(m) of the Code.
4.3 Reuse of Shares
Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for or settled in shares) shall again be
available for issuance in connection with future grants of Awards under the
Plan; provided, however, that for purposes of Section 4.2, any such shares shall
be counted in accordance with the requirements of Section 162(m) of the Code.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers, directors and
employees of the Company and its Related Corporations as the Plan Administrator
from time to time selects. Awards may also be made to consultants, agents,
advisors and independent contractors who provide services to the Company and its
Related Corporations; provided, however, that such Participants render bona fide
services that are not in connection with the offer and sale of the Company's
securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company's securities.
SECTION 6. AWARDS
6.1 Form and Grant of Awards
The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be made under the Plan. Such Awards
may include, but are not limited to, Incentive Stock Options, Nonqualified Stock
Options and Stock Awards. Awards may be granted singly or in combination.
6.2 Settlement of Awards
The Company may settle Awards through the delivery of shares of Common
Stock, cash payments, the granting of replacement Awards or any combination
thereof as the Plan Administrator shall determine. Any Award settlement,
including payment deferrals, may be subject to such conditions, restrictions and
contingencies as the Plan
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Administrator shall determine. The Plan Administrator may permit or require the
deferral of any Award payment, subject to such rules and procedures as it may
establish, which may include provisions for the payment or crediting of
interest, or dividend equivalents, including converting such credits into
deferred stock equivalents. The Plan Administrator may at any time offer to buy
out, for a payment in cash or Common Stock, an Award previously granted based on
such terms and conditions as the Plan Administrator shall establish and
communicate to the Participant at the time such offer is made.
6.3 Acquired Company Awards
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Award is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution for or
assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, except as may be required for
compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
awards shall be deemed to be Participants.
SECTION 7. AWARDS OF OPTIONS
7.1 Grant of Options
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and with respect to Nonqualified Stock Options. For
Incentive Stock Options granted to a more than 10% shareholder, the Option
exercise price shall be as specified in Section 8.2.
7.3 Term of Options
The term of each Option (the "Option Term") shall be as established by the
Plan Administrator or, if not so established, shall be ten years from the Grant
Date. For Incentive Stock Options, the maximum Option Term shall be as
specified in Sections 8.2 and 8.4.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which, or the installments in which, the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established in the
instrument evidencing the Option, the Option shall vest and become exercisable
according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:
Period of Participant's Continuous Employment or
Service With the Company or Its Related Corporations
From the Option Grant Date Percent of Total Option
That Is Vested and Exercisable
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After 4 months of fulltime employment 25%
Each additional one-month period of continuous An additional 1/20
employment completed thereafter
After 2 years 100%
The Plan Administrator may adjust the vesting schedule of an Option held by
a Participant who works less than "full-time" as that term is defined by the
Plan Administrator.
To the extent that an Option has vested and become exercisable, the Option
may be exercised from time to time by delivery to the Company of a written stock
option exercise agreement or notice, in a form and in accordance with procedures
established by the Plan Administrator, setting forth the number of shares with
respect to which the Option is being exercised, the restrictions imposed on the
shares purchased under such exercise agreement, if any, and such representations
and agreements as may be required by the Plan Administrator, accompanied by
payment in full as described in Section 7.5. An Option may not be exercised for
less than a reasonable number of shares at any one time, as determined by the
Plan Administrator.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines
otherwise, either at the time the Option is granted or at any time before
it is exercised, in any combination of
(a) cash or check;
(b) tendering (either actually or, if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, by attestation)
shares of Common Stock already owned by the Participant for at least six months
(or any shorter period necessary to avoid a charge to the Company's earnings for
financial reporting purposes) having a Fair Market Value on the day prior to the
exercise date equal to the aggregate Option exercise price;
(c) if and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, delivery of a properly executed exercise notice,
together with irrevocable instructions, to (i) a brokerage firm designated by
the Company to deliver promptly to the Company the aggregate amount of sale or
loan proceeds to pay the Option exercise price and any withholding tax
obligations that may arise in connection with the exercise and (ii) the Company
to deliver the certificates for such purchased shares directly to such brokerage
firm, all in accordance with the regulations of the Federal Reserve Board; or
(d) such other consideration as the Plan Administrator may permit.
In addition, to assist a Participant (including a Participant who is an
officer or a director of the Company) in acquiring shares of Common Stock
pursuant to an Award granted under the Plan, the Plan Administrator, in its sole
discretion, may authorize, either at the Grant Date or at any time before the
acquisition of Common Stock pursuant to the Award, (i) the payment by a
Participant of a full-recourse promissory note, (ii) the payment by the
Participant of the purchase price, if any, of the Common Stock in installments,
or (iii) the guarantee by the Company of a loan obtained by the Participant from
a third party. Subject to the foregoing, the Plan Administrator shall in its
sole discretion specify the terms of any loans, installment payments or loan
guarantees, including the interest rate and terms of and security for repayment.
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7.6 Post-Termination Exercises
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option shall continue to be exercisable,
and the terms and conditions of such exercise, if a Participant ceases to be
employed by, or to provide services to, the Company or its Related Corporations,
which provisions may be waived or modified by the Plan Administrator at any
time. If not so established in the instrument evidencing the Option, the Option
shall be exercisable according to the following terms and conditions, which may
be waived or modified by the Plan Administrator at any time:
(a) Any portion of an Option that is not vested and exercisable on the date
of termination of the Participant's employment or service relationship (the
"Termination Date") shall expire on such date.
(b) Any portion of an Option that is vested and exercisable on the
Termination Date shall expire upon the earliest to occur of
(i) the last day of the Option Term;
(ii) if the Participant's Termination Date occurs for reasons other
than Cause, death, Disability, or Retirement, the three-month anniversary of
such Termination Date;
(iii) if the Participant's Termination Date occurs by reason of
Retirement, the one-year anniversary of such Termination Date; and
(iv) if the Participant's Termination Date occurs by reason of
Disability or death, the one-year anniversary of such Termination Date.
Notwithstanding the foregoing, if the Participant dies after the
Termination Date while the Option is otherwise exercisable, the portion of the
Option that is vested and exercisable on such Termination Date shall expire upon
the earlier to occur of (y) the last day of the Option Term and (z) the first
anniversary of the date of death, unless the Plan Administrator determines
otherwise.
Also notwithstanding the foregoing, in case of termination of the
Participant's employment or service relationship for Cause, the Option shall
automatically expire upon first notification to the Participant of such
termination, unless the Plan Administrator determines otherwise. If a
Participant's employment or service relationship with the Company is suspended
pending an investigation of whether the Participant shall be terminated for
Cause, all the Participant's rights under any Option likewise shall be suspended
during the period of investigation.
A Participant's transfer of employment or service relationship between or
among the Company and its Related Corporations, or a change in status from an
employee to a consultant, agent, advisor or independent contractor, shall not be
considered a termination of employment or service relationship for purposes of
this Section 7. Employment or service relationship shall be deemed to continue
while the Participant is on a bona fide leave of absence, if such leave was
approved by the Company or a Related Corporation in writing and if continued
crediting of service for purposes of this Section 7 is expressly required by the
terms of such leave or by applicable law (as determined by the Company). The
effect of a Company-approved leave of absence on the terms and conditions of an
Option shall be determined by the Plan Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions:
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8.1 Dollar Limitation
To the extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the
event the Participant holds two or more such Options that become exercisable for
the first time in the same calendar year, such limitation shall be applied on
the basis of the order in which such Options are granted.
8.2 More Than 10% Shareholders
If an individual owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option Term shall not exceed five
years. The determination of more than 10% ownership shall be made in accordance
with Section 422 of the Code.
8.3 Eligible Employees
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4 Term
Except as provided in Section 8.2, the Option Term shall not exceed 10
years.
8.5 Exercisability
An Option designated as an Incentive Stock Option shall cease to qualify
for favorable tax treatment as an Incentive Stock Option to the extent it is
exercised (if permitted by the terms of the Option) (a) more than three months
after the Termination Date for reasons other than death or Disability, (b) more
than one year after the Termination Date by reason of Disability, or (c) after
the Participant has been on leave of absence for more than 90 days, unless the
Participant's reemployment rights are guaranteed by statute or contract.
For purposes of this Section 8.5, Disability shall mean "disability" as
that term is defined for purposes of Section 422 of the Code.
8.6 Taxation of Incentive Stock Options
In order to obtain certain tax benefits afforded to Incentive Stock Options
under Section 422 of the Code, the Participant must hold the shares issued upon
the exercise of an Incentive Stock Option for two years after the Grant Date and
one year from the date of exercise. A Participant may be subject to the
alternative minimum tax at the time of exercise of an Incentive Stock Option.
The Participant shall give the Company prompt notice of any disposition of
shares acquired by the exercise of an Incentive Stock Option prior to the
expiration of such holding periods.
8.7 Promissory Notes
The amount of any promissory note delivered pursuant to Section 7.5 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator, but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.
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SECTION 9. STOCK AWARDS
9.1 Grant of Stock Awards
The Plan Administrator is authorized to make Awards of Common Stock or
Awards denominated in units of Common Stock on such terms and conditions and
subject to such restrictions, if any (which may be based on continuous service
with the Company or the achievement of performance goals related to profits,
profit growth, profit-related return ratios, cash flow or total shareholder
return, where such goals may be stated in absolute terms or relative to
comparison companies), as the Plan Administrator shall determine, in its sole
discretion, which terms, conditions and restrictions shall be set forth in the
instrument evidencing the Award. The terms, conditions and restrictions that
the Plan Administrator shall have the power to determine shall include, without
limitation, the manner in which shares subject to Stock Awards are held during
the periods they are subject to restrictions and the circumstances under which
forfeiture of the Stock Award shall occur by reason of termination of the
Participant's employment or service relationship.
9.2 Issuance of Shares
Upon the satisfaction of any terms, conditions and restrictions prescribed
in respect to a Stock Award, or upon the Participant's release from any terms,
conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall release, as soon as practicable, to the
Participant or, in the case of the Participant's death, to the personal
representative of the Participant's estate or as the appropriate court directs,
the appropriate number of shares of Common Stock.
9.3 Waiver of Restrictions
Notwithstanding any other provisions of the Plan, the Plan Administrator
may, in its sole discretion, waive the forfeiture period and any other terms,
conditions or restrictions on any Stock Award under such circumstances and
subject to such terms and conditions as the Plan Administrator shall deem
appropriate provisions; provided, however, that the Plan Administrator may not
adjust performance goals for any Stock Award intended to be exempt under Section
162(m) of the Code for the year in which the Stock Award is settled in such a
manner as would increase the amount of compensation otherwise payable to a
Participant.
SECTION 10. WITHHOLDING
The Company may require the Participant to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant, vesting or exercise of any Award. Subject to the Plan and applicable
law, the Plan Administrator may, in its sole discretion, permit the Participant
to satisfy withholding obligations , in whole or in part, (a) by paying cash,
(b) by electing to have the Company withhold shares of Common Stock (up to the
minimum required federal tax withholding rate) or (c) by transferring to the
Company shares of Common Stock (already owned by the Participant for the period
necessary to avoid a charge to the Company's earnings for financial reporting
purposes), in such amounts as are equivalent to the Fair Market Value of the
withholding obligation. The Company shall have the right to withhold from any
Award or any shares of Common Stock issuable pursuant to an Award or from any
cash amounts otherwise due or to become due from the Company to the Participant
an amount equal to such taxes. The Company may also deduct from any Award any
other amounts due from the Participant to the Company or a Related Corporation.
SECTION 11. ASSIGNABILITY
Awards granted under the Plan and any interest therein may not be assigned,
pledged or transferred by the Participant and may not be made subject to
attachment or similar proceedings otherwise than by will or by the applicable
laws of descent and distribution, and, during the Participant's lifetime, such
Awards may be exercised only by the Participant. Notwithstanding the foregoing,
and to the extent permitted by Section 422 of the Code, the Plan Administrator,
in its sole discretion, may permit such assignment, transfer and exercisability
and may permit a Participant to designate a beneficiary who may exercise the
Award or receive compensation under the Award after
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the Participant's death; provided, however, that any Award so assigned or
transferred shall be subject to all the same terms and conditions contained in
the instrument evidencing the Award.
SECTION 12. ADJUSTMENTS
12.1 Adjustment of Shares
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator shall make proportional adjustments in (i) the maximum number and
kind of securities subject to the Plan as set forth in Section 4.1 and the
maximum number and kind of securities that may be made subject to Stock Awards
and to Awards to any individual as set forth in Section 4.2, and (ii) the number
and kind of securities that are subject to any outstanding Award and the per
share price of such securities, without any change in the aggregate price to be
paid therefor. The determination by the Plan Administrator as to the terms of
any of the foregoing adjustments shall be conclusive and binding.
Notwithstanding the foregoing, a dissolution or liquidation of the Company or a
Corporate Transaction shall not be governed by this Section 12.1 but shall be
governed by Sections 12.2 and 12.3, respectively.
12.2 Dissolution or Liquidation
In the event of the proposed dissolution or liquidation of the Company, the
Plan Administrator shall notify each Participant as soon as practicable prior to
the effective date of such proposed transaction. The Plan Administrator in its
discretion may permit a Participant to exercise an Option until ten days prior
to such transaction with respect to all vested and exercisable shares of Common
Stock covered thereby and with respect to such number of unvested shares as the
Plan Administrator shall determine. In addition, the Plan Administrator may
provide that any forfeiture provision or Company repurchase option applicable to
any Award shall lapse as to such number of shares as the Plan Administrator
shall determine, contingent upon the occurrence of the proposed dissolution or
liquidation at the time and in the manner contemplated. To the extent an Option
has not been previously exercised, the Option shall terminate automatically
immediately prior to the consummation of the proposed action. To the extent a
forfeiture provision applicable to a Stock Award has not been waived by the Plan
Administrator, the Stock Award shall be forfeited automatically immediately
prior to the consummation of the proposed action.
12.3 Corporate Transaction
12.3.1 Definitions
The following terms shall be defined as set forth below:
"Corporate Transaction" means any of the following events:
(a) Consummation of any merger or consolidation of the Company with or into
another corporation;or
(b) Consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all the
Company's outstanding securities or substantially all the Company's assets other
than a transfer of the Company's assets to a majority-owned subsidiary
corporation (as defined in Section 8.3) of the Company; or
(c) Acquisition by a person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the date of adoption of the Plan) of the
Exchange Act of a majority or more of the Company's outstanding voting
securities (whether directly or indirectly, beneficially or of record).
Ownership of voting
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securities shall take into account and shall include ownership as determined by
applying Rule 13d-3(d)(1)(i) (as in effect on the date of adoption of the Plan)
under the Exchange Act.
Any such Awards that are assumed or replaced in the Corporate Transaction,
other than a Related Party Transaction, and do not otherwise accelerate at that
time shall be accelerated in the event that the Participant's employment or
service relationship should subsequently terminate within two years following
such Corporate Transaction, unless such employment or service relationship is
terminated by the Successor Corporation for Cause or by the Participant
voluntarily without Good Reason.
"Related Party Transaction" means (a) a merger of the Company in which the
holders of shares of Common Stock immediately prior to the merger hold at least
a majority of the shares of Common Stock in the surviving corporation
immediately after the merger, (b) a mere reincorporation of the Company or (c) a
transaction undertaken for the sole purpose of creating a holding company.
(d)
12.3.2 Options
In the event of a Corporate Transaction, except as otherwise provided in
the instrument evidencing the Award, each outstanding Option shall be assumed or
continued or an equivalent option or right substituted by the surviving
corporation, the successor corporation or its parent corporation, as applicable
(the "Successor Corporation"). In the event that the Successor Corporation
refuses to assume, continue or substitute for the Option, the Participant shall
fully vest in and have the right to exercise the Option as to all of the shares
of Common Stock subject thereto, including shares as to which the Option would
not otherwise be vested or exercisable. If an Option will become fully vested
and exercisable in lieu of assumption or substitution in the event of a
Corporate Transaction, the Plan Administrator shall notify the Participant in
writing or electronically that the Option shall be fully vested and exercisable
for a specified time period after the date of such notice, and the Option shall
terminate upon the expiration of such period, in each case conditioned on the
consummation of the Corporate Transaction. For the purposes of this Section
12.3, the Option shall be considered assumed if, following the Corporate
Transaction, the option or right confers the right to purchase or receive, for
each share of Common Stock subject to the Option, immediately prior to the
Corporate Transaction, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares); provided,
however, that if such consideration received in the Corporate Transaction is not
solely common stock of the Successor Corporation, the Plan Administrator may,
with the consent of the Successor Corporation, provide for the consideration to
be received upon the exercise of the Option, for each share of Common Stock
subject thereto, to be solely common stock of the Successor Corporation equal in
fair market value to the per share consideration received by holders of Common
Stock in the Corporate Transaction. All Options shall terminate and cease to
remain outstanding immediately following the consummation of the Corporate
Transaction, except to the extent assumed by the Successor Corporation.
12.3.3 Stock Awards
In the event of a Corporate Transaction, the vesting of shares subject to
Stock Awards shall accelerate, and the forfeiture provisions to which such
shares are subject shall lapse, if and to the same extent that the vesting of
outstanding Options accelerates in connection with the Corporate Transaction.
If unvested Options are to be assumed, continued or substituted by a Successor
Corporation without acceleration upon the occurrence of a Corporate Transaction,
the forfeiture provisions to which such shares are subject will continue with
respect to shares of the Successor Corporation that may be issued in exchange
for such Shares.
12.4 Further Adjustment of Awards
Subject to Sections 12.2 and 12.3, the Plan Administrator shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
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the Plan Administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to the Participants, with respect
to Awards. Such authorized action may include (but shall not be limited to)
establishing, amending or waiving the type, terms, conditions or duration of, or
restrictions on, Awards so as to provide for earlier, later, extended or
additional time for exercise, lifting restrictions and other modifications, and
the Plan Administrator may take such actions with respect to all Participants,
to certain categories of Participants or only to individual Participants. The
Plan Administrator may take such action before or after granting Awards to which
the action relates and before or after any public announcement with respect to
such sale, merger, consolidation, reorganization, liquidation or change in
control that is the reason for such action.
12.5 Limitations
The grant of Awards shall in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
SECTION 13. MARKET STANDOFF
In connection with any underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement filed under
the Securities Act, a person shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
of or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to any shares issued pursuant to an Award granted
under the Plan without the prior written consent of the Company or its
underwriters. Such limitations shall be in effect for such period of time as
may be requested by the Company or such underwriters and agreed to by the
Company's officers and directors with respect to their shares; provided,
however, that in no event shall such period exceed 180 days. The limitations of
this paragraph shall in all events terminate two years after the effective date
of the Company's initial public offering. Holders of shares issued pursuant to
an Award granted under the Plan shall be subject to the market standoff
provisions of this paragraph only if the officers and directors of the Company
are also subject to similar arrangements.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 13, to the same extent the purchased shares are
at such time covered by such provisions.
In order to enforce the limitations of this Section 13, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.
SECTION 14. AMENDMENT AND TERMINATION OF PLAN
14.1 Amendment of Plan
The Plan may be amended only by the Board in such respects as it shall deem
advisable; provided, however, that to the extent required for compliance with
Section 422 of the Code or any applicable law or regulation, shareholder
approval shall be required for any amendment that would (a) increase the total
number of shares available for issuance under the Plan, (b) modify the class of
persons eligible to receive Options, or (c) otherwise require shareholder
approval under any applicable law or regulation. Any amendment made to the Plan
that would constitute a "modification" to Incentive Stock Options outstanding on
the date of such amendment shall not, without the consent of the Participant, be
applicable to such outstanding Incentive Stock Options but shall have
prospective effect only.
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14.2 Termination of Plan
The Board may suspend or terminate the Plan at any time. The Plan shall
have no fixed expiration date; provided, however, that no Incentive Stock
Options may be granted more than ten years after the later of (a) the Plan's
adoption by the Board and (b) the adoption by the Board of any amendment to the
Plan that constitutes the adoption of a new plan for purposes of Section 422 of
the Code.
14.3 Consent of Participant
The amendment or termination of the Plan or the amendment of an outstanding
Award shall not, without the Participant's consent, impair or diminish any
rights or obligations under any Award theretofore granted to the Participant
under the Plan. Any change or adjustment to an outstanding Incentive Stock
Option shall not, without the consent of the Participant, be made in a manner so
as to constitute a "modification" that would cause such Incentive Stock Option
to fail to continue to qualify as an Incentive Stock Option. Notwithstanding
the foregoing, any adjustments made pursuant to Section 12 shall not be subject
to these restrictions.
