UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SEURITIES OF
SMALL BUSINESS ISSUERS Under Section 12(b) or
(g) of the Securities Exchange Act of 1934
California Software Corporation
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(Name of Small Business Issuer in its charter)
Nevada 88-0408446
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2901 S. Pullman Street, Santa Ana, California 92705
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(Address of principal executive offices) (zip code)
Issuer's telephone number: (949) 553-8900
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Securities to be registered under section 12(b) of the Act:
Title of Each Class Name on each exchange on which
to be so registered each class is to be registered
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Securities to be registered under section 12(g) of the Act:
Common Stock, $.001 par value per share, 20,000,000 shares authorized, 3,270,900
issued and outstanding as of January 27, 1999.
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Part I .......................................................................3
Item 1. Description of Business..................................3
Item 2. Management's Discussion and Analysis or Plan of
Operation ...............................................9
Item 3. Description of Property..................................11
Item 4. Security Ownership of Management and Others and
Certain Security Holders ................................11
Item 5. Directors, Executives, Officers and Significant
Employees................................................12
Item 6. Executive Compensation...................................14
Item 7. Certain Relationships and Related Transactions...........14
Part II ......................................................................15
Item 1. Legal Proceedings........................................15
Item 2. Market for Common Equity and Related Stockholder
Matters..................................................15
Item 3. Recent Sales of Unregistered Securities..................16
Item 4. Description of Securities................................16
Item 5. Indemnification of Directors and Officers................17
Part F/S .....................................................................19
Item 1. Financial Statements.....................................19
Item 2. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure......................19
Part III .....................................................................20
Item 1. Index to Exhibits........................................20
Item 2. Description of Exhibits..................................23
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Part I
Item 1. Description of Business
A. Business Development and Summary
California Software Corporation, hereinafter referred to as the
"Company" or "CSC", was organized by the filing of articles of incorporation
with the Secretary of State of the State of Nevada on October 28, 1998. The
articles of the Company authorized the issuance of twenty million (20,000,000)
shares of Common Stock at a par value of $0.001 per share.
The Company is a developmental stage company with a principal business
objective to provide software and related technology products and services to
businesses. The Company currently provides "PC" based software solutions that
replicate the IBM midrange systems environment on a PC platform. The Company
also provides high level programming language services, allowing business
customers to execute midrange applications on a PC network in "native" mode
without the need for redevelopment. Additionally, the Company offers services to
its clients designed to turn an existing network of PCs into a true distributed
processing client/server system.
The Company's goal is to become the platform of choice for re-hosting
software solutions from the IBM AS/400 to the PC platform. The IBM AS/400 and
its predecessors, the System/32, 34, 36 and 38, collectively called the IBM
Midrange computers, are a separate class from Personal Computers. When
introduced in the late eighties, the AS/400 like its Midrange predecessors was a
far more powerful, multi-user computer than individual PCs and was capable of
supporting environments with hundreds of users.
These IBM Midrange Systems, were the systems of choice for general
business usage because there were more software products, both custom and
pre-packaged that ran on them. Over 28,000 business programs have been written
for these systems, more than any other platform.
In recent years PC networks have become far more powerful and the
number of PC users has grown to the point where virtually all business people
use them daily. While there are many benefits to the AS/400, they appear
old-fashioned to many information management professionals today. While the
software that runs on these IBM machines is very solid and reliable, it is also
very proprietary. It won't run on other platforms. The Company has completely
replicated this IBM Midrange machine environment on the PC platform. This means
that the end user can run these very solid, reliable software applications on
PC's. The only other method for achieving this goal would be to completely
rewrite the software in a different language for the PC. That endeavor is
expensive and time-consuming.
Small to medium size software developers and many end users cannot
afford the monetary, time and staffing investments to rewrite their
applications. With the BABY/36 and BABY/400 products they do not have to. BABY
replicates the IBM Midrange operating environments under Windows(TM). What this
means is that the applications developer can take older IBM Midrange programs
that meet current business requirements and run them on an NT(TM) network.
Moreover, the developer can utilize another BABY product to translate text-based
screens into icon and mouse-driven point-and-click ones. Importantly, BABY also
provided a Y2K compliant platform for System/3x programs. This makeover
dramatically extends the life of the application at a relatively low cost to the
application developer.
The Company designates as its priorities for the first twelve months of
operations as developing and emphasizing its platform-migration software
products to establish its business in the software and technology market. The
Company believes this strategy will allow it to produce competitive profit
margins and provide high-quality information technology services to a broad base
of users.
Headquartered in Santa Ana, California, the Company currently markets
its products overseas through an international distributor network of 40 IBM
Business Partners and software houses. In North America, the Company sells its
products and services directly to end users as well as through an extensive
network of over 150 value added resellers who bundle their own midrange
applications with the Baby products into a PC offering. The Company is an IBM
AS/400 Partner in Development and a Microsoft Solution Provider.
On January 12, 1999, the Company completed an acquisition of
approximately $1,628,068 worth of assets and $702,742 of liabilities from
California Software Products, Inc. - a California company in a similar line of
business as the Company - in exchange for a convertible note as amended in the
principal sum of $2,250,000 - convertible into the Common Shares of the Company
once the Company is trading on the OTC-BB(R) or a similar market and based upon
the Company's trading price sixty(60) days following the first day of trading of
the Company's Shares with a minimum conversion rate of $1.50 per share on that
date.
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In the early eighties, the Company's founders used their extensive
programming expertise to pioneer the first PC based RPG systems the Baby product
line. These products allow a company to execute midrange applications on a PC
network in "native" mode without the need for redevelopment. Over the past
decade, Baby products have become household names in the worldwide marketplace
with more than 100,000 users in 42 countries.
B. Business of Issuer
(1) Principal Products and Services and Principal Markets
The Company currently designs, develops and markets platform-migration
software and provides high-quality service and support for its clients.
The Baby Products
The Company currently offers solutions for midrange applications
developed in RPG II, RPG III, and RPG /400. All products are uniquely designed
to easily migrate IBM midrange applications to the PC environment in three
steps: (i) move the existing source code and data files to the PC; (ii)
recompile the source code into executable object code; and (iii) execute the RPG
application in the PC environment. Every Baby system contains a full array of
feature-rich development tools, along with compilers for RPG, OCL/CL, and
DDS/SFGR. As a result, businesses and companies worldwide use the Company's
family of Baby products for off loading their program development by moving
their source code to the PC where it can be modified, recompiled, and debugged
using Baby products. These programs can then be run on the PC or the midrange
system. The Company offers the following applications:
Baby/400 - The Baby/400 is a powerful PC based RPG/400 development,
execution, and operating environment that combines all the benefits of PC and PC
network technology with the power and versatility of an IBM AS/400 midrange
computer. Existing source code is downloaded to the PC, recompiled and executed
without the need for any redevelopment. New programs can be developed, compiled
and debugged on the PC platform. New applications can be executed on the PC or
uploaded to the AS/400. Baby/400 allows users to preserve their existing
application software investment, improve system performance and end-user
response time, avoid the high cost of midrange system upgrades, lower
maintenance and system operations cost, integrate RPG/400 application data with
existing PC applications, increase end user productivity and performance and
shorten new user training time.
Baby/400 Client Server - The Baby/400 Client Server rapidly converts
AS/400 legacy applications into Client/Server solutions without the need for any
redevelopment of PC functionality. With Baby/400 Client Server, portions of the
legacy application targeted to become PC Clients can be downloaded to the PC and
recompiled, creating native PC based object code. The PC based RPG application
is able to execute for the Client and continue to use the data files residing on
the AS/400 (true Client/Server). This makes it possible to rapidly turn a legacy
application into a Client/Server application, eliminating the need for
reprogramming or leaning new PC based languages. Benefits of the Baby 400 Client
Server are no redevelopment of application functionality, rapid implementation
cycle with low project completion risk, minimal project and staff investment, no
learning curve for new PC based programming languages, ease of project backlog
of the MIS department, the original source code always remains on the AS/400,
increased end user productivity and performance and shortened application
training time for new users.
Baby/400 Desktop Developer - This is a standalone PC, entry level
version of Baby/400 with all the same features and functionality but scaled for
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a single user. Baby/400 Desktop Developer allows a maximum file size of 4,000
records, making it an affordable choice for off-line development, recompiling,
and code testing.
Baby/36 - Baby/36 is a powerful PC based RPG II development, execution
and operating environment for the migration of System/36 applications to a PC
standalone or network environment without the need for any redevelopment. Many
users have replaced their System/36 with PC networks and were able to easily
migrate their S/36 applications in a matter of days. Benefits of Baby/36 include
the ability to preserve existing application software investments, improved
system performance and end user response time, avoiding high midrange system
upgrade cost, lower maintenance and system operations cost, integration of RPG
II application data with existing PC applications, increased end user
productivity and performance, avoiding the cost of adding third party GUI
products, shortened new user training time and the ability to execute S/36
applications on portable PCs and across remote locations.
Service and Support
The Company currently supports its products with a team of technical
experts that can assist clients in a smooth migration to the PC environment.
Management believes its technical support team and implementation consultants
are well-equipped to support IBM midrange, PC, connectivity hardware, and
operating system environments. The Company also offers services such as:
Pre-Migration Analysis - Analysis and preparation of the software and
hardware environment for the migration to the Company's products.
Client/Server Consulting - Assistance in planning for and converting
legacy application environments to Client/Server environments.
Application Migration Services - Migration of RPG applications to the
Company's PC based operating environment.
Implementation Service - On-Site installation of migrated applications,
technical training, and configuration of the PC environment for program
execution.
The market for the Company's migration software applications is highly
competitive. The Company believes that the principal competitive factors in this
business include product performance, time to market for new product
introductions, adherence to industry standards, price, and marketing and
distribution resources. The Company believes that it competes favorably in all
of these categories.
(2) Distribution Methods of the Products or Services
The Company is currently marketing and distributing its services and
products through a direct sales force. The Company believes that its
multi-channel distribution strategy will enable it to effectively market its
software and services to a wide range of potential customers. The Company has
also established and will continue to establish marketing and distribution
relationships through a broad range of channels including value added resellers
("VARs"), distributors and manufacturers' representatives, as well as direct
sales representatives.
The Company has organized its information technology services business
such that each service technician maintains a direct relationship with certain
of the Company's service customers. Specific marketing programs will vary by
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target customer. The Company believes that its direct sales approach, including
having Company service technicians serve as client-relationship managers, has
led to better account penetration and management, better communications and
long-term relationships with its clients and greater opportunities for follow-on
sales of products and services to its client base.
In support of its sales efforts, the Company currently markets its
products through direct mail, advertising, seminars, trade shows, telemarketing,
and on-going customer and third-party communications programs. The Company also
generates interest in, and educates potential customers about, computer and
network software solutions through speaking engagements, contributed articles,
interviews and documentaries. However, management of the Company currently
believes that a vast majority of its sales will come from marketing its products
through an international distributor network of IBM Business Partners and
software houses. In North America, management of the Company believes that its
products will be sold primarily through an extensive network of value added
resellers who bundle their own midrange applications with the Baby products into
a PC offering. In addition, the Company plans on becoming an IBM AS/400 Partner
in Development and a Microsoft Solution Provider.
(3) Status of Any Announced New Product or Service
The Company is currently working on a new product family set of
software to be released in 1999. The Company, however, has yet to announce this
new product family and has not announced any other recent additions to the
existing products and services it currently offers.
(4) Industry Background
The IBM's midrange computing platforms, the System/36 and the AS/400,
have served as a popular computing solution for business applications since
IBM's introduction of these two systems in 1983 and 1988, respectively. While
IBM made obsolete the System/36 in 1988, industry sources estimate approximately
250,000 System/36 systems remained in use worldwide at the end of 1995. Industry
publications estimate that over 360,000 AS/400 systems were in use worldwide at
the end of 1995. The Gartner Group estimates that, by the end of 1997, the
installed base of AS/400 systems will increase to over 450,000 systems
worldwide.
In adopting IBM's midrange computing platforms, businesses, and the
ISVs that support them, have invested substantial resources developing
applications software that provides a wide variety of manufacturing, accounting
and other information-management functions. According to industry sources, by
1995, an estimated 25,000 software applications had been developed for use on
AS/400 systems. Development of applications software intended for use on IBM's
midrange computing platforms continues, assisted by approximately 8,000 ISVs
that IBM estimates develop and market applications software for the AS/400
platform. In 1995, these ISVs generated an estimated $2.5 billion in revenues
from AS/400 applications software sales.
IBM computing platform users and developers have historically been
constrained by the nonportable and proprietary nature of IBM's operating
systems. Software applications written for the System/36 and AS/400 platforms
would not run on other computing platforms, including those using open operating
systems such as UNIX, or other portable operating systems such as Windows NT.
These other computing platforms often offer users significant advantages,
including access to a wider range of software and hardware vendors, as well as
increased system capacity, interoperability and scalability. Since the late
1980s, vendors of hardware and, to a lesser extent, software have experienced
substantial price reductions of their products due to increased competition and
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the availability of alternative operating systems. The Company believes that
decreasing prices and increasing functionality in information technology
products have also led to increased market acceptance of open systems and
customer demand for information technology products based on such systems. The
Gartner Group estimates that sales of server/host systems based on the UNIX and
Windows NT operating systems will increase to $40 billion annually by the year
2000, up from an estimated $22 billion in 1996. Industry sources estimate that
the UNIX applications software market is currently smaller, but growing faster,
than the AS/400 applications software market.
Changing to new computing platforms often results in significant
disruption of business operations as users are retrained and errors in the new
software are discovered and corrected. Even more critical to many businesses is
the potential loss of data contained in existing databases that may result from
a change to new applications software. ISVs must also adapt to customer demands
associated with increased popularity of new computing platforms. ISVs that have
developed successful AS/400 applications software are faced with the challenge
of migrating their products to new platforms to meet customer demands while
maintaining their existing customer base for applications software running on
the AS/400 platform.
Approaches to migrating System/36 and AS/400 systems may be summarized
as follows:
Refacing - Refacing involves replacing the "green-screen" interface
with a graphical user interface. Because refacing affects only the end-user
interface, the source code must still be run on the original computing platform,
thereby defeating the goal of many users to upgrade system performance,
interoperability and scalability.
Re-engineering - Re-engineering requires rewriting existing
applications software to enable it to operate on a new computing platform. Since
this entails completely rewriting applications software to meet customer
requirements, it often results in increased cost, risk of failure, disruption
and delay.
Packaged Solutions - Migrating to a new computing platform can
sometimes be accomplished by installing an applications software package that
has been independently developed to run on open or portable platforms. While a
substantial number of packaged software applications are available, businesses
implementing this approach will often have to abandon their investment in
existing databases and software and may incur substantial retraining costs.
Rehosting - Rehosting involves migration of applications software to a
new computing platform with minimal change to the source code or user interface.
Rehosting is achieved by rebuilding applications software to run efficiently on
the new computing platform. This solution often enables businesses to enjoy the
continued use of their existing programs and databases, reduce retraining costs
and obtain the advantages of a new computing platform.
The market for the Company's migration software applications is highly
competitive. The Company believes that the principal competitive factors in this
business include product performance, time to market for new product
introductions, adherence to industry standards, price, and marketing and
distribution resources. The Company believes that it competes favorably in all
of these categories.
(5) Raw Materials and Suppliers
The Company is a software technology business, and thus does not use
raw materials or have any principal suppliers.
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(6) Customers
The Company provides software solutions and high level programming
language services to business customers worldwide. The Company plans to reach
these customers via direct mail, telemarketing, seminars, trade shows, the
Internet and the referral process. As of January 12, 1999, no sales revenues
have been generated by the Company. In addition, the Company does not anticipate
that its revenues will be dependent on any one or even a few major customers.
(7) Patents, Trademarks , Licenses , Franchises , Concessions, Royalty
Agreements, or Labor Contracts
The Company owns a United States trademark for its family of Baby
software technology. Management is currently planning for additional copyrights
and/or trademarks to fully protect its software. In addition, new proprietary
technological advancements are being protected as trade secrets until
appropriate measure can be taken for protection.
The Company believes that its success and ability to compete is
dependent in part on the protection of its potential trademarks, trade names,
service marks and other proprietary rights. The Company intends to rely on trade
secret and copyright laws to protect the intellectual property that it plans to
develop, but there can be no assurance that such laws will provide sufficient
protection to the Company, that others will not develop products and services
that are similar or superior to those of the Company's, or that third parties
will not copy or otherwise obtain and use the Company's proprietary information
without authorization. In addition, the Company plans to rely on certain
property licensed from third parties, and may be required to license additional
products or services in the future, for use in general operations. There can be
no assurance that these third party licenses will be available or will continue
to be available to the Company on acceptable terms or at all. The inability to
enter into and maintain any of these licenses could have a material adverse
effect on the Company's business, financial condition or operating results.
Policing unauthorized use of the Company's proprietary and other
intellectual property rights, in the future, could entail significant expense
and could be difficult or impossible. In addition, there can be no assurance
that third parties will not bring claims of copyright or trademark infringement
against the Company or claim that certain of the Company's products, processes
or features violates a patent. There can be no assurance that third parties will
not claim that the Company has misappropriated their creative ideas or formats
or otherwise infringed upon their proprietary rights. Any claims of
infringement, with or without merit, could be time consuming to defend, result
in costly litigation, divert management attention, require the Company to enter
into costly royalty or licensing arrangements to prevent the Company from using
important technologies or methods, any of which could have a material adverse
effect on the Company's business, financial condition or operating results.
(8) Regulation
The Company does not need any government approval for its principal
products or services.
(9) Effect of Existing or Probable Government Regulations
None -- Not Applicable.
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(10) Research and Development Activities
The market for business computing products has historically been
characterized by frequent technological advances, evolving industry standards
and escalating customer expectations. As a result, management believes that the
Company's future growth and success will be largely dependent on its ability to
develop or acquire products to meet the evolving needs of its prospective
clients. The Company anticipates that the long-term success of its product
offering will require further product development. The Company expects to
continually evaluate its products to determine what additional products or
enhancements are required by the marketplace. The Company plans to develop and
enhance its products internally to meet clients' needs, but if the Company can
purchase or license proven products at reasonable costs it will do so in order
to avoid the time and expense involved in developing products.
The Company has yet to incur any research and development costs from
October 28, 1998 (date of inception) through January 12, 1999. However, during
the fiscal and calendar year ending December 31, 1999, the Company plans to
incur research and development expenses of approximately $100,000 with respect
to its current and future products. The cost of such activities are not expected
to be borne by the Company's customers.
California Software has planned to add new features to both BABY/36 and
BABY/400 to allow Internet access. A new product called BABY/GUI has been
announced for release in July of 1999. Much of the technology for the GUI
product has already been released as a component of BABY/36. Thus, most of the
Research and Development is already completed. BABY/GUI creates a Graphical User
Interface (GUI) for software companies and users of the IBM AS/400 computer
itself, whether they purchase our original BABY series of products or not. In
short, AS/400 users not wishing to deploy their software on PCs can maintain
their IBM Midrange computer and make their software appear more modern.
As mentioned earlier, more than 500,000 IBM Midrange systems are
deployed globally. One of the limitations of the IBM Midrange computer family is
that it is not graphical. The software that runs on it appears old-fashioned and
unfriendly.
Users of more modern software running under Windows have come to expect
graphical point and click software. BABY/GUI allows software companies and end
users the ability to create graphical screens without having to rewrite their
non-graphical text-based software. Having created these new graphical screens,
BABY/GUI allows customers to save these screens in HTML format and deploy them
on the Internet.
(11) Impact of Environmental Laws
The Company is not aware of any federal, state or local environmental
laws which would effect its operations.
(12) Employees
The Company presently has twenty-one (21) full time employees. The
Company's employees are currently not represented by a collective bargaining
agreement, and the Company believes that its relations with its employees are
good.
Item 2. Management's Discussion and Analysis or Plan of Operation
A. The Company's Predecessor, California Software
Products, Inc.
California Software Products, Inc. (CSPI) was
founded in 1975 and incorporated in California for the purpose
of writing programs for mainframe manufacturers. In 1980, the
company was approached by the PC Division of IBM to write a
program that would compile System/32 software to run on a
personal computer. Development continued throughout the eighties
adding new features and updating current programs as IBM
introduced newer computer systems. When the PC Division was
disbanded and the AS/400 Division chose not to continue the
relationship, CSPI continued to improve these products on its
own. The company had excellent technical resources, but
management did not understand the marketplace and thus began
a gradual decline in revenues and profits. In late 1996 a new
management team headed by Bruce Acacio and Carol Conway took over
the company bringing their extensive knowledge of
turnaround strategies and marketing. The first order of
business for the new team was to restructure the company through
immediate cost-cutting measures to make it profitable. Due to an
unresolved conflict with a major creditor, the team filed
for Chapter 11 protection under Federal Bankruptcy law in
January of 1997. The Plan put forward by management was approved
in October of 1997 and California Software Products, Inc.
finished 1997 profitably, its first profitable year since
1988. 1998 revenues have grown by nearly 60% over 1997 and gross
profits are higher.
Compensation as paid by California Software Products,
Inc. (CSPI) for Bruce Acacio and Carol Conway increased during
the period from January 1997 through January 1999. These
increases were substantially due to a determination by the board
of directors that the additional efforts of both individuals in
facilitating the asset purchase and restructuring of operations
as well as the additional work efforts required of each,
warranted a commensurate increase in wages. In January 1997 Bruce
Acacio and Carol Conway were each compensated at an annual rate
of $100,000. This increased to $120,000 in October 1997 pursuant
to the Chapter 11 reorganization plan. In January 1999
remuneration levels increased to $180,000 for Bruce Acacio and
$150,000 for Carol Conway. On January 15, 1999 California
Software Corporation (CSC) replaced CSPI as the employer of
record and began compensating both employees.
B. Management's Plan of Operation
In its initial approximately five month operating
period ended March 31, 1999, the Company generated net income of
$149,828.00 for sales of products and services. On October 31,
1998, founding shareholders purchased 2,700,000 shares of the
Company's authorized treasury stock for cash. An original
stock offering was made pursuant to Nevada Revised Statues
Chapter 90.490. Additionally, on December 7, 1998, the Company
completed an offering of five-hundred-seventy thousand and nine-
hundred (570,900) shares of the Common Stock of the Company to
approximately forty-five (45) unaffiliated shareholders. This
offering was made in reliance upon an exemption from the
registration provisions of Section 4(2) of the Securities
Act of 1993, as amended, pursuant to Regulation D, Rule 504 of
the Act. As of the date of this filing, the Company has three
million two-hundred-seventy thousand nine-hundred (3,270,900)
shares of its $0.001 par value common voting stock issued
and outstanding which are held by approximately forty-seven
(47) shareholders of record. Management fully anticipates that
the proceeds from the sale of all of the Common Shares sold in
this offering delineated above in addition to the cash flow and
earnings from current operations will be sufficient to provide
the Company's capital needs for the foreseeable future.
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In addition, management believes the need for
additional capital going forward will be met from ongoing
revenues and earnings generated from the assets and contracts
the Company purchased via an Asset Purchase Agreement with
California Software Products, Inc. - a California Company in a
similar line of business as the Company as much as from cash
flow and earnings from present and future operations. On January
12, 1999, the Company completed an acquisition of
approximately $1,628,068 worth of assets and $702,742 of
liabilities from California Software Products, Inc. - a
California company - in exchange for a convertible note in the
principal sum of $2,250,000, convertible into Common Shares of
the Company once the Company is trading on the OTC-BB(R) or a
similar market and based upon the Company's trading price sixty
(60) days following the first day of trading of the Company's
Shares on a recognized public exchange with a minimum exchange
rate of $1.50 per share. Assuming the Company makes no further
acquisitions of assets or capital stock of similar companies,
management believes the Company will not need to raise
additional equity funds to meet its cash requirements.
The Company's continued revenue generation is primarily
dependent upon the Company's ability to effectively and
efficiently provide software and programming products and
services to businesses. The Company designates as its priorities
for the first twelve months of operations as developing
and emphasizing its platform-migration software products to
establish its business in the software and technology market.
The Company's primary interest is the design of PC based
software solutions to enable users to preserve their
investment in existing legacy applications, reduce hardware and
operating costs, and, in most cases, significantly improve
system response times. The Company currently supports its
products with a team of technical experts that can assist clients
in a smooth migration to the PC environment. Management
believes its technical support team and implementation
consultants are well-equipped to support IBM midrange, PC,
connectivity hardware, and operating system environments.
