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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
ENTERPRISES SOLUTIONS, INC
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
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ENTERPRISES SOLUTIONS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 11, 2000
Braintree, Massachusetts
July 18, 2000
A Special Meeting (in lieu of the Annual Meeting) of Stockholders (the
"Special Meeting") of Enterprises Solutions, Inc., a Nevada corporation (the
"Company"), will be held at the Boston-Dedham Hotel and Conference Center, 55
Ariadne Road, Junction I95 and Route 1A, Dedham, Massachusetts 02026, on Friday,
August 11, 2000, at 10:00 A.M. (local time) for the following purposes:
1. To elect three directors to the Corporation's Board of Directors, each
to hold office until his successor is elected and qualified or until his earlier
resignation or removal (Proposal No. 1);
2. To consider and act upon a proposal to amend the Company's Articles of
Incorporation to increase the number of authorized shares of the Company's
common stock, par value $.001 per share, from 25,000,000 to 100,000,000
(Proposal No. 2);
3. To approve the Company's 2000 Employee Stock Option Plan and to reserve
up to 2,500,000 shares of Common Stock for issuance thereunder (Proposal No. 3);
and
4. To transact such other business as may properly come before the Special
Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors,
are more fully described in the Proxy Statement which is attached and made a
part of this Notice.
The Board of Directors has fixed the close of business on Monday, July
3, 2000, as the record date for determining the stockholders entitled to notice
of and to vote at the Special Meeting and any adjournment or postponement
thereof.
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All stockholders are cordially invited to attend the Special Meeting in
person. However, whether or not you expect to attend the Special Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card as
promptly as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Special Meeting. If you send
in your proxy card and then decide to attend the Special Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
By Order of the Board of Directors,
/s/ ALFRED T. SAKER
---------------------------
Alfred T. Saker
Secretary
IMPORTANT
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF
RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY
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ENTERPRISES SOLUTIONS, INC.
140 Wood Road, Suite 200, Braintree, Massachusetts 02184
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of Enterprises Solutions, Inc., a Nevada
corporation (the "Company"), of proxies in the enclosed form for use in voting
at a Special Meeting (in lieu of the Annual Meeting) of Stockholders (the
"Special Meeting") to be held at the Boston-Dedham Hotel and Conference Center,
55 Ariadne Road, Junction I95 and Route 1A, Dedham, Massachusetts 02026, on
Friday, August 11, 2000, at 10:00 A.M. (local time), and any adjournment or
postponement thereof.
Only holders of record of the Company's common stock, par value $.001
per share (the "common stock"), on July 3, 2000 (the "Record Date") will be
entitled to vote at the Special Meeting. At the close of business on the Record
Date, the Company had outstanding 4,724,282 shares of common stock.
Any person giving a proxy in the form accompanying this Proxy
Statement has the power to revoke it prior to its exercise. Any proxy given is
revocable prior to the Special Meeting by an instrument revoking it or by a duly
executed proxy bearing a later date delivered to the Secretary of the Company.
Such proxy is also revoked if the stockholder is present at the Special Meeting
and elects to vote in person.
The Company will bear the entire cost of preparing,
assembling, printing and mailing the proxy materials furnished by the Board of
Directors to stockholders. Copies of the proxy materials will be furnished to
brokerage houses, fiduciaries and custodians to be forwarded to the beneficial
owners of the common stock. In addition to the solicitation of proxies by use of
the mail, some of the officers, directors and regular employees of the Company
may (without additional compensation) solicit proxies by telephone or personal
interview, the costs of which the Company will bear.
This Proxy Statement and the accompanying form of proxy is
being sent or given to stockholders on or about July 18, 2000.
Stockholders of the Company's common stock are entitled to one
vote for each share held. Such shares may not be voted cumulatively.
Each validly returned proxy (including proxies for which no
specific instruction is given) which is not revoked will be voted "FOR" each of
the proposals as described in this Proxy Statement and, at the proxy holders'
discretion, on such other matters, if any, which may come before the Special
Meeting (including any proposal to adjourn the Meeting).
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Determination of whether a matter specified in the Notice of
Special Meeting of Stockholders has been approved will be determined as follows.
Those persons will be elected directors who receive a plurality of the votes
cast at the Special Meeting in person or by proxy and entitled to vote on the
election. Accordingly, abstentions or directions to withhold authority will have
no effect on the outcome of the vote. For each other matter specified in the
Notice of Special Meeting of Stockholders, the affirmative vote of a majority of
the shares of common stock present at the Special Meeting in person or by proxy
and entitled to vote on such matter is required for approval. Abstentions will
be considered shares present in person or by proxy and entitled to vote and,
therefore, will have the effect of a vote against the matter. Broker non-votes
will be considered shares not present for this purpose and will have no effect
on the outcome of the vote. Directions to withhold authority to vote for
directors, abstentions and broker non-votes will be counted for purposes of
determining whether a quorum is present for the Special Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
At the Special Meeting, the stockholders will elect three (3)
directors to serve until the next annual meeting of stockholders or until their
respective successors are elected and qualified. In the event any nominee is
unable or unwilling to serve as a director at the time of the Special Meeting,
the proxies may be voted for the balance of those nominees named and for any
substitute nominee designated by the present Board or the proxy holders to fill
such vacancy, or for the balance of the nominees named without nomination of a
substitute, or the size of the Board may be reduced in accordance with the
By-Laws of the Company. The Board has no reason to believe that any of the
persons named below will be unable or unwilling to serve as a nominee or as a
director if elected.
Assuming a quorum is present, the three nominees receiving the
highest number of affirmative votes of shares entitled to be voted for them will
be elected as directors of the Company for the ensuing year. Unless marked
otherwise, proxies received will be voted "FOR" the election of each of the
three nominees named below. In the event that additional persons are nominated
for election as directors, the proxy holders intend to vote all proxies received
by them in such a manner as will ensure the election of as many of the nominees
listed below as possible, and, in such event, the specific nominees to be voted
for will be determined by the proxy holders.
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Name Age Position
John A. Solomon 50 President, CEO and Director
Alfred T. Saker 52 Treasurer, Secretary and Director
Charles E. Bobbish 51 Director
The following information with respect to the principal occupation or
employment of each nominee for director, the principal business of the
corporation or other organization in which such occupation or employment is
carried on, and such nominee's business experience during the past five years,
has been furnished to the Company by the respective director nominees:
John A. Solomon has served as the Company's President and Chief
Executive Officer since October, 1999. Mr. Solomon also is a member of the
Company's Board of Directors. Prior to his appointment to his positions with the
Company, from 1979 to 1995, Mr. Solomon was the President and Chief Executive
Officer of Computer Engineering Associates, Inc. ("CEA"), a systems integration
and security technology company. In November, 1995 CEA filed a petition for
voluntary bankruptcy which resulted from cash flow problems CEA encountered
related to several bonded construction projects CEA performed. Because Mr.
Solomon personally indemnified the bonding companies who insured CEA's
construction projects, Mr. Solomon was forced to file for personal bankruptcy in
February, 1997. Mr. Solomon was discharged from his personal bankruptcy in May,
1999.
Alfred T. Saker is the Treasurer and Secretary of the Company and was
elected to the Board of Directors on June 29, 2000, to fill the vacancy
resulting from the resignation of Nina L. Cannon. Mr. Saker received a B.A. in
Arts and Sciences in 1971, and a M.S. in accounting in 1978, from Kent State
University. From 1996 to 1998, Mr. Saker was Finance Manager for International
Shipholding Corporation, a marine transportation company. From 1993 to 1996, he
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was Treasurer for American Heavy Lift Shipping Company and, prior thereto, he
held various positions with BP Oil Company, his last position, from 1990 to
1993, being Manager, Services and Control (Controller).
Charles E. Bobbish was elected a director of the Company on July 6,
2000, to fill the vacancy resulting from the resignation of Wayne G. Kight. From
April, 1991, to April, 1995, Mr. Bobbish was a Senior Vice President of Mosaic
Data Systems, Inc., Bedford, Massachusetts, with responsibility for planning and
coordinating information systems implementation and integration. In 1995, Mr.
Bobbish had a consulting business involving proposal and business development,
which was, in early 1996, incorporated into Qualserv, Inc., Burlington,
Massachusetts, a proposal writing and business development company, of which he
has served as President from that time to the present. In his present position,
Mr. Bobbish advises executives of large information technology companies on
market positioning and provides inputs to business strategies, directions and
proposals.
No director or executive officer of the Company has any family
relationship with any other director or executive officer of the Company.
Directors serve until the next annual meeting of stockholders or until
their successors are elected and qualified. Officers serve at the discretion of
the Board of Directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1999, the Board of Directors
of the Corporation held eleven (11) meetings and acted by unanimous written
consent on two (2) occasions. No director nominated for election at the Annual
Meeting attended fewer than 75% of the total number of meetings of the Board of
Directors during the last fiscal year.
The Company does not have a standing audit or compensation committee.
Although the Board of Directors does not have a nominating committee or a
committee performing the functions of a nominating committee, and there are no
formal procedures for stockholders to nominate persons to serve as directors,
the Board will consider nominations from stockholders, which should be addressed
to Alfred T. Saker at the Company's address set forth above.
COMPENSATION OF DIRECTORS
Directors currently receive $100 for each meeting attended and
are reimbursed for reasonable out-of-pocket expenses incurred in connection with
attendance at meetings of the Board or any committee thereof they attend. During
the 1999 fiscal year, Wayne G. Kight and Jeffrey M. Moritz were each granted
options to purchase common stock as compensation for their services as directors
of the Company.
The proxy holders intend to vote the shares represented by proxies for
all of the Board's nominees, except to the extent authority to vote for the
nominees is withheld.
RECOMMENDATION OF THE BOARD:
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THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL
NOMINEES NAMED ABOVE.
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MANAGEMENT
The Officers and Directors of the Company are as follows:
Name Age Title
---- --- -----
John A. Solomon 50 President, C.E.O and Director
Gary S. Baker 52 Executive Vice President - Engineering
Alfred T. Saker 52 Treasurer, Secretary and Director
Charles E. Bobbish 51 Director
During the fiscal year ended December 31, 1999, no salaries in excess of
$100,000 per year have been paid to any executive officer or director of the
Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Potential
Realizable Value at
Assumed Annual Alternative
Rates of Stock Price to (f) and (g)
Appreciation Grant Date
Individual Grants for Option Term Value
-------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
Number of % of
Securities Total
Under- Options/
Lying SAR's
Options/ Granted to Exercise Grant
SAR's Employees or Base Date
Granted in Fiscal Price Expiration Present
Name (#) Year ($/Sh) Date 5% ($) 10%($) Value $
---- --- ---- ------ ---- ------ ------ -------
<S> <C> <C> <C> <C>
Wayne B.
Kight 15,000 $5.67 7/31/02 $98,456 $113,202 NA
10,000 $7.50 8/31/02 $86,822 $ 99,825 NA
Nina L.
Cannon 10,000 $7.50 8/31/02 $86,822 $ 99,825 NA
Jeffrey M.
Moritz 15,000 $5.67 7/31/02 $98,456 $113,202 NA
</TABLE>
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized Unexercisable Unexercisable
---------------------------------------------------------------------------------------------------
<S> <C>
Wayne B. Kight 47,500/0 $35,550/0
Nina L. Cannon 10,000/0 - 0 -
Jeffrey M. Moritz 37,500/0 - 0 -
</TABLE>
STOCK AND OPTION COMPENSATION OF OFFICERS AND DIRECTORS
The Company has authorized the issuance to John A. Solomon
of 75,000 shares of common stock (and a balance owing of 150,000 shares) at a
nominal price pursuant to Mr. Solomon's Employment Agreement with the Company.
At the Board of Directors meeting held on March 20, 2000, the Board authorized
the issuance to Mr. Solomon of options to purchase 100,000 shares of common
stock at a price of $6.25 per share.
Mr. Wayne B. Kight, a former Director and Executive Vice President of
the Company, purchased 10,000 shares of common stock at $.05 per share (adjusted
to 15,000 shares by reason of the stock split in June 1999) in June, 1998. At
the Board of Directors meeting held on July 30, 1998, the Board authorized the
issuance to Mr. Kight of options to purchase 22,500 shares of common stock at a
price of $.67 per share and options to purchase 15,000 shares of common stock at
$5.67 per share (adjusted for the June 1999 stock split). At the Board of
Directors meeting held on September 1, 1999, the Board authorized the issuance
to Mr. Kight of options to purchase 10,000 shares of common stock at an exercise
price of $7.50 per share. The Company has authorized the issuance to Mr. Kight
of 40,000 shares of common stock (and a balance owing of 80,000 shares) at a
nominal price pursuant to Mr. Kight's Employment Agreement with the Company. At
the Board of Directors meeting held on March 20, 2000, the Board authorized the
issuance to Mr. Kight of options to purchase 25,000 shares of common stock at a
price of $6.25 per share.
At the Board of Directors meeting held on September 1, 1999, the Board
authorized the issuance to Nina L. Cannon, a former Director of the Company, of
options to purchase 10,000 shares of common stock at an exercise price of $7.50
per share.
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All options referred to above issued to John A. Solomon, Wayne B. Kight
and Nina L. Cannon expire three years from their respective dates of issuance.
EMPLOYMENT CONTRACTS
The Company has entered into an employment agreement with John A.