SECTION 15. GENERAL
15.1 Evidence of Awards
Awards granted under the Plan shall be evidenced by a written instrument
that shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.
15.2 No Individual Rights
Nothing in the Plan or any Award granted under the Plan shall be deemed to
constitute an employment contract or confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any other
relationship with, the Company or any Related Corporation or limit in any way
the right of the Company or any Related Corporation to terminate a Participant's
employment or other relationship at any time, with or without Cause.
15.3 Registration
Notwithstanding any other provision of the Plan, the Company shall have no
obligation to issue or deliver any shares of Common Stock under the Plan or make
any other distribution of benefits under the Plan unless such issuance, delivery
or distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act), and the applicable
requirements of any securities exchange or similar entity.
The Company shall be under no obligation to any Participant to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
To the extent that the Plan or any instrument evidencing an Award provides
for issuance of stock certificates to reflect the issuance of shares of Common
Stock, the issuance may be effected on a noncertificated basis, to the extent
not prohibited by applicable law or the applicable rules of any stock exchange.
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15.4 No Rights as a Shareholder
No Option or Stock Award denominated in units shall entitle the Participant
to any cash dividend, voting or other right of a shareholder unless and until
the date of issuance under the Plan of the shares that are the subject of such
Award.
15.5 Compliance With Laws and Regulations
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator, in its sole discretion, may bifurcate the Plan so as to restrict,
limit or condition the use of any provision of the Plan to Participants who are
officers or directors subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning the Plan with respect to other
Participants. Additionally, in interpreting and applying the provisions of the
Plan, any Option granted as an Incentive Stock Option pursuant to the Plan
shall, to the extent permitted by law, be construed as an "incentive stock
option" within the meaning of Section 422 of the Code.
15.6 Participants in Foreign Countries
The Plan Administrator shall have the authority to adopt such
modifications, procedures and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which the Company or
its Related Corporations may operate to assure the viability of the benefits
from Awards granted to Participants employed in such countries and to meet the
objectives of the Plan.
15.7 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Participant, and no
Participant shall have any rights that are greater than those of a general
unsecured creditor of the Company.
15.8 Severability
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
15.9 Choice of Law
The Plan and all determinations made and actions taken pursuant hereto, to
the extent not otherwise governed by the laws of the United States, shall be
governed by the laws of the State of Nevada without giving effect to principles
of conflicts of laws.
SECTION 16. EFFECTIVE DATE
The Effective Date is the date on which the Plan is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.
Adopted by the Board on Sept. 7 , 199 and approved by the Company's
---------- --
shareholders on Sept. 7 , 1999 .]
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PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
SUMMARY PAGE
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<S> <C> <C> <C>
Section/Effect of Date of Shareholder
Date of Board Action Action Amendment Approval
Sept 7 , 1999 Initial Plan Adoption Sept. 7 , 1999
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</TABLE>
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EXHIBIT 10.6
BASIC LEASE INFORMATION
OFFICE GROSS
PLAZA CENTER
<TABLE>
<S> <C>
LEASE DATE: December 9, 1998
TENANT: Absolut Future Tech Inc., a Nevada corporation
TENANT'S NOTICE ADDRESS: 10900 N.E. 8th Street, Suite 1414 , Bellevue, Washington 98004-1455
TENANT'S BILLING ADDRESS: 10900 N.E. 8th Street, Suite 1414 , Bellevue, Washington 98004-1455
TENANT CONTACT: Blair Henderson PHONE NUMBER: 604-551-9961
FAX NUMBER: 604-687-6652
LANDLORD: Spieker Properties, L.P., a California limited partnership
LANDLORD'S NOTICE ADDRESS: 1150 - 114th Avenue S.E., Bellevue, Washington 98004
LANDLORD'S REMITTANCE ADDRESS: P. O. Box 24827, Dept. 20351, Seattle, Washington 98124-0827
Project Description: That certain building commonly known as Plaza Center located in
Bellevue, Washington and the real property on which the Building is
located, as more fully and legally described on Exhibit A-1 attached
Building Description: That certain building commonly known as Plaza Center located at 10900
N.E. 8th Street, Bellevue Washington 98004-1455
Premises: Approximately 2,231 rentable square feet in Suite 1414
10900 N.E. 8th Street, Bellevue, Washington 98004-1455
Permitted Use: General office use.
Occupancy Density: 4 employees per 1,000 Rentable Square Feet
Parking Density: 2.5 per 1,000 Rentable Square Feet
Parking and Parking Charge: Six (6) non-exclusive spaces at market rate which is currently $90.00
per space / per month including 8.6% Washington Sales Tax.
Scheduled Term Commencement Date: January 1, 1999
Scheduled Length of Term: 60 Months
Scheduled Term Expiration Date: December 31, 2003
Rent:
Base Rent Months 1-12 $5,113.00 per month
Months 13-24 $5,299.00 per month
Months 25-36 $5,485.00 per month
Months 37-48 $5,670.00 per month
Months 49-60 $5,856.00 per month
(subject to adjustment as provided in Paragraph 39. hereof)
Base Year for Operating Expenses: 1999
Security Deposit: $5,856.00
Tenant's Proportionate Share of Building: 0.70%
</TABLE>
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.
<TABLE>
<S> <C>
LANDLORD TENANT
Spieker Properties, L.P., Absolut Future Tech, Inc.
a California limited partnership A Nevada corporation
By: Spieker Properties, Inc.,
a Maryland corporation, -------------------------------
its general partner By: Graham Andrews
Its: President
-------------------------------
By: Richard T. Leider
Its: Vice President
</TABLE>
<PAGE>
TABLE OF CONTENTS
Page
Basic Lease Information.................................... 1
Table of Contents.......................................... 2
1. Premises................................................... 3
2. Possession and Lease Commencement.......................... 3
3. Term....................................................... 3
4. Use........................................................ 3
5. Rules and Regulations...................................... 4
6. Rent....................................................... 4
7. Operating Expenses......................................... 4
8. Insurance and Indemnification.............................. 6
9. Waiver of Subrogation...................................... 7
10. Landlord's Repairs and Maintenance......................... 7
11. Tenant's Repairs and Maintenance........................... 8
12. Alterations................................................ 8
13. Signs...................................................... 8
14. Inspection/Posting Notices................................. 8
15. Services and Utilities..................................... 9
16. Subordination.............................................. 9
17. Financial Statements....................................... 10
18. Estoppel Certificate....................................... 10
19. Security Deposit........................................... 10
20. Limitation of Tenant's Remedies............................ 10
21. Assignment and Subletting.................................. 10
22. Authority of Tenant........................................ 11
23. Condemnation............................................... 11
24. Casualty Damage............................................ 11
25. Holding Over............................................... 12
26. Default.................................................... 12
27. Liens...................................................... 13
28. Substitution............................................... 13
29. Transfers by Landlord...................................... 14
30. Right of Landlord to Perform Tenant's Covenants............ 14
31. Waiver..................................................... 14
32. Notices.................................................... 14
33. Attorney's Fees............................................ 14
34. Successors and Assigns..................................... 14
35. Force Majeure.............................................. 14
36. Surrender of Premises...................................... 14
37. Parking.................................................... 15
38. Miscellaneous.............................................. 15
39. Additional Provisions...................................... 16
40. Jury Trial Waiver.......................................... 16
Signatures................................................. 16
Exhibits:
Exhibit A............................... Rules and Regulations
Exhibit A-1................................. Legal Description
Exhibit B..................... Site Plan, Property Description
Exhibit C.............. Tenant Improvements and Specifications
Exhibit D.......................... Form of Tenant Certificate
Exhibit E.................................... Letter of Credit
2
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LEASE
THIS LEASE is made as of the 9th day of December, 1998, by and between Spieker
Properties, L.P., a California limited partnership (hereinafter called
"Landlord"), and Absolut Future Tech, Inc., a Nevada corporation (hereinafter
called "Tenant").
1. PREMISES
Landlord leases to Tenant and Tenant leases from Landlord, upon the terms
and conditions hereinafter set forth, those premises (the "Premises") outlined
in red on Exhibit B and described in the Basic Lease Information. The Premises
shall be all or part of a building (the "Building") and of a project (the
"Project"), which may consist of more than one building and additional
facilities, as described in the Basic Lease Information. The Building and
Project are situated at the real property described on Exhibit A-1 and are
outlined in blue and green respectively on Exhibit B. Landlord and Tenant
acknowledge that physical changes may occur from time to time in the Premises,
Building or Project, and that the number of buildings and additional facilities
which constitute the Project may change from time to time, which may result in
an adjustment in Tenant's Proportionate Share, as defined in the Basic Lease
Information, as provided in Paragraph 7.A.
2. POSSESSION AND LEASE COMMENCEMENT
A. Existing Improvements. If this Lease pertains to a Premises in which the
interior improvements have already been constructed ("Existing Improvements"),
the provisions of this Paragraph 2.A. shall apply and the term commencement date
("Term Commencement Date") shall be the earlier of the date on which: (1) Tenant
takes possession of some or all of the Premises; or (2) Landlord notifies Tenant
that Tenant may occupy the Premises. If for any reason Landlord cannot deliver
possession of the Premises to Tenant on the scheduled Term Commencement Date,
Landlord shall not be subject to any liability therefor, nor shall Landlord be
in default hereunder nor shall such failure affect the validity of this Lease,
and Tenant agrees to accept possession of the Premises at such time as Landlord
is able to deliver the same, which date shall then be deemed the Term
Commencement Date. Tenant shall not be liable for any Rent (defined below) for
any period prior to the Term Commencement Date. Tenant acknowledges that Tenant
has inspected and accepts the Premises in their present condition, "as is," and
as suitable for, the Permitted Use (as defined below), and for Tenant's intended
operations in the Premises. Tenant agrees that the Premises and other
improvements are in good and satisfactory condition as of when possession was
taken. Tenant further acknowledges that no representations as to the condition
or repair of the Premises nor promises to alter, remodel or improve the Premises
have been made by Landlord or any agents of Landlord unless such are expressly
set forth in this Lease. Upon Landlord's request, Tenant shall promptly execute
and return to Landlord a "Start-Up Letter" in which Tenant shall agree, among
other things, to acceptance of the Premises and to the determination of the Term
Commencement Date, in accordance with the terms of this Lease, but Tenant's
failure or refusal to do so shall not negate Tenant's acceptance of the Premises
or affect determination of the Term Commencement Date.
B. Construction of Improvements. If this Lease pertains to a Building to be
constructed or improvements to be constructed within a Building, the provisions
of this Paragraph 2.B. shall apply in lieu of the provisions of Paragraph 2.A.
above and the term commencement date ("Term Commencement Date") shall be the
earlier of the date on which: (1) Tenant takes possession of some or all of the
Premises; or (2) the improvements to be constructed or performed in the Premises
by Landlord (if any) shall have been substantially completed in accordance with
the plans and specifications, if any, described on Exhibit C and Tenant's taking
of possession of the Premises or any part thereof shall constitute Tenant's
confirmation of substantial completion for all purposes hereof, whether or not
substantial completion of the Building or Project shall have occurred. If for
any reason Landlord cannot deliver possession of the Premises to Tenant on the
scheduled Term Commencement Date, Landlord shall not be subject to any liability
therefor, nor shall Landlord be in default hereunder nor shall such failure
affect the validity of this Lease, and Tenant agrees to accept possession of the
Premises at such time as such improvements have been substantially completed,
which date shall then be deemed the Term Commencement Date. Tenant shall not be
liable for any Rent for any period prior to the Term Commencement Date (but
without affecting any obligations of Tenant under any improvement agreement
appended to this Lease). In the event of any dispute as to substantial
completion of work performed or required to be performed by Landlord, the
certificate of Landlord's architect or general contractor shall be conclusive.
Substantial completion shall have occurred notwithstanding Tenant's submission
of a punchlist to Landlord, which Tenant shall submit, if at all, within three
(3) business days after the Term Commencement Date or otherwise in accordance
with any improvement agreement appended to this Lease. Upon Landlord's request,
Tenant shall promptly execute and return to Landlord a "Start-Up Letter" in
which Tenant shall agree, among other things, to acceptance of the Premises and
to the determination of the Term Commencement Date, in accordance with the terms
of this Lease, but Tenant's failure or refusal to do so shall not negate
Tenant's acceptance of the Premises or affect determination of the Term
Commencement Date.
3. TERM
The term of this Lease (the "Term") shall commence on the Term Commencement
Date and continue in full force and effect for the number of months specified as
the Length of Term in the Basic Lease Information or until this Lease is
terminated as otherwise provided herein. If the Term Commencement Date is a
date other than the first day of the calendar month, the Term shall be the
number of months of the Length of Term in addition to the remainder of the
calendar month following the Term Commencement Date.
4. USE
A. General. Tenant shall use the Premises for the permitted use specified in
the Basic Lease Information ("Permitted Use") and for no other use or purpose.
Tenant shall control Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees and subtenants (collectively, "Tenant's
Parties") in such a manner that Tenant and Tenant's Parties cumulatively do not
exceed the occupant density (the "Occupancy Density") or the parking density
(the "Parking Density") specified in the Basic Lease Information at any time.
Tenant shall pay the Parking Charge specified in the Basic Lease Information as
Additional Rent (as hereinafter defined) hereunder. So long as Tenant is
occupying the Premises, Tenant and Tenant's Parties shall have the nonexclusive
right to use, in common with other parties occupying the Building or Project,
the parking areas, driveways and other common areas of the Building and Project,
subject to the terms of this Lease and such rules and regulations as Landlord
may from time to time prescribe. Landlord reserves the right, without notice or
liability to Tenant, and without the same constituting an actual or constructive
eviction, to alter or modify the common areas from time to time, including the
location and configuration thereof, and the amenities and facilities which
Landlord may determine to provide from time to time.
B. Limitations. Tenant shall not permit any odors, smoke, dust, gas,
substances, noise or vibrations to emanate from the Premises or from any portion
of the common areas as a result of Tenant's or any Tenant's Party's use thereof,
nor take any action which would constitute a nuisance or would disturb, obstruct
or endanger any other tenants or occupants of the Building or Project or
elsewhere, or interfere with their use of their respective premises or common
areas. Storage outside the Premises of materials, vehicles or any other items
is prohibited. Tenant shall not use or allow the Premises to be used for any
immoral, improper or unlawful purpose, nor shall Tenant cause
3
<PAGE>
or maintain or permit any nuisance in, on or about the Premises. Tenant shall
not commit or suffer the commission of any waste in, on or about the Premises.
Tenant shall not allow any sale by auction upon the Premises, or place any loads
upon the floors, walls or ceilings which could endanger the structure, or place
any harmful substances in the drainage system of the Building or Project. No
waste, materials or refuse shall be dumped upon or permitted to remain outside
the Premises. Landlord shall not be responsible to Tenant for the non-compliance
by any other tenant or occupant of the Building or Project with any of the
above-referenced rules or any other terms or provisions of such tenant's or
occupant's lease or other contract.
C. Compliance with Regulations. By entering the Premises, Tenant accepts the
Premises in the condition existing as of the date of such entry. Tenant shall
at its sole cost and expense strictly comply with all existing or future
applicable municipal, state and federal and other governmental statutes, rules,
requirements, regulations, laws and ordinances, including zoning ordinances and
regulations, and covenants, easements and restrictions of record governing and
relating to the use, occupancy or possession of the Premises, to Tenant's use of
the common areas, or to the use, storage, generation or disposal of Hazardous
Materials (hereinafter defined) (collectively "Regulations"). Tenant shall at
its sole cost and expense obtain any and all licenses or permits necessary for
Tenant's use of the Premises. Tenant shall at its sole cost and expense
promptly comply with the requirements of any board of fire underwriters or other
similar body now or hereafter constituted. Tenant shall not do or permit
anything to be done in, on, under or about the Project or bring or keep anything
which will in any way increase the rate of any insurance upon the Premises,
Building or Project or upon any contents therein or cause a cancellation of said
insurance or otherwise affect said insurance in any manner. Tenant shall
indemnify, defend (by counsel reasonably acceptable to Landlord), protect and
hold Landlord harmless from and against any loss, cost, expense, damage,
attorneys' fees or liability arising out of the failure of Tenant to comply with
any Regulation. Tenant's obligations pursuant to the foregoing indemnity shall
survive the expiration or earlier termination of this Lease.
D. Hazardous Materials. As used in this Lease, "Hazardous Materials" shall
include, but not be limited to, hazardous, toxic and radioactive materials and
those substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes," "toxic substances," or other similar designations in any
Regulation. Tenant shall not cause, or allow any of Tenant's Parties to cause,
any Hazardous Materials to be handled, used, generated, stored, released or
disposed of in, on, under or about the Premises, the Building or the Project or
surrounding land or environment in violation of any Regulations. Tenant must
obtain Landlord's written consent prior to the introduction of any Hazardous
Materials onto the Project. Notwithstanding the foregoing, Tenant may handle,
store, use and dispose of products containing small quantities of Hazardous
Materials for "general office purposes" (such as toner for copiers) to the
extent customary and necessary for the Permitted Use of the Premises; provided
that Tenant shall always handle, store, use, and dispose of any such Hazardous
Materials in a safe and lawful manner and never allow such Hazardous Materials
to contaminate the Premises, Building, or Project or surrounding land or
environment. Tenant shall immediately notify Landlord in writing of any
Hazardous Materials' contamination of any portion of the Project of which Tenant
becomes aware, whether or not caused by Tenant. Landlord shall have the right
at all reasonable times to inspect the Premises and to conduct tests and
investigations to determine whether Tenant is in compliance with the foregoing
provisions, the costs of all such inspections, tests and investigations to be
borne by Tenant. Tenant shall indemnify, defend (by counsel reasonably
acceptable to Landlord), protect and hold Landlord harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, liens, damages,
injuries or expenses (including attorneys' and consultants' fees and court
costs), demands, causes of action, or judgments directly or indirectly arising
out of or related to the use, generation, storage, release, or disposal of
Hazardous Materials by Tenant or any of Tenant's Parties in, on, under or about
the Premises, the Building or the Project or surrounding land or environment,
which indemnity shall include, without limitation, damages for personal or
bodily injury, property damage, damage to the environment or natural resources
occurring on or off the Premises, losses attributable to diminution in value or
adverse effects on marketability, the cost of any investigation, monitoring,
government oversight, repair, removal, remediation, restoration, abatement, and
disposal, and the preparation of any closure or other required plans, whether
such action is required or necessary prior to or following the expiration or
earlier termination of this Lease. Neither the consent by Landlord to the use,
generation, storage, release or disposal of Hazardous Materials nor the strict
compliance by Tenant with all laws pertaining to Hazardous Materials shall
excuse Tenant from Tenant's obligation of indemnification pursuant to this
Paragraph 4.D. Tenant's obligations pursuant to the foregoing indemnity shall
survive the expiration or earlier termination of this Lease.
5. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the building rules and
regulations attached hereto as Exhibit A and any other rules and regulations and
any modifications or additions thereto which Landlord may from time to time
prescribe in writing for the purpose of maintaining the proper care,
cleanliness, safety, traffic flow and general order of the Premises or the
Building or Project. Tenant shall cause Tenant's Parties to comply with such
rules and regulations. Landlord shall not be responsible to Tenant for the non-
compliance by any other tenant or occupant of the Building or Project with any
of such rules and regulations, any other tenant's or occupant's lease or any
Regulations.
6. RENT
A. Base Rent. Tenant shall pay to Landlord and Landlord shall receive,
without notice or demand throughout the Term, Base Rent as specified in the
Basic Lease Information, payable in monthly installments in advance on or before
the first day of each calendar month, in lawful money of the United States,
without deduction or offset whatsoever, at the Remittance Address specified in
the Basic Lease Information or to such other place as Landlord may from time to
time designate in writing. Base Rent for the first full month of the Term shall
be paid by Tenant upon Tenant's execution of this Lease. If the obligation for
payment of Base Rent commences on a day other than the first day of a month,
then Base Rent shall be prorated and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date.
The Base Rent payable by Tenant hereunder is subject to adjustment as provided
elsewhere in this Lease, as applicable. As used herein, the term "Base Rent"
shall mean the Base Rent specified in the Basic Lease Information as it may be
so adjusted from time to time.
B. Additional Rent. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, Tenant's Proportionate Share of
Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be
paid by Tenant under Paragraph 15, the interest and late charge described in
Paragraphs 26.C. and D., and any monies spent by Landlord pursuant to Paragraph
30, shall be considered additional rent ("Additional Rent"). "Rent" shall mean
Base Rent and Additional Rent.