Realization of significant sales of the Company's
products and services throughout the rest of the fiscal year
ending December 31, 1999 is vital to its plan of operations.
To this end, management is currently emphasizing distribution of
its platform-migration software through a direct sales force,
as well as through independent distributors. The Company may
also seek to enter into strategic relationships with major
hardware system vendors as well as international systems
integrators. The Company believes that a multi-channel
distribution strategy will enable it to effectively market its
products and services to a wide range of potential customers.
The Company anticipates that the long-term success
of its product offering will require further product
development. The Company expects to continually evaluate
its products to determine what additional products or
enhancements are required by the marketplace. The Company
plans to develop and enhance its products internally to meet
clients' needs, but if the Company can purchase or license
proven products at reasonable costs it will do so in order to
avoid the time and expense involved in developing products.
The Company has incurred $23,200 in research and
development costs from October 28, 1998 (date of inception)
through March 31, 1999. The Company based on expenditures to
March 31, 1999 estimates its fiscal year and calendar year
December 31, 1999, Research and Development expenses to be
$100,000. The cost of such activities are not expected to be
borne by the Company's customers.
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The Company currently does not expect to purchase or
sell any of its facilities or equipment.
Management does not anticipate any significant
changes in the number of employees.
C. Segment Data
As of January 12, 1999, no sales revenue has been
generated by the Company. Accordingly, no table showing
percentage breakdown of revenue by business segment or product
line is included.
Item 3. Description of Property
A. Description of Property
The Company's corporate headquarters are located at 2901
South Pullman, Santa Ana, California 92705. The Company has
use of this space through a sub-lease arrangement from
California Software Products, Inc. ("CSPI"), a related party
the Company purchased all outstanding assets and contracts from
on January 12, 1999. The sub-lease is for approximately $0.98 per
square foot per month ($5,851.40 per month) from October 1, 1997
to May 15, 1998, and raises to $1.20 per square foot per month
($7,228.20 per month), from January 12, 1999 through September
30, 1999. The amount increases to $1.26 per square foot per
month ($7,572.40 per month, from October 1, 1999 to September 30,
2000 and are at the same rates that CSPI is currently under
obligation to lease the facility at. This leased facility
consists of 6,000 square feet, and management believes this is
currently suitable as the main administrative office and
should remain so for the next twelve (12) months. The
Company does not have any additional facilities.
There are currently no proposed programs for
the renovation, improvement or development of the properties
currently leased by the Company.
B. Investment Policies
Management of the Company does not currently have
policies regarding the acquisition or sale of assets
primarily for possible capital gain or primarily for income.
The Company does not presently hold any investments or
interests in real estate, investments in real estate mortgages
or securities of or interests in persons primarily engaged in
real estate activities.
Item 4. Security Ownership of Management and Certain Security
Holders
A. Security Ownership of Management and Certain Beneficial
Owners
The following table sets forth information as of
the date of this Registration Statement certain information
with respect to the beneficial ownership of the Common Stock
of the Company concerning stock ownership by (i) each director,
(ii) each executive officer, (iii) the directors and officers of
the Company as a group, (iv) and each person known by the
Company to own beneficially more than five percent (5%) of the
Common Stock. Unless otherwise indicated, the owners have sole
voting and investment power with respect to their respective
shares.
11
<PAGE>
<TABLE>
<CAPTION>
Amount
Title Name and Address of shares Percent
of of Beneficial held by of
Class Owner of Shares Position Owner Class
<S> <C> <C> <C> <C>
Common Bruce Acacio (1) Chairman; CEO 1,377,000 41.73%
Common Carol Conway (1) Secretary/Treasurer; 1,323,000 40.09%
Vice President; CFO; Dir.
Common All Executive 2,700,000 82.55%
Officers and
Directors as a Group
</TABLE>
(1) c/o California Software Corporation, 2901 S. Pullman Street, Santa Ana,
California 92705.
B. Persons Sharing Ownership of Control of Shares
No person other than Bruce Acacio and Carol Conway owns or shares the
power to vote ten percent (10%) or more of the Company's securities.
C. Non-voting Securities and Principal Holders Thereof
The Company has not issued any non-voting securities.
D. Options, Warrants and Rights
There are no options, warrants or rights to purchase securities of the
Company.
E. Parents of the Issuer
Under the definition of parent, as including any person or business
entity who controls substantially all (more than 80%) of the issuers of common
stock, the Company has no parents.
Item 5. Directors, Executive Officers and Significant Employees
A. Directors, Executive Officers and Significant Employees
The names, ages and positions of the Company's directors and executive
officers are as follows:
Name Age Position
- ------------- --- ----------------------------------------------
Bruce Acacio 38 President, Chief Executive Officer and Chairman
Carol Conway 55 Secretary/Treasurer, Vice President, CFO and
Director
B. Work Experience
Mr. Bruce Acacio is chairman of the board, president and chief
executive officer of the Company and has held those positions since the
12
<PAGE>
Company's inception. He has a background in strategic
turnaround and growth companies. Mr. Acacio is currently
managing 20 employees including development, technical support,
administration and sales and marketing personnel. Mr. Acacio is
the former President and CEO of California Software Products,
Inc. ("CSPI") of Santa Ana, California. Mr. Acacio took the
reigns of CSPI in 1996. At CSPI, Mr. Acacio was responsible for
the release of new versions of CSPI's trademarked Baby/36 and
Baby/400 products. Prior to his involvement with CSPI, Mr.
Acacio was the president of an INC 500 company, which enjoyed
2,000% growth during his tenure. During his career, Mr.
Acacio has held sales and middle management positions of
increasing responsibility with UK-based conglomerate Lex
Service, PLC and was an agent manager for IBM. In these
positions, he has been responsible for turning around troubled
operations and expanding business units.
Ms. Carol Conway is the secretary, treasurer, vice
president, and CFO of the Company and has held those positions
since the company's inception. She is the former CFO of CSPI
of Santa Ana, California. Her background is in marketing of
technical and consumer products. Ms. Conway currently manages
a nine member technical support and development team. She
assisted in the strategic and financial planning of a return to
profitability and sales growth for CSPI. Ms. Conway was directly
involved in the planning and execution of new product releases,
support and documentation of new versions of Baby/36 and
Baby/400. She is currently guiding the development team for CSC
with the release of a new product family set to be released in
1999. Prior to her involvement with CSPI and CSC, Ms.
Conway held account and management positions of increasing
responsibility with Ketchum in San Francisco, California in both
the technology sector and consumer products.
C. Family Relationships
None - Not Applicable.
D. Involvement on Certain Material Legal Proceedings
During the Last Five Years
(1) In January of 1997, California Software Products,
Inc. ("CSPI"), a California Company Bruce Acacio and Carol
Conway were CEO and CFO of, respectively, filed for
Chapter 11 bankruptcy under the laws of the State of California
due to a dispute with a creditor. In October of 1997, that
dispute was resolved, and the Company emerged from
bankruptcy. No other bankruptcy petitions have been filed by
or against any business or property of any director,
officer, significant employee or consultant of the Company nor
has any bankruptcy petition been filed against a partnership
or business association where these persons were general
partners or executive officers.
(2) No director, officer, significant employee or
consultant has been convicted in a criminal proceeding,
exclusive of traffic violations.
(3) No director, officer, significant employee or
consultant has been permanently or temporarily enjoined, barred,
suspended or otherwise limited from involvement in any type of
business, securities or banking activities.
(4) No director, officer or significant employee has
been convicted of violating a federal or state securities or
commodities law.
13
<PAGE>
Item 6. Executive Compensation
Remuneration of Directors and Executive Officers
The Company does not currently have employment
agreements with its executive officers but expects to sign
employment agreements with each in the next approximately three
(3) months. All executive officers of the Company prior to
January 12, 1999 did not draw a salary from the Company. Over the
next twelve months, however, each executive officer is expected
to draw the following annual compensation. The Company does not
currently have a stock option plan.
(1) Name of Individual Capacities in Which Annual
or Identity of Group Remuneration was Recorded Compensation
-------------------- ------------------------- ------------
Bruce Acacio President and CEO $180,000
Carol Conway CFO $150,000
(2) Compensation of Directors
There were no arrangements pursuant to which any
director of the Company was compensated for the period from
October 28, 1998 to January 12, 1999 for any service provided as
a director. In addition, no such arrangement is contemplated
for the foreseeable future as the Company's only directors are
its current executive officers who are already drawing a salary
for the management of the Company.
Item 7. Certain Relationships and Related Transactions
On January 12, 1999, the Company completed the acquisition of
approximately $1,628,068 worth of assets and $702,742 of
liabilities from California Software Products, Inc. ("CSPI") - a
California company under the principal control and direction of
Bruce Acacio and Carol Conway - in exchange for a convertible
note in the principal sum of $2,250,000, convertible into Common
Shares of the Company once the Company is trading on the OTC-
BB(R) or a similar market and based upon the Company's trading
price sixty (60) days following the first day of trading of the
Company's Shares with a minimum conversion price of $1.50 per
share.
Management valued California Software Products, Inc. primarily
by considering the sum of net book value for the Company on
January 12, 1999 and the expected earnings for the years 1999 and
2000 ($2,961,159.92). Expected earnings were determined as a
function of prior earnings and a projected growth rate of 20
percent. Management then discounted this value to $2,250,000.00
so as to account for likely differences between industry averages
and the Company itself. This valuation is based on projections
which may or may not be realized given various factors which may
effect actual results including but not limited to changing
macroeconomic conditions, unforeseen events and unaccounted for
variables.
While management made every effort to accurately assess the
value of CSPI from an objective arms length view consistent with
a third-party market transaction, the two entities are in fact
related. Furthermore, there are no readily identifiable,
comparable, third-party examples sufficient to determine the
degree to which this transaction and underlying valuation compare
to a market transaction. Finally, management may not have the
specific financial expertise or accounting sophistication or
experience sufficient to arrive at a precise valuation. As such,
management does not know exactly how this transaction and related
valuation would compare to a third party transaction. In
management's view, however, the valuation as determined is an
accurate reflection of the likely actual market value of
California Software Products, Inc. ("CSPI").
As stated previously in this Registration Statement, the
Company's corporate headquarters are sub-leased through a sub-
lease arrangement with California Software Products, Inc.
("CSPI"), a related party from which the Company purchased all
outstanding assets and contracts on January 12, 1999. The terms
of the sub-lease include approximately $0.98 per square foot per
month ($5,851.40 per month) from October 1, 1997 to May 15, 1998,
increases to $1.20 per square foot per month ($7,228.20 per
month), from January 12, 1999 through September 30, 1999. The
amount increases to $1.26 per square foot per month ($7,572.40
per month, from October 1, 1999 to September 30, 2000. This sub-
lease mirrors the terms and conditions of the underlying lease
between CSPI as lessee and Rayson Inc., the lessor, an unrelated,
third party. The sub-lease is therefore, an arms length
transaction comparable to market rates and as such, management of
the Company believes that the lease to which the Company is
subject is at market rates. Because of the development
stage nature of the Company and its relatively recent
inception, October 28, 1998, the Company has no other
relationships or transactions.
14
<PAGE>
Part II
Item 1. Legal Proceedings
The Company is not currently involved in any legal
proceedings nor does it have knowledge of any threatened
litigation.
Item 2. Market for Common Equity and Related Stockholder Matters
A. Market Information
(1) The common stock of the Company is currently not
traded on the NASDAQ OTC Bulletin Board or any other formal or
national securities exchange. Being a start-up company, there is
no fiscal history to disclose.
(2)(i) There is currently no Common Stock which is subject
to outstanding options or warrants to purchase, or securities
convertible into, the Company's common stock.
(ii) There is currently no common stock of the Company
which could be sold under Rule 144 under the Securities Act
of 1933 as amended or that the registrant has agreed to
register for sale by security holders.
(iii) There is currently no common equity that is being or is
proposed to be publicly offered by the registrant, the offering
of which could have a material effect on the market price of the
issuer's common equity.
B. Holders
As of December 21, 1998, the Company had 47 stockholders
of record.
C. Dividend Policy
The Company has not paid any dividends to date. In
addition, it does not anticipate paying dividends in the
immediate foreseeable future. The board of directors of the
Company will review its dividend policy from time to time to
determine the desirability and feasibility of paying
dividends after giving consideration to the Company's
earnings, financial condition, capital requirements and
such other factors as the board may deem relevant.
D. Reports to Shareholders
The Company intends to furnish its shareholders with
annual reports containing audited financial statements and
such other periodic reports as the Company may determine to be
appropriate or as may be required by law. Upon the effectiveness
of this Registration Statement, the Company will be required
to comply with periodic reporting, proxy solicitation
and certain other requirements by the Securities Exchange Act
of 1934.
15
<PAGE>
E. Transfer Agent and Registrar
The Transfer Agent for the shares of common voting stock
of the Company is Shelley Godfrey, Pacific Stock Transfer
Company, 5844 S. Pecos, Suite D, Las Vegas, Nevada 89120, (702)-
361-3033.
Item 3. Recent Sale of Unregistered Securities
On December 7, 1998, the Company completed a public
offering of shares of common stock of the Company pursuant
to Regulation D, Rule 504 of the Securities Act of 1933, as
amended, whereby it sold 570,900 shares of the Common Stock of
the Company to 45 unaffiliated shareholders of record. The
Company filed an original Form D with the Securities and Exchange
Commission on or about December 21, 1998. As of December 21,
1998, the Company has 3,270,900 shares of common stock issued
and outstanding held by 47 shareholders of record.
Item 4. Description of Securities
A. Common Stock
(1) Description of Rights and Liabilities of Common
Stockholders
i. Dividend Rights - The holders of outstanding shares of
common stock are entitled to receive dividends out of assets
legally available therefore at such times and in such amounts as
the board of directors of the Company may from time to time
determine.
ii. Voting Rights - Each holder of the Company's common
stock are entitled to one vote for each share held of record on
all matters submitted to the vote of stockholders,
including the election of directors. All voting is
noncumulative, which means that the holder of fifty percent
(50%) of the shares voting for the election of the directors can
elect all the directors. The board of directors may issue shares
for consideration of previously authorized but unissued
common stock without future stockholder action.
iii. Liquidation Rights - Upon liquidation, the holders of
the common stock are entitled to receive pro rata all of the
assets of the Company available for distribution to such
holders.
iv. Preemptive Rights - Holders of common stock are
not entitled to preemptive rights.
v. Conversion Rights - No shares of common stock are
currently subject to outstanding options, warrants, or other
convertible securities.
vi. Redemption rights - no redemption rights exist for
shares of common stock.
vii. Sinking Fund Provisions - No sinking fund provisions
exist.
viii. Further Liability For Calls - No shares of common stock
are subject to further call or assessment by the issuer. The
Company has not issued stock options as of the date of this
Registration Statement.
(2) Potential Liabilities of Common Stockholders to
State and Local Authorities
16
<PAGE>
No material potential liabilities are anticipated
to be imposed on stockholders under state statues. Certain
Nevada regulations, however, require regulation of beneficial
owners of more than 5% of the voting securities. Stockholders
that fall into this category, therefore, may be subject to fines
in circumstances where non-compliance with these regulations are
established.
B. Debt Securities
The Company is not registering any debt
securities, nor are any outstanding.
C. Other Securities To Be Registered
The Company is not registering any security other
than its common stock.
Item 5. Indemnification of Directors and Officers
The Bylaws of the Company provide for indemnification of
its directors, officers and employees as follows: Every
director, officer, or employee of the Corporation shall be
indemnified by the Corporation against all expenses and
liabilities, including counsel fees, reasonably incurred by
or imposed upon him/her in connection with any proceeding to
which he/she may be made a party, or in which he/she may become
involved, by reason of being or having been a director,
officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of the Corporation, partnership,
joint venture, trust or enterprise, or any settlement thereof,
whether or not he/she is a director, officer, employee or agent
at the time such expenses are incurred, except in such cases
wherein the director, officer, employee or agent is adjudged
guilty of willful misfeasance or malfeasance in the
performance of his/her duties; provided that in the event of a
settlement the indemnification herein shall apply only when
the Board of Directors approves such settlement and
reimbursement as being for the best interests of the
Corporation.
The Bylaws of the Company further states that the
Company shall provide to any person who is or was a director,
officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of the corporation, partnership,
joint venture, trust or enterprise, the indemnity against
expenses of a suit, litigation or other proceedings which
is specifically permissible under applicable Nevada law. The
Board of Directors may, in its discretion, direct the purchase of
liability insurance by way of implementing the provisions of
this Article. However, the Company has yet to purchase any such
insurance and has no plans to do so.
The Articles of Incorporation of the Company states
that a director or officer of the corporation shall not be
personally liable to this corporation or its stockholders for
damages for breach of fiduciary duty as a director or officer,
but this Article shall not eliminate or limit the liability
of a director or officer for (i) acts or omissions which
involve intentional misconduct, fraud or a knowing violation of
the law or (ii) the unlawful payment of dividends. Any repeal or
modification of this Article by stockholders of the corporation
shall be prospective only, and shall not adversely affect
any limitation on the personal liability of a director or officer
of the corporation for acts or omissions prior to such repeal or
modification.
The Articles of Incorporation of the Company further
states that every person who was or is a party to, or is
threatened to be made a party to, or is involved in any such
action, suit or proceeding, whether civil, criminal,
administrative or investigative, by the reason of the fact that
he or she, or a person with whom he or she is a legal
representative, is or was a director of the corporation, or
who is serving at the request of the corporation as a
director or officer of another corporation, or is a
representative in a
17
<PAGE>
partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless to the fullest extent legally
permissible under the laws of the State of Nevada from time to
time against all expenses, liability and loss (including
attorneys' fees, judgments, fines, and amounts paid or to be
paid in a settlement) reasonably incurred or suffered by
him or her in connection therewith. Such right of
indemnification shall be a contract right which may be enforced
in any manner desired by such person. The expenses of
officers and directors incurred in defending a civil suit or
proceeding must be paid by the corporation as incurred and in
advance of the final disposition of the action, suit, or
proceeding, under receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that
he or she is not entitled to be indemnified by the corporation.
Such right of indemnification shall not be exclusive of any other
right of such directors, officers or representatives may have or
hereafter acquire, and, without limiting the generality of such
statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of
stockholders, provision of law, or otherwise, as well as their
rights under this article.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
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
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant 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.
18
<PAGE>
Part F/S
Item 1. Financial Statements
The following documents are filed as part of this report:
a) California Software Corporation Financial Statements
Report of James E. Slayton, CPA
Balance Sheet as of January 12, 1999 and December 31, 1998
Statement of Operations for the period from October 28,
1998 through January 12, 1999
Statement of Stockholder's Equity for the period from
October 28, 1998 through January 12, 1999
Statement of Cash Flows for the period from October 28,
1998 through January 12, 1999
Notes to Financial Statements
b) California Software Corporation Interim Financial Statements
For the Period Ending March 31, 1999
c) California Software Corporation Pro-forma Financial Statements
December 31, 1998 and March 31, 1999
d) California Software Corporation Analysis of Changes in Assets,
Liabilities & Equity from December 31, 1998 to January 12, 1999
e) California Software Products, Inc. Financial Statements
Report of James E. Slayton, CPA
Balance Sheet as of December 31, 1997 and December 31, 1998
Statement of Operations for the period from December
31, 1998 and December 31, 1997
Statement of Changes in Stockholder's Equity for the years ended
December 31, 1998 and December 31, 1997
Statement of Cash Flows for the periods ending December 31, 1998
and December 31, 1997
Notes to Financial Statements
Item 2. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure
None -- Not Applicable.
19
<PAGE>
SECTION F/S 1.a
California Software Corporation
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1998
and
January 12, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT.................... 1
BALANCE SHEET........................... 2-3
STATEMENT OF OPERATIONS....................... 4
STATEMENT OF STOCKHOLDER'S EQUITY............... 5
STATEMENT OF CASH FLOWS..................... 6
NOTES TO FINANCIAL STATEMENTS.................. 7
<PAGE>
James E. Slayton, CPA
3867 WEST MARKET STREET
SUITE 208
AKRON, OHIO 44333
Board of Directors
January 26, 1999
California Software Corporation (the Company)
Las Vegas, Nevada 89102
I have audited the Balance Sheet of California Software
Corporation (A Development Stage Company), as of December 31,
1998 and January 12, 1999, and the related Statements of
Operations, Stockholders' Equity and Cash Flows for the period
October 28, 1998 (Date of Inception) to December 31, 1998 and the
period ended January 12, 1999. These financial statements are
the responsibility of the Company's management. My
responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis evidence supporting the
amounts and disclosures in the financial statement presentation.
An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. I
believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of California Software Corporation, (A Development Stage
Company), at December 31, 1998 and January 12, 1999, and the
results of its operations and cash flows for the period October
28, 1998 (Date of Inception) to December 31, 1998 and the period
ended January 12, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As
discussed in Note 3 to the financial statements, the Company has
had limited operations. Management's plan in regard to these
matters are also described in Note 3.
James E. Slayton, CPA
Ohio License ID# 04-1-15582
<PAGE>
California Software Corporation
(A Development Stage Company)
BALANCE SHEET
AS AT
December 31, 1998 and January 12, 1999
January 12 December 31
1999 1998
ASSETS
CURRENT ASSETS
Cash 358,115 15,395
Money Market Investment Account 80,273 0
Accounts Receivable (Net of Reserves) 810,691 0
Inventory on Consignment 192,504 0
Inventory (Net of Reserves) 110,094 0
Other Current Assets 22,902 0
Deferred Tax Benefits 22,088 0
----------- -----------
Total Current Assets 1,596,667 15,395
PROPERTY AND EQUIPMENT
Furniture, Fixtures and Equipment (Net of 62,315 0
Depreciation)
Leasehold Improvements (Net of Amortization) 6,569 0
----------- -----------
Total Property and Equipment 68,884 0
OTHER ASSETS
Organization Costs (Net of Amortization) 324 348
Non-Competition Agreement (Net of Amortization) 330,000 0
Acquired Technology (Net of Amortization) 345,000 0
Deferred Tax Benefits 243,193 0
Goodwill 384,393 0
----------- -----------
Total Other Assets 1,302,928 348
----------- -----------
TOTAL ASSETS 2,968,479 15,743
=========== ===========
See accompanying notes to financial statements
-2-
<PAGE>
California Software Corporation
(A Development Stage Company)
BALANCE SHEET
AS AT
December 31, 1998 and January 12, 1999
January 12 December 31
1999 1998
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable 363,534 0
Federal Payroll Taxes Payable 15,068 0
Other Taxes Payable 4,369 0
Other Current Liabilities 64,412 0
Employee Benefits Payable 70,602 0
Accrued Sales Commission 11,201 0
Current portion-Long Term Liabilities 67,040 0
Deferred Revenue 67,020 0
----------- -----------
Total Current Liabilities 663,246 0
Long Term Liabilities
Long Term Liabilities 39,496 0
Convertible Note Payable 2,250,000 0
----------- -----------
Total Long Term Liabilities 2,289,496 0
----------- -----------
TOTAL LIABILITIES 2,952,742 0
EQUITY
Capital Stock 3,271 3,271
Additional Paid in Capital 32,449 32,449
Retained Earnings (or Deficit) Accumulated During (19,983) (19,977)
the Development Stage
----------- -----------
Total Stockholder's Equity 15,737 15,737
TOTAL LIABILTIES & OWNER'S EQUITY 2,968,479 15,743
=========== ===========
See accompanying notes to financial statements
-3-
<PAGE>
California Software Corporation
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR PERIOD
October 28, 1998 (Date of Inception) to December 31, 1998 and the Period
Ended January 12, 1999
January 12 December 31
1999 1998
REVENUE
Services 0 0
COSTS AND EXPENSES
Selling, General and Administrative 0 19,965
Amortization of Organization costs 6 12
----------- -----------
Total Costs and Expenses 6 19,977
----------- -----------
Net Ordinary Income or (Loss) (6) (19,977)
=========== ===========
Weighted average
number of common
shares outstanding 3,270,900 3,270,900
Net Earnings
Per Share (0.01) (0.01)
See accompanying notes to financial statements
-4-
<PAGE>
California Software Corporation
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIOD
October 28, 1998 (Date of Inception) to December 31, 1998 and the Period
Ended January 12, 1999
Deficit
Accumulated
Additional During
Common Stock paid-in Development
Shares Amount Capital Stage
--------- --------- ---------- ------------
October 28, 1998
Issued for cash 2,700,000 2,700 4475
November 16, 1998
Issued for cash 570,900 571 27,974
Net loss
October 28, 1998
(inception) to
January 12, 1999 (19,983)
--------- --------- --------- ---------
Balance as at
January 12, 1999 3,270,900 3,271 32,449 (19,983)
========= ========= ========= =========
See accompanying notes to financial statements
-5-
<PAGE>
California Software Corporation
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR PERIOD
October 28, 1998 (Date of Inception) to December 31, 1998 and the Period
Ended January 12, 1999
January 12 December 31
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 0 0
----------- -----------
Net Cash provided by Operating 0 0
Activities
Cash paid to suppliers and employees 0 19,965
Amortization of Organization costs (6) (12)
----------- -----------
Cash disbursed for Operating (6) 19,953
Activities
----------- -----------
Net Cash flow used by 6 (19,953)
Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant assets 0 0
----------- -----------
Net Cash used by investing activities 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Capital Stock 0 35,720
339,542 0
----------- -----------
Net cash provided by financing 339,542 35,720
activities
Net increase (decrease) in cash 339,548 15,767
Cash and cash equivalents, 357,733 15,385
January 12, 1999
See accompanying notes to financial statements
-6-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
January 12, 1999
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized October 28, 1998 (Date of Inception) under
the laws of the State of Nevada, as California Software Corporation (the
Company).