Solomon, the term of which is for three years from September 15, 1999. The
agreement provides for Mr. Solomon's employment as the President and Chief
Executive Officer of the Company at an annual salary of $200,000, which would be
increased to $500,000 once the Company receives funding in the amount of
$10,000,000 (the "Funding Event"). In the fiscal year ended December 31, 1999,
Mr. Solomon did not draw any salary from the Company. The agreement provides for
bonuses as determined by the Board of Directors at the sole discretion of the
Board, but not less than 7% of the Net Before Tax corporate profits in each year
of employment. Under the agreement, Mr. Solomon is entitled to borrow up to
$750,000 from the Company on a secured basis, all loans being repayable within
10 years of the first loan being taken out, and with the Company's stock as
collateral in value at least equal to 125% of the loan amount, the amount of
stock to be held as collateral to be adjusted monthly based on the price for the
stock in the market. On June 2, 2000, Mr. Solomon took down a $650,000 loan
under this provision. This loan bears interest at the rate of 7% per annum, is
due ten years from the drawdown date, with interest only payable monthly until
maturity. The loan is secured by the pledge of all shares of common stock of the
Company and options to purchase common stock held by Mr. Solomon. The agreement
provides for the issuance of 225,000 shares of common stock of the Company to
Mr. Solomon in three installments of 75,000 shares each at the end of each year
of employment completion; the right to the first installment vested as of
execution of the employment agreement and is to have been issued by December 31,
1999. If the Funding Event condition is satisfied, Mr. Solomon is entitled under
the agreement to be issued an additional 275,000 shares of common stock at the
time of the resulting increase in his salary.
The Company has also entered into employment agreements with Michael F.
Thompson, Wayne B. Kight and Gary S. Baker. The agreements have a term of three
years commencing on August 1, 1999 for Mr. Baker, September 20, 1999 for Mr.
Thompson, and October 6, 1999 for Mr. Kight. The agreements provide for a base
salary of $85,000 for Michael F. Thompson, $120,000 for Wayne B. Kight and
$120,000 for Gary S. Baker. The agreement with Mr. Baker stipulates that Mr.
Baker is entitled to purchase 100,000 shares of common stock at a nominal price
in three equal installments, commencing on August 1, 2000, and on the next two
anniversaries of that date. Mr. Kight's agreement provides for the issuance of
40,000 shares of common stock upon execution of the agreement effective October
6, 1999, and of an additional 80,000 shares of common stock in two equal
installments at the end of each of the next two calendar years of service.
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PRINCIPAL STOCKHOLDERS
The following table sets forth, as of July 3, 2000, information concerning the
beneficial ownership of the Common Stock of the Company by (i) each person who
is known by the Company to own beneficially more than 5% of the Company's common
stock, (ii) each director of the Company, and (iii) all directors and executive
officers of the Company as a group.
Approx.
Name and Address of Amount and Nature % of
Beneficial Owner Of Ownership Class*
------------------- ----------------- ------
John A. Solomon(1) 175,000(2) 3.7%
Alfred T. Saker(3) -- --
Charles E. Bobbish(4) -- --
All directors and officers as a group 175,000 3.7%
Rowan House Limited 244,168 5.168%
1 Corral Rd., Suite 2A
Eurolife Building, Gibraltar
--------------------------------
* Percentages are based upon the assumption that the stockholder has exercised
all of the currently exercisable options he or she owns which are currently
exercisable or exercisable within 60 days and that no other stockholder has
exercised any options he or she owns.
(1) The address for Mr. Solomon is c/o the Company at 140 Wood Road, Braintree,
Massachusetts 02184.
(2) 75,000 shares are to be issued under Mr. Solomon's employment agreement.
Mr. Solomon holds options to purchase 100,000 shares of common stock at an
exercise price of $6.25 per share.
(3) The address for Mr. Saker is 904 Penny Street S.E., North Canton, Ohio
44720.
(4) The address for Mr. Bobbish is 82 Drake Road, Burlington, Massachusetts
01803.
TRANSACTIONS WITH MANAGEMENT
Omega Funding, Inc., a corporation 100% owned by Nina L. Cannon, a
former director of the Company, made loans to the Company aggregating $94,500 in
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1999, and an additional loan of $23,000 on February 24, 2000. In December, 1999,
Nina L. Cannon also made a personal loan to the Company in the amount of
$22,000, which was repaid in January, 2000. In 1999, Omega Funding was also
assigned an additional loan made to the Company by a third party in the amount
of $10,000. All of the loans by Omega Funding, Inc., aggregating $127,500, were
repaid on June 29, 2000, with interest at the rate of 8% per annum totalling
$5,243.
Dr. Roger Raymond Schell, a former officer of the Company, is a
shareholder in Gemini Computers, Inc. with which the Company had a teaming
agreement.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company believes that during the fiscal year ended December 31,
1999, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were satisfied.
PROPOSAL NO. 2
APPROVE AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON
STOCK, PAR VALUE $.001 PER SHARE, FROM 25,000,000 TO 100,000,000
The Board of Directors of the Company has adopted a resolution unanimously
approving and recommending to the Company's stockholders for their approval an
amendment to the Company's Articles of Incorporation to provide for an increase
of the number of shares of common stock that the Company is authorized to issue
from 25,000,000 to 100,000,000.
The Board of Directors recommends the proposed increase in the
authorized number of share of common stock to insure that a sufficient number of
authorized and unissued shares is available (i) to meet the Company's
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obligations under the issued convertible preferred stock, the April 2, 2000 Deed
Poll and warrants and options previously issued or contracted for by the Company
or to permit a refinancing of any or all of the Company's outstanding
convertible debenture or debts, (ii) to raise additional capital for the
operations of the Company, (iii) for the financing of the acquisition of other
businesses and (iv) to make options and shares available to employees, future
non-employee directors and consultants of the Company as an incentive for
services provided to the Company. Such shares would be available for issuance by
the Board of Directors of the Company without further action by the
stockholders, unless required by the Company's Certificate of Incorporation or
by the laws of the State of Nevada. Neither the presently authorized shares of
common stock nor the additional shares of common stock that may be authorized
pursuant to the proposed Amendment carry preemptive rights.
Except as described above, there are currently no set plans or
arrangements relating to the issuance of any additional shares of common stock
proposed to be authorized. However, if this proposal is approved by the
stockholders, no assurance can be given that the Company will not consider
effecting an equity offering of common stock or otherwise issuing such stock in
the future for the purpose of raising additional working capital, acquiring
related business or assets or otherwise.
The additional shares of common stock, if issued, would have a dilutive
effect upon the percentage of equity of the Company owned by present
stockholders. The issuance of such additional shares of common stock might be
disadvantageous to current stockholders in that any additional issuances would
potentially reduce per share dividends, if any. Stockholders should consider,
however, that the possible impact upon dividends is likely to be minimal in view
of the fact that the Company has never paid dividends, has never adopted any
policy with respect to the payment of dividends and does not intend to pay any
cash dividends in the foreseeable future. In addition, the issuance of such
additional shares of common stock, by reducing the percentage of equity of the
Company owned by present stockholders, would reduce such present stockholders'
ability to influence the election of directors or any other action taken by the
holders of common stock.
The authorization to issue the additional shares of common stock would
provide management with the capacity to negate the efforts of unfriendly tender
offerors through the issuance of securities to others who are friendly or
desirable to management. This proposal is not the result of management's
knowledge of any specific effort to accumulate shares of the Company's common
stock or to obtain control of the Company in opposition to management or
otherwise. The Company is not submitting this proposal to enable it to frustrate
any efforts by another party to acquire a controlling interest or to seek
representation on the Board of Directors. The submission of this proposal is not
part of any plan by the Company's management to adopt a series of amendments to
the Articles of Incorporation or By-Laws so as to render the takeover of the
Company more difficult.
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If Proposal No. 2 is approved by the Company's stockholders, the Board
of Directors expects to file a Certificate of Amendment to the Company's
Articles of Incorporation increasing the number of authorized shares of common
stock as soon as practicable after the date of the Special Meeting. The
Certificate of Amendment would amend and restate paragraph A of Article IV of
the Company's Articles of Incorporation to read substantially as follows:
A. Common Stock. The Corporation shall be authorized to issue one
hundred million (100,000,000) shares of common stock having a par value of one
mil ($.001) per share.
The Company's authority to issue up to 5,000,000 shares of Preferred
Stock, par value $.001 per share, would remain unchanged by the proposed
amendment.
Annexed to this Proxy Statement and marked Exhibit A is proposed amendment to
the Articles of Incorporation of the Company.
The vote required for approval of the Proposal to amend the Articles of
Incorporation is the affirmative vote of the holders of a majority of the shares
of the Company's common stock present at the Special Meeting in person or by
proxy and entitled to vote on the matter.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE ARTICLES
OF INCORPORATION.
PROPOSAL NO. 3
APPROVAL OF THE 2000 EMPLOYEE STOCK OPTION PLAN
At the Special Meeting, the Company's stockholders are being asked to
approve the 2000 Employee Stock Option Plan (the "2000 Option Plan") and to
authorize options to purchase up to 2,500,000 shares of common stock for
issuance thereunder. The following is a summary of principal features of the
2000 Option Plan. The summary, however, does not purport to be a complete
description of all the provisions of the 2000 Option Plan, a copy of which,
together with the form of Incentive Stock Option Agreement to be utilized in
connection therewith, is attached hereto as Exhibit B.
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GENERAL
The 2000 Option Plan was adopted by the Board of Directors on June 29,
2000. The Board of Directors has initially reserved 2,500,000 shares of common
stock for issuance under the 2000 Option Plan.
REASONS FOR ADOPTION OF THE 2000 OPTION PLAN
One of the primary purposes of the 2000 Option Plan is to advance the
interests of the Company and its stockholders by aiding the Company in
attracting and retaining qualified personnel. Another important purpose of the
2000 Option Plan is to support the achievement of the Company's business
objectives by providing stock-based incentives which focus participants in the
Plan on the Company's long-term objectives and link the participants' interests
with the interests of the Company's stockholders. The 2000 Option Plan is also
designed to respond to applicable tax laws, accounting rules and securities
regulations.
DESCRIPTION OF THE 2000 OPTION PLAN
The following is a summary of certain provisions of the 2000 Option Plan
and is qualified in its entirety by reference to the complete text of the 2000
Option Plan set forth in Exhibit B to this Proxy Statement.
Under the Plan, options may be granted which are intended to qualify as
Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue Code
of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as
Incentive Stock Options thereunder.
The 2000 Option Plan is administered by the Board of Directors or a
committee (the "Committee") which is appointed by the Board of Directors from
those of its members who are "non-employees" of the Company as defined in Rule
16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"). Subject to
the provisions of the 2000 Option Plan, the Board of Directors, or the
Committee, if one is appointed, has full authority to determine the persons to
be granted options under the Plan and the number and purchase price of the
shares represented by each option, the time or times at which the options may be
exercised, and the terms and provisions of each option, which need not be
uniform for all options.
Key employees of the Company or its subsidiaries, as determined by the
Board or Committee, and non-employee directors of the Company or its
subsidiaries are eligible to receive awards under the 2000 Option Plan. The 2000
Option Plan authorizes the Committee to grant, over a ten-year period, options
to purchase up to a maximum of 2,500,000 shares of the Company's common stock,
subject to adjustment as described below. If any option expires or is terminated
prior to its exercise in full and prior to the termination of the 2000 Option
Plan, the shares subject to such unexercised option shall again be available for
the grant of new options under the 2000 Option Plan. Further, any shares used as
full or partial payment by an optionee upon exercise of an option may
12
<PAGE>
subsequently be used by the Company to satisfy other options granted under the
2000 Option Plan, subject to limitations on the total number of shares
authorized to be issued under the 2000 Option Plan. The 2000 Option Plan
provides that the purchase price per share may not be less than 100% of the fair
market value of the common stock at the time of grant. The purchase price is to
be paid in cash or common stock of the Company held for at least six (6) months
and with a market value equivalent to that of the shares being acquired or, in
the discretion of the Committee, any combination of these.
The term of each option will not be more than ten (10) years from the date
of grant. Options granted under the 2000 Option Plan may be exercised only
during the continuance of the Participant's employment with the Company or one
of its subsidiaries. The 2000 Option Plan permits an outstanding option to be
exercised after termination of employment only to the extent that the option was
exercisable on the date of termination but in no event beyond the original term
of the option (i) within one year by the estate or rightful heir(s) of the
optionee if the optionee's employment is terminated due to the optionee's death;
(ii) within one year after the date of such termination if the termination is
due to the optionee's disability (as defined in the 2000 Option Plan); or (iii)
within three months after the date of such termination if the termination was
due to the optionee's retirement (as defined in the 2000 Option Plan) or was for
reasons other than death or disability and other than "for cause" (as defined in
the 2000 Option Plan). Upon termination of an optionee's employment "for cause,"
any unexercised options held by the optionee will be forfeited. In the event of
the dissolution, liquidation or sale of all or substantially all of the assets
of the Company, to the extent it has not been previously exercised, an option
will terminate immediately prior to the consummation of such proposed action. In
the event of the merger of the Company with or into another corporation, the
option shall be assumed or an equivalent option shall be substituted by such
successor corporation or, if such successor corporation does not agree to
asssume the option or substitute an equivalent option, the Board shall provide
for the option holder to have the right to exercise the option as to all of the
optioned shares, including shares as to which the option would not otherwise be
exercisable.
The number of shares subject to options and the option prices will be
appropriately adjusted in the event of changes in the outstanding common stock
by reason of stock dividends, recapitalizations, splits and combinations of
shares, and the like. The Board of Directors may at any time terminate or modify
the 2000 Option Plan, except that without further approval of the stockholders
the Board may not make any changes to the Plan which would materially increase
the number of shares that may be issued under the Plan, materially modify the
eligibility requirements for participation in the Plan, or require stockholder
approval under the Nevada Private Corporations Law, the Exchange Act, or the
Code.