7. OPERATING EXPENSES
A. Operating Expenses. In addition to the Base Rent required to be paid
hereunder, beginning with the expiration of the Base Year specified in the Basic
Lease Information (the "Base Year"), Tenant shall pay as Additional Rent,
Tenant's Proportionate Share of the Building and/or Project (as applicable), as
defined in the Basic Lease Information, of increases in Operating Expenses
(defined below) over the Operating Expenses incurred by Landlord during the Base
Year (the "Base Year Operating Expenses"), in the manner set forth below.
Tenant shall pay the applicable Tenant's Proportionate Share of each such
Operating Expenses. Landlord and Tenant acknowledge that if the number of
buildings which constitute the Project increases or decreases, or if physical
changes are made to the Premises, Building or Project or the configuration of
any thereof, Landlord may at its discretion reasonably adjust Tenant's
Proportionate Share of the Building or Project to reflect the change.
Landlord's determination of Tenant's Proportionate Share of the Building and of
the Project shall be conclusive so long as it is reasonably and consistently
applied. "Operating Expenses" shall mean all expenses and costs of every kind
and nature which Landlord shall pay or become obligated to pay, because of or in
connection with the ownership, management, maintenance,
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repair, preservation, replacement and operation of the Building or Project and
its supporting facilities and such additional facilities now and in subsequent
years as may be determined by Landlord to be necessary or desirable to the
Building and/or Project (as determined in a reasonable manner) other than those
expenses and costs which are specifically attributable to Tenant or which are
expressly made the financial responsibility of Landlord or specific tenants of
the Building or Project pursuant to this Lease. Operating Expenses shall
include, but are not limited to, the following:
(1) Taxes. All real property taxes and assessments, possessory interest
taxes, sales taxes, personal property taxes, business or license taxes or
fees, gross receipts taxes, service payments in lieu of such taxes or fees,
annual or periodic license or use fees, excises, transit charges, and other
impositions, general and special, ordinary and extraordinary, unforeseen as
well as foreseen, of any kind (including fees "in-lieu" of any such tax or
assessment) which are now or hereafter assessed, levied, charged,
confirmed, or imposed by any public authority upon the Building or Project,
its operations or the Rent (or any portion or component thereof), or any
tax, assessment or fee imposed in substitution, partially or totally, of
any of the above. Operating Expenses shall also include any taxes,
assessments, reassessments, or other fees or impositions with respect to
the development, leasing, management, maintenance, alteration, repair, use
or occupancy of the Premises, Building or Project or any portion thereof,
including, without limitation, by or for Tenant, and all increases therein
or reassessments thereof whether the increases or reassessments result from
increased rate and/or valuation (whether upon a transfer of the Building or
Project or any portion thereof or any interest therein or for any other
reason). Operating Expenses shall not include inheritance or estate taxes
imposed upon or assessed against the interest of any person in the Project,
or taxes computed upon the basis of the net income of any owners of any
interest in the Project. If it shall not be lawful for Tenant to reimburse
Landlord for all or any part of such taxes, the monthly rental payable to
Landlord under this Lease shall be revised to net Landlord the same net
rental after imposition of any such taxes by Landlord as would have been
payable to Landlord prior to the payment of any such taxes.
(2) Insurance. All insurance premiums and costs, including, but not
limited to, any deductible amounts, premiums and other costs of insurance
incurred by Landlord, including for the insurance coverage set forth in
Paragraph 8.A. herein.
(3) Common Area Maintenance.
(a) Repairs, replacements, and general maintenance of and for the
Building and Project and public and common areas and facilities of and
comprising the Building and Project, including, but not limited to,
the roof and roof membrane, windows, elevators, restrooms, conference
rooms, health club facilities, lobbies, mezzanines, balconies,
mechanical rooms, building exteriors, alarm systems, pest
extermination, landscaped areas, parking and service areas, driveways,
sidewalks, loading areas, fire sprinkler systems, sanitary and storm
sewer lines, utility services, heating/ventilation/air conditioning
systems, electrical, mechanical or other systems, telephone equipment
and wiring servicing, plumbing, lighting, and any other items or areas
which affect the operation or appearance of the Building or Project,
which determination shall be at Landlord's discretion, except for:
those items expressly made the financial responsibility of Landlord
pursuant to Paragraph 10 hereof; those items to the extent paid for by
the proceeds of insurance; and those items attributable solely or
jointly to specific tenants of the Building or Project.
(b) Repairs, replacements, and general maintenance shall include the
cost of any capital improvements made to or capital assets acquired
for the Project or Building that in Landlord's discretion may reduce
any other Operating Expenses, including present or future repair work,
are reasonably necessary for the health and safety of the occupants of
the Building or Project, or are required to comply with any
Regulation, such costs or allocable portions thereof to be amortized
over such reasonable period as Landlord shall determine, together with
interest on the unamortized balance at the publicly announced "prime
rate" charged by Wells Fargo Bank, N.A. (San Francisco) or its
successor at the time such improvements or capital assets are
constructed or acquired, plus two (2) percentage points, or in the
absence of such prime rate, then at the U.S. Treasury six-month market
note (or bond, if so designated) rate as published by any national
financial publication selected by Landlord, plus four (4) percentage
points, but in no event more than the maximum rate permitted by law,
plus reasonable financing charges.
(c) Payment under or for any easement, license, permit, operating
agreement, declaration, restrictive covenant or instrument relating to
the Building or Project.
(d) All expenses and rental related to services and costs of
supplies, materials and equipment used in operating, managing and
maintaining the Premises, Building and Project, the equipment therein
and the adjacent sidewalks, driveways, parking and service areas,
including, without limitation, expenses related to service agreements
regarding security, fire and other alarm systems, janitorial services,
window cleaning, elevator maintenance, Building exterior maintenance,
landscaping and expenses related to the administration, management and
operation of the Project, including without limitation salaries, wages
and benefits and management office rent.
(e) The cost of supplying any services and utilities which benefit
all or a portion of the Premises, Building or Project, including
without limitation services and utilities provided pursuant to
Paragraph 15 hereof.
(f) Legal expenses and the cost of audits by certified public
accountants; provided, however, that legal expenses chargeable as
Operating Expenses shall not include the cost of negotiating leases,
collecting rents, evicting tenants nor shall it include costs incurred
in legal proceedings with or against any tenant or to enforce the
provisions of any lease.
(g) A management and accounting cost recovery fee equal to five
percent (5%) of the sum of the Project's base rents and Operating
Expenses to the extent not included in such base rents (other than
such management and accounting fee).
If the rentable area of the Building and/or Project is not fully occupied during
any fiscal year of the Term as determined by Landlord, an adjustment may be made
in Landlord's discretion in computing the Operating Expenses for such year so
that Tenant pays an equitable portion of all variable items (e.g., utilities,
janitorial services and other component expenses that are affected by variations
in occupancy levels) of Operating Expenses, as reasonably determined by
Landlord; provided, however, that in no event shall Landlord be entitled to
collect in excess of one hundred percent (100%) of the total Operating Expenses
from all of the tenants in the Building or Project, as the case may be.
Operating Expenses shall not include the cost of providing tenant improvements
or other specific costs incurred for the account of, separately billed to and
paid by specific tenants of the Building or Project, the initial construction
cost of the Building, or debt service on any mortgage or deed of trust recorded
with respect to the Project other than pursuant to Paragraph 7.A.(3)(b) above.
Notwithstanding anything herein to the contrary, in any instance wherein
Landlord, in Landlord's sole discretion, deems Tenant to be responsible for any
amounts greater than Tenant's Proportionate Share, Landlord shall have the right
to allocate costs in any manner Landlord deems appropriate.
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The above enumeration of services and facilities shall not be deemed to impose
an obligation on Landlord to make available or provide such services or
facilities except to the extent if any that Landlord has specifically agreed
elsewhere in this Lease to make the same available or provide the same. Without
limiting the generality of the foregoing, Tenant acknowledges and agrees that it
shall be responsible for providing adequate security for its use of the
Premises, the Building and the Project and that Landlord shall have no
obligation or liability with respect thereto, except to the extent if any that
Landlord has specifically agreed elsewhere in this Lease to provide the same.
B. Payment of Estimated Operating Expenses. "Estimated Operating Expenses"
for any particular year shall mean Landlord's estimate of the Operating Expenses
for such fiscal year made with respect to such fiscal year as hereinafter
provided. Landlord shall have the right from time to time to revise its fiscal
year and interim accounting periods so long as the periods as so revised are
reconciled with prior periods in a reasonable manner. During the last month of
each fiscal year during the Term, or as soon thereafter as practicable, Landlord
shall give Tenant written notice of the Estimated Operating Expenses for the
ensuing fiscal year. Tenant shall pay Tenant's Proportionate Share of the
difference between Estimated Operating Expenses and Base Year Operating Expenses
with installments of Base Rent for the fiscal year to which the Estimated
Operating Expenses applies in monthly installments on the first day of each
calendar month during such year, in advance. Such payment shall be construed to
be Additional Rent for all purposes hereunder. If at any time during the course
of the fiscal year, Landlord determines that Operating Expenses are projected to
vary from the then Estimated Operating Expenses by more than five percent (5%),
Landlord may, by written notice to Tenant, revise the Estimated Operating
Expenses for the balance of such fiscal year, and Tenant's monthly installments
for the remainder of such year shall be adjusted so that by the end of such
fiscal year Tenant has paid to Landlord Tenant's Proportionate Share of the
revised difference between Estimated Operating Expenses and Base Year Operating
Expenses for such year, such revised installment amounts to be Additional Rent
for all purposes hereunder.
C. Computation of Operating Expense Adjustment. "Operating Expense
Adjustment" shall mean the difference between Estimated Operating Expenses and
actual Operating Expenses for any fiscal year, over Base Year Operating
Expenses, determined as hereinafter provided. Within one hundred twenty (120)
days after the end of each fiscal year, or as soon thereafter as practicable,
Landlord shall deliver to Tenant a statement of actual Operating Expenses for
the fiscal year just ended, accompanied by a computation of Operating Expense
Adjustment. If such statement shows that Tenant's payment based upon Estimated
Operating Expenses is less than Tenant's Proportionate Share of actual increases
in Operating Expenses over the Base Year Operating Expenses, then Tenant shall
pay to Landlord the difference within twenty (20) days after receipt of such
statement, such payment to constitute Additional Rent for all purposes
hereunder. If such statement shows that Tenant's payments of Estimated Operating
Expenses exceed Tenant's Proportionate Share of actual increases in Operating
Expenses over the Base Year Operating Expenses, then (provided that Tenant is
not in default under this Lease) Landlord shall pay to Tenant the difference
within twenty (20) days after delivery of such statement to Tenant. If this
Lease has been terminated or the Term hereof has expired prior to the date of
such statement, then the Operating Expense Adjustment shall be paid by the
appropriate party within twenty (20) days after the date of delivery of the
statement. Tenant's obligation to pay increases in Operating Expenses over the
Base Year Operating Expenses shall commence on January 1 of the year succeeding
the Base Year. Should this Lease terminate at any time other than the last day
of the fiscal year, Tenant's Proportionate Share of the Operating Expense
Adjustment shall be prorated based on a month of 30 days and the number of
calendar months during such fiscal year that this Lease is in effect. Tenant
shall in no event be entitled to any credit if Operating Expenses in any year
are less than Base Year Operating Expenses. Notwithstanding anything to the
contrary contained in Paragraph 7.A or 7.B, Landlord's failure to provide any
notices or statements within the time periods specified in those paragraphs
shall in no way excuse Tenant from its obligation to pay Tenant's Proportionate
Share of increases in Operating Expenses.
D. Gross Lease. This shall be a gross Lease; however, it is intended that
Base Rent shall be paid to Landlord absolutely net of all costs and expenses
other than Operating Expenses each year equal to Tenant's Proportionate Share of
Base Year Operating Expenses, except as otherwise specifically provided to the
contrary in this Lease. The provisions for payment of increases in Operating
Expenses and the Operating Expense Adjustment are intended to pass on to Tenant
and reimburse Landlord for all costs and expenses of the nature described in
Paragraph 7.A. incurred in connection with the ownership, management,
maintenance, repair, preservation, replacement and operation of the Building
and/or Project and its supporting facilities and such additional facilities, in
excess of the Base Year Operating Expenses, now and in subsequent years as may
be determined by Landlord to be necessary or desirable to the Building and/or
Project.
E. Tenant Audit. If Tenant shall dispute the amount set forth in any
statement provided by Landlord under Paragraph 7.B. or 7.C. above, Tenant shall
have the right, not later than twenty (20) days following receipt of such
statement and upon the condition that Tenant shall first deposit with Landlord
the full amount in dispute, to cause Landlord's books and records with respect
to Operating Expenses for such fiscal year to be audited by certified public
accountants selected by Tenant and subject to Landlord's reasonable right of
approval. The Operating Expense Adjustment shall be appropriately adjusted on
the basis of such audit. If such audit discloses a liability for a refund in
excess of ten percent (10%) of Tenant's Proportionate Share of the Operating
Expenses previously reported, the cost of such audit shall be borne by Landlord;
otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not
request an audit in accordance with the provisions of this Paragraph 7.E. within
twenty (20) days after receipt of Landlord's statement provided pursuant to
Paragraph 7.B. or 7.C., such statement shall be final and binding for all
purposes hereof.
8. INSURANCE AND INDEMNIFICATION
A. Landlord's Insurance. All insurance maintained by Landlord shall be for
the sole benefit of Landlord and under Landlord's sole control.
(1) Property Insurance. Landlord agrees to maintain property insurance
insuring the Building against damage or destruction due to risk including
fire, vandalism, and malicious mischief in an amount not less than the
replacement cost thereof, in the form and with deductibles and endorsements
as selected by Landlord. At its election, Landlord may instead (but shall
have no obligation to) obtain "All Risk" coverage, and may also obtain
earthquake, pollution, and/or flood insurance in amounts selected by
Landlord.
(2) Optional Insurance. Landlord, at Landlord's option, may also (but
shall have no obligation to) carry insurance against loss of rent, in an
amount equal to the amount of Base Rent and Additional Rent that Landlord
could be required to abate to all Building tenants in the event of
condemnation or casualty damage for a period of twelve (12) months.
Landlord may also (but shall have no obligation to) carry such other
insurance as Landlord may deem prudent or advisable, including, without
limitation, liability insurance in such amounts and on such terms as
Landlord shall determine. Landlord shall not be obligated to insure, and
shall have no responsibility whatsoever for any damage to, any furniture,
machinery, goods, inventory or supplies, or other personal property or
fixtures which Tenant may keep or maintain in the Premises, or any
leasehold improvements, additions or alterations within the Premises.
B. Tenant's Insurance.
(1) Property Insurance. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term, insurance on all personal property and fixtures
of Tenant and all improvements, additions or alterations made by or for
Tenant to the Premises on an "All Risk" basis, insuring such property for
the full replacement value of such property.
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(2) Liability Insurance. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term Commercial General Liability insurance covering
bodily injury and property damage liability occurring in or about the
Premises or arising out of the use and occupancy of the Premises and the
Project, and any part of either, and any areas adjacent thereto, and the
business operated by Tenant or by any other occupant of the Premises. Such
insurance shall include contractual liability insurance coverage insuring
all of Tenant's indemnity obligations under this Lease. Such coverage
shall have a minimum combined single limit of liability of at least Two
Million Dollars ($2,000,000.00), and a minimum general aggregate limit of
Three Million Dollars ($3,000,000.00), with an "Additional Insured -
Managers or Lessors of Premises Endorsement." All such policies shall be
written to apply to all bodily injury (including death), property damage or
loss, personal and advertising injury and other covered loss, however
occasioned, occurring during the policy term, shall be endorsed to add
Landlord and any party holding an interest to which this Lease may be
subordinated as an additional insured, and shall provide that such coverage
shall be "primary" and non-contributing with any insurance maintained by
Landlord, which shall be excess insurance only. Such coverage shall also
contain endorsements including employees as additional insureds if not
covered by Tenant's Commercial General Liability Insurance. All such
insurance shall provide for the severability of interests of insureds; and
shall be written on an "occurrence" basis, which shall afford coverage for
all claims based on acts, omissions, injury and damage, which occurred or
arose (or the onset of which occurred or arose) in whole or in part during
the policy period.
(3) Workers' Compensation and Employers' Liability Insurance. Tenant
shall carry Workers' Compensation Insurance as required by any Regulation,
throughout the Term at Tenant's sole cost and expense. Tenant shall also
carry Employers' Liability Insurance in amounts not less than One Million
Dollars ($1,000,000) each accident for bodily injury by accident; One
Million Dollars ($1,000,000) policy limit for bodily injury by disease; and
One Million Dollars ($1,000,000) each employee for bodily injury by
disease, throughout the Term at Tenant's sole cost and expense.
(4) General Insurance Requirements. All coverages described in this
Paragraph 8.B. shall be endorsed to (i) provide Landlord with thirty (30)
days' notice of cancellation or change in terms; and (ii) waive all rights
of subrogation by the insurance carrier against Landlord. If at any time
during the Term the amount or coverage of insurance which Tenant is
required to carry under this Paragraph 8.B. is, in Landlord's reasonable
judgment, materially less than the amount or type of insurance coverage
typically carried by owners or tenants of properties located in the general
area in which the Premises are located which are similar to and operated
for similar purposes as the Premises or if Tenant's use of the Premises
should change with or without Landlord's consent, Landlord shall have the
right to require Tenant to increase the amount or change the types of
insurance coverage required under this Paragraph 8.B. All insurance
policies required to be carried by Tenant under this Lease shall be written
by companies rated A X or better in "Best's Insurance Guide" and authorized
to do business in the State of Washington. In any event deductible amounts
under all insurance policies required to be carried by Tenant under this
Lease shall not exceed Five Thousand Dollars ($5,000.00) per occurrence.
Tenant shall deliver to Landlord on or before the Term Commencement Date,
and thereafter at least thirty (30) days before the expiration dates of the
expired policies, certified copies of Tenant's insurance policies, or a
certificate evidencing the same issued by the insurer thereunder; and, if
Tenant shall fail to procure such insurance, or to deliver such policies or
certificates, Landlord may, at Landlord's option and in addition to
Landlord's other remedies in the event of a default by Tenant hereunder,
procure the same for the account of Tenant, and the cost thereof shall be
paid to Landlord as Additional Rent.
C. Indemnification. Tenant shall indemnify, defend by counsel reasonably
acceptable to Landlord, protect and hold Landlord harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, liens, damages,
injuries or expenses, including reasonable attorneys' and consultants' fees and
court costs, demands, causes of action, or judgments, directly or indirectly
arising out of or related to: (1) claims of injury to or death of persons or
damage to property occurring or resulting directly or indirectly from the use or
occupancy of the Premises, Building or Project by Tenant or Tenant's Parties, or
from activities or failures to act of Tenant or Tenant's Parties; (2) claims
arising from work or labor performed, or for materials or supplies furnished to
or at the request or for the account of Tenant in connection with performance of
any work done for the account of Tenant within the Premises or Project; (3)
claims arising from any breach or default on the part of Tenant in the
performance of any covenant contained in this Lease; and (4) claims arising from
the negligence or intentional acts or omissions of Tenant or Tenant's Parties.
The foregoing indemnity by Tenant shall not be applicable to claims to the
extent arising from the gross negligence or willful misconduct of Landlord.
Landlord shall not be liable to Tenant and Tenant hereby waives all claims
against Landlord for any injury or damage to any person or property in or about
the Premises, Building or Project by or from any cause whatsoever (other than
Landlord's gross negligence or willful misconduct) and, without limiting the
generality of the foregoing, whether caused by water leakage of any character
from the roof, walls, basement or other portion of the Premises, Building or
Project, or caused by gas, fire, oil or electricity in, on or about the
Premises, Building or Project. The provisions of this Paragraph shall survive
the expiration or earlier termination of this Lease.
9. WAIVER OF SUBROGATION
To the extent permitted by law and without affecting the coverage provided
by insurance to be maintained hereunder or any other rights or remedies,
Landlord and Tenant each waive any right to recover against the other for: (a)
damages for injury to or death of persons; (b) damages to property, including
personal property; (c) damages to the Premises or any part thereof; and (d)
claims arising by reason of the foregoing due to hazards covered by insurance
maintained or required to be maintained pursuant to this Lease to the extent of
proceeds recovered therefrom, or proceeds which would have been recoverable
therefrom in the case of the failure of any party to maintain any insurance
coverage required to be maintained by such party pursuant to this Lease. This
provision is intended to waive fully, any rights and/or claims arising by reason
of the foregoing, but only to the extent that any of the foregoing damages
and/or claims referred to above are covered or would be covered, and only to the
extent of such coverage, by insurance actually carried or required to be
maintained pursuant to this Lease by either Landlord or Tenant. This provision
is also intended to waive fully, and for the benefit of each party, any rights
and/or claims which might give rise to a right of subrogation on any insurance
carrier. Subject to all qualifications of this Paragraph 9, Landlord waives its
rights as specified in this Paragraph 9 with respect to any subtenant that it
has approved pursuant to Paragraph 21 but only in exchange for the written
waiver of such rights to be given by such subtenant to Landlord upon such
subtenant taking possession of the Premises or a portion thereof. Each party
shall cause each insurance policy obtained by it to provide that the insurance
company waives all right of recovery by way of subrogation against either party
in connection with any damage covered by any policy.