On October 31, 1998, the Company issued 2,700,000 Shares of its $0.001
par value common stock for $7,175 to the two founding shareholders. The
consideration paid for the common stock represents $2,800 deposited into
the Company's new bank account and the subsequent cancellation of a loan
owed by the Company. The canceled loan was owed to the two founding
shareholders for corporate consulting and incorporation costs paid for by
these shareholders on behalf of the Company in the amount of $4,375.
On November 16, 1998, the Company completed a public offering that was
exempt from federal regulation pursuant to Regulation D, Rule 504 of the
Securities Act of 1933, as amended. The Company sold 570,900 shares of
Common Stock as a price of $.05 per share for a total amount raised of
$28,545.
On January 12, 1999, the Company effectuated the asset purchase of
California Software Products, Inc. (CSPI), a California corporation. The
Company completed the acquisition of $1,628,068 worth of assets and
$702,742 of liabilities from California Software Products Inc.- a
California company in a similar line of business as the Company - in
exchange for a convertible note in the principle sum of $2,250,000 -
convertible into Common Shares of the Company once the Company is trading
on the OTC-BB or a similar market and based on the trading price sixty (60)
days following the first day of trading of the Company's shares on a
recognized public exchange with a minimum conversion rate of $1.50 per
share. (See attached summary of assets purchased and liabilities assumed)
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. The cost of organization, $360, is being amortized over a period of 60
months (October 28, 1998 through October 27, 2003).
3. Earnings per share is computed using the weighted average number of
shares of common stock outstanding.
4. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
-7-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
January 12, 1999
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES (continued)
5. The Company acquired goodwill in the amount of $384,393 as a result of
the Asset Purchase Agreement of January 12, 1999. Management of the
Company has chosen to amortize this goodwill over a period of 5 years
using the straight line method. Goodwill impairment will be recognized
when incurred or acquired.
6. The convertible note associated with the Asset Purchase Agreement may
effect future earnings per share. It is undetermined at this time as to
whether there will be a dilutive or antidilutive effect on earnings per
share. This shall be determined when the conversion conditions are met.
7. The fiscal year of the Company ends on December 31st.
8. The statement of cash flows was prepared per SFAS 95.
9. The money market investment account is an interest bearing money funds
account with Bank of America. The account is reported at cost. Market
fluctuations are insignificant and gains or (losses) are reported when
realized.
10. Accounts receivable and Inventory are reported net of reserves. The
Company reports inventory using the cost basis pricing method. The
Company has Reserve for Returned Products in the amount of $42,622,
Reserve for Bad Debts in the amount of $12,185 and Inventory Reserve in
the amount of $1,001.
11. The Company reports Research and Development costs as incurred for
each period an income statement is issued. The Company did not incur any
Research & Development costs during 1998 and in the period January 1,1999
through January 12, 1999.
12. The Company reports tax expense and deferrals as incurred for each
period an income statement is issued. The Company did not incur any tax
expense during 1998 and in the period January 1, 1999 through January 12,
1999.
13. The Company is accounting for the Assets Purchase Agreement as a
business combination using the purchase method of accounting per APB 16.
14. The Company reports its property and equipment at cost.
15. The Company uses the accrual basis of accounting for revenue
recognition, recording revenues when an exchange has taken place.
-8-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
January 12, 1999
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES (continued)
16. Other identifiable assets from the Asset Purchase Agreement include a
non-competition agreement at $330,000. This asset will be depreciated on
the straight line basis over a period of 60 months from January 13, 1999
to January 12, 2004, the period of the non-compete agreement. Acquired
technology includes the computer hardware components and software. This
asset has been valued at $345,000 and will be depreciated over the 60
months, the estimated useful life of the technology. There was no in-
process technology from January 1, 1999 to January 12, 1999. These values
were determined by management. Deferred tax benefits were determined at
the statutory rate. Current deferred tax benefits recorded are $22,088.
Non-current deferred tax benefits recorded are $243,193.
17. The Company has commenced operations and will not be considered a
Development Stage Company for the fiscal year ended December 31,1999. The
Company was a Development Stage Company in prior periods. Comparative
financial statements for prior years will be presented in the fiscal year
reports.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. As a result of the Asset Purchase Agreement
of January 12, 1999, the Company assumed continuing contracts which provide
a revenue stream. Based on current activity levels for operations, the
Company estimates its operating funds requirement for the twelve months
ending January 11, 2000 to be $2,105,312.00. Sources for these funds will
be operations. Based on current levels for operations of the acquired
company and its contracts, funds provided by operations for the twelve
months ending January 11, 2000 are estimated to be $2,913,412.00.
NOTE 4 - RELATED PARTY TRANSACTION
The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in other
business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in selecting between the
Company and their other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 5 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
There is convertible debt of $2,250,000 which may be converted after
the stock of the Company trades for sixty days on a recognized public
exchange with a minimum conversion rate of $1.50 per share. There are no
shares of stock reserved for payment of the note. The note may only be
exchanged for common stock of the Company and the convertible debt is
secured by the assets purchased from California Software Products, Inc.
-9-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
January 12, 1999
NOTE 6 - LONG TERM OBLIGATIONS
The Company has long term separation agreements.
Total Monthly As at As at As at As at
Debt As Payment 12/31/97 12/31/98 12/31/99 12/31/00
at
12/31/97
Robert Way
Termination $2,337.00 $194.75 $2,142.25 $194.75 $0.00 $0.00
Liz Richell $58,237.05 $3,054.86 $36,853.03 $21,384.02 $0.00 $0.00
Peter Warkenton $45,961.95 $2,337.06 $28,044.72 $17,917.23 $0.00 $0.00
---------- --------- ---------- ---------- --------- ---------
$106,536.00 $5,586.67 $106,536.00 $39,496.00 $0.00 $0.00
The Company assumed a three year lease agreement with Rayson, Inc.
ending September 30, 2000. The monthly rent is $7,228.20 from May 15, 1998
to September 30, 1999 and will increase to $7,572.40 for the period October
1, 1999 to September 30, 2000. The total office rent expense reported for
1998 was $0.00. The total office rent for the period January 1, 1999 to
January 12, 1999 was $0.00.
-10-
END SECTION F/S 1.a
<PAGE>
SECTION F/S 1.b
California Software Corporation
(A Development Stage Company)
INTERIM
FINANCIAL STATEMENTS
For the period ending
March 31, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
COMPILATION REPORT............................ 1
BALANCE SHEET.............................. 2-3
STATEMENT OF OPERATIONS....................... 4
STATEMENT OF CASH FLOWS..................... 5
NOTES TO FINANCIAL STATEMENTS.................. 6
<PAGE>
James E. Slayton, CPA
3867 WEST MARKET STREET
SUITE 208
AKRON, OHIO 44333
Board of Directors
June 11, 1999
California Software Corporation (the Company)
Las Vegas, Nevada 89102
I have compiled the Balance Sheet of California Software
Corporation (A Development Stage Company), for the interim period
ending March 31, 1999, and the related Statements of Operations
and Cash Flows for the period January 1, 1999 to March 31, 1999
in accordance with standards established by the American
Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of
financial statements information that is the representation of
management. We have not audited or reviewed the accompanying
financial statements and, accordingly, do not express an opinion
or any other form of assurance on them.
James E. Slayton, CPA
Ohio License ID# 04-1-15582
<PAGE>
California Software Corporation
(A Development Stage Company)
BALANCE SHEET
AS AT
March 31, 1999
March 31 March 31
1999 1998
ASSETS
CURRENT ASSETS
Cash 19,824 0
Money Market Investment Account 248,129 0
Accounts Receivable (Net of Reserves) 1,288,430 0
Inventory on Consignment 66,926 0
Inventory (Net of Reserves) 110,095 0
Other Current Assets 22,004 0
Deferred Tax Benefits 22,088 0
----------- -----------
Total Current Assets 1,777,496 0
PROPERTY AND EQUIPMENT
Furniture, Fixtures and Equipment (Net of 52,401 0
Depreciation)
Leasehold Improvements (Net of Amortization) 9,925 0
----------- -----------
Total Plant and Equipment 62,326 0
OTHER ASSETS
Organization Costs (Net of Amortization) 324 0
Non-Competition Agreement (Net of Amortization) 313,500 0
Acquired Technology (Net of Amortization) 327,750 0
Deferred Tax Benefits 243,193 0
Goodwill 365,173 0
----------- -----------
Total Other Assets 1,249,940 0
----------- -----------
TOTAL ASSETS 3,089,762 0
=========== ===========
See accompanying notes to financial statements
-2-
<PAGE>
California Software Corporation
(A Development Stage Company)
BALANCE SHEET
AS AT
March 31, 1999
March 31 March 31
1999 1998
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable 377,685 0
Federal Payroll Taxes Payable 20,565 0
Other Taxes Payable 10,884 0
Other Current Liabilities 29,029 0
Employee Benefits Payable 100,168 0
Accrued Sales Commission 9,373 0
Deferred Revenue 67,020 0
----------- -----------
Total Current Liabilities 614,724 0
Long Term Liabilities
Long Term Liabilities 39,496 0
Convertible Note Payable 2,250,000 0
----------- -----------
Total Long Term Liabilities 2,289,496 0
----------- -----------
TOTAL LIABILITIES 2,904,220 0
EQUITY
Capital Stock 3,271 0
Additional Paid in Capital 32,449 0
Retained Earnings (or Deficit) Accumulated During 149,822 0
the Development Stage
----------- -----------
Total Stockholder's Equity 185,542 0
TOTAL LIABILTIES & OWNER'S EQUITY 3,089,762 0
=========== ===========
See accompanying notes to financial statements
-3-
<PAGE>
California Software Corporation
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR PERIOD
January 1, 1999 to March 31, 1999
Three Three
Months Months
Ending Ending
March 31, March 31,
1999 1998
REVENUE
Net Sales 823,937 0
Cost of Goods Sold 10,014 0
----------- -----------
Gross Profit 813,923 0
COSTS AND EXPENSES
Selling, General and Administrative 591,130 0
Amortization of Intangible assets 52,988 0
----------- -----------
Total Costs and Expenses 644,118 0
----------- -----------
Net Ordinary Income or (Loss) 169,805 0
before Income Taxes
Provision for Income Tax 0 0
----------- -----------
Net Ordinary Income or (Loss) 169,805 0
after Income Taxes
=========== ===========
Weighted average
number of common
shares outstanding 3,270,900 0
Net Earnings
Per Share 0.05 0
See accompanying notes to financial statements
-4-
<PAGE>
California Software Corporation
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR PERIOD
January 1, 1999 to March 31, 1999
Three Three
Months Months
Ending Ending
March 31, March 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 444,072 0
Interest received 0 0
----------- -----------
Net Cash provided by Operating 444,072 0
Activities
Cash paid to suppliers and employees 557,640 0
Interest paid 0 0
Income taxes paid 0 0
----------- -----------
Cash disbursed for Operating 533,852 0
Activities
----------- -----------
Net Cash flow provided by (89,780) 0
Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant assets 0 0
----------- -----------
Net Cash used by investing 0 0
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Long Term Obligations 0 0
----------- -----------
Net cash used by financing 0 0
activities
Cash balance at beginning of year 357,733 0
Net increase (decrease) in cash (89,780) 0
Cash balance as at March 31, 1999 267,953 0
See accompanying notes to financial statements
-5-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized October 28, 1998 (Date of Inception) under
the laws of the State of Nevada, as California Software Corporation (the
Company).
On October 31, 1998, the Company issued 2,700,000 Shares of its $0.001
par value common stock for $7,175 to the two founding shareholders. The
consideration paid for the common stock represents $2,800 deposited into
the Company's new bank account and the subsequent cancellation of a loan
owed by the Company. The canceled loan was owed to the two founding
shareholders for corporate consulting and incorporation costs paid for by
these shareholders on behalf of the Company in the amount of $4,375.
On November 16, 1998, the Company completed a public offering that was
exempt from federal regulation pursuant to Regulation D, Rule 504 of the
Securities Act of 1933, as amended. The Company sold 570,900 shares of
Common Stock as a price of $.05 per share for a total amount raised of
$28,545.
On January 12, 1999, the Company effectuated the asset purchase of
California Software Products, Inc. (CSPI), a California corporation. The
Company completed the acquisition of $1,628,068 worth of assets and
$702,742 of liabilities from California Software Products Inc.- a
California company in a similar line of business as the Company - in
exchange for a convertible note in the principle sum of $2,250,000 -
convertible into Common Shares of the Company once the Company is trading
on the OTC-BB or a similar market and based on the trading price sixty (60)
days following the first day of trading of the Company's shares on a
recognized public exchange with a minimum conversion rate of $1.50 per
share. (See attached summary of assets purchased and liabilities assumed)
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. The cost of organization, $360, is being amortized over a period of 60
months (October 28, 1998 through October 27, 2003).
3. Earnings per share is computed using the weighted average number of
shares of common stock outstanding.
4. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
-6-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES (continued)
5. The Company acquired goodwill in the amount of $384,393 as a result of
the Asset Purchase Agreement of January 12, 1999. Management of the
Company has chosen to amortize this goodwill over a period of 5 years
using the straight line method. Goodwill impairment will be recognized
when incurred or acquired.
6. The convertible note associated with the Asset Purchase Agreement may
effect future earnings per share. It is undetermined at this time as to
whether there will be a dilutive or antidilutive effect on earnings per
share. This shall be determined when the conversion conditions are met.
7. The fiscal year of the Company ends on December 31st.
8. The statement of cash flows was prepared per SFAS 95.
9. The money market investment account is an interest bearing money funds
account with Bank of America. The account is reported at cost. Market
fluctuations are insignificant and gains or (losses) are reported when
realized.
10. Accounts receivable and Inventory are reported net of reserves. The
Company reports inventory using the cost basis pricing method. The
Company has Reserve for Returned Products in the amount of $42,622,
Reserve for Bad Debts in the amount of $12,185 and Inventory Reserve in
the amount of $1,001.
11. The Company reports Research and Development costs as incurred for
each period an income statement is issued. The Company incurred $23,200
in the three months ending March 31, 1999.
12. The Company reports tax expense and deferrals as incurred for each
period an income statement is issued.
13. The Company is accounting for the Assets Purchase Agreement as a
business combination using the purchase method of accounting per APB 16.
14. The Company reports its property and equipment at cost.
15. The Company uses the accrual basis of accounting for revenue
recognition, recording revenues when an exchange has taken place.
-7-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES (continued)
16. Other identifiable assets from the Asset Purchase Agreement include a
non-competition agreement at $330,000. This asset will be depreciated on
the straight line basis over a period of 60 months from January 13, 1999
to January 12, 2004, the period of the non-compete agreement. Acquired
technology includes the computer hardware components and software. This
asset has been valued at $345,000 and will be depreciated over the 60
months, the estimated useful life of the technology. These values were
determined by management. Deferred tax benefits were determined at the
statutory rate. Current deferred tax benefits recorded are $22,088. Non-
current deferred tax benefits recorded are $243,193.
17. The Company has commenced operations and will not be considered a
Development Stage Company for the fiscal year ended December 31, 1999.
The Company was a Development Stage Company in prior periods. Comparative
financial statements for prior years will be presented in the fiscal year
reports.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. As a result of the Asset Purchase Agreement
of January 12, 1999, the Company has continuing contracts which provide a
revenue stream. Based on current activity levels for operations, the
Company estimates its operating funds requirement for the twelve months
ending March 31, 2000 to be $2,259,500.00. Sources for these funds will be
operations. Based on current levels for operations, funds provided by
operations for the twelve months ending March 31, 2000 are estimated to be
$3,055,120.00
NOTE 4 - RELATED PARTY TRANSACTION
The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in other
business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in selecting between the
Company and their other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 5 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
There is convertible debt of $2,250,000 which may be converted after
the stock of the Company trades for sixty days on a recognized public
exchange with a minimum conversion rate of $1.50 per share. There are no
shares of stock reserved for payment of the note. The note may only be
exchanged for common stock of the Company and the convertible debt is
secured by the assets purchased from California Software Products, Inc.
-8-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
NOTE 6 - LONG TERM OBLIGATIONS
The Company has long term separation agreements.
Total Monthly As at As at As at As at
Debt As Payment 12/31/97 12/31/98 12/31/99 12/31/00
at
12/31/97
Robert Way
Termination $2,337.00 $194.75 $2,142.25 $194.75 $0.00 $0.00
Liz Richell $58,237.05 $3,054.86 $36,853.03 $21,384.02 $0.00 $0.00
Peter Warkenton $45,961.95 $2,337.06 $28,044.72 $17,917.23 $0.00 $0.00
---------- --------- ---------- ---------- --------- ---------
$106,536.00 $5,586.67 $106,536.00 $39,496.00 $0.00 $0.00
The Company assumed a three year lease agreement with Rayson, Inc.
ending September 30, 2000. The monthly rent is $7,228.20 from May 15, 1998
to September 30, 1999 and will increase to $7,572.40 for the period October
1, 1999 to September 30, 2000. The total office rent for the period
January 1, 1999 to March 31, 1999 was $21,684.00.
-9-
END SECTION F/S 1.b
<PAGE>
SECTION F/S 1.c
California Software Corporation
(A Development Stage Company)
PRO FORMA
FINANCIAL STATEMENTS
December 31, 1998
and
March 31, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
PRO FORMA COMPILATION REPORT.................. 1
BALANCE SHEET........................... 2
STATEMENT OF OPERATIONS........................ 3
NOTES TO FINANCIAL STATEMENTS................. 4-7
<PAGE>
James E. Slayton, CPA
3867 WEST MARKET STREET
SUITE 208
AKRON, OHIO 44333
Board of Directors June 11, 1999
California Software Corporation (the Company)
Las Vegas, Nevada 89102
I have compiled the Pro Forma Balance Sheet of California
Software Corporation (A Development Stage Company), as of
December 31, 1998 and March 31, 1999, and the related Statements
of Operations and Cash Flows for the period ending March 31, 1999
and the year ended December 31, 1998 in accordance with standards
established by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of
financial statements information that is the representation of
management. We have not audited or reviewed the accompanying
financial statements and, accordingly, do not express an opinion
or any other form of assurance on them.
James E. Slayton, CPA
Ohio License ID# 04-1-15582
<PAGE>
California Software Corporation
(A Development Stage Company)
BALANCE SHEET
AS AT
March 31, 1999
March 31 December 31
1999 1998
ASSETS
CURRENT ASSETS
Cash 267,953 248,384
Accounts Receivable (Net of Reserves) 1,288,430 794,614
Inventory on Consignment 66,926 192,504
Inventory (Net of Reserves) 110,095 110,094
Other Current Assets 22,004 15,354
Deferred Tax Benefits 0 22,088
----------- -----------
Total Current Assets 1,755,408 1,383,038
PLANT AND EQUIPMENT
Plant and Equipment (less Depreciation) 62,326 68,884
----------- -----------
Total Plant and Equipment 62,326 68,884
OTHER ASSETS
Organization Costs (Net of Amortization) 324 342
Non-Competition Agreement (Net of Amortization) 247,500 264,000
Acquired Technology (Net of Amortization) 258,750 276,000
Deferred Tax Benefits 207,547 243,193
Goodwill 288,294 307,514
----------- -----------
Total Other Assets 1,002,415 1,091,049
----------- -----------
TOTAL ASSETS 2,820,149 2,542,971
=========== ===========
LIABILITIES & EQUITY
Current Liabilities 614,724 560,136
Long Term Liabilities
Long Term Liabilities 39,496 39,496
Convertible Note Payable 2,250,000 2,250,000
----------- -----------
Total Long Term Liabilities 2,289,496 2,289,496
EQUITY
Capital Stock 3,271 3,271
Additional Paid in Capital 32,449 32,449
Retained Earnings (or Deficit) Accumulated During (119,791) (342,381)
the Development Stage
----------- -----------
Total Stockholder's Equity (84,071) (306,661)
TOTAL LIABILTIES & OWNER'S EQUITY 2,820,149 2,542,971
=========== ===========
See accompanying notes to financial statements
-2-
<PAGE>
California Software Corporation
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR PERIOD
January 1, 1998 to December 31, 1998
and
Three Months Ended March 31, 1999
March 31 December 31
1999 1998
REVENUE
Net Sales 823,937 3,575,933
Cost of Goods Sold 10,014 234,211
----------- -----------
Gross Profit 813,923 3,341,722
COSTS AND EXPENSES
Selling, General and Administrative 591,130 2,570,569
Amortization of Intangible assets 52,988 211,952
Total Costs and Expenses 644,118 2,782,521
----------- -----------
Net Ordinary Income or (Loss) 169,805 559,201
before Income Taxes
Provision for Income Tax 0 0
----------- -----------
Net Ordinary Income or (Loss) 169,805 559,201
after Income Taxes
=========== ===========
Weighted average
number of common
shares outstanding 3,270,900 3,270,900
Net Earnings
Per Share 0.05 0.17
See accompanying notes to financial statements
-3-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and March 31, 1999
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized October 28, 1998 (Date of Inception) under
the laws of the State of Nevada, as California Software Corporation (the
Company).
On October 31, 1998, the Company issued 2,700,000 Shares of its $0.001
par value common stock for $7,175 to the two founding shareholders. The
consideration paid for the common stock represents $2,800 deposited into
the Company's new bank account and the subsequent cancellation of a loan
owed by the Company. The canceled loan was owed to the two founding
shareholders for corporate consulting and incorporation costs paid for by
these shareholders on behalf of the Company in the amount of $4,375.
On November 16, 1998, the Company completed a public offering that was
exempt from federal regulation pursuant to Regulation D, Rule 504 of the
Securities Act of 1933, as amended. The Company sold 570,900 shares of
Common Stock as a price of $.05 per share for a total amount raised of
$28,545.
On January 12, 1999, the Company effectuated the asset purchase of
California Software Products, Inc. (CSPI), a California corporation. The
Company completed the acquisition of $1,628,068 worth of assets and
$702,742 of liabilities from California Software Products Inc.- a
California company in a similar line of business as the Company - in
exchange for a convertible note in the principle sum of $2,250,000 -
convertible into Common Shares of the Company once the Company is trading
on the OTC-BB or a similar market and based on the trading price sixty (60)
days following the first day of trading of the Company's shares on a
recognized public exchange with a minimum conversion rate of $1.50 per
share. (See attached summary of assets purchased and liabilities assumed)
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. The cost of organization, $360, is being amortized over a period of 60
months (October 28, 1998 through October 27, 2003).
3. Earnings per share is computed using the weighted average number of
shares of common stock outstanding.
4. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
-4-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and March 31, 1999
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES (continued)
5. The Company acquired goodwill in the amount of $384,393 as a result of
the Asset Purchase Agreement of January 12, 1999. Management of the
Company has chosen to amortize this goodwill over a period of 5 years
using the straight line method. Goodwill impairment will be recognized
when incurred or acquired.
6. The convertible note associated with the Asset Purchase Agreement may
effect future earnings per share. It is undetermined at this time as to
whether there will be a dilutive or antidilutive effect on earnings per
share. This shall be determined when the conversion conditions are met.
