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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section (12) or (g) of
The Securities Exchange Act of 1934
ENTERPRISES SOLUTIONS, INC.
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(Name of small business issuer in its Charter)
Nevada 88-0232148
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
15 RAVEN ROAD, CANTON, MASSACHUSETTS 02021
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(Address of principal executive offices)
Issuer's telephone number, including area code:
617-510-3898
781-821-0131
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
to be so registered which each class is to be
Registered
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
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ENTERPRISES SOLUTIONS, INC.
(General Form for Registration of Securities
of Small Business Issuers on Form 10-SB)
PAGE
PART I
Description of Business........................................................3
Property.......................................................................8
Management's Discussion and Analysis of Financial
Condition......................................................................9
Security Ownership of Certain Beneficial Owners
and Management..............................................................16
Management....................................................................16
Executive Compensation........................................................17
Transactions with Management and Others.......................................17
Description of Securities.....................................................18
PART II
Legal Proceedings.............................................................18
Market for Common Equity and Related Stockholder
Matters.......................................................................19
Recent Sales of Unregistered Securities.......................................20
Indemnification of Directors and Officers.....................................22
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..........................................22
PART F/S
Financial Schedules and Exhibits..............................................22
PART III
Index to Exhibits.............................................................23
Description of Exhibits.......................................................24
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DESCRIPTION OF BUSINESS
General Development of Business
Enterprises Solutions, Inc., a Nevada corporation (the "Company"), was
incorporated on September 16, 1987 under the name of Sedgewicke Business
Alliance, Inc. On December 21, 1994, the Company changed its name to American
Casinos International, Inc. ("ACII") and from that time focused its operations
on the gaming industry. In particular, ACII operated a casino in Venezuela. In
mid-1997, the Venezuelan government effectively shut down all casinos pending
relicensing under a much changed and restrictive law. Although the new law had
not yet been interpreted or clearly defined as to how it would ultimately be
implemented, ACII's casino could not reopen as it had previously operated.
In 1998, the Company made a cognitive change in its corporate
philosophy in response to the growing global problem of Internet security. On
September 1, 1999, the Company changed its name to Enterprises Solutions, Inc.
and began to focus its endeavors on developing a suite of products and solutions
for Internet security.
In June 1998, the Company capitalized $779,897 in shareholder loans and
accrued payroll expenses. The shareholders to whom the loan and payroll were
owed sold their shares to new investors and were allowed to keep the gaming
equipment in Venezuela as compensation for any and all liabilities associated
with the discontinued gaming operations. The Company also terminated a certain
licensing agreement and the rights to offer Internet bingo and casino games,
which the Company no longer part of its corporate business focus.
Description of Business
The Company's objective is to address what it perceives to be a lack of
security in Internet applications by developing and providing a fully secure
computer network and related products and services. Based upon its research, the
Company believes that none of the computer systems and software currently being
used for Internet transactions is fully secure or "trusted." The Company's
management believes that the demand for totally secure trusted network systems
and products has grown significantly in recent years due to the dramatic
increase in the transmission of sensitive information over the Internet in e-
commerce transactions.
The Company sees three potential market segments which it expects will
be interested in purchasing its trusted network products and related services:
infrastructure providers, corporate consumers and governments. The three main
product
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areas which the Company plans to offer to these segments are: (1) bondable
hardware products that provide the platforms for a secure network
infrastructure; (2) layered software application products built on these
platforms; and (3) consulting and hosted services offered to customers or
provided through the Company's prospective business partners
The Company believes that the technology which it intends to acquire is
the only fully trusted network technology developed to date. This, the Company
believes, will give it an advantage over any potential competitors. The
technology which the Company intends to acquire for development and marketing of
its products and services has been objectively evaluated by an independent third
party and rated according to the U.S. Government's Trusted Computer System
Evaluations Criteria ("TCSEC"). The TCSEC is a rating schedule for computer
security programs based upon the level of security or "assurance" which each
system provides. The technology which the Company intends to acquire and develop
for its network server has received a rating of A1 rating under the TCSEC, which
is the highest possible rating and indicates that products made with the
technology are fully secure or trusted. Management believes that this is the
only technology to have achieved such a rating. In addition, the technology
which the Company intends to acquire for use in its workstation products has
received a rating of C2. Although this indicates a lower level of assurance, the
Company believes that when used in conjunction with its A1 rated, trusted
network server, its workstation product will be trusted as well.
Because of this independent evaluation and government rating, the
Company anticipates that its products will be secure enough to be bonded by
business insurance carriers and to provide the fundamental assurance necessary
for growth in e-commerce, particularly in business to business Internet
exchanges.
The Company is in the process of acquiring and developing its
trademarked network security architecture, known as the Bondable Network
Architecture(TM). As planned, this will transparently integrate fully secure
workstations, servers and other network products into the existing Internet
environment without modifying either the basic user applications or the
prevailing workstation environment. In addition, the Company believes that the
demand for its products will give rise to a demand for security related
consulting, support and training services. The Company believes that its
products and services will be unique in that they will provide the only
A1-rated, "trusted" network systems available.
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Principal Platform Products
The Company plans for its initial group of products to include its own
fully secure computer platforms, some of which are designed as "plug-ins" to
make existing Internet systems secure and others of which are fully secure
products, which can be pre-loaded with the Company's specially designed trusted
software.
Novell(R)Proprietary Network Interface Card
The Company's planned initial product offering is a card consisting of
a computer board and embedded software which can be plugged into an existing
computer workstation to retrofit it into a secure workstation. The retrofitted
workstations will be able to operate within the practical boundaries of a Local
Area Network (LAN) and have been certified for a TCSEC assurance level C2 for
use with the Novell Trusted Network Architecture(R). The Proprietary Network
Interface Card, as part of Novell's trusted NetWare(TM), is intended to identify
users who access the network and support the enforcement of a discretionary
access control policy over data in the network. Although TCSEC level C2 is not
considered trusted or fully secure, the Company believes that when used with its
A1-rated Bondable Network Server(TM), the Proprietary Network Interface Card
will be fully secure.
Bondable Network Server(TM)
This general-purpose server, as planned, will include a Trusted
Computing Base that enforces a worldwide and persistent security policy for data
privacy and integrity. The technology which the Company plans to develop into
its Bondable Network Server has been independently evaluated and given a TCSEC
rating of A1, the highest level of security assurance possible. The Company
believes that the Bondable Network Server(TM) will be capable of supporting a
variety of trusted network functions required for e-commerce.
Bondable Internet Workstation(TM)
The Company intends to develop and market its own fully secure, trusted
workstation, known as the Bondable Internet Workstation(TM), which will be
marketed together with the Company's trusted applications software. The
technology which the Company plans to use for its Bondable Internet Workstation
has also been objectively evaluated by an independent third party and given a
TCSEC rating of A1 (the highest possible rating). The Company also expects the
Bondable Internet Workstation to perform the security functions when used with
standard workstation software.
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As a secure network workstation, when used with the Bondable Network
Server(TM), the Bondable Internet Workstation(TM) should provide workstation
users with fully secure access to sensitive company data. The Bondable Network
Architecture(TM) only allows access in a manner consistent with specific
corporate security policies.
The PKI enabled security services within the Bondable Internet
Workstation(TM) and the explicit security properties supported by the Secure
Certificate Authority(TM) on the Bondable Network Server(TM) are expected to
form an insurable network capable of supporting E-Commerce in an environment
protected from subversion and unauthorized modification.
Principal Software Applications Products
Once it develops the platforms described above, the Company believes
that it can develop and market the following trusted software applications for
use in its platform products. These are not based on unique or new technology of
the Company. Rather, the Company plans to customize these commonly used
applications for use with its hardware platforms to provide the highest possible
level of security in e-commerce transactions.
"Un-hackable" Web Server
The first planned network application for use on the Bondable Network
Server(TM) is a Web server. The Company believes that this Web server will be
unlike any previously marketed Web server, in that it should provide Web pages
that are protected from unauthorized modification. This is a first in Web page
protection, because it is the only independently evaluated and tested product
with high assurance access control mechanisms. These access control mechanisms
are a common thread throughout the Bondable Network Architecture(TM) and are
expected to protect the data as well as the programs which constitute the Web
Page.
The "Un-hackable" Web Server(TM) is a Bondable Network Server(TM) with
untrusted applications software. The underlying access control mechanism
protects the data, and therefore has no dependency on the security properties of
the Web server applications. The Web server does not depend on encryption
services, nor does it require a secure workstation. However, using the full
Bondable Network Architecture(TM) will enhance security.
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Secure Certificate Authority(TM)
The Company also plans to develop a certificate authority software
application. A certificate authority is a mechanism for assigning identification
"certificates", or sets of data, to users who access secure, password-protected
sites on the world wide web. The Secure Certificate Authority can be designed to
extend e-business and e-commerce activities for all types of organizations via
the certificate and digital signature technologies. Activities, such as secure
e-mail and business-to-business exchanges, and purchasing and funds
commitments, will (for the first time) actually be supported by the underlying
and fundamental requirements for internal security promulgated by generally
accepted accounting practices applied to E-Commerce activities.
The Company expects that the Secure Certificate Authority(TM) server
will correctly tie the user of a digital certificate to its use. This will
support high assurances in the attribution of digital signatures to the
companies who issue them because it is protected from modification and
subversion when run on the Bondable Network Server(TM). It thereby provides a
trusted foundation for the PKI-enabled security services of integrity,
confidentiality and non-repudiation.
Trusted Virtual Private Networks
The Bondable Internet Workstation(TM) can be used to create a private
network over a public channel like the Internet. Such a network is referred to
as a "virtual private network" or "VPN." A VPN may be used, for example, by
multinational users to exchange value-laden data and perform transactions across
international borders. Cryptography is often limited by international
regulations and the varying laws and regulations imposed by different countries.
Encryption techniques on Bondable Internet Workstation(TM) can be used to create
VPNs which conform to the international laws and regulations in the countries
where they are used. Unlike other commercial products, which are restricted by
national regulatory boundaries, this offers customers true privacy and the
ability to operate on an international network. Integrated, common security
services on the Bondable Network Server(TM) and Bondable Internet Client(TM) are
intended to implement trusted and secure communication paths involving
transactions over the Internet within the Bondable Network Architecture(TM).
Bondable Directory Service(TM)
The Company intends to establish another e-commerce-enabling network
service, called the Bondable Directory Service(TM), to satisfy a growing need
for a trusted utility to authenticate and
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validate the identity of parties on the Internet. Business-to-business users
need to know whom they are dealing with electronically. Also, the Company
believes that the pervasive nature of the Bondable Directory Service(TM) will
greatly simplify distribution and revocation of identity certificates. This can
support the PKI-enabled security services infrastructure in the Bondable Network
Architecture(TM). The Company believes that the Bondable Directory Service(TM)
can offer for the first time the ease and facility to respond to these customer
needs in a secure manner. As planned, the Bondable Directory Service(TM)
application will also be protected from modification and subversion by the
Bondable Network Server(TM) within the Bondable Network Architecture(TM).
Principal Consulting & Hosted Services
The Company believes that the development and marketing of its products
will create opportunities to provide related services. The Company believes that
a market will develop for both consulting and hosted services.
Consulting Services
The Company plans to provide consulting services initially in two
areas: (1) application developer consulting and (2) corporate architecture
development consulting.
Application Developer Consulting
Application developer consulting would involve assisting businesses and
others to establish a secure, trusted network, complete with the
Company's hardware and software products which is tailored to the needs
of the customer. The Company believes that demand for product
development consulting will be stimulated by the new and unique
Bondable Network Architecture(TM). The Company also believes that this
type of consulting can actually precede delivery to a customer of the
Bondable Network Server(TM) since many customers will need consultation
on both their current network applications delivery as well as the
prospect of future Bondable Network(TM) products.
Corporate Architecture Development Consulting
This area of consulting would involve working with companies' in-house
programming personnel to develop a secure, trusted network
infrastructure which is also tailored to the needs of the individual
company. The Company believes that the strength
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of its bondable technology can creates an immediate need to provide
high quality network computing consulting services to potential
customers and partners. Building Bondable Networks(TM) requires
individuals conversant with and ready to help customers deploy the
technology.
Hosted Services
The Company believes that its security products will enable it to
support service providers with what it believes are a uniquely attractive class
of hosted services. A "hosted service" is a service provided over the Internet
to facilitate Internet commerce. An example of such a hosted service which the
Company may offer is a truly trusted Internet Service Provider (ISP). The
Company believes that a trusted ISP could enable new electronic commerce
capabilities that are currently blocked by concerns about the lack of security
in today's ISPs, such as secure storage of personal identification numbers and
passwords.
Toward that end, the Company also plans to provide a global registry
service where a closed group of subscribers worldwide can access, on a bonded
basis, a highly reliable registry of various information. This could be useful,
for example, in providing information services departments with a means of
controlling the use of unapproved or deficient software by employees of large
organizations. The Company believes that, among other benefits, this will meet
the growing demand for trusted software distribution and control. That is, the
ability to verify the source and authenticity of software which is used by
businesses and is capable of being transported from external sources.
Underlying Technology
Based upon its research, the Company believes that there currently are
only two types of networking technology in the world which are fully secure or
"trusted". The Company's management is in the process of obtaining the rights to
develop each of these technologies and plans to combine them into its family of
products.
The Company is negotiating with Gemini Computers Incorporated
("Gemini"), located in Carmel, California, to purchase the exclusive rights to
the technology needed to develop its Bondable Network Server and its Un-hackable
Web Server(TM). The Company is also considering purchasing an equity interest in
Gemini.
The Company has entered into a Teaming Agreement, dated as of July 26,
1999, with Gemini, which provides for Gemini to act as a subcontractor on
contracts for information technology equipment,
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supplies and services which are to be developed by the Company. Pursuant to the
agreement, the Company and Gemini share responsibilities on technical proposals
and on the actual contract work. The Company is to manage all proposals under
the agreement and provide facilities for the production of proposals as well as
administrative support. Gemini is to provide technical and non-technical
information and data to support development of the proposals. The division of
responsibilities for contracts is to be agreed upon by the parties on a
project-by-project basis.
The Company is also negotiating with certain creditors of Systex Inc.
for the exclusive rights to purchase "Assure" technology, which was created by
Systex Inc. in conjunction with Novell's Trusted Network Architecture(R). The
Company plans to use this technology to develop its level C2 certified plug-in
card for its workstation.
Because the Company is still negotiating for the rights to license and
develop these two technologies, it is possible that it will be unable to do so.
If it were unable to acquire these technologies, management would have to
consider the feasibility of developing the Company's planned products
independently of these technologies. The Company estimates that such development
would take as much as two years. The Company may be unable to obtain adequate
funding to continue its operations during those two years or to support its
research and development of the products. This would have a material adverse
effect on the Company and its business plan.
The Company has spent 1,600,000 during the past year on research and
development.
Planned European Operations
The Company plans to establish a subsidiary in Germany, under the name
of Enterprise GmbH. The Company believes that the establishment of this
subsidiary will strengthen its presence in the international secure networking
market place. Additionally, the Company is strategically looking at other
European manufacturers of complimentary products which can be used to augment
the company's family of products.
Government Regulation
The Company plans to acquire technology for use in developing its
products which has been independently evaluated and rated according to the TCSEC
and ITSEC government standards. In order to maintain these government ratings,
the Company will have to continuously update its products and have them
evaluated independently. In particular, in order to provide digital certificates
in Germany, the Company will be required to maintain an
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ITSEC evaluation level of E4 or above.
In addition, the Company will have to establish an adequate technical
basis for providing digital signatures per statutes in several states in the
U.S.
In order to export any of its high assurance products or any equipment
containing encryption technology, the Company will have to comply with the
relevant regulations then in effect which are promulgated by the Departments of
State and/or Commerce.
Industry and Market for the Company's Products and Services
The Need for Business Level Assurances of Protection
The Company's management believes that as more and more businesses come
to rely on the Internet as a means of communicating and conducting transactions
with suppliers, customers and business partners, the need for secure, trusted
network products will become critical. The market analysis in the 1998 Ernst and
Young Special Report on Technology in Banking and Financial Services presents
technology spending trends on a global basis. The report focuses on e-commerce,
and the survey findings indicate that global commerce has, in general,
recognized the importance of the direct e-commerce channel and exposes the need
for critical infrastructure - the, as yet, unsolved problems posed by today's
technologies. Of the 100 institutions surveyed in 26 countries the majority plan
to allocate significant resources to develop the information infrastructure
required to exploit e-commerce. Management believes that this indicates that the
Internet has come of age as a viable means of communicating and conducting
transactions with suppliers, customers and business partners.
According to the Gartner Group, "...through the year 2008, enterprises
will continue to evolve into extended enterprises, where business processes
encompass their partners, alliances and suppliers as well as their customers."
In these so-called "value networks" (Ernst & Young), enterprises will use
Internet-derived technology to extend their business processes.
The Company believes that businesses will continue to extend their
internal business processes to their external business partners, essentially
redefining process boundaries to include the Internet, web server and browsers.
This extranet technology will encompass all major businesses. But as stated by
Forrester, "...the explosive growth of the Internet raises new dimensions of
risk, in the form of
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[attacks]...that exploit a system's communication capabilities." The Company
believes that this is equally true of extranets.
Management believes that an "open" Internet means an "exposed"
Internet, where the user is not protected. The Gartner Group has also stated
that "As businesses expose their internal process to customers and suppliers,
today's security is being rendered ineffective. Firewalls have reached their
limit - taxed by the growing onslaught of invasive applications and aggressively
outbound users." Forrester has suggested, "What do you do when there are no
perimeters? If you succeed in making your Web site easier to use, then everybody
is an insider."
Gartner further states "A new model is needed to save companies from
security's crippling complexity and to enable increased openness." To do this,
Gartner suggests that enterprises "...must adopt tools that add identity and
policy to the extranet while delegating control across the business." The
business community must establish liability, accountability and interoperability
uniformly across the entire e-commerce networking environment which is just as
reliable as in the pen-and-paper based business world.
Market Analysis
The market trends in the Ernst and Young 1998 Special Report on
Technology indicate significant changes from previous years, with the area of
greatest change being Information Technology (IT) project spending. Projections
contained in the report indicate that such spending will be more than twice its
historical levels over the coming two to three years. This increase is to be
largely driven by mandatory initiatives, such as the Year 2000 computer problem
and European Union Mandates. In 2001, these mandatory requirements are
anticipated to decline dramatically. The Company believes, however, that these
budgets will not be cut but rather reallocated to other areas even over
budgetary constraints. Management further believes that, due to competitive
demands, there will be a surge of new e-commerce budget monies after 2001
resulting from these reallocations.
The Ernst & Young survey also indicated that stated growth in e-
commerce spending is far out-stripping that of spending for new technologies as
a whole. Respondents indicated that in 1998 they allocated twice as much of
their technology budgets for e-commerce as they allocated in 1997. New
technology budgets are projected to double from 1992 to 2001. Respondents also
indicated that by 2001, they plan to expend 14% of their new technology budgets
on e-commerce, alone. From this survey, it appears that during the next five
years, there will be allocations of the new technology budgets for developing
the information infrastructure for supporting e-commerce which will take
precedence over technology upgrades.
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Respondents expect to see discretionary funding return to historical
levels (around 31%) by the Year 2000. Additionally, revenue growth through
e-commerce activities, viz., more content provider services, network service
providers, and direct sales channels, continues to be the primary focus of IT
discretionary spending and is projected to remain so for the next three to five
years.
In view of the survey findings, there are three aspects to the
Company's products and marketing potential to be considered.
First, according to the survey, sharp increases in IT funding,
primarily attributable to mandatory projects such as Y2K compliance, with no
corresponding reductions after the Year 2000, coupled with increases in
discretionary funding projected for the Year 2000 and after, suggest that key
project activities, such as security ("the number one concern" according to
Gartner Group) and building of the information infrastructure are projected to
receive a major share of the IT budget.
Secondly, based on the survey predictions of the IT budgets dedicated
for e-commerce and the expressed interests in public key cryptography and
digital certificate systems, the Company believes that a trusted PKI security
service would be positioned to compete for a significant share of this funding.
Finally, increases in discretionary funding and in discretionary
project budgets will likely address security apart from e-commerce, focusing
strictly on corporate security requirements.
The Company believes that Ernst & Young's identification of security as
a top concern creates a greater potential to capture the niche security market
share more rapidly while competing with less comprehensive add-on security
products. For example, it would not be necessary for a customer to purchase a
firewall virus protection and a certificate management system separately when
using a comprehensive high assurance network product such as the Bonded Network
Architecture(TM). The Company believes that high assurance network products
should compete aggressively in the area over the next three to five years.
Marketing the Company's Products
The Company believes that the demand for secure network products is now
ready for significant expansion. Management believes that the biggest challenge
facing the Company in marketing its products is to educate a few very big
e-commerce customers about the risks caused by the substantial lack of security
in today's Internet products, and then to follow through with an introduction to
the Company's own solutions. The Company believes it has an advantage over any
potential competitors in technical capabilities.
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The Company has developed potential customers and customers'
representatives over a 4-year period with on going contact, meetings,
associations and repeated presentations. The Company is a member of the Black
Forest Group, a trade group which management believes positions the Company for
introduction to major potential customers.
Additionally, in response to a specific request from the U.S.
Government, the Company has joined a security research project in the Naval
Postgraduate School in Monterey, California in submitting a formal proposal for
a 3-4 year research and development project with substantial demonstrations of
the Company's technology. Management anticipates that participation in this
arena will open up significant new markets within the government.
The Company has identified key trade publications in which it will seek
to advertise its products and services. The Company plans to target publications
with a tailored appropriate message for each specific audience, i.e., CEO, CIO,
CFO, Corporate Information Security Officers, Auditors, Department Management,
Consultants, LAN Administrators, and end users. Publications in which the
Company may seek to advertise include Info Security News, EDPAA Journal,
Computer Security Institute (CSI) Newsletter, International Security Association
(ISSA), Information Week, LAN Times, Computer World, Communications Week, LAN
Technology, PC Week and Auerbach Publications.
Business Strategy
The Company focuses on incorporating "predecessor" technologies (Gemini
and Assure) and leveraging existing standards to significantly shorten product
development, enhancement and time to market. Exploiting the specific
technologies requires a highly knowledgeable world-recognized staff and
experienced team of technical and management individuals with a common vision.
The Company plans to grow its technical and managerial team to 50 by the end of
the first year. Over three years, the team is expected to reach approximately
100 engineers and technical and support staff, as required to produce the
comprehensive product line.
In its first full year of operation, the Company's goal is to seek a
market share of 5% of the market for gross sales of e-commerce products and a
majority of the market share of trusted, insurable e-commerce products. The
Company cannot be certain that it will be able to sell its products or, if it
does, that it will achieve this revenue potential.
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Competition
The market in which the Company plans to compete is that of bondable,
business-to-business e-commerce platforms and services. The fundamental factor
distinguishing the Company from the competition is the high level of security
assurance afforded by the Company's products. The technologies which the Company
plans to utilize in developing its products have been certified for their high
level of security assurance by independent evaluation. The Company believes that
this distinguishes the Company to potential customers.
Only high assurance products offer protection against attacks by
malicious software. The platforms and applications currently on the market, as
well as add-on products, are vulnerable to malicious software attacks.
The Company believes, however, that the development of its products and
related markets could accelerate the industry for high assurance products. This
would increase competition with the Company's products and services and
encourage other companies to enter the market. Some of these other companies may
be far larger and have greater resources than the Company and may thus gain a
competitive advantage over the Company in product development and marketing.
Competitor Differentiation:
The Company believes that the market for Internet security products is
divided among (i) other high assurance Internet products, (ii) low assurance
Internet products and (iii) products of ambiguous assurance.
Other high assurance Internet products
A competitor could develop or acquire high assurance computer
technology and develop clients and/or servers that would be part of an insurable
network architecture. In particular, a competitor's ability to buy rights to
GEMSOS, and then proceed with a U.S. or European evaluation, represents the
single greatest competitive threat. The acquisition of Gemini technology and our
subsequent exclusive agreement with Gemini (and an agreement that they will not
themselves pursue an evaluation) is the only way to significantly reduce this
threat.
Low assurance Internet products
These are existing platforms and add-on security products such as those
being used today to conduct E-business. These would not compete in the bonded
products market; rather they represent the rabble above which we must raise the
bar.
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Products of ambiguous assurance
These include products that were designed to meet high assurance
requirements but never completed any evaluation (e.g., the Lock system or
trusted MACH). Also in this group are modified and extended versions of what
were once evaluated products, but that no longer have any independent basis for
claims of high assurance (e.g., they were not modified under a RAMP program).
Competitors could obtain evaluations for these products, making them high
assurance competitors. The ambiguous assurance competition is our biggest
challenge in terms of educating potential customers. By neither accepting or
condoning such development and marketing shortcuts by competitors through our
own aggressive program of truthful and accurate responses; we plan to
differentiate ourselves from such products.
High Assurance Competitors
Today there are three high assurance platforms that could potentially
be used as foundations for insurable networks:
HIGH ASSURANCE COMPETITORS
HIGH ASSURANCE STRENGTHS WEAKNESSES
BASE
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Gemini and Most scalable & The Company plans sell
other extensible of the only evaluated
licensees all. Best instance. An exclusive
of GEMSOS performance. licensing agreement
would lock out
competitors.
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Wang Multiprocessor. Would require sig-
Potential server, nificant modification
or if modified, a for use as a
workstation. workstation. Class B3;
does not address
malicious code in the
TCB.
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Boeing Designed for VPN Not suitable for a
type server.
applications.
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Low Assurance Competitors
As previously noted, the Company does not expect that these low
assurance competitors will compete in the bonded network marketplace. This
category includes all Microsoft products (workstations and servers). Of the
clients, IBM is most noteworthy as an initial
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competitor. IBM's strength is based upon its hardware production.
However, its weakness is in the insecure operating systems which
manage applications and user interfaces.
Ambiguous Assurance Competitors
Products such as Lock and Trusted Mach have been developed to meet high
assurance requirements. Therefore, technical resources exist that could be
applied to completing an evaluation of such a product. This would move such a
product to the group of high assurance competitors.
Staying Competitive
The Company believes that the use of high assurance products is its
primary competitive advantage. However, at some point, other high assurance
competitors will enter the market and possibly outperform the Company. In order
to compete on this level, the Company plans to establish and maintain a
reputation for providing the only third-party evaluated products and services of
high performance, quality, utility, convenience, versatility, safety and
serviceability.
Performance
The Company believes it has a strong engineering organization capable
of producing high performance products. The multi-processor capabilities of the
server platforms allow the company to offer expandable systems with scalable
performance.
Quality
The Company plans to institute quality assurance programs from the very
beginning of its operations. As planned, hardware products will be produced from
the highest quality commercial components and where necessary be ISO 9000
certified.
Utility
The Company believes that the technical expertise of its staff will
ensure that its products continue to meet the needs of secure E- commerce as
business models continue to evolve.
Convenience
The underlying secure infrastructure is designed to operate
transparently with existing end-user client applications. Administrative and
trusted path interfaces will be designed using well-established standards and
conventions for ease of use.
- 15 -
<PAGE>
Versatility
A small, powerful security kernel API provides the same underlying base
to each of the products. The kernel can essentially be viewed as "smart
hardware" that can be readily used as the base to many applications and
services. Significant engineering resources will be used to investigate product
enhancements to expand the application of the products to new areas of network
computing.
Safety
The Company plans to design its products for safety with a goal of
obtaining UL certification.
Serviceability
The Company believes that its extensive use of commodity hardware
components will aid serviceability of the products. Automated diagnostics and
built in tests are planned to perform fault isolation functions. The Company
plans to develop and expand these capabilities over the early life of the
product. The Company plans to offer both hardware and software maintenance
products with a range of service levels.
Employees
The Company currently has seven employees, consisting of five
engineers, a chief executive officer and an office administrator. The Company
plans to hire additional employees, particularly engineers, to assist in the
development of its products.
Headquarters
The Company's executive headquarters is located Southeast of Boston at
15 Raven Road, Canton, Massachusetts 02021. The Company's Security Systems
Solutions (S3) engineering and product development division and is located at 50
Ragsdale Drive, Suite 150, Monterey, California 93940. The main operations
center is located at 5061 North
Dixie Highway Boca Raton, Florida 33431.
PROPERTY
The Company's Security Systems Solutions ("SSS") engineering and
product development division is located at 50 Ragsdale Drive, Suite 150,
Monterey, California 93940. The Company has entered into a lease for this
facility which has a three year term commencing on September 15, 1999 and
expiring on September 14, 2002. The lease provides for a base rent of $5,919 per
month. Pursuant to the lease, the Company is
- 16 -
<PAGE>
also responsible for 21.37% of (1) the operating expenses (estimated at $2,320
per month for the first year and including real property and any public
authority taxes), (2) the services and utilities and (3) the Landlord's
performance of Tenant Company's Covenants (if applicable). The building is a
two-story office building in which the Company leases approximately 4,735 square
feet. The Company believes that the premises are adequately insured.
The Company's SSS division also has leased a corporate condominium
located at 24525 Outlook Drive, #26, Carmel, California, 93923. The lease is for
a period of one year commencing on September 8, 1999 and expiring on August 31,
1999 at a monthly rent of $2,250.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
General
Results of Operations
Comparison of the Eight Months Ended August 31, 1999 and 1998
Revenues decreased $328 from $328 in the eight months ended August 31,
1999 to zero for the eight months ended August 31, 1998. The decrease resulted
from the fact that the Company discontinued its prior operations and has not yet
generated any revenues from its planned Internet security business.
In July 1998, the Company terminated its pending acquisition of the
company it had advanced approximately $634,000 for working capital purposes. The
Company terminated is pending acquisition due to its inability to obtain
satisfactory audited financial statements because of missing financial
information, questionable contracts, lack of internal controls, and substantial
liabilities. As a result, the Company suffered a bad debt loss of $634,023
during the eight months ended August 31, 1999, which was the result of its
termination.
Selling, general and administrative expenses increased $41,960 or 37.5%
to $153,934 in the eight months ended August 31, 1999 from $111,960 in the prior
period. The increase is attributable primarily to the increase in professional
and consulting fees incurred as it began its new business plan and the auditing
of its terminated acqusition. In addition, the Company began incurring selling
expenses for travel and promotion as it began implementing its new Internet
security business plan.
- 17 -
<PAGE>
As a result of the above factors, the Company's net loss increased
$676,325 from $111,632 for the eight months ended August 31, 1998 to $787,957
for the eight months ended August 31, 1999.
Comparison of the Year Ended December 31, 1998 and 1997
Revenues decreased $16,038 (98%) to $328 in fiscal 1998 as compared to
$16,366 in fiscal 1997. The decrease resulted from the fact that the Company
discontinued its prior operations and has not yet generated any revenues from
its planned Internet security business.
Selling, general and administrative expenses increased $64,670 to
$125,567 in fiscal 1998 from $61,500 in fiscal 1997.
The net loss for fiscal 1998 increased $107,105 to $125,239 from a net
loss in 1997 of $45,134 due to the foregoing.
Liquidity and Capital Resources
The Company's working capital at August 31, 1999 was $48,504. The
Company's primary sources of working capital have been from the issuance of
Company securities and loans from shareholders.
Currently, the Company's primary cash requirements include the ongoing
cost of the development of its new business plan and the costs of maintaining
its administrative expenses.
- 18 -
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the name and address of each officer and
director of the Company and each person who owns beneficially more than ten
percent of the Common Stock of the Company, and the number of shares owned by
each such person and by all officers and directors as a group:
Approx.
Name and Address of Amount and Nature % of
Beneficial Owner of Ownership Class
------------------- ----------------- --------
Dr. John A. Solomon(1) 225,000(2) 4.8%
Wayne B. Kight(3) 45,000 *
Roger Schell(4) 150,000 3.2%
Gary S Baker(4) 100,000(5) 2.1%
Richard A Lee II(4) 100,000 2.1%
Jeffrey M Moritz(3) 45,000(6) *
Nina L. Cannon(3) 10,000 *
Humphrey Limited 275,001 5.9%
Eurolife Bldg.
1 Corral Road, Ste. 2A
Gibraltar
Rowan House Limited 244,168 5.2%
Eurolife Bldg.
1 Corral Road, Ste. 2A
Gibraltar
All directors and officers 230,000 4.9%
as a group
*Less than 1%
(1) The address for Dr. Solomon is c/o the Company at 15 Raven Road, Canton,
Massachusetts 02021.
(2) 75,000 shares to be issued on December 31, 1999, 2000 and 2001,
respectively.
(3) The address for Mr. Kight and Ms. Cannon is c/o the Company at
5061 North Dixie Highway Boca Raton, Florida
- 19 -
<PAGE>
(4)The address for Messrs. Schell, Baker and Lee is c/o the Company at
50 Ragsdale Drive, Suite 150, Monterey, California 93940.
(5) Subject to pledge.
(6) 15,000 of such shares are held by The Saugus Group, in which Mr. Moritz is a
partner. 30,000 of such shares underlie options which are presently exercisable
- 20 -
<PAGE>
MANAGEMENT
The Officers and Directors of the Company are as follows:
Name Age Title
- ---- --- -----
Dr. John A. Solomon 50 President and C.E.O*
Wayne B. Kight 48 Executive Vice
President/Operations*
Dr. Roger Raymond Schell 59 Executive Vice President/
Engineering
Gary S. Baker 52 Vice President/ Engineering
Richard A. Lee II 50 Vice President/Business
Development
Jeffrey M. Moritz 54 Treasurer*
Nina C. Anthony 41 Secretary*
* Indicates Directors
Dr. John A. Solomon has been President, Chief Executive Officer and
Director of the Company from October, 1999 to present. Dr. Solomon was President
and Chief Executive Officer of CEA, Inc., a systems integration and security
technology company, from 1979 to 1995. He was Chief Executive Officer of ACG,
Inc., a telecommunications provider, from 1996 to 1997 and has been Managing
Principal of Madison Consulting LLC, a high tech consultancy firm since 1997.
Dr. Solomon has over 28 years of global technical and management
experience in the field of electronic systems integration, software
development and distributed networks. Dr. Solomon has to his credit
many successful corporations/ventures for the US and foreign
governments and multinational corporations.
Wayne B. Kight has been Executive Vice President and Director of the
Company from June 1998 to present. He was Vice President of Homeowners Financial
Corp., a mortgage banking company, from May 1994 to June 1998 (this corporation
filed for Chapter 11 Bankruptcy in 1997 and for Chapter 7 Bankruptcy in 1998).
Mr Kight had his own consultancy practice from 1998 to 1999. He is also on the
Board of Directors of American ATM, Corp.
Dr. Roger Raymond Schell has been Executive Vice President and
President of the Company's SSS Division since August 1999. From 1994 to August
1999 he was a Senior Manager for Novell, Inc., a software security company.
Dr. Roger R. Schell, shall administer to the division in
accordance with the established policy and guidelines of the
- 21 -
<PAGE>
corporation. Additionally, Dr. Schell will perform mentoring and
technical direction to the engineering staff. Dr. Schell has over 35
years of accomplishment in the managing development of high quality
software and software engineering techniques. He has delivered major
Internet security enhancements in the world's leading network
operating systems.
Gary S. Baker has been Vice President and Director of Engineering of
the Company since August 1999. He was a Senior Engineer at Stratus Computer from
1993 to 1996, a Senior Engineer and Manager at Novell Computer from 1996 to 1998
and Director of Engineering at Sistrex from 1998 to 1999. He also serves as a
director of the Company's Secure Systems Solutions Division.
Richard A. Lee II has been Vice President of Business Strategy
of the Company since August 1999. He was the Senior Technical
Research Engineer at Novell, Inc. from 1990 to 1998.
Jeffrey M. Moritz has been Treasurer and Director of the Company since
June 1998. Mr. Moritz ran his own accounting firm until January 1998 and was
also a Partner at the Saugus Group, a Management Consulting firm until January
1999. Mr. Moritz filed for bankruptcy in 1993 and was discharged in 1994. His
CPA license was revoked by the Commonwealth of Massachusetts for three years as
of February 1, 1997 as a result of a Consent Agreement regarding the alleged
sale of securities without a license, under which he consented to jurisdiction,
paid a $500 minimum fine and agreed to cease activities. This agreement does not
however impact on his ability to apply for and be granted a license to sell
securities.
Nina Cannon has been Secretary of the Company since September 18, 1999
and a director since September 1, 1999. She was Director of Account and Contract
Management of Nortel Networks Telecommunications from December 1988 until
November 1997 and from December 1997 to September 1999 she was Vice President of
Operations, Sales and Planning at Lucent Technologies Telecommunications. Ms.
Cannon is currently an independent consultant.
Employment Agreements
The Company has entered into employment agreements with Dr. John
A. Solomon, Dr. Roger R. Schell, Gary S. Baker and Richard A. Lee II.
Each agreement has a term of three years commencing on August 1, 1999
for Messrs. Schell, Baker and Lee and commencing September 15, 1999
for Dr. John A. Solomon. The agreements provide for a base salary of
$200,000 for Dr. Solomon, $150,000 for Dr. Schell and $120,000 for
Messrs. Baker and Lee. The agreements also provide for stock to be
issued to each of the employees and held in escrow until such
issuance.
- 22 -
<PAGE>
Executive Compensation
During the fiscal year ended December 31, 1998, no compensation was
paid to officers. No salaries in excess of $100,000 have been paid to any
executive officer or director of the Company since the Company's change in
business focus.
Transactions with Management and Others
Dr. Roger Raymond Schell is a shareholder in Gemini Computers,
Inc. with which the Company has a Teaming Agreement. The Company
intends to acquire from Gemini the license to certain technology which
is necessary for the development of the Company's products. In
addition, Dr. Schell claims he has a position of about 20% of Gemini
which he claims has been fraudulently diluted to less than 5%.
Sistemas de Comercio Internet has been advanced the sum of $105,000 by
the Company at an interest rate of 6%, which loan was approved by the Company's
Board of Directors and subject to an equity conversion of 10% of the Company.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings
and has no knowledge that any such proceedings are threatened.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's securities trade on the OTC Bulletin Board and in the
over-the-counter market "pink sheets". The Company's trading symbol is "EPSO".
Over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not represent actual transactions. The
following sets forth the range of high and low bid information for the quarterly
periods indicated as reported by the National Quotation Bureau:
High Low High Low
---- --- ---- ---
1997: 1st Quarter .21875 .0625 1998: 1st Quarter .50 .25
2nd Quarter .21875 .03 2nd Quarter 2.25 .125
3rd Quarter .05 .03 3rd Quarter 5 2
4th Quarter .5625 .04 4th Quarter 6.50 4.50
1999: 1st Quarter 11.25 6
2nd Quarter 15.125 11
3rd Quarter 14 13.50
- 23 -
<PAGE>
The foregoing bid information has not been adjusted for the stock
dividend which occurred in June 1999.
Holders
As of November 15, 1999, the number of holders of record of shares of
common stock, excluding the number of beneficial owners whose securities are
held in street name was approximately 80.
Dividend Policy
The Company does not anticipate paying any cash dividends on its
common stock in the foreseeable future because it intends to retain its earnings
to finance the expansion of its business. Thereafter, declaration of dividends
will be determined by the Board of Directors in light of conditions then
existing, including without limitation the Company's financial condition,
capital requirements and business condition.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 25,000,000 shares of common stock,
$.001 par value of which 3,827,443 shares are issued and outstanding. The
holders of shares of common stock have one vote per share. None of the shares
have preemptive or cumulative voting rights, have any rights of redemption or
are liable for assessments or further calls. None of the shares will have any
conversion rights. The holders of common stock are entitled to dividends, when
and as declared by the Board of Directors from funds legally available therefor
and upon liquidations of the Company to share pro rata in any distribution to
shareholders.
The Company is authorized to issue 5,000,000 shares of preferred
stock, $.001 par value of which 148,500 shares are issued and outstanding. The
preferred shares are 8% cumulative and redeemable at the Company's option at
110% .
American Stock Transfer & Trust Company, 40 Wall Street, New York,
New York is the transfer agent and registrar for the Company's common stock.
- 24 -
<PAGE>
Shares Eligible for Future Sale
The Company has 3,827,443 shares of Common Stock outstanding but of
these shares, only 3,182,443 shares are freely tradable. All of the remaining
shares of Common Stock are "restricted securities" and in the future, may be
sold only in compliance with Rule 144 or in an exempt transaction under the
Securities Act of 1933 (the "Act"), unless registered under the Act (the
"restricted shares").
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain conditions, a person, including an affiliate of the
Company (or persons whose shares are aggregated), who has owned restricted
shares of Common Stock beneficially for at least one year is entitled to sell
within any three month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or, if
the common stock is quoted on a national quotation system, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least two years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above.
Options and Warrants
On July 30, 1998, the Board of Directors has authorized the issuance
of annual options to members of the Board of Directors for their services to the
Company. On July 1 of each year, each then member of the Board of Directors is
to receive 15,000 options at 100% of the market bid price of common shares at
the close of business on June 30. As of August 31, 1999 options to purchase
60,000 shares have been issued.
In connection with its offerings during 1998 and through August 31,
1999, the Company issued 2,150,000 warrants to purchase common shares at a price
of $1.667 per common share (1,800,000 warrants) and at $2.50 per common share
(350,000 warrants). The warrants expire on September 6, 2000. These warrants
have been adjusted for the June 1999 stock split.
