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As filed with the Securities and Exchange Commission ("SEC") on April 27, 1999.
This Registration Statement has not yet been declared effective by the
SEC, thus, the information contained herein is subject to amendment.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
ADVANCED SYSTEMS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
NEVADA 13-3953047
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(Jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
25300 Telegraph Road, Suite 455, Southfield, MI 48034
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(Address of principal executive offices)
(248) 569-9650
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(Registrant's telephone number)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
to be so registered which each class is to be
registered
N/A N/A
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
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Title of Class
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The discussion throughout this registration statement contains certain
forward-looking statements which involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among other things, the uncertainty as to the
Company's future profitability; the uncertainty as to the demand for information
technology services and solutions; industry trends towards outsourcing
information technology services; increasing competition in the information
technology services market; the ability to hire, train and retain sufficient
qualified personnel; the ability to obtain financing on acceptable terms to
finance the Company's growth strategy; the ability to develop and implement
operational and financial systems to manage the Company's growth; and other
factors referenced in this registration statement.
ITEM 1. DESCRIPTION OF BUSINESS
General
Advanced Systems International, Inc. ("AdSys"), a Nevada corporation,
is the holding company for one operating subsidiary, Automatic Time Systems
Corp. ("ATS"). References in this registration statement to "the Company" mean
both AdSys and ATS.
ATS is a developer and supplier of time and attendance data collection
and tracking and labor allocation computer applications (software) as well as
data distribution and access solutions for the Enterprise Resource Planning
environment (the "ERP Environment"). ATS' product offering includes the
application software, hardware, implementation services and ongoing support
necessary for deployment of enterprise-wide distributed processing. ATS markets
its products through direct sales and in conjunction with strategic partners.
AdSys and ATS are headquartered in Southfield, Michigan, a suburb of
Detroit. ATS was formed in 1995 to acquire substantially all the assets and
certain liabilities of Automated Time Systems Corp. This acquisition was
completed in early 1996. AdSys was formed in 1996. On July 8, 1997, AdSys, then
a publicly-held shell company, acquired ATS via a "reverse takeover" merger.
In that transaction, the ATS shareholders received 5,481,667 (65%) of
AdSys' then outstanding common shares, with the prior AdSys shareholders
retaining the balance of 3,000,000 shares (35%). Contemporaneously with the
merger, AdSys consummated an equity placement of approximately $1 million.
Principal Products
ATS is a supplier of time and attendance data collection and tracking
and labor allocation applications, as well as data distribution and access (DDA)
solutions for the ERP Environment. The objective of the ATS DDA solution is to
integrate disparate business functions of an organization from financials and
human resources to manufacturing and sales and distribution. This integration
enables companies to optimize supply chains, strengthen customer relationships,
and make accurate management decisions based on real-time data.
ATS' product offering includes the application software, hardware,
implementation services and on-going support necessary for deployment of
enterprise-wide distributed processing. Key markets include automotive,
automotive supply, packaged goods, pharmaceuticals, food processing and other
manufacturing industries.
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ATS developed ATServer(R) to facilitate the dissemination of key labor
data to supervisors throughout the organization. Managers can therefore make
decisions on labor allocations and costing based on timely information that is
consistent throughout the enterprise.
ATLink(TM) provides a seamless universal interface between automated
shop floor and warehouse data capture and the multiple ERP modules, packaged
application integration software, bolt-on applications, and legacy systems which
require this data.
For a typical implementation, ATS representatives work with customers
to develop a strategy that provides a tailored time & attendance and/or DDA
solution. Once that is accomplished, a functional specification is developed,
and the ATS professional services team configures and modifies the existing
software to meet requirements. When the implementation is complete, ATS provides
3-tiered support on an on-going, automatic renewal basis that the client can
select to fit their needs. Typical installations can take from 2 to 6 months
depending on the complexity of the management reporting requested, the number of
sites and users, and the timeline of the customer.
ATServer(R)
ATServer(R) is a Time and Attendance client/server solution developed
in collaboration with Perot Systems for DaimlerChrysler Corporation.
ATServer(R) was designed to efficiently and seamlessly collect, process and
distribute key employee labor data throughout the organization.
Reasons for continued growth in the Time and Attendance industry are:
(1) companies investing to solve Y2K compliance problems, (2) rapidly increasing
demand for multifaceted software solutions, and (3) Time and Attendance's
linking to the ERP Environment. ATServer(R) meets critical industry demands that
software packages be reliable and able to interface with other software
solutions and effectively reduce the time and costs associated with supervisors
performing normal employee allocation tasks.
ATServer(R) Competition
The Time and Attendance industry can be categorized as mature. Two
companies dominate the sector: Kronos Incorporated and Simplex Time Recorder
Co. Kronos has released a client/server time and attendance application. As of
this date, Simplex has not released an open client/server time and attendance
solution.
As the ATServer(R) was developed with Perot Systems and
DaimlerChrysler, ATS has gained a strong foundation, with several functioning
client/server sites, in the Automotive and Automotive Supplier sectors. With a
foundation established in the automotive industry, ATS has recently begun to
enter new vertical markets. New verticals include manufacturing (Sauder
Furniture) and food processing (Sara Lee Foods). Success in entering these new
sectors indicates that ATServer(R) can successfully operate in different
sectors. As a result, the Company expects to be able to continue to increase its
market share of the Time and Attendance industry.
ATServer(R) Competitive Advantages
The core product was designed and built as a client/server application.
The architecture of the solution is open thus enabling the customer to utilize
common hardware or software-operating environments. ATServer(R) was developed
using stored procedures for information and rules. As a result, it is versatile
and adaptable to various rules present at the different operating environments.
ATServer(R) was designed as a Windows(TM) program (rather than being a
DOS based system) and utilizes some of the latest software applications. Key
employee data can be captured from a variety of sources. The competition has
developed their applications within specific parameters. As a result
competitor's products are bound to those parameters.
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ATLink(TM)
ATLink(TM) is a powerful and flexible data distribution and access
(DDA) product that reduces ERP implementation cycles and costs. ATLink(TM)
provides a seamless universal interface between automated shop floor and
warehouse data capture and the multiple ERP modules, packaged application
integration software, bolt-on applications, and legacy systems which require
this data.
Entry into the DDA market was a natural progression for ATS from its
existing client base in Time and Attendance software. Current customers can be
used as a platform to introduce ATLink(TM) to potential clients in both
warehouse and manufacturing sectors.
ATLink(TM) has successfully been certified by two levels of SAP R/3,
the leading ERP company (in terms of published revenue data). The two levels of
certification are MM-MOB and PP-PDC. The criteria for MM-MOB meets the data
collection requirements within the materials management module of SAP R/3, while
PP-PDC meets the requirements of the SAP human resources information module.
ATS designed, produced and achieved certification in less than 12 months.
ATLink(TM) Competition
The Distributed Transaction Processing ("DTP") segment of Middleware is
fragmented and mainly comprised of small private and public companies. The
largest companies in terms of annual revenue are i2 Technologies and Teklogix.
ATLink(TM) Competitive Advantages
ATS believes that companies (like ATS) that provide open, industry
standard non-proprietary solutions will achieve high rates of growth in the DTP
industry. ATLink(TM) meets all industry standard criteria for universal Data
Distribution and Access software for ERP systems. It is a true client/server
DDA solution that is platform driven, database-independent, scaleable and is
built on non-proprietary, industry-standard modules (GUI, RDBMS, ODBC, SQL, ADO,
DCOM/COM, ActiveX/OLE). The Company worked closely with data collection terminal
manufacturers such as Intermec, Hand Held Products, and Control Module to
incorporate built-in interfaces to their products. The development team focused
on ease of integration, ease of use, and low ownership costs as design criteria.
Using ATLink(TM)'s Windows(TM) NT-based graphic user interface, users
(customers and integrators) can rapidly automate data capture tasks involving a
variety of data collection devices, and then distribute accurate, reliable data
throughout the enterprise. The RAD (Rapid Application Development) tools
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and native Microsoft development tools, such as Visual Basic, were used to
develop terminal applications that work with ATLink(TM) and can reduce typical
application development time by a factor of ten.
Research and Development
In 1996, 1997 and 1998, ATS invested $673,802, $1,772,537 and $610,782,
respectively, in research and development costs for the ATS products.
Y2K Compliance
Management believes that all of the ATS products, as well as its
internal systems, are fully "Y2K" compliant. ATS does not believe that Y2K
issues will adversely affect it. Rather, ATS believes that Y2K issues affecting
customers likely will enhance ATS' sales prospects. ATS has sought information
and assurances from its material third-party vendors and suppliers regarding
their Y2K readiness. ATS intends to continuously evaluate its vendor and
supplier relationships and to develop contingency plans to mitigate the negative
effects on ATS from the Y2K problems of its suppliers and vendors.
Employees
The Company employs 47 full time employees. None of the employees is
represented by a union.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information in this section should be read together with the
consolidated financial statements and notes thereto that are included elsewhere
in this registration statement.
The Company has incurred losses since its inception during which time
it developed its two software applications and developed a level of experience
and resources which management believes should enable ATS to grow. The Company
anticipates earnings in 1999 resulting from installations at Fortune 1000
Companies in industries such as automotive supply, food processing,
entertainment and furniture manufacturing.
The Company has secured a reseller's agreement with EDS (Electronic
Data Systems). The focus of the agreement is to reach Automotive, Automotive
Supplier, Entertainment and other Clients EDS has under management. The Company
believes that the agreement provides not only credibility for ATS and
ATServer(R), but revenue growth potential as the relationship matures.
The non-proprietary Middleware sector of the software industry is in
its initial stages and is experiencing high growth. Management believes that
existing clients in the Time and Attendance Sector can be utilized for
introduction of its Middleware product. Successful entrance in the Middleware
market will further assist the Company's long-term growth potential by providing
two separate but compatible software products, ATServer(R) and ATLink(TM).
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RESULTS OF OPERATIONS
1998 compared to 1997
The Company generated revenue of $2,379,987 in 1998 compared to
$2,012,317 in 1997, as it moved from the development phase to the marketing
phase in its business cycle.
Research and Development expenses decreased from $1,772,537 in 1997 to
$314,587 in 1998, a net decrease of $1,457,950. In 1998, the Company increased
its focus on the development of its products through commercial implementations
and in-house developers rather than through third parties. Reaching
technological feasibility with ATLink(TM) allowed for capitalization of $296,195
of costs, also contributing to the decrease in development costs.
General and Administrative expenses increased to $2,294,668 in 1998
from $1,227,894 in 1997, an increase of $1,066,774. The increase was due
primarily to a greater number of employees, additional travel costs resulting
from increased business activity, and the moving of Corporate Headquarters to a
new facility to accommodate the Company's expansion. Also, in 1998 the Company
obtained Directors & Officers Insurance, saw an increase in depreciation costs
on the Company's assets, and incurred employee moving expenses related to
attracting and retaining key personnel.
Sales and Marketing expenses increased from $485,020 in 1997 to
$945,736 in 1998, an increase of $460,716. This was primarily due to a greater
number of sales personnel, larger commissions due to higher revenues and more
clients, and more intense marketing efforts both in house and through the
Company's third party consultants.
LIQUIDITY AND CAPITAL RESOURCES
The Company converted $674,900 of principal and accrued interest on
outstanding debentures into common stock in 1998.
During 1998 and early 1999, AdSys received an aggregate of
approximately $2.4 million from investors through equity sales made pursuant to
exemptions from registration. AdSys continues to offer shares on a
private-placement basis.
Beyond the ongoing placement efforts, AdSys seeks to generate
sufficient cash flow from operations to fund its anticipated short-term
liquidity needs. In addition, AdSys is currently seeking a line of credit
arrangement with a commercial bank to finance its accounts receivables, to
address liquidity needs pending customer payments. Although the Company believes
that these efforts will result in sufficient liquidity being available to AdSys
to meet its liquidity requirements, no assurance can be given that additional
sources will not be required. To take advantage of high growth in the Middleware
Industry, the Company plans to raise additional capital in the second half of
1999 in the debt or equity markets based on an acceptable strike price and
certain business conditions. Circumstances in which the Company would consider
raising
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additional capital include a desire for a stronger capital base, investment in
product development, acquisitions of companies with synergistic value, resource
procurement based on a definable implementation schedule or backlog, and/or
office space expansion.
ITEM 3. DESCRIPTION OF PROPERTY
The Company currently leases a 8,472 square foot office facility in
Southfield, Michigan pursuant to a lease that expires on October 31, 2003.
Rent for the facility is approximately $164,000 per year.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of AdSys' Common Stock as of April 15, 1999, by (i) each
person who, to AdSys' knowledge, beneficially owned more than 5% of the Common
Stock; (ii) each AdSys director; (iii) each of the Named Executive Officers
described in Item 6 below; and (iv) all executive officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
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NAME AND ADDRESS OF AMOUNT OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
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<S> <C> <C>
Gerald A. Pesut 766,667 6.5
25300 Telegraph Rd., Ste. 455
Southfield, MI 48034
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Alexander D. Henry 644,567 5.4
2 First Canadian Place, Ste. 2810
Toronto, On Canada M5X 1A9
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Mark O'Donoghue 25,000(4) *
Tropicana Bldg.
Providenciales, Turks & Caicos Islands
British West Indies
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John V. Williams -0- -0-
210 S. High
Denver, CO 80209
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Greg Farbolin -0- -0-
1905 Canadair Court
Daytona Beach, FL 32124
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Temple Securities Ltd. 2,121,015(5) 17.4
Tropicana Bldg.
Providenciales, Turks & Caicos Islands
British West Indies
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914151 Ontario Limited 750,000(6) 6.4
Box 131, RR #2
Navan, ON Canada K4B 1H9
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Roxborough Holdings Limited 996,666(7) 8.2
First Canadian Place Ste 6250
Toronto, ON Canada M5X 1C7
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All Officers and Directors as a Group (7 persons) 1,436,334 11.0
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</TABLE>
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*Represents less than 1% of the outstanding shares of Common Stock.
(1) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in
the rules and regulations promulgated under the Exchange Act, and
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accordingly, may include securities owned by and for among others the
spouse and/or minor children of an individual and any other relative
who has the same home as such individual, as well as other securities
as to which the individual has or shares voting or investment power or
which such person has the right to acquire within 60 days after the
date of this filing pursuant to the exercise of options, or otherwise.
Beneficial ownership may be disclaimed as to certain of the securities.
This table has been prepared based on 11,761,591 shares of Common Stock
outstanding as of April 15, 1999.
(2) Consists of 250,000 shares owned of record by Pesut & Associates, a
company wholly-owned by Mr. Pesut and 516,667 shares which Mr. Pesut
has the right to acquire pursuant to options. Does not include 83,333
shares under other options which are not yet vested.
(3) Consists of 150,000 shares and 175,000 Units (resulting in the right to
acquire up to 350,000 shares)owned by Hampton Equity Holdings Inc.,
and 113,150 shares and 14,750 warrants to acquire shares owned by
REVBEN Management Corporation, affiliates of Mr. Henry, and 16,667
shares which Mr. Henry has the right to acquire pursuant to an option.
Does not include 83,333 shares under an option issued to Mr. Henry
which is not yet vested.
(4) These shares are owned of record by Temple Securities Ltd., a company
affiliated with Mr. O'Donoghue. Does not include 100,000 shares under
an option issued to Mr. O'Donoghue which is not yet vested.
(5) Consists of 1,672,040 shares owned, and 448,975 shares which may be
acquired pursuant to warrants. Includes 25,000 shares also shown for
Mr. O'Donoghue above. Includes 772,040 held of record by Temple for
various client accounts (no account holds beneficial interests in
excess of 5% of AdSys' Common Stock).
(6) Consists of 600,000 shares owned, and 150,000 which may be acquired
pursuant to an option.
(7) Consists of 596,666 shares owned, and 400,000 which may be acquired
pursuant to warrants.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following sets forth certain information regarding each of the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION TERM AS DIRECTOR
<S> <C> <C>
Gerald A. Pesut 59 President, CEO July 1997
John Williams 55 Director August 1998
Greg Farbolin 39 Director December 1999
Alexander Henry 52 Director July 1997
Mark O'Donoghue 34 Director August 1998
Howard Tarnoff 50 VP Sales &
Marketing
Robert C. DeMerell 31 CFO, Secretary,
Treasurer and
Controller
</TABLE>
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GERALD PESUT, PRESIDENT & CEO
Mr. Pesut has extensive general management experience in leading start
up, growth and turnaround organizations. He has a proven track record of
significant contributions to corporate growth and profitability through personal
leadership, customer focus, sales experience, aligned empowerment and continuous
improvement within the organization.
Most recently before joining AdSys, Mr. Pesut was President & CEO of
Distributed Systems Division Inc., a subsidiary of Storage Technology
Corporation, where he managed the $240 million integrator of midrange and
network systems, with 500 employees.
Mr. Pesut has held a number of senior management positions throughout
the technology industry. This multifaceted background has provided Mr. Pesut
with the ability to understand market developments and advances, while
establishing corporate direction to meet the ever-changing demands of the
market.
Mr. Pesut is a graduate of the York University Accelerated MBA program.
JOHN WILLIAMS, DIRECTOR
Mr. Williams brings to AdSys a successful career as a senior executive
leading technology companies through different phases of growth. His background
includes startups, turnaround and Fortune 500 companies. Most recently he was
the Senior Executive Vice President at Storage Teck, a $2 billion multinational
manufacturer of storage and retrieval systems. Mr. Williams's senior level
experiences with international mergers and acquisitions, establishment of
information technology strategies, competitive and strategic planning and
execution are a valuable addition to the ATS corporate team.
GREG FARBOLIN, DIRECTOR
Mr. Farbolin's family founded The HoneyBaked Ham Company in 1973. Over
a 20-year period, the business grew to $130 million in sales with 150 locations.
In 1994, Mr. Farbolin personally spearheaded the project to overhaul the
corporate IT based infrastructure components for the entire organization. The
reporting components from each store, through data warehouse for all
departments, were installed on a Windows based retail management system.
HoneyBaked was one of the first successful high-profile installs on Windows. The
software application was developed with the assistance of Virtual Systems.
Mr. Farbolin was a Director for Virtual Systems between 1995 and 1997.
Over that period, Virtual was awarded Microsoft's prestigious Retail Application
Developer (RAD) in 1996 and 1997. As a member of the board at Virtual, Mr.
Farbolin was responsible for developing a distribution model by creating a
resellers network, as well as managing their relationships with major Hardware,
Software and End Users.
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ALEXANDER HENRY, DIRECTOR
Mr. Henry qualified as a Chartered Accountant with Touche Ross & Co.
(now, Deloitte & Touche) in Toronto, Ontario in 1973. From 1973 to 1981, he
continued in public practice. While in public practice, he directed his
attention toward the areas of taxation, real estate and financial planning.
During this time, Mr. Henry lectured and published on these subjects.
In 1981, Mr. Henry left public practice to concentrate, both as a
principal and a promoter, on the syndication of real estate tax sheltered
investment vehicles, commercial real estate and real estate debt/mortgage
investments.
In 1991, Mr. Henry joined LOM & Associates, the "small cap" group at
Loewen, Ondaatje, McCutcheon to organize and manage various tax-assisted and
otherwise unique real estate offerings. In 1993, Mr. Henry joined Hampton Equity
Management Inc. (which he had formed in 1991 with certain other principals of
LOM & Associates) on a full-time basis to organize financings for computer
software developers that were primarily tax-assisted and seed capital financings
for other emerging companies.
Mr. Henry sits on the boards of several companies, including
MusicMusicMusic Inc. (an electronic commerce company delivering music selections
and applications via the internet) and Jax Mold & Machine, Inc. (a high-tech
machine shop company providing molds to the tire and rubber industry). He is
active in fund raising for various charitable and non-profit organizations.
MARK O'DONOGHUE, DIRECTOR
Mr. O'Donoghue is currently (since 1997) the Chief Executive Officer
managing the rapid growth and expansion of Temple Securities Ltd., a full
service investment dealer. From 1993 to 1997, he was a Trust Officer and
Investment Advisor to Temple Trust Company Ltd. Mr. O'Donoghue possesses a
comprehensive multinational background and shall provide ATS with financial
guidance for business growth issues and international development. Mr.
O'Donoghue holds his Canadian Chartered Accountant designation. While with Ernst
& Young, his team provided client services and related corporate support to a
wide range of industries.
HOWARD TARNOFF, VP SALES & MARKETING
Mr. Tarnoff has 21 years of experience in the Time and Attendance
industry. He brings to Advanced Systems International a comprehensive track
record of multidisciplined professionalism of General Management, Business
Development, Operations and Sales and Marketing.
Mr. Tarnoff worked at Simplex Time Recorder Co., as a Director of
Time/Data Systems Division, from 1993 until joining Advanced Systems
International in December 1998. While at Simplex, he developed advanced
business, operations, sales and marketing solutions, and infused cutting edge
management, communications and technological systems. Mr. Tarnoff was successful
at spear heading and maintaining a 70% annual growth rate while increasing the
sales force to 113 from 12.
Prior to joining Simplex, Mr. Tarnoff held numerous staff and line
management positions at Kronos Incorporated. As Product and Industry Marketing
Manager, he led the marketing development of a labor / job costing product
family and developed new offerings to expand products beyond the scope of Time
and Attendance. In his field management capacity, Mr. Tarnoff ran a highly
successful dealership that was a model for the Kronos direct sales and service
organization.
Mr. Tarnoff is a graduate of the University of Wisconsin.
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ROBERT C. DEMERELL, CHIEF FINANCIAL OFFICER, SECRETARY, TREASURER AND CONTROLLER
Mr. DeMerell possesses a diversified background with proven abilities
in both professional and academic environments. He brings to Advanced Systems
International excellent technical and analytical skills, highly effective
communication abilities and is a focused team builder. Moreover, he has played a
critical role in building the financial reporting and accounting systems of two
high growth start-up companies.
Prior to joining ATS, Mr. DeMerell worked as Controller at FAME
Information Services, Inc. He played a pivotal role in the development and
implementation of the financial controls as the company rapidly grew to $25
million in annual sales from $5 million over a two-year period. In addition, Mr.
DeMerell oversaw the implementation of the financial controls as the company
established operations in both the U.K. and in Asia. Mr. DeMerell worked as an
Auditor for Ernst & Young. His primary role was the auditing of a variety of
small businesses including manufacturing, financial services and health care. In
addition, he gained extensive experience auditing employee pension, 401(k),
ESOP, and Health and Welfare Benefit Plans.
Mr. DeMerell holds an MBA from the University of Notre Dame Graduate
School of Business. He is a Certified Public Accountant (CPA). He completed his
BA in Economics at the University of Michigan with a concentration in Public
Finance.
SIGNIFICANT EMPLOYEES
MARTIN YOUNG, ACCOUNT MANAGER
Mr. Young has twenty years experience in the management consulting and
computerized labor tracking industries. His experience and expertise in the
development of computerized time and attendance-recording systems for a variety
of organizations has placed Mr. Young as one of North America's leading experts
on the benefits of automated labor tracking systems and the products offered by
other suppliers.
Mr. Young spent three years with Seimens-Nixdorf as project manager
overseeing the implementation of one of the world's largest real time data
collection networks, a traffic control project, and physical access security
products for Canada Post Corporation's 65,000 employees. The system involved a
real-time data communication network that gathered employee time transactions at
over 427 locations.
Mr. Young's professional experience also includes: International Time
Recorders Limited (ITR), Canada's largest time & attendance company, where he
started in the technical services area and progressed through sales to the
position of branch manager for the Ottawa Region.
Mr. Young has been instrumental in the design, construction, sale and
deployment of the industry leading ATServer(R) software package.
PAUL F. ABRAHAM, MANAGER OF ENGINEERING
Mr. Abraham has over 10 years experience in the high tech industry. He
has made significant contributions during the various stages of development,
sales and implementation process of data transaction and application software.
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Mr. Abraham was a member of the team that laid the foundation for the
current Data Transaction Processing Middleware industry at Epic Data, as a
Senior Systems Analyst between 1991 - 1997. Mr. Abraham was instrumental in the
design and development of Epic Data's interface to SAP R/3. Utilizing his
experience as a core member of the development team, Mr. Abraham became a
Project Lead at Epic Data. As a Project Lead, he was instrumental in the design
of system requirements for various SAP R/3 customers in addition to basis
administration and configuration during implementations and system support.
Between 1997 and 1998, Mr. Abraham was System Engineering Manager and
Senior Systems Consultant at Epic Data. He managed an implementation team that
consisted of 18 system engineers and programmers. During this two-year period,
he was responsible for all aspects of System Implementations for Epic Data.
Mr. Abraham is an Honors graduate of Humber College Computer Science
Program.
SHAWN RECHKEMMER, DIRECTOR SUPPORT SERVICES
Mr. Rechkemmer possesses comprehensive systems engineering and
management experience. His professional background has provided him with the
necessary capacity to perform tasks on all levels as required for providing
effective management of `hands-on' product support. His expertise includes
analysis in various Client/Server database environments.
Prior to joining ATS, Mr. Rechkemmer worked at EDS for seven years.
During his final three years he was Project Manager responsible for managing the
Client/Server software development project. Responsibilities at that position
included: creating and implementing an annual business plan with project
initiatives, staffing plans for GM customers, managing a team of 12 technical
support staff, and leading the support and development of applications for
customers.
Mr. Rechkemmer also worked as a Systems Engineer and Database
Administrator at EDS. In this position, he set up new databases for clients in
Germany and Sweden and provided support for the users. He was also a member of
the Design and Prototype team charged with utilizing Object Oriented technology
to develop automobile diagnostics for use in GM dealerships. Mr. Rechkemmer is a
graduate of Taylor University with a B.Sc. in Management Information Systems.
ITEM 6. EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid to or accrued by the Company's Chief Executive Officer and all
other executive officers who earned more than $100,000 (salary and bonus) (the
"Named Executive Officers") for all services rendered in all capacities to the
Company during the year ended December 31, 1998.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------------- -------------------
NAME AND
PRINCIPAL POSITION YEAR SALARY OPTIONS/SARS (#)
------------------ ---- ------ ----------------
<S> <C> <C> <C>
Gerald A. Pesut 1998 $199,992 600,000
President and Chief
Executive Officer
Richard A. Penington 1998 $126,000 500,000(1)
Chief Financial Officer,
Secretary, Treasurer
Martin Young, VP 1998 $126,000 -0-
Technical Sales
</TABLE>
- ----------------------
(1) Does not include other options which lapsed on executive's resignation
effective as of 12/31/1998.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------------
PERCENT OF TOTAL
OPTIONS/SARS
NUMBER OF SECURITIES GRANTED TO
UNDERLYING OPTIONS/ EMPLOYEES IN EXERCISE OR BASE
NAME SARS GRANTED (#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
---- ---------------- ----------- ------------ ---------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gerald A. Pesut 500,000 15.1% $0.50 7/8/2017
50,000 1.5% $0.50 7/8/2007
50,000 1.5% $0.50 8/6/2008
- ----------------------------------------------------------------------------------------------------------------------
Richard A. Penington 500,000 15.1% $0.50 7/8/2017
- ----------------------------------------------------------------------------------------------------------------------
Martin Young -0- -0- N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------------------------------------------
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ------------------ ------------- -------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gerald A. Pesut -0- -0- 500,000/100,000 $75,000/$44,500
- ---------------------------------------------------------------------------------------------------------------------
Richard A. Penington -0- -0- 500,000/0 $80,000/$0
- ---------------------------------------------------------------------------------------------------------------------
Martin Young -0- -0- -0- N/A
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
EMPLOYMENT AGREEMENTS
ATS entered into an employment agreement with Gerald A. Pesut dated
November 15, 1996 (amended March 13, 1998). Under the agreement, Mr. Pesut was
engaged to serve as Chief Executive Officer for salary at the rate of $200,000
per year. Mr. Pesut is entitled to bonuses based on ATS' achievement of certain
sales targets. Pursuant to the agreement, Mr. Pesut also received options to
acquire up to 500,000 shares of AdSys stock at the price of $1.00 per share
(repriced to $.50 per share in September, 1998). The agreement may be terminated
by the Company at any time for any reason, either with or without cause.
Similarly, Mr. Pesut may terminate his employment at any time. If the Company
terminates the agreement other than for cause or if Mr. Pesut terminates the
agreement for good cause (as defined in the employment agreement), Mr. Pesut is
entitled to severance compensation equal to 12 months salary together with any
bonus accrued up to the date of termination. In computing the bonus under the
severance arrangement, ATS is deemed to have attained 100% of the bonus targets
for the performance period in which the termination occurs. Upon a change in
control of AdSys, Mr. Pesut's options will accelerate and vest 100%. The
employment agreement also contains a covenant not to compete, which would
prohibit Mr. Pesut from engaging in activities in competition with ATS or AdSys
for a two year period commencing on the date of termination of his employment.
STOCK OPTION PLANS
AdSys currently maintains two stock option plans: the 1997 Employee
Stock Option Plan, and the 1997 Director Stock Option Plan.
The Employee Plan was adopted and approved by the Board and the
Shareholders as of July 1, 1997. The Employee Plan was amended April 15, 1999 to
cover a maximum of 4.5 million shares. Under its terms, participants in the plan
include officers and other employees of AdSys or ATS having managerial,
supervisory or similar responsibilities or who are key administrative employees
and managers, and who are not covered by any collective bargaining agreement. In
addition, the Compensation Committee may grant awards under the Employee Plan to
non-employees who, in the judgment of the Compensation Committee, render or have
rendered significant services to AdSys or ATS.
The Employee Plan is currently administered by the Compensation
Committee of the Board, composed of two outside directors. Subject to the
provisions of the Employee Plan, the Compensation Committee has full power and
authority to determine, from among the persons eligible for grants or awards
under the Employee Plan: (i) the individuals to whom grants or awards will be
made, (ii) a combination of grants or awards to participants, and (iii) the
specific terms of each grant or award. The plan authorizes a wide variety of
stock based compensatory awards, including options (both "incentive stock
options" under Section 422 of the Internal Revenue Code or otherwise), stock
appreciation rights, restricted stock awards or other stock based awards (i.e.,
other awards that are valued in whole or in part by reference to, or are
otherwise based on, AdSys Common Stock). The plan has no set termination date,
although no incentive stock option may be granted after July 1, 2007. As of
April 15, 1999, there were a total of 2,654,000 options outstanding under the
Employee Plan to a total of approximately 50 employees and outside service
providers.
The Director Plan was adopted and approved by the Board and the
Shareholders as of July 1, 1997 (amended August 6, 1998). Under the Director
Plan, options to acquire up to a maximum of 1,000,000 shares may be granted to
members of the AdSys Board of Directors. The plan is administered by the Board
of Directors. Under the Director Plan, upon the date a person first
14
<PAGE> 15
becomes a member of the AdSys Board, the director is automatically granted a
non-qualified stock option to acquire 100,000 shares. The purchase price for
each share which may be purchased upon exercise of an option is the fair market
value of the AdSys Common Stock on the date of grant. Options vest in one-third
increments on the first, second and third grant date anniversaries. The Director
Plan has no outside termination date, and will remain in effect until all shares
authorized have been issued, or unless the Director Plan is earlier terminated
or abandoned by action of the Board of Directors. As of March 15, 1999, options
to acquire a total of 600,000 shares were outstanding, none of which had vested
or were exercisable.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1997 and 1998, KIF Capital Corp. rendered consulting services to
AdSys pursuant to a consulting agreement. Consulting fees paid during 1997 and
1998 were $130,000 and $91,000, respectively. Also pursuant to that agreement,
KIF Capital Corp. was granted an option to acquire 100,000 shares of common
stock under the employee plan. The exercise price under this option is $.50 per
share. In 1997 and 1998, AdSys paid KIF Capital Corp. $26,278 and $40,470,
respectively, in respect of sales of common stock made outside the United
States. KIF Capital Corp. is owned by Mr. Kenneth MacAlpine, who was a member of
the AdSys Board of Directors until August, 1998.
During 1998, AdSys paid $35,352 in cash and granted warrants to acquire
up to 376,000 shares of Common Stock in respect of sales of securities outside
the United States to Temple Securities Ltd., a company affiliated with Mark
O'Donoghue, a member of the AdSys Board of Directors.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
AdSys is authorized to issue 20,000,000 shares of Common Stock, $.001
par value per share, of which 11,646,590 are issued and outstanding as of March
15, 1999.
Holders of Common Stock have equal rights to receive dividends when, as
and if declared by the Board of Directors, out of funds legally available
therefor. Holders of Common Stock have one vote for each share held of record
and do not have cumulative voting rights.
Holders of Common Stock are entitled upon liquidation of AdSys to share
ratably in the net assets available for distribution, subject to the rights, if
any, of holders of any preferred stock then outstanding. Shares of Common Stock
are not redeemable and have no preemptive or similar rights. All outstanding
shares of Common Stock are fully paid and nonassessable.
15
<PAGE> 16
PREFERRED STOCK
Within the limits and restrictions provided in the Restated Articles of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issue up to 10,000,000 shares of preferred stock, $.001
par value per share (the "Preferred Stock"), in one or more series, and to fix,
as to any such series, the dividend rate, redemption prices, preferences on
liquidation or dissolution, sinking fund terms, conversion rights, voting
rights, and any other preference or special rights and qualifications. There are
presently no shares of Preferred Stock outstanding.
Shares of Preferred Stock issued by the Board of Directors could be
utilized, under certain circumstances, to make an attempt to gain control of
AdSys more difficult or time consuming. For example, shares of Preferred Stock
could be issued with certain rights that might have the effect of diluting the
percentage of Common Stock owned by a significant stockholder or issued to
purchasers who might side with management in opposing a takeover bid that the
Board of Directors determines is not in the best interest of AdSys and its
stockholders. The existence of Preferred Stock may, therefore be viewed as
having possible anti-takeover effects. A takeover transaction frequently affords
stockholders the opportunity to sell their shares at a premium over current
market prices. The Board of Directors has not authorized the issuance of any
series of Preferred Stock.
DIVIDEND POLICY
AdSys has not paid any cash dividends to date, and has no intention to
pay any cash dividends on its Common Stock in the foreseeable future. The
declaration and payment of dividends is subject to the discretion of the Board
of Directors and to certain limitations imposed by the Nevada corporate laws.
The timing, amount and form of dividends, if any, will depend, among other
things, on AdSys' results of operations, financial condition, cash requirements
and other factors deemed relevant by Board of Directors.
MISCELLANEOUS
AdSys common shares are "penny stock" as defined by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the Nasdaq National Market, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The Commission has adopted
rules that regulate broker-dealer practices in connection with transactions in
penny stocks. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer's account. The bid and
compensation information, must be given to the customer orally or in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
such rules the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading
16
<PAGE> 17
activity in the secondary market for a stock that is subject to the penny stock
rules and therefore make it more difficult to sell those shares.
AdSys' articles of incorporation and bylaws do not contain any
provision that would delay, defer or prevent a change in control.
TRANSFER AGENT
The transfer agent for the Common Stock is Interstate Transfer Company,
874 E. 5900 South, Suite 101, Salt Lake City, Utah 84107, 801-281-9746.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
AdSys' Common Stock is listed for quotation on the Nasdaq Electronic
Bulletin Board under the symbol "ADSN" however, the market for such shares is
extremely limited. No assurance can be given that a significant trading market
for the Common Stock will develop or, if developed, will be sustained. The
Common Stock has been eligible for such trading since January 25, 1998.
The following table sets forth the range of the high and low closing
bid prices of the Company's Common Stock during each of the calendar quarters
identified below. These bid prices were obtained from the Nasdaq BB and do not
necessarily reflect actual transactions, retail markups, mark downs or
commissions. The transactions include inter-dealer transactions.
<TABLE>
<CAPTION>
1998 HIGH LOW
---- ---- ---
<S> <C> <C>
1st Quarter 2 1/2 1 3/4
2nd Quarter 2 1/4 1 5/8
3rd Quarter 1 7/8 7/16
4th Quarter 1 7/16
1999
----
1st Quarter 7/16 1 11/16
</TABLE>
- ----------------------
The closing bid price of the Company's Common Stock on April 22, 1999
was $1.31 per share. On that date, there were approximately 126 holders of
record of Common Stock.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings, although
it is involved from time to time in routine litigation incident to its business.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NOT APPLICABLE
17
<PAGE> 18
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In connection with its organization in late 1995 and early 1996, ATS
issued a net total of 2,720 shares of common stock and warrants to acquire up to
400 shares (subsequently reduced to 300 shares)at $1,000 per share (converted in
the merger described below to warrants to acquire 300,000 shares at $1 per
share) to its original four organizers, for contributions in the aggregate
amount of approximately $20,000. No underwriters were used for this transaction.
Exemption from registration is claimed pursuant to Section 4(2) of the
Securities Act, no public offering having been involved.
At various times from June, 1996 through April, 1997, ATS sold a total
of 2,761.667 shares (converted in the merger described below to 2,761,667
shares) for aggregate proceeds of approximately $2,000,000 to approximately 40
Canadian residents. No underwriters were engaged, although sales commissions of
approximately $200,000 were paid to certain non-U.S. persons and warrants to
acquire up to 740 shares (converted in the merger described below to warrants to
acquire 740,000 shares) were issued to Hampton Equity Management Inc.,
Roxborough Holdings Ltd, James Hogan and Eric Boyd (all non-US persons)for sales
activities. Exemption from registration is claimed pursuant to Regulation S, for
offers and sales made outside the United States to non-U.S. persons.
On May 15, 1997, AdSys (at the time named Bennington) sold a total of
2,000,000 shares for aggregate proceeds of $20,000, to fund its start-up and
other costs associated with structuring and closing the RTO merger described
below. No underwriters or sales agents were used for this transaction. Exemption
from registration was claimed pursuant to Rule 504 of Regulation D.
On June 30, 1997, AdSys (at the time named Bennington) sold 980,000
units for aggregate proceeds of $980,000 to approximately 24 persons, in
connection with the RTO merger described below. Each unit consisted of one
common share plus a warrant to acquire one-half common share at an exercise
price of $2.00 per share. No underwriters were used for this offering. Exemption
from registration is claimed pursuant to Rule 504 of Regulation D.
On July 8, 1997, AdSys issued an aggregate of 5,481,667 shares to the
former ATS shareholders and warrants to acquire up to 1,040,000 shares to the
former ATS warrantholders in connection with the RTO merger acquisition by AdSys
of ATS. The warrants carry exercise prices varying from $0.50 to $1.88 per
share. No underwriters were used for this transaction, and no commissions were
paid. Exemption from registration was claimed pursuant to Regulation S, for
offers and sales made outside the United States to non-U.S. persons.
On October 1, 1997, AdSys sold 250,000 shares to an existing
shareholder for $300,000. No underwriters were engaged, and no commissions
were paid. Exemption from registration is claimed under Section 4(2) of the
Securities Act (no public offering having been involved) and Regulation S (for
an offer and sale made outside the United States to a non-U.S. person).
In March, 1998, AdSys sold 267,000 shares at a sales price of $1.60 per
share to a small number of foreign investors. American Equities Overseas (UK)
Ltd. (London, England) acted as lead sales agent for this offering. A total of
approximately $17,088 was paid in sales commissions. Exemption from registration
is claimed pursuant to Regulation S, for offers and sales made outside the
United States to non-U.S. persons.
At various times from August, 1998 through January, 1999, AdSys sold an
aggregate of 1,449,002 common shares for aggregate proceeds of $977,763.
Exemption from registration is claimed pursuant to Rule 504 of Regulation D. All
investors were "accredited investors."
At various times from August, 1998 through March, 1999, AdSys sold an
aggregate of 918,922 shares of common stock for aggregate proceeds of $999,325.
Exemption from registration is claimed pursuant to Rule 506 of Regulation D, for
sales made solely to accredited investors.
18
<PAGE> 19
In connection with the foregoing Rule 504 and Rule 506 placements, no
underwriters were engaged, although $143,712 was paid in commissions to various
non-U.S. sales agents in respect of sales outside the United States to non-U.S.
persons.
In April 1999, AdSys approved the issuance of 937,000 warrants to
acquire shares at an exercise price of $0.75 to 11 non-U.S. persons in
compensation for their sales efforts in connection with certain of the sales
outside the United States to non-U.S. persons described above. Exemption from
registration for the warrants issuance is claimed pursuant to Regulation S, for
offers and sales made outside the United States to non-U.S. persons.
In April 1999, AdSys approved the issuance of 93,725 warrants to
acquire shares at an exercise price of $0.625 per share to certain debenture
holders who converted their debentures to shares of common stock and warrants.
The shares so issued were included in the Rule 504 and Rule 506 offerings
described in the preceding paragraphs, and exemption from registration is
claimed for the warrant issuance under Regulation S, for offers and sales made
outside the United States to non-U.S. persons.
At various times from July 8, 1997 through December 31, 1998, AdSys has
issued options to acquire common stock to its directors, employees and outside
consultants pursuant to the director and employee option plans. None of the
options has been exercised and, accordingly, no shares have been sold pursuant
to the options. The grants of these options were exempt from registration under
Rule 701 (as to grants to employees) and under Section 4(2) of the Securities
Act of 1933 (as to grants to directors, executive officers and five outside
consultants). Sales upon exercise (if options are exercised) will be made under
applicable available exemptions or pursuant to a registration statement.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The AdSys Articles of Incorporation and Bylaws reflect the adoption of
the provisions of Section 78.037 of the Nevada General Corporation Law, which
eliminates or limits the personal liability of a director to the company or its
stockholders for monetary damages for breach of fiduciary duty under certain
circumstances. The company's Articles of Incorporation and Bylaws also provide
that the company shall indemnify any person, who was or is a party to a
proceeding by reason of the fact that he 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, against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with such proceeding if he acted in
good faith and in a manner he reasonably believed to be or not opposed to the
best interests of the Company, in accordance with, and to the full extent
permitted by, the Nevada General Corporation Law. In addition, the Bylaws
authorize the company to maintain insurance to cover such liabilities.
Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in a successful defense of any action, suit
or proceeding) is asserted by a director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
19
<PAGE> 20
PART FS
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ADVANCED SYSTEMS INTERNATIONAL, INC.
DECEMBER 31, 1998 AND 1997
<PAGE> 21
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants............................................... 3
FINANCIAL STATEMENTS
Consolidated Balance Sheets.................................................................. 4
Consolidated Statements of Operations........................................................ 6
Consolidated Statement of Stockholders' Deficit.............................................. 7
Consolidated Statements of Cash Flows........................................................ 8
Notes to Consolidated Financial Statements................................................... 9
</TABLE>
<PAGE> 22
[GRANT THORNTON LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Advanced Systems International, Inc.
We have audited the accompanying consolidated balance sheets of Advanced Systems
International, Inc. (a Michigan corporation) and Subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of operations,
stockholders' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Advanced Systems
International, Inc. and Subsidiaries as of December 31, 1998 and 1997 and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Grant Thornton LLP
Southfield, Michigan
February 25, 1999
<PAGE> 23
ADVANCED SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1998 1997
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash $ 225,491 $ 68,132
Accounts receivable, less allowance for doubtful
accounts of $8,700 in 1998 494,063 387,910
Loan receivable - stockholder -- 72,917
Inventory 23,642 14,370
Prepaid expenses 9,169 1,544
---------- ----------
Total Current Assets 752,365 544,873
PROPERTY AND EQUIPMENT - At Cost
Computer equipment 185,148 66,108
Office equipment 68,126 36,609
Leasehold improvements 27,477 --
---------- ----------
280,751 102,717
Less accumulated depreciation and amortization 83,139 29,530
---------- ----------
197,612 73,187
OTHER ASSETS
Deposits 62,292 32,368
Software development costs 296,195 --
Organization costs, less accumulated amortization of
$21,628 and $14,165 in 1998 and 1997, respectively 15,675 23,139
---------- ----------
$1,324,139 $ 673,567
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE> 24
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT 1998 1997
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES
Line of credit $ -- $ 550,000
Current maturities of long-term obligations 328,013 378,795
Current maturities of long-term obligations
to related parties 88,000 375,000
Customer deposits 96,638 92,209
Accounts payable
Trade 356,497 196,941
Related parties -- 10,122
----------- -----------
356,497 207,063
Accrued liabilities
Payroll 235,615 --
Payroll taxes 24,840 3,574
Interest 3,851 38,126
Other -- 8,169
----------- -----------
264,306 49,869
----------- -----------
Total Current Liabilities 1,133,454 1,652,936
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES 319,922 120,067
LONG-TERM OBLIGATIONS TO RELATED PARTIES,
LESS CURRENT MATURITIES 62,822 96,000
LEASE COMMITMENT (NOTE E) -- --
STOCKHOLDERS' DEFICIT
Preferred stock - $.001 par value; authorized, 10,000,000
shares; none issued and outstanding -- --
Common stock - $.001 par value; authorized, 20,000,000
shares; 11,157,672 and 8,136,667 shares issued and
outstanding in 1998 and 1997, respectively 11,158 8,137
Additional paid-in capital 5,356,775 2,866,744
Accumulated Deficit (5,559,992) (4,070,317)
----------- -----------
(192,059) (1,195,436)
----------- -----------
$ 1,324,139 $ 673,567
=========== ===========
</TABLE>
5
<PAGE> 25
ADVANCED SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Sales $ 2,379,987 $ 2,012,317
Cost of sales 155,147 304,564
----------- -----------
Gross profit 2,224,840 1,707,753
Operating expenses
Sales & marketing 945,736 485,020
Research and development 314,587 1,772,537
General and administrative 2,294,668 1,227,894
----------- -----------
3,554,991 3,485,451
----------- -----------
Loss from operations (1,330,151) (1,777,698)
Other expense
Interest 122,728 113,770
Loss on settlement 26,250 --
Loss on disposal of assets 8,305 3,681
Sundry 2,241 343
----------- -----------
159,524 117,794
----------- -----------
Net loss $(1,489,675) $(1,895,492)
=========== ===========
Loss per share - basic $ (.17) $ (.28)
=========== ===========
Weighted average number of shares outstanding 8,870,550 6,739,167
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE> 26
ADVANCED SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $ 5,887 $ 1,239,270 $(2,174,825) $ (929,668)
Issuance of 2,000,000 shares
of stock in connection with
reverse acquisition and
recapitalization (Note A) 2,000 1,327,724 -- 1,329,724
Issuance of 250,000 shares
of stock 250 299,750 -- 300,000
Net loss -- -- (1,895,492) (1,895,492)
----------- ----------- ----------- -----------
Balance at December 31, 1997 8,137 2,866,744 (4,070,317) (1,195,436)
Issuance of 2,194,082 shares
of stock 2,194 1,888,875 -- 1,891,069
Conversion of debentures and
interest to 899,840 shares
of stock 900 674,000 -- 674,900
Foreclosure on loan receivable -
stockholder (72,917 shares) (73) (72,844) -- (72,917)
Net loss -- -- (1,489,675) (1,489,675)
----------- ----------- ----------- -----------
Balance at December 31, 1998 $ 11,158 $ 5,356,775 $(5,559,992) $ (192,059)
=========== =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
<PAGE> 27
ADVANCED SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(1,489,675) $(1,895,492)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 68,533 30,867
Loss on disposal of property and equipment 8,305 3,681
Conversion of interest on debentures to common stock 60,900 -
Change in assets and liabilities
Increase in accounts receivable (106,153) (335,921)
Decrease (increase) in loan receivable 72,917 (72,917)
Decrease in purchased contracts - 226,715
Increase in inventories (9,272) (11,370)
Increase in deposits (29,924) (29,456)
Increase in prepaid expenses (7,625) (1,544)
Increase (decrease) in accounts payable 149,434 (30,895)
Increase (decrease) in accrued liabilities 214,437 (27,884)
Increase in customer deposits 4,429 92,209
----------- -----------
Net cash used in operating activities (1,063,694) (2,052,007)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (193,799) (68,189)
Increase in software development costs (296,195) -
Increase in organization costs - (760)
----------- -----------
Net cash used in investing activities (489,994) (68,949)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of obligations 17,600 143,880
Repayment of obligations (94,527) (50,852)
Proceeds from issuance of obligations to related parties 100,000 471,000
Proceeds from issuance of common stock 1,818,152 1,629,724
Repayments of related party obligations (130,178) (30,000)
----------- -----------
Net cash provided by financing activities 1,711,047 2,163,752
----------- -----------
Net increase in cash 157,359 42,796
Cash at beginning of year 68,132 25,336
----------- -----------
Cash at end of year $ 225,491 $ 68,132
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 157,003 $ 97,062
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
During 1998, common stock was issued upon the conversion of $614,000 of
long-term debt and common stock was retired upon the foreclosure of a loan
receivable-stockholder of $72,917.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE> 28
ADVANCED SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanying financial statements follows.
ORGANIZATION AND BASIS OF PRESENTATION
Advanced Systems International, Inc. (formerly Automatic Time Systems Corp.)
("the Company") commenced operations on February 1, 1996. The Company develops
and sells high technology time and attendance software applications to accompany
their customers' hardware configurations in the United States.
On July 8, 1997 Advanced Systems International, Inc. acquired all of the
outstanding common stock of Automatic Time Systems Corp. The acquisition has
been accounted for as a recapitalization of Automatic Time Systems Corp. with
Automatic Time Systems Corp. as the acquirer (reverse acquisition). Accordingly,
stockholders' deficit has been restated to reflect the issuance of common stock
in connection with the merger. The historical financial statements prior to July
8, 1997 are those of Automatic Time Systems Corp.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Automatic Time Systems Corp. and ASI Automatic
Systems International Ltd. All significant intercompany balances and
transactions have been eliminated.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. The Company uses accelerated methods
for depreciation based on useful lives ranging from 3 to 7 years. Depreciation
expense was $61,069 and $23,402 for the years ended December 31, 1998 and 1997,
respectively.
Expenditures for major repairs and improvements that extend the useful life of
property and equipment are capitalized and are depreciated or amortized over the
life of the improvement or the life of the lease whichever is shorter.
Expenditures for maintenance and repairs are charged to expense as incurred.
ORGANIZATION COSTS
The organization costs are amortized on the straight line method over a 60 month
period.
SOFTWARE DEVELOPMENT
Software development costs are capitalized once technological feasibility has
been achieved. Costs incurred prior to achieving technological feasibility are
charged to research and development expense as incurred. The Company had
capitalized software of $296,195 relating to the development efforts on the
Company's middleware product, ATLink.
INCOME TAXES
The Company accounts for income taxes on the asset and liability method.
Deferred tax assets and liabilities are recorded based upon the differences
between the tax bases of assets and liabilities and their carrying amounts for
financial statement purposes. Current taxes are measured by applying the
provision of enacted tax laws to taxable earnings to determine the amount of
taxes payable.
9
<PAGE> 29
ADVANCED SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER SHARE
During 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", which is effective for financial statements issued after December 15,
1997. The new standard eliminates primary and fully diluted earnings per share
and requires presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed. Basic loss per share
excludes dilution and is computed by dividing loss available to common
shareholders by the weighted-average common shares outstanding for the period.
Diluted loss per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted
into common stock or resulted in the issuance of common stock that then shared
in the loss of the entity. The Company adopted this pronouncement at December
31, 1997. Common stock equivalents have been excluded from the calculation of
net loss per share due to their antidilutive effect.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management believes the fair value of the Company's financial instruments
approximates their carrying value. The fair value of long-term obligations
approximate their carrying values based on current rates for instruments with
similar characteristics.
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 statement and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
STOCK BASED COMPENSATION
In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS 123 establishes financial accounting and reporting standards
for stock-based employee compensation plans. It defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans and include the cost in the income statement
as compensation expense. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company has elected to account
for compensation cost for stock option plans in accordance with APB Opinion No.
25.
10
<PAGE> 30
ADVANCED SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting of Comprehensive Income",
which establishes standards for reporting and display of comprehensive income
and its components (revenues, expense, gains, and losses) in a full set of
financial statements. This statement also requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This statement is effective
for fiscal years beginning after December 15, 1997. Earlier application is
permitted. Reclassification of financial statements for earlier periods provided
for comparative purposes is required. The adoption of SFAS 130 does not have an
effect on the consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. This statement also establishes standards for related disclosures
about products and services, geographic areas, and major customers. This
statement requires the reporting of financial and descriptive information about
an enterprise's reportable operating segments. This statement is effective for
financial statements for periods beginning after December 15, 1997. In the
initial year of adoption, comparative information for earlier years is to be
restated. The adoption of SFAS 131 does not have an effect on the consolidated
financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to 1997 to conform to the 1998
presentation.
NOTE B - LINE OF CREDIT
On August 20, 1998 the Company converted its line of credit to a note payable.
11
<PAGE> 31
ADVANCED SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE C - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Note payable to bank with interest at 1.5% above the bank's prime rate
(9.25% at December 31, 1998), and payable in monthly installments of $10,000
plus interest through August 31, 1999; monthly installments of $15,000 plus
accrued interest from September 1, 1999 through maturity and a principal
payment of $160,000 due July 1, 1999. the note is due on February 19, 2001
and is collateralized by all of the assets of the Company. $510,000 $ -
Note payable to bank with interest at 2% above the bank's prime rate (9.75% at
December 31, 1998), and payable in monthly installments of $1,590 plus interest.