7. The fiscal year of the Company ends on December 31st.
8. The statement of cash flows was prepared per SFAS 95.
9. The money market investment account is an interest bearing money funds
account with Bank of America. The account is reported at cost. Market
fluctuations are insignificant and gains or (losses) are reported when
realized.
10. Accounts receivable and Inventory are reported net of reserves. The
Company reports inventory using the cost basis pricing method. The
Company has Reserve for Returned Products in the amount of $42,622,
Reserve for Bad Debts in the amount of $12,185 and Inventory Reserve in
the amount of $1,001.
11. The Company reports Research and Development costs as incurred for
each period an income statement is issued. This amounted to $93,175 in
the year ended December 31, 1998 and $23,200 for the three months ended
March 31, 1999.
12. The Company reports tax expense and deferrals as incurred for each
period an income statement is issued.
13. The Company is accounting for the Assets Purchase Agreement as a
business combination using the purchase method of accounting per APB 16.
14. The Company reports its property and equipment at cost.
15. The Company uses the accrual basis of accounting for revenue
recognition, recording revenues when an exchange has taken place.
-5-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and March 31, 1999
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES (continued)
16. Other identifiable assets from the Asset Purchase Agreement include a
non-competition agreement at $330,000. This asset will be depreciated on
the straight line basis over a period of 60 months from January 13, 1999
to January 12, 2004, the period of the non-compete agreement. Acquired
technology includes the computer hardware components and software. This
asset has been valued at $345,000 and will be depreciated over the 60
months, the estimated useful life of the technology. These values were
determined by management. Deferred tax benefits were determined at the
statutory rate. Current deferred tax benefits recorded are $22,088. Non-
current deferred tax benefits recorded are $243,193.
17. The Company has commenced operations and will not be considered a
Development Stage Company for the fiscal year ended December 31, 1999.
The Company was a Development Stage Company in prior periods. Comparative
financial statements for prior years will be presented in the fiscal year
reports.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. As a result of the Asset Purchase Agreement
of January 12, 1999, the Company has continuing contracts which provide a
revenue stream. Based on current activity levels for operations, the
Company estimates its operating funds requirement for the twelve months
ending March 31, 2000 to be $2,259,500.00. Sources for these funds will be
operations. Based on current levels for operations, funds provided by
operations for the twelve months ending March 31, 2000 are estimated to be
$3,055,120.00
NOTE 4 - RELATED PARTY TRANSACTION
The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in other
business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in selecting between the
Company and their other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 5 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
There is convertible debt of $2,250,000 which may be converted after
the stock of the Company trades for sixty days on a recognized public
exchange with a minimum conversion rate of $1.50 per share. There are no
shares of stock reserved for payment of the note. The note may only be
exchanged for common stock of the Company and the convertible debt is
secured by the assets purchased from California Software Products, Inc.
-6-
<PAGE>
California Software Corporation
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and March 31, 1999
NOTE 6 - LONG TERM OBLIGATIONS
The Company has long term separation agreements.
Total Monthly As at As at As at As at
Debt As Payment 12/31/97 12/31/98 12/31/99 12/31/00
at
12/31/97
Robert Way
Termination $2,337.00 $194.75 $2,142.25 $194.75 $0.00 $0.00
Liz Richell $58,237.05 $3,054.86 $36,853.03 $21,384.02 $0.00 $0.00
Peter Warkenton $45,961.95 $2,337.06 $28,044.72 $17,917.23 $0.00 $0.00
---------- --------- ---------- ---------- --------- ---------
$106,536.00 $5,586.67 $106,536.00 $39,496.00 $0.00 $0.00
The Company has a three year lease agreement with Rayson, Inc. ending
September 30, 2000. The total office rent for 1998 was $69,604.23. The
monthly rent was $5,851.40 from October 1, 1997 to May 15, 1998. The
monthly rent is $7,228.20 for the period May 15, 1998 to September 30, 1999
and will increase to $7,572.40 for the period October 1, 1999 to September
30, 2000. The total office rent for the three months ending March 31, 1999
was $21,864.00.
NOTE 7 - PRO FORMA STATEMENTS
The Company has prepared pro forma balance sheets and statements of
operations for the period ending December 31, 1998 and March 31, 1999.
Intangible assets, deferred tax benefits and convertible debt were among
the items included to prepare the pro forma reports.
-7-
END SECTION F/S 1.c
<PAGE>
SECTION F/S 1.d
California Software Corporation
(A Development Stage Company)
ANALYSIS OF CHANGES
IN ASSETS, LIABILITIES &
EQUITY FROM
December 31, 1998 to January 12, 1999
<PAGE>
<TABLE> ANALYSIS OF CHANGES IN ASSETS, LIABILITIES, & EQUITY
<S> <C> <C> <C> <C> <C>
ASSETS
December 31 January 12 DR. CR.
1998 1999
CURRENT ASSETS
Cash 152,716 342,720 190,004 (1)
Money Market Investment Account 80,273 80,273 0
Accounts Receivable 794,614 810,691 16,077 (2)
(Net of Reserves)
Inventory on Consignment 192,504 192,504 0
Inventory 110,094 110,094 0
(Net of Reserves)
Prepaid Expenses 4,301 4,301 0
Other Current Assets 11,053 18,601 7,548 (3)
-------------------------------------------
Total Current Assets 1,345,555 1,559,184
PLANT AND EQUIPMENT
Plant and Equipment 293,432 293,432 0
Less Depreciation -224,548 -224,548 0
-------------------------------------------
Total Plant and Equipment 68,884 68,884
OTHER ASSETS
Total Other Assets 0 0 0
--------------------------------------------
TOTAL ASSETS 1,414,439 1,628,068
========== ==========
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable 392,261 430,574 38,313(4)
Federal Payroll Taxes Payable 20,565 15,068 5,497 (5)
Other Taxes Payable 10,517 4,369 6,148 (6)
Other Current Liabilities 25,053 64,412 39,359(7)
Employee Benefits Payable 44,720 81,803 37,083(8)
Deferred Revenue 67,020 67,020 0
---------------------------------------------
Total Current Liabilities 560,136 663,246
Long Term Liabilities
Long Term Liabilities 39,496 39,496 0
---------------------------------------------
Total Long Term Liabilities 39,496 39,496
---------------------------------------------
TOTAL LIABILITIES 599,632 702,742
EQUITY
Capital Stock 1,144,445 1,144,445 0
Additional Paid in Capital 0 0
Retained Earnings (or Deficit) -329,638 -219,119 110,519(9)
----------------------------------------------
Total Stockholder's Equity 814,807 925,326
TOTAL LIABILITIES & 1,414,439 1,628,068 225,274 225,274
OWNERS EQUITY ========== ========= ========= =========
</TABLE>
<PAGE>
CHANGES IN ASSETS AND LIABILITIES
(1) Operations - collections from customers.
(2) Operations - recorded items sold to customers on account.
(3) Operations-increase in other assets.
(4) Operations-increase due to recording invoices from suppliers.
(5) Operations-reduction due to payment to tax agency.
(6) Operations-reduction due to payment to tax agency.
(7) Operations-increase due to recording liabilities from other than suppliers.
(8) Operations-increase due to recording liabilities due employees as a result
of sales.
(9) Operations-change in retained earnings d-e to net income from operations.
END SECTION F/S 1.d
<PAGE>
SECTION F/S 1.e
California Software Products, Inc.
FINANCIAL STATEMENTS
December 31, 1997
and
December 31, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT..................... 1
BALANCE SHEET............................ 2
STATEMENT OF OPERATIONS.......................... 3
STATEMENT OF STOCKHOLDER'S EQUITY................. 4
STATEMENT OF CASH FLOWS....................... 5
NOTES TO FINANCIAL STATEMENTS................... 6
<PAGE>
James E. Slayton, CPA
3867 WEST MARKET STREET
SUITE 208
AKRON, OHIO 44333
Board of Directors
March 12, 1999
California Software Products, Inc. (the Company)
Las Vegas, Nevada 89102
I have audited the Balance Sheet of California Software
Products, Inc., as of December 31, 1998 and December 31, 1997,
and the related Statements of Operations, Stockholders' Equity
and Cash Flows for the period ended December 31, 1998 and
December 31, 1997. These financial statements are the
responsibility of the Company's management. My responsibility is
to express an opinion on these financial statements based on my
audit.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis evidence supporting the
amounts and disclosures in the financial statement presentation.
An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. I
believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of California Software Products, Inc., at December 31, 1998 and
December 31, 1997, and the results of its operations and cash
flows for the periods ending December 31, 1998 and December 31,
1997, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As
discussed in Note 3 to the financial statements, the Company
filed Chapter 11 in 1997 and has suffering recurring losses
through 1996. This raises substantial doubt about its ability to
continue as a going concern. Management's plan in regard to
these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
James E. Slayton, CPA
Ohio License ID# 04-1-15582
<PAGE>
California Software Products, Inc.
BALANCE SHEET
AS AT
December 31, 1998 and December 31, 1997
1998 1997
ASSETS
CURRENT ASSETS
Cash 232,989 27,540
Accounts Receivable (Net of Reserves) 794,614 327,037
Inventory on Consignment 192,504 0
Inventory (Net of Reserves) 110,094 15,761
Other Current Assets 15,354 998,957
----------- -----------
Total Current Assets 1,345,555 1,369,295
PLANT AND EQUIPMENT
Plant and Equipment 293,432 276,701
Less Depreciation (224,548) (181,516)
----------- -----------
Total Plant and Equipment 68,884 95,185
OTHER ASSETS 0 0
----------- -----------
Total Other Assets 0 0
----------- -----------
TOTAL ASSETS 1,414,439 1,464,480
=========== ===========
LIABILITIES & EQUITY
Current Liabilities 560,136 1,314,289
Long Term Obligations 39,496 106,536
----------- -----------
TOTAL LIABILITIES 599,632 1,420,825
EQUITY
Capital Stock 1,144,445 1,144,445
Additional Paid in Capital 0 0
Retained Earnings (or Deficit) (329,638) (1,100,790)
----------- -----------
Total Stockholder's Equity 814,807 43,655
TOTAL LIABILTIES & OWNER'S EQUITY 1,414,439 1,464,480
=========== ===========
See accompanying notes to financial statements
-2-
<PAGE>
California Software Products, Inc.
STATEMENT OF OPERATIONS
FOR PERIOD
December 31, 1998 and December 31, 1997
1998 1997
REVENUE
Net Sales 3,575,933 2,176,778
Cost of Goods Sold 234,211 333,027
----------- -----------
Gross Profit 3,341,722 1,843,751
COSTS AND EXPENSES
Selling, General and Administrative 2,570,569 1,816,838
----------- -----------
Total Costs and Expenses 2,570,569 1,816,838
----------- -----------
Net Ordinary Income or (Loss) 771,153 26,913
before Income Taxes
Provision for Income Tax 0 0
=========== ===========
Net Ordinary Income or (Loss) 771,153 26,913
after Income Taxes
Weighted average
number of common
shares outstanding 1,998,704 1,998,704
Net Earnings
Per Share 0.39 0.01
See accompanying notes to financial statements
-3-
<PAGE>
California Software Products, Inc.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR YEARS ENDED
December 31, 1998 and December 31, 1997
Additional Retained Total
Common Stock paid-in Earnings Stockholder
Shares Amount Capital (Deficit) Equity
--------- --------- --------- --------- ---------
Balances at January 1,998,704 1,144,445 0 (1,127,703) 16,742
1, 1997
Common Stock 0 0
Dividends
Net Earnings 26,913 26,913
--------- --------- --------- --------- ---------
Balances at 1,998,704 1,144,445 0 (1,100,790) 43,655
December 31, 1997
Common Stock 0 0
Dividends
Net Earnings 771,152 771,152
--------- --------- --------- --------- ---------
Balance as at 1,998,704 1,144,445 0 (329,638) 814,807
December 31, 1998
========= ========= ========= ========= =========
See accompanying notes to financial statements
-4-
<PAGE>
California Software Products, Inc.
STATEMENT OF CASH FLOWS
FOR PERIOD
December 31, 1998 and December 31, 1997
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 2,907,271 2,279,583
Interest received 835 0
----------- -----------
Net Cash provided by Operating 2,907,271 2,279,583
Activities
Cash paid to suppliers and employees 2,592,935 2,206,833
Interest paid 25,951 80,746
Income taxes paid 0 0
----------- -----------
Cash disbursed for Operating 2,618,886 2,287,579
Activities
----------- -----------
Net Cash flow used by 289,220 (7,996)
Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant assets 16,731 16,282
----------- -----------
Net Cash used by investing 16,731 16,282
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Long Term Obligations 67,040 0
----------- -----------
Net cash used by financing 67,040 0
activities
Net increase (decrease) in 205,449 (24,278)
cash
Cash balance beginning of year 27,540 51,818
Net increase (decrease) in cash 250,449 (24,278)
Cash balance end of year 232,989 27,540
See accompanying notes to financial statements
-5-
<PAGE>
California Software Products, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized under the laws of the State of California,
as California Software Products, Inc. (the Company).
The Company issued $1,144,445 in common stock. The Company has issued
and outstanding 1,998,704 shares of its no par value common stock. The
Company is authorized to issue 5,000,000 shares of common stock and 1,250
shares of preferred stock.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. Research and Development
The Company expenses research and development costs as incurred per
SFAS 2. This amounted to $82,700 in year ended December 31, 1997
and $93,175 in the year ended December 31, 1998.
3. The Company reports its property and equipment on the cost bases and
uses an accelerated method of depreciation for its plant and equipment.
4. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
5. The Company reports tax expense and deferrals as incurred for each
period a financial statement is issued. Currently, the Company has net
operating losses carryforward which total $1,551,391 at the end of 1997
and $780,238 at the end of 1998. The net operating losses are carried
forward for twenty years.
The net operating losses will expire
Year Amount
2015 $ 4,965
2016 $ 538,788
2017 $ 176,485
Total$ 780,238
The Company does not expect to have any federal tax liability for
the year ended December 31, 1998. The Company did not have any
federal tax liability for the tax year ended December 31, 1997.
The Company's estimated taxable income is $771,153 before net
operating losses with an estimated statutory tax of $262,192. The
Company's statutory rate for the tax year ended 1998 is estimated
at 34%. The Company did not record any deferred tax assets for the
year ended December 31, 1997 or December 31, 1998. The Company's
effective tax rate is 0%.
-6-
<PAGE>
California Software Products, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES (continued)
6. The money market investment account is an interest bearing money funds
account with Bank of America.
7. Accounts receivable and Inventory are reported net of reserves. The
Company has Reserves for Returned Products in the amount of $42,622 at
December 31, 1998 and $52,097 at December 31, 1997. The Company had
Reserves for Bad Debts in the amount of $12,185 at December 31, 1998 and
$15,022 at December 31, 1997. The Company had Inventory Reserves in the
amount of $1,001 at December 31, 1998 and $1,751 at December 31, 1997.
8. Earnings per share is computed using the weighted average number of
shares of common stock outstanding.
9. The Company reports its inventory using the cost basis pricing method.
10. The Company reports its property and equipment at cost.
11. The Company uses the accrual basis of accounting for revenue
recognition, recording revenues when an exchange has taken place.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. As a result of the Company filing Chapter
11 in 1997, doubts were raised about the Company's ability to continue as a
going concern. This has been addressed in the President of California
Software Products, Incorporated Letter to Shareholders (see attached) which
points out that the Company has emerged from Chapter 11 and operated
profitably in years ending December 31, 1997 and December 31, 1998.
NOTE 4 - RELATED PARTY TRANSACTION
The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in other
business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in selecting between the
Company and their other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
-7-
<PAGE>
California Software Products, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
NOTE 5 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
NOTE 6 - LONG TERM OBLIGATIONS
The Company has long term separation agreements.
Total Monthly As at As at As at As at
Debt As Payment 12/31/97 12/31/98 12/31/99 12/31/00
at
12/31/97
Robert Way
Termination $2,337.00 $194.75 $2,142.25 $194.75 $0.00 $0.00
Liz Richell $58,237.05 $3,054.86 $36,853.03 $21,384.02 $0.00 $0.00
Peter Warkenton $45,961.95 $2,337.06 $28,044.72 $17,917.23 $0.00 $0.00
---------- --------- ---------- ---------- --------- ---------
$106,536.00 $5,586.67 $106,536.00 $39,496.00 $0.00 $0.00
The Company has a three year lease agreement with Rayson, Inc. ending
September 30, 2000. The total office rent expense for 1997 was $57,696.00.
The total office rent for 1998 was $69,604.23. The monthly rent was
$5,851.40 from October 1, 1997 to May 15, 1998. The monthly rent is
$7,228.20 for the period May 16, 1998 to September 30, 1999 and will
increase to $7,572.40 for the period October 1, 1999 to September 30, 2000.
-8-
END SECTION F/S 1.e
<PAGE>
Part III
Item 1. Index to Exhibits (Pursuant to Item 601 of Regulation SB)
Exhibit
Number Name and/or Identification of Exhibit
- - ------ -------------------------------------
1. Underwriting Agreement
Not applicable
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation,
or Succession
(I) Asset Purchase Agreement with California Software
Products, Inc.
(II) Amendment to Asset Purchase Agreement.
(III) Note
3. Articles of Incorporation & By-Laws
(a) Articles of Incorporation of the Company filed
October 28, 1998
(b) By-Laws of the Company adopted October 31, 1998
4. Instruments Defining the Rights of Security Holders
No instruments other than those included in Exhibit 3
5. Opinion on Legality
Not applicable
6. No Exhibit Required
Not applicable
7. Opinion on Liquidation Preference
Not applicable
8. Opinion on Tax Matters
Not applicable
9. Voting Trust Agreement and Amendments
Not applicable
10. Material Contracts
(a) Assumption of Premise Lease dated September 25, 1997
20
<PAGE>
Exhibit
Number Name and/or Identification of Exhibit
- - ------ -------------------------------------
11. Statement Re Computation of Per Share Earnings
Not applicable - Computation of per share earnings
can be clearly determined from the Statement of
Operations in the Company's financial statements
12. No Exhibit Required
Not applicable
13. Annual or Quarterly Reports - Form 10-Q
Not applicable
14. Material Foreign Patents
Not applicable
15. Letter on Unaudited Interim Financial Information
Not applicable
16. Letter on Change in Certifying Accountant
Not applicable
17. Letter on Director Resignation
Not applicable
18. Letter on Change in Accounting Principles
Not applicable
19. Reports Furnished to Security Holders
Not applicable
20. Other Documents or Statements to Security Holders
None - Not applicable
21. Subsidiaries of Small Business Issuer
None - Not applicable
21
<PAGE>
Exhibit
Number Name and/or Identification of Exhibit
- - ------ -------------------------------------
22. Published Report Regarding Matters Submitted to Vote of
Security Holders
Not applicable
23. Consent of Experts and Counsel
Consents of independent public accountants
24. Power of Attorney
Not applicable
25. Statement of Eligibility of Trustee
Not applicable
26. Invitations for Competitive Bids
Not applicable
27. Financial Data Schedule
Financial Data Schedule of California Software Corp.
ending January 12, 1999
28. Information from Reports Furnished to State Insurance
Regulatory Authorities
Not applicable
29. Additional Exhibits
Not applicable
22
<PAGE>
Item 2. Description of Exhibits
Exhibit
Number Name and/or Identification of Exhibit
- ------- -------------------------------------
1. Underwriting Agreement
Not applicable
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation,
or Succession
(I) Asset Purchase Agreement with California Software
Products, Inc.
(II) Amendment to Asset Purchase Agreement.
(III) Note
3. Articles of Incorporation & By-Laws
(a) Articles of Incorporation of the Company filed
October 28, 1998
(b) By-Laws of the Company adopted October 31, 1998
4. Instruments Defining the Rights of Security Holders
No instruments other than those included in Exhibit 3
5. Opinion on Legality
Not applicable
6. No Exhibit Required
Not applicable
7. Opinion on Liquidation Preference
Not applicable
8. Opinion on Tax Matters
Not applicable
9. Voting Trust Agreement and Amendments
Not applicable
10. Material Contracts
(a) Assumption of Premise Lease dated September 25, 1997
23
<PAGE>
Exhibit
Number Name and/or Identification of Exhibit
- ------- -------------------------------------
11. Statement Re Computation of Per Share Earnings
Not applicable - Computation of per share earnings
can be clearly determined from the Statement of
Operations in the Company's financial statements
12. No Exhibit Required
Not applicable
13. Annual or Quarterly Reports - Form 10-Q
Not applicable
14. Material Foreign Patents
Not applicable
15. Letter on Unaudited Interim Financial Information
Not applicable
16. Letter on Change in Certifying Accountant
Not applicable
17. Letter on Director Resignation
Not applicable
18. Letter on Change in Accounting Principles
Not applicable
19. Reports Furnished to Security Holders
Not applicable
20. Other Documents or Statements to Security Holders
None - Not applicable
21. Subsidiaries of Small Business Issuer
None - Not applicable
24
<PAGE>
Exhibit
Number Name and/or Identification of Exhibit
- - ------ -------------------------------------
22. Published Report Regarding Matters Submitted to Vote of
Security Holders
Not applicable
23. Consent of Experts and Counsel
Consents of independent public accountants
24. Power of Attorney
Not applicable
25. Statement of Eligibility of Trustee
Not applicable
26. Invitations for Competitive Bids
Not applicable
27. Financial Data Schedule
Financial Data Schedule of California Software Corp.
ending January 12, 1999
28. Information from Reports Furnished to State Insurance
Regulatory Authorities
Not applicable
29. Additional Exhibits
Not applicable
25
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
California Software Corporation
- --------------------------------------------------------------------------------
(Registrant)
Date: January 27, 1999
----------------
By: /s/ Bruce Acacio
-------------------------------------
Bruce Acacio, Chairman of the Board,
President and Chief Executive Officer
By: /s/ Carol Conway
---------------------------------------
Carol Conway, Director, Vice President,
CFO, Secretary/Treasurer
26
CALIFORNIA SOFTWARE CORPORTATION
EXHIBIT #2.I
Asset Purchase Agreement with California Software Products, Inc.
<PAGE>
Asset Purchase Agreement
This Asset Purchase Agreement (the "Agreement") is made and entered
into this 12th day of January, 1999, by and between California Software
Products, Inc., a California corporation ("Seller") and California Software
Corporation, a Nevada corporation ("Buyer").
RECITALS
A. Seller is the owner of certain assets and accounts payable, a
complete list of which is attached hereto and incorporated herein by reference
as Exhibit A (the "Assets").
B. Buyer desires to purchase and acquire from Seller such Assets, and
Seller desires to transfer and convey the same to Buyer, in accordance with the
terms and conditions of this Agreement.
C. Contemporaneously with the closing (as hereinafter defined), Buyer
and Seller will enter into an agreement not-to-compete (the form of which is
attached hereto as Exhibit B).
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, and on the terms and subject to the
conditions herein set forth, the parties hereby agree as follows:
ARTICLE I
Definitions
-----------
As used in this Agreement, the following terms shall have the meanings
set forth below:
1.1 Closing. "Closing" shall mean the closing of the transaction
contemplated by this Agreement, which shall occur at 5:00 p.m., Pacific Standard
Time, on the Closing Date in the offices of Seller, or at such other time and
place as shall be mutually agreed in writing by the parties hereto.
1.2 Closing Date. "Closing Date" shall mean January 12, 1999, unless
otherwise mutually agreed in writing by the parties hereto.
1.3 Assets. "Assets" shall mean all rights and interests in the
patents, copyrights, trademarks, trade names, etc. concerning the assets listed
at Exhibit A hereto, as well as the accounts payable listed at Exhibit A hereto.
ARTICLE II
Purchase and Sale
-----------------
2.1 Sale and Purchase of Assets. Subject to and upon the terms and
conditions contained herein, at the Closing, Seller shall sell, transfer,
<PAGE>
assign, convey, and deliver to Buyer, free and clear of all liens, claims and
encumbrances, and Buyer shall purchase, accept and acquire from Seller the
Assets.
2.2 Purchase Price. The total purchase price for the Assets shall be
TWO MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($2,250,000.00), payable by Buyer
to Seller in the form of a note convertible into common shares of Buyer. The
Note shall be substantially in the form of Exhibit 2.III attached hereto.