RECENT SALES OF UNREGISTERED SECURITIES
The following paragraphs set forth information with respect to all
securities of the Company sold within the past three years without registering
the securities under the Act. The information includes the names of purchasers,
date of issue, number of shares issued and the consideration received by the
Company for the issuance of these shares.
- 25 -
<PAGE>
From July 1998 through March 1999, the Company issued 300,000 shares
of its common stock at a price of $2.50 per share in a private
offering pursuant to Rule 504 of Regulation D under the Securities
Act of 1933, as amended. The shares were purchased in the following
amounts and by the following individuals:
Name Number of Shares Purchased
Mona Morris 4,000
Stanley & Phyllis 6,000
Basist
Babbette Levy 10,000
Ivan Jay Steinhardt 4,000
National Resource 30,000
Center Inc.
George Rosati 10,000
Audra Cerruto 5,000
Monteville Ltd. 64,000
Sal Cerruto 4,000
William Metnick 4,000
Anne & Seymour 4,000
Goldberg
Martin Axetrod 10,000
Lee Engel 4,000
Barry Haberman 4,000
Joe Lapatin 4,000
Wayne & Vera Kaplan 4,000
Brent Anderson 50,000
Brent Anderson 401K 30,000
Kenneth Weitz 4,000
Hi-Tel Group Inc. 25,000
Trans Global Trade 8,000
Linc Inc.
Antoinette J. 4,000
Schwetzer
Sally Staltare 8,000
- 26 -
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws include certain provisions permitted pursuant to
the General Corporation Law of the State of Nevada (the "NGCL") whereby
officers, directors and employees of the Company are to be indemnified against
certain liabilities. The Articles of Incorporation also limit to the fullest
extent permitted by the NGCL a director's personal liability for obligations,
suits of any kind including but not limited to malpractice suits, class action
suits, discrimination suits, personal injury suits, anti-trust suits, liens,
acts or judgments of the Company or any other liability which may be construed
within the scope of the laws and statutes of the State of Nevada. The Company
believes that these provisions will facilitate the Company's ability to continue
to attract and retain qualified individuals to serve as directors and officers
of the Company.
CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
FINANCIAL SCHEDULES AND EXHIBITS
(a) There are filed as part of this Form 10-SB the following:
Financial Statements. The financial statements filed as part
of this Form 10-SB are indexed below and are included at page F-1.
Independent Auditors' Report................................................ F-1
Balance Sheet as at August 31, 1999 (unaudited) December 31, 1998
and December 31, 1997 (audited)............................................. F-2
Statement of Operations for the eight months ended August 31, 1999
and 1998 (unaudited) and for the years ended December 31, 1998
and 1997 (audited).......................................................... F-3
Statement of Stockholders' Equity for the eight months ended August 31, 1999
(unaudited) and for the years ended December 31, 1998 and 1997
(audited)................................................................... F-4
Statements of Cash Flow for the eight months ended August 31, 1999 and 1998
(unaudited) and for the years ended December 31, 1998 and 1997
(audited)................................................................... F-5
Notes to Financial Statements........................................ F-6 - F-20
- 27 -
<PAGE>
ENTERPRISE SOLUTIONS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (AUDITED)
AND
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1999 AND 1998 (UNAUDITED)
<PAGE>
ENTERPRISE SOLUTIONS, INC.
TABLE OF CONTENTS
PAGE NO.
--------
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets F-2
Statements of Operations F-3
Statements of Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to the Consolidated Financial Statements F-6 - F-9
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
To the Shareholders of
Enterprise Solutions, Inc.
We have audited the accompanying consolidated balance sheets of Enterprise
Solutions, Inc. as of December 31, 1998 and 1997, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
two years in the period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Enterprise Solutions, Inc. as of December 31, 1998 and 1997, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principals.
/s/ Van Buren & Hauke
-----------------------------
Van Buren & Hauke, LLC
October 12, 1999
F-1
<PAGE>
ENTERPRISE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997 (AUDITED) AND
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
December 31,
-------------------------------- August 31,
1998 1997 1999
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets
Cash $ 38,974 $ 1,478 $ 90,504
---------- ---------- ----------
Total current assets 38,974 1,478 90,504
Loans and advances 125,000 - 130,000
Equipment - - 10,000
---------- ---------- ----------
Total assets $ 163,974 $ 1,478 $ 230,504
========== ========== ==========
Liabilities and Shareholders' Equity
Current liabilities
Shareholders loans - 774,897 42,000
Commitments and contingencies
Shareholders' equity
Preferred stock; $0.001 par value; 5,000,000 shares
authorized; 110,000 and 148,500 (unaudited) shares
issued and outstanding at December 31, 1998 and
August 31, 1999, respectively 100 - 148
Common stock; $0.001 par value; 25,000,000
shares authorized; 3,443,340, 317,340, and
3,827,443 (unaudited) shares issued and
outstanding at December 31, 1998, 1997 and
August 31, 1999, respectively 3,444 318 3,827
Additional paid-in capital 1,969,178 859,772 2,731,234
(Less) subscription receivable (50,000) - -
Retained (deficit) (1,758,748) (1,633,509) (2,546,705)
---------- ---------- ----------
Total shareholders' (deficit) equity 163,974 (773,419) 188,504
---------- ---------- ----------
Total liabilities and shareholders' equity $ 163,974 $ 1,478 $ 230,504
========== ========== ==========
</TABLE>
See accompanying notes.
F-2
<PAGE>
ENTERPRISE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (AUDITED)
AND FOR THE EIGHT MONTHS ENDED AUGUST 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Years Ended Eight Months Ended
December 31, August 31,
--------------------------------- ---------------------------------
1998 1997 1999 1998
---------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Revenues $ 328 $ 16,366 $ - $ 328
Costs and expenses
Bad debt expense - - 634,023 -
Salaries and wages - 11,407 4,900 -
Professional/consultants fees 16,821 37,415 111,126 8,290
Office expenses 5,024 5,092 4,736 2,470
Computer services - 385 - -
Stock transfer expenses 3,722 500 4,000 1,200
Abandonment of licensing agreement 100,000 - - 100,000
Travel and promotion - 6,701 29,172 -
---------- ---------- ----------- ----------
Total costs and expenses 125,567 61,500 787,957 111,960
---------- ---------- ----------- ----------
Net (loss) from continuing operations (125,239) (45,134) (787,957) (111,632)
Adjustment of loss on abandonment
of discontinued operation - 14,966 - -
---------- ---------- ----------- ----------
Net (loss) $ (125,239) $ (30,168) $ (787,957) $ (111,632)
========== ========== =========== ==========
Net (loss) per common share $ (0.10) $ (0.09) $ (0.22) $ (0.16)
========== ========== =========== ==========
Weighted average common shares 1,278,071 317,340 3,527,865 698,298
========== ========== =========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
ENTERPRISE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional Total
----------------------------------------------- Paid-In Retained Shareholders'
Shares Amount Shares Amount Capital Earnings Equity
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 211,560 $ 212 - $ - $ 859,878 $ (1,603,341) $ (743,251)
1997 Activity:
Net (loss) - - - - - (30,168) (30,168)
Common shares issued
in stock split 105,780 106 (106) - -
--------------------------------------------------------------------------------------------
Balance, December 31, 1997 317,340 318 - - 859,772 (1,633,509) (773,419)
1998 Activity:
Preferred shares issued - - 100,000 100 99,900 - 100,000
Common shares issued 2,084,000 2,084 - - 243,916 - 246,000
Common shares issued
in stock split 1,042,000 1,042 - - (1,042) - -
Capitalize shareholder
loans and accrued
payables - - - - 786,397 - 786,397
(Less) underwriting
expenses - - - - (19,765) - (19,765)
(Less) subscription
receivable - - - - (50,000) - (50,000)
Net (Loss) - - - - - (125,239) (125,239)
--------------------------------------------------------------------------------------------
Balance, December 31, 1998 3,443,340 3,444 100,000 100 1,919,178 (1,758,748) 163,974
1999 Activity (unaudited):
Preferred shares issued - - 48,500 48 48,452 - 48,500
Common shares issued 293,500 293 - - 737,207 - 737,500
Common shares issued
in stock split 90,603 90 - - (90) - -
Subscription receivable-
paid - - - - 50,000 - 50,000
(Less) underwriting
expenses - - - - (23,513) - (23,513)
(Net) loss - eight months
ended August 31, 1999 - - - - - (787,957) (787,957)
--------------------------------------------------------------------------------------------
Balance, August 31, 1999 3,827,443 $ 3,827 148,500 $ 148 $ 2,731,234 $ (2,546,705) $ 188,504
============================================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
ENTERPRISE SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (AUDITED)
AND FOR THE EIGHT MONTHS ENDED AUGUST 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Years Ended Eight Months Ended
December 31, August 31,
---------------------------------- ---------------------------------
1998 1997 1999 1998
----------- ---------- ----------- ------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net (loss) $ (125,239) $ (30,168) $ (787,957) $ (111,632)
Adjustments to reconcile net (loss)
to net cash (used) by operating
activities
Write-off loan - - 25,000 -
---------- --------- ---------- ----------
Net cash (used) by operating activities (125,239) (30,168) (762,957) (111,632)
---------- --------- ---------- ----------
Cash flows from investing activities
Purchase equipment - - (10,000) -
Loans and advances (125,000) - (5,000) -
---------- --------- ---------- ----------
Net cash (used) by investing activities (125,000) - (15,000) -
---------- --------- ---------- ----------
Cash flows from financing activities
Loan repayments - - (65,000) -
Proceeds from issuance of shares
of common stock 246,000 - 737,500 123,500
Proceeds from issuance of shares
of preferred stock 100,000 - 48,500 -
Proceeds from shareholders loans 11,500 30,510 82,000 11,500
Subscription receivable (50,000) - 50,000 -
Underwriting expenses (19,765) - (23,513) (985)
---------- --------- ---------- ----------
Net cash provided by financing
activities 287,735 30,510 829,487 134,015
---------- --------- ---------- ----------
Net increase in cash 37,496 342 51,530 22,383
Cash at beginning of period 1,478 1,136 38,974 1,478
---------- --------- ---------- ----------
Cash at end of period $ 38,974 $ 1,478 $ 90,504 $ 23,861
========== ========= ========== ==========
Schedule of Non-Cash Financing
Transactions:
Additional paid-in capital upon
conversion of debt $ 786,397 $ - $ - $ 786,397
========== ========= ========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE>
ENTERPRISE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. GENERAL
Enterprise Solutions, Inc. (ESI) (Company), a Nevada Corporation,
together with its wholly-owned subsidiary, provides both government and
commercial enterprises with high assurance security technology.
Although the Company currently has no substantial revenues of a
continuing nature, it is management's intention to offer its total
security solutions nationally and internationally.
The accompanying financial statements include the consolidated accounts
of ESI and its wholly-owned subsidiary. All material intercompany
balances and transactions have been eliminated.
Prior to 1998, the Company's focus was in the gaming business,
particularly with a casino in South America. In mid 1997, the
Venezuelan government effectively shut down all casinos pending
relicensing under a much changed and restrictive law. Although the new
law had not yet been interpreted or clearly defined as to how it would
ultimately be implemented nevertheless, the casino could not reopen as
it was previously operating. Management decided to abandon the
operation and write-off its investment. That adjustment was given
effect in the 1996 consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
Assets, liabilities, revenues and expenses are recognized on the
accrual method of accounting for financial statement presentation and
for federal income tax purposes.
Unaudited Interim Consolidated Financial Statements
The unaudited interim consolidated financial statements as of August
31, 1999 and for the eight months ended August 31, 1999 and 1998 have
been prepared on the same basis as the audited consolidated financial
statements included herein. In the opinion of management, such
unaudited interim consolidated financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary
to present fairly the results for such periods. The consolidated
operating results for the eight months ended August 31, 1999 are not
necessarily indicative of the operating results to be expected for the
full fiscal year or for any future period.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date
F-6
<PAGE>
ENTERPRISE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Income Taxes
At December 31, 1998, the Company has net operating loss carry forwards
of approximately $1,760,000 available to offset future taxable income
which if unused, expire through 2019. Therefore, a provision for income
taxes has not been provided.
Net Loss Per Common Share
Net loss per common share has been computed by dividing the net loss by
the weighted average number of common shares outstanding during the
period.
3. GOING CONCERN
Currently, the Company has neither substantial revenues of a continuing
nature nor sufficient working capital to sustain its limited
operations. Management is planning to raise equity to pursue its
intended plan of operations. No assurance can be had that the Company
will be successful in raising additional funds or that any funding will
be sufficient. The Company has limited resources and has depended on
outside financings. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
4. LOANS AND ADVANCES
The Company advanced $100,000 at December 31, 1998 and an additional
$5,000 through August 31, 1999 (unaudited) to a company to develop an
Internet credit and clearing operation. The loan is for one year
payable November 4, 1999 with interest at 6%. The Company has the right
to convert its loan including interest up to 10% equity interest in the
borrower.
As of August 1999 (unaudited), the Company advanced $25,000 to a
company for working capital purposes. The loan is for one year payable
June 2000 with interest at 6%.
5. SHAREHOLDERS LOANS
In 1999 (unaudited), the Company borrowed $42,000 from a shareholder
for one year at 10%, payable with interest in April 2000.
F-7
<PAGE>
ENTERPRISE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
6. SHAREHOLDERS' EQUITY
In 1998 and through August 31, 1999 (unaudited) the Company issued
2,084,000 and 293,500 common shares, respectively, in private
placements, raising $983,500 in total. In connection with certain of
these offerings, the Company also issued through August 31, 1999
2,150,000 warrants to purchase common stock at a price of $1.667 per
common share (1,800,000 warrants) and $2.50 per common share (350,000
warrants). The warrants expire on September 6, 2000. The number of
warrants and their exercise price have been adjusted for the June 1999
stock split.
The Company also issued to certain common shareholders 100,000 and
48,500 shares of preferred stock at $1.00 per share in 1998 and through
August 31, 1999, respectively.
In June 1998, the Company capitalized $779,897 of shareholders loans
and accrued payrolls as part of a transaction in which the shareholders
to whom these amounts were owed sold their entire interest in the
company to new shareholders. The Company's involvement in the exchange
was to capitalize the shareholders loans and accrued payrolls, and
permit the old shareholders to keep the gaming equipment in South
America as compensation for any and all liabilities associated with the
discontinued operations.
In March 1999, the Company amended its certificate of incorporation to
change its name from American Casinos International, Inc. (ACII), to
alter the authorized number of common shares to 25,000,000 shares, par
value $.001, and to authorize 5,000,000 preferred shares, par value
$.001, with the board of directors authorized to determine, among
others, the series, etc. These changes were made retroactively in these
consolidated financial statements.
In June 1999, the Company declared a 50% common stock split which
totaled 1,238,383 shares. This adjustment was reported in these
consolidated financial statements as if it had accrued in December
1997.
The Company's preferred stock is 8% cumulative and redeemable at the
Company's option at 110%. In 1998 and 1999 (unaudited), the Company
issued 100,000 shares and 38,500 shares, respectively, at $1.00 per
share.
7. ABANDONED LICENSING AGREEMENT
In 1998, the Company abandoned a licensing agreement wherein the rights
to offer certain Internet bingo and Internet casino games was
determined to be of no value.
8. BAD DEBT EXPENSE
In July 1999, the Company terminated its pending acquisition of the
company it had advanced approximately $634,000 for working capital
purposes (unaudited). The Company
F-8
<PAGE>
ENTERPRISE SOLUTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
had advanced the target $25,000 in 1998 and an additional $609,000 in
1999. The Company terminated its pending acquisition due to the
Company's inability to obtain satisfactory audited financial statements
because of missing financial information, questionable contracts, lack
of internal controls, and substantial liabilities.
9. OFFICE
The Company's office is maintained through a month to month arrangement
at $150 per month, including utilities.
F-9
<PAGE>
Exhibits and Financial Schedules.
(a) Exhibits
3.1 Articles of Incorporation as filed with the Nevada Secretary of State on
3.2 By-laws
3.3 Amended and Restated By-laws*
4.1 Specimen Stock Certificate*
10.1 Lease for SSS Division's corporate condominium
10.2 Lease for SSS Division's office space
10.3 Employment Agreement by and between the Company and Dr. John A. Solomon
10.4 Employment Agreement by and between the Company and Richard A. Lee, II
10.5 Employment Agreement by and between the Company and Roger Schell
10.6 Employment Agreement by and between the Company and Gary L. Baker.
Teaming Agreement by and between the Company and Gemini Computers, Inc.
21.1 Subsidiaries of the Company
27.1 Financial data schedule
- --------------
* To be filed by amendment
- 28 -
<PAGE>
SIGNATURE
---------
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf the
undersigned thereto duly authorized.
Dated: November 17, 1999
Enterprises Solutions, Inc.
/s/ Dr. John A. Solomon
--------------------------------
John A. Solomon, Ph.D., MBA
President & CEO
- 29 -
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
SEP 16 1987
xxxxxxxxxxxxx, SECRETARY
7161-87
ARTICLES OF INCORPORATION
OF
SEDGEWICKE BUSINESS ALLIANCE, INC.
I, the undersigned natural person being of the age of twenty-one years,
or more, acting as incorporator under the laws of the State of Nevada relating
to corporations, and to that end adopt the following articles of incorporation
as follows:
ARTICLE ONE. NAME: The name of the corporation shall be SEDGEWICKE
BUSINESS ALLIANCE, INC.
ARTICLE TWO. DURATION: The corporation shall exist perpetually.
ARTICLE THREE. PURPOSES:
1. The Corporation is organized for any and all lawful purposes for
which corporations may be organized under this Act, including without
limitation, research and development, organization, management, acquisition, and
marketing of all types of information technology, services, data and statistical
research, corporate management services, printing services, billing services,
accounting services, factoring & management services for account receivables &
payables, computer programing services, formulation of business plans, editing,
news service and public relations, mailing services, employee leasing, arbitrage
and mortgage and investment banking services.
The Corporation shall have and exercise all powers necessary or
convenient for the carrying out of any or all of the purposes for which it is
organized.
Additional purposes for which it is organized are:
2. To purchase, receive by way of gift, subscribe for, invest in, and
in all other ways acquire import, lease, possess, maintain, handle on
consignment, own, hold for investment or otherwise, use, enjoy, exercise,
operate, manage, conduct, perform, make borrow, guarantee, contract in respect
of, trade and deal in, sell, exchange, let, lend, export, mortgage, pledge, deed
in trust, hypothecate, encumber, transfer, assign and in all other ways dispose
of, design, develop, invent, improve, equip, repair, alter, fabricate, assemble,
build, construct, operate, manufacture, plant, cultivate, product, market, and
in all other ways (whether like or unlike any of the foregoing), deal in and
with property of every kind and character, real, personal or mixed, tangible or
intangible, wherever situated and however held, including, but not limited to,
money, credits, choices in action, securities, stocks, bonds, warrants, scripts,
certificates, debentures, mortgages, notes, commercial paper, and other
obligations and evidences of interest in or indebtedness of any person, firm, or
corporation, foreign or domestic, or of any government, subdivision or agency
thereof, documents of title, and accompanying rights, and every other kind and
character of personal property, real property (improved or unimproved), and the
products avails thereof, and every character of interest therein and
appurtenance thereto, including, but not limited to, mineral, oil, gas, and
water rights, all or any part of any going business and its incidents,
franchises, subsidies, charters, concessions, grants, rights, powers or
privileges, granted or conferred by any government or subdivision or agency
thereof, and any interest in or part of any of the foregoing, and to exercise in
respect thereof the rights, powers, privileges, and immunities of individual
owners or holders thereof.
2
<PAGE>
3. To hire and employ agents, servants, and employees, and to enter
into agreements of employment and collective bargaining agreements, and to act
as agents, contractor, trustee, factor or otherwise, either alone or in company
with others.
4. To promote or aid in any manner, financially or otherwise, any
person, firm, associate, or corporation, and to guarantee contracts and other
obligations.
5. To let concessions to others to do any of the things that this
corporation is empowered to do, and to enter into, make, perform, and carry out,
contracts and arrangements of every kind and character with any person, firm,
association, or corporation, or any government or authority or subdivision or
agency thereof.
6. To carry on any business whatsoever that this corporation may deem
proper or convenient in connection with any of the foregoing purposes or
otherwise, or that it may deem calculated, directly or indirectly, to improve
the interests of this corporation, and to do all things specified in the laws of
the State of Nevada, and to have and to exercise all powers conferred by the
laws of said State of Nevada on corporations formed under the laws pursuant to
which this corporation is formed under the laws pursuant to which this
corporation is formed, as such laws are now in effect or may at any time
hereafter may be amended, and to do any and all things hereinabove set forth to
the same extent and as fully as natural persons might or could do, either alone
or in connection with other persons, firms associations, or corporations, and in
any part of the world.
The foregoing statement of purposes shall be construed as a statement
of both purposes and powers, shall be liberally construed in aid of the powers
of this corporation, and the powers and purposes stated in each clause shall,
except where otherwise stated, be in nowise limited or restricted by any term or
provision of any other clause, and shall be regarded not only as independent
purposes, but the purposes and powers stated shall be construed distributively
as each object expressed, and the enumeration as to specific powers shall not be
construed as to limit in any manner the aforesaid general powers, but are in
furtherance of, in addition to, and not in limitation of said general powers.
3
<PAGE>
7. To own, hold, rent, lease, manage, encumber, improve, exchange,
buy, and sell real property, collect rents, and do a general real estate
business; and in general to have and exercise all powers, rights, and privileges
necessary and incident to carrying out properly the objects above mentioned.
ARTICLE FOUR. CAPITALIZATION: The total number of shares that the
corporation is authorized to issue is FIFTY MILLION (50,000,000) shares of
single class common stock, without services, having a part value of ONE MIL
($.001) per share. Total authorized capital shall be FIFTY THOUSAND DOLLARS
($50,000.00). All of the shares may be issued by the corporation from time to
time and for such consideration as may be determined upon and fixed by the board
of directors not inconsistent with law, and when such consideration has been
received by the corporation, such shares shall be deemed fully paid. There shall
be no cumulative voting, no preferences, limitations, or preemptive rights.
ARTICLE FIVE. AMENDMENT OF ARTICLES OF INCORPORATION. These articles of
incorporation may be amended by the affirmative vote of a majority of the votes
of the shareholders entitled to vote from time to time.
ARTICLE SIX. LOCATION: The principal office of the corporation is to be
located at 3631 Seneca Ln., Las Vegas, Nevada 89109.
ARTICLE SEVEN. DIRECTORS. The members of the governing board of the
corporation shall be styled "directors". The total number of directors shall be
not less than one (1) and not more than seven (7). The number of directors
constituting the first board of directors is three (3), and the names and post
office addresses of the first board of directors are:
NAME ADDRESS
Michael D. Haynes 23441 Golden Springs Drive
Diamond Bar, California 91765
Whitney D. Lund, Sr. 551 Cimmaron Way, #34
Elko, Nevada
Peter E. Berney P.O. Box 510144
S.L.C., Utah 84151
4
<PAGE>
The number of directors of the corporation may be changed by an
affirmative vote of the shares of the corporation entitled to vote, in
accordance with the provisions of Nevada Revised Statutes 78.330.
ARTICLE EIGHT. INCORPORATOR. The name and address of the Incorporator
is as follows:
Whitney D. Lund, Sr. 551 Cimmaron Way, #34
Elko, Nevada
ARTICLE NINE. THE INITIAL REGISTERED AGENT: The initial registered
agent of the corporation, corporate address, and address of its registered agent
is as follows:
NAME ADDRESS
Jo Ann Ellsworth 3631 Seneca Lane
Las Vegas, Nevada 89109
ARTICLE TEN. PERSONAL LIABILITY. The private property of the
shareholders shall not be liable for obligations, suits of any kind including
but not limited to malpractice suits, class action suits, discrimination suits,
personal injury suits, anti-trust suits, liens, acts, or judgments of the
corporation.
ARTICLE ELEVEN. DIRECTOR LIABILITY. Directors of the corporation shall
not be held personally liable for obligations, suits of any kind including but
not limited to malpractice suits, class action suits, discrimination suits,
personal injury suits, anti-trust suits, liens, acts or judgments of the
corporation, or any other liability which may be construed to be contained
within the scope of the laws and statutes of the State of Nevada which pertain
to Director Liability.
ARTICLE TWELVE. BY-LAWS AND SHAREHOLDERS AGREEMENT. There are separate
bylaws regulating the internal affairs of the corporation and a shareholders'
agreement restricting the transfer of shares.
ARTICLE THIRTEEN. "SUBCHAPTER-S" CORPORATION STATUS. The stockholders
of the corporation shall elect to qualify it as a Sub-S corporation under
section 1361, and sections 1362 through 1379 of the Internal Revenue Code, and
such status shall continue unless a majority of shareholders shall vote in the
affirmative to discontinue such status.
5
<PAGE>
IN WITNESS WHEREOF, I have executed these articles of incorporation in
duplicate on this 4th day of September, 1987, at Salt Lake City, Utah.
/s/ Whitney D. Lund, Sr.
--------------------------
Whitney D. Lund, Sr.
Incorporator
ACKNOWLEDGEMENT
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
The undersigned Notary Public certifies, deposes, and states that
Whitney D. Lund, Sr., personally appeared before me and executed the foregoing
this 4th day of September 1987, at Salt Lake City, Utah.
/s/ Kristin D. McBarlow
-----------------------------
Notary Public
My commission Expires on: 3/25/91
Residing in: Salt Lake City, UT
SEAL
6
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 13 1993
/s/ CHERYL A. LAU
7161-87 C.
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(AFTER ISSUANCE OF STOCK)
SEDGEWICKE BUSINESS ALLIANCE, INC.
- --------------------------------------------------------------------------------
Name of Corporation
We the undersigned Michael D. Haynes and
---------------------------------------------------------
President or Vice Presient
Peter E. Berney, Assistant Secretary or
Donald C. Bradley, Secretary Sedgewicke Business Alliance, Inc.
- ------------------------------------ of ----------------------------------
Assistant Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened and
held on the 22nd day of April, 1993, adopted a resolution to amend the original
articles as follows:
Article IV (Four) is hereby amended to read as follows:
Authorize 50,000 shares of Preferred shares at a par value of .01 per share,
in addition to the now authorized 50,000,000 common shares at a par value of
.001 per share.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation are 50,000; that the said change(s)
and amendment has been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon.
/s/ Michael D. Haynes
-------------------------------------
President or Vice President
/s/ Peter E. Berney
-------------------------------------
Assistant Secretary
State of Nevada
ss.
County of Clark
On 4-22-93, personally appeared before me, a Notary Public,
Michael D. Haynes - Peter Berney
- --------------------------------------------------------------------------------
(Names of persons appearing and signing document.)
who acknowledged that they executed the above instrument.
/s/ E.V. Stambro
-------------------------------------
Signature of Notary
OFFICIAL SEAL
E.V. STAMBRO
Notary Public - State of Nevada
CLARK COUNTY
My Comm. Expires May 14, 1996
[NOTARY STAMP OR SEAL]
CHERYL A. LAU
Secretary of State
By________________________
<PAGE>
STATE OF NEVADA
DEPARTMENT OF STATE
I hereby certify that this is a true and complete copy of the document as
filed in this office.
DATED: SEP 16, 1987
FRANKIE SUE DEL PAPA
Secretary of State
By /s/ Beverly J. Davenport
-------------------------
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
DEC 21 1994
7161-87
CHERYL A. LAU, SECRETARY OF STATE
/s/ Cheryl A. Lau
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Sedgewicke Business Alliance, Inc. NV File No. 7161-87
- -------------------------------------------------------------------------------
Name of Corporation
We the undersigned Raymond M. Girard, President and
----------------------------
President or Vice President
William "Ted" Thurman, of Sedgewicke Business Alliance, Inc.
- -------------------------------- ----------------------------------
Secretary or Assistant Secretary Name of Corporation
do hereby certify:
That the board of Directors of said corporation at a meeting duly convened and
held on the 5th day of December, 1994, adopted a resolution to amend the
original articles as follows:
Article(s) I and IV are hereby amended to read as follows:
ARTICLE I. Name: The name of the corporation shall be American Casinos
International, Inc.
ARTICLE IV. CAPITALIZATION: The total number of shares that the corporation is
authorized to issue is ONE HUNDRED MILLION (100,000,000) shares of single class
common stock, without series, having a par value of ONE MIL ($0.001) per share.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation are 2,000,000; that the said
change(s) and amendment has been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
/s/ Raymond M. Girard
---------------------------------------
Raymond M. Girard, President
President or Vice President
/s/ William Ted Thurman
---------------------------------------
William "Ted" Thurman, Secretary
Secretary or Assistant Secretary
State of Nevada
County of Clark
On 12-5-94 personally appeared before me, a Notary Public, Raymond M. Girard and
William "Ted" Thurman, who acknowledged that he/she/they executed the above
document.
/s/ David Jett
------------------------------
Notary Public
[Stamp/Seal]
DAVID JETT
Notary Public-State of Nevada
SEAL Appointment Recorded in Clark County
My Appointment Expires May 2, 1996
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
SEP 17 1997
No. C7161-87
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
AMERICAN CASINOS INTERNATIONAL, INC.
Pursuant to the provisions of Nevada Revised Statutes, Title Chapter 78,
the undersigned officers do hereby certify:
FIRST: The name of the Corporation is American Casinos International,
Inc. (the "Corporation"):
SECOND: The Board of Directors of the Corporation, by Unanimous Consent
on May 1, 1997, adopted a resolution to amend the Articles of Incorporation as
follows:
Article IV. (a) The total number of shares of stock which the
corporation shall have authority to issue is Twenty Five Million
(25,000,000). The par value of each of such shares is One Mil
($.001). All such shares are of one class and are shares of Common
Stock; (b) The 10,708,000 shares of Common Stock, $.001 par value,
presently outstanding shall be reduced to 214,160 shares of Common
Stock, $.001 par value by effecting a one for fifty reverse stock
split.
SECOND: At a meeting of the shareholders of the Corporation on July 14,
1997, the shareholders of the Corporation voted to amend the Articles of
Incorporation to reduce the authorized number of shares that the Corporation is
authorized to issued from 100,000,000 shares, $.001 par value to 25,000,000
shares, $.001 par value and to reduce the number of outstanding shares of common
stock from 10,708,000 shares to 214,160 shares by effecting a one for fifty
reverse stock split. Therefore, Article IV of the Articles of Incorporation of
the Corporation is hereby amended to read as follows:
"Article IV. (a) The total number of shares of stock which the
corporation shall have authority to issue is Twenty Five Million
(25,000,000). The par value of each of such shares is One Mil
($.001). All such shares are of one class and are shares of Common
Stock; (b) The 10,708,000 shares of Common Stock, $.001 par value,
presently outstanding shall be reduced to 214,160 shares of Common
Stock, $.001 par value by effecting a 1 for 50 reverse stock split."
THIRD: This amendment was approved by the shareholders of the Corporation
at a meeting held for that purpose on July 14, 1997. At said meeting 6,146,862
or the 10,708,000 outstanding shares of $.001 par value common stock, in person
or by proxy, voted on the Amendment of Article IV, Section (a). Of said
6,146,862 shares represented, 5,672,216 shares voted in favor of the adoption of
the amendment of Article IV, Section (a) and 464,646 voted against such
adoption. At said meeting 6,136,792 of the 10,708,000 outstanding shares of
$.001 par value common stock, in person or by proxy voted on the Amendment of
Article IV, Section (b). Of said 6,136,792 shares represented, 5,595,421 shares
voted in favor of the adoption of the amendment of Article IV, Section (b) and
541,371 voted against such adoption.
Dated: Sparta, New Jersey
July 16, 1997.
American Casinos International, Inc.
By: /s/ John Falco
-------------------------------------
John Falco, President
/s/ Jeffrey Geez
-------------------------------------
Jeffrey Geez, Secretary
<PAGE>
State of New York
County of New York
I, Gerald A. Adler, a Notary Public, do hereby certify that on this 16 day of
July 1997, personally appeared before me, John Falco and Jeffrey Geez who, being
by me first duly sworn, declared that he signed the foregoing document as
President and Secretary of the corporation, respectively, and that the
statements therein contained are true.
/s/ Gerald A. Adler
----------------------------
Notary Public
My Commission expires: June 30, 1998
GERALD ADLER
Notary Public, State of New York
(NOTARIAL SEAL) No. 31-4602697
Certified in New York County
Commission Expires June 30, 1998
Articles of Amendment
prepared by:
Loselle Greenawalt Kaplan Blair & Adler
Two Grand Central Tower
140 East 45th Street, 42nd Floor
New York, New York 10017-3144
<PAGE>
FILED C7161-87
--------
MAR 18 1999
IN THE OFFICE OF THE
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
AMERICAN CASINOS INTERNATIONAL, INC.
Pursuant to the provisions of Nevada Revised Statutes, Title 7, Chapter
78, the undersigned officers do hereby certify:
FIRST: The name of the Corporation is American Casinos International,
Inc. (the "Corporation"):
SECOND: The Board of Directors of the Corporation, by Unanimous Consent
on March 1, 1999, adopted resolutions to amend the Articles of Incorporation as
follows:
Articles I and IV are hereby amended to read as follows:
Article I. Name: The name of the corporation shall be Enterprise
Solutions, Inc.
Article IV. Capitalization: The Corporation is authorized to issue
two classes of stock: common and preferred, described as follows:
A. Common Stock. The Corporation shall be authorized to issue twenty-five
million (25,000,000) shares of common stock having a par value of one mil
($.001) per share.
B. Preferred Stock. (a) The Corporation shall be authorized to issue five
million (5,000,000) shares of preferred stock $.001 par value per share (the
"Preferred Shares") The Preferred Shares may be issued from time to time in one
or more series, each of which shall have such number, designation, relative
rights, preferences and limitations as are stated and expressed herein and in a
resolution or resolutions providing for the issue of such series, adopted by the
Board of Directors.
The Board of Directors of the Corporation is hereby granted the authority
to establish and designate series of Preferred Shares and to fix and determine
the following with respect to each series:
(i) the designation of the series and the limitations, if any, on
the number of shares of the series that may be issued;
(ii) the dividend payable on the shares of each series, the
payment dates of the shares of each series and the date or dates from which
dividends on the shares of a series shall accumulate;
(iii) the consideration to be received by the Corporation in
exchange for the shares of stock of each series, and the terms of its payment;
and
(iv) any other powers and preferences, relative, participating,
option, and other special rights, and qualifications, limitations and
restrictions of each series not inconsistent with the Articles of Incorporation
of the Corporation.
The designation of each series of Preferred Stock and its terms and
provisions shall be fixed and determined by the Board of Directors of the
Corporation in a manner permitted by law and stated in a resolution or
resolutions providing for the issuance of the series.
Except as otherwise provided in the resolution or resolutions providing
for the issuance of a series, the Board of Directors may from time to time
increase the number of shares of any series already created, but providing that
any unissued shares of Preferred Stock constitute a part of that series, and may
from time to time decrease (but not below the number of shares of the series
then outstanding) the number of shares of any series already created by
providing that any unissued shares previously assigned to that series no longer
constitute a part of that series.
<PAGE>
The Board of Directors may classify and reclassify any unissued shares of
Preferred Stock by fixing or altering the terms and provisions of the shares
with respect to the terms and provisions discussed above, and by assigning the
shares to an existing or newly created series from time to time before the
issuance of the shares, except as may otherwise be expressly provided in a
resolutions or resolutions providing for the issuance of a particular series.
The number of shares of the Corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation are 2,541,500; that the said
change(s) and amendments has been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
Dated: Boca Raton, Florida
March 15, 1999
American Casinos International, Inc.
By: /s/ Wayne Kight
-----------------------------------------
Wayne Kight, President
/s/ Jeffrey Moritz
-----------------------------------------
Jeffrey Moritz, Secretary
State of Florida
County of Palm Beach
The undersigned, a Notary Public, do hereby certify that on this 15 day
of March 1999, personally appeared before me, Wayne Kight who, being by me first
duly sworn, declared that he signed the foregoing document as President of the
corporation and that the statements therein contained are true.
/s/ J. Peart
--------------------------------
Notary Public
My Commission expires: March 29, 2002
June C. Peart
(NOTARIAL SEAL) My Commission CC728725
Expires March 29, 2002
State of Massachusetts
County of
The undersigned, a Notary Public, do hereby certify that on this ____ day
of March 1999, personally appeared before me, Jeffrey Moritz who, being by me
first duly sworn, declared that he signed the foregoing document as Secretary of
the corporation and that the statements therein contained are true.
--------------------------------
Notary Public
My Commission expires:
(NOTARIAL SEAL)
Articles of Amendment
prepared by:
Bondy & Schloss LLP
6 East 43rd Street
New York, New York 10017
<PAGE>
State of Massachusetts
County of Barnstable
The undersigned, a Notary Public, do hereby certify that on this 15th day
of March 1999, personally appeared before me, Jeffrey Moritz who, being by me
first duly sworn, declared that he signed the foregoing document as Secretary of
the corporation and that the statements therein contained are true.
/s/ XXXXXXXX
--------------------------------
Notary Public
My Commission expires: November 25, 2005
(NOTARIAL SEAL)
Articles of Amendment
prepared by:
Bondy & Schloss LLP
6 East 43rd Street
New York, New York 10017
<PAGE>
STATE OF NEVADA
Secretary of State
I hereby certify that this is a
true and complete copy of the
document as filed in this office.
MAR 18 89
/s/ Dean Heller
DEAN HELLER
Secretary of State
<PAGE>
STATE OF NEVADA
SECRETARY OF STATE
CERTIFICATE OF REINSTATEMENT
I, DEAN HELLER, the duly elected Secretary of State of the State of Nevada,
do hereby certify that ENTERPRISES SOLUTIONS, INC. a corporation formed under
the laws of the State of NEVADA having paid all filing fees, licenses, penalties
and costs, in accordance with the provisions of Title 7 of the Nevada Revised
Statutes as amended, for the years and in the amounts as follows:
1998-1999 List of Officers + penalty $100.00
1999-2000 List of Officers $ 85.00
Reinstatement $ 50.00
total $235.00
and otherwise complied with the provisions of said section, the said corporation
has been reinstated, and that by virtue of such reinstatement it is authorized
to transact its business in the same manner as if the aforesaid filing fees,
licenses, penalties and costs had been paid when due.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed the Great Seal of State, at my office in
Carson City, Nevada, on September 1, 1999.
[SEAL] /s/ Dean Heller
Secretary of State
By:
Deputy
<PAGE>
ANNUAL LIST OF OFFICERS, DIRECTORS AND AGENTS OF
FILE NUMBER
7161-87
Corporation name: Enterprise Solutions, Inc.
The Corporation's duly appointed Resident Agent in the
State of Nevada upon whom process can be served is:
United Corporate Services Inc. FOR OFFICE USE ONLY
202 South Minnesota Street FILED DATED
Carson City, NV 89703 SEP 01 1999
Dean Heller
[ ] IF THE ABOVE INFORMATION IS INCORRECT, PLEASE CHECK THIS BOX AND A
CHANGE OF RESIDENT AGENT/ADDRESS FORMS WILL BE SENT.
PLEASE READ INSTRUCTIONS BEFORE COMPLETING AND RETURNING THIS FORM.
1. Include the names and addresses, either residence or business for all
officers and directors. A President, Secretary, Treasurer and all Directors
must be returned. There must be at least one director. Last year's
information has been xxxx. If you need to make changes, cross out the
incorrect information and xxxxx.
2. If this
3. xxxx
4. Make our check payable to the Secretary of State. If you need the below
attachment file stamped, enclose a self-addressed stamped envelope. To
receive a certified copy, enclose a copy of this completed form, an
additional $10.00 and appropriate instructions.
5. Return the completed form to: Secretary of State, Capital Complex, Carson
City, NV 89710. (702) 687-5203.
FILING FEE: $55.00 LATE PENALTY: $15.00
- --------------------------------------------------------------------------------
NAME Wayne B. Kight TITLE PRESIDENT
5061 North Dixie Highway, Boca Raton FL 33431
STREET ADDRESS CITY ST ZIP
PO BOX
- --------------------------------------------------------------------------------
NAME Jeffrey M. Moritz TITLE SECRETARY
5061 North Dixie Highway, Boca Raton FL 33431
STREET ADDRESS CITY ST ZIP
PO BOX
- --------------------------------------------------------------------------------
NAME Jeffrey M. Moritz TITLE TREASURER
STREET ADDRESS CITY ST ZIP
PO BOX
- --------------------------------------------------------------------------------
NAME Wayne B. Kight TITLE DIRECTOR
STREET ADDRESS CITY ST ZIP
PO BOX
- --------------------------------------------------------------------------------
NAME Jeffrey M. Moritz TITLE DIRECTOR
STREET ADDRESS CITY ST ZIP
PO BOX
- --------------------------------------------------------------------------------
NAME TITLE DIRECTOR
STREET ADDRESS CITY ST ZIP
PO BOX
- --------------------------------------------------------------------------------
Signature of officer Wayne B. Kight Title President Date 8/30/99
Certificate STATE OF NEVADA -- SECRETARY OF STATE File Number
The Secretary of State of Nevada does hereby certify that the above
corporation after having paid the annual fee of $35.00 for filing in this office
a list of its officers and directors and designation of resident agent for the
above filing period, together with penalty in the sum of and
having also filed the aforesaid list as required by Nevada Revised Statutes
Sections 78.150-78.165 and 80.110-80.140, as amended, is hereby authorized to
transact and conduct business within this state for the aforesaid period.