Options granted under the Plan may be in the form of "incentive stock
options" which qualify as such under Section 422 of the Code or non-qualified
stock options which do not meet the criteria for incentive stock options under
Section 422. The tax treatment of stock options qualifying as incentive stock
options may be more favorable to employees than that afforded to non-qualified
stock options. Options granted under the 2000 Option Plan are, generally,
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<PAGE>
transferable only by will or by the laws of descent and distribution, and may be
exercised during the lifetime of the optionee only by the optionee or by his
legal representative in the event of his Disability. In its sole discretion,
however, the Committee may permit an optionee to make certain transfers of
non-qualified stock options, provided that the transfers are to "family members"
and are not for value, as defined in the General Instructions to Form S-8 under
the Securities Act of 1933, as amended.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of tax considerations relates only to U.S. federal
individual income tax matters and is based upon current income tax laws,
regulations and rulings. The discussion is general in nature and does not take
into account a number of considerations which may apply in light of an
optionee's particular circumstances.
Generally, upon the exercise of an ISO, the optionee will recognize no
income for U.S. federal income tax purposes. The difference between the exercise
price of the ISO and the fair market value of the stock at the time of purchase
is, however, an item of tax preference which may require payment of an
alternative minimum tax. On the sale of shares acquired by exercise of an
incentive stock option (assuming that the sale does not occur within two (2)
years of the date of grant of the option or within one (1) year from the date of
exercise), any gain will be taxed to the optionee as long-term capital gain. In
contrast, upon the exercise of a non-qualified option, the optionee recognizes
taxable income (subject to withholding) in an amount equal to the difference
between the fair market value of the shares on the date of exercise and the
exercise price. Upon any sale of such shares by the optionee, any difference
between the sale price and the fair market value of the shares on the date of
exercise of the non-qualified option will be treated generally as capital gain
or loss. Under rules applicable to U.S. corporations, no deduction is usually
available to the employer corporation upon the grant or exercise of an incentive
stock option (although a deduction may be available if the employee sells the
shares so acquired before the applicable holding period expires). By contrast,
upon the exercise of a non-qualified stock option, the employer corporation is
entitled to a deduction in an amount equal to the income recognized by the
employee, subject to certain limitations imposed by the Code in the case of
highly compensated employees.
REQUIRED VOTE
The approval of the 2000 Option Plan and the reservation of 2,500,000
shares of common stock for issuance pursuant to options granted under the Plan
requires the affirmative vote of the holders of a majority of the shares of the
Company's common stock present at the Special Meeting in person or by proxy and
entitled to vote on the matter.
The proxy holders intend to vote the shares represented by proxies to
approve the 2000 Employee Stock Option Plan.
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RECOMMENDATION OF THE BOARD:
---------------------------
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE 2000 EMPLOYEE
STOCK OPTION PLAN.
INDEPENDENT AUDITORS
Van Buren & Hauck LLC has served as the Company's independent auditors
since 199_ and has been appointed by the Board to continue as the Company's
independent auditors for the fiscal year ending December 31, 2000. Van Buren &
Hauck LLC has no interest, financial or otherwise, in the Company. A
representative of Van Buren & Hauck LLC is not expected to be present at the
Special Meeting.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at next year's
Annual Meeting of Stockholders must be received by Alfred T. Saker, Secretary,
Enterprises Solutions, Inc., 140 Wood Road, Suit 200, Braintree, Massachusetts
02184, on or before December 1, 2000.
OTHER PROPOSED ACTION
The Board of Directors is not aware of any other business which will
come before the Special Meeting, but if any such matters are properly presented,
the proxies solicited hereby will be voted in accordance with the best judgment
of the persons holding the proxies. All shares represented by duly executed
proxies will be voted at the Special Meeting.
APPENDIX - FORM 10-KSB
The Company's Amendment No. 2 to its 1999 Form 10-KSB containing all
financial statements is attached to this proxy statement as an Appendix.
FINANCIAL INFORMATION - INCORPORATED BY REFERENCE
The Company's report on Form 10-QSB for the fiscal quarter ended
March 31, 2000, as well as Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Form 10-QSB, is
incorporated herein by reference.
AVAILABILITY OF CERTAIN DOCUMENTS REFERRED TO HEREIN
THIS PROXY STATEMENT AND THE APPENDIX HERETO REFER TO CERTAIN
DOCUMENTS OF THE COMPANY THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
SUCH DOCUMENTS ARE AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS PROXY STATEMENT IS DELIVERED, UPON ORAL OR WRITTEN REQUEST, WITHOUT
CHARGE, DIRECTED TO ALFRED T. SAKER, ENTERPRISES SOLUTIONS, INC., 140 WOOD ROAD,
SUITE 200, BRAINTREE, MASSACHUSETTS 02184, TELEPHONE NUMBER (781) 356-4387. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, SUCH REQUESTS SHOULD BE MADE
BY JULY 31, 2000.
15
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other business that will be
presented to the Special Meeting. If any other business is properly brought
before the Special Meeting, proxies in the enclosed form will be voted in
respect thereof as the proxy holders deem advisable.
It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to mark, date, execute and
promptly return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ ALFRED T. SAKER
Braintree, Massachusetts Alfred T. Saker,
July 18, 2000 Secretary
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--------------------------------------------------------------------------------
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT!
Dear Stockholder:
We cordially invite you to attend a Special Meeting of Stockholders of
Enterprises Solutions, Inc. to be held at the Boston-Dedham Hotel and Conference
Center, 55 Ariadne Road, Junction I95 and Route 1A, Dedham, Massachusetts 02026,
on Friday, August 11, 2000, at 10:00 A.M. (Local Time).
Please read the proxy statement which describes the proposals and
presents other important information, and complete, sign and return your proxy
promptly in the enclosed envelope.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1-3.
--------------------------------------------------------------------------------
PROXY PROXY
ENTERPRISES SOLUTIONS, INC.
PROXY FOR SPECIAL MEETING TO BE HELD ON AUGUST 11, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dr. John A. Solomon or Alfred T. Saker,
or either of them, as proxies, each with the power to appoint his substitutes,
to represent and to vote all the shares of common stock of Enterprises
Solutions, Inc. (the "Company"), which the undersigned would be entitled to
vote, at the Company's Special Meeting of Stockholders to be held on August 11,
2000 and at any adjournments thereof, subject to the directions indicated on the
reverse side hereof.
In their discretion, the Proxies are authorized to vote upon any other
matter that may properly come before the meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE,
BUT IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
ALL NOMINEES AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE.
IMPORTANT--This Proxy must be signed and dated on the reverse side.
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<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Special Meeting of Stockholders
ENTERPRISES SOLUTIONS, INC.
August 11, 2000
Please Detach and Mail in the Envelope Provided
--------------------------------------------------------------------------------
[X] Please mark your
votes as indicated
in this example.
1. ELECTION OF DIRECTORS -- For Withhold
Nominees: John A. Solomon [_] [_]
Alfred T. Saker
Charles E. Bobbish
For, except vote withheld from the following nominee(s)
---------------------------------------------------------
For Against Abstain
2. Proposal to amend the Company's [_] [_] [_]
Articles of Incorporation to increase
the authorized shares of common stock
from 25,000,000 to 100,000,000.
3. Proposal to approve the Company's 2000 [_] [_] [_]
Employee Stock Option Plan.
If you plan to attend the Special Meeting please mark this box. [_]
Signature ______________________________________________________________________
Name (printed) _________________________________________________________________
Title __________________________________________________________________________
Dated:________________, 2000
Important: Please sign exactly as name appears on this proxy. When
signing as attorney, executor, trustee, guardian, corporate officer, etc.,
please indicate full title.
18
<PAGE>
EXHIBIT A
Certificate of Amendment to Articles of Incorporation
Of
Enterprises Solutions, Inc.
(After payment of capital or issuance of stock)
John A. Solomon, President and Alfred T. Saker, Secretary, hereby
certify that:
1. The original Articles were filed in the Office of the Secretary of State on
September 16, 1987.
2. Stockholders holding a majority of the voting power approved this amendment
at a Special Meeting of Stockholders held on August 11, 2000.
3. The corporation hereby adopts the following amendment to the Articles of
Incorporation of this corporation:
Paragraph A of Article IV is amended to read in its entirety as follows:
A. Common Stock. The Corporation shall be authorized to issue one
hundred million (100,000,000) shares of common stock having a par value of one
mil ($.001) per share.
No other changes to Article IV are effected by this amendment.
--------------------------
John A. Solomon, President
---------------------------
Alfred T. Saker , Secretary
Dated this day of August, 2000.
<PAGE>
EXHIBIT B
ENTERPRISES SOLUTIONS, INC.
2000 EMPLOYEE STOCK OPTION PLAN
1. Purpose
The proper execution of the duties and responsibilities of the
executives and key employees of Enterprises Solutions, Inc. (the "Corporation")
and its Subsidiaries is a vital factor in the continued growth and success of
the Corporation. Toward this end, it is necessary to attract and retain
effective and capable individuals to assume positions that contribute materially
to the successful operation of the business of the Corporation and its
Subsidiaries. It will benefit the Corporation, therefore, to bind the interests
of these persons more closely to its own interests by offering them an
attractive opportunity to acquire a proprietary interest in the Corporation and
thereby provide them with added incentive to remain in the service of the
Corporation and its Subsidiaries and to increase the prosperity, growth, and
earnings of the Corporation. This stock option plan is intended to serve these
purposes.
2. Definitions
The following terms wherever used herein shall have the meanings set
forth below.
"Board of Directors" or "Board" shall mean the Board of Directors of
the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder.
"Committee" shall mean a committee to be appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.
"Common Stock" shall mean the shares of common stock of the
Corporation, including both the voting and non-voting classes of stock.
"Corporation" shall mean Enterprises Solutions, Inc., a Nevada
corporation.
"Employee" shall mean a common law employee of the Corporation or a
Parent or a Subsidiary.
"Employment" means periods during which an Employee qualifies as an
Employee.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" of the Common Stock on any date shall be (a) the
average on that date of the high and low prices of a share of Common Stock on
the principal national securities exchange on which shares of Common Stock of
the same class are then trading, or, if shares were not traded on such date,
then on the next preceding date on which a trade occurred; or (b) if Common
Stock is not traded on a national securities exchange but is quoted on the
National Association of Securities Dealers, Inc. Authorized Quotation System
("NASDAQ") or a successor quotation system, the last reported sale price on such
date as reported by NASDAQ or such successor quotation system; or (c) if Common
Stock is not traded on a national securities exchange and is not reported on
NASDAQ or a successor quotation system, the closing bid price (or average of bid
prices) last quoted on such date by an established quotation service for
over-the-counter securities; or (d) if Common Stock is not traded on a national
securities exchange, is not reported on NASDAQ or a successor quotation system
and is not otherwise publicly traded on such date, the fair market value of a
share of the same class of Common Stock as established by the Board of Directors
or Committee acting in good faith and taking into consideration all factors
which it deems appropriate, including, without limitation, the Corporation's net
book value and recent sale or offer prices for the Common Stock in private
arm's-length transactions. During periods when the Fair Market Value of a share
of Common Stock cannot be determined under any of the methods specified in
clauses (a), (b) and (c), above, the Board of Directors or Committee shall have
the authority to establish the Fair Market Value of the Common Stock as of the
beginning of (or periodically during) each fiscal year of the Corporation and to
use such value for all transactions occurring thereafter within such fiscal
year.
"Immediate Family Member" shall mean each of (a) the children, step
children or grandchildren of the Employee to whom the Option is granted, (b) the
spouse or any parent of the Employee to whom the Option is granted, (c) any
trust solely for the benefit of any such family members, and (iv) any
partnership or other entity in which such family members are the only partners
or other equity holders.
"Incentive Stock Option" shall mean any Option granted pursuant to the
Plan that is designated as an Incentive Stock Option and which satisfies the
requirements of Section 422(b) of the Code.
"Nonstatutory Stock Option" shall mean any Option granted pursuant to
the Plan that is not an Incentive Stock Option.
"Option" or "Stock Option" shall mean a right granted pursuant to the
Plan to purchase shares of Common Stock, and shall include the terms "Incentive
Stock Option" and "Nonstatutory Stock Option".
"Optionee" shall mean an Employee who is granted an Option under this
Plan.
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<PAGE>
"Option Agreement" shall mean a written agreement representing Options
granted pursuant to the Plan, as contemplated by Section 7 of the Plan.
"Option Holder" means the Optionee or, if applicable, the person to
whom the Optionee's rights under the Option Agreement shall have been validly
transferred.
"Parent" shall mean a "parent company" of the Corporation, whether now
or hereafter existing, as defined in Section 424(e) of the Code.
"Plan" shall mean the Enterprises Solutions, Inc. 2000 Employee Stock
Option Plan as originally approved by the Board of Directors on June 29, 2000,
as embodied in this document, and as the same may be amended from time to time.
"Share" shall mean a share of the Common Stock of the Corporation that
is subject to an Option, as adjusted in accordance with Section 9 of the Plan.
"Subsidiary" shall mean a "subsidiary corporation" of Corporation or a
Parent, whether now or hereafter existing, as defined in Section 424(f) of the
Code.
3. Effective Date of the Plan
The Plan shall become effective upon stockholder approval pursuant to
Section 15 of the Plan, provided that such approval is received before the
expiration of one year from the date the Plan is approved by the Board of
Directors, and provided further that the Board of Directors may grant Options
pursuant to the Plan prior to stockholder approval if such Options by their
terms are contingent upon subsequent stockholder approval of the Plan.
4. Administration
(a) Procedure.