The note is due on February 19, 2001 and is collateralized by all
of the assets of the Company. 41,354 60,440
Note payable to bank with interest at 1.5% above the bank's prime rate (9.25%
at December 31, 1998), and payable in monthly installments of $2,606 plus
interest. the note is due on February 19, 2001 and is collateralized by
all of the assets of the Company. 67,762 99,035
Debenture payable, with interest at 6% (converted to common stock in 1998). - 300,000
Debenture payable, with interest at 18% (converted to common stock in 1998). - 25,000
Lease payable to bank, payable in monthly installments of $388, including
interest at 11.5%, due October 30, 2001. 11,219 14,387
Settlement payable to former employee, payable in monthly installments of
$733, due December 7, 2000. 17,600 -
-------- --------
647,935 498,862
Less current maturities 328,013 378,795
-------- --------
$319,922 $120,067
======== ========
</TABLE>
Maturities of long-term obligations are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------
<S> <C>
1999 $328,013
2000 243,167
2001 76,755
--------
$647,935
========
</TABLE>
12
<PAGE> 32
ADVANCED SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE D - INCOME TAXES
Deferred tax assets (liabilities) consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net operating losses $ 1,957,000 $ 1,380,000
Capitalized software (101,000) --
Valuation allowance (1,856,000) (1,380,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
The income tax provision reconciled to the tax computed at the statutory federal
rate for continuing operations was as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Tax benefit at statutory rates applied to loss
before federal income tax $ (506,000) $ (644,000)
Effect of nondeductible items 30,000 2,000
Valuation allowance 476,000 642,000
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
The net operating loss carryforwards expire through 2018
NOTE E - LEASE COMMITMENT
The Company leases office space under an operating lease which expires on
October 31, 2003. Approximate future minimum rental payments under this lease
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------
<S> <C>
1999 $164,063
2000 166,435
2001 168,807
2002 171,179
2003 144,298
--------
$814,782
========
</TABLE>
Rent expense was approximately $73,600 and $41,600 for the periods ended
December 31, 1998 and 1997, respectively.
13
<PAGE> 33
ADVANCED SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE F - MAJOR CUSTOMERS
The Company had the following customers representing more than 10% of sales for
the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
---- -----
<S> <C> <C>
Customer A --% 84%
Customer B 19 --
Customer C 16 --
Customer D 14 --
Customer E 12 --
Customer F 11 --
-- --
72% 84%
== ==
</TABLE>
Included in accounts receivable, is $180,000 and $255,000 at December 31, 1998
and 1997, respectively, related to these customers.
NOTE G - RELATED PARTY TRANSACTIONS
During the years ending December 31, 1998 and 1997, approximately $211,000 and
$272,000 was paid to related parties for consulting services. Also, during the
year ended December 31, 1998, approximately $92,000 was paid to related parties
for commissions on stock subscriptions.
Long-term obligations to related parties consists of the following at December
31:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Subordinated non-interest bearing note payable to
stockholder, collateralized by all the assets of the
Company, due December 2000 $150,822 $196,000
Debentures payable to stockholders, bearing interest at 18%
(converted to common stock in 1998) -- 275,000
-------- --------
150,822 471,000
Less current maturities 88,000 375,000
-------- --------
$ 62,822 $ 96,000
======== ========
</TABLE>
Maturities of related party obligations are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------
<S> <C>
1999 $ 88,000
2000 62,822
----------
$150,822
==========
</TABLE>
14
<PAGE> 34
ADVANCED SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE H - Common Stock
During 1998, the Company entered into agreements with certain stockholders that
if additional shares were sold at a price per share which was less than the
price paid by these stockholders, then the Company would issue additional shares
to them to cause the effective price per share paid by them to equal the lowest
effective price per share for sales of stock through February 19, 1999.
At December 31, 1998, the Company anticipates that approximately 72,000
additional shares will be issued under these agreements.
NOTE I - STOCK OPTION PLANS
The 1997 Employee Stock Option Plan ("Employee Plan") and the 1997 Director
Stock Option Plan ("Director Plan") were approved by stockholders on July 1,
1997.
During 1998, the Employee Plan was amended to provide for 3,500,000 shares of
common stock to be reserved for options that may be issued under the plan. The
plan provides that the option price is not less than the fair market value at
the date of grant. The options granted under the plan become exercisable on the
second anniversary of the date of grant. Options granted under the plan have a
term of ten to twenty years.
During 1998, the Director Plan was amended to provide for 1,000,000 shares of
common stock to be reserved for options that may be issued under the plan. The
plan provides that the option price is not less than the fair market value at
the date of grant. The plan provides that each director, on the date such person
becomes a director, will be granted options to purchase 100,000 shares of stock.
The options granted under the plan become exercisable on the second anniversary
of the date of grant for options granted prior to August 6, 1998 and the third
anniversary for options granted on or after August 6, 1998. Options granted
under the plan have a term of ten years.
The Company also issues stock options to outside consultants for services
provided. During 1998, 410,000 shares with an exercise price ranging from $.50
to $1.00 were issued and an expense of $163,000 was recorded by the Company.
During 1998, the Company revised the option price for all options outstanding at
December 31, 1997 from $1.00 to $.50 per share.
The weighted average remaining life of the stock options is approximately
thirteen years.
15
<PAGE> 35
ADVANCED SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE I - STOCK OPTION PLANS (CONTINUED)
The following table summarizes the changes in the number of common shares under
stock options granted pursuant to the preceding plans:
<TABLE>
<CAPTION>
EMPLOYEE PLAN DIRECTOR PLAN
------------------------- ------------------------
AVERAGE AVERAGE
SHARES OPTION SHARES OPTION
UNDER PRICE UNDER PRICE
OPTION PER SHARE OPTION PER SHARE
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Outstanding at January 1, 1997 -- --
Granted during the 1997 1,525,000 $ .50 300,000 $ .50
Cancelled during 1997 (100,000) $ .50 --
--------- --------
Outstanding at December 31, 1997 1,425,000 $ .50 300,000 $ .50
Granted during the year 1,155,055 $ .50 400,000 $ .50
Cancelled during the year (375,000) $ .50 (200,000) $ .50
--------- --------
Outstanding at December 31, 1998 2,205,055 $ .50 500,000 $ .50
========= ========
</TABLE>
The Company also has issued warrants to purchase common stock. These warrants
expire three years from the date of issuance. The following table summarizes the
changes in the number of common shares under warrants:
<TABLE>
<CAPTION>
WARRANTS
TO PURCHASE AVERAGE
SHARES OF EXERCISE
COMMON PRICE PER
STOCK SHARE
----------- ---------
<S> <C> <C>
Outstanding at January 1, 1997 1,285,000 $ 1.11
Granted during 1997 590,000 $ 1.98
Cancelled during 1997 (302,083) $ 1.00
---------
Outstanding at December 31, 1997 1,572,917 $ 1.46
Granted during 1998 15,000 $ 1.00
Cancelled during 1998 (232,917) $ 1.00
---------
Outstanding at December 31, 1998 1,355,000 $ 1.53
=========
</TABLE>
16
<PAGE> 36
ADVANCED SYSTEMS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE I - STOCK OPTION PLANS (CONTINUED)
The Company accounts for the stock option plan under APB Opinion No. 25,
"Accounting for Stock Issued to Employees." No compensation costs have been
recognized. Had compensation cost for the plan been determined based on the fair
value of the options at the grant dates consistent with the method of SFAS No.
123, the Company's net loss and loss per share would have been as follows:
<TABLE>
<CAPTION>
NET LOSS 1998 1997
------------- -------------
<S> <C> <C>
As reported .. $ (1,489,675) $ (1,895,492)
Pro forma .... (1,563,334) $ (2,386,367)
LOSS PER SHARE
As reported .. $ (.17) $ (.28)
Pro forma .... $ (.18) $ (.34)
</TABLE>
The fair value of each option is estimated on the date of grant using the
Block-Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1998 1997
---------- -------------
<S> <C> <C>
Dividend yield 0% 0%
Expected volatility 34.5% 22.0 - 63.6%
Risk-free interest rate 4.9 - 6.4% 5.8 - 6.5%
Expected lives 10 YEARS 10 - 20 years
</TABLE>
17
<PAGE> 37
Part III
Item 1. Index to Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
3.1 Amended and Restated Articles of Incorporation of Advanced Systems International, Inc.
3.2 Bylaws of Advanced Systems International, Inc.
4.1 Specimen Stock Certificate
10.1 Merger Agreement with Bennington Corporation
10.2 Director Stock Option Plan
10.3 Employee Stock Option Plan
10.4 Employment Agreement between registrant and Gerald Pesut dated as of November 15, 1996.
10.5 Employment Agreement between registrant and Richard Penington dated as of March 5, 1997.
10.6 Employment Agreement between registrant and Howard H. Tarnoff dated as of July 22, 1998.
10.7 Employment Agreement between registrant and Robert C. DeMerell dated as of January 8, 1999.
10.8 Consulting Agreement between registrant and KIF International dated as of November 15, 1996.
10.9 Consulting Agreement between Advanced Systems International, Inc. and Gregory J. Farbolin dated as
of February 4, 1999.
10.10 Stock Option Agreement - Pesut
10.11 Stock Option Agreement - Penington
10.12 Unit - Hampton
10.13 Warrants - Temple
10.14 Warrants - Revben
10.15 Lease for Southfield headquarters facility
27.1 Financial Data Schedule
</TABLE>
Item 2. Description of Exhibits (See Item 1 above)
<PAGE> 38
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
ADVANCED SYSTEMS INTERNATIONAL, INC.
Date: April 27, 1999 By: /s/ Gerald A. Pesut
------------------------------
Gerald A. Pesut
President and Chief Executive Officer
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
3.1 Amended and Restated Articles of Incorporation of Advanced Systems International, Inc.
3.2 Bylaws of Advanced Systems International, Inc.
4.1 Specimen Stock Certificate
10.1 Merger Agreement with Bennington Corporation
10.2 Director Stock Option Plan
10.3 Employee Stock Option Plan
10.4 Employment Agreement between registrant and Gerald Pesut dated as of November 15, 1996.
10.5 Employment Agreement between registrant and Richard Penington dated as of March 5, 1997.
10.6 Employment Agreement between registrant and Howard H. Tarnoff dated as of July 22, 1998.
10.7 Employment Agreement between registrant and Robert C. DeMerell dated as of January 8, 1999.
10.8 Consulting Agreement between registrant and KIF International dated as of November 15, 1996.
10.9 Consulting Agreement between Advanced Systems International, Inc. and Gregory J. Farbolin dated as
of February 4, 1999.
10.10 Stock Option Agreement - Pesut
10.11 Stock Option Agreement - Penington
10.12 Unit - Hampton
10.13 Warrants - Temple
10.14 Warrants - Revben
10.15 Lease for Southfield headquarters facility
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BENNINGTON CORPORATION
Pursuant to the provisions of Section 78.403 of the Nevada Revised
Statutes, the undersigned corporation adopts the following Amended and Restated
Articles of Incorporation as of this date:
FIRST: The present name of the corporation is BENNINGTON CORPORATION. The new
name of the corporation is ADVANCED SYSTEMS INTERNATIONAL, INC.
SECOND: The Articles of Incorporation of the corporation were filed by the
Secretary of State on the fourteenth day of October, 1996.
THIRD: The name and address of the original incorporator are as follows:
<TABLE>
<CAPTION>
====================================================================================
Name Address
---- -------
------------------------------------------------------------------------------------
<S> <C>
Jeffrey Bradpiece 23440 Hawthorne #120, Torrance, CA
90505
====================================================================================
</TABLE>
FOURTH: The board of directors of the corporation by action lawfully taken on
the 3rd day of May, 1997, adopted resolutions to amend and restate the
original Articles .
1
<PAGE> 2
FIFTH: The number of shares of the corporation outstanding and entitled to
vote on the amendment to and restatement of the Articles of
Incorporation are 2,000,000.
SIXTH: The holders of more than the minimum voting power required by Nevada
Revised Statutes, Title 7, Section 78.320(2) dispensed with the holding
of a meeting of stockholders and adopted the amendment to and
restatement of the Articles herein certified by a consent in writing
signed by them in accordance with the provisions of Nevada Revised
Statutes, Title 7, Section 78.320.
SEVENTH: The Articles of Incorporation, as amended to the date of this
certificate, are hereby restated as set forth in Attachment A attached
hereto.
James Petrie is currently the president of BENNINGTON CORPORATION and Gerald
A. Pesut is the assistant secretary of the corporation; and the foregoing
certificate and Attachment A hereto sets forth the text of the Articles of
Incorporation as amended to the date of the certificate.
Date July 8, 1997
BENNINGTON CORPORATION
By: /s/
-------------------------------------------
Its President
2
<PAGE> 3
And by: /s/
----------------------------------------
Its Assistant Secretary
State of )
)ss
County of )
I, , a notary public, do hereby certify
------------------------------------
that on this ___ day of June, 1997, personally appeared before me, James Petrie
and Gerald A. Pesut, who being by me first duly sworn, declared that they signed
the foregoing document as President and Assistant Secretary of the corporation,
respectively, and that the statements contained therein are true.
-----------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires
----------------
3
<PAGE> 4
ATTACHMENT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ADVANCED SYSTEMS INTERNATIONAL, INC.
(F/K/A Bennington Corporation)
================================================================================
FIRST: The name of the corporation (hereinafter called the
corporation) upon adoption of these Amended and Restated Articles is ADVANCED
SYSTEMS INTERNATIONAL, INC.
SECOND: The name of the corporation's resident agent in the State of
Nevada is The Corporation Trust Company of Nevada and the street address of the
resident agent where process may be served on the corporation is One East First
Street, Reno, NV 89501. The mailing address and the street address of the
resident agent are identical.
THIRD: The aggregate number of shares which the corporation shall have
authority to issue is 30,000,000, which are divided into 10,000,000 Preferred
shares of a par value of one mill each and 20,000,000 Common shares of a par
value of one mill each.
Subject to the provisions of Section 502 of the Business
Corporation Law, the Board of Directors of the corporation is authorized to
issue the Preferred shares of the corporation, from time to time, in one or more
series with variations as to the number of shares to be included in each series,
as to the distinctive serial designation, as to the rate or rates of
preferential cumulative, non-participating dividends payable in cash annually,
semi-annually, or quarterly, as to the times of payment of and the dates from
which such dividends shall be cumulative, as to the price or prices at which the
same may be redeemed, which shall be not less than the par value thereof, plus
arrearages, if any, as to the notice of redemption, as to the amount and terms
of any sinking or purchase fund, if any, for the purchase or redemption thereof,
provided such sinking fund is payable only out of funds legally available
therefor, as to the terms, conditions, rights, privileges, and other provisions,
if any, respecting the conversion of any or all series of Preferred shares into
Common shares, and as to the preferential amount or amounts which shall be paid
to the holders thereof in the event of the liquidation, dissolution, or winding
up of the corporation, whether voluntary or involuntary, which shall be not less
than the par value thereof, plus arrearages, if any.
Whenever full dividends as aforesaid upon all shares of all
series of Preferred shares which are issued and outstanding for all past annual
dividend periods
<PAGE> 5
shall have been paid, without interest, and whenever full dividends upon said
shares as aforesaid for the then current annual dividend period shall have been
declared and either paid or a sum sufficient for the payment thereof set aside
in full, without interest, the Board of Directors may declare, set aside, or pay
additional cash dividends, and/or may make share distributions of the authorized
but unissued Common shares of the corporation and/or its treasury Common shares,
if any, and/or may make distributions of bonds or property of the corporation,
including the shares or bonds of other corporations. The holders of record of
the issued and outstanding Common shares shall be entitled in respect of said
Common shares exclusively to receive any such additional cash dividends which
may be declared and/or any such distributions which may be made, each issued and
outstanding Common share entitling the holder of record thereof to receive an
equal proportion of said dividends and/or distributions. Any reference to
"distributions" in this paragraph contained shall not be deemed to include any
distributions made in connection with any liquidation, dissolution, or winding
up of the corporation, whether voluntary or involuntary; nor shall any such
reference to "distributions" in relation to issued and outstanding shares be
deemed to limit, curtail, or divest the authority of the Board of Directors to
make any proper distributions, including distributions of authorized but
unissued Common shares, in relation to its treasury Common shares, if any.
Each issued and outstanding Common share shall entitle the
holder thereof to full voting power. Except as any provision of law may
otherwise require, no share of any series of Preferred shares shall entitle the
holder thereof to any voting power, to participate in any meeting of
shareholders, or to have notice of any meeting of shareholders.
FOURTH: No holder of any of the shares of any class of the corporation
shall be entitled as of right to subscribe for, purchase, or otherwise acquire
any shares of any class of the corporation which the corporation proposes to
issue or any rights or options which the corporation proposes to grant for the
purchase of shares of any class of the corporation or for the purchase of any
shares, bonds, securities, or obligations of the corporation which are
convertible into or exchangeable for, or which carry any rights, to subscribe
for, purchase, or otherwise acquire shares of any class of the corporation; and
any and all of such shares, bonds, securities, or obligations of the
corporation, whether now or hereafter authorized or created, may be issued, or
may be reissued or transferred if the same have been reacquired and have
treasury status, and any and all of such rights and options may be granted by
the Board of Directors to such persons, firms, corporations, and associations,
and for such lawful consideration, and on such terms, as the Board of Directors
in its discretion may determine, without first offering the same, or any
thereof, to any said holder.
FIFTH: The governing board of the corporation shall be styled as a
"Board of Directors", and any member of said Board shall be styled as a
"Director."
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SIXTH: The number of members constituting the first Board of Directors
of the corporation was one; and the name and the post office box or street
address, either residence or business, of the first member was as follows:
NAME ADDRESS
---- -------
Sidney Bradpiece 14108 Tahiti Way Ste 621
Marina del Rey, CA 90292
The number of members constituting the present Board of
Directors of the corporation is six; and the names and the business street
address of these present members are as follows:
NAME ADDRESS
---- -------
Gerald A. Pesut 17515 W 9 Mile Rd Ste 225
Southfield, MI 48075-4408
James Petrie 17515 W 9 Mile Rd Ste 225
Southfield, MI 48075-4408
Kenneth MacAlpin 17515 W 9 Mile Rd Ste 225
Southfield, MI 48075-4408
Alexander Stewart 17515 W 9 Mile Rd Ste 225
Southfield, MI 48075-4408
Douglas Bailey 17515 W 9 Mile Rd Ste 225
Southfield, MI 48075-4408
Alex Henry 17515 W 9 Mile Rd Ste 225
Southfield, MI 48075-4408
SEVENTH: The number of directors of the corporation may be increased or
decreased in the manner provided in the Bylaws of the corporation; provided,
that the number of directors shall never be less than one. In the interim
between elections of directors by stockholders entitled to vote, all vacancies,
including vacancies caused by an increase in the number of directors and
including vacancies resulting from the removal of directors by the stockholders
entitled to vote which are not filled by said stockholders, may be filled by the
remaining directors, though less than a quorum.
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EIGHTH: The corporation shall have perpetual existence.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the General Corporation Law
of the State of Nevada, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the
General Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Law, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
ELEVENTH: The nature of the business of the corporation and the objects
or the purposes to be transacted, promoted, or carried on by it are to engage in
any lawful activity.
TWELFTH: The corporation reserves the right to amend, alter, change,
or repeal any provision contained in these Articles of Incorporation in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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EXHIBIT 3.2
BYLAWS OF
ADVANCED SYSTEMS INTERNATIONAL, INC.
(hereinafter referred to as the "Corporation")
ARTICLE I.
OFFICES
Section 1. LOCATION. The registered office of the Corporation in the
State of Nevada shall be located in such city and county as the Board may from
time to time determine.
Section 2. CHANGE. The Board of Directors (hereinafter referred to as
the "Board") may change the principal office of the Corporation from time to
time and may establish other offices, either within or without the State of
Nevada, as the business of the Corporation may require.
ARTICLE II.
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
Section 1. ANNUAL MEETING. The annual shareholders' meeting shall be
held at such time on such day as the Board shall annually determine, or the
shareholders shall take action by written consent at least once a year, for the
purposes of electing directors, hearing reports of the affairs of the
Corporation and transacting any other business within the power of the
shareholders. If the election of directors shall not be held on the day
designated herein for an annual meeting, or at any adjournment thereof, the
Board may cause the election to be held at a special shareholders' meeting as
soon thereafter as one may be conveniently called and noticed for that purpose.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time by the Chairperson of the Board, President, Chief
Executive Officer or, in case of such officers' death or disability, any Vice
president who is authorized in such circumstances to exercise the authority of
the President, or by the Board of Directors by action at a meeting or a majority
of the directors acting without a meeting, or by shareholders holding 50% or
more of the voting power of the then outstanding shares entitled to vote in an
election of directors. Such meetings may be held within or without the State of
Nevada at such time and place as may be specified in the notice thereof. The
request shall state the purpose or purposes for which the meeting is to be
called, and the business
<PAGE> 2
transacted at any such meeting shall be limited to the purpose or purposes
stated in the notice thereof.
Section 3. PLACE OF MEETING. The Board may specifically designate any
place either within or without the State of Nevada as the place of meeting for
any annual or special shareholders' meeting. If no such designation is made or
if a special meeting is called other than at the request of the Board, the place
of meeting shall be the registered office of the Corporation in the State of
Nevada.
Section 4. WRITTEN NOTICE. Notice of any annual shareholders' meeting
shall specify in writing the place, day and hour thereof and shall be given by
the Secretary to each such shareholder entitled to vote thereat not less than
ten (10) nor more than sixty (60) days before each such meeting. Such written
notice shall constitute due, legal, and personal notice to each such shareholder
if it is given by:
(a) delivering it to such shareholder personally; or
(b) sending it to him by mail, telegraph, or other means of
written communication, charges prepaid, addressed to him at:
(i) his address as it appears on the stock
transfer books of the Corporation; or
(ii) such other address as he may have requested in
writing that the Corporation use for the purpose of giving
such notice; or
(iii) at the registered office of the Corporation
and by publishing it at least once in some newspaper of
general circulation in the county in which that office is
located if his address does not appear on the stock transfer
books of the Corporation and he has not requested in writing
that the Corporation use any address for such notice.
If mailed, such notice shall be deemed given when deposited in the United States
Mail postage prepaid and addressed to the shareholder at any such address.
Except in extraordinary circumstances where express provision is made allowable
by statute, notice of any special shareholders' meeting shall be given in the
same manner as for annual shareholders' meetings.
Attendance of a person at a meeting of shareholders, in person or by
proxy, constitutes (i) a waiver of notice of the meeting, except when the
shareholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened; and (ii) a waiver of objection to
consideration of a particular
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matter at the meeting that is not within the purpose or purposes described in
the meeting notice, unless the shareholder objects to considering the matter
when it is presented.
Section 5. ADJOURNED MEETINGS AND NOTICE THEREOF. Any annual or special
shareholders' meeting, whether or not a quorum is present, may be adjourned from
time to time by the vote of a majority of the shares, the holders of which are
either present in person or represented by proxy thereat; in the absence of a
quorum no other business may be transacted at such meeting.
A meeting may be adjourned to another time or place without giving
notice of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken and at
the adjourned meeting only such business is transacted as might have been
transacted at the original meeting. However, after the adjournment the Board may
fix a new record date for the adjourned meeting and a notice of the adjourned
meeting shall be given to each shareholder of record on the new record date
entitled to notice.
Section 6. VOTING. Unless a record date for voting purposes is fixed as
provided in Section l of Article V of these Bylaws, only those persons in whose
names shares entitled to vote stand and are registered on the stock transfer
books of the Corporation on the day three (3) days prior to any meeting of
shareholders shall be entitled to vote at such meeting. Such vote may be by
voice or by ballot; however, all elections for directors must be by ballot upon
demand made by a shareholder at any election and before the voting begins.
Each shareholder of the Corporation shall, at every shareholders'
meeting, be entitled to one (1) vote in person or by proxy for each share of
each class of capital stock of the Corporation outstanding and entitled to vote
and registered in his name on the record date or the date set forth herein.
Except as otherwise provided in the Corporation's Articles of Incorporation,
directors shall be elected by a plurality of the votes cast at an election.
Except as otherwise provided by law, the Corporation's Articles of
Incorporation, or these Bylaws, every act or decision done or made by vote of
the shareholders entitled to exercise a majority of the voting power present in
person or by proxy at any shareholders' meeting shall be regarded as an act or
decision done or made with the approval of the shareholders.
Section 7. QUORUM. Unless otherwise provided in this Corporation's
Articles of Incorporation, the presence in person or by proxy of persons
entitled to vote a majority of the voting shares of the capital stock of the
Corporation that are outstanding and entitled to vote shall constitute a quorum
for the transaction of business at any meeting. The shareholders present at a
duly called or held
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meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 8. CONSENT OF ABSENTEES. The transactions of any annual or
special shareholders' meeting, however called and noticed, shall be as valid as
though had at a meeting duly held after regular call and notice if a quorum is
present either in person or by proxy and if, either before or after the meeting,
each of the shareholders who was entitled to vote but was not present in person
or by proxy, signs a written waiver of notice and written consent to the holding
of such meeting or a written approval of the minutes thereof. All such waivers
and consents or approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 9. ACTION WITHOUT MEETING. As long as the Articles of
Incorporation do not provide otherwise, any action required or permitted under
any provision of the Nevada Business Corporation Act, to be taken at an annual
or special meeting of shareholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take the action
at a meeting at which all shares entitled to vote thereon were present and
voted. If less than unanimous written consent of the shareholders shall be given
for any action to be taken, the written consent shall bear the date of signature
of each shareholder who signs the consent and shall be delivered to the
Corporation within sixty (60) days after the record date set forth in Section 6
of this Article II hereof. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
shareholders who have not consented in writing.
Section 10. PROXIES. Every person entitled to vote or execute consents
or dissents shall have the right to do so either in person or by one or more
agents authorized by a written proxy executed by such person or his duly
authorized agent and filed at or before the meeting at which they are intended
to be used with the Secretary of the Corporation. Proxies shall be valid for the
length of time which the person executing it specifies, which in no case shall
exceed three (3) years from the date of its execution. Any proxy duly executed
shall be deemed not to have been revoked and to be in full force and effect and,
in the absence of any limitation to the contrary contained in the proxy, it
shall extend to all shareholders' meetings, unless and until an instrument
revoking said proxy or a duly executed proxy bearing a later date is filed with
the Secretary of the Corporation. A proxy shall be deemed sufficient if it
appears on its face to confer the requisite authority and is signed by the owner
of the stock to be voted; no witnesses to the execution of any proxy shall be
required. Notwithstanding that a valid proxy may be
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<PAGE> 5
outstanding, except in the case of an irrevocable proxy coupled with an interest
which shall state that it is irrevocable on its face, the powers of the proxy
holder or holders shall be suspended if the person or persons executing such
proxy shall be present at the meeting and elect to vote in person.
Section 11. ORDER OF BUSINESS AT ANNUAL MEETING. The Chairperson of the
Board or such other member of the Board as is designated by the Board of
Directors, shall preside over meetings of the shareholders. The Secretary of the
Corporation shall act as Secretary of the shareholders' meeting and shall record
all of the proceedings of such shareholders' meeting; provided, that in the
absence of such officer, the presiding officer shall appoint another officer of
the Corporation to act as Secretary of the meeting.
At an annual or special meeting of shareholders, only such business
shall be conducted, and only such proposals shall be acted upon, as shall have
been properly brought before such meeting. To be properly brought before a
meeting of shareholders, business must be (i) in the case of a special meeting,
specified in the notice of the special meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (ii) properly brought before
the meeting by or at the direction of the Board of Directors, or (iii) otherwise
properly brought before the meeting by a shareholder. For business to be
properly brought before a meeting of shareholders by a shareholder, if such
business relates to the nominating by a shareholder of a person to be voted on
for a director position, the shareholder must comply with Article III, Section
3(c) hereof; for all other business, the shareholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice must be delivered or mailed and received at the principal
executive offices of the Corporation not less than 30 days nor more than 60 days
prior to the shareholder meeting; provided, however, that if less than 40 days'
notice or prior public disclosure of the date of the meeting is given or made to
the shareholders, notice by the shareholder to be timely must be so delivered or
received not later than the close of business on the tenth day following the
earlier of (i) the day on which such notice of the date of the meeting was
mailed, or (ii) the day on which such public disclosure was made.
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before a meeting of shareholders, (i) a
brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (ii) the name and
address, as they appear on the Corporation's books, of the shareholder proposing
such business and any shareholders known by such shareholder to be supporting
such proposal, (iii) the class and number of shares of the Corporation which are
beneficially owned by the shareholder on the date of such shareholder's to be
supporting such proposal on the date of such shareholder's notice, and (iv) any
material interest of the shareholder in such proposal.
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Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at a meeting of shareholders except in accordance
with the procedures set forth in this Section. The presiding officer of the
shareholder meeting shall, if the facts warrant, determine and declare to the
meeting that the business was not properly brought before the meeting in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 12. REMOVAL OF DIRECTORS. The shareholders may remove any
member of the Board at any special meeting called for that purpose or by consent
in the manner set forth in the Nevada Business Corporation Act, and the
shareholders may elect a director to fill the vacancy thus created at that
meeting, at any other meeting called for the purpose of filling that vacancy, or
by consent.
Section 13. VOTING OF SHARES BY CERTAIN HOLDERS. Any other corporation
that owns shares of stock of this Corporation outstanding and entitled to vote
may vote the same by the President of the shareholder corporation or proxy
appointed by him, unless some other person is appointed to vote such shares by
resolution of the Board of the shareholder corporation.
Shares held by an administrator, executor, guardian, conservator,
receiver, trustee, or other fiduciary may be voted by him, either in person or
by proxy, without a transfer of such shares into his name, provided the
Corporation is furnished satisfactory proof of the authority of such person to
vote those shares.
A shareholder whose shares are pledged shall be entitled to vote such
shares unless in the transfer the pledgor has expressly empowered the pledgee to
vote such shares and had the same indicated on the books of the Corporation, in
which case only the pledgee or his proxy may represent and vote such shares.
Shares of this Corporation's own stock held by it in a fiduciary
capacity shall not be voted, directly or indirectly, at any meeting or for any
purpose and shall not be counted in determining the total number of shares
present for quorum purposes.
Section 14. INSPECTORS OF ELECTION. Whenever any person entitled to
vote at any shareholders' meeting shall request the appointment of persons to
inspect any election, the Board, prior to the meeting, or the person presiding
at such meeting shall appoint not more than three (3) inspectors, who need not
be shareholders. If the right of any person to vote at such meeting shall be
challenged, the inspectors shall determine such right. The inspectors shall
receive and count the votes for any election or for the decision of any
questions and shall determine the result. Their certificate of any vote shall be
prima facie evidence thereof.
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Section 15. SHAREHOLDER MEETING BY CONFERENCE TELEPHONE OR SIMILAR
EQUIPMENT. A shareholder may participate in a meeting of shareholders by a
conference telephone or similar communications equipment by which all persons
participating in the meeting may hear each other if all participants are advised
of the communications equipment and the names of the participants in the
conference are divulged to all participants. Participation in a meeting pursuant
to this section constitutes presence in person at the meeting.
ARTICLE III.
DIRECTORS AND MEETINGS OF THE BOARD OF DIRECTORS
Section 1. POWERS. All of the powers of this Corporation not expressly
reserved to or conferred upon the shareholders by statute, the Articles of
Incorporation, or these Bylaws shall be vested in the Board of Directors of this
Corporation which shall control and manage its business and affairs.
Section 2. NUMBER OF DIRECTORS. The authorized number of directors of
the Corporation shall be SEVEN until changed by a duly adopted amendment of
these Bylaws.
Section 3. ELECTION, TERM OF OFFICE AND QUALIFICATION OF DIRECTORS.
(a) Directors need not be shareholders of this Corporation.
Except as provided in Subsection (b) below, the directors, other than
those serving on the first Board, shall be elected at each annual
shareholders' meeting or otherwise as provided in Article II, Section
1, above. Each director shall hold office until he resigns, dies, is
removed from office, or his successor is duly elected and qualified,
whichever occurs first.
(b) The Articles of Incorporation or a bylaw adopted by the
shareholders may provide that in lieu of annual election of all
directors the directors be divided into two or three classes, each to
be as nearly equal in number as possible. The term of office of
directors in the first class shall expire at the first annual meeting
of shareholders after their election, that of the second class shall
expire at the second annual meeting after their election, and that of
the third class, if any, shall expire at the third annual meeting after
their election. At each annual meeting after such classification, a
number of directors equal to the number of the class whose term expires
at the time of the meeting shall be elected to hold office until the
second succeeding annual meeting if there are two classes, or until the
third succeeding annual meeting if there are three classes.
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(c) Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors.
Nominations of persons for election as directors of the Corporation may
be made at a meeting of shareholders by or at the direction of the
directors, by any nominating committee or person appointed by the
directors, or by any shareholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the
notice procedures set forth in this Section 3(c). Such nominations,
other than those made by or at the direction of the directors, shall be
made pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the
Corporation not less than 30 days nor more than 60 days prior to the
meeting; provided, however, that if less than 40 days' notice or prior
public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so
received not later than the close of business on the tenth day
following the earlier of the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such
shareholder's notice shall set forth (a) as to each person who is not
an incumbent director who the shareholder proposes to nominate for
election as a director (i) the name, age, business address and
residence address of such person; (ii) the principal occupation of
employment of such person; (iii) the class and number of shares of the
Corporation which are beneficially owned by such person; and (iv) any
other information relating to such person that is required to be
disclosed in solicitations for proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, or any successor provision; and (b) as to the shareholder
giving notice, (i) the name and record address of such shareholder and
(ii) the class and number of shares of the Corporation which are
beneficially owned by such shareholder. Such notice shall be
accompanied by the written consent of each proposed nominee to serve as
a director of the Corporation, if elected. The Corporation may require
any proposed nominee to furnish such other information as may be
reasonably required by the Corporation to determine the qualifications
of such proposed nominee to serve as a director of the Corporation.
The presiding officer of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not
made in accordance with the provisions of this Section 3(c) and if he
should so determine, the defective nomination shall be disregarded.
Section 4. VACANCIES. A vacancy in the Board shall be deemed to
exist if any of the following events occurs:
(a) Any director dies;
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(b) The authorized number of directors is greater than the
number of directors on the Board; or
(c) At any shareholders' meeting at which one or more
directors are to be elected, the shareholders then fail to elect the
full authorized number of directors.
Vacancies in the Board may be temporarily filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining director making
such appointment, and each director so appointed shall hold office until his
successor is elected at an annual or special shareholders' meeting and is
qualified.
The shareholders may elect a director at any time to fill any vacancy
temporarily filled or not filled by the one or more remaining directors. If the
Board accepts the resignation of a director tendered to take effect at a future
time, the Board or the shareholders shall have the power to elect immediately a
successor to take office when such resignation is intended to become effective.
Section 5. PLACE OF MEETING. Regular Board meetings shall be held at
any place within or without the State of Nevada which has been designated from
time to time by resolution of a majority of the Board or by written consent of a
majority of the members of the Board given either before or after the meeting
and filed with the Secretary of the Corporation. In the absence of such
designation, regular meetings shall be held at the registered office of the
Corporation. Any special Board meeting may be held at any place designated with
the written consent of a majority of the directors; otherwise special Board
meetings shall be held at the registered office of the Corporation in the State
of Nevada.
Section 6. ORGANIZATION MEETING. Immediately following each annual
shareholders' meeting and each adjourned annual and special shareholders'
meeting held for the purpose of electing a new Board, the newly elected Board
may hold a regular meeting for the purpose of organization, election of
officers, and the transaction of other business. Notice of each such meeting
need not be given and is hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS. Board meetings may be regularly
scheduled for dates, times and places as determined by the Board, and in such
case notice of such meetings need not be given and is hereby dispensed with.
Section 8. SPECIAL MEETINGS AND NOTICE THEREOF. Special Board meetings
for any purpose or purposes, may be called at any time by any director or by the
President or, if he is absent or unable to act, by any Vice President. The
business transacted at any such meeting shall be limited to the purpose or
purposes stated in the notice thereof. Written notice of the place, day, and
hour of
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special Board meetings shall be given to each director and constitute due,
legal, and personal notice to him if that notice is delivered personally to him
or sent to him by mail, telegraph, or other means of written communication,
charges prepaid, addressed to him at his address as it is shown upon the records
or stock transfer books of the Corporation or, if such address is not so shown
on such records or is not readily ascertainable, at the place in which the
regular directors' meetings are held. If delivered personally, such notice shall
be so delivered at least twenty-four (24) hours prior to the time of the holding
of the meeting. If mailed or telegraphed, such notice shall be deposited in the
United States Mail or delivered to the telegraph company in the place which the
principal office of the Corporation in the State of Nevada is located at least
forty-eight (48) hours prior to the time of holding the meeting; if mailed, such
notice shall be deemed given when deposited in the United States Mail postage
prepaid and addressed as set forth above.
Section 9. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned Board meeting need not be given to absent directors if the
time and place be fixed at the meeting adjourned provided that the meeting is
not adjourned for more than thirty (30) days.
Section 10. WAIVER OF NOTICE. The attendance of a director at any Board
meeting shall constitute a waiver of notice of such meeting, except where a
director attends for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called, noticed, or convened.
The transactions of whatever kind or nature held at any Board meeting,
however called and noticed or wherever held, shall be as valid as though had at
a meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not present signs a
written waiver of notice of the meeting and a written consent to holding such
meeting, or a written approval of the minutes thereof. All such waivers and
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
In addition, any action required or permitted to be taken by the Board
under the Nevada Business Corporation Act may be taken without a meeting, if all
members of the Board shall individually and collectively consent in writing to
such action. Such written consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such directors at a duly called,
noticed, and held Board meeting. Any certificate or other document filed under
any provision of the Nevada Business Corporation Act which relates to action so
taken shall state that the action was taken by unanimous written consent of the
Board without a meeting and that these Bylaws authorized the directors so to
act, and such statement shall be prima facie evidence of such authority.
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Section 11. QUORUM. Except to adjourn the meeting as hereinafter
provided, a majority of the Board without regard to the authorized number of
directors shall be necessary to constitute a quorum for the transaction of
business. Every act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board unless a greater number be required by law, the Articles of
Incorporation, or these Bylaws.
Section 12. ADJOURNMENT. A quorum may adjourn any Board meeting to meet
again at a stated place, date, and hour; however, in the absence of a quorum, a
majority of the directors present at any regular or special Board meeting may
adjourn from time to time until the time fixed for the next regular Board
meeting.
Section 13. FEES AND COMPENSATION. By resolution of the Board, the
directors may be paid their expenses, if any, of attendance at each Board
meeting and a fixed sum for attendance at each Board meeting or a stated salary
as director. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity as an officer,
agent, employee or otherwise and receiving a separate compensation therefor.
Section 14. PRESUMPTION OF ASSENT. A director who is present at any
Board meeting at which action on any corporate matter is taken shall be presumed
to have assented to any action taken by the Board at that meeting unless his
dissent shall be entered in the minutes of the meeting or he shall file his
written dissent to such action with the person acting as the Secretary of the
meeting before the adjournment thereof or he shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action. A director who is absent from a meeting of
the board, or a committee thereof of which he is a member, at which any such
action is taken is presumed to have assented to the action unless he files his
dissent with the Secretary of the Corporation within a reasonable time after he
has knowledge of the action.
Section 15. EXECUTIVE COMMITTEES. The Board, by resolution passed by a
majority of the whole Board, may provide for an Executive Committee by
appointing two (2) or more members thereto, each of whom shall be a director and
who shall serve during the pleasure of the Board. Unless one of the members
shall have been designated as Chairperson of the Board, the Executive Committee
shall elect a Chairperson from its own members. Except as provided herein or
otherwise by resolution of the Board, the Executive Committee during the
intervals between Board meetings shall possess and may exercise all of the
powers of the Board in the management of the business and affairs of the
Corporation. The Executive Committee shall keep full and fair records and
accounts of its proceedings and transactions. All actions taken by the Executive
Committee shall
11
<PAGE> 12
be reported to the Board at its meeting next succeeding such action and shall be
subject to revision and alteration by the Board, except that no rights of third
persons created in reliance thereon shall be affected by any such revision or
alteration. Vacancies in the Executive Committee shall be filled by the Board.
Subject to provisions of these Bylaws, the Executive Committee shall
fix its own rules of procedure and shall meet as provided by such rules, by
resolution of the Board, or at the call of the President or Secretary of the
Corporation or of any two (2) members of the committee. Unless otherwise
provided by such rules, the provisions of the Bylaws relating to the notice
required to be given to directors shall apply to all meetings of the Executive
Committee. A majority of the Executive Committee shall be necessary to
constitute a quorum.
Section 16. OTHER COMMITTEES. The Board may by resolution provide for
such other standing or special committees as it deems desirable and discontinue
the same at its pleasure. Each such committee shall have such powers and perform
such duties not inconsistent with law, as may be assigned to it by the Board. If
provision be made for any such committee, the members thereof shall be appointed
by the Board, shall consist of one or more members of the Board and shall serve
during the pleasure of the Board. Vacancies in such committees shall be filled
by the Board.
ARTICLE IV.
OFFICERS
Section 1. OFFICERS. The officers of the Corporation shall be a
President and a Secretary. The Corporation may also have in the discretion of
the Board, a Chairperson of the Board, a Treasurer, one or more Vice Presidents,
one or more Assistant Secretaries, one or more Assistant Treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
3 of this Article IV. One person may hold two or more offices. In no case shall
any officer execute, acknowledge or verify any instrument in more than one
capacity.
Section 2. ELECTION. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Sections 3 or
5 of this Article IV, shall be chosen by the Board, and each shall hold his
office until he resigns, dies, is removed or otherwise disqualified to serve, or
until his successor is elected and qualified, whichever occurs first.
Section 3. OTHER OFFICERS AND AGENTS. The Board may appoint such other
officers (including, without limitation, a Chief Executive Officer, a Chief
Operating Officer, a Chief Financial Officer and a Chief Accounting Officer) and
agents as the business of the Corporation may require, each of whom shall hold
12
<PAGE> 13
office for such period, have such authority, and perform such duties as may be
provided in these Bylaws or as the Board may from time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer or agent may be removed
by a majority of the whole Board at the time in office at any regular or special
Board meeting.
Any officer may resign at any time by giving written notice to the
Board, the President, or the Secretary. Any such resignation shall take effect
at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 6. CHAIRPERSON OF THE BOARD. The Chairperson of the Board, if
there shall be such an officer, shall, if present, preside at all meetings of
the Shareholders or the Board and shall exercise and perform such other powers
and duties as may from time to time be assigned to him by the Board or
prescribed by these Bylaws. Unless otherwise ordered by the Board, the
Chairperson shall be the Chief Executive Officer of the Corporation, vested with
the powers and duties usually vested in the office of the chief executive
officer of a corporation.
Section 7. PRESIDENT. Subject to such powers and duties, if any, as may
be given to the Chairperson of the Board by the Board or prescribed by these
Bylaws, the President shall, subject to the control of the Board, report to the
Chairperson and have general supervision, direction and control of the business
and affairs of the Corporation. In the absence of the Chairperson of the Board
or if there be no such Chairperson, he shall preside at all shareholders'
meetings and at all Board meetings. He shall be ex officio a member of all the
standing committees, including the Executive Committee, if any; shall have the
general powers and duties of management usually vested in the office of
President of a corporation; shall see that all orders and resolutions of the
Board are carried into effect; and shall have such other powers and duties as
may be prescribed by the Board or these Bylaws.
Section 8. VICE PRESIDENTS. In the event of the President's absence or
disability, the Vice Presidents, if more than one, in order of their rank as
fixed by the Board or, if not ranked, the Vice President designated by the Board
shall perform all the duties of and shall be subject to all the restrictions
upon the President. The Vice Presidents shall have such other powers and
authority and shall perform such other duties as from time to time may be
prescribed for them respectively by the Board or these Bylaws.
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<PAGE> 14
Section 9. SECRETARY. The Secretary shall attend all shareholders'
meetings and all Board meetings and shall keep or cause to be kept, in his
custody at the principal or registered office of the Corporation in the State of
Nevada or such other place as the Board may order, a book recording the minutes
of all Board and shareholders' meetings setting forth: the place, date, and hour
of holding; whether regular or special, and, if special, how authorized; the
notice thereof given; the names of those present at Board meetings; the number
of shares present or represented at shareholders' meetings; and the proceedings
thereof.
The Secretary shall keep or cause to be kept at the registered office
of the Corporation in the State of Nevada or at the office of the Corporation's
transfer agent, a share register or a duplicate share register or a list showing
the names of the shareholders and their addresses; the number and classes of
shares held by each; the number and date of certificates issued for the same;
and the number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall keep in safe custody the seal of the Corporation
and, when authorized by the Board, affix the same or cause the same to be
affixed to any instrument requiring it; when so affixed, the seal shall be
attested by his signature or by the signature of the Treasurer or the Assistant
Secretary. The Secretary shall perform such other duties and have such other
authorities as are delegated to him by the Board.
The Secretary shall give or cause to be given notice of all Board and
shareholders' meetings required by these Bylaws or by law.
Section 10. ASSISTANT SECRETARIES. In the event of the Secretary's
absence or disability, any Assistant Secretary shall act as Secretary in all
respects. The Assistant Secretaries shall exercise such other powers and perform
such other duties as from time to time may be prescribed for them respectively
by the Board, the President, the Secretary, or these Bylaws.
Section 11. TREASURER. The Treasurer shall, subject to the direction of
the Board, have the custody of the corporate funds and securities and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation.
The Treasurer shall deposit all monies and other valuables in the name
and to the credit of the Corporation with such depositaries as may be designated
by the Board; shall disburse the funds of the Corporation as may be ordered by
the Board; shall render to the President and the Board, whenever either requests
it, an account of all of his transactions as Treasurer and of the financial
condition of the Corporation; and shall have such other powers and authority
incident to the office
14
<PAGE> 15
of Treasurer and shall perform such other duties as may be prescribed by the
Board or these Bylaws.
Section 12. ASSISTANT TREASURERS. In the event of the Treasurer's
absence or disability, the Assistant Treasurer shall act as Treasurer in all
respects. The Assistant Treasurer shall exercise such other powers and perform
such other duties as from time to time may be prescribed for him by the Board,
the President, the Treasurer, or these Bylaws.
Section 13. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board.
ARTICLE V.
MISCELLANEOUS
Section 1. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of and to vote at a meeting of shareholders or
an adjournment of a meeting, the Board may fix a record date which shall not
precede the date on which the resolution fixing the record date is adopted by
the Board and which shall be not more than 60 nor less than 10 days preceding
the date of the meeting.
For the purpose of determining shareholders entitled to express consent
to or to dissent from a proposal without a meeting, the Board may fix a record
date, which shall not be more than 60 days before effectuation of the action
proposed to be taken.
For the purpose of determining shareholders entitled to receive payment
of a share dividend or distribution or allotment of a right, or for the purpose
of any other action, the Board may fix a record date which shall not precede the
date on which the resolution fixing the record date is adopted by the Board and
which shall not be more than 60 days preceding the date of the payment of the
share dividend or distribution or allotment of a right or other action.
Section 2. ANNUAL REPORT. The Corporation shall cause a financial
report of the Corporation for the preceding fiscal year to be made and
distributed to each shareholder thereof within four (4) months after the end of
the fiscal year. The report shall include the Corporation's statement of income,
its year-end balance sheet and, if prepared by the Corporation, its statement of
source and application of funds.
Section 3. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
15
<PAGE> 16
authorized by a resolution of the Board. Such authority may be general or
confined to specific instances. No loan or advance to or overdraft or withdrawal
by an officer, director, or shareholder of the Corporation other than in the
ordinary and usual course of the business of the Corporation shall be made or
permitted unless each such transaction shall be approved by a vote of the
majority of the members of the whole Board after excluding from any
deliberations about such transaction any director involved in it. A full and
detailed statement of all such transactions and any payments shall be submitted
at the next annual shareholders' meeting, and the aggregate amount of such
transaction less any repayments shall be stated in the next annual report to
shareholders.
Section 4. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or by a proxy appointed by him; or, in the absence of the President
and his proxy, the Treasurer or by a proxy appointed by him; or, in the absence
of both the President and the Treasurer and their proxies, the Secretary or by a
proxy appointed by him are authorized in that order to vote, represent, and
exercise on behalf of this Corporation all rights incident to any and all shares
of other Corporations standing in the name of this Corporation. The Board,
however, may by resolution appoint some other person to vote such shares.
Section 5. INDEMNIFICATION. The Corporation shall, to the fullest
extent authorized or permitted by the Nevada Business Corporation Act and in
accordance with the procedural requirements of the Nevada Business Corporation
Act, (a) indemnify any person, and his or her heirs, executors, administrators
and legal representatives, who was, is, or is threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(collectively, "Covered Matters"); and (b) pay or reimburse the reasonable
expenses incurred by such person and his or her heirs, executors, administrators
and legal representatives in connection with any Covered Matter in advance of
final disposition of such Covered Matter. The Corporation may provide such other
indemnification to directors, officers, employees and agents by insurance,
contract or otherwise as is permitted by law and authorized by the Board of
Directors.
Section 6. PERSONAL LIABILITY OF DIRECTORS. As long as the Articles of
Incorporation of the Corporation continue to so provide, a director of the
Corporation shall not be personally liable to the Corporation or its
shareholders for monetary damages for a breach of the directors fiduciary duty
to the extent that the breach does not involve or constitute:
(a) Acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law.
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<PAGE> 17
(b) A violation of Section 78.037(1) of the Nevada Business
Corporation Act.
ARTICLE VI.
EXECUTION OF INSTRUMENTS
Section 1. BANK ACCOUNTS. Each bank account of the Corporation shall be
established and continued only by order of the Board.
Section 2. CHECKS, ETC. All checks, drafts, and orders for the payment
of money shall be signed in the name of the Corporation in such manner and by
such officers or agents as the Board shall from time to time designate for that
purpose. No check or other instrument for the payment of money to the
Corporation shall be endorsed otherwise than for deposit to the credit of the
Corporation. All checks of the Corporation shall be drawn to the order of the
payee.
Section 3. CONTRACTS, CONVEYANCES, ETC. When the execution of any
contract, conveyance or other instrument has been authorized without
specification of the executing officers, the President or any Vice President and
the Secretary or Treasurer may execute the same in the name and on behalf of
this Corporation and may affix the corporate seal thereto. The Board shall have
power to designate the officers and agents who shall have authority to execute
any instrument on behalf of the Corporation in more than one capacity.
Notwithstanding anything contained herein to the contrary, no officer,
agent or employee of this Corporation shall have the authority to disburse
monies or other property to other persons, to obligate the Corporation to do or
perform any act, to make any payments of money or property, or to execute any of
the instruments described herein on behalf of this Corporation other than in the
ordinary course of business unless he shall have previously obtained the
approval of the Board and unless such approval or ratification shall appear in
the minutes of this Corporation.
ARTICLE VII.
RIGHT OF INSPECTION
Section 1. INSPECTION OF BYLAWS. The Corporation shall keep in its
registered or principal office the original or a copy of these Bylaws and the
Articles of Incorporation as amended or otherwise altered to date, certified by
the
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<PAGE> 18
Secretary, which shall be open to inspection by all shareholders during regular
business hours.
Section 2. INSPECTION OF RECORDS. A person who is a shareholder of
record of the Corporation, upon at least ten (10) days' written demand may
examine for any proper purpose in person or by agent or attorney, during usual
business hours, its minutes of shareholders' meetings and record of
shareholders' and make extracts therefrom, at the places where the said records
are kept.
ARTICLE VIII.
DIVIDENDS
Section 1. DIVIDENDS OF CASH OR OTHER PROPERTY. The Board may, from
time to time and in accordance with the Nevada Business Corporation Act, declare
dividends on its outstanding shares to be paid in cash or other property, other
than the Corporation's shares.
Section 2. DIVIDENDS OF STOCK. The Board may, from time to time,
declare dividends on its outstanding shares to be paid in the Corporation's
stock. However, shares of one class or series may not be issued as a share
dividend in respect of shares of another class or series unless a majority of
the votes entitled to be cast by the class or series to be issued approve the
issue, or there are no outstanding shares of the class or series to be issued.
ARTICLE IX.
CAPITAL STOCK
Section 1. ISSUANCE OF SHARES. The shares of capital stock of the
Corporation shall be issued by the Board in such amounts, at such times, for
such consideration, and on such terms and conditions as the Board shall deem
advisable, subject to the provisions of the Articles of Incorporation and these
Bylaws.
Section 2. CERTIFICATES FOR SHARES. The shares of the Corporation shall
be represented by certificates and every shareholder of this Corporation shall
be entitled to have a certificate. The certificate shall be signed by the
Chairperson of the Board, President or a Vice President and may also be signed
by another officer of the Corporation; shall certify the number and class of
shares represented by such certificate; shall state, if such shares are not
fully paid, the amount paid; and may be sealed with the seal of the Corporation
or a facsimile thereof. The signatures of the officers of the Corporation upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation itself or an
employee of the Corporation. If an officer who has
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<PAGE> 19
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be an officer before the certificate is issued, it may be issued
by the Corporation with the same effect as if he were the officer at the date of
its issue. The Board may also authorize the issuance of some or all of the
shares of any or all of the Corporation's classes or series of capital stock
without certificates, in "book entry" form.
Certificates of stock shall in all other respects be in such form as
shall be determined by the Board and shall be consecutively numbered or
otherwise identified.