/s/ Dean Heller
-----------------
THIS CERTIFICATE BECOMES A RECEIPT UPON BEING DEAN HELLER
VALIDATED BY THE OFFICE OF SECRETARY OF STATE Secretary of State
<PAGE>
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT
AGENT FOR SERVICE OF PROCESS
In the matter of Enterprise Solutions, Inc., United Corporate Services,
Inc., with address at 202 South Minnesota Street, City of Carson City, State of
Nevada, Zip Code 89703, hereby accepts appointment as Resident Agent for Service
of Process for the above-named corporation in accordance with NRS CHAPTER 78.
United Corporate Services, Inc.
By
Michelle Ellis August 31, 1999
- -------------------------------------------------------------------------------
Signature of Authorized Representative of Resident Agent for Service of Process
<PAGE>
ACII By-Laws
BYLAWS - INDEX
Page
----
ARTICLE I - OFFICES ..................................................... 1
ARTICLE II - MEETING OF STOCKHOLDERS .................................... 1-3
SECTION 1. - ANNUAL MEETINGS ........................................... 1
SECTION 2. - SPECIAL MEETINGS .......................................... 1
SECTION 3. - PLACE OF MEETING .......................................... 1
SECTION 4. - NOTICE OF MEETINGS ........................................ 1-2
SECTION 5. - QUORUM .................................................... 2
SECTION 6. - VOTING .................................................... 2-3
ARTICLE III - BOARD OF DIRECTORS ........................................ 3-6
SECTION 1. - NUMBER ELECTION AND TERM OF OFFICE ........................ 3
SECTION 2. - DUTIES AND POWERS ......................................... 3
SECTION 3. - ANNUAL AND REGULAR MEETINGS; NOTICE ....................... 3-4
SECTION 4. - SPECIAL MEETING; NOTICE ................................... 4
SECTION 5. - CHAIRMAN .................................................. 4
SECTION 6. - QUORUM AND ADJOURNMENTS ................................... 4-5
SECTION 7. - MANNER OF ACTING .......................................... 5
SECTION 8. - VACANCIES ................................................. 5
SECTION 9. - RESIGNATION ............................................... 5
SECTION 10. - REMOVAL ................................................... 6
SECTION 11. - SALARY .................................................... 6
SECTION 12. - CONTRACTS ................................................. 6
SECTION 13. - COMMITTEES ................................................ 6
ARTICLE IV - OFFICERS ................................................... 7-8
SECTION 1. - NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE ....... 7
SECTION 2. - RESIGNATION ............................................... 7
SECTION 3. - REMOVAL ................................................... 7
SECTION 4. - VACANCIES ................................................. 7
SECTION 5. - DUTIES OF OFFICERS ........................................ 7
SECTION 6. - SURITIES AND BONDS ........................................ 8
SECTION 8. - SHARES OF STOCK OF OTHER CORPORTATIONS .................... 8
ARTICLE V - SHARES OF STOCK ............................................. 8-9
SECTION 1. - CERTIFICATE OF STOCK ...................................... 8
SECTION 2. - LOST OR DESTROYED CERTIFICATES ............................ 8-9
SECTION 3. - TRANSFER OF SHARES ........................................ 9
SECTION 4. - RECORD DATE ............................................... 9
ARTICLE VI - DIVIDENDS .................................................. 10
ARTICLE VII - FISCAL YEAR ............................................... 10
ARTICLE VIII - CORPORATE SEAL ........................................... 10
ARTICLE IX - INDEMNITY .................................................. 10
ARTICLE X - AMENDMENTS .................................................. 10-11
SECTION 1. - BY STOCKHOLDERS ........................................... 10-11
SECTION 2. - BY DIRECTORS .............................................. 11
CERTIFICATE OF PRESIDENT ................................................ 12
<PAGE>
BYLAWS
OF
SEDGEWICKE BUSINESS ALLIANCE, INC.
ARTICLE I - OFFICES
The principal office of the Corporation shall be located at 3631 Seneca
Lane, Las Vegas, NV 89109, and it may be changed from time to time by the Board
of Directors. The Corporation may also maintain offices at such other places
within or without the United States as the Board of Directors may, from time to
time, determine.
ARTICLE II - MEETINGS OF STOCKHOLDERS
SECTION 1 - ANNUAL MEETINGS:
The annual meeting of the stockholders of the Corporation shall be held
within six (6) months after the close of the fiscal year of the Corporation, for
the purpose of electing directors, and transacting such other business as may
properly come before the meeting.
SECTION 2 - SPECIAL MEETINGS:
Special meetings of the stockholders may be called at any time by the Board
of Directors or by the President, and shall be called by the President or the
Secretary at the written request of the holders of twenty-five percent (25%) of
the shares then outstanding and entitled to vote thereat, or as otherwise
required by law.
SECTION 3 - PLACE OF MEETINGS:
All meetings of stockholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of such meetings.
SECTION 4 - NOTICE OF MEETINGS:
(a) Except as otherwise provided by statute, written notice of each meeting of
stockholders, whether annual or special, stating the time when and place where
it is to be held, shall be served either personally or by mail, not less than
ten or more than sixty (60) days before the meeting, upon each stockholder of
record entitled to vote at such meeting, and any other stockholder to whom the
giving of notice may be required by law. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle stockholders to receive payment for their shares
pursuant to statute, the notice of such
BYLAWS - 1
<PAGE>
meeting shall include a statement of that purpose and to the effect. If mailed,
such notice shall be directed to each such stockholder at his address, as it
appears on the records of the stockholders of the Corporation, unless he shall
have previously filed with the Secretary of the Corporation a written request
that notices intended for him be mailed to some other address, in which case, it
shall be mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
stockholder of record after the mailing of such notice and prior to the meeting,
or to any stockholder who attends such meeting, in person or by proxy, or
submits a signed waiver of notice either before or after such a meeting. Notice
of any adjourned meeting of stockholders need not be given, unless otherwise
required by statute.
SECTION 5- QUORUM
(a) Except as otherwise provided herein, or by statute, or in the Certificate of
Incorporation (such certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of stockholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of stockholders holding of record 51% of the
total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum
for the transaction of any business. The withdrawal of any stockholder after
the commencement of a meeting shall have no effect on the existence of a
quorum, after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
stockholders, the stockholders, by a majority of the votes cast by the holders
of shares entitled to vote thereat, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business, may be transacted
at the meeting as originally called if a quorum had been present.
SECTION 6 - VOTING
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors, to be
taken by vote of the stockholders, shall be authorized by a majority of votes
cast at a meeting of stockholders by the holders of shares entitled to vote
thereat.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of stockholders, each holder or record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each stockholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy: provided, however, that the instrument authorizing
such proxy to act shall have been
BYLAWS - 2
<PAGE>
executed in writing by the stockholder himself or by his attorney-in-fact
thereunto duly authorized in writing. No Proxy shall be valid after the
expiration of eleven (11) months from the date of its execution, unless the
person executing it shall have specified therein the length of time it is to
continue in force. Such instrument shall be exhibited to the Secretary at the
meeting and shall be filed with the minutes of the meeting.
(d) Any action, except election of directors, which may be taken by a vote of
stockholders at a meeting, may be taken without a meeting if authorized by a
written consent of shareholders holding at least a majority of the voting power,
provided that if a greater proportion of voting power is required by such action
at such meeting, then such greater proportion of written consents shall be
required.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1 - NUMBER, ELECTION AND TERM OF OFFICE:
(a) The number of the directors of the Corporation shall be not less than 1 nor
more than 9, unless and until otherwise determined by vote of a majority of the
entire Board of Directors. The number of Directors shall not be less than three
(3), unless all of the outstanding shares of stock are owned beneficially and of
record by less than three (3) stockholders, in which event the number of
directors shall not be less than the number of stockholders or the minimum
permitted by statute.
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation by way of cumulative voting rights the members of the Board of
Directors of the Corporation, who need not be stockholders, shall be elected by
a majority of the votes cast at a meeting of stockholders, by the holders of
shares of stock present in person or by proxy, entitled to vote in the
election.
(c) Each director shall hold office until the annual meeting of the stockholders
next succeeding his election, and until his successor is elected and qualified,
or until his prior death, resignation or removal.
SECTION 2 - DUTIES AND POWERS
The Board of Directors shall be responsible for the control and management of
the affairs, property and interest of the Corporation and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the stockholders.
SECTION 3 - ANNUAL AND REGULAR MEETINGS; NOTICE:
(a) Regular annual meeting of the Board of Directors shall be held immediately
following the annual meeting of the stockholders, at the place of such annual
meeting of stockholders.
(b) The Board of Directors, from time to time, may provide by resolution for the
holding of other
BYLAWS - 3
<PAGE>
regular meetings of the Board of Directors, and may fix the time and place
thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
change was made within the time limited, and in the manner set forth in
Paragraph (b) Section 4 of this Article III, with respect to special meetings,
unless such notice shall be waived in the manner set forth in Paragraph (c) of
such Section 4.
SECTION 4 - SPECIAL MEETING; NOTICE:
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meetings shall be
mailed directly to each director, addressed to him at his residence or usual
place of business, at least four (4) days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegram, radio or cable,
or shall be delivered to him personally or given to him orally, not later than
the day before the day on which the meeting is to be held. A notice, or waiver
of notice except as required by Section 8 of this Article III, need not specify
the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
SECTION 5 - CHAIRMAN:
At all meetings of the Board of Directors, the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be absent,
then the Vice Chairman shall preside, and in his absence, a Chairman chosen by
the directors shall preside.
SECTION 6 - QUORUM AND ADJOURNMENTS:
(a) At all meetings of the Board of Directors, the presence of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, except as otherwise provided by law, by the Certificate
of Incorporation or by these Bylaws.
(b) A majority of the directors, present at the time and place of any regular or
special meeting.
BYLAWS - 4
<PAGE>
although less than a quorum, may adjourn the same from time to time without
notice, until a quorum shall be present.
SECTION 7 - MANNER OF ACTING:
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these Bylaws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors.
(c) Unless otherwise required by amendment to the Articles of Incorporation or
statute, any action required or permitted to be taken at any meeting of the
Board of Directors or any Committee thereof may be taken without a meeting if a
written consent thereto is signed by all the members of the Board or Committee.
Such written consent shall be filed with the minutes of the proceedings of the
Board or Committee.
(d) Unless otherwise prohibited by Amendments to the Articles of Incorporation
or statute, members of the Board of Directors or of any Committee of the Board
of Directors may participate in a meeting of such Board or Committee by means of
a conference telephone network or a similar communications method by which all
persons participating in the meeting can hear each other. Such participation is
constituted presence of all of the participating persons at such meeting, and
each person participating in the meeting shall sign the minutes thereof, which
may be signed in counterparts.
SECTION 8 - VACANCIES:
Any vacancy in the Board of Directors, occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, diqualification,
removal (unless vacancy created by the removal of a director by the stockholders
shall be filled by the stockholders at the meeting at which the removal was
effected) or inability to act of any director, or otherwise, shall be filled for
the unexpired portion of the term by a majority vote of the remaining directors,
though less than a quorum, at any regular meeting or special meeting of the
Board of Directors called for that purpose.
SECTION 9 - 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.
BYLAWS - 5
<PAGE>
SECTION 10 - REMOVAL:
Any director may be removed with or without cause at any time by the affirmative
vote of stockholders 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
stockholders called for that purpose, and may be removed for cause by action of
the Board.
SECTION 11 - SALARY:
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 12 - CONTRACTS:
(a) 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 interest 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.
(b) 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 13 - 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.
BYLAWS - 6
<PAGE>
ARTICLE IV - OFFICERS
SECTION 1 - NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE:
(a) The officers of the Corporation shall consist of a President, a Secretary, a
Treasurer, or a President and Secretary-Treasurer, and such other officers,
including a Chairman of the Board of Directors, and one or more Vice Presidents,
as the Board of Directors may from time to time deem advisable. Any officer
other than the Chairman or Vice Chairman of the Board of Directors may be, but
is not required to be a director of the Corporation. Any two or more offices may
be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
stockholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
elected and qualified or until his death, resignation or removal.
SECTION 2 - 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 3 - REMOVAL:
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
SECTION 4 - VACANCIES:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification or any other cause, may at any time be filled for the unexpired
portion of the term by a majority vote of the Board of Directors.
SECTION 5 - DUTIES OF OFFICERS:
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these Bylaws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
BYLAWS - 7
<PAGE>
SECTION 6 - SURITIES 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 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 hands.
SECTION 7 - SHARES OF STOCK OF OTHER CORPORATIONS:
Whenever the Corporation is the holder of shares of stock of any other
corporation, any right or power of the Corporation as such stockholder
(including the attendance, acting and voting at stockholders' 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 - SHARES OF STOCK
SECTION 1 - CERTIFICATE OF STOCK:
(a) The certificates representing shares of the Corporation's stock shall be in
such form as shall be adopted by the Board of Directors, and shall be numbered
and registered in the order issued. The certificates shall bear the following:
the Corporate Seal, the holder's name, the number of shares of stock and the
signatures of: (1) the Chairman of the Board, the President or a Vice President
and (2) the Secretary, Treasurer, any Assistant Secretary or Assistant
Treasurer.
(b) No certificate representing shares of stock shall be issued until the full
amount of consideration therefor has been paid, except as otherwise permitted by
law.
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share of stock which shall entitle
the holder to exercise voting rights, receive dividends and participate in
liquidating distributions, in proportion to the fractional holdings: or it may
authorize the payment in cash of the fair value of fractions of a share of stock
as of the time when those entitled to receive such fractions are determined; or
it may authorize the issuance, subject to such conditions as may be permitted by
law, of scrip in registered or bearer form over the signature of an officer or
agent of the Corporation, exchangeable as therein provided for full shares of
stock, but such scrip shall not entitle the holder to any rights of a
stockholder, except as therein provided.
BYLAWS - 8
<PAGE>
SECTION 2 - LOST OR DESTROYED CERTIFICATES:
The holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of any loss or destruction of the
certificate representing the same. The Corporation may issue a new certificate
in the place of any certificate theretofore issued by it, alleged to have been
lost or destroyed. On production of such evidence of loss or destruction as the
Board of Directors in its discretion may require, the Board of Directors may, in
its discretion, require the owner of the lost or destroyed certificate, or his
legal representatives, to give the Corporation a bond in such sum as the Board
may direct, and with such surety or sureties as may be satisfactory to the
Board, to indemnify the Corporation against any claims, loss, liability or
damage it may suffer on account of the issuance of the new certificate. A new
certificate may be issued without requiring any such evidence or bond when, in
the judgment of the Board of Directors, it is proper to do so.
SECTION 3 - TRANSFER OF SHARES:
(a) Transfer of shares of stock of the Corporation shall be made on the stock
ledger of the Corporation only by the holder of record thereof, in person or by
his duly authorized attorney, upon surrender for cancellation of the certificate
or certificates representing such shares of stock with an assignment or power of
transfer endorsed thereon or delivered therewith, duly executed, with such proof
of the authenticity of the signature and of authority to transfer and of payment
of taxes as the Corporation or its agencies may require.
(b) The Corporation shall be entitled to treat the holder of record of any share
or shares of stock as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other claim
to, or interest in, such share or shares of stock on the part of any other
person, whether or not it shall have expenses or other notice thereof, except as
otherwise expressly provided by law.
SECTION 4 - RECORD DATE:
In lieu of closing the stock ledger of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding sixty (60) days, nor less than ten
(10) days, as the record date for the determination of stockholders entitled to
receive notice of, or to vote at, any meeting of stockholders, or to consent to
any proposal without a meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividends or allotment of any rights, or for
the purpose of any other action. If no record date is fixed, the record date for
the determination of stockholders entitled to notice of, or to vote at, a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which the notice is given, or, if no notice is given, the
day preceding the day on which the meeting is held. The record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the resolution of the directors relating thereto is adopted.
When a determination of stockholders of record entitled to notice of, or to vote
at, any meeting of stockholders has been made, as provided for herein, such
determination shall apply to any adjournment thereof, unless the directors fix a
new record date for the adjourned meeting.
<PAGE>
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amount, and at such time or times as the
Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be September 30th, and may be changed
by the Board of Directors from time to time subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal shall be in such form as shall be approved from time to time
by the Board of Directors.
ARTICLE IX - INDEMNITY
(a) Any person made a party to any action, suit or proceeding, by reason of the
fact that he, his testator or interstate representative is or was a director,
officer or employee of the Corporation or of any corporation in which he served
as such at the request of the Corporation shall be indemnified by the
Corporation against the reasonable expenses, including attorneys' fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceedings, or in connection with any appeal therein, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding or in connection with any appeal therein that such officer, director
or employee is liable for gross negligence or misconduct in the performance of
his duties.
(b) The foregoing right of indemnification shall not be deemed exclusive of any
other rights to which any officer or director or employee may be entitled apart
from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be entitled
shall be fixed by the Board of Directors, except that in any case in which there
is no disinterested majority of the Board available, the amount shall be fixed
by arbitration pursuant to the then existing rules of the American Arbitration
Association.
ARTICLE X - AMENDMENTS
SECTION 1 - BY STOCKHOLDERS:
All bylaws of the Corporation shall be subject to alteration or repeal, and new
bylaws may be made, by the affirmative vote of stockholders holding of record in
the aggregate at least a majority of the outstanding shares of stock entitled to
BYLAWS - 10
<PAGE>
vote in the election of directors at any annual or special meeting of
stockholders, provided that the notice or waiver of notice of such meeting shall
have summarized or set forth in full therein, the proposed amendment.
SECTION 2 - BY DIRECTORS:
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, bylaws of the Corporation, provided, however, that the
stockholders entitled to vote with respect thereto as in this Article X
above-provided may alter, amend or repeal bylaws made by the Board of Directors,
except that the Board of Directors shall have no power to change the quorum for
meetings of stockholders or of the Board of Directors or to change any
provisions of the bylaws with respect to the removal of directors of the filling
of vacancies in the Board resulting from the removal by the stockholders. In any
bylaw regulating an impending election of directors is adopted, amended or
repealed by the Board of Directors, there shall be set forth in the notice of
the next meeting of stockholders for the election of Directors, the bylaws so
adopted, amended or repealed, together with a concise statement of the changes
made.
BYLAWS - 11
<PAGE>
CERTIFICATE OF PRESIDENT
THIS IS TO CERTIFY that I am the duly elected, qualified and acting
President of
Sedgewicke Business Alliance, Inc.
----------------------------------
and that the above and foregoing bylaws constituting a true original copy were
duly adopted as the bylaws of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand.
DATED: September 6, 1987
-----------------------
-------------------------------
PRESIDENT
BYLAWS - 12
<PAGE>
STATE OF NEVADA
DEPARTMENT OF STATE
--------------
CERTIFICATE OF REINSTATEMENT
I, CHERYL A. LAU, the duly elected Secretary of State of the State of
Nevada, do hereby certify that SEDGEWICKE BUSINESS ALLIANCE, INC. a corporation
formed under the laws of the State of NEVADA having paid all filing fees,
licenses, penalties and costs, in accordance with the provisions of Section
78.180 NRS, as amended, for the years and in the amounts as follows:
1989-90 LIST OF OFFICERS AND PENALTY.............$100.00
1990-91 LIST OF OFFICERS AND PENALTY.............$100.00
1991-92 LIST OF OFFICERS AND PENALTY.............$100.00
1992-93 LIST OF OFFICERS AND PENALTY.............$100.00
REINSTATEMENT FEE.................................$50.00
and otherwise complied with the provisions of said section, the said corporation
has been reinstated, and that by virtue of such reinstatement it is authorized
to transact its business in the same manner as if the aforesaid filing fees,
licenses, penalties and costs had been paid when due.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed the Great Seal of State, at my office, in
[SEAL] Carson City, Nevada this 12th day of MAY, A.D.,
1993.
/s/ Cheryl A. Lau
--------------------------------------------------
Secretary of State
<PAGE>
CERTIFICATE OF PRESIDENT
THIS IS TO CERTIFY that I am the duly elected, qualified and acting
President of
Sedgewicke Business Alliance, Inc.
and that the above and foregoing bylaws constituting a true original copy were
duly adopted as the bylaws of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand.
DATED: September 6, 1987
/s/ xxxxxxxxxx
---------------------------------
PRESIDENT
BYLAWS - 12
<PAGE>
CALIFORNIA
[logo] ASSOCIATION APPLICATION TO RENT
OF REALTORS(R) RECEIPT FOR DEPOSIT/SCREENING FEE
1. APPLICATION TO RENT
THIS SECTION TO BE COMPLETED BY APPLICANT. A SEPARATE APPLICATION IS REQUIRED.
FOR ANY OCCUPANT 18 YEARS OF AGE OR OVER.
Application to rent property at 24525 Outlook Dr.________________ ("Premises").
FULL NAME OF APPLICANT Secure Systems Solutions
Fed. Tax I.D. 880232148 Drivers's license no._________State_______Expires_____
Phone Number Home 831-620-1403______Work_______________Date of birth____________
Current address 25580 Via Cazador _______ Previous address _____________________
City/State/Zip Carmel, CA 93923__________ City/State/Zip_______________________
Name of landlord/manager N/A Name of landlord/manager______________
Landlord/manager's phone N/A Landlord/manager's phone______________
How long at current address? N/A How long at this address?_____________
Reason for leaving current address N/A Reason for leaving this address_______
Name(s) of all other proposed occupant(s)and relationship to applicant
Gary & Chris Baker Proposed pet(s)(number and type) 0
Current employer N/A Supervisor__________Length of employment__________
Employer's address N/A Phone_________________________
Position or title N/A Gross income $_________per_________
Previous employer N/A Supervisor__________Length of employmment___________
Employer's address N/A Phone___________________________
Position or title N/A Gross income $________per__________
Other income $______per______Source_____________________________________________
Auto make_______Model_______Year_______License no._______State_______Color______
In case of emergency, person to notify____________________Relationship__________
Address___________________________________________________Phone_________________
Does applicant plan to use liquid filled furniture? No [X] Yes [ ] Type_________
Has applicant been a party to an unlawful detainer action or filed bankruptcy
within the last seven years? No [X] Yes [ ]
If yes, explain ________________________________________________________________
Has applicant or any proposed occupant ever been convicted of, or pled nolo
contendre to, a felony? No [X] Yes [ ]
If yes, explain_________________________________________________________________
________________________________________________________________________________
Name of creditor Account number Monthly payment Balance due
________________________________________________________________________________
GTE Wireless RO4000195 current
________________________________________________________________________________
________________________________________________________________________________
Name of bank Address/branch Account number Type of account
________________________________________________________________________________
Bank of America 200 E. Franklin St. 00812-16920 checking
Monterey
________________________________________________________________________________
________________________________________________________________________________
Applicant represents the above information to be true and complete, and hereby
authorizes verification of the information provided.
Date Sept. 4, 1999 Time___________________ Application R.R. Schell
_________________________________________________Roger R. Schell, President
<PAGE>
II. RECEIPT FOR DEPOSIT/SCREENING FEE
THIS SECTION TO BE COMPLETED BY AGENT, LANDLORD OR MANAGER
Applicant has deposited the sum of $4,500 as a deposit on the Premises. The
deposit is evidenced by:
[ ] Cashier's Check, [ ] Personal Check, or [ ] other__________, payable to
__________________________, to be held uncashed until approval of the
Application To Rent. If deposit is in cash, deposit shall be [ ] held in
Broker's Trust Account or [ ] given to Owner. The executed lease or rental
agreement may require additional sums to be paid, as security deposit, or for
other purposes. If the Application to Rent is approved, the deposited sum shall
be applied to total sums due upon execution of a lease or rental agreement. If
the Application to Rent is not approved within________days, the deposit shall be
returned to Applicant.
In addition to the deposit, Applicant has paid a screening fee of $____________,
applied as follows: $_________________for credit report(s);
$____________for___________________(other out-of-pocket expenses), and $________
for processing.
The undersigned has read the foregoing and acknowledge(s)receipt of a copy.
/s/_____________________________________________________________________________
Applicant Date
The undersigned has received the deposit and screening fee indicated above.
________________________________________________________________________________
Landlord or Manager's Signature Date
THIS FORM HAS BEEN APPROVED BY THE CALIFORNIA ASSOCIATION OF
REALTORS(R)(C.A.R.). NO REPRESENTATION IS MADE AS TO THE LEGAL VALIDITY OR
ADEQUACY OF ANY PROVISION IN ANY SPECIFIC TRANSACTION. A REAL ESTATE BROKER IS
THE PERSON QUALIFIED TO ADVISE ON REAL ESTATE TRANSACTIONS. IF YOU DESIRE LEGAL
OR TAX ADVICE, CONSULT AN APPROPRIATE PROFESSIONAL.
This form is available for use by the entire real estate industry. It is not
intended to identify the user as a REALTOR(R). REALTOR(R) is a registered
collective membership mark which may be used only by members of the NATIONAL
ASSOCIATION OF REALTORS(R) who subscribe to its Code of Ethics.
This copyright laws of the United States (17 U.S. Code) forbid the unauthorized
reproduction of this form by any means, including fascimile or computerized
formats. Copyright(c) 1993-1998, CALIFORNIA ASSOCIATION OF REALTORS(R).
l Published and Distributed by: OFFICE USE ONLY
o REAL ESTATE BUSINESS SERVICES, INC. Reviewed by Broker
g a subsidiary of the CALIFORNIA ASSOCIATION OF REALTORS(R) or Deisgnee______
o 525 South Virgil Avenue, Los Angeles, California 90020 Date ______ (logo)
PRINT DATE
R APR 98
<PAGE>
CALIFORNIA
[logo] ASSOCIATION RESIDENTIAL LEASE OR
OF REALTORS(R) MONTH-TO-MONTH RENTAL AGREEMENT
The Vistas / MAJID MAHROOM (831) 595-9292 (Dianne) ("Landlord") and
Secure Systems Solutions 25580 Via Casador, ("Tenant") agree as follows:
Carmel CA 93923
1. PROPERTY:
A. Landlord rents to Tenant and Tenant rents from Landlord, the real property
and improvements described as: 24525 Outlook Dr #26 Carmel, CA 93923
______________________________________("Premises").
B. The following personal property is included: Refrigerator
2. TERM: The term begins on (date) September 8, 1999 ("Commencement Date"),
(Check A or B):
[ ] A. Month-to-month: and continues as a month-to-month tenancy. Either
party may terminate the tenancy by giving written notice to the other at
least 30 days prior to the intended termination date, subject to any
applicable local laws. Such notice may be give on any date.
[X] B. Lease: and shall terminate on (date) August 31, 2000 at 12 AM/PM.
Any holding over after the term of this Agreement expires, with
Landlord's consent, shall create a month-to-month tenancy which either
party may terminate as specified in paragraph 2A. Rent shall be at a rate
equal to the rent for the immediately preceding month, unless otherwise
notified by Landlord, payable in advance. All other terms and conditions
of this Agreement shall remain in full force and effect.
3. RENT:
A. Tenant agrees to pay rent at the rate of $2,250 per month for the term of
the Agreement.
B. Rent is payable in advance on the 1st (or [ ]) day of each calendar month,
and is delinquent on the next day.
C. If Commencement Date falls on any day other than the first day of the
month, rent shall be prorated based on a 30-day period. If Tenant has paid
one full month's rent in advance of Commencement Date, rent for the second
calendar month shall be prorated based on a 30-day period.
D. PAYMENT: The rent shall be paid to (name) The Vistas or Majid Mahroom,
at (address) given to Dianne Mahroom or Majil Mahroom-3510 Edgefield Pl,
Carmel, CA 93923 or at any other location specified by Landlord in writing
to Tenant.
4. SECURITY DEPOSIT:
A. Tenant agrees to pay $2,250 as a security deposit. Security deposit will
be [X] given to the Owner of the Premises; or [ ] held in Owner's
Broker's trust account.
B. All or any portion of the security deposit may be used, as reasonably
necesssary, to: (1) cure Tenant's default in payment of rent. Late
Charges, NSF fees, or other sums due; (2) repair damage, excluding
ordinary wear and tear, caused by Tenant or by a guest or licensee of
Tenant; (3) clean Premises, if necessary, upon termination of tenancy; and
(4) replace or return personal property or appurtenances. SECURITY DEPOSIT
SHALL NOT BE USED BY TENANT IN LIEU OF PAYMENT OF LAST MONTH'S RENT. If
all or any portion of the security deposit is used during tenancy, Tenant
agrees to reinstate the total security deposit within five days after
written notice is delivered to Tenant. Within three weeks after Tenant
vacates the Premises, Landlord shall (1) furnish Tenant an itemized state-
ment indicating the amount of any security deposit received and the basis
for its disposition, and (2) return any remaining portion of security
deposit to Tenant.
C. No interest will be paid on security deposit, unless required by local
ordinance.
D. If security deposit is held by Owner, Tenant agrees not to hold Broker
responsible for its return. If security deposit is held in Owner's
Broker's trust account, and Broker's authority is terminated before
expiration of this Agreement, and security deposits are released to
someone other than Tenant, then Broker shall notify Tenant, in writing,
where and to whom security deposit has been released. Once Tenant has
been provided such notice, Tenant agrees not to hold Broker responsible
for security deposit.
<PAGE>
5. MOVE-IN COSTS RECEIVED/DUE:
________________________________________________________________________________
Category Total Due Payment Received Balance Due Date Due
________________________________________________________________________________
Rent from 9/8/99 1,725 1,725
to 9/30/99 (date)
________________________________________________________________________________
*Security Deposit 2,250 2,250
________________________________________________________________________________
Other______
________________________________________________________________________________
Other______ 3,975 3,975
________________________________________________________________________________
Total 0
________________________________________________________________________________
*The maximum amount that Landlord may receive as security deposit, however
designated, cannot exceed two month's rent for an unfurnished premises, and
three month's rent for a furnished premises.
6. PARKING: (Check A or B)
[X] A. Parking is permitted as follows: One covered garage space and one
uncovered space. The right to parking [X] is, [ ]is not, included in
the rent charged pursuant to paragraph 3. If not included in the rent,
the parking rental fee shall be an additional $______per month.
Parking space(s) are to be used for parking operable motor vehicles,
except for trailers, boats, campers, buses or trucks (other than
pick-up trucks). Tenant shall park in assigned space(s) only. Parking
space(s) are to be kept clean. Vehicles leaking oil, gas or other
motor vehicle fluids shall not be parked on the Premises. Mechanical
work or storage of inoperable vehicles is not allowed in parking
space(s) or elsewhere on the Premises.
OR [ ] B. Parking is not permitted on the Premises.
7. STORAGE:(Check A or B)
[X] A. Storage is permitted as follows: on deck and one rubbermaid in garage.
The right to storage space [x] is, [ ] not, included in the rent
charged pursuant to paragraph 3. If not included in rent, storage
space shall be an additional $________per month. Tenant shall store
only personal property that Tenant owns, and shall not store property
that is claimed by another or in which another has any right, title,
or interest. Tenant shall not store any improperly packaged food or
perishable goods, flammable materials, explosives, or other inherently
dangerous material.
OR [ ] B. Storage is not permitted on the Premises.
8. LATE CHARGE/NSF CHECKS: Tenant acknowledges that either late payment of rent
or issuance of a non-sufficient funds ("NSF") check may cause Landlord to
incur costs and expenses, the exact amount of which are extremely difficult
and impractical to determine. These costs may include, but are not limited
to, processing, enforcement and accounting expenses, and late charges
imposed on Landlord. If any installment of rent due from Tenant is not
received by Landlord within 5 (or [ ] ______) calendar days after date
due, or if a check is returned NSF, Tenant shall pay to Landlord,
respectively, an additional sum of $225 as Late Charge and $25.00 as a NSF
fee, either or both of which shall be deemed additional rent. Landlord and
Tenant agree that these charges represent a fair and reasonable estimate of
the costs Landlord may incur by reason of Tenant's late or NSF payment. Any
Late Charge or NSF fee due shall be paid with the current installment of
rent. Landlord's acceptance of any Late Charge or NSF fee shall not
constitute a waiver as to any default of Tenant. Landlord's right to
collect a Late Charge or NSF fee shall not be deemed an extension of the
date rent is due under paragraph 3, or prevent Landlord from exercising
any other rights and remedies under this Agreement, and as provided by law.
Tenant and Landlord acknowledge receipt of copy of this page, which
constitutes Page 1 of 3 Pages
Tenant's initials (______) (______) Landlord's initials ______) (______)
THIS FORM HAS BEEN APPROVED BY THE CALIFORNIA ASSOCIATION OF REALTORS(R)
(C.A.R.). NO REPRESENTATION IS MADE AS TO THE LEGAL VALIDITY OR ADEQUACY OF ANY
PROVISION IN ANY SPECIFIC TRANSACTION. A REAL ESTATE BROKER IS THE PERSON
QUALIFIED TO ADVISE ON REAL ESTATE TRANSACTIONS. IF YOU DESIRE LEGAL OR TAX
ADVICE, CONSULT AN APPROPRIATE PROFESSIONAL.
The copyright laws of the United States (17 U.S. Code) forbid the unauthorized
reproduction of this form by any means, including facsimile or computerized
formats. Copyright(c) 1994-1997, CALIFORNIA ASSOCIATION OF REALTORS(R)
l Published and Distributed by: OFFICE USE ONLY
o REAL ESTATE BUSINESS SERVICES, INC. Reviewed by Broker
g a subsidiary of the CALIFORNIA ASSOCIATION OF REALTORS(R) or Deisgnee______
o 525 South Virgil Avenue, Los Angeles, California 90020 Date ______ (logo)
PRINT DATE
R JUL 98
<PAGE>
Premises: 24525 Outlook Dr #26, Carmel Ca 93923 Date 9/4/99
------------------------------------- ------
9. CONDITION OF PREMISES: Tenant has examined Premises, all furniture,
furnishings, appliances and landscaping, if any, and fixtures, including
smoke detector(s).
(Check one:)
[X] A. Tenant acknowledges that these items are clean and in operative
condition, with the following exceptions ____________________________
_____________________________________________________________________
OR [ ] B. Tenants acknowledgement of the condition of these items is contained
in an attached statement of condition, (such as C.A.R.'s MIMO-11).
OR [ ] C. Tenant will provide Landlord a list of items which are damaged or not
in operable condition within 3 (or [ ] ________) days after
Commencement Date, not as a contingency of this Agreement but rather
as an acknowledgement of the condition of the Premises.
OR [ ] D. Other:_______________________________________________________________
10. NEIGHBORHOOD CONDITIONS: Tenant is advised to satisfy him or herself as to
neighborhood or area conditions, including schools, proximity and adequacy
of law enforcement, crime statistics, registered felons or offenders, fire
protection, other governmental services, proximity to commercial, industrial
or agricultural activities, existing and proposed transportation,
construction and development which may affect noise, view, or traffic,
airport noise, noise or odor from any source, wild and domestic animals,
other nuisances, hazards, or circumstances, facilities and condition of
common areas, conditions and influences of significance to certain cultures
and/or religions, and personal needs, requirements and preferences to
Tenant.
11. UTILITIES: Tenant agrees to pay for all utilities and services, and the
following charges:__________________________________________________________
except Garbage, which shall be paid for by Landlord. If any utilities are
not separately metered, Tenant shall pay Tenant's proportional share, as
reasonably determined by Landlord.
12. OCCUPANTS: The Premises are for the sole use as a personal residence by the
following named persons only: Gary Baker and Christine Baker.
13. PETS: No animal or pet shall be kept on or about the Premises without
Landlord's prior written consent, except____________________________________
____________________________________________________________________________
14. RULES/REGULATIONS: Tenant agrees to comply with all rules and regulations of
Landlord which are at any time posted on the Premises or delivered to
Tenant. Tenant shall not, and shall ensure that guests and licensees of
Tenant shall not, disturb, annoy, endanger, or interfere with other tenants
of the building or neighbors, or use the Premises for any unlawful purposes,
including, but not limited to, manufacturing, selling, storing, or
transporting illicit drugs or other contraband, or violate any law or
ordinance, or commit a waste or nuisance on or about the Premises.
15. CONDOMINIUM/PLANNED UNIT DEVELOPMENT: [ ] (if checked) The Premises is a
unit in a condominium, planned unit, or other development governed by an
owner's association. The name of the owner's association is _______________.
Tenant agrees to comply with all covenants, conditions and restrictions,
by-laws, rules and regulations and decisions of owner's association.
Landlord shall provide Tenant copies of rules and regulations, if any.
Tenant shall reimburse Landlord for any fines or charges imposed by owner's
association or other authorities, due to any violation by Tenant, or the
guests or licensees of Tenant.
16. MAINTENANCE:
A. Tenant shall properly use, operate, and safeguard Premises, including if
applicable, any landscaping, furniture, furnishings, and appliances and
all mechanical, electrical, gas and plumbing fixtures, and keep them
clean and sanitary. Tenant shall immediately notify Landlord, in writing,
of any problem, malfunction or damage. Tenant shall pay for all repairs
or replacements caused by Tenant, or guests or invitees of Tenant,
excluding ordinary wear and tear. Tenant shall pay for all damage to
Premises as a result of failure to report a problem in a timely manner.
Tenant shall pay for repair of drain blockages or stoppages, unless
caused by defective plumbing parts or tree roots invading sewer lines.
B. [X] Landlord, [ ] Tenant, shall water the garden, landscaping, trees and
shrubs, except __________________________________________________________
_________________________________________________________________________
C. [X] Landlord, [ ] Tenant shall maintain the garden, landscaping, trees,
and shrubs, except_______________________________________________________
17. ALTERATIONS: Tenant shall not make any alterations in or about the Premises,
without Landlord's prior written consent, including: painting, wallpapering,
adding or changing locks, installing antenna or satellite dish, placing
signs, displays or exhibits, or using screws, fastening devises, large nails
or adhesive materials.
<PAGE>
18. KEYS/LOCKS:
A. Tenant acknowledges receipt of (or Tenant will receive [ ] prior to the
Commencment Date, or [X] at commencement):
[X] 2 key(s) to Premises, [ ] ___ remote control device for
garage door/gate opener(s).
[X] 2 key(s) to mailbox, [ ] ______________________________
[ ] ___ key(s) to common area(s), [ ] ______________________________
B. Tenant acknowledges that locks to the Premises [ ] have, [ ] have not,
been re-keyed.
C. If Tenant re-keys existing locks or opening devices, Tenant shall
immediately deliver copies of all keys to Landlord. Tenant shall pay all
costs and charges related to loss of any keys or opening devices. Tenant
may not remove locks, even if installed by Tenant.
19. ENTRY: Tenant shall make Premises available to Landlord or representative
for the purpose of entering to make necessary or agreed repairs,
decorations, alterations or improvements, or to supply necessary or agreed
services, or to show Premises to prospective or actual purchasers, tenants,
mortgagees, lenders, appraisers, or contractors. Landlord and Tenant agree
that twenty-four hours notice (oral or written) shall be reasonable and
sufficient notice. In an emergency, Landlord or representative may enter
Premises at any time without prior notice.
20. SIGNS: Tenant authorizes Landlord to place For Sale/Lease signs on the
Premises.
21. ASSIGNMENT/SUBLETTING: Tenant shall not sublet all or any part of Premises,
or assign or transfer this Agreement or any interest in it, without prior
written consent of Landlord. Unless such consent is obtained, any
assignment, transfer or subletting of Premises or this Agreement or tenancy,
by voluntary act of Tenant, operation of law, or otherwise, shall be null
and void, and, at the option of Landlord, terminate this Agreement. Any
proposed assignee, transferee or sublessee shall submit to Landlord an
application and credit information for Landlord's approval, and, if
approved, sign a separate written agreement with Landlord and Tenant.
Landlord's consent to any one assignment, transfer, or sublease, shall not
be construed as consent to any subsequent assignment, transfer or sublease,
and does not release Tenant of Tenant's obligation under this Agreement.
22. [ ] LEAD PAINT (CHECK IF APPLICABLE): Premises was constructed prior to
1978. In accordance with federal law, Landlord gives, and Tenant
acknowledges receipt of, the disclosures on the attached form (such as
C.A.R. Form FLD-14) and a federally approved lead pamphlet.
23. POSSESSION: If Landlord is unable to deliver possession of Premises on
Commencement Date, such Date shall be extended to date on which possession
is made available to Tenant. If Landlord is unable to deliver possession
within 5 (or [ ] ___) calendar days after agreed Commencement Date, Tenant
may terminate this Agreement by giving written notice to Landlord, and
shall be refunded all rent and security deposit paid.
24. TENANT'S OBLIGATIONS UPON VACATING PREMISES: Upon termination of Agreement,
Tenant shall: (a) give Landlord all copies of all keys or opening devices to
Premises, including any common areas; (b) vacate Premises and surrender it
to Landlord empty of all persons; (c) vacate any/all parking and/or storage
space; (d) deliver Premises to Landlord in the same condition as referenced
in paragraph 9; (e) clean Premises, including professional cleaning of
carpet and drapes; (f) give written notice to Landlord of Tenant's
forwarding address, and (h)_________________________________________________
___________________________________________________________________________.
All improvements installed by Tenant, with or without Landlord's consent,
become the property of Landlord upon termination.
25. BREACH OF CONTRACT/EARLY TERMINATION: In addition to any obligations
established by paragraph 24, in event of termination by Tenant prior to
completion of the original term of Agreement, Tenant shall also be
responsible for lost rent, rental commissions, advertising expenses, and
painting costs necessary to ready Premises for re-rental.