---------
(i) Administration With Respect to Directors and Officers.
With respect to grants of Options to Employees who are also officers or
directors of the Corporation, the Plan shall be administered by (A) the Board,
if the Board may administer the Plan in compliance with Rule 16b-3 promulgated
under the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a
plan intended to qualify thereunder as a discretionary plan, or (B) a committee
designated by the Board to administer the Plan, which committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
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<PAGE>
(ii) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Other Employees. With
respect to grants of Options to Employees who are neither directors nor officers
of the Corporation, the Plan shall be administered by (A) the Board or (B) a
Committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of Nevada corporate and securities laws
and of the Code (the "Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Board. Subject to the provisions of the Plan, the
Board (or the Committee) shall have the authority, in its discretion: (i) to
grant Incentive Stock Options or Nonstatutory Stock Options; (ii) to determine,
upon review of relevant information the fair market value of the Common Stock in
each class; (iii) to determine the exercise price per Share of Options to be
granted, which exercise price shall be determined in accordance with Section
7(b) of the Plan; (iv) to determine the regular, full-time Employees to whom,
and the time or times at which, Options shall be granted and the number of
Shares to be represented by each Option; (v) to interpret the Plan; (vi) to
prescribe, amend and rescind rules and regulations relating to the Plan; (vii)
to determine the rules and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, modify or amend each
Option; (viii) to accelerate or defer (with the consent of the Option Holder)
the exercise date of any Option, consistent with the provisions of Section 7 of
the Plan; (ix) to authorize any person to execute on behalf of the Corporation
any instrument required to effectuate the grant of an Option previously granted
by the Board or Committee; and (x) to make all other determinations deemed
necessary or advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board (or the Committee designated by the Board to
administer the Plan) shall be final and binding on all Optionees and Option
Holders of any Options granted under the Plan.
5. Participation in the Plan
(a) Participation in the Plan shall be limited to those Employees (1)
who are designated for payroll purposes as full-time, permanent employees of the
Corporation and any Parents or Subsidiary and (2) who shall be designated by the
Committee and approved by the Board of Directors as participants in the Plan.
The Plan shall not confer upon any Optionee any right with respect to
continuation of Employment, nor shall it interfere in any way with his or her
right or the Corporation's right to terminate his or her employment at any time,
with or without cause.
4
<PAGE>
(b) No member of the Board of Directors who is not also an Employee
shall be eligible to participate in the Plan.
6. Stock Subject to the Plan
(a) Subject to Section 9 of the Plan, there shall be reserved for the
granting of Options pursuant to the Plan and for issuance and sale pursuant to
such Options Two Million Five Hundred Thousand (2,500,000) Shares of voting
Common Stock, par value $.001 per share. To determine the number of Shares of
either the voting or non-voting class of Common Stock that is available at any
time for the granting of Options, there shall be deducted from the total number
of reserved shares of that class of Common Stock, the number of shares of that
class of Common Stock in respect of which Options have been granted pursuant to
the Plan that are still outstanding or have been exercised. The Shares of Common
Stock to be issued upon the exercise of Options granted pursuant to the Plan
shall be made available from the authorized but unissued shares of Common Stock
or reacquired Common Stock. If for any reason Shares of Common Stock as to which
an Option has been granted cease to be subject to purchase thereunder, then such
Shares of Common Stock again shall (unless the Plan shall have been terminated)
be available for issuance pursuant to the exercise of Options pursuant to the
Plan. Notwithstanding any other provision of the Plan, Shares issued under the
Plan and later repurchased by the Corporation shall not become available for
future grant or sale under the Plan.
(b) Proceeds from the purchase of shares of Common Stock upon the
exercise of Options granted pursuant to the Plan shall be used for the general
business purposes of the Corporation.
7. Terms and Conditions of Options
(a) Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options and may be for the purchase of either voting or
non-voting Common Stock, all as determined by the Board of Directors or
Committee at its discretion and as designated in the terms of the Option
Agreement. However, notwithstanding such designations, to the extent that the
aggregate fair market value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Corporation) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of the prior sentence, Options shall be taken into account in the order
in which they were granted, and the fair market value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
5
<PAGE>
(b) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board of
Directors or Committee at the time of the grant, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option:
(A) which is granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Corporation
or any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) which is granted to any other Employee, the per
Share exercise price shall be no less than 100% of the fair market value per
Share on the date of grant.
(ii) In the case of Nonstatutory Stock Option
(A) which is granted to a person who, at the time of
the grant of such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Corporation or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the fair
market value per Share on the date of the grant.
(B) granted to any other person, the per Share
exercise price shall be no less than 100% of the fair market value per Share on
the date of grant.
For purposes of this Section 7(b), in the event that an Option
is amended to reduce the exercise price, the date of grant of such Option shall
thereafter be considered to be the date of such amendment.
If the Board of Directors or Committee does not establish a
specific exercise price per share at the time of grant, the exercise price per
share shall be equal to the Fair Market Value of a share of Common Stock on the
date of grant of the Options.
(c) Each Option, subject to the other limitations set forth in the
Plan, may extend for a period of up to but not exceeding 10 years from the date
on which it is granted. The term of each Option shall be determined by the Board
of Directors or Committee at the time of grant of the Option and specified in
the Option Agreement, provided that if no term is specified by the Board or
Committee the term of the Option shall be the maximum term permitted under this
Section measured from the date on which it is granted. Notwithstanding anything
to the contrary, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Corporation or any Parent or
Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the
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Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Incentive Stock Option Agreement, or (b) if the
Option is a Nonstatutory Stock Option, the term of the Option shall be five (5)
years and one (1) day from the date of grant thereof or such shorter term as may
be provided in the Nonstatutory Stock Option Agreement.
(d) The Board of Directors or Committee may provide in the Option
Agreement that the right to exercise each Option for the number of shares
subject to each Option shall vest in the Optionee over such period of time as
the Board or Committee, in its discretion, shall determine for each Optionee.
(e) Options shall be nontransferable and nonassignable and may not be
sold, pledged, assigned, hypothecated, transferred, or disposed in any manner,
except that (1) Options may be transferred by testamentary instrument or by the
laws of descent and distribution, and (2) subject to the terms and conditions of
the Option Agreement or any other terms and conditions imposed by the Board of
Directors or Committee from time to time, Options may be transferred in
accordance with Section 7(l) of the Plan if the applicable Option Agreement or
other action of the Board or Committee expressly provides that the Options are
transferable.
(f) Upon voluntary or involuntary termination of an Optionee's active
Employment for any reason (including disability), his Option and all rights
thereunder shall terminate effective at the close of business on the date the
Optionee ceases to be an active, regular employee of the Corporation or any of
its subsidiaries, except (1) to the extent previously exercised and (2) as
provided in Sections 7 (g), (h), (i) and (j) of the Plan.
(g) In the event an Optionee takes a leave of absence from the
Corporation or any Parent or Subsidiary for personal reasons or as a result of
entry into the armed forces of the United States, or any of the departments or
agencies of the United States government, the Committee may consider his or her
case and may take such action in respect of the related Option Agreement as it
may deem appropriate under the circumstances in its absolute discretion,
including accelerating the time previously-granted Options may be exercised and
extending the time following the Optionee's termination of Employment during
which the Option Holder is entitled to purchase the Shares of Common Stock
subject to such Options, provided that in no event may any Option be exercised
after the expiration of the term of the Option or more than ninety (90) days
after the Optionee's termination of Employment.
(h) If an Optionee's Employment terminates as a result of his or her
total and permanent disability (as defined in Section 22(e)(3) of the Code), the
Option Holder may exercise his or her Option within no more than the twelve (12)
month period beginning on the date of his or her termination of Employment (to
the extent the Option Holder was entitled to exercise the Option at the date of
the Optionee's termination of Employment and provided that in no event may any
Option be exercised after the expiration of the term of the Option), after which
the Option shall lapse.
7
<PAGE>
(i) If an Optionee dies during the term of his or her Option without
the Option having been fully exercised, the executor or administrator of the
Optionee's estate or the person who inherits the right to exercise the Option by
bequest or inheritance shall have the right within one (1) year of the
Optionee's death to purchase the number of Shares of Common Stock that the
deceased Optionee was entitled to purchase at the date of death, after which the
Option shall lapse, provided that in no event may any Option be exercised after
the expiration of the term of the Option.
(j) If an Optionee terminates employment without having fully exercised
the Option due to the Optionee's retirement at or after age 60 and with the
consent of the Corporation, then the Option Holder shall have the right within
ninety (90) days of the Optionee's termination of Employment to purchase the
number of shares of Common Stock that the Option Holder was entitled to purchase
at the date of termination of the Optionee's Employment, after which the Option
shall lapse, provided that in no event may any Option be exercised after the
expiration of the term of the Option. The Board of Directors or Committee may
cancel an Option during the ninety day period referred to in this paragraph, if
the Optionee engages in employment or activities contrary, in the opinion of the
Board or Committee, to the best interests of the Corporation. The Board or
Committee shall determine in each case whether a termination of Employment shall
be considered a retirement with the consent of the Corporation, and, subject to
applicable law, whether a leave of absence shall constitute a termination of
Employment. Any such determination of the Board or Committee shall be final and
conclusive, unless the Committee is overruled by the Board.
(k) The granting of an Option pursuant to the Plan shall not constitute
or be evidence of any agreement or understanding, express or implied, on the
part of the Corporation or any of its subsidiaries to retain or employ the
Optionee for any specified period.
(l) The Board of Directors or Committee may provide, in the original
grant of a Nonqualified Stock Option or in an amendment or supplement to a
previous grant, that some or all of the Nonqualified Stock Options granted under
the Plan are transferable by the Optionee to an Immediate Family Member of the
Optionee, provided that (i) the Option Agreement, as it may be amended from time
to time, expressly so provides or the Board or Committee otherwise designates
the Option as transferable, (ii) the transfer by the Optionee is a bona fide
gift without consideration, (iii) the transfer is irrevocable, (iv) the Optionee
and any such transferee provides such documentation or other information
concerning the transfer or the transferee as the Board of Directors or Committee
or any Employee of the Corporation acting on behalf of the Board or Committee
may from time to time request, and (v) the Optionee or the Option Holder
complies with all of the terms and conditions (including, without limitation,
any further restrictions or limitations) included in the Option Agreement. Any
Nonqualified Stock Option transferred in accordance with the terms and
conditions provided in this Section 7(l) shall continue to be subject to the
same terms and conditions that were applicable to such Nonqualified Stock Option
prior to the transfer. Notwithstanding any other provisions of the Plan, the
Corporation shall not be required to honor any exercise by an Immediate Family
Member of an Option transferred in accordance with the terms and conditions
provided in this Section 7(l) unless and until payment or provision for payment
of any applicable withholding taxes has been made.
8
<PAGE>
(m) In addition to the general terms and conditions set forth in this
Paragraph 7 in respect of Options granted pursuant to the Plan, Incentive Stock
Options granted pursuant to the Plan shall be subject to the following
additional terms and conditions:
(i) "Incentive Stock Options" shall be granted only
to individuals who, at the date of grant of the Option, are
regular, full-time Employees of the Corporation or any Parent
or Subsidiary;
(ii) No Employee who owns beneficially more than 10%
of the total combined voting power of all classes of stock of
the Corporation shall be eligible to be granted an "Incentive
Stock Option", unless the exercise price per Share is at least
110% of the Fair Market Value of the Common Stock subject to
the Option on the date of grant of the Option and the Option,
by its terms, is not exercisable after the expiration of five
years from the date the Option is granted.
(iii) To the extent that the aggregate fair
market value (determined at the time the Option is granted) of
the shares of Common Stock in respect of which an Option is
exercisable for the first time by the Optionee during any
calendar year (and taking into account all "incentive stock
option" plans of the Corporation and its subsidiaries) exceeds
$100,000, that number of whole shares for which an Option
issued hereunder is exercisable with an aggregate fair market
value in excess of this $100,000 limit shall not be treated as
having been granted under an "incentive stock option"; and
(iv) Any other terms and conditions
specified by the Committee that are not inconsistent with the
Plan, except that such terms and conditions must be consistent
with the requirements for "incentive stock options" under
Section 422 of the Code.
8. Methods of Exercise of Options
(a) An Optionee (or other Option Holder, if any, entitled to exercise
an Option hereunder) desiring to exercise an Option granted pursuant to the Plan
as to all or part of the Shares of Common Stock covered by the Option shall (i)
notify the Corporation in writing at its principal office to that effect,
specifying the number of Shares of Common Stock to be purchased and the method
of payment therefor, and (ii) make payment or provision for payment for the
shares of Common Stock so purchased in accordance with this Paragraph 8. Such
written notice may be given by means of a facsimile transmission. If a facsimile
transmission is used, the Option Holder should mail the original executed copy
of the written notice to the Corporation promptly thereafter. An Option may not
be exercised for as fraction of a share of Common Stock.
9
<PAGE>
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board of Directors and may consist entirely of cash, check, promissory note,
other shares of Common Stock which (i) either have been owned by the Option
Holder for more than six (6) months on the date of surrender or were not
acquired, directly or indirectly, from the Corporation, and (ii) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, or any combination of
such methods of payment, or such other consideration and method of payment for
the issuance of Shares to the extent permitted under the laws of Nevada. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Corporation.