If the Corporation is authorized to issue shares of more than one
class, every certificate of stock shall set forth on its face or back, or state
on its face or back that the Corporation will furnish to a shareholder upon
request and without charge, a full statement of the designation, relative
rights, preferences and limitations of the shares of each class authorized to be
issued, and if the Corporation is authorized to issue any class of shares in
series, the designation, relative rights, preferences, and limitations of each
series so far as the same have been prescribed and the authority of the Board to
designate and prescribe the relative rights, preferences, and limitations of
other series.
Section 3. TRANSFER OF SHARES. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative who shall furnish satisfactory
evidence of his authority, file it with the Secretary of the Corporation, and
surrender for cancellation the certificate for such shares. All certificates
surrendered to the Corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except as otherwise provided in
Section 6 of this Article IX of these Bylaws. The Secretary of the Corporation
shall record each such transfer on the stock transfer books and shall record the
fact that a transfer is made for collateral security and not absolutely when
such is stated in the instrument of transfer.
Section 4. RECORD OWNER. The Corporation shall be entitled to treat the
person in whose name any share of stock is registered as the owner thereof for
the following purposes: recapitalization, consolidation, merger, reorganization,
sale of assets, liquidation or otherwise; for votes, approvals, and consents by
shareholders; for notices to shareholders; and for all other purposes whatever.
The Corporation shall not be bound to recognize any equitable or other claim to
or interest in such shares on the part of any other person, whether or not the
Corporation shall have notice thereof, except as expressly required by law or
these Bylaws.
Section 5. LIEN BY CORPORATION. The Corporation shall have a lien upon
the capital stock of the Corporation for debts due to the Corporation from the
<PAGE> 20
owners thereof pursuant to such owner's subscription agreement for such capital
stock.
Section 6. LOST, MUTILATED, OR DESTROYED STOCK CERTIFICATES. Upon the
presentation to the Corporation of a proper affidavit attesting the loss,
destruction or mutilation of any certificate for shares of stock of the
Corporation, the Board may direct the issuance of a new certificate in lieu of
and to replace the certificate so alleged to be lost, destroyed or mutilated.
The Board may require as a condition precedent to the issuance of a new
certificate any or all of the following:
(a) Additional evidence of the loss, destruction or
mutilation claimed;
(b) Advertisement of the loss in such manner as the Board
may direct or approve;
(c) A bond or agreement of indemnity in such form and
amount, with or without such sureties as the Board may approve; or
(d) The order or approval of a court.
The Corporation may recognize the person in whose name the new certificate, or
any certificate thereafter issued as owner of the shares described therein for
all purposes until the owner of the original certificate or a transferee thereof
without notice and for value shall enjoin the Corporation and the holder of any
new certificate, or any certificate issued in exchange or substitution therefor,
from so acting.
Section 7. TRANSFER AGENT AND REGISTRAR. The Board may appoint a
transfer agent and/or a registrar of transfers and may require all certificates
of shares to bear the signature of such transfer agent and of such registrar of
transfers, or as the Board may otherwise direct.
Section 8. REGULATIONS. The Board shall have power and authority to
make all such rules and regulations as the Board shall deem expedient regulating
the issue, transfer, and registration of certificates for shares in this
Corporation.
Section 9. CANCELED CERTIFICATES. All certificates for shares exchanged
or surrendered to the Corporation for transfer or cancellation shall be marked
with the date of cancellation by the Secretary and shall be immediately fastened
to the stubs in the certificate books from which they were detached when issued.
Section 10. PAYMENT. Where stock is issued in exchange for a promissory
note, draft, obligation or promise of future services of the purchaser,
certificates therefor shall be delivered to the purchaser and the stock shall be
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<PAGE> 21
deemed to be fully paid and non-assessable, unless the Board, upon authorization
of the issuance of such stock, declares that such stock will not be deemed to be
fully paid and non-assessable until such time as the promissory note or draft is
paid, or obligation or promise performed.
ARTICLE X.
FISCAL YEAR
Unless otherwise set by the Board of Directors, the fiscal year of the
Corporation shall end on December 31.
ARTICLE XI.
SEAL
The Corporation may have a seal which shall have inscribed thereon the
name of the Corporation, the state of incorporation, and the words "Corporate
Seal." The seal may be used by causing it or a facsimile to be imprinted,
affixed, reproduced, or otherwise.
ARTICLE XII.
POLICY AS TO COMPENSATION OF EMPLOYEES
Section 1. COMPENSATION POLICY. It is the policy of this Corporation to
fairly and adequately compensate its employees, to reimburse its employees only
for expenses reasonably incurred for and on behalf of this Corporation to
further this Corporation's business, to pay its employees reasonable rental for
any property this Corporation may lease from its employees and to pay only a
fair and proper rate of interest on any loans made by an employee to this
Corporation. However, in recognition of the fact that the Internal Revenue Code
and the regulations issued thereunder provide that the Internal Revenue Service
has the power to determine that some portion of compensation paid to an employee
or some portion of interest or rental payments made to an employee or some
portion of expense reimbursement paid to an employee is not deductible by the
Corporation as a business expense under the Internal Revenue Code,
notwithstanding the fact that such compensation, interest payment, rental
payment and/or expense reimbursement is based upon a good faith determination by
the directors and the officers of the Corporation as to the worth of an employee
and/or the propriety of such interest payment, rental payment and/or expense
reimbursement, it is hereby declared that any payment made to an employee of
this Corporation such as salary, commission, bonus, interest, rent or
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<PAGE> 22
reimbursement of expenses incurred by him which is disallowed in whole or in
part as a deductible expense by the Internal Revenue Service shall be reimbursed
by such employee to this Corporation to the full extent of such disallowance.
Each employee shall agree to such reimbursement as a condition of his
employment. In lieu of payment by the employee, the Board may, in its
discretion, withhold an appropriate amount from the employee's future
compensation payments until the amount owed to this Corporation has been
recovered.
ARTICLE XIII.
AMENDMENTS
These Bylaws may be added to, altered, amended, or repealed:
(1) By the (a) written consent of all of the members of the
Board then in office, or (b) vote of not less than a majority of the
members of the Board then in office at any regular or special meeting,
if written notice of the proposed addition, alteration, amendment, or
repeal shall have been given to each director at least five (5) days
before the meeting, or waived in writing; or
(2) By the (a) written consent of the holders of a majority
of the then outstanding shares of stock entitled to vote, or (b)
shareholders at any annual or special meeting if notice of the proposed
addition, alteration, amendment, or repeal shall have been included in
the notice of such special meeting or waived in writing.
<PAGE> 1
EXHIBIT 4.1
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
================================================================================
---------------------
CUSIP NO. 00757P 10 9
---------------------
NUMBER SHARES
----------- -----------
*** *****
----------- -----------
ADVANCED SYSTEMS INTERNATIONAL, INC.
AUTHORIZED COMMON STOCK: 20,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT SAMPLE
IS THE RECORD HOLDER OF *SAMPLE*
-Shares of ADVANCED SYSTEMS INTERNATIONAL, INC. Common Stock-
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated: SAMPLE
------------------------------ ------------------------------
SECRETARY PRESIDENT
Countersigned:
INTERSTATE TRANSFER COMPANY
874 East 5900 South, Suite 101
Salt Lake City, Utah 84107
(801) 281-9746 - Fax (801) 281-9750
By:
--------------------------------
================================================================================
ADVANCED SYSTEMS INTERNATIONAL, INC.
CORPORATE
SEAL
NEVADA
*****
<PAGE> 1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
AGREEMENT FOR RTO MERGER
AMONG
BENNINGTON CORPORATION,
ATS ACQUISITION INC.
AND
AUTOMATIC TIME SYSTEMS CORP.
- --------------------------------------------------------------------------------
<PAGE> 2
AGREEMENT FOR RTO MERGER
THIS AGREEMENT FOR RTO MERGER (the "Agreement") is made as of June 15,
1997, by and among BENNINGTON CORPORATION, a Nevada corporation (the
"Acquirer"), ATS ACQUISITION INC., a Michigan corporation and wholly-owned
subsidiary of the Acquirer ("Acquisition Sub"), and AUTOMATIC TIME SYSTEMS
CORP., a Michigan corporation ("ATS").
RECITALS
A. The respective Boards of Directors of ATS, Acquisition Sub and the
Acquirer have approved the merger (the "Merger") of Acquisition Sub with and
into ATS in accordance with the laws of the State of Michigan and the provisions
of this Agreement.
B. ATS, Acquisition Sub and the Acquirer desire to make certain
representations, warranties and agreements in connection with, and establish
various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties agree as follows:
ARTICLE I.
TERMS OF THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions
of this Agreement, the Merger shall be consummated in accordance with the
Michigan Business Corporation Act (the "Michigan Act"). At the Effective Time
(as defined in Section 1.02, below), upon the terms and subject to the
conditions of this Agreement, Acquisition Sub shall be merged with and into ATS
in accordance with the Michigan Act and the separate existence of Acquisition
Sub shall thereupon cease, and, ATS, as the surviving corporation in the Merger
(the "Surviving Corporation"), shall continue its corporate existence under the
laws of the State of Michigan as a subsidiary of the Acquirer. The parties shall
prepare and execute a certificate of merger in substantially the form attached
hereto as Exhibit 1.1 (the "Certificate of Merger") in order to comply in all
respects with the requirements of the Michigan Act and the provisions of this
Agreement.
SECTION 1.02 EFFECTIVE TIME. The Merger shall become effective at the
time of the filing of the Certificate of Merger with the Administrator of the
Michigan Department of Consumer and Industry Services in accordance with the
applicable provisions of the Michigan Act or at such later time as may be
specified in the Certificate of Merger. The Certificate of
2
<PAGE> 3
Merger shall be filed as soon as practicable after the execution and delivery of
this Agreement. ATS and the Acquirer shall agree upon the time of such filing
and the place where the closing of the Merger (the "Closing") shall occur. The
time when the Merger shall become effective is hereinafter referred to as the
"Effective Time" and the date on which the Effective Time occurs is hereinafter
referred to as the "Closing Date."
SECTION 1.03 MERGER CONSIDERATION. Subject to the provisions of this
Agreement, at the Effective Time, each issued and outstanding Series A Common
Share of ATS (the "ATS Common Stock"; shares of ATS Common Stock to be converted
in the Merger are referred to as the "ATS Shares") shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive, and there shall be paid and issued as hereinafter
provided in exchange for the ATS Shares, 1,000 shares of the Common Stock of the
Acquirer ("Acquirer Stock") for each ATS Share (the "Merger Consideration"), for
an Exchange Ratio of 1,000-for-1 (Acquirer:ATS).
No fractional shares of the Acquirer Stock shall be issued pursuant to
the Merger nor will any fractional share interest involved entitle the holder
thereof to vote, to receive dividends or to exercise any other rights of a
shareholder of the Acquirer. In lieu thereof, any person who would otherwise be
entitled to a fractional share of the Acquirer Stock pursuant to the provisions
hereof shall receive an amount in cash equal to the value of such fractional
share. The value of such fractional share shall be the product of such fraction
(rounded down to the nearest hundredth of a share) multiplied by the Share Value
of $1.00 for each share of Acquirer Stock.
Subject to the provisions of this Agreement, at the Effective Time,
each share of Acquisition Sub common stock outstanding immediately prior to the
Merger shall be converted, by virtue of the Merger and without any action on the
part of the holder thereof, into one share of the common stock of the Surviving
Corporation (the "Surviving Corporation Common Stock"), which shares of the
Surviving Corporation Common Stock shall constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
SECTION 1.04 STOCKHOLDERS' RIGHTS UPON MERGER. Upon consummation of the
Merger, the certificates which theretofore represented ATS Shares (the
"Certificates") shall cease to represent any rights with respect thereto, and,
subject to applicable Law and this Agreement, shall only represent the right to
receive the Merger Consideration and the amount of cash, if any, payable in lieu
of fractional shares of the Acquirer Stock into which their ATS Shares have been
converted pursuant to this Agreement.
SECTION 1.05 SURRENDER AND EXCHANGE OF SHARES. After the Effective
Time, each holder of an ATS Share shall surrender and deliver the Certificates
to the Surviving Corporation together with a duly completed and executed
assignment form. Upon such surrender and delivery, the holder shall receive a
certificate representing the number of whole shares of the Acquirer Stock to
which such holder is entitled pursuant to this Agreement plus any cash payable
in lieu of fractional shares.
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<PAGE> 4
SECTION 1.06 WARRANTS AND OPTIONS. At the Effective Time, the Acquirer
shall cause each holder of a then-outstanding and unexercised option or warrant
exercisable for shares of ATS Common Stock (the "ATS Options") to receive, by
virtue of the Merger and without any action on the part of the holder thereof,
options or warrants exercisable for shares of Acquirer Stock having the same
terms and conditions as the ATS Options except that the exercise price and the
number of shares issuable upon exercise shall be divided and multiplied,
respectively, by the Exchange Ratio. The Acquirer acknowledges that at the
Effective Time, all such options shall be vested and exercisable to the extent
provided in the ATS Options or applicable employment agreements.
SECTION 1.07 ARTICLES OF INCORPORATION. At and after the Effective
Time, the Articles of Incorporation of Acquisition Sub shall be the Articles of
Incorporation of the Surviving Corporation (subject to any subsequent
amendment).
SECTION 1.08 BYLAWS. At and after the Effective Time, the Bylaws of
Acquisition Sub shall be the Bylaws of the Surviving Corporation (subject to any
subsequent amendment).
SECTION 1.09 DIRECTORS AND OFFICERS. At and after the Effective Time,
until their successors are duly elected or appointed, the directors and the
officers of the Surviving Corporation shall be:
Person Position
=================================================================
Gerald A. Pesut Director
James Petrie Director
Gerald A. Pesut Chairman/CEO
James Petrie President/COO
Richard Penington Treasurer/CFO/Secretary
SECTION 1.10 OTHER EFFECTS OF MERGER. The Merger shall have all further
effects as specified in the applicable provisions of the Michigan Act.
SECTION 1.11 TAX-FREE REORGANIZATION. The parties intend that the
Merger qualify as a tax-free reorganization pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code").
SECTION 1.12 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Acquisition Sub or ATS or otherwise to carry out
this Agreement, the officers and directors of the Surviving Corporation shall be
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<PAGE> 5
authorized to execute and deliver, in the name and on behalf of Acquisition Sub
or ATS, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of Acquisition Sub or ATS, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II.
REPRESENTATIONS, WARRANTIES
AND CERTAIN COVENANTS OF ATS
Except as expressly set forth in the Exhibits attached hereto, ATS represents,
warrants and/or covenants to and with the Acquirer as follows:
SECTION 2.01 ORGANIZATION AND GOOD STANDING. ATS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
SECTION 2.02 CAPITALIZATION. As of the date hereof, the authorized
capital stock of ATS consists of 30,000 shares of ATS Common Stock, 5,481.667
shares of which are issued and outstanding, and 30,000 Series B Common Shares,
no shares of which are issued and outstanding. No other capital stock of ATS is
authorized or issued. All issued and outstanding shares of the ATS Common Stock
are duly authorized, validly issued, fully paid and non-assessable. Options and
warrants to acquire an aggregate of 1,972.917 shares of ATS Common Stock are
presently outstanding, and these options and warrants are all outstanding
rights, subscriptions, warrants, puts, calls, unsatisfied preemptive rights,
options, or other agreements of any kind relating to any of the outstanding,
authorized but unissued, unauthorized or treasury shares of the capital stock or
any other security of ATS and there is no other authorized or outstanding
security of any kind convertible into or exchangeable for any such capital stock
or other security.
SECTION 2.03 AUTHORIZATION; BINDING AGREEMENT. ATS has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the Certificate of Merger and the consummation of the Merger
have been duly and validly authorized by ATS's Board of Directors and
shareholder and no other corporate proceedings on the part of ATS are necessary
to authorize the execution and delivery of this Agreement or to consummate the
Merger. This Agreement has been duly and validly executed and delivered by ATS
and constitutes the legal, valid and binding agreement of ATS, enforceable
against ATS in accordance with its terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or
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<PAGE> 6
other similar laws affecting the enforcement of creditors' rights generally and
by principles of equity regarding the availability of remedies ("Enforceability
Exceptions").
SECTION 2.04 GOVERNMENTAL APPROVALS. No consent, approval, waiver or
authorization of, notice to or declaration or filing with (a "Consent") any
nation or government, any state or other political subdivision thereof, any
entity, authority or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, any governmental or regulatory authority, agency,
department, board, commission or instrumentality, any court, tribunal or
arbitrator and any self-regulatory organization (a "Governmental Authority") on
the part of ATS is required in connection with the execution or delivery by ATS
of this Agreement or the consummation by ATS of the transactions contemplated
hereby or thereby other than the filing of the Certificate of Merger with the
Administrator of the Michigan Department of Consumer and Industry Services,
Corporation, Securities and Land Development Bureau in accordance with the
Michigan Act and those Consents that, if they were not obtained or made, do not
or would not materially and adversely affect the ability of ATS to perform its
obligations as set forth herein or to consummate the transactions contemplated
hereby.
SECTION 2.05 COMPLIANCE WITH LAWS. The business of ATS is operated in
material compliance with all Laws, except for any instances of non-compliance
which do not or would not have a material adverse effect on ATS.
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND
CERTAIN COVENANTS OF THE ACQUIRER
AND ACQUISITION SUB
Except as expressly set forth in the Exhibits attached hereto, the
Acquirer represents, warrants and/or covenants to and with ATS as follows:
SECTION 3.01 ORGANIZATION AND GOOD STANDING. The Acquirer and its sole
subsidiary, the Acquisition Sub each is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
The Acquirer and the Acquisition Sub each is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the character of the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing does not or would not
have a material adverse effect on the business, assets (including, but not
limited to, intangible assets), condition (financial or otherwise), properties
(including, but not limited to, intangible properties), liabilities or the
results of operations of the Acquirer and the Acquisition Sub taken as a whole
(an "Acquirer Material Adverse Effect"), it being understood and expressly
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<PAGE> 7
acknowledged by ATS that, for any and all purposes of this Agreement, under no
circumstances shall any action or other event or matter to the extent permitted
or contemplated by the provisions of this Agreement, constitute, or be deemed to
have caused, a Acquirer Material Adverse Effect). The Acquirer is a Nevada
corporation, and it is not licensed or qualified as a foreign corporation in any
other jurisdiction. Acquisition Sub is the sole subsidiary of the Acquirer. The
Acquirer has heretofore made available to ATS accurate and complete copies of
the Articles of Incorporation and Bylaws, or equivalent governing instruments,
as currently in effect, of the Acquirer and the Acquisition Sub.
SECTION 3.02 CAPITALIZATION. Effective upon the filing of Restated
Articles as approved by the Board of Directors and shareholders of the Acquirer,
the authorized capital stock of the Acquirer will consist of 20,000,000 shares
of the Acquirer Stock and 10,000,000 shares of Preferred Stock (the "Acquirer
Preferred Stock"). As of the date hereof, 3,000,000 shares of the Acquirer Stock
are issued and outstanding. No other capital stock of the Acquirer is authorized
or issued. All issued and outstanding shares of the Acquirer Stock are duly
authorized, validly issued, fully paid and non-assessable and were issued free
of preemptive rights and in compliance with applicable securities laws and
regulations. Except for warrants to acquire up to 500,000 shares of Acquirer
Stock issued in connection with a recent financing, there are no outstanding
rights, subscriptions, warrants, puts, calls, unsatisfied preemptive rights,
options or other agreements of any kind relating to any of the outstanding
authorized but unissued, unauthorized or treasury shares of the capital stock or
any other security of the Acquirer, and there is no authorized or outstanding
security convertible into or exchangeable for any such capital stock or other
security.
SECTION 3.03 AUTHORIZATION; BINDING AGREEMENT. The Acquirer has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the Merger have been duly and
validly authorized by the Board of Directors and shareholders of the Acquirer,
the Board of Directors of the Acquisition Sub, and the Acquirer as the sole
shareholder of Acquisition Sub, and no other corporate proceedings on the part
of the Acquirer or the Acquisition Sub are necessary to authorize the execution
and delivery of this Agreement or to consummate the Merger. This Agreement has
been duly and validly executed and delivered by each of the Acquirer and
Acquisition Sub and constitutes the legal, valid and binding agreement of each
of the Acquirer and Acquisition Sub, enforceable against each of the Acquirer
and Acquisition Sub in accordance with its terms, subject to the Enforceability
Exceptions.
SECTION 3.04 GOVERNMENTAL APPROVALS. No Consent from or with any
Governmental Authority on the part of the Acquirer or any of the Acquirer
Subsidiaries is required in connection with the execution or delivery by the
Acquirer of this Agreement or the consummation by the Acquirer of the
transactions contemplated hereby or thereby other than those Consents that, if
they were not obtained or made, do not or would not have a Acquirer Material
Adverse Effect or materially and adversely affect the ability of the Acquirer to
perform its obligations set forth herein or to consummate the transactions
contemplated hereby.
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<PAGE> 8
SECTION 3.05 NO VIOLATIONS. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by the Acquirer with any of the provisions hereof will not (i)
conflict with or result in any breach of any provision of the Certificate and/or
Articles of Incorporation or Bylaws or other governing instruments of the
Acquirer or any of the Acquirer Subsidiaries, (ii) require any Consent under or
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or augment the performance required by the Acquirer
or any Acquirer Subsidiary, as applicable) under any of the terms, conditions or
provisions of any Acquirer Material Contract (as hereinafter defined) or other
obligation to which the Acquirer or any Acquirer Subsidiary is a party or by
which any of them or any of their properties or assets may be bound, (iii)
result in the creation or imposition of any lien or encumbrance of any kind upon
any of the assets of the Acquirer or any Acquirer Subsidiary, or (iv) be subject
to obtaining the Consents from Governmental Authorities, contravene any Law
currently in effect to which the Acquirer or any Acquirer Subsidiary or its or
any of their respective assets or properties are subject, except in the case of
clauses (ii), (iii) and (iv), above, for any deviations from the foregoing which
do not or would not have an Acquirer Material Adverse Effect.
SECTION 3.06 DISCLOSURE. All information and documents provided prior
to the date of this Agreement, and all information and documents subsequently
provided, to ATS or its representatives by or on behalf of the Acquirer are or
contain, or will be or will contain as to subsequently provided information or
documents, true, accurate and complete information in all material respects with
respect to the subject matter thereof and are, or will be as to subsequently
provided information or documents, reasonably responsive to any specific request
made by or on behalf of ATS or its representatives.
ARTICLE IV.
TERMINATION AND ABANDONMENT
SECTION 4.01 TERMINATION. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time:
(a) by action of the Board of Directors of each of ATS and the
Acquirer;
(b) by ATS or the Acquirer if the Closing shall not have occurred on
or before July 15, 1997, provided said failure to close does not
result from an act or failure to act of the party effecting
termination.
SECTION 4.02 EFFECT OF TERMINATION AND ABANDONMENT. In the event this
Agreement is terminated and the Merger is abandoned as provided in this Article,
this Agreement shall become wholly void and of no effect, and the parties shall
be released
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<PAGE> 9
from all further obligations hereunder; provided, however, that the obligations
of the parties as to confidentiality provided in this Agreement shall not be
extinguished, but shall survive such termination and abandonment.
Notwithstanding the foregoing, promptly following the termination of this
Agreement, any party whose willful default shall have caused the conditions to
the obligations of the other party not to have been fulfilled, or which shall
have refused to satisfy its obligations hereunder, shall reimburse such other
party for its reasonable out-of-pocket costs incurred in connection with this
Agreement, including, without limitation, attorneys' and accountants' fees and
expenses.
ARTICLE V.
MISCELLANEOUS
SECTION 5.01 CONFIDENTIALITY. Unless (i) otherwise expressly provided
in this Agreement, (ii) required by applicable Law or any listing agreement
with, or the rules and regulations of, any applicable securities exchange or the
NASD, (iii) necessary to secure any required Consents as to which the other
party has been advised, or (iv) consented to in writing by the Acquirer and ATS,
this Agreement and any information or documents furnished in connection herewith
shall be kept strictly confidential by ATS, the Acquirer and their respective
officers, directors, employees and agents. Prior to any disclosure pursuant to
the preceding sentence, the party intending to make such disclosure shall
consult with the other party regarding the nature and extent of the disclosure.
Nothing contained herein shall preclude disclosures to the extent necessary to
comply with accounting, SEC and other disclosure obligations imposed by Law. In
the event the Merger is not consummated, each party shall return to the other
all documents furnished by the other and will hold in absolute confidence any
information obtained from the other party except to the extent (i) such party is
required to disclose such information by Law or such disclosure is necessary or
desirable in connection with the pursuit or defense of a claim, (ii) such
information was known by such party prior to such disclosure or was thereafter
developed or obtained by such party independent of such disclosure, or (iii)
such information becomes generally available to the public or is otherwise no
longer confidential. Prior to any disclosure of information pursuant to the
exception in clause (i) of the preceding sentence, the party intending to
disclose the same shall so notify the party which provided the same in order
that such party may seek a protective order or other appropriate remedy should
it choose to do so.
SECTION 5.02 AMENDMENT AND MODIFICATION. To the extent permitted by
applicable Law, this Agreement may be amended, modified or supplemented only by
a written agreement among ATS, Acquisition Sub and the Acquirer.
SECTION 5.03 WAIVER OF COMPLIANCE; CONSENTS. Any failure of ATS or the
Acquirer to comply with any obligation, covenant, agreement or condition herein
may be waived by the other party only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to,
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<PAGE> 10
any subsequent or other failure. Whenever this Agreement requires or permits
consent by or on behalf of any party hereto, such consent shall be given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in this Section 5.03.
SECTION 5.04 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of ATS and the Shareholders contained herein or
in any certificates or other documents delivered at the Closing shall survive
the execution and delivery of this Agreement but shall terminate at the
Effective Time. The representations and warranties of the Acquirer contained
herein or in any certificates or other documents delivered at the Closing shall
survive the execution and delivery of this Agreement.
SECTION 5.05 SURVIVAL OF COVENANTS. The respective covenants of ATS and
the Acquirer contained herein or in any certificates or other documents
delivered at the Closing shall survive the execution and delivery of this
Agreement but shall terminate at the Effective Time.
SECTION 5.06 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by facsimile, receipt confirmed, or on the next business day when
sent by overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to ATS, to:
Automatic Time Systems Corp.
17515 W 9 Mile Rd Ste 225
Southfield, MI 48075-4408
Attention: Mr. James Petrie
Telecopy: 248-569-1669
with a copy to:
Jaffe, Raitt, Heuer & Weiss
One Woodward Ave Ste 2400
Detroit, Michigan 48226-3418
Attention: David D. Warner, Esq.
Telecopy: 313-961-8358
and
(b) if to the Acquirer, to:
Bennington Corporation
c/o Robert Seaman
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515 Madison Ave Ste 3200
New York, NY 10022
Telecopy: 212-644-6828
SECTION 5.07 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto prior to the Effective Time without the
prior written consent of the other party hereto. This Agreement is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.
SECTION 5.08 EXPENSES; TIME OF PAYMENT. All fees, costs and expenses
required or contemplated by, or incurred in connection with, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
costs or expenses.
SECTION 5.09 GOVERNING LAW. This Agreement shall be deemed to be made
in, and in all respects shall be interpreted, construed and governed by and in
accordance with the internal laws of the State of Michigan.
SECTION 5.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 5.11 INTERPRETATION. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"Person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity; (ii)
the term "Affiliate," with respect to any person, shall mean and include any
person controlling, controlled by or under common control with such person; and
(iii) the term "Subsidiary" of any specified person shall mean any corporation
fifty percent (50%) or more of the outstanding voting power of which, or any
partnership, joint venture, limited liability company or other entity fifty
percent (50%) or more of the total equity interest of which, is directly or
indirectly owned by such specified person.
SECTION 5.12 ENTIRE AGREEMENT. This Agreement and the documents or
instruments referred to herein including, but not limited to, the Exhibits
attached hereto, which Exhibits are incorporated herein by reference, embody the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and the understandings between the parties with respect to such
subject matter.
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SECTION 5.13 SEVERABILITY. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
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IN WITNESS WHEREOF, the Acquirer, Acquisition Sub and ATS have caused
this Agreement to be signed and delivered as of the date first above written.
AUTOMATIC TIME SYSTEMS CORP.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
BENNINGTON CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
ATS ACQUISITION INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
13
<PAGE> 1
EXHIBIT 10.2
================================================================================
ADVANCED SYSTEMS INTERNATIONAL, INC.
1997 DIRECTOR STOCK OPTION PLAN
(AS AMENDED AUGUST 6, 1998 AND APRIL 15, 1999)
1. PURPOSE AND ADOPTION OF THE PLAN
1.1. PURPOSE. The purpose of the Advanced Systems International, Inc.
1997 Director Stock Option Plan is to attract and retain the services of
experienced and knowledgeable directors of Advanced Systems International, Inc.
(the "Company") and to provide an additional incentive for such directors to
continue to work for the best interests of the Company and its stockholders.
1.2. ADOPTION AND TERM. The Plan has been approved by the Board and the
Company's stockholders, was effective as of July 1, 1997, and amended on August
6, 1998 and April 15, 1999, and will remain in effect until all shares
authorized under the terms of the Plan have been issued, unless earlier
terminated or abandoned by action of the Board.
2. DEFINITIONS
2.1. GENERAL. The following words and phrases shall, when used herein,
have the following respective meanings unless the context clearly indicates
otherwise:
2.1.1. BENEFICIARY means (a) an individual, trust or estate who or
which, by will or by operation of the laws of descent and
distribution, succeeds to the rights and obligations of the
Director under the Plan and Option Agreement upon the Director's
death; or (b) an individual, who by designation of the Director,
succeeds to the rights and obligations of the Director under the
Plan and Option Agreement upon the Director's death.
2.1.2. BOARD means the Board of Directors of the Company.
2.1.3. CHANGE OF CONTROL EVENT means (a) an event or series of
events by which any person or other entity or group (as such term
is used in Section 13(d) and 14(d) of the Exchange Act) of persons
or other entities acting in concert as a partnership or other
group (a "Group of Persons") (other than persons who are, or
Groups of Persons entirely made up of, (i) management personnel of
the Company or (ii) any affiliates of any such management
personnel) shall, as a result of a tender or exchange offer or
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<PAGE> 2
offers, an open market purchase or purchases, a privately
negotiated purchase or purchases or otherwise, become the
beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of 20% or
more of the combined voting power of the then outstanding voting
stock of the Company; (b) the Company consolidates with, or merges
with or into, another person (other than a Subsidiary in a
transaction which is not otherwise a Change of Control Event), or
sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any person, or any
person consolidates with, or merges with or into the Company, in
any such event pursuant to a transaction in which the outstanding
voting stock of the Company is converted into or exchanged for
cash, securities or other property; (c) during any consecutive
two-year period, individuals who at the beginning of such period
constituted the Board (together with any new directors whose
election by such Board or whose nomination for election by the
stockholders of the Company, was approved by a vote of 66-2/3% of
the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Board then in office; or (d) any
liquidation or dissolution of the Company (other than a
liquidation into a Subsidiary that is not otherwise a Change of
Control Event).
2.1.4. CODE means the Internal Revenue Code of 1986, as amended.
References to a section of the Code shall include that section and
any comparable section or sections of any future legislation that
amends, supplements or supersedes that section.
2.1.5. COMPANY means Advanced Systems International, Inc., a
Nevada corporation.
2.1.6. COMPANY COMMON STOCK means the Common Stock of the Company.
2.1.7. DATE OF GRANT means the date an Option is granted under
this Plan.
2.1.8. DIRECTOR means a member of the Board of Directors of the
Company.
2.1.9. EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
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<PAGE> 3
2.1.10. EXPIRATION DATE means the date specified in an Option
Agreement as the expiration date of such Award.
2.1.11. FAIR MARKET VALUE means, on any given date, (a) if the
Company Common Stock is, on the given date, listed on a national
securities exchange, Fair Market Value shall be the average of the
highest and lowest selling price for the given date, or the most
recent date upon which sales occurred, (b) if (a) does not apply,
then Fair Market Value shall be the average of the highest and
lowest selling price for the Company Common Stock as reported on
the Nasdaq National Market for the given date, or the most recent
date upon which sales were reported, (c) if neither (a) nor (b)
applies, Fair Market Value shall be the average of the final bid
and asked prices for the Company Common Stock as quoted for the
given date in whatever medium then issues such quotes, or the most
recent date upon which such quotes were published, (d) if none of
(a), (b) or (c) applies, then Fair Market Value shall be
determined by the Board based on such valuation methods and/or
indicia of value as the Board deems advisable at the time of such
determination. The use by the Board of any method or indicia of
value to determine Fair Market Value on any valuation date will
not, of itself, preclude the Board from use of a different method
or indicia on a subsequent valuation date.
2.1.12. NON-QUALIFIED STOCK OPTION means a stock option which is
not an Incentive Stock Option as described in Section 422 of the
Code.
2.1.13. OPTION means a Non-Qualified Stock Option granted at any
time under the Plan.
2.1.14. OPTION AGREEMENT means a written agreement between the
Company and the option holder evidencing the grant of an Option
and setting forth the terms and conditions of the Option.
2.1.15. PLAN means the Advanced Systems International, Inc. 1997
Director Stock Option Plan, as described herein and as it may be
amended from time to time.
2.1.16. PURCHASE PRICE, with respect to options, shall have the
meaning set forth in Section 5.2.
2.1.17. SUBSIDIARY shall have the meaning set forth in Section
424(f) of the Code.
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<PAGE> 4
3. COMPANY COMMON STOCK ISSUABLE PURSUANT TO THE PLAN
3.1. SHARES ISSUABLE. Shares to be issued under the Plan may be
authorized and unissued shares or issued shares which have been reacquired by
the Company. Except as provided in Section 3.3, the Options granted under the
Plan shall be limited so that Options to acquire no more than 1,000,000 shares
in the aggregate may be outstanding at any one time.
3.2. SHARES SUBJECT TO TERMINATED OPTIONS. In the event that any Option
at any time granted under the Plan shall be surrendered to the Company, be
terminated or expire before it shall have been fully exercised, then all shares
formerly subject to such Option as to which such Option shall not have been
exercised shall be available for any Option subsequently granted in accordance
with the Plan.
3.3. ADJUSTMENTS TO REFLECT CAPITAL CHANGES. If capital changes occur,
adjustments shall be made as described below.
3.3.1. RECAPITALIZATION. The number and kind of shares subject to
outstanding Options, the Purchase Price for such shares, and the
number and kind of shares available for Options subsequently
granted under the Plan shall be appropriately adjusted to reflect
any stock dividend, stock split, combination or exchange of
shares, merger, consolidation or other change in capitalization
with a similar substantive effect upon the Plan or the Options
granted under the Plan. The Board shall have the power to
determine the amount of the adjustment to be made in each case.
3.3.2. SALE OR REORGANIZATION. After any reorganization, merger or
consolidation in which the Company is a participant, each Director
shall, at no additional cost, be entitled upon exercise of an
Option to receive (subject to any required action by
stockholders), in lieu of the number of shares of Company Common
Stock receivable or exercisable pursuant to such Option, a number
and class of shares of stock or other securities to which such
Director would have been entitled pursuant to the terms of the
reorganization, merger or consolidation if, at the time of such
reorganization, merger or consolidation, such Director had been
the holder of record of a number of shares of stock equal to the
number of shares receivable or exercisable pursuant to such
Option. Comparable rights shall accrue to each Director in the
event of successive reorganizations, mergers or consolidations of
the character described above.
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4. PARTICIPATION
4.1. ELIGIBLE INDIVIDUALS. All Directors of the Company shall be
eligible to receive Options under the Plan.
4.2. ADMINISTRATION. The Board may delegate any part, or all, of its
authority and powers to administer this Plan, in any respect (including granting
and amending options) to a committee of the board.
5. OPTION AWARDS
5.1. GRANT OF OPTIONS. All options outstanding under the Plan as of
April 15, 1999 shall continue in effect, with modifications as may be agreed to
between the holder and the Company. After April 15, 1999, upon the date a person
first becomes a member of the Board, the director will be granted a
Non-Qualified Stock Option to acquire 100,000 shares. Each Option shall be
evidenced by an Option Agreement.
5.2. PURCHASE PRICE OF OPTIONS. The Purchase Price of each share of
Company Common Stock which may be purchased upon exercise of any Option granted
under the Plan shall be the Fair Market Value on the Date of Grant.
5.3. VESTING OF OPTIONS. All options outstanding under the Plan as of
April 15, 1999 shall continue in effect, with modifications as may be agreed to
between the holder and the Company. Options granted after April 15, 1999 shall
vest in one-third increments on each of the first, second and third
anniversaries of the grant date.
5.4. DURATION OF OPTIONS. Options granted under the Plan shall
terminate after the first to occur of the following events:
5.4.1. Ten years from the Date of Grant.
5.4.2. Three months after the Optionee ceases to be a Director,
except in the case of either (a) retirement from the Board after
the Optionee reaches the age of 60, or (b) death as described in
5.4.3 below. However, vesting shall cease as of the date the
Optionee ceases to be a Director, and the Optionee's right to
exercise the Option during the post-termination period will be
limited to the number of shares vested as of the date of
termination.
5.4.3. In the event of the death of a Director while a Director,
the right to exercise all unexpired Options shall be accelerated
and shall accrue as of the date of death, and the Director's
Options may be exercised by his Beneficiary at any time within one
year after the date of the Director's death. In the event of the
death of a Director within the ninety day period
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after he or she ceases to be a Director, the Director's
Beneficiary may exercise his or her Options, to the extent
exercisable on the date of death, within one year after the date
of the Director's death.
5.5. EXERCISE PROCEDURES. Each Option granted under the Plan may be
exercised by written notice to the Company which must be received by the
Secretary of the Company on or before the Expiration Date of the Option. The
Purchase Price of shares purchased upon exercise of an Option granted under the
Plan shall be paid in full in cash by the Director on the date of exercise.
5.6. RIGHTS AS A STOCKHOLDER. The Director or any transferee of an
Option pursuant to Section 5.4.3 or Section 5.9 shall have no rights as a
stockholder with respect to any shares of Company Common Stock covered by an
Option until the Director or transferee shall have become the holder of record
of any such shares, and no adjustment shall be made for dividends and cash or
other property or distributions or other rights with respect to any such shares
of Company Common Stock for which the record date is prior to the date on which
the Director or a transferee of the Option shall have become the holder of
record of any such shares covered by the Option.
5.7. PLAN PROVISIONS CONTROL OPTION TERMS. The terms of the Plan shall
govern all Options granted under the Plan. Option agreements may be in such
form, and containing such terms not inconsistent with this Plan, as the Board
may deem advisable. In the event any provision of any Option granted under the
Plan shall conflict with any term in the Plan as constituted on the Date of
Grant of such Option, the term in the Plan as constituted on the Date of Grant
of such Option shall control. Except as provided in Section 3.3, as provided in
Section 6.2, the terms of any Option granted under the Plan may not be changed
after the granting of such Option without the express approval of the Director.
5.8. TAXES. The Company shall be entitled, if the Company deems it
necessary or desirable, to withhold (or secure payment from the Director in lieu
of withholding) the amount of any withholding or other tax required by law to be
withheld or paid by the Company with respect to any shares issuable upon
exercise of an Option, and the Company may defer issuance of the stock upon
exercise unless indemnified to its satisfaction against any liability for such
tax.
5.9. LIMITATIONS ON TRANSFER. A Director's rights and interest under
the Plan may not be assigned or transferred other than by will or the laws of
descent and distribution, or pursuant to the terms of a domestic relations
order, as defined in Section 414(p)(1)(B) of the Code, which satisfies the
requirements of Section 414(p)(1)(A) of the Code (a "Qualified Domestic
Relations Order"). During the lifetime of a Director, only the Director
personally (or the Director's personal representative or attorney-in-fact) or
the alternate payee named in a Qualified Domestic Relations Order may exercise
the Director's rights under the Plan. The Director's Beneficiary may exercise a
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Director's rights to the extent they are exercisable under the Plan following
the death of the Director.
5.9.10. CHANGE OF CONTROL EVENT. Unless otherwise provided in the
Option Agreement, and subject to such other terms and conditions as the Board
may establish in the Option Agreement, upon the occurrence of a Change of
Control Event, irrespective of whether or not an Option is then exercisable, the
holder of any Option granted hereunder (including Options granted prior to
August 6, 1998) shall have the right to exercise in full any unexpired Option to
the extent not theretofore exercised or terminated.
6. GENERAL PROVISIONS
6.1. AMENDMENT AND TERMINATION OF PLAN. The Plan may be amended,
suspended or terminated as set forth below.
6.1.1. AMENDMENT. The Board shall have complete power and
authority to amend the Plan at any time as it deems necessary or
appropriate and no approval by the stockholders of the Company or
by any other person, committee or entity of any kind shall be
required to make any amendment; provided, however, that the Board
shall not, without the requisite affirmative approval of
stockholders of the Company, make any amendment which requires
stockholder approval under any applicable law, including the Code,
unless such compliance, if discretionary, is no longer desired. No
termination or amendment of the Plan may, without the consent of
the Director to whom any Option shall theretofore have been
granted under the Plan, adversely affect the right of such
individual under such Option. For the purposes of this section, an
amendment to the Plan shall be deemed to have the affirmative
approval of the stockholders of the Company if such amendment
shall have been submitted for a vote by the stockholders at a duly
called meeting of such stockholders at which a quorum was present
and the majority of votes cast with respect to such amendment at
such meeting shall have been cast in favor of such amendment, or
if the holders of outstanding stock having not less than a
majority of the outstanding shares consent to such amendment in
writing in the manner provided under the Company's bylaws.
6.1.2. SUSPENSION OR TERMINATION. The Board shall have the right
and the power to suspend the operation of or terminate the Plan at
any time. If the Plan is not earlier terminated, the Plan shall
terminate when all shares authorized under the Plan have been
issued. No Option shall be granted under the Plan while the Plan
is suspended of after the termination of the Plan, but the
suspension or termination of the Plan shall not have any other
effect and any Option outstanding at the time of the suspension or
termination of the Plan may be exercised after suspension
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or termination of the Plan at any time prior to the expiration
date of such Option to the same extent such award would have been
exercisable if the Plan had not been suspended or terminated.
6.2. MODIFICATION OF OPTIONS. The Board may, with the consent of the
involved Director, modify the terms of any options granted under this Plan in
any respect (including, in particular, as to price and vesting).
6.3. NO RIGHT TO CONTINUE AS DIRECTOR. Neither the Plan nor any action
taken hereunder shall be construed as giving any Director any right to be
retained as a Director, or to limit in any way the right of the stockholders of
the Company to remove such person as a Director.
6.4. SECURITIES LAW RESTRICTIONS. The shares of Company Common Stock
issuable pursuant to the terms of any Options granted under the Plan may not be
issued by the Company without registration or qualification of such shares under
the Securities Act of 1933, as amended, or under various state securities laws
or without an exemption from such registration requirements. Unless the shares
to be issued under the Plan have been registered and/or qualified as
appropriate, the Company shall be under no obligation to issue shares of Company
Common Stock upon exercise of an Option unless and until such time as there is
an appropriate exemption available from the registration or qualification
requirements of federal or state law as determined by the Company in its sole
discretion. The Company may require any person who is granted an award hereunder
to agree with the Company to represent and agree in writing that if such shares
are issuable under an exemption from registration requirements, the shares will
be "restricted" securities which may be resold only in compliance with
applicable securities laws, and that such person is acquiring the shares issued
upon exercise of the Option for investment, and not with the view toward
distribution.
6.5. CAPTIONS. The captions (i.e., all section headings) used in the
Plan are for convenience only, do not constitute a part of the Plan, and shall
not be deemed to limit, characterize or affect in any way any provisions of the
Plan, and all provisions of the Plan shall be construed as if no captions have
been used in the Plan.
6.6. SEVERABILITY. Whenever possible, each provision in the Plan and
every Option at any time granted under the Plan shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Option at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Option at any time granted under the Plan shall remain
in full force and effect.
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6.7. CHOICE OF LAW. All determinations made and actions taken pursuant
to the Plan shall be governed by the laws of Nevada and construed in accordance
therewith.
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EXHIBIT 10.3
================================================================================
ADVANCED SYSTEMS INTERNATIONAL, INC.
1997 EMPLOYEE STOCK OPTION PLAN
(As Amended March 13, 1998 and April 15, 1999)
================================================================================
1. PURPOSE AND ADOPTION OF THE PLAN
1.1. PURPOSE. The purpose of the Advanced Systems International, Inc.
1997 Employee Stock Option Plan is to provide certain key employees of Advanced
Systems International, Inc. (the "Company") with an additional incentive to
promote the Company's financial success and to provide an incentive which the
Company may use to induce able persons to enter into or remain in the employment
of the Company or a Subsidiary.
1.2. ADOPTION AND TERM. The Plan has been approved by the Board and the
Company's shareholders, is effective as of July 1, 1997, amended as of March 3,
1998 and April 15, 1999, and will remain in effect until all shares authorized
under the terms of the Plan have been issued, unless earlier terminated or
abandoned by action of the Board; provided, however, that no Incentive Stock
Option may be granted after July 1, 2007.
2. DEFINITIONS
2.1. GENERAL. The following words and phrases shall, when used herein,
have the following respective meanings unless the context clearly indicates
otherwise:
2.1.1. ADMINISTRATOR means the group of persons having authority to
administer the Plan pursuant to Section 3.1.
2.1.2. AWARD means any one or combination of Nonqualified Stock
Options, Performance Based Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Share Rights or any other award made
under the terms of the Plan.
2.1.3. AWARD AGREEMENT means a written agreement between the Company
and Participant or a written acknowledgment from the Company
specifically setting forth the terms and conditions of an Award granted
under the Plan.
<PAGE> 2
2.1.4. AWARD PERIOD means, with respect to an Award, the period of
time set forth in the Award Agreement during which specified
conditions set forth in the Award Agreement must be satisfied.
2.1.5. BENEFICIARY means (a) an individual, trust or estate who or
which, by will or by operation of the laws of descent and distribution,
succeeds to the rights and obligations of the Participant under the
Plan and Award Agreement upon the Participant's death; or (b) an
individual, who by designation of the Participant, succeeds to the
rights and obligations of the Participant under the Plan and Award
Agreement upon the Participant's death.
2.1.6. BOARD means the Board of Directors of the Company.
2.1.7. CODE means the Internal Revenue Code of 1986, as amended.
References to a section of the Code shall include that section and any
comparable section or sections of any future legislation that amends,
supplements or supersedes that section.
2.1.8. COMPANY means Advanced Systems International, Inc., a
Nevada corporation.
2.1.9. COMPANY COMMON STOCK means the Common Stock of the Company.
2.1.10. DATE OF GRANT means the date designated by the Administrator as
the date as of which it grants an Award, which shall not be earlier
than the date on which the Administrator approves the granting of such
Award.
2.1.11. DIRECTOR means a member of the Board of Directors of the
Company.
2.1.12. EXERCISE PRICE means, with respect to a Stock Appreciation
Right, the amount established by the Administrator, in accordance with
Section 7.3 hereunder, and set forth in the Award Agreement, which is
to be subtracted from the Fair Market Value on the date of exercise in
order to determine the amount of the Incremental Value to be paid to
the Participant.
2.1.13. EXPIRATION DATE means the date specified in an Award Agreement
as the expiration date of such Award.
2.1.14. FAIR MARKET VALUE means, on any given date, (a) if the Company
Common Stock is, on the given date, listed on a national securities
exchange, Fair Market Value shall be the average of the highest and
lowest selling price for the given date, or the most recent date upon
which sales occurred, (b) if (a) does not apply, then Fair Market Value
shall be the average of the highest and lowest selling price for the
Company Common Stock as reported on the Nasdaq National Market for the
given date, or the most recent date upon which sales
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<PAGE> 3
were reported, (c) if neither (a) nor (b) applies, Fair Market Value
shall be the average of the final bid and asked prices for the Company
Common Stock as quoted for the given date in whatever medium then
issues such quotes, or the most recent date upon which such quotes were
published, (d) if none of (a), (b) or (c) applies, then Fair Market
Value shall be determined by the Board based on such valuation methods
and/or indicia of value as the Board deems advisable at the time of
such determination. The use by the Board of any method or indicia of
value to determine Fair Market Value on any valuation date will not, of
itself, preclude the Board from use of a different method or indicia on
a subsequent valuation date.
2.1.15. INCENTIVE STOCK OPTION means a stock option described in
Section 422 of the Code.
2.1.16. INCREMENTAL VALUE has the meaning given such term in Section
7.1 of the Plan.
2.1.17. NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option.
2.1.18. OFFICER means a president, vice president, treasurer,
secretary, controller, and any other person who performs functions
corresponding to the foregoing officers for the Company, any member of
the Board of the Company or any person performing similar functions
with respect to the Company, and any other participant who is deemed
under applicable law to be an officer or director of the Company.
2.1.19. OPTIONS means all Non-Qualified Stock Options, Incentive Stock
Options and Performance Based Options granted at any time under the
Plan.
2.1.20. PARTICIPANT shall have the meaning set forth in Article 5.
2.1.21. PERFORMANCE BASED OPTION means a stock option which, upon
exercise or at any other time, would not result in or give rise to
"applicable employee remuneration" within the meaning of Section 162(m)
of the Code.
2.1.22. PLAN means the Advanced Systems International, Inc. 1997
Employee Stock Option Plan, as described herein and as it may be
amended from time to time.
2.1.23. PURCHASE PRICE, with respect to options, shall have the meaning
set forth in Section 6.2.
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<PAGE> 4
2.1.24. RESTRICTED SHARE RIGHT means a right to receive Company Common
Stock subject to restrictions imposed under the terms of an Award
granted pursuant to Article 9.
2.1.25. STOCK APPRECIATION RIGHT means an Award granted in accordance
with Article 8.
2.1.26. SUBSIDIARY shall have the meaning set forth in Section 424(f)
of the Code.
2.1.27. TERMINATION OF EMPLOYMENT means the voluntary or involuntary
termination of a Participant's employment with the Company for any
reason, including death, disability, retirement or as the result of the
divestiture of the Participant's employer or any other similar
transaction in which the Participant's employer ceases to be the
Company or a Subsidiary of the Company. Whether an authorized leave of
absence or absence on military or government service, absence due to
disability, or absence for any other reason shall constitute
Termination of Employment shall be determined in each case by the
Administrator in its sole discretion.
3. ADMINISTRATION
3.1. ADMINISTRATION. The Administrator of the Plan shall be the Board
of Directors of the Company. The Board may, by formal action, delegate the
duties and responsibilities of Administrator to a committee of two or more
Directors with authority to act who shall be elected or appointed by the Board.
The members of the committee shall with respect to Awards designated as
Performance Based Options, be "outside directors" within the meaning of Section
162(m) of the Code. The Administrator shall administer the Plan in accordance
with this provision and shall have the sole discretionary authority to interpret
the Plan, to establish and modify administrative rules for the Plan, to impose
such conditions and restrictions on Awards as it determines appropriate, to
cancel Awards (including those made pursuant to other plans of the Company) and
to substitute new options (including options granted under other plans of the
Company) with the consent of the recipient, and to take such steps in connection
with the Plan and Awards granted thereunder as it may deem necessary or
advisable. The Administrator may, with respect to Participants who are not
Officers, delegate such of its powers and authority under the Plan as it deems
appropriate to designated officers or employees of the Company.
3.2. INDEMNIFICATION. Members of the Administrator shall be entitled to
indemnification and reimbursement from the Company for any action or any failure
to act in connection with service as Administrator to the full extent provided
for or permitted by the Company's certificate of incorporation or bylaws or by
any insurance
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<PAGE> 5
policy or other agreement intended for the benefit of the Company's officers,
directors or employees or by any applicable law.
4. COMPANY COMMON STOCK ISSUABLE PURSUANT TO THE PLAN
4.1. SHARES ISSUABLE. Shares to be issued under the Plan may be
authorized and unissued shares or issued shares which have been reacquired by
the Company. Except as provided in Section 4.3, the Awards granted to any
Participant and to all Participants in the aggregate under the Plan shall be
limited so that the sum of the following shall never exceed 4,500,000 shares of
Company Common Stock: (i) all shares which shall be issued upon the exercise of
outstanding Options or other Awards granted under the Plan, (ii) all shares for
which payment of Incremental Value shall be made by reason of the exercise of
Stock Appreciation Rights at any time granted under the Plan, and (iii) the
number of shares otherwise issuable under an Award which are applied by the
Company to payment of the withholding or tax liability discussed in Section
11.4.
4.2. SHARES SUBJECT TO TERMINATED AWARDS. In the event that any Award
at any time granted under the Plan shall be surrendered to the Company, be
terminated or expire before it shall have been fully exercised, or an award of
Stock Appreciation Rights is exercised for cash, then all shares formerly
subject to such Award as to which such Award shall not have been exercised shall
be available for any Award subsequently granted in accordance with the Plan.
Shares of Company Common Stock subject to Options, or portions thereof, which
have been surrendered in connection with the exercise of tandem Stock
Appreciation Rights shall not be available for subsequent Awards under the Plan,
and shares of Company Common Stock issued in payment of such Stock Appreciation
Rights shall be charged against the number of shares of Company Common Stock
available for the grant of Awards. Shares which are reacquired by the Company or
shares issuable subject to Restricted Share Rights which are forfeited pursuant
to forfeiture provisions in the Award Agreement shall be available for
subsequently granted Awards only if the forfeiting Participant received no
benefits of ownership (such as dividends actually paid to the Participant) other
than voting rights of the forfeited shares. Any shares of Company Common Stock
issued by the Company pursuant to its assumption or substitution of outstanding
grants from acquired companies shall not reduce the number of shares available
for Awards under this Plan unless issued under this Plan.