26. TEMPORARY RELOCATION: Tenant agrees, upon demand of Landlord, to temporarily
vacate Premises for a reasonable period, to allow for fumigation, or other
methods, to control wood destroying pests or organisms, or other repairs to
Premises. Tenant agrees to comply with all instructions and requirements
necessary to prepare Premises to accommodate pest control, fumigation or
other work, including bagging or storage of food and medicine, and removal
of perishables and valuables. Tenant shall only be entitled to a credit of
rent equal to the per diem rent for the period of time Tenant is required to
vacate Premises.
27. DAMAGE TO PREMISES: If, by no fault of Tenant, Premises are totally or
partially damaged or destroyed by fire, earthquake, accident or other
casualty, which render Premises uninhabitable, either Landlord or Tenant may
terminate Agreement by giving the written notice. Rent shall be abated as of
date of damage. The abated amount shall be the current monthly rent prorated
on a 30-day basis. If Agreement is not terminated, Landlord shall promptly
repair the damage, and rent shall be reduced based on the extent to which
the damage interferes with Tenant's reasonable use of Premises. If damage
occurs as a result of an act of Tenant or Tenant's guests, only Landlord
shall have the right of termination, and no reduction in rent shall be made.
Tenant and Landlord acknowledge receipt of copy of this page, which constitutes
Page 2 of 3 Pages.
Tenant's Initials (____) (____) Landlord's initials (______) (______)
<PAGE>
28. INSURANCE: Tenant's personal property and vehicles are not insured by
Landlord or, if applicable, owner's association, against loss or damage
due to fire, theft, vandalism, rain, water, criminal or negligent acts of
others, or any other cause. Tenant is to carry Tenant's own Insurance
(Renter's Insurance) to protect Tenant from any such loss.
29. WATERBEDS: Tenant shall not use or have waterbeds on the Premises unless:
(a) Tenant obtains a valid waterbed insurance policy; (b) Tenant increases
the security deposit in an amount equal to one-half of one month's rent;
and (c) the bed conforms to the floor load capacity of Premises.
30. WAIVER: The waiver of any breach shall not be construed as a continuing
waiver of the same or any subsequent breach.
31. NOTICE: Notices may be served at the following address, or at any other
location subsequently designated:
Landlord: Majid Mahroom Tenant: Gary and Christine Baker
3510 Edgefield Pl.
Carmel CA 93923
32. TENANCY STATEMENT (ESTOPPEL CERTIFICATE): Tenant shall execute and return a
tenancy statement (estoppel certificate) delivered to Tenant by Landlord or
Landlord's agent within 3 days after its receipt. The tenancy statement
acknowledges that this Agreement is unmodified and in full force, or in
full force as modified, and states the modifications. Failure to comply
with this requirement shall be deemed Tenant's acknowledgment that the
tenancy statement is true and correct, and may be relied upon by a lender
or purchaser.
33. JOINT AND INDIVIDUAL OBLIGATIONS: If there is more than one Tenant, each
one shall be individually and completely responsible for the performance of
all obligations of Tenant under this Agreement, jointly with every other
Tenant, and individually, whether or not in possession.
34. [ ] MILITARY ORDINANCE DISCLOSURE: (It applicable and known to Landlord)
Premises is located within one mile of an area once used for military
training, and which may contain potentially explosive munitions.
35. TENANT REPRESENTATIONS; CREDIT: Tenant warrants that all statements in
Tenant's rental application are accurate. Tenant authorizes Landlord and
Broker(s) to obtain Tenant's credit report at time of application and
periodically during tenancy in connection with approval, modification, or
enforcement of this Agreement. Landlord may cancel this Agreement, (a)
before occupancy begins, upon disapproval of the credit report(s), or (b)
at any time, upon discovering that information in Tenant's application is
false. A negative credit report reflecting on Tenant's record may be
submitted to a credit reporting agency if Tenant fails to fulfill the terms
of payment and other obligations under this Agreement.
36. OTHER TERMS AND CONDITIONS/SUPPLEMENTS: ___________________________________
___________________________________________________________________________
___________________________________________________________________________
The following ATTACHED supplements are incorporated in this Agreement:
2 page House Rules_________________________________________________________
37. ATTORNEY'S FEES: In any action or proceeding arising out of this
Agreement, the prevailing party between Landlord and Tenant shall be
entitled to reasonable attorney's fees and costs.
38. ENTIRE CONTRACT: Time is of the essence. All prior agreements between
Landlord and Tenant are incorporated in this Agreement which constitutes
the entire contract. It is intended as a final expression of the parties'
agreement, and may not be contradicted by evidence of any prior agreement
or contemporaneous oral agreement. The parties further intend that this
Agreement constitutes the complete and exclusive statement of its terms,
and that no extrinsic evidence whatsoever may be introduced in any judicial
or other proceeding, if any, involving this Agreement. Any provision of
this Agreement which is held to be invalid shall not affect the validity or
enforceability of any other provision in this Agreement.
<PAGE>
39. AGENCY:
A. Confirmation: The following agency relationship(s) are hereby confirmed
for this transaction:
Listing Agent: (Print firm name) __________________________ is the agent
of
(check one): [ ] the Landlord exclusively; or [ ] both the Landlord
and Tenant.
Leasing Agent: (Print firm name) _______________________________________
(if not same as Listing Agent) is the agent of
(check one): [ ] the Tenant exclusively; or [ ] the Landlord
exclusively; or [ ] both the Tenant and Landlord.
B. Disclosure: [ ] (if checked): The term of this lease exceeds one year.
An agency disclosure form has been provided to Landlord and Tenant, who
each acknowledge its receipt.
40. [ ] INTERPRETER/TRANSLATOR: The terms of this Agreement have been
interpreted/translated for Tenant into the following language:
_____________________________. Interpretation/translation service has been
provided by (print name) _________________________________________________,
who has the following Driver's License or other Identification number: ____
_______________. Tenant has been advised to rely on, and has in fact solely
relied on the interpretation/translation services of the above-named
individual, and not on the Landlord or other person involved in negotiating
the Agreement. If the Agreement has been negotiated primarily in Spanish,
Tenant has been provided a Spanish language translation of this Agreement
pursuant to California Civil Code. (C.A.R.Form LR-14-S fulfills this
requirement.)
Signature of interpreter/translator _____________________ Date ___________
- --------------------------------------------------------------------------------
Landlord and Tenant acknowledge and agree that Brokers: (a) Do not
guarantee the condition of the Premises; (b) Cannot verify representations
made by others; (c) Cannot provide legal or tax advice; (d) Will not
provide other advice or Information that exceeds the knowledge, education
or experience required to obtain a real estate license. Furthermore, if
Brokers are not also acting as Landlord in this Agreement, Brokers (e) Do
not decide what rental rate a Tenant should pay or Landlord should accept;
and (f) Do not decide upon the length or other terms of tenancy. Landlord
and Tenant agree that they will seek legal, tax, insurance, and other
desired assistance from appropriate professionals.
- --------------------------------------------------------------------------------
Tenant Roger R. Schell, President /s/ Roger R. Schell Date 9/4/99
------------------------------------------------ ------------------
Secure Systems Solutions Date 9/4
------------------
Landlord ___________________________________________ Date __________________
(owner or agent with authority to enter into this lease)
Landlord ____________________________________________ Date __________________
(owner or agent with authority to enter into this lease)
Agency relationships are confirmed as above. Real estate brokers who are not
also Landlord in this Agreement are not a party to the Agreement between
Landlord and Tenant.
Real Estate Broker __________________ By ________________________ Date _________
(Leasing Firm Name)
Address _____________________________ Telephone _________________ Fax __________
Real Estate Broker __________________ By ________________________ Date _________
(Listing Firm Name)
Address _____________________________ Telephone _________________ Fax __________
This form is available for use by the entire real estate industry. It is not
intended to identify the user as a REALTOR(R), REALTOR(R) is a registered
collective membership mark which may be used only by members of the NATIONAL
ASSOCIATION OF REALTORS(R) who subscribe to its Code of Ethics.
OFFICE USE ONLY
Reviewed by Broker [HOUSE]
or Designee ______ EQUAL HOUSING
Date _____________ OPPORTUNITY
<PAGE>
BASIC LEASE INFORMATION
OFFICE NET
<TABLE>
<CAPTION>
<S> <C>
LEASE DATE: September 3, 1999
TENANT: Enterprise Solutions, Inc., A Nevada corporation
TENANT'S NOTICE ADDRESS: 50 Ragsdale Drive, Suite 150, Monterey, California 93940
TENANT'S BILLING ADDRESS: 50 Ragsdale Drive, Suite 150, Monterey, California 93940
TENANT CONTACT: Mr. Gary Baker PHONE NUMBER: 801-368-7108
FAX NUMBER:
LANDLORD: Spieker Properties, L.P., a California limited partnership
LANDLORD'S NOTICE ADDRESS: 40 Ragsdale Drive, Suite 100, Monterey, California 93940
LANDLORD'S REMITTANCE ADDRESS: P.O. Box 45587, Dept. 10321, San Francisco, California 94145-0670
Project Description: A two-story wood frame office building located at 50 Ragsdale
Drive, Monterey, California
Building Description: A two-story wood frame office building located at 50 Ragsdale
Drive, Monterey, California
Premises: Suite 150, Approximately 4,735 rentable square feet
Permitted Use: General Office
Occupancy Density: One (1) person per two hundred fifty (250) rentable square feet.
Parking Density: One (1) parking space per two hundred seventy-five (275) rentable
square feet.
Parking and Parking Charge: Seventeen (17) non-exclusive spaces at no additional charge.
Scheduled Term Commencement Date: September 15, 1999
Scheduled Length of Term: 36 Months
Scheduled Term Expiration Date: September 14, 2002
Rent:
Base Rent: $5,919.00 per month
(subject to adjustment as provided in Paragraph 39 A hereof)
Estimated First Year Operating Expenses: $2,320.00 per month
Security Deposit: $8,239.00 payable upon lease execution.
Tenant's Proportionate Share:
Of Building: 21.37%
Of Project: 21.37%
</TABLE>
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.
LANDLORD TENANT
Spieker Properties, L.P., Enterprise Solutions, Inc.
a California limited partnership A Nevada corporation
By: Spieker Properties, Inc.,
a Maryland corporation, By: Wayne Kight
its general partner --------------------------
Wayne Kight
Its: President
By: Joseph Russell, Jr.
-----------------------------------
Joseph Russell, Jr.
Its: Regional Senior Vice President
<PAGE>
TABLE OF CONTENTS
Page
Basic Lease Information.................................................. 1
Table of Contents........................................................ 2
1. Premises................................................................. 3
2. Possession and Lease Commencement....................................... 3
3. Term .................................................................... 3
4. Use...................................................................... 3
5. Rules and Regulations.................................................... 4
6. Rent..................................................................... 4
7. Operating Expenses....................................................... 4
8. Insurance and Indemnification............................................ 6
9. Waiver of Subrogation.................................................... 7
10. Landlord's Repairs and Maintenance....................................... 8
11. Tenant's Repairs and Maintenance......................................... 8
12. Alterations.............................................................. 8
13. Signs.................................................................... 8
14. Inspection/Posting Notices............................................... 9
15. Services and Utilities................................................... 9
16. Subordination............................................................ 10
17. Financial Statements..................................................... 10
18. Estoppel Certificate..................................................... 10
19. Security Deposit......................................................... 10
20. Limitation of Tenant's Remedies.......................................... 10
21. Assignment and Subletting................................................ 10
22. Authority of Tenant...................................................... 11
23. Condemnation............................................................. 11
24. Casualty Damage.......................................................... 12
25. Holding Over............................................................. 12
26. Default.................................................................. 13
27. Liens.................................................................... 14
28. Substitution............................................................. 14
29. Transfers by Landlord.................................................... 14
30. Right of Landlord to Perform Tenant's Covenants.......................... 14
31. Waiver................................................................... 14
32. Notices.................................................................. 14
33. Attorney's Fees.......................................................... 15
34. Successors and Assigns................................................... 15
35. Force Majeure............................................................ 15
36. Surrender of Premises.................................................... 15
37. Parking.................................................................. 15
38. Miscellaneous............................................................ 16
39. Additional Provisions.................................................... 16
40. Jury Trial Waiver........................................................ 17
Signatures............................................................... 17
Exhibits:
Exhibit A..............................................Rules and Regulations
Exhibit B....................................Site Plan, Property Description
Exhibit C.............................Tenant Improvements and Specifications
Exhibit D.........................................................Space Plan
<PAGE>
LEASE
THIS LEASE is made as of the 3rd day of September, 1999, by and between Spieker
Properties, L.P., a California limited partnership (hereinafter called
"Landlord"), and Enterprise Solutions, Inc., A Nevada corporation (hereinafter
called "Tenant").
1. PREMISES
Landlord leases to Tenant and Tenant leases from Landlord, upon the terms
and conditions hereinafter set forth, those premises (the "Premises") outlined
in red on Exhibit B and described in the Basic Lease Information. The Premises
shall be all or part of a building (the "Building") and of a project (the
"Project"), which may consist of more than one building and additional
facilities, as described in the Basic Lease Information. The Building and
Project are outlined in blue and green respectively on Exhibit B. Landlord and
Tenant acknowledge that physical changes may occur from time to time in the
Premises, Building or Project, and that the number of buildings and additional
facilities which constitute the Project may change from time to time, which may
result in an adjustment in Tenant's Proportionate Share, as defined in the Basic
Lease Information, as provided in Paragraph 7.A.
2. POSSESSION AND LEASE COMMENCEMENT
A. Existing Improvements. If this Lease pertains to a Premises in which the
interior improvements have already been constructed ("Existing Improvements"),
the provisions of this Paragraph 2.A. shall apply and the term commencement date
("Term Commencement Date") shall be the earlier of the date on which: (1) Tenant
takes possession of some or all of the Premises; or (2) Landlord notifies Tenant
that Tenant may occupy the Premises. If for any reason Landlord cannot deliver
possession of the Premises to Tenant on the scheduled Term Commencement Date,
Landlord shall not be subject to any liability therefor, nor shall Landlord be
in default hereunder nor shall such failure affect the validity of this Lease,
and Tenant agrees to accept possession of the Premises at such time as Landlord
is able to deliver the same, which date shall then be deemed the Term
Commencement Date. Tenant shall not be liable for any Rent (defined below) for
any period prior to the Term Commencement Date. Tenant acknowledges that Tenant
has inspected and accepts the Premises in their present condition, "as is," and
as suitable for, the Permitted Use (as defined below), and for Tenant's intended
operations in the Premises. Tenant agrees that the Premises and other
improvements are in good and satisfactory condition as of when possession was
taken. Tenant further acknowledges that no representations as to the condition
or repair of the Premises nor promises to alter, remodel or improve the Premises
have been made by Landlord or any agents of Landlord unless such are expressly
set forth in this Lease. Upon Landlord's request, Tenant shall promptly execute
and return to Landlord a "Start-Up Letter" in which Tenant shall agree, among
other things, to acceptance of the Premises and to the determination of the Term
Commencement Date, in accordance with the terms of this Lease, but Tenant's
failure or refusal to do so shall not negate Tenant's acceptance of the Premises
or affect determination of the Term Commencement Date.
B. Construction of Improvements. If this Lease pertains to a Building to be
constructed or improvements to be constructed within a Building, the provisions
of this Paragraph 2.B. shall apply in lieu of the provisions of Paragraph 2.A.
above and the term commencement date ("Term Commencement Date") shall be the
earlier of the date on which: (1) Tenant takes possession of some or all of the
Premises; or (2) the improvements to be constructed or performed in the Premises
by Landlord (if any) shall have been substantially completed in accordance with
the plans and specifications, if any, described on Exhibit C and Tenant's taking
of possession of the Premises or any part thereof shall constitute Tenant's
confirmation of substantial completion for all purposes hereof, whether or not
substantial completion of the Building or Project shall have occurred. If for
any reason Landlord cannot deliver possession of the Premises to Tenant on the
scheduled Term Commencement Date, Landlord shall not be subject to any liability
therefor, nor shall Landlord be in default hereunder nor shall such failure
affect the validity of this Lease, and Tenant agrees to accept possession of the
Premises at such time as such improvements have been substantially completed,
which date shall then be deemed the Term Commencement Date. Tenant shall not be
liable for any Rent for any period prior to the Term Commencement Date (but
without affecting any obligations of Tenant under any improvement agreement
appended to this Lease). In the event of any dispute as to substantial
completion of work performed or required to be performed by Landlord, the
certificate of Landlord's architect or general contractor shall be conclusive.
Substantial completion shall have occurred notwithstanding Tenant's submission
of a punchlist to Landlord, which Tenant shall submit, if at all, within three
(3) business days after the Term Commencement Date or otherwise in accordance
with any improvement agreement appended to this Lease. Upon Landlord's request,
Tenant shall promptly execute and return to Landlord a "Start-Up Letter" in
which Tenant shall agree, among other things, to acceptance of the Premises and
to the determination of the Term Commencement Date, in accordance with the terms
of this Lease, but Tenant's failure or refusal to do so shall not negate
Tenant's acceptance of the Premises or affect determination of the Term
Commencement Date.
<PAGE>
3. TERM
The term of this Lease (the "Term") shall commence on the Term Commencement
Date and continue in full force and effect for the number of months specified as
the Length of Term in the Basic Lease Information or until this Lease is
terminated as otherwise provided herein. If the Term Commencement Date is a date
other than the first day of the calendar month, the Term shall be the number of
months of the Length of Term in addition to the remainder of the calendar month
following the Term Commencement Date.
4. USE
A. General. Tenant shall use the Premises for the permitted use specified in the
Basic Lease Information ("Permitted Use") and for no other use or purpose.
Tenant shall control Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees and subtenants (collectively, "Tenant's
Parties") in such a manner that Tenant and Tenant's Parties cumulatively do not
exceed the occupant density (the "Occupancy Density") or the parking density
(the "Parking Density") specified in the Basic Lease Information at any time. So
long as Tenant is occupying the Premises, Tenant and Tenant's Parties shall have
the nonexclusive right to use, in common with other parties occupying the
Building or Project, the parking areas, driveways and other common areas of the
Building and Project, subject to the terms of this Lease and such rules and
regulations as Landlord may from time to time prescribe. Landlord reserves the
right, without notice or liability to Tenant, and without the same constituting
an actual or constructive eviction, to alter or modify the common areas from
time to time, including the location and configuration thereof, and the
amenities and facilities which Landlord may determine to provide from time to
time.
B. Limitations. Tenant shall not take any action, permit any odors, smoke, dust,
gas, substances, noise or vibrations to emanate from the Premises or from any
portion of the common areas as a result of Tenant's or any Tenant's Party's use
thereof, which would constitute a nuisance or would disturb, obstruct or
endanger any other tenants or occupants of the Building or Project or elsewhere,
or interfere with their use of their respective premises or common areas.
Storage outside the Premises of materials, vehicles or any other items is
prohibited. Tenant shall not use or allow the Premises to be used for any
immoral, improper or unlawful purpose, nor shall Tenant cause or maintain or
permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer the commission of any waste in, on or about the Premises. Tenant shall
not allow any sale by auction upon the Premises, or place any loads upon the
floors, walls or ceilings which could endanger the structure, or place any
harmful substances in the drainage system of the Building or Project. No waste,
materials or refuse shall be dumped upon or permitted to remain outside the
Premises. Landlord shall not be responsible to Tenant for the non-compliance by
any other tenant or occupant of the Building or Project with any of the
above-referenced rules or any other terms or provisions of such tenant's or
occupant's lease or other contract.
C. Compliance with Regulations. By entering the Premises, Tenant accepts the
Premises in the condition existing as of the date of such entry. Tenant shall at
its sole cost and expense strictly comply with all existing or future applicable
municipal, state and federal and other governmental statutes, rules,
requirements, regulations, laws and ordinances, including zoning ordinances and
regulations, and covenants, easements and restrictions of record governing and
relating to the use, occupancy or possession of the Premises, to Tenant's use of
the common areas, or to the use, storage, generation or disposal of Hazardous
Materials (hereinafter defined) (collectively "Regulations"). Tenant shall at
its sole cost and expense obtain any and all licenses or permits necessary for
Tenant's use of the Premises. Tenant shall at its sole cost and expense promptly
comply with the requirements of any board of fire underwriters or other similar
body now or hereafter constituted. Tenant shall not do or permit anything to be
done in, on, under or about the Project or bring or keep anything which will in
any way increase the rate of any insurance upon the Premises, Building or
Project or upon any contents therein or cause a cancellation of said insurance
or otherwise affect said insurance in any manner. Tenant shall indemnify, defend
(by counsel reasonably acceptable to Landlord), protect and hold Landlord
harmless from and against any loss, cost expense, damage, attorneys' fees or
liability arising out of the failure of Tenant to comply with any Regulation.
Tenant's obligations pursuant to the foregoing indemnity shall survive the
expiration or earlier termination of this Lease.
<PAGE>
D. Hazardous Materials. As used in this Lease, "Hazardous Materials" shall
include, but not be limited to, hazardous, toxic and radioactive materials and
those substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes, "toxic substances," or other similar designations in any
Regulation. Tenant shall not cause, or allow any of Tenant's Parties to cause,
any Hazardous Materials to be handles, used, generated, stored, released or
disposed of in, on, under or about the Premises, the Building or the Project or
surrounding land or environment in violation of any Regulations. Tenant must
obtain Landlord's written consent prior to the introduction of any Hazardous
Materials onto the Project. Notwithstanding the foregoing, Tenant may handle,
store, use and dispose of products containing small quantities of Hazardous
Materials for "general office purposes" (such as toner for copiers) to the
extent customary and necessary for the Permitted Use of the Premises; provided
that Tenant shall always handle, store, use, and dispose of any such Hazardous
Materials in a safe and lawful manner and never allow such Hazardous Materials
to contaminate the Premises, Building, or Project or surrounding land or
environment. Tenant shall immediately notify Landlord in writing of any
Hazardous Materials' contamination of any portion of the Project of which Tenant
becomes aware, whether or not caused by Tenant. Landlord shall have the right at
all reasonable times to inspect the Premises and to conduct tests and
investigations to determine whether Tenant is in compliance with the foregoing
provisions, the costs of all such inspections, tests and investigations to be
borne by Tenant. Tenant shall indemnify, defend (by counsel reasonably
acceptable to Landlord), protect and hold Landlord harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, liens, damages,
injuries or expenses (including attorneys' and consultants' fees and court
costs), demands, causes of action, or judgments directly or indirectly arising
out of or related to the use, generation, storage, release, or disposal of
Hazardous Materials by Tenant or any of Tenant's Parties in, on, under or about
the Premises, the Building or the Project or surrounding land or environment,
which indemnity shall include, without limitation, damages for personal or
bodily injury, property damage, damage to the environment or natural resources
occurring on or off the Premises, losses attributable to diminution in value or
adverse effects on marketability, the cost of any investigation, monitoring,
government oversight, repair, removal, remediation, restoration, abatement, and
disposal, and the preparation of any closure or other required plans, whether
such action is required or necessary prior to or following the expiration or
earlier termination of this Lease. Neither the consent by Landlord to the use,
generation, storage, release or disposal of Hazardous Materials nor the strict
compliance by Tenant with all laws pertaining to Hazardous Materials shall
excuse Tenant from Tenant's obligation of indemnification pursuant to this
Paragraph 4.D. Tenant's obligations pursuant to the foregoing indemnity shall
survive the expiration or earlier termination of this Lease.
5. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the building rules and
regulations attached hereto as Exhibit A and any other rules and regulations and
any modifications or additions thereto which Landlord may from time to time
prescribe in writing for the purpose of maintaining the proper care,
cleanliness, safety, traffic flow and general order of the Premises or the
Building or Project. Tenant shall cause Tenant's Parties to comply with such
rules and regulations. Landlord shall not be responsible to Tenant for the
non-compliance by any other tenant or occupant of the Building or Project with
any of such rules and regulations, any other tenant's or occupant's lease or any
Regulations.
<PAGE>
6. RENT
A. Base Rent. Tenant shall pay to Landlord and Landlord shall receive, without
notice or demand throughout the Term, Base Rent as specified in the Basic Lease
Information, payable in monthly installments in advance on or before the first
day of each calendar month, in lawful money of the United States, without
deduction or offset whatsoever, at the Remittance Address specified in the Basic
Lease Information or to such other place as Landlord may from time to time
designate in writing. Base Rent for the first full month of the Term shall be
paid by Tenant upon Tenant's execution of this Lease. If the obligation for
payment of Base Rent commences on a day other than the first day of a month,
then Base Rent shall be prorated and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date.
The Base Rent payable by Tenant hereunder is subject to adjustment as provided
elsewhere in this Lease, as applicable. As used herein, the term "Base Rent"
shall mean the Base Rent specified in the Basic Lease Information as it may be
so adjusted from time to time.
B. Additional Rent. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, Tenant's Proportionate Share of
Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be
paid by Tenant under Paragraph 15, the interest and late charge described in
Paragraphs 26.C. and D., and any monies spent by Landlord pursuant to Paragraph
30, shall be considered additional rent ("Additional Rent"). "Rent" shall mean
Base Rent and Additional Rent.
7. OPERATING EXPENSES
A. Operating Expenses. In addition to the Base Rent required to be paid
hereunder, Tenant shall pay as Additional Rent, Tenant's Proportionate Share of
the Building and/or Project (as applicable), as defined in the Basic Lease
Information, of Operating Expenses (defined below) in the manner set forth
below. Tenant shall pay the applicable Tenant's Proportionate Share of each such
Operating Expenses. Landlord and Tenant acknowledge that if the number of
buildings which constitute the Project increases or decreases, or if physical
changes are made to the Premises, Building or Project or the configuration of
any thereof, Landlord may at its discretion reasonably adjust Tenant's
Proportionate Share of the Building or Project to reflect the change. Landlord's
determination of Tenant's Proportionate Share of the Building and of the Project
shall be conclusive so long as it is reasonably and consistently applied.
"Operating Expenses" shall mean all expenses and costs of every kind and nature
which Landlord shall pay or become obligated to pay, because of or
<PAGE>
in connection with the ownership, management, maintenance, repair, preservation,
replacement and operation of the Building or Project and its supporting
facilities and such additional facilities now and in subsequent years as may be
determined by Landlord to be necessary or desirable to the Building and/or
Project (as determined in a reasonable manner) other than those expenses and
costs which are specifically attributable to Tenant or which are expressly made
the financial responsibility of Landlord or specific tenants of the Building or
Project pursuant to this Lease. Operating Expenses shall include, but are not
limited to, the following:
(1) Taxes. All real property taxes and assessments, possessory interest
taxes, sales taxes, personal property taxes, business or license taxes
or fees, gross receipts taxes, service payments in lieu of such taxes
or fees, annual or periodic license or use fees, excises, transit
charges, and other impositions, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind (including
fees "in-lieu" of any such tax or assessment) which are now or
hereafter assessed, levied, charged, confirmed, or imposed by any
public authority upon the Building or Project, its operations or the
Rent (or any portion or component thereof), or any tax, assessment or
fee imposed in substitution, partially or totally, of any of the above.
Operating Expenses shall also include any taxes, assessments,
reassessments, or other fees or impositions with respect to the
development, leasing, management, maintenance, alteration, repair, use
or occupancy of the Premises, Building or Project or any portion
thereof, including, without limitation, by or for Tenant, and all
increases therein or reassessments thereof whether the increases or
reassessments result from increased rate and/or valuation (whether upon
a transfer of the Building or Project or any portion thereof or any
interest therein or for any other reason). Operating Expenses shall not
include inheritance or estate taxes imposed upon or assessed against
the interest of any person in the Project, or taxes computed upon the
basis of the net income of any owners of any interest in the Project.
If it shall not be lawful for Tenant to reimburse Landlord for all or
any part of such taxes, the monthly rental payable to Landlord under
this Lease shall be revised to net Landlord the same net rental after
imposition of any such taxes by Landlord as would have been payable to
Landlord prior to the payment of any such taxes.
(2) Insurance. All insurance premiums and costs, including, but not
limited to, any deductible amounts, premiums and other costs of
insurance incurred by Landlord, including for the insurance coverage
set forth in Paragraph 8.A. herein.
(3) Common Area Maintenance.
(a) Repairs, replacements, and general maintenance of and for the
Building and Project and public and common areas and facilities of
and comprising the Building and Project, including, but not limited
to, the roof and roof membrane, windows, elevators, restrooms,
conference rooms, health club facilities, lobbies, mezzanies,
balconies, mechanical rooms, building exteriors, alarm systems,
pest extermination, landscaped areas, parking and service areas,
driveways, sidewalks, loading areas, fire sprinkler systems,
sanitary and storm sewer lines, utility services,
heating/ventilation/air conditioning systems, electrical,
mechanical or other systems, telephone equipment and wiring
servicing, plumbing, lighting, and any other items or areas which
affect the operation or appearance of the Building or Project,
which determination shall be at Landlord's discretion, except for:
those items expressly made the financial responsibility of Landlord
pursuant to Paragraph 10 hereof; those items to the extent paid for
by the proceeds of insurance; and those items attributable solely
or jointly to specific tenants of the Building or Project.
(b) Repairs, replacements, and general maintenance shall include
the cost of any capital improvements made to or capital assets
acquired for the Project or Building that in Landlord's discretion
may reduce any other Operating Expenses, including present or
future repair work, are reasonably necessary for the health and
safety of the occupants of the Building or Project, or are required
to comply with any Regulation, such costs or allocable portions
thereof to be amortized over such reasonable period as Landlord
shall determine, but not less than twelve (12) months, together
with interest on the unamortized balance at the publicly announced
"prime rate" charged by Wells Fargo Bank, N.A. (San Francisco) or
its successor at the time such improvements or capital assets are
constructed or acquired, plus two (2) percentage points, or in the
absence of such prime rate, then at the U.S. Treasury six-month
market note (or bond, if so designated) rate as published by any
national financial publication selected by Landlord, plus four (4)
percentage points, but in no event more than the maximum rate
permitted by law, plus reasonable financing charges.
<PAGE>
(c) Payment under or for any easement, license, permit, operating
agreement, declaration, restrictive covenant or instrument relating
to the Building or Project.
(d) All expenses and rental related to services and costs of
supplies, materials and equipment used in operating, managing and
maintaining the Premises, Building and Project, the equipment
therein and the adjacent sidewalks, driveways, parking and service
areas, including, without limitation, expenses related to service
agreements regarding security, fire and other alarm systems,
janitorial services, window cleaning, elevator maintenance,
Building exterior maintenance, landscaping and expenses related to
the administration, management and operation of the Project,
including without limitation salaries, wages and benefits and
management office rent.
(e) The cost of supplying any services and utilities which benefit
all or a portion of the Premises, Building or Project, including
without limitation services and utilities provided pursuant to
Paragraph 15 hereof.
(f) Legal expenses and the cost of audits by certified public
accountants; provided, however, that legal expenses chargeable as
Operating Expenses shall not include the cost of negotiating
leases, costs incurred maintaining publicly held company,
collecting rents, evicting tenants nor shall it include costs
incurred in legal proceedings with or against any tenant or to
enforce the provisions of any lease.
(g) A management and accounting cost recovery fee equal to five
percent (5%) of the sum of the Project's base rents and Operating
Expenses (other than such management and accounting fee).
If the rentable area of the Building and/or Project is not fully occupied during
any fiscal year of the Term as determined by Landlord, an adjustment may be made
in Landlord's discretion in computing the Operating Expenses for such year so
that Tenant pays an equitable portion of all variable items (e.g., utilities,
janitorial services and other component expenses that are affected by variations
in occupancy levels) of Operating Expenses, as reasonably determined by
Landlord; provided, however, that in no event shall Landlord be entitled to
collect in excess of one hundred percent (100%) of the total Operating Expenses
from all of the tenants in the Building or Project, as the case may be.
Operating Expenses shall not include the cost of providing tenant improvements
or other specific costs incurred for the account of, separately billed to and
paid by specific tenants of the Building or Project, the initial construction
cost of the Building, or debt service on any mortgage or deed of trust recorded
with respect to the Project other than pursuant to Paragraph 7.A.(3)(b) above.
Notwithstanding anything herein to the contrary, in any instance wherein
Landlord, in Landlord's reasonable discretion, deems Tenant to be responsible
for Tenant generated costs for any amounts in addition to Tenant's Proportionate
Share, Landlord shall have the right to allocate costs directly to Tenant as
Landlord deems appropriate.
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The above enumeration of services and facilities shall not be deemed to impose
an obligation on Landlord to make available or provide such services or
facilities except to the extent if any that Landlord has specifically agreed
elsewhere in this Lease to make the same available or provide the same. Without
limiting the generality of the foregoing, Tenant acknowledges and agrees that it
shall be responsible for providing adequate security for its use of the
Premises, the Building and the Project and that Landlord shall have no
obligation or liability with respect thereto, except to the extent if any that
Landlord has specifically agreed elsewhere in this Lease to provide the same.
B. Payment of Estimated Operating Expenses. "Estimated Operating Expenses" for
any particular year shall mean Landlord's estimate of the Operating Expenses for
such fiscal year made with respect to such fiscal year as hereinafter provided.
Landlord shall have the right from time to time to revise its fiscal year and
interim accounting periods so long as the periods as so revised are reconciled
with prior periods in a reasonable manner. During the last month of each fiscal
year during the Term, or as soon thereafter as practicable, Landlord shall give
Tenant written notice of the Estimated Operating Expenses for the ensuing fiscal
year. Tenant shall pay Tenant's Proportionate Share of the Estimated Operating
Expenses with installments of Base Rent for the fiscal year to which the
Estimated Operating Expenses applies in monthly installments on the first day of
each calendar month during such year, in advance. Such payment shall be
construed to be Additional Rent for all purposes hereunder. If at any time
during the course of the fiscal year, Landlord determines that Operating
Expenses are projected to vary from the then Estimated Operating Expenses by
more than five percent (5%), Landlord may, by written notice to Tenant, revise
the Estimated Operating Expenses for the balance of such fiscal year, and
Tenant's monthly installments for the remainder of such year shall be adjusted
so that by the end of such fiscal year Tenant has paid to Landlord Tenant's
Proportionate Share of the revised Estimated Operating Expenses for such year,
such revised installment amounts to be Additional Rent for all purposes
hereunder.
C. Computation of Operating Expense Adjustment. "Operating Expense Adjustment"
shall mean the difference between Estimated Operating Expenses and actual
Operating Expenses for any fiscal year determined as hereinafter provided.
Within one hundred twenty (120) days after the end of each fiscal year, or as
soon thereafter as practicable, Landlord shall deliver to Tenant a statement of
actual Operating Expenses for the fiscal year just ended, accompanied by a
computation of Operating Expense Adjustment. If such statement shows that
Tenant's payment based upon Estimated Operating Expenses is less than Tenant's
Proportionate Share of Operating Expenses, then Tenant shall pay to Landlord the
difference within twenty (20) days after receipt of such statement, such payment
to constitute Additional Rent for all purposes hereunder. If such statement
shows that Tenant's payments of Estimated Operating Expenses exceed Tenant's
Proportionate Share of Operating Expenses, then (provided that Tenant is not in
default under this Lease) Landlord shall pay to Tenant the difference within
twenty (20) days after delivery of such statement to Tenant. If this Lease has
been terminated or the Term hereof has expired prior to the date of such
statement, then the Operating Expense Adjustment shall be paid by the
appropriate party within twenty (20) days after the date of delivery of the
statement. Should this Lease commence or terminate at any time other than the
first day of the fiscal year, Tenant's Proportionate Share of the Operating
Expense Adjustment shall be prorated based on a month of 30 days and the number
of calendar months during such fiscal year that this Lease is in effect.
Notwithstanding anything to the contrary contained in Paragraph 7.A or 7.B,
Landlord's failure to provide any notices or statements within the time periods
specified in those paragraphs shall in no way excuse Tenant from its obligation
to pay Tenant's Proportionate Share of Operating Expenses.
D. Net Lease. This shall be a triple net Lease and Base Rent shall be paid to
Landlord absolutely net of all costs and expenses, except as specifically
provided to the contrary in this Lease. The provisions for payment of Operating
Expenses and the Operating Expense Adjustment are intended to pass on to Tenant
and reimburse Landlord for all costs and expenses of the nature described in
Paragraph 7.A. incurred in connection with the ownership, management,
maintenance, repair, preservation, replacement and operation of the Building
and/or Project and its supporting facilities and such additional facilities now
and in subsequent years as may be determined by Landlord to be necessary or
desirable to the Building and/or Project.
E. Tenant Audit. If Tenant shall dispute the amount set forth in any statement
provided by Landlord under Paragraph 7.B. or 7.C. above, Tenant shall have the
right, not later than twenty (20) days following receipt of such statement and
upon the condition that Tenant shall first deposit with Landlord the full amount
in dispute, to cause Landlord's books and records with respect to Operating
Expenses for such fiscal year to be audited by certified public accountants
selected by Tenant and subject to Landlord's reasonable right of approval. The
Operating Expense Adjustment shall be appropriately adjusted on the basis of
such audit. If such audit discloses a liability for a refund in excess of ten
percent (10%) of Tenant's Proportionate Share of the Operating Expenses
previously reported, the cost of such audit shall be borne by Landlord;
otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not
request an audit in accordance with the provisions of this Paragraph 7.E. within
twenty (20) days after receipt of Landlord's statement provided pursuant to
Paragraph 7.B. or 7.C., such statement shall be final and binding for all
purposes hereof.
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8. INSURANCE AND INDEMNIFICATION
A. Landlord's Insurance. All insurance maintained by Landlord shall be for the
sole benefit of Landlord and under Landlord's sole control.
(1) Property Insurance. Landlord agrees to maintain property insurance
insuring the Building against damage or destruction due to risk
including fire, vandalism, and malicious mischief in an amount not less
than the replacement cost thereof, in the form and with deductibles and
endorsements as selected by Landlord. At its election, Landlord may
instead (but shall have no obligation to) obtain "All Risk" coverage,
and may also obtain earthquake, pollution, and/or flood insurance in
amounts selected by Landlord.
(2) Optional Insurance. Landlord, at Landlord's option, may also (but
shall have no obligation to) carry insurance against loss of rent, in
an amount equal to the amount of Base Rent and Additional Rent that
Landlord could be required to abate to all Building tenants in the
event of condemnation or casualty damage for a period of twelve (12)
months. Landlord may also (but shall have no obligation to) carry such
other insurance as Landlord may deem prudent or advisable, including,
without limitation, liability insurance in such amounts and on such
terms as Landlord shall determine. Landlord shall not be obligated to
insure, and shall have no responsibility whatsoever for any damage to,
any furniture, machinery, goods, inventory or supplies, or other
personal property or fixtures which Tenant may keep or maintain in the
Premises, or any leasehold improvements, additions or alterations
within the Premises.
B. Tenant's Insurance.
(1) Property Insurance. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term, insurance on all personal property and
fixtures of Tenant and all improvements, additions or alterations made
by or for Tenant to the Premises on an "All Risk" basis, insuring such
property for the full replacement value of such property.
(2) Liability Insurance. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term Commercial General Liability insurance
covering bodily injury and property damage liability occuring in or
about the Premises or arising out of the use and occupancy of the
Premises and the Project, and
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any part of either, and any areas adjacent thereto, and the business
operated by Tenant or by any other occupant of the Premises. Such
insurance shall include contractual liability insurance coverage
insuring all of Tenant's indemnity obligations under this Lease. Such
coverage shall have a minimum combined single limit of liability of at
least Two Million Dollars ($2,000,000.00), and a minimum general
aggregate limit of Three Million Dollars ($3,000,000.00), with an
"Additional Insured - Managers or Lessors of Premises Endorsement." All
such policies shall be written to apply to all bodily injury (including
death), property damage or loss, personal and advertising injury and
other covered loss, however occasioned, occurring during the policy
term, shall be endorsed to add Landlord and any party holding an
interest to which this Lease may be subordinated as an additional
insured, and shall provide that such coverage shall be "primary" and
non-contributing with any insurance maintained by Landlord, which shall
be excess insurance only. Such coverage shall also contain endorsements
including employees as additional insureds if not covered by Tenant's
Commercial General Liability Insurance. All such insurance shall
provide for the severability of interests of insureds; and shall be
written on an "occurrence" basis, which shall afford coverage for all
claims based on acts, omissions, injury and damage, which occurred or
arose (or the onset of which occurred or arose) in whole or in part
during the policy period.
(3) Workers' Compensation and Employers' Liability Insurance. Tenant
shall carry Workers' Compensation Insurance as required by any
Regulation, throughout the Term at Tenant's sole cost and expense.
Tenant shall also carry Employers' Liability Insurance in amounts not
less than One Million Dollars ($1,000,000) each accident for bodily
injury by accident; One Million Dollars ($1,000,000) policy limit for
bodily injury by disease; and One Million Dollars ($1,000,000) each
employee for bodily injury by disease, throughout the Term at Tenant's
sole cost and expense.