10. LANDLORD'S REPAIRS AND MAINTENANCE
Landlord shall at Landlord's expense maintain in good repair, reasonable
wear and tear excepted, the structural soundness of the roof, foundations, and
exterior walls of the Building. The term "exterior walls" as used herein shall
not include windows, glass or plate glass, doors, special store fronts or office
entries. Any damage caused by or repairs necessitated by any negligence or act
of Tenant or Tenant's Parties may be repaired by Landlord at Landlord's option
and Tenant's expense. Tenant shall immediately give Landlord written notice of
any defect or need of repairs in such components of the Building for which
Landlord is responsible, after which Landlord shall have a reasonable
opportunity and the right to enter the Premises at all reasonable times to
repair same. Landlord's liability with respect to any defects, repairs, or
maintenance for which Landlord is responsible under any of the provisions of
this Lease shall be limited to the cost of such repairs or maintenance, and
there shall be no abatement of rent and no liability of Landlord by reason of
any injury to or interference with Tenant's business arising from the making of
repairs, alterations or improvements in or to any portion of the Premises, the
Building or the Project or to fixtures, appurtenances or equipment in the
Building, except as provided in Paragraph 24. By taking possession of the
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Premises, Tenant accepts them "as is," as being in good order, condition and
repair and the condition in which Landlord is obligated to deliver them and
suitable for the Permitted Use and Tenant's intended operations in the Premises,
whether or not any notice of acceptance is given.
11. TENANT'S REPAIRS AND MAINTENANCE
Tenant shall at all times during the Term at Tenant's expense maintain all
parts of the Premises and such portions of the Building as are within the
exclusive control of Tenant in a first-class, good, clean and secure condition
and promptly make all necessary repairs and replacements, as determined by
Landlord, with materials and workmanship of the same character, kind and quality
as the original. Notwithstanding anything to the contrary contained herein,
Tenant shall, at its expense, promptly repair any damage to the Premises or the
Building or Project resulting from or caused by any negligence or act of Tenant
or Tenant's Parties. Nothing herein shall expressly or by implication render
Tenant Landlord's agent or contractor to effect any repairs or maintenance
required of Tenant under this Paragraph 11, as to all of which Tenant shall be
solely responsible.
12. ALTERATIONS
A. Tenant shall not make, or allow to be made, any alterations, physical
additions, improvements or partitions, including without limitation the
attachment of any fixtures or equipment, in, about or to the Premises
("Alterations") without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld with respect to proposed Alterations
which: (a) comply with all applicable Regulations; (b) are, in Landlord's
opinion, compatible with the Building or the Project and its mechanical,
plumbing, electrical, heating/ventilation/air conditioning systems, and will not
cause the Building or Project or such systems to be required to be modified to
comply with any Regulations (including, without limitation, the Americans With
Disabilities Act); and (c) will not interfere with the use and occupancy of any
other portion of the Building or Project by any other tenant or its invitees.
Specifically, but without limiting the generality of the foregoing, Landlord
shall have the right of written consent for all plans and specifications for the
proposed Alterations, construction means and methods, all appropriate permits
and licenses, any contractor or subcontractor to be employed on the work of
Alterations, and the time for performance of such work, and may impose rules and
regulations for contractors and subcontractors performing such work. Tenant
shall also supply to Landlord any documents and information reasonably requested
by Landlord in connection with Landlord's consideration of a request for
approval hereunder. Tenant shall cause all Alterations to be accomplished in a
first-class, good and workmanlike manner, and to comply with all applicable
Regulations and Paragraph 27 hereof. Tenant shall at Tenant's sole expense,
perform any additional work required under applicable Regulations due to the
Alterations hereunder. No review or consent by Landlord of or to any proposed
Alteration or additional work shall constitute a waiver of Tenant's obligations
under this Paragraph 12, nor constitute any warranty or representation that the
same complies with all applicable Regulations, for which Tenant shall at all
times be solely responsible. Tenant shall reimburse Landlord for all costs
which Landlord may incur in connection with granting approval to Tenant for any
such Alterations, including any costs or expenses which Landlord may incur in
electing to have outside architects and engineers review said plans and
specifications, and shall pay Landlord an administration fee of fifteen percent
(15%) of the cost of the Alterations as Additional Rent hereunder. All such
Alterations shall remain the property of Tenant until the expiration or earlier
termination of this Lease, at which time they shall be and become the property
of Landlord; provided, however, that Landlord may, at Landlord's option, require
that Tenant, at Tenant's expense, remove any or all Alterations made by Tenant
and restore the Premises by the expiration or earlier termination of this Lease,
to their condition existing prior to the construction of any such Alterations.
All such removals and restoration shall be accomplished in a first-class and
good and workmanlike manner so as not to cause any damage to the Premises or
Project whatsoever. If Tenant fails to remove such Alterations or Tenant's
trade fixtures or furniture or other personal property, Landlord may keep and
use them or remove any of them and cause them to be stored or sold in accordance
with applicable law, at Tenant's sole expense. In addition to and wholly apart
from Tenant's obligation to pay Tenant's Proportionate Share of Operating
Expenses, Tenant shall be responsible for and shall pay prior to delinquency any
taxes or governmental service fees, possessory interest taxes, fees or charges
in lieu of any such taxes, capital levies, or other charges imposed upon, levied
with respect to or assessed against its fixtures or personal property, on the
value of Alterations within the Premises, and on Tenant's interest pursuant to
this Lease, or any increase in any of the foregoing based on such Alterations.
To the extent that any such taxes are not separately assessed or billed to
Tenant, Tenant shall pay the amount thereof as invoiced to Tenant by Landlord.
Notwithstanding the foregoing, at Landlord's option (but without obligation),
all or any portion of the Alterations shall be performed by Landlord for
Tenant's account and Tenant shall pay Landlord's estimate of the cost thereof
(including a reasonable charge for Landlord's overhead and profit) prior to
commencement of the work. In addition, at Landlord's election and
notwithstanding the foregoing, however, Tenant shall pay to Landlord the cost of
removing any such Alterations and restoring the Premises to their original
condition such cost to include a reasonable charge for Landlord's overhead and
profit as provided above, and such amount may be deducted from the Security
Deposit or any other sums or amounts held by Landlord under this Lease.
B. In compliance with Paragraph 27 hereof, at least ten (10) business days
before beginning construction of any Alteration, Tenant shall give Landlord
written notice of the expected commencement date of that construction to permit
Landlord to post and record a notice of non-responsibility. Upon substantial
completion of construction, if the law so provides, Tenant shall cause a timely
notice of completion to be recorded in the office of the recorder of the county
in which the Building is located.
13. SIGNS
Tenant shall not place, install, affix, paint or maintain any signs, notices,
graphics or banners whatsoever or any window decor which is visible in or from
public view or corridors, the common areas or the exterior of the Premises or
the Building, in or on any exterior window or window fronting upon any common
areas or service area without Landlord's prior written approval which Landlord
shall have the right to withhold in its absolute and sole discretion; provided
that Tenant's name shall be included in any Building-standard door and directory
signage, if any, in accordance with Landlord's Building signage program,
including without limitation, payment by Tenant of any fee charged by Landlord
for maintaining such signage, which fee shall constitute Additional Rent
hereunder. Any installation of signs, notices, graphics or banners on or about
the Premises or Project approved by Landlord shall be subject to any Regulations
and to any other requirements imposed by Landlord. Tenant shall remove all such
signs or graphics by the expiration or any earlier termination of this Lease.
Such installations and removals shall be made in such manner as to avoid injury
to or defacement of the Premises, Building or Project and any other improvements
contained therein, and Tenant shall repair any injury or defacement including
without limitation discoloration caused by such installation or removal.
14. INSPECTION/POSTING NOTICES
After reasonable notice, except in emergencies where no such notice shall be
required, Landlord and Landlord's agents and representatives, shall have the
right to enter the Premises to inspect the same, to clean, to perform such work
as may be permitted or required hereunder, to make repairs, improvements or
alterations to the Premises, Building or Project or to other tenant spaces
therein, to deal with emergencies, to post such notices as may be permitted or
required by law to prevent the perfection of liens against Landlord's interest
in the Project or to exhibit the Premises to prospective tenants, purchasers,
encumbrancers or to others, or for any other purpose as Landlord may deem
necessary or desirable; provided, however, that Landlord shall use reasonable
efforts not to unreasonably interfere with Tenant's business operations. Tenant
shall not be entitled to any abatement of Rent by reason of the exercise of any
such right of entry. Tenant waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of
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the Premises, and any other loss occasioned thereby. Landlord shall at all times
have and retain a key with which to unlock all of the doors in, upon and about
the Premises, excluding Tenant's vaults and safes or special security areas
(designated in advance), and Landlord shall have the right to use any and all
means which Landlord may deem necessary or proper to open said doors in an
emergency, in order to obtain entry to any portion of the Premises, and any
entry to the Premises or portions thereof obtained by Landlord by any of said
means, or otherwise, shall not be construed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an eviction, actual or constructive, of
Tenant from the Premises or any portions thereof. At any time within six (6)
months prior to the expiration of the Term or following any earlier termination
of this Lease or agreement to terminate this Lease, Landlord shall have the
right to erect on the Premises, Building and/or Project a suitable sign
indicating that the Premises are available for lease.
15. SERVICES AND UTILITIES
A. Provided Tenant shall not be in default hereunder, and subject to the
provisions elsewhere herein contained and to the rules and regulations of the
Building, Landlord shall furnish to the Premises during ordinary business hours
of generally recognized business days, to be determined by Landlord (but
exclusive, in any event, of Saturdays, Sundays and legal holidays), water for
lavatory and drinking purposes and electricity, heat and air conditioning as
usually furnished or supplied for use of the Premises for reasonable and normal
office use as of the date Tenant takes possession of the Premises as determined
by Landlord (but not including above-standard or continuous cooling for
excessive heat-generating machines, excess lighting or equipment), janitorial
services during the times and in the manner that such services are, in
Landlord's judgment, customarily furnished in comparable office buildings in the
immediate market area, and elevator service, which shall mean service either by
nonattended automatic elevators or elevators with attendants, or both, at the
option of Landlord. Tenant acknowledges that Tenant has inspected and accepts
the water, electricity, heat and air conditioning and other utilities and
services being supplied or furnished to the Premises as of the date Tenant takes
possession of the Premises, as being sufficient for use of the Premises for
reasonable and normal office use in their present condition, "as is," and
suitable for the Permitted Use, and for Tenant's intended operations in the
Premises. Landlord shall have no obligation to provide additional or after-
hours electricity, heating or air conditioning, but if Landlord elects to
provide such services at Tenant's request, Tenant shall pay to Landlord a
reasonable charge for such services as determined by Landlord. Tenant agrees to
keep and cause to be kept closed all window covering when necessary because of
the sun's position, and Tenant also agrees at all times to cooperate fully with
Landlord and to abide by all of the regulations and requirements which Landlord
may prescribe for the proper functioning and protection of electrical, heating,
ventilating and air conditioning systems. Wherever heat-generating machines,
excess lighting or equipment are used in the Premises which affect the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, shall be paid by Tenant to Landlord upon
demand by Landlord.
B. Tenant shall not without written consent of Landlord use any apparatus,
equipment or device in the Premises, including without limitation, computers,
electronic data processing machines, copying machines, and other machines, using
excess lighting or using electric current, water, or any other resource in
excess of or which will in any way increase the amount of electricity, water, or
any other resource being furnished or supplied for the use of the Premises for
reasonable and normal office use, in each case as of the date Tenant takes
possession of the Premises as determined by Landlord, or which will require
additions or alterations to or interfere with the Building power distribution
systems; nor connect with electric current, except through existing electrical
outlets in the Premises or water pipes, any apparatus, equipment or device for
the purpose of using electrical current, water, or any other resource. If
Tenant shall require water or electric current or any other resource in excess
of that being furnished or supplied for the use of the Premises as of the date
Tenant takes possession of the Premises as determined by Landlord, Tenant shall
first procure the written consent of Landlord which Landlord may refuse, to the
use thereof, and Landlord may cause a special meter to be installed in the
Premises so as to measure the amount of water, electric current or other
resource consumed for any such other use. Tenant shall pay directly to Landlord
as an addition to and separate from payment of Operating Expenses the cost of
all such additional resources, energy, utility service and meters (and of
installation, maintenance and repair thereof and of any additional circuits or
other equipment necessary to furnish such additional resources, energy, utility
or service). Landlord may add to the separate or metered charge a recovery of
additional expense incurred in keeping account of the excess water, electric
current or other resource so consumed. Landlord shall not be liable for any
damages directly or indirectly resulting from nor shall the Rent or any monies
owed Landlord under this Lease herein reserved be abated by reason of: (a) the
installation, use or interruption of use of any equipment used in connection
with the furnishing of any such utilities or services, or any change in the
character or means of supplying or providing any such utilities or services or
any supplier thereof; (b) the failure to furnish or delay in furnishing any such
utilities or services when such failure or delay is caused by acts of God or the
elements, labor disturbances of any character, or any other accidents or other
conditions beyond the reasonable control of Landlord or because of any
interruption of service due to Tenant's use of water, electric current or other
resource in excess of that being supplied or furnished for the use of the
Premises as of the date Tenant takes possession of the Premises; (c) the
inadequacy, limitation, curtailment, rationing or restriction on use of water,
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Premises or Project, whether by Regulation or otherwise;
or (d) the partial or total unavailability of any such utilities or services to
the Premises or the Building, whether by Regulation or otherwise; nor shall any
such occurrence constitute an actual or constructive eviction of Tenant.
Landlord shall further have no obligation to protect or preserve any apparatus,
equipment or device installed by Tenant in the Premises, including without
limitation by providing additional or after-hours heating or air conditioning.
Landlord shall be entitled to cooperate voluntarily and in a reasonable manner
with the efforts of national, state or local governmental agencies or utility
suppliers in reducing energy or other resource consumption. The obligation to
make services available hereunder shall be subject to the limitations of any
such voluntary, reasonable program. In addition, Landlord reserves the right to
change the supplier or provider of any such utility or service from time to
time. Tenant shall have no right to contract with or otherwise obtain any
electrical or other such service for or with respect to the Premises or Tenant's
operations therein from any supplier or provider of any such service. Tenant
shall cooperate with Landlord and any supplier or provider of such services
designated by Landlord from time to time to facilitate the delivery of such
services to Tenant at the Premises and to the Building and Project, including
without limitation allowing Landlord and Landlord's suppliers or providers, and
their respective agents and contractors, reasonable access to the Premises for
the purpose of installing, maintaining, repairing, replacing or upgrading such
service or any equipment or machinery associated therewith.
C. Tenant shall pay, upon demand, for all utilities furnished to the Premises,
or if not separately billed to or metered to Tenant, Tenant's Proportionate
Share of all charges jointly serving the Project in accordance with Paragraph 7.
All sums payable under this Paragraph 15 shall constitute Additional Rent
hereunder.
16. SUBORDINATION
Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, the Lease shall be and is hereby
declared to be subject and subordinate at all times to: (a) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises and Project are situated, or
both; and (b) any mortgage or deed of trust which may now exist or be placed
upon the Building, the Project and/or the land upon which the Premises or the
Project are situated, or said ground leases or underlying leases, or Landlord's
interest or estate in any of said items which is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or any such
liens to this Lease. If any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord provided that Tenant shall not be disturbed in its possession under
this Lease by such successor in interest so long as Tenant is not in default
under this Lease. Within ten (10) days after request by Landlord,
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Tenant shall execute and deliver any additional documents evidencing Tenant's
attornment or the subordination of this Lease with respect to any such ground
leases or underlying leases or any such mortgage or deed of trust, in the form
requested by Landlord or by any ground landlord, mortgagee, or beneficiary under
a deed of trust, subject to such nondisturbance requirement. If requested in
writing by Tenant, Landlord shall use commercially reasonable efforts to obtain
a subordination, nondisturbance and attornment agreement for the benefit of
Tenant reflecting the foregoing from any ground landlord, mortgagee or
beneficiary, at Tenant's expense, subject to such other terms and conditions as
the ground landlord, mortgagee or beneficiary may require.
17. FINANCIAL STATEMENTS
At the request of Landlord from time to time, Tenant shall provide to Landlord
Tenant's and any guarantor's current financial statements or other information
discussing financial worth of Tenant and any guarantor, which Landlord shall use
solely for purposes of this Lease and in connection with the ownership,
management, financing and disposition of the Project.
18. ESTOPPEL CERTIFICATE
Tenant agrees from time to time, within ten (10) days after request of Landlord,
to deliver to Landlord, or Landlord's designee, an estoppel certificate stating
that this Lease is in full force and effect, that this Lease has not been
modified (or stating all modifications, written or oral, to this Lease), the
date to which Rent has been paid, the unexpired portion of this Lease, that
there are no current defaults by Landlord or Tenant under this Lease (or
specifying any such defaults), that the leasehold estate granted by this Lease
is the sole interest of Tenant in the Premises and/or the land at which the
Premises are situated, and such other matters pertaining to this Lease as may be
reasonably requested by Landlord or any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or Project or any interest therein.
Failure by Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that the statements
included are true and correct without exception. Tenant agrees that if Tenant
fails to execute and deliver such certificate within such ten (10) day period,
Landlord may execute and deliver such certificate on Tenant's behalf and that
such certificate shall be binding on Tenant. Landlord and Tenant intend that
any statement delivered pursuant to this Paragraph may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the Building or
Project or any interest therein. The parties agree that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of the Lease, and shall be an event of default (without
any cure period that might be provided under Paragraph 26.A(3) of this Lease) if
Tenant fails to fully comply or makes any material misstatement in any such
certificate.
19. SECURITY DEPOSIT
Tenant agrees to deposit with Landlord upon execution of this Lease, a security
deposit as stated in the Basic Lease Information (the "Security Deposit"), which
sum shall be held and owned by Landlord, without obligation to pay interest, as
security for the performance of Tenant's covenants and obligations under this
Lease. The Security Deposit is not an advance rental deposit or a measure of
damages incurred by Landlord in case of Tenant's default. Upon the occurrence
of any event of default by Tenant, Landlord may from time to time, without
prejudice to any other remedy provided herein or by law, use such fund as a
credit to the extent necessary to credit against any arrears of Rent or other
payments due to Landlord hereunder, and any other damage, injury, expense or
liability caused by such event of default, and Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the Security Deposit to its
original amount. Although the Security Deposit shall be deemed the property of
Landlord, any remaining balance of such deposit shall be returned by Landlord to
Tenant at such time after termination of this Lease that all of Tenant's
obligations under this Lease have been fulfilled, reduced by such amounts as may
be required by Landlord to remedy defaults on the part of Tenant in the payment
of Rent or other obligations of Tenant under this Lease, to repair damage to the
Premises, Building or Project caused by Tenant or any Tenant's Parties and to
clean the Premises. Landlord may use and commingle the Security Deposit with
other funds of Landlord.
20. LIMITATION OF TENANT'S REMEDIES
The obligations and liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease are not personal obligations of Landlord or of the
individual or other partners of Landlord or its or their partners, directors,
officers, or shareholders, and Tenant agrees to look solely to Landlord's
interest in the Project for the recovery of any amount from Landlord, and shall
not look to other assets of Landlord nor seek recourse against the assets of the
individual or other partners of Landlord or its or their partners, directors,
officers or shareholders. Any lien obtained to enforce any such judgment and
any levy of execution thereon shall be subject and subordinate to any lien,
mortgage or deed of trust on the Project. Under no circumstances shall Tenant
have the right to offset against or recoup Rent or other payments due and to
become due to Landlord hereunder except as expressly provided in Paragraph 23.B.
below, which Rent and other payments shall be absolutely due and payable
hereunder in accordance with the terms hereof.