4.3. ADJUSTMENTS TO REFLECT CAPITAL CHANGES. If capital changes occur,
adjustments shall be made as described below.
4.3.1. RECAPITALIZATION. The number and kind of shares subject to
outstanding Awards, the Purchase Price or Exercise Price for such
shares, and the number and kind of shares available for Awards
subsequently granted under the Plan shall be appropriately adjusted to
reflect any stock dividend, stock split,
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<PAGE> 6
combination or exchange of shares, merger, consolidation or other
change in capitalization with a similar substantive effect upon the
Plan or the Awards granted under the Plan. The Administrator shall have
the power to determine the amount of the adjustment to be made in each
case.
4.3.2. SALE OR REORGANIZATION. After any reorganization, merger or
consolidation in which the Company is a participant, each Participant
shall, at no additional cost, be entitled upon exercise of an Award to
receive (subject to any required action by stockholders), in lieu of
the number of shares of Company Common Stock receivable or exercisable
pursuant to such Award, a number and class of shares of stock or other
securities to which such Participant would have been entitled pursuant
to the terms of the reorganization, merger or consolidation if, at the
time of such reorganization, merger or consolidation, such Participant
had been the holder of record of a number of shares of stock equal to
the number of shares receivable or exercisable pursuant to such Award.
Comparable rights shall accrue to each Participant in the event of
successive reorganizations, mergers or consolidations of the character
described above.
4.3.3. OPTIONS TO PURCHASE STOCK OF ACQUIRED COMPANIES. After any
reorganization, merger or consolidation in which the Company or a
Subsidiary of the Company shall be a surviving corporation, the
Administrator may grant substituted Options under the provisions of the
Plan, pursuant to Section 424 of the Code, replacing old options
granted under a plan of another party to the reorganization, merger or
consolidation, where such party's stock may no longer be issued
following such merger or consolidation. The foregoing adjustments and
manner of application of the foregoing provisions shall be determined
by the Administrator in its sole discretion. Any adjustments may
provide for the elimination of any fractional shares which might
otherwise have become subject to any Awards.
5. PARTICIPATION
5.1. ELIGIBLE EMPLOYEES. Participants in the Plan shall be the Officers
who are employees of the Company or a Subsidiary of the Company and other
employees of the Company or a Subsidiary having managerial, supervisory or
similar responsibilities or who are key administrative employees or managers,
and who are not covered by any collective bargaining agreement binding on such
persons' employer, as the Administrator, in its sole discretion, may designate
from time to time. The Administrator's designation of a Participant in any year
shall not require the Administrator to designate such person to receive Awards
in any other year. The Administrator shall consider such factors as it deems
pertinent in selecting Participants and in determining the type and amount of
their respective Awards.
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<PAGE> 7
5.2. SPECIAL PROVISIONS FOR CERTAIN NONEMPLOYEES. Notwithstanding any
provision contained in this Plan to the contrary, the Administrator may grant
Awards under the Plan to non-employees who, in the judgment of the
Administrator, render or have rendered significant services to the Company or a
Subsidiary, on such terms and conditions as the Administrator deems appropriate
and consistent with the intent of the Plan.
6. OPTION AWARDS
6.1. POWER TO GRANT OPTIONS. The Administrator may grant, to such
Participants as the Administrator may select, Options entitling the Participant
to purchase Company Common Stock from the Company in such quantity, at such
price, and on such terms and subject to such conditions, not inconsistent with
the terms of this Plan, as may be established by the Administrator. Neither the
existence of this Plan nor the fact that any Awards may have (at any time) been
granted hereunder, will create any entitlement or expectation in any person that
he/she will receive any (or any further) Awards hereunder. The terms of any
Option granted under this Plan shall be set forth in an Award Agreement.
6.2. PURCHASE PRICE OF OPTIONS. The Purchase Price of each share of
Company Common Stock which may be purchased upon exercise of any Option granted
under the Plan shall be determined by the Administrator, provided that the
Purchase Price for shares of Company Common Stock purchased pursuant to Stock
Options designated by the Administrator as Incentive Stock Options shall be
equal to or greater than the Fair Market Value on the Date of Grant as required
under Section 422 of the Code and provided further that the Purchase Price for
shares of Company Common Stock purchased pursuant to Stock Options designated by
the Administrator as Performance Based Options shall be equal to or greater than
the Fair Market Value on the Date of Grant.
6.3. DESIGNATION OF INCENTIVE STOCK OPTIONS. Except as otherwise
expressly provided in the Plan, the Administrator may designate, at the Date of
Grant of each Option, that the Option is an Incentive Stock Option under Section
422 of the Code.
6.4. INCENTIVE STOCK OPTION SHARE LIMITATION. No Participant may be
granted Incentive Stock Options under the Plan (or any other plans of the
Company) which would result in stock with an aggregate Fair Market Value
(measured on the Date of Grant) of more than $100,000 first becoming exercisable
in any one calendar year, or which would entitle such Participant to purchase a
number of shares greater than the maximum number permitted by Section 422 of the
Code as in effect on the Date of Grant.
6.5. OTHER INCENTIVE STOCK OPTION TERMS. Whenever possible, each
provision in the Plan and in every Option granted under this Plan which is
designated
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<PAGE> 8
by the Administrator as an Incentive Stock Option shall be interpreted in such a
manner as to entitle the Option to the tax treatment afforded by Section 422 of
the Code. If any provision of this Plan or any Option designated by the
Administrator as an Incentive Stock Option shall be held not to comply with
requirements necessary to entitle such Option to such tax treatment, then (i)
such provision shall be deemed to have contained from the outset such language
as shall be necessary to entitle the Option to the tax treatment afforded under
Section 422 of the Code, and (ii) all other provisions of this Plan and the
Award Agreement shall remain in full force and effect. If any agreement covering
an Option designated by the Administrator to be an Incentive Stock Option under
this Plan shall not explicitly include any terms required to entitle such
Incentive Stock Option to the tax treatment afforded by Section 422 of the Code,
all such terms shall be deemed implicit in the designation of such Option and
the Option shall be deemed to have been granted subject to all such terms.
6.6. DESIGNATION OF PERFORMANCE BASED OPTIONS. Except as otherwise
expressly provided in the Plan, the Administrator may designate, at the Date of
Grant of each Option, that the Option is a Performance Based Option. A
Performance Based Option shall have a Purchase Price not less than the Fair
Market Value on the Date of Grant and shall contain such other terms and
conditions as the Administrator may deem necessary so that, upon exercise or at
any other time, the Performance Based Option does not result in or give rise to
"applicable employee remuneration" within the meaning of Section 162(m) of the
Code.
6.7. RIGHTS AS A STOCKHOLDER. The Participant or any transferee of an
Option pursuant to Section 8.2 or Section 11.5 shall have no rights as a
stockholder with respect to any shares of Company Common Stock covered by an
Option until the Participant or transferee shall have become the holder of
record of any such shares, and no adjustment shall be made for dividends and
cash or other property or distributions or other rights with respect to any such
shares of Company Common Stock for which the record date is prior to the date on
which the Participant or a transferee of the Option shall have become the holder
of record of any such shares covered by the Option.
7. STOCK APPRECIATION RIGHTS
7.1. POWER TO GRANT STOCK APPRECIATION RIGHTS. The Administrator is
authorized to grant to any Participant, on such terms established by the
Administrator on or prior to the Date of Grant and subject to and not
inconsistent with the provisions of this Plan, the right to receive the payment
from the Company, payable as provided in Section 7.4, of an amount equal to the
Incremental Value of the Stock Appreciation Rights, which shall be an amount
equal to the remainder derived from subtracting (a) the Exercise Price for the
right established in the Award Agreement from (b) the Fair Market Value of a
share of Company Common Stock on the date of exercise. The
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terms of any Stock Appreciation Right granted under the Plan shall be set forth
in an Award Agreement.
7.2. TANDEM STOCK APPRECIATION RIGHTS. The Administrator may grant to
any Participant a Stock Appreciation Right consistent with the provisions of
this Plan covering any share of Company Common Stock which is, at the Date of
Grant of the Stock Appreciation Right, also covered by an Option granted to the
same Participant, either prior to or simultaneously with the grant to such
Participant of the Stock Appreciation Right, provided: (a) any Option covering
any share of Company Common Stock shall expire and not be exercisable upon the
exercise of any Stock Appreciation Right with respect to the same share; (b) any
Stock Appreciation Right covering any share of Company Common Stock shall not be
exercisable upon the exercise of any related Option with respect to the same
share; and (c) an Option and Stock Appreciation Right covering the same share of
Company Common Stock may not be exercised simultaneously.
7.3. EXERCISE PRICE. The Exercise Price established under any Stock
Appreciation Right granted under this Plan shall be determined by the
Administrator and, in the case of a tandem Stock Appreciation Right, shall not
be less than the Purchase Price of the related Option. Upon exercise of the
Stock Appreciation Rights, the number of shares subject to exercise under a
related Option shall automatically be reduced by the number of shares of Company
Common Stock represented by the Option or portion thereof which is surrendered
as a result of the exercise of such Stock Appreciation Rights.
7.4. PAYMENT OF INCREMENTAL VALUE. Any payment which may become due
from the Company by reason of Participant's exercise of a Stock Appreciation
Right may be paid to the Participant as determined by the Administrator (a) all
in cash, (b) all in Company Common Stock, or (c) in any combination of cash and
Company Common Stock. In the event that all or a portion of the payment is made
in Company Common Stock, the number of shares of the Company Common Stock
delivered in satisfaction of such payment shall be determined by dividing the
amount of the payment by the Fair Market Value on the date of exercise. The
Administrator may determine whether payment upon exercise of a Stock
Appreciation Right will be made in cash or in stock, or a combination thereof,
upon or at any time prior to the exercise of such Stock Appreciation Right. No
fractional share of Company Common Stock shall be issued to make any payment; if
any fractional shares would be issuable, the mix of cash and Company Common
Stock payable to the Participant shall be adjusted as directed by the
Administrator to avoid the issuance of any fractional share.
8. TERMS OF OPTIONS AND STOCK APPRECIATION RIGHTS
8.1. DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options and
Stock Appreciation Rights shall terminate after the first to occur of the
following events:
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8.1.1. Expiration Date of the Award as provided in the Award
Agreement; or
8.1.2. Termination of the Award as provided in Section 8.2; or
8.1.3. In the case of an Incentive Stock Option, ten years from
the Date of Grant; or
8.1.4. Solely in the case of tandem Stock Appreciation Rights, upon the
Expiration Date of the related Option.
8.2. EXERCISE ON DEATH OR TERMINATION OF EMPLOYMENT. The following
provisions pertain to exercise of Award Agreements on death or termination of
the recipient's employment.
8.2.1. Unless otherwise provided in the Award Agreement, in the event
of the death of a Participant while an employee of the Company or a
Subsidiary of the Company, the right to exercise all unexpired Awards
shall be accelerated and shall accrue as of the date of death, and the
Participant's Awards may be exercised by his Beneficiary at any time
within one year after the date of the Participant's death.
8.2.2. Unless otherwise provided in the Award Agreement, in the event
of Participant's Termination of Employment at any time for any reason
(except disability or retirement) other than death or for "cause", as
defined in paragraph (d) below, an Award may be exercised, but only to
the extent it was otherwise exercisable, on the date of Termination of
Employment, within ninety days after the date of Termination of
Employment. In the event of the death of the Participant within the
ninety-day period following Termination of Employment, his Award may be
exercised by his Beneficiary within the one year period provided in
subparagraph (a) above.
8.2.3. With respect to an Award which is intended to constitute an
Incentive Stock Option, upon Termination of Employment, such Award
shall be exercisable as provided in Section 422 of the Code.
8.2.4. In the event that a Participant's Termination of Employment is
for "cause", all Awards shall terminate immediately upon Termination of
Employment. A Participant's employment shall be deemed to have been
terminated for "cause" if such termination is determined, in the sole
discretion of the Administrator, to have resulted from an act or
omission by the Participant constituting active and deliberate
dishonesty, as established by a final judgment or actual receipt of an
improper benefit or profit in money, property or services, or from the
Participant's continuous failure to perform his or her duties under any
employment agreement in effect between the Participant and the Company
in any material manner (or, in the absence of such an agreement, the
consistent
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failure or refusal of the Participant to perform according to
reasonable expectations and standards set by the Board and/or
management consistent with Participant's title and position) after
receipt of notice of such failure from the Company specifying how the
Participant has so failed to perform.
8.3. ACCELERATION OF EXERCISE TIME. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit purchase of shares under any Award prior to the time such Award would
otherwise become exercisable under the terms of the Award Agreement.
8.4. EXTENSION OF EXERCISE TIME. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit any Award granted under this Plan to be exercised after its Expiration
Date or after the ninety day period following Termination of Employment,
subject, however, to the limitations described in Sections 8.1.3 and 8.1.4.
8.5. CONDITIONS FOR EXERCISE. An Award Agreement may contain such
waiting periods, exercise dates and restrictions on exercise (including, but not
limited to, periodic installments which may be cumulative) as may be determined
by the Administrator at the Date of Grant. No Stock Appreciation Right may be
exercised prior to six months from the Date of Grant.
8.6. EXERCISE PROCEDURES. Each Option and Stock Appreciation Right
granted under the Plan shall be exercised by written notice to the Company which
must be received by the officer of the Company designated in the Award Agreement
on or before the Expiration Date of the Award. The Purchase Price of shares
purchased upon exercise of an Option granted under the Plan shall be paid in
full in cash by the Participant pursuant to the Award Agreement; provided,
however, that the Administrator may (but need not) permit payment to be made by
delivery to the Company of either (a) shares of Company Common Stock (including
shares issuable to the Participant pursuant to the exercise of the Option), or
(b) any combination of cash and shares of Company Common Stock, or (c) such
other consideration as the Administrator deems appropriate and in compliance
with applicable law (including payment in accordance with a cashless exercise
program under which, if so instructed by the Participant, shares of Company
Common Stock may be issued directly to the Participant's broker or dealer upon
receipt of the Purchase Price in cash from the broker or dealer.) In the event
that any Company Common Stock shall be transferred to the Company to satisfy all
or any part of the Purchase Price, the part of the Purchase Price deemed to have
been satisfied by such transfer of Company Common Stock shall be equal to the
product derived by multiplying the Fair Market Value as of the date of exercise
times the number of shares transferred. The Participant may not transfer to the
Company in satisfaction of the Purchase Price (y) a number of shares which when
multiplied times the Fair Market Value as of the date of exercise would result
in a product greater than the Purchase Price or (z) any fractional share of
Company Common Stock. Any part of the Purchase Price paid in cash upon the
exercise of any Option shall be added to the
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general funds of the Company and used for any proper corporate purpose. Unless
the Administrator shall otherwise determine, any Company Common Stock
transferred to the Company as payment of all or part of the Purchase Price upon
the exercise of any Option shall be held as treasury shares.
9. RESTRICTED STOCK AWARDS
9.1. RESTRICTED SHARE AWARDS. The Administrator may grant to any
Participant an Award of Restricted Share Rights entitling such person to receive
shares of Company Common Stock in such quantity, and on such terms, conditions
and restrictions (whether based on performance standards, periods of service or
otherwise) as the Administrator shall determine on or prior to the Date of
Grant. The terms of any Award of Restricted Share Rights granted under the Plan
shall be set forth in an Award Agreement.
9.2. DURATION OF RESTRICTED SHARE RIGHTS. In no event shall any
Restricted Share Rights granted entitle the holder to receive shares of Company
Common Stock free of all restrictions on transfer at any time prior to the
expiration of six months from the Date of Grant, and each Award Agreement shall
provide that the Participant shall remain employed by the Company or a
Subsidiary for that six month period (subject to the Company's or Subsidiary's
right to terminate such employment).
9.3. FORFEITURE OF RESTRICTED SHARE RIGHTS. Subject to Section 9.5, all
Restricted Share Rights shall be forfeited and all Restricted Share Awards shall
terminate unless the Participant continues in the service of the Company or a
Subsidiary until the expiration of the forfeiture and satisfies any other
conditions set forth in the Award Agreement. If the Award Agreement shall so
provide, in the case of death, disability or retirement (as defined in the Award
Agreement) of the Participant, all of the shares covered by the Restricted Share
Rights shall immediately vest and any restrictions shall lapse as of the date of
such death, disability or retirement.
9.4. DELIVERY OF SHARES UPON VESTING. Upon the lapse of the
restrictions established in the Award Agreement, the Participant shall be
entitled to receive, without payment of any cash or other consideration,
certificates for the number of shares covered by the Award.
9.5. WAIVER OR MODIFICATION OF FORFEITURE PROVISIONS. The Administrator
has full power and authority to modify or waive any or all terms, conditions or
restrictions applicable to any Restricted Share Rights granted to a Participant
under the Plan; provided that no modification shall, without consent of the
Participant, adversely affect the Participant's rights thereunder and no
modification shall reduce the employment requirement to less than six months,
except in the case of death, disability or retirement.
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<PAGE> 13
9.6. RIGHTS AS A STOCKHOLDER. No person shall have any rights as a
stockholder with respect to any shares subject to Restricted Share Rights until
such time as the person shall have been issued a certificate for such shares.
10. OTHER STOCK BASED AWARDS
10.1. GRANT OF OTHER AWARDS. Other Awards of Company Common Stock or
other securities of the Company and other Awards that are valued in whole or in
part by reference to, or are otherwise based on, Company Common Stock ("Other
Awards") may be granted either alone or in addition to or in conjunction with
Options or Stock Appreciation Rights under the Plan. Subject to the provisions
of the Plan, the Administrator shall have the sole and complete authority to
determine the persons to whom and the time or times at which Other Awards shall
be made, the number of shares of Company Common Stock or other securities, if
any, to be granted pursuant to such Other Awards, and all other conditions of
such Other Awards. Any Other Award shall be confirmed by an Award Agreement
executed by the Administrator and the Participant, which agreement shall contain
such provisions as the Administrator determines to be necessary or appropriate
to carry out the intent of this Plan with respect to the Other Award.
10.2. TERMS OF OTHER AWARDS. In addition to the terms and conditions
specified in the Award Agreement, Other Awards made pursuant to this Article 10
shall be subject to the following:
10.2.1. Any shares of Company Common Stock subject to such Other Awards
may not be sold, assigned, transferred or otherwise encumbered prior to
the date on which the shares are issued, or, if later, the date on
which any applicable restriction, performance or deferral period
lapses; and
10.2.2. If specified by the Administrator and the Award Agreement, the
recipient of an Other Award shall be entitled to receive, currently or
on a deferred basis, interest or dividends or dividend equivalents with
respect to the Company Common Stock or other securities covered by the
Other Award; and
10.2.3. The Award Agreement with respect to any Other Award shall
contain provisions providing for the disposition of such Other Award in
the event of Termination of Employment prior to the exercise,
realization or payment of such Other Award, with such provisions to
take account of the specific nature and purpose of the Other Award.
11. TERMS APPLICABLE TO ALL AWARDS
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<PAGE> 14
11.1. AWARD AGREEMENT. The grant and the terms and conditions of the
Award shall be set forth in an Award Agreement between the Company and the
Participant. No person shall have any rights under any Award granted under the
Plan unless and until the Administrator and the Participant to whom the Award is
granted shall have executed and delivered an Award Agreement expressly granting
the Award to such person and setting forth the terms of the Award.
11.2. PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the
Administrator have the power to grant any Award under the Plan which is contrary
to any of the provisions of the Plan. In the event any provision of any Award
granted under the Plan shall conflict with any term in the Plan as constituted
on the Date of Grant of such Award, the term in the Plan as constituted on the
Date of Grant of such Award shall control. Except as provided in Section 4.3,
(a) the terms of any Award granted under the Plan may not be changed after the
granting of such Award without the express approval of the Participant and (b)
if the Company is subject to Section 16 of the Exchange Act, no modification may
be made to an Award granted to an Officer except in compliance with Rule 16b-3.
11.3. MODIFICATION OF AWARD AFTER GRANT. Each Award granted under the
Plan to a Participant other than an Officer may be modified after the date of
its grant by express written agreement between the Company and the Participant,
provided that such change (a) shall not be inconsistent with the terms of the
Plan and (b) shall be approved by the Administrator. If the Company is subject
to Section 16 of the Exchange Act, No modifications may be made to any Awards
granted to an Officer except in compliance with Rule 16b-3.
11.4. TAXES. The Company shall be entitled, if the Administrator deems
it necessary or desirable, to withhold (or secure payment from the Participant
in lieu of withholding) the amount of any withholding or other tax required by
law to be withheld or paid by the Company with respect to any amount payable
and/or shares issuable under such Participant's Award, or with respect to any
income recognized upon a disqualifying disposition of shares received pursuant
to the exercise of an Incentive Stock Option, and the Company may defer payment
or issuance of the cash or stock upon exercise or vesting of an Award unless
indemnified to its satisfaction against any liability for such tax. The amount
of such withholding or tax payment shall be determined by the Administrator and,
unless otherwise provided by the Administrator, shall be payable by the
Participant at the time of issuance or payment in accordance with the following
rules:
11.4.1. A Participant, other than an Officer, shall have the right to
elect to meet his or her withholding requirement by: (a) having the
Company withhold from such Award the appropriate number of shares of
Company Common Stock, rounded out to the next whole number, the Fair
Market Value of which is equal to such amount, or, in the case of the
cash payment, the amount of cash, as is
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<PAGE> 15
determined by the Company to be sufficient to satisfy applicable tax
withholding requirements; or (b) direct payment to the Company in cash
of the amount of any taxes required to be withheld with respect to such
Award.
11.4.2. Unless otherwise provided by the Administrator, with respect to
Officers, the Company shall withhold from such Award the appropriate
number of shares of Company Common Stock, rounded up to the next whole
number, the Fair Market Value of which is equal to the amount, as
determined by the Administrator, (or, in the case of a cash payment,
the amount of cash) required to satisfy applicable tax withholding
requirements.
11.4.3. In the event that an Award or property received upon exercise
of an Award has already been transferred to the Participant on the date
upon which withholding requirements apply, the Participant shall pay
directly to the Company the cash amount determined by the Company to be
sufficient to satisfy applicable federal, state or local withholding
requirements. The Participant shall provide to the Company such
information as the Company shall require to determine the amounts to be
withheld and the time such withholding requirements become applicable.
11.4.4. If permitted under applicable federal income tax laws, a
Participant may elect to be taxed in the year in which an Award is
exercised or received, even if it would not otherwise have become
taxable to the Participant. If the Participant makes such an election,
the Participant shall promptly notify the Company in writing and shall
provide the Company with a copy of the executed election form as filed
with the Internal Revenue Service no later than thirty days from the
date of exercise or receipt. Promptly following such notification, the
Participant shall pay directly to the Company the cash amount
determined by the Company to be sufficient to satisfy applicable
federal, state or local withholding tax requirements.
11.5. LIMITATIONS ON TRANSFER. A Participant's rights and interest
under the Plan may not be assigned or transferred other than by will or the laws
of descent and distribution, or pursuant to the terms of a domestic relations
order, as defined in Section 414(p)(1)(B) of the Code, which satisfies the
requirements of Section 414(p)(1)(A) of the Code (a "Qualified Domestic
Relations Order"). During the lifetime of a Participant, only the Participant
personally (or the Participant's personal representative or attorney-in-fact) or
the alternate payee named in a Qualified Domestic Relations Order may exercise
the Participant's rights under the Plan. The Participant's Beneficiary may
exercise a Participant's rights to the extent they are exercisable under the
Plan following the death of the Participant.
11.6. SURRENDER OF AWARDS. Any Award granted under the Plan may be
surrendered to the Company for cancellation on such terms as the Administrator
and Participant approve, including, but not limited to, terms which provide that
upon such
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surrender the Company will pay to the Participant cash or Company Common Stock,
or a combination of cash and Company Common Stock.
12. GENERAL PROVISIONS
12.1. AMENDMENT AND TERMINATION OF PLAN. The Plan may be amended,
suspended or terminated as set forth below.
12.1.1. AMENDMENT. The Board shall have complete power and authority to
amend the Plan at any time and to add any other stock based Award or
other incentive compensation programs to the Plan as it deems necessary
or appropriate and no approval by the stockholders of the Company or by
any other person, committee or entity of any kind shall be required to
make any amendment; provided, however, that the Board shall not,
without the requisite affirmative approval of stockholders of the
Company, (a) make any amendment which requires stockholder approval
under any applicable law, including the Code, unless such compliance,
if discretionary, is no longer desired, or (b) which, unless approved
by the requisite affirmative approval of stockholders of the Company,
would cause, result in or give rise to "applicable employee
remuneration" within the meaning of Section 162(m) of the Code with
respect to any Performance Based Option. No termination or amendment of
the Plan may, without the consent of the Participant to whom any Award
shall theretofore have been granted under the Plan, adversely affect
the right of such individual under such Award. For the purposes of this
section, an amendment to the Plan shall be deemed to have the
affirmative approval of the stockholders of the Company if such
amendment shall have been submitted for a vote by the stockholders at a
duly called meeting of such stockholders at which a quorum was present
and the majority of votes cast with respect to such amendment at such
meeting shall have been cast in favor of such amendment, or if the
holders of outstanding stock having not less than a majority of the
outstanding shares consent to such amendment in writing in the manner
provided under the Company's bylaws.
12.1.2. SUSPENSION OR TERMINATION. The Board shall have the right and
the power to suspend the operation of or terminate the Plan at any
time. If the Plan is not earlier terminated, the Plan shall terminate
when all shares authorized under the Plan have been issued. No Award
shall be granted under the Plan while the Plan is suspended or after
the termination of the Plan, but the suspension or termination of the
Plan shall not have any other effect and any Award outstanding at the
time of the suspension or termination of the Plan may be exercised
after suspension or termination of the Plan at any time prior to the
expiration date of such Award to the same extent such award would have
been exercisable if the Plan had not been suspended or terminated.
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12.2. NO RIGHT TO EMPLOYMENT. No employee or other person shall have
any claim or right to be granted an Award under this Plan. Neither the Plan nor
any action taken hereunder shall be construed as giving any employee any right
to be retained in the employ of the Company or a Subsidiary of the Company.
12.3. SECURITIES LAW RESTRICTIONS. The shares of Company Common Stock
issuable pursuant to the terms of any Awards granted under the Plan may not be
issued by the Company without registration or qualification of such shares under
the Securities Act of 1933, as amended, or under various state securities laws
or without an exemption from such registration requirements. Unless the shares
to be issued under the Plan have been registered and/or qualified as
appropriate, the Company shall be under no obligation to issue shares of Company
Common Stock upon exercise of an Award unless and until such time as there is an
appropriate exemption available from the registration or qualification
requirements of federal or state law as determined by the Administrator in its
sole discretion. The Administrator may require any person who is granted an
award hereunder to agree with the Company to represent and agree in writing that
if such shares are issuable under an exemption from registration requirements,
the shares will be "restricted" securities which may be resold only in
compliance with applicable securities laws, and that such person is acquiring
the shares issued upon exercise of the Award for investment, and not with the
view toward distribution.
12.4. CAPTIONS. The captions (i.e., all section headings) used in the
Plan are for convenience only, do not constitute a part of the Plan, and shall
not be deemed to limit, characterize or affect in any way any provisions of the
Plan, and all provisions of the Plan shall be construed as if no captions have
been used in the Plan.
12.5. SEVERABILITY. Whenever possible, each provision in the Plan and
every Award at any time granted under the Plan shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Award at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
12.6. NO STRICT CONSTRUCTION. No rule of strict construction shall be
implied against the Company, the Administrator, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Administrator.
12.7. CHOICE OF LAW. All determinations made and actions taken pursuant
to the Plan shall be governed by the laws of Nevada and construed in accordance
therewith.
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EXHIBIT 10.4
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement") is
executed pursuant to Board approval dated March 13, 1998, to rescind, replace,
amend and restate the Employment Agreement (the "Initial Agreement") originally
intended to be entered into as of the 15th day of November, 1996, between
AUTOMATIC TIME SYSTEMS CORP., a Michigan corporation (the "Company"), and GERALD
A. PESUT (the "Employee").
In order to correct certain errors and omissions inadvertently made in
connection with the Initial Agreement and to update certain references to
reflect the acquisition by Advanced Systems International, Inc. of all the
shares of the capital stock of the Company which occurred in July 1997, and in
consideration of the mutual promises contained in this Agreement, the parties
agree as follows:
SECTION 1. OPERATION OF AGREEMENT.
This Agreement rescinds, replaces, amends and restates the Initial
Agreement ab initio, for all intents and purposes as if this Agreement had been
the document executed instead of the Initial Agreement. For service as an
officer and/or employee of the Company, the Employee shall be entitled to the
full protection of the applicable indemnification provisions of the Articles of
Incorporation and Bylaws of the Company, as they may be amended from time to
time. In addition, the Company will indemnify Employee and hold him harmless, in
advance and on demand, from any and all loss or liabilities he my incur as a
result of claims asserted against Employee in connection with his employment or
his status as a stockholder of the Company's parent, Advanced Systems
International, Inc. ("Parent"), except for claims resulting from Employee's
willful conduct.
SECTION 2. TERM OF AGREEMENT.
This Agreement shall remain in effect until it is terminated pursuant
to Section 5.
SECTION 3. SERVICES.
The Employee shall serve the Company in the capacity, with the title,
and with the present and anticipated future job descriptions, duties and
positions, as are set forth in the attached Exhibit A. He shall have such
general powers of supervision and management and such other responsibilities as
are consistent with such positions, at all times subject to the control and
supervision of the Board of Directors; provided, however, that the Employee may
serve in such other Employee position as is mutually acceptable to the Company
and the Employee. The Employee shall serve the Company faithfully and
diligently. The Employee shall devote such of his productive time, ability and
attention to the business of the Company during the term of this Agreement as
may be required to dispatch his duties hereunder in a competent manner.
<PAGE> 2
Employee's principal job location shall not change from the metropolitan Detroit
area without consent.
SECTION 4. SALARY, BONUS, BENEFITS AND EXPENSES.
The Company shall pay or provide Employee with the base salary, bonus,
equity compensation, and fringe and other benefits as are set forth in the
attached Exhibit B.
SECTION 5. TERMINATION OF EMPLOYMENT.
(A) TERMINATION BY THE COMPANY. The Company may terminate this
Agreement at any time for any reason, either with or without "Cause". For
purposes of this Agreement, "Cause" shall mean: (i) the willful misconduct of
Employee materially injurious to the Company; (ii) any violation by Employee of
any law, rule or regulation related to the business of the Company that results
in a material injury to the Company; or (iii) the failure by Employee to follow
any written policy adopted by the Company (provided that such policy does not
conflict with the provisions of this Agreement), which failure results in a
material injury to the Company; No act or failure to act on the Employee's part
shall be considered "willful" unless done, or not done, by the Employee in bad
faith and without reasonable belief that the act or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Employee shall not
be deemed to have been terminated for Cause unless the Company shall have
delivered to the Employee a notice of such termination within thirty (30) days
after the date that the Company becomes aware of the occurrence of the event
giving rise to Cause. The Employee shall be entitled to invoke the arbitration
procedures set forth in this Agreement in the event of a dispute between the
Company and the Employee as to the existence of "Cause".
(B) INVOLUNTARY OR VOLUNTARY TERMINATION BY EMPLOYEE. The Employee's
employment with the Company shall also be terminated upon the occurrence of any
of the following:
(i) the Employee's voluntary termination of employment with
the Company for any reason, including, but not limited to, for "Good
Cause;" or
(ii) the Employee's involuntary termination of employment with
the Company for any reason, including, but not limited to, the death or
Disability of the Employee.
For purposes of this Agreement, "Good Cause" shall mean any material change in
the responsibilities or duties of the Employee as described in Section 3 hereof
except as may be permitted therein, or the Company's breach of any other
material term or material condition of this Agreement. For purposes of this
Agreement, a "Disability" shall be deemed to have occurred if the Employee is
prevented from performing his duties hereunder by reason of physical or mental
incapacity for a period of ninety (90) consecutive days. During the term of
disability the employee will receive his normal pay for the first sixty (60)
days, 50% of his normal pay for the next thirty (30) days and thereafter shall
be compensated by way of and according to the terms of the disability insurance
policy.
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<PAGE> 3
SECTION 6. TERMINATION BENEFITS.
(A) Upon termination of the Employee's employment by the Company other
than for Cause, or upon the voluntary termination for Good Cause by the Employee
of his employment with the Company, the Company shall pay to the Employee, or
his legal representative, an amount equal to twelve months salary together with
any bonus accrued up to the date of termination; provided, that with respect to
any bonus plan, the Company shall be deemed to have attained one hundred percent
(100%) of the bonus targets for the performance period in which the termination
of the Employee's employment occurs and the corresponding bonus payments shall
be payable to the Employee as if the Employee's employment had not been
terminated. All amounts payable to the Employee hereunder which are not paid to
the Employee within thirty (30) days after the due date therefor shall include
interest at the prime rate (published in the "Money Rates" column of The Wall
Street Journal on the date thirty (30) days after such due date) (the "Prime
Rate") plus two percent (2%). The Company may, at its sole option, purchase
insurance to cover all or any part of the compensation and benefits payable to
the Employee upon termination of employment under this Section 6(a).
(B) Notwithstanding anything in Subsection (a) of this Section 6 to the
contrary, upon termination of the Employee's employment for any reason, the
Company will continue to provide the Employee and his spouse with medical and
hospitalization insurance only to the extent, for the time periods and at
Employee's expense, as mandated by COBRA or any similar successor law.
SECTION 7. CHANGE IN CONTROL.
A "Change in Control" shall be deemed to have occurred if both (i) any
person or "group" other than shareholders as of the date of this Agreement
acquires "beneficial ownership" (in each case as defined by applicable
regulations promulgated by the Securities and Exchange Commission) of 51% or
more of the Parent's outstanding equity securities. Upon a Change in Control,
the Employee's stock ownership and options shall accelerate and vest 100%.
SECTION 8. COVENANT NOT TO COMPETE.
(A) During the term of this Agreement and for a two year period
commencing on the date of termination of this Agreement, Employee will not,
directly or indirectly, engage in, or have an interest in or be associated with
(whether as an officer, director, stockholder, partner, associate, employee,
consultant, owner or otherwise) any corporation, firm or enterprise which is
engaged in the sale of products in competition with those of the Company,
anywhere within a 500 mile radius of the Company's then executive offices;
provided, however, that Employee shall be permitted to make passive investments
in companies which may compete with the Business (as hereinafter defined), as
long as such investments do not exceed 5% of the equity interests of such
companies.
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<PAGE> 4
(B) Employee will not at any time, for so long as any Confidential
Information (as defined below) shall remain confidential or otherwise remain
wholly or partially protectable, either during the term of this Agreement or
thereafter, use or disclose, directly or indirectly to any person outside of the
Company or any corporation owned or controlled by the Company or under common
control with the Company ("Affiliate") any Confidential Information.
(C) During the term of this Agreement and for a two year period
commencing on the date of termination of this Agreement, Employee shall not
directly or indirectly divert, or by aid to others, do anything which would tend
to divert, from the Company or any Affiliate any trade or business with any
customer or supplier with whom Employee had contact or association during the
term of his association with the Company or with any party whose identity or
potential as a ' customer or supplier was confidential or learned by Employee
during his association with the Company.
(D) During the term of this Agreement and for a two year period
commencing on the date of termination of this Agreement, Employee shall not,
either directly or indirectly, induce or attempt to induce any person with whom
Employee was acquainted while associated with the Company to leave the
employment of the Company or any of the affiliates.
(E) As used in this Agreement, the term "Confidential Information"
shall mean all business information of any nature and in any form which at the
time or times concerned is not generally known to those persons engaged in
business similar to that conducted or contemplated by the Company or any
affiliate (other than by the act or acts of an employee not authorized by the
Company to disclose such information) and which relates to any one or more of
the aspects of the present or past business of the Company or any of the
Affiliates or any of their respective predecessors, including, without
limitation, patents and patent applications, inventions and improvements
(whether or not patentable), development 'projects, policies, processes,
formulas, techniques, know-how, and other facts relating to sales, advertising,
promotions, financial matters, customers, customer lists, customer purchases or
requirements, and other trade secrets.
(F) As used in this Agreement, the Company's "Business" shall mean the
development, design, manufacture, documentation, distribution and sales of
computer hardware, computer software and associated equipment relating to time
and attendance.
(G) Employee agrees and understands that the remedy at law for any
breach by him of this Covenant Not to Compete will be inadequate and that the
damages flowing from such breach are not readily susceptible to being measured
in monetary terms. Accordingly, it is acknowledged that, upon adequate proof of
Employee's violation of any legally enforceable provision of this Covenant Not
to Compete, the Company shall be entitled to immediate injunctive relief and may
obtain a temporary order restraining any threatened or further breach. Nothing
in this Covenant Not to Compete shall be deemed to limit the Company's remedies
at law or in equity for any breach by Employee of any of the provisions of this
Covenant which may be pursued or availed of by the Company.
SECTION 9. TAX WITHHOLDING.
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The Company may withhold from any amounts payable under this Agreement,
or shall require Employee to remit to the Company at the time of receipt of
payments, all applicable federal, state, local or other withholding taxes.
SECTION 10. BINDING EFFECT.
(A) This Agreement shall be binding upon the successors and assigns of
the Company. The Company shall take whatever actions are necessary to ensure
that any successor to its operations (whether by purchase, merger,
consolidation, sale of substantially all assets or otherwise) assumes all of the
Company's obligations under this Agreement, and the Company shall obtain from
such successor a written agreement satisfactory to the Employee evidencing the
successors assumption of such obligations.
(B) This Agreement shall be binding upon, and shall inure to the
benefit of, and be enforceable by, the Employee and his legal representatives
and heirs. However, the rights of the Employee under this Agreement shall not be
assigned, transferred, pledged, hypothecated or otherwise encumbered.
SECTION 11. AMENDMENT OR MODIFICATION OF AGREEMENT.
This Agreement may not be modified or amended except by instrument in
writing signed by the parties hereto.
SECTION 12. VALIDITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall continue in full force and effect.
SECTION 13. LIMITATION ON RIGHTS.
(A) Subject to the terms and conditions set forth herein: (i) this
Agreement shall create no right in the Employee to continue in the Company's
employment for any specific period of time or create any other rights of the
Employee or obligations on the part of the Company; and (ii) this Agreement
shall not restrict the right of the Company to terminate the Employee or
restrict the right of the Employee to terminate his employment.
(B) This Agreement shall not be construed to exclude the Employee from
participation in any other compensation or benefit programs in which he is
specifically eligible to participate either prior to or following the execution
of this Agreement, or any such programs that generally are available to other
Employee personnel of the Company, nor shall it affect the kind and amount of
other compensation to which the Employee is entitled.
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<PAGE> 6
SECTION 14. ARBITRATION.
Disputes under this Agreement shall be settled pursuant to binding
arbitration before three arbitrators in Oakland County, Michigan, in accordance
with the commercial arbitration rules of the American Arbitration Association,
as then in effect. For purposes of choosing the arbitrators, the Company shall
designate one arbitrator, the Employee shall choose one arbitrator and the two
arbitrators jointly shall designate a third arbitrator, in accordance with the
commercial arbitration rules referenced above. The arbitrators' sole authority
shall be to interpret and apply the provisions of this Agreement; they shall not
change, add to, or subtract from, any of its provisions. The arbitrators shall
have the power to compel attendance of witnesses at the hearing. Any court
having jurisdiction over this matter may enter a judgment based upon such
arbitration. All decisions of the arbitrators shall be final and binding on the
claimant and the Company without appeal to any court.
SECTION 15. FEES AND EXPENSES.
To the extent that the Employee is successful as the result of any
controversy over the interpretation, enforceability or validity of any provision
in this Agreement, the Company shall reimburse the Employee for any and all fees
and expenses, including, but not limited to, attorneys' fees, incurred by the
Employee in connection with such dispute. The Company shall reimburse the
Employee for such fees and expenses within twenty days following written demand
therefor by the Employee. Payments of fees and expenses made by the Company more
than twenty (20) days after written demand therefor (for any reason) shall
accrue interest at the Prime Rate (on the twentieth day following the due date
thereof) plus two percent (2%), which interest shall begin accruing on the
twentieth day following such date.
SECTION 16. MISCELLANEOUS.
A waiver of the breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. The headings in this Agreement are inserted
for convenience of reference only and shall not be a part of or control or
affect the meaning of any provision hereof.
SECTION 17. GOVERNING LAW.
To the extent not preempted by federal law, this Agreement shall be
governed and construed in accordance with the laws of the State of Michigan.
SECTION 18. ENTIRE AGREEMENT.
This document represents the entire agreement and understanding of the
parties with respect to the subject matter of the Agreement and it may not be
altered or amended except by an agreement in writing.
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<PAGE> 7
SECTION 19. NOTICE.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been given when delivered personally or mailed in the
United States by certified or registered mail, postage prepaid, return receipt
requested, to the parties at the following addresses or at such other addresses
as may be given in writing by one party to the other at least five (5) days
prior to the mailing or delivery of such notice:
Employee: Gerald A. Pesut
488 Harmon Ave
Birmingham, MI 48009
Company: AUTOMATIC TIME SYSTEMS CORP.
17515 W. Nine Mile Road
Southfield, Michigan 48075
Attn: President
In all events, with a copy to:
Jaffe, Raitt, Heuer & Weiss,
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226-3418
Attn: David D. Warner, Esq.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
AUTOMATIC TIME SYSTEMS CORP.,
a Michigan corporation
By:
-------------------------------
Richard Penington, Chief
Financial Officer
-------------------------------
Gerald A. Pesut
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<PAGE> 8
EXHIBIT A TO EMPLOYMENT AGREEMENT
GERALD A. PESUT
JOB TITLE: Chief Executive Officer
RESPONSIBILITIES
- - Lead the Company operations to successful growth while ensuring a profitable
return to investors.
- - Contribute to the establishment of the overall strategic direction and
oversee the execution of same.
- - Shape product direction within the context of the Company business strategy.
- - Evaluate, develop, lead and motivate the management team.
- - Develop a tight relationship with customers and partners.
- - Be proactive to industry and the trends and issues likely to impact ATS and
respective markets.
- - Be the Company spokesperson.
- - Lead the ATS team to behave within the following culture and principles:
- Communicate effectively with the complete organization sharing
information widely and openly.
- People make the difference.
- Ensure customer satisfaction is sustained through motivated employees
who have a passion for their work.
- Recognize people who can and will initiate change.
- Ensure the Corporation responds promptly to opportunities, problems and
conflicts.
- Behave with a high level of trust, honesty, fairness and mutual
respect.
- Reward those who achieve results while practicing these principles.
<PAGE> 9
EXHIBIT B TO THE
EMPLOYMENT AGREEMENT
GERALD A. PESUT
COMPENSATION
- $12,500/month for the first 3 months thereafter $16,666/mth subject to
review annually
- Accommodation expenses in Detroit for the first 90 days.
- Moving expenses to move household goods from Toronto to Detroit
BONUS will be paid as follows:
- $25,000 if gross sales reach $7 million
- Bonus will increase by $25,000 for every million in sales thereafter
- Bonus is based upon the current business plan and does not include any
sales that might be achieved through acquisitions or mergers.
OPTIONS are granted for up to 500,000 shares of Parent's stock at $1.00 per
share, according to the terms and conditions of an Option Agreement (form
attached).
BENEFITS
The Company currently provides the following benefits all of which may be
reviewed periodically:
HEALTH BENEFITS
The Company currently provides comprehensive health benefits for the
employee. The employee must pay the expense associated with adding
other family members to the coverage. The specific terms and benefits
of the policy are subject to periodic review and revision.
DENTAL PLAN
Coverage in accordance with the Company policy is provided for the
employee, with the employee having the option of adding other family
members. The specific terms and benefits of the policy are subject to
periodic review and revision.
RETIREMENT BENEFIT
At this time, the employee is responsible for privately arranging their
own retirement program.
LIFE INSURANCE
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The Company will provide $500,000 of term life insurance for the
employee
DISABILITY INSURANCE
The Company will provide Disability Insurance for the employee, which
will commence after 90 days of disability as defined in the policy. The
specific terms and benefits of the policy are subject to periodic
review and revision
EXPENSE RECOVERY
The employee will be reimbursed for all expenses properly incurred on behalf of
the Company. All expenses must be within the policy guidelines as established
from time to time by Company management, and must be properly supported by
receipts. Expense claims are to be submitted at the end of each month with full
details for each expense item, and on the expense form provided by the Company.
Automobile usage will be reimbursed at $.35/mile driven on Company business.
Policy guidelines include economy airline travel, approved hotels include Best
Western, Holiday Inns, Ramada Inns, Choice Hotels, and others of similar class.
Food expenses when traveling is based on a $25.00 daily guideline. Reimbursement
will be within two weeks of expense form submission.
VACATION/TIME OFF
Three weeks of vacation annually and all statutory and corporately recognized
holidays.
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<PAGE> 1
EXHIBIT 10.5
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement") is
executed pursuant to Board approval dated March 13, 1998, to rescind, replace,
amend and restate the Employment Agreement (the "Initial Agreement") originally
intended to be effective as of the 1st day of September, 1996 but entered into
5th of March, 1997, between AUTOMATIC TIME SYSTEMS CORP., a Michigan corporation
(the "Company"), and RICHARD PENINGTON (the "Employee").
In order to correct certain errors and omissions inadvertently made in
connection with the Initial Agreement and to update certain references to
reflect the acquisition by Advanced Systems International, Inc. of all the
shares of the capital stock of the Company which occurred in July 1997, and in
consideration of the mutual promises contained in this Agreement, the parties
agree as follows:
SECTION 1. OPERATION OF AGREEMENT.
This Agreement rescinds, replaces, amends and restates the Initial
Agreement ab initio, for all intents and purposes as if this Agreement had been
the document executed instead of the Initial Agreement. For service as an
officer and/or employee of the Company, the Employee shall be entitled to the
full protection of the applicable indemnification provisions of the Articles of
Incorporation and Bylaws of the Company, as they may be amended from time to
time. In addition, the Company will indemnify Employee and hold him harmless, in
advance and on demand, from any and all loss or liabilities he my incur as a
result of claims asserted against Employee in connection with his employment or
his status as a stockholder of the Company's parent, Advanced Systems
International, Inc. ("Parent"), except for claims resulting from Employee's
willful conduct.
SECTION 2. TERM OF AGREEMENT.
This Agreement shall remain in effect until it is terminated pursuant
to Section 5.
SECTION 3. SERVICES.
The Employee shall serve the Company in the capacity, with the title,
and with the present and anticipated future job descriptions, duties and
positions, as are set forth in the attached Exhibit A. He shall have such
general powers of supervision and management and such other responsibilities as
are consistent with such positions, at all times subject to the control and
supervision of the Board of Directors; provided, however, that the Employee may
serve in such other Employee position as is mutually acceptable to the Company
and the Employee. The Employee shall serve the Company faithfully and
diligently. The Employee shall devote such of his productive time, ability and
attention to the business of the Company during the term of this
<PAGE> 2
Agreement as may be required to dispatch his duties hereunder in a competent
manner. Employee's principal job location shall not change from the metropolitan
Detroit area without his consent.
SECTION 4. SALARY, BONUS, BENEFITS AND EXPENSES.
The Company shall pay or provide Employee with the base salary, bonus,
equity compensation, and fringe and other benefits as are set forth in the
attached Exhibit B.
SECTION 5. TERMINATION OF EMPLOYMENT.
(a) TERMINATION BY THE COMPANY. The Company may terminate this
Agreement at any time for any reason, either with or without "Cause". For
purposes of this Agreement, "Cause" shall mean: (i) the willful misconduct of
Employee materially injurious to the Company; (ii) any violation by Employee of
any law, rule or regulation related to the business of the Company that results
in a material injury to the Company; or (iii) the failure by Employee to follow
any written policy adopted by the Company (provided that such policy does not
conflict with the provisions of this Agreement), which failure results in a
material injury to the Company. No act or failure to act on the Employee's part
shall be considered "willful" unless done, or not done, by the Employee in bad
faith and without reasonable belief that the act or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Employee shall not
be deemed to have been terminated for Cause unless the Company shall have
delivered to the Employee a notice of such termination within thirty (30) days
after the date that the Company becomes aware of the occurrence of the event
giving rise to Cause. The Employee shall be entitled to invoke the arbitration
procedures set forth in this Agreement in the event of a dispute between the
Company and the Employee as to the existence of "Cause".
(b) INVOLUNTARY OR VOLUNTARY TERMINATION BY EMPLOYEE. The Employee's
employment with the Company shall also be terminated upon the occurrence of any
of the following:
(i) the Employee's voluntary termination of employment with the
Company for any reason, including, but not limited to, for "Good
Cause;" or
(ii) the Employee's involuntary termination of employment with the
Company for any reason, including, but not limited to, the death or
Disability of the Employee.
For purposes of this Agreement, "Good Cause" shall mean any material change in
the responsibilities or duties of the Employee as described in Section 3 hereof
except as may be permitted therein, or the Company's breach of any other
material term or material condition of this Agreement. For purposes of this
Agreement, a "Disability" shall be deemed to have occurred if the Employee is
prevented from performing his duties hereunder by reason of physical or mental
incapacity for a period of ninety (90) consecutive days. During the term of
disability the employee will receive his normal pay for the first sixty (60)
days, 50% of his
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<PAGE> 3
normal pay for the next thirty (30) days and thereafter shall be compensated by
way of and according to the terms of the Company's disability insurance policy.
SECTION 6. TERMINATION BENEFITS.
(a) Upon termination of the Employee's employment by the Company other
than for Cause, or upon the voluntary termination for Good Cause by the Employee
of his employment with the Company, the Company shall pay to the Employee, or
his legal representative, an amount equal to three months salary together with
any bonus accrued up to the date of termination; provided, that with respect to
any bonus plan, the Company shall be deemed to have attained one hundred percent
(100%) of the bonus targets for the performance period in which the termination
of the Employee's employment occurs and the corresponding bonus payments shall
be payable to the Employee as if the Employee's employment had not been
terminated. All amounts payable to the Employee hereunder which are not paid to
the Employee within thirty (30) days after the due date therefor shall include
interest at the prime rate (as published in the "Money Rates" column of The Wall
Street Journal on the date thirty (30) days after such due date) (the "Prime
Rate") plus two percent (2%). The Company may, at its sole option, purchase
insurance to cover all or any part of the compensation and benefits payable to
the Employee upon termination of employment under this Section 6(a).
(b) Notwithstanding anything in Subsection (a) of this Section 6 to
the contrary, upon termination of the Employee's employment for any reason, the
Company will continue to provide the Employee and his spouse with medical and
hospitalization insurance only to the extent, for the time periods and at
Employee's expense, as mandated by COBRA or any similar successor law.
SECTION 7. CHANGE IN CONTROL.
A "Change in Control" shall be deemed to have occurred if both (i) any
person or "group" other than shareholders as of the date of this Agreement
acquires "beneficial ownership" (in each case as defined by applicable
regulations promulgated by the Securities and Exchange Commission) of 51 % or
more of the Parent's outstanding equity securities. Upon a Change in Control,
the Employee's stock ownership, units and options shall accelerate and vest
100%.
SECTION 8. COVENANT NOT TO COMPETE.
(a) During the term of this Agreement and for a two year period
commencing on the date of termination of this Agreement, Employee will not,
directly or indirectly, engage in, or have an interest in or be associated with
(whether as an officer, director, stockholder, partner, associate, employee,
consultant, owner or otherwise) any corporation, firm or enterprise which is
engaged in the sale of products in competition with those of the Company,
anywhere within a 500 mile radius of the Company's then executive offices;
provided, however, that Employee shall be permitted to make passive investments
in companies which may compete with the Business (as hereinafter defined), as
long as such investments do not exceed 5% of the equity interests of such
companies.
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<PAGE> 4
(b) Employee will not at any time, for so long as any Confidential
Information (as defined below) shall remain confidential or otherwise remain
wholly or partially protectable, either during the term of this Agreement or
thereafter, use or disclose, directly or indirectly to any person outside of the
Company or any corporation owned or controlled by the Company or under common
control with the Company ("Affiliate") any Confidential Information.
(c) During the term of this Agreement and for a two year period
commencing on the date of termination of this Agreement, Employee shall not
directly or indirectly divert, or by aid to others, do anything which would tend
to divert, from the Company or any Affiliate any trade or business with any
customer or supplier with whom Employee had contact or association during the
term of his association with the Company or with any party whose identity or
potential as a customer or supplier was confidential or learned by Employee
during his association with the Company.
(d) During the term of this Agreement and for a two year period
commencing on the date of termination of this Agreement, Employee shall not,
either directly or indirectly, induce or attempt to induce any person with whom
Employee was acquainted while associated with the Company to leave the
employment of the Company or any of the affiliates.
(e) As used in this Agreement, the term "Confidential Information"
shall mean all business information of any nature and in any form which at the
time or times concerned is not generally known to those persons engaged in
business similar to that conducted or contemplated by the Company or any
affiliate (other than by the act or acts of an employee not authorized by the
Company to disclose such information) and which relates to any one or more of
the aspects of the present or past business of the Company or any of the
Affiliates or any of their respective predecessors, including, without
limitation, patents and patent applications, inventions and improvements
(whether or not patentable), development projects, policies, processes,
formulas, techniques, know-how, and other facts relating to sales, advertising,
promotions, financial matters, customers, customer lists, customer purchases or
requirements, and other trade secrets.