(4) General Insurance Requirements. All coverages described in this
Paragraph 8.B. shall be endorsed to (i) provide Landlord with thirty
(30) days' notice of cancellation or change in terms; and (ii) waive
all rights of subrogation by the insurance carrier against Landlord. If
at any time during the Term the amount or coverage of insurance which
Tenant is required to carry under this Paragraph 8.B. is, in Landlord's
reasonable judgment, materially less than the amount or type of
insurance coverage typically carried by owners or tenants of properties
located in the general area in which the Premises are located which are
similar to and operated for similar purposes as the Premises or if
Tenant's use of the Premises should change with or without Landlord's
consent, Landlord shall have the right to require Tenant to increase
the amount or change the types of insurance coverage required under
this Paragraph 8.B. All insurance policies required to be carried by
Tenant under this Lease shall be written by companies rated A X or
better in "Best's Insurance Guide" and authorized to do business in
the State of California. In any event deductible amounts under all
insurance policies required to be carried by Tenant under this Lease
shall not exceed Five Thousand Dollars ($5,000.00) per occurrence.
Tenant shall deliver to Landlord on or before the Term Commencement
Date, and thereafter at least thirty (30) days before the expiration
dates of the expired policies, certified copies of Tenant's insurance
policies, or a certificate evidencing the same issued by the insurer
thereunder; and, if Tenant shall fail to procure such insurance, or to
deliver such policies or certificates, Landlord may, at Landlord's
option and in addition to Landlord's other remedies in the event of a
default by Tenant hereunder, procure the same for the account of
Tenant, and the cost thereof shall be paid to Landlord as Additional
Rent.
C. Indemnification. Tenant shall indemnify, defend by counsel reasonably
acceptable to Landlord, protect and hold Landlord harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, damages, injuries or
expenses, including reasonable attorneys' and consultants' fees and court costs,
demands, causes of action, or judgments, directly or indirectly arising out of
or related to: (1) claims of injury to or death of persons or damage to property
occurring or resulting directly or indirectly from the use or occupancy of the
Premises, Building or Project by Tenant or Tenant's Parties, or from activities
or failures to act of Tenant or Tenant's Parties; (2) claims arising from work
or labor performed, or for materials or supplies furnished to or at the request
or for the account of Tenant in connection with performance of any work done for
the account of Tenant within the Premises or Project; (3) claims arising from
any breach or default on the part of Tenant in the performance of any covenant
contained in this Lease; and (4) claims arising from the negligence or
intentional acts or omissions of Tenant or Tenant's Parties. The foregoing
indemnity by Tenant shall not be applicable to claims to the extent arising from
the gross negligence or willful misconduct of Landlord. Landlord shall not be
liable to Tenant and Tenant hereby waives all claims against Landlord for any
injury or damage to any person or property in or about the Premises, Building or
Project by or from any cause whatsoever (other than Landlord's gross negligence
or willful misconduct) and, without limiting the generality of the foregoing,
whether caused by water leakage of any character from the roof, walls, basement
or other portion of the Premises, Building or Project, or caused by gas, fire,
oil or electricity in, on or about the Premises, Building or Project. The
provisions of this Paragraph shall survive the expiration or earlier termination
of this Lease.
<PAGE>
D. Landlord Indemnification. Landlord shall indemnify, defend by counsel
reasonably acceptable to Tenant, protect and hold Tenant harmless from and
against any and all claims, liabilities, losses, costs, damages, injuries or
expenses, including reasonable attorneys' and consultants' fees and court costs,
demands, causes of action, or judgments arising out of or relating to the gross
negligence or willful misconduct of Landlord or Landlord's agents, employees or
invitees. Notwithstanding the foregoing or anything to the contrary contained in
this Lease, Landlord shall in no event be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury or damage to any person or
property in or about the Premises, Building or Project, including without
limitation the common areas, whether caused by theft, fire, rain or water
leakage of any character from the roof, walls, plumbing, sprinklers, pipes,
basement or any other portion of the Premises, Building or Project, or caused by
gas, fire, oil or electricity in, on or about the Premises, Building or Project,
or from any other systems except in each case to the extent caused by the gross
negligence or willful misconduct of Landlord, or by acts of God (including
without limitation flood or earthquake), acts of public enemy, riot, strike,
insurrection, war, court order, requisition or order of governmental body or
authority or from any other cause whatsoever, or for any damage or inconvenience
which may arise through repair, subject to and except as expressly otherwise
provided in Paragraph 9 or 10 of this Lease. In addition, landlord shall in no
event be liable for (i) injury to Tenant's business or any loss of income or
profit therefrom or from consequential damages, or (ii) sums up to the amount of
insurance proceeds received by Tenant. The foregoing indemnity by Landlord shall
not be applicable to claims to the extent arising from the negligence or willful
misconduct of Tenant or Tenant's Parties. The foregoing indemnity by Landlord
shall survive the expiration or earlier termination of this Lease.
9. WAIVER OF SUBROGATION
To the extent permitted by law and without affecting the coverage
provided by insurance to be maintained hereunder or any other rights or
remedies, Landlord and Tenant each waive any right to recover against the other
for: (a) damages for injury to or death of persons; (b) damages to property,
including personal property; (c) damages to the Premises or any part thereof;
and (d) claims arising by reason of the foregoing due to hazards covered by
insurance maintained or required to be maintained pursuant to this Lease to the
extent of proceeds recovered therefrom, or proceeds which would have been
recoverable therefrom in the case of the failure of any party to maintain any
insurance coverage required to be maintained by such party pursuant to this
Lease. This provision is intended to waive fully, any rights and/or claims
arising by reason of the foregoing, but only to the extent that any of the
foregoing damages and/or claims referred to above are covered or would be
covered, and only to the extent of such coverage, by insurance actually carried
or required to be maintained pursuant to this Lease by either Landlord or
Tenant. This provision is also intended to waive fully, and for the benefit of
each party, any rights and/or claims which might give rise to a right of
subrogation on any insurance carrier. Subject to all qualifications of this
Paragraph 9, Landlord waives its rights as specified in this Paragraph 9 with
respect to any subtenant that it has approved pursuant to Paragraph 21
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but only in exchange for the written waiver of such rights to be given by such
subtenant to Landlord upon such subtenant taking possession of the Premises or a
portion thereof. Each party shall cause each insurance policy obtained by it to
provide that the insurance company waives all right of recovery by way of
subrogation against either party in connection with any damage covered by any
policy.
10. LANDLORD'S REPAIRS AND MAINTENANCE
Landlord shall at Landlord's expense maintain in good repair, reasonable wear
and tear excepted, the structural soundness of the roof, foundations, and
exterior walls of the Building. The term "exterior walls" as used herein shall
not include windows, glass or plate glass, doors, special store fronts or office
entries. Any damage caused by or repairs necessitated by any negligence or act
of Tenant or Tenant's Parties may be repaired by Landlord at Landlord's option
and Tenant's expense. Tenant shall immediately give Landlord written notice of
any defect or need of repairs in such components of the Building for which
Landlord is responsible, after which Landlord shall have a reasonable
opportunity and the right to enter the Premises at all reasonable times to
repair same. Landlord's liability with respect to any defects, repairs, or
maintenance for which Landlord is responsible under any of the provisions of
this Lease shall be limited to the cost of such repairs or maintenance, and
there shall be no abatement of rent and no liability of Landlord by reason of
any injury to or interference with Tenant's business arising from the making of
repairs, alterations or improvements in or to any portion of the Premises, the
Building or the Project or to fixtures, appurtenances or equipment in the
Building, except as provided in Paragraph 24. By taking possession of the
Premises, Tenant accepts them "as is," as being in good order, condition and
repair and the condition in which Landlord is obligated to deliver them and
suitable for the Permitted Use and Tenant's intended operations in the Premises,
whether or not any notice of acceptance is given.
11. TENANT'S REPAIRS AND MAINTENANCE
Tenant shall at all times during the Term at Tenant's expense maintain all parts
of the Premises and such portions of the Building as are within the exclusive
control of Tenant in a first-class, good, clean and secure condition and
promptly make all necessary repairs and replacements, as determined by Landlord,
excluding reasonable wear and tear, with materials and workmanship of the same
character, kind and quality as the original. Notwithstanding anything to the
contrary contained herein, Tenant shall, at its expense, promptly repair any
damage to the Premises or the Building or Project resulting from or caused by
any negligence or act of Tenant or Tenant's Parties.
12. ALTERATIONS
A. Tenant shall not make, or allow to be made, any alterations, physical
additions, improvements or partitions, including without limitation the
attachment of any fixtures or equipment, in, about or to the Premises
("Alterations") without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld with respect to proposed Alterations
which: (a) comply with all applicable Regulations; (b) are, in Landlord's
opinion, compatible with the Building or the Project and its mechanical,
plumbing, electrical, heating/ventilation/air conditioning systems, and will not
cause the Building or Project or such systems to be required to be modified to
comply with any Regulations (including, without limitation, the Americans With
Disabilities Act); and (c) will not interfere with the use and occupancy of any
other portion of the Building or Project by any other tenant or its invitees.
Specifically, but without limiting the generality of the foregoing, Landlord
shall have the right of written consent for all plans and specifications for the
proposed Alterations, construction means and methods, all appropriate permits
and licenses, any contractor or subcontractor to be employed on the work of
Alterations, and the time for performance of such work, and may impose rules and
regulations for contractors and subcontractors performing such work. Tenant
shall also supply to Landlord any documents and information reasonably
requested by Landlord in connection with Landlord's consideration of a request
for approval hereunder. Tenant shall cause all Alterations to be accomplished in
<PAGE>
a first-class, good and workmanlike manner, and to comply with all applicable
Regulations and Paragraph 27 hereof. Tenant shall at Tenant's sole expense,
perform any additional work required under applicable Regulations due to the
Alterations hereunder. No review or consent by Landlord of or to any proposed
Alteration or additional work shall constitute a waiver of Tenant's obligations
under this Paragraph 12, nor constitute any warranty or representation that the
same complies with all applicable Regulations, for which Tenant shall at all
times be solely responsible. Tenant shall reimburse Landlord for all costs which
Landlord may incur in connection with granting approval to Tenant for any such
Alterations, including any costs or expenses which Landlord may incur in
electing to have outside architects and engineers review said plans and
specifications, and shall pay Landlord an administration fee of ten percent
(10%) of the cost of the Alterations as Additional Rent hereunder. All such
Alterations shall remain the property of Tenant until the expiration or earlier
termination of this Lease, at which time they shall be and become the property
of Landlord; provided, however, that Landlord may, at Landlord's option, require
that Tenant, at Tenant's expense, remove any or all Alterations made by Tenant
and restore the Premises by the expiration or earlier termination of this Lease,
to their condition existing prior to the construction of any such Alterations.
All such removals and restoration shall be accomplished in a first-class and
good and workmanlike manner so as not to cause any damage to the Premises or
Project whatsoever. If Tenant fails to remove such Alterations or Tenant's trade
fixtures or furniture or other personal property, Landlord may keep and use them
or remove any of them and cause them to be stored or sold in accordance with
applicable law, at Tenant's sole expense. In addition to and wholly apart from
Tenant's obligation to pay Tenant's Proportionate Share of Operating Expenses,
Tenant shall be responsible for and shall pay prior to delinquency any taxes or
governmental service fees, possessory interest taxes, fees or charges in lieu of
any such taxes, capital levies, or other charges imposed upon, levied with
respect to or assessed against its fixtures or personal property, on the value
of Alterations within the Premises, and on Tenant's interest pursuant to this
Lease, or any increase in any of the foregoing based on such Alterations. To the
extent that any such taxes are not separately assessed or billed to Tenant,
Tenant shall pay the amount thereof as invoiced to Tenant by Landlord.
Notwithstanding the foregoing, at Landlord's option (but without obligation),
all or any portion of the Alterations shall be performed by Landlord for
Tenant's account and Tenant shall pay Landlord's estimate of the cost thereof
(including a reasonable charge for Landlord's overhead and profit) prior to
commencement of the work. In addition, at Landlord's election and
notwithstanding the foregoing, however, Tenant shall pay to Landlord the cost of
removing any such Alterations and restoring the Premises to their original
condition such cost to include a reasonable charge for Landlord's overhead and
profit as provided above, and such amount may be deducted from the Security
Deposit or any other sums or amounts held by Landlord under this Lease.
B. In compliance with Paragraph 27 hereof, at least ten (10) business days
before beginning construction of any Alteration, Tenant shall give Landlord
written notice of the expected commencement date of that construction to permit
Landlord to post and record a notice of non-responsibility. Upon substantial
completion of construction, if the law so provides, Tenant shall cause a timely
notice of completion to be recorded in the office of the recorder of the county
in which the Building is located.
13. SIGNS
Tenant shall not place, install, affix, paint or maintain any signs, notices,
graphics or banners whatsoever or any window decor which is visible in or from
public view or corridors, the common areas or the exterior of the Premises or
the Buildings, in or on any exterior window or window fronting upon any common
areas or service area without Landlord's prior written approval which Landlord
shall have the right to withhold in its absolute and sole discretion; provided
that Tenant's name shall be included in any Building-standard door and directory
signage, if any, in accordance with Landlord's Building signage program,
including without limitation, payment by Tenant of any fee charged by Landlord
for maintaining such signage, which fee shall constitute Additional Rent
hereunder. Any installation of signs, notices, graphics or banners on or about
the Premises or Project approved by Landlord shall be subject to any Regulations
and to any other requirements imposed by Landlord. Tenant shall remove all such
signs or graphics by the expiration or any earlier termination of this Lease.
Such installations and removals shall be made in such manner as to avoid injury
to or defacement of the Premises, Building or Project and any other improvements
contained therein, and Tenant shall repair any injury or defacement including
without limitation discoloration caused by such installation or removal.
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14. INSPECTION/POSTING NOTICES
After reasonable notice, except in emergencies where no such notice shall be
required, Landlord and Landlord's agents and representatives, shall have the
right to enter the Premises to inspect the same, to clean, to perform such work
as may be permitted or required hereunder, to make repairs, improvements or
alterations to the Premises, Building or Project or to other tenant spaces
therein, to deal with emergencies, to post such notices as may be permitted or
required by law to prevent the perfection of liens against Landlord's interest
in the Project or to exhibit the Premises to prospective tenants, purchasers,
encumbrancers or to others, or for any other purpose as Landlord may deem
necessary or desirable; provided, however, that Landlord shall use reasonable
efforts not to unreasonably interfere with Tenant's business operations. Tenant
shall not be entitled to any abatement of Rent by reason of the exercise of any
such right of entry. Tenant waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby.
Landlord agrees to be accompanied by Tenant's representative excluding
abandonment of premises and in the case of an emergency. Landlord shall at all
times have and retain a key with which to unlock all of the doors in, upon and
about the Premises, excluding Tenant's vaults and safes or special security
areas (designated in advance), and Landlord shall have the right to use any and
all means which Landlord may deem necessary or proper to open said doors in an
emergency, in order to obtain entry to any portion of the Premises, and any
entry to the Premises or portions thereof obtained by Landlord by any of said
means, or otherwise, shall not be construed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an eviction, actual or constructive, of
Tenant from the Premises or any portions thereof. At any time within six (6)
months prior to the expiration of the Term or following any earlier termination
of this Lease or agreement to terminate this Lease, Landlord shall have the
right to erect on the Premises, Building and/or Project a suitable sign
indicating that the Premises are available for lease.
15. SERVICES AND UTILITIES
A. Provided Tenant shall not be in default hereunder, and subject to the
provisions elsewhere herein contained and to the rules and regulations of the
Building, Landlord shall furnish to the Premises during ordinary business hours
of generally recognized business days, to be determined by Landlord (but
exclusive, in any event, of Saturdays, Sundays and legal holidays), water for
lavatory and drinking purposes and electricity, heat and air conditioning as
usually furnished or supplied for use of the Premises for reasonable and normal
office use as of the date Tenant takes possession of the Premises as determined
by Landlord (but not including above-standard or continuous cooling for
excessive heat-generating machines, excess lighting or equipment), janitorial
services during the times and in the manner that such services are, in
Landlord's judgment, customarily furnished in comparable office buildings in the
immediate market area, and elevator service, which shall mean service either by
nonattended automatic elevators or elevators with attendants, or both, at the
option of Landlord. Tenant acknowledges that Tenant has inspected and accepts
the water, electricity, heat and air conditioning and other utilities and
services being supplied or furnished to the Premises as of the date Tenant takes
possession of the Premises, as being sufficient for use of the Premises for
reasonable and normal office use in their present condition, "as is," and
suitable for the Permitted Use, and for Tenant's intended operations in the
Premises. Landlord shall have no obligation to provide additional or after-hours
electricity, heating or air conditioning, but if Landlord elects to provide such
services at Tenant's request, Tenant shall pay to Landlord a reasonable charge
for such services as determined by Landlord. Tenant agrees to keep and cause to
be kept closed all window covering when necessary because of the sun's position,
and Tenant also agrees at all times to cooperate fully with Landlord and to
abide by all of the regulations and requirements which Landlord may prescribe
for the proper functioning and protection of electrical, heating, ventilating
and air conditioning systems. Wherever heat-generating machines, excess lighting
or equipment are used in the Premises which affect the temperature otherwise
maintained by the air conditioning system, Landlord reserves the right to
install supplementary air conditioning units in the Premises and the cost
thereof, including the cost of installation and the cost of operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord.
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B. Tenant shall not without written consent of Landlord use any apparatus,
equipment or device in the Premises, including without limitation, computers,
electronic data processing machines, copying machines, and other machines, using
excess lighting or using electric current, water, or any other resource in
excess of or which will in any way increase the amount of electricity, water, or
any other resource being furnished or supplied for the use of the Premises for
reasonable and normal office use, in each case as of the date Tenant takes
possession of the Premises as determined by Landlord, or which will require
additions or alterations to or interfere with the Building power distribution
systems; nor connect with electric current, except through existing electrical
outlets in the Premises or water pipes, any apparatus, equipment or device for
the purpose of using electrical current, water, or any other resource. If Tenant
shall require water or electric current or any other resource in excess of that
being furnished or supplied for the use of the Premises as of the date Tenant
takes possession of the Premises as determined by Landlord, Tenant shall first
procure the written consent of Landlord which Landlord may refuse, to the use
thereof, and Landlord may cause a special meter to be installed in the Premises
so as to measure the amount of water, electric current or other resource
consumed for any such other use. Tenant shall pay directly to Landlord as an
addition to and separate from payment of Operating Expenses the cost of all such
additional resources, energy, utility service and meters (and of installation,
maintenance and repair thereof and of any additional circuits or other equipment
necessary to furnish such additional resources, energy, utility or service).
Landlord may add to the separate or metered charge a recovery of additional
expense incurred in keeping account of the excess water, electric current or
other resource so consumed. Landlord shall not be liable for any damages
directly or indirectly resulting from nor shall the Rent or any monies owed
Landlord under this Lease herein reserved be abated by reason of: (a) the
installation, use or interruption of use of any equipment used in connection
with the furnishing of any such utilities or services, or any change in the
character or means of supplying or providing any such utilities or services or
any supplier thereof; (b) the failure to furnish or delay in furnishing any such
utilities or services when such failure or delay is caused by acts of God or the
elements, labor disturbances of any character, or any other accidents or other
conditions beyond the reasonable control of Landlord or because of any
interruption of service due to Tenant's use of water, electric current or other
resource in excess of that being supplied or furnished for the use of the
Premises as of the date Tenant takes possession of the Premises; (c) the
inadequacy, limitation, curtailment, rationing or restriction on use of water,
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Premises or Project, whether by Regulation or otherwise;
or (d) the partial or total unavailability of any such utilities or services to
the Premises or the Building, whether by Regulation or otherwise; nor shall any
such occurrence constitute an actual or constructive eviction of Tenant.
Landlord shall further have no obligation to protect or preserve any apparatus,
equipment or device installed by Tenant in the Premises, including without
limitation by providing additional or after-hours heating or air conditioning.
Landlord shall be entitlted to cooperate voluntarily and in a reasonable manner
with the efforts of national, state or local governmental agencies or utility
suppliers in reducing energy or other resource consumption. The obligation to
make services available hereunder shall be subject to the limitations of any
such voluntary, reasonable program. In addition, Landlord reserves the right to
change the supplier or provider of any such utility or service from time to
time. Tenant shall have no right to contract with or otherwise obtain any
electrical or other such service for or with respect to the Premises or Tenant's
operations therein from any supplier or provider of any such service. Tenant
shall cooperate with Landlord and any supplier or provider of such services
designated by Landlord from time to time to facilitate the delivery of such
services to Tenant at the Premises and to the Building and Project, including
without limitation allowing Landlord and Landlord's suppliers or providers, and
their respective agents and contractors,
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reasonable access to the Premises for the purpose of installing, maintaining,
repairing or upgrading such service or any equipment or machinery associated
therewith.
C. Tenant shall pay, upon demand, for all utilities furnished to the Premises,
or if not separately billed to or metered to Tenant, Tenant's Proportionate
Share of all charges jointly serving the Project in accordance with Paragraph 7.
All sums payable under this Paragraph 15 shall constitute Additional Rent
hereunder.
16. SUBORDINATION
Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, this Lease shall be and is hereby
declared to be subject and subordinate at all times to: (a) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises and Project are situated, or
both; and (b) any mortgage or deed of trust which may now exist or be placed
upon the Building, the Project and/or the land upon which the Premises or the
Project are situated, or said ground leases or underlying leases, or Landlord's
interest or estate in any of said items which is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or any such
liens to this Lease. If any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust if foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord provided that Tenant shall not be disturbed in its possession under
this Lease by such successor in interest so long as Tenant is not in default
under this Lease. Within ten (10) days after request by Landlord, Tenant shall
execute and deliver any additional documents evidencing Tenant's attornment or
the subordination of this Lease with respect to any such ground leases or
underlying leases or any such mortgage or deed of trust, in the form requested
by Landlord or by any ground landlord, mortgagee, or beneficiary under a deed of
trust, subject to such nondisturbance requirement. If requested in writing by
Tenant, Landlord shall use commercially reasonable efforts to obtain a
subordination, nondisturbance and attornment agreement for the benefit of Tenant
reflecting the foregoing from any ground landlord, mortgagee or beneficiary, at
Tenant's expense, subject to such other terms and conditions as the ground
landlord, mortgagee or beneficiary may require.
17. FINANCIAL STATEMENTS
At the reasonable request of Landlord from time to time and with reasonable
notice, Tenant shall provide to Landlord Tenant's and any guarantor's current
financial statements or other informaton discussing financial worth of Tenant
and any guarantor, which Landlord shall use solely for purposes of this Lease
and in connection with the ownership, management, financing and disposition of
the Project.
18. ESTOPPEL CERTIFICATE
Tenant agrees from time to time, within ten (10) days after request of Landlord,
to deliver to Landlord, or Landlord's designee, an estoppel certificate stating
that this Lease is in full force and effect, that this Lease has not been
modified (or stating all modifications, written or oral, to this Lease), the
date to which Rent has been paid, the unexpired portion of this Lease, that
there are no current defaults by Landlord or Tenant under this Lease (or
specifying any such defaults), that the leasehold estate granted by this Lease
is the sole interest of Tenant in the Premises and/or the land at which the
Premises are situated, and such other matters pertaining to this Lease as may be
reasonably requested by Landlord or any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or Project or any interest therein.
Failure by Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that the statements
included are true and correct without exception. Tenant agrees that if Tenant
fails to execute and deliver such certificate within such ten (10) day period,
Landlord may execute and deliver such certificate on Tenant's behalf and that
such certificate shall be binding on Tenant. Landlord and Tenant intend that any
statement delivered pursuant to this Paragraph may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the Building or
Project or any interest therein. The parties agree that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of this Lease, and shall be an event of default
(without any cure period that might be provided under Paragraph 26.A(3) of this
Lease) if Tenant fails to fully comply or makes any material misstatement in any
such certificate.
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19. SECURITY DEPOSIT
Tenant agrees to deposit with Landlord upon execution of this Lease, a security
deposit as stated in the Basic Lease Information (the "Security Deposit"), which
sum shall be held and owned by Landlord, without obligation to pay interest, as
security for the performance of Tenant's covenants and obligations under this
Lease. The Security Deposit is not an advance rental deposit or a measure of
damages incurred by Landlord in case of Tenant's default. Upon the occurrence of
any event of default by Tenant, Landlord may from time to time, without
prejudice to any other remedy provided herein or by law, use such fund as a
credit to the extent necessary to credit against any arrears of Rent or other
payments due to Landlord hereunder, and any other damage, injury, expense or
liability caused by such event of default, and Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the Security Deposit to its
original amount. Although the Security Deposit shall be deemed the property of
Landlord, any remaining balance of such deposit shall be returned by Landlord to
Tenant at such time after termination of this Lease that all of Tenant's
obligations under this Lease have been fulfilled, reduced by such amounts as may
be required by Landlord to remedy defaults on the part of Tenant in the payment
of Rent or other obligations of Tenant under this Lease, to repair damage to the
Premises, Building or Project caused by Tenant or any Tenant's Parties and to
clean the Premises. Landlord may use and commingle the Security Deposit with
other funds of Landlord.
20. LIMITATION OF TENANT'S REMEDIES
The obligations and liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease are not personal obligations of Landlord or of the
individual or other partners of Landlord or its or their partners, directors,
officers, or shareholders, and Tenant agrees to look solely to Landlord's
interest in the Project for the recovery of any amount from Landlord, and shall
not look to other assets of Landlord nor seek recourse against the assets of the
individual or other partners of Landlord or its or their partners, directors,
officers or shareholders. Any lien obtained to enforce any such judgment and any
levy of execution thereon shall be subject and subordinate to any lien, mortgage
or deed of trust on the Project. Under no circumstances shall Tenant have the
right to offset against or recoup Rent or other payments due and to become due
to Landlord hereunder except as expressly provided in Paragraph 23.B. below,
which Rent and other payments shall be absolutely due and payable hereunder in
accordance with the terms hereof.
21. ASSIGNMENT AND SUBLETTING
A. (1) General. This Lease has been negotiated to be and is granted as an
accommodation to Tenant. Accordingly, this Lease is personal to Tenant,
and Tenant's rights granted hereunder do not include the right to assign
this Lease or sublease the Premises, or to receive any excess, either in
installments or lump sum, over the Rent which is expressly reserved by
Landlord as hereinafter provided, except as otherwise expressly
hereinafter provided. Tenant shall not assign or pledge this Lease or
sublet the Premises or any part thereof, whether voluntarily or by
operation of law, or permit the use or occupancy of the Premises or any
part thereof by anyone other than Tenant; or suffer or permit any such
assignment, pledge, subleasing or occupancy, without Landlord's prior
written consent except as provided herein. Consent to assignment shall
not be unreasonably withheld. If
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Tenant desires to assign this Lease or sublet any or all of the Premises.
Tenant shall give Landlord written notice (the "Transfer Notice") at
least sixty (60) days prior to the anticipated effective date of the
proposed assignment or sublease, which shall contain all of the
information reasonably requested by Landlord to address Landlord's
decision criteria specified hereinafter. Landlord shall then have a
period of thirty (30) days following receipt of the Transfer Notice to
notify Tenant in writing that Landlord elects either: (i) to terminate
this Lease as to the space so affected as of the date so requested by
Tenant; or (ii) to consent to the proposed assignment or sublease,
subject, however, to Landlord's prior written consent of the proposed
assignee or subtenant and of any related documents or agreements
associated with the assignment or sublease. If Landlord should fail to
notify Tenant in writing of such election within said period, Landlord
shall be deemed to have waived option (i) above, but written consent by
Landlord of the proposed assignee or subtenant shall still be required.
If Landlord does not exercise option (i) above, Landlord's consent to a
proposed assignment or sublease shall not be unreasonably withheld.
Consent to any assignment or subletting shall not constitute consent to
any subsequent transaction to which this Paragraph 21 applies.
(2) Conditions of Landlord's Consent. Without limiting the other instances in
which it may be reasonable for Landlord to withhold Landlord's consent to
an assignment or subletting, Landlord and Tenant acknowledge that it
shall be reasonable for Landlord to withhold Landlord's consent in the
following instances: if the proposed assignee does not agree to be bound
by and assume the obligations of Tenant under this Lease in form and
substance satisfactory to Landlord; the use of the Premises by such
proposed assignee or subtenant would not be a Permitted Use or would
violate any exclusivity or other arrangement which Landlord has with any
other tenant or occupant or any Regulation or would increase the
Occupancy Density or Parking Density of the Building or Project, or would
otherwise result in an undesirable tenant mix for the Project as
determined by Landlord; the proposed assignee or subtenant is not of
sound financial condition as determined by Landlord in Landlord's sole
discretion; the proposed assignee or subtenant is a governmental agency;
the proposed assignee or subtenant does not have a good reputation as a
tenant of property or a good business reputation; the proposed assignee
or subtenant is a person with whom Landlord is negotiating to lease space
in the Project or is a present tenant of the Project; the assignment or
subletting would entail any Alterations which would lessen the value of
the leasehold improvements in the Premises or use of any Hazardous
Materials or other noxious use or use which may disturb other tenants of
the Projects; or Tenant is in default of any obligation of Tenant under
this Lease, or Tenant has defaulted under this Lease on three (3) or more
occasions during any twelve (12) months preceding the date that Tenant
shall request consent. Failure by or refusal of Landlord to consent to a
proposed assignee or subtenant shall not cause a termination of this
Lease. Upon a termination under Paragraph 21.A.(1)(i), Landlord may lease
the Premises to any party, including parties with whom Tenant has
negotiated an assignment or sublease, without incurring any liability to
Tenant. At the option of Landlord, a surrender and termination of this
Lease shall operate as an assignment to Landlord of some or all subleases
or subtenancies. Landlord shall exercise this option by giving notice of
that assignment to such subtenants on or before the effective date of the
surrender and termination. In connection with each request for assignment
or subletting, Tenant shall pay to Landlord Landlord's standard fee for
approving such requests, as well as all costs incurred by Landlord or any
mortgagee or ground lessor in approving each such request and effecting
any such transfer, including, without limitation, reasonable attorneys'
fees.
B. Bonus Rent. Any Rent or other consideration realized by Tenant under any such
sublease or assignment in excess of the Rent payable hereunder, after
amortization of a reasonable brokerage commission incurred by Tenant, shall be
divided and paid, fifty percent (50%) to Tenant, fifty percent (50%) to
Landlord. In any subletting or assignment undertaken by Tenant, Tenant shall
diligently seek to obtain the maximum rental amount available in the marketplace
for comparable space available for primary leasing. Landlord agrees that should
Tenant sublet a portion of the premises, less than twenty-five percent (25%) of
the total premises, rental in excess of Tenant's rent payable hereunder shall be
paid to Tenant.
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C. Corporation. If Tenant is a corporation, a transfer of corporate shares by
sale, assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings) resulting in a change in the
present control of such corporation or any of its parent corporations by the
person or persons owning a majority of said corporate shares, shall constitute
an assignment for purposes of this Lease.
D. Unincorporated Entity. If Tenant is a partnership, joint venture,
unincoporated limited liability companyor other unincorporated business form, a
transfer of the interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest, inheritance,
operation of law or other disposition, so as to result in a change in the
present control of said entity and/or of the underlying beneficial interests of
said entity and/or a change in the identity of the persons responsible for the
general credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.
E. Liability. No assignment or subletting by Tenant, permitted or otherwise,
shall relieve Tenant of any obligation under this Lease or alter the primary
liability of the Tenant named herein for the payment of Rent or for the
performance of any other obligations to be performed by Tenant, including
obligations contained in Paragraph 25 with respect to any assignee or subtenant.
Landlord may collect rent or other amounts or any portion thereof from any
assignee, subtenant, or other occupant of the Premises, permitted or otherwise,
and apply the net rent collected to the Rent payable hereunder, but no such
collection shall be deemed to be a waiver of this Paragraph 21, or the
acceptance of the assignee, subtenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of the obligations of Tenant under
this Lease. Any assignment or subletting which conflicts with the provisions
hereof shall be void.
22. AUTHORITY
Landlord represents and warrants that it has full right and authority to enter
into this Lease and to perform all of Landlord's obligations hereunder and that
all persons signing this Lease on its behalf are authorized to do. Tenant and
the person or persons, if any, signing on behalf of Tenant, jointly and
severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant's obligations hereunder, and
that all persons signing this Lease on its behalf are authorized to do so.
23. CONDEMNATION
A. Condemnation Resulting in Termination. If the whole or any substantial part
of the Premises should be taken or condemned for any public use under any
Regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the Permitted
Use of the Premises, either party shall have the right to terminate this Lease
at its option. If any material portion of the Building or Project is taken or
condemned for any public use under any Regulation, or by right of eminent
domain, or by private purchase in lieu thereof, Landlord may terminate this
Lease at its option. In either of such events, the Rent shall be abated during
the unexpired portion of this Lease, effective when the physical taking of said
Premises shall have occurred.
B. Condemnation Not Resulting in Termination. If a portion of the Project of
which the Premises are a part should be taken or condemned for any public use
under any Regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the taking prevents or materially interferes with the
Permitted Use of the Premises, and this Lease is not terminated as provided in
Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion
of this Lease shall be reduced, beginning on the date when the physical taking
shall have occurred, to such amount as may be fair and reasonable under all of
the circumstances, but only after giving Landlord credit for all sums received
or to be received by Tenant by the condemning authority. Notwithstanding
anything to the contrary contained
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in this Paragraph, if the temporary use or occupancy of any part of the Premises
shall be taken or appropriated under power of eminent domain during the Term,
this Lease shall be and remain unaffected by such taking or appropriation and
Tenant shall continue to pay in full all Rent payable hereunder by Tenant during
the Term; in the event of any such temporary appropriation or taking. Tenant
shall be entitled to receive that portion of any award which represnts
compensation for the use of or occupancy of the Premises during the Term, and
Landlord shall be entitled to receive that portion of any award which represents
the cost of restoration of the Premises and the use and occupancy of the
Premises.
C. Award. Landlord shall be entitled to (and Tenant shall assign to Landlord)
any and all payment, income, rent, award or any interest therein whatsoever
which may be paid or made in connection with such taking or conveyance and
Tenant shall have no claim against Landlord or otherwise for any sums paid by
virtue of such proceedings, whether or not attributable to the value of any
unexpired portion of this Lease, except as expressly provided in this Lease.
Notwithstanding the foregoing, any compensation specifically and separately
awarded Tenant for Tenant's personal property and moving costs, shall be and
remain the property of Tenant.
D. Waiver of CCP(Section)1265.130. Each party waives the provisions of
California Civil Code Procedure Section 1265.130 allowing either party to
petition the superior court to terminate this Lease as a result of a partial
taking.
24. CASUALTY DAMAGE
A. General. If the Premises or Building should be damaged or destroyed by fire,
tornado, or other casualty (collectively, "Casualty"), Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
Landlord's receipt of such notice, Landlord shall notify Tenant whether in
Landlord's estimation material restoration of the Premises can reasonably be
made within one hundred eighty (180) days from the date of such notice and
receipt of required permits for such restoration. Landlord's determination shall
be binding on Tenant.
B. Within 180 Days. If the Premises or Building should be damaged by Casualty to
such extent that material restoration can in Landlord's estimation be reasonably
completed within one hundred eighty (180) days after the date of such notice and
receipt of required permits for such restoration, this Lease shall not
terminate. Provided that insurance proceeds are received by Landlord to fully
repair the damage, Landlord shall proceed to rebuild and repair the Premises in
the manner determined by Landlord, except that Landlord shall not be required to
rebuild, repair or replace any part of the Alterations which may have been
placed on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.
C. Greater than 180 Days. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs cannot in Landlord's
estimation be reasonably completed within one hundred eighty (180) days after
the date of such notice and receipt of required permits for such rebuilding or
repair, then Landlord shall have the option of either; (1) terminating this
Lease effective upon the date of the occurrence of such damage, in which event
the Rent shall be abated during the unexpired portion of this Lease; or (2)
electing to rebuild or repair the Premises diligently and in the manner
determined by Landlord. Landlord shall notify Tenant of its election within
thirty (30) days after Landlord's receipt of notice of the damage or
destruction. Notwithstanding the above, Landlord shall not be required to
rebuild, repair or replace any part of any Alterations which may have been
placed, on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.
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D. Tenant's Fault. Notwithstanding anything herein to the contrary, if the
Premises or any other portion of the Building are damaged by Casualty resulting
from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's
Parties, Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and expense
of the repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds. Landlord shall bear the
responsibility for any damage or loss suffered by Tenant as the result of
Landlord's negligence or the negligence of contractors hired by Landlord.
E. Insurance Proceeds. Notwithstanding anything herein to the contrary, if the
Premises or Building are damaged or destroyed and are not fully covered by
the insurance proceeds received by Landlord or if the holder of any indebtedness
secured by a mortgage or deed of trust covering the Premises requires that the
insurance proceeds be applied to such indebtedness, then in either case Landlord
shall have the right to terminate this Lease by delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to
Landlord that said damage or destruction is not fully covered by insurance or
such requirement is made by any such holder, as the case may be, whereupon this
Lease shall terminate.
F. Waiver. This Paragraph 24 shall be Tenant's sole and exclusive remedy in the
event of damage or destruction to the Premises or the Building. As a material
inducement to Landlord entering into this Lease, Tenant hereby waives any rights
it may have under Sections 1932, 1933(4), 1941 or 1942 of the Civil Code of
California with respect to any destruction of the Premises, Landlord's
obligation for tenantability of the Premises and Tenant's right to make repairs
and deduct the expenses of such repairs, or under any similar law, statutes or
ordinance now or hereafter in effect.
G. Tenant's Personal Property. In the event of any damage or destruction of the
Premises or the Building, under no circumstances shall Landlord be required to
repair any injury or damage to, or make any repairs to or replacements of,
Tenant's personal property.
25. HOLDING OVER
Unless Landlord expressly consents in writing to Tenant's holding over, Tenant
shall be unlawfully and illegally in possession of the Premises, whether or not
Landlord accepts any rent from Tenant or any other person while Tenant remains
in possession of the Premises without Landlord's written consent. If Tenant
shall retain possession of the Premises or any portion thereof without
Landlord's consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
triple the amount of daily rental as of the last month prior to the date of
expiration or earlier termination. Tenant shall also indemnify, defend, protect
and hole Landlord harmless from any loss, liability or cost, including
consequential and incidental damages and reasonable attorneys' fees, incurred by
Landlord resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by the succeeding tenant founded on such
delay. Acceptance of Rent by Landlord following expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, shall not constitute a renewal of this Lease, and nothing contained in
this Paragraph 25 shall waive Landlord's right of reentry or any other right.
Additionally, if upon expiration or earlier termination of this Lease, or
following demand by Landlord for possession of the Premises, Tenant has not
fulfilled its obligation with respect to repairs and cleanup of the Premises or
any other Tenant obligations as set forth in this Lease, then Landlord shall
have the right to perform any such obligations as it deems necessary at Tenant's
sole cost and expense, and any time required by Landlord
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to complete such obligations shall be considered a period of holding over and
the terms of this Paragraph 25 shall apply. The provisions of this Paragraph 25
shall survive any expiration or earlier termination of this Lease.
26. DEFAULT
A. Events of Default. The occurrence of any of the following shall constitute an
event of default on the part of Tenant.
(1) Abandonment. Abandonment or vacation of the Premises for a continuous
period in excess of five (5) days. Tenant waives any right to notice Tenant
may have under Section 1951.3 of the Civil Code of the State of California,
the terms of this Paragraph 26.A. being deemed such notice to Tenant as
required by said Section 1951.3.
(2) Nonpayment of Rent. Failure to pay any installment of Rent or any other
amount due and payable hereunder upon the date when said payment is due, as
to which time is of the essence.
(3) Other Obligations. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in subparagraphs
(1) and (2) of this Paragraph 26.A., such failure continuing for fifteen (15)
days after written notice of such failure, as to which time is of the
essence.
(4) General Assignment. A general assignment by Tenant for the benefit of
creditors.
(5) Bankruptcy. The filing of any voluntary petition in bankruptcy by Tenant,
or the filing of an involuntary petition by Tenant's creditors, which
involuntary petition remains undischarged for a period of thirty (30) days.
If under applicable law, the trustee in bankruptcy or Tenant has the right to
affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, in such time period as may be
permitted by the bankruptcy court having jurisdiction, cure all defaults of
Tenant hereunder outstanding as of the date of the affirmance of this Lease
and provide to Landlord such adequate assurances as may be necessary to
ensure Landlord of the continued performance of Tenant's obligations under
this Lease.
(6) Receivership. The employment of a receiver to take possession of
substantially all of Tenant's assets or Tenant's leasehold of the Premises,
if such appointment remains undismissed or undischarged for a period of
fifteen (15) days after the order therefor.
(7) Attachment. The attachment, execution or other judicial seizure of all or
substantially all of Tenant's assets or Tenant's leasehold of the Premises,
if such attachment or other seizure remains undismissed or undischarged for a
period of fifteen (15) days after the levy thereof.
(8) Insolvency. The admission by Tenant in writing of its inability to pay
its debts as they become due.
B. Remedies Upon Default.
(1) Termination. In the event of the occurrence of any event of default,
Landlord shall have the right to give a written termination notice to Tenant,
and on the date specified in such notice, Tenant's right to possession shall
terminate, and this Lease shall terminate unless on or before such date all
Rent in arrears and all costs and expenses incurred by or on behalf of
Landlord hereunder shall have been paid by Tenant and all other events of
default of this Lease by Tenant at the time existing shall have been fully
remedied to the satisfaction of Landlord. At any time after such termination,
Landlord may recover possession of the Premises or any part thereof and expel
and remove therefrom Tenant and any other person occupying the same,
including any subtenant or subtenants notwithstanding Landlord's consent to
any sublease, by any lawful means, and again repossess and enjoy the Premises
without prejudice to any of the remedies that Landlord may have under this
Lease, or at law or equity by any reason of Tenant's default or of such
termination. Landlord hereby reserves the right, but shall not have the
obligation, to recognize the continued possession of any subtenant. The
delivery or surrender to Landlord by or on behalf of Tenant of keys, entry
codes, or other means to bypass at the Premises shall not terminate this
Lease.