21. ASSIGNMENT AND SUBLETTING
A. (1) General. This Lease has been negotiated to be and is granted as an
accommodation to Tenant. Accordingly, this Lease is personal to Tenant, and
Tenant's rights granted hereunder do not include the right to assign this
Lease or sublease the Premises, or to receive any excess, either in
installments or lump sum, over the Rent which is expressly reserved by
Landlord as hereinafter provided, except as otherwise expressly hereinafter
provided. Tenant shall not assign or pledge this Lease or sublet the
Premises or any part thereof, whether voluntarily or by operation of law,
or permit the use or occupancy of the Premises or any part thereof by
anyone other than Tenant, or suffer or permit any such assignment, pledge,
subleasing or occupancy, without Landlord's prior written consent except as
provided herein. If Tenant desires to assign this Lease or sublet any or
all of the Premises, Tenant shall give Landlord written notice (the
"Transfer Notice") at least sixty (60) days prior to the anticipated
effective date of the proposed assignment or sublease, which shall contain
all of the information reasonably requested by Landlord to address
Landlord's decision criteria specified hereinafter. Landlord shall then
have a period of thirty (30) days following receipt of the Transfer Notice
to notify Tenant in writing that Landlord elects either: (i) to terminate
this Lease as to the space so affected as of the date so requested by
Tenant; or (ii) to consent to the proposed assignment or sublease, subject,
however, to Landlord's prior written consent of the proposed assignee or
subtenant and of any related documents or agreements associated with the
assignment or sublease. If Landlord should fail to notify Tenant in writing
of such election within said period, Landlord shall be deemed to have
waived option (i) above, but written consent by Landlord of the proposed
assignee or subtenant shall still be required. If Landlord does not
exercise option (i) above, Landlord's consent to a proposed assignment or
sublease shall not be unreasonably withheld. Consent to any assignment or
subletting shall not constitute consent to any subsequent transaction to
which this Paragraph 21 applies.
(2) Conditions of Landlord's Consent. Without limiting the other
instances in which it may be reasonable for Landlord to withhold Landlord's
consent to an assignment or subletting, Landlord and Tenant acknowledge
that it shall be reasonable for Landlord to withhold Landlord's consent in
the following instances: if the proposed assignee does not agree to be
bound by and assume the obligations of Tenant under this Lease in form and
substance satisfactory to Landlord; the use of the Premises by such
proposed assignee or subtenant would not be a Permitted Use or would
violate any exclusivity or other arrangement which Landlord has with any
other tenant or occupant or any Regulation or would increase the Occupancy
Density or Parking Density of the Building or Project, or would otherwise
result in an undesirable tenant mix for the Project as determined by
Landlord; the proposed assignee or subtenant is not of sound financial
condition as determined by Landlord in Landlord's sole discretion; the
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proposed assignee or subtenant is a governmental agency; the proposed
assignee or subtenant does not have a good reputation as a tenant of
property or a good business reputation; the proposed assignee or subtenant
is a person with whom Landlord is negotiating to lease space in the Project
or is a present tenant of the Project; the assignment or subletting would
entail any Alterations which would lessen the value of the leasehold
improvements in the Premises or use of any Hazardous Materials or other
noxious use or use which may disturb other tenants of the Project; or
Tenant is in default of any obligation of Tenant under this Lease, or
Tenant has defaulted under this Lease on three (3) or more occasions during
any twelve (12) months preceding the date that Tenant shall request
consent. Failure by or refusal of Landlord to consent to a proposed
assignee or subtenant shall not cause a termination of this Lease. Upon a
termination under Paragraph 21.A.(1)(i), Landlord may lease the Premises to
any party, including parties with whom Tenant has negotiated an assignment
or sublease, without incurring any liability to Tenant. At the option of
Landlord, a surrender and termination of this Lease shall operate as an
assignment to Landlord of some or all subleases or subtenancies. Landlord
shall exercise this option by giving notice of that assignment to such
subtenants on or before the effective date of the surrender and
termination. In connection with each request for assignment or subletting,
Tenant shall pay to Landlord Landlord's standard fee for approving such
requests, as well as all costs incurred by Landlord or any mortgagee or
ground lessor in approving each such request and effecting any such
transfer, including, without limitation, reasonable attorneys' fees.
B. Bonus Rent. Any Rent or other consideration realized by Tenant under any
such sublease or assignment in excess of the Rent payable hereunder, after
amortization of a reasonable brokerage commission incurred by Tenant, shall be
divided and paid, ten percent (10%) to Tenant, ninety percent (90%) to Landlord.
In any subletting or assignment undertaken by Tenant, Tenant shall diligently
seek to obtain the maximum rental amount available in the marketplace for
comparable space available for primary leasing.
C. Corporation. If Tenant is a corporation, a transfer of corporate shares by
sale, assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings) resulting in a change in the
present control of such corporation or any of its parent corporations by the
person or persons owning a majority of said corporate shares, shall constitute
an assignment for purposes of this Lease.
D. Unincorporated Entity. If Tenant is a partnership, joint venture,
unincorporated limited liability company or other unincorporated business form,
a transfer of the interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest, inheritance,
operation of law or other disposition, so as to result in a change in the
present control of said entity and/or of the underlying beneficial interests of
said entity and/or a change in the identity of the persons responsible for the
general credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.
E. Liability. No assignment or subletting by Tenant, permitted or otherwise,
shall relieve Tenant of any obligation under this Lease or alter the primary
liability of the Tenant named herein for the payment of Rent or for the
performance of any other obligations to be performed by Tenant, including
obligations contained in Paragraph 25 with respect to any assignee or subtenant.
Landlord may collect rent or other amounts or any portion thereof from any
assignee, subtenant, or other occupant of the Premises, permitted or otherwise,
and apply the net rent collected to the Rent payable hereunder, but no such
collection shall be deemed to be a waiver of this Paragraph 21, or the
acceptance of the assignee, subtenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of the obligations of Tenant under
this Lease. Any assignment or subletting which conflicts with the provisions
hereof shall be void.
22. AUTHORITY
Landlord represents and warrants that it has full right and authority to enter
into this Lease and to perform all of Landlord's obligations hereunder and that
all persons signing this Lease on its behalf are authorized to do. Tenant and
the person or persons, if any, signing on behalf of Tenant, jointly and
severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant's obligations hereunder, and
that all persons signing this Lease on its behalf are authorized to do so.
23. CONDEMNATION
A. Condemnation Resulting in Termination. If the whole or any substantial
part of the Premises should be taken or condemned for any public use under any
Regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the Permitted
Use of the Premises, either party shall have the right to terminate this Lease
at its option. If any material portion of the Building or Project is taken or
condemned for any public use under any Regulation, or by right of eminent
domain, or by private purchase in lieu thereof, Landlord may terminate this
Lease at its option. In either of such events, the Rent shall be abated during
the unexpired portion of this Lease, effective when the physical taking of said
Premises shall have occurred.
B. Condemnation Not Resulting in Termination. If a portion of the Project of
which the Premises are a part should be taken or condemned for any public use
under any Regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the taking prevents or materially interferes with the
Permitted Use of the Premises, and this Lease is not terminated as provided in
Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion
of the Lease shall be reduced, beginning on the date when the physical taking
shall have occurred, to such amount as may be fair and reasonable under all of
the circumstances, but only after giving Landlord credit for all sums received
or to be received by Tenant by the condemning authority. Notwithstanding
anything to the contrary contained in this Paragraph, if the temporary use or
occupancy of any part of the Premises shall be taken or appropriated under power
of eminent domain during the Term, this Lease shall be and remain unaffected by
such taking or appropriation and Tenant shall continue to pay in full all Rent
payable hereunder by Tenant during the Term; in the event of any such temporary
appropriation or taking, Tenant shall be entitled to receive that portion of any
award which represents compensation for the use of or occupancy of the Premises
during the Term, and Landlord shall be entitled to receive that portion of any
award which represents the cost of restoration of the Premises and the use and
occupancy of the Premises.
C. Award. Landlord shall be entitled to (and Tenant shall assign to Landlord)
any and all payment, income, rent, award or any interest therein whatsoever
which may be paid or made in connection with such taking or conveyance and
Tenant shall have no claim against Landlord or otherwise for any sums paid by
virtue of such proceedings, whether or not attributable to the value of any
unexpired portion of this Lease, except as expressly provided in this Lease.
Notwithstanding the foregoing, any compensation specifically and separately
awarded Tenant for Tenant's personal property and moving costs, shall be and
remain the property of Tenant.
24. CASUALTY DAMAGE
A. General. If the Premises or Building should be damaged or destroyed by
fire, tornado, or other casualty (collectively, "Casualty"), Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
Landlord's receipt of such notice, Landlord shall notify Tenant whether in
Landlord's estimation material restoration of the Premises can reasonably be
made within one hundred eighty (180) days from the date of such notice and
receipt of required permits for such restoration. Landlord's determination
shall be binding on Tenant.
B. Within 180 Days. If the Premises or Building should be damaged by Casualty
to such extent that material restoration can in Landlord's estimation be
reasonably completed within one hundred eighty (180) days after the date of such
notice and receipt of required
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permits for such restoration, this Lease shall not terminate. Provided that
insurance proceeds are received by Landlord to fully repair the damage, Landlord
shall proceed to rebuild and repair the Premises in the manner determined by
Landlord, except that Landlord shall not be required to rebuild, repair or
replace any part of the Alterations which may have been placed on or about the
Premises by Tenant. If the Premises are untenantable in whole or in part
following such damage, the Rent payable hereunder during the period in which
they are untenantable shall be abated proportionately, but only to the extent of
rental abatement insurance proceeds received by Landlord during the time and to
the extent the Premises are unfit for occupancy.
C. Greater than 180 Days. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs cannot in Landlord's
estimation be reasonably completed within one hundred eighty (180) days after
the date of such notice and receipt of required permits for such rebuilding or
repair, then Landlord shall have the option of either: (1) terminating this
Lease effective upon the date of the occurrence of such damage, in which event
the Rent shall be abated during the unexpired portion of this Lease; or (2)
electing to rebuild or repair the Premises diligently and in the manner
determined by Landlord. Landlord shall notify Tenant of its election within
thirty (30) days after Landlord's receipt of notice of the damage or
destruction. Notwithstanding the above, Landlord shall not be required to
rebuild, repair or replace any part of any Alterations which may have been
placed, on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.
D. Tenant's Fault. Notwithstanding anything herein to the contrary, if the
Premises or any other portion of the Building are damaged by Casualty resulting
from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's
Parties, Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and expense
of the repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds.
E. Insurance Proceeds. Notwithstanding anything herein to the contrary, if
the Premises or Building are damaged or destroyed and are not fully covered by
the insurance proceeds received by Landlord or if the holder of any indebtedness
secured by a mortgage or deed of trust covering the Premises requires that the
insurance proceeds be applied to such indebtedness, then in either case Landlord
shall have the right to terminate this Lease by delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to
Landlord that said damage or destruction is not fully covered by insurance or
such requirement is made by any such holder, as the case may be, whereupon this
Lease shall terminate.
F. Waiver. This Paragraph 24 shall be Tenant's sole and exclusive remedy in
the event of damage or destruction to the Premises or the Building. As a
material inducement to Landlord entering into this Lease, Tenant hereby waives
any rights it may have under any law, statute or ordinance now or hereafter in
effect or also with respect to any destruction of the Premises, Landlord's
obligation for tenantability of the Premises and Tenant's right to make repairs
and deduct the expenses of such repairs.
G. Tenant's Personal Property. In the event of any damage or destruction of
the Premises or the Building, under no circumstances shall Landlord be required
to repair any injury or damage to, or make any repairs to or replacements of,
Tenant's personal property.
25. HOLDING OVER
Unless Landlord expressly consents in writing to Tenant's holding over, Tenant
shall be unlawfully and illegally in possession of the Premises, whether or not
Landlord accepts any rent from Tenant or any other person while Tenant remains
in possession of the Premises without Landlord's written consent. If Tenant
shall retain possession of the Premises or any portion thereof without
Landlord's consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
triple the amount of daily rental as of the last month prior to the date of
expiration or earlier termination. Tenant shall also indemnify, defend, protect
and hold Landlord harmless from any loss, liability or cost, including
consequential and incidental damages and reasonable attorneys' fees, incurred by
Landlord resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by the succeeding tenant founded on such
delay. Acceptance of Rent by Landlord following expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, shall not constitute a renewal of this Lease, and nothing contained in
this Paragraph 25 shall waive Landlord's right of reentry or any other right.
Additionally, if upon expiration or earlier termination of this Lease, or
following demand by Landlord for possession of the Premises, Tenant has not
fulfilled its obligation with respect to repairs and cleanup of the Premises or
any other Tenant obligations as set forth in this Lease, then Landlord shall
have the right to perform any such obligations as it deems necessary at Tenant's
sole cost and expense, and any time required by Landlord to complete such
obligations shall be considered a period of holding over and the terms of this
Paragraph 25 shall apply. The provisions of this Paragraph 25 shall survive any
expiration or earlier termination of this Lease.
26. DEFAULT
A. Events of Default. The occurrence of any of the following shall constitute
an event of default on the part of Tenant:
(1) Abandonment. Abandonment or vacation of the Premises for a continuous
period in excess of five (5) days.
(2) Nonpayment of Rent. Failure to pay any installment of Rent or any
other amount due and payable hereunder upon the date when said payment is
due, as to which time is of the essence.
(3) Other Obligations. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in
subparagraphs (1) and (2) of this Paragraph 26.A., such failure continuing
for fifteen (15) days after written notice of such failure, as to which
time is of the essence.
(4) General Assignment. A general assignment by Tenant for the benefit of
creditors.
(5) Bankruptcy. The filing of any voluntary petition in bankruptcy by
Tenant, or the filing of an involuntary petition by Tenant's creditors,
which involuntary petition remains undischarged for a period of thirty (30)
days. If under applicable law, the trustee in bankruptcy or Tenant has the
right to affirm this Lease and continue to perform the obligations of
Tenant hereunder, such trustee or Tenant shall, in such time period as may
be permitted by the bankruptcy court having jurisdiction, cure all defaults
of Tenant hereunder outstanding as of the date of the affirmance of this
Lease and provide to Landlord such adequate assurances as may be necessary
to ensure Landlord of the continued performance of Tenant's obligations
under this Lease.
(6) Receivership. The employment of a receiver to take possession of
substantially all of Tenant's assets or Tenant's leasehold of the Premises,
if such appointment remains undismissed or undischarged for a period of
fifteen (15) days after the order therefor.
(7) Attachment. The attachment, execution or other judicial seizure of
all or substantially all of Tenant's assets or Tenant's leasehold of the
Premises, if such attachment or other seizure remains undismissed or
undischarged for a period of fifteen (15) days after the levy thereof.
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(8) Insolvency. The admission by Tenant in writing of its inability to
pay its debts as they become due.
B. Remedies Upon Default.
(1) Termination. In the event of the occurrence of any event of default,
Landlord shall have the right to give a written termination notice to
Tenant, and on the date specified in such notice, Tenant's right to
possession shall terminate, and this Lease shall terminate unless on or
before such date all Rent in arrears and all costs and expenses incurred by
or on behalf of Landlord hereunder shall have been paid by Tenant and all
other events of default of this Lease by Tenant at the time existing shall
have been fully remedied to the satisfaction of Landlord. At any time after
such termination, Landlord may recover possession of the Premises or any
part thereof and expel and remove therefrom Tenant and any other person
occupying the same, including any subtenant or subtenants notwithstanding
Landlord's consent to any sublease, by any lawful means, and again
repossess and enjoy the Premises without prejudice to any of the remedies
that Landlord may have under this Lease, or at law or equity by any reason
of Tenant's default or of such termination. Landlord hereby reserves the
right, but shall not have the obligation, to recognize the continued
possession of any subtenant. The delivery or surrender to Landlord by or on
behalf of Tenant of keys, entry codes, or other means to bypass security at
the Premises shall not terminate this Lease.
(2) Continuation After Default. Even though an event of default may have
occurred, this Lease shall continue in effect for so long as Landlord does
not terminate Tenant's right to possession under Paragraph 26.B.(1) hereof,
and Landlord may enforce all of Landlord's rights and remedies under this
Lease and at law or in equity, including without limitation, the right to
recover Rent as it becomes due. Acts of maintenance, preservation or
efforts to lease the Premises or the appointment of a receiver under
application of Landlord to protect Landlord's interest under this Lease or
other entry by Landlord upon the Premises shall not constitute an election
to terminate Tenant's right to possession.
(3) Increased Security Deposit. If Tenant is in default under Paragraph
26.A.(2) hereof and such default remains uncured for ten (10) days after
such occurrence or such default occurs more than three times in any twelve
(12) month period, Landlord may require that Tenant increase the Security
Deposit to the amount of three times the current month's Rent at the time
of the most recent default.
C. Damages After Default. Should Landlord terminate this Lease pursuant to
the provisions of Paragraph 26.B.(1) hereof, Landlord shall have the rights and
remedies to which Landlord may be entitled under this Lease or under applicable
law or at equity. In addition, Landlord shall be entitled to recover from
Tenant: (1) the unpaid Rent and other amounts which had been earned at the time
of termination, (2) the amount by which the unpaid Rent and other amounts that
would have been earned after the date of termination until the time of award
exceeds the amount of such Rent loss that Tenant proves could have been
reasonably avoided; (3) the amount by which the unpaid Rent and other amounts
for the balance of the Term after the time of award exceeds the amount of such
Rent loss that the Tenant proves could be reasonably avoided; and (4) any other
amount and court costs necessary to compensate Landlord for all detriment
proximately caused by Tenant's failure to perform Tenant's obligations under
this Lease or which, in the ordinary course of things, would be likely to result
therefrom. If this Lease provides for any periods during the Term during which
Tenant is not required to pay Base Rent or if Tenant otherwise receives a Rent
concession, then upon the occurrence of an event of default, Tenant shall owe to
Landlord the full amount of such Base Rent or value of such Rent concession,
plus interest at the Applicable Interest Rate (defined below), calculated from
the date that such Base Rent or Rent concession would have been payable.
D. Late Charge. In addition to its other remedies, Landlord shall have the
right without notice or demand to add to the amount of any payment required to
be made by Tenant hereunder, and which is not paid and received by Landlord on
or before the first day of each calendar month, an amount equal to ten percent
(10%) of the delinquency for each month or portion thereof that the delinquency
remains outstanding to compensate Landlord for the loss of the use of the amount
not paid and the administrative costs caused by the delinquency, the parties
agreeing that Landlord's damage by virtue of such delinquencies would be
extremely difficult and impracticable to compute and the amount stated herein
represents a reasonable estimate thereof. Any waiver by Landlord of any late
charges or failure to claim the same shall not constitute a waiver of other late
charges or any other remedies available to Landlord.
E. Interest. Interest shall accrue on all sums not paid when due hereunder at
the lesser of eighteen percent (18%) per annum or the maximum interest rate
allowed by law ("Applicable Interest Rate") from the due date until paid.
F. Remedies Cumulative. All rights, privileges and elections or remedies of
the parties are cumulative and not alternative, to the extent permitted by law
and except as otherwise provided herein.
27. LIENS
Tenant shall at all times keep the Premises and the Project free from liens
arising out of or related to work or services performed, materials or supplies
furnished or obligations incurred by or on behalf of Tenant or in connection
with work made, suffered or done by or on behalf of Tenant in or on the Premises
or Project. If Tenant shall not, within ten (10) days following the imposition
of any such lien, cause the same to be released of record by payment or posting
of a proper bond, Landlord shall have, in addition to all other remedies
provided herein and by law, the right, but not the obligation, to cause the same
to be released by such means as Landlord shall deem proper, including payment of
the claim giving rise to such lien. All sums paid by Landlord on behalf of
Tenant and all expenses incurred by Landlord in connection therefor shall be
payable to Landlord by Tenant on demand with interest at the Applicable Interest
Rate as Additional Rent. Landlord shall have the right at all times to post and
keep posted on the Premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord, the Premises, the
Project and any other party having an interest therein, from mechanics' and
materialmen's liens, and Tenant shall give Landlord not less than ten (10)
business days prior written notice of the commencement of any work in the
Premises or Project which could lawfully give rise to a claim for mechanics' or
materialmen's liens to permit Landlord to post and record a timely notice of
non-responsibility, as Landlord may elect to proceed or as the law may from time
to time provide, for which purpose, if Landlord shall so determine, Landlord may
enter the Premises. Tenant shall not remove any such notice posted by Landlord
without Landlord's consent, and in any event not before completion of the work
which could lawfully give rise to a claim for mechanics' or materialmen's liens.
28. SUBSTITUTION
A. At any time after execution of this Lease, Landlord may substitute for the
Premises other premises in the Project or owned by Landlord in the vicinity of
the Project (the "New Premises") upon not less than sixty (60) days prior
written notice, in which event the New Premises shall be deemed to be the
Premises for all purposes hereunder and this Lease shall be deemed modified
accordingly to reflect the new location and shall remain in full force and
effect as so modified, provided that:
(1) The New Premises shall be similar in area and in function for Tenant's
purposes; and
(2) If Tenant is occupying the Premises at the time of such substitution,
Landlord shall pay the expense of physically moving Tenant, Tenant's
property and equipment to the New Premises and shall, at Landlord's sole
cost, improve the New
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Premises with improvements substantially similar to those the Landlord has
committed to provide or has provided in the Premises.