(f) As used in this Agreement, the Company's "Business" shall mean the
development, design, manufacture, documentation, distribution and sales of
computer hardware, computer software and associated equipment relating to time
and attendance.
(g) Employee agrees and understands that the remedy at law for any
breach by him of this Covenant Not to Compete will be inadequate and that the
damages flowing from such breach are not readily susceptible to being measured
in monetary terms. Accordingly, it is acknowledged that, upon adequate proof of
Employee's violation of any legally enforceable provision of this Covenant Not
to Compete, the Company shall be entitled to immediate injunctive relief and may
obtain a temporary order restraining any threatened or further breach. Nothing
in this Covenant Not to Compete shall be deemed to limit the Company's remedies
at law or in equity for any breach by Employee of any of the provisions of this
Covenant which may be pursued or availed of by the Company.
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<PAGE> 5
SECTION 9. TAX WITHHOLDING.
The Company may withhold from any amounts payable under this Agreement,
or shall require Employee to remit to the Company at the time of receipt of
payments, all applicable federal, state, local or other withholding taxes.
SECTION 10. BINDING EFFECT.
(a) This Agreement shall be binding upon the successors and assigns of
the Company. The Company shall take whatever actions are necessary to ensure
that any successor to its operations (whether by purchase, merger,
consolidation, sale of substantially all assets or otherwise) assumes all of the
Company's obligations under this Agreement, and the Company shall obtain from
such successor a written agreement satisfactory to the Employee evidencing the
successors assumption of such obligations.
(b) This Agreement shall be binding upon, and shall inure to the
benefit of, and be enforceable by, the Employee and his legal representatives
and heirs. However, the rights of the Employee under this Agreement shall not be
assigned, transferred, pledged, hypothecated or otherwise encumbered.
SECTION 11. AMENDMENT OR MODIFICATION OF AGREEMENT.
This Agreement may not be modified or amended except by instrument in
writing signed by the parties hereto.
SECTION 12. VALIDITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall continue in full force and effect.
SECTION 13. LIMITATION ON RIGHTS.
(a) Subject to the terms and conditions set forth herein: (i) this
Agreement shall create no right in the Employee to continue in the Company's
employment for any specific period of time or create any other rights of the
Employee or obligations on the part of the Company; and (ii) this Agreement
shall not restrict the right of the Company to terminate the Employee or
restrict the right of the Employee to terminate his employment.
(b) This Agreement shall not be construed to exclude the Employee from
participation in any other compensation or benefit programs in which he is
specifically eligible to participate either prior to or following the execution
of this Agreement, or any such programs that generally are available to other
Employee personnel of the Company, nor shall it affect the kind and amount of
other compensation to which the Employee is entitled.
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<PAGE> 6
SECTION 14. ARBITRATION.
Disputes under this Agreement shall be settled pursuant to binding
arbitration before three arbitrators in Oakland County, Michigan, in accordance
with the commercial arbitration rules of the American Arbitration Association,
as then in effect. For purposes of choosing the arbitrators, the Company shall
designate one arbitrator, the Employee shall choose one arbitrator and the two
arbitrators jointly shall designate a third arbitrator, in accordance with the
commercial arbitration rules referenced above. The arbitrators' sole authority
shall be to interpret and apply the provisions of this Agreement; they shall not
change, add to, or subtract from, any of its provisions. The arbitrators shall
have the power to compel attendance of witnesses at the hearing. Any court
having jurisdiction over this matter may enter a judgment based upon such
arbitration. All decisions of the arbitrators shall be final and binding on the
claimant and the Company without appeal to any court.
SECTION 15. FEES AND EXPENSES.
To the extent that the Employee is successful as the result of any
controversy over the interpretation, enforceability or validity of any provision
in this Agreement, the Company shall reimburse the Employee for any and all fees
and expenses, including, but not limited to, attorneys' fees, incurred by the
Employee in connection with such dispute. The Company shall reimburse the
Employee for such fees and expenses within twenty days following written demand
therefor by the Employee. Payments of fees and expenses made by the Company more
than twenty (20) days after written demand therefor (for any reason) shall
accrue interest at the Prime Rate (on the twentieth day following the due date
thereof) plus two percent (2%), which interest shall begin accruing on the
twentieth day following such date.
SECTION 16. MISCELLANEOUS.
A waiver of the breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. The headings in this Agreement are inserted
for convenience of reference only and shall not be a part of or control or
affect the meaning of any provision hereof.
SECTION 17. GOVERNING LAW.
To the extent not preempted by federal law, this Agreement shall be
governed and construed in accordance with the laws of the State of Michigan.
SECTION 18. ENTIRE AGREEMENT.
This document represents the entire agreement and understanding of the
parties with respect to the subject matter of the Agreement and it may not be
altered or amended except by an agreement in writing.
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<PAGE> 7
SECTION 19. NOTICE.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been given when delivered personally or mailed in the
United States by certified or registered mail, postage prepaid, return receipt
requested, to the parties at the following addresses or at such other addresses
as may be given in writing by one party to the other at least five (5) days
prior to the mailing or delivery of such notice:
Employee: Richard Penington
31207 Foxboro Way
Beverly Hills, Michigan 48025
Company: AUTOMATIC TIME SYSTEMS CORP.
17515 W. Nine Mile Road
Southfield, Michigan 48075
Attn: President
In all events, with a copy to:
Jaffe, Raitt, Heuer & Weiss,
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226-3418
Attn: David D. Warner, Esq.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
THE EMPLOYEE AUTOMATIC TIME SYSTEMS CORP.,
a Michigan corporation
By: By:
--------------------------------- ---------------------------------
Richard Penington Gerald A. Pesut, President
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<PAGE> 8
EXHIBIT A TO
THE EMPLOYMENT AGREEMENT
RICHARD PENINGTON
JOB TITLE
Chief Financial Officer/Vice President of Finance
JOB DESCRIPTION
1. Establish and be responsible for all accounting and financial functions
at ATS.
2. Develop and maintain budgets and business plans as required.
3. Keep management appraised of the financial performance of the
corporation and make recommendations to achieve corporate financial
objectives.
4. Development of Presentation Materials for Funding/Investment Activities
5. Maintain Banking Relationships
6. Maintain Auditing Relationships
7. Establish and Maintain Financial and Operational Controls and
contracts.
8. Responsible for Benefits Program and Personnel Policies
9. Develop and Maintain Customer Purchase Contracts
10. Work with all areas of the organization to promote and support the
goals and objectives of the Corporation.
REPORTING STRUCTURE
Reporting to the President, Chief Executive Officer
<PAGE> 9
EXHIBIT B TO THE
EMPLOYMENT AGREEMENT
RICHARD PENINGTON
COMPENSATION
SALARY: $10,500/month subject to review annually.
BONUS: Bonus is based on the current business plan which indicates
Total Revenue of $6 million and Total Operating Profit of $1.5
million
- Upon achievement of 100% of plan of either of the two
components a bonus of $20,000 will be paid for each of
the milestones.
- On "Total Revenues" over plan a bonus of 2% of same shall be
paid
- Bonus is based upon the current business plan and does not
include any sales that might be achieved through
acquisitions or mergers.
OPTIONS: For up to 500,000 shares of Parent's stock at $0.70 per share,
according to the terms and conditions of an Option Agreement
(form attached).
BENEFITS
The Company currently provides the following benefits all of which may be
reviewed periodically:
HEALTH BENEFITS
The Company currently provides comprehensive health benefits for the
employee. The employee must pay the expense associated with adding
other family members to the coverage. The specific terms and benefits
of the policy are subject to periodic review and revision
DENTAL PLAN
Coverage in accordance with the Company policy is provided for the
employee, with the employee having the option of adding other family
members. The specific terms and benefits of the policy are subject to
periodic review and revision.
RETIREMENT BENEFIT
At this time, the employee is responsible for privately arranging his
own retirement program.
LIFE INSURANCE
<PAGE> 10
The Company will provide $500,000 of term life insurance for the
employee.
DISABILITY INSURANCE
The Company will provide Disability Insurance for the employee, which
will commence after 90 days of disability as defined in the policy. The
specific terms and benefits of the policy are subject to periodic
review and revision
EXPENSE RECOVERY
The employee will be reimbursed for all expenses properly incurred on behalf of
the Company. All expenses must be within the policy guidelines as established
from time to time by Company management, and must be properly supported by
receipts. Expense claims are to be submitted at the end of each month with full
details for each expense item, and on the expense form provided by the Company.
Automobile usage will be reimbursed at $.35/mile driven on Company business.
Policy guidelines include economy airline travel, approved hotels include Best
Western, Holiday Inns, Ramada Inns, Choice Hotels, and others of similar class.
Food expenses when traveling is based on a $25.00 daily guideline. Reimbursement
will be within two weeks of expense form submission.
VACATION/TIME OFF
Three weeks of vacation annually and all statutory and corporately recognized
holidays.
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Agreement is by and between AUTOMATED SYSTEMS INTERNATIONAL, a
Michigan corporation, hereinafter referred to as "EMPLOYER", and Howard H
Tarnoff, hereinafter called "EMPLOYEE" and is effective as of the 22th day of
July, 1998.
WITNESSETH:
WHEREAS, EMPLOYER is in the business of development, design,
manufacture, documentation, distribution and sales of computer hardware,
computer software and associated equipment relating to time and attendance (the
"Business");
WHEREAS, EMPLOYEE has experience in the Business; and
WHEREAS, EMPLOYER and EMPLOYEE desire to enter into an employment
agreement setting forth their mutual obligations.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, receipt and
sufficiency whereof are hereby acknowledged, it is mutually covenanted and
agreed by and between the parties hereto as follows:
1. Duties of EMPLOYEE. EMPLOYEE shall serve Vice President of Sales.
EMPLOYEE shall devote substantially all of his time to the performance of
his/her duties in such capacity.
2. At Will Employment. EMPLOYEE'S employment will be under an "at will"
arrangement pursuant to which EMPLOYEE'S employment can be terminated at any
time, at the option of either EMPLOYER or EMPLOYEE, with or without cause, for
any reason or for no reason, with or without prior notice. In the event the
EMPLOYER terminates employment, the EMPLOYEE will receive 60 days salary
severance pay. Notwithstanding the foregoing, the provisions contained in
Sections 4, 5 and 6 of this Agreement shall survive any termination of this
Agreement.
3. Compensation. For services performed pursuant to the terms
contained in this Agreement, EMPLOYER shall pay cash compensation to EMPLOYEE
as outlined in the attached offer letter.
4. Developments. EMPLOYEE agrees to promptly inform EMPLOYER of the
full details of any and all of EMPLOYEE'S inventions, discoveries, concepts,
and ideas (collectively called, "Developments"), whether patentable or not,
including but not limited to: hardware and apparatus, processes and methods,
formulae, computer programs and techniques, as well as any improvements and
related knowledge, which EMPLOYEE conceives, completes, or reduces to practice
(whether alone or with others) while EMPLOYEE is employed by Employer and (a)
which relate to the present or prospective Business, work, or investigations of
EMPLOYER, or (b) which result from any work EMPLOYEE does using any equipment,
facilities, materials, or personnel of EMPLOYER, or (c) which result from or are
suggested by any work which EMPLOYEE may do for EMPLOYER
EMPLOYEE further agrees to assign, and does hereby assign, to EMPLOYER
or EMPLOYER'S designee, EMPLOYEE'S entire right, title and interest in the
following items, which EMPLOYEE conceives or makes (whether alone or with
others) while employed by EMPLOYER or within one year of the end of EMPLOYEE'S
employment (if conceived as a result of such employment): (a) all Developments;
(b) all trademarks, copyrights, -.,id mask work rights in Developments; and (c)
all patent applications filed and patents granted on any Developments, including
those in foreign countries.
<PAGE> 2
Both while employed by EMPLOYER and afterwards, EMPLOYEE agrees to
execute any documents that EMPLOYER may consider necessary or helpful to obtain
or maintain patents or other registration(s) of proprietary right, whether
during the prosecution of patent applications or during the conduct of an
interference, litigation, Other matter (all related expenses to be borne by
EMPLOYER).
5. Proprietary Information. EMPLOYER shall provide access to
confidential and proprietary information regarding EMPLOYER'S Business products
and services being marketed, recognizing that EMPLOYEE, by virtue of EMPLOYEE'S
role with EMPLOYER will have full access to any and all of such information, and
that the disclosure of any and all such confidential and proprietary information
to third parties may cause irreparable harm to EMPLOYER and its competitive
position in the marketplace, EMPLOYEE agrees not to disclose any confidential
and proprietary information obtained by virtue of employment with EMPLOYER to
any entity, individual, corporation, partnership, sole proprietorship, or
customer of EMPLOYER except as the same may be reasonably utilized in the
ordinary course of marketing EMPLOYER'S products and services to such customer.
Therefore, during the term of employment by EMPLOYER, or thereafter, EMPLOYEE
will not disclose other than to an employee of EMPLOYER any confidential and
proprietary information, including any information relating to EMPLOYER'S
procedures, administrative policies, customer lists, financial data,
bookkeeping, product and service information, or similar proprietary secrets or
know-how, without prior written consent from EMPLOYER. On termination of
employment for any reason, EMPLOYEE shall return any documents, files, papers,
letters, product or process descriptions or copies thereof, or other
confidential and proprietary information, of any type or description. For
purposes of this Agreement, "confidential and proprietary information" includes:
(a) information or materials which relate to EMPLOYER'S inventions,
technological developments, "know-how," purchasing, accounting, merchandising,
or licensing;
(b) trade secrets as defined in the Restatement of Torts, which
EMPLOYEE accepts as an appropriate statement of law;
(c) software in various stages of development (source code, object
code, documentation, diagrams, flow charts), designs, drawings, specifications,
models, data, and customer information; and
(d) any information of the type described above which EMPLOYER
obtained from another party and which EMPLOYER treats as proprietary or
designates as confidential, whether or not owned or developed by EMPLOYER and
which is not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice, whether or
not the underlying details are in the public domain.
6. NON-COMPETITION
(a) EMPLOYEE covenants and agrees that at no time during the term of
this employment, and for a period of two (2) years following the termination of
employment, for any reason whatsoever will EMPLOYEE, individually, or on behalf
of any other person, persons, firm, partnership, corporation or company, engage
in any Business enterprise within a radius of 500 miles surrounding Southfield,
Michigan that is identical or similar to the Business of EMPLOYER as it is now
or as it may further expand or develop or engage in or contribute EMPLOYEE'S
knowledge to any work which is competitive with or similar to a product,
process, apparatus, or service upon which EMPLOYEE worked during the two (2)
year period immediately preceding the termination of EMPLOYEE'S employment
hereunder. EMPLOYEE will not, directly or indirectly, for or on behalf of, or in
conjunction with any other person, persons, firm, partnership, corporation or
company (i) solicit or attempt to solicit the business or perform such other
incidental business and service as is now or in the course of EMPLOYEE'S
employment performed by EMPLOYER or (ii) solicit, attempt to solicit or hire any
other employee of EMPLOYER.
<PAGE> 3
(b) EMPLOYEE agrees that the geographic area established herein is
divisible in such a manner that if this provision is held to be invalid by a
court of competent jurisdiction, that portion of the geographic area is
severable and this clause remains in effect for the remaining included
geographic area in which the clause is valid. EMPLOYEE acknowledges that any
breach of these provisions may cause irreparable harm to EMPLOYER and therefore
EMPLOYER may seek injunctive relief to enjoin any violation hereof by EMPLOYEE
without necessity of posting bond in addition to any other remedy available.
7. Assignment. EMPLOYEE agrees that this Agreement and the rights,
interests and benefits hereunder shall not be assigned, transferred, pledged or
hypothecated in any way by EMPLOYEE or other person claiming under EMPLOYEE by
virtue of this Agreement, and shall not be subject to execution, attachment or
similar process. Any attempt to assign, transfer, pledge, hypothecate or
otherwise dispose of this Agreement or of such rights, interests and benefits
contrary to the foregoing provisions, or upon the levy of any attachment or
similar process thereupon shall be null and void and without effect, and shall
relieve EMPLOYER of any and all liability hereunder.
8. General Terms.
(a) Arbitration. In the event any controversy or claim arising out
of or relating to this Agreement whether or not a breach thereof, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. Following delivery of the arbitrator's
decision the prevailing party may enter the decision as a judgment in a court of
competent jurisdiction in Oakland County, Michigan.
(b) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the respective parties, their heirs, personal representatives,
legal representatives, successors and assigns.
(c) Confidentiality. Both parties shall protect the terms of this
Agreement as confidential information. Neither party shall disclose the terms of
this Agreement to any third party without the prior written consent of the
non-disclosing party.
(d) Entire Agreement. This Agreement constitutes the entire
agreement between the parties and contains all of the Agreements among the
parties with respect to the subject matter hereof.
(e) Injunctive Relief. In the event of violation of any term
contained in this Agreement, the non-violating party shall be entitled to pursue
injunctive relief, in addition to any other remedies available at law or in
equity, without the necessity of posting bond as a condition of obtaining such
relief.
(f) Jurisdiction and Venue. Any cause of action related to this
Agreement shall be heard in a court of competent jurisdiction in Oakland County,
Michigan.
(g) Laws to govern. The laws of the State of Michigan shall govern
interpretation and enforcement of the terms contained in this Agreement.
(h) Modification of Agreement. No change or modification of this
Agreement shall be binding upon the parties unless the same is in writing and
signed by both parties. No waiver of any provision of this Agreement shall be
valid unless made in writing and signed by the person or party against whom the
same may be charged.
<PAGE> 4
(i) Notice. Any and all notices, designations, consents, offers,
acceptances, or any other communication provided for herein shall be given in
writing by personal service, registered or certified mail, return receipt
requested, which shall be addressed as follows:
EMPLOYER:
Automated Systems International
17511 W. Nine Mile Road
Suite 225
Southfield, MI 48034
EMPLOYEE:
Howard H. Tarnoff
9 Maple Tree Lane
Franklin, MA 02038
(j) Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
(k) EMPLOYEE acknowledges and agrees that any action or suit against
EMPLOYER, or any of its employees, arising out of this Agreement, including but
not limited to, claims arising under state or federal civil rights statutes or
for breach of this Agreement, must be brought within one hundred eighty (180)
days of the event giving rise to the claims or be forever barred, and EMPLOYEE
waives any limitation periods to the contrary. EMPLOYEE further agrees that if
he/she should bring any action or claim arising out of this Agreement in which
EMPLOYER prevails, EMPLOYEE will pay to EMPLOYER any and all costs incurred in
defense of said claims or action, including attorneys' fees. EMPLOYEE further
acknowledges that Michigan law requires employers to make accommodations to
handicapped applicants and employees where the accommodation does not pose an
undue hardship on the employer. EMPLOYEE acknowledges that handicapped employees
and applicants may request an accommodation of their handicap by notifying
EMPLOYER in writing of the need for accommodation within one hundred eighty-two
(182) days of the date the handicapped knows, or should know, that an
accommodation is needed and that failure to properly notify the Company within
one hundred eighty-two (182) days will preclude any claim that the Company
failed to accommodate the handicapped.
IN WITNESS WHEREOF, EMPLOYER has caused this Agreement to be signed by
its duly authorized officer, and EMPLOYEE has hereunto set his hand and seal on
the day written above.
EMPLOYER: EMPLOYEE:
AUTOMATED SYSTEMS INTERNATIONAL
By: By: Howard H. Tarnoff
------------------------------ ----------------------------
Name: Gerald A. Pesut Name: Howard H. Tarnoff
Title: Chief Executive Officer
Date: July 22, 1998
<PAGE> 5
[AUTOMATED SYSTEMS LETTERHEAD]
July 22, 1998
Howard H. Tarnoff
9 Maple Tree Lane
Franklin, MA 02038
Dear Howard,
It is with great personal pleasure that I can extend this offer to you
to join A.S.I. as the Vice President of Sales.
In this position your compensation will be as follows:
Annual Salary: $145,000.00 per year paid monthly, except as provided
below.
Annual Bonus: $50,000 if 100% of revenue plan achieved. During the
first 12 months of employment, however, ASI will
guarantee $50,000 in bonus to be paid as follows:
$25,000 on the first day of employment, which is
expected to be September 1, 1998, with the remaining
$25,000 paid at the end of the first 12 months.
All subsequent bonuses will be based on achievement of
goals under the revenue plan and will be paid according
to ASI standard compensation practices. Upon
termination of employment after the first year,
employee will be paid any pro rata share of bonus
earned under the revenue plan for the quarter during
which employment is terminated.
Share Options: 200,000 options granted under the Advanced Systems
Employee Option Plan will be awarded at the date of
hire and an additional 100,000 awarded at the end of 99
if you achieve your revenue plan. Acquisitions and
mergers will be excluded from this plan. These options
will be granted at market bid value and approved by the
Board of Directors. Your options will vest over two
years. If there is a change of ownership your stock
will vest at that time.
If the company terminates your employment during the first year for any
reason, the balance of the annual salary will be owed and paid monthly for the
balance of that year. If the company terminates your employment during the
second year for any reason, the company will pay you six months of severance,
paid monthly, plus any bonus earned as provided above and
<PAGE> 6
your stock options will vest. On termination following the second year,
severance will be paid according to the terms of our standard employment
contract, which provides severance of sixty days. Otherwise, the terms of your
employment will be subject to our usual procedures, as set forth in the Employee
Manual.
Yours truly,
Gerald A. Pesut
Gerald A. Pesut
Chairman/CEO
I understand and agree to the terms of employment outlined above.
Howard Tarnoff 8/11/98
- ----------------------------------------------- ---------------------------
Howard Tarnoff Date
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Agreement is by and between ADVANCED SYSTEMS INTERNATIONAL, a
Michigan corporation, hereinafter referred to as "EMPLOYER", and Robert C.
DeMerell, hereinafter called "EMPLOYEE" and is effective as of the 8th day of
January 1999.
WITNESSETH:
WHEREAS, EMPLOYER is in the business of development, design,
manufacture, documentation, distribution and sales of computer hardware,
computer software and associated equipment relating to time and attendance (the
"Business");
WHEREAS, EMPLOYEE has experience in the Business; and
WHEREAS, EMPLOYER and EMPLOYEE desire to enter into an employment
agreement setting forth their mutual obligations.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, receipt and
sufficiency whereof are hereby acknowledged, it is mutually covenated and agreed
by and between the parties hereto as follows:
1. Duties of EMPLOYEE. EMPLOYEE shall serve Corporate Controller.
EMPLOYEE shall devote substantially all of his time to the performance of
his/her duties in such capacity.
2. At Will Employment. EMPLOYEE'S employment will be under an "at
will" arrangement pursuant to which EMPLOYEE'S employment can be terminated at
any time, at the option of either EMPLOYER or EMPLOYEE, with or without cause,
for any reason or for no reason, with or without prior notice. In the event the
EMPLOYER terminates employment, the EMPLOYEE will receive 30 days salary
severance pay. Notwithstanding the foregoing, the provisions contained in
Sections 4, 5 and 6 of this Agreement shall survive any termination of this
Agreement.
3. Compensation. For services performed pursuant to the terms
contained in this Agreement, EMPLOYER shall pay cash compensation to EMPLOYEE as
outlined in the attached offer letter.
4. Developments. EMPLOYEE agrees to promptly inform EMPLOYER of the
full details of any and all of EMPLOYEE'S inventions, discoveries, concepts, and
ideas (collectively called, "Developments"), whether patentable or not,
including but not limited to: hardware and apparatus, processes and methods,
formulae, computer programs and techniques, as well as any improvements and
related knowledge, which EMPLOYEE conceives, completes, or reduces to practice
(whether alone or with others) while EMPLOYEE is employed by Employer and (a)
which relate to the present or prospective Business, work, or investigations of
EMPLOYER, or (b) which result from any work EMPLOYEE does using any equipment,
facilities, materials, or personnel of EMPLOYER, or (c) which result from or are
suggested by any work which EMPLOYEE may do for EMPLOYER.
<PAGE> 2
EMPLOYEE further agrees to assign, and does hereby assign, to EMPLOYER
or EMPLOYER'S designee, EMPLOYEE'S entire right, title, and interest in the
following items, which EMPLOYEE conceives or makes (whether alone or with
others) while employed by EMPLOYER or within one year of the end of EMPLOYEE'S
employment (if conceived as a result of such employment): (a) all Developments;
(b) all trademarks, copyrights, and mask work rights in Developments; and (c)
all patent applications filed and patents granted on any Developments, including
those in foreign countries.
Both while employed by EMPLOYER and afterwards, EMPLOYEE agrees to
execute any documents that EMPLOYER may consider necessary or helpful to obtain
or maintain patents or other registration(s) of proprietary right, whether
during the prosecution of patent applications or during the conduct of an
interference, litigation, or other matter (all related expenses to be borme by
EMPLOYER).
5. PROPRIETARY INFORMATION. EMPLOYER shall provide access to
confidential and proprietary information regarding EMPLOYER'S Business products
and services being marketed, recognizing that EMPLOYEE, by virtue of EMPLOYEE'S
role with EMPLOYER will have full access to any and all of such information, and
that the disclosure of any and all such confidential and proprietary information
to third parties may cause irreparable harm to EMPLOYER and its competitive
position in the marketplace, EMPLOYEE agrees not to disclose any confidential
and proprietary information obtained by virtue of employment with EMPLOYER to
any entity, individual, corporation, partnership, sole proprietorship, or
customer of EMPLOYER except as the same may be reasonably utilized in the
ordinary course of marketing EMPLOYER'S products and services to such customer.
Therefore, during the term of employment by EMPLOYER, or thereafter, EMPLOYEE
will not disclose other than to an employee of EMPLOYER any confidential and
proprietary information, including any information relating to EMPLOYER'S
procedures, administrative policies, customer lists, financial data,
bookkeeping, product and service information, or similar proprietary secrets or
know-how, without prior written consent from EMPLOYER. On termination of
employment for any reason, EMPLOYEE shall return any documents, files, papers,
letters, product or process descriptions or copies thereof, or other
confidential and proprietary information, of any type or description. For
purposes of this Agreement, "confidential and proprietary information" includes:
(a) information or materials which relate to EMPLOYER'S inventions,
technological developments, "know-how," purchasing, accounting, merchandising,
or licensing;
(b) trade secrets as defined in the Restatement of Torts, which
EMPLOYEE accepts as an appropriate statement of law;
(c) software in various stages of development (source code, object
code, documentation, diagrams, flow charts), designs, drawings, specifications,
models, data, and customer information; and
(d) any information of the type described above which EMPLOYER
obtained from another party and which EMPLOYER treats as proprietary or
designates as confidential, whether or not owned or developed by EMPLOYER and
which is not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice, whether or
not the underlying details are in the public domain.
<PAGE> 3
6. NON-COMPETITION.
(a) EMPLOYEE covenants and agrees that at no time during the term of
this employment, and for a period of two (2) years following the termination of
employment, for any reason whatsoever will EMPLOYEE, individually, or on behalf
of any other person, persons, firm, partnership, corporation or company, engage
in any Business enterprise within a radius of 500 miles surrounding Southfield,
Michigan that is identical or similar to the Business of EMPLOYER as it is now
or as it may further expand or develop or engage in or contribute EMPLOYEE'S
knowledge to any work which is competitive with or similar to a product,
process, apparatus, or service upon which EMPLOYEE worked during the two (2)
year period immediately preceding the termination of EMPLOYEE'S employment
hereunder. EMPLOYEE will not, directly or indirectly, for or on behalf of, or in
conjunction with any other person, persons, firm, partnership, corporation or
company (i) solicit or attempt to solicit the business or perform such other
incidental business and service as is now or in the course of EMPLOYEE'S
employment performed by EMPLOYER or (ii) solicit, attempt to solicit or hire any
other employee of EMPLOYER.
(b) EMPLOYEE agrees that the geographic area established herein is
divisible in such a manner so that if this provision is held to be invalid by a
court of competent jurisdiction, that portion of the geographic area is
severable and this clause remains in effect for the remaining included
geographic area in which the clause is valid. EMPLOYEE acknowledges that any
breach of these provisions may cause irreparable harm to EMPLOYER and therefore
EMPLOYER may seek injunctive relief to enjoin any violation hereof by EMPLOYEE
without necessity of posting bond in addition to any other remedy available.
7. Assignment. EMPLOYEE agrees that this Agreement and the rights,
interests and benefits hereunder shall not be assigned, transferred, pledged or
hypothecated in any way by EMPLOYEE or other person claiming under EMPLOYEE by
virtue of this Agreement, and shall not be subject to execution, attachment or
similar process. Any attempt to assign, transfer, pledge, hypothecate or
otherwise dispose of this Agreement or of such rights, interests and benefits
contrary to the foregoing provisions, or upon the levy of any attachment or
similar process thereupon shall be null and void and without effect, and shall
relieve EMPLOYER of any and all liability hereunder.
8. General Terms.
(a) ARBITRATION. In the event any controversy or claim arising out
of or relating to this Agreement whether or not a breach thereof, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. Following delivery of the arbitrator's
decision the prevailing party may enter the decision as a judgment in a court of
competent jurisdiction in Oakland County, Michigan.
(b) BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the respective parties, their heirs, personal representatives,
legal representatives, successors and assigns.
(c) CONFIDENTIALITY. Both parties shall protect the terms of this
Agreement as confidential information. Neither party shall disclose the terms of
this Agreement to any third party without the prior written consent of the
non-disclosing party.
<PAGE> 4
employers to make accommodations to handicapped applicants and employees where
the accommodation does not pose an undue hardship on the employer. EMPLOYEE
acknowledges that handicapped employees and applicants may request an
accommodation of their handicap by notifying EMPLOYER in writing of the need for
accommodation within one hundred eighty-two (182) days of the date the
handicapped knows, or should know, that an accommodation is needed and that
failure to properly notify the Company within one hundred eighty-two (182) days
will preclude any claim that the Company failed to accommodate the handicapped.
IN WITNESS WHEREOF, EMPLOYER has caused this Agreement to be signed by
its duly authorized officer, and EMPLOYEE has hereunto set his hand and seal on
the day written above.
EMPLOYER: EMPLOYEE:
ADVANCED SYSTEMS INTERNATIONAL
By: By:
---------------------------- ----------------------------
Name: Gerald A. Pesut Name: Robert C. DeMerell
Title: Chief Executive Officer
Date: January 8, 1999
<PAGE> 5
[ADVANCED SYSTEMS LETTERHEAD]
January 8, 1999
Robert C. DeMerell
207 S. Seventh
Ann Arbor, MI 48103
Dear Robert,
It is with great personal pleasure that I can extend this offer to you
to join A.S.I. as the Corporate Controller.
In this position your compensation will be as follows:
Annual Salary: $80,000.00 per year paid monthly.
Share Options: 150,000 options granted under the Advanced
Systems Employee Option Plan will be awarded at the
date of hire. These options will be granted at market
bid value and approved by the Board of Directors. Your
options will vest over three years. If there is a
change of ownership your options will vest at that
time.
Bonus: Employee will be paid $5,000.00 Quarterly in arrears
pursuant to performance goals that have yet to be
determined.
Your experience and skills, as outlined in your resume and our
discussions appear to be well suited to help our growing company realize the
full potential of the opportunity before us.
I am personally looking forward to working with you.
Yours truly,
/s/ Gerald A. Pesut
Gerald A. Pesut
President/CEO
I understand and agree to the terms of employment outlined above.
/s/ Robert C. DeMerell 1/11/99
- -------------------------------------- ----------------------------
Robert C. DeMerell Date
*If not accepted this offer expires on Monday January 11, 1999.
<PAGE> 6
JOB TITLE: Corporate Controller
COMPENSATION: Base Salary portion - $6,666.67 monthly, paid monthly
at the first of each month. In the event the first of
the month falls on the weekend, you will be paid on the
first business day following the weekend.
SHARE OPTIONS: 150,000 share options at a price to be determined by
the Board of Directors. The option price will be
determined by the fair market value of the stock on the
day that you start employment with ASI. These options
will be vested over a three-year period and must be
approved by the Board of Directors. The term will be
calculated with the start date being the first day on
which you begin employment. The vesting period will be
determined at 33%/year for 3 years.
EXPENSE RECOVERY: You will be reimbursed for all expenses properly
incurred on behalf of the company. All expenses must be
within the policy guidelines as established from time
to time by company management, and must be properly
supported by receipts. Expense claims are to be
submitted at the end of each month, with full details
for each expense item, and on the expense form provided
by the company.
Automobile usage will be reimbursed at $.315/mile
driven on company business.
Policy guidelines include economy airline travel,
approved hotels include Best Western, Holiday Inns,
Ramada Inns, Choice Hotels, and others of a similar
nature. Reimbursement will be within two weeks of
expense form submission and approval.
The policy for expense reimbursement is outlined in
detail in the Employee Handbook. These polices are
subject to changes.
VACATION/TIME OFF: The company's policy provides for two weeks of vacation
annually, growing to three weeks after five years, in
addition to all statutory and corporately recognized
holidays, as outlined in the Employee Handbook.
BENEFITS: The company provides the following benefits:
HEALTH BENEFITS
The company currently provides comprehensive health
benefits for the employee and your family.
<PAGE> 7
DENTAL PLAN
Again, full coverage is provided for the employee and
family members.
RETIREMENT BENEFIT
At this time, ASI currently supports a 401K plan for
its employees.
A more detailed outline of these benefits can be found
in the Employee Handbook.
<PAGE> 1
EXHIBIT 10.8
CONSULTING AGREEMENT
This Agreement is entered into as of the 15th day of November, 1996,
between AUTOMATIC TIME SYSTEMS CORP., a Michigan corporation (the "Company"),
and KIF CAPITAL CORP. (the "Consultant").
In consideration of the mutual promises contained in this Agreement,
the parties agree as follows:
SECTION 1. OPERATION OF AGREEMENT.
This Agreement shall be effective as of the date first written above.
For service as a consultant to the Company, the Consultant shall be entitled to
the full protection of the applicable indemnification provisions of the Articles
of Incorporation and Bylaws of the Company, as they may be amended from time to
time. In addition, the Company will indemnify Consultant and hold it harmless,
in advance and on demand, from any and all loss or liabilities it my incur as a
result of claims asserted against Consultant in connection with its status as a
consultant to the Company or a stockholder of the Company's parent, 1145301
Ontario Ltd. ("Parent"), except for claims resulting from Consultant's willful
conduct.
SECTION 2. TERM OF AGREEMENT.
This Agreement shall terminate upon the first to occur of the
following: (a) the Consultant ceasing to own, either directly or beneficially
through options, at least 100,000 shares or options of the Common Stock of
Parent (as adjusted from time to time to reflect stock splits, stock dividends,
and similar recapitalizations or capital account modifications) except in
connection with a Change in Control or a change in the control of Parent, or (b)
January 1, 1999.
SECTION 3. SERVICES.
The Consultant shall provide consulting services to the company as per
attached Schedule A.
SECTION 4. COMPENSATION AND EXPENSES.
The Company shall pay Consultant $10,500 monthly and other compensation
and recompense as may be deemed appropriate. In addition the company shall
reimburse consultant $500.00 of automobile allowance plus all expenses incurred
while conducting Company business. Said expenses to be reimbursed semi-monthly
or when submitted.
<PAGE> 2
SECTION 5. TERMINATION OF CONSULTANCY.
(a) TERMINATION BY THE COMPANY. The Company may terminate this
Agreement prior to the termination of this Agreement at any time for any reason;
provided, however, the Company shall pay to the Consultant the termination
benefits (if any) set forth in Section 6 of this Agreement if such termination
is other than for "Cause". For purposes of this Agreement, "Cause" shall mean:
(i) the willful misconduct of Consultant materially injurious to the Company;
(ii) any violation by Consultant of any law, rule or regulation related to the
business of the Company that results in a material injury to the Company; or
(iii) the failure by Consultant to follow any written policy adopted by the
Company (provided that such policy does not conflict with the provisions of this
Agreement), which failure results in a material injury to the Company. No act or
failure to act on the Consultant's part shall be considered "willful" unless
done, or not done, by the Consultant in bad faith and without reasonable belief
that the act or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Consultant shall not be deemed to have been
terminated for Cause unless the Company shall have delivered to the Consultant a
notice of such termination within thirty (30) days after the date that the
Company becomes aware of the occurrence of the event giving rise to Cause. The
Consultant shall be entitled to invoke the arbitration procedures set forth in
this Agreement in the event of a dispute between the Company and the Consultant
as to the existence of "Cause".
(b) VOLUNTARY TERMINATION BY CONSULTANT. The Consultant may also
terminate this Agreement at any time voluntarily for any reason, including, but
not limited to, for "Good Cause." For purposes of this Agreement, "Good Cause"
shall mean any material change in the responsibilities or duties of the
Consultant as described in Section 3 hereof except as may be permitted therein,
or the Company's breach of any other material term or material condition of this
Agreement.
SECTION 6. TERMINATION BENEFITS.
a) Upon termination of this Agreement by the Company other than for
Cause, or upon the voluntary termination for Good Cause by the Consultant of
this Agreement on or before January 1, 1999, the Company shall immediately pay
to the consultant an amount equal to twelve (12) times the consultants then
current compensation and benefits or if higher an amount equal to the
consultants highest monthly compensation and benefits. In the event the
consultant voluntarily terminates this agreement, other than for good cause, the
company shall then pay to the consultant an amount equal to 1/12th times the
consultants then current annual compensation and benefits. All amounts payable
to the Consultant hereunder which are not paid to the Consultant within thirty
(30) days after the due date therefor shall include interest at the prime rate
(as published in the "Money Rates" column of The Wall Street Journal on the date
thirty (30) days after such due date) (the "Prime Rate") plus two percent (2%).
SECTION 11. TAX WITHHOLDING.
The Company may withhold from any amounts payable under this Agreement,
or shall require Consultant to remit to the Company at the time of receipt of
payments, all applicable federal, state, local or other withholding taxes.
<PAGE> 3
SECTION 12. BINDING EFFECT.
(b) This Agreement shall be binding upon the successors and assigns of
the Company. The Company shall take whatever actions are necessary to ensure
that any successor to its operations (whether by purchase, merger,
consolidation, sale of substantially all assets or otherwise) assumes all of the
Company's obligations under this Agreement, and the Company shall obtain from
such successor a written agreement satisfactory to the Consultant evidencing the
successor's assumption of such obligations.
(c) This Agreement shall be binding upon, and shall inure to the
benefit of, and be enforceable by, the Consultant and its successors and
assigns. However, the rights of the Consultant under this Agreement shall not be
assigned, transferred, pledged, hypothecated or otherwise encumbered without the
consent of the Company.
SECTION 13. AMENDMENT OR MODIFICATION OF AGREEMENT.
This Agreement may not be modified or amended except by instrument in
writing signed by the parties hereto.
SECTION 14. VALIDITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall continue in full force and effect.
SECTION 15. LIMITATION ON RIGHTS.
Subject to the terms and conditions set forth herein: (i) this
Agreement shall create no right in the Consultant to continue as a consultant to
the Company for any specific period of time or create any other rights of the
Consultant or obligations on the part of the Company; and (ii) this Agreement
shall not restrict the right of the Company to terminate the Consultant or
restrict the right of the Consultant to terminate this Agreement.
SECTION 16. ARBITRATION.
Disputes under this Agreement shall be settled pursuant to binding
arbitration before three arbitrators in Oakland County, Michigan, in accordance
with the commercial arbitration rules of the American Arbitration Association,
as then in effect. For purposes of choosing the arbitrators, the Company shall
designate one arbitrator, the Consultant shall choose one arbitrator and the two
arbitrators jointly shall designate a third arbitrator, in accordance with the
commercial arbitration rules referenced above. The arbitrators' sole authority
shall be to interpret and apply the provisions of this Agreement; they shall not
change, add to, or subtract from, any of its provisions. The arbitrators shall
have the power to compel attendance of witnesses at the hearing. Any court
having jurisdiction over this matter may enter a judgment based upon such
arbitration. All decisions of the arbitrators shall be final and binding on the
claimant and the Company without appeal to any court.
SECTION 17. FEES AND EXPENSES.
To the extent that the Consultant is successful as the result of any
controversy over the interpretation, enforceability or validity of any provision
in this Agreement, the
<PAGE> 4
Company shall reimburse the Consultant for any and all fees and expenses,
including, but not limited to, attorneys' fees, incurred by the Consultant in
connection with such dispute. The Company shall reimburse the Consultant for
such fees and expenses within twenty days following written demand therefor by
the Consultant. Payments of fees and expenses made by the Company more than
twenty (20) days after written demand therefor (for any reason) shall accrue
interest at the Prime Rate (on the twentieth day following the due date thereof)
plus two percent (2%), which interest shall begin accruing on the twentieth day
following such date.
SECTION 18. MISCELLANEOUS.
A waiver of the breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. The headings in this Agreement are inserted
for convenience of reference only and shall not be a part of or control or
affect the meaning of any provision hereof.
SECTION 19. GOVERNING LAW.
To the extent not preempted by federal law, this Agreement shall be
governed and construed in accordance with the laws of the State of Michigan.
SECTION 20. ENTIRE AGREEMENT.
This document represents the entire agreement and understanding of the
parties with respect to the subject matter of the Agreement and it may not be
altered or amended except by an agreement in writing.
SECTION 21. Notice.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been given when delivered personally or mailed in the
United States by certified or registered mail, postage prepaid, return receipt
requested, to the parties at the following addresses or at such other addresses
as may be given in writing by one party to the other at least five (5) days
prior to the mailing or delivery of such notice:
Consultant: KIF CAPITAL CORP.
311 Tawny Rd.,
Sarnia, Ontario
N7S 5K1
Company: AUTOMATIC TIME SYSTEMS CORP.
15 W. Nine Mile Road
Southfield, Michigan 48075
Attn: C.E.O.
In all events, with a copy to: affe,
Raitt, Heuer & Weiss,
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226-3422
Attn: David D. Warner, Esq.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
AUTOMATIC TIME SYSTEMS CORP.,
a Michigan corporation
Gerry Pesut, CEO
-----------------------------
Gerry Pesut, CEO
KIF CAPITAL CORP.
Kenneth MacAlpine
-----------------------------
Kenneth MacAlpine President
<PAGE> 6
[Automatic Time Systems Letterhead]
June 12, 1997
Kenneth MacAlpine
KIF Capital Corp.
311 Tawny Rd
Sarnia, ON N7S 5KI
Dear Kenneth:
We refer to the Consulting Agreement between KIF Capital Corp. and
Automatic Time Systems Corp. dated November 15, 1996 (the "Agreement"). All
capitalized terms in this letter shall have the meanings assigned in the
Agreement. The Company expects to very soon complete a "reverse takeover" with
Bennington Corporation. As a result of that transaction, the Company will become
a wholly-owned subsidiary of Bennington, with the Company's shareholders holding
a controlling interest in Bennington. We hereby agree that, upon completion of
that transaction all equity ownership references in the Agreement shall be
references to equity in Bennington, (b) a "Change in Control" will not be deemed
to have occurred as a result of the transaction, and (c) future Changes in
Control will be measured with respect to a change in the ultimate beneficial
ownership of the Company (either a change in control of Bennington (according to
the definition contained in the Agreement, mutatis mutandi) or a sale by
Bennington of the Company). In all other respects, the Consulting Agreement is
hereby confirmed.
Please countersign one copy of this letter to indicate your
understanding of, and agreement to, the terms outlined herein.
Very truly yours,
AUTOMATIC TIME SYSTEMS CORP.
James Petrie
-----------------------
James Petrie, President
Accepted and agreed:
KIF Capital Corp.
By:
-----------------------------
Kenneth MacAlpine
<PAGE> 7
[Advanced Systems Letterhead]
July 1, 1998
Kenneth MacAlpine
KIF Capital Corp.
311 Tawny Rd
Sarnia, ON N7S 5KI
Dear Kenneth:
We refer to the Consulting Agreement between KIF Capital Corp. and
Automatic Time Systems Corp. ("ASI") dated November 15, 1996 as amended June 12,
1997 (the "Agreement"). All capitalized terms in this letter shall have the
meanings assigned in the Agreement. This confirms our agreement that the rate of
compensation under the Agreement will be US$5,500 per month, effective as of
July 1, 1998. In consideration of this adjustment, the parent of ASI (Advanced
Systems International, Inc.) will grant to you an option to acquire 10,000
shares of its common stock under its 1997 Employee Stock Option Plan at the
"Fair Market Value" of the shares as of July 1, 1998, containing the usual terms
of options granted under that Plan.
Please countersign one copy of this letter to indicate your
understanding of, and agreement to, the terms outlined herein.
Very truly yours,
AUTOMATIC TIME SYSTEMS CORP.
And
ADVANCED SYSTEMS INTERNATIONAL,INC.
Gerald A. Pesut
--------------------------
Gerald A. Pesut, President
Accepted and agreed:
KIF Capital Corp.
Kenneth MacAlpine
-----------------------------
Kenneth MacAlpine
<PAGE> 1
EXHIBIT 10.9
ADVANCED SYSTEMS INTERNATIONAL, INC.
AND
AUTOMATIC TIME SYSTEMS CORP.
25300 Telegraph Road, Suite 455
Southfield, MI 48034
February 4, 1999
Mr. Gregory J. Farbolin Via Federal Express
1905 Canadair Court
Daytona Beach, Florida 32124
Dear Greg:
I am very happy that you have joined our Board, effective January 13,
1999. Enclosed are three copies of a booklet containing your stock option grant
under the Adsys Directors Stock Option Plan and a copy of the Plan itself.
Please sign all three where indicated, and return two copies to me for the
Company's records. The third is, of course, for your files.
I am also pleased to confirm your engagement by Adsys' operating
subsidiary, Automatic Time Systems Corp., as a consultant to assist our
management team on an "as requested - as needed" basis subject to our mutually
agreeable arrangements. You will consult with our management team as to general
and specific information relating to marketing our products, gathering and
analyzing market and competitive data, and locating, introducing and referring
ATSC in respect of sales and partnering opportunities.
Because these consulting services are in addition to, and over and
above, your service as a member of the board of the directors of Adsys, ATSC
will, itself, directly compensate you for these services. For the first ninety
(90) days of your engagement as consultant (effective as of a date you and I
will mutually designate), ATSC will pay you a consulting fee of $5,000 per
month, payable at the end of each month. Prior to the conclusion of the initial
ninety (90) day period, you and I will review the level and extent of services
you have been called upon to provide during that period, and we will mutually
agree to an adjustment to the consulting fee as we both deem appropriate. As
each ninety (90) day period ends, you and I will again meet to determine
appropriate adjustments (if any) to your compensation. Of course, either one of
us may terminate this consulting arrangement as of the end of any ninety (90)
day period, on ten (10) days written notice.
<PAGE> 2
If this letter accurately states our understanding, please countersign
one copy where indicated below and return it to me.
Very truly yours,
ADVANCED SYSTEMS INTERNATIONAL, INC.
and
AUTOMATIC TIME SYSTEMS CORP.
Gerald A. Pesut, Chairman and President
Accepted and Agreed:
- ------------------------
Gregory J. Farbolin
Dated: , 1999
---------------
<PAGE> 1
EXHIBIT 10.10
ADVANCED SYSTEMS INTERNATIONAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Advanced Systems International, Inc., a Nevada corporation (the
"Company"), hereby grants to GERALD A. PESUT (the "Employee"), as of July 8,
1997 (the "Date of Grant"), an option to purchase up to 500,000 shares (the
"Option") of the Company's Common Stock (the "Shares"), at a price of One Dollar
($1.00) per share (the "Option Price"). This Option replaces (pursuant to the
terms of Section 1.06 of the Agreement for RTO Merger dated July 8, 1997 to
which the Company is a party) an option previously granted to Employee by
Automatic Time Systems Corp.
ARTICLE I. EXERCISE OF OPTION
SECTION 1.01 Employee may exercise this Option, in whole or in part, at
any time prior to the date the Option expires, as described in Article IV.
ARTICLE II. TRANSFERABILITY
SECTION 2.01 Employee may not transfer this Option except by will or
the laws of descent and distribution or pursuant to the terms of a domestic
relations order, as defined in Section 414(p)(1)(B) of the Internal Revenue Code
of 1986, which satisfies the requirements of Section 414(p)(1)(A) of the
Internal Revenue Code of 1986 (a "Qualified Domestic Relations Order"). During
Employee's life, only Employee (or Employee's personal representative or
attorney-in-fact) or the alternate payee named in a Qualified Domestic Relations
Order, may exercise this Option. The Employee's estate or beneficiary may
exercise this Option following the death of the Employee. The Option shall not
otherwise be transferred, assigned, pledged or hypothecated for any purpose
whatsoever, and is not subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge or hypothecation or other disposition of
the Option, other than in accordance with the terms of this Agreement, shall be
void and of no effect.
ARTICLE III. MANNER OF EXERCISE
SECTION 3.01 This Option shall be exercised by written notice to the
Company's Secretary specifying the number of Shares to be purchased and
accompanied by payment for those Shares and any applicable withholding taxes. At
the election of Employee, such payment may be made in cash, check, or by
delivery of certificate(s) representing Shares of the Company's common stock
previously held by the Employee, duly endorsed for transfer, or shares issuable
to the Employee pursuant to the exercise of this Option. The Company may also
permit payment to be made in such other manner as the Company deems appropriate
and in compliance with applicable law. Any shares delivered to the Company in
payment of the aggregate Option Price shall be
<PAGE> 2
valued at the "Fair Market Value" of the Company's shares, as defined below, as
of the date of Employee's exercise of the Option. If the Employee is, at the
time of exercise, an officer of the Company or any of its subsidiaries, the
Company shall withhold the appropriate number of Shares, rounded up to the next
whole number, as have a Fair Market Value equal to the amount required to
satisfy applicable withholding taxes. If the Employee is not an officer of the
Company or any of its subsidiaries at the date of exercise, he may elect to have
Shares withheld or may deliver cash or a check to pay the withholding taxes. The
Option shall be exercised in accordance with such reasonable administrative
regulations as the Company shall from time to time adopt.
SECTION 3.02 "Fair Market Value" means, on any given date, (a) if the
Company Common Stock is, on the given date, listed on a national securities
exchange, Fair Market Value shall be the highest selling price for the given
date, or the most recent date upon which sales occurred, (b) if (a) does not
apply, then Fair Market Value shall be the highest selling price for the Company
Common Stock as reported on the Nasdaq National Market for the given date, or
the most recent date upon which sales were reported, (c) if neither (a) nor (b)
applies, Fair Market Value shall be the final asked price for the Company Common
Stock as quoted for the given date in whatever medium then issues such quotes,
or the most recent date upon which such quotes were published, (d) if none of
(a), (b) or (c) applies, then Fair Market Value shall be determined by the
Company based on such valuation methods and/or indicia of value as the Company
deems advisable at the time of such determination. The use by the Company of any
method or indicia of value to determine Fair Market Value on any valuation date
will not, of itself, preclude the Company from use of a different method or
indicia on a subsequent valuation date.
ARTICLE IV. EXPIRATION
SECTION 4.01 All unexercised rights under the Option shall expire on
the first to occur of (a) July 8, 2017, or (b) the termination of Employee's
employment with the Company or its subsidiaries for "cause," as defined below.
SECTION 4.02 The Employee's employment shall be deemed to have been
terminated for "cause" if such termination is determined, in the sole discretion
of the Company, to have resulted from an act or omission by the Employee
constituting active and deliberate dishonesty, as established by a final
judgment or actual receipt of an improper benefit or profit in money, property
or services, or from the Employee's continuous failure to perform his duties
under any employment agreement in effect between the Employee and the Company in
any material manner (or, in the absence of such an agreement, the consistent
failure or refusal of the Employee to perform according to reasonable
expectations and standards set by the Board and/or management consistent with
Employee's title and position) after receipt of notice of such failure from the
Company specifying how the Employee has so failed to perform.
2
<PAGE> 3
ARTICLE V. ANTI-DILUTION PROVISIONS
SECTION 5.01 Common Stock Dividends, Subdivisions, Combinations. If the
Company shall (a) pay or make a dividend or other distribution to all holders of
its Common Stock in shares of Common Stock, (b) subdivide, split or reclassify
the outstanding shares of its Common Stock into a larger number of shares, or
(c) combine or reclassify the outstanding shares of its Common Stock into a
smaller number of shares, then in each such case the Shares for which this
option may be exercised (the "Underlying Shares") shall be adjusted to equal the
number of Shares to which the Employee would have been entitled upon the
occurrence of such event had this Option been exercised immediately prior to the
happening of such event or, in the case of a stock dividend or other
distribution, prior to the record date for determination of such shareholder
entitled thereto, and the Option Price shall be proportionately adjusted. An
adjustment made pursuant to this 0shall become effective immediately after such
record date, in the case of a dividend or distribution, and immediately after
the effective date, in the case of a subdivision, split, combination or
reclassification.
SECTION 5.02 Reorganization or Reclassification. In case of any capital
reorganization or any reclassification of the Common Stock of the Company
(whether pursuant to a merger, consolidation or otherwise), this Option shall
thereafter be exercisable for the number of shares of stock or other securities
or property receivable upon such capital reorganization or reclassification of
Common Stock, as the case may be, by a holder of the number of shares of Common
Stock into which this Option was exercisable immediately prior to such capital
reorganization or reclassification of Common Stock; and, in any case,
appropriate adjustment shall be made in the application of the provisions herein
set forth with respect to the rights and interests thereafter of the Employee to
the end that the provisions set forth herein shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this Option.