<PAGE>
(2) Continuation After Default. Even though an event of default may have
occurred, this Lease shall continue in effect for so long as Landlord does
not terminate Tenant's right to possession under Paragraph 26.B(1) hereof,
and Landlord may enforce all of Landlord's rights and remedies under this
Lease and at law or in equity, including without limitation, the right to
recover Rent as it becomes due, and Landlord, without terminating this Lease,
may exercise all of the rights and remedies of a landlord under Section
1951.4 of the Civil Code of the State of California or any successor code
section. Acts of maintenance, preservation or efforts to lease the Premises
or the appointment of a receiver under application of Landlord to protect
Landlord's interest under this Lease or other entry by Landlord upon the
Premises shall not constitute an election to terminate Tenant's right to
possession.
(3) Increased Security Deposit. If Tenant is in default under Paragraph
26.A.(2) hereof and such default remains uncured for ten (10) days after
such occurrence or such default occurs more than three times in any twelve
(12) month period, Landlord may require that Tenant increase the Security
Deposit to the amount of three times the current month's Rent at the time of
the most recent default.
C. Damages After Default. Should Landlord terminate this Lease pursuant to the
provisions of Paragraph 26.B.(1) hereof, Landlord shall have the rights and
remedies of a Landlord provided by Section 1951.2 of the Civil Code of the State
of California, or any successor code sections. Upon such termination, in
addition to any other rights and remedies to which Landlord may be entitled
under applicable law or at equity, Landlord shall be entitled to recover from
Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts
which had been earned at the time of termination, (2) the worth at the time of
the amount by which the unpaid Rent and other amounts that would have been
earned after the date of termination until the time of award exceeds the amount
of such Rent loss that Tenant proves could have been reasonably avoided; (3) the
worth at the time of award of the amount by which the unpaid Rent and other
amounts for the balance of the Term after the time of award exceeds the amount
of such Rent loss that the Tenant proves could be reasonably avoided; and (4)
any other amount and court costs necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which, in the ordinary course of things, would be likely to
result therefrom. The "worth at the time of award" as used in (1) and (2) above
shall be computed at the Applicable Interest Rate (defined below). The "worth at
the time of award" as used in (3) above shall be computed by discounting such
amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%). If this Lease provides for any
periods during the Term during which Tenant is not required to pay Base Rent or
if Tenant otherwise receives a Rent concession, then upon the occurrence of an
event of default, Tenant shall owe to Landlord the full amount of such Base Rent
or value of such Rent concession, plus interest at the Applicable Interest Rate,
calculated from the date that such Base Rent or Rent concession would have been
payable.
D. Late Charge. In addition to its other remedies, Landlord shall have the right
without notice or demand to add to the amount of any payment required to be made
by Tenant hereunder, and which is not paid and received by Landlord on or before
the fifth day of each calendar month, an amount equal to ten percent (10%) of
the delinquency for each month or portion thereof that the delinquency remains
outstanding to compensate Landlord for the loss of the use of the amount not
paid and the administrative costs caused by the delinquency, the parties
agreeing that Landlord's damage by virtue of such delinquencies would be
extremely difficult and impracticable to compute and the amount stated herein
represents a reasonable estimate thereof. Any waiver by Landlord of any late
charges or failure to claim the same shall not constitute a waiver of other late
charges or any other remedies available to Landlord.
E. Interest. Interest shall accrue on all sums not paid when due hereunder at
the lesser of ten percent (10%) per annum or the maximum interest rate allowed
by law ("Applicable Interest Rate") from the due date until paid.
F. Remedies Cumulative. All rights, privileges and elections or remedies of the
parties are cumulative and not alternative, to the extent permitted by law and
except as otherwise provided herein.
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27. LIENS
Tenant shall at all times keep the Premises and the Project free from liens
arising out of or related to work or services performed, materials or supplies
furnished or obligations incurred by or on behalf of Tenant or in connection
with work made, suffered or done by or on behalf of Tenant in or on the Premises
or Project. If Tenant shall not, within ten (10) days following the imposition
of any such lien, cause the same to be released of record by payment or posting
of a proper bond, Landlord shall have, in addition to all other remedies
provided herein and by law, the right, but not the obligation, to cause the same
to be released by such means as Landlord shall deem proper, including payment of
the claim giving rise to such lien. All sums paid by Landlord on behalf of
Tenant and all expenses incurred by Landlord in connection therefor shall be
payable to Landlord by Tenant on demand with interest at the Applicable Interest
Rate as Additional Rent. Landlord shall have the right at all times to post and
keep posted on the Premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord, the Premises, the
Project and any other party having an interest therein, from mechanics' and
materialmen's liens, and Tenant shall give Landlord not less than ten (10)
business days prior written notice of the commencement of any work in the
Premises or Project which could lawfully give rise to a claim for mechanics' or
materialmen's liens to permit Landlord to post and record a timely notice of
non-responsibility, as Landlord may elect to proceed or as the law may from time
to time provide, for which purpose, if Landlord shall so determine, Landlord may
enter the Premises. Tenant shall not remove any such notice posted by Landlord
without Landlord's consent, and in any event not before completion of the work
which could lawfully give rise to a claim for mechanics' or materialmen's liens.
28. SUBSTITUTION
29. TRANSFERS BY LANDLORD
In the event of a sale or conveyance by Landlord of the Building or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord's successor-in-interest. In
such event, Tenant agrees to look solely to the responsibility of the
successor-in-interest of Landlord under this Lease with respect to the
performance of the covenants and duties of "Landlord" to be performed after the
passing of title to Landlord's successor-in-interest. This Lease shall not be
affected by any such sale and Tenant agrees to attorn to the purchaser or
assignee. Landlord's successor(s)-in-interest shall not have liability to Tenant
with respect to the failure to perform any of the obligations of "Landlord," to
the extent required to be performed prior to the date such
successor(s)-in-interest became the owner of the Building.
30. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
All covenants and agreements to be performed by Tenant under any of the terms of
this Lease shall be performed by Tenant at Tenant's sole cost and expense and
without any abatement of Rent. If Tenant shall fail to pay any sum of money,
other than Base Rent, required to be paid by Tenant hereunder or shall fail to
perform any other act on Tenant's part to be performed hereunder, including
Tenant's obligations under Paragraph 11 hereof, and such failure shall continue
for fifteen (15) days after notice thereof by Landlord, in addition to the other
rights and remedies of Landlord, Landlord may make any such payment and perform
any such act on Tenant's part. In the case of an emergency, no prior
notification by Landlord shall be required. Landlord may take such actions
without any obligation and without releasing Tenant from any of Tenant's
obligations. All sums so paid by Landlord and all incidental costs incurred by
Landlord and interest thereon at the Applicable Interest Rate, from the date of
payment by Landlord, shall be paid to Landlord on demand as Additional Rent.
<PAGE>
31. WAIVER
If either Landlord or Tenant waives the performance of any term, covenant or
condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord, based upon full knowledge of the circumstances.
32. NOTICES
Each provision of this Lease or of any applicable governmental laws, ordinances,
regulations and other requirements with reference to sending, mailing, or
delivery of any notice or the making of any payment by Landlord or Tenant to the
other shall be deemed to be complied with when and if the following steps are
taken:
A. Rent. All Rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at Landlord's Remittance Address set
forth in the Basic Lease Information, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance herewith.
Tenant's obligation to pay Rent and any other amounts to Landlord under the
terms of this Lease shall not be deemed satisfied until such Rent and other
amounts have been actually received by Landlord.
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B. Other. All notices, demands, consents and approvals which may or are required
to be, given by either party to the other hereunder shall be in writing and
either personally delivered, sent by commercial overnight courier, mailed,
certified or registered, postage prepaid or sent by facsimile with confirmed
receipt (and with an original set by commercial overnight courier), and in each
case addressed to the party to be notified at the Notice Address for such party
as specified in the Basic Lease information or to such other place as the party
to be notified may from time to time designate by at least fifteen (15) days
notice to the notifying party. Notices shall be deemed served upon receipt or
refusal to accept delivery. Tenant appoints as its agent to receive the service
of all default notices and notice of commencement of unlawful detainer
proceedings the person in charge of or apparently in charge of occupying the
Premises at the time, and, if there is no such person, then such service may be
made by attaching the same on the main entrance of the Premises.
C. Required Notices. Tenant shall immediately notify Landlord in writing of any
notice of a violation or a potential or alleged violation of any Regulation that
relates to the Premises or the Project, or of any inquiry, investigation,
enforcement or other action that is instituted or threatened by any
governmental or regulatory agency against Tenant or any other occupant of the
Premises, or any claim that is instituted or threatened by any third party that
relates to the Premises or the Project.
33. ATTORNEY' FEES
If Landlord places the enforcement of this Lease, or any part thereof, or the
collection of any Rent due, or to become due hereunder, or recovery of
possession of the Premises in the hands of an attorney, Tenant shall pay to
Landlord, upon demand, Landlord's reasonable attorney's fees and court costs,
whether incurred without trial, at trial, appeal or review. In any action which
Landlord or Tenant brings to enforce its respective rights hereunder, the
unsuccessful party shall pay all costs incurred by the prevailing party
including reasonable attorney's fees, to be fixed by the court, and said costs
and attorneys' fees shall be a part of the judgment in said action.
34. SUCCESSORS AND ASSIGNS
This Lease shall be binding upon and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon and inure to the benefit of
Tenant, its successors, and to the extent assignment is approved by Landlord as
provided hereunder Tenant's assigns.
<PAGE>
35. FORCE MAJEURE
If performance by a party of any portion of this Lease is made impossible by any
prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes for those items, government actions, civil commotions, fire or other
casualty, or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage is excused. Tenant's obligation to pay Rent,
however, is not excused by this Paragraph 35.
36. SURRENDER OF PREMISES
Tenant shall, upon expiration or sooner termination of this Lease, surrender the
Premises to Landlord substantially in the same condition as existed on the date
Tenant originally took possession thereof, including, but not limited to, all
interior walls cleaned, all interior painted surfaces repainted in the original
color, all holes in walls repaired, all carpets shampooed and cleaned, and all
floors cleaned, waxed, and free of any Tenant-introduced marking or painting,
all to the reasonable satisfaciton of Landlord. Tenant shall remove all of its
debris from the Project. At or before the time of surrender, Tenant shall comply
with the terms of Paragraph 12.A. hereof with respect to Alterations to the
Premises and all other matters addressed in such Paragraph. If the Premises are
not so surrendered at the expiration or sooner termination of this Lease, the
provisions of Paragraph 25 hereof shall apply. All keys to the Premises or any
part thereof shall be surrendered to Landlord upon expiration or sooner
termination of the Term. Tenant shall give written notice to Landlord at least
thirty (30) days prior to vacating the Premises and shall meet with Landlord for
a joint inspection of the Premises at the time of vacating, but nothing
contained herein shall be construed as and extension of the Term or as a consent
by Landlord to any holding over by Tenant. In the event of Tenant's failure to
give such notice or participate in such joint inspection, Landlord's inspection
at or after Tenant's vacating the Premises shall conclusively be deemed correct
for purposes of determining Tenant's responsibility for repairs and restoration.
Any delay caused by Tenant's failure to carry out its obligations under this
Paragraph 36 beyond the term hereof shall constitute unlawful and illegal
possession of Premises under Paragraph 25 hereof.
37. PARKING
So long as Tenant is occupying the Premises, Tenant and Tenant's Parties shall
have right to use up to the number of parking spaces, if any, specified in the
Basic Lease Information on an unreserved, nonexclusive, first come, first served
basis, for passenger-size automobiles, in the parking areas in the Project
designated from time to time by Landlord for use in common by tenants of the
Building.
Tenant may request additional parking spaces from time to time and if
Landlord in its sole discretion agrees to make such additional spaces available
for use by Tenant, such spaces shall be provided on a month-to-month unreserved
and nonexclusive basis (unless otherwise agreed in writing by Landlord), and
shall otherwise be subject to such terms and conditions as Landlord may require.
Tenant shall at all times comply and shall cause all Tenant's Parties and
visitor to comply with all Regulations and any rules and regulations established
from time to time by Landlord relating to parking at the Project, including any
keycard, sticker, or other identification or entrance system, and hours of
operation, as applicable.
Landlord shall have no liability for any damage to property or other items
located in the parking areas of the Project, nor for any personal injuries or
death arising out of the use of parking areas in the Project by Tenant or any
Tenant's Parties. Without limiting the foregoing, if Landlord arranges for the
parking areas to be operated by an independent contractor not affiliated with
Landlord, Tenant acknowledges that Landlord shall have no liability for claims
arising through acts or omissions of such independent contractor. In all events,
Tenant agrees to look first to its insurance carrier and to require that
Tenant's Parties look first to their respective insurance carriers for payment
of any losses sustained in connection with any use of the parking areas.
Landlord reserves the right to assign specific spaces, and to reserve
spaces for visitors, small cars, disabled persons or for other tenants or
guests, and Tenant shall not park and shall not allow Tenant's Parties to park
in any such assigned or reserved spaces. Tenant may validate visitor parking by
such method as Landlord may approve, at the validation rate from time to time
generally applicable to visitor parking. Landlord also reserves the right to
alter, modify, relocate or close all or any portion of the parking areas in
order to make repairs or perform maintenance service, or to restripe or renovate
the parking areas, or if required by casualty; condemnation, act of God,
Regulations or for any other reason deemed reasonable by Landlord.
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38. MISCELLANEOUS
A. General. The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.
B. Time. Time is of the essence regarding this Lease and all of its provisions.
C. Choice of Law. This Lease shall in all respects be governed by the laws of
the State of California.
D. Entire Agreement. This Lease, together with its Exhibits, addenda and
attachments and the Basic Lease Information, contains all the agreements of the
parties hereto and supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made between the parties
other than those set forth in this Lease and its Exhibits, addenda and
attachments and the Basic Lease Information.
E. Modification. This Lease may not be modified except by a written instrument
signed by the parties hereto. Tenant accepts the area of the Premises as
specified in the Basic Lease Information as the approximate area of the Premises
for all purposes under this Lease, and acknowledges any agrees that no other
definition of the area (rentable, usable or otherwise) of the Premises shall
apply. Tenant shall in no event be entitled to a recalculation of the square
footage of the Premises, rentable, usuable or otherwise, and no recalculation,
if made, irrespective of its purpose, shall reduce Tenant's obligations under
this Lease in any manner, including without limitation the amount of Base Rent
payable by Tenant or Tenant's Proportionate Share of the Building and of the
Project.
F. Severability. If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect.
G. Recordation. Tenant shall not record this Lease or a short form memorandum
hereof.
H. Examination of Lease. Submission of this Lease to Tenant does not constitute
an option or offer to lease and this Lease is not effective otherwise until
execution and delivery by both Landlord and Tenant.
I. Accord and Satisfaction. No payment by Tenant of a lesser amount than the
total Rent due not any endorsement on any check or letter accompanying any check
or payment of Rent shall be deemed an accord and satisfaction of full payment of
Rent, and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies. All offers by
or on behalf of Tenant of accord and satisfaction are hereby rejected in
advance.
J. Easements. Landlord may grant easements on the Project and dedicate for
public use portions of the Projects without Tenant's consent; provided that no
such grant or dedication shall materially interfere with Tenant's Permitted Use
of the Premises. Upon Landlord's request, Tenant shall execute, acknowledge and
deliver to Landlord documents, instruments, maps and plans necessary to
effectuate Tenant's covenants hereunder.
<PAGE>
K. Drafting and Determination Presumption. The parties acknowledge that this
Lease has been agreed to by both the parties, that both Landlord and Tenant have
consulted with attorneys with respect to the terms of this Lease and that no
presumption shall be created against Landlord because Landlord drafted this
Lease. Except as otherwise specifically set forth in this Lease, with respect to
any consent, determination or estimation of Landlord required to allowed in this
Lease or requested of Landlord, Landlord's consent, determination or estimation
shall be given or made solely by Landlord in Landlord's good faith opinion,
whether or not objectively reasonable. If Landlord fails to respond to any
request for its consent within the time period, if any, specified in this Lease,
Landlord shall be deemed to have disapproved such request.
L. Exhibits. The Basic Lease Information, and the Exhibits, addenda and
attachments attached hereto are hereby incorporated herein by this reference and
made a part of this Lease as though fully set forth herein.
M. No Light, Air or View Easement. Any diminution or shutting off of light, air
or view by any structure which may be erected on lands adjacent to or in the
vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.
N. No Third Party Benefit. This Lease is a contract between Landlord and Tenant
and nothing herein is intended to create any third party benefit.
O. Quiet Enjoyment. Upon payment by Tenant of the Rent, and upon the observance
and performance of all of the other covenants, terms and conditions on Tenant's
part to be observed and performed, Tenant shall peaceably and quietly hold and
enjoy the Premises for the term hereby demised without hindrance or interruption
by Landlord or any other person or persons lawfully or equitably claiming by,
through or under Landlord, subject, nevertheless, to all of the other terms and
conditions of this Lease. Landlord shall not be liable for any hindrance,
interruption, interference or disturbance by other tenants or third persons,
nor shall Tenant be released from any obligations under this Lease because of
such hindrance, interruption, interference or disturbance.
P. Counterparts. This Lease may be executed in any number of counterparts, each
of which shall be deemed an original.
Q. Multiple Parties. If more than one person or entity is named herein as
Tenant, such multiple parties shall have joint and several responsibility to
comply with the terms of this Lease.
R. Prorations. Any Rent or other amounts payable to Landlord by Tenant hereunder
for any fractional month shall be prorated based on a month of 30 days. As used
herein, the term "fiscal year' shall mean the calendar year as such other
fiscal year as Landlord may deem appropriate.
39. ADDITIONAL PROVISIONS
A. Rental. The base rental of $5,919.00 per month plus operating expenses per
Paragraph 7 of the Lease Agreement. Operating expenses for the calendar year
1999 for estimated at $.49 per square foot per month. Direct operating expenses
are estimated a year in advance and collected on a monthly basis. Any
adjustments necessary (up or down) will be made at the end of each operating
year.
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Rental shall be the base rental of $5,919.00 adjusted annually at the end of
each twelve month period from lease commencement as follows:
Months 1-12: The base rental of $5,919.00 per month plus operating expenses
per Paragraph 7 of this Lease Agreement.
Months 13-24: The base rental of $6,097.00 per month plus operating expenses
per Paragraph 7 of this Lease Agreement.
Months 25-36: The base rental of $6,280.00 per month plus operating expenses
per Paragraph 7 of this Lease Agreement.
B. Cancellation for Larger Premises. If, after the 12th month of occupancy of
the Premises, Tenant requires additional space and intends to vacate the
Premises, and Landlord and Tenant execute a new lease agreement for a larger
space in another building or project owned by Landlord that is at least fifty
percent (50%) larger in rentable square feet than Tenant's existing Premises and
for at least a three (3) year period, this Lease will be canceled as of the
commencement date of the new lease covering the larger space, provided that (1)
Tenant is not, and has not been, in default of the terms of this Lease; (2) on
the commencement date of the new lease, Tenant delivers the existing Premises
to Landlord in the condition required under Paragraph 36 of this Lease; and (3)
the terms and conditions of the new lease shall be at least at the same rental
rate and terms and conditions as is then offered other tenants for comparable
space in such building or project, as determined by Landlord taking into account
the costs associated with the termination of this Lease, provided that in no
event shall the rental rate on the new lease be less than the rate payable by
Tenant under this Lease during the Term of this Lease. Tenant shall still be
obligated for reconciliation of Operating Expenses and for all other obligations
under this Lease accrued prior to the effective date of such cancellation, or
which are based on any indemnity set forth in this Lease and any liabilities or
damages arising out of the release or discharge of Hazardous Materials occurring
during the term of this Lease, and any obligations which survive expiration or
termination of this Lease. Any security deposit or prepaid rental or portion
thereof that Tenant may be entitled to under this Lease shall be credited to
Tenant under the new lease. In the event a mortgage or deed of trust exists or
is placed upon, or Landlord sells, the Building or Project in which the Premises
is located or the land on which the Building or Project is located, the
foregoing cancellation right shall only apply to the extent larger space is
located in the same Building in which the existing Premises is located, unless
the mortgagee or purchaser otherwise agrees in writing.
C. Temporary Use. Landlord agrees that if the premises under this Lease
Agreement is not completed by September 15, 1999, Tenant shall be provided
temporary use of Suite 106 at 20 Ragsdale Drive under the terms and conditions
of the Temporary Use License Agreement. If the premises under this Lease
Agreement is completed by September 15, 1999, all terms and conditions of the
Temporary Use License Agreement shall become null and void.
<PAGE>
40. JURY TRIAL WAIVER
EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL
REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY
JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH
THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF THE
COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 40. THE
PROVISIONS OF THIS PARAGRAPH 40 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and the year first above written.
LANDLORD
Spieker Properties, L.P.,
a California limited partnership
By: Spieker Properties, Inc.,
a Maryland corporation,
its general partner
By: Joseph D. Russell, Jr.
------------------------------------------
Joseph D. Russell, Jr.
Its: Regional Senior Vice President
Date: 9/13/99
TENANT
Enterprise Solutions, Inc.,
A Nevada corporation
By: Wayne Kight
----------------------------------------------
Wayne Kight
Its: President
Date:
17
<PAGE>
EXHIBIT A
Rules and Regulations
1. Driveways, sidewalks, halls, passages, exits, entrances, elevators,
escalators and stairways shall not be obstructed by tenants or used by
tenants for any purpose other than for ingress to and egress from their
respective premises. The driveways, sidewalks, halls, passages, exits,
entrances, elevators and stairways are not for the use of the general
public and Landlord shall in all cases retain the right to control and
prevent access thereto by all persons whose presence, in the judgment of
Landlord, shall be prejudicial to the safety, character, reputation and
interests of the Building, the Project and its tenants, provided that
nothing herein contained shall be construed to prevent such access to
persons with whom any tenant normally deals in the ordinary course of such
tenant's business unless such persons are engaged in illegal activities. No
tenant, and no employees or invitees of any tenant, shall go upon the roof
of any Building, except as authorized by Landlord. No tenant, and no
employees or invitees of any tenant shall move any common area furniture
without Landlord's consent.
2. No sign, placard, banner, picture, name, advertisement or notice, shall be
displayed in windows--visible from the exterior of the Premises or the
Building or the common areas of the Building shall be inscribed, painted,
affixed, installed or otherwise displayed by Tenant either on its Premises or
any part of the Building or Project without the prior written consent of
Landlord in Landlord's sole and absolute discretion. Landlord shall have the
right to remove any such sign, placard, banner, picture, name, advertisement,
or notice without notice to and at the expense of Tenant, which were
installed or displayed in violation of this rule. If Landlord shall have
given such consent to Tenant at any time, whether before or after the
execution of Tenant's Lease, such consent shall in no way operate as a waiver
or release of any of the provisions hereof or of the Lease, and shall be
deemed to relate only to the particular sign, placard, banner, picture, name,
advertisement or notice so consented to by Landlord and shall not be
construed as dispensing with the necessity of obtaining the specific written
consent of Landlord with respect to any other such sign, placard, banner,
picture, name, advertisement or notice.
All approved signs or lettering on doors and walls shall be printed, affixed or
inscribed at the expense of Tenant by a person or vendor approved by Landlord
and shall be removed by Tenant at the time of vacancy at Tenant's expense.
3. The directory of the Building or Project will be provided exclusively for the
display of the name and location of tenants only and Landlord reserves the
right to charge for the use thereof and to exclude any other names therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other coverings,
awnings, hangings or decorations shall be attached to, hung or placed in, or
used in connection with, any window or door on the Premises without the
prior written consent of Landlord. In any event with the prior written
consent of Landlord, all such items shall be installed inboard of Landlord's
standard window covering and shall in no way be visible from the exterior of
the Building. All electrical ceiling fixtures hung in offices or spaces along
the perimeter of the Building must be fluorescent or of a quality, type,
design, and bulb color approved by Landlord. No articles shall be placed or
kept on the window sills so as to be visible from the exterior of the
Building. No articles shall be placed against glass partitions or doors which
Landlord considers unsightly from outside Tenant's Premises.
5. Landlord reserves the right to exclude from the Building and the Project,
between the hours of 6 p.m. and 8 a.m. and at all hours on Saturdays, Sundays
and legal holidays, all persons who are not tenants or their accompanied
guests in the Building. Each tenant shall be responsible for all persons for
whom it allows to enter the Building or the Project and shall be liable to
Landlord for all acts of such persons.
<PAGE>
Landlord and its agents shall not be liable for damages for any error
concerning the admission to, or exclusion from, the Building or the Project
of any person.
During the continuance of any invasion, mob, riot, public excitement or other
circumstance rendering such action advisable in Landlord's opinion, Landlord
reserves the right (but shall not be obligated) to prevent access to the
Building and the Project during the continuance of that event by any means it
considers appropriate for the safety of tenants and protection of the
Building, property in the Building and the Project.
6. All cleaning and janitorial services for the Building and the Premises shall
be provided exclusively through Landlord. Except with the written consent of
Landlord, no person or persons other than those approved by Landlord shall be
permitted to enter the Building for the purpose of cleaning the same. Tenant
shall not cause any unnecessary labor by reason of Tenant's carelessness or
indifference in the preservation of good order and cleanliness of its
Premises. Landlord shall in no way be responsible to Tenant for any loss of
property on the Premises, however, occurring, or for any damage done to
Tenant's property by the janitor or any other employee or any other person.
Landlord agrees to schedule janitorial in sensitive areas during business
hours. If scheduling is not successful, Tenant agrees to address janitorial
in sensitive areas at its own expense.
7. Tenant shall see that all doors of its Premises are closed and securely
locked and must observe strict care and caution that all water faucets or
water apparatus, coffee pots or other heat-generating devices are entirely
shut off before Tenant or its employees leave the Premises, and that all
utilities shall likewise be carefully shut off, so as to prevent waste or
damage. Tenant shall be responsible for any damage or injuries sustained by
other tenants or occupants of the Building or Project or by Landlord for
noncompliance with this rule. On multiple-tendancy floors, all tenants shall
keep the door or doors to the Building corridors closed at all times except
for ingress and egress.
8. Tenant shall not use any method of heating or air-conditioning other than
that supplied by Landlord. As more specifically provided in Tenant's lease of
the Premises, Tenant shall not waste electricity, water or air-conditioning
and agrees to cooperate fully with Landlord to assure the most effective
operation of the Building's heating and air-conditioning, and shall refrain
from attempting to adjust any controls other than room thermostats installed
for Tenant's use.
9. Landlord will furnish Tenant free of charge with two keys to each door in the
Premises. Landlord may make a reasonable charge for any additional keys, and
Tenant shall not make or have made additional keys. Tenant shall not alter
any lock or access device or install a new or additional lock or access
device or bolt on any door of its Premises, without the prior written consent
of Landlord. If Landlord shall give its consent, Tenant shall in each case
furnish Landlord with a key for any such lock. Tenant, upon the termination
of its tenancy, shall deliver to Landlord the keys for all doors which have
been furnished to Tenant, and in the event of loss of any keys so furnished,
shall pay Landlord therefor. Landlord agrees to allow Tenant to install
security card reader.
Version 10.1
Exhibit A - Page 1
<PAGE>
10. The restrooms, toilets, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown into them. The
expense of any breakage, stoppage, or damage resulting from violation of
this rule shall be borne by the tenant who, or whose employees of invitees,
shall have caused the breakage, stoppage, or damage.
11. Tenant shall not use or keep in or on the Premises, the Building or the
Project any kerosene, gasoline, or inflammable or combustible fluid or
material.
12. Tenant shall not use, keep or permit to be used or kept in its Premises any
foul or noxious gas or substance. Tenant shall not allow the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations or
interfere in any way with other tenants of those having business therein,
nor shall any animals or birds be brought or kept in or about the Premises,
the Building, or the Project.
13. No cooking shall be done or permitted by any tenant on the Premises, except
that use by the tenant of Underwriters Laboratory (UL) approved equipment,
refrigerators and microwave ovens may be used in the Premises for the
preparation of coffee, tea, hot chocolate and similar beverages, storing and
heating food for tenants and their employees shall be permitted. All uses
must be in accordance with all applicable federal, state and city laws,
codes, ordinances, rules and regulations and the Lease.
14. Except with the prior written consent of Landlord, Tenant shall not sell, or
permit the sale, at retail, of newspapers, magazines, periodicals, theater
tickets or any other goods or merchandise in or on the Premises, nor shall
Tenant carry on, or permit or allow any employee or other person to carry
on, the business of stenography, typewriting or any similar business in or
from the Premises for the service or accommodation of occupants of any other
portion of the Building, nor shall the Premises be used for the storage of
merchandise or for manufacturing of any kind, or the business of a public
barber shop, beauty parlor, nor shall the Premises be used for any illegal,
improper, immoral or objectionable purpose, or any business or activity
other than that specifically provided for in such Tenant's Lease. Tenant
shall not accept hairstyling, barbering, shoeshine, nail, massage or similar
services in the Premises or common areas except as authorized by Landlord.
15. If Tenant requires telegraphic, telephonic, telecommunications, data
processing, burglar alarm or similar services, it shall first obtain, and
comply with, Landlord's instruction in their installation. The cost of
purchasing, installation and maintenance of such services shall be borne
solely by Tenant.
16. Landlord will direct electricians as to where and how telephone, telegraph
and electrical wires are to be introduced or installed. No boring or cutting
for wires will be allowed without the prior written consent of Landlord. The
location of burglar alarms, telephones, call boxes and other office
equipment affixed to the Premises shall be subject to the prior written
approval of Landlord. Landlord agrees to allow Tenant's installation of
computer cabling.
17. Tenant shall not install any radio or television antenna, satellite dish,
loudspeaker or any other device on the exterior walls or the roof of the
Building, without Landlord's consent. Tenant shall not interfere with radio
or television broadcasting or reception from or in the Building, the Project
or elsewhere.
18. Tenant shall not mark, or drive nails, screws or drill into the partitions,
woodwork or drywall or in any way deface the Premises or any part thereof
without Landlord's consent. Tenant may install nails and screws in areas of
the Premises that have been identified for those purposes to Landlord by
Tenant at the time those walls or partitions were installed in the Premises.
Tenant shall not lay linoleum, tile, carpet or any other floor covering so
that the same shall be affixed to the floor of its Premises in any manner
except as approved in writing by Landlord. The expense of repairing any
damage resulting from a violation of this rule or the removal of any floor
covering shall be borne by the tenant by whom, or by whose contractors,
employees or invitees, the damage shall have been caused.
19. No furniture, freight, equipment, materials, supplies, packages, merchandise
or other property will be received in the Building or carried up or down the
elevators except between such hours and in such elevators as shall be
designated by Landlord.
Tenant shall not place a load upon any floor of its Premises which exceeds
the load per square foot which such floor was designed to carry or which is
allowed by law. Landlord shall have the right to prescribe the weight, size
and position of all safes, furniture or other heavy equipment brought into
the Building. Safes or other heavy objects shall, if considered necessary by
Landlord, stand on wood strips of such thickness as determined by Landlord
to be necessary to properly distribute the weight thereof. Landlord will not
be responsible for loss of or damage to any such safe, equipment or property
from any cause, and all damage done to the Building by moving or maintaining
any such safe, equipment or other property shall be repaired at the expense
of Tenant.
<PAGE>
Business machines and mechanical equipment belonging to Tenant which cause
noise or vibration that may be transmitted to the structure of the Building
or to any space therein to such a degree as to be objectionable to Landlord
or to any tenants in the Building shall be placed and maintained by Tenant,
at Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration. The persons employed to move such equipment in
or out of the Building must be acceptable to Landlord.
20. Tenant shall not install, maintain or operate upon its Premises any vending
machine without the written consent of Landlord.
21. There shall not used in any space, or in the public areas of the Project
either by Tenant or others, any hand trucks except those equipped with
rubber tires and side guards or such other material handling equipment as
Landlord may approve. Tenants using hand trucks shall be required to use the
freight elevator, or such elevator as Landlord shall designate. No other
vehicles of any kind shall be brought by Tenant into or kept in or about its
Premises.
22. Each tenant shall store all its trash and garbage within the interior of the
Premises. Tenant shall not place in the trash boxes or receptacles any
personal trash or any material that may not or cannot be disposed of in the
ordinary and customary manner of removing and disposing of trash and garbage
in the city, without violation of any law or ordinance governing such
disposal. All trash, garbage and refuse disposal shall be made only through
entry-ways and elevators provided for such purposes and at such times as
Landlord shall designate. If the Building has implemented a building-wide
recycling program for tenants, Tenant shall use good faith efforts to
participate in said program.
<PAGE>
23. Canvassing, soliciting, distribution of handbills or any other written
material and peddling in the Building and the Project are prohibited and
each tenant shall cooperate to prevent the same. No tenant shall make
room-to-room solicitation of business from other tenants in the Building or
the Project, without the written consent of Landlord.
24. Landlord shall have the right, exercisable without notice and without
liability to any tenant, to change the name and address of the Building and
the Project. Landlord agrees to give Tenant reasonable notice, within
Landlord's control.
25. Landlord reserves the right to exclude or expel from the Project any person
who, in Landlord's judgment, is under the influence of alcohol or drugs or
who commits any act in violation of any of these Rules and Regulations.
26. Without the prior written consent of Landlord, Tenant shall not use the
name of the Building or the Project or any photograph or other likeness of
the Building or the Project in connection with, or in promoting or
advertising, Tenant's business except that Tenant may include the
Building's or Project's name in Tenant's address. Landlord agrees to allow
Tenant to use a graphic portrayal of the Building, however, Tenant shall
not use Landlord's name in any advertisement or portrayal.
27. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
28. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
29. The requirements of Tenant will be attended to only upon appropriate
application at the office of the Building by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside of
their regular duties unless under special instructions from Landlord, and
no employees of Landlord will admit any person (tenant or otherwise) to any
office without specific instructions from Landlord.
30. Landlord reserves the right to designate the use of the parking spaces on
the Project. Tenant or Tenant's guests shall park between designated
parking lines only, and shall not occupy two parking spaces with one car.
Parking spaces shall be for passenger vehicles only; no boats, trucks,
trailers, recreational vehicles or other types of vehicles may be parked in
the parking areas (except that trucks may be loaded and unloaded in
designated loading areas). Vehicles in violation of the above shall be
subject to tow-away, at vehicle owner's expense. Vehicles parked on the
Project overnight without consent of the Landlord shall be deemed abandoned
and shall be subject to tow-away at vehicle owner's expense. No tenant of
the Building shall park in visitor or reserved parking areas. Any tenant
found parking in such designated visitor or reserved parking areas or
unauthorized areas shall be subject to tow-away at vehicle owner's expense.
The parking areas shall not be used to provide car wash, oil changes,
detailing, automotive repair or other services unless otherwise approved or
furnished by Landlord. Tenant will from time to time, upon the request of
Landlord, supply Landlord with a list of license plate numbers of vehicles
owned or operated by its employees or agents.
31. No smoking of any kind shall be permitted anywhere within the Building,
including, without limitation, the Premises and those areas immediately
adjacent to the entrances and exits to the Building, or any other area as
Landlord elects. Smoking in the Project is only permitted in smoking areas
identified by Landlord.
32. If the Building furnishes common area conferences rooms for tenant usage,
Landlord shall have the right to control each tenant's usage of the
conference rooms, including limiting tenant usage so that the rooms are
equally available to all tenants in the Building. Any common area amenities
or facilities shall be provided from time to time at Landlord's discretion.
33. Tenant shall not swap or exchange building keys or cardkeys with other
employees or tenants in the Building or the Project.
34. Tenant shall be responsible for the observance of all of the foregoing
Rules and Regulations by Tenant's employees, agents, clients, customers,
invitees and guests.
35. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify, alter or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of any premises in the
Project.
<PAGE>
36. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of
any other tenant or tenants, nor prevent Landlord from thereafter enforcing
any such Rules and Regulations against any or all tenants of the Building.
37. Landlord reserves the right to make such other and reasonable rules and
regulations as in its judgment may from time to time be needed for safety
and security, for care and cleanliness of the Building and the Project and
for the preservation of good order therein. Tenant agrees to abide by all
such Rules and Regulations herein stated and any additional rules and
regulations which are adopted.
Exhibit A - Page 3
<PAGE>
EXHIBIT "B"
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT C
TENANT IMPROVEMENTS
1. In consideration of the mutual covenants contained in the Lease of which
this Exhibit C is apart, Landlord agrees to perform the following tenant
improvement work, in the Premises ("Tenant Improvements") not to exceed the
cost of $13,000.00. Tenant agrees to pay any improvement costs in excess of
the $13,000.00 Tenant Improvement Allowance. All Tenant Improvements shall
be mutually agreed upon by Landlord and Tenant.
- Add full height walls to enclose equipment room
- Install one door with lock-set between server room and adjoining
equipment room
- Extend HVAC ductwork from server room to equipment room
- Install Electricity Meter to monitor HVAC use in server room
- Install new 38oz. carpet throughout suite
- Install security card render equipment (to include access to restroom
corridor)
2. All the Tenant Improvements shall be performed by Landlord using Building
Standard materials and in the Building Standard manner. As used herein,
"Building Standard" shall mean the standards for a particular item selected
from time to time by Landlord for the Building or such other standards as
may be mutually agreed upon between Landlord and Tenant in writing.
3. Without limiting the "as-is" provisions of the Lease, Tenant accepts the
Premises in its "as-is" condition and ackowledges that Landlord has no
obligation to make any changes or improvements to the Premises or to pay any
costs expended or be expended in connection with any such changes or
improvements, other than the tenant improvements specified in Paragraph 1 of
this Exhibit C.
4. Tenant shall not perform any work in the Premises (including, without
limitation, cabling, wiring, fixturization, painting, carpeting,
replacements or repairs) except in accordance with Paragraphs 12 and 27 of
the Lease.
<PAGE>
OFFICE OFFICE OFFICE OFFICE
------ ------ ------ ------
STORAGE
-------
OFFICE
------
CONFERENCE
----------
OFFICE
------
T101
CAGE AREA RECEPTION
--------- ---------
OFFICE OFFICE
------ ------
OFFICE OFFICE OFFICE OFFICE OFFICE OFFICE
------ ------ ------ ------ ------ ------
<PAGE>
SPIEKER
PROPERTIES
September 23, 1999
Mr. Wayne Kight
Secure Systems Solutions
50 Ragsdale Drive, Suite 150
Monterey, CA 93940
Re: Lease Commencement - 50 Ragsdale Drive, Suite 150, Monterey, California
Dear Mr. Kight:
On September 27, 1999, your office at 50 Ragsdale Drive, Suite 150, will be
ready for occupancy. Per Paragraph 1 of our Lease Agreement dated September 3,
1999, this letter will serve to define the term of our Lease Agreement as
begining September 27, 1999 and ending September 30, 2002. Please indicate your
acceptance of this by signing below and returning all three copies of this
letter to our office. We will return a fully executed copy of this letter to
you.
We are in receipt of your security deposit of $8,239.00 and October rental
payment of $8,239.00.
Your pro-rata rent for the month of September is $1,099.00. This amount is now
due and payable.
Your next monthly rental payment due November 1, 1999, and due by the first of
each month therafter is as follows:
Base Rental $5,919.00
Operating Expenses $2,320.00
---------
Total Monthly Rental $8,239.00
You will not be invoiced for rents. Rental is due, and must be received no later
than, the first of each month. Rental payments should be made payable to Spieker
Properties, L.P. and mailed to the following address:
Spieker Properties, L.P.
Dept. 10321
P.O. Box 44587
San Francisco, CA 94145-0587
Please reference lease identification SECUSYS01 on all remittance.
<PAGE>
Secure Systems Solutions
September 23, 1999
Page 2
It is pleasure to have Secure Systems Solutions as a tenant in Ryan Ranch.
Very truly yours,
/s/ Tasha Ginet
- ------------------
Tasha Ginet
Building Manager
Agreed and Accepted:
Spieker Properties, L.P., a California Enterprise Solutions, Inc. a Nevada
limited partnership corporation, dba Secure Systems
By: Spieker Properties, Inc., a Maryland Solutions
Corporation By: /s/ Wayne B. Kight, Pres.
Its: General Partner -------------------------
Wayne Kight
Its: President
By:__________________________
Joseph D. Russell, Jr.
Its: Regional Senior Vice President
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT dated September 15, 1999, by and between Enterprises Solutions
Inc., a Florida corporation ("Company"), and John A. Solomon ("Employee").
WHEREAS, the Company is engaged in the business of developing and operating
internet and computer security solutions, government and corporate systems
integration and contract selling and development work;
WHEREAS, the Company and the Employee wish to enter into an Employment
Agreement in order to retain Employees ongoing services as the President and
Chief Executive of the Company or in such capacities as the Company's Board from
time to time determines;
WHEREAS, Employee is employed by the company in a confidential relationship
wherein Employee, in the course of his employment with the Company, will become
familiar with and aware of information as to the specific manner of doing
business and the customers of the Company and its affiliates and future plans
with respect thereto, all of which will be established and maintained at great
expense to the Company; this information is a trade secret and constitutes the
valuable goodwill of the Company.