29. TRANSFERS BY LANDLORD
In the event of a sale or conveyance by Landlord of the Building or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord's successor-in-interest. In
such event, Tenant agrees to look solely to the responsibility of the successor-
in-interest of Landlord under this Lease with respect to the performance of the
covenants and duties of "Landlord" to be performed after the passing of title to
Landlord's successor-in-interest. This Lease shall not be affected by any such
sale and Tenant agrees to attorn to the purchaser or assignee. Landlord's
successor(s)-in-interest shall not have liability to Tenant with respect to the
failure to perform any of the obligations of "Landlord," to the extent required
to be performed prior to the date such successor(s)-in-interest became the owner
of the Building.
30. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
All covenants and agreements to be performed by Tenant under any of the terms of
this Lease shall be performed by Tenant at Tenant's sole cost and expense and
without any abatement of Rent. If Tenant shall fail to pay any sum of money,
other than Base Rent, required to be paid by Tenant hereunder or shall fail to
perform any other act on Tenant's part to be performed hereunder, including
Tenant's obligations under Paragraph 11 hereof, and such failure shall continue
for fifteen (15) days after notice thereof by Landlord, in addition to the other
rights and remedies of Landlord, Landlord may make any such payment and perform
any such act on Tenant's part. In the case of an emergency, no prior
notification by Landlord shall be required. Landlord may take such actions
without any obligation and without releasing Tenant from any of Tenant's
obligations. All sums so paid by Landlord and all incidental costs incurred by
Landlord and interest thereon at the Applicable Interest Rate, from the date of
payment by Landlord, shall be paid to Landlord on demand as Additional Rent.
31. WAIVER
If either Landlord or Tenant waives the performance of any term, covenant or
condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord, based upon full knowledge of the circumstances.
32. NOTICES
Each provision of this Lease or of any applicable governmental laws, ordinances,
regulations and other requirements with reference to sending, mailing, or
delivery of any notice or the making of any payment by Landlord or Tenant to the
other shall be deemed to be complied with when and if the following steps are
taken:
A. Rent. All Rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at Landlord's Remittance Address
set forth in the Basic Lease Information, or at such other address as Landlord
may specify from time to time by written notice delivered in accordance
herewith. Tenant's obligation to pay Rent and any other amounts to Landlord
under the terms of this Lease shall not be deemed satisfied until such Rent and
other amounts have been actually received by Landlord.
B. Other. All notices, demands, consents and approvals which may or are
required to be given by either party to the other hereunder shall be in writing
and either personally delivered, sent by commercial overnight courier, mailed,
certified or registered, postage prepaid or sent by facsimile with confirmed
receipt (and with an original sent by commercial overnight courier), and in each
case addressed to the party to be notified at the Notice Address for such party
as specified in the Basic Lease Information or to such other place as the party
to be notified may from time to time designate by at least fifteen (15) days
notice to the notifying party. Notices shall be deemed served upon receipt or
refusal to accept delivery. Tenant appoints as its agent to receive the service
of all default notices and notice of commencement of unlawful detainer
proceedings the person in charge of or apparently in charge of occupying the
Premises at the time, and, if there is no such person, then such service may be
made by attaching the same on the main entrance of the Premises.
C. Required Notices. Tenant shall immediately notify Landlord in writing of
any notice of a violation or a potential or alleged violation of any Regulation
that relates to the Premises or the Project, or of any inquiry, investigation,
enforcement or other action that is instituted or threatened by any governmental
or regulatory agency against Tenant or any other occupant of the Premises, or
any claim that is instituted or threatened by any third party that relates to
the Premises or the Project.
33. ATTORNEYS' FEES
If Landlord places the enforcement of this Lease, or any part thereof, or the
collection of any Rent due, or to become due hereunder, or recovery of
possession of the Premises in the hands of an attorney, Tenant shall pay to
Landlord, upon demand, Landlord's reasonable attorneys' fees and court costs,
whether incurred without trial, at trial, appeal or review. In any action which
Landlord or Tenant brings to enforce its respective rights hereunder, the
unsuccessful party shall pay all costs incurred by the prevailing party
including reasonable attorneys' fees, to be fixed by the court, and said costs
and attorneys' fees shall be a part of the judgment in said action.
34. SUCCESSORS AND ASSIGNS
This Lease shall be binding upon and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon and inure to the benefit of
Tenant, its successors, and to the extent assignment is approved by Landlord as
provided hereunder, Tenant's assigns.
35. FORCE MAJEURE
If performance by a party of any portion of this Lease is made impossible by any
prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes for those items, government actions, civil commotions, fire or other
casualty, or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage is excused. Tenant's obligation to pay Rent,
however, is not excused by this Paragraph 35.
36. SURRENDER OF PREMISES
Tenant shall, upon expiration or sooner termination of this Lease, surrender the
Premises to Landlord in the same condition as existed on the date Tenant
originally took possession thereof, including, but not limited to, all interior
walls cleaned, all interior painted surfaces
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repainted in the original color, all holes in walls repaired, all carpets
shampooed and cleaned, and all floors cleaned, waxed, and free of any Tenant-
introduced marking or painting, all to the reasonable satisfaction of Landlord.
Tenant shall remove all of its debris from the Project. At or before the time of
surrender, Tenant shall comply with the terms of Paragraph 12.A. hereof with
respect to Alterations to the Premises and all other matters addressed in such
Paragraph. If the Premises are not so surrendered at the expiration or sooner
termination of this Lease, the provisions of Paragraph 25 hereof shall apply.
All keys to the Premises or any part thereof shall be surrendered to Landlord
upon expiration or sooner termination of the Term. Tenant shall give written
notice to Landlord at least thirty (30) days prior to vacating the Premises and
shall meet with Landlord for a joint inspection of the Premises at the time of
vacating, but nothing contained herein shall be construed as an extension of the
Term or as a consent by Landlord to any holding over by Tenant. In the event of
Tenant's failure to give such notice or participate in such joint inspection,
Landlord's inspection at or after Tenant's vacating the Premises shall
conclusively be deemed correct for purposes of determining Tenant's
responsibility for repairs and restoration. Any delay caused by Tenant's failure
to carry out its obligations under this Paragraph 36 beyond the term hereof,
shall constitute unlawful and illegal possession of Premises under Paragraph 25
hereof.
37. PARKING
So long as Tenant is occupying the Premises, Tenant and Tenant's Parties
shall have the right to use up to the number of parking spaces, if any,
specified in the Basic Lease Information on an unreserved, nonexclusive, first
come, first served basis, for passenger-size automobiles, in the parking areas
in the Project designated from time to time by Landlord for use in common by
tenants of the Building.
Tenant may request additional parking spaces from time to time and if
Landlord in its sole discretion agrees to make such additional spaces available
for use by Tenant, such spaces shall be provided on a month-to-month unreserved
and nonexclusive basis (unless otherwise agreed in writing by Landlord), and
subject to such parking charges as Landlord shall determine, and shall otherwise
be subject to such terms and conditions as Landlord may require.
Tenant shall at all times comply and shall cause all Tenant's Parties and
visitors to comply with all Regulations and any rules and regulations
established from time to time by Landlord relating to parking at the Project,
including any keycard, sticker or other identification or entrance system, and
hours of operation, as applicable.
Landlord shall have no liability for any damage to property or other items
located in the parking areas of the Project, nor for any personal injuries or
death arising out of the use of parking areas in the Project by Tenant or any
Tenant's Parties. Without limiting the foregoing, if Landlord arranges for the
parking areas to be operated by an independent contractor not affiliated with
Landlord, Tenant acknowledges that Landlord shall have no liability for claims
arising through acts or omissions of such independent contractor. In all events,
Tenant agrees to look first to its insurance carrier and to require that
Tenant's Parties look first to their respective insurance carriers for payment
of any losses sustained in connection with any use of the parking areas.
Landlord reserves the right to assign specific spaces, and to reserve
spaces for visitors, small cars, disabled persons or for other tenants or
guests, and Tenant shall not park and shall not allow Tenant's Parties to park
in any such assigned or reserved spaces. Tenant may validate visitor parking by
such method as Landlord may approve, at the validation rate from time to time
generally applicable to visitor parking. Landlord also reserves the right to
alter, modify, relocate or close all or any portion of the parking areas in
order to make repairs or perform maintenance service, or to restripe or renovate
the parking areas, or if required by casualty, condemnation, act of God,
Regulations or for any other reason deemed reasonable by Landlord.
Tenant shall pay to Landlord (or Landlord's parking contractor, if so
directed in writing by Landlord), as Additional Rent hereunder, the monthly
charges established from time to time by Landlord for parking in such parking
areas (which shall initially be the charge specified in the Basic Lease
Information, as applicable). Such parking charges shall be payable in advance
with Tenant's payment of Basic Rent. No deductions from the monthly parking
charge shall be made for days on which the Tenant does not use any of the
parking spaces entitled to be used by Tenant.
38. MISCELLANEOUS
A. General. The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.
B. Time. Time is of the essence regarding this Lease and all of its
provisions.
C. Choice of Law. This Lease shall in all respects be governed by the laws of
the State of Washington.
D. Entire Agreement. This Lease, together with its Exhibits, addenda and
attachments and the Basic Lease Information, contains all the agreements of the
parties hereto and supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made between the parties
other than those set forth in this Lease and its Exhibits, addenda and
attachments and the Basic Lease Information.
E. Modification. This Lease may not be modified except by a written
instrument signed by the parties hereto. Tenant accepts the area of the Premises
as specified in the Basic Lease Information as the approximate area of the
Premises for all purposes under this Lease, and acknowledges and agrees that no
other definition of the area (rentable, usable or otherwise) of the Premises
shall apply. Tenant shall in no event be entitled to a recalculation of the
square footage of the Premises, rentable, usable or otherwise, and no
recalculation, if made, irrespective of its purpose, shall reduce Tenant's
obligations under this Lease in any manner, including without limitation the
amount of Base Rent payable by Tenant or Tenant's Proportionate Share of the
Building and of the Project.
F. Severability. If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect.
G. Recordation. Tenant shall not record this Lease or a short form memorandum
hereof.
H. Examination of Lease. Submission of this Lease to Tenant does not
constitute an option or offer to lease and this Lease is not effective otherwise
until execution and delivery by both Landlord and Tenant.
I. Accord and Satisfaction. No payment by Tenant of a lesser amount than the
total Rent due nor any endorsement on any check or letter accompanying any check
or payment of Rent shall be deemed an accord and satisfaction of full payment of
Rent, and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies. All offers by
or on behalf of Tenant of accord and satisfaction are hereby rejected in
advance.
J. Easements. Landlord may grant easements on the Project and dedicate for
public use portions of the Project without Tenant's consent; provided that no
such grant or dedication shall materially interfere with Tenant's Permitted Use
of the Premises. Upon Landlord's
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request, Tenant shall execute, acknowledge and deliver to Landlord documents,
instruments, maps and plats necessary to effectuate Tenant's covenants
hereunder.
K. Drafting and Determination Presumption. The parties acknowledge that this
Lease has been agreed to by both the parties, that both Landlord and Tenant have
consulted with attorneys with respect to the terms of this Lease and that no
presumption shall be created against Landlord because Landlord drafted this
Lease. Except as otherwise specifically set forth in this Lease, with respect
to any consent, determination or estimation of Landlord required or allowed in
this Lease or requested of Landlord, Landlord's consent, determination or
estimation shall be given or made solely by Landlord in Landlord's good faith
opinion, whether or not objectively reasonable. If Landlord fails to respond to
any request for its consent within the time period, if any, specified in this
Lease, Landlord shall be deemed to have disapproved such request.
L. Exhibits. The Basic Lease Information, and the Exhibits, addenda and
attachments attached hereto are hereby incorporated herein by this reference and
made a part of this Lease as though fully set forth herein.
M. No Light, Air or View Easement. Any diminution or shutting off of light,
air or view by any structure which may be erected on lands adjacent to or in the
vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.
N. No Third Party Benefit. This Lease is a contract between Landlord and
Tenant and nothing herein is intended to create any third party benefit.
O. Quiet Enjoyment. Upon payment by Tenant of the Rent, and upon the
observance and performance of all of the other covenants, terms and conditions
on Tenant's part to be observed and performed, Tenant shall peaceably and
quietly hold and enjoy the Premises for the term hereby demised without
hindrance or interruption by Landlord or any other person or persons lawfully or
equitably claiming by, through or under Landlord, subject, nevertheless, to all
of the other terms and conditions of this Lease. Landlord shall not be liable
for any hindrance, interruption, interference or disturbance by other tenants or
third persons, nor shall Tenant be released from any obligations under this
Lease because of such hindrance, interruption, interference or disturbance.
P. Counterparts. This Lease may be executed in any number of counterparts,
each of which shall be deemed an original.
Q. Multiple Parties. If more than one person or entity is named herein as
Tenant, such multiple parties shall have joint and several responsibility to
comply with the terms of this Lease.
R. Prorations. Any Rent or other amounts payable to Landlord by Tenant
hereunder for any fractional month shall be prorated based on a month of 30
days. As used herein, the term "fiscal year" shall mean the calendar year or
such other fiscal year as Landlord may deem appropriate.
39. ADDITIONAL PROVISIONS
Letter of Credit
Tenant shall deposit with Landlord a security deposit in the amount of Five
Thousand, Eight Hundred, Fifty Six and no/100 Dollars ($5,856.00). In addition
this Lease shall not be effective unless and until Tenant shall have provided to
Landlord a letter of credit in the total amount of Seventy Thousand, Two Hundred
Seventy Six and 50/100 Dollars ($70,276.50) issued by a United States bank that
is a member of the Federal Reserve System in the forms attached hereto as
Exhibit E, or with such variations as Landlord may approve in advance in
writing, which approval may be withheld for any or no reason. If letter of
credit is not issued and delivered within seven (7) days after execution of this
Lease, this Lease shall be null, void and of no force or effect. If, and only
if, all of the financial conditions hereinafter set forth in this Lease (the
"Conditions") shall have been met and the Tenant is not then in breach or
default under any term of this Lease, and Landlord shall not by then have
presented a draft upon the same, Landlord shall promptly surrender the original
letter of credit. The Conditions are as follows:
The Tenant's achievement of pre-tax profitability of no less than One
Hundred Thousand and No/100 Dollars ($100,000.00) per month for not less
than four (4) consecutive months and a net worth equal to Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) evidenced by audited and tenant-
verified financial statements prepared by the Tenant in accordance with
generally accepted accounting principles.
1. Jury Trial Waiver
EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL
REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY
JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH
THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF THE
COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 40. THE
PROVISIONS OF THE PARAGRAPH 40 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and the year first above written.
LANDLORD
Spieker Properties, L.P.,
a California limited partnership
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By: Spieker Properties, Inc.,
a Maryland corporation,
its general partner
/s/ Richard T. Leider
-----------------------------------------
By: Richard T. Leider
Its: Vice President
Date: December 28, 1998
-----------------------------------
TENANT
Absolut Future Tech, Inc.
a Nevada corporation
/s/ Graham Andrews
-----------------------------------------
By: Graham Andrews
Its: President
Date: December 14, 1998
-----------------------------------
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EXHIBIT 10.7
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of May 24, 1999,
is by and among Corporate Tours and Travel, Inc, a Nevada corporation ("CTOR"),
Lewis Eslick, a principal of CTOR (the "CTOR Principal"), Absolut Future Tech,
Inc, a Nevada Corporation ("Absolut"), and the persons Identified in Schedule 1,
representing 100% of the shareholders of Absolut (the "Absolut Shareholders").
WITNESSETH:
WHEREAS, the Absolut Shareholders own all of the issued and outstanding
registered shares of Absolut and desire to sell to CTOR, and CTOR desires to
purchase, all of the registered shares of Absolut.
NOW, THEREFORE, in consideration of the promises, the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
I. TRANSFER OF SHARES
1.1 Transfer of Shares; Closing. In accordance with the terms and
conditions set forth herein, on the Closing Date (as hereinafter defined), the
Absolut Shareholders shall transfer, convey, assign and deliver, and CTOR shall
purchase, all of the issued and outstanding registered shares (the "Absolut
Shares") of Absolut, $0.0001 par value per share (the "Absolut Stock"), free and
clear of any and all liens, claims and encumbrances whatsoever.
<PAGE>
1.2 Consideration, Exchange of Certificates. As of the Closing Date (as
hereinafter defined) and subject to the provisions of Sections 6 and 7, in
exchange for certificates representing the Absolut Shares, the Absolut
Shareholders will receive from CTOR an aggregate consideration of 3,000,000
restricted Common Stock shares of CTOR, $.0001 par value per share (the "CTOR
Shares"). The CTOR Shares shall rank pari passu with the issued and outstanding
shares of CTOR Common Stock.
1.3 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing"), upon the satisfaction of all of the conditions set
forth in Sections 6 and 7 hereof, or the waiver thereof, shall occur May
,1999 (the "Closing Date").
1.4 Deliveries at Closing. At the Closing, the Absolut Shareholders shall
deliver to CTOR the various certificates, including without limitation stock
certificates representing the Absolut Shares, together with accompanying stock
transfer powers or instruments of assignment, duly endorsed in blank. At the
Closing, CTOR shall deliver to Absolut and the Absolut Shareholders the various
certificates, including without limitation stock certificates representing CTOR
Shares.
II. REPRESENTATIONS AND WARRANTIES OF ABSOLUT
AND THE ABSOLUT SHAREHOLDERS
Absolut and the Absolut Shareholders, jointly and severally, hereby
represent and warrant to CTOR and the CTOR Principal as follows:
2.1 Organization. Absolut and its officers and directors, but not the
Absolut Shareholders represent and warrant to CTOR and CTOR Principal that
Absolut is a corporation duly organized, validly existing and in good standing
under the laws of Nevada. Absolut and the Absolut Shareholders have the power
and authority to enter into and perform the purchase of the CTOR Shares, the
sale of Absolut Stock, and to consummate the transactions contemplated by this
Agreement.
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2.2 Authority. Absolut and the Absolut Shareholders have full power and
authority to enter into this Agreement and to consummate the transactions
provided for herein, and the execution and delivery of this Agreement, and the
other documents and instruments specified herein, and the consummation of the
transactions provided for herein by Absolut and the Absolut Shareholders have
been duly and validly authorized by all necessary action on the part of Absolut
and the Absolut Shareholders and are in compliance with applicable law. This
Agreement constitutes the valid and binding agreement on the part of Absolut and
the Absolut Shareholders, enforceable against them in accordance with its terms.
2.3 Absence of Violations or Conflicts. The execution and delivery of this
Agreement and the consummation by Absolut and the Absolut Shareholders of the
transactions contemplated hereto (a) will not constitute a violation of, be in
conflict with, constitute a default under or result in the creation or
imposition of any security interest, lien or other encumbrance or adverse claim
upon any of Absolut's assets under (i) any contract, agreement, commitment or
understanding to which Absolut or the Absolut Shareholders is a party, to which
either of them is subject or by which either of them is bound, (ii) any
applicable judgment, decree or order of any court or governmental agency or
(iii) any applicable statute, law, rule, regulation, release or other official
pronouncement and (b) will not create, or cause the acceleration of the maturity
of, any debt, obligation or liability of Absolut or the Absolut Shareholders.
2.4 Capital Stock. Absolut and its officers and directors, but not the
Absolut Shareholders, represent and warrant to CTOR and CTOR Principal that the
authorized capital stock of Absolut consists of 50,000,000 shares of Common
Stock, par value U. S. $0.0001 per share, of which, as of May , 1999,
10,000,000 shares of Absolut Common Stock were duly authorized and validly
issued and outstanding, fully paid and nonassessable, and no shares of Absolut
Common Stock were held in the
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treasury of Absolut. Except as set forth on Schedule 2.4, the Absolut
Shareholders is and will be on the Closing Date the record and beneficial owner
and holder of the Absolut Shares, free and clear of any charge, claim, equitable
interest, lien, option, pledge, security interest, right of first refusal, or
restriction of any kind, including any restriction on use, voting, transfer,
receipt of income, or exercise of any other attribute of ownership. Other than
the Absolut Shares, no shares of Absolut Stock have been issued, and Absolut has
no commitments to issue or sell any shares of Absolut Stock or any other
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from Absolut, any shares of Absolut
Stock, and no securities or obligations evidencing such rights are outstanding.