(c) An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Corporation in accordance with the terms of
the Option by the Option Holder and full payment for the Shares with respect to
which the Option is exercised has been received by the Corporation. Full payment
may, as authorized by the Board of Directors, consist of any consideration and
method of payment allowable under Section 8(b) of the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of the Corporation or of a
duly authorized transfer agent of the Corporation) of the stock certificate
evidencing such Shares, no right to vote (in the case of voting stock) or
receive dividends or any other rights as a shareholder shall exist with respect
to the optioned Shares, notwithstanding the exercise of the Option. The
Corporation shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. In the event that the exercise of an Option is
treated in part as the exercise of a Nonstatutory Stock Option, the Corporation
shall issue a separate stock certificate evidencing the Shares of each class
treated as acquired upon exercise of an Incentive Stock Option and a separate
stock certificate evidencing the Shares of each class treated as acquired upon
exercise of a Nonstatutory Stock Option, and shall identify each such
certificate accordingly in its stock transfer records. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 9 of the
Plan.
(d) An Option Holder at any time may elect in writing to abandon an
Option in respect of all or part of the number of Shares of Common Stock as to
which the Option shall not have been exercised.
(e) Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
9. Adjustments Upon Changes in Capitalization or Merger
Subject to any required action by the shareholders of the Corporation,
the number of Shares of Common Stock covered by each outstanding Option, and the
number of Shares of Common Stock which have been authorized for issuance under
10
<PAGE>
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Corporation; provided, however,
that conversion of any convertible securities of the Corporation shall not be
deemed to have been "effected without receipt of consideration." Such adjustment
shall be made by the Board of Directors, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
of Common Stock subject to an Option.
In the event of the proposed dissolution, liquidation or sale of all or
substantially all of the assets of the Corporation, the Board shall notify the
Optionee or other Option Holder at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
will terminate immediately prior to the consummation of such proposed action. In
the event of the merger of the Corporation with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless such successor corporation does not agree to assume the Option or to
substitute an equivalent option, in which case the Board shall, in lieu of such
assumption or substitution, provide for the Option Holder to have the right to
exercise the Option as to all of the optioned Shares, including Shares as to
which the Option would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the Optionee or other Option
Holder that the Option shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option will terminate upon the
expiration of such period.
10. Time of Granting Options
The date of grant of an Option shall, for all purposes, be the date on
which the Board of Directors or Committee makes the determination granting such
Option. Notice of the determination shall be given to each Optionee within a
reasonable time after the date of such grant.
11. Amendments and Discontinuance of the Plan
(a) The Board of Directors shall have the right at any time and from
time to time to amend, modify, or discontinue the Plan in such respects as the
Board may deem advisable; provided that, unless approved by the Corporation's
shareholders in accordance with Section 15, no such amendment, modification, or
discontinuance of the Plan shall (i) revoke or alter the terms of any valid
11
<PAGE>
Option previously granted pursuant to the Plan, (ii) increase the number of
shares of Common Stock to be reserved for issuance and sale pursuant to Options
granted pursuant to the Plan, (iii) change the maximum aggregate number of
shares of Common Stock that may be issued upon the exercise of Options granted
pursuant to the Plan to any single individual, (iv) decrease the price
determined pursuant to the provisions of Section 7(b), (v) change the class of
persons to whom Options may be granted pursuant to the Plan, (vi) provide for
Options exercisable more than 10 years after the date granted, (vii) if the
Corporation has a class of equity securities registered under Section 12 of the
Exchange Act at the time of such revision or amendment, any material increase in
the benefits accruing to participants under the Plan.
(b) Shareholder Approval. If any amendment requiring shareholder
approval under Section 15(a) of the Plan is made at a time when any class of
equity securities by the Corporation is registered under Section 12 of the
Exchange Act, such shareholder approval shall be solicited as described in
Section 15 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee or
other Option Holder and the Board of Directors, which agreement must be in
writing and signed by the Option Holder and the Corporation.
12. Plan Subject to Governmental Laws and Regulations
The Plan and the grant and exercise of Options pursuant to the Plan
shall be subject to all applicable governmental laws and regulations.
Notwithstanding any other provision of the Plan to the contrary, the Board of
Directors may in its sole and absolute discretion make such changes in the Plan
as may be required to conform the Plan to such laws and regulations. Shares
shall not be issued pursuant to the exercise of an Option unless the exercise of
such Option and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Corporation with respect to such compliance.
As a condition to the exercise of an Option, the Corporation may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Corporation, such a representation is required by any
of the aforementioned relevant provisions of law.
12
<PAGE>
13. Reservation of Shares
The Corporation, during the term of this Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
The inability of the Corporation to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Corporation's counsel to be necessary to the lawful issuance and sale of any
Shares hereunder, shall relieve the Corporation of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
14. Option Agreement
Options shall be evidenced by written option agreements in such form as
the Committee shall determine from time to time.
15. Shareholder Approval
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Corporation within twelve (12) months before or after the
date the Plan is adopted.
(b) The required approval of the shareholders of the Corporation shall
be solicited substantially in accordance with Section 14(a) of the Exchange Act
and the rules and regulations promulgated thereunder.
16. Information to Optionees
The Company shall provide to each Option Holder, during the period for
which such Option Holder has one or more Options outstanding, copies of all
annual reports and other information which are provided to all shareholders of
the Corporation. The Corporation shall not be required to provide such
information if the issuance of Options under the Plan is limited to Senior
Executive Officers whose duties in connection with the Corporation assure their
access to equivalent information.
17. Term of Plan
The Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the shareholders of the
Corporation as described in Section 15 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 11 of the
Plan.
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<PAGE>
ENTERPRISES SOLUTIONS, INC.
INCENTIVE STOCK OPTION AGREEMENT
Enterprises Solutions, Inc., a Nevada corporation (the "Corporation"),
has granted to _____________________________ (the "Optionee"), an option (the
"Option") to purchase a total of ____________ shares of Common Stock (the
"Shares"), at the price determined as provided herein, and in all respects
subject to the terms, definitions and provisions of the Enterprises Solutions,
Inc. 2000 Employee Stock Option Plan (the "Plan") adopted by the Corporation,
which is incorporated herein by reference. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings herein.
1. Nature of the Option. This Option is intended by the Corporation and
the Optionee to be an Incentive Stock Option that is subject to Section 422 of
the Code and Section 7(m) of the Plan.
2. Exercise Price. The exercise price is $_______ for each share of
Common Stock.
3. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Section 8 of the Plan as follows:
(i) Vesting and Right to Exercise.
(a) Subject to subsections 3(i)(b), (c) and (d) below, the
right to purchase the Shares subject to this Option shall vest and become
exercisable cumulatively, as follows:
Number of Shares
Date Becoming Exercisable
---- --------------------
One year after the Date of Grant ___________
Two years after the Date of Grant ___________
Three years after the Date of Grant ___________
Four years after the Date of Grant ___________
Five years after the Date of Grant ___________
Six years after the Date of Grant ___________
Seven years after the Date of Grant ___________
Eight years after the Date of Grant ___________
<PAGE>
Nine years after the Date of Grant ___________
Ten years after the Date of Grant ___________
The right to purchase Shares pursuant to this Option shall be permanently
forfeited upon the Optionee's termination of Employment under the terms of the
Plan, except to the extent that such right is vested under this Section 3(a).
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 7, 8 and 9 below.
(d) Under no circumstances shall this Option be exercised more
than ten (10) years from the date of its grant and in no event may this Option
be exercised after the date of expiration of the term of this Option as set
forth in Section 11 below.
(ii) Method of Exercise. This Option shall be
exercisable by written notice which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised,
and such other representations and agreements as to the holder's investment
intent with respect to such shares of Common Stock as may be required by the
Corporation pursuant to the provisions of the Plan. Such written notice shall be
signed by the Option Holder and shall be delivered in person or by certified
mail to the Secretary of the Corporation. The written notice shall be
accompanied by payment of the exercise price. This Option shall be deemed
exercised upon receipt by the Corporation of such written notice accompanied by
the exercise price and a Restricted Stock Purchase Agreement in the form
attached as Exhibit A and validly executed by the Option Holder.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Option Holder on the date on which the Option is
exercised with respect to such Shares.
4. Option Holder's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised, the
Option Holder shall, concurrently with the exercise of all or any portion of
this Option, deliver to the Corporation his or her Investment Representation
Statement in the form attached hereto as Exhibit B.
5. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Committee:
(i) cash;
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<PAGE>
(ii) check;
(iii) delivery of a promissory note (the "Note") of Option
Holder in the amount of the exercise price together with the execution and
delivery by the Option Holder of the Security Agreement attached hereto as
Exhibit C; the Note shall be in the form attached hereto as Exhibit D, shall
contain the terms and be payable as set forth therein, shall bear interest at a
rate (compounded semiannually) not less than the rate required to ensure that
there will be no "unstated interest" with respect to the purchase of shares
under this Option, pursuant to the applicable provisions of the Code and the
regulations in effect thereunder at the time of such purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement; or
(iv) surrender of other shares of Common Stock of the
Corporation which (A) either have been owned by the Option Holder for more than
six (6) months on the date of surrender or were not acquired, directly or
indirectly, from the Corporation and (B) have a Fair Market Value on the date of
surrender equal to the exercise price of the Shares as to which the Option is
being exercised.
6. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Corporation,
or if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Corporation may require Option Holder to make any representation and
warranty to the Corporation as may be required by any applicable law or
regulation.
7. Involutary Termination of Status as an Employee (Other Than For Just
Cause). In the event of termination by the Corporation of Optionee's Employment
for reasons other than "Just Cause", as defined in Schedule I, the Option Holder
may, but only within three (3) months after the date of such termination (but in
no event later than the date of expiration of the term of this Option as set
forth in Section 11 below), exercise this Option to the extent that the Option
Holder was entitled to exercise it at the date of such termination. To the
extent that the Option Holder was not entitled to exercise this Option at the
date of such termination, or if the Option Holder does not exercise this Option
within the time specified herein, the Option shall terminate.
8. Death or Disability of Optionee. Notwithstanding anything to the
contrary, in the event of termination of Optionee's Employment as a result of
the Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code), the Option Holder may, but only within twelve (12) months
from the date of such termination (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below),
exercise this Option to the extent the Option Holder was entitled to exercise it
at the date of such termination. To the extent that he or she was not entitled
to exercise the Option at the date of termination, or if the Option Holder does
not exercise such Option (which he or she was entitled to exercise) within the
time specified herein, the Option shall terminate.
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<PAGE>
9. Voluntary Termination or Termination for Just Cause. In the event of
termination by the Corporation of Optionee's Employment for "Just Cause", as
defined in Schedule II, or voluntary termination by the Optionee of the
Optionee's Employment, all rights under this Option Agreement shall be forfeited
to the extent they have not been exercised at the date of such termination of
Employment
10. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by him.
The terms of this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.
11. Term of Option. This Option may not be exercised more than ten (10)
years (five (5) years if Optionee owns, immediately before the Option is
granted, stock representing more than 10 percent of the total combined voting
power of all classes of stock of the Corporation or of any Parent or Subsidiary)
from the date of grant of this Option, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
12. Early Disposition of Stock. Option Holder understands that if he or
she disposes of any Shares received under this Option within two (2) years after
the date of this Agreement or within one (1) year after such Shares were
transferred to him or her, the Option Holder will be treated for federal income
tax purposes as having received ordinary income at the time of such disposition
in an amount generally measured by the difference between the price paid for the
Shares and the lower of the fair market value of the Shares at the date of the
exercise or the Fair Market Value of the Shares at the date of disposition. The
amount of such ordinary income may be measured differently if Optionee is an
officer, director or 10% shareholder of the Corporation, or if the Shares were
subject to a substantial risk of forfeiture at the time they were transferred to
Optionee. Option Holder hereby agrees to notify the Corporation in writing
within 30 days after the date of any such disposition. Optionee understands that
if he or she disposes of such Shares at any time after the expiration of such
two-year and one-year holding periods, any gain on such sale will be taxed as
long-term capital gain.
DATE OF GRANT:
Enterprises Solutions, Inc., a Nevada
corporation
By:___________________________
Title:________________________
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<PAGE>
SCHEDULE I
"Just Cause" shall mean (i) the willful and continued failure
of the Optionee to substantially perform his duties with the Corporation other
than any such failure resulting from his incapacity due to death or physical or
mental illness after a written demand for substantial performance is delivered
to the Optionee by the Board of Directors of the Corporation, which demand
specifically identifies the manner in which the Board of Directors believes that
the Optionee has not substantially performed his duties, or (ii) the willful
engaging by the Optionee in conduct which is demonstrably and materially
injurious to the Corporation, monetarily or otherwise. For purpose of this
Schedule I, no act or failure to act by the Optionee shall be deemed "willful"
unless done, or omitted to be done, by the Optionee not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Corporation. Notwithstanding the foregoing, Optionee shall not be deemed
to have been terminated for Just Cause unless and until there shall have been
delivered to Optionee a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the Board of
Directors of the Corporation at a meeting called and held for such purpose
(after reasonable notice to Optionee and an opportunity for him, together with
his counsel, to be heard before the Board of Directors) finding in the good
faith opinion of the Board of Directors that Optionee was guilty of conduct set
forth in this Schedule I and specifying the particulars thereof in detail.
OPTION HOLDER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTION HOLDER FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 2000 EMPLOYEE STOCK OPTION PLAN
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTION HOLDER ANY
RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT BY THE COMPANY, NOR SHALL IT
INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
Option Holder acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the
terms and provisions thereof. Option Holder has reviewed the Plan and this
Option in their entirety, has had an opportunity to obtain the advice of counsel
5
<PAGE>
prior to executing this Option and fully understands all provisions of the
Option. Option Holder hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Board upon any questions arising under
the Plan. Option Holder further agrees to notify the Corporation upon any change
in the residence address indicated below.