2.3 Instruments of Transfer; Further Assurances.
(a) At the Closing, Seller shall deliver to Buyer:
(i) An assignment of each Asset, in form and
substance satisfactory to Buyer;
(ii) An agreement not-to-compete, substantially in the
form of Exhibit B attached hereto; and
(iii)Such other instrument or instruments of transfer
as shall be necessary or appropriate, as Buyer
shall reasonably request, to vest in Buyer good
and marketable title to the Assets.
(b) At the Closing, Buyer shall deliver to Seller:
(i) A Note, substantially in the form of Exhibit
attached hereto; and
(ii) Such other instrument or instruments as shall be
necessary or appropriate, as Seller shall
reasonably request.
ARTICLE III
Representations and Warranties of Buyer
---------------------------------------
Buyer represents and warrants that the following are true and correct
as of this date and will be true and correct through the Closing Date as if made
on that date:
3.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, with all the requisite power and authority to carry on the business in
which it is engaged, to own the properties it owns and to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
3.2 Authorization and Validity. The execution, delivery and performance
by Buyer of this Agreement and the other agreements contemplated hereby, and the
consummation of the transactions contemplated hereby, have been duly authorized
by Buyer. This Agreement and each other agreement contemplated hereby have been
or will be prior to Closing duly executed and delivered by Buyer and constitute
or will constitute legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms.
<PAGE>
3.3 No Violation. Neither the execution and performance of this
Agreement or the other agreements contemplated hereby, nor the consummation of
the transactions contemplated hereby or thereby, will (a) conflict with, or
result in a breach of the terms, conditions and provisions of, or constitute a
default under, the Articles of Incorporation or Bylaws of Buyer or any
agreement, indenture or other instrument under which Buyer is bound, or (b)
violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
having jurisdiction over Buyer or the properties or assets of Buyer.
3.4 Consents. No authorization, consent, approval, permit or license
of, or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of Buyer.
ARTICLE IV
Representations and Warranties of Seller
----------------------------------------
Seller represents and warrants that the following are true and correct
as of this date and will be true and correct through the Closing Date as if made
on that date:
4.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, with all the requisite power and authority to carry on the business
in which it is engaged, to own the properties it owns and to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
4.2 Authorization and Validity. The execution, delivery and performance
by Seller of this Agreement and the other agreements contemplated hereby, and
the consummation of the transactions contemplated hereby, have been duly
authorized by Seller. This Agreement and each other agreement contemplated
hereby have been or will be prior to Closing duly executed and delivered by
Seller and constitute or will constitute legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms.
4.3 Title. Seller has good and marketable title to the Assets which are
the subject of this Agreement. Upon consummation of the transactions
contemplated hereby, Buyer shall receive good, valid and marketable title to all
the Assets free and clear of all liens, claims, and encumbrances.
4.4 Commitments. Except as set forth in Exhibit D, Seller has not
entered into, nor are the Assets or the business of Seller bound by, whether or
not in writing, any (i) partnership or joint venture agreement; (ii) deed of
trust or other security agreement; (iii) guaranty or suretyship, indemnification
or contribution agreement or performance bond; (iv) employment, consulting or
compensation agreement or arrangement, including the election or retention in
office of any director or officer; (v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other obligation relating to
indebtedness for borrowed money or money lent to another; (vii) deed or other
document evidencing an interest in or contract to purchase or sell real
<PAGE>
property; (viii) agreement with dealers or sales or commission agents, public
relations or advertising agencies, accountants or attorneys; (ix) lease of real
or personal property, whether as lessor, lessee, sublessor, or sublessee; (x)
agreement relating to any material matter or transition in which an interest is
held by a person or entity which is an affiliate of Seller; (xi) powers of
attorney; or (xii) contracts containing noncompetition covenants.
4.5 Adverse Agreements. Seller is not a party to any agreement or
instrument or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree, rule or regulation which materially
and adversely affects or, so far as Seller can now foresee, may in the future
materially and adversely affect the business operations, prospects, properties,
assets or condition, financial or otherwise, of Seller.
4.6 No Violation. Neither the execution and performance of this
Agreement or the other agreements contemplated hereby, nor the consummation of
the transactions contemplated hereby or thereby, will (a) conflict with, or
result in a breach of the terms, conditions and provisions of, or constitute a
default under, the Articles of Incorporation or Bylaws of Seller or any
agreement, indenture or other instrument under which Buyer is bound, or (b)
violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
having jurisdiction over Seller or the properties or assets of Seller.
4.7 Consents. No authorization, consent, approval, permit or license
of, or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of Seller.
4.8 Compliance with Laws. There are no existing violations by Seller of
any applicable federal, state or local law or regulation, except to the extent
that any such violations would not have a material adverse effect on the
property or business of Seller.
4.9 Accuracy of Information Furnished. All information furnished to
Buyer by Seller is true, correct and complete in all material respects. Such
information states all material facts required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which such
statements are made, true, correct and complete.
4.10 Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.
ARTICLE V
Indemnification
---------------
5.1 Seller's Indemnity. Subject to the terms of this Section, Seller
hereby agrees to indemnify, defend and hold harmless Buyer and its officers,
directors, agents, attorneys, accountants and affiliates from and against any
and all losses, claims, obligations, demands, assessments, penalties,
liabilities, costs, damages, reasonable attorneys' fees and expenses ("Damages")
asserted against or incurred by Buyer by reason of or resulting from a breach by
<PAGE>
Seller of any representation, warranty or covenant contained herein, or in any
agreement executed pursuant thereto.
5.2 Buyer's Indemnity. Subject to the terms of this Section, Buyer
hereby agrees to indemnify, defend and hold harmless Seller and its officers,
directors, agents, attorneys, accountants and affiliates from and against any
and all losses, claims, obligations, demands, assessments, penalties,
liabilities, costs, damages, reasonable attorneys' fees and expenses ("Damages")
asserted against or incurred by Seller by reason of or resulting from a breach
by Buyer of any representation, warranty or covenant contained herein, or in any
agreement executed pursuant thereto.
5.3 Remedies Not Exclusive. The remedies provided for in this Section
shall not be exclusive of any other rights or remedies available by one party
against the other, either at law or in equity.
ARTICLE VI
Termination
-----------
6.1 Termination for Cause. This Agreement may be terminated prior to
Closing upon notice to the other party at any time by a party if any
representation or warranty of the other party contained in this Agreement or in
any certificate or other document executed and delivered by one party to the
other is or becomes untrue or breached in any material respect or if one party
fails to comply in any material respect with any covenant or agreement contained
herein, and any such misrepresentation, breach or noncompliance is not cured,
waived, or eliminated before Closing.
6.2 Termination Without Cause. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and abandoned at any
time without further obligation or liability on the part of any party in favor
of any other by mutual consent of Purchaser and Seller.
ARTICLE VII
Miscellaneous Provisions
------------------------
7.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by a written agreement
signed by Buyer and Seller.
7.2 Waiver of Compliance; Consents.
7.2.1 Any failure of any party to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the performance of such obligation, covenant or agreement or who has the benefit
of such condition, but such waiver or failure to insist upon strict compliance
with such obligation, covenant, or agreement or condition will not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
<PAGE>
7.2.2 Whenever this Agreement requires or permits consent by
or on behalf of any party hereto, such consent will be given in a manner
consistent with the requirements for a waiver of compliance as set forth above.
7.3 Notices. All Notices, requests, demands and other communications
required or permitted hereunder will be in writing and will be deemed to have
been duly given when delivered by (i) hand; (ii) reliable overnight delivery
service; or (iii) facsimile transmission.
If to Buyer, to: 2901 S. Pullman Street, Santa Ana, California
92705
If to Seller, to: 2901 S. Pullman Street, Santa Ana,
California 92705
7.4 Titles and Captions. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
7.5 Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
7.6 Agreement Binding. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
7.7 Attorneys' Fees. In the event an arbitration, suit or action is
brought by any party under this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
7.8 Computation of Time. In computing any period of time pursuant to
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall be included, unless it is a Saturday, Sunday
or a legal holiday, in which event the period shall begin to run on the next day
that is not a Saturday, Sunday or legal holiday.
7.9 Pronouns and Plurals. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons may require.
7.10 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEVADA. THE PARTIES AGREE THAT ANY LITIGATION RELATING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT MUST BE BROUGHT BEFORE AND DETERMINED
BY A COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF NEVADA.
<PAGE>
7.11 Arbitration. If at any time during the term of this Agreement any
dispute, difference, or disagreement shall arise upon or in respect of this
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbiter may be entered in any court having jurisdiction thereof.
7.12 Presumption. This Agreement or any Section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
7.13 Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
7.14 Parties in Interest. Nothing herein shall be construed to be to
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.
7.15 Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected hereby.
7.16 Confidentiality. The parties shall keep this Agreement and its
terms confidential, but any party may make such disclosures as it reasonably
considers are required by law or necessary to obtain financing. In the event
that the transactions contemplated by this Agreement are not consummated for any
reason whatsoever, the parties hereto agree not to disclose or use any
confidential information they may have concerning the affairs of other parties,
except for information which is required by law to be disclosed. Confidential
information includes, but is not limited to, financial records, surveys,
reports, plans, proposals, financial information, information relating to
personnel contracts, stock ownership, liabilities and litigation.
7.17 Costs, Expenses and Legal Fees. Whether or not the transactions
contemplated hereby are consummated, each party hereto shall bear its own costs
and expenses (including attorneys' fees), except as set forth in the Escrow
Agreement.
7.18 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effecting during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid and unenforceable provision, there shall be added
<PAGE>
automatically as part of this Agreement a provision as similar in nature in its
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable.
7.19 Counterparts and Facsimile Signatures. 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. For
purposes of this Agreement, facsimile signatures shall be treated as originals
until such time that applicable pages bearing non-facsimile signatures are
obtained from the relevant party or parties.
7.20 Continuing Nature. All representations and warranties contained in
this Agreement shall survive the Closing for a period of two (2) years and, if
applicable, all covenants, which, according to their terms are to be performed
after the execution of this Agreement, shall survive the Closing for a period of
two (2) years.
IN WITNESS WHEREOF, the parties hereto have set their hands this 12th
day of January, 1999.
California Software Corporation California Software Products, Inc.
A Nevada Corporation (Buyer) A California Corporation (Seller)
by: /s/ Bruce Acacio by: /s/ Carol Conway
--------------------------------- ---------------------------------
Bruce Acacio, President Carol Conway, Vice President
<PAGE>
EXHIBIT A
List of Assets
<PAGE>
Exhibit A
California Software Products, Inc.
Detail of Assets
ASSETS
Current Asset
Int. Cash (10.00)
Cash in Bank 101,445.70
Cash-Credit Card (6,998.28)
CSPI Savings Account 251.88
CSPI Payroll Account 97,253.38
Payroll Tax Account 81.33
Cash in Bank - Newport Branch 150,692.90
Cash in Bank Operating Accounts $342,719.93
Money Market Account 80,272.94
Accounts Receivable 1,058,002.73
Less Returned Products Reserve (42,622.00)
Less Bad Debts Reserve (12,185.00)
Less Inventory on Consignment
Recorded as Accounts Receivable (192,504.00)
Accounts Receivable 810,691.73
Inventory on Consignment 192,504.00
Inventory 111,094.63
Less Reserves (1,001.23)
Inventory 110,093.40
Prepaid Items
Prepaid Expenses 4,551.00
Employee advances (250.55)
4,300.45
Other Current Assets
Deposits-building, utility, etc. 17,965.11
Foreign Taxes Deducted 636.00
Other current assets 18,801.11
------------
Total Current Assets 1,559,183.56
Property and Equipment
Furniture, Fixtures and Equipment 281,151.14
Less Depreciation (281,636.23)
Total Furniture, Fixtures and Equipment 62,314.91
Leasehold Improvements 12,281.00
Less Amortization (5,711.52)
6,569.45
Total Property and Equipment 68,884.39
OTHER ASSETS
Total Other Assets 0.00
TOTAL ASSETS $1,626,087.95
============
<PAGE>
EXHIBIT B
Noncompetition Agreement
<PAGE>
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (the "Agreement") is made as of the 12th
day of January, 1999, by and between California Software Corporation, a Nevada
corporation ("Buyer"), and California Software Products, Inc., a California
corporation ("Seller").
RECITALS
A. Buyer and Seller have entered into an Asset Purchase Agreement dated
January 12th, 1999 (the "Purchase Agreement") under the terms of which Buyer has
agreed to purchase certain Assets of Seller, all as more fully set forth and
described in the Purchase Agreement.
B. Seller's delivery to Buyer of this Agreement is a condition to Buyer
consummating the transactions contemplated by the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein and in the Purchase Agreement, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby covenant and agree as follows:
1. Noncompetition.
1.1 Seller covenants and agrees that for a period of five (5)
years from the date hereof, Seller will not engage in or carry on, directly or
indirectly, any business in competition with the business of Buyer relating to
the Assets that are the subject of the Purchase Agreement but only for as long
as such like business is carried on by (i) Buyer or any subsidiary or affiliate
of Buyer or (ii) any person or entity deriving title from Buyer of the Assets,
in any county in which Buyer or any of its subsidiaries or affiliates conduct
business, or in any other county or state of the United States, or in any
country or political subdivision of the world.
1.2 The term of the covenants contained in Section 1.1 hereof
shall be tolled for the period commencing on the date any successful action is
filed for injunctive relief or damages arising out of a breach by Seller of
Section 1.1 hereof and ending upon final adjudication (including appeals) of
such action.
1.3 If, in any judicial proceeding, the court shall refuse to
enforce all of the covenants contained in Section 1.1 hereof because the time
limit is excessive, it is expressly understood and agreed between the parties
hereto that for purposes of such proceeding such time limitation shall be deemed
reduced to the extent necessary to permit enforcement of such covenants. If, in
any judicial proceeding, the court shall refuse to enforce all of the covenants
contained in Section 1.1 hereof because it is more extensive than necessary to
protect the business and goodwill of Buyer, it is expressly understood and
agreed between the parties hereto that for purposes of such proceeding the
geographic area, scope of business or other aspect shall be deemed reduced to
the extent necessary to permit enforcement of such covenants.
<PAGE>
1.4 Seller covenants and represents that Seller has no
interest in, or claim to, any of the procedures, written technical data,
computer software and related documentation, patents, copyrights, formulas,
methods, practices, statistics, trade secrets, trademarks, trade names, or
service marks relating to the Assets that are the subject of the Purchase
Agreement, and all knowledge or information of a confidential nature acquired at
or before the date hereof with respect to said Assets will be held in confidence
by Seller and will not be disclosed or made public or, except for the benefit of
Buyer, made use of, by or through Seller, directly or indirectly.
2 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEVADA. THE PARTIES AGREE THAT ANY LITIGATION RELATING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT MUST BE BROUGHT BEFORE AND DETERMINED
BY A COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF NEVADA.
3 Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
4 Agreement Binding. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
5 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effecting during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid and unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in nature in its
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable.
IN WITNESS WHEREOF, the parties hereto have set their hands this 12th
day of January, 1999.
California Software Corporation California Software Products, Inc.
A Nevada Corporation (Buyer) A California Corporation (Seller)
by: /s/ Bruce Acacio by: /s/ Carol Conway
--------------------------------- ---------------------------------
Bruce Acacio, President Carol Conway, Vice President
<PAGE>
EXHIBIT C
Commitments
CALIFORNIA SOFTWARE CORPORTATION
EXHIBIT #2.II
<PAGE>
Amendment to Asset Purchase Agreement
This Amendment to the Asset Purchase Agreement (the Agreement) entered into on
the 12th day of January, 1999, by and between California Software Products,
Inc., a California corporation (Seller) and California Software Corporation, a
Nevada corporation (Buyer), is made and entered into this 28th day of May,
1999.
RECITALS
WHEREAS, Buyer and Seller entered into the Agreement on January 12th, 1999;
and WHEREAS, it has become apparent to the parties that certain terms of the
Agreement require further clarification.
NOW, THEREFORE, pursuant to Article VII, Section 7.1 of the Agreement, the
parties hereto agree to modify and amend the Agreement as follows:
1. Article II, Section 2.2 is amended to read as follows:
21 Purchase Price. The total purchase price for the Assets shall be TWO
MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($2,250,000.00), payable by Buyer
to Seller in the form of a note convertible into common shares of Buyer on The
sixtieth (60th) day of trading of Buyer's common shares on recognized U.S.
public stock exchange or national market quotation service (i.e. the National
Association of Securities Dealers, Inc. Over-the-Counter Bulletin Board or the
NQB Pink Sheets), subject to a minimum conversion rate of $130 per chart The
Note shall be substantially in the form of Exhibit 2.III attached hereto.
2. The Note attached to the Agreement is hereby rescinded by the parties,
and is replaced by the Note attached hereto and incorporated by this reference
at Exhibit A to this Amendment.
IN WITNESS WHEREOF, the parties hereto have set their hands this 28th day of
May, l999
California Software Corporation California Software Products, Inc.
A Nevada Corporation (Buyer) A California Corporation (Seller)
By: /s/Bruce Acacio By: /s/Carol Conway
Bruce Acacio, President Carol Conway, Vice President
CALIFORNIA SOFTWARE CORPORTATION
EXHIBIT #2.III
NOTE
<PAGE>
NOTE
For value received, California Software Corporation (the Debtor) promises to
pay to California Software Products, Inc. (the Holder) or order, the principal
sum of TWO MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($2,250,000.00). The
outstanding principal hereunder shall be due and payable as follows:
(A) On the date sixty (60) days following the first day of trading of Debtor's
shares of common stock on a recognized U.S. public stock exchange or national
market quotation service (i.e. the National Association of Securities Dealers,
Inc. Over-the-Counter Bulletin Board or the NQB Pink Sheets) (the Conversion
Date), the principal sum of two million two hundred fifty thousand dollars
($2,250,000.00) shall be due and payable in the form of the number of common
shares of Debtor that would equal the principal amount at the close of trading
on that date. Notwithstanding the foregoing, the minimum conversion rate for
shares of Debtor on the Conversion Date shall be one dollar and fifty cents
($1.50) per share.
This Note is issued pursuant to an Asset Purchase Agreement (the Purchase
Agreement) of January 12, 1999, and an amendment thereto of even date herewith
between Debtor and Holder. Pursuant to a Security Agreement, repayment of this
Note is secured by a pledge of the Assets purchased by the Debtor from the
Holder pursuant to the Purchase Agreement. Reference is made to the Purchase
Agreement and the Security Agreement for a full statement of the rights and
obligations of the parties, including, without limitation, the parties' rights
and duties with respect to the Debtor's failure to pay amounts under this Note
when due.
The Holder of this Note shall have full recourse against the maker, and shall
not be required to proceed against the collateral securing this Note in the
event of default.
If action is instituted to collect this Note, the Debtor will pay all costs
and expenses, including reasonable attorney's fees, incurred in connection
with such action. The Debtor hereby waives notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor and all other
notices or demands relative to this instrument. No delay on the part of the
Holder in exercising any right hereunder shall operate as a waiver of such
right or any other right.
The holding of any provision of this Note to be invalid or unenforceable by a
court of competent jurisdiction shall not affect any other provisions and the
other provisions of this Note shall remain in full force and effect.
The Debtor's obligations under this Note may not be transferred or assigned to
another party without the prior written consent of the Holder hereof All
rights and obligations of the Debtor and the Holder shall be binding upon and
benefit the successors, assigns, heirs and administrators of such parties.
This Note shall be construed in accordance with the laws of the State of
Nevada, without regard to the conflicts of law provisions of any state of the
United States.
<PAGE>
IN WITNESS WHEREOF, the Debtor has caused this Installment Note to be
issued as of January 12, 1999.
CALIFORNIA SOFTWARE CORPORATION
by: /s/ Bruce Acacio
----------------------------
Bruce Acacio, President
CALIFORNIA SOFTWARE CORPORATION
EXHIBIT #3
Articles of Incorporation and By-Laws of the Company
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
OCT 28 1998
No.C25281-98
- - -------------------------------
/s/Dean Heller
Dean Heller, Secretary of State
ARTICLES OF INCORPORATION
OF
California Software Corporation
1. Name of Company:
California Software Corporation
2. Resident Agent:
The resident agent of the Company is: Nevada Internet Corporation
Enterprises, Inc.
3110 S. Valley View, Suite 105
Las Vegas, Nevada 89102
3. Board of Directors:
The Company shall initially have one director (1) who is;
This individual shall serve as director until their successor or successors
have been elected and qualified. The number of directors may be increased or
decreased by a duly adopted amendment to the By-Laws of the Corporation.
4. Authorized Shares:
The aggregate number of shares which the corporation shall
have authority to issue shall consist of 20,000,000 shares of Common Stock
having a $.001 par value, and 5,000,000 shares of Preferred Stock having a $.001
par value. The Common and/or Preferred Stock of the Company may be issued from
time to time without prior approval by the stockholders. The Common and/or
Preferred Stock may be issued for such consideration as may be fixed from time
to time by the Board of Directors. The Board of Directors may issue such share
of Common and/or Preferred Stock in one or more series, with such voting powers,
designations, preferences and rights or qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions.
5. Preemptive Rights and Assessment of Shares:
Holders of Common Stock or Preferred Stock of the corporation
shall not have any preference, preemptive right or right of subscription to
acquire shares of the corporation authorized, issued, or sold, or to be
authorized, issued or sold, or to any obligations or shares authorized or issued
or to be authorized or issued, and convertible into shares of the corporation,
nor to any right of subscription thereto, other than to the extent, if any, the
Board of Directors in its sole discretion, may determine from time to time.
The Common Stock of the Corporation, after the amount of the
subscription price has been fully paid in, in money, property or services, as
the directors shall determine, shall not be subject to assessment to pays the
debts of the corporation, nor for any other purpose, and no Common Stock issued
as fully paid shall ever be assessable or assessed, and the Articles of
Incorporation shall not be amended to provide for such assessment.
<PAGE>
Incorporation Continued
6. Directors' and Officers' Liability
A director or officer of the corporation shall not be
personally liable to this corporation or its stockholders for damages for breach
of fiduciary duty as a director or officer, but this Article shall not eliminate
or limit the liability of a director or officer for (i) acts or omissions which
involve intentional misconduct, fraud or a knowing violation of the law or (ii)
the unlawful payment of dividends. Any repeal or modification of this Article by
stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director or
officer of the corporation for acts or omissions prior to such repeal or
modification.
7. Indemnity
Every person who was or is a party to, or is threatened to be
made a party to, or is involved in any such action, suit or proceeding, whether
civil, criminal, administrative or investigative, by the reason of the fact that
he or she, or a person with whom he or she is a legal representative, is or was
a director of the corporation, or who is serving at the request of the
corporation as a director or officer of another corporation, or is a
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the laws of the State of Nevada from time to time against all expenses,
liability and loss (including attorneys' fees, judgments, fines, and amounts
paid or to be paid in a settlement) reasonably incurred or suffered by him or
her in connection therewith. Such right of indemnification shall be a contract
right which may be enforced in any manner desired by such person. The expenses
of officers and directors incurred in defending a civil suit or proceeding must
be paid by the corporation as incurred and in advance of the final disposition
of the action, suit, or proceeding, under receipt of an undertaking by or on
behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he or she is not entitled
to be indemnified by the corporation. Such right of indemnification shall not be
exclusive of any other right of such directors, officers or representatives may
have or hereafter acquire, and, without limiting the generality of such
statement, they shall be entitled to their respective rights of indemnification
under any bylaw, agreement, vote of stockholders, provision of law, or
otherwise, as well as their rights under this article.
Without limiting the application of the foregoing, the Board
of Directors may adopt By-Laws from time to time without respect to
indemnification, to provide at all times the fullest indemnification permitted
by the laws of the State of Nevada, and may cause the corporation to purchase or
maintain insurance on behalf of any person who is or was a director or officer
8. Amendments
Subject at all times to the express provisions of Section 5 on
the Assessment of Shares, this corporation reserves the right to amend, alter,
change, or repeal any provision contained in these Articles of Incorporation or
its By-Laws, in the manner now or hereafter prescribed by statute or the
Articles of Incorporation or said By-Laws, and all rights conferred upon
shareholders are granted subject to this reservation.