WHEREAS, employee recognizes that the Company's business is dependent upon
a number of trade secrets, including locations, trade contacts, supplies,
techniques, methods and data. The protection of the trade secrets is of critical
importance to the successful operation of the Company.
WHEREAS, the Company will sustain great loss and damage if during the terms
of this Agreement or Employee's employment with the Company, or for a period of
two (2) years immediately following the termination of the Agreement or
Employee's employment, for whatever reason, Employee should violate the
provisions of Articles III or IV of this Agreement. Further, monetary damages
for such losses would be extemely difficult to measure.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:
ARTICLE I
Employment and Duties
A. The Company hereby employs Employee as its President and Chief Executive
Officer. Additional or different duties, titles or positions, however, may
be assigned to Employee or may be taken from Employee from time to time by
the Board of Directors ("Board") of the Company. Employee hereby accepts
this employment upon the terms and conditions herein contained and agrees
to devote his time, attention and efforts to promote and further the
1
<PAGE>
business and services of the Company. Employee shall faithfully adhere to,
execute and fulfill all policies established by the Company.
B. Employee shall perform such duties, assume such responsibilities and devote
such time, attention and energy to the business of the Company as the Board
shall from time to time require and shall not, during the term of his
employment hereunder, be engaged in any other business activity pursued for
gain, profit or other pecuniary advantage if such activity interferes with
Employee's duties and responsibilities hereunder. However, the foregoing
limitations shall not be construed as prohibiting Employee from making
personal investments in such form or manner as will neither require his
services in the operation or affairs of the companies or enterprises in
which such investments are made nor violate the terms of Paragraphs 3 or 4
hereof.
C. All funds received by Employee on behalf of the Company, if any, shall be
held in trust for the Company and shall be delivered to the Company as soon
as practicable.
ARTICLE II
Compensation
2.01 Salary. From and after the effective date of this Agreement, the Employee
shall receive a salary ("Salary") from the Company in an amount equal to
$200,000.00 per year.
The Employee's Salary shall be payable pursuant to a monthly schedule
consisting of semi-monthly payments ("Salary"), each such payment being in an
amount equal to 1/72 of $600,000.00 or $8,333.33.
2.02 Expense Reimbursement. The Company shall reimburse Employee for all
reasonable travel, entertainment and other expenses related to his employment by
or promotion of the Company. Employee shall provide a written accounting and
receipt of all expenses for which reimbursement is sought on a monthly basis and
the Company shall reimburse all such expenses within ten (10) days following
receipt of each written accounting.
2.03 Bonuses. The Employee shall be entitled to receive such bonuses as the
Board shall determine from time to time in accordance with Company policy and at
the sole discretion of the Board, but not less than 7% of the Net Before Tax
corporate profits in each year of employment.
2.04 Plan Participation. The Employee shall be entitled to participate in any
and all stock option, stock bonus, pension, profit sharing, retirement or other
similar plans adopted by the Company.
2.05 Other. The Employee shall be entitled to such fringe benefits as the
Company shall establish for its employees generally which shall include with
respect to the Employee at least four weeks paid vacation annually, (family)
medical, life and disability insurance, disability pay and
2
<PAGE>
such other benefits as the Company shall adopt, subject to the discretion of the
Company to add or delete such standard benefits as the Board deems appropriate,
from time to time.
2.06 Stock Compensation. The Employee shall be entitled to receive in the form
of Common Stock of the Company shares in the amount of 225,000, said shares
which shall be held in escrow by the Company, with 1/3rd being released to the
Employee at the end of each year of employment completion. The right to the
first 1/3rd of Common Stock shall vest upon execution of this contract and shall
be issued to Employee on or before December 31, 1999.
In the event the Employee's employment by the Company is terminated on or before
September 14, 2002 or following a "change in control of the Company", as defined
in section 5.02E below, any stock bonus provided for above shall be deemed to be
earned in full and shall be paid by the Company simultaneously with such change
in control.
ARTICLE III
Non-Competition Agreement
A. Employee will not, during the period of this Agreement or of his employment
by or with the Company, and for a period of two (2) years immediately
following the termination of this Agreement or his employment, whichever is
longer, for any reason whatsoever, directly or indirectly, for himself or
on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature (i) call upon any
customer of the Company (including, but not limited to, any customer
obtained for the Company by Employee) for the purpose of soliciting or
selling any products or services in competition with those of the Company
or its affiliates; (ii) call upon any employee of the Company or any of its
affiliates for the purpose or with the intent of enticing them away from or
out of the employ of the Company or any reason whatever, (iii) establish,
enter it, be employed by or, advise, consult with or become a part of, any
company, partnership, corporation or other business entity or venture, or
in any way engage in business for himself or for others, in competition
with the Company or its affiliates within one hundred (100) miles of the
home office of the Company and/or any affiliated company location, such
location having a permanent and known facility wherein the Employee has
served in any capacity and wherever Employee has performed duties or had
management responsibility on behalf of the Company or its affiliates; or
(iv) during or after the term of his employment with the Company, disclose
the Company's customers or any other trade secrets of the Company whether
in existence or proposed, to any person, firm partnership, corporation or
business for any reason or purpose whatsoever.
B. Because of the difficulty of measuring economic losses to the Company and
its affiliates as a result of his breach of the foregoing covenant and
because of the immediate and irreparable damage that would be caused to the
Company and its affiliates for which it would have no other adequate
remedy, Employee agrees that the foregoing covenant may be enforced by the
Company and its affililiates in the event of breach by him by injunctions
and restraining orders.
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C. It is agreed by the parties that the foregoing covenants in this
Paragraph 3 are necessary to protect the goodwill and business interests of
the Company and its affiliates and impose a reasonable restraint on
Employee in light of the activities and business of the Company and its
affiliates on the date of the execution of this Agreement and the future
plans of the Company; but it is also the intent of the Company and Employee
that such covenants be construed and enforced in accordance with the
activities and business of the Company and its affiliates on the date of
the termination of the employment of the Employee.
D. The covenants in this Paragraph 3 are severable and separate and the
unenforceability of any specific covenant shall not affect the provisions
of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial
restriction set forth are unreasonable, then it is the intention of the
parties that such restrictions be enforced to the fullest extent which the
court deems reasonable and the Agreement shall thereby be reformed.
E. All of the covenants in this Paragraph 3 shall be construed as an agreement
independent of any other provision in this Agreement and the existence of
any claim or cause of action of Employee against the Company or its
affiliates, whether predicated in this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenants.
It is specifically agreed that the period of two (2) years stated at the
beginning of this Paragraph 3, during which the agreements and covenants of
Employee made in this Paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in
violation of any provision of this Paragraph 3 and any time during which
there is pending in any court of competent Jurisdiction any action
(including any appeal from any final judgment) brought by any person,
whether or not a party to this Agreement, in which action the Company or
its affiliates seeks to enforce the agreements and covenants of Employee or
in which any person contests the validity of such agreements and covenants
or their unenforceability or seeks to avoid their performance or
enforcement.
ARTICLE IV
Non-Disclosure Agreement and Proprietary Information.
A. The Employee recognizes and acknowledges that the information, techniques,
processes, formulas, developments, experimental work, work in progress,
business, list of the Company's customers and any other trade secret or
other secret or confidential information relating to Company's business as
they may exist from time to time are valuable, special and unique assets of
Company's business. In addition, Employee recognizes that Company is
continually engaged in research and development of new inventions and
improvements to the information, techniques, processes, formulas,
developments, trade secrets, and other secrets and confidential matters
relating to Company's business. Therefore, Employee agrees as follows:
1. That Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to
his employment, without the express
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authorization of the Board of Directors of the Company, any information,
manufacturing technique, process, business customer lists, trade secrets or
any other secrets or confidential matter relating to any aspect of the
Company's business as designated from time to time by the Board of
Directors of Company, except as such disclosure or use may be required in
connection with Employee's work for the Company.
2. That upon request or at the time of leaving the employ of the Company, the
Employee will deliver to the Company, and not keep or deliver to anyone
else, any and all notes, memoranda, documents and, in general, any and all
material relating to the Company's business.
3. That the Board of Directors of the Company may from time to time designate
other subject matters requiring confidentiality and secrecy which shall be
deemed to be covered by the terms of this Agreement.
B. In the event of a breach or threatened breach by the Employee of the
provisions of this Paragraph 4, the Company shall be entitled to an
injunction:
1. Restraining the Employee from disclosing, in whole or in part, any
information as described above or from rendering any services to any
person, firm, corporation association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to be
disclosed; and/or
2. Requiring that Employee deliver to Company all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employee's leave of the employ of the Company. Nothing herein
shall be construed as prohibiting the Company from pursuing other remedies
available to the Company for such breach or threatened breach, including
the recovery of damages from the Employer.
ARTICLE V
Term: Terminations
5.01 Term. The term of this agreement shall begin on September 15, 1999 and
continue until September 14, 2002, unless further extended or sooner terminated
as herein provided. On September 14, 2002, and on the 14th day of September each
year thereafter, the term of the Employee's employment shall be automatically
extended one (1) additional year unless, on or before sixty (60) days in advance
of such 14th day of September 2002, the Company shall have delivered to the
Employee or the Employee shall have delivered to the Company written notice that
the term of the Employee's employment hereunder will not be extended.
5.02 Termination. This Agreement and Employee's employment may be terminated in
any one of the following ways:
A. The death of Employee.
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B. The Company may terminate the Agreement after thirty (30) days written
notice ("Notice of Termination") to Employee if, because of illness or
physical or mental disability or other incapacity which continues for
a period in excess of three (3) months, Employee is unable to perform
his duties under this agreement.
C. Employee shall not be discharged during the Employment Period except
for justifiable cause. For purposes of this Agreement, justifiable
cause is limited to the following: willful, material dishonesty,
including theft, misappropriation or material intentional falsehood;
invidious discrimination or significant harassment, battery or assault
of an officer, employee, customer, client or vendor of the Company,
whether associated with race, color, religion, national origin, age,
sex, non-job related disability or any other factor or status
protected by law; willful or wanton breach of fiduciary duties;
material and persistent refusal to carry out lawfully assigned duties;
intentional or grossly reckless defamation conviction of a felony or
other illegal public action that materially damages the Company's
reputation. The termination of the Employee for reasons other than
those specified in the preceding paragraph shall be deemed to be
without justifiable cause. No action or inaction by the Employee shall
be deemed to have occurred under this Agreement unless written notice
of such action or inaction shall have been given to the Employee by
the Company and the Employee shall have failed to cure or remedy such
defect to the Company's reasonable satisfaction within sixty (60) days
after the Employee receives written notice of the offending action or
inaction. Any termination of the Employee without justifiable cause
shall entitle the Employee to a minimum severance package of two (2)
years current salary payable over six (6) monthly installments, or the
balance of $600,000 less any payments made to Employee pursuant to
this agreement, whichever is less. Employee will also be entitled to
immediate issuance of shares in the Company equal to 225,000 less
shares already issued Employee.
D. Thirty (30) days notice by Employee of his intent to resign his
position.
E. For purposes of this Agreement a "change in control of the Company"
shall mean a change in control that would be required to be reported
in response to Item I(a) of Form 8-K under the Securities Exchange Act
of 1934 (the "Exchange Act"); provided that, without limitation, such
a change in control shall be deemed to have occurred if (i) any
"person" (as that term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Company, as constituted, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
then outstanding securities, (ii) during any period of three
consecutive years during the term of this Agreement, individuals who
at the beginning of such period constitute the Board cease for any
reason to constitute at least a majority thereof, unless the election
of each director who was not a director at the beginning of such
period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the
beginning of the period.
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F. In the event the Company terminates, or attempts to terminate, the
employment of the Employee other than as provided above, or the
Company otherwise is in breach of the terms of this Agreement, the
Company agrees to pay or reimburse the Employee for, all legal fees,
costs and other damages, including back-pay and benefits if
applicable, incurred as a result of such breach or wrongful
termination.
5.03 Compensation Upon Termination or During Disability
A. During any period that the Employee fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), the Employee shall continue to receive his full
salary at the rate then in effect for such period until his employment
is terminated pursuant to section 5.02B hereof.
B. If the Employee's employment shall be terminated pursuant to Section
5.02B, the Company shall pay the Employee his full salary through the
date of termination, at the rate in effect at the time Notice of
Termination is given, plus all outstanding expenses payable pursuant
to section 2.02 hereof and the Company shall have no further
obligations to the Employee under this Agreement.
C. If the Employee shall terminate his employment und Section 5.02D
hereof, the Company shall pay the Employee his full salary through the
date of termination at the rate in effect at the date of termination,
plus all outstanding expenses payable pursuant to section 2.02 hereof.
D. If the Company shall terminate the Employee's employment in breach
hereof or within one year of a "change in control of the Company", for
any reason other than death or disability under section 5.02A or B,
then:
1. The Company shall pay the Employee for any termination without
justified cause a minimum severance package of (2) years
current salary payable over six (6) months installments, or
the balance of $600,000 less any payments made to Employee
pursuant to this agreement, whichever is less. Employee will
also be entitled to immediate issuance of shares in the
Company equal to 225,000 less shares already issued Employee.
2. The Company shall maintain in full force and effect, for the
continued benefit of the Employee for three (3) months from
the date of termination, any employee benefit plans and
programs in which the Employee was entitled to participate
immediately prior to the date of termination provided that the
Employee's continued participation is possible under the
general terms and provisions of such plans and programs. All
such benefit plans and programs shall be maintained at the
level and value provided immediately prior to the date of
termination. In the event that the Employee's participation in
any such
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plan or program is barred, the Company shall arrange to
provide the Employee with benefits substantially similar to
those which the Employee would otherwise have been entitled to
receive under such plans and programs from which his continued
participation is barred.
Employer shall be permitted to take key man life insurance out
on employee, with the company as beneficiary in the amount up
to $1,000,000.
Except as required above, the Company shall not be required to
maintain in force for the benefit of the Employee any employee
benefit plans or programs following the date of termination.
E. The Employee shall not be required to mitigate the amount of any
payment provided for in this Section by seeking other employment or
otherwise.
ARTICLE VI
Representations of Employee
Employee has represented and hereby represents and warrants to the Company
that he is not subject to any restriction or non-competition covenant in favor
of a former employer or any other persons or entity and that the execution of
this Agreement by Employee and his employment by the Company or its affiliates
and the performance of his duties hereunder will not violate or be a breach of
any agreement with a former employer or any other person or entity. Further,
Employee agrees to indemnify the Company and its affiliates for any claim,
including, but not limited to, attorney's fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company or its affiliates based upon or arising out of any
non-competition agreement or invention and secrecy agreement between Employee
and such third party.
ARTICLE VII
Miscellaneous
7.01 Complete Agreement. This Agreement is not a promise of future employment.
There are no oral representations, understandings or agreements with the Company
or any of its officers, directors or representatives covering the same subject
matter as this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between the Company and
Employee and of all the terms of this Agreement and it cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous oral or
written agreements. This written agreement may not be later modified except by a
further writing signed by the Company and Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such terms.
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7.02 No Waiver. No waiver by the parties hereto of any default or breach of any
terms, condition or covenant of this Agreement shall be deemed to be a waiver of
any subsequent default or breach of the same or any other term, condition or
covenant contained herein.
7.03 Non Delegation of Duties. Employee understands that he has been selected
for employment by the Company on the basis of his personal qualifications,
experience and skills. Employee agrees, therefore, that he cannot delegate any
part of his duties under this Agreement.
7.04 Notice. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To the Company: Enterprises Solutions Inc.
5061 N. Dixie Highway
Boca Raton, FL 33431
To Employee: John A. Solomon
15 Raven Road
Canton, MA 02021
Notice shall be deemed given and effective three (3) days after the deposit in
the Unites States mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
party may change the address for notice by notifying the other party of such
change in accordance with this Section 7.04.
7.05 Severability Headings. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. The paragraph
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of this Agreement
or of any part hereof.
7.06 Arbitration. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in the City of
Boca Raton, Florida in accordance with the rules then existing of the American
Arbitration Association and judgement upon the award may be entered in any Court
having jurisdiction thereof.
7.07 Governing Law. This Agreement shall in all respects be construed according
to the laws of the State of Florida.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
date herein first set forth.
ENTERPRISES SOLUTIONS INC.
WITNESSED BY:
________________________ /s/ Wayne B. Kight
-------------------------
Wayne Kight
Dated: _________________ Corporate President
EMPLOYEE:
WITNESSED BY:
________________________ _________________________
John A. Solomon
Dated: _________________
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EMPLOYMENT AGREEMENT
AGREEMENT, dated August 1, 1999, by and between Enterprise Solutions
Inc., a Florida corporation ("Company"), and Richard A. Lee, II ___________
("Employee").
WHEREAS, Company desires to establish a new division, subsidiary or
affiliate to enter into the business of developing and operating internet and
computer security solutions, government and corporate systems integration and
contract selling and development work, and
WHEREAS, Employee has unique skills and experience in internet and
computer security solutions.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, it is
hereby agreed as follows:
ARTICLE I
Employment and Duties
1.01 New Division or Subsidiary. Company will form a division, subsidiary or
affiliate with its principal place of business in Northern, California to
produce and sell Commercial and Mass Market security products.
1.02 Place of Employment. Company will employ Employee in Northern California.
1.03 Position, Duties. Company hereby employs Employee as its Vice President
Strategy and Business Development for new and existing security products
development of the Company. The duties of Employee are as part of the new
division, subsidiary or affiliate and include strategic directions, strategic
relations, sales and marketing executive. From time to time the Board of
Directors ("Board") of Company may change employee's position and duties in a
manner consistent with Employee's abilities and the needs of the business.
Employee hereby accepts this employment upon the terms and conditions herein
contained and agrees to devote his time, attention and efforts to promote and
further the business and services of Company. Employee shall faithfully adhere
to, execute and fulfill all policies established by Company. Any Prior
Agreements are hereby superseded, terminated and shall have no further force or
effect nor shall they be legally binding upon either Employee or Company.
1.04 Full Time Employment. Employee shall perform such duties, assume such
responsibilities and devote such time, attention and energy to the business of
Company as the Board shall from time to time require and shall not, during the
term of his employment hereunder, be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage if such activity
interferes with Employee's duties and responsibilities hereunder. However, the
foregoing limitations shall not be construed as prohibiting Employee from making
personal investments in such form or manner as will neither require his services
in the operation or affairs of the companies or enterprises in which such
investments are made nor violate the terms of Paragraphs 3 or 4 hereof.
1.05 Funds Held in Trust. All funds received by Employee on behalf of Company,
if any, shall be held in trust for Company and shall be delivered to Company as
soon as practicable.
<PAGE>
ARTICLE II
Compensation
2.01 Salary and Draw. From and after the effective date of this Agreement,
Employee shall receive a salary ("Salary") from Company in an amount equal to
One Hundred Twenty Thousand Dollars ($120,000.00) per year. However, employee
shall defer 50% of salary for the initial five months of this agreement, or
until completion of Company's public offering, whichever is the first to
complete, at which time payment will be made in full.
Employee's Salary shall be payable pursuant to a monthly schedule
consisting of seventy two (72) semi-monthly payments ("Draw"), each such payment
being in an amount equal to 1/72 of Three Hundred Sixty Thousand DOLLARS
($360,000.00) or Five Thousand DOLLARS ($5,000.00)
2.02 Expense Reimbursement. Company shall reimburse Employee for all reasonable
travel, entertainment and other expenses related to his employment by or
promotion of Company. Employee shall provide a written accounting an explanation
of all expenses for which reimbursement is sought on a monthly basis and Company
shall reimburse all such expenses within ten (10) days following receipt of each
written accounting.
2.03 Bonuses. Employee shall be entitled to receive such bonuses as the Board
shall determine from time to time in accordance with Company policy and at the
sole discretion of the Board.
2.04 Plan Participation. Employee shall be entitled to participate in any and
all stock option, stock bonus, pension, profit sharing retirement or other
similar plans adopted by Company.
2.05 Other. Employee shall be entitled to such fringe benefits as Company shall
establish for its employees generally which shall include with respect to
Employee at least two weeks paid vacation annually, eight paid holidays as
designated by Company, provisions for an industry competitive health, dental and
vision insurance plan coverage for Employee and his dependents from the starting
date of this agreement, $500,000 of term life insurance, and $500,000 of term
life insurance with the Company as beneficiary, disability pay and such other
benefits, as Company shall adopt, subject to the discretion of Company to add or
delete such standard benefits as the Board deems appropriate, from time to time.
In addition, on the earlier of five months from the date of this Agreement or
Company's initial public offering, Company shall approve and reimburse
Employee's relocation expenses of up to $10,000.
2.06 Stock Compensation. Employee shall be entitled to purchase from the Company
One Hundred Thousand (100,000) shares of the Company's Common Stock in blocks of
1/3rd of shares each on or after August 1, 2000, August 1, 2001 and August 1,
2002, paying the aggregate price of THIRTY-THREE DOLLARS and THIRTY-THREE CENTS
($33.33) for each block of shares, provided that this Agreement is not sooner
terminated for death under Section 5.02A, disability under Sections 5.02B or
503A or Cause under sections 5.02C below. On the execution of this Agreement,
Company shall place all of said shares in escrow, and hold them for the benefit
of Employee. In the event that Company breaches this Agreement with a purported
termination or Employee terminates it for Good Reason, Employee shall be
entitled to purchase from Company within 30 days of termination the remainder of
the 100,000 shares of Common Stock not previously purchased hereunder.
2.07 Cash Bonus Compensation. Employee shall be paid a signing bonus of
Twenty-four Thousand DOLLARS ($24,000.00) for joining Company. The bonus shall
be paid on the earlier of the following: Fourteen Thousand DOLLARS ($14,000.00)
on signing this Agreement and Ten Thousand DOLLARS ($10,000.00) within 30 days.
2.08 Financial Disclosures. Company agrees to share with Employee all financial
information relevant to the raising of capital, and the making of a public
offering, as set forth in Section 2.01.
<PAGE>
ARTICLE III
Non-Competition Agreement
3.01 No Competition During Employment Term. Employee will not, during his
employment by or with Company, engage in Competition with Company.
3.02 No Competition After Employment Term. In the event that the Company
exercises its option to repurchase all of the Company's Common Stock paid to
Employee hereunder within 30 days of termination, Employee will not for a period
of one (1) year immediately following the termination of his employment for any
reason whatsoever directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature engage in Competition with Company. Pursuant to
California Business and Professions Code Section 16600 et seq., Employee will be
free to engage in Competition after the termination of his employment unless
Company exercises its Option as set forth in Section 5.06 below.
3.03 Competition Defined. For purposes of this Agreement, Employee engages in
"Competition" when he directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation
or business of whatever nature, (i) Company by Employee) for the purpose of
soliciting or selling any Commercial and Mass Market security products; and (ii)
establishes, enters it, is employed by or, advises, consults with or becomes a
part of any company, partnership, corporation or other business entity or
venture, or in any way engage in business for himself or for others, in
producing or selling Commercial and Mass Market security products within thirty
(30) miles of the home office of Company and/or any affiliated company location,
such location having a permanent and known facility wherein Employee has served
in any capacity and wherever Employee has performed duties or had management
responsibility on behalf of Company or its affiliates.
3.04 Injunctive Relief. Because of the difficulty of measuring economic losses
to Company and its affiliates as a result of his breach of the foregoing
covenant and because of the immediate and irreparable damage that would be
caused to Company and its affiliates for which it would have no other adequate
remedy, Employee agrees that the foregoing covenant may be enforced by Company
and its affiliates in the event of breach by him by injunctions and restraining
orders.
3.05 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Paragraph 3 are necessary to protect the goodwill and business
interests of Company and its affiliates and impose a reasonable restraint on
Employee in light of the activities and business of Company and its affliates
on the date of the execution of this Agreement and the future plans of Company;
but it is also the intent of Company and Employee that such covenants be
construed and enforced in accordance with the activities and business of Company
and its affiliates on the date of the termination of the employment of Employee.
3.06 Severable Covenants. The covenants in this Paragraph 3 are severable and
separate and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restriction set
forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable
and the Agreement shall thereby be reformed.
3.07 Independent Covenants. All of the covenants in this Paragraph 3 shall be
construed as an agreement independent of any other provision in this Agreement
and the existence of any claim or cause of action of Employee against Company or
its affiliates, whether predicated in this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of such covenants.
3.08 Calculation of Time. It is specifically agreed that the period of one (1)
year stated at the beginning of this Section 3.02, during which the agreements
and covenants of Employee made in this Paragraph 3 shall be effective, shall run
from the Company's exercise of its option under Section 5.06 and exclude from
such computation any time during which Employee is in violation of any provision
of this Paragraph 3 and any time during which there is pending in any court of
competent jurisdiction any action (including any appeal from any final judgment)
brought by any person, whether or not a party to this Agreement, in which action
Company or its affiliates seeks to enforce the agreements and covenants of
Employee or in which any person contests the validity of such agreements and
covenants or their unenforceability or seeks to avoid their performance or
enforcement.
<PAGE>
ARTICLE IV
Non-Disclosure Agreement and Proprietary Information.
4.01 Proprietary Information. Employee recognizes and acknowledges that the
information, techniques, processes, formulas, developments, experimental work,
work in progress, business, list of Company's customers, contractual
arrangements, contract negotiations and any other trade secret or other secret
or confidential information relating to Company's business as they may exist
from time to time are valuable, special and unique assets of Company's business.
In addition, Employee recognizes that Company is continually engaged in research
and development of new inventions and improvements to the information,
techniques, processes, formulas, developments, trade secrets, and other secrets
and confidential matters relating to Company's business. Therefore, Employee
agrees as follows:
A. That Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to
his employment, without the express authorization of the Board of Directors
of Company, any information, manufacturing technique, process, business
customer lists, contractual arrangements, contract negotiations, trade
secrets or any other secrets or confidential matter relating to any aspect
of Company's business as designated from time to time by the Board of
Directors of Company, except as such disclosure or use may be required in
connection with Employee's work for Company.
B. Employee will not disclose Company's customers or any other trade
secrets of Company whether in existence or proposed, to any person, firm
partnership, corporation or business for any reason or purpose whatsoever.
C. That upon request or at the time of leaving the employ of Company,
Employee will deliver to Company, and not keep or deliver to anyone else,
any and all notes, memoranda, documents and, in general, any and all
material relating to Company's business.
<PAGE>
4.02 Assignment of Inventions Conceived During Employment. Employee shall
(without any additional compensation) promptly disclose in writing to the Board
of Directors of Company all ideas, formulas, programs, systems, devices,
processes, business concepts, discoveries and inventions (hereinafter referred
to collectively as "discoveries"), whether or not patentable, which Employee,
while employed by Company, conceives, makes, develops, acquires or reduces to
practice, whether alone or with others and whether during or after usual working
hours; and which are related to Company's business or interest, or are used or
usable by Company, or arise out of or in connection with the duties performed by
Employee hereunder, and Employee hereby transfers and assigns to Company, all
rights, title and interests in and to said discoveries, including any and all
domestic and foreign contractual agreements entered into by Employee during the
term of this Agreement and any renewals thereof. On request of Company, Employee
shall from time to time during or after the expiration or termination of their
employment, execute such further instruments (including, without limitation,
royalties, licenses and/or interest whatsoever and assignments thereof) and do
all such other acts and things as may be deemed necessary or desirable by
Company to protect and/or enforce its rights in respect of said discoveries.
Company agrees to pay all expenses of filing and/or prosecuting any interest in
such discovery shall be borne by Company, as well as reasonable consulting fees
to Employee in the amount of $200/hour. Employee shall cooperate in filing
and/or prosecuting any such interest or violation in rights thereto.
4.03. Non-Solicitation. During the term of this Agreement and for one year
thereafter, Employee will not call upon or cause to be called upon any employee
of Company or any of its affiliates for the purpose or with the intent of
enticing them away from or out of the employ of Company or any reason whatever.
4.04 Injunctive Relief. In the event of a breach or threatened breach by
Employee of the provisions of this Paragraph 4, Company shall be entitled to an
injunction:
A. Restraining Employee from disclosing, in whole or in part, any
information as described above or from rendering any services to any
person, firm, corporation association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to be
disclosed; and/or
B. Requiring that Employee deliver to Company all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employee's leave of the employ of Company. Nothing herein shall
be construed, as prohibiting Company from pursuing other remedies available
to Company for such breach or threatened breach, including the recovery of
damages from the Employer.
<PAGE>
ARTICLE V
Term: Terminations
5.01 Term. The term of this agreement shall begin on August 1, 1999 and continue
until July 31, 2002, unless further extended or sooner terminated as herein
provided. On August 1, 2002, and on the 13th day of June of each year
thereafter, the term of Employee's employment shall be extended one (1)
additional year unless, on or before sixty (60) days in advance of such last day
of December, Company shall have delivered to Employee or Employee shall have
delivered to Company written notice that the term of Employee's employment
hereunder will not be extended.
5.02 Termination by Company, Company may terminate this Agreement and Employee's
employment only in one of the following ways:
A. Termination for Death. Company may terminate this Agreement in the event
of the death of Employee.
B. Termination for Disability. Company may terminate the Agreement after
thirty (30) days written notice ("Notice of Termination") to Employee if
because of illness or physical or mental disability or other incapacity
which continues for a period in excess of three (3) months, Employee is
unable to perform his duties under this Agreement. Until such Notice of
Termination becomes effective, Employee shall continue to receive his
compensation and benefits hereunder.
C. Termination for Cause. Company may terminate this Contract for Cause.
For purposes of this Agreement "Cause" exists if Employee commits any of
the following: material act of dishonesty or gross misconduct,
unjustifiable neglect of his employment duties, conviction of a felony, or
such acts of dishonesty, theft, fraud, misrepresentation, or other acts of
moral turpitude as would have a direct, substantial and adverse effect on
Employer's business.
5.03 Termination by Employee. Employee may terminate this Agreement and
Employee's employment only in one of the following ways:
A. Termination for Disability. Employee may terminate his employment if his
health should become impaired to an extent that makes his continued
performance of his duties hereunder hazardous to his physical or mental
health or his life, provided that Employee shall have furnished Company
with a written statement from a qualified doctor to such effect and
provided, further, that, at Company's request, Employee shall submit to an
examination by a doctor selected by Company and such doctor shall have
concurred in the conclusion of Employee's doctor.
B. Termination for Good Reason. Employee may terminate his employment
hereunder by resigning for Good Reason.
C. Definitions. For purposes of this Agreement, the capitalized shall have
the meaning set forth below.
<PAGE>
"Good Reason" shall mean (i) a Change in Control of Company (as described
below), (ii) a failure by Company to comply with any material provision of this
Agreement which has not been cured within thirty (30) days after written notice
of such noncompliance has been given by Employee to Company, or (iii) any
purported termination of Employee's employment by Company which is not effected
pursuant to the provisions hereof (and for purposes of this Agreement no such
purported termination shall be effective).
"Change in Control of Company" shall mean a change in control that would be
required to be reported in response to Item 1(a) of Form 8-K under the
Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred if (i) any
"person" (as that term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than Company, as constituted, is or becomes the "beneficial owner" (as
defined in Rule l3d-3 under the Exchange Act), directly or indirectly, of
securities of Company representing 25% or more of the combined voting power of
Company's then outstanding securities, (ii) during any period of three
consecutive years during the term of this Agreement, individuals who at the
beginning of such period constitute the Board cease for any reason to constitute
at least a majority thereof, unless the election of each director who was not a
director at the beginning of such period has been approved in advance by
directors representing at least two-thirds of the directors then in office who
were directors at the beginning of the period.
5.04 Compensation Upon Termination for Death or Disability. If Employee's
employment is terminated on death pursuant to 5.02A or disability pursuant to
Section 5.02B or 5.03A, Company shall pay Employee's estate his full salary and
benefits through the date of termination plus all outstanding expenses payable
pursuant to section 2.02 and Company shall have no further obligations to
Employee under this Agreement.
5.05 Compensation Upon Termination for Cause. If Company terminates Employee's
employment for Cause pursuant to Section 5.02C, Company shall pay Employee his
full salary through the date of termination, at the rate in effect at the time
Notice of Termination is given, and Company shall have no further obligations to
Employee under this Agreement.
5.06 Compensation on Resignation for Good Reason or Company Termination in
Breach of Agreement.
If Employee shall terminate his employment for Good Reason or if Company
shall commit a material breach hereof, including without limitation the wrongful
termination of this Agreement, then Employee shall have the following remedies
in addition to those otherwise provided by law:
A. Within 30 days after such resignation or termination, Employee shall
receive from Company his full salary for the remaining term of this
Agreement, and any deferred salary, signing bonus not previously released
to Employee. Employee shall have the right to Common Stock as set forth in
Section 2.06 without regard to the completion of employment with the
Company.
B. Employee shall receive for three (3) months from the date of
termination, all employee benefit plans and programs in which Employee
participated immediately prior to the date of termination provided that
Employee's continued participation is possible under the general terms and
provisions of such plans and programs. All such benefit plans and programs
shall be maintained at the level and value provided immediately prior to
the date of termination. In the event that Employee's participation in any
such plan or program is barred, Company shall arrange to provide Employee
with benefits substantially similar to those which Employee would otherwise
have been entitled to receive under such plans and programs from which his
continued participation is barred.
C. Except as required above, Company shall not be required to maintain in
force for the benefit of Employee any employee benefit plans or programs
following the date of termination.
D. Employee shall not be required to mitigate the amount of any payment
provided for in this Section 5.05 by seeking other employment or otherwise.
<PAGE>
5.07 Company's Option to Repurchase Shares. In the event of Employee's
termination for any reason, and under any circumstance, Company shall have the
option (the "Option") to purchase not less than all of the shares of the
Company's Common Stock held by Employee at the per share price of $10 or the
average closing price of Common Stock within the 30 days prior to Company's
exercise of the Option, whichever amount is greater. This right to purchase
shall be exercised on written notice to Employee delivered within 30 days of
such termination and shall provide for payment as follows: one third within 30
days of the notice to Employee: one third within 180 days of the notice and the
remaining third within one year of the notice. If Company does not give Employee
notice of its exercise of the Option within the limits stated, the Option and
Employee's obligations under Section 3.02 will expire without further notice.
ARTICLE VI
Representations of Employee
6.01 Restrictions from Prior Employment. Employee hereby represents and warrants
to Company that he is not subject to any trade secret restriction or
non-competition covenant in favor of a former employer or any other persons or
entity, other than those listed in Exhibit A attached hereto and incorporated
herein by this reference. Employee further represents that the execution of this
Agreement by Employee and his employment by Company or its affiliates and the
performance of his duties described herein will not violate or be a breach of
any of the agreements listed in Exhibit A or any other agreement with a former
employer or any other person or entity.
6.02 Non Disclosure of Trade Secrets. Employee agrees not to disclose to Company
or use in the course of his employment by the Company, any information to the
extent that such information constitutes a trade secret of prior employers.
Employee further agrees not to use in the course of his employment by the
Company, any documentation containing proprietary information, or equipment that
may have been obtained by Employee from former employers.
6.03 Remedies. Employee agrees to indemnify Company and its affiliates for any
claim, including, but not limited to, attorney's fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against Company or its affiliates based upon or arising
out of any non-competition agreement or invention and secrecy agreement between
Employee and such third party.
ARTICLE VII
Miscellaneous
7.01 Complete Agreement. This Agreement is not a promise of future employment.
There are no oral representations, understandings or agreements with Company or
any of its officers, directors or representatives covering the same subject
matter as this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between Company and Employee
and of all the terms of this Agreement and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. Upon the effective date of this agreement, the Prior Agreement shall
be terminated and superseded in its entirety. This written agreement may not be
later modified except by a further writing signed by Company and Employee, and
no term of this Agreement may be waived except by writing signed by the party
waiving the benefit of such terms.
7.02 No Waiver. No waiver by the parties hereto of any default or breach of any
terms, condition or covenant of this Agreement shall be deemed to be a waiver of
any subsequent default or breach of the same or any other term, condition or
covenant contained herein.
<PAGE>
7.03 Assignment: Binding Effect. Employee understands that he has been selected
for employment by Company on the basis of his personal qualifications,
experience and skills per 1A, preceding. Employee agrees, therefore, that this
Agreement and the rights to his services may be assigned by Company at any time
without notice to him, provided that such Assignee may not direct employee to
relocate from Northern California or assume other duties than described in
Section 1A. Employee agrees that he cannot assign all or any portion of this
Agreement. Subject to the preceding two sentences, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors, and assigns. It is further understood and agreed that Company
may be merged or consolidated with another entity and that any such entity shall
automatically success to the rights, powers and duties of Company hereunder.
7.04 Notice. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To Company: Enterprise Solutions Inc.
5061 N. Dixie Highway
Boca Raton, FL 33431
Attn: Wayne Knight
To Employee: Richard A. Lee, II
601 Valley Drive
Heber City, UT 84032
<PAGE>
P.O. Box 2119
Salinas, CA 93902
Notice, shall be deemed given and effective three (3) days after the deposit in
the United States mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
party may change the address for notice by notifying the other party
of such change in accordance with this Section 7.04.
7.05 Attorneys Fees. In the event of litigation or arbitration to enforce or
interpret this Agreement, the court or arbitrator shall award the prevailing
party his reasonable attorneys' fees and costs of suit, including the costs of
expert witnesses.
7.06 Severability: Headings. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. The paragraph
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of this Agreement
or of any part hereof.
7.07 Governing Law. This Agreement shall in all respects by construed according
to the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
date herein first set forth.
ENTERPRISE SOLUTIONS INC.
WITNESSED BY:
/S/ JUNE PEART /S/ JEFFREY M. MORITZ
- -------------- -----------------------
Dated: 7-29-99 Corporate Treasurer
WITNESSED BY:
/S/ D. E. xxxxxx /S/ RICHARD A. LEE, II
- ----------------- -----------------------
Dated: 7-29-99 Richard A. Lee, II
<PAGE>
EXHIBIT A TO
EMPLOYMENT AGREEMENT
A. Non-Compete Agreements.
B. Other companies entrusting Employee with restricted intellectual property
that may not be used by others:
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated August 1, 1999, by and between Enterprise Solutions
Inc., a Florida corporation ("Company"), and Roger Schell ("Employee").
WHEREAS, Company desires to establish a new division, subsidiary or
affiliate to enter into the business of developing and operating internet and
computer security solutions, government and corporate systems integration and
contract selling and development work; and
WHEREAS, Employee has unique skills and experience in internet and
computer security solutions.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, it is
hereby agreed as follows:
ARTICLE I
Employment and Duties
---------------------
1.01 New Division or Subsidiary. Company will form a division, subsidiary or
affiliate with its principal place of business in Northern, California to
produce and sell Commercial and Mass Market security products
1.02. Place of Employment. Company will employ Employee in Northern California.
1.03 Position, Duties. Company hereby employs Employee as the Executive Vice
President and Sr. Engineer Executive for new and existing security products
development of the Company. The duties of Employee are as part of the new
division, subsidiary or affiliate and include being the senior engineering
executive who is the line manager responsible for hiring the key people needed,
establishing personnel policies for the staff, and choosing the physical
facilities and the equipment and services to support the development team. From
time to time the Board of Directors ("Board") of Company may change employee's
position and duties in a manner consistent with Employee's abilities and the
needs of the business. Employee hereby accepts this employment upon the terms
and conditions herein contained and agrees to devote his time, attention and
efforts to promote and further the business and services of Company. Employee
shall faithfully adhere to, execute and fulfill all policies established by
Company. Any Prior Agreements are hereby superseded, terminated and shall have
no further force or effect nor shall they be legally binding upon either
Employee or Company.
1.04 Full Time Employment. Employee shall perform such duties, assume such
responsibilities and devote such time, attention and energy to the business of
Company as the Board shall from time to time require and shall not, during the
term of his employment hereunder, be engaged in any other business activity
1
<PAGE>
pursued for gain, profit or other pecuniary advantage if such activity
interferes with Employee's duties and responsibilities hereunder. However, the
foregoing limitations shall not be construed as prohibiting Employee from making
personal investments in such form or manner as will neither require his services
in the operation or affairs of the companies or enterprises in winch such
investments are made nor violate the terms of Paragraphs 3 or 4 hereof ..
1.05 Funds Held in Trust. All funds received by Employee on behalf of Company,
if any, shall be held in trust for Company and shall be delivered to Company as
soon as practicable.
ARTICLE 11
Compensation
------------
2.01 Salary and Draw. From and after the effective date of this Agreement,
Employee shall receive a salary ("Salary") from Company in an amount equal to
ONE HUNDRED AND FIFTY THOUSAND ($150,000.00) per year. However, employee shall
defer 50% of salary for the initial five months of this agreement, or until
completion of Company's public offering, whichever is the first to complete, at
which time payment will be made in full.
Employee's Salary shall be payable pursuant to a monthly schedule
consisting of seventy-two (72) semi-monthly payments ("Draw"), each such payment
being in an amount equal to 1/72 of FOUR HUNDRED AND FIFTY THOUSAND DOLLARS
($450,000.00) or SIX THOUSAND, TWO HUNDRED AND FIFTY DOLLARS ($6,250.00)
2.02. Expense Reimbursement. Company shall reimburse Employee for all
reasonable travel, entertainment and other expenses related to his employment by
or promotion of Company. Employee shall provide a written accounting an
explanation of all expenses for which reimbursement is sought on a monthly basis
and Company shall reimburse all such expenses within ten (10) days following
receipt of each written accounting.