III. REPRESENTATIONS AND WARRANTIES
OF CTOR AND THE CTOR PRINCIPAL
CTOR and the CTOR Principal, jointly and severally, hereby represent and
warrant to Absolut and the Absolut Shareholders as follows:
3.1 Organization and Standing; Subsidiaries. CTOR is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has full corporate power to carry on its business as it is now being
conducted and to own or hold under lease the assets a now owns or holds under
lease and to issue the CTOR Shares, and to consummate the transactions
contemplated by this Agreement. CTOR does not own any subsidiaries.
3.2 Capitalization of CTOR. CTOR's entire authorized capital stock
consists of 50,000,000 shares of CTOR Common Stock, of which 4,100,000 shares
are issued and outstanding; 10,000,000 shares of CTOR Preferred Stock, of which
none are issued or outstanding, and no shares of CTOR Common Stock are held in
the treasury of CTOR. All the issued and outstanding shares
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of CTOR Common Stock have been duly authorized and are validly issued and are
fully paid and non-assessable, free of any preemptive rights, and are owned by
those shareholders in those amounts indicated under their respective names on
Exhibit A attached hereto. Each of the CTOR shareholders has good and marketable
title to CTOR Common Stock owned by him or it, free of any liens, restrictions
or encumbrances of any kind. CTOR is not a party to or bound by any options,
calls, contracts or commitments of any character relating to any issued or
unissued stock or any other equity security issued or to be issued by CTOR. None
of the shares of CTOR Common Stock was issued in violation of the Securities Act
of 1933, as amended, or any regulation or rule promulgated thereunder, or any
other federal or state law relating to the sale and issuance of securities. All
of the shares of CTOR Common Stock were issued pursuant to Rule 504 of the
Securities Act of 1933, as amended (the "1933 Act"), and are thus freely
tradeable securities. None of the shares of CTOR Common Stock are "restricted
securities" within the meaning of Rule 144 of the 1933 Act. As of the Closing,
the CTOR Shares will be duly and validly authorized and issued, fully paid and
nonassessable, and free of any preemptive rights. The sale and issuance of CTOR
Shares will not violate the 1933 Act or any regulation or rule promulgated
thereunder, or any other federal or state law relating to the sale and issuance
of the CTOR Shares. The CTOR Common Stock is not subject to the provisions of
Nevada Revised Statute 78.378 through 78.3793 (the Acquisition of Controlling
Interest Statute).
3.3 Financial Statements. CTOR has delivered to Absolut copies of CTOR's
audited consolidated financial statements for the fiscal years 1996, 1997 and
1998. These financial statements are true and complete in all respects, have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the period covered by such statements (except
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as may be stated in the explanatory notes to such statements), and present
fairly the consolidated financial position and results of operations of CTOR at
the dates of such statements and for the periods covered thereby.
3.4 No Undisclosed Liabilities. Except as and to the extent reflected or
reserved against in the consolidated balance sheets included within CTOR's
consolidated financial statements referred to in Section 3.3 of this Agreement,
at the date of such statements, CTOR had no liabilities or obligations (whether
accrued, absolute or contingent), of the character which, under generally
accepted accounting principles, should be shown, disclosed or indicated in a
consolidated balance sheet of CTOR or explanatory notes or information
supplementary thereto, including, without limitation, any liabilities resulting
from failure to comply with any law or any federal, state or local tax
liabilities due or to become due whether (a) incurred in respect of or
measured by income for any period prior to the close of business on such dates,
or (b) arising out of transactions entered into, or any state of facts existing
prior thereto.
3.5 Absence of Certain Changes, Events or Conditions. Since December 31,
1998, there has not been any change in CTOR's consolidated financial position,
results of operations, assets, liabilities, net worth or business, other than
changes in the ordinary course of business which have not been materially
adverse. Since December 31, 1998, CTOR has not experienced any event or
condition of any character (whether or not covered by insurance) which has
adversely affected or will or might so affect its respective properties,
businesses, financial positions, results of operations, or net worth.
3.6 Title to Leasehold. The leases and other agreements or instruments
under which CTOR holds, leases or is entitled to the use of any real property or
personal property, are set forth
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in Schedule 3.6, and are in full force and effect and all rentals, royalties or
other payments payable thereunder prior to the date hereof have been duly paid.
All "buy-out" prices under operating or capital leases are shown on Schedule
3.6, regardless as to whether the lessee has any obligation to purchase such
property. True and correct copies of such leases and agreements, together with
all amendments, are attached to this Agreement as part of Schedule 3.6. No
default or event of default exists, and no event which, with notice or lapse of
time or both, would constitute a default, has occurred and is continuing, under
the terms or provisions, express or implied, of any of such lease, agreement or
other instrument or under the terms or provisions of any agreement to which any
of such properties is subject, nor has CTOR received notice of any claim of such
default (whether material or not), nor, has CTOR failed to comply in any respect
with any provision or condition of any such lease, agreement or other
instrument. CTOR has not received a notice of violation of any applicable law,
ordinance, regulation, order or requirement relating to its operations or its
owned or leased properties.
3.7 Title to Assets. CTOR owns and has good, marketable and insurable
title to all of its assets, none of which are subject to any mortgage, pledge,
lien, security interest or other encumbrance.
3.8 Litigation. Except as described on Schedule 3.8, there is no claim,
controversy, legal action, mediation, arbitration, non-insured workers'
compensation claim, litigation, proceeding or governmental investigation pending
or, threatened or in prospect, against or relating to CTOR, its respective
properties or business, or the transactions contemplated by this Agreement. All
litigation and claims identified on Schedule 3.8 are covered by CTOR's insurance
and are being defended by and at the cost of CTOR's insurance carrier. Except as
disclosed on Schedule 3.8, CTOR is not
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subject to or bound by any order of any court, regulatory commission, board or
administrative body entered in any proceeding to which it is a party or of which
CTOR has knowledge.
3.9 Intangible Property. Except as described on Schedule 3.9, CTOR owns
all of the rights in and to all trademarks, service marks, trade names, logos,
processes, systems, inventions, writings, or methods, whether or not patentable
or copyrightable, which are set forth on Schedule 3.9, free of any obligations
to any third parties, free from any security interest or other lien or
encumbrance, and free of the rightful claims of any third party by way of
infringement CTOR has no knowledge of any facts which negatively impacts the
ability of Absolut from obtaining copyrights or trademarks on all otherwise
copyrightable material or the ability of Absolut to obtain worldwide trademark
rights in its products. The conduct of the business of CTOR as now conducted
does not and will not conflict with patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, copyrights or trade dress of others in any way likely to
affect adversely the business, assets or condition, financial or otherwise, of
CTOR. Except as described on Schedule 3.9, no other person or entity has
heretofore used or now uses any trademark, trade name or other intangible
property owned by or licensed to CTOR, except as duly licensed by CTOR under an
agreement disclosed in Schedule 3.9. No material infringement of any proprietary
right owned by, or licensed by or to, CTOR known to CTOR.
3.10 [Open]
3.11 Government and Other Consents. No consent, authorization or approval
of, or exemption by, or filing with any governmental, public or self-regulating
body or authority is required by CTOR, the CTOR Principal or any shareholder of
CTOR for consummation of this Agreement or
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any of the instruments or agreements herein referred to, or the taking of any
action herein contemplated.
3.12 Compliance. CTOR has all governmental licenses, permits, approvals
and other authorizations, and have made all filings and registrations, which are
necessary in order to enable them to conduct its business in all respects. CTOR
heretofore has delivered to Absolut Schedule 3.13 which fairly and accurately
summarizes or lists all material licenses, permits, approvals, authorizations
and regulatory matters relating to the business of CTOR. CTOR has complied with,
and is in compliance with, all laws, regulations and ordinances which are
applicable to its business.
3.13 Labor Relations. CTOR has been and is in compliance with all federal
and state laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and have not engaged in, and are
not engaging in, any unfair labor practice. There is no collective bargaining
agreement which is binding on CTOR, and CTOR has not experienced, and is not
experiencing, any material labor stoppage, concerted activity or other labor
difficulty, and CTOR has no employment or consulting agreements.
3.14 No Conflict with Other Documents. Except as described in Schedule
3.14, neither the execution and delivery of this Agreement nor the carrying out
of the transactions contemplated hereby will result in any violation,
termination or modification of, or be in conflict with, CTOR's charter or
organizational documents or bylaws, any terms of any contract or other
instrument to which CTOR or is a party, or any judgment, decree or order
applicable to CTOR or result in the creation of any lien, charge or encumbrance
upon any of the properties or assets of CTOR.
3.15 Company Authority. The execution, delivery and performance of this
Agreement by CTOR and by the CTOR Principal have been duly authorized and
approved by the Board of
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Directors and shareholders of CTOR and this Agreement is a valid, legally
binding and enforceable obligation of CTOR and the CTOR Principal. This
Agreement, the issuance of the CTOR Common Stock, the purchase of the Absolut
Common Stock and the other transactions contemplated hereunder have been
approved by the Board of Directors and shareholders of CTOR, and all corporate
authorizations required for consummation of the transactions contemplated by
this Agreement have been received and continue to be in full force and effect.
Upon satisfaction of all conditions contained herein, this Agreement will result
in the valid, legally binding and enforceable obligation of CTOR and the CTOR
Principal.
3.16 Contracts. Except as shown on Schedule 3.16, CTOR is not a party to
or subject to: (a) any employment contract with any officer, consultant,
director or employee; (b) any plan or contract or arrangement providing for
bonuses, pensions, options, deferred compensation, retirement payments, profit
sharing, or the like; (c) any contract or agreement with any labor union; (d)
any lease of real or personal property; (e) any agreement for the purchase, sale
or other disposition of any materials, equipment, supplies or inventory; (f) any
instrument creating a lien or evidencing or related to indebtedness for borrowed
money; (g) any franchise, manufacturer's representative, distributorship or
similar agreement; (h) any contract containing covenants not to enter into or
consummate the transactions contemplated hereby or which will be terminated or
modified by the carrying out of such transactions; or (i) any other contract or
agreement not of the type covered by any of the other specific items of this
section. Each of the contracts, instruments, and other documents described on
Schedule 3.16 is valid and in full force and effect, and a true and complete
copy thereof heretofore has been delivered to Absolut. CTOR is not in default,
or alleged to be in default, in any respect under any of the contracts,
instruments, obligations or other documents to which it is a party or by
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which it is bound. Except as shown on Schedule 3.16, the issuance of CTOR Common
Stock and the transactions contemplated by this Agreement will not cause a
default under, or provide any right of termination with respect to, any
contract, instrument, obligation or other document to which CTOR is a party or
by which CTOR is bound. No party with whom CTOR has an agreement is in default
thereunder in any respect.
3.17 Tax Matters. The provisions made for taxes on the consolidated
balance sheet of CTOR contained in the 1998 financial statements referred to in
Section 3.3 of this Agreement are sufficient for the payment of all unpaid
federal, state, county, local and other taxes of CTOR, whether or not disputed.
The consolidated federal income tax returns of CTOR has been audited by the
Internal Revenue Service (or are no longer subject to audit) for all open years
to and including 1998. There are no proposed additional taxes, interest or
penalties with respect to any year examined or not yet examined. CTOR has
provided to Absolut true and complete copies of the consolidated federal and
state income tax returns of CTOR for the year ended 1998, together with true and
complete copies as filed of all reports of any taxing authority relating to
examinations thereof which have been delivered to CTOR. Each such tax return was
prepared in accordance with applicable law and properly reflect the liability
for taxes of CTOR to the jurisdiction to which such return is made for the
period covered thereby CTOR has not entered into any agreements extending the
statute of limitations with respect to any federal or state taxes.
3.18 Title to Real and Personal Properties; Absence of Liens and
Encumbrances, Etc. CTOR has good, marketable and insurable title to all its
properties and assets, real and personal (including those properties and assets
reflected in the consolidated balance sheets contained in the 1998 financial
statements referred to in Section 3.3 of this Agreement except as sold or
otherwise
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disposed of in the ordinary course of business since the date thereof), in each
case free and clear of all liens and encumbrances, except those reflected in
such financial statements or in the notes to such financial statements, the lien
of current taxes not yet due and payable and such imperfections of title,
easements and encumbrances, if any, as are not substantial in character, amount
or extent, and do not detract from the value, or interfere with the present or
anticipated business use, of the properties subject thereto or affected thereby,
or impair business operations. CTOR is not in violation of any laws, judgment,
order, decree, regulation or rule of any court or governmental authority
applicable to any of them, and the business operations of CTOR are in compliance
with all applicable building codes, environmental, zoning and land use laws, and
other local, state and federal licensing and permitting requirements CTOR has
not received any notice of violation of any applicable zoning laws, orders,
regulations, or requirements relating to its operations or its properties which
has not been complied with, nor any proposed changes in any such laws, orders or
regulations which might have an adverse effect on its business. There is no
threatened or impending condemnation of any of the assets of CTOR or any other
properties of CTOR by any governmental authority.
3.19 Condition of Facilities. The structures and equipment comprising the
business of CTOR and owned, operated or leased by CTOR are presently adequate
for the operations for which they are being used, such facilities, structures
and equipment are structurally sound and in good repair and operating condition,
normal wear and tear excepted, and CTOR is not in violation of any applicable
building, zoning, antipollution, environmental, health, safety, manufacturing or
other laws, ordinance or regulation in respect of such facilities, structures or
equipment, and CTOR has not received any notice alleging such a violation. There
are no pending or contemplated eminent domain proceeding affecting such
facilities, structures or equipment or any part thereof and CTOR has not
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received notice of any such eminent domain proceeding. CTOR has not received
notice of any pending or contemplated proceedings or public improvements which
could or might result in the levy of any special tax or assessment against
facilities, structures or equipment. There are no outstanding requirements or
recommendations by fire underwriters, rating boards or insurance companies
requiring or recommending any repairs or work to be done with reference to such
facilities, structures or equipment.
3.20 Environmental Matters. During the period of time that CTOR or any
entity controlled or affiliated with CTOR has owned or controlled the business
operations, and the properties on which the business operations of CTOR are
conducted has not been used prior to the Closing Date for the disposal of any
toxic or hazardous waste, material or substance as the terms "hazardous waste,"
"hazardous substance," "hazardous material" or "toxic substance" are defined in
the Comprehensive Environmental Response, Compensation and Liability Act, the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, any applicable state law or any other applicable environmental law or rules
and regulations promulgated thereunder nor has any "release" of such substances
occurred on or about any premises of CTOR in violation of, or requiring
"remedial action" under such laws, rules and regulations, as those terms are
defined therein.
3.21 Pension and Employee Benefit Plans. There are no plans in effect for
pension, profit sharing, deferred compensation, severance pay, bonuses, stock
options, stock purchases, or any other form of retirement or deferred benefit,
or for any health, accident or other welfare plan, in which any employee of CTOR
is entitled to participate.
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3.22 Insurance. Schedule 3.22 summarizes the insurance currently carried
by CTOR in respect of its respective properties and operations, as well as the
assets of CTOR. Including, without limitation, information as to limits of
coverage, deductibles, annual premium requirements and expiration dates with
respect to product liability, general liability, umbrella liability, contractual
liability, employers' liability, automobile liability, workers' compensation,
property and casualty, business interruption and other insurance carried by
CTOR. All such insurance continues to be in full force and effect, and CTOR is
in compliance with all requirements and provisions thereof. Except as set forth
on Schedule 3.22, none of the insurance carried by CTOR is subject to any
retroactive rate or audit adjustments, or co-insurance arrangements. True and
correct copies of all insurance policies relating to such coverage have been
provided by CTOR, to Absolut. There is no reason to believe that any such
insurance coverage will not be renewed upon the expiration thereof at premiums
substantially equivalent to those currently being paid by CTOR. The insurance
coverages heretofore and currently carried by CTOR were and are consistent with
types and amounts of coverages customarily carried by similarly situated
companies.
3.23 No Pending Transactions. Except for the transactions contemplated by
this Agreement CTOR is not a party to or bound by or the subject of any
agreement, undertaking or commitment (i) to merge or consolidate with, or
acquire all or substantially all of the property and assets of, any other
corporation or person, or (ii) to sell, lease or exchange all or substantially
all of its property, and assets to any other corporation or person, or (iii) to
sell, transfer or issue any CTOR Common Stock.
3.24 Disclosure. No representation or warranty made by CTOR or the CTOR
Principal in this Agreement and no statement contained in a certificate,
schedule, list or other instrument or
14
<PAGE>
document specified in or delivered pursuant to this Agreement, whether
heretofore furnished to Absolut or hereafter required to be furnished to
Absolut, contains or will contain any untrue statement of a fact or omits or
will omit to state any fact necessary to make the statements contained herein or
therein not misleading. All information relating to the historical and
prospective financial position, results of operations, assets and business of
CTOR which is or would be material to the issuance of CTOR Common Stock to
Absolut has been provided by CTOR to Absolut.
3.25 Transactions with Affiliates. Except as disclosed on Schedule 3.25,
CTOR is not a party to any transaction with any (i) current or former officer or
director of CTOR, or (ii) any parent, spouse, child, brother, sister or other
family relation of any such officer or director or (iii) any corporation or
partnership of which any such officer or director or any such family relation is
an officer, director, partner or greater than 10% shareholder (based on
percentage ownership of voting stock) or (iv) any "affiliate" or "associate" of
any such persons or entities (as such terms are defined in the rules and
regulations promulgated under the 1933 Act, including, without limitation, any
transaction involving a contract, agreement or other arrangement providing for
the employment of, furnishing of materials, products or services by, rental of
real or personal property from, or otherwise requiring payments to, any such
person or entity.
3.26 SEC Documents. All documents and forms have been filed with the
Securities and Exchange Commission (the "SEC") that were required to be filed
with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the
"1934 Act")
3.27 OTC Bulletin Board. The CTOR Common Stock is posted on the OTC
Bulletin Board, and trading of the CTOR Common Stock has not been suspended or
terminated since the
15
<PAGE>
commencement of the posting of CTOR Common Stock on the OTC Bulletin Board. The
OTC Bulletin Board Market Maker for the CTOR Common Stock is J. Alexander
Securities.
3.28 Registration Rights. No corporation, general or limited partnership,
limited liability company, joint venture, trust, association, natural person or
entity of any kind has any right to require the registration of any shares of
CTOR Common Stock or any other securities of CTOR.
3.29 Directors and Officers
No director or officer of CTOR has (1) filed a registration statement with
the SEC which is the subject of any pending proceeding or examination under the
1933 Act or is the subject of any refusal order or stop order thereunder five
years prior to the date of this Agreement; (2) been convicted within five years
prior to the date of this Agreement of any felony or misdemeanor in connection
with the purchase or sale of any security or involving the making of any false
filing with the SEC; (3) been subject to any order, judgment or decree of any
court of competent jurisdiction temporarily or preliminary restraining or
enjoining, or been subject to any order, judgment or decree of any court of
competent jurisdiction, entered within five years prior to the date of this
Agreement, permanently restraining or enjoining such person from engaging in or
continuing any conduct or practice in connection with the purchase or sale of
any security or involving the making of any false filing with the SEC; (4) been
convicted within ten years prior to the date of this Agreement of any felony or
misdemeanor in connection with the purchase or sale of any security, involving
the making of a false filing with the SEC or arising out of the conduct of the
business of an underwriter, broker, dealer, municipal securities dealer or
investment advisor; (5) been subject to any order, judgment or decree of any
court of competent jurisdiction temporarily or preliminarily enjoining or
restraining or been subject to any order, judgment or decree of any court of
competent jurisdiction entered within
16
<PAGE>
five years of the date of this Agreement, permanently enjoining or restraining
such person from engaging in or continuing any conduct or practice in connection
with the purchase or sale of any security, involving the making of a false
filing with the SEC or arising out of the conduct of the business of any
underwriter, broker, dealer, municipal securities dealer or investment advisor;
(6) been suspended or expelled from membership in, or suspended or barred from
association with a member of an exchange registered as a National Securities
Exchange pursuant to Section 6 of the Securities Exchange Act of 1934, an
association registration as a National Securities Association under Section 15A
1934 Act or Canadian securities exchange or association for any act or omission
to act constituting conduct inconsistent with just and equitable principles of
trade.
IV. COVENANTS OF ABSOLUT
AND THE ABSOLUT SHAREHOLDERS
Absolut and the Absolut Shareholders covenant that, except as otherwise
consented to in writing by CTOR and the CTOR. Principal after the date of this
Agreement.
4.1 Consents. Absolut and the Absolut Shareholders will take all necessary
corporate or other action and use their best efforts to obtain all consents and
approvals required for consummation of the transactions contemplated by this
Agreement.