9. Power of Directors
In furtherance, and not in limitation of those powers
conferred by statute, the Board of Directors is expressly authorized:
(a) Subject to the By-Laws, if any, adopted by the
shareholders, to make, alter or repeal the By-Laws of the corporation;
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Incorporation Continued
(b) To authorize and caused to be executed mortgages and
liens, with or without limitations as to amount, upon the real and personal
property of the corporation;
(c) To authorize the guaranty by the corporation of the
securities, evidences of indebtedness and obligations of other persons,
corporations or business entities;
(d) To set apart out of any funds of the corporation available
for dividends a reserve or reserves for any proper purpose and to abolish any
such reserve;
(e) By resolution adopted by the majority of the whole board,
to designate one or more committees to consist of one or more directors of the
of the corporation, which, to the extent provided on the resolution or in the
By-Laws of the corporation, shall have and may exercise the powers of the Board
of Directors in the management of the affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers which may
require it. Such committee or committees shall have name and names as may be
stated in the By-Laws of the corporation or as may be determined from time to
time by resolution adopted by the Board of Directors.
All the corporate powers of the corporation shall be exercised
by the Board of Directors except as otherwise herein or in the By-Laws or by
law.
IN WITNESS WHEREOF, I hereunder set my hand this Wednesday,
February 10, 1999, hereby declaring and certifying that the facts stated
hereinabove are true.
Signature of Incorporator
Name: Thomas C. Cook, Esq.
Address: 3110 S. Valley View, Suite 105
Las Vegas, Nevada 89102
Signature: /s/ Thomas C. Cook
-------------------------------
State of Nevada )
County of Clark )
This instrument was acknowledged before me on
February 10, 1999, by Thomas C. Cook.
/s/ Matthew J. Blevins
- - -----------------------------------------
Notary Public Signature
Certificate of Acceptance of Appointment as Resident Agent: I, TED D. CAMPBELL
II, as a principal of Nevada Internet Corporation Enterprises, Inc. (NICE),
hereby accept appointment of NICE as the resident agent for the above referenced
company.
Signature: /s/ Ted D. Campbell II
------------------------
Ted D. Campbell II
3
BYLAWS
OF
California Software Corporation
ARTICLE I
OFFICES
The principal office of the Corporation in the State of Nevada shall be
located in Las Vegas, County of Clark. The Corporation may have such other
offices, either within or without the State of Nevada, as the Board of Directors
may designate or as the business of the Corporation may require from time to
time.
ARTICLE II
SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the first day in the month of October in each year, beginning with
the year 1999, at the hour of one o'clock p.m., for the purpose of electing
Directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday, such
meeting shall be held on the next business day. If the election of Directors
shall not be held on the day designated herein for any annual meeting of the
shareholders, or at any adjournment thereof, the Board of Directors shall cause
the election to be held at a special meeting of the shareholders as soon
thereafter as soon as conveniently may be.
SECTION 2. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than fifty percent (50%) of
all the outstanding shares of the Corporation entitled to vote at the meeting.
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SECTION 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Nevada, unless otherwise prescribed
by statute, as the place of meeting for any annual meeting or for any special
meeting. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of Nevada,
unless otherwise prescribed by statute, as the place for the holding of such
meeting. If no designation is made, the place of the meeting will be the
principal office of the Corporation.
SECTION 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall unless otherwise prescribed by statute,
be delivered not less than ten (10) days nor more than sixty (60) days before
the date of the meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, addressed to the shareholder at his/her address as it
appears on the stock transfer books of the Corporation, with postage thereon
prepaid.
SECTION 5. Closing of Transfer Books or Fixing of Record. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period, but not to exceed in any case fifty (50) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten (10) days immediately preceding such meeting. In lieu
of closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than fifty (50) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for
determination of shareholders entitled to notice of or to vote at a meeting of
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shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make a complete list of
the shareholders entitled to vote at each meeting of shareholders or at any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
SECTION 7. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder by his/her
duly authorized attorney-in-fact. Such proxy shall be filed with the secretary
of the Corporation before or at the time of the meeting.
SECTION 9. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
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Bylaws of such corporation may prescribe or, in the absence of such provision,
as the Board of Directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and the shares held by or under the control of a receiver may be voted
by such receiver without the transfer thereof into his name, if authority to do
so be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
SECTION 11. Informal Action by Shareholders. Unless otherwise provided
by law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
ARTCLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The Board of Directors shall be responsible
for the control and management of the affairs, property and interests of the
Corporation and may exercise all powers of the Corporation, except as are in the
Articles of Incorporation or by statute expressly conferred upon or reserved to
the shareholders.
SECTION 2. Number, Tenure and Qualifications. The number of directors
of the Corporation shall be fixed by the Board of Directors, but in no event
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<PAGE>
shall be less than one (1). Each director shall hold office until the next
annual meeting of shareholders and until his/her successor shall have been
elected and qualified.
SECTION 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without notice other than such resolution.
SECTION 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at
least one (1) day previous thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the notice be given to the telegraph
company. Any directors may waive notice of any meeting. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. Quorum. A majority of the number of directors fixed by
Section 2 of this Article shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. Telephonic Meeting. A meeting of the Board of Directors may
be had by means of a telephone conference or similar communications equipment by
which all persons participating in the meeting can hear each other, and the
participation in a meeting under such circumstances shall constitute presence at
the meeting.
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SECTION 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 9. Action Without a Meeting. Any action that may be taken by
the Board of Directors at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so to be taken, shall be signed before such
action by all of the directors.
SECTION 10. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors, unless otherwise provided
by law. A director elected to fill a vacancy shall be elected for the unexpired
term of his/her predecessor in office. Any directorship to be filled by reason
of an increase in the number of directors may be filled by election by the Board
of Directors for a term of office continuing only until the next election of
directors by the shareholders.
SECTION 11. Resignation. Any director may resign at any time by giving
written notice to the Board of Directors, the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice such resignation
shall take effect upon receipt thereof by the Board of Directors or such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
SECTION 12. Removal. Any director may be removed with or without cause
at any time by the affirmative vote of shareholders holding of record in the
aggregate at least a majority of the outstanding shares of stock of the
Corporation at a special meeting of the shareholders called for that purpose,
and may be removed for cause by action of the Board.
SECTION 13. Compensation. By resolution of the Board of Directors, each
director may be paid for his/her expenses, if any, of attendance at each meeting
of the Board of Directors, and may be paid a stated salary as director or a
fixed sum for attendance at each meeting of the Board of Directors or both. No
such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
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SECTION 14. Contracts. No contract or other transaction between this
Corporation and any other corporation shall be impaired, affected or
invalidated, nor shall any director be liable in any way by reason of the fact
that one or more of the directors of this Corporation is or are interested in,
or is a director or officer, or are directors or officers of such other
corporations, provided that such facts are disclosed or made known to the Board
of Directors, prior to their authorizing such transaction. Any director,
personally and individually, may be a party to or may be interested in any
contract or transaction of this Corporation, and no directors shall be liable in
any way by reason of such interest, provided that the fact of such interest be
disclosed or made known to the Board of Directors prior to their authorization
of such contract or transaction, and provided that the Board of Directors shall
authorize, approve or ratify such contract or transaction by the vote (not
counting the vote of any such Director) of a majority of a quorum,
notwithstanding the presence of any such director at the meeting at which such
action is taken. Such director or directors may be counted in determining the
presence of a quorum at such meeting. This Section shall not be construed to
impair, invalidate or in any way affect any contract or other transaction which
would otherwise be valid under the law (common, statutory or otherwise)
applicable thereto.
SECTION 15. Committees. The Board of Directors, by resolution adopted
by a majority of the entire Board, may from time to time designate from among
its members an executive committee and such other committees, and alternate
members thereof, as they may deem desirable, with such powers and authority (to
the extent permitted by law) as may be provided in such resolution. Each such
committee shall serve at the pleasure of the Board.
SECTION 16. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his/her dissent shall be entered into the minutes of the meeting or unless
he/she shall file written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof, or shall forward such
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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.
ARTICLE IV
OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary, and a Treasurer, each of
whom shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors, including a Chairman of the Board. In its discretion, the
Board of Directors may leave unfilled for any such period as it may determine
any office except those of President and Secretary. Any two or more offices may
be held by the same person. Officers may be directors or shareholders of the
Corporation.
SECTION 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his/her successor
shall have been duly elected and shall have qualified, or until his/her death,
or until he/she shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3. Resignation. Any officer may resign at any time by giving
written notice of such resignation to the Board of Directors, or to the
President or the Secretary of the Corporation. Unless otherwise specified in
such written notice, such resignation shall take effect upon receipt thereof by
the Board of Directors or by such officer, and the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 4. Removal. Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
20
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rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights, and such appointment shall
be terminable at will.
SECTION 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 6. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He/she shall, when present, preside at all meetings
of the shareholders and of the Board of Directors, unless there is a Chairman of
the Board, in which case the Chairman will preside. The President may sign, with
the Secretary or any other proper officer of the Corporation thereunto
authorized by the Board of Directors, certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of President and such other
duties as may be prescribed by the Board of Directors from time to time.
SECTION 7. Vice President. In the absence of the President or in event
of his/her death, inability or refusal to act, the Vice President shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. The Vice President
shall perform such other duties as from time to time may be assigned by the
President or by the Board of Directors. If there is more than one Vice
President, each Vice President shall succeed to the duties of the President in
order of rank as determined by the Board of Directors. If no such rank has been
determined, then each Vice President shall succeed to the duties of the
President in order of date of election, the earliest date having first rank.
SECTION 8. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
minute book provided for that purpose; (b) see that all notices are duly given
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in accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder; (e) sign with the president certificates
for shares of the Corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the Corporation; and (g) in general perform all duties
incident to the office of the Secretary and such other duties as from time to
time may be assigned by the President or by the Board of Directors.
SECTION 9. Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the Corporation; (b)
receive and give receipts for moneys due and payable to the Corporation from any
source whatsoever, and deposit all such moneys in the name of the Corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of Article VI of these Bylaws; and (c) in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the President or by the
Board of Directors.
SECTION 10. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary by reason of the fact that he/she is also a director of
the corporation.
SECTION 11. Sureties and Bonds. In case the Board of Directors shall so
require any officer, employee or agent of the Corporation shall execute to the
Corporation a bond in such sum, and with such surety or sureties as the Board of
Directors may direct, conditioned upon the faithful performance of his/her
duties to the Corporation, including responsibility for negligence for the
accounting for all property, funds or securities of the Corporation which may
come into his/her hands.
SECTION 12. Shares of Stock of Other Corporations. Whenever the
Corporation is the holder of shares of stock of any other corporation, any right
of power of the Corporation as such shareholder (including the attendance,
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acting and voting at shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the Corporation by
the President, any Vice President or such other person as the Board of directors
may authorize.
ARTICLE V
INDEMNITY
The Corporation shall indemnify its directors, officers and employees
as follows:
Every director, officer, or employee of the Corporation shall be
indemnified by the Corporation against all expenses and liabilities, including
counsel fees, reasonably incurred by or imposed upon him/her in connection with
any proceeding to which he/she may be made a party, or in which he/she may
become involved, by reason of being or having been a director, officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of the Corporation,
partnership, joint venture, trust or enterprise, or any settlement thereof,
whether or not he/she is a director, officer, employee or agent at the time such
expenses are incurred, except in such cases wherein the director, officer,
employee or agent is adjudged guilty of willful misfeasance or malfeasance in
the performance of his/her duties; provided that in the event of a settlement
the indemnification herein shall apply only when the Board of Directors approves
such settlement and reimbursement as being for the best interests of the
Corporation.
The Corporation shall provide to any person who is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of the
corporation, partnership, joint venture, trust or enterprise, the indemnity
against expenses of a suit, litigation or other proceedings which is
specifically permissible under applicable law.
The Board of Directors may, in its discretion, direct the purchase of
liability insurance by way of implementing the provisions of this Article.
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ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII
SHARES OF STOCK
SECTION 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such a form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the Board of
Directors to do so, and sealed with the corporate seal. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificate shall be issued until the
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former certificate for a like number of shares shall have been surrendered and
canceled, except that in the case of a lost, destroyed or mutilated certificate,
a new one may be issued therefor upon such terms and indemnity to the
Corporation as the Board of Directors may prescribe.
SECTION 2. 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/her legal representative, who shall furnish proper
evidence of authority to transfer, or by his/her attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary of the
Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the Corporation
shall be deemed by the Corporation to be the owner thereof for all purposes.
Provided, however, that upon any action undertaken by the shareholders to elect
S Corporation status pursuant to Section 1362 of the Internal Revenue Code and
upon any shareholders' agreement thereto restricting the transfer of said shares
so as to disqualify said S Corporation status, said restriction on transfer
shall be made a part of the Bylaws so long as said agreement is in force and
effect.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of
January and end on the thirty first day of December of each year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
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ARTICLE X
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words "Corporate Seal".
ARTICLE XI
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the Corporation under the provisions of
these Bylaws or under the provisions of the Articles of Incorporation or under
the provisions of the applicable Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE XII
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the Board
of Directors.
The above Bylaws are certified to have been adopted by the Board of
Directors of the Corporation on the 31st day of October, 1998.
/s/ Carol Conway
------------------------------
Secretary
CALIFORNIA SOFTWARE CORPORATION
EXHIBIT #10
Material Contracts- Assumption of Premise Lease dated September 25,1997
<PAGE>
CALIFORNIA SOFTWARE
PRODUCTS, INC.
January 21, 1999
California Software Corporation
2901 S. Pullman Street
Santa Ana, CA 92705
This letter confirms the terms of the sublet agreement between California
Software Products, Incorporated, a California Corporation (CSPI) and California
Software Corporation, a Nevada Corporation (CSC).
Effective immediately, California Software Products, Inc. shall sublet the
facility located at 2901 S. Pullman Street to California Software Corporation
under the exact terms of its Standard Office Lease with Rayson, Inc. (Lessee)
dated September 25, 1997, a copy of which is enclosed.
Acceptance
/s/ Bruce Acacio /s/ Carol Conway
- --------------------------------------- -----------------------------------
Bruce Acacio Carol Conway
President, CEO Vice President
California Software Products, Inc. California Software Corporation
<PAGE>
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
Dated: September 25. 1997
-------------------------------------------
By and Between Rayson Inc. ("Lessor") and California Software Products, Inc.
------------------------------------------------------------------
("Lessee")
- - ----------
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
Including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in good
faith judges to be a threat to the safety, reputation, or property of the Office
Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or interfere
with other lessees or persons having business within the Office Building
Project.
4. Lessee shall not keep animals or birds within the Office Building Project,
and shall not bring bicycles, motorcycles or other vehicles into areas not
designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts.
7. Lessee shall be responsible for the inappropriate use of any toilet rooms,
plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the
Premises or Office Building Project.
9. Lessee shall not suffer or permit any thing in or around the Premises or
Building that causes excessive vibration or floor loading in any part of the
Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or out
of the building only with the Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
Lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services or work to
be performed in the Building, except as approved by Lessor.
12. Lessor reserves the right to close and lock the Building on Saturdays,
Sundays and legal holidays, and on other days between the hours of___ P.M. and
___ A.M. of the following day. If Lessee uses the Premises during such periods,
Lessee shall be responsible for securely locking any doors it may have opened
for entry.
13. Lessee shall return all keys at the termination of its tenancy and shall
be responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used by
Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted cigars
or cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
17. Lessee shall not use any method of heating or air conditioning other than
as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines upon
the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking or
food preparation.
20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or regulations,
and/or as to any particular Lessee, and any such waiver shall not constitute a
waiver of any other rule or regulation or any subsequent application thereof to
such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and Safety of the Office Building Project and its occupants. Lessee
agrees to abide by these and such rules and regulations.
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no longer than
full size, passenger automobiles herein called "Permitted Size Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized
Vehicles .
2. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.
3. Parking stickers or identification devices shall be the property of Lessor
and be returned to Lessor by the holder thereof upon termination of the holder's
parking privileges. Lessee will pay such replacement charge as is reasonably
established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly identification
devices to any person or entity that willfully refuses to comply with the
applicable rules, regulations, laws and/or agreements.
5. Lessor reserves the right to relocate all or a part of parking spaces from
floor to floor, within one floor, and/or to reasonably adjacent offsite
location(s), and to reasonably allocate them between compact and standard size
spaces, as long as the same complies with applicable laws, ordinances and
regulations.
6. Users of the parking area will obey all posted signs and park only in
areas designated for vehicle parking.
7. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will no, be responsible for
any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party using the parking area.
8. Validation, if established, will be permissible only by such method or
methods as Lessor and/or Its licensee may establish at rates generally
applicable to visitor parking.
9. The maintenance, washing, waxing or cleaning of vehicles in the parking
structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees, agents
and invitees comply with the applicable parking rules, regulations, laws and
agreements.
11. Lessor reserves the right to modify these rules and/or adopt such other
reasonable and non-discriminatory rules and regulations as it may deem necessary
for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a license
only and no bailment is intended or shall be created hereby.
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PAGE 1 OF 1
<PAGE>
[Graphic Omitted]
Floor plan of lease space as attachment to standard office lease.
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STANDARD OFFICE LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Lease Provisions ("Basic Lease Provisions")
1.1 Parties:This Lease, dated, for reference purposes only, September 25,1997
is made by and between Rayson, Inc. (herein called "Lessor") and California
Software, Inc. doing business under the name of (herein called "Lessee").
1.2 Premises: Suite Number(s)N/A floors, consisting of approximately 6,884
sq.feet, more or less, as defined in paragraph 2 and as shown on Exhibit "A"
hereto (the "Premises").
1.3 Building: Commonly described as being located at 2901 S. Pullman Street
in the City of Santa Ana County of orange State of CA as more particularly
described in Exhibit hereto, and as defined in paragraph 2.
1.4 Use: General office subject to paragraph 6.
1.5 Term: Three (3) yearcommencing October 01, 199("Commencement Date") and
ending September 30, 2000 as defined in paragraph 3.
1.6 Base Rent $5,851.40 from October 1, 1997 to May 15, 1998, $7,228.20 per
month from May 15, 1998 to September 30, 1999, and $7,572.40 per month from
October 1, 1999 to September 30, 2000. The rent is due and payable on the last
day of each month, per paragraph 4.1.
1.7 Base Rent Increase: On See paragraph 50 the monthly Base Rent payable
under paragraph 1.6 above shall be adjusted as provided in paragraph 4.3 below.
1.8 Rent Paid Upon Execution: $17,554.20 for October, November and December ,
1997.
1.9 Security Deposit: $7,572.40 1.10 Lessee's Share of Operating Expense
I100.000: % as defined In paragraph 4.2.
2. Premises, Parking and Common Areas.
2.1 Premises: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project." Lessor hereby leases to Lessee an Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, paragraph 1.2, as
the "Premises," including rights to the Common Areas as hereinafter specified.
2.2 Vehicle Parking: So long as Lessee is not in default, and subject to the
rules and regulations attached hereto, and as established by Lessor from time to
time, Lessee shall be entitled to rent and use 27 parking spaces in the Office
Building Project at the monthly rate applicable from time to time for monthly
parking as set by Lessor and/or its licensee.
2.2.1 If Lessee commits, permits or allows any of the prohibited
activities described in the Lease or the rules then in effect, then Lessor shall
have the right, without notice, in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.2.2 The monthly parking rate per parking space will be $ -0- per month
at the commencement of the term of this Lease, and is subject to change upon
five (5) days prior written notice to Lessee. Monthly parking fees shall be
payable one month in advance prior to the first day of each calendar month.
2.3 Common Areas-Definition. The term "Common Areas" is defined as all areas
and facilities outside the Premises and within the exterior boundary line of the
Office Building Project that are provided and designated by the Lessor from time
to time for the general non-exclusive use of Lessor, Lessee and of other lessees
of the Office Building Project and their respective employees, suppliers,
shippers, customers and invitees, including but not limited to common entrances,
lobbies, corridors, stairways an stairwells, public restrooms, elevators,
escalators, parking areas to the extent not otherwise prohibited by this Lease,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, ramps, driveways, landscaped areas and decorative walls.
2.4 Common Areas-Rules and Regulations. Lessee agrees to abide by and conform
to the rules and regulations attached hereto as Exhibit B with respect to the
Office Building Project and Common Areas, and to cause its employees, suppliers,
customers, and invitees to so abide and conform. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to modify, amend and
enforce said rules and regulations Lessor shall not be responsible to Lessee for
the non-compliance with said rules and regulations by other lessees, their
agents, employees and invitees of the Office Building Project.
2.5 Common Areas-Changes. Lessor shall have the right, in Lessors sole
discretion, from time to time:
(a) To make changes to the Building interior and exterior and Common
Areas, including, without limitation, changes in the location, size, shape,
number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide the parking facilities
required by applicable law;
(b) To close temporarily any of the Common Areas for maintenance purposes
so long as reasonable access to the Premises remains available;
(c) To designate other land and improvements outside the boundaries of
the Office Building Project to be a part of the Common Areas, provided that such
other land and improvements have a reasonable and functional relationship to the
Office Building Project;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof-,
(f) To do and perform such other acts and make such other changes in, to
or with respect to the Common Areas and Office Building Project as Lessor may,
in the exercise of sound business judgment deem to be appropriate.
3. Term.
3.1 Term. The term and Commencement Date of this Lease shall be as specified
in paragraph 1.5 of the Basic Lease Provisions.
3.2 Delay In Possession. Notwithstanding said Commencement Date, If for any
reason Lessor cannot deliver possession of the Premises to Lessee on said date
and subject to paragraph 3.2.2, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease or the
obligations of Lessee hereunder or extend the term hereof', but, in such case,
Lessee shall not be obligated to pay rent or perform any other obligation of
Lessee under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of a Work Letter executed by
Lessor and Lessee, Lessee
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Voit Commercial Brokerage 18500 Von Karman Avenue, #150 Irvine CA 92612
Phone: 714/851-5100
Fax: 714/261-9092
<PAGE>
may, at Lessee's option, by notice in writing to Lessor within ten (10) days
thereafter, cancel this Lease, in which event the parties shall be discharged
from all obligations hereunder; provided, however, that, as to Lessee's
obligations, Lessee first reimburses Lessor for all costs incurred for
Non-Standard Improvements and, as to Lessors obligations, Lessor shall return
any money previously deposited by Lessee (less any offsets due Lessor for
Non-Standard Improvements); and provided further, that if such written notice by
Lessee is not received by Lessor Within said ten (10) day period, Lessee's right
to cancel this Lease hereunder shall terminate and be of no further force or
effect.
3.2.1 Possession Tendered-Defined. Possession of the Premises shall be
deemed tendered to Lessee ("Tender of Possession") when (1) the improvements to
be provided by Lessor under this Lease are substantially completed, (2) the
Building utilities are ready for use in the Premises, (3) Lessee has reasonable
access to the Premises, and (4) ten (10) days shall have expired following
advance written notice to Lessee of the occurrence of the matters described in
(1), (2) and (3), above of this paragraph 3.2. 1.
3.2.2 Delays Caused by Lessee. There shall be no abatement of rent, and
the sixty (60) day period following the Commencement Date before which Lessee's
right to cancel this Lease accrues under paragraph 3.2, shall be deemed extended
to the extent of any delays caused by acts or omissions of Lessee, Lessee's
agents, employees and contractors.
3.3 Early Possession. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.
3.4 Uncertain Commencement. In the event commencement of the Lease term is
defined as the completion of the improvements, Lessee and Lessor shall execute
an amendment to this Lease establishing the date of Tender of Possession (as
defined in paragraph 3.2.1) or the actual taking of possession by Lessee,
whichever first occurs. as the Commencement Date.
4. Rent.
4.1 Base Rent. Subject to adjustment as hereinafter provided in paragraph
4.3, and except as may be otherwise expressly provided in this Lease, Lessee
shall pay to Lessor the Base Rent for the Premises set forth in paragraph 1.6 of
the Basic Lease Provisions, without offset or deduction. Lessee shall pay Lessor
upon execution hereof the advance Base Rent described in paragraph 1.8 of the
Basic Lease Provisions. Rent for any period during the term hereof which is for
less than one month shall be prorate based upon the actual number of days of the
calendar month involved. Rent shall be payable in lawful money of the United
States to Lessor at the address stated herein or to such other persons or at
such other places as Lessor may designate in writing.
4.2 Operating Expense Increase. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's Share, as hereinafter defined, of
the amount by which all Operating Expenses, as hereinafter defined, for each
Comparison Year exceeds the amount of all Operating Expenses for the Base Year,
such excess being hereinafter referred to as the "Operating Expense Increase,"
in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease, as the
percentage set forth in paragraph 1.10 of the Basic Lease Provisions, which
percentage has been determined by dividing the approximate square footage of the
Premises by the total approximate square footage of the rentable space contained
in the Office Building Project. It is understood and agreed that the square
footage figures set forth In the Basic Lease Provisions are approximations which
Lessor and Lessee agree are reasonable and shall not be subject to revision
except in connection with an actual change in the size of the Premises or a
change in the space available for lease in the Office Building Project.