2.03 Bonuses. Employee shall be entitled to receive such bonuses as the Board
shall determine from time to time in accordance with Company policy and at the
sole discretion of the Board.
2.04 Plan Participation. Employee shall be entitled to participate in any and
all stock option, stock bonus, pension, profit sharing, retirement or other
similar plans adopted by Company.
2.05 Other. Employee shall be entitled to such fringe benefits as Company shall
establish for its employees generally which shall include with respect to
Employee at least two weeks paid vacation annually, eight paid holidays as
designated by Company, provisions for an industry competitive health, dental and
vision insurance plan coverage for Employee and his dependents. from the
starting date of this agreement, $500,000 of term life insurance, and $500,000
of term life insurance with the Company as beneficiary, disability pay and such
other benefits as Company shall adopt, subject to the discretion of Company to
add or delete such standard benefits as the Board deems appropriate, from time
to time. In addition, on the earlier of five months from the
2
<PAGE>
date of this Agreement or Company's initial public offering, Company shall
approve and reimburse Employee's relocation expenses of up to $ 10,000.
2.06 Stock Compensation. Employee shall be entitled to purchase from the Company
150,000 shares of the Company's Common Stock in blocks of 50,000 shares each on
or after August 15, 2000, August 15, 2001 and August 15, 2002, paying the
aggregate price of FIFTY DOLLARS ($50.00) for each block of shares, provided
that this Agreement is not sooner terminated for death under Section 5.02A,
disability under Sections 5.02B or 503A or Cause under sections 5.02C below. On
the execution of this Agreement, Company shall place all of said shares in
escrow, and hold them for the benefit of Employee. In the event that Company
breaches this Agreement with a purported termination or Employee terminates it
for Good Reason, Employee shall be entitled to purchase from Company within 30
days of termination the remainder of the 150,000 shares of Common Stock not
previously purchased hereunder.
2.07 Cash Bonus Compensation. Employee shall be paid a signing bonus of TWENTY
SEVEN THOUSAND DOLLARS $27,000 for joining Company. The bonus shall be paid on
the earlier of the following: five months after the date of this Agreement, or
upon Company raising $1,500,000 for the Division in which Employee shall be
employed.
2.08 Financial Disclosures. Company agrees to share with Employee all financial
information relevant to the raising of capital and the making of a public
offering, as set forth in Section 2.01.
ARTICLE III
Non-Competition Agreement
------------------------
3.01 No Competition During Employment Term. Employee will not, during his
employment by or with Company, engage in Competition with Company.
3.02 No Competition After Employment Term. In the event that the Company
exercises its Option to repurchase all of the Company's Common Stock paid to
Employee hereunder within 30 days of termination, Employee will not for a period
of one (1) year immediately following the termination of his employment for any
reason whatsoever directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature engage in Competition with Company. Pursuant to
California Business and Professions Code ss.16600 et seq., Employee will be
free to engage in Competition after the termination of his employment unless
Company exercises its Option as set forth in ss. 5.06 below.
3.03 Competition Defined. For purposes of this Agreement, Employee engages in.
"Competition" when he directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature, (i) calls upon any customer of Company (including,
but not limited to, any customer obtained for Company by Employee) for the
purpose of soliciting or selling any Commercial and Mass Market security
products; and (ii) establishes, enters it, is employed by or, advises, consults
3
<PAGE>
with or becomes a part of any company, partnership, corporation or other
business entity or venture, or in any way engage in business for himself or for
others, in producing or selling Commercial and Mass Market security products
within thirty (30) miles of the home office of Company and/or any affiliated
company location, such location having a permanent and known facility wherein
Employee has served in any capacity and wherever Employee has performed duties
or had management responsibility on behalf of Company or its affiliates.
3.04 Injunctive Relief. Because of the difficulty of measuring economic losses
to Company and its affiliates as a result of his breach of the foregoing
covenant and because of the immediate and irreparable damage that would be
caused to Company and its affiliates for which it would have no other adequate
remedy, Employee agrees that the foregoing covenant may be enforced by Company
and its affiliates in the event of breach by him by injunctions and restraining
orders.
3.05 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Paragraph 3 are necessary to protect the goodwill and business
interests of Company and its affiliates and impose a reasonable restraint on
Employee in light of the activities and business of Company and its affiliates
on the date of the execution of this Agreement and the future plans of Company;
but it is also the intent of Company and Employee that such covenants be
construed and enforced in accordance with the activities and business of Company
and its affiliates on the date of the termination of the employment of Employee.
3.06 Severable Covenants. The covenants in this Paragraph 3 are severable and
separate and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restriction set
forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable
and the Agreement shall thereby be reformed.
3.07 Independent Covenants. All of the covenants in this Paragraph 3 shall be
construed as an agreement independent of any other provision in this Agreement
and the existence of any claim or cause of action of Employee against Company or
its affiliates, whether predicated in this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of such covenants.
3.08 Calculation of Time It is specifically agreed that the period of one (1)
year stated at the beginning of this Section 3.02, during which the agreements
and covenants of Employee made in this Paragraph 3 shall be effective, shall run
from the Company's exercise of its option under ss. 5.06 and exclude from such
computation any time during which Employee is in violation of any provision of
this Paragraph 3 and any time during which there is pending in any court of
competent jurisdiction any action (including any appeal from any final judgment)
brought by any person, whether or not a party to this Agreement, in which action
Company or its affiliates seeks to enforce the agreements and covenants of
Employee or in which any person contests the validity of such agreements and
4
<PAGE>
covenants or their unenforceability or seeks to avoid their performance or
enforcement
ARTICLE IV
Non-Disclosure Agreement and Proprietary Information.
-----------------------------------------------------
4.01 Proprietary Information. Employee recognizes and acknowledges that the
information, techniques, processes, formulas, developments, experimental work,
work in progress, business, list of Company's customers, contractual
arrangements, contract negotiations and any other trade secret or other secret
or confidential information relating to Company's business as they may exist
from time to time are valuable, special and unique assets of Company's business.
In addition, Employee recognizes that Company is continually engaged in research
and development of new inventions and improvements to the information,
techniques, processes, formulas, developments, trade secrets, and other secrets
and confidential matters relating to Company's business. Therefore, Employee
agrees as follows:
A. That Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to
his employment, without the express authorization of the Board of Directors
of Company, any information, manufacturing technique, process, business
customer lists, contractual arrangements, contract negotiations, trade
secrets or any other secrets or confidential matter relating to any aspect
of Company's business as designated from time to time by the Board of
Directors of Company, except as such disclosure or use may be required in
connection with Employee's work for Company.
B. Employee will not disclose Company's customers or any other trade
secrets of Company whether in existence or proposed, to any person, firm
partnership, corporation or business for any reason or purpose whatsoever.
C. That upon request or at the time of leaving the employ of Company,
Employee will deliver to Company, and not keep or deliver to anyone else,
any and all notes, memoranda, documents and, in general, any and all
material relating to Company's business.
4.02 Assignment of Inventions Conceived During Employment. Employee shall
(without any additional compensation) promptly disclose in writing to the Board
of Directors of Company all ideas, formulas, programs, systems, devices,
processes, business concepts, discoveries and inventions (hereinafter referred
to collectively as "discoveries"), whether or not patentable, which Employee,
while employed by Company, conceives, makes develops, acquires or reduces to
practice, whether alone or with others and whether during or after usual working
hours, and which are related to Compan3es business or interest, or are used or
usable by Company, or arise out of or in connection with the duties performed by
Employee hereunder, and Employee hereby transfers and assigns to Company, all
rights, title and interests in and to said discoveries, including any and all
domestic and foreign contractual agreements entered into by Employee during the
term of this Agreement and any renewals thereof. On request of Company, Employee
5
<PAGE>
shall from time to time during or after the expiration or termination of their
employment, execute such further instruments (including, without limitation,
royalties, licenses and/or interest whatsoever and assignments thereof) and do
all such other acts and things as may be deemed necessary or desirable by
Company to protect and/or enforce its rights in respect of said discoveries.
Company agrees to pay all expenses of filing and/or prosecuting any interest in
such discovery shall be borne by Company, as well as reasonable consulting fees
to Employee in the amount of S200/hour. Employee shall cooperate in filing
and/or prosecuting any such interest or violation in rights thereto.
4.03. Non-Solicitation. During the term of this Agreement and for one year
thereafter, Employee will not call upon or cause to be called upon any employee
of Company or any of its affiliates for the purpose or with the intent of
enticing them away from or out of the employ of Company or any reason whatever.
4.04 Injunctive Relief. In the event of a breach or threatened breach by
Employee of the provisions of this Paragraph 4, Company shall be entitled to an
injunction:
A. Restraining Employee from disclosing, in whole or in part, any
information as described above or from rendering any services to any
person, firm, corporation association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to be
disclosed; and/or
B. Requiring that Employee deliver to Company all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employees leave of the employ of Company. Nothing herein shall
be construed as prohibiting Company from pursuing other remedies available
to Company for such breach or threatened breach, including the recovery of
damages from the Employer.
ARTICLE V
Term: Terminations
------------------
5.01 Term. The term of this agreement shall begin on August 15, 1999 and
continue until August 14, 2002, unless further extended or sooner terminated as
herein provided. On August 14, 2002, and on the 13th day of June of each year
thereafter, the term of Employees employment shall be automatically extended one
(1) additional year unless, on or before sixty (60) days in advance of such last
day of December, Company shall have delivered to Employee or Employee shall have
delivered to Company written notice that the term of Employee's employment
hereunder will not be extended.
5.02 Termination by Company. Company may terminate this Agreement and Employee's
employment only in one of the following ways:
6
<PAGE>
A. Termination for Death. Company may terminate this Agreement in the event
of the death of Employee.
B. Termination for Disability. Company may terminate the Agreement after
thirty (30) days written notice ("Notice of Termination") to Employee if,
because of illness or physical or mental disability or other incapacity
which continues for a period in excess of three (3) months, Employee is
unable to perform his duties under this Agreement. Until such Notice of
Termination becomes effective, Employee shall continue to receive his
compensation and benefits hereunder.
C. Termination for Cause. Company may terminate this Contract for Cause.
For purposes of this Agreement "Cause" exists if Employee commits any of
the following: material act of dishonesty or gross misconduct,
unjustifiable neglect of his employment duties, conviction of a felony, or
such acts of dishonesty, theft, fraud, misrepresentation, or other acts of
moral turpitude as would have a direct, substantial and adverse effect on
Employer's business.
5.03 Termination by Employee. Employee may terminate this Agreement and
Employee's employment only in one of the following ways:
A. Termination for Disability. Employee may terminate his employment if his
health should become impaired to an extent that makes his continued
performance of his duties hereunder hazardous to his physical or mental
health or his life, provided that Employee shall have furnished Company
with a written statement from a qualified doctor to such effect and
provided, further, that, at Company's request, Employee shall submit to an
examination by a doctor selected by Company and such doctor shall have
concurred in the conclusion of Employee's doctor.
B. Termination for Good Reason. Employee may terminate his employment
hereunder by resigning for Good Reason,
C. Definitions. For purposes of this Agreement, the capitalized terms shall
have the meaning set forth below:
"Good Reason" shall mean (i) a Change in Control of Company (as described
below), (ii) a failure by Company to comply with any material provision of this
Agreement which has not been cured within thirty (30) days after written notice
of such noncompliance has been given by Employee to Company, or (iii) any
purported termination of Employee's employment by Company which is not effected
pursuant to the provisions hereof (and for purposes of this Agreement no such
purported termination shall be effective).
"Change in Control of Company" shall mean a change in control that would
be required to be reported in response to Item I(a) of Form 8-K under the
Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without
limitation, such a
7
<PAGE>
change in control shall be deemed to have occurred if (i) any "person" (as that
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
Company, as constituted, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
Company representing 25% or more of the combined voting power of Company's then
outstanding securities, (h) during any period of three consecutive years during
the term of this Agreement, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a majority
thereof unless the election of each director who was not a director at the
beginning of such period has been approved in advance by directors representing
at least two-thirds of the directors then in office who were directors at the
beginning of the period.
5.04 Compensation Upon Termination for Death or Disability. If Employee's
employment is terminated on death pursuant to 5.02A or disability pursuant to
Section 5.02B or 5.03A, Company shall pay Employee's estate his full salary and
benefits through the date of termination plus all outstanding expenses payable
pursuant to section 2.02 and Company shall have no futher obligations to
Employee under this Agreement
5.05 Compensation Upon Termination for Cause. If Company terminates Employee's
employment for Cause pursuant to Section 5.02C, Company shall pay Employee his
full salary through the date of termination, at the rate in effect at the time
Notice of Termination is given, and Company shall have no further obligations to
Employee under this Agreement.
5.06 Compensation on Resignation for Good Reason or Company Termination in
Breach of Agreement.
If Employee shall terminate his employment for Good Reason or if Company
shall commit a material breach hereof including without limitation the wrongful
termination of this Agreement, then Employee shall have the following remedies
in addition to those otherwise provided by law;
A. Within 30 days after such resignation or termination, Employee shall
receive from Company his full salary for the remaining term of this
Agreement, and any deferred salary, bonus not previously released to
Employee. Employee shall have the right to purchase Common Stock as set
forth in Section 2.06 without regard to the completion of employment with
the Company.
B. Employee shall receive for three (3) months from the date of
termination, all employee benefit plans and programs in which Employee
participated immediately prior to the date of termination provided that
Employee's continued participation is possible under the general terms and
provisions of such plans and programs. All such benefit plans and program
shall be maintained at the level and value provided immediately prior to
the date of termination. In the event that Employees participation in any
such plan or program is barred, Company shall arrange to provide Employee
with benefits substantially similar to those which Employee would otherwise
have been entitled to receive under such plans and programs from which his
continued participation is barred.
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C. Except as required above, Company shall not be required to maintain in
force for the benefit of Employee any employee benefit plans or programs
following the date of termination.
D. Employee shall not be required to mitigate the amount of any payment
provided for in this Section 5.05 by seeking other employment or otherwise.
5.07 Company's Option to Repurchase Shares. In the event of Employee's
termination for any reason, and under any circumstance, Company shall have the
option (the "Option") to purchase not less than all of the shares of the
Company's Common Stock held by Employee at the per share price of $10 or the
average closing price of Common Stock within the 30 days prior to Company's
exercise of the Option, whichever amount is greater. This right to purchase
shall be exercised on written notice to Employee delivered within 30 days of
such termination and shall provide for payment as follows: one third within 30
days of the notice to Employee: one third within 180 days of the notice and the
remaining third within one year of the notice. If Company does not give Employee
notice of its exercise of the Option within the limits stated, the Option and
Employee's obligations under Section 3.02 will expire without further notice.
ARTICLE VI
Representations of Employee
-------------------------
6.01 Restrictions from Prior Employment. Employee hereby represents and warrants
to Company that he is not subject to any trade secret restriction or
non-competition covenant in favor of a former employer or any other persons or
entity, other than those listed in Exhibit A attached hereto and incorporated
herein by this reference. Employee further represents that the execution of this
Agreement by Employee and his employment by Company or its affiliates; and the
performance of his duties described herein will not violate or be a breach of
any of the agreements listed in Exhibit A or any other agreement with a former
employer or any other person or entity.
6.02 Non Disclosure of Trade Secrets. Employee agrees not to disclose to
Con4xu3y or use in the course of his employment by the Company, any information
to the extent that such information constitutes a trade secret of prior
employers. Employee further agrees not to use in the course of his employment by
the Company, any documentation containing proprietary information, or equipment
that may have been obtained by Employee from former employers.
6.03 Remedies. Employee agrees to indemnify Company and its affiliates for any
claim, including, but not limited to, attorney's fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against Company or its affiliates based upon or arising
out of any non-competition agreement or invention and secrecy agreement between
Employee and such third party.
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ARTICLE VII
Miscellaneous
-------------
7.01 Complete Agreement. This Agreement is not a promise of future employment.
There are no oral representations, understandings or agreements with Company or
any of its officers, directors or representatives covering the same subject
matter as this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between Company and Employee
and of all the terms of this Agreement and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. Upon the effective date of this agreement, the Prior Agreement shall
be terminated and superseded in its entirety. This written agreement may not be
later modified except by a further writing signed by Company and Employee, and
no term of this Agreement may be waived except by writing signed by the party
waiving the benefit of such terms.
7.02 No Waiver. No waiver by the parties hereto of any default or breach of any
terms, condition or covenant of this Agreement shall be deemed to be a waiver of
any subsequent default or breach of the same or any other term, condition or
covenant contained herein.
7.03 Assignment: Binding Effect. Employee understands that he has been selected
for employment by Company on the basis of his personal qualifications,
experience and skills per IA, preceding. Employee agrees, therefore, that this
Agreement and the rights to his services may be assigned by Company at any time
without notice to him, provided that such Assignee may not direct employee to
relocate from Northern California or assume other duties than described in
Section 1A. Employee agrees that he cannot assign all or any portion of this
Agreement. Subject to the preceding two sentences, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors, and assigns. It is further understood and agreed that Company
may be merged or consolidated with another entity and that any such entity shall
automatically success to the rights, powers and duties of Company hereunder.
7.04 Notice. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To Company: Enterprise Solutions Inc.
5061 N. Dixie Highway
Boca Raton, FL 33431
Attn: Wayne Kight
To Employee: Roger Schell
1979 North 630 East
Orem, UT 84079
with a copy to: James W. Sullivan
Lombardo & Gilles
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P.O. Box 2119
Salina, CA 93902
Notice shall be deemed given and effective three (3) days after the deposit in
the Unites States mail of a writing addressed as above and sent first class mail
certified, return receipt requested, or when actual1y received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this Section 7.04.
7.05 Attorneys Fees. In the event of litigation or arbitration to enforce or
interpret this Agreement, the court or arbitrator shall award the prevailing
party his reasonable attorneys' fees and costs of suit, including the costs of
expert witnesses.
7.06 Severability: Heading. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. The paragraph
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of this Agreement
or of any part hereof
7.07 Governing Law. This Agreement shall in all respects be construed according
to the laws of the State of Calfornia.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
date herein first set forth.
ENTERPRISE SOLUTIONS INC.
WITNESSED BY:
/s/ June Peart /s/ Jeffrey M. Moritz
- ----------------- -------------------------
Jeffrey M. Moritz
Dated: 7/29/99 Corporate Treasurer
EMPLOYEE:
WITNESSED BY:
/s/ LaVome Schell /s/ Roger Schell
- ----------------- -------------------------
Roger Schell
Dated: 7/30/99
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EXHIBIT A TO
EMPLOYMENT AGREEMENT
A. Non-Compete Agreements.
None.
B. Other companies entrusting Employee with restricted intellectual property
that may not be used by others:
1. Novell, Inc.
2. Hewlett Packard.
3. Sistex, Inc.
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EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated August 1, 1999, by and between Enterprise Solutions Inc.,
a Florida corporation ("Company"), and Gary S. Baker ("Employee").
WHEREAS, Company desires to establish a new division, subsidiary or
affiliate to enter into the business of developing and operating internet and
computer security solutions, government and corporate systems integration and
contract selling and development work; and
WHEREAS, Employee has unique skills and experience in internet and computer
security solutions.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:
ARTICLE I
Employment and Duties
1.01 New Division or Subsidiary. Company will form a division, subsidiary or
affiliate with its principal place of business in Northern, California to
produce and sell Commercial and Mass Market security products.
1.02. Place of Employment. Company will employ Employee in Northern California.
1.03 Position, Duties. Company hereby employs Employee as its Vice President and
Director of Engineering for new and existing security products development of
the Company. The duties of Employee are as part of the new division, subsidiary
or affiliate and include all matters relating to the planning, engineering, and
development of company marketed security products. From time to time the Board
of Directors ("Board") of Company may change employee's position and duties in a
manner consistent with Employee's abilities and the needs of the business.
Employee hereby accepts this employment upon the terms and conditions herein
contained and agrees to devote his time, attention and efforts to promote and
further the business and services of Company. Employee shall faithfully adhere
to, execute and fulfill all policies established by Company. Any Prior
Agreements are hereby superseded, terminated and shall have no further force or
effect nor shall they be legally binding upon either Employee or Company.
1.04 Full Time Employment. Employee shall perform such duties, assume such
responsibilities and devote such time, attention and energy to the business of
Company as the Board shall from time to time require and shall not, during the
term of his employment hereunder, be engaged in any other business activitiy
pursued for gain, profit or other pecuniary advantage if such activity
interferes with Employee's duties and responsibilities hereunder. However, the
foregoing limitations shall not be contrued as prohibiting Employee from making
personal investments in
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such form or manner as will neither require his services in the operation or
affiars of the companies or enterprises in which such investments are made nor
violate the terms of Paragraphs 3 or 4 hereof.
1.05 Funds Held in Trust. All funds received by Employee on behalf of Company,
if any, shall be held in trust for Company and shall be delivered to Company as
soon as practicable.
ARTICLE II
Compensation
2.01 Salary and Draw. From and after the effective date of this Agreement,
Employee shall receive a salary ("Salary") from Company in an amount equal to
one hundred and twenty thousand dollars ($120,000.00) per year. However,
employee shall defer 50% of salary for the initial five months of this
agreement, or until completion of Company's public offering, whichever is the
first to complete, at which time payment will be made in full.
Employee's Salary shall be payable pursuant to a monthly schedule
consisting of seventy-two (72) semi-monthly payments ("Draw"), each such payment
being in an amount equal to 1/72 of three hundred and sixty thousand dollars
($360,000.00) or five thousand dollars ($5,000.00).
2.02 Expense Reimbursement. Company shall reimburse Employee for all reasonable
travel, entertainment and other expenses related to his employment by or
promotion of Company. Employee shall provide a written accounting and
explanation of all expenses for which reimbursement is sought on a monthly basis
and Company shall reimburse all such expenses within ten (10) days following
receipt of each written accounting.
2.03 Bonuses. Employee shall be entitled to receive such bonuses as the Board
shall determine from time to time in accordance with Company policy and at the
sole discretion of the Board.
2.04 Plan Participation. Employee shall be entitled to participate in any and
all stock option, stock bonus, pension, profit sharing, retirement or other
similar plans adopted by Company.
2.05 Other. Employee shall be entitled to such fringe benefits as Company shall
establish for its employees generally which shall include with respect to
Employee at least two weeks paid vacation annually, eight paid holidays as
designated by Company, provisions for an industry competitive health, dental and
vision insurance plan coverage for Employee and his dependents from the starting
date of this agreement, $500,000 of term life insurance, and $500,000 of term
life insurance with the Company as beneficiary, disability pay and such other
benefits as Company shall adopt, subject to the discretion of Company to add or
delete such standard benefits as the Board deems appropriate, from time to time.
In addition, on the earlier of five months from the date of this Agreement or
Company's initial public offering. Company shall approve and reimburse
Employee's relocation expenses of up to $10,000.
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<PAGE>
2.06 Stock Compensation. Employee shall be entitled to purchase from the Company
one hundred thousand (100,000) shares of the Company's Common Stock in blocks of
thirty-three thousand three hundred and thirty-four (33,334) shares each on or
after August 1, 2000, August 1, 2001 and August 1, 2002, paying the aggregate
price of THIRTY-THREE DOLLARS and THIRTY-THREE CENTS ($33.33) for each block of
shares, provided that this Agreement is not sooner terminated for death under
Section 5.02A, disability under Sections 5.02B or 5.03A or Cause under sections
5.02C below. On the execution of this Agreement, Company shall place all of said
shares in escrow, and hold them for the benefit of Employee. In the event that
Company breaches this Agreement with a purported termination or Employee
terminates it for Good Reason, Employee shall be entitled to purchase from
Company within 30 days of termination the remainder of the 100,000 share of
Common Stock not previously purchased hereunder.
2.07 Cash Bonus Compensation. Employee shall be paid a signing bonus of
fifty-two thousand dollars ($52,000) for joining Company. The bonus shall be
paid in two payments as follows: thirty-two thousand dollars ($32,000.00) on
signing this Agreement and twenty thousand dollars ($20,000.00) within thirty
(30) days of signing.
2.08 Financial Disclosures. Company agrees to share with Employee all financial
information relevant to the raising of capital and the making of a public
offering, as set forth in Section 2.01.
ARTICLE III
Non-Competition Agreement
3.01 No Competition During Employment Term. Employee will not, during his
employment by or with Company, engage in Competition with Company.
3.02 No Competition After Employment Term. In the event that the Company
exercises its Option to repurchase all of the Company's Common Stock paid to
Employee hereunder within 30 days of termination, Employee will not for a period
of one (1) year immediately following the termination of his employment for any
reason whatsoever directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature engage in Competition with Company. Pursuant to
California Business and Professions Code ss. 16600 et seq., Employee will be
free to engage in Competition after the termination of his employment unless
Company exercises its Option as set forth in ss. 5.06 below.
3.03 Competition Defined. For purposes of this Agreement, Employee engages in
"Competition" when he directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature, (i) calls upon any customer of Company (including,
but not limited to, any customer obtained for Company by Employee) for the
purpose of solicitating or selling any Commercial and Mass Market security
product; and (ii) establishes, enters it, is employed by or, advises, consults
with or
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becomes a part of, any company, partnership, corporation or other business
entity or venture, or in any way engage in business for himself or for others,
in producing or selling Commercial and Mass Market security products within
thirty (30) miles of the home office of Company and/or any affiliated company
location, such location having a permanent and known facility wherein Employee
has served in any capacity and wherever Employee has performed duties or had
management responsibility on behalf of Company or its affiliates.
3.04 Injunctive Relief. Because of the difficulty of measuring economic losses
to Company and its affiliates as a result of his breach of the foregoing
covenant and because of the immediate and irreparable damage that would be
caused to Company and its affiliates for which it would have no other adequate
remedy, Employee agrees that the foregoing covenant may be enforced by Company
and its affiliates in the event of breach by him by injunctions and restraining
orders.
3.05 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Paragraph 3 are necessary to protect the goodwill and business
interests of Company and its affiliates and impose a reasonable restraint on
Employee in light of the activities and business of Company and its affiliates
on the date of the execution of this Agreement and the future plans of Company;
but it is also the intent of Company and Employee that such covenants be
construed and enforced in accordance with the activities and business of Company
and its affiliates on the date of the termination of the employment of Employee.
3.06 Severable Covenants. The covenants in this Paragraph 3 are severable and
separate and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restriction set
forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable
and the Agreement shall thereby be reformed.
3.07 Independent Covenants. All of the covenants in this Paragraph 3 shall be
construed as an agreement independent of any other provision in this Agreement
and the existence of any claim or cause of action of Employee against Company or
its affiliates, whether predicated in this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of such covenants.
3.08 Calculation of Time. It is specifically agreed that the period of one (1)
year stated at the beginning of this Section 3.02, during which the agreements
and covenants of Employee made in this Paragraph 3 shall be effective, shall run
from the Company's exercise of its option under ss. 5.06 and exclude from such
computation any time during which Employee is in violation of any provision of
this Paragraph 3 and any time during which there is pending in any court of
competent jurisdiction any action (including any appeal from any final judgment)
brought by any person, whether or not a party to this Agreement, in which action
Company or its affiliates seeks to enforce the agreements and covenants of
Employee or in which any person contests the validity of such agreements and
covenants or their unenforceability or seeks to avoid their performance or
enforcement.
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ARTICLE IV
Non-Disclosure Agreement and Proprietary Information.
4.01 Proprietary Information. Employee recognizes and acknowledges that the
information, techniques, processes, formulas, developments, experimental work,
work in progress, business, list of Company's customers, contractual
arrangements, contract negotiations and any other trade secret or other secret
or confidential information relating to Company's business as they may exist
from time to time are valuable, special and unique assets of Company's business.
In addition, Employee recognizes that Company is continually engaged in research
and development of new inventions and improvements to the information,
techniques, processes, formulas, developments, trade secrets, and other secrets
and confidential matters relating to Company's business. Therefore, Employee
agrees as follows:
A. That Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to
his employment, without the express authorization of the Board of Directors
of Company, any information, manufacturing technique, process, business
customer lists, contractual arrangements, contract negotiations, trade
secrets or any other secrets or confidential matter relating to any aspect
of Company's business as designated from time to time by the Board of
Directors of Company, except as such dislosure or use may be required in
connection with Employee's work for Company.
B. Employee will not disclose Company's customers or any other trade
secrets of Company whether in existence or proposed, to any person, firm
partnership, corporation or business for any reason or purpose whatsoever.
C. That upon request or at the time of leaving the employ of Company,
Employee will deliver to Company, and not keep or deliver to anyone else,
any and all notes, memoranda, documents and, in general, any and all
material relating to Company's business.
4.02 Assignment of Inventions Conceived During Employment. Employee shall
(without any additional compensation) promptly disclose in writing to the Board
of Directors of Company all ideas, formulas, programs, systems, devices,
processes, business concepts, discoveries and inventions (hereinafter referred
to collectively as "discoveries"), whether or not patentable, which Employee,
while employed by Company, conceives, makes, develops, acquires or reduces to
practice, whether alone or with others and whether during or after usual working
hours, and which are related to Company's business or interest, or are used or
usable by Company, or arise out of or in connection with the duties performed
by Employee hereunder; and Employee hereby transfers and assigns to Company, all
rights, title and interests in and to said discoveries, including any and all
domestic and foreign contractual agreements entered into by Employee during the
term of this Agreement and any renewals thereof. On request of Company, Employee
shall from time to time during or after the expiration or termination of their
employment, execute such
5
<PAGE>
further instruments (including, without limitation, royalties, licenses and/or
interest whatsoever and assignments thereof) and do all such other acts and
things as may be deemed necessary or desirable by Company to protect and/or
enforce its rights in respect of said discoveries. Company agrees to pay all
expenses of filing and/or prosecuting any interest in such discovery shall be
borne by Company, as well as reasonable consulting fees to Employee in the
amount of $200/hour. Employee shall cooperate in filing and/or prosecuting any
such interest or violation in rights thereto.
4.03. Non-Solicitation. During the term of this Agreement and for one year
thereafter, Employee will not call upon or cause to be called upon any employee
of Company or any of its affiliates for the purpose or with the intent of
enticing them away from or out of the employ of Company or any reason whatever.
4.04 Injunctive Relief. In the event of a breach or threatened breach by
Employee of the provisions of this Paragraph 4, Company shall be entitled to an
injunction:
A. Restraining Employee from disclosing, in whole or in part, any
information as described above or from rendering any services to any
person, firm, corporation association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to be
disclosed; and/or
B. Requiring that Employee deliver to Company all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employee's leave of the employ of Company. Nothing herein shall
be construed as prohibiting Company from pursuing other remedies available
to Company for such breach or threatened breach, including the recovery of
damages from the Employer.
ARTICLE V
Term: Terminations
5.01 Term. The term of this agreement shall begin on August 1, 1999 and continue
until July 31, 2002, unless further extended or sooner terminated as herein
provided. On August 1, 2002, and on the 13th day of June of each year
thereafter, the term of Employee's employment shall be automatically extended
one (1) additional year unless, on or before sixty (60) days in advance of such
last day of December, Company shall have delivered to Employee or Employee shall
have delivered to Company written notice that the term of Employee's employment
hereunder will not be extended.
5.02 Termination by Company. Company may terminate this Agreement and Employee's
employment only in one of the following ways:
A. Termination for Death. Company may terminate this Agreement in the event
of the death of Employee.
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B. Termination for Disability. Company may terminate the Agreement after
thirty (30) days written notice ("Notice of Termination") to Employee if,
because of illness or physical or mental disability or other incapacity
which continues for a period in excess of three (3) months, Employee is
unable to perform his duties under this Agreement. Until such Notice of
Termination becomes effective, Employee shall continue to receive his
compensation and benefits hereunder.
C. Termination for Cause. Company may terminate this Contract for Cause.
For purposes of this Agreement "Cause" exists if Employee commits any of
the following: material act of dishonesty or gross misconduct,
unjustifiable neglect of his employment duties, conviction of a felony, or
such acts of dishonesty, theft, fraud, misrepresentation, or other acts of
moral turpitude as would have a direct, substantial and adverse effect on
Employer's business.
5.03 Termination by Employee. Employee may terminate this Agreement and
Employee's employment only in one of the following ways:
A. Termination for Disability. Employee may terminate his employment if his
health should become impaired to an extent that makes his continued
performance of his duties hereunder hazardous to his physical or mental
health or his life, provided that Employee shall have furnished Company
with a written statement from a qualified doctor to such effect and
provided, further, that, at Company's request, Employee shall submit to
an examination by a doctor selected by Company and such doctor shall have
concurred in the conclusion of Employee's doctor.
B. Termination for Good Reason. Employee may terminate his employment
hereunder by resigning for Good Reason.
C. Definitions. For purposes of this Agreement, the capitalized terms shall
have the meaning set forth below:
"Good Reason" shall mean (i) a Change in Control of Company (as described
below), (ii) a failure by Company to comply with any material provision
of this Agreement which has not been cured within thirty (30) days after
written notice of such noncompliance has been given by Employee to
Company, or (iii) any purported termination of Employee's employment by
Company which is not effected pursuant to the provisions hereof (and for
purposes of this Agreement no such purported termination shall be
effective).
"Change in Control of Company" shall mean a change in control that would
be required to be reported in response to Item 1(a) of Form 8-K under the
Securities Exchange Act of 1934 (the "Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have
occurred if (i) any "person" (as that term is used in Sections 13(d) and
14(d) of the Exchange Act), other than Company, as constituted, is
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or becomes the "beneficial owner" (as defined in Rule l3d-3 under the
Exchange Act), directly or indirectly, of securities of Company
representing 25% or more of the combined voting power of Company's
then outstanding securities, (ii) during any period of three
consecutive years during the term of this Agreement, individuals who
at the beginning of such period constitute the Board cease for any
reason to constitute at least a majority thereof, unless the election
of each director who was not a director at the beginning of such
period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the
beginning of the period.
5.04 Compensation Upon Termination for Death or Disability. If Employee's
employment is terminated on death pursuant to 5.02A or disability pursuant to
Section 5.02B or 5.03A, Company shall pay Employee's estate his full salary and
benefits through the date of termination plus all outstanding expenses payable
pursuant to section 2.02 and Company shall have no further obligations to
Employee under this Agreement.
5.05 Compensation Upon Termination for Cause. If Company terminates Employee's
employment for Cause pursuant to Section 5.02C, Company shall pay Employee his
full salary through the date of termination, at the rate in effect at the time
Notice of Termination is given, and Company shall have no further obligations to
Employee under this Agreement.
5.06 Compensation on Resignation for Good Reason or Company Termination in
Breach of Agreement.
If Employee shall terminate his employment for Good Reason or if Company
shall commit a material breach hereof, including without limitation the wrongful
termination of this Agreement, then Employee shall have the following remedies
in addition to those otherwise provided by law:
A. Within 30 days after such resignation or termination, Employee
shall receive from Company his full salary for the remaining term of
this Agreement, and any deferred salary, signing bonus not previously
released to Employee. Employee shall have the right to purchase Common
Stock as set forth in Section 2.06 without regard to the completion of
employment with the Company.
B. Employee shall receive for three (3) months from the date of
termination, all employee benefit plans and programs in which Employee
participated immediately prior to the date of termination provided
that Employee's continued participation is possible under the general
terms and provisions of such plans and programs. All such benefit
plans and programs shall be maintained at the level and value provided
immediately prior to the date of termination. In the event that
Employee's participation in any such plan or program is barred,
Company shall arrange to provide Employee with benefits substantially
similar to those which Employee would otherwise have been entitled to
receive under such plans and programs from which his continued
participation is barred.
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C. Except as required above, Company shall not be required to maintain
in force for the benefit of Employee any employee benefit plans or
programs following the date of termination.
D. Employee shall not be required to mitigate the amount of any
payment provided for in this Section 5.05 by seeking other employment
or otherwise.
5.07 Company's Option to Repurchase Shares. In the event of Employee's
termination for any reason, and under any circumstance, Company shall have the
option (the "Option") to purchase not less than all of the shares of the
Company's Common Stock held by Employee at the per share price of $10 or the
average closing price of Common Stock within the 30 days prior to Company's
exercise of the Option, whichever amount is greater. This right to purchase
shall be exercised on written notice to Employee delivered within 30 days of
such termination and shall provide for payment as follows: one third within 30
days of the notice to Employee: one third within 190 days of the notice and the
remaining third within one year of the notice. If Company does not give Employee
notice of its exercise of the Option within the limits stated, the Option and
Employee's obligations under Section 3.02 will expire without further notice.
ARTICLE VI
Representations of Employee
6.01 Restrictions from Prior Employment. Employee hereby represents and warrants
to Company that he is not subject to any trade secret restriction or
non-competition covenant in favor of a former employer or any other persons or
entity, other than those listed in Exhibit A attached hereto and incorporated
herein by this reference. Employee further represents that the execution of this
Agreement by Employee and his employment by Company or its affiliates and the
performance of his duties described herein will not violate or be a breach of
any of the agreements listed in Exhibit A or any other agreement with a former
employer or any other person or entity.
6.02 Non Disclosure of Trade Secrets. Employee agrees not to disclose to Company
or use in the course of his employment by the Company, any information to the
extent that such information constitutes a trade secret of prior employers.
Employee further agrees not to use in the course of his employment by the
Company, any documentation containing proprietary information, or equipment that
may have been obtained by Employee from former employers.
6.03 Remedies. Employee agrees to indemnify Company and its affiliates for any
claim, including, but not limited to, attorney's fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against Company or its affiliates based upon or arising
out of any non-competition agreement or invention and secrecy agreement between
Employee and such third party.
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ARTICLE VII
Miscellaneous
7.01 Complete Agreement. This Agreement is not a promise of future employment.
There are no oral representations, understandings or agreements with Company or
any of its officers, directors or representatives covering the same subject
matter as this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between Company and Employee
and of all the terms of this Agreement and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. Upon the effective date of this agreement, the Prior Agreement shall
be terminated and superseded in its entirety. This written agreement may not be
later modified except by a further writing signed by Company and Employee and no
term of this Agreement may be waived except by writing signed by the party
waiving the benefit of such terms.
7.02 No Waiver. No waiver by the parties hereto of any default or breach of any
terms, condition or covenant of this Agreement shall be deemed to be a waiver
of any subsequent default or breach of the same or any other term, condition or
covenant contained herein.
7.03 Assignment: Binding Effect. Employee understands that he has been selected
for employment by Company on the basis of his personal qualifications,
experience and skills per 1A, Employee agrees, therefore, that this Agreement
and the rights to his services may be assigned by Company at any time without
notice to him, provided that such Assignee may not direct employee to relocate
from Northern California or assume other duties than described in Section 1A.
Employee agrees that he cannot assign all, or any portion of this Agreement.
Subject to the preceding two sentences this Agreement shall be upon and inure to
the benefit of the parties hereto and their respective heirs, successors, and
assigns. It is further understood and agreed that Company may be merged or
consolidated with another entity and that any such entity shall automatically
success to the rights, powers, and duties of Company hereunder.
7.04 Notice. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows.
To Company: Enterprise Solutions Inc.
5061 N. Dixie Highway
Boca Raton, FL 33431
Attn: Wayne Kight
To Employee: Gary S. Baker
1703 Fairway Lane
Spanish Fork, Utah 84660
with a copy to: James W. Sullivan
Lombardo & Gilles
P.O. Box 2119
Salinas, CA 93902
10
<PAGE>
Notice shall be deemed given and effective three (3) days after the deposit in
the United States mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
party may change the address for notice by notifying the other party of such
change in accordance with this Section 7.04.
7.05 Attorneys Fees. In the event of litigation or arbitration to enforce or
interpret this Agreement, the court or arbitrator shall award the prevailing
party his reasonable attorneys' fees and costs of suit, including the costs of
expert witnesses.
7.06 Severability: Headings. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. The paragraph
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of this Agreement
or of any part hereof.
7.07 Governing Law. This Agreement shall in all respects be construed according
to the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
date herein first set forth
ENTERPRISE SOLUTIONS INC.
WITNESSED BY:
/s/ June Pearl /s/ Jefferey M. Moritz
- ----------------------------- -----------------------------
Dated: 7-29-99 Jefferey M. Moritz
----------------------- Corporate Treasurer
EMPLOYEE:
WITNESSED BY:
/s/ /s/ Gary S. Baker
- ---------------------------- -----------------------------
Dated: 7-29-99 Gary S. Baker
----------------------
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<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 8-MOS YEAR
<FISCAL-YEAR-END> Dec-31-1999 Dec-31-1998
<PERIOD-START> Jan-01-1999 Jan-01-1998
<PERIOD-END> Aug-31-1999 Dec-31-1998
<CASH> 90,504 38,974
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 90,504 38,974
<PP&E> 10,000 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 230,504 163,974
<CURRENT-LIABILITIES> 42,000 774,897
<BONDS> 0 0
3,827 3,444
0 0
<COMMON> 148 100
<OTHER-SE> 184,529 160,430
<TOTAL-LIABILITY-AND-EQUITY> 230,504 163,974
<SALES> 0 0
<TOTAL-REVENUES> 0 328
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 787,957 125,567
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (787,957) (125,239)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (787,957) (125,239)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (787,957) (125,239)
<EPS-BASIC> (0.22) (0.10)
<EPS-DILUTED> (0.22) (0.10)
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