SECTION 5.03 Distributions of Assets or Securities Other Than Common
Stock. In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any of its capital stock (other than
Common Stock), rights or warrants to purchase any of its securities, cash, other
assets or evidences of its indebtedness, then in each such case the Option Price
shall be reduced (but not below zero) by the fair market value (as determined in
good faith by the Board of Directors of the Company) of the portion of the
securities, cash, assets or evidences of indebtedness so distributed applicable
to one share of Common Stock. An adjustment made pursuant to this 0shall become
effective immediately after such distribution date.
3
<PAGE> 4
SECTION 5.04 No Impairment. The Company shall not, without the prior
consent of the Employee, by amendment of its Articles of Incorporation or
through any reorganization, transfer of the assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but shall at all times in good faith
assist in the carrying out of all the provisions of this 0 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the Employee against impairment.
SECTION 5.05 Readjustment. Upon the termination of any right of
conversion or exchange of any securities convertible into or exchangeable for
Common Stock, or upon the expiration of any rights or options to purchase Common
Stock (other than this Option) or any securities convertible into or
exchangeable for Common Stock, or upon any change in the number of shares of
Common Stock issuable upon exercise, conversion or exchange of any such
securities, rights or options, the Underlying Shares then in effect shall
forthwith be readjusted to such Underlying Shares as would have been in effect
had the adjustments made upon the issuance or sale of such securities, rights or
options been made upon the basis of the issuance of only the number of shares of
Common Stock actually issued or to be issued upon the exercise, conversion or
exchange or such securities, rights or options, and the Option Price shall be
proportionately adjusted.
SECTION 5.06 Notice of Certain Corporate Transactions. The Company
shall mail to the Employee a notice of any proposed dividend, merger,
dissolution, liquidation or winding up of the Company, stating the proposed
record date (if any) or effective date for any such transaction and briefly
describing the transaction. The Company shall give this notice at least ten
business days prior to the date of such action.
SECTION 5.07 No Adjustment or Readjustment in Certain Circumstances.
The Company shall not make any adjustment or readjustment of any of the Option
Price or the number of Underlying Shares in the case of (a) the exercise of this
Option, or (b) the issuance or sale by the Company of Common Stock or rights or
options pursuant to, or the adjustment of the Option Price, or the exercise or
termination, of rights or options issued pursuant to, any employee stock option
or similar plan of the Company, or (c) except as specifically provided in this
0, by reason of the issuance of shares of Common Stock or any other securities
of the Company in exchange for cash, property or services or other
consideration.
SECTION 5.08 Certificate of Adjustment. Upon the occurrence of each
adjustment or readjustment pursuant to this 0, the Company, at its expense,
shall as promptly as practicable compute such adjustment or readjustment in
accordance with the provisions of this 0, and prepare and furnish to the
Employee a certificate setting forth such adjustment or readjustment and
4
<PAGE> 5
showing in reasonable detail the facts upon which such adjustment or
readjustment in based.
SECTION 5.09 Information to be Furnished Upon Request. Upon the request
at any time of the Employee, the Company shall as promptly as practicable
furnish or cause to be furnished, to the Employee, at his address set forth in
such request, a certificate setting forth the number of shares of Common Stock
that at the time would be received upon the exercise of the Option and the
Option Price thereof.
ARTICLE VI. SALE OF THE COMPANY; REORGANIZATION
SECTION 6.01 In the event that (i) a Sale of the Company, or (ii) any
capital reorganization or reclassification of the capital stock of the
Corporation or merger of the Company with or into another corporation or other
entity (collectively, a "Reorganization"), is in such a way that holders of
Common Stock are entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such Sale of the
Company or Reorganization, lawful and adequate provision shall be made whereby
the Employee shall thereafter have the right to receive, upon the basis and upon
the terms and conditions specified in this Option, and in lieu of the Common
Stock immediately theretofore receivable upon the exercise of this Option, such
shares of stock, securities or assets as would have been (by virtue of such Sale
of the Company or Reorganization) issued or payable with respect to or in
exchange for a number of outstanding shares of Common Stock equal to the number
of shares of Common Stock immediately theretofore receivable upon the exercise
of this Option, assuming such exercise had taken place immediately prior to such
Sale of the Company or Reorganization. In any such case, appropriate provision
shall be made with respect to the rights and interests of the Employee to the
end that the provisions hereof (including, without limitation, provisions for
adjustments of the number of shares of Common Stock receivable upon exercise of
this Option) shall thereafter be applicable, as nearly as may be, in relation to
any shares of stock, securities or assets thereafter receivable upon the
exercise of this Option. The Company shall not effect any such Sale of the
Company or Reorganization, unless, prior to or simultaneously with the
consummation thereof, the successor entity (if other than the Company) resulting
from such transaction shall assume by written instrument, executed and mailed or
delivered to the Employee, the obligation to deliver to the Employee such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
the Employee may be entitled to receive.
SECTION 6.02 Notice of any proposed Sale of the Company or
Reorganization shall be given by the Company to the Employee as promptly as
practicable after such transaction appears likely, but not less than 20 days
prior to the date on which the proposed Sale of the Company or Reorganization is
to be consummated.
5
<PAGE> 6
SECTION 6.03 In lieu of the provisions of 0above, in the event of a
Sale of the Company or a Reorganization, the Employee may, at his election,
compel the Company to purchase this Option (the "Put") at a price (the "Put
Price") equal to the aggregate Fair Market Value of the Underlying Shares minus
the aggregate Option Price. The Company shall pay the Put Price to the Employee
at the same time that the Sale or Reorganization is consummated. The Employee
may exercise this Put at any time by notice to the Company not later than ten
days after the notice described in 0has been given.
SECTION 6.04 "Sale of the Company" shall mean any change of control of
the Company (as the term "control" is defined in Rule 405 of the Securities and
Exchange
6
<PAGE> 7
Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act")), whether such change of control occurs through
merger, consolidation, sale of assets or stock, exchange of securities, or
otherwise.
ARTICLE VII. DISSOLUTION OR LIQUIDATION
SECTION 7.01 Upon any proposed distribution of the assets of the
Company in dissolution or liquidation (except under circumstances when 0 or 0
shall be applicable), the Company shall mail notice thereof to the Employee and
shall make no distribution to its shareholders until the expiration of 30 days
from the date of mailing of such notice and, in any such event, the Employee may
exercise the purchase rights with respect to this Option within 30 days from the
date of mailing such notice. All rights herein granted not so exercised within
such 30-day period shall thereafter become null and void.
ARTICLE VIII. NOTICES AND OTHER SHAREHOLDER COMMUNICATIONS
SECTION 8.01 The Company shall provide to the Employee a copy of any
and all reports, notices, proxy statements, annual, quarterly or special
reports, or other communications to its shareholders of any type whatever, at
the same time such communications are dispatched to the shareholders.
ARTICLE IX. REGISTRATION RIGHTS
SECTION 9.01 Definitions. As used in this Article IX, the term
"Registrable Securities" means (i) the shares of Common Stock issuable upon
exercise of this Option, (ii) any shares of Common Stock which the Employee may
hereafter acquire, and (iii) any capital stock of the Company issued as a
dividend or other distribution with respect thereto, or in exchange for or in
replacement of, the shares of Common Stock referred to in clauses (i) and (ii)
above.
SECTION 9.02 Required Registration.
(a) If, at any time after the Company registers its Common Stock
with the Commission pursuant to the Securities Exchange Act of 1934, as
amended, the Company receives a written request therefor from the
Employee, the Company shall prepare and file a registration statement
under the Securities Act covering the Registrable Securities which are
the subject of such request and shall use its reasonable best efforts
to cause such registration statement to become effective. The Company
shall be obligated to prepare, file and cause to become effective only
one registration statement pursuant to this Section 9.02.
Notwithstanding the foregoing obligation of the Company, if either (i)
in the good faith judgment of the Company's board of directors the
registration of the Registrable Securities would at such time interfere
with a primary offering of
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<PAGE> 8
securities or a sale or acquisition transaction material to the
Company, require the disclosure of material information that the
Company has a bona fide business purpose for preserving as
confidential, or require the Company to provide information required by
the Commission or the Securities Act, such as pro forma information,
that at such time the Company would be unable to provide, then the
Company's obligation to prepare and file a registration statement in
connection with the Registrable Securities which are the subject of the
Employee's request shall be suspended for a reasonable period (not to
exceed 90 days) until the Company consummates or abandons such primary
offering or other transaction, determines that such confidential
information may be disclosed or is able to provide any such information
required by the Commission or the Securities Act, provided that the
Company may exercise the right to suspension of an offering under this
Section 9.02 no more than one time during any 12 month period.
(b) In the event that the Employee shall determine for any reason
not to proceed with a registration at any time before the registration
statement has been declared effective by the Commission, and (i) the
Employee requests the Company to withdraw such registration statement,
if theretofore filed with the Commission, with respect to the
Registrable Securities covered thereby, or if the offering is not
consummated for any reason, and (ii) the Employee agrees to bear its
expenses incurred in connection therewith and to reimburse the Company
for the expenses incurred by it attributable to the registration of
such Registrable Securities, then the Employee shall not be deemed to
have exercised its right to require the Company to register Registrable
Securities pursuant to this Section 9.02.
(c) Without the written consent of the Employee, neither the
Company nor any other holder of securities of the Company may include
securities in such registration if in the good faith judgment of the
managing underwriter of such public offering the inclusion of such
securities would interfere with the successful marketing of the
Registrable Securities or require the exclusion of any portion of the
Registrable Securities to be registered.
SECTION 9.03 Incidental Registration. Each time the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act on any form (other than Form S-4 or any
successor form thereto) that would permit the inclusion of the Registrable
Securities in connection with the proposed offer and sale for money of any of
its securities by it or any of its security holders, the Company will give
written notice of its determination to the Employee. Upon the written request of
the Employee given within 30 days after receipt of any such notice from the
Company, the Company will, except as herein provided, cause all such shares of
Registrable Securities for which the Employee has so requested registration, to
be included in such registration statement, all to the extent requisite to
permit the sale or other disposition by the Employee to be so registered;
provided, however, that nothing herein shall prevent the Company from, at any
time, abandoning or delaying any such
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<PAGE> 9
registration initiated by it. If any registration pursuant to this Section shall
be underwritten in whole or in part, the Company may require that the
Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. If in the good faith judgment of
the managing underwriter of such public offering the inclusion of all of the
Registrable Securities originally covered by a request for registration would
reduce the number of shares to be offered by the Company or its security holders
exercising demand registration rights, or interfere with the successful
marketing of the shares of stock offered by the Company or its security holders
exercising demand registration rights, the number of shares of Registrable
Securities otherwise to be included in the underwritten public offering may be
reduced pro rata among the holders thereof requesting such registration. Those
shares of Registrable Securities which are thus excluded from the underwritten
public offering shall be withheld from the market by the holders thereof for a
period, not to exceed 180 days, which the managing underwriter reasonably
determines is necessary in order to effect the underwritten public offering.
SECTION 9.04 Registration Procedures. If and whenever the Company is
required by the provisions of Sections 12(b) or 12(c) to effect the registration
of any Registrable Securities under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration statement
with respect to such securities, and use its reasonable best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed three months;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed three months;
(c) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as
such security holders and underwriters may reasonably request in order
to facilitate the public offering of such securities;
(d) use its reasonable best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request within 20 days following the original
filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general
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<PAGE> 10
consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration
statement has been filed;
(f) notify such holders promptly of any request by the Commission
for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the
request of any such holders, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for such holders (and concurred in by counsel for the Company), is
required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Registrable
Securities by such holder;
(h) prepare and promptly file with the Commission and promptly
notify such holders of the filing of such amendment or supplement to
such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which
any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading;
(i) advise such holders, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement
or the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be issued;
(j) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
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<PAGE> 11
(k) at the request of any such holder, furnish on the effective
date of the registration statement and, if such registration includes
an underwritten public offering, at the closing provided for in the
underwriting agreement: (A) opinions, dated such respective dates, of
the counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the holder
or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request, in which
opinion such counsel shall state (without limiting the generality of
the foregoing) that (1) such registration statement has become
effective under the Securities Act; (2) to the best of such counsel's
knowledge no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act; (3) the registration
statement and each amendment or supplement thereto comply as to form in
all material respects with the requirements of the Securities Act and
the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements contained therein); (4) to the best of the knowledge of such
counsel neither the registration statement nor any amendment nor
supplement thereto contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (except that
such counsel need express no opinion as to financial statements
contained therein); (5) the description in the registration statement
or any amendment or supplement thereto of legal and governmental
proceedings and contracts are accurate and fairly present the
information required to be shown; and (6) such counsel does not know of
any legal or governmental proceedings, pending or threatened, required
to be described in the registration statement or any amendment or
supplement thereto which are not described as required nor of any
contracts or documents or instruments of the character required to be
described in the registration statement or amendment or supplement
thereto or to be filed as exhibits to the registration statement, which
are not described or filed as required; and (B) letters, dated such
respective dates, from the independent certified public accountants of
the Company, addressed to the underwriters, if any, and to the holder
or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request, in which
letters such accountants shall state (without limiting the generality
of the foregoing) that they are independent certified public
accountants within the meaning of the Securities Act and that in the
opinion of such accountants the financial statements and other
financial data of the Company included in the registration statement or
any amendment or supplement thereto comply in all material respects
with the applicable accounting requirements of the Securities Act.
SECTION 9.05 Expenses. With respect to any registration requested
pursuant to Section 9.02 (except as otherwise provided in such Section with
respect to registrations
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<PAGE> 12
voluntarily terminated at the request of the requesting security holders) and
with respect to each inclusion of shares of Registrable Securities in a
registration statement pursuant to Section 9.03, the Company shall bear the
following fees, costs and expenses: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for the
Company and one counsel for the selling security holders, all internal Company
expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of jurisdictions in which the securities to be offered are to be registered
or qualified. Underwriting discounts and commissions and transfer taxes for
selling security holders and any other expenses incurred by the selling security
holders not expressly included above shall be borne by the selling security
holders.
SECTION 9.06 Indemnification. In the event that any Registrable
Securities are included in a registration statement under Sections 9.02 or 9.03:
(a) The Company will indemnify and hold harmless the Employee and
any underwriter (as defined in the Securities Act) and each person, if
any, who controls such holder or such underwriter within the meaning of
the Securities Act, from and against any and all loss, damage,
liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that the Company will not be liable in any such case
to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by such holder, in writing, such underwriter or
such controlling person.
(b) The Employee will indemnify and hold harmless the Company,
any controlling person and any underwriter from and against any and all
loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged
untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, in each case
to the
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<PAGE> 13
extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with information furnished in
writing by such holder.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section of notice of the
commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the
indemnifying party of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than hereunder. In
case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the
right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party pursuant to the provisions of said
paragraph (a) or (b) for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (A) the
indemnified party shall have employed counsel in accordance with the
proviso of the preceding sentence, (B) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the
notice of the commencement of the action, or (C) the indemnifying party
has authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party.
SECTION 9.07 Registration Rights of Transferees. The registration
rights granted to the holders of Registrable Securities pursuant to this 0 shall
also be for the benefit of, and enforceable by, any permitted subsequent holder
of Registrable Securities, whether or not any express assignment of such rights
to any such subsequent holder is made.
ARTICLE X. ISSUANCE OF SHARES
SECTION 10.01 The Company shall not be required to issue or deliver any
Shares upon an exercise of the Option:
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<PAGE> 14
(a) Prior to the admission of such Shares to listing on any
public exchange on which the Company's common stock may be listed; or
(b) Prior to the completion of any proceedings under any
applicable state or federal securities law, rule or regulation that the
Company or its counsel determines to be necessary or advisable to the
issuance of the Shares; or
(c) Unless such issuance, in the opinion of the Company's
counsel, is exempt from federal and state securities registration
requirements.
SECTION 10.02 The Company may require Employee to represent and agree
in writing that if such Shares are issuable under an exemption from registration
requirements, the Shares will be "restricted". Employee shall not have the
rights of a shareholder with respect to the Shares until certificates evidencing
the Shares have been issued and delivered to Employee.
ARTICLE XI. NOTICE
SECTION 11.01 All notices given pursuant to or in connection with this
Agreement shall be in writing and shall be deemed to be duly given when
personally delivered or when mailed, if sent by certified or registered mail,
postage prepaid, return receipt requested, and addressed as follows, or to such
other address as the parties may indicate:
If to the Company:
Advanced Systems International, Inc.
17515 W. Nine Mile Rd Ste 225
Southfield, MI 48075
ATTN: Chief Executive Officer
If to the Employee:
Gerald A. Pesut
488 Harmon Ave
Birmingham, MI 48009
With a Required Copy of any Notice to:
David D. Warner, Esq.
Jaffe, Raitt, Heuer & Weiss
Professional Corporation
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<PAGE> 15
One Woodward Ave Ste 2400
Detroit, Michigan 48226-3418
ARTICLE XII. NO RIGHT TO EMPLOYMENT CONFERRED
SECTION 12.01 Nothing in this Agreement or the Plan shall confer upon
the Employee any right to continue as a employee of the Company or a subsidiary
or interfere in any way with the right of the Company or any subsidiary to
terminate such person's engagement as an employee at any time.
ARTICLE XIII. SEVERABILITY
SECTION 13.01 If any provision of this Agreement is held invalid or
unenforceable, the remaining provisions shall continue to be in full force and
effect to the maximum extent permitted by law.
ARTICLE XIV. AMENDMENT
SECTION 14.01 This instrument contains the entire Agreement of the
parties and may only be amended by written agreement executed by the parties
hereto or their respective permitted successors above.
ARTICLE XV. GOVERNING LAW
SECTION 15.01 This Agreement is made and entered into and shall be
construed and enforced in accordance with the laws of the State of Michigan.
ARTICLE XVI. HEADINGS
SECTION 16.01 The section numbers and headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
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<PAGE> 16
IN WITNESS WHEREOF, this Nonqualified Stock Option Agreement is hereby
executed.
"COMPANY"
ADVANCED SYSTEMS INTERNATIONAL,
INC., a Nevada corporation
By:
-------------------------------------------------
Richard Penington, Chief Financial Officer
"EMPLOYEE"
----------------------------------------------------
Gerald A. Pesut
16
<PAGE> 1
EXHIBIT 10.11
ADVANCED SYSTEMS INTERNATIONAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Advanced Systems International, Inc., a Nevada corporation (the
"Company"), hereby grants to RICHARD PENINGTON (the "Employee"), as of July 8,
1997 (the "Date of Grant"), an option to purchase up to 500,000 shares (the
"Option") of the Company's Common Stock (the "Shares"), at a price of Seventy
Cents ($0.70) per share (the "Option Price"). This Option replaces (pursuant to
the terms of Section 1.06 of the Agreement for RTO Merger dated July 8, 1997 to
which the Company is a party) an option previously granted to Employee by
Automatic Time Systems Corp.
ARTICLE I. EXERCISE OF OPTION
SECTION 1.01 Employee may exercise this Option, in whole or in part, at
any time prior to the date the Option expires, as described in Article IV.
ARTICLE II. TRANSFERABILITY
SECTION 2.01 Employee may not transfer this Option except by will or
the laws of descent and distribution or pursuant to the terms of a domestic
relations order, as defined in Section 414(p)(1)(B) of the Internal Revenue Code
of 1986, which satisfies the requirements of Section 414(p)(1)(A) of the
Internal Revenue Code of 1986 (a "Qualified Domestic Relations Order"). During
Employee's life, only Employee (or Employee's personal representative or
attorney-in-fact) or the alternate payee named in a Qualified Domestic Relations
Order, may exercise this Option. The Employee's estate or beneficiary may
exercise this Option following the death of the Employee. The Option shall not
otherwise be transferred, assigned, pledged or hypothecated for any purpose
whatsoever, and is not subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge or hypothecation or other disposition of
the Option, other than in accordance with the terms of this Agreement, shall be
void and of no effect.
ARTICLE III. MANNER OF EXERCISE
SECTION 3.01 This Option shall be exercised by written notice to the
Company's Secretary specifying the number of Shares to be purchased and
accompanied by payment for those Shares and any applicable withholding taxes. At
the election of Employee, such payment may be made in cash, check, or by
delivery of certificate(s) representing Shares of the Company's common stock
previously held by the Employee, duly endorsed for transfer, or shares issuable
to the Employee pursuant to the exercise of this Option. The Company may also
permit payment to be made in such other manner as the Company deems appropriate
and in compliance with applicable law. Any shares delivered to the Company in
payment of the aggregate Option Price shall be
<PAGE> 2
valued at the "Fair Market Value" of the Company's shares, as defined below, as
of the date of Employee's exercise of the Option. If the Employee is, at the
time of exercise, an officer of the Company or any of its subsidiaries, the
Company shall withhold the appropriate number of Shares, rounded up to the next
whole number, as have a Fair Market Value equal to the amount required to
satisfy applicable withholding taxes. If the Employee is not an officer of the
Company or any of its subsidiaries at the date of exercise, he may elect to have
Shares withheld or may deliver cash or a check to pay the withholding taxes. The
Option shall be exercised in accordance with such reasonable administrative
regulations as the Company shall from time to time adopt.
SECTION 3.02 "Fair Market Value" means, on any given date, (a) if the
Company Common Stock is, on the given date, listed on a national securities
exchange, Fair Market Value shall be the highest selling price for the given
date, or the most recent date upon which sales occurred, (b) if (a) does not
apply, then Fair Market Value shall be the highest selling price for the Company
Common Stock as reported on the Nasdaq National Market for the given date, or
the most recent date upon which sales were reported, (c) if neither (a) nor (b)
applies, Fair Market Value shall be the final asked price for the Company Common
Stock as quoted for the given date in whatever medium then issues such quotes,
or the most recent date upon which such quotes were published, (d) if none of
(a), (b) or (c) applies, then Fair Market Value shall be determined by the
Company based on such valuation methods and/or indicia of value as the Company
deems advisable at the time of such determination. The use by the Company of any
method or indicia of value to determine Fair Market Value on any valuation date
will not, of itself, preclude the Company from use of a different method or
indicia on a subsequent valuation date.
ARTICLE IV. EXPIRATION
SECTION 4.01 All unexercised rights under the Option shall expire on
the first to occur of (a) July 8, 2017, or (b) the termination of Employee's
employment with the Company or its subsidiaries for "cause," as defined below.
SECTION 4.02 The Employee's employment shall be deemed to have been
terminated for "cause" if such termination is determined, in the sole discretion
of the Company, to have resulted from an act or omission by the Employee
constituting active and deliberate dishonesty, as established by a final
judgment or actual receipt of an improper benefit or profit in money, property
or services, or from the Employee's continuous failure to perform his duties
under any employment agreement in effect between the Employee and the Company in
any material manner (or, in the absence of such an agreement, the consistent
failure or refusal of the Employee to perform according to reasonable
expectations and standards set by the Board and/or management consistent with
Employee's title and position) after receipt of notice of such failure from the
Company specifying how the Employee has so failed to perform.
2
<PAGE> 3
ARTICLE V. ANTI-DILUTION PROVISIONS
SECTION 5.01 Common Stock Dividends, Subdivisions, Combinations. If the
Company shall (a) pay or make a dividend or other distribution to all holders of
its Common Stock in shares of Common Stock, (b) subdivide, split or reclassify
the outstanding shares of its Common Stock into a larger number of shares, or
(c) combine or reclassify the outstanding shares of its Common Stock into a
smaller number of shares, then in each such case the Shares for which this
option may be exercised (the "Underlying Shares") shall be adjusted to equal the
number of Shares to which the Employee would have been entitled upon the
occurrence of such event had this Option been exercised immediately prior to the
happening of such event or, in the case of a stock dividend or other
distribution, prior to the record date for determination of such shareholder
entitled thereto, and the Option Price shall be proportionately adjusted. An
adjustment made pursuant to this 0shall become effective immediately after such
record date, in the case of a dividend or distribution, and immediately after
the effective date, in the case of a subdivision, split, combination or
reclassification.
SECTION 5.02 Reorganization or Reclassification. In case of any capital
reorganization or any reclassification of the Common Stock of the Company
(whether pursuant to a merger, consolidation or otherwise), this Option shall
thereafter be exercisable for the number of shares of stock or other securities
or property receivable upon such capital reorganization or reclassification of
Common Stock, as the case may be, by a holder of the number of shares of Common
Stock into which this Option was exercisable immediately prior to such capital
reorganization or reclassification of Common Stock; and, in any case,
appropriate adjustment shall be made in the application of the provisions herein
set forth with respect to the rights and interests thereafter of the Employee to
the end that the provisions set forth herein shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this Option.
SECTION 5.03 Distributions of Assets or Securities Other Than Common
Stock. In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any of its capital stock (other than
Common Stock), rights or warrants to purchase any of its securities, cash, other
assets or evidences of its indebtedness, then in each such case the Option Price
shall be reduced (but not below zero) by the fair market value (as determined in
good faith by the Board of Directors of the Company) of the portion of the
securities, cash, assets or evidences of indebtedness so distributed applicable
to one share of Common Stock. An adjustment made pursuant to this 0shall become
effective immediately after such distribution date.
3
<PAGE> 4
SECTION 5.04 No Impairment. The Company shall not, without the prior
consent of the Employee, by amendment of its Articles of Incorporation or
through any reorganization, transfer of the assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but shall at all times in good faith
assist in the carrying out of all the provisions of this 0 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the Employee against impairment.
SECTION 5.05 Readjustment. Upon the termination of any right of
conversion or exchange of any securities convertible into or exchangeable for
Common Stock, or upon the expiration of any rights or options to purchase Common
Stock (other than this Option) or any securities convertible into or
exchangeable for Common Stock, or upon any change in the number of shares of
Common Stock issuable upon exercise, conversion or exchange of any such
securities, rights or options, the Underlying Shares then in effect shall
forthwith be readjusted to such Underlying Shares as would have been in effect
had the adjustments made upon the issuance or sale of such securities, rights or
options been made upon the basis of the issuance of only the number of shares of
Common Stock actually issued or to be issued upon the exercise, conversion or
exchange or such securities, rights or options, and the Option Price shall be
proportionately adjusted.
SECTION 5.06 Notice of Certain Corporate Transactions. The Company
shall mail to the Employee a notice of any proposed dividend, merger,
dissolution, liquidation or winding up of the Company, stating the proposed
record date (if any) or effective date for any such transaction and briefly
describing the transaction. The Company shall give this notice at least ten
business days prior to the date of such action.
SECTION 5.07 No Adjustment or Readjustment in Certain Circumstances.
The Company shall not make any adjustment or readjustment of any of the Option
Price or the number of Underlying Shares in the case of (a) the exercise of this
Option, or (b) the issuance or sale by the Company of Common Stock or rights or
options pursuant to, or the adjustment of the Option Price, or the exercise or
termination, of rights or options issued pursuant to, any employee stock option
or similar plan of the Company, or (c) except as specifically provided in this
0, by reason of the issuance of shares of Common Stock or any other securities
of the Company in exchange for cash, property or services or other
consideration.
SECTION 5.08 Certificate of Adjustment. Upon the occurrence of each
adjustment or readjustment pursuant to this 0, the Company, at its expense,
shall as promptly as practicable compute such adjustment or readjustment in
accordance with the provisions of this 0, and prepare and furnish to the
Employee a certificate setting forth such adjustment or readjustment and
4
<PAGE> 5
showing in reasonable detail the facts upon which such adjustment or
readjustment in based.
SECTION 5.09 Information to be Furnished Upon Request. Upon the request
at any time of the Employee, the Company shall as promptly as practicable
furnish or cause to be furnished, to the Employee, at his address set forth in
such request, a certificate setting forth the number of shares of Common Stock
that at the time would be received upon the exercise of the Option and the
Option Price thereof.
ARTICLE VI. SALE OF THE COMPANY; REORGANIZATION
SECTION 6.01 In the event that (i) a Sale of the Company, or (ii) any
capital reorganization or reclassification of the capital stock of the
Corporation or merger of the Company with or into another corporation or other
entity (collectively, a "Reorganization"), is in such a way that holders of
Common Stock are entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such Sale of the
Company or Reorganization, lawful and adequate provision shall be made whereby
the Employee shall thereafter have the right to receive, upon the basis and upon
the terms and conditions specified in this Option, and in lieu of the Common
Stock immediately theretofore receivable upon the exercise of this Option, such
shares of stock, securities or assets as would have been (by virtue of such Sale
of the Company or Reorganization) issued or payable with respect to or in
exchange for a number of outstanding shares of Common Stock equal to the number
of shares of Common Stock immediately theretofore receivable upon the exercise
of this Option, assuming such exercise had taken place immediately prior to such
Sale of the Company or Reorganization. In any such case, appropriate provision
shall be made with respect to the rights and interests of the Employee to the
end that the provisions hereof (including, without limitation, provisions for
adjustments of the number of shares of Common Stock receivable upon exercise of
this Option) shall thereafter be applicable, as nearly as may be, in relation to
any shares of stock, securities or assets thereafter receivable upon the
exercise of this Option. The Company shall not effect any such Sale of the
Company or Reorganization, unless, prior to or simultaneously with the
consummation thereof, the successor entity (if other than the Company) resulting
from such transaction shall assume by written instrument, executed and mailed or
delivered to the Employee, the obligation to deliver to the Employee such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
the Employee may be entitled to receive.
SECTION 6.02 Notice of any proposed Sale of the Company or
Reorganization shall be given by the Company to the Employee as promptly as
practicable after such transaction appears likely, but not less than 20 days
prior to the date on which the proposed Sale of the Company or Reorganization is
to be consummated.
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<PAGE> 6
SECTION 6.03 In lieu of the provisions of 0above, in the event of a
Sale of the Company or a Reorganization, the Employee may, at his election,
compel the Company to purchase this Option (the "Put") at a price (the "Put
Price") equal to the aggregate Fair Market Value of the Underlying Shares minus
the aggregate Option Price. The Company shall pay the Put Price to the Employee
at the same time that the Sale or Reorganization is consummated. The Employee
may exercise this Put at any time by notice to the Company not later than ten
days after the notice described in 0has been given.
SECTION 6.04 "Sale of the Company" shall mean any change of control of
the Company (as the term "control" is defined in Rule 405 of the Securities and
Exchange
6
<PAGE> 7
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act")), whether such change of control occurs through merger,
consolidation, sale of assets or stock, exchange of securities, or otherwise.
ARTICLE VII. DISSOLUTION OR LIQUIDATION
SECTION 7.01 Upon any proposed distribution of the assets of the
Company in dissolution or liquidation (except under circumstances when 0 or 0
shall be applicable), the Company shall mail notice thereof to the Employee and
shall make no distribution to its shareholders until the expiration of 30 days
from the date of mailing of such notice and, in any such event, the Employee may
exercise the purchase rights with respect to this Option within 30 days from the
date of mailing such notice. All rights herein granted not so exercised within
such 30-day period shall thereafter become null and void.
ARTICLE VIII. NOTICES AND OTHER SHAREHOLDER COMMUNICATIONS
SECTION 8.01 The Company shall provide to the Employee a copy of any
and all reports, notices, proxy statements, annual, quarterly or special
reports, or other communications to its shareholders of any type whatever, at
the same time such communications are dispatched to the shareholders.
ARTICLE IX. REGISTRATION RIGHTS
SECTION 9.01 Definitions. As used in this Article IX, the term
"Registrable Securities" means (i) the shares of Common Stock issuable upon
exercise of this Option, (ii) any shares of Common Stock which the Employee may
hereafter acquire, and (iii) any capital stock of the Company issued as a
dividend or other distribution with respect thereto, or in exchange for or in
replacement of, the shares of Common Stock referred to in clauses (i) and (ii)
above.
SECTION 9.02 Required Registration.
(a) If, at any time after the Company registers its Common
Stock with the Commission pursuant to the Securities Exchange Act of
1934, as amended, the Company receives a written request therefor from
the Employee, the Company shall prepare and file a registration
statement under the Securities Act covering the Registrable Securities
which are the subject of such request and shall use its reasonable best
efforts to cause such registration statement to become effective. The
Company shall be obligated to prepare, file and cause to become
effective only one registration statement pursuant to this Section
9.02. Notwithstanding the foregoing obligation of the Company, if
either (i) in the good faith judgment of the Company's board of
directors the registration of the Registrable Securities would at such
time interfere with a primary offering of
7
<PAGE> 8
securities or a sale or acquisition transaction material to the
Company, require the disclosure of material information that the
Company has a bona fide business purpose for preserving as
confidential, or require the Company to provide information required by
the Commission or the Securities Act, such as pro forma information,
that at such time the Company would be unable to provide, then the
Company's obligation to prepare and file a registration statement in
connection with the Registrable Securities which are the subject of the
Employee's request shall be suspended for a reasonable period (not to
exceed 90 days) until the Company consummates or abandons such primary
offering or other transaction, determines that such confidential
information may be disclosed or is able to provide any such information
required by the Commission or the Securities Act, provided that the
Company may exercise the right to suspension of an offering under this
Section 9.02 no more than one time during any 12 month period.
(b) In the event that the Employee shall determine for any
reason not to proceed with a registration at any time before the
registration statement has been declared effective by the Commission,
and (i) the Employee requests the Company to withdraw such registration
statement, if theretofore filed with the Commission, with respect to
the Registrable Securities covered thereby, or if the offering is not
consummated for any reason, and (ii) the Employee agrees to bear its
expenses incurred in connection therewith and to reimburse the Company
for the expenses incurred by it attributable to the registration of
such Registrable Securities, then the Employee shall not be deemed to
have exercised its right to require the Company to register Registrable
Securities pursuant to this Section 9.02.
(c) Without the written consent of the Employee, neither the
Company nor any other holder of securities of the Company may include
securities in such registration if in the good faith judgment of the
managing underwriter of such public offering the inclusion of such
securities would interfere with the successful marketing of the
Registrable Securities or require the exclusion of any portion of the
Registrable Securities to be registered.
SECTION 9.03 Incidental Registration. Each time the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act on any form (other than Form S-4 or any
successor form thereto) that would permit the inclusion of the Registrable
Securities in connection with the proposed offer and sale for money of any of
its securities by it or any of its security holders, the Company will give
written notice of its determination to the Employee. Upon the written request of
the Employee given within 30 days after receipt of any such notice from the
Company, the Company will, except as herein provided, cause all such shares of
Registrable Securities for which the Employee has so requested registration, to
be included in such registration statement, all to the extent requisite to
permit the sale or other disposition by the Employee to be so registered;
provided, however, that nothing herein shall prevent the Company from, at any
time, abandoning or delaying any such
8
<PAGE> 9
registration initiated by it. If any registration pursuant to this Section shall
be underwritten in whole or in part, the Company may require that the
Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. If in the good faith judgment of
the managing underwriter of such public offering the inclusion of all of the
Registrable Securities originally covered by a request for registration would
reduce the number of shares to be offered by the Company or its security holders
exercising demand registration rights, or interfere with the successful
marketing of the shares of stock offered by the Company or its security holders
exercising demand registration rights, the number of shares of Registrable
Securities otherwise to be included in the underwritten public offering may be
reduced pro rata among the holders thereof requesting such registration. Those
shares of Registrable Securities which are thus excluded from the underwritten
public offering shall be withheld from the market by the holders thereof for a
period, not to exceed 180 days, which the managing underwriter reasonably
determines is necessary in order to effect the underwritten public offering.
SECTION 9.04 Registration Procedures. If and whenever the Company is
required by the provisions of Sections 12(b) or 12(c) to effect the registration
of any Registrable Securities under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration
statement with respect to such securities, and use its reasonable best
efforts to cause such registration statement to become and remain
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed three months;
(b) prepare and file with the Commission such amendments to
such registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed three months;
(c) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as
such security holders and underwriters may reasonably request in order
to facilitate the public offering of such securities;
(d) use its reasonable best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request within 20 days following the original
filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general
9
<PAGE> 10
consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration
statement has been filed;
(f) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the
request of any such holders, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for such holders (and concurred in by counsel for the Company), is
required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Registrable
Securities by such holder;
(h) prepare and promptly file with the Commission and promptly
notify such holders of the filing of such amendment or supplement to
such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which
any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading;
(i) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should be
issued;
(j) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
10
<PAGE> 11
(k) at the request of any such holder, furnish on the
effective date of the registration statement and, if such registration
includes an underwritten public offering, at the closing provided for
in the underwriting agreement: (A) opinions, dated such respective
dates, of the counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the holder
or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request, in which
opinion such counsel shall state (without limiting the generality of
the foregoing) that (1) such registration statement has become
effective under the Securities Act; (2) to the best of such counsel's
knowledge no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act; (3) the registration
statement and each amendment or supplement thereto comply as to form in
all material respects with the requirements of the Securities Act and
the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements contained therein); (4) to the best of the knowledge of such
counsel neither the registration statement nor any amendment nor
supplement thereto contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (except that
such counsel need express no opinion as to financial statements
contained therein); (5) the description in the registration statement
or any amendment or supplement thereto of legal and governmental
proceedings and contracts are accurate and fairly present the
information required to be shown; and (6) such counsel does not know of
any legal or governmental proceedings, pending or threatened, required
to be described in the registration statement or any amendment or
supplement thereto which are not described as required nor of any
contracts or documents or instruments of the character required to be
described in the registration statement or amendment or supplement
thereto or to be filed as exhibits to the registration statement, which
are not described or filed as required; and (B) letters, dated such
respective dates, from the independent certified public accountants of
the Company, addressed to the underwriters, if any, and to the holder
or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request, in which
letters such accountants shall state (without limiting the generality
of the foregoing) that they are independent certified public
accountants within the meaning of the Securities Act and that in the
opinion of such accountants the financial statements and other
financial data of the Company included in the registration statement or
any amendment or supplement thereto comply in all material respects
with the applicable accounting requirements of the Securities Act.
SECTION 9.05 Expenses. With respect to any registration requested
pursuant to Section 9.02 (except as otherwise provided in such Section with
respect to registrations
11
<PAGE> 12
voluntarily terminated at the request of the requesting security holders) and
with respect to each inclusion of shares of Registrable Securities in a
registration statement pursuant to Section 9.03, the Company shall bear the
following fees, costs and expenses: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for the
Company and one counsel for the selling security holders, all internal Company
expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of jurisdictions in which the securities to be offered are to be registered
or qualified. Underwriting discounts and commissions and transfer taxes for
selling security holders and any other expenses incurred by the selling security
holders not expressly included above shall be borne by the selling security
holders.
SECTION 9.06 Indemnification. In the event that any Registrable
Securities are included in a registration statement under Sections 9.02 or 9.03:
(a) The Company will indemnify and hold harmless the Employee
and any underwriter (as defined in the Securities Act) and each person,
if any, who controls such holder or such underwriter within the meaning
of the Securities Act, from and against any and all loss, damage,
liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that the Company will not be liable in any such case
to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by such holder, in writing, such underwriter or
such controlling person.
(b) The Employee will indemnify and hold harmless the Company,
any controlling person and any underwriter from and against any and all
loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged
untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, in each case
to the
12
<PAGE> 13
extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with information furnished in
writing by such holder.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section of notice of the
commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the
indemnifying party of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than hereunder. In
case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the
right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party pursuant to the provisions of said
paragraph (a) or (b) for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (A) the
indemnified party shall have employed counsel in accordance with the
proviso of the preceding sentence, (B) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the
notice of the commencement of the action, or (C) the indemnifying party
has authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party.
SECTION 9.07 Registration Rights of Transferees. The registration
rights granted to the holders of Registrable Securities pursuant to this 0 shall
also be for the benefit of, and enforceable by, any permitted subsequent holder
of Registrable Securities, whether or not any express assignment of such rights
to any such subsequent holder is made.
ARTICLE X. ISSUANCE OF SHARES
SECTION 10.01 The Company shall not be required to issue or deliver
any Shares upon an exercise of the Option:
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<PAGE> 14
(a) Prior to the admission of such Shares to listing on any
public exchange on which the Company's common stock may be listed; or
(b) Prior to the completion of any proceedings under any
applicable state or federal securities law, rule or regulation that the
Company or its counsel determines to be necessary or advisable to the
issuance of the Shares; or
(c) Unless such issuance, in the opinion of the Company's
counsel, is exempt from federal and state securities registration
requirements.
SECTION 10.02 The Company may require Employee to represent and agree
in writing that if such Shares are issuable under an exemption from registration
requirements, the Shares will be "restricted". Employee shall not have the
rights of a shareholder with respect to the Shares until certificates evidencing
the Shares have been issued and delivered to Employee.
ARTICLE XI. NOTICE
SECTION 11.01 All notices given pursuant to or in connection with this
Agreement shall be in writing and shall be deemed to be duly given when
personally delivered or when mailed, if sent by certified or registered mail,
postage prepaid, return receipt requested, and addressed as follows, or to such
other address as the parties may indicate:
If to the Company:
Advanced Systems International, Inc.
17515 W. Nine Mile Rd Ste 225
Southfield, MI 48075
ATTN: Chief Executive Officer
If to the Employee:
Richard Penington
31207 Foxboro Way
Beverly Hills, MI 48025-3605
With a Required Copy of any Notice to:
David D. Warner, Esq.
Jaffe, Raitt, Heuer & Weiss
Professional Corporation
14
<PAGE> 15
One Woodward Ave Ste 2400
Detroit, Michigan 48226-3418
ARTICLE XII. NO RIGHT TO EMPLOYMENT CONFERRED
SECTION 12.01 Nothing in this Agreement or the Plan shall confer upon
the Employee any right to continue as a employee of the Company or a subsidiary
or interfere in any way with the right of the Company or any subsidiary to
terminate such person's engagement as an employee at any time.
ARTICLE XIII. SEVERABILITY
SECTION 13.01 If any provision of this Agreement is held invalid or
unenforceable, the remaining provisions shall continue to be in full force and
effect to the maximum extent permitted by law.
ARTICLE XIV. AMENDMENT
SECTION 14.01 This instrument contains the entire Agreement of the
parties and may only be amended by written agreement executed by the parties
hereto or their respective permitted successors above.
ARTICLE XV. GOVERNING LAW
SECTION 15.01 This Agreement is made and entered into and shall be
construed and enforced in accordance with the laws of the State of Michigan.
ARTICLE XVI. HEADINGS
SECTION 16.01 The section numbers and headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
15
<PAGE> 16
IN WITNESS WHEREOF, this Nonqualified Stock Option Agreement is hereby
executed.
"COMPANY"
ADVANCED SYSTEMS INTERNATIONAL,
INC., a Nevada corporation
By:
------------------------------------------
Gerald A. Pesut, Chief Executive Officer
"EMPLOYEE"
---------------------------------------------
Richard Penington
16
<PAGE> 1
EXHIBIT 10.12
HAMPTON UNIT
Number of Units Represented
By This Certificate: 175,000
Dated: As of July 8, 1997
Amended September 17, 1998
UNITS TO PURCHASE COMMON SHARES
AND WARRANTS OF
ADVANCED SYSTEMS INTERNATIONAL, INC.
THIS IS TO CERTIFY THAT, HAMPTON LTD. (the "Unit Holder") has the right to
purchase from Advanced Systems International, Inc. (the "Corporation"), upon and
subject to the terms and conditions set forth below one (1) fully paid and
non-assessable share of the Corporation's Common Shares ("Shares") and one (1)
warrant to acquire one Share (in the form and containing the terms set forth in
the attached form of Warrant Certificate), for each one (1) Unit represented
hereby at the exercise price of U.S.$0.50 per Unit (the "Exercise Price") for a
period ended July 8, 2017 (the "Expiry Date").
The Units may only be exercised by the Unit Holder. Further, this Unit may be
exercised only prior to the Expiry Date, and only by the Unit Holder: (a) duly
completing and executing the subscription form as attached hereto as Schedule
"A", in the manner therein indicated; (b) surrendering this Unit Certificate to
the Corporation at its designated office (Advanced Systems International, Inc.,
25300 Telegraph Rd Ste 455, Southfield, Michigan 48034); and (c) paying the
appropriate purchase price for the Shares and Warrants being purchased, by
certified check payable to or to the order of the Corporation.
Upon surrender and payment, the Corporation will issue to the Unit Holder the
number of Shares and Warrants subscribed for, and will issue a new Unit
Certificate for any remaining Unit rights. However, the Corporation shall not be
required to issue or deliver any Shares or Warrants upon exercise of this Unit
unless such issuance, in the opinion of the Corporation's counsel, is permitted
under all applicable federal and state securities registration requirements. The
Corporation may require the holder to represent and agree in writing that if
such Shares and Warrants are issuable under an exemption from registration
requirements, the Shares and Warrants will be "restricted". The Unit Holder
shall not have the rights of a shareholder with respect to the Shares until
certificates evidencing the Shares have been issued and delivered to the Unit
Holder.
If prior to the Expiry Date the Shares then subject to this Unit are affected by
any recapitalization, merger, consolidation, reorganization, stock dividend,
stock split or other change in capitalization affecting the common stock of the
Corporation, the Corporation will appropriately adjust the number and kind of
Shares covered by this Unit and the Exercise Price per share as is necessary to
prevent dilution or the enlargement of rights which might otherwise result.
THE UNIT HOLDER, BY ACCEPTANCE OF THIS UNIT CERTIFICATE, AGREES THAT THE UNITS
REPRESENTED HEREBY AMD ALL RIGHTS HEREUNDER ARE NON-TRANSFERABLE AND ANY SHARES
ACQUIRED BY THE UNIT HOLDER PURSUANT TO THIS UNIT CERTIFICATE ARE NOT TO BE SOLD
BY THE UNIT HOLDER, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES
LEGISLATION OF THE JURISDICTION IN WHICH SUCH TRANSFER OR SALE TAKES PLACE.
IN WITNESS WHEREOF, THE CORPORATION has caused this Unit Certificate to be
issued by its duly authorized agent as of July 8, 1997, amended as of September
17, 1998.
Advanced Systems International, Inc.
By:
---------------------------------
Gerald A. Pesut, Chairman
<PAGE> 2
SCHEDULE "A"
UNITS TO PURCHASE COMMON SHARES
AND WARRANTS OF
ADVANCED SYSTEMS INTERNATIONAL, INC.
SUBSCRIPTION FORM
To: Advanced Systems International, Inc.
25300 Telegraph Rd Ste 455
Southfield, Michigan 48034
The undersigned holder of the within Unit Certificate hereby irrevocably
subscribes for _________ Series A Common Shares and Warrants of ADVANCED SYSTEMS
INTERNATIONAL, INC. (the "Corporation") pursuant to the within Unit Certificate
at the Exercise Price per share specified in the said Unit Certificate and
encloses herewith a certified check payable to the order of the Corporation in
payment of the subscription price therefor.
DATED this day of , .
NAME:
--------------------------------
Signature:
--------------------------------
Address:
--------------------------------
--------------------------------
[ ] Please check box if these share and warrant certificates are to be
delivered at the office where this Unit Certificate is surrendered, failing
which the share and warrant certificates will be mailed to the subscriber at the
address set out above.
If any Units represented by this Unit Certificate are not being exercised, a new
Unit Certificate will be issued and delivered with the share and warrant
certificates.
<PAGE> 3
Form of Warrant
Number of Warrants Represented
By This Certificate: 175,000
Dated: [DATE]
WARRANTS TO PURCHASE COMMON SHARES
OF
ADVANCED SYSTEMS INTERNATIONAL, INC.
THIS IS TO CERTIFY THAT, HAMPTON LTD. (the "Warrant Holder") has the right to
purchase from Advanced Systems International, Inc. (the "Corporation"), upon and
subject to the terms and conditions set forth below one (1) fully paid and
non-assessable share of the Corporation's Common Shares ("Shares") for each one
(1) warrant represented hereby at the price of U.S.$0.50 per Share (the
"Exercise Price") for a period ended three (3) years (the "Expiry Date") from
the date hereof.
The right to purchase Shares may only be exercised by the Warrant Holder.
Further, this Warrant may be exercised only prior to the Expiry Date, and only
by the Warrant Holder: (a) duly completing and executing the subscription form
as attached hereto as Schedule "A", in the manner therein indicated; (b)
surrendering this warrant certificate to the Corporation at its designated
office (Advanced Systems International, Inc., 25300 Telegraph Rd Ste 455,
Southfield, Michigan 48034); and (c) paying the appropriate purchase price for
the Shares being purchased, by certified check payable to or to the order of the
Corporation.
Upon surrender and payment, the Corporation will issue to the Warrant Holder the
number of Shares subscribed for, and will issue a new Warrant Certificate for
any remaining Warrant rights. However, the Corporation shall not be required to
issue or deliver any Shares upon exercise of this Warrant unless such issuance,
in the opinion of the Corporation's counsel, is permitted under all applicable
federal and state securities registration requirements. The Corporation may
require the holder to represent and agree in writing that if such Shares are
issuable under an exemption from registration requirements, the Shares will be
"restricted". The Warrant Holder shall not have the rights of a shareholder with
respect to the Shares until certificates evidencing the Shares have been issued
and delivered to the Warrant Holder.
If prior to the Expiry Date the Shares then subject to this Warrant are affected
by any recapitalization, merger, consolidation, reorganization, stock dividend,
stock split or other change in capitalization affecting the common stock of the
Corporation, the Corporation will appropriately adjust the number and kind of
Shares covered by this Warrant and the Exercise Price per share as is necessary
to prevent dilution or the enlargement of rights which might otherwise result.
THE WARRANT HOLDER, BY ACCEPTANCE OF THIS WARRANT CERTIFICATE, AGREES THAT THE
WARRANTS REPRESENTED HEREBY AMD ALL RIGHTS HEREUNDER ARE NON-TRANSFERABLE AND
ANY SHARES ACQUIRED BY THE WARRANT HOLDER PURSUANT TO THIS WARRANT CERTIFICATE
ARE NOT TO BE SOLD BY THE WARRANT HOLDER, EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE SECURITIES LEGISLATION OF THE JURISDICTION IN WHICH SUCH
TRANSFER OR SALE TAKES PLACE.
IN WITNESS WHEREOF, THE CORPORATION has caused this Warrant Certificate to be
issued by its duly authorized agent as of [DATE].
Advanced Systems International, Inc.
By:
--------------------------------
<PAGE> 4
SCHEDULE "A"
WARRANTS TO PURCHASE COMMON SHARES
OF ADVANCED SYSTEMS INTERNATIONAL, INC.
SUBSCRIPTION FORM
To: Advanced Systems International, Inc.
25300 Telegraph Rd Ste 455
Southfield, Michigan 48034
The undersigned holder of the within Warrant Certificate hereby irrevocably
subscribes for _________ Common Shares of ADVANCED SYSTEMS INTERNATIONAL, INC.
(the "Corporation") pursuant to the within Warrant Certificate at the Exercise
Price per share specified in the said Warrant Certificate and encloses herewith
a certified check payable to the order of the Corporation in payment of the
subscription price therefor.
DATED this day of , 19 .
NAME:
--------------------------------
Signature:
--------------------------------
Address:
--------------------------------
--------------------------------
[ ] Please check box if these share certificates are to be delivered at the
office where this Warrant Certificate is surrendered, failing which the share
certificates will be mailed to the subscriber at the address set out above.
If any Warrants represented by this Warrant Certificate are not being exercised,
a new Warrant Certificate will be issued and delivered with the share
certificates.
<PAGE> 1
EXHIBIT 10.13
INVESTOR WARRANT
Number of Warrants Represented
By This Certificate: 376,000
Dated: DECEMBER 31, 1998
WARRANTS TO PURCHASE COMMON SHARES
OF
Advanced Systems International, Inc.
THIS IS TO CERTIFY THAT, TEMPLE SECURITIES LTD. (the "Warrant Holder") has the
right to purchase from Advanced Systems International, Inc. (the "Corporation"),
upon and subject to the terms and conditions set forth below one (1) fully paid
and non-assessable share of the Corporation's Common Shares ("Shares") for each
one (1) warrant represented hereby at the price of U.S.$0.75 per Share (the
"Exercise Price") for a period ended DECEMBER 31, 2000 (the "Expiry Date").
The right to purchase Shares may only be exercised by the Warrant Holder.
Further, this Warrant may be exercised only prior to the Expiry Date, and only
by the Warrant Holder: (a) duly completing and executing the subscription form
as attached hereto as Schedule "A", in the manner therein indicated; (b)
surrendering this warrant certificate to the Corporation at its designated
office (Advanced Systems International, Inc., 23500 Telegraph Rd Ste 445,
Southfield, Michigan, 48034); and (c) paying the appropriate purchase price for
the Shares being purchased, by certified check payable to or to the order of the
Corporation.
Upon surrender and payment, the Corporation will issue to the Warrant Holder the
number of Shares subscribed for, and will issue a new Warrant Certificate for
any remaining Warrant rights. However, the Corporation shall not be required to
issue or deliver any Shares upon exercise of this Warrant unless such issuance,
in the opinion of the Corporation's counsel, is permitted under all applicable
federal and state securities registration requirements. The Corporation may
require the holder to represent and agree in writing that if such Shares are
issuable under an exemption from registration requirements, the Shares will be
"restricted". The Warrant Holder shall not have the rights of a shareholder with
respect to the Shares until certificates evidencing the Shares have been issued
and delivered to the Warrant Holder.