(b) "Base Year" is defined as the calendar year in which the Lease term
commences.
(c) "Comparison Year" is defined as each calendar year during the term of
this Lease subsequent to the Base Year; provided, however, Lessee shall have no
obligation to pay a share of the Operating Expense Increase applicable to the
first twelve (12) months of the Lease Term (other than such as are mandated by a
governmental authority, as to which government mandated expenses Lessee shall
pay Lessee's Share, notwithstanding they occur during the first twelve (12)
months). Lessee's Share of the Operating Expense Increase for the first and last
Comparison Years of the Lease Term shall be prorated according to that portion
of such Comparison Year as to which Lessee is responsible for a share of such
increase.
(d) "Operating Expenses" is defined, for purposes of this Lease, to
include all costs, if any, incurred by Lessor in the exercise of its reasonable
discretion, for:
(I)The operation, repair, maintenance, and replacement, in neat,
clean, safe, good order and condition, of the Office Building Project, including
but not limited to, the following:
(aa) The Common Areas, including their surfaces, coverings,
decorative items, carpets, drapes and window coverings, and including parking
areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways,
stairways, parkways, driveways, landscaped areas, striping, bumpers, irrigation
systems, Common Area lighting facilities, building exteriors and roofs, fences
and gates;
(bb) All heating, air conditioning, plumbing, electrical systems,
life safety equipment, telecommunication and other equipment used in common by,
or for the benefit of, lessees or occupants of the Office Building Project,
including elevators and escalators, tenant directories, fire detection systems
including sprinkler system maintenance and repair.
(ii) Trash disposal, janitorial and security services;
(ii) Any other service to be provided by Lessor that is elsewhere in
this Lease stated to be an "Operating Expense";
(iv) The cost of the premiums for the liability and property insurance
policies to be maintained by Lessor under paragraph 8 hereof;
(v)The amount of the real property taxes to be paid by Lessor under
paragraph 10. 1 hereof',
(vi) The cost of water, sewer, gas, electricity, and other publicly
mandated services to the Office Building Project;
(vii)Labor, salaries and applicable fringe benefits and costs,
materials, supplies and tools, used in maintaining and/or
cleaning the Office Building Project and accounting and a
management fee attributable to the operation of the Office
Building Project;
(viii) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby amortized
over its useful life according to Federal income tax regulations or guidelines
for depreciation thereof (including interest on the unamortized balance as is
then reasonable in the judgment of Lessor's accountants);
(ix) Replacements of equipment or improvements that have a useful life
for depreciation purposes according to Federal income tax guidelines of five (5)
years or less, as amortized over such life.
(e) Operating Expenses shall not include the costs of replacements of
equipment or improvements that have a useful life for Federal income tax
purposes in excess of five (5) years unless it is of the type described in
paragraph 4.2(d)(viii), in which case their cost shall be included as above
provided.
(f) Operating Expenses shall not include any expenses paid by any lessee
directly to third parties, or as to which Lessor is otherwise reimbursed by any
third party, other tenant, or by insurance proceeds.
(g) Lessee's Share of Operating Expense Increase shall be payable by
Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time in advance of Lessee's Share
of the Operating Expense Increase for any Comparison Year, and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each Comparison
Year of the Lease term, on the same day a the Base Rent is due hereunder. In the
event that Lessee pays Lessor's estimate of Lessee's Share of Operating Expense
Increase as aforesaid, Lessor shall deliver to Lessee within sixty (60) days
after the expiration of each Comparison Year a reasonably detailed statement
showing Lessee's Share of the actual Operating Expense Increase incurred during
such year. If Lessee's payments under this paragraph 4.2(g) during said
Comparison year exceed Lessee's Share as indicated on said statement, Lessee
shall be entitled to credit the amount of such overpayment against Lessee's
Share of Operating Expense Increase next failing due. If Lessee's payments under
this paragraph during said Comparison Year were less than Lessee's Share as
indicated on said statement, Lessee shall pay to Lessor the amount of the
deficiency within ten (10) days after delivery by Lessor to Lessee of said
statement. Lessor and Lessee shall forthwith adjust between them by cash payment
any balance determined to exist with respect to that portion of the last
Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.
4.3 Rent Increase.
4.3.1 At the times set forth in paragraph 1.7 of the Basic Lease
Provisions, the monthly Base Rent payable under paragraph 4.1 of this Lease
shall be adjusted by the increase, if any, in the Consumer Price Index of the
Bureau of Labor Statistics of the Department of Labor for AN Urban Consumers, (1
967=1 00), "All Items," for the city nearest the location of the Building,
herein referred to as "C.P.I.," since the date of this Lease.
4.3.2 The Monthly Base Rent payable pursuant to paragraph 4.3.1 shall be
calculated as follows: the Base Rent payable for the first month of the term of
this Lease, as set forth in paragraph 4.1 of this Lease, shall be multiplied by
a fraction the numerator of which shall be the C.P.I. of the calendar month
during which the adjustment is to take effect, and the denominator of which
shall be the C.P.I. for the calendar month in which the original Lease term
commences. The sum so calculated shall constitute the new monthly Base Rent
hereunder, but, in no event, shall such new monthly Base Rent be less than the
Base Rent payable for the month immediately preceding the date for the rent
adjustment.
4.3.3 In the event the compilation and/or publication of the C.P.I. shall
be transferred to any other governmental department or bureau or
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agency or shall be discontinued, then the Index most nearly the same as the
C.P.I. shall be used to make such calculations. In the event that Lessor and
Lessee cannot agree on such alternative index, then the matter shall be
submitted for decision to the American Arbitration Association in the County in
which the Premises are located, in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties, notwithstanding one party failing to appear after due notice of the
proceeding. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
4.3.4 Lessee shall continue to pay the rent at the rate previously in
effect until the increase, if any, is determined. Within five (5) days following
the date on which the increase is determined, Lessee shall make such payment to
Lessor as will bring the increased rental current, commencing with the effective
date of such increase through the date of any rental installments then due.
Thereafter the rental shall be paid, at the increased rate.
4.3.5 At such time as the amount of any change in rental required by this
Lease is known or determined, Lessor and Lessee shall execute an amendment to
this Lease setting forth such change.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the
security deposit set forth in paragraph 1.9 of the Basic Lease Provisions as
security for Lessee's faithful performance of Lessee's obligations hereunder. If
Lessee fails to pay rent or other charges due hereunder, or otherwise defaults
with respect to any provision of this Lease, Lessor may use, apply or retain all
or any portion of said deposit for the payment of any rent or other charge in
default for the payment of any other sum to which Lessor may become obligated by
reason of Lessee's default, or to compensate Lessor for any loss or damage which
Lessor may suffer thereby. If Lessor so uses or applies all or any portion of
said deposit, Lessee shall within ten (10) days after written demand therefor
deposit cash with Lessor in an amount sufficient to restore said deposit to the
full amount then required of Lessee. If the monthly Base Rent shall, from time
to time, increase during the term of this Lease, Lessee shall, a the time of
such increase, deposit with Lessor additional money as a security deposit so
that the total amount of the security deposit held by Lessor shall at all times
bear the same proportion to the then current Base Rent as the initial security
deposit bears to the initial Base Rent set forth in paragraph 1.6 of the Basic
Lease Provisions. Lessor shall not be required to keep said security deposit
separate from Its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit or so much thereof as has not heretofore
been applied by Lessor, shall be returned, without payment of interest or other
increment for its use, to Lessee (or. at Lessor's option, to the last assignee,
if any, of Lessee's interest hereunder) at the expiration of the term hereof,
and after Lessee has vacated the Premises. No trust relationship is created
herein between Lessor and Lessee with respect to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for the purpose set
forth in paragraph 1.4 of the Basic Lease Provisions or any other use which is
reasonably comparable to that use and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in the state existing an
the date that the Lease term commences, but without regard to alterations or
improvements made by Lessee or the use for which Lessee will occupy the
Premises, does not violate any covenants or restrictions of record, or any
applicable building code, regulation or ordinance in effect on such Lease term
Commencement Date. In the event it is determined that this warranty has been
violated, then it shall be the obligation of the Lessor, after written notice
from Lessee, to promptly, at Lessor's sole cost and expense, rectify any such
violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at Lessee's
expense, promptly comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements of
any fife Insurance underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part of the term hereof, relating in
any manner to the Premises and the occupation and use by Lessee of the Premises.
Lessee shall conduct its business in a lawful manner and shall not use or permit
the use of the Premises or the Common Areas in any manner that will tend to
create waste or a nuisance or shall tend to disturb other occupants of the
Office Building Project.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee in a clean condition on
the Lease Commencement Date (unless Lessee is already in possession) and Lessor
warrants to Lessee that the plumbing, lighting, air conditioning, and heating
system in the Premises shall be in good operating condition. In the event that
it is determined that this warranty has been violated, then it shall be the
obligation of Lessor, after receipt of written notice from Lessee setting forth
with specificity the nature of the violation, to promptly, at Lessor's sole
cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts the
Premises and the Office Building Project in their condition existing as of the
Lease Commencement Date or the date that Lessee takes possession of the
Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any easements, covenants or restrictions of record, and
accepts this Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Lessee acknowledges that it has satisfied itself
by its own independent investigation that the Premises are suitable for its
intended use, and that neither Lessor nor Lessor's agent or agents has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of Lessee's
business.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof, and common areas, and
the equipment whether used exclusively for the Premises or in common with other
premises, in good condition and repair; provided, however, Lessor shall not be
obligated to paint, repair or replace wall coverings, or to repair or replace
any improvements that are not ordinarily a part of the Building or are above
then Building standards. Except as provided in paragraph 9.5, there shall be no
abatement of rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project or any part
thereof. Lessee expressly waives the benefits of any statute now or hereafter in
effect which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Premises in good order, condition and repair.
7.2 Lessee's Obligations.
(a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
serves only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear. Lessee shall be responsible for the cost of
painting, repairing or replacing wall coverings and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may, at its option, upon reasonable
notice, elect to have Lessee perform any particular such maintenance or repairs
the cost of which is otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as received,
ordinary wear and tear excepted, clean and free of debris. Any damage or
deterioration of the Premises shall not be deemed ordinary wear and tear if the
same could have been prevented by good maintenance practices by Lessee. Lessee
shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, alterations, furnishings and equipment.
Except as otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings, wall coverings, carpets, wall paneling,
ceilings and plumbing on the Premises and in good operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, Utility Installations or repairs in, on or
about the Premises, or the Office Building Project. As used in this paragraph
7.3 the term "Utility Installation" shall mean carpeting, window and wall
coverings, power panels, electrical distribution systems, lighting fixtures, air
conditioning, plumbing and telephone and telecommunication wiring and equipment.
At the expiration of the term, Lessor may require the removal of any or all of
said alterations, improvements, additions or Utility Installations, and the
restoration of the Premises and the Office Building Project to their prior
condition, at Lessee's expense. Should Lessor permit Lessee to make its own
alterations, improvements, additions or Utility Installations, Lessee shall use
only such contractor as has been expressly approved by Lessor, and Lessor may
require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such improvements, to insure Lessor against any liability for mechanic's and
materialmen's liens and to insure completion of the work. Should Lessee make any
alterations, improvements, additions or Utility Installations without the prior
approval of Lessor, or use a contractor not expressly approved by Lessor, Lessor
may, at any time during the term of this Lease, require that Lessee remove any
part or all of the same.
(b) Any alterations, improvements, additions or Utility Installations in
or about the Premises or the Office Building Project that Lessee shall desire to
make shall be presented to Lessor in written form, with proposed detailed plans.
If Lessor shall give its consent to Lessee's making such alteration,
improvement, addition or Utility Installation, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from the applicable
governmental agencies, furnishing a copy thereof to Lessor prior to the
commencement of the work, and compliance by Lessee with all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for Use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days' notice prior to
the commencement of any work in the Premises by Lessee, and Lessor shall have
the right to post notices of non-responsibility in or on the Premises or the
Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy
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any such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, the Building or the Office Building
Project, upon the condition that if Lessor shall require, Lessee shall furnish
to Lessor a surety bond satisfactory to Lessor in an amount equal to such
contested lien claim or demand indemnifying Lessor against liability for the
same and holding the Premises, the Building and the Office Building Project free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessors reasonable attorneys' fees and costs in participating in such action
if Lessor shall decide it is to Lessor's best interest so to do.
(e) Ail alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of Lessee),
which may be made to the Premises by Lessee, including but not limited to, floor
coverings, paneling, doors, drapes., built-ins, moldings, sound attenuation,
and lighting and telephone or communication systems, conduit, wiring and
outlets, shall be made and done in a good and workmanlike manner and of good and
sufficient quality and materials and shall be the property of Lessor and remain
upon and be surrendered with the Premises at the expiration of the Lease term,
unless Lessor requires their removal pursuant to paragraph 7.3(a). Provided
Lessee is not in default, notwithstanding the provisions of this paragraph
7.3(e), Lessee's personal property and equipment, other than that which is
affixed to the Premises so that it cannot be removed without material damage to
the Premises or the Building, and other than Utility Installations, shall remain
the property of Lessee and may be removed by Lessee subject to the provisions of
paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and specifications
for any alterations, improvements, additions or Utility Installations.
7.4 Utility Additions. Lessor reserves the right to install new or additional
utility facilities throughout the Office Building Project for the benefit of
Lessor or Lessee, or any other lessee of the Office Building Project, including,
but not by way of limitation, such utilities as plumbing. electrical systems,
communication systems, and fire protection and detection systems, so long as
such installations do not unreasonably interfere with Lessee's use of the
Premises.
8. insurance; Indemnity.
8.1 Liability Insurance-Lessee. Lessee shall, at Lessee's expense, obtain and
keep in force during the term of this Lease a policy of Comprehensive General
Liability insurance utilizing an Insurance Services Office standard form with
Broad Form General Liability Endorsement (GL0404), or equivalent, in an amount
of not less than $1,000,000 per occurrence of bodily injury and property damage
combined or in a greater amount as reasonably determined by Lessor and shall
insure Lessee with Lessor as an additional insured against liability arising out
of the use, occupancy or maintenance of the Premises. Compliance with the above
requirement shall not, however, limit the liability of Lessee hereunder.
8.2 Liability Insurance-Lessor. Lessor shall obtain and keep In force during
the term of this Lease a policy of Combined Single Limit Bodily injury and Broad
Form Property Damage Insurance, plus coverage against such other risks Lessor
deems advisable from time to time, Insuring Lessor, but not Lessee, against
liability arising out of the ownership, use, occupancy or maintenance of the
Office Building Project in an amount not less than $5,000,000.00 per occurrence.
8.3 Property Insurance-Lessee. Lessee shall, at Lessee's expense, obtain and
keep in force during the term of this Lease for the benefit of Lessee,
replacement cost fire and extended coverage insurance, with vandalism and
malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.
8.4 Property Insurance-Lessor. Lessor shall obtain and keep in force during
the term of this Lease a policy or policies of insurance covering loss or damage
to the Office Building Project improvements, but not Lessee's personal property,
fixtures, equipment or tenant improvements, in the amount of the full
replacement cost thereof, as the same may exist from time to time, utilizing
Insurance Services Office standard form, or equivalent, providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, plate glass, and such other perils as
Lessor deems advisable or may be required by a lender having a lien on the
Office Building Project. In addition, Lessor shall obtain and keep in force,
during the term of this Lease, a policy of rental value insurance covering a
period of one year, with loss payable to Lessor, which insurance shall also
cover all Operating Expenses for said period. Lessee will not be named in any
such policies carried by Lessor and shall have no right to any proceeds
therefrom. The policies required by these paragraphs 8.2 and 8.4 shall contain
such deductibles as Lessor or the aforesaid lender may determine. In the event
that the Premises shall suffer an insured loss as defined in paragraph 9.1(f)
hereof, the deductible amounts under the applicable insurance policies shall be
deemed an Operating Expense. Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies carried by Lessor. Lessee shall
pay the entirety of any increase in the property insurance premium for the
Office Building Project over what it was immediately prior to the commencement
of the term of this Lease if the increase is specified by Lessors insurance
carrier as being caused by the nature of Lessee's occupancy or any act or
omission of Lessee.
8.5 Insurance Policies. Lessee shall deliver to Lessor copies of liability
insurance policies required under paragraph 8.1 or certificates evidencing the
existence and amounts of such insurance within seven (7) days after the
Commencement Date of this Lease. No such policy shall be cancelable or subject
to reduction of coverage or other modification except after thirty (30) days
prior written notice to Lessor. Lessee shall, at least thirty (30) days prior to
the expiration of such policies, furnish Lessor with renewals thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and relieve
the other, and waive their entire right of recovery against the other, for
direct or consequential loss or damage arising out of or incident to the perils
covered by property insurance carried by such party, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this Lease
shall be endorsed to so provide.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and against
any and all claims for damage to the person or property of anyone or any entity
arising from Lessee's use of the Office Building Project, or from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee in or about the Premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all claims, costs
and expenses arising from any breach or default in the performance of any
obligation an Lessee's part to be performed under the terms of this Lease, or
arising from any act or omission of Lessee, or any of Lessee's agents,
contractors, employees, or invitees, and from and against all costs, attorney's
fees, expenses and liabilities incurred by Lessor as the result of any such use,
conduct, activity, work, things done, permitted or suffered, breach, default or
negligence, and in dealing reasonably therewith, including but not limited to
the defense or pursuit of any claim or any action or proceeding involved
therein; and in case any action or proceeding be brought against Lessor by
reason of any such matter, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property of Lessee
or injury to persons, in, upon or about the Office Building Project arising from
any cause and Lessee hereby waives all claims in respect thereof against Lessor.
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from theft,
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible, Lessor shall not be liable
for any damages arising from any act or neglect of any other lessee, occupant or
user of the Office Building Project, nor from the failure of Lessor to enforce
the provisions of any other lease of any other lessee of the Office Building
Project.
8.9 No Representation of Adequate Coverage. Lessor makes no representation
that the limits or forms of coverage of insurance specified in this paragraph 8
are adequate to cover Lessee's property or obligations under this Lease.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Damage" shall mean if the Premises are damaged or destroyed
to any extent.
(b) "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is less than fifty percent (50%) of the then Replacement Cost of
the building.
(c) "Premises Building Total Destruction" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is fifty percent (50%) or more of the then Replacement Cost of
the Building.
(d) "Office Building Project Buildings" shall mean all of the buildings
on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction" shall mean if
the Office Building Project Buildings are damaged or destroyed to the extent
that the cost of repair is fifty percent (50%) or more of the Replacement Cost
of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was caused by
an event required to be covered by the insurance described in paragraph 8. The
fact that an Insured Loss has a deductible amount shall not make the loss an
uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to be
spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other than those installed by Lessor at Lessee's expense.
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9.2 Premises Damage; Premises Building Partial Damage.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and 9.5, If
at any time during the term of this Lease there is damage which is an insured
Loss and which falls into tire classification of either Premises Damage or
Premises Building Partial Damage. then Lessor shall, as soon as reasonably
possible and to the extent the required materials and labor are readily
available through usual commercial channels, at Lessor's expense, repair such
damage (but not Lessee's fixtures, equipment or tenant improvements originally
paid for by Lessee) to its condition existing at the time of the damage. and
this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and 9.5,
if at any time during the term of this Lease there is damage which is not an
Insured Loss and which falls within the classification of Premises Damage or
Premises Building Partial Damage, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense), which
damage prevents Lessee from making any substantial use of the Premises, Lessor
may at Lessors option either (I) repair such damage as soon as reasonably
possible at Lessors expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee within thirty (30) days
after the date of the occurrence of such damage of Lessor's intention to cancel
and terminate this Lease as of the date of the occurrence of such damage, in
which event this Lease shall terminate as of the date of the occurrence of such
damage.
9.3 Promises Building Total Destruction; Office Building Project Total
Destruction. Subject to the provisions of paragraphs 9.4 and 9.6, if at any time
during the term of this Lease there is damage, whether or not it is an Insured
Loss, which falls into the classification of either (I) Premises Building Total
Destruction, or (ii) Office Building Project Total Destruction, then Lessor may
at Lessor's option either (I) repair such damage or destruction as soon as
reasonably possible at Lessor's expense (to the extent the required materials
are readily available through usual commercial channels) to its condition
existing at the time of the damage, but not Lessee's fixtures, equipment or
tenant improvements. and this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the date of
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date of the occurrence
of such damage.
9.4 Damage Near End of Term.
(a) Subject to paragraph 9.4(b), if at any time during the last twelve
(12) months of the term of this Lease there is substantial damage to the
Premises. Lessor may at Lessor's option cancel and terminate this Lease as of
the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which said option may
be exercised has not yet expired, Lessee shall exercise such option, if it is to
be exercised at all, no later than twenty (20) days after the occurrence of an
Insured Loss failing within the classification of Premises Damage during the
last twelve (12) months of the term of this Lease. If Lessee duly exercises such
option during said twenty (20) day period, Lessor shall, at Lessors expense,
repair such damage, but not Lessee's fixtures, equipment or tenant improvements,
as soon as reasonably possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option during said twenty (20) day
period, then Lessor may at Lessors option terminate and cancel this Lease as of
the expiration of said twenty (20) day period by giving written notice to Lessee
of Lessor's election to do so within ten (10) days after the expiration of said
twenty (20) day period, notwithstanding any term or provision in the grant of
option to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
(a) In the event Lessor repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of the Premises are
not usable (including loss of use due to loss of access or essential services),
the rent payable hereunder (including Lessee's Share of Operating Expense
Increase) for the period during which such damage, repair or restoration
continues shall be abated, provided (1) the damage was not the result of the
negligence of Lessee, and (2) such abatement shall only be to the extent the
operation and profitability of Lessee's business as operated from the Premises
is adversely affected. Except for said abatement of rent, if any, Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises or the
Building under the provisions of this Paragraph 9 and shall not commence such
repair or restoration within ninety (90) days after such occurrence, or if
Lessor shall not complete the restoration and repair within six (6) months after
such occurrence, Lessee may at Lessee's option cancel and terminate this Lease
by giving Lessor written notice of Lessee's election to do so at any time prior
to the commencement or completion, respectively, of such repair or restoration.
In such event this Lease shall terminate as of the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any such
restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.
9.6 Termination - Advance Payments. Upon termination of this Lease pursuant
to this paragraph 9, an equitable adjustment shall be made concerning advance
rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10. 1 Payment of Taxes. Lessor shall pay real property tax, as defined in
paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.
10.2 Additional Improvements. Lessee shall not be responsible for paying any
increase in real property tax specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 Definition of "Real Property Tax." As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance. personal income
or estate taxes) imposed on the Office Building Project or any portion thereof
by any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, as against any
legal or equitable interest of Lessor in the Office Building Project or in any
portion thereof, as against Lessors right to rent or other income therefrom, and
as against Lessors business of leasing the Office Building Project. The term
"real property tax" shall also include any tax, fee, levy, assessment or charge
(I) in substitution of, partially or totally, any tax, fee, levy, assessment or
charge hereinabove included within the definition of "real property tax", or
(ii) the nature of which was hereinbefore included within the definition of
"real property tax", or (iii) which is imposed for a service or right not
charged prior to June 1, 1978, or, if previously charged, has been increased
since June 1, 1978, or (iv) which is imposed as a result of a change in
ownership, as defined by applicable local statutes for property tax purposes, of
the Office Building Project or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such change of
ownership, or (v) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the improvements or property, the taxes for which
are to be paid separately by Lessee under paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may be
reasonably available. Lessors reasonable determination thereof, in good faith,
shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessee's property.
11. Utilities.
11.1 Services Provided by Lessor. Lessor shall provide heating, ventilation,
air conditioning, and janitorial service as reasonably required, reasonable
amounts of electricity for normal lighting and office machines, water for
reasonable and normal drinking and lavatory use, and replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures.
11.2 Services Exclusive to Lessee. Lessee shall pay for all water, gas, heat,
light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately metered
to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises in the Building.