Dated:
-------------------
------------------------------------------
Option Holder
Residence Address:
------------------------------------------
------------------------------------------
6
<PAGE>
APPENDIX
--------
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
ENTERPRISES SOLUTIONS, INC.
----------------------------------------------
(Name of small business issuer in its Charter)
Nevada 88-0232148
------------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
140 Wood Road, Suite 200, Braintree, Massachusetts 02184
-------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 781-356-4387
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes __X__ No ____
<PAGE>
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer had no revenues for the fiscal year ended December 31, 1999.
As of July 3, 2000, there were 4,724,282 shares of Common Stock outstanding. The
Common Stock has not traded on the OTC Bulletin Board since March 30, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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FORWARD LOOKING STATEMENTS
This document includes forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. These statements are based on the
Company's current expectations as to future events. In the light of the
uncertainties in the potential markets for the Company's planned products, the
forward-looking events and circumstances discussed in this document might not
occur and actual results could differ materially from those anticipated or
implied in the forward-looking statements.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
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 August, 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 considered part of its corporate business focus.
On September 1, 1999, the Company changed its name to Enterprises
Solutions, Inc. and, after being introduced to the merits of an engineering plan
to provide security products and a bondable (insurable) architecture for the
Internet, began to focus its endeavors on developing a suite of products and
solutions for Internet security.
Recent Developments
Securities and Exchange Commission Proceedings
Suspension in Trading of Common Stock. On March 30, 2000, the
Securities and Exchange Commission ("Commission") announced the temporary
suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934
(the "Exchange Act"), of trading of the Common Stock of the Company at 9:30 a.m.
on March 30, 2000 and terminating at 11:59 p.m. on April 12, 2000. The
Commission announced that it temporarily suspended trading in the securities of
the Company because of questions concerning the accuracy and completeness of
assertions made by the Company in its filings with the Commission, in its recent
press releases, and on its Internet website, including questions about the
identity of persons in control of the operations and management of the Company.
The Commission cautioned broker-dealers, shareholders, and prospective
purchasers that they should carefully consider the foregoing information along
with all other currently available information and any information subsequently
issued by the Company. Further, the Commisssion advised that brokers and dealers
should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange
Act, at the termination of the trading suspension, no quotation may be entered
unless and until they have strictly complied with all of the provisions of the
rule. If any broker or dealer has any questions as to whether or not he has
complied with the rule, he should not enter any quotation but immediately
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contact the staff of the Commission in Washington, D.C. If any broker or dealer
is uncertain as to what is required by Rule 15c2-11, he should refrain from
entering quotations relating to Enterprises Solutions, Inc. securities until
such time as he has familiarized himself with the rule and is certain that all
of its provisions have been met. If any broker or dealer enters any quotation
that is in violation of the rule, the Commission stated that it would consider
the need for prompt enforcement action.
Court Filing for Temporary Restraining Order and Other Relief. On April
6, 2000, the Commission filed in the U.S. District Court for the Southern
District of New York (1) a motion for Temporary Restraining Order, Order to Show
Cause and Orders Granting Other Relief against the Company and Herbert S.
Cannon, Defendants; (2) a Verified Complaint against the Company, Herbert S.
Cannon and John A. Solomon, Defendants, and Rowen House Ltd. and Montville Ltd.,
Relief Defendants; and (3) and an Ex Parte Application For Order Freezing
Assets, Order To Show Cause Re Preliminary Injunction and Other Relief against
the Company, Herbert S. Cannon, Rowen House, Ltd. and Montville, Ltd.
The Commission's application for Temporary Restraining Order requests a
Court order (i) freezing certain assets of relief defendants, Rowen House, Ltd
and Montville, Ltd., (ii) requiring these relief defendants to show cause why
preliminary injunctive relief should not be entered, and (iii) enjoining all
defendants and relief defendants from destroying evidence. As to the
Commission's application to freeze assets of the relief defendants, it requested
an immediate freeze, with specified provisos, on (i) all monies held in any
account name maintained at the brokerage firm of Wall Street Equities, in the
name of, for the benefit of, or over which account authority is held by relief
defendants Rowen House, Ltd. and Montville, Ltd., to the extent such funds
represent the proceeds from the sale of shares of stock of the Company, and (ii)
any shares of the Company's Stock contained in such account. The Commission also
applied for expedited discovery for an order that all defendants and relief
defendants, and specified persons associated with them, be restrained and
enjoined from destroying, mutilating, concealing, altering, or disposing of, in
any manner, an document (as defined in the Commission's application). The Court
granted the Commission's application for the above Temporary Restraining Order
on April 6, 2000.
The Commission's Verified Complaint alleged securities fraud in
violation of the Exchange Act Section 10(b) and Rule 10b-5 promulgated
thereunder and requested relief enjoining the Company, Herbert S. Cannon and
John A. Solomon from violating the Exchange Act, the aforementioned Section
10(b) and Rule 10b-5; ordering Herbert S. Cannon to account for and disgorge,
with interest, all profits he has realized from any sales of the Company's
Common Stock, including sales through brokerage firms over which he had any
direct or indirect control, including those of relief defendants, Rowen House,
Ltd. and Montville, Ltd.; imposing a constructive trust upon any and all
proceeds from the Company's Common Stock sales being held in the brokerage
accounts of relief defendants Rowen House, Ltd. and Montville, Ltd.; and
ordering Herbert S. Cannon and John A. Solomon to pay appropriate civil
penalties.
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The Commission's Ex Parte Aplication for Order Freezing Assets, Order
To Show Cause Re Preliminary Injunction and Other Relief supports its
application for an ex parte order (i) freezing certain assets of the relief
defendants Rowen House, Ltd. and Montville, Ltd., (ii) requiring these relief
defendants to show cause why preliminary injunctive relief should not be
entered, (iii) requiring these relief defendants to each provide certain asset
identifying information, and (iv) enjoining all defendants and relief defendants
from destroying evidence.
On April 12, 2000, the Commission and the Company reached an agreement
concerning the Temporary Restraining Order. The Commission agreed not to ask the
Court to extend the prohibitions placed on the Company on April 6, 2000. In
return, the Company has agreed that it will not destroy any document as that
term is defined in the April 6, 2000 Temporary Restraining Order. The agreement
reached with the Company applies also to the relief sought against John A.
Solomon, the Company's President and CEO.
Since the April 6, 2000 hearing, additional hearings were held by the
Court on April 14, 2000 and April 24, 2000, for the purpose of continuing the
temporary restraining order imposed against the relief defendants, Rowen House,
Ltd. and Montville, Ltd. Pursuant to the agreement reached with the Commission,
however, Enterprises Solutions, Inc. and John A. Solomon were not affected by
those hearings or the restraining order issued against the relief defendants.
The order entered by the Court on May 1, 2000 imposes a preliminary injunction
only against relief defendants, Rowen House, Ltd. and Montville, Ltd.
The Company and John A. Solomon have filed answers to the Commission's
verified complaint. Both the Company and Mr. Solomon deny the Commission's
allegations. Defendant Herbert Cannon has filed a motion to dismiss and a
memorandum in which he denies the Commission's allegations. The Court granted
Mr. Cannon's motion to dismiss with leave for the Commission to refile. The
parties are pursuing discovery at this time, and expect that a trial could be
scheduled by September 2000.
The Company is working actively to attempt to settle the above
proceedings with the Commission.
Termination of Teaming Agreement with Gemini Computers, Incorporated
On April 10, 2000, Gemini Computers, Incorporated ("Gemini") advised
the Company that, given the above-described actions by the Commission, it was
terminating the Teaming Agreement in effect between the parties effective
immediately and it had no intent to move forward with any transaction involving
the acquisition of Gemini by the Company.
Offshore Financing
On April 2, 2000, the Company executed a Deed Poll under the laws of
Switzerland in favor of the holders of notes issued pursuant thereto (the "Deed
Poll"). Upon application of Waltrag A.G., in exchange for a purchase price of
$5,000,000, the Company issued to Waltrag A.G., the initial holder, $5,000,000
principal amount of its Convertible Notes pursuant to the Deed Poll (the
"Notes", such term to include the additional note issued as described below). As
set forth in the Deed Poll, each Note is in registered form and in the minimum
denomination of $250,000 each, bearing a coupon interest rate of 10% nominal
interest per annum, payable monthly in arrears, and maturing April 2, 2001. The
Notes are convertible at the option of the holder into Common Stock of the
Company, on or before April 2, 2001, at a conversion price of 90% of the 22 day
moving average price of the Company's Common Stock, backdated from the time of
the conversion request. The Company received payment of the $5,000,000 purchase
price for the above Notes on April 4, 2000.
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In connection with the issuance of the Notes, as a commission without
payment of additional consideration, Waltrag A.G. was also issued an additional
Note in the principal amount of $250,000, the terms of which Note are the same
as those of the $5,000,000 principal amount of Notes referred to above, and
warrants to purchase 50,000 shares of Common Stock of the Company on or before
April 2, 2003, exercisable at a price equal to 120% of the conversion price of
the Notes calculated as of April 2, 2000.
Under the Deed Poll, the holder(s) of the Notes and Warrants have
piggyback registration rights for the underlying shares of Common Stock with
respect to any registration statement under the Securities Act of 1933 filed by
the Company at any time. The Company has no right to redeem any of the Notes
prior to their maturity date of April 2, 2001. The holder of Notes may, within
28 days of first becoming entitled to voting shares of the Company such that any
further aquisition of voting shares by the holder, require the Company within a
21 day period to redeem the outstanding Notes. The holder of the Notes has the
express right to demand the redemption of its Notes.
The Company is not restricted in future financings by the provisions of
the Deed Poll.
The Deed Poll provides for a minimum subscription price by an applicant
of $100,000. Each holder of notes issued pursuant to the Deed Poll has the
benefit of, and is entitled to enforce the Deed Poll, whether or not such holder
is or is not a party to the Deed Poll. The Company agreed to establish and
maintain in New York, N.Y., a Register of the holders of notes issued pursuant
to the Deed Poll, and to determine amounts, if any, of withholding tax
applicable to any payment in respect to a note.
Description of Business
The Company's business is in the developmental stage. The Company has
one product under development that it is currently offering, its ESIGuard, a
secure virtual private network ("VPN") guard, which would provide a node to node
domain separating, gateway router. The defining characteristics of this premier
guard would be its ability to provide strong domain separation of communication
channels based upon an independently evaluated, high assurance multi-level
secure ("MLS") security kernel.
The Company's objective is to address what it perceives to be a lack of security
in the Internet applications by developing and providing high assurance security
computer networks 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 adequately secure to business levels of
assurance. Based on independent, trusted third party assessment of the security
properties of its technology, the Company anticipates that its products will
afford the high assurance security levels necessary to support liability bonding
by business insurance carriers, and therefore provide the basis for growth in
electronic commerce over the Internet, particularly in Business-to-Business
(B2B) transactions, and enable Internet E-Commerce to reach critical mass.
The Company's management believes that the demand for trusted network systems
and products has grown significantly in recent years due to the dramatic
increase in the use of the Internet for electronic business transactions, and
its demonstrated vulnerability to attacks, evident by increasing incidents of
break-ins. Further, the Company management believes that, while the current
arsenal of security products may provide adequate defenses against specific
known vulnerabilities, improving the basic integrity of the network platforms
(workstations and servers) provides a more comprehensive and effective approach
to network security against all forms of attacks. To this end, the Company's
product line will concentrate on establishing high assurance platforms, or
enhancing of existing platforms, specifically workstations, such that high
levels of assurance in the security of the networking foundations can be
established, and the integrity of the composed networks sustained. By
establishing secure network foundations with verifiable security properties, the
Company believes that it can enable liability management for eBusiness over the
Internet.
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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 areas which the Company plans to offer to these segments are: (1)
bondable hardware/software products that provide enhancements that extend the
basic platform architecture for a secure network infrastructure; (2) layered
software applications and network services built upon secure server platforms;
and (3) support for consulting and integrator services which provide hosted
services offered to customers.
The Company has commenced initial planning and development of a network
security architecture, which it plans to market under the Bondable Network
Architecture (BNA) product designation. The Company intends that this planned
family of trusted network server appliances and secure client workstations based
on its technology, would transparently integrate into the existing Internet
environment without modification either to the basic user applications or the
prevailing workstation environment. The Company's planned product line would
support bondable networks satisfying a wide range of E-Commerce business needs,
while preserving current investments in Internet technologies. In addition, the
Company believes that the demand for its products would give rise to a demand
for security related consulting, support and training services.
The Bondable Network Architecture would integrate a scalable number of high
assurance network components connected through existing media (both private and
public networks, such as the Internet) by reliably authenticated, trusted
sessions to compose secure virtual networks isolating the business processes.
The principle components of the BNA include the secure E-Commerce Workstations
and trusted eBusiness Servers.
The planned family of high assurance network servers, of which the ESIGuard is
the first, would host trusted network services which are required to support the
trusted architecture, as well as enterprise-specific value-laden applications.
In addition to the trusted ESIGuard, the Company plans to produce an high
assurance Certificate Authority (CA) server, a secure Web environment in the
form of a Web Server, and trusted, pervasive Directory Services (DS).
The Company's planned family of trusted workstation products are based
on an additional hardware/software component that would enhance the existing
platform operating system to extend the architecture ensuring the integrity of
the critical security services supported across the Bondable Network
Architecture. Assuming the availability of adequate financing, the Company
estimates time to market of six months for the first of its planned client
components.
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Research and Development Expenditures
The Company has made no expenditures the past fiscal year on research
and development.