If prior to the Expiry Date the Shares then subject to this Warrant are affected
by any recapitalization, merger, consolidation, reorganization, stock dividend,
stock split or other change in capitalization affecting the common stock of the
Corporation, the Corporation will appropriately adjust the number and kind of
Shares covered by this Warrant and the Exercise Price per share as is necessary
to prevent dilution or the enlargement of rights which might otherwise result.
THE WARRANT HOLDER, BY ACCEPTANCE OF THIS WARRANT CERTIFICATE, AGREES THAT THE
WARRANTS REPRESENTED HEREBY AMD ALL RIGHTS HEREUNDER ARE NON-TRANSFERABLE AND
ANY SHARES ACQUIRED BY THE WARRANT HOLDER PURSUANT TO THIS WARRANT CERTIFICATE
ARE NOT TO BE SOLD BY THE WARRANT HOLDER, EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE SECURITIES LEGISLATION OF THE JURISDICTION IN WHICH SUCH
TRANSFER OR SALE TAKES PLACE.
IN WITNESS WHEREOF, THE CORPORATION has caused this Warrant Certificate to be
issued by its duly authorized agent as of DECEMBER 31, 1998.
Advanced Systems International, Inc.
By:
--------------------------------
Gerald A. Pesut, President
<PAGE> 2
SCHEDULE "A"
WARRANTS TO PURCHASE COMMON SHARES
OF ADVANCED SYSTEMS INTERNATIONAL, INC.
SUBSCRIPTION FORM
To: Advanced Systems International, Inc.
23500 Telegraph Rd Ste 445
Southfield, Michigan 48034
The undersigned holder of the within Warrant Certificate hereby irrevocably
subscribes for _________ Common Shares of ADVANCED SYSTEMS INTERNATIONAL, INC.
(the "Corporation") pursuant to the within Warrant Certificate at the Exercise
Price per share specified in the said Warrant Certificate and encloses herewith
a certified check payable to the order of the Corporation in payment of the
subscription price therefor.
DATED this day of , .
NAME:
--------------------------------
Signature:
--------------------------------
Address :
--------------------------------
--------------------------------
[ ] Please check box if these share certificates are to be delivered at the
office where this Warrant Certificate is surrendered, failing which the share
certificates will be mailed to the subscriber at the address set out above.
If any Warrants represented by this Warrant Certificate are not being exercised,
a new Warrant Certificate will be issued and delivered with the share
certificates.
<PAGE> 3
INVESTOR WARRANT
Number of Warrants Represented
By This Certificate: 72975
Dated: DECEMBER 31, 1998
WARRANTS TO PURCHASE COMMON SHARES
OF
ADVANCED SYSTEMS INTERNATIONAL, INC.
THIS IS TO CERTIFY THAT, TEMPLE SECURITIES LTD. (the "Warrant Holder") has the
right to purchase from ADVANCED SYSTEMS INTERNATIONAL, INC. (the "Corporation"),
upon and subject to the terms and conditions set forth below one (1) fully paid
and non-assessable share of the Corporation's Common Shares ("Shares") for each
one (1) warrant represented hereby at the price of U.S.$0.625 per Share (the
"Exercise Price") for a period ended DECEMBER 31, 1999 (the "Expiry Date").
The right to purchase Shares may only be exercised by the Warrant Holder.
Further, this Warrant may be exercised only prior to the Expiry Date, and only
by the Warrant Holder: (a) duly completing and executing the subscription form
as attached hereto as Schedule "A", in the manner therein indicated; (b)
surrendering this warrant certificate to the Corporation at its designated
office (Advanced Systems International, Inc., 23500 Telegraph Rd Ste 445,
Southfield, Michigan, 48034); and (c) paying the appropriate purchase price for
the Shares being purchased, by certified check payable to or to the order of the
Corporation.
Upon surrender and payment, the Corporation will issue to the Warrant Holder the
number of Shares subscribed for, and will issue a new Warrant Certificate for
any remaining Warrant rights. However, the Corporation shall not be required to
issue or deliver any Shares upon exercise of this Warrant unless such issuance,
in the opinion of the Corporation's counsel, is permitted under all applicable
federal and state securities registration requirements. The Corporation may
require the holder to represent and agree in writing that if such Shares are
issuable under an exemption from registration requirements, the Shares will be
"restricted". The Warrant Holder shall not have the rights of a shareholder with
respect to the Shares until certificates evidencing the Shares have been issued
and delivered to the Warrant Holder.
If prior to the Expiry Date the Shares then subject to this Warrant are affected
by any recapitalization, merger, consolidation, reorganization, stock dividend,
stock split or other change in capitalization affecting the common stock of the
Corporation, the Corporation will appropriately adjust the number and kind of
Shares covered by this Warrant and the Exercise Price per share as is necessary
to prevent dilution or the enlargement of rights which might otherwise result.
THE WARRANT HOLDER, BY ACCEPTANCE OF THIS WARRANT CERTIFICATE, AGREES THAT THE
WARRANTS REPRESENTED HEREBY AMD ALL RIGHTS HEREUNDER ARE NON-TRANSFERABLE AND
ANY SHARES ACQUIRED BY THE WARRANT HOLDER PURSUANT TO THIS WARRANT CERTIFICATE
ARE NOT TO BE SOLD BY THE WARRANT HOLDER, EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE SECURITIES LEGISLATION OF THE JURISDICTION IN WHICH SUCH
TRANSFER OR SALE TAKES PLACE.
IN WITNESS WHEREOF, THE CORPORATION has caused this Warrant Certificate to be
issued by its duly authorized agent as of DECEMBER 31, 1998.
Advanced Systems International, Inc.
By:
--------------------------------
Gerald A. Pesut, President
<PAGE> 4
SCHEDULE "A"
WARRANTS TO PURCHASE COMMON SHARES
OF ADVANCED SYSTEMS INTERNATIONAL, INC.
SUBSCRIPTION FORM
To: Advanced Systems International, Inc.
23500 Telegraph Rd Ste 445
Southfield, Michigan 48034
The undersigned holder of the within Warrant Certificate hereby irrevocably
subscribes for _________ Common Shares of ADVANCED SYSTEMS INTERNATIONAL, INC.
(the "Corporation") pursuant to the within Warrant Certificate at the Exercise
Price per share specified in the said Warrant Certificate and encloses herewith
a certified check payable to the order of the Corporation in payment of the
subscription price therefor.
DATED this day of , .
NAME:
--------------------------------
Signature:
--------------------------------
Address:
--------------------------------
--------------------------------
[ ] Please check box if these share certificates are to be delivered at the
office where this Warrant Certificate is surrendered, failing which the share
certificates will be mailed to the subscriber at the address set out above.
If any Warrants represented by this Warrant Certificate are not being exercised,
a new Warrant Certificate will be issued and delivered with the share
certificates.
<PAGE> 1
EXHIBIT 10.14
INVESTOR WARRANT
Number of Warrants Represented
By This Certificate: 14,750
Dated: DECEMBER 31, 1998
WARRANTS TO PURCHASE COMMON SHARES
OF
Advanced Systems International, Inc.
THIS IS TO CERTIFY THAT, REVBEN MANAGEMENT CORPORATION (the "Warrant Holder")
has the right to purchase from Advanced Systems International, Inc. (the
"Corporation"), upon and subject to the terms and conditions set forth below one
(1) fully paid and non-assessable share of the Corporation's Common Shares
("Shares") for each one (1) warrant represented hereby at the price of
U.S.$0.625 per Share (the "Exercise Price") for a period ended DECEMBER 31, 1999
(the "Expiry Date").
The right to purchase Shares may only be exercised by the Warrant Holder.
Further, this Warrant may be exercised only prior to the Expiry Date, and only
by the Warrant Holder: (a) duly completing and executing the subscription form
as attached hereto as Schedule "A", in the manner therein indicated; (b)
surrendering this warrant certificate to the Corporation at its designated
office (Advanced Systems International, Inc., 23500 Telegraph Rd Ste 445,
Southfield, Michigan, 48034); and (c) paying the appropriate purchase price for
the Shares being purchased, by certified check payable to or to the order of the
Corporation.
Upon surrender and payment, the Corporation will issue to the Warrant Holder the
number of Shares subscribed for, and will issue a new Warrant Certificate for
any remaining Warrant rights. However, the Corporation shall not be required to
issue or deliver any Shares upon exercise of this Warrant unless such issuance,
in the opinion of the Corporation's counsel, is permitted under all applicable
federal and state securities registration requirements. The Corporation may
require the holder to represent and agree in writing that if such Shares are
issuable under an exemption from registration requirements, the Shares will be
"restricted". The Warrant Holder shall not have the rights of a shareholder with
respect to the Shares until certificates evidencing the Shares have been issued
and delivered to the Warrant Holder.
If prior to the Expiry Date the Shares then subject to this Warrant are affected
by any recapitalization, merger, consolidation, reorganization, stock dividend,
stock split or other change in capitalization affecting the common stock of the
Corporation, the Corporation will appropriately adjust the number and kind of
Shares covered by this Warrant and the Exercise Price per share as is necessary
to prevent dilution or the enlargement of rights which might otherwise result.
THE WARRANT HOLDER, BY ACCEPTANCE OF THIS WARRANT CERTIFICATE, AGREES THAT THE
WARRANTS REPRESENTED HEREBY AMD ALL RIGHTS HEREUNDER ARE NON-TRANSFERABLE AND
ANY SHARES ACQUIRED BY THE WARRANT HOLDER PURSUANT TO THIS WARRANT CERTIFICATE
ARE NOT TO BE SOLD BY THE WARRANT HOLDER, EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE SECURITIES LEGISLATION OF THE JURISDICTION IN WHICH SUCH
TRANSFER OR SALE TAKES PLACE.
IN WITNESS WHEREOF, THE CORPORATION has caused this Warrant Certificate to be
issued by its duly authorized agent as of DECEMBER 31, 1998.
Advanced Systems International, Inc.
By:
-----------------------------------
Gerald A. Pesut, President
<PAGE> 2
SCHEDULE "A"
WARRANTS TO PURCHASE COMMON SHARES
OF ADVANCED SYSTEMS INTERNATIONAL, INC.
SUBSCRIPTION FORM
To: Advanced Systems International, Inc.
23500 Telegraph Rd Ste 445
Southfield, Michigan 48034
The undersigned holder of the within Warrant Certificate hereby irrevocably
subscribes for _________ Common Shares of ADVANCED SYSTEMS INTERNATIONAL, INC.
(the "Corporation") pursuant to the within Warrant Certificate at the Exercise
Price per share specified in the said Warrant Certificate and encloses herewith
a certified check payable to the order of the Corporation in payment of the
subscription price therefor.
DATED this day of , .
NAME:
------------------------------
Signature:
------------------------------
Address:
------------------------------
/ / Please check box if these share certificates are to be delivered at the
office where this Warrant Certificate is surrendered, failing which the share
certificates will be mailed to the subscriber at the address set out above.
If any Warrants represented by this Warrant Certificate are not being exercised,
a new Warrant Certificate will be issued and delivered with the share
certificates.
<PAGE> 1
EXHIBIT 10.15
=====================================
LEASE
BETWEEN
485 PROPERTIES, LLC,
AS LANDLORD
AND
ADVANCED SYSTEMS
INTERNATIONAL, INC.,
AS TENANT
=====================================
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. BASIC LEASE PROVISIONS....................................1
SECTION 2. THE PREMISES..............................................2
SECTION 3. THE TERM..................................................3
SECTION 4. THE BASE RENT.............................................3
SECTION 5. LATE CHARGES AND INTEREST.................................3
SECTION 6. OPERATING EXPENSES, UTILITIES, AND TAXES..................3
SECTION 7. USE OF PREMISES...........................................5
SECTION 8. INSURANCE.................................................7
SECTION 9. DAMAGE BY FIRE OR OTHER CASUALTY..........................8
SECTION 10. REPAIRS, RENOVATIONS AND ALTERATIONS.....................10
SECTION 11. LIENS....................................................11
SECTION 12. EMINENT DOMAIN...........................................11
SECTION 13. ASSIGNMENT OR SUBLETTING.................................12
SECTION 14. INSPECTION OF PREMISES...................................12
SECTION 15. FIXTURES AND EQUIPMENT...................................13
SECTION 16. PARKING AREAS............................................13
SECTION 17. NOTICE OR DEMANDS........................................13
SECTION 18. BREACH; INSOLVENCY; RE-ENTRY.............................13
SECTION 19. SURRENDER OF PREMISES ON TERMINATION.....................15
SECTION 20. PERFORMANCE BY LANDLORD OF THE COVENANTS OF TENANT.......15
SECTION 21. SUBORDINATION; ESTOPPEL CERTIFICATES.....................15
SECTION 22. QUIET ENJOYMENT..........................................16
SECTION 23. HOLDING OVER.............................................16
SECTION 24. REMEDIES NOT EXCLUSIVE; WAIVER...........................16
SECTION 25. WAIVER OF SUBROGATION....................................16
SECTION 26. RIGHT TO SHOW PREMISES...................................17
SECTION 27. INDEMNIFICATION..........................................17
SECTION 28. DEFINITION OF LANDLORD; LANDLORD'S LIABILITY;............17
SECTION 29. SECURITY DEPOSIT AND SECURITY INTEREST...................18
SECTION 30. RULES AND REGULATIONS....................................18
SECTION 31. SIGNS AND ADVERTISING....................................18
SECTION 32. GENERAL..................................................19
EXHIBIT A SPACE PLAN...............................................21
EXHIBIT B RULES AND REGULATIONS OF THE PROJECT.....................22
EXHIBIT C DAILY JANITORIAL SERVICE.................................25
EXHIBIT D SPECIAL PROVISIONS.......................................26
Dl EXCESS TENANT IMPROVEMENT COSTS.................................26
D2 ADA COMPLIANCE REPRESENTATION...................................26
D3 NON-DISTURBANCE................................................ 26
<PAGE> 3
LEASE
THIS LEASE is made and entered into as of May 29, 1998, by and between
485 PROPERTIES, LLC, a Delaware Limited Liability Company (the "Landlord"),
having its principal office at 730 Third Avenue, New York, New York 10017, and
Tenant named below who agree as follows:
SECTION 1.
BASIC LEASE PROVISIONS
1.01 The following basic lease provisions are an integral part of this
Lease and are referred to in other Sections of this Lease.
(a) Tenant's name and jurisdiction of formation:
ADVANCED SYSTEMS INTERNATIONAL, INC., a Nevada Corporation
Tenant Social Security/Taxpayer Identification Number: 13-3953047
Tenant Standard Industrial Classification (SIC) Code Number: 7372
(b) Tenant's Address: 17515 W. Nine Mile Rd., Suite 225
Southfield, MI 48076
(c) Manager's Name REDICO Management, Inc.
and Address: 20500 Civic Center Drive
Suite 3000
Southfield, Michigan 48076
(d) Project Name: Raleigh Officentre Phase I and II
Building Name: Raleigh Officentre
Building Address: 25300 Telegraph Road
Southfield, MI 48076
(e) Premises: Floor: fourth
Suite Number: 455
Square Feet: 8,472 usable / 9,488 rentable
square feet
(f) Term:
Scheduled Occupancy Date: November 1, 1998
Scheduled Expiration Date of Initial Term; October 31, 2003
Initial Term: Five (5) years
(g) Base Rent:
<TABLE>
<CAPTION>
Monthly Annual
------- ------
<S> <C> <C>
Year 1 $13,639.00 $163,668.00
Year 2 $13,836.67 $166,040.04
Year 3 $14,034.33 $168,411.96
Year 4 $14,232.00 $170,784.00
Year 5 $14,429.67 $173,156.04
Total Aggregate: $842,060.04
</TABLE>
(h) Tenant's Proportionate Share:
9,488 Rentable square feet in the Premises divided by
289,019 Rentable square feet in the Building = 3.28 %
(i) Number of Exclusive Parking Spaces: NONE - at an initial increase
of additional rent of $0
(j) Security Deposit: $28,068.66
(k) Tenant Improvement Allowance: See Exhibit D
(1) Base Year:1998
(m) Permitted Use: General Office
1
<PAGE> 4
SECTION 2.
THE PREMISES
2.01 Landlord, in consideration of the rents to be paid and the covenants
and agreements to be performed by Tenant, hereby leases to Tenant the premises
set forth in Section 1.01(e) (the "Premises") in the building(s) (the
"Building") described in Section 1.01(d), together with the right to use the
parking and common areas and facilities which may be furnished from time to time
by Landlord (collectively the "Common Areas"), including, without limitation,
all common elevators, hallways and stairwells located within the Building, and
all common parking facilities, driveways and sidewalks, in common with Landlord
and with the tenants and occupants of the Project, their agents, employees,
customers, clients and invitees. Tenant agrees that the Premises and the
Building shall be deemed to include the number of rentable square feet set forth
in Section 1.01(h) and in no event shall Tenant have the right to challenge,
demand, request or receive any change in the base rent or other sums due
hereunder as a result of any claimed or actual error or omission in the rentable
or usable square footage of the Premises, the Building or the Project. Landlord
reserves the right at any time and from time to time to make alterations or
additions to the Building or the Common Areas, and to demolish improvements on
and to build additional improvements on the land surrounding the Building and to
add or change the name of the Building from time to time, in its sole discretion
without the consent of Tenant and the same shall not be construed as a breach of
this Lease. The Building, the other buildings listed in Section 1.01 (d), the
Common Areas and the land surrounding the Building and the Common Areas are
hereinafter collectively referred to as the "Project".
2.02 Landlord agrees to construct the improvements to the Premises (the
"Tenant Improvements") in accordance with the space plan(s) (as it may be
amended by approved change orders, the "Plans"), attached as Exhibit "A". All
material changes from the Plans which Landlord determines are necessary during
construction shall be submitted to Tenant for Tenant's approval or rejection. If
Tenant fails to notify Landlord of Tenant's approval or rejection of such
changes within five (5) days of receipt thereof, Tenant shall be conclusively
deemed to have approved such changes. Landlord's approval of the Plans shall not
constitute a representation, warranty or agreement (and Landlord shall have no
responsibility or liability for) the completeness or design sufficiency of the
Plans or the Tenant Improvements, or the compliance of the Plans or Tenant
Improvements with any laws, rules or regulations of any governmental or other
authority.
2.03 The provisions of Exhibit D, special provisions, shall govern the
cost of constructing Tenant Improvements.
2.04 Landlord intends to construct the Tenant Improvements and deliver
the Premises "ready for occupancy" (as defined below) to Tenant on the Scheduled
Occupancy Date set forth in Paragraph 1.01(f). The Premises will be conclusively
deemed "ready for occupancy" on the earlier to occur of when: (i) the work to be
done under this Paragraph has been substantially completed and after the
issuance of a conditional or temporary certificate of occupancy for the Premises
by the appropriate government agency within whose jurisdiction the Building is
located, or (ii) when Tenant takes possession of the Premises. The Premises will
not be considered unready or incomplete if only minor or insubstantial details
of construction, decoration or mechanical adjustments remain to be done within
the Premises or Common Areas of the Building, or if only landscaping or exterior
trim remains to be done outside the Premises, or if the delay in the
availability of the Premises for Tenant's occupancy is caused in whole or in
material part by Tenant. By occupying the Premises, Tenant will be deemed to
have accepted the Premises and to have acknowledged that they are in the
condition called for in this Lease, subject only to "punch list" items (as the
term "punch list" is customarily used in the construction industry in the area
where the Project is located) identified by Tenant by written notice delivered
to Landlord within ten (10) days after the date Landlord tenders possession of
the Premises to Tenant. If in good faith Landlord is delayed or hindered in
construction by any labor dispute, strike, lockout, fire, unavailability of
material, severe weather, acts of God, restrictive governmental laws or
regulations, riots, insurrection, war or other casualty or events of a similar
nature beyond its reasonable control ("Force Majeure"), the date for the
delivery of the Premises to Tenant "ready for occupancy" shall be extended for
the period of delay caused by the Force Majeure. If Landlord is delayed or
hindered in construction as a result of change orders or other requests by, or
acts of, Tenant ("Tenant Delay") the date for the delivery of the Premises to
Tenant "ready for occupancy" shall be accelerated by the number of days of delay
caused by Tenant Delay. The Scheduled Occupancy Date as extended or accelerated
as a result of the occurrence of a Force Majeure or Tenant Delay or with the
consent of Tenant, is herein referred to as the Occupancy Date.
2
<PAGE> 5
SECTION 3.
THE TERM
3.01 The initial term of this Lease (the "Initial Term or "Term ) will
commence (the "Commencement Date") on the earlier of: (i) the date Tenant takes
possession of the Premises; or (ii) the Occupancy Date; (iii) the date the
Occupancy Date would have occurred in the absence of Tenant Delay. Unless sooner
terminated or extended in accordance with the terms hereof, the Lease will
terminate the Number of Lease Years and Months set forth in Paragraph 1.01(f)
after the Commencement Date. If the Commencement Date is other than the first
day of a calendar month, the first Lease Year shall begin on the first day of
the first full calendar month following the Commencement Date. Upon request by
Landlord, Tenant will execute a written instrument confirming the Commencement
Date and the expiration date of the Initial Term.
SECTION 4.
THE BASE RENT
4.01 From and after the Commencement Date, Tenant agrees to pay to
Landlord, as minimum net rental for the Initial Term and Option Terms of this
Lease, the sum(s) set forth in Paragraph 1.01(g) (the "Base Rent"). The term
"Lease Year" as used herein shall be defined to mean a period of twelve (12)
consecutive calendar months. The first Lease Year shall begin on the date
determined in accordance with Section 3.01. Each succeeding Lease Year shall
commence on the anniversary date of the first Lease Year.
4.02 Base Rent and other sums due Landlord hereunder shall be paid by
Tenant to Landlord in equal monthly installments (except as otherwise provided
herein), in advance, without demand and without any setoffs or deductions
whatsoever, on the first day of each and every calendar month (the "Rent Day")
during the Initial Term and Option Terms, if any, at the office of Manager as
set forth in Section 1.01(c), or at such other place as Landlord from time to
time may designate in writing. In the event the Commencement Date is other than
the first day of a calendar month, the Base Rent for the partial first calendar
month of the Initial Term will be prorated on a daily basis based on the number
of days in the calendar month and will be paid in addition to the rent provided
in Paragraph 4.01 above. Base Rent for such partial calendar month and for the
first full calendar month of the first Lease Year shall be paid upon the
execution of this Lease by Tenant.
SECTION 5.
LATE CHARGES AND INTEREST
5.01 Any rent or other sums payable by Tenant to Landlord under this
Lease which are not paid within five (5) days after they are due will be subject
to a late charge of ten (10%) percent of the amount due. Such late charges will
be due and payable as additional rent on or before the next Rent Day.
5.02 Any rent late charges or other sums payable by Tenant to Landlord
under this Lease not paid within ten (10) days after the same are due will bear
interest at a per annum rate equal to the lower of: (i) eighteen (18%) percent
per annum, or (ii) the highest rate permitted by law. Such interest will be due
and payable as additional rent on or before the next Rent Day, and will accrue
from the date that such rent, late charges or other sums are payable under the
provisions of this Lease until actually paid by Tenant.
5.03 Any default in the payment of rent, late charges or other sums will
not be considered cured unless and until the late charges and interest due
hereunder are paid by Tenant to Landlord. If Tenant defaults in paying such late
charges and/or interest, Landlord will have the same remedies as Landlord would
have if Tenant had defaulted in the payment of rent. The obligation hereunder to
pay late charges and interest will exist in addition to, and not in the place
of, the other default provisions of this Lease.
SECTION 6.
OPERATING EXPENSES, UTILITIES, AND TAXES
6.01 in the event that Operating Expenses for the Project, in any
calendar year, exceed the Operating Expenses for the Base Year (as defined in
Paragraph 1.01 (1)), Tenant shall pay to Landlord, as additional rent, Tenant's
Proportionate Share (as defined in Paragraph 1.01(h)) of any such excess.
Tenant's obligations hereunder shall be pro-rated for any calendar year in which
Tenant is obligated to
3
<PAGE> 6
pay rent for only a portion thereof. For the purposes of this Section, the term
"Operating Expenses" shall mean and include those expenses paid or incurred by
Landlord for: maintaining, operating, owning, and repairing the Project,
providing electricity, steam, water, sewer, fuel, heating, lighting, air
conditioning, window cleaning, janitorial service, personal property taxes,
insurance (including, but not limited to, fire, extended coverage, liability,
worker's compensation, elevator, boiler and machinery, war risk, or any other
insurance carried in good faith by Landlord and applicable to the Project);
painting, uniforms, management fees, supplies, sundries, sales, or use taxes on
supplies or services; wages and salaries of all persons engaged in the
operation, maintenance and repair of the Project, and so-called fringe benefits,
including social security taxes, unemployment insurance taxes, providing
coverage for disability benefits, pension, hospitalization, welfare or
retirement plans, or any other similar or like expenses incurred under the
provisions of any collective bargaining agreement, or any other similar or like
expenses which Landlord pays or incurs to provide benefits for employees so
engaged in the operation, maintenance and repair of the Project; the charges of
any independent contractor who, under contract with Landlord or its
representatives, does any of the work of operating, maintaining or repairing the
Project; capital expenditures required under any governmental law or regulation;
legal and accounting expenses including, but not limited to, such expenses as
relate to seeking or obtaining reductions in, and refunds of, real estate taxes,
or any other expenses or charges, whether or not hereinbefore mentioned, which
in accordance with generally accepted accounting and management principles would
be considered as an expense of maintaining, operating, owning or repairing the
Project.
6.02 If the Project is not fully rented during all or a portion of any
year, then Landlord shall elect to make an appropriate adjustment of the
Operating Expenses and Real Estate Taxes (as defined below) for such year and
for the Base Year employing sound accounting and management principles, to
determine the amount of Operating Expenses and Real Estate Taxes that would have
been paid or incurred by Landlord had the Project been fully rented; and the
amount so determined shall be deemed to have been the amount of Operating
Expenses and Real Estate Taxes for such year. If any expenses relating to the
Project, though paid in one year, relate to more than one calendar year, at the
option of Landlord such expense may be proportionately allocated among such
related calendar years. In addition, in the event any Operating Expense or Real
Estate Tax applies to only some portion of the Project or is partially allocable
to other buildings or projects, landlord shall allocate such expense among
such buildings and projects in accordance with sound accounting and management
principles to determine the amount of Operating Expenses and Real Estate Taxes
for the Project and the Building.
6.03 In the event that Real Estate Taxes (as hereinafter defined) for the
Project, in any calendar year, exceed the Real Estate Taxes for the Base Year,
Tenant shall pay to Landlord, as additional rent, Tenant's Proportionate Share
of any such excess over and above the Base Real Estate Taxes (as hereinafter
defined). The "Base Real Estate Taxes" shall be the Real Estate Taxes shown on
the bills for which the "due date" occurs in the Base Year. "Real Estate Taxes"
as used herein shall mean real estate taxes, assessments (general, special,
ordinary or extraordinary) sewer rents, rates and charges, taxes based upon the
receipt of rent, and any other federal, state or local charge (general,
special, ordinary or extraordinary) which may now or hereafter be imposed,
levied or assessed against the Project or any part thereof, or on any building
or improvements at any time situated thereon. In the event the State of Michigan
or any political subdivision thereof having taxing authority shall modify,
repeal or abolish the ad valorem tax on real property, or impose a tax or
assessment of any kind or nature upon, against, or with respect to the Project
or the rents payable by Tenant or on the income derived from the Project, or
with respect to Landlord's ownership interest in the Project, which tax is
assessed or imposed by way of substitution for or in addition to all or any part
of the Real Estate Taxes, then such tax or assessment shall be included within
the definitions of "Real Estate Taxes"; provided, however, nothing herein
contained shall impose an obligation on Tenant to pay the general income tax or
Michigan Single Business Tax liabilities of Landlord, except to the extent such
a tax is being used to fund governmental functions presently or previously
funded by ad valorem taxes on real property.
6.04 At any time and from time to time, Landlord may reasonably estimate
the amount by which current Real Estate Taxes and Operating Expenses are
expected to exceed the Real Estate Taxes and Operating Expenses for the Base
Year (the "Estimated Excess Expenses"). Tenant shall pay its Proportionate Share
of the Estimated Excess Expenses by depositing with Landlord on each Rent Day
during the term hereof an amount equal to one-twelfth (1/12) of its annual share
of the Estimated Excess Expenses. Landlord shall deliver to Tenant, within a
reasonable period of time after the close of each calendar year, an annual
statement indicating the amount by which the Real Estate Taxes and Operating
Expenses actually incurred in that calendar year exceed the Real Estate Taxes
and Operating Expenses for the Base Year (the "Actual Excess Expenses"). In the
event that the Actual Excess Expenses exceed the Estimated Excess Expenses,
Tenant shall pay Tenant's Proportionate Share of the difference to Landlord
within fifteen (15) days of delivery of the annual statement. In the event that
Estimated Excess Expenses exceed Actual Excess Expenses, then at Landlord's
option Tenant shall either be reimbursed to the extent that Tenant's payments
toward Tenant's share of the Estimated Excess Expenses exceed Tenant's
Proportionate Share of the Actual Excess Expenses, or Tenant shall be granted a
corresponding credit against the Base Rent or other sums next due Landlord
hereunder.
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6.05 Tenant shall be responsible for and pay before delinquent all
municipal, county, and state taxes assessed, levied or imposed during the term
of this Lease, and all extensions thereof, upon the leasehold interest and all
furniture, fixtures, machinery, equipment, apparatus, systems and all other
personal property of any kind whatsoever located at, placed in or used in
connection with the Premises.
6.06 Landlord agrees with Tenant that Landlord will furnish heat and air
conditioning during normal business hours (8:00 a.m. to 6:00 p.m. Monday through
Friday and Saturday 9:00 a.m. to 2:00 p.m. excluding Building holidays), usual
and customary janitorial services, as set forth in Exhibit "C", and provide
water and sewer service to the Premises and hot and cold water for ordinary
lavatory purposes in the common area restrooms. However, if Tenant uses or
consumes water for any other purpose or in unusual quantities (of which fact
Landlord shall be the sole judge) Landlord may install a water meter at Tenant's
expense which Tenant shall thereafter maintain at Tenant's expense in good
working order and repair, to register such water consumption. Tenant shall pay
for the quantity of water shown on said meter, together with the sewer rents,
debt service and other charges made by the local utilities for water and sewer
service, as additional rent, at the secondary rate per gallon (general service
rate) established by the applicable governmental authority or the applicable
utility company providing the water. Whenever machines or equipment which
generate heat 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 equipment in the Premises, and the cost
thereof, and the expense of operation and maintenance thereof, shall be paid by
Tenant to Landlord. Although Landlord will provide air-conditioning and/or heat
upon the prior request of Tenant in accordance with Building practices for hours
other than regular business hours, Tenant will pay Landlord's charges for
providing such service. Said charges shall include a cost equal to the cost to
operate the equipment for Tenant's expanded business hours and days, and
Landlord's maintenance, equipment amortization and other appropriate charges
which Landlord determines are attributable to operating the equipment for
periods in excess of the normal business hours described above.
6.07 Tenant shall pay all charges made against the Premises for
electricity used upon or furnished to the Premises as and when due during the
continuance of this Lease. To the extent electricity is not separately metered
for the Premises, Landlord shall make a determination of Tenant's usage of
electricity supplied to the Building, and Tenant agrees to pay for such
electricity within thirty (30) days after request therefor from Landlord.
Whether or not metered, Tenant shall pay for the electricity at the secondary
rate (general service rate) established by the applicable governmental authority
or the applicable utility company providing the electricity. Tenant shall also
pay for fluorescent or other electric light bulbs or tubes and electric
equipment used in the leased premises.
SECTION 7.
USE OF PREMISES
7.01 Tenant shall occupy and use the Premises during the Term for the
purposes set forth in Section 1.01(m) only, and for no other purpose without the
prior written consent of Landlord. Tenant agrees that it will not use or permit
any person to use the Premises or any part thereof for any use or purpose in
violation of the laws of the United States, the laws, ordinances or other
regulations of the State or municipality in which the Premises are located, or
of any other lawful authorities, or any building and use restrictions, now or
hereafter affecting the Premises or any part thereof.
7.02 Tenant will not do or permit any act or thing to be done in or to
the Premises or the Project which will invalidate or be in conflict with any
terms or conditions required to be contained in any property or casualty
insurance policy authorized to be issued in the State of Michigan or any term or
condition of the Insurance Services Office's (ISO) Commercial Property Insurance
and/or Commercial General Liability Insurance Conditions or any different or
additional terms and conditions of any insurance policy in effect on the
Premises or the Project from time to time (collectively the "Building
Insurance"), Nor shall Tenant do nor permit any other act or thing to be done in
or to the Premises or the Project which shall or might subject Landlord to any
liability or responsibility to any person or for property damage, nor shall
Tenant use the Premises or keep anything on or in the Project except as now or
hereafter permitted by the fire regulations, the fire department or zoning,
health, safety, land use or other regulations. Tenant, at Tenant's sole cost and
expense, shall comply with all requirements and recommendations set forth by any
property or casualty insurer or reinsurer providing coverage for the Premises or
the Project or by any person or entity engaged by Landlord or Manager to perform
any loss control, analysis or assessment for the Premises or the Project. Tenant
shall not do or permit anything to be done in or upon the Premises or the
Project or bring or keep anything therein or use the Premises or the Project in
a manner which increases the rate of premium for any Building Insurance or any
property or equipment located therein over the rate in effect at the
commencement of the Term of this Lease. In addition, Tenant agrees to pay
Landlord the amount of any increase in premiums for insurance which may be
charged during the term of this Lease resulting from the act or omissions of
Tenant or the character or nature of its occupancy or use
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of the Project or the Premises, whether or not Landlord has consented to the
same. Any scheduled or "make-up" of any insurance rate for the Premises, the
Building or the Project issued by any insurance company establishing insurance
premium rates for the Premises, Building or the Project shall be prima facie
evidence of the facts therein stated and of the several items and charges in the
insurance premium rates then applicable to the Premises, the Building or the
Project. Tenant shall give Landlord notice promptly after Tenant learns of any
accident, emergency, or occurrence for which Landlord is or may be liable, or
any fire or other casualty or damage or defects to the Premises, the Building or
the Project which Landlord is or may be responsible or which constitutes the
property of Landlord.
7.03 Tenant shall not perform acts or carry on any activities or engage
in any practices which may injure the Premises or any portion of the Project or
which may be a nuisance or menace to other persons on or in the Project. Tenant
shall pay all costs, expenses, fines, penalties, or damages which may be imposed
upon Landlord by reason of Tenant's failure to comply with the provisions of
this Section.
7.04 Tenant will not place any load upon any floor of the Premises
exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Landlord reserves the right to prescribe the weight and
position of all safes, business machines and mechanical equipment. Such items
shall be placed and maintained by Tenant, at Tenant's expense, in settings
sufficient in Landlord's judgment, to absorb and prevent vibration, noise and
annoyance. If at any time any windows of the Premises are temporarily or
permanently closed, darkened or covered for any reason whatsoever, including
Landlord's own acts, Landlord shall not be liable for any damage Tenant may
sustain thereby, and the same shall not be considered a default under this Lease
and Tenant shall not be entitled to any compensation therefore nor abatement of
any Base Rent or any other sums due hereunder, nor shall the same release Tenant
from its obligations hereunder nor constitute an eviction, construction, actual
or otherwise.
7.05 During the term hereof, and consistent with janitorial services
provided by Landlord, Tenant will keep the Premises in a clean and wholesome
condition, will use the same in a careful and proper manner, and generally will
comply with all laws, ordinances, orders and regulations affecting the Premises
and the cleanliness, safety, occupancy and use thereof. Tenant will not commit
waste in or on the Premises, and will use the Premises in accordance with the
Rules and Regulations of the Project, as set forth in Exhibit B, attached hereto
and made a part hereof.
7.06 As between Landlord and Tenant, Tenant shall be responsible for any
alterations, changes or improvements to the Premises which may be necessary in
order for the Premises and Tenant's use thereof to be in compliance with the
Americans with Disabilities Act of 1990 and its state and local counterparts or
equivalents (the "Disabilities Act") during the term of this Lease.
7.07 For the purposes of this Lease, the term "Hazardous Materials" shall
mean, collectively, (i) any biological materials, chemicals, materials,
substances or wastes which are now or hereafter become defined as or included in
the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar import, under any
applicable Environmental Law (as defined below) and (ii) any petroleum or
petroleum products and asbestos in any form that is or could become friable.
7.08 For the purposes of this Lease, the term "Environmental Laws" shall
mean all federal, state, and local laws, statutes, ordinances, regulations,
criteria, guidelines and rules of common law now or hereafter in effect, and in
each case as amended, and any judicial or administrative interpretation thereof,
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases or Hazardous Materials or otherwise
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials. Environmental Laws
include but are not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended; the Resource Conservation
and Recovery Act, as amended; the Clean Air Act, as amended; the Clean Water
Act, as amended; and their state and local counterparts or equivalents.
7.09 Tenant shall not (either with or without negligence) cause or permit
the escape, disposal or release of any Hazardous Materials. Tenant shall not
allow the storage or use of such Hazardous Materials on the Premises or the
Project in any manner prohibited by the Environmental Laws or by the highest
standards prevailing in the industry for the storage and use of such Hazardous
Materials, nor allow to be brought into the Premises or the project any such
hazardous materials except to use in the ordinary course of Tenant's business,
and then only after written notice is given to Landlord of the identity of such
Hazardous Materials and Landlord consents in writing to the use of such
materials. Landlord shall have the right at any times during the term of this
Lease to perform assessments of the environmental condition of the Premises and
of Tenant's compliance with this Section 7.09. In connection with any such
assessment, Landlord shall have the right to enter and inspect the Premises and
perform tests (including physically invasive tests), provided such tests are
performed in a manner that minimizes disruption to
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Tenant. Tenant will cooperate with Landlord in connection with any such
assessment by, among other things, responding to inquires and providing relevant
documentation and records. Tenant will accept custody and arrange for the
disposal of any Hazardous Materials that are required to be disposed of as a
result of those tests. Landlord shall have no liability or responsibility to
Tenant with respect to any such assessment or test or with respect to results of
any such assessment or test. If any lender or governmental agency shall ever
require testing to ascertain whether or not there has been any release of
Hazardous Materials, then the reasonable costs thereof shall be reimbursed by
Tenant to Landlord upon demand as additional charges if such requirement applies
to the Premises or Tenant's activities on the Project. If any inspection
indicates any (i) non-compliance with any Environmental Law or the highest
standards prevailing in the industry for the storage and use of Hazardous
Materials; (ii) damage; or (iii) contamination, Tenant shall, at its cost and
expense, remedy such non-compliance, damage or contamination. In addition,
Tenant shall execute affidavits, representations and the like from time to time
at Landlord's request concerning Tenant's best knowledge and belief regarding
the presence of Hazardous Materials on the Premises. Irrespective of whether
Landlord elects to inspect the Premises, if Hazardous Materials are found on or
about the Premises, Landlord shall have no responsibility, liability or
obligation whatsoever with respect to the existence, removal or transportation
of the Hazardous Material or the restoration and remediation of the Premises.
Further, Landlord shall have the right to require Tenant to immediately
terminate the conduct of any activity in violation of the Environmental Law, the
highest standards prevailing in the industry for the storage and use of
Hazardous Materials or, if none exist, the standards determined by Landlord.
Tenant's obligations under this paragraph with respect to any environmental
condition shall not be applicable to the extent that such environmental
condition (a) exists prior to the commencement of the initial term of this Lease
or (b) results from (i) the actions or omissions of Landlord either before the
commencement of this Lease, during the term hereof or after the termination of
this Lease or (ii) the actions or omissions of any preceding or succeeding
tenant or owner of the Premises or (iii) the actions or omissions of any person
or entity who or which is not a subtenant, employee, agent, invitee, customer,
visitor, licensee, contractor or designee of Tenant.
7.10 Tenant further agrees that it will not, by either action or
inaction, invite or otherwise cause agents or representatives of any federal,
state or local governmental agency to enter onto the Premises or the Project
and/or investigate the Premises or the Project. This agreement does not allow
Tenant to obstruct any such entry or investigation and the mere fact of a
regulatory agency entry or investigation without Tenant's involvement either by
action or inaction shall not be deemed a breach of this lease. Nothing set forth
in this paragraph shall prohibit Tenant from reporting any fact or condition
which Tenant has been advised it has a legal obligation to report provided
Tenant first notifies Landlord of such fact or condition and Tenant's intention
to report the fact or condition.
7.11 Tenant shall indemnify, hold harmless and defend Landlord, its
licensees, servants, agents, employees and contractors from any loss, damage,
claim, liability or expense (including reasonable attorney's fees) arising out
of the failure of the Premises or Tenant's use thereof to be in compliance with
Disabilities Act. Tenant shall not be required to indemnify, hold harmless or
defend Landlord for the failure, if any, of the common areas (including the
parking areas, ramps and walkways) to comply with the Disabilities Act. Tenant
shall indemnify, hold harmless and defend Landlord, its licensees, servants,
agents, employees and contractors for any loss, damage, claim, liability or
expense (including reasonable attorney's fees) arising out of any violation of
any Environmental Law(s) by Tenant or its responsible parties (as described in
Section 7.09 above) on the Premises or the Project which occurs after the date
hereof. Tenant shall notify Landlord as soon as possible after Tenant learns of
the existence of or potential for any such loss, damage, claim, liability or
expense arising out of any violation or suspected violation of any Environmental
Law(s) or the Disabilities Act. In the event Tenant refuses to address such
violation or suspected violation within five (5) days of such notice from
Landlord, and, thereafter, to investigate such violation or suspected violation,
and promptly commence and diligently pursue any action required to address such
violation or suspected violation, Landlord shall have the right, in addition to
every other right and remedy it may have hereunder, to terminate this Lease by
giving ten (10) days prior written notice thereof to Tenant, and upon the
expiration of such ten (10) days, this Lease shall terminate. The covenants set
forth herein shall survive the expiration or earlier termination of this Lease.
SECTION 8.
INSURANCE
8.01 Commencing on the Commencement Date, Tenant shall, during the Term
of this Lease, maintain in full force and effect policies of commercial general
liability insurance (including premises, operation, bodily injury, personal
injury, death, independent contractors, products and completed operations, broad
form contractual liability and broad form property damage coverage), in a
combined single limit amount of not less than One Million Dollars ($1,000,000)
per occurrence and Two Million Dollars ($2,000,000) of excess umbrella coverage
(exclusive of defense costs), against all claims, demands or actions with
respect to damage, injury or death made by or on
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behalf of any person or entity, arising from or relating to the conduct and
operation of Tenant's business in, on or about the Premises (which shall include
Tenant's signs, if any), or arising from or related to any act or omission of
Tenant or of Tenant's principals, officers, agents, contractors, servants,
employees, licensees and invitees. Whenever, in Landlord's reasonable judgment,
good business practice and changing conditions indicate a need for additional
amounts or different types of insurance coverage, Tenant shall, within ten (10)
days after Landlord's request, obtain such insurance coverage, at Tenant's sole
cost and expense.
8.02 Commencing on the Commencement Date, Tenant shall obtain and
maintain policies of workers' compensation and employers' liability insurance
which shall provide for statutory workers' compensation benefits and employers'
liability limits of not less than that required by law.
8.03 Commencing on the Commencement Date, Tenant shall obtain and
maintain insurance protecting and indemnifying Tenant against any and all damage
to or loss of any personal property, fixtures, leasehold improvements,
alterations, decorations, installations, repairs, additions, replacements or
other physical changes in or about the Premises, including but not limited to
the Tenant Improvements, and all claims and liabilities relating thereto, for
their full replacement value without deduction or depreciation. In addition, if
Tenant shall install or maintain one or more pressure vessels to serve Tenant's
operations on the Premises, Tenant shall, at Tenant's sole cost and expense,
obtain, maintain and keep in full force and effect appropriate boiler or other
insurance coverage therefore in an amount not less than One Million and No/100
Dollars ($1,000,000.00) (it being understood and agreed, however, that the
foregoing shall not be deemed a consent by Landlord to the installation and/or
maintenance of any such pressure vessels in the Premises, which installation
and/or maintenance shall at all times be subject to the prior written consent of
Landlord). All insurance policies required pursuant to this Paragraph 8.03 shall
be written on a so-called "all risk" form and shall be carried in sufficient
amount so as to avoid the imposition of any co-insurance penalty in the event of
a loss. Such insurance shall provide the broadest coverage then available,
including coverage for loss of profits or business income or reimbursement for
extra expense incurred as the result of damage or destruction to all or a part
of the Premises.
8.04 All insurance policies which Tenant shall be required to maintain
pursuant to this Section 8 shall, in addition to any of the foregoing: be
written by insurers which have an A.M. Best & Company rating of "A", Class "X",
or better and who are authorized to write such business in the State of Michigan
and are otherwise satisfactory to Landlord; be written as "occurrence" policy;
be written as primary policy coverage and not contributing with or in excess of
any coverage which Landlord or any ground or building lessor may carry; name
Landlord, the Manager, and Landlord's mortgagee and ground or building lessor,
if any, as additional insureds; be endorsed to provide that they shall not be
cancelled, failed to be renewed, diminished or materially altered for any reason
except on thirty (30) days prior written notice to Landlord and the other
additional insureds; and provide coverage to Landlord, Landlord's property
management company, and Landlord's mortgagee whether or not the event or
occurrence giving rise to the claim is alleged to have been caused in whole or
in part by the acts or negligence of Landlord, Landlord's property management
company, or Landlord's mortgagee. At Landlord's option, either the original
policies or certified duplicate copies of the original policies will be
delivered by Tenant to Landlord at least ten (10) days prior to their effective
date thereof, together with receipts evidencing payment of the premiums
therefor. Tenant will deliver certificates of renewal for such policies to
Landlord not less than thirty (30) days prior to the expiration dates thereof.
No such policy shall contain a deductible or self insured retention greater than
$5,000.00 per claim, nor shall any such policy be the subject of an
indemnification or other arrangement by which any insured is obligated to repay
any insurer with respect to loss occurring on the Premises.
8.05 If Tenant fails to provide all or any of the insurance required by
this Section 8 or subsequently fails to maintain such insurance in accordance
with the requirements hereof, then after giving one (1) business days written
notice to Tenant, Landlord may (but will not be required to) procure or renew
such insurance to protect its own interests only, and any amounts paid by
Landlord for such insurance will be additional rental due and payable on or
before the next Rent Day, together with late charges and interest as provided
in Section 5 hereof. Landlord and Tenant agree that no insurance acquired by
Landlord pursuant hereto shall cover any interest or liability of Tenant and any
procurement by Landlord of any such insurance or the payment of any such
premiums shall not be deemed to waive or release the default of Tenant with
respect thereto.
SECTION 9.
DAMAGE BY FIRE OR OTHER CASUALTY
9.01 It is understood and agreed that if, during the Term hereof, the
Project and/or the Premises shall be damaged or destroyed in whole or in part by
fire or other casualty, without the fault or neglect of Tenant, Tenant's
servants, employees, agents, visitors, invitees or licensees, which damage is
covered by insurance carried pursuant to Section 8 above, unless Landlord elects
to terminate this Lease
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as provided in Paragraph 9 02 below, Landlord shall cause the Project and/or the
Premises to be repaired and restored to good, tenantable condition with
reasonable dispatch at its expense; provided, however, Landlord shall not be
obligated to expend for such repair or restoration an amount in excess of
insurance proceeds made available to Landlord for such purpose, if any.
Landlord's obligation hereunder shall be limited to repairing or restoring the
Project and/or the Premises to substantially the same condition that existed
prior to such damage or destruction.
9.02 If (i) more than fifty (50%) percent of the floor area of the
Premises shall be damaged or destroyed, (ii) more than twenty-five (25%) percent
of the Project shall be damaged or destroyed, or (iii) any material damage or
destruction occurs to the Premises or the Project during the last twelve (12)
months of the Initial Term or Option Term, as the case may be, then Landlord may
elect to either terminate this Lease or repair and rebuild the Premises. In
order to terminate this lease pursuant to this Paragraph, Landlord must give
written notice to Tenant of its election to so terminate, such notice to be
given within ninety (90) days after the occurrence of damage or destruction
fitting the above description, and thereupon the term of this Lease shall expire
by lapse of time ten (10) days after such notice is given and Tenant shall
vacate the Premises and surrender the same to Landlord, without prejudice,
however, to Landlord's rights and remedies against Tenant under the Lease
provisions in effect prior to such termination, and any rent owing shall be paid
up to such date and any payments of rent made by Tenant which were on account of
any period subsequent to such date shall be returned to Tenant. Tenant
acknowledges that Landlord will not carry insurance on Tenant's furniture and/or
furnishings or any fixtures or equipment, improvements, or appurtenances
removable by Tenant and agrees that Landlord will not be obligated to repair any
damage thereto or replace the same.
9.03 Tenant shall give immediate notice to Landlord in case of fire or
accident at the Premises. If Landlord repairs or restores the Premises as
provided in Paragraph 9.01 above, Tenant shall promptly repair or replace its
trade fixtures, furnishings, equipment, personal property and leasehold
improvements in a manner and to a condition equal to that existing prior to the
occurrence of such damage or destruction.
9.04 If the casualty, or the repairing or rebuilding of the Premises
pursuant to Paragraphs 9.01 and 9.02 above shall render the Premises
untenantable, in whole or in part, a proportionate abatement of the rent due
hereunder shall be allowed from the date when the damage occurred until the date
Landlord completes the repairs on the Premises or, in the event Landlord elects
to terminate this Lease, until the date of termination. Such abatement shall be
computed on the basis of the ratio of the floor area of the Premises rendered
untenantable to the entire floor area of the Premises.
9.05 Tenant shall not entrust any property to any employee, contractor,
licensee, or invitee of Landlord. Any person to whom any property is entrusted
by or on behalf of Tenant in violation of foregoing prohibition shall be deemed
to be acting as Tenant's agent with respect to such property and neither
Landlord nor its agents shall be liable for any damage to property of Tenant or
of others entrusted to employees of the Project, nor shall Landlord or its
agents be liable for any such damage caused by other tenants or persons in, upon
or about the Project or caused by operations or construction of any private,
public or quasi-public work.
9.06 Notwithstanding Landlord's right not to terminate this Lease
pursuant to Section 9.01 above, in the event the Premises are damaged or
destroyed in whole or in part by fire or other casualty, without the fault or
neglect of Tenant, Tenant's servants, employees, agents, visitors, invitees or
licensees, tenant may elect to terminate this Lease if: (i) more than fifty
percent (50%) of the floor area of the Premises shall be damaged or destroyed,
or (ii) any material damage or destruction occurs to the Premises during the
last twelve (12) months of the Initial Term or Option Term, as the case may be,
or (iii) if the Restoration Period (as defined below) for the aforementioned
casualty (i) or (ii) is more than two hundred and seventy (270) days after the
date of said damage or destruction, (individually referred to as the "Qualified
Casualty"). In order to terminate this Lease pursuant to Qualified Casualty (i)
or (ii) above Tenant shall, within fifteen (15) days of said damage or
destruction, provide written notice to Landlord indicating its intent to
terminate its Lease, and thereupon the term of this Lease shall expire by lapse
of time thirty (30) days after said notice from Tenant is given and Tenant shall
vacate the Premises and surrender the same to Landlord, without prejudice,
however, to Landlord's rights and remedies against tenant under the Lease
provisions in effect prior to such termination, and any rent owing shall be paid
up to such date and any payments of rent made by Tenant which were on account of
any period subsequent to such date shall be returned to Tenant. If Tenant fails
to provide written notice to Landlord within such time period, Tenant's right
to terminate this Lease under this paragraph shall be deemed waived. In order to
terminate this Lease for Qualified Casualty (iii) Tenant shall within fifteen
(15) days of the damage or destruction resulting in Qualified Casualty (i) or
(ii), provide written notice to Landlord requesting an estimate of the time
required to substantially restore the Premises. If Tenant fails to provide
written notice to Landlord within such time period, Tenant's right to terminate
this Lease under this paragraph shall be deemed waived. Within a reasonable
time of receipt of Tenant's notice requesting the restoration time frame,
Landlord shall provide a written notice to Tenant (the "Landlord Casualty
Restoration Estimate
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Notice") indicating the scheduled completion date to repair or restore the
Premises as described in Section 9.01 (the "Restoration Period"). If the
Restoration Period is more than two-hundred seventy (270) days after the date of
said damage or destruction, then Tenant may elect to terminate this Lease. In
order to terminate this Lease, Tenant must give written notice to Landlord of
its election to so terminate, such notice (the "Tenant Casualty Termination
Notice") shall be given within fifteen (15) days of the date the Landlord
Casualty Restoration Estimate Notice and thereupon the Term of this Lease shall
expire by lapse of time thirty (30) days after Tenant Casualty Termination
Notice is given and Tenant shall vacate the Premises and surrender the same to
Landlord, without prejudice, however, to Landlord's rights and remedies against
Tenant under the Lease provisions in effect prior to such termination, and any
rent owing shall be paid up to such date and any payments of rent made by Tenant
which were on account of any period subsequent to such date shall be returned to
Tenant.
SECTION 10.