11.3 Hours of Service. Said services and utilities shall be provided during
generally accepted business days and hours or such other days or hours as may
hereafter be set forth. Utilities and services required at other times shall be
subject to advance request and reimbursement by Lessee to Lessor of the cost
thereof.
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11.4 Excess Usage by Lessee. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Lessor shall require
Lessee to reimburse Lessor for any excess expenses or costs that may arise out
of a breach of this subparagraph by Lessee. Lessor may, in its sole discretion.
install at Lessee's expense supplemental equipment and/or separate metering
applicable to Lessee's excess usage or loading.
11.5 Interruptions. There shall be no abatement of rent and Lessor shall not
be liable in any respect whatsoever for the inadequacy, stoppage, interruption
or discontinuance of any utility or service due to riot, strike, labor dispute,
breakdown, accident, repair or other cause beyond Lessor's reasonable control or
in cooperation with governmental request or directions.
12. Assignment and Subletting.
12.1 Lessors Consent Required. Lessee shall not voluntarily or by operation
of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber all
or any part of Lessee's interest in the Lease or in the Premises, without
Lessor's prior written consent, which Lessor shall not unreasonably withhold.
Lessor shall respond to Lessee's request for consent hereunder in a timely
manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease, without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall include
the transfer or transfers aggregating: (a) if Lessee is a corporation, more than
twenty-five percent (25%) of the voting stock of such corporation, or (b) if
Lessee is a partnership, more than twenty-five percent (25%) of the profit and
loss participation in such partnership.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessors consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, all of which are referred to as "Lessee Affiliate";
provided that before such assignment shall be effective, (a) said assignee shall
assume, in full, the obligations of Lessee under this Lease and (b) Lessor shall
be given written notice of such assignment and assumption. Any such assignment
shall not, in any way, affect or limit the liability of Lessee under the terms
of this Lease even if after such assignment or subletting the terms of this
Lease are materially changed or altered without the consent of Lessee, the
consent of whom shall not be necessary.
12.3 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, no assignment or subletting shall
release Lessee of Lessee's obligations hereunder or alter the primary liability
of Lessee to pay the rent and other sums due Lessor hereunder including Lessee's
Share of Operating Expense Increase, and to perform all other obligations to be
performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such assignment or
subletting, nor the acceptance of rent, shall constitute a waiver or estoppel of
Lessor's right to exercise its remedies for the breach of any of the terms or
conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to such
sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee. However,
Lessor may consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without obtaining their consent and such
action shall not relieve such persons from liability under this Lease or said
sublease; however, such persons shall not be responsible to the extent any such
amendment or modification enlarges or increases the obligations of the Lessee or
sublessee under this Lease or such sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied upon by
Lessor in giving its consent to an assignment or subletting was materially false
shall, at Lessor's election, render Lessor's said consent null and void.
12.4 Additional Terms and Conditions Applicable to Subletting. Regardless of
Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be deemed
included in all subleases under this Lease whether or not expressly incorporated
therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and apply
same toward Lessee's obligations under this Lease; provided, however, that until
a default shall occur in the performance of Lessee's obligations under this
Lease, Lessee may receive. collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee or Lessor for any such rents
so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into any sublease,
Lessee shall use only such form of sublessee as -is satisfactory to Lessor, and
once approved by Lessor such sublease shall not be changed or modified without
Lessors prior written consent. Any sublease shall, by reason of entering into a
sublease under this Lease, be deemed, for the benefit of Lessor, to have assumed
and agreed to conform and comply with each and every obligation herein to be
performed by Lessee other than such obligations as are contrary to or
inconsistent with provisions contained in a sublease to which Lessor has
expressly consented in writing.
(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any obligation to
do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such sublease from the time of
the exercise of said option to the termination of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to Lessee or for any other prior defaults of Lessee under
such sublease.
(d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has consented, Lessor
agrees to deliver a copy of any notice of default by Lessee to the sublessee.
Such sublessee shall have the right to cure a default of Lessee within three (3)
days after service of said notice of default upon such sublessee, and the
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such defaults cured by the sublessee.
12.5 Lessors Expenses. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, Including attorneys', architects', engineers' or other
consultants' fees.
12.6 Conditions to Consent. Lessor reserves the right to condition any
approval to assign or sublet upon Lessors determination that (a) the proposed
assignee or sublessee shall conduct a business on the Premises of a quality
substantially equal to that of Lessee and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee or sublessee be at least as financially responsible as Lessee was
expected to be at the time of the execution of this Lease or of such assignment
or subletting, whichever is greater.
13. Default; Remedies.
13.1 default. The occurrence of any one or more of the following events shall
constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee. Vacation of
the Premises shall include the failure to occupy the Premises for a continuous
period of sixty (60) days or more, whether or not the rent is paid.
(b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b) (subordination), 33
(auctions), or 41.1 (easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by Lessor to Lessee
thereof.
(c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
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(d) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee
other than those referenced in subparagraphs (b) and (c), above, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee: provided, however, that if the nature of Lessee's
noncompliance is such that more than thirty (30) days are reasonably required
for its cure, then Lessee shall not be deemed to be in default if Lessee
commenced such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion. To the extent permitted by law, such thirty
(30) day notice shall constitute the sole and exclusive notice required to be
given to Lessee under applicable Unlawful Detainer statutes.
(a) (I) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors; (if) Lessee becoming a "debtor" as
defined In 11 U.S.C. ss.101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within sixty (60)
days (iii) the appointment of a trustee or receiver to lake possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
Interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1 (a) is contrary to
any applicable law, such provision shall be of no force or effect.
(f) The discovery by Lessor that any financial statement given to Lessor
by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was materially false.
13.2 Remedies. In the event of any material default or breach of this Lease
by Lessee, Lessor may at any time thereafter. with or without notice or demand
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease and the term hereof shall terminate and Lessee
shall immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of retailing, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and any real estate commission actually paid; the worth at the time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by Lessor pursuant to paragraph 15
applicable to the unexpired term of this Lease.
(b) Maintain I on-inn's right to possession in which case this [.ease
shall continue in effect whether or not Lessee shall have vacated or abandoned
the Promises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, Including the right to recover the rent
as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
Unpaid installments of rent and other unpaid monetary obligations of Lessee
under the terms of this Lease shall bear interest from the date due at the
maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be In default unless Lessor fails to
perform obligations required of Lessor within a reasonable time, but in no event
later than thirty (30) days after written notice by Lessee to Lessor and to the
holder of any first mortgage or deed of trust covering the Premises whose name
and address shall have therefore been furnished to Lessee In writing, specifying
wherein Lessor has failed to perform such obligation; provided, however, that if
the nature of Lessor's obligation Is such that more than thirty (30) days are
required for performance then Lessor shall not be in default if Lessor commences
performance within such 30-day period and thereafter diligently pursues the same
to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee to
Lessor of Base Rent, Lessee's Share of Operating Expense Increase or other sums
due hereunder will cause Lessor to Incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain. Such costs
Include, but are not limited to, processing and accounting charges, end late
charges which may be Imposed on Lessor by the terms of any mortgage or trust
deed covering the Office Building Project. Accordingly. if any installment of
Base Rent, Operating Expense Increase, or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due. then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to 6% of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
14. Condemnation. If the Premises or any portion thereof or the Office Building
Project are taken under the power of eminent domain, or sold under the threat of
the exercise of said power (all of which are herein called "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs; provided that if so
much of the Premises or the Office Building Project are taken by such
condemnation as would substantially and adversely affect the operation and
profitability of Lessee's business conducted from the Premises, Lessee shall
have the option, to be exercised only in writing within thirty (30) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within thirty (30) days after the condemning authority shall
have taken possession), to terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the rent and Lessee's
Share of Operating Expense Increase shall be reduced in the proportion that the
floor area of the Premises taken bears to the total floor area of the Premises.
Common Areas taken shall be excluded from the Common Areas usable by Lessee and
no reduction of rent shall occur with respect thereto or by reason thereof.
Lessor shall have the option in its sole discretion to terminate this Lease as
of the taking of possession by the condemning authority, by giving written
notice to Lessee of such election within thirty (30) days after receipt of
notice of a taking by condemnation of any part of the Premises or the Office
Building Project. Any award for the taking of all or any part of the Premises or
the Office Building Project under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as a compensation for diminution in value of
the leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any separate award for loss of or
damage to Lessee's trade fixtures, removable personal property and unamortized
tenant improvements that have been paid for by Lessee. For that purpose the cost
of such improvements shall be amortized over the original term of this Lease
excluding any options. In the event that this Lease is not terminated by reason
of such condemnation, Lessor shall to the extent of severance damages received
by Lessor in connection with such condemnation, repair any damage to the
Premises caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall pay any amount in
excess of such severance damages required to complete such repair.
15. Broker's Fee.
(a) The brokers involved in this transaction are Voit Commercial Brokerage
(Deason) as "listing broker" and Voit Commercial Brokerage (Ozimec) as
"cooperating broker,* licensed real estate broker(s). A "cooperating broker" is
defined as any broker other than the listing broker entitled to a share of any
commission arising under this Lease. Upon execution of this Lease by both
parties, Lessor shall pay to said brokers jointly, or in such separate shares as
they may mutually designate in writing, a fee as set forth in a separate
agreement between Lessor and said broker(s), or in the event there is no
separate agreement between Lessor and said broker(s), the sum of $ per separate
agreement for brokerage services rendered by said broker(s) to Lessor in this
transaction.
(b) Lessor further agrees that (I) if Lessee exercises any Option, as defined
in paragraph 39.1 of this Lease, which is granted to Lessee under this Lease, or
any subsequently granted option which is substantially similar to an Option
granted to Lessee under this Lease, or (if) if Lessee acquires any rights to the
Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or (III) if Lessee remains in possession of the Premises
after the expiration of the term of this Lease after having failed to exercise
an Option, or (iv) if said broker(s) are the procuring cause of any other lease
or sale entered into between the parties pertaining to the Premises and/or any
adjacent property in which Lessor has an interest, or (v) if the Base Rent is
increased, whether by agreement or operation of an escalation clause contained
herein, then as to any of said transactions or rent increases, Lessor shall pay
said broker(s) a fee in accordance with the schedule of said broker(s) in effect
at the time of execution of this Lease. Said fee shall be paid at the time such
increased rental is determined.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but also on
behalf of any person, corporation, association, or other entity having an
ownership interest in said real property or any part thereof, when such fee is
due hereunder. Any transferee of Lessors interest in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have assumed
Lessors obligation under this paragraph 15. Each listing and cooperating broker
shall be a third party beneficiary of the provisions of this paragraph 15 to the
extent of their interest in any commission arising under this Lease and may
enforce that right directly against Lessor; provided, however, that all brokers
having a right to any part of such total commission shall be a necessary party
to any suit with respect thereto.
(d) Lessee and Lessor each represent and warrant to the other that neither
has had any dealings with any person, firm, broker or finder (other than the
person(s), if any, whose names are set forth in paragraph 15(a), above) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and no other broker or other person, firm or
entity is entitled to any commission or finder's fee in connection with said
transaction and Lessee and Lessor do each hereby indemnify and hold the other
harmless from and against any costs, expenses, attorneys' fees or liability for
compensation or charges which may be claimed by such unnamed broker, finder or
other similar party by reason of any dealings or actions of the indemnifying
party.
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at any time upon not less than
ten (10) days' prior written notice from the other party ("requesting party")
execute, acknowledge and deliver to the requesting party a statement in writing
(i) certifying that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date
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to which the tent and other charges are paid in advance, if any, and
(if) acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrance of the Office Building Project or
of the business of Lessee,
(b) At the requesting party's option, the failure to deliver such statement
within such time shall be a material default of this Lease by the party who is
to respond, without any further notice to such party, or it shall be conclusive
upon such party that (1) this Lease is in full force and effect, without
modification except as may be represented by the requesting party, (ii) there
are no uncured defaults in the requesting party's performance, and (iii) if
Lessor is the requesting party, not more than one month's rent has been paid in
advance. I
(c) If Lessor desires to finance, refinance, or sell the Office Building
Project, or any part thereof, Lessee hereby agrees to deliver to any lender or
Purchaser designated by Lessor such financial statements of Lessee as may be
reasonably required by such lender or purchaser. Such statements shall include
the past three (3) years' financial statements of Lessee. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such title
or interest, Lessor herein named (and in case of any subsequent transfers then
the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall, subject
as aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.
18. Severability. The Invalidity of any provision of this Lease as determined by
a court of competent jurisdiction shall In no way affect the validity of any
other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law or judgments from the date due. Payment of such interest
shall not excuse or cure any default by Lessee under this Lease; provided,
however, that interest shall not be payable on late charges incurred by Lessor
nor on any amounts upon which late charges are paid by Lessee.
20. Time of Essence. Time is of the essence with respect to the obligations to
be performed under this Lease.
21. Additional Rent All monetary obligations of Lessee to Lessor under the terms
of this Lease, including but not limited to Lessee's Share of Operating Expense
Increase and any other expenses payable by Lessee hereunder shall be deemed to
be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the real estate broker
listed in paragraph 15 hereof nor any cooperating broker on this transaction nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Office Building Project and Lessee acknowledges
that Lessee assumes all responsibility regarding the Occupational Safety Health
Act, the legal use and adaptability of the Premises and the compliance thereof
with all applicable laws and regulations in effect during the term of this Lease
23. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. Mailed notices shall be deemed given
upon actual receipt at the address required, or forty-eight hours following
deposit in the mail, postage prepaid, whichever first occurs. Either party may
by notice to the other specify a different address for notice purposes except
that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
24. Waivers. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining or Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessors knowledge of such preceding breach at the time of
acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the rent payable
shall be two hundred percent (200%) of the rent payable immediately preceding
the termination date of this Lease, and all Options, if any, granted under the
terms of this Lease shall be deemed terminated and be of no further effect
during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by Lessee
shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Office Building Project is located and any litigation concerning this
Lease between the parties hereto shall be initiated in the county in which the
Office Building Project is located.
30. Subordination.
(a) This Lease, and any Option or right of first refusal granted hereby, at
Lessor's option, shall be subordinate to any ground lease, mortgage, deed of
trust, or any other hypothecation or security now or hereafter placed upon the
Office Building Project and to any and all advances made on the security thereof
and to all renewals, modifications, consolidations, replacements and extensions
thereof. Notwithstanding such subordination, Lessee's right to quiet possession
of the Premises shall not be disturbed if Lessee is not in default and so long
as Lessee shall pay the rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms. If
any mortgagee, trustee or ground lessor shall elect to have this Lease and any
Options granted hereby prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be. Lessee's failure to execute such documents within ten (10) days after
written demand shall constitute a material default by Lessee hereunder without
further notice to Lessor or, at Lessors option, Lessor shall execute such
documents on behalf of Lessee as Lessee's attorney in-fact. Lessee does hereby
make, constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and
in Lessee's name, place and stead, to execute such documents in accordance with
this paragraph 30(b).
31. Attorneys' Fees.
31.1 If either party or the broker(s) named herein bring an action to enforce
the terms hereof or declare rights hereunder, the prevailing party in any such
action, trial or appeal thereon, shall be entitled to his reasonable attorneys'
fees to be paid by the losing party as fixed by the court in the same or a
separate suit, and whether or not such action is pursued to decision or
judgment. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.
31.2 The attorneys' fee award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all other
costs and expenses Incurred in the preparation and service of notice of default
and consultations in connection therewith, whether or not a legal transaction is
subsequently commenced in connection with such default.
32. Lessor's Access.
32.1 Lessor and Lessor's agents shall have the right to enter the Premises at
reasonable times for the purpose of inspecting the same, performing any services
required of Lessor, showing the same to prospective purchasers, lenders, or
lessees, taking such safety measures, erecting such scaffolding or other
necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs.
32.2 All activities of Lessor pursuant to this paragraph shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the same.
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32.3 Lessor shall have the right to retain keys to the Premises and to unlock
all doors in or upon the Premises other than to files, vaults and safes, and in
the case of emergency to enter the Premises by any reasonably appropriate means,
and any such entry shall not be deemed a forceable or unlawful entry or detainer
of the Premises or an eviction. Lessee waives any charges for damages or
injuries or interference with Lessee's property or business In connection
therewith.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent. The holding of any auction an the Premises or Common Areas in violation
of this paragraph shall constitute a material default of this Lease.
34. Signs. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no circumstances
shall Lessee place a sign on any roof of the Office Building Project.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. Consents. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
Lease. The individuals executing this Lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such execution is binding upon
all parties holding an ownership Interest in the Office Building Project.
39. Options.
39.1 Definition. As used hi this paragraph Ilia word "Option" tins tire
following meaning: (1) the right or option to extend Ilia term of this Lease or
In renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option of right of first refusal to lease 1110
Promises or the right of first offer to lease the Premises or the right of first
refusal to lease other space within the Office Building Project or other
property of Lessor or the right of first offer to lease other space within the
Office Building Project or other property of Lessor; (3) the right or option to
purchase the Premises or the Office Building Project, or the right of first
refusal to purchase the Premises or the Office Building Project or the right of
first offer to purchase the Premises or the Office Building Project, or the
right or option to purchase other property of Lessor, or the right of first
refusal to purchase other property of Lessor or the right of first offer to
purchase other property of Lessor.
39.2 Options Personal. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original Lessee
while occupying the Premises who does so without the intent of thereafter
assigning this Lease or subletting the Premises or any portion thereof, and may
not be exercised or be assigned, voluntarily or involuntarily, by or to any
person or entity other than Lessee; provided, however, that an Option may be
exercised by or assigned to any Lessee Affiliate as defined in paragraph 12.2 of
this Lease. The Options, if any, herein granted to Lessee are not assignable
separate and apart from this Lease, nor may any Option be separated from this
Lease in any manner, either by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple options to
extend or renew this Lease a later option cannot be exercised unless the prior
option to extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding any
provision In the grant of Option to the contrary, (I) during the time commencing
from the date Lessor gives to Lessee a notice of default pursuant to paragraph
13.1 (c) or 13.1 (d) and continuing until the noncompliance alleged in said
notice of default is cured, or (ii) during the period of time commencing on the
day after a monetary obligation to Lessor is due from Lessee and unpaid (without
any necessity for notice thereof to Lessee) and continuing until the obligation
is paid, or (III) in the event that Lessor has given to Lessee three or more
notices of default under paragraph 13.1 (c), or paragraph 13.1 (d) whether or
not the defaults are cured, during the 12 month period of time immediately prior
to the time that Lessee attempts to exercise the subject Option, (iv) if Lessee
has committed any non-curable breach, including without limitation those
described in paragraph 13.1 (b), or is otherwise in default of any of the terms,
covenants or conditions of this Lease.
(b) The period of time within which an Option may be exercised shall not
be extended or enlarged by reason of Lessee's inability to exercise an Option
because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (I) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1 (d) within thirty (30)
days after the date that Lessor gives notice to Lessee of such default and/or
Lessee fails thereafter to diligently prosecute said cure to completion, or
(III) Lessor gives to Lessee three or more notices of default under paragraph
13.1(c), or paragraph 13.1(d), whether or not the default are cured, or (iv) if
Lessee has committed any non-curable breach, including without limitation those
described in paragraph 13.1 (b), or is otherwise in default of any of the terms,
covenants and conditions of this Lease.
40. Security Measures - Lessors Reservations.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measure for the benefit of
the Premises or the Office Building Project. Lessee assumes all responsibility
for the protection of Lessee, its agents, and invitees and the property of
Lessee and of Lessee's agents and invitees from acts of third parties. Nothing
herein contained shall prevent Lessor, at Lessor's sole option, from providing
security protection for the Office Building Project Or any part thereof, in
which event the cost thereof shall be included within the definition of
Operating Expenses, as set forth in paragraph 4.2(b).
40.2 Lessor shall have the following rights:
(a) To change the name. address or title of the Office Building Project
or building in which the Premises are located upon not less than 90 days prior
written notice;
(b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any business as
long as such exclusive does not conflict with any rights expressly given herein;
(d) To place such signs, notices or displays as Lessor reasonably deems
necessary or advisable upon the roof, exterior of the buildings or the Office
Building Project or on pole signs in the Common Areas;
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the Building or
the Office Building Project or their name(s) in connection with Lessee's
business;
(b) Suffer or permit anyone, except in emergency, to go upon the roof of
the Building.
41. Easements.
41.1 Lessor reserves to itself the right, from time to time. to grant such
easements, rights and dedications that Lessor deems necessary or desirable, and
to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any structure erected
in the vicinity of the Building, whether by Lessor or third parties, shall in no
way affect this Lease or impose any liability upon Lessor.
42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
c 1984 American Industrial Real Estate Association Initials:/s/ DSB
---------
FULL SERVICE-GROSS /s/ BA
PAGE 9 OF 10 ---------
<PAGE>
43. Authority. It Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee Is a corporation.
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. Conflict. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any. shall be
controlled by the typewritten or handwritten provisions.
45. No Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.
46. Lender Modification. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an Institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.
47. Multiple Parties. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
48. Work Letter. This Lease is supplemented by that certain Work Letter of even
date executed by Lessor and Lessee, attached hereto as Exhibit C, and
incorporated herein by this reference.
49. Attachments. Attached hereto are the following documents which constitute a
part of this Lease:
50. Rent Schedule:
----------------------
Dates Rent
----- ----
October 1, 1997 - May 15, 1998 $5,851.40
May 15, 1998 - September 30, 1999 $7,228.20
October 1, 1999 - September 30, 2000 $7,572.40
51. Janitorial: Lessee shall be responsible for its inside janitorial service.
52. Electricity: The Lessee shall be responsible to reimburse the Lessor for
electricity usage expenses above the $715 per month average of the past three
(3) years. The Lessee shall reimburse the Lessor within ten (10) days of
receiving notice and the utility bills at the end of each year of the lease.
53. Lessor agrees to repair or replace the broken interior door.
54. The Lessee may have early occupancy on Friday, September 26, 1997.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR
SUBMISSION TO YOUR ATTORNEY FOR HIS APPROVAL. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION RELATING THERETO; THE PARTIES SHALL RELY
SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE
LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
Rayson, Inc. California Software Products, Inc.
- ------------- ----------------------------------
By /s/Charlie F. Betz By /s/Bruce Acacio
-------------------------------- ---------------------------------
Bruce Acacio
Its General Partner Its President
------------------------------- --------------------------------
By /s/Dave C. Betz By
-------------------------------- ---------------------------------
Its Its
------------------------------- --------------------------------
Executed at Executed at
----------------------- ------------------------
on on 09/25/1997
-------------------------------- --------------------------------
Address 2700 Kimball Avenue, Address 1221 E. Dyer Road, # 105
Pomona, CA 91767 Santa Ana, CA 92705
-------------------------- ---------------------------
c 1984 American Industrial Real Estate Association
FULL SERVICE-GROSS
PAGE 10 OF 10
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Please Writ or call us to make sure that you are utilizing the
most current form. We can be reached at the American Industrial Real Estate
Association, 700 South Flower, Suite 600, Los Angeles, CA 90017, (213) 687-8777
Fax (213) 687-8616 FORM OFG-0-6184 EZ
CALIFORNIA SOFTWARE CORPORATION
EXHIBIT #23
Consent of Experts and Counsel
<PAGE>
James E. Slayton, CPA
- --------------------------------------------------------------------------------
3867 WEST MARKET STREET
SUITE 208
AKRON, OHIO 44333
To Whom It May Concern January 26, 1999
The firm of James E. Slayton, Certified Public Accountant consents to the
inclusion of my report of January 26, 1999 on the Financial Statements of
California Software Corporation from the inception date of October 28, 1998
through January 12, 1999, in any filings that are necessary now or in the near
future to be filed with the U.S. Securities and Exchange Commissions.
Professionally,
/s/ James E. Slayton
James E. Slayton, CPA
Ohio License ID # 04-1-15582
CALIFORNIA SOFTWARE CORPORATION
EXHIBIT # 27
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JAN-12-1999
<CASH> 358115
<SECURITIES> 0
<RECEIVABLES> 810691
<ALLOWANCES> 0
<INVENTORY> 302598
<CURRENT-ASSETS> 1574579
<PP&E> 68884
<DEPRECIATION> 0
<TOTAL-ASSETS> 2968479
<CURRENT-LIABILITIES> 663246
<BONDS> 80273
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2968479
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 19983
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (19983)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19983)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19983)
<EPS-BASIC> (0.052)
<EPS-DILUTED> (0.052)
</TABLE>