Government Regulation
The Company plans to acquire technologies for use in developing its
products which would enable them to leverage the prior evaluations and evidences
of the technology based on international security criteria. In order to maintain
these government ratings, the Company will have to continuously update its
products with evaluations and ratings. As an example, the Company will be
required to maintain am ITSEC evaluation level of E4 or above assurance level
for marketing in Germany. In addition, the Company will have to establish an
adequate technical basis for providing digital signatures per statues in several
US states.
In order to import/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 various
world governments and US Department 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 most 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
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
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Forrester, "...the explosive growth of the Internet raises new dimensions of
risk, in the form of [attacks]...that exploit a system's communication
capabilities." The Company believes that this is equally true of extranets.
The Company 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." As one analyst 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
Company believes this to mean that 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. Further, the Company believes that the BNA
will enable these capabilities.
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 has been
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, as
apparently do the analysts, 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, the Company believes, as do the
analysts, 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.
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.
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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 analysts reports such as this Ernst & Young report, clearly
identify network security as a top concern of corporate IT departments. As such,
it believes that a comprehensive high assurance network architecture such as its
BNA will create a greater potential to capture the niche security market share
more rapidly when competing with the less comprehensive add-on security products
currently available. 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. The Company believes that high assurance network
products should compete aggressively in the area over the next three to five
years. The Company also believes that as a potential basis for a new financial
services industry, i.e., network bonding and insuring of transactions, its
products would have a significant competitive advantage because of their
enabling of liability management for B2B transactions.
Competition
The market in which the Company plans to compete is that of bondable,
business-to-business network platforms and services. The Company is not aware
that any of the major network operating system providers currently is basing its
product offerings on high assurance technology.
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 planned products and services and
encourage other companies to enter the market. Many of these other companies may
be far larger and have greater resources than the Company, and could thus
achieve a competitive advantage over the Company in product development and
marketing in the long term.
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Employees
The Company currently has six employees, consisting of four engineers,
one salesperson and one office administrator. The Company plans to hire
additional employees, particularly engineers, to assist in the development of
its products.
ITEM 2. PROPERTIES
The Company's executive headquarters is located Southeast of Boston at
140 Wood Road, Suite 200, Braintree, Massachusetts 02184. The office is leased
at a rate of $1,680 per month, initially for a 60-day term commencing May 1,
2000, and renewable on a month-to-month basis thereafter. 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 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 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 of 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,
2000 at a monthly rent of $2,250.
ITEM 3. LEGAL PROCEEDINGS
See "Item 1. Description of Business" for a description of pending
proceedings with the Securities and Exchange Commission.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
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 2000: 1st Quarter 21.50 1.50
2nd Quarter 15.125 11
3rd Quarter 14 13.50
4th Quarter 6 1
The foregoing bid information has been adjusted for the stock dividend
which occurred in June 1999.
Holders
As of July 3, 2000, 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 78.
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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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Comparison of the Year Ended December 31, 1999 and 1998
Revenues decreased $328 (100%) to $0 in fiscal 1999 as compared to $328
in fiscal 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.
Selling, general and administrative expenses increased $1,379,968 to
$1,503,535 in fiscal 1999 from $125,567 in fiscal 1998. The net loss for fiscal
1999 increased $1,378,296 to $1,503,535 from a net loss in 1998 of $125,239 due
to the foregoing.
Liquidity and Capital Resources
The Company's working capital at April 4, 2000 was $5,000,000. The
Company's primary sources of working capital have been from the offshore
financing from Waltrag, A.G. referenced in Item 1, Recent Developments.
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.
ITEM 7. FINANCIAL STATEMENTS
Financial statements of the Company meeting the requirements of Regulation S-B
are filed on the succeeding pages as listed below:
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ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
PAGE NO.
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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT 16
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets 17
Statements of Operations 18
Statements of Shareholders' (Deficit) 19
Statements of Cash Flows 20
Notes to the Consolidated Financial Statements 21-24
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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
To the Shareholders of
Enterprises Solutions, Inc.
We have audited the accompanying consolidated balance sheets of Enterprises
Solutions, Inc., (A Development Stage Company) as of December 31, 1999 and 1998,
and the related consolidated statements of operations, shareholders' (deficit)
and cash flows for each of the two years in the period ended December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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
Enterprises Solutions, Inc. as of December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Enterprises Solutions, Inc. will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company has suffered recurring losses
from operations and, at December 31, 1999, had a working capital deficiency of
$471,179 and a shareholders' deficit of $471,179 that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
April 9, 2000 /s/ Van Buren & Hauke, LLC
--------------------------
Van Buren & Hauke, LLC
16
<PAGE>
ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
Assets
Current assets
Cash $ 31,581 $ 38,974
---------- ----------
Total current assets 31,581 38,974
Loans and advances -- 125,000
---------- ----------
Total assets $ 31,581 $ 163,974
========== ==========
Liabilities and Shareholders' (Deficit)
Current liabilities
Accounts payable and accrued expenses $ 246,510 $ --
Demand loans 256,250 --
---------- ----------
Total current liabilities 502,760 --
---------- ----------
Commitments and contingencies
Shareholders' (deficit)
Preferred stock; $0.001 par value; 5,000,000 shares authorized;
148,500 and 100,000 shares issued and outstanding at
December 31, 1999 and 1998, respectively 148 100
Common stock; $0.001 par value; 25,000,000 shares authorized;
4,309,954 and 3,443,340 shares issued and outstanding at
December 31, 1999 and 1998, respectively 4,310 3,444
Additional paid-in capital 2,786,646 1,969,178
(Less) subscription receivable -- (50,000)
Retained (deficit) (1,633,509) (1,633,509)
(Deficit) accumulated during the development stage (1,628,774) (125,239)
---------- ----------
Total shareholders' (deficit) equity (471,179) 163,974
---------- ----------
Total liabilities and shareholders' (deficit) $ 31,581 $ 163,974
========== ==========
</TABLE>
See accompanying notes.
17
<PAGE>
ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Years Ended
December 31,
----------------------------
1999 1998
----------- ----------
Revenues $ -- $ 328
----------- ----------
Costs and expenses
Bad debt expense, net 727,617 --
Salaries, wages and taxes 122,355 --
Professional/consultants fees 387,739 16,821
Rent 46,664 --
Insurance 31,144 --
Telephone 10,374 --
Office expenses 30,450 5,024
Relocation expenses 48,474
Stock transfer and related expenses 11,049 3,722
Abandonment of licensing agreement -- 100,000
Travel and promotion 87,669 --
----------- ----------
Total costs and expenses 1,503,535 125,567
----------- ----------
Net (loss) $(1,503,535) $(125,239)
=========== ==========
Net (loss) per common share $ (0.40) $ (0.10)
=========== ==========
Weighted average common shares 3,714,010 1,278,071
=========== ==========
See accompanying notes.
18
<PAGE>
April 9, 2000
ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional Total
----------------------------------------------- Paid-In Retained Shareholders'
Shares Amount Shares Amount Capital (Deficit) (Deficit)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 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:
Preferred shares issued -- -- 48,500 48 48,452 -- 48,500
Common shares issued 326,000 326 -- -- 802,174 -- 802,500
Common shares issued
in stock split 90,603 90 -- -- (90) -- --
Common shares issued
in cashless warrant
exercise 450,011 450 -- -- (450) -- --
Subscription receivable-
paid -- -- -- -- 50,000 -- 50,000
(Less) underwriting
expenses -- -- -- -- (32,618) -- (32,618)
Net (loss) -- -- -- -- -- (1,503,535) (1,503,535)
----------------------------------------------------------------------------------------------
Balance, December 31, 1999 4,309,954 $ 4,310 148,500 $ 148 $ 2,786,646 $ (3,262,283) $ (471,179)
==============================================================================================
</TABLE>
See accompanying notes.
19
<PAGE>
ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Years Ended
December 31,
---------------------------
1999 1998
---------- -----------
Cash flows from operating activities
Net (loss) $(1,503,535) $ (125,239)
Adjustments to reconcile net (loss)
to net cash (used) by operating
activities
Bad debts 739,422 --
Operating assets and liabilities
Accounts payable and accrued expenses 246,510
---------- -----------
Net cash (used) by operating activities (517,603) (125,239)
---------- -----------
Cash flows from investing activities
Loans and advances (614,242) (125,000)
---------- -----------
Net cash (used) by investing activities (614,242) (125,000)
---------- -----------
Cash flows from financing activities
Demand loan proceeds 349,250 11,500
Loan repayments (93,000) --
Proceeds from issuance of shares
of common stock 802,500 246,000
Proceeds from issuance of shares
of preferred stock 48,500 100,000
Subscription receivable 50,000 (50,000)
Underwriting expenses (32,618) (19,765)
---------- -----------
Net cash provided by financing
activities 1,124,632 287,735
---------- -----------
Net (decrease) increase in cash (7,213) 37,496
Cash at beginning of year 38,794 1,478
---------- -----------
Cash at end of year $ 31,581 $ 38,974
========== ===========
Schedule of Non-Cash Financing
Transactions:
Additional paid-in capital upon
conversion of debt $ -- $ 786,397
========== ===========
See accompanying notes.
20
<PAGE>
ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. GENERAL
Enterprises Solutions, Inc. (ESI) (Company), a Nevada Corporation, together
with its wholly-owned subsidiary, plans to provide both government and
commercial enterprises with high assurance security technology.
The Company is in the development stage and currently has no revenue of a
continuing nature. It is management's plans to develop and provide high
assurance security computer networks and related products and services.
The accompanying financial statements include the consolidated accounts of
ESI and its wholly-owned subsidiary (a non-operating company with no assets
or liabilities.) All material intercompany balances and transactions have
been eliminated.
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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
At December 31, 1999, the Company has net operating loss carry forwards of
approximately $1,7 million 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
21
<PAGE>
ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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 $105,000 at December 31, 1999 to a company to develop an
Internet credit and clearing operation. At December 31, 1999 the advance was
considered worthless and was written off.
5. DEMAND LOANS
In 1999, the Company borrowed $349,250 from shareholders and others at no
interest, payable on demand, repaying $93,000 during 1999.
6. SHAREHOLDERS' (DEFICIT)
In 1999 and 1998 the Company issued 866,614 and 3,126,000 common shares,
respectively, in private placements, raising $1,048,500 in total.
In connection with certain of these offerings, the Company also issued,
during 1998, warrants to purchase 1,200,000 shares common stock at $2.50 per
share. In connection with the stock split declared in June 1999 these
warrants were adjusted. The new warrants are to purchase 1,800,000 shares of
common stock at $1.67 per share. The warrants expire in June 2003 and as of
December 31, 1999 none of the warrants had been exercised. During 1999
warrants were issued, in connection with certain common stock issuances, to
purchase 1,225,000 shares of common stock at $2.50 per common share, the
warrants had an expiration date of September 6, 2000. These warrants provided
the investors with a cashless exercise option where a reduced number of
common shares could be purchased with no additional cash payment. All of
these warrants were exercised, during 1999. In accordance with the cashless
exercise option, 811,680 shares of common stock were issued with no
additional proceeds being received by the Company.
The Company also issued to certain common shareholders 48,500 and 100,000
shares of preferred stock at $1.00 per share in 1999 and 1998, respectively.
In June 1998, the Company capitalized $786,397 of shareholders loan 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.
22
<PAGE>
ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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 occurred in December 1997.
The Company's preferred stock is 8% cumulative and redeemable at the
Company's option at 100%. In 1999 and 1998, the Company issued 48,500 shares
and 100,000 shares, respectively, at $1.00 per share.
7. STOCK OPTION PLAN
The Company grants stock options for a fixed number of shares to members of
the Board of Directors with an exercise price equal to the fair market value
of the shares at the date of grant. The options are to expire two years after
the resignation of a Director who has served in that capacity at least one
year, unless otherwise modified by an action of a majority of the Board of
Directors. These options are for a term of three years. As of December 31,
1999 and 1998 no options had been issued or exercised.
8. COMMITMENTS AND CONTINGENCIES
The Company leases facilities and equipment in both Florida and California.
The term of these agreements varies from a month-to-month basis to a
five-year term. The facilities in Florida are leased on a month-to-month
basis, with a monthly rental cost of $150. The facilities in California are
leased for a 36-month term, expiring in September 2002, with a monthly rental
cost of $5,919. The Company is responsible for annual operating expenses,
services and utilities.
The minimum lease payments for all of the above facilities and equipment are
as follows:
Calendar Year Amount
------------- ------
2000 $93,486
2001 87,286
2002 45,891
2003 4,468
2004 4,130
23
<PAGE>
ENTERPRISES SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
9. SUBSEQUENT EVENT
On April 4, 2000, the Company received $5,000,000 from a financing
arrangement in Switzerland whereby the Company issued convertible notes with
interest at 10% per annum, due April 2, 2001. The notes are convertible at
the option of the holder into common stock of the Company, on or before April
2, 2001, at a defined conversion price. In connection with the financing, the
agent received a note in the amount of $250,000, the terms of which are the
same as those of the $5,000,000 principal amount of convertible notes. The
agent was also issued warrants to purchase 50,000 common shares on or before
April 2, 2003, at a price equal to 120% of the conversion price of the
convertible notes calculated as of April 2, 2000. The holder of the notes and
warrants have piggyback registration rights for the underlying shares of
common stock.
24
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Officers and Directors of the Company are as follows:
Name Age Title
---- --- -----
John A. Solomon 50 President and C.E.O*
Gary S. Baker 52 Executive Vice President-Engineering
Alfred T. Saker 52 Treasurer and Secretary*
Charles E. Bobbish 51 Director
* Indicates Directors
John A. Solomon has served as the Company's President and Chief
Executive Officer since October, 1999. Mr. Solomon also is a member of the
Company's Board of Directors. Prior to his appointment to his positions with the
Company, from 1979 to 1995, Mr. Solomon was the President and Chief Executive
Officer of Computer Engineering Associates, Inc. ("CEA"), a systems integration
and security technology company. In November, 1995 CEA filed a petition for
voluntary bankruptcy which resulted from cash flow problems CEA encountered
related to several bonded construction projects CEA performed. Because Mr.