REPAIRS, RENOVATIONS AND ALTERATIONS
10.01 Tenant shall, at Tenant's sole expense, keep the interior of the
Premises and the fixtures therein in good condition, reasonable wear and tear
excepted, and will also repair all damage or injury to the Premises and fixtures
resulting from the carelessness, omission, neglect or other action or inaction
of Tenant, its servants, employees, agents, visitors, invitees or licensees.
Such damage shall be promptly repaired or damaged items replaced by Tenant, at
its sole expense, to the satisfaction of Landlord. If Tenant fails to make such
repairs or replacements, Landlord may do so and the cost thereof shall become
collectible as additional rent hereunder and shall be paid by Tenant within ten
(10) days after presentation of statement therefor. Landlord shall maintain, and
shall make all necessary repairs and replacements to, the Building, the heating,
air conditioning and electrical systems located therein, and the Common Areas,
provided that at Landlord's option, (i) Tenant shall make all repairs and
replacements arising from its act, neglect or default and that of its agents,
servants, employees, invitees and licensees, or (ii) Landlord may make such
repairs and replacements and the costs thereof shall become collectable as
additional rent hereunder and shall be paid by Tenant within five (5) days after
presentation of a statement therefore. Tenant shall keep and maintain the
Premises in a clean, sanitary and safe condition, and shall keep and maintain
the interior of the Premises in full compliance with the laws of the United
States and State of Michigan, all directions, rules and regulations of any
health officer, fire marshal, building inspector, or other proper official of
any governmental agency having jurisdiction over the Premises, and the
requirements of Landlord's mortgagee, all at Tenant's full cost and expense, and
Tenant shall comply with all requirements of law, ordinance and regulation
affecting the Premises. Tenant shall make all non-structural repairs to the
Premises as and when needed to preserve them in good order and condition. All
the aforesaid repairs shall be of quality or class equal to the original
construction. Tenant shall give Landlord prompt written notice of any defective
condition in any plumbing, heating system or electrical lines located in,
servicing or passing through the Premises and following such notice, Landlord
shall remedy the condition with due diligence but at the expense of Tenant if
repairs are necessitated by damage or injury attributable to Tenant, Tenant's
servants, agents, employees, invitees or licensees, There shall be no allowance
to Tenant for diminutions of rental value and no liability on the part of
Landlord by reason of inconvenience, annoyance or injury to business arising
from Landlord, Tenant, or others making or failing to make any repairs,
alterations, additions, or improvements in or to any portion of the Building or
the Premises or in and to the fixtures, appurtenances or equipment thereof. The
provisions of this Section 10 with respect to the making of repairs shall not
apply in the case of fire or other casualty which are dealt with in Section 9
hereof.
10.02 Tenant shall not make any renovations, alterations, additions or
improvements to the Premises without Landlord's prior written consent. All
plans and specifications for such renovations, alterations, additions or
improvements shall be approved by Landlord prior to commencement of any work.
Landlord's approval of the plans, specifications and working drawings for
Tenant's alterations shall create no responsibility or liability on the part of
Landlord for their completeness, design sufficiency, or compliance with laws,
rules and regulations of governmental agencies or authorities, including but not
limited to the Americans with Disabilities Act, as amended. All renovations,
alterations, additions or improvements made by Tenant upon the Premises, except
for movable office furniture and movable trade fixtures installed at the expense
of Tenant, shall be and shall remain the property of Landlord, and shall be
surrendered with the Premises at the termination of this Lease, without
molestation or injury. In addition, Landlord may designate by written notice to
Tenant the alterations, additions, improvements and fixtures made by or for
Tenant, which shall be removed by Tenant at the expiration or termination of the
Lease and Tenant shall promptly remove the same and repair any damage to the
Premises caused by such removal.
10.03 Tenant agrees that all renovations, alterations, additions and
improvements made by it pursuant to Paragraph 10.02, notwithstanding Landlord's
approval thereof, shall be done in a good and workmanlike manner and in
conformity with all guidelines provided by Landlord and all laws, ordinances and
regulations of all public authorities having jurisdiction, that materials of
good quality shall be
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employed therein, that the structure of the Premises shall not be impaired
thereby, that the work shall be carried out and completed in an orderly, clean
and safe manner, and that, while the work is being performed, Tenant shall
maintain builder's risk insurance coverage with Landlord as a named insured,
which insurance coverage shall meet the criteria set forth in Section 8.
SECTION 11.
LIENS
11.01 Tenant will keep the Premises free of liens of any sort and will
hold Landlord harmless from any liens which may be placed on the Premises except
those attributable to debts incurred by Landlord. In the event a construction or
other lien shall be filed against the Building, the Premises or Tenant's
interest therein as a result of any work undertaken by Tenant or its employees,
agents, contractors or subcontractors, or as a result of any repairs or
alterations made by or any other act of Tenant or its employees, agents,
contractors or subcontractors, Tenant shall, within two (2) days after receiving
notice of such lien, discharge such lien either by payment of the indebtedness
due the lien claimant or by filing a bond (as provided by statute) as security
for the discharge of such lien. In the event Tenant shall fail to discharge such
lien, Landlord shall after have the right to procure such discharge by filing
such bond, and Tenant shall pay the cost of such bond to Landlord as additional
rent upon the next Rent Day in accordance with Section 5 hereof.
SECTION 12.
EMINENT DOMAIN
12.01 If all of the Premises are condemned or taken in any manner
(including without limitation any conveyance in lieu thereof) for any public or
quasi-public use, the term of this Lease shall cease and terminate as of the
date title is vested in the condemning authority. If (i) more than fifty (50%)
percent of the floor area of the Premises shall be condemned or taken in any
manner, or (ii) more than twenty-five (25%) percent of the Building shall be
condemned or taken, or (iii) any material condemnation or taking occurs, during
the last twelve (12) months of the Initial Term or Option Term, as the case
may be, or (iv) such a portion of the parking area on the Land is so condemned
or taken that the number of parking spaces remaining are less than the number
required by applicable zoning laws or other building code for the Building,
then Landlord may elect to terminate this Lease. In order to terminate this
Lease pursuant to this Paragraph, Landlord must give Tenant written notice of
its election to so terminate, such notice to be given not later than ninety (90)
days after the completion of such condemnation or taking, and thereupon the term
of this Lease shall expire on the date set forth in such notice, and Tenant
shall vacate the Premises and surrender the same to Landlord, without prejudice,
however, to Landlord's rights and remedies against Tenant under the Lease
provisions in effect prior to such termination, and any rent owing shall be paid
up to such date and any payments of rent made by Tenant which were on account of
any period subsequent to such date shall be returned to Tenant.
12.02 If this Lease is not terminated following such a condemnation or
taking, Landlord, as soon as reasonably practicable after such condemnation or
taking and the determination and payment of Landlord's award on account thereof,
shall expend as much as may be necessary of the net amount which is awarded to
Landlord and released by Landlord's mortgagee, if any, in restoring, to the
extent originally constructed by Landlord (consistent, however, with zoning laws
and building codes then in existence), so much of the Building as was originally
constructed by Landlord to an architectural unit as nearly like its condition
prior to such taking as shall be practicable; provided, however, Landlord shall
not be obligated to expend for such restoration an amount in excess of
condemnation proceeds made available to Landlord, if any. Landlord's obligation
hereunder shall be limited to restoring the Building and/or the Premises to
substantially the same condition that existed prior to such condemnation or
taking.
12.03 If this Lease is not terminated pursuant to Paragraph 12.01, the
Base Rent and other sums payable by Tenant hereunder, as adjusted as provided
herein, shall be reduced in proportion to the reduction in area of the Premises
by reason of the condemnation or taking. If this Lease is terminated pursuant to
Paragraph 12.01. the minimum net rental and other charges which are the
obligation of Tenant hereunder shall be apportioned and prorated accordingly as
of the date of termination.
12.04 The whole of any award or compensation for any portion of the
Premises taken, condemned or conveyed in lieu of taking or condemnation,
including the value of Tenant's leasehold interest under the Lease, shall be
solely the property of and payable to Landlord. Nothing herein contained shall
be deemed to preclude Tenant from seeking, at its own cost and expense, an award
from the condemning authority for loss of its business, the value of any trade
fixtures or other personal property of Tenant in the Premises or moving
expenses, provided that the award for such claim or claims shall not be in
diminution of the award made to Landlord.
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SECTION 13.
ASSIGNMENT OR SUBLETTING
13.01 Tenant agrees not to assign or in any manner transfer this Lease
or any interest in this Lease without the prior written consent of Landlord
which shall not be unreasonably withheld or delayed, and not sublet the premises
or any part of the Premises or to allow anyone to use or to come in, and not to
sublet the Premises or any part of the remise allow through or under the
Premises without Landlord's consent which shall not be unreasonably withheld or
delayed. Any attempted subletting or assignment without Landlord's consent
shall be voidable in Landlord's sole discretion and, at Landlord's option, shall
grant Landlord the right to terminate this Lease or to exercise any of the other
rights or remedies it may have hereunder. If consented to, no assignment or
Subletting shall be binding upon Landlord unless the sublessee or assignee shall
deliver to Landlord an instrument (in recordable form, if Landlord so requests)
containing an agreement of assumption of all of Tenant's obligations under this
Lease. In no event may Tenant assign, sublet or otherwise transfer this Lease or
any interest in this Lease at any time while an Event of Default exists
hereunder. Landlord may, in its sole discretion, refuse to give its consent to
any proposed subletting or assignment or exercise its other rights hereunder for
any reason, including, but not limited to, the financial condition,
creditworthiness or business reputation of the proposed sublessee or assignee,
the prevailing market or quoted rental rates for space in the Building or other
comparable buildings, and the proposed use of the Premises by, or business of,
the proposed sublessee or assignee. One consent by Landlord to a subletting or
assignment will not be deemed a consent to any subsequent assignment,
subletting, occupation or use by any other person. Neither the consent to any
assignment or subletting nor the acceptance of rent from an assignee, subtenant
or occupant will constitute a release of Tenant from the further performance of
the obligations of Tenant contained in this Lease. A dissolution, merger,
consolidation, or other reorganization of Tenant, and the issuance or transfer
of TWENTY (20%) PERCENT OR MORE OF THE VOTING CAPITAL OF TENANT TO PERSONS other
than shareholders as of the beginning of such period within any twelve (12)
month period, shall each be deemed to be an assignment of this Lease, and as
such, prohibited without Landlord's prior written consent.
13.02 In the event Tenant desires to sublet all or a portion of the
Premises or assign this Lease, Tenant shall give notice to Landlord setting
forth the terms of the proposed subletting or assignment together with such
financial and other information Landlord may request. Landlord shall have the
right, exercisable by written notice to Tenant within sixty (60) days after
receipt of Tenant's notice, (1) to consent or refuse to consent thereto in
accordance with Paragraph 13.01 above, or (ii) to terminate this Lease which
termination may, in Landlord's sole discretion, be conditioned upon Landlord and
the proposed subtenant/assignee entering into a new Lease. However, in the event
Landlord desires to elect to terminate this Lease, it shall first notify Tenant
of its desire whereupon Tenant may withdraw the request within ten (10) days
after Landlord's notice by the delivery of written withdrawal thereof to
Landlord whereupon Landlord shall withdraw its recapture option and Tenant shall
remain fully obligated under this Lease.
13.03 Upon the occurrence of an Event of Default, as defined under
Section 18, if all or any part of the Premises are then sublet or assigned,
Landlord, in addition to any other remedies provided by this Lease or by law,
may, at its option, collect directly from the sublessee or assignee all rent
becoming due to Landlord by reason of the subletting or assignment. Any
collection by Landlord from the sublessee or assignee shall not be construed to
constitute a waiver or release of Tenant from the further performance of its
obligations under this Lease or the making of,a new Lease with such sublessee or
assignee.
13.04 In the event Tenant shall sublet all or a portion of the Premises
or assign this Lease, all of the sums of money or other economic consideration
received by Tenant or its affiliates, directly or indirectly, as a result of
such subletting or assignment, whether denominated as rent or otherwise, which
exceed in the aggregate the total sums which Tenant is obligated to pay Landlord
under this Lease (prorated to reflect obligations allocable to that portion of
the Premises subject to such sublease) shall be payable to Landlord as
additional rent under this Lease without effecting or reducing any other
obligation of Tenant hereunder.
SECTION 14.
INSPECTION OF PREMISES
14.01 Tenant agrees to permit Landlord to enter the Premises for the
purpose of inspecting the same and to show same to prospective purchasers,
tenants or mortgagees of the Project, and to make such repairs, alterations,
improvements or additions as Landlord may deem necessary or desirable, and
Landlord shall be allowed to take all material into and upon the Premises that
may be required therefor without the same constituting an eviction of Tenant in
whole or in part and the rent reserved shall in no way abate while said repairs,
alterations, improvements, or additions are being made, by reason of loss or
interruption of business of Tenant, or otherwise. Landlord will give Tenant
reasonable notice prior to an
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entry by Landlord pursuant to this Section 14.01, except in the case of
emergencies in which event no notice need be given.
SECTION 15.
FIXTURES AND EQUIPMENT
15.01 All fixtures and equipment paid for by Landlord and all fixtures
and equipment which may be paid for and placed on the Premises by Tenant from
time to time but which are so incorporated and affixed to Premises that their
removal would involve damage or structural change to Premises will be and remain
the property of Landlord.
15.02 All tenant furnishings, office equipment and tenant fixtures (other
than those specified in Sections 10.02 and 15.01), which are paid for and placed
on the Premises by Tenant from time to time (other than those which are
replacements for fixtures originally paid for by Landlord) will remain the
property of Tenant.
SECTION 16.
PARKING AREAS
16.01 Tenant and its agents, employees, customers, licensees and invitees
shall have the non-exclusive right to use in common with Landlord and all other
tenants and occupants of the Building and their respective agents, employees,
customers, licensees and invitees, the Common Area parking and loading dock
facilities, if any, on the Land, and all driveways, entrances and exits located
within the Project necessary to provide a means of ingress and egress to and
from the Premises. Such use of parking facilities shall be subject to, and
consistent with, the Rules and Regulations of the Project (as set forth in
Exhibit B), together with such reasonable modifications and additions as may be
made thereto during the term of this Lease. Landlord shall designate the number
of parking spaces set forth in Paragraph 1.01(i) in the parking lot of the
Project for the exclusive use of Tenant (the "Tenant's Designated Parking
Spaces"). Tenant shall pay Landlord, as additional rent on each Rent Day, an
amount set forth in Section 1.01(i). Such sums may be increased by Landlord from
time to time by the delivery of thirty (30) days prior written notice to Tenant.
Within thirty (30) days of receipt Of Such notification, Tenant may: (i) accept
such increase; or (6) reject such increase for all or any of its exclusive
spaces,in which event Tenant's exclusive parking rights for such spaces shall
terminate. If Tenant accepts such increase or fails to reject such increase
within the thirty (30) day period, then commencing with the next Rent Day
following Landlord's notice, the amount of additional rent payable hereunder
shall be increased accordingly. Notwithstanding anything contained herein to the
contrary, Landlord shall have the right to relocate Tenant's Designated Parking
Spaces within the parking lot of the Project, and Landlord shall have the right
to designate other parking spaces in the parking lot for the exclusive use of
others. Tenant agrees to be bound by parking regulations in effect at the
Project, together with reasonable modifications or additions as may be necessary
during the term of this Lease, as more fully described in Exhibit "B", attached
hereto and made part hereof.
SECTION 17.
NOTICE OR DEMANDS
17.01 All bills, notices, requests, statements, communications, or
demands (collectively, "notices or demands") to or upon Landlord or Tenant
desired or required to be given under any of the provisions hereof must be in
writing. Any such notices or demands from Landlord to Tenant will be deemed to
have been duty and sufficiently given if a copy thereof has been personally
delivered, mailed by United States certified mail, return receipt requested.
postage prepaid, or sent via overnight courier service to Tenant at the address
of the Premises or at such other address as Tenant may have last furnished in
writing to Landlord for such purpose. Any such notices or demands from Tenant to
Landlord will be deemed to have been duly and sufficiently given if delivered to
Landlord in the same manner as provided above at the address set forth at the
heading of this Lease or at the address last furnished by written notice from
Landlord to Tenant. The effective date and the delivery date of such notice or
demand will be deemed to be the time when it is personally delivered, three (3)
days after it is mailed or the day after it is sent via overnight courier as
herein provided.
SECTION 18.
BREACH; INSOLVENCY; RE-ENTRY
18.01 Each of the following shall constitute an Event of Default under
this Lease: (i) Tenant's failure to pay rent or any other sum payable hereunder
when due; (ii) Tenant's failure to perform any of
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the non-monetary terms, conditions or covenants of this Lease to be observed or
performed by Tenant for more than seven (7) days after written notice of such
failure shall have been delivered to Tenant; (iii) if Tenant is named as the
debtor in any bankruptcy proceeding, or similar debtor proceeding, and any Such
proceeding, if involuntary, is not dismissed or set aside within sixty (60) days
from the date thereof; (iv) if Tenant makes an assignment for the benefit of
creditors or petitions for or enters into an arrangement with creditors or if a
receiver of any property of Tenant in or upon the Premises is appointed in any
action, suit or proceeding by or against Tenant, or if Tenant shall admit to any
creditor or to Landlord that it is insolvent, or if the interest of Tenant in
the Premises shall be sold under execution or other legal process; or (v) if
Tenant shall abandon the Premises, vacate the Premises for a period of more than
fifteen (15) consecutive days, or suffer this Lease to be taken under any writ
of execution. Upon the occurrence of any Event of Default, Landlord, in addition
to any other rights and remedies it may have hereunder or by law, shall have the
immediate right of re-entry, and may remove all persons and property from the
Premises and it shall have the right to abandon or otherwise dispose of such
property in any way it may deem fit which is not in contravention of applicable
law. In addition, Landlord shall have the right, but not the obligation, to
store all or some of the property which may have been removed in a public
warehouse or elsewhere at the cost of, and for the account of, Tenant, all
without service of notice or resort to legal process and all without being
deemed guilty of trespass or becoming liable for any loss or damage which may be
occasioned thereby.
18.02 In the event Landlord shall elect to re-enter the Premises in
accordance with Paragraph 18.01, or should Landlord take possession of Premises
pursuant to legal proceedings or pursuant to any notice provided by law,
Landlord may either terminate this Lease or may from time to time without
terminating this Lease, make such alterations and repairs as Landlord may deem
necessary in order to relet the Premises, and relet the Premises or any part
thereof for any such term or terms (which may be for a term extended beyond the
term of this Lease) and at such rental or rentals, and upon such other terms and
conditions as Landlord may deem advisable.
18.03 Upon the reletting of the Premises in accordance with Paragraph
18.02, all rentals received by Landlord from such reletting shall be applied in
the following order of priority: (a) to the payment of any additional rent
payable as provided in Section 5 hereof, including interest and late charges;
(b) to the payment of any other indebtedness other than rent due hereunder from
Tenant to Landlord; (c) to the payment of the actual costs and expenses of
obtaining possession, restoring and repairing the Premises and the actual costs
and expenses of reletting, including brokerage and attorneys' fees; and (d) to
the payment of any rent and other sums due and unpaid under this Lease. The
remainder, if any, shall be held by Landlord and applied in payment of future
rent as the same may become due and payable hereunder. If the rental received
from such reletting during any month is less than that to be paid during that
month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord
monthly. No such re-entry or taking possession of the Premises or any part
thereof by Landlord shall be construed as an election on its part to terminate
this Lease unless a written notice of such intention is given to Tenant or
unless the termination thereof is decreed by a court of competent jurisdiction.
18.04 Notwithstanding any reletting of the Premises without termination
in accordance with Paragraph 18.02, Landlord may at any time after the
occurrence of any Event of Default, terminate this Lease and, in addition to any
other remedies Landlord may have, Landlord may recover from Tenant all damages
it may incur by reason of Tenant's breach, including, without limitation, the
reasonable cost of recovering and reletting the Premises and reasonable
attorneys' fees incidental thereto and the worth at the time of the termination
of the amount of rent and other charges payable hereunder for the remainder of
the Term, all of which amounts shall be immediately due and payable by Tenant to
Landlord.
18.05 In case suit shall be brought or an attorney otherwise consulted,
for recovery of possession of the leased premises, for the recovery of rent or
any other amount due under the provisions of this Lease, or because of the
breach of any other covenant herein contained on the part of Tenant to be kept
and performed, or any other action against Tenant by Landlord, or because of any
claimed breach of this Lease by Landlord or any other action against Landlord by
Tenant, (and Landlord shall be the prevailing party), Tenant shall pay to
Landlord all expenses incurred therefor, including a reasonable attorneys' fee.
In addition, Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by Landlord or Tenant against the other on
any matter whatsoever arising out of or in any way connected with this Lease,
the relationship of Landlord to Tenant, the use or occupancy of the Premises by
Tenant or any person claiming through or under Tenant, any claim of injury or
damage, and any emergency or other statutory remedies; provided, however, the
foregoing waiver shall not apply to any action for personal injury or property
damage.
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not claim any rights of setoff, or listing such rights of setoff; (iv) to the
amount of monthly rent and other sums due hereunder as of the date of the
certificate, the date to which the rent has been paid in advance, and the amount
of any security deposit or prepaid rent; (v) that Tenant agrees to provide any
mortgagee of Landlord with notice of any default by Landlord hereunder and give
such mortgagee the opportunity to cure such default within sixty (60) days of
such mortgagee's receipt of notice of such default, and (vi) such other matters
as may be reasonably requested by Landlord. Any such certificate may be relied
upon by any prospective purchaser, mortgagee or lessor of the Premises or any
part thereof.
SECTION 22.
QUIET ENJOYMENT
22.01 Landlord agrees that at all times when no Event of Default exists
under this Lease, Tenant's quiet and peaceable enjoyment of the Premises, in
accordance with and subject to the terms of this Lease, will not be disturbed or
interfered with by Landlord or any person claiming by, through, or under
Landlord.
SECTION 23.
HOLDING OVER
23.01 If Tenant remains in possession of the Premises after the
expiration of this Lease without executing a new lease, Landlord shall have the
right to deem Tenant to be occupying the Premises as a tenant from month to
month and the Base Rent for each month will be two hundred percent (200%) of the
greater of: (a) the regular monthly installment of Base Rent payable for the
last month of the Term of this Lease; or (b) the then prevailing market rates of
rent for the Project determined by Landlord in its sole and absolute discretion.
This provision shall not preclude Landlord from terminating the lease or
recovering any and all damages Landlord may incur as a result of Tenant's
failure to timely deliver possession of the Premises to Landlord or from
exercising any other right or remedy It may have hereunder.
SECTION 24.
REMEDIES NOT EXCLUSIVE; WAIVER
24.01 Each and every of the rights, remedies and benefits of Landlord
provided by this Lease are cumulative, and are not exclusive of any other of
said rights, remedies and benefits, or of any other rights, remedies and
benefits allowed by law.
24.02 The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease
or of any of the rules or regulations set forth or hereafter adopted by
Landlord, shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach and no
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord. One or more waivers of any
covenant or condition by either party shall not be construed as a waiver of a
further or subsequent breach of the same covenant or condition, and the consent
or approval by Landlord to or of any act by Tenant requiring Landlord's consent
or approval will not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar act by Tenant. No payment by Tenant
or receipt by Landlord of a lesser amount than the monthly rental herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord shall accept such check or payment without prejudice
to Landlord's right to recover the balance of such rent or pursue any other
remedy provided in this Lease.
SECTION 25.
WAIVER OF SUBROGATION
25.01 Landlord and Tenant hereby release each other and their respective
agents and employees from any and all liability to each other or anyone claiming
through or under them by way of subrogation or otherwise for any loss or damage
to property caused by or resulting from risks insured against under the property
insurance for loss, damage or destruction by fire or other casualty carried by
the parties hereto and which was in force at the time of any such loss or damage
or which would have been so covered had the insurance required hereunder been
maintained; provided, however, that this release shall be applicable only with
respect to loss or damage occurring during such time as the releasor's policies
of insurance contain a clause or endorsement to the effect that any such release
shall
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not adversely affect or impair such policies or prejudice the right of the
releasor to recover thereunder. Landlord and Tenant each agrees that it will
require its property insurance carriers to include in its policy such a clause
or endorsement. However, if such endorsement cannot be obtained, or shall be
obtainable only by the payment of an additional premium charge above that which
is charged by companies carrying such insurance without such waiver of
subrogation, then the party undertaking to obtain such waiver shall notify the
other party of such fact and such other party shall have a period of ten (10)
days after the giving of such notice to agree in writing to pay such additional
premium if such policy is obtainable at additional cost (in the case of Tenant,
pro rate in proportion of Tenant's rentable area to the total rentable area
covered by such insurance); and if such other party does not so agree or the
waiver shall not be obtainable, then the provisions of this Section 25.01 shall
be null and void as to the risks covered by such policy for so long as either
such waiver cannot be obtained or the party in whose favor a waiver of
subrogation is desired shall refuse to pay the additional premium. If the
release of either Landlord or Tenant, as set forth in the second sentence of
this Section 25.01, shall contravene any law with respect to exculpatory
agreements, the liability of the party in question shall be deemed not released,
but no action or rights shall be sought or enforced against such party unless
and until all rights and remedies against the other's insurer are exhausted and
the other party shall be unable to collect such insurance proceeds. The waiver
of subrogation referred to above shall extend to the agents and employees of
each party (including, as to Landlord, the Manager), but only if and to the
extent that such waiver can be obtained without additional charge (unless such
party shall pay such charge). Nothing contained in this Section 25.01 shall be
deemed to relieve either party from any duty imposed elsewhere in this Lease to
repair, restore and rebuild.
SECTION 26.
RIGHT TO SHOW PREMISES
26.01 Landlord may upon reasonable advance notice except in an emergency
show the Premises to prospective tenants and brokers, and may display signs
about the Project and elsewhere advertising the availability of the Premises.
SECTION 27.
INDEMNIFICATION
27.01 Tenant at its expense will defend, indemnify, save and hold
harmless Landlord, its invitees, licensees, servants, agents, employees,
affiliated entities and contractors, from and against any loss, damage, claim of
damage, liability or expense, (including attorney fees) to or for any person or
property, whether based on contract, tort, negligence or otherwise, arising
directly or indirectly out of or in connection with the condition of the
Premises, the occupation, use or misuse thereof by Tenant or any other person,
the acts or omissions of Tenant, its invitees, licensees, servants, agents,
employees or contractors, the failure of Tenant to comply with any provision of
this Lease, or any event on or relating to the Premises, whatever the cause or
any litigation or other proceeding by or against Tenant to which Landlord is
made a party, other than the intentional, willful or malicious act of Landlord
which causes an injury which was either expected or intended by Landlord when it
performed the act in question. The provisions of this Section 27.01 will survive
the expiration or termination of this Lease.
SECTION 28.
DEFINITION OF LANDLORD; LANDLORD'S LIABILITY
28.01 The term "Landlord" as used in this Lease so far as covenants,
agreements, stipulations or obligations on the part of Landlord are concerned is
limited to mean and include only the owner or owners of the Premises at the time
in question, and in the event of any transfer or transfers of the title to such
fee Landlord herein named (and in case of any subsequent transfers or
conveyances the then grantor) will automatically be freed and relieved from and
after the date of such transfer or conveyance of all personal liability for the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed.
28.02 This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on the part of
Tenant to be performed shall in no way be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease or is
unable to supply or is delayed in supplying any service expressly or implied to
be supplied or is unable to make, or is delayed in making any repairs,
additions, alterations or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if Landlord is prevented or delayed from so
doing by reasons of shortages of materials, acts of God, governmental
restrictions, strike or labor troubles or any cause beyond Landlord's reasonable
control including, but not limited to, government preemption in connection with
a national emergency or by reason of any rule, order or regulation of any
department or
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subdivision thereof of any government agency or by reason of the conditions of
supply and demand which have been or are affected by war or other emergency.
SECTION 29.
SECURITY DEPOSIT AND SECURITY INTEREST
29.01 Upon execution hereof, Tenant shall deliver to Landlord cash in the
amount set forth in Paragraph 1.01 (j), above, which Landlord is to retain as
security for the faithful performance of all the covenants, conditions and
agreements of this Lease, but in no event shall Landlord be obligated to apply
the same upon rents or other charges in arrears or upon damages for Tenant's
failure to perform the said covenants, conditions, and agreements; Landlord may
so apply the security at its option, and Landlord's right to the possession of
the Premises for nonpayment of rent or for any other reason shall not in any
event be affected by reason of the fact that Landlord holds this security. The
said sum, if not applied toward the payment of rent in arrears or toward the
payment of damages suffered by Landlord by reason of Tenant's breach of the
covenants, conditions and agreements of this Lease, is to be returned, without
interest thereon, to Tenant when this Lease is terminated, and fully performed
by Tenant, according to these terms, and in no event is the said security to be
returned until Tenant has vacated the Premises and delivered possession to
Landlord.
29.02 In the event that Landlord repossesses the Premises because of
Tenant's default or because of Tenant's failure to carry out the covenants,
conditions and agreements of this Lease, Landlord may apply the said security
upon all damages suffered to the date of said repossession and may retain the
said security to apply upon such damages as may be suffered or shall accrue
thereafter by reason of Tenant's default or breach. Landlord shall not be
obligated to keep the said security as a separate fund, but may mix the said
security with its own funds. In the event Landlord shall use any part of the
Security Deposit, Tenant shall, upon demand, deposit with Landlord the full
amount so used, in order that Landlord shall have the full Security Deposit on
hand at all times during the Term of this Lease. In the event of a sale or lease
of the Building and the transfer of the Security Deposit to the purchaser or
lessee, Landlord shall be released from all liability for the return of the
Security Deposit. Tenant shall have no legal power to assign or encumber the
Security Deposit herein described.
29.03 To secure the faithful performance of all covenants, conditions and
agreements of this Lease to be performed and observed by Tenant and to secure
the payment of all rent and other sums which may be due Landlord under this
Lease. Tenant hereby grants Landlord a security interest in all property,
equipment, fixtures, chattels, inventory and general intangibles and the
proceeds thereof, whether now owned or hereafter acquired, which may at any time
be placed in or upon the Leased Premises or used or useable in connection with
Tenant's business (collectively the "Collateral"). Upon the occurrence of an
Event of Default, Landlord may exercise any of its rights and remedies provided
by the Uniform Commercial Code. The proceeds of any such sale, after payment of
Landlord's expenses, shall be applied to the payment of Tenant's obligations
hereunder and satisfaction of such Event of Default. Enforcement of this
security interest shall be in addition to and shall not waive, alter, limit or
affect in any manner any other remedies available to Landlord. Tenant agrees
that upon Landlord's request it shall execute and deliver all such financing
statements as may be necessary to perfect this security interest. Provided no
Event of Default exists under the terms of this Lease, then within thirty (30)
days after the expiration of the Term, Landlord shall deliver all such
termination statements as Tenant may reasonably request, whereupon the security
interest granted by this Section 29 shall terminate.
SECTION 30.
RULES AND REGULATIONS
30.01 Tenant shall faithfully abide by and observe the rules and
regulations for the Building, a copy of which is attached hereto as Exhibit B
and made a part hereof, and, after notice thereof, all additions thereto and
modifications thereof of uniform applicability from time to time promulgated in
writing by Landlord.
SECTION 31.
SIGNS AND ADVERTISING
31.01 No signs, lighting, lettering, pictures, notices, advertisements,
shades, awnings or decorations will be displayed, used or installed by Tenant
except as approved in writing by Landlord. All such materials displayed in and
about the Premises will be such only as to advertise the business carried on
upon the Premises and Landlord will control the location, character and size
thereof. Tenant shall not cause or permit to be used any advertising materials
or methods which are reasonably objectionable to Landlord or to other tenants of
the Building, including without limiting the generality of the foregoing:
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<PAGE> 20
loudspeakers, mechanical or moving display devices, unusually bright or flashing
lights and similar devices the effect of which may be seen or heard from outside
the Premises. Tenant shall not solicit business, sell or display merchandise, or
distribute hand bills or other advertising matter in the parking area or other
Common Areas.
SECTION 32.
GENERAL
32.01 If, by reason of the occurrence of unavoidable delays due to acts
of God, governmental restrictions, strikes, labor disturbances, shortages of
materials or supplies or for any other cause or event beyond Landlord's
reasonable control, Landlord is unable to furnish or is delayed in furnishing
any service required by Landlord under the provisions of this Lease, or Landlord
is unable to perform or make or is delayed in performing or making any
installations, decorations, repairs, alterations, additions, or improvements,
required to be performed or made under this Lease, or is unable to fulfill or is
delayed in fulfilling any of Landlord's other obligations under this Lease, no
such inability or delay shall constitute an actual or constructive eviction in
whole or in part, or, except as otherwise expressly provided herein, entitle
Tenant to any abatement or diminution of rental or other charges due hereunder
or otherwise relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord or its agents by reason of inconvenience or
annoyance to Tenant, or injury to or interruption of Tenant's business, or
otherwise.
32.02 This Lease is being entered into and executed in the State of
Michigan, and all questions with respect to the construction of this Agreement
and the rights and liabilities of the parties shall be determined in accordance
with the provisions of the laws of the State of Michigan.
32.03 Many references in this Lease to persons, entities and items have
been generalized for ease of reading. Therefore, references to a single person,
entity or item will also mean more than one person, entity or thing whenever
such usage is appropriate (for example, "Tenant" may include, if appropriate, a
group of persons acting as a single entity, or as tenants-in-common). Similarly,
pronouns of any gender should be considered interchangeable with pronouns of
other genders.
32.04 Section headings appearing in this Lease are for convenience only.
They do not define, limit or construe the contents of any paragraphs or clauses
contained herein.
32.05 Landlord reserves the right to relocate tenant in other space in
the Building upon not less than sixty (60) days prior written notice to Tenant.
Landlord shall pay the cost of moving Tenant to new space. If Tenant does not
wish to accept such relocation, Tenant may object thereto by written notice to
Landlord within ten (10) days after the notice from Landlord. In the event
Tenant fails to object within such ten (10) day period, Tenant shall be deemed
to have accepted the relocation. In the event Tenant so objects, Landlord may
rescind the notice of intention to relocate Tenant or may reaffirm said
intention, in which event Tenant may terminate this Lease by written notice to
Landlord within five (5) days after the affirmation notice from Landlord. In the
event Tenant fails to notify Landlord of its termination within such five (5)
day period, it shall be deemed to have accepted the relocation. If Tenant
terminates this Lease pursuant this paragraph, Tenant must vacate the Premises
within thirty (30) days following Tenant's notice to Landlord of termination.
32.06 The covenants, conditions and agreements contained in this Lease
shall bind and inure to the benefit of Landlord and Tenant and their respective
heirs, distributees, successors, administrators and executors provided, however,
that no assignment by, from, through, or under Tenant in violation of any of the
provisions hereof shall vest in the assigns any right, title, or interest
whatsoever. All provisions of this Lease are and will be binding on the
successors and permitted assigns of Landlord and Tenant,
32.07 Time shall be and is of the essence in this Lease and with respect
to the performance of all obligations of Landlord and Tenant hereunder.
32.08 Any services which Landlord is required to furnish pursuant to the
provisions of this Lease may, at Landlord's option, be furnished from time to
time, in whole or in part, by employees of Landlord or by the managing agent of
the Project or by one or more third persons.
32.09 Landlord shall have the right at any time, and from time to time,
to unilaterally amend the provisions of this Lease if Landlord is advised by
counsel that all or any portion of the monies paid by Tenant to Landlord
hereunder are, or may be deemed to be, unrelated business income within the
meaning of the United States Internal Revenue Code or regulation issued
thereunder, and Tenant agrees that it will execute all documents or instruments
necessary to effect such amendment or amendments, provided that no such
amendment shall result in Tenant having to pay in the aggregate more money on
account of its occupancy of the Premises under the term of this Lease as so
amended and provided,
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<PAGE> 21
further, that no such amendment or amendments shall result in Tenant receiving
tinder the provisions of this Lease less service than it is entitled to receive,
nor services of a lesser quality.
32.10 Neither Landlord nor Landlord's agents have made any
representations or promises with respect to the physical condition of the
Building, the Land or the Premises, or with respect to the rents, leases,
expenses of operation or any other matter or thing affecting or related to the
Premises except as expressly set forth herein; and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth in the provisions of this Lease.
32.11 Annually and at any other time, Tenant shall promptly furnish
Landlord financial statements reflecting Tenant's and any Guarantor's current
financial condition. All such financial statements shall be in such form and
contain such detail as Landlord shall reasonably request.
32.12 In case any provision of this Lease or any agreement or instrument
executed in connection herewith shall be invalid, illegal or unenforceable, such
provision shall be enforced to the fullest extent permitted by applicable law,
and the validity, legality and enforceability of the remaining provisions hereof
and thereof shall not in any way be affected or impaired thereby. This Lease
shall not be construed more strictly against one party than against the other,
merely by virtue of the fact that it may have been prepared by counsel for one
of the parties, it being recognized that both Landlord and Tenant have
contributed substantially and materially to the preparation of this Lease.
32.13 This Lease can be modified or amended only by a written agreement
signed by Landlord and Tenant. This Lease and the Exhibits attached hereto and
forming a part hereof set forth all of the covenants, agreements, stipulations,
promises, conditions and understandings between Landlord and Tenant concerning
the Premises, and there are no covenants, agreements, stipulations, promises,
conditions or understanding, either oral or written, between them other than set
forth herein or therein.
32.14 Tenant will not record this Lease or a memorandum hereof, and will
not otherwise disclose the terms of this Lease to anyone other than its
attorneys, accountants or employees who need to know of its contents in order to
perform their duties for Tenant. Any other disclosure will be an Event of
Default under the Lease. Tenant agrees that Landlord shall have the right to
publish a "tombstone" or other promotional description of this Lease.
32.15 Except as disclosed in writing to Landlord, Tenant represents and
warrants to Landlord that there are no claims for brokerage commissions or
finder's fees in connection with this Lease as a result of the contracts,
contacts or actions of Tenant, and Tenant agrees to indemnify Landlord and hold
it harmless from all liabilities arising from any such claim arising from an
alleged agreement or act by Tenant (including, without limitation, the cost of
counsel fees in connection therewith); such agreement to survive the termination
of this Lease.
32.16 The matters set forth on Exhibit D, Special Provisions, if any, are
hereby accepted and agreed to between Landlord and Tenant and incorporated
herein by reference.
IN WITNESS WHEREOF Landlord and Tenant have executed this Lease as of the
date and year first above written.
LANDLORD: TENANT:
485 PROPERTIES, LLC, a Delaware ADVANCED SYSTEMS INTERNATIONAL, INC.,
Limited Liability Company a Nevada Corporation
By: By: Richard Penington
---------------------------- ---------------------------------
Printed: Printed: Richard Penington
----------------------- ---------------------------------
Its: Its: Chief Financial Officer
--------------------------- ---------------------------------
20
<PAGE> 22
EXHIBIT A
SPACE PLAN
[The plan shown below is for locational purposes only, The Plans which show the
Tenant Improvements to be constructed in the Premises will be issued and
approved by Tenant at a later date.]
[SPACE PLAN]
Approved by Tenant:
ADVANCED SYSTEMS INTERNATIONAL, INC.,
A Nevada Corporation
By: Richard Penington
------------------------------------
Printed: Richard Penington
------------------------------------
Its: Chief Financial Officer
------------------------------------
21
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EXHIBIT B
RULES AND REGULATIONS OF THE PROJECT
Tenant agrees for itself, its employees, agents, clients, customers,
licensees, invitees and guests, to comply fully with the following rules and
regulations and with such reasonable modifications thereof and additions thereto
as Landlord may make for the Project. All rules and regulations set forth in
this Exhibit B shall be in addition to, and shall in no way limit, the
provisions of the Lease.
1. The Common Areas of the Project shall not be used by Tenant for any
purpose other than those for which they are intended or designated.
2. Landlord has the right to control access to the Project and refuse
admittance to any person or persons without satisfactory identification or a
pass issued by Tenant during hours reasonably determined by Landlord.
3. No person shall disturb other occupants of the Building by making loud
or disturbing noises.
4. Soliciting, peddling and canvassing is prohibited in the Project and
Tenant shall cooperate to prevent the same. No vending machine shall be operated
in the Building by any tenant without the prior written consent of Landlord.
5. All deliveries and removals of furniture, equipment or other bulky
items must take place after notification to Landlord, during such hours and in
such manner as Landlord shall reasonably determine. Tenant shall be responsible
for all damage or injury resulting from the delivery or removal of all articles
into or out of the Project or the Premises. No load shall be placed on the
floors or in elevators in excess of the limits which shall be established by
Landlord.
6. Tenant shall not use any equipment emitting noxious fumes or
offensive odors unless they are properly vented at Tenant's expense.
7. Nothing shall be attached to the interior or exterior of the Building
without the prior written consent of Landlord.
8. No sign or other representation shall be placed on the interior or
exterior of the Building without prior written consent of Landlord.
9. No hazardous articles, bicycles, vehicles or animals of any kind
(other than wheelchairs and seeing-eye dogs) shall be brought into or kept in or
about the Building without the prior consent of Landlord.
10. No marking, painting, drilling, boring, cutting or defacing of the
walls, floors or ceilings of the Building, other than that which is reasonably
necessary for the hanging of art work, diplomas and similar objects which do not
require any material alteration to any wall, floor or ceiling, shall be
permitted without the prior written consent of Landlord.
11. The electrical system and lighting fixtures in the Building shall
not be altered or disturbed in any manner without the prior written consent from
Landlord. Any alterations or additions must be performed by licensed personnel
authorized by Landlord.
12. The toilets and other plumbing fixtures shall not be used for any
purpose other than that for which they are designed. No sweepings, rubbish or
other similar materials or substances shall be deposited therein.
13. Smoking is prohibited in the elevator(s), hallways, corridors,
stairs, lobbies and other common areas of the Project unless clearly designated
to the contrary by Landlord.
14. Tenant shall not waste electricity, water or air-conditioning, and
shall cooperate fully with Landlord to assure the most effective operation of
the Building's heating and air-conditioning. Tenant shall not adjust any
controls other than room thermostats installed for Tenant's use. Tenant shall
not tie, wedge or otherwise fasten open any water faucet or outlet. Tenant
shall keep all corridor doors closed.
15. Tenant assumes full responsibility for protecting the Premises from
theft, burglary, robbery and pilferage. Except during Tenant's normal
business hours, Tenant shall keep all doors to the Premises locked and other
means of entry to the Premises closed and secured.
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<PAGE> 24
16. Tenant or Tenant's employees shall not distribute literature, flyers,
handouts or pamphlets of any kind in any of the common areas of the Project
without the prior written consent of Landlord.
17. Tenant shall not sell or prepare any food or beverages in or from the
Premises without Landlord's prior written consent.
18. Tenant shall not permit the use of any apparatus for sound production
or transmission in such manner that the sound so transmitted or produced shall
be audible or vibrations therefrom shall be detectable beyond the Premises.
19. Tenant shall keep all electrical and mechanical apparatus free of
vibration, noise and air waves which may be transmitted beyond the Premises.
20. No floor covering shall be affixed to any floor in the Premises by
means of glue or other adhesive without Landlord's prior written consent.
21. Tenant shall not use the name of the Building for any purpose other
than that of the business address of Tenant (which it may do, at its own risk,
in the event the name of the Building changes), and shall not use any picture or
likeness of the Building in any circulars, notices, advertisements or
correspondence.
22. Tenant shall not obstruct sidewalks, entrances, passages, courts,
corridors, vestibules, halls, elevators and stairways in or about the Building,
nor shall Tenant place objects against glass partitions, doors or windows which
would be unsightly from the Building's corridors, or from other areas of the
Building.
23. Tenant shall not make any room-to-room canvass to solicit business
from other tenants of the Building.
24. No additional locks or similar devices shall be attached to any door
and no locks shall be changed without Landlord's prior written consent. Upon
termination of this lease or of Tenant's possession of the Premises, Tenant
shall surrender all keys for door locks and other locks in or about the Premises
and shall make known to Landlord the combination of all locks, safes, cabinets
and vaults which are not removed by Tenant.
25. Tenant shall not install or operate any machinery or mechanical
devices of a nature not directly related to Tenant's ordinary use of the
Premises without Landlord's prior written consent.
26. Tenant shall not employ any person to perform any cleaning,
repairing, janitorial, decorating, painting or other services or work in or
about the Premises, except with the approval of Landlord.
27. Tenant shall ascertain from Landlord the maximum amount of electrical
current which can safely be used in the Premises, taking into account the
capacity of the electric wiring in the Building and the Premises and the needs
of other tenants, and shall not use more than such safe capacity. Landlord's
consent to the installation of electric equipment shall not relieve Tenant from
the obligation not to use more electricity than such safe capacity.
28. Tenant shall not overload any floor or elevator and shall not install
any heavy objects, safes, business machines, files or other equipment without
having received Landlord's prior written consent as to size, maximum weight,
routing and locations thereof. Safes, furniture, equipment, machines and other
large or bulky articles shall be brought through the Building and into and out
of the Premises at such times and in such manner as Landlord shall direct
(including the designation of elevator) and at Tenant's sole risk and
responsibility. Prior to Tenant's removal of any such articles from the
Building, Tenant shall obtain written authorization therefore from Landlord.
29. Tenant shall not in any manner deface or damage the Building.
30. Tenant shall not bring into the Building or Premises inflammables
such as gasoline, kerosene, naphtha and benzine, or explosives or any other
articles of intrinsically dangerous nature.
31. Movement into or out of the Building of furniture or office
equipment, or dispatch or receipt by Tenant of any merchandise or materials
other than hand-delivered packages, which requires the use of elevators or
stairways or movement through the Building entrances or lobby, shall be
restricted to the hours designated by Landlord. Tenant assumes all risk of
damage to any and all articles so moved, as well as injury to any person or
property in such movement, and hereby agrees to indemnify Landlord against any
loss resulting therefrom.
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32. Landlord shall not be responsible for any lost or stolen property,
equipment, money or jewelry from the Premises or the public areas of the
Building regardless of whether such loss occurs when the Premises are locked.
33. The Premises shall not be used for housing, lodging, sleeping or for
any immoral or illegal purpose.
34. The work of the janitor or cleaning personnel shall not be
hindered by Tenant after 5:30 p.m. and the windows may be cleaned at any time.
Tenant shall provide adequate waste and rubbish receptacles to prevent
unreasonable cost to Landlord in discharging its obligations regarding cleaning
services.
35. Tenant will refer all contractors or installation technicians
rendering any service for Tenant for supervision and approval of Landlord
before performance of any contractual services.
36. Parking Regulations:
(i) Cars WILL NOT park in the designated "Reserved" spaces.
There will be no parking in any area of the Project
other than those areas clearly marked and defined for
parking.
(ii) Parking will be on the basis of first-come,
first-served except for reserved spaces.
(iii) Parkers will be expected to park their cars in an
orderly manner within the marked stalls provided.
(iv) It is recommended that cars be left in a "brakes on,
doors locked" condition at all times.
(v) No car will be allowed to park in any driveway area or
in any manner which will interfere with the normal flow
of traffic.
(vi) Cars parked illegally will be towed at the car owner's
expense.
(vii) Tenant agrees that all its employees have been fully
informed as to the content of these regulations.
(viii) Landlord or Landlord's agents and employees shall not
be liable for and Tenant waives all claims resulting
from any accident or occurrence in and upon the parking
area.
(ix) All automobiles parked in the parking areas shall be in
good condition and repair, utilized for personal
transportation, not commercial in nature and driven and
handled at the risk of the owner.
(x) Automobile owner or owner's agents shall not wash, wax
or otherwise clean or prep the interior/exterior of
vehicles or perform any maintenance whatsoever on
vehicles within the parking area or on any part of the
parking lot servicing the Building.
(xi) In the event that automobile owner's use of the parking
area violates any local, county or state law,
regulation or ordinance, automobile owner's right to
utilize the parking area shall immediately cease. In
addition, in no event shall Tenant permit its
employees, licensees, invitees or other occupants to
use more than Tenant's Proportionate Share of the
existing parking spaces for the Project.
(xii) Parking areas shall not be used to store vehicles or
for parking large commercial or recreational vehicles.
Tenant shall be responsible for the observance of all the foregoing rules and
regulations by Tenant's employees, agents, clients, customers, invitees,
licensees and guests. Landlord shall not be responsible for any violation of the
foregoing rules and regulations by other tenants of the Building and shall have
no obligation to enforce the same against other tenants. Landlord shall have the
right to amend these rules and regulations from time to time in accordance with
the terms of the Lease.
Approved by Tenant:
ADVANCED SYSTEMS INTERNATIONAL INC., a Nevada
Corporation
By: /s/ Richard Penington
-------------------------------------------
Printed: Richard Penington
-------------------------------------
Its: Chief Financial Officer
-------------------------------------
24
<PAGE> 26
EXHIBIT C
DAILY JANITORIAL SERVICE
(a) All waste paper baskets and ashtrays are emptied and cleaned.
(b) All furniture and cleared desks are dusted as required.
(c) All carpeting is vacuum cleaned daily as required.
(d) All doors, doorknobs, and glass are wiped down as required.
(e) Walls are spot cleaned as required.
(f) Windows are spot cleaned as required.
(g) All corridors, common areas, common area bathrooms, and elevators
are cleaned daily, which includes washing all tile floors, washing out the sinks
and stalls, vacuum cleaning the hallway carpeting, cleaning out the drinking
fountains and spot cleaning the walls and mirrors where necessary.
Approved by Tenant:
ADVANCED SYSTEMS INTERNATIONAL, INC.,
A Nevada Corporation
By: /s/ Richard Penington
------------------------------------
Printed: Richard Penington
-------------------------------
Its: Chief Financial Officer
-----------------------------------
25
<PAGE> 27
EXHIBIT D
SPECIAL PROVISIONS
D1 EXCESS TENANT IMPROVEMENT COSTS.
Landlord shall construct the Tenant Improvements up to a cost of seven
thousand twenty-one dollars and twelve cents ($7,021.12) (the "Tenant
Improvement Allowance"). In the event the cost of completing the Tenant
Improvements is less than the Tenant Improvement Allowance, Landlord shall
retain the difference and Tenant shall have no claim for and not be entitled to
receive any such sums. In the event the estimated cost of completing the Tenant
Improvements in accordance with the Plans shall at anytime exceed one hundred
five percent (105%) of the Tenant Improvement Allowance, Tenant shall pay
Landlord, within five (5) days of request for such payment (which request will
come no more than twice monthly), the difference between the estimated cost of
completion and the Tenant Improvement Allowance on a percentage of completion
basis. If the estimated cost of completion of the Tenant Improvements is less
than one hundred five percent (105%) of the Tenant Improvement Allowance, Tenant
shall pay Landlord the difference between the actual cost of completion and the
Tenant Improvement Allowance when the Tenant Improvements are substantially
complete.
D2 ADA COMPLIANCE REPRESENTATION.
Landlord represents and warrants, to the best of its knowledge, but without any
current or independent investigation, that the Common Areas will either comply
in all material respects with the Disabilities Act (subject, however, to
Landlord's right to challenge in court or through administrative proceeding any
regulations or rules implemented with respect to the Disabilities Act and
subject to any non-compliance which is due in whole or in part to the acts or
omissions of Tenant) on the date Landlord notifies Tenant that the Premises are
available for Tenant's occupancy or to the extent of any material non-compliance
and subject to the matters set forth above, Landlord will implement a plan for
future construction or removal of barriers so as to cause the Common Areas to
comply in all material respects with the Disabilities Act.
D3 NON-DISTURBANCE.
In the event of subordination of this Lease, the subordination shall be
conditioned upon the agreement of the mortgagee or lessor that in the event of
foreclosure or the assertion of any other rights under the mortgage or lease,
this Lease and the rights of Tenant hereunder shall continue in effect and shall
not be terminated or disturbed so long as Tenant continues to perform and no
Event of Default exists under this Lease.
Approved by Tenant:
ADVANCED SYSTEMS INTERNATIONAL, INC.,
A Nevada Corporation
By: /s/ Richard Penington
------------------------------------
Printed: Richard Penington
-------------------------------
Its: Chief Financial Officer
-----------------------------------
26
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<CURRENCY> US DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 225,491 68,132
<SECURITIES> 0 0
<RECEIVABLES> 502,763 387,910
<ALLOWANCES> 8,700 0
<INVENTORY> 23,642 14,370
<CURRENT-ASSETS> 752,365 544,873
<PP&E> 280,751 102,717
<DEPRECIATION> 83,139 29,530
<TOTAL-ASSETS> 1,324,139 673,567
<CURRENT-LIABILITIES> 1,133,454 1,652,936
<BONDS> 0 0
0 0
0 0
<COMMON> 11,158 8,137
<OTHER-SE> (203,217) (1,203,573)
<TOTAL-LIABILITY-AND-EQUITY> 1,324,139 673,567
<SALES> 2,379,987 2,012,317
<TOTAL-REVENUES> 2,379,987 2,012,317
<CGS> 155,147 304,564
<TOTAL-COSTS> 3,832,866 3,903,785
<OTHER-EXPENSES> 36,796 4,024
<LOSS-PROVISION> 8,700 0
<INTEREST-EXPENSE> 122,728 113,770
<INCOME-PRETAX> (1,489,675) (1,895,492)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,489,675) (1,895,492)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,489,675) (1,895,492)
<EPS-PRIMARY> (0.17) (0.28)
<EPS-DILUTED> (0.17) (0.28)
</TABLE>