4.2 Cause Conditions to be Satisfied. Absolut and the Absolut Shareholders
will use their best efforts to cause all of the conditions described in Article
VII of this Agreement to be satisfied (to the extent such matters reasonably are
within its control).
17
<PAGE>
V. COVENANTS OF CTOR AND THE CTOR
PRINCIPAL
CTOR and the CTOR Principal covenant to Absolut and the Absolut
Shareholders that, except as otherwise consented to in writing by Absolut and
the Absolut Shareholders after the date of this Agreement:
5.1 Conduct of Business. Except as otherwise provided in this Agreement,
after the date of this Agreement and on or prior to the Closing Date, with
respect to CTOR (a) its business will be conducted only in the ordinary course;
(b) it will not enter into, adopt or amend any employee pension, profit-sharing,
retirement, insurance, incentive compensation, severance or similar plan,
agreement or arrangement, enter into or amend any employment contacts, or
increase the salaries or compensation of its executive officers or, other than
ordinary increases in salaries in accordance with past practices, of other
employees; (c) it shall not incur any liability for borrowed money, encumber any
of its assets or enter into any agreement relating to the incurrence of
additional debt (other than short term unsecured bank credit in the ordinary
course of operations in accordance with past practices), except in accordance
with Section 6.12 of this Agreement; (d) it will use its best efforts to
preserve its business organization intact, to keep available the service of its
officers and employees and to preserve the goodwill of suppliers, customers and
others doing business with it; (e) it will not acquire or agree to acquire by
merging or consolidating with, purchasing substantially all of the assets of, or
otherwise, any business or any corporation, partnership, association or other
business organization or division thereof; (f) it will not enter into or amend
any contract or agreement with any labor union or any lease of real estate or
personal property; (g) it will not enter into any agreement for the purchase,
sale or other disposition, or purchase, sell or dispose of, any equipment,
18
<PAGE>
supplies, inventory, investments or other assets (other than sales of inventory
and purchases of material and supplies in the ordinary course of business and in
accordance with past practices), (h) it will not compromise or write off any
material account receivable other than by collection of the full recorded amount
thereof. (i) no change shall be made in its charter documents or bylaws. (j) no
change shall be made in the number of shares or terms of its authorized, issued
or outstanding capital stock, nor shall it enter into or grant any options,
calls, contracts or commitments of any character relating to any issued or
unissued capital stock, and (k) no dividend or other distribution or payment
shall be declared or paid in respect of its capital stock.
5.2 Consents. CTOR and the CTOR Principal agree to take all necessary
corporate or other action and to use their best efforts to complete all filings
and obtain all governmental and other consents, permits licenses and approvals
required for consummation of the transactions contemplated by this Agreement.
5.3 Notice of Litigation. CTOR will provide written notice to Absolut of
any litigation, proceeding or governmental investigation which arises or is
threatened or in prospect, after the date of this Agreement and prior to the
Closing, against or relating to CTOR, its respective assets, properties or
businesses, or the transactions contemplated by this Agreement, setting forth in
such notice the facts and circumstances currently available to CTOR with respect
to such litigation, proceeding or investigation.
5.4 Corporate Transactions. CTOR will not seek, and the CTOR Principal
will cause CTOR not to seek, the affiliation of CTOR with any entity other than
Absolut and neither will negotiate or entertain any offer with respect to the
issuance of CTOR Common Stock or the sale of part or, all of the CTOR Common
Stock or substantially all of CTOR's assets CTOR will not
19
<PAGE>
authorize or permit any officer, director or employee of CTOR to, or any
investment banker, attorney, accountant or other representative retained by CTOR
to, solicit or encourage (including by way of furnishing information) any
inquiries or the making of any proposal that is reasonably expected may lead to
the acquisition of part or all of the CTOR Common Stock or substantially all of
its assets by any person other than Absolut. CTOR promptly will advise Absolut
orally, followed by written confirmation, of any such inquiries or proposals.
5.5 Cause Conditions to be Satisfied. CTOR will use its best efforts to
cause all of the conditions described in Article VI of this Agreement to be
satisfied (to the extent such matters reasonably are within their control).
VI. CONDITIONS TO ABSOLUT AND THE
ABSOLUT SHAREHOLDERS' OBLIGATIONS
Unless waived by Absolut and the Absolut Shareholders in writing in their
sole discretion, all obligations of Absolut and the Absolut Shareholders under
this Agreement are subject to the fulfillment, prior to or at the Closing, of
each of the following conditions by CTOR and the CTOR Principal:
6.1 Representations, Warranties and Covenants. The representations and
warranties of CTOR and the CTOR Principal contained in Section 3 of this
Agreement shall be true at and as of the Closing Date, shall be deemed made
again at and as of such date and be true as so made again, CTOR and the CTOR
Principal shall have performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by them prior to the
Closing, and Absolut shall have received from CTOR and the CTOR Principal a
certificate or certificates in such
20
<PAGE>
reasonable detail as Absolut may reasonably request, signed by the Chairman of
the Board or President of CTOR and by the CTOR principal and dated the date of
Closing, to the foregoing effect.
6.2 Opinion of Counsel. CTOR and the CTOR Principal shall have delivered
to Absolut and the Absolut Shareholders a favorable opinion of its counsel,
Michael J. Morrison, dated the Closing Date, in form and substance satisfactory
to Absolut and its counsel.
6.3 Approvals of Governmental Authorities. All consents and approvals
necessary or advisable in the opinion of Absolut's counsel to consummate the
transactions contemplated by this Agreement shall have been received and shall
not contain any provision which, in the judgment of Absolut, is unduly
burdensome.
6.4 No Adverse Proceedings or Events. No suit, action or other proceeding
against CTOR or Absolut, or their respective officers or directors, or any
shareholders of CTOR or Absolut shall be threatened or pending before any court
or governmental agency in which it will be, or it is, sought to restrain or
prohibit any of the transactions contemplated by this Agreement or to obtain
damages or other relief in connection with this Agreement or the transactions
contemplated hereby.
6.5 Consents and Actions: Contracts. All requisite consents of any third
parties and other actions which CTOR has covenanted to use its best efforts to
obtain and take shall have been obtained and completed. All contracts and
agreements of CTOR relating to its assets and business, including, without
limitation, all contracts and agreements listed on Schedule 6.5, shall be in
full force and effect and shall not be affected by the consummation of the
transactions contemplated hereby. CTOR shall also have been removed and
discharged from all guaranties, contracts, agreements and Commitments relating
to any matter other than the assets and the business specifically and not by way
of limitation the lease with respect to the corporate offices of CTOR shall have
been terminated.
21
<PAGE>
6.6 No Adverse Change. No adverse change in the financial condition,
results of operations, assets, liabilities, business or prospects (including any
change resulting from governmental regulations or the loss of any permits,
licenses or franchises) of the business of CTOR shall have occurred between the
date hereof and the Closing Date.
6.7 No Prohibition. No federal, state or local governmental unit, agency,
body or authority with competent jurisdiction over the subject matter shall have
given official written notice of its intention to institute proceedings to
prohibit the transactions contemplated by this Agreement.
6.8 All Approvals. Absolut shall have obtained all federal, city, county
and state approvals, licenses and permits required for the operation of the
facilities included in the assets by Absolut and no such approval shall have
been conditioned upon any structural changes being made to the business or
assets of CTOR or shall have required the expenditure of more than $1,000.
6.9 All Transfers of Intellectual Property. CTOR shall have executed and
delivered to Absolut any and all necessary documents transferring all
intellectual property of CTOR to Absolut, including without limitation, all
trade names, trade marks, logos and copyrighted materials by Absolut.
6.10 Resignations. The officers and directors of CTOR, excluding the CTOR
Principal, shall have resigned effective as of the Closing Date. The CTOR
Principal shall resign as an officer and director immediately following the
Closing Date.
6.11 Releases. CTOR, the CTOR Principal and each officer and director of
CTOR shall have executed releases concerning any claim against CTOR, including
any claims for indemnification,
22
<PAGE>
contribution or otherwise arising with respect to this Agreement, the
representations, warranties and agreements contained herein and the transactions
contemplated hereby.
6.12 Other Evidence. Absolut shall have received from CTOR such further
certificates and documents evidencing due action in accordance with this
Agreement, including certified copies of proceedings of the board of directors
and shareholders of CTOR, as Absolut reasonably shall request.
VII. CONDITIONS TO CTOR AND THE CTOR
PRINCIPAL'S OBLIGATIONS
Unless waived by CTOR and the CTOR Principal in writing in their sole
discretion, all obligations of CTOR and the CTOR Principal under this Agreement
are subject to the fulfillment by Absolut and the Absolut Shareholders, prior to
or at the Closing, of each of the following conditions:
7.1 Representations, Warranties and Covenants. The representations and
warranties of Absolut and the Absolut Shareholders contained in Section 2 of
this Agreement shall be true at and as of the Closing Date, shall be deemed made
again at and as of such date and be true as so made again, Absolut and the
Absolut Shareholders shall have performed all obligations and complied with all
covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing, and CTOR and the CTOR Principal shall have received
from Absolut and the Absolut Shareholders a certificate or certificates in such
reasonable detail as CTOR may reasonably request, signed by the President or a
Vice President of Absolut and by the Absolut Shareholders and dated the Closing
Date, to the foregoing effect.
23
<PAGE>
7.2 No Adverse Proceedings or Events. No suit, action or other proceeding
against CTOR or Absolut, or its officers or directors, shall have been
instituted and resulted in entry of a court order (which has not subsequently
been dismissed, terminated or vacated) enjoining, either temporarily or
permanently, the consummation of the transactions contemplated by this
Agreement.
7.3 Consents and Actions. All requisite consents of any third parties and
other actions which Absolut and the Absolut Shareholders have covenanted to use
their best efforts to obtain and take under this Agreement shall have been
obtained and completed.
7.4 Other Evidences. CTOR and the CTOR Principal shall have received from
Absolut and the Absolut Shareholders such further certificates and documents
evidencing due action in accordance with this Agreement, including certified
copies of proceedings of the board of directors of Absolut, as CTOR and the CTOR
Principal reasonably shall request.
VIII INDEMNIFICATION
8.1 Survival. The parties agree that the representations and warranties
contained in this Agreement shall survive the Closing and continue to be
binding, regardless of any investigation made at any time by the parties.
8.2 Indemnification of Absolut and the Absolut Shareholders. CTOR and the
CTOR Principal, jointly and severally, hereby agree to indemnify and hold
harmless Absolut and the Absolut Shareholders, and each officer, director,
employee or agent of Absolut, their respective controlling persons, and their
respective estates, successors, and assigns (each an "Indemnified Party"), from
and against any and all claims, losses, damages, liabilities and expenses
(including, without limitation, settlement costs and any legal or other expenses
for investigating or defending any actions or threatened actions) (the "Losses")
reasonably recurred by such Indemnified Party as a result of:
24
<PAGE>
(a) the untruth, inaccuracy or breach of any representation or
warranty made by CTOR or the CTOR Principal pursuant to Article III of this
Agreement;
(b) the nonfulfillment or breach of any covenant, agreement or
obligation of CTOR or the CTOR Principal contained in this Agreement;
(c) any and all amounts of federal, state, and/or local income,
franchise, property, and/or sales and use taxes that my be assessed against
Absolut with respect to any taxable period(s) ending on or before the date of
this Agreement for which adequate provisions therefor have not been made through
the Closing Date, as reflected on CTOR's books of account and in CTOR financial
statements as of the Closing Date; and the amount(s) of any interest and/or
penalties that may be assessed with respect to said tax assessments;
(d) any matter disclosed on any Schedule; and
(e) any claim or demand by any person asserting any interest in any
share of CTOR Common Stock or seeking dissenters' or appraisal rights or any
other claim in respect to the issuance of CTOR Common Stock.
IX. MISCELLANEOUS
9.1 Brokers and Advisors. Absolut and CTOR represent and warrant to each
other that the transactions contemplated by this Agreement have been negotiated
directly between them and their respective counsel, without the intervention of
any person as a result of any action by them in such a manner as to give rise to
a valid claim against any party hereto for a brokerage commission, finder's fee,
counseling or advisory fee, or like payment, and each agrees to indemnify the
opposite party against any such liability arising from or through it.
25
<PAGE>
9.2 Expenses. Each party shall pay all of its own expenses relating to
this Agreement and the transactions contemplated hereby, including fees and
disbursements of its counsel, accountants, investment bankers, and financial
advisors.
9.3 Good Faith; Further Assurances; Further Cooperation. The parties to
this Agreement shall in good faith undertake to perform their obligations under
this Agreement, to satisfy all conditions and to cause the transactions
contemplated by this Agreement to be carried out promptly in accordance with the
terms of this Agreement. Upon the execution of this Agreement and thereafter,
each party shall do such things as may be reasonably requested by the party
hereto in order more effectively consummate or document the transaction
contemplated by this Agreement.
9.4 Notices. All notices, communications and delivers under this Agreement
shall be made in writing, signed by the party making the same, shall specify the
Section of this Agreement pursuant to which it is given, and shall be deemed
given on the date delivered if delivered in person or on the third business day
after mailed if mailed certified mail (with postage prepaid), return receipt
requested, as follows:
To Absolut: Absolut Future Tech, Inc.
Suite 1375, 885 W Georgia St.
-----------------------------
Vancouver, B.C. V6C 3E8
-----------------------------
Canada
-----------------------------
Fax: (604) 609-0599
-----------------------------
Attn: Graham Andrews
-----------------------------
26
<PAGE>
With a copy to:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
To the Absolut
Shareholders: AFT Shareholders
-------------------------------
-------------------------------
-------------------------------
-------------------------------
With a copy to:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
To CTOR: CTOR Consulting, Inc.
8452 Boseck Drive
Suite 272
Las Vegas, NV 89128
Attn: Lewis Eslick
27
<PAGE>
With a copy to: Michael J. Morrison, Esquire
1495 Ridge View Drive
Suite 220
Reno, NV 89509
Facsimile (775) 827-6311
To the CTOR
Principal: Lewis Eslick
8452 Boseck Drive
Suite 272
Las Vegas, NV 89128
Ann Lewis Eslick
With a copy to Michael J. Morrison, Esquire
1495 Ridge View Drive
Suite 220
Reno, NV 89509
Facsimile (775) 827-6311
or to such other representative or to such other address as the parties hereto
may furnish to the other parties in writing. If notice is given pursuant to this
section of a permitted successor or assign of a party of this Agreement, then
notice shall be given as set forth above to such successor or assign of such
party. All such notices, requests, or communications shall be mailed postage
prepaid, certified mail, return receipt requested or delivered personally or by
facsimile copy, and shall be sufficient and effective when delivered to or
received at the address so specified. Any party may change the address at which
it is to receive notice by the written notice to the other.
9.5 Assignment. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, and their respective legal representatives,
heirs, successors and permitted assigns. Absolut shall have the absolute right
to assign its rights and obligations hereunder to an entity owned or controlled
by Absolut without the prior consent of CTOR or the CTOR Shareholder.
28
<PAGE>
9.6 Captions; Definitions. The titles or caption of articles, sections and
subsections contained in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof. The parties
agree to all definitions in this Agreement and in the other introductory
language to this Agreement.
9.7 Controlling Law; Jurisdiction; Amendment; Waiver; Remedies Cumulative;
Attorneys' Fees.
(a) This Agreement shall be construed and enforced in accordance with
the laws of the State of Nevada, without regard to its conflicts of laws rules.
This Agreement may not be altered or amended except in writing signed by
Absolut, the Absolut Shareholders, CTOR and the CTOR Principal. The failure of
any party hereto at any time to require performance of any provisions hereof
shall in no manner affect the right to enforce the same. No waiver by any party
hereto of any condition, or of the breach of any term, provision, warranty,
representation, agreement or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver of
any other condition or of the breach of any other terms, provision, warranty,
representation, agreement or covenant hereto continued.
(b) Any action or proceeding against any party hereto relating in any
way to this Agreement or the obligations or any party arising from the
transactions contemplated herein or other documents delivered pursuant hereto
shall be brought and enforced only in the federal and state courts of the State
of Nevada and the parties irrevocably submit to the jurisdiction of each such
court in respect to any such action or proceeding.
29
<PAGE>
(c) The parties hereto each irrevocably waive, to the fullest extent
permitted by applicable law, any objection that any of them may now or hereafter
have to the laying of venue of any such action or proceeding in the federal and
state courts of the State of Nevada and any claim that such action or proceeding
brought in any such court has been brought in an inconvenient forum.
(d) If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any provisions of this Agreement, the
successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees, court costs and all expenses even if not taxable as
court costs (including, without limitation, all such fees, costs and expenses
incident to appeals), incurred in that action or proceeding, in addition to any
other relief to which such party or parties may be entitled.
9.8 Representations and Warranties. The respective representations and
warranties of each party hereto shall not be deemed to be waived or otherwise
affected by any investigation made by any other parties hereto.
9.9 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the transactions contemplated and
supersedes all prior agreements, understandings, letter of intent and
negotiations, both written and oral, among the parties with respect thereto.
9.10 Counterparts. This Agreement may be executed by each party upon a
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties of this
Agreement. This Agreement shall become effective when one or more counterparts
have been signed by each of the parties to this Agreement and delivered to each
of the other parties to this Agreement. This Agreement may be executed in two or
more
30
<PAGE>
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms of this Agreement to
produce or account for more than one of such counterparts.
IN WITNESS WHEREOF, Absolut, CTOR, the Absolut Shareholders, and the CTOR
Principal have caused this Agreement to be duly executed and their respective
seals to be hereunto affixed as of the date first above written.
ABSOLUT FUTURE TECH, INC.
By: /s/ Graham Andrews
---------------------------
Title: President
------------------------
CORPORATE TOURS & TRAVEL, INC.
By: /s/ Lewis Eslick
---------------------------
Title: President
------------------------
ATF SHAREHOLDERS
/s/ Graham Andrews
------------------------------
Graham Andrews
/s/ Alina Nikolaeva
------------------------------
Alina Nikolaeva
/s/ A.E. Groves
------------------------------
Cherryvale Limited
31
<PAGE>
/s/ Park, Joon-Hyun /s/ John Burry
- ------------------------------- -----------------------------
Park, Joon-Hyun John Burry
/s/ Dong Joong Park /s/ SJH Rodger, Trustee
- ------------------------------- -----------------------------
Dong Joong Park SJH Rodger Childrens Trust
/s/ Jung, OK JA /s/ R. Sheard, Director
- ------------------------------- -----------------------------
Jung, OK JA Tigan Investments Limited
/s/ Grinde Eiendom
- ------------------------------- -----------------------------
Grinde Eiendom A.G.
/s/ Richard Farleigh
- ------------------------------- -----------------------------
Richard Farleigh
/s/ Nadeja Oujvenko
- ------------------------------- -----------------------------
Nadeja Oujvenko
- -------------------------------
CTOR PRINCIPAL
/s/ Lewis Eslick
-----------------------------
Lewis Eslick
32
<PAGE>
Exhibit 16.1
Letter on change in certifying accountants
Barry L Friedman PC
Certified Public Accountant
1582 Tulita Drive
Las Vegas, Nevada 89123
March 17, 2000
Mr. Graham Andrews
President
Absolutefuture.com
10900 NE 8th Street, Suite 1414
Bellevue, WA 98004
Dear Mr. Andrews:
8-K FILING RE CHANGE OF AUDITOR
Thank you for the copy of the 8-K report filed on March 10, 2000 concerning the
change of auditors from Barry L Friedman PC to KPMG LLP. This letter is to
confirm that we agree with the statements made in the from 8-K.
Very truly yours,
/s/ BARRY L. FRIEDMAN
Barry L Friedman PC
<PAGE>
Exhibit 21.1
Subsidiaries Schedule
The following are subsidiary companies of AbsoluteFuture.com:
<TABLE>
<CAPTION>
Name State or Jurisdiction Doing Business As:
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Absolut Future Tech Inc. Nevada AbsoluteFuture.com, Internet
Interview
- -------------------------------------------------------------------------------------------------------------
Absolut Future Tech Inc. (Canada) British Columbia, Canada AbsoluteFuture.com
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,681
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,734
<PP&E> 87,824
<DEPRECIATION> 24,563
<TOTAL-ASSETS> 277,344
<CURRENT-LIABILITIES> 440,862
<BONDS> 0
0
0
<COMMON> 14,400
<OTHER-SE> (760,918)
<TOTAL-LIABILITY-AND-EQUITY> 277,344
<SALES> 163,258
<TOTAL-REVENUES> 163,258
<CGS> 142,171
<TOTAL-COSTS> 989,842
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,409
<INCOME-PRETAX> (1,010,164)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,010,164)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,010,164)
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