Solomon personally indemnified the bonding companies who insured CEA's
construction projects, Mr. Solomon was forced to file for personal bankruptcy in
February, 1997. Mr. Solomon was discharged from his personal bankruptcy in May,
1999.
Gary S. Baker has served as Vice President and Director of Engineering
and Executive Vice President-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
Sistex from 1998 to 1999. He also serves as a director of the Company's Secure
Systems Solutions Division.
25
<PAGE>
Alfred T. Saker is the Treasurer and Secretary of the Company and was
elected a Director on June 29, 2000, to fill the vacancy in the Board created by
the resignation of Nina L. Cannon. Mr. Saker received a B.A. in Arts and
Sciences in 1971, and a M.S. in accounting in 1978, from Kent State University.
From 1996 to 1998, Mr. Saker was Finance Manager for International Shipholding
Corporation, a marine transportation company. From 1993 to 1996, he was
Treasurer for American Heavy Lift Shipping Company and, prior thereto, he held
various positions with BP Oil Company, his last position, from 1990 to 1993,
being Manager, Services and Control (Controller).
Charles E. Bobbish was elected a Director of the Company on July 6,
2000, to fill the vacancy resulting from the resignation of Wayne G. Kight. From
April, 1991, to April, 1995, Mr. Bobbish was a Senior Vice President of Mosaic
Data Systems, Inc., Bedford, Massachusetts, with responsibility for planning and
coordinating information systems implementation and integration. In 1995, Mr
Bobbish had a consulting business involving proposal and business development,
which was, in early 1996, incorporated into Qualserv, Inc., Burlington,
Massachusetts, a proposal writing and business development company, of which he
has served as President from that time to the present. In his present position,
Mr. Bobbish advises executives of large information technology companies on
market positioning and provides inputs to business strategies, directions and
proposals.
Promoter and Former Control Person
In recent years, Herbert S. Cannon acted as a general business
consultant to management pursuant to a consulting agreements dated July 1, 1998,
and January 7, 2000. As a consultant, Mr. Cannon performed a significant
management role for the Company primarily with respect to raising capital for
the Company and in interviewing and selecting management candidates, including
Wayne B. Kight, the former CEO and President, and John A. Solomon, the current
CEO and President. Mr. Cannon's consulting agreement entitled him to the payment
of $3,000 per month in 1999 and under both agreements he was entitled to a total
award of 300,000 shares of common stock in exchange for his services. Since
January 1, 1999, the Company has paid Mr. Cannon approximately $111,257 in
consulting fees, expense reimbursements and other compensation (including a
$16,500 reimbursement for a loan made by Mr. Cannon on behalf of the Company to
Infotex Holdings, Ltd.). The Company may have made other payments to entities
controlled by Herbert S. Cannon. Mr. Cannon may be deemed a "promoter" and/or a
"controlling person" of the Company, as those terms are defined under the
Securities Act of 1933 and the Securities Exchange Act of 1934. John A. Solomon,
the Company's Chief Executive Officer, upon authorization of the Board of
Directors, terminated Mr. Cannon's consulting arrangement effective March 20,
2000.
Mr. Cannon also acted as a general business consultant to Infotex
Holdings, Ltd., which the Company agreed to acquire in March 1999. In July 1999,
the Company cancelled its agreement to acquire Infotex. In the months preceding
October, 1999, certain unauthorized press releases concerning the Company were
issued. Mr. Cannon appears to have played a role in the drafting and
dissemination of these press releases. These press releases contained, among
other things, revenue projections and statements about contracts purportedly
awarded to the Company. The Company did not authorize the press releases, and
did not realize the projections nor was it awarded the contracts referred to
therein.
26
<PAGE>
In addition, in a lawsuit described elsewhere (see "Legal
Proceedings"), the Securities and Exchange Commission has alleged, among other
things, that Mr. Cannon, through several offshore entities, including one listed
under the heading "Security Ownership of Certain Beneficial Owners and
Management", is a beneficial owner of more than 5% of the Company's outstanding
common stock. That issue is being litigated in court between the Commission and
Mr. Cannon. In August, 1987, the Securities and Exchange Commission issued an
order barring Mr. Cannon from the securities industry. In 1988 and again in
1993, in separate civil cases brought by the Commission, federal courts entered
final judgments enjoining Mr. Cannon from violating certain provisions of the
federal securities laws.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company believes that during the fiscal year ended December 31,
1999, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were satisfied.
ITEM 10. EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1999, no salaries in excess
of $100,000 per year have been paid to any executive officer or director of the
Company.
LONG-TERM INCENTIVE PLAN AWARDS
The Company has no Long-term Incentive Plan Awards currently in effect.
STOCK AND OPTION COMPENSATION OF OFFICERS AND DIRECTORS
The Company has authorized the issuance to John A. Solomon of 75,000
shares of Common Stock (and a balance owing of 150,000 shares) at a nominal
price pursuant to Mr. Solomon's Employment Agreement with the Company. At the
Board of Directors meeting held on March 20, 2000, the Board authorized the
issuance to Mr. Solomon of options to purchase 100,000 shares of Common Stock at
a price of $6.25 per share.
Mr. Wayne B. Kight, a former Director and Executive Vice President of
the Company, purchased 10,000 shares at $.05 per share (adjusted to 15,000
shares by reason of the stock split in June 1999) in June, 1998. At the Board of
Directors meeting held on July 30, 1998, the Board authorized the issuance to
Mr. Kight of options to purchase 22,500 shares of Common Stock at a price of
$.67 per share and options to purchase 15,000 shares of Common Stock at $5.67
per share (adjusted for the June 1999 stock split). At the Board of Directors
meeting held on September 1, 1999, the Board authorized the issuance to Mr.
Kight of options to purchase 10,000 shares of Common Stock at an exercise price
of $7.50 per share. The Company has authorized the issuance to Mr. Kight of
40,000 shares of Common Stock (and a balance owing of 80,000 shares) at a
nominal price pursuant to Mr. Kight's Employment Agreement with the Company. At
the Board of Directors meeting held on March 20, 2000, the Board authorized the
issuance to Mr. Kight of options to purchase 25,000 shares of Common Stock at a
price of $6.25 per share.
At the Board of Directors meeting held on September 1, 1999, the Board
authorized the issuance to Nina L. Cannon, a former Director of the Company, of
options to purchase 10,000 shares of Common Stock at an exercise price of $7.50
per share. At the Board of Directors meeting held on March 20, 2000, the Board
authorized the issuance to Ms. Cannon of options to purchase 25,000 shares of
Common Stock at a price of $6.25 per share.
All options referred to above issued to John A. Solomon, Wayne B. Kight
and Nina L. Cannon expire three years from their respective dates of issuance.
27
<PAGE>
EMPLOYMENT CONTRACTS
The Company has entered into an employment agreement with John A.
Solomon, the term of which is for three years from September 15, 1999. The
agreement provides for Mr. Solomon's employment as the President and Chief
Executive Officer of the Company at an annual salary of $200,000, which would be
increased to $500,000 once the Company receives funding in the amount of
$10,000,000 (the "Funding Event"). In the fiscal year ended December 31, 1999,
Mr. Solomon did not draw any salary from the Company. The agreement provides for
bonuses as determined by the Board of Directors at the sole discretion of the
Board, but not less than 7% of the Net Before Tax corporate profits in each year
of employment. Under the agreement, Mr. Solomon is entitled to borrow up to
$750,000 from the Company on a secured basis, all loans being repayable within
10 years of the first loan being taken out, and with the Company's stock as
collateral in value at least equal to 125% of the loan amount, the amount of
stock to be held as collateral to be adjusted monthly based on the price for the
stock in the market. On June 2, 2000, Mr. Solomon borrowed $650,000 under this
provision. This loan bears interest at the rate of 7% per annum, is due ten
years from the drawdown date, with interest only payable monthly until maturity.
The loan is secured by the pledge of all shares of common stock of the Company
and options to purchase common stock held by Mr. Solomon. The agreement provides
for the issuance of 225,000 shares of common stock of the Company to Mr. Solomon
in three installments of 75,000 shares each at the end of each year of
employment completion; the right to the first installment vested as of execution
of the employment agreement and is to have been issued by December 31, 1999. If
the Funding Event condition is satisfied, Mr. Solomon is entitled under the
agreement to be issued an additional 275,000 shares of common stock at the time
of the resulting increase in his salary.
The Company has also entered into employment agreements with Michael F.
Thompson, Wayne B. Kight and Gary S. Baker. The agreements have a term of three
years commencing on August 1, 1999 for Mr. Baker, September 20, 1999 for Mr.
Thompson, and October 6, 1999 for Mr. Kight. The agreements provide for a base
salary of $85,000 for Michael F. Thompson, $120,000 for Wayne B. Kight and
$120,000 for Gary S. Baker. The agreement with Mr. Baker stipulates that Mr.
Baker is entitled to purchase 100,000 shares of common stock at a nominal price
in three equal installments, commencing on August 1, 2000, and on the next two
anniversaries of that date. Mr. Kight's agreement provides for the issuance of
40,000 shares of common stock upon execution of the agreement effective October
6, 1999, and of an additional 80,000 shares of common stock in two equal
installments at the end of each of the next two calendar years of service.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 3, 2000, information
concerning the beneficial ownership of the Common Stock of the Company by (i)
each person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each director of the Company, and (iii) all
directors and executive officers of the Company as a group. See "Item 10.
Executive Compensation -- Stock and Option Compensation of Officers and
Directors" for information as to stock and options authorized to be issued to
directors and officers.
Approx.
Name and Address of Amount and Nature % of
Beneficial Owner Of Ownership Class
------------------- ----------------- -------
John A. Solomon(1) 75,000(2) 1.587%
Alfred T. Saker(3) -- --
Charles E. Bobbish(4) -- --
Rowan House Limited 244,168 5.168%
1 Corral Road, Suite 2A
EuroLife Building, Gibraltar
All directors and officers as a group 75,000 1.587%
28
<PAGE>
(1) The address for Mr. Solomon is c/o the Company at 140 Wood Road, Braintree,
Massachusetts 02184.
(2) To be issued under Mr. Solomon's employment agreement.
(3) The address for Mr. Saker is 904 Penny Street S.E., North Canton, Ohio
44720.
(4) The address for Mr. Bobbish is 82 Drake Road, Burlington, Massachusetts
01803.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omega Funding, Inc., a corporation 100% owned by Nina L. Cannon, a
former director of the Company, made loans to the Company aggregating $94,500 in
1999, and an additional loan of $23,000 on February 24, 2000. In December, 1999,
Nina L. Cannon also made a personal loan to the Company in the amount of
$22,000, which was repaid in January, 2000. In 1999, Omega Funding was also
assigned an additional loan made to the Company by a third party in the amount
of $10,000. All of the loans held by Omega Funding, Inc., aggregating $127,500,
were repaid on June 29, 2000, with interest in the amount of $5,243.
Dr. Roger Raymond Schell, a former officer of the Company, is a
shareholder in Gemini Computers, Inc. with which the Company had a teaming
agreement.
See "Security Ownership of Certain Beneficial Owners and Management"
and "Executive Compensation" above.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
NONE
The Company incorporates the following Exhibits by reference to the filings set
forth below:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION FILED AS EXHIBIT
----------- ----------- ----------------
<S> <C> <C>
3.1 Articles of Incorporation. 3.1 to Form 10-SB dated November 17, 1999
3.2 By-Laws 3.2 to Form 10-SB dated November 17, 1999
3.3 Amended and Restated By-Laws 3.3 to Amendment No. 1 to Form 10-KSB dated
May 15, 2000
4.1 Specimen Common Stock Certificate 4.1 to Amendment No. 1 to Form
10-SB dated January 3, 2000
4.2 Deed Poll dated April 2, 2000 4.1 to Form 8-K dated April 7, 2000
10.1 Lease for SSS Division's Corporate Condominium 10.1 to Form 10-SB dated November 17, 1999
10.2 Lease for SSS Division's Office Space 10.2 to Form 10-SB dated November 17, 1999
10.3 Employment Agreement by and between the Company 10.3 to Amendment No. 1 to Form 10-KSB
and John A. Solomon dated May 15, 2000
10.4 Employment Agreement by and between 10.6 to Form 10-SB dated November 17, 1999
the Company and Gary L. Baker
10.5 Employment Agreement by and between 10.5 to Form 10-KSB dated April 12, 2000
the Company and Michael F. Thompson
10.6 Employment Agreement by and between 10.6 to Form 10-KSB dated April 12, 2000
the Company and Wayne B. Kight
10.7 License Agreement dated May 1, 2000 for the 10.7 to Amendment No. 1 to Form 10-KSB
Company's executive offices dated May 15, 2000
21 Subsidiaries of Registrant 21 to Form 10-KSB dated April 12, 2000
</TABLE>
(B) REPORTS ON FORM 8-K:
The Company filed a Form 8-K on April 10, 2000.
29
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf the undersigned, thereto duly
authorized.
Dated: July 6, 2000
Enterprises Solutions, Inc.
By: /s/ John A. Solomon
-------------------------------------
John A. Solomon,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on July 6, 2000.
SIGNATURE CAPACITY
--------- --------
/s/ Alfred T. Saker Director
----------------------
Alfred T. Saker
Director
----------------------
Charles E. Bobbish
30